1

Co-ownership
FIRST DIVISION

ARNELITO ADLAWAN, G.R. No. 161916

Petitioner,
Present:

Panganiban, C.J. (Chairman),

- versus - Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
EMETERIO M. ADLAWAN and
NARCISA M. ADLAWAN, Promulgated:
Respondents.
January 20, 2006

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

DECISION

YNARES-SANTIAGO, J.:

Assailed in this petition for review is the September 23, 2003 Decision[1] of the Court of
Appeals in CA-G.R. SP No. 74921 which set aside the September 13, 2002 Decision[2] of the
Regional Trial Court (RTC) of Cebu City, Branch 7, in Civil Case No. CEB-27806, and reinstated
the February 12, 2002 Judgment[3] of the Municipal Trial Court (MTC) of Minglanilla, Metro
Cebu, in Civil Case No. 392, dismissing petitioner Arnelito Adlawan’s unlawful detainer suit
against respondents Emeterio and Narcisa Adlawan. Likewise questioned is the January 8,
2004 Resolution[4] of the Court of Appeals which denied petitioner’s motion for reconsideration.

The instant ejectment suit stemmed from the parties’ dispute over Lot 7226 and the house
built thereon, covered by Transfer Certificate of Title No. 8842,[5] registered in the name of the
late Dominador Adlawan and located at Barrio Lipata, Municipality of Minglanilla, Cebu. In his
complaint, petitioner claimed that he is an acknowledged illegitimate child[6] of Dominador who
died on May 28, 1987 without any other issue. Claiming to be the sole heir of Dominador, he
executed an affidavit adjudicating to himself Lot 7226 and the house built thereon.[7] Out of
respect and generosity to respondents who are the siblings of his father, he granted their plea to
occupy the subject property provided they would vacate the same should his need for the
property arise. Sometime in January 1999, he verbally requested respondents to vacate the
house and lot, but they refused and filed instead an action for quieting of title[8] with the RTC.
Finally, upon respondents’ refusal to heed the last demand letter to vacate dated August 2,
2000, petitioner filed the instant case on August 9, 2000.[9]

On the other hand, respondents Narcisa and Emeterio, 70 and 59 years of age,
respectively,[10] denied that they begged petitioner to allow them to stay on the questioned
property and stressed that they have been occupying Lot 7226 and the house standing thereon
since birth. They alleged that Lot 7226 was originally registered in the name of their deceased
father, Ramon Adlawan[11] and the ancestral house standing thereon was owned by Ramon
2

and their mother, Oligia Mañacap Adlawan. The spouses had nine[12] children including the
late Dominador and herein surviving respondents Emeterio and Narcisa. During the lifetime of
their parents and deceased siblings, all of them lived on the said property. Dominador and his
wife, Graciana Ramas Adlawan, who died without issue, also occupied the same.[13]
Petitioner, on the other hand, is a stranger who never had possession of Lot 7226.

Sometime in 1961, spouses Ramon and Oligia needed money to finance the renovation
of their house. Since they were not qualified to obtain a loan, they transferred ownership of Lot
7226 in the name of their son Dominador who was the only one in the family who had a college
education. By virtue of a January 31, 1962 simulated deed of sale,[14] a title was issued to
Dominador which enabled him to secure a loan with Lot 7226 as collateral. Notwithstanding the
execution of the simulated deed, Dominador, then single, never disputed his parents’ ownership
of the lot. He and his wife, Graciana, did not disturb respondents’ possession of the property
until they died on May 28, 1987 and May 6, 1997, respectively.

Respondents also contended that Dominador’s signature at the back of petitioner’s birth
certificate was forged, hence, the latter is not an heir of Dominador and has no right to claim
ownership of Lot 7226.[15] They argued that even if petitioner is indeed Dominador’s
acknowledged illegitimate son, his right to succeed is doubtful because Dominador was
survived by his wife, Graciana.[16]

On February 12, 2002, the MTC dismissed the complaint holding that the establishment
of petitioner’s filiation and the settlement of the estate of Dominador are conditions precedent to
the accrual of petitioner’s action for ejectment. It added that since Dominador was survived by
his wife, Graciana, who died 10 years thereafter, her legal heirs are also entitled to their share in
Lot 7226. The dispositive portion thereof, reads:

In View of the foregoing, for failure to prove by preponderance of

evidence, the plaintiff’s cause of action, the above-entitled case is hereby
Ordered DISMISSED.

SO ORDERED.[17]

On appeal by petitioner, the RTC reversed the decision of the MTC holding that the title
of Dominador over Lot 7226 cannot be collaterally attacked. It thus ordered respondents to turn
over possession of the controverted lot to petitioner and to pay compensation for the use and
occupation of the premises. The decretal portion thereof, provides:

Wherefore, the Judgment, dated February 12, 2002, of the Municipal Trial
Court of Minglanilla, Cebu, in Civil Case No. 392, is reversed. Defendants-
appellees are directed to restore to plaintiff-appellant possession of Lot 7226 and
the house thereon, and to pay plaintiff-appellant, beginning in August 2000,
compensation for their use and occupation of the property in the amount of
P500.00 a month.

So ordered.[18]

Meanwhile, the RTC granted petitioner’s motion for execution pending appeal[19] which
was opposed by the alleged nephew and nieces of Graciana in their motion for leave to
intervene and to file an answer in intervention.[20] They contended that as heirs of Graciana,
they have a share in Lot 7226 and that intervention is necessary to protect their right over the
3

property. In addition, they declared that as co-owners of the property, they are allowing
respondents to stay in Lot 7226 until a formal partition of the property is made.

The RTC denied the motion for leave to intervene.[21] It, however, recalled the order
granting the execution pending appeal having lost jurisdiction over the case in view of the
petition filed by respondents with the Court of Appeals.[22]

On September 23, 2003, the Court of Appeals set aside the decision of the RTC and
reinstated the judgment of the MTC. It ratiocinated that petitioner and the heirs of Graciana are
co-owners of Lot 7226. As such, petitioner cannot eject respondents from the property via an
unlawful detainer suit filed in his own name and as the sole owner of the property. Thus –

WHEEFORE, premises considered, the appealed Decision dated

September 13, 2002 of the Regional Trial Court of Cebu City, Branch 7, in Civil
Case No. CEB-27806 is REVERSED and SET ASIDE, and the Judgment dated
February 12, 2002 of the Municipal Trial Court of Minglanilla, Metro Cebu, in Civil
Case No. 392 is REINSTATED. Costs against the respondent.

SO ORDERED.[23]

Petitioner’s motion for reconsideration was denied. Hence, the instant petition.

The decisive issue to be resolved is whether or not petitioner can validly maintain the
instant case for ejectment.

Petitioner averred that he is an acknowledged illegitimate son and the sole heir of
Dominador. He in fact executed an affidavit adjudicating to himself the controverted property.
In ruling for the petitioner, the RTC held that the questioned January 31, 1962 deed of sale
validly transferred title to Dominador and that petitioner is his acknowledged illegitimate son who
inherited ownership of the questioned lot. The Court notes, however, that the RTC lost sight of
the fact that the theory of succession invoked by petitioner would end up proving that he is not
the sole owner of Lot 7226. This is so because Dominador was survived not only by petitioner
but also by his legal wife, Graciana, who died 10 years after the demise of Dominador on May
28, 1987.[24] By intestate succession, Graciana and petitioner became co-owners of Lot 7226.
[25] The death of Graciana on May 6, 1997, did not make petitioner the absolute owner of Lot
7226 because the share of Graciana passed to her relatives by consanguinity and not to
petitioner with whom she had no blood relations. The Court of Appeals thus correctly held that
petitioner has no authority to institute the instant action as the sole owner of Lot 7226.

Petitioner contends that even granting that he has co-owners over Lot 7226, he can on
his own file the instant case pursuant to Article 487 of the Civil Code which provides:

ART. 487. Any one of the co-owners may bring an action in ejectment.

This article covers all kinds of actions for the recovery of possession. Article 487
includes forcible entry and unlawful detainer (accion interdictal), recovery of possession (accion
publiciana), and recovery of ownership (accion de reivindicacion).[26] A co-owner may bring
such an action without the necessity of joining all the other co-owners as co-plaintiffs because
the suit is presumed to have been filed to benefit his co-owners. It should be stressed,
however, that where the suit is for the benefit of the plaintiff alone who claims to be the sole
owner and entitled to the possession of the litigated property, the action should be dismissed.
[27]
4

The renowned civilist, Professor Arturo M. Tolentino, explained –

A co-owner may bring such an action, without the necessity of joining all the
other co-owners as co-plaintiffs, because the suit is deemed to be instituted for
the benefit of all. If the action is for the benefit of the plaintiff alone, such
that he claims possession for himself and not for the co-ownership, the
action will not prosper. (Emphasis added)[28]

In Baloloy v. Hular,[29] respondent filed a complaint for quieting of title claiming

exclusive ownership of the property, but the evidence showed that respondent has co-owners
over the property. In dismissing the complaint for want of respondent’s authority to file the case,
the Court held that –

Under Article 487 of the New Civil Code, any of the co-owners may bring
an action in ejectment. This article covers all kinds of actions for the recovery of
possession, including an accion publiciana and a reinvidicatory action. A co-
owner may bring such an action without the necessity of joining all the other co-
owners as co-plaintiffs because the suit is deemed to be instituted for the benefit
of all. Any judgment of the court in favor of the co-owner will benefit the others
but if such judgment is adverse, the same cannot prejudice the rights of the
unimpleaded co-owners. If the action is for the benefit of the plaintiff alone who
claims to be the sole owner and entitled to the possession thereof, the action will
not prosper unless he impleads the other co-owners who are indispensable
parties.

In this case, the respondent alone filed the complaint, claiming sole
ownership over the subject property and praying that he be declared the sole
owner thereof. There is no proof that the other co-owners had waived their rights
over the subject property or conveyed the same to the respondent or such co-
owners were aware of the case in the trial court. The trial court rendered
judgment declaring the respondent as the sole owner of the property and entitled
to its possession, to the prejudice of the latter’s siblings. Patently then, the
decision of the trial court is erroneous.

Under Section 7, Rule 3 of the Rules of Court, the respondent was

mandated to implead his siblings, being co-owners of the property, as parties.
The respondent failed to comply with the rule. It must, likewise, be stressed that
the Republic of the Philippines is also an indispensable party as defendant
because the respondent sought the nullification of OCT No. P-16540 which was
issued based on Free Patent No. 384019. Unless the State is impleaded as
party-defendant, any decision of the Court would not be binding on it. It has
been held that the absence of an indispensable party in a case renders
ineffective all the proceedings subsequent to the filing of the complaint including
the judgment. The absence of the respondent’s siblings, as parties, rendered all
proceedings subsequent to the filing thereof, including the judgment of the court,
ineffective for want of authority to act, not only as to the absent parties but even
as to those present.[30]

In the instant case, it is not disputed that petitioner brought the suit for unlawful detainer
in his name alone and for his own benefit to the exclusion of the heirs of Graciana as he even
executed an affidavit of self- adjudication over the disputed property. It is clear therefore that
5

petitioner cannot validly maintain the instant action considering that he does not recognize the
co-ownership that necessarily flows from his theory of succession to the property of his father,
Dominador.

In the same vein, there is no merit in petitioner’s claim that he has the legal personality
to file the present unlawful detainer suit because the ejectment of respondents would benefit not
only him but also his alleged co-owners. However, petitioner forgets that he filed the instant
case to acquire possession of the property and to recover damages. If granted, he alone will
gain possession of the lot and benefit from the proceeds of the award of damages to the
exclusion of the heirs of Graciana. Hence, petitioner cannot successfully capitalize on the
alleged benefit to his co-owners. Incidentally, it should be pointed out that in default of the said
heirs of Graciana, whom petitioner labeled as “fictitious heirs,” the State will inherit her share[31]
and will thus be petitioner’s co-owner entitled to possession and enjoyment of the property.

The present controversy should be differentiated from the cases where the Court upheld
the right of a co-owner to file a suit pursuant to Article 487 of the Civil Code. In Resuena v.
Court of Appeals,[32] and Sering v. Plazo,[33] the co-owners who filed the ejectment case did
not represent themselves as the exclusive owner of the property. In Celino v. Heirs of Alejo and
Teresa Santiago,[34] the complaint for quieting of title was brought in behalf of the co-owners
precisely to recover lots owned in common.[35] Similarly in Vencilao v. Camarenta,[36] the
amended complaint specified that the plaintiff is one of the heirs who co-owns the controverted
properties.

In the foregoing cases, the plaintiff never disputed the existence of a co-ownership nor
claimed to be the sole or exclusive owner of the litigated lot. A favorable decision therein would
of course inure to the benefit not only of the plaintiff but to his co-owners as well. The instant
case, however, presents an entirely different backdrop as petitioner vigorously asserted
absolute and sole ownership of the questioned lot. In his complaint, petitioner made the
following allegations, to wit:

3. The plaintiff was the only son (illegitimate) and sole heir of the
late DOMINADOR ADLAWAN who died intestate on 28 May 1987 without any
other descendant nor ascendant x x x.

xxxx

5. Being the only child/descendant and, therefore, sole heir of the

deceased Dominador Adlawan, the plaintiff became the absolute owner, and
automatically took POSSESSION, of the aforementioned house and lot x x x.
(Emphasis added)[37]

Clearly, the said cases find no application here because petitioner’s action operates as a
complete repudiation of the existence of co-ownership and not in representation or recognition
thereof. Dismissal of the complaint is therefore proper. As noted by Former Supreme Court
Associate Justice Edgrado L. Paras “[i]t is understood, of course, that the action [under Article
487 of the Civil Code] is being instituted for all. Hence, if the co-owner expressly states that he
is bringing the case only for himself, the action should not be allowed to prosper.”[38]

Indeed, respondents’ not less than four decade actual physical possession of the
questioned ancestral house and lot deserves to be respected especially so that petitioner failed
to show that he has the requisite personality and authority as co-owner to file the instant case.
Justice dictates that respondents who are now in the twilight years of their life be granted
6

possession of their ancestral property where their parents and siblings lived during their lifetime,
and where they, will probably spend the remaining days of their life.

WHEREFORE, the petition is DENIED. The September 23, 2003 Decision of the Court
of Appeals in CA-G.R. SP No. 74921 which reinstated the February 12, 2002 Judgment of the
Municipal Trial Court of Minglanilla, Metro Cebu, dismissing petitioner’s complaint in Civil Case
No. 392, and its January 8, 2004 Resolution, are AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 161817 July 30, 2004
DANIEL D. CELINO, petitioner,
vs.
HEIRS OF ALEJO and TERESA SANTIAGO, respondents.

RESOLUTION

TINGA, J.:
Before us is a petition for review of the Decision1 of the Court of Appeals promulgated on 28
October 2002 and its Resolution2 promulgated on 14 January 2004 denying petitioner's Motion
for Reconsideration.
The case stemmed from an action for Quieting of Title, Recovery of Possession and Damages
with Prayer for the Issuance of a Writ of Preliminary Mandatory Injunction filed by the heirs of
Alejo and Teresa Santiago against herein petitioner Daniel Celino.3 Petitioner filed a Motion to
Dismiss,4 alleging that complainant Juliet Santiago did not have the legal capacity to sue, since
she did not have the corresponding written authority to represent her co-plaintiffs, and since the
Complaint failed to state a cause of action. The trial court, presided by Judge Antonio C. Reyes,
denied the said motion on the ground that the issues posed by petitioner could best be resolved
during the trial.5 It likewise denied petitioner's motion for reconsideration.6
Thereafter, pre-trial was held. There, plaintiff Juliet Santiago presented through counsel, a copy
of the Special Power of Attorney7 executed by Virginia S. Robertson and Gloria S. Tinoyan, two
of the plaintiffs in the Complaint, authorizing counsels Juan Antonio R. Alberto III and Alexander
A. Galpo to represent them in the pre-trial of the case. Likewise submitted was a Special Power
of Attorney8 executed by Romeo Santiago, Juliet Santiago and Larry Santiago in favor of
above-named counsels to represent them in the pre-trial conference.
Trial ensued and plaintiffs therein, now respondents, presented their evidence. Petitioner filed a
Demurrer to Evidence,9 still on the ground of Juliet Santiago's alleged lack of legal capacity to
sue. Petitioner claimed that the evidence presented by Santiago should not be admitted since
she failed to present any evidence of authority to file the complaint for and in behalf of her co-
plaintiffs. In an Order dated 29 April 2002,10 Judge Reyes denied the Demurrer, stating that
Juliet Santiago had submitted the necessary authorization. On 10 July 2002, the Judge denied
petitioner's Motion for Reconsideration11 for lack of merit.12
Petitioner thereafter filed a Petition For Review on Certiorari,13 seeking to nullify and set aside
the 29 April 2002 and the 10 July 2002 orders of the trial court. In its Decision dated 28 October
2003, the Court of Appeals dismissed the petition, stating that petitioner's allegation of lack of
legal capacity to sue is not the ground contemplated by the Rules of Court to support an
adverse party's Demurrer to Evidence.14 Thereafter, petitioner filed his Motion for
Reconsideration,15 which was denied for lack of merit.16
7

Petitioner now submits the following issues:

I. WHETHER OR NOT A DEMURRER TO EVIDENCE UNDER RULE 33 OF THE
REVISED RULES OF COURT MAY BE RESORTED TO WHEN CLEARLY THE
COMPLAINT (SIC) HAS NO AUTHORITY TO SUE FOR AND IN BEHALF OF HER CO-
PLAINTIFFS.
II. WHETHER OR NOT THE COMPLAINT MAY BE DISMISSED FOR FAILURE OF CO-
PLAINTIFFS TO EXECUTE AND SIGN THE CERTIFICATION AGAINST NON-FORUM
SHOPPING.17
A demurrer to evidence is a motion to dismiss on the ground of insufficiency of evidence and is
presented after the plaintiff rests his case.18 It is an objection by one of the parties in an action,
to the effect that the evidence which his adversary produced is insufficient in point of law,
whether true or not, to make out a case or sustain the issue.19 The evidence contemplated by
the rule on demurrer is that which pertains to the merits of the case.20 Thus, as correctly held
by the Court of Appeals, lack of legal capacity to sue is not a proper ground for a demurrer to
evidence, pertaining as it does to a technical aspect, and it having nothing to do with the
evidence on the merits of the complaint. Consequently, petitioner's Demurrer to Evidence and
Motion for Reconsideration should be denied, as the trial court did.
Anent the second issue, we hold that the Complaint may not be dismissed on account of the
failure of the other plaintiffs to execute and sign the certification against non-forum shopping.
Respondents herein are co-owners of two parcels of land owned by their deceased mother. The
properties were allegedly encroached upon by the petitioner. As co-owners of the properties,
each of the heirs may properly bring an action for ejectment,21 forcible entry and detainer,22 or
any kind of action for the recovery of possession of the subject properties. 23 Thus, a co-owner
may bring such an action, even without joining all the other co-owners as co-plaintiffs, because
the suit is deemed to be instituted for the benefit of all.24 However, if the action is for the benefit
of the plaintiff alone, such that he claims the possession for himself and not for the co-
ownership, the action will not prosper.25
It is clear from the Complaint that the same was made precisely to recover possession of the
properties owned in common, and as such, will redound to the benefit of all the co-owners.
Indeed, in the verification of the Complaint, Juliet Santiago claimed that she caused the
preparation and the filing of the said pleading as a co-owner of the subject properties and as a
representative of the other plaintiffs. Hence, the instant case may prosper even without the
authorization from Juliet Santiago's co-plaintiffs.
From the procedural perspective, the instant petition should also fail. Petitioner questioned Juliet
Santiago's authority to sue in behalf of his co-plaintiffs in his Motion to Dismiss dated 24 August
1999, which the lower court denied in its Order dated 16 March 2000. After filing a motion for
reconsideration dated 30 March 2000, as well as a Supplemental to Motion for Reconsideration
dated 11 April 2000,26 which the lower court denied in its Order dated 02 May 2000, he did
nothing until he filed the Demurrer to Evidence dated 11 February 2002. But that was after the
pre-trial and trial on the merits were conducted and plaintiffs had presented their evidence-in-
chief. On the assumption that the lower court committed grave abuse of discretion in denying
the Motion to Dismiss' petitioner as defendant should have filed the corresponding petition for
certiorari under Rule 65 of the Revised Rules of Court with the Court of Appeals. He failed to do
so within the period prescribed therefor, which is not later than sixty (60) days from notice of the
order denying the motion for reconsideration.27 Thus, it is clear that even his petition under
Rule 65 before the Court of Appeals was filed way out of time, it having been presented only on
31 July 2002.28
While the instant petition seeks only to resolve the above-stated issues, this Court will not close
its eyes to any irregularity or defect in any decision or disposition, which, if tolerated, may result
to confusion, and even injustice to any of the litigants.29
8

In the instant case, not only was the trial court miscreant in appreciating the documents
presented before it, it was also injudicious in its understanding of the nature of a demurrer to
evidence.
Relying on the two Special Powers of Attorney presented by the plaintiff, the trial court denied
petitioner's Demurrer to Evidence in the following manner:
"Considering that plaintiff Juliet Santiago has submitted the necessary Special
Power of Authority from her co-plaintiffs authorizing her to institute the instant
action against the defendant, the Demurrer to Evidence is denied for lack of merit."30
(emphasis supplied)
As correctly pointed out by the petitioner, the said instruments were grants of authority to
plaintiffs' counsel to represent them in the pre-trial conference and cannot in any way be
constituted as a source of authority for Juliet Santiago to be the legal representative of her co-
heirs. As such, plaintiff Juliet Santiago has not in fact presented any evidence supporting her
claim that she is the duly constituted representative of the other named plaintiffs in the
Complaint. Despite the very clear wording of the instruments, the trial court failed to appreciate
the import of the same and equated the Special Powers of Attorney executed in favor of counsel
to an authorization in favor of Juliet Santiago.
In this regard, Judge Antonio Reyes of the Regional Trial Court of Cebu is well-advised to be
prudent and meticulous in appreciating the documents and evidence presented before him. The
duty to be well-informed of the law and legal procedures is ingrained in the position of court
judge.
WHEREFORE, the instant Petition is DENIED for lack of merit. The assailed Decision dated 28
October 2002 and the Resolution dated 14 January 2004 are hereby AFFIRMED. Costs against
the petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 152168 December 10, 2004
HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE; Namely, ANTONIO
T. BALITE, FLOR T. BALITE-ZAMAR, VISITACION T. BALITE-DIFUNTORUM, PEDRO T.
BALITE, PABLO T. BALITE, GASPAR T. BALITE, CRISTETA T. BALITE and AURELIO T.
BALITE JR., All Represented by GASPAR T. BALITE, petitioners,
vs.
RODRIGO N. LIM, respondent.

DECISION

PANGANIBAN, J.:
A deed of sale that allegedly states a price lower than the true consideration is nonetheless
binding between the parties and their successors in interest. Furthermore, a deed of sale in
which the parties clearly intended to transfer ownership of the property cannot be presumed to
be an equitable mortgage under Article 1602 of the Civil Code. Finally, an agreement that
purports to sell in metes and bounds a specific portion of an unpartitioned co-owned property is
not void; it shall effectively transfer the seller’s ideal share in the co-ownership.
The Case
1
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the February
11, 2002 Decision2 of the Court of Appeals (CA) in CA-GR CV No. 65395. The decretal portion
of the Decision reads as follows:
9

"IN THE LIGHT OF ALL THE FOREGOING, the Decision of the Court a quo subject of
the appeal is hereby SET ASIDE AND REVERSED and another Decision is hereby
rendered as follows:
1. The "Deed of Absolute Sale" (Exhibit "A") is valid only insofar as the pro indiviso
share of Esperanza Balite over the property covered by Original Certificate of Title No.
10824 is concerned;
2. The Register of Deeds is hereby ordered to cancel Transfer Certificate of Title No.
6683 and to issue another over the entirety of the property covered by Original
Certificate of Title No. 10824, upon the payment of the capital gains tax due, as provided
for by law, (based on the purchase price of the property in the amount of
P1,000,000.00), with the following as co-owners, over the property described therein:
a) Each of the [petitioners] over an undivided portion of 975 square meters;
b) The [respondent], with an undivided portion of 9,751 square meters.
3. The [respondent] is hereby ordered to pay to the [petitioners] the amount of
P120,000.00, within a period of five (5) months from the finality of the Decision of this
Court;
4. In the event that the [respondent] refuses or fails to remit the said amount to the
[petitioner] within the period therefor, the rights and obligations of the parties shall be
governed by Republic 6552 (Maceda Law)."3
The Facts
The CA summarized the facts in this manner:
"The spouses Aurelio x x x and Esperanza Balite were the owners of a parcel of land,
located [at] Poblacion (Barangay Molave), Catarman, Northern Samar, with an area of
seventeen thousand five hundred fifty-one (17,551) square meters, [and] covered by
Original Certificate of Title [OCT] No. 10824. When Aurelio died intestate [in 1985, his
wife], Esperanza Balite, and their children, x x x [petitioners] Antonio Balite, Flor Balite-
Zamar, Visitacion Balite-Difuntorum, Pedro Balite, Pablo Balite, Gaspar Balite, Cristeta
(Tita) Balite and Aurelio Balite, Jr., inherited the [subject] property and became co-
owners thereof, with Esperanza x x x inheriting an undivided [share] of [9,751] square
meters.
"In the meantime, Esperanza x x x [became] ill and was in dire need of money for her
hospital expenses x x x. She, through her daughter, Cristeta, offered to sell to Rodrigo
Lim, [her] undivided share x x x for the price of P1,000,000.00. x x x Esperanza x x x and
Rodrigo x x x agreed that, under the "Deed of Absolute Sale", to be executed by
Esperanza x x x over the property, it will be made to appear that the purchase price of
the property would be P150,000.00, although the actual price agreed upon by them for
the property was P1,000,000.00.
"On April 16, 1996, Esperanza x x x executed a "Deed of Absolute Sale" in favor of
Rodrigo N. Lim over a portion of the property, covered by [OCT] No. 10824, with an area
of 10,000 square meters, for the price of P150,000.00 x x x.
[They] also executed, on the same day, a "Joint Affidavit" under which they declared that
the real price of the property was P1,000,000.00, payable to Esperanza x x x, by
installments, as follows:
1. P30,000.00 – upon signing today of the document of sale.
2. P170,000.00 – payable upon completion of the actual relocation survey of the
land sold by a Geodetic Engineer.
3. P200,000.00 – payable on or before May 15, 1996.
4. P200,000.00 – payable on or before July 15, 1996.
5. P200,000.00 – payable on or before September 15, 1996.
6. P200,000.00 – payable on or before December 15, 1996.
"Only Esperanza and two of her children, namely, Antonio x x x and Cristeta x x x, knew
about the said transaction. x x x Geodetic Engineer Bonifacio G. Tasic conducted a
10

subdivision survey of the property and prepared a "Sketch Plan" showing a portion of the
property, identified as Lot 243 with an area of 10,000 square meters, under the name
Rodrigo N. Lim.
"The "Sketch Plan" was signed by Rodrigo x x x and Esperanza. Thereafter, Rodrigo x x
x took actual possession of the property and introduced improvements thereon. He
remitted to Esperanza x x x and Cristeta x x x sums of money in partial payments of the
x x x property for which he signed "Receipts".
"Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. x x x learned of the sale, and on August
21, 1996, they wrote a letter to the Register of Deeds [RD] of Northern Samar, [saying]
that they [were] not x x x informed of the sale of a portion of the said property by their
mother x x x nor did they give their consent thereto, and requested the [RD] to:
"x x x hold in abeyance any processal or approval of any application for
registration of title of ownership in the name of the buyer of said lot, which has
not yet been partitioned judicially or extrajudicially, until the issue of the
legality/validity of the above sale has been cleared."
"On August 24, 1996, Antonio x x x received from Rodrigo x x x, the amount of
P30,000.00 in partial payment of [the] property and signed a "Receipt" for the said
amount, declaring therein that "the remaining balance of P350,000.00 shall personally
and directly be released to my mother, Esperanza Balite, only." However, Rodrigo x x x
drew and issued RCBC Check No. 309171, dated August 26, 1996, [payable] to the
order of Antonio Balite in the amount of P30,000.00 in partial payment of the property.
"On October 1, 1996, Esperanza x x x executed a "Special Power of Attorney"
appointing her son, Antonio, to collect and receive, from Rodrigo, the balance of the
purchase price of the x x x property and to sign the appropriate documents therefor.
"On October 23, 1996, Esperanza signed a letter addressed to Rodrigo informing the
latter that her children did not agree to the sale of the property to him and that she was
withdrawing all her commitments until the validity of the sale is finally resolved:
xxx xxx xxx
"On October 31, 1996, Esperanza died intestate and was survived by her aforenamed
children.
"[Meanwhile], Rodrigo caused to be published, in the Samar Reporter, on November 14,
21 and 28, 1996, the aforesaid "Deed of Absolute Sale". Earlier, on November 21, 1996,
Antonio received the amount of P10,000.00 from Rodrigo for the payment of the estate
tax due from the estate of Esperanza.
"Also, the capital gains tax, in the amount of P14,506.25, based on the purchase price of
P150,000.00 appearing on the "Deed of Absolute Sale", was paid to the Bureau of
Internal Revenue which issued a "Certification" of said payments, on March 5, 1997,
authorizing the registration of the "Deed of Absolute Sale" x x x. However, the [RD]
refused to issue a title over the property to and under the name of Rodrigo unless and
until the owner’s duplicate of OCT No. 10824 was presented to [it]. Rodrigo filed a
"Petition for Mandamus" against the RD with the Regional Trial Court of Northern Samar
(Rodrigo Lim versus Fernando Abella, Special Civil Case No. 48). x x x. On June 13,
1997, the court issued an Order to the RD to cancel OCT No. 10824 and to issue a
certificate of title over Lot 243 under the name of Rodrigo.
"On June 27, 1997, [petitioners] filed a complaint against Rodrigo with the Regional Trial
Court of Northern Samar, entitled and docketed as "Heirs of the Spouses Aurelio
Balite, et al. versus Rodrigo Lim, Civil Case No. 920, for "Annulment of Sale,
Quieting of Title, Injunction and Damages x x x, [the origin of the instant case.]
xxx xxx xxx
"The [petitioners] had a "Notice of Lis Pendens", dated June 23, 1997, annotated, on
June 27, 1997, at the dorsal portion of OCT No. 10824.
11

"In the meantime, the RD cancelled, on July 10, 1997, OCT No. 10824 and issued
Transfer Certificate of Title [TCT] No. 6683 to and under the name of Rodrigo over Lot
243. The "Notice of Lis Pendens" x x x was carried over in TCT No. 6683.
"Subsequently, Rodrigo secured a loan from the Rizal Commercial Banking Corporation
in the amount of P2,000,000.00 and executed a "Real Estate Mortgage" over the
[subject] property as security therefor.
"On motion of the [petitioners], they were granted x x x leave to file an "Amended
Complaint" impleading the bank as [additional] party-defendant. On November 26, 1997,
[petitioners] filed their "Amended Complaint".
The [respondent] opposed the "Amended Complaint" x x x contending that it was
improper for [petitioners] to join, in their complaint, an ordinary civil action for the
nullification of the "Real Estate Mortgage" executed by the respondent in favor of the
Bank as the action of the petitioners before the court was a special civil action.
"On March 30, 1998, the court issued an Order rejecting the "Amended Complaint" of
the petitioners on the grounds that: (a) the Bank cannot be impleaded as party-
defendant under Rule 63, Section 1 of the 1997 Rules of Civil Procedure; (b) the
"Amended Complaint" constituted a collateral attack on TCT No. 6683. The [petitioners]
did not file any motion for the reconsideration of the order of the court."4
The trial court dismissed the Complaint and ordered the cancellation of the lis pendens
annotated at the back of TCT No. 6683. It held that, pursuant to Article 493 of the Civil Code, a
co-owner has the right to sell his/her undivided share. The sale made by a co-owner is not
invalidated by the absence of the consent of the other co-owners. Hence, the sale by Esperanza
of the 10,000-square-meter portion of the property was valid; the excess from her undivided
share should be taken from the undivided shares of Cristeta and Antonio, who expressly agreed
to and benefited from the sale.
Ruling of the Court of Appeals
The CA held that the sale was valid and binding insofar as Esperanza Balite’s undivided share
of the property was concerned. It affirmed the trial court’s ruling that the lack of consent of the
co-owners did not nullify the sale. The buyer, respondent herein, became a co-owner of the
property to the extent of the pro indiviso share of the vendor, subject to the portion that may be
allotted to him upon the termination of the co-ownership. The appellate court disagreed with the
averment of petitioners that the registration of the sale and the issuance of TCT No. 6683 was
ineffective and that they became the owners of the share of Esperanza upon the latter’s death.
The CA likewise rejected petitioners’ claim that the sale was void allegedly because the actual
purchase price of the property was not stated in the Deed of Absolute Sale. It found that the true
and correct consideration for the sale was P1,000,000 as declared by Esperanza and
respondent in their Joint Affidavit. Applying Article 13535 of the Civil Code, it held that the falsity
of the price or consideration stated in the Deed did not render it void. The CA pointed out,
however, that the State retained the right to recover the capital gains tax based on the true price
of P1,000,000.
The appellate court rejected petitioners’ contention that, because of the allegedly
unconscionably low and inadequate consideration involved, the transaction covered by the
Deed was an equitable mortgage under Article 1602 of the Civil Code. Observing that the
argument had never been raised in the court a quo, it ruled that petitioners were proscribed from
making this claim, for the first time, on appeal.
The CA further held that the remaining liability of respondent was P120,000. It relied on the
Receipt dated August 24, 1996, which stated that his outstanding balance for the consideration
was P350,000. It deducted therefrom the amounts of P30,000 received by Antonio on August
27, 1996; and P200,000, which was the amount of the check dated September 15, 1996, issued
by respondent payable to Esperanza.
Finally, the appellate court noted that the mortgage over the property had been executed after
the filing of the Complaint. What petitioners should have filed was a supplemental complaint
12

instead of an amended complaint. Contrary to respondent’s argument, it also held that the bank
was not an indispensable party to the case; but was merely a proper party. Thus, there is no
necessity to implead it as party-defendant, although the court a quo had the option to do so.
And even if it were not impleaded, the appellate court ruled that the bank would still have been
bound by the outcome of the case, as the latter was a mortgagee pendente lite over real estate
that was covered by a certificate of title with an annotated lis pendens.
Hence, this Petition.6
Issues
In their Memorandum, petitioners present the following issues:
"A
"Whether or not the [CA] seriously erred in not deciding that the Deed of Absolute Sale
dated April 16, 1996 is null and void on the grounds that it is falsified; it has an unlawful
cause; and it is contrary to law and/or public policy.
"B
"Whether or not the [CA] gravely erred in not finding that the amount paid by
[respondent] is only three hundred twenty thousand (P320,000.00) pesos and that
respondent’s claim that he has paid one million pesos except P44,000.00 as balance, is
fraudulent and false.
"C
"Whether or not the [CA] seriously erred in not deciding that at the time the Deed of Sale
was registered x x x on May 30, 1997, said Deed of Sale can no longer bind the property
covered by OCT No. 10824 because said land had already become the property of all
the petitioners upon the death of their mother on October 31, 1996 and therefore such
registration is functus of[f]icio involving a null and void document.
"D
"Whether or not the [CA] seriously erred in not ruling that petitioners’ amended complaint
dated November 27, 1997 was proper and admissible and deemed admitted to conform
to evidence presented.
"E
"Whether or not the [CA] seriously erred in not declaring that TCT No. T-6683 in the
name of Respondent Rodrigo N. Lim is null and void and all dealings involving the same
are likewise null and void and/or subject to the decision of the case at bar in view of the
notice of lis pendens annotated therein.
"F
"Even assuming but without admitting that the Deed of Sale is enforceable, the
respondent court seriously erred in not deciding that the consideration is unconscionably
low and inadequate and therefore the transaction between the executing parties
constitutes an equitable mortgage.
"G
"The [CA] greatly erred in not rendering judgment awarding damages and attorney’s
fee[s] in favor of petitioners among others."7
In sum, the issues raised by petitioners center on the following: 1) whether the Deed of Absolute
Sale is valid, and 2) whether there is still any sum for which respondent is liable.
The Court’s Ruling
The Petition has no merit.
First Issue:
Validity of the Sale
Petitioners contend that the Deed of Absolute Sale is null and void, because the undervalued
consideration indicated therein was intended for an unlawful purpose -- to avoid the payment of
higher capital gains taxes on the transaction. According to them, the appellate court’s reliance
on Article 1353 of the Civil Code was erroneous. They further contend that the Joint Affidavit is
13

not proof of a true and lawful cause, but an integral part of a scheme to evade paying lawful
taxes and registration fees to the government.
We have before us an example of a simulated contract. Article 1345 of the Civil Code provides
that the simulation of a contract may either be absolute or relative. In absolute simulation, there
is a colorable contract but without any substance, because the parties have no intention to be
bound by it. An absolutely simulated contract is void, and the parties may recover from each
other what they may have given under the "contract."8 On the other hand, if the parties state a
false cause in the contract to conceal their real agreement, such a contract is relatively
simulated. Here, the parties’ real agreement binds them.9
In the present case, the parties intended to be bound by the Contract, even if it did not reflect
the actual purchase price of the property. That the parties intended the agreement to produce
legal effect is revealed by the letter of Esperanza Balite to respondent dated October 23, 199610
and petitioners’ admission that there was a partial payment of P320,000 made on the basis of
the Deed of Absolute Sale. There was an intention to transfer the ownership of over 10,000
square meters of the property . Clear from the letter is the fact that the objections of her children
prompted Esperanza to unilaterally withdraw from the transaction.
Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and
enforceable. All the essential requisites prescribed by law for the validity and perfection of
contracts are present. However, the parties shall be bound by their real agreement for a
consideration of P1,000,000 as reflected in their Joint Affidavit.11
The juridical nature of the Contract remained the same. What was concealed was merely the
actual price. Where the essential requisites are present and the simulation refers only to the
content or terms of the contract, the agreement is absolutely binding and enforceable12 between
the parties and their successors in interest.
Petitioners cannot be permitted to unmake the Contract voluntarily entered into by their
predecessor, even if the stated consideration was included therein for an unlawful purpose.
"The binding force of a contract must be recognized as far as it is legally possible to do so."13
However, as properly held by the appellate court, the government has the right to collect the
proper taxes based on the correct purchase price.
Being onerous, the Contract had for its cause or consideration the price of P1,000,000. Both this
consideration as well as the subject matter of the contract -- Esperanza’s share in the property
covered by OCT No. 10824 -- are lawful. The motives of the contracting parties for lowering the
price of the sale -- in the present case, the reduction of capital gains tax liability -- should not be
confused with the consideration.14 Although illegal, the motives neither determine nor take the
place of the consideration. 15
Deed of Sale not an
Equitable Mortgage
Petitioner further posits that even assuming that the deed of sale is valid it should only be
deemed an equitable mortgage pursuant to Articles 1602 and 1604 of the Civil Code, because
the price was clearly inadequate. They add that the presence of only one of the circumstances
enumerated under Article 1602 would be sufficient to consider the Contract an equitable
mortgage. We disagree.
For Articles 1602 and 1604 to apply, two requisites must concur: one, the parties entered into a
contract denominated as a contract of sale; and, two, their intention was to secure an existing
debt by way of mortgage.16
Indeed, the existence of any of the circumstances enumerated in Article 1602, not a
concurrence or an overwhelming number thereof, suffices to give rise to the presumption that a
contract purporting to be an absolute sale is actually an equitable mortgage.17 In the present
case, however, the Contract does not merely purport to be an absolute sale. The records and
the documentary evidence introduced by the parties indubitably show that the Contract is,
indeed, one of absolute sale. There is no clear and convincing evidence that the parties agreed
upon a mortgage of the subject property.
14

Furthermore, the voluntary, written and unconditional acceptance of contractual commitments

negates the theory of equitable mortgage. There is nothing doubtful about the terms of, or the
circumstances surrounding, the Deed of Sale that would call for the application of Article 1602.
The Joint Affidavit indisputably confirmed that the transaction between the parties was a sale.
When the words of a contract are clear and readily understandable, there is no room for
construction. Contracts are to be interpreted according to their literal meaning and should not be
interpreted beyond their obvious intendment.18 The contract is the law between the parties.
Notably, petitioners never raised as an issue before the trial court the fact that the document did
not express the true intent and agreement of the contracting parties. They raised mere
suppositions on the inadequacy of the price, in support of their argument that the Contract
should be considered as an equitable mortgage.
We find no basis to conclude that the purchase price of the property was grossly inadequate.
Petitioners did not present any witness to testify as to the market values of real estate in the
subject’s locale. They made their claim on the basis alone of the P2,000,000 loan that
respondent had been able to obtain from the Rizal Commercial Banking Corporation. This move
did not sufficiently show the alleged inadequacy of the purchase price. A mortgage is a mere
security for a loan. There was no showing that the property was the only security relied upon by
the bank; or that the borrowers had no credit worthiness, other than the property offered as
collateral.
Co-Ownership
The appellate court was correct in affirming the validity of the sale of the property insofar as the
pro indiviso share of Esperanza Balite was concerned.
Article 493 of the Civil Code19 gives the owner of an undivided interest in the property the right
to freely sell and dispose of such interest. The co-owner, however, has no right to sell or
alienate a specific or determinate part of the thing owned in common, because such right over
the thing is represented by an aliquot or ideal portion without any physical division. Nonetheless,
the mere fact that the deed purports to transfer a concrete portion does not per se render the
sale void.20 The sale is valid, but only with respect to the aliquot share of the selling co-owner.
Furthermore, the sale is subject to the results of the partition upon the termination of the co-
ownership.
Hence, the transaction between Esperanza Balite and respondent could be legally recognized
only in respect to the former’s pro indiviso share in the co-ownership. As a matter of fact, the
Deed of Absolute Sale executed between the parties expressly referred to the 10,000-square-
meter portion of the land sold to respondent as the share of Esperanza in the conjugal property.
Her clear intention was to sell merely her ideal or undivided share in it. No valid objection can be
made against that intent. Clearly then, the sale can be given effect to the extent of 9,751 square
meters, her ideal share in the property as found by both the trial and the appellate courts.
Transfer of Property
During her lifetime, Esperanza had already sold to respondent her share in the subject parcel;
hence her heirs could no longer inherit it. The property she had transferred or conveyed no
longer formed part of her estate to which her heirs may lay claim at the time of her death. The
transfer took effect on April 16, 1996 (the date the Deed of Absolute Sale was executed), and
not on May 30, 1997, when the Deed of Absolute Sale was registered. Thus, petitioners’ claim
that the property became theirs upon the death of their mother is untenable.
Second Issue:
Respondent’s Liability
Petitioners insist that the appellate court erred in holding that respondent’s outstanding liability
on the Deed of Sale was P120,000, when the Receipts on record show payments in the total
amount of P320,000 only. They argue that the August 24, 1996 Receipt, on which the appellate
court based its conclusion, was unreliable.
To begin with, this Court is not a trier of facts. 21 It is not its function to examine and determine
the weight of the evidence. Well-entrenched is the doctrine that only errors of law,22 and not of
15

facts, are reviewable by this Court in a petition for review on certiorari under Rule 45 of the
Revised Rules of Court. Philippine Airlines, Inc. v. Court of Appeals23 has held that factual
findings of the Court of Appeals are binding and conclusive upon the Supreme Court. These
findings may be reviewed24 only under exceptional circumstances such as, among others, when
the inference is manifestly mistaken;25 the judgment is based on a misapprehension of facts;26
findings of the trial court contradict those of the CA;27 or the CA manifestly overlooked certain
relevant and undisputed facts that, if properly considered, would justify a different conclusion.28
Although the factual findings of the two lower courts were not identical, we hold that in the
present case, the findings of the CA are in accord with the documents on record. The trial court
admitted in evidence the August 24, 1996 Receipt signed by Antonio Balite. Interestingly, he
was never presented in the lower court to dispute the veracity of the contents of that Receipt,
particularly the second paragraph that had categorically stated the outstanding balance of
respondent as of August 24, 1996, to be P350,000. Furthermore, the evidence shows that
subsequent payments of P30,000 and P200,000 were made by the latter. Thus, we affirm the
CA’s Decision holding that the remaining unpaid balance of the price was P120,000.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against the
petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 142441 November 10, 2004
PEDRO BONGALON now substituted by FILIPINA BONGALON, petitioner,
vs.
COURT OF APPEALS, CECILIO BONGALON and AMPARO BONGALON, respondents.

DECISION

CARPIO, J.:
The Case
This is a petition for review1 of the Decision2 dated 27 November 1992 of the Court of Appeals
and its Resolution dated 23 February 2000. The 27 November 1992 Decision reversed the
Decision3 dated 28 June 1991 of the Regional Trial Court, Branch 17, Tabaco, Albay ("RTC")
while the 23 February 2000 Resolution denied the motion for reconsideration.
The Facts
Pedro Bongalon, the late husband of petitioner Filipina Bongalon ("petitioner"), respondents
Cecilio Bongalon ("Cecilio") and Amparo Bongalon ("Amparo") and four4 others are the children
of the late Cirila Bonga ("Cirila") and Bernabe Bongalon ("Bernabe"). Cirila is one of the five
children of Rosalia Buenaflor ("Rosalia") and Cornelio Bonga ("Cornelio"). The other children of
Rosalia and Cornelio are Trinidad Bonga Bobier ("Trinidad"), Jacoba Bonga Faustino
("Jacoba"), Emilio Bonga ("Emilio") and Benito Bonga ("Benito"). Jacoba had three children,
namely, Conchita Faustino Base ("Conchita"), Catalina Faustino Conlo ("Catalina"), and
Leonardo Faustino ("Leonardo"). Emilio also had three children, namely, Teodora Bonga Bien
("Teodora"), Francisca Bonga Camba ("Francisca"), and Maxima Bonga Diaz ("Maxima"). It
appears that Jacoba and Emilio predeceased their children.5
Rosalia was the owner of Lot No. 525-A in A. A. Berces St., Tabaco, Albay measuring 149
square meters and covered by Original Certificate of Title No. RO-17402 (23825) ("OCT No.
RO-17402") issued in her name. OCT No. RO-17402 was later cancelled and replaced by
Transfer Certificate of Title No. T-67656 ("TCT No. T-67656") also issued in Rosalia’s name.6
Rosalia died intestate in 1940, survived by her husband and five children.
16

On 26 July 1943, Trinidad, Conchita, and Teodora executed a Deed of Absolute Sale ("Exhibit
2")7 conveying to Cirila "a part of" Lot No. 525-A for P100. On the same day, Cirila, and again
Trinidad, Conchita, and Teodora, executed a Deed of Absolute Sale ("Exhibit B")8 conveying to
Pedro Bongalon "a part of" Lot No. 525-A also for P100. The same notary public notarized both
deeds of sale on that same day. On 22 February 1971, Cirila executed another Deed of
Absolute Sale ("22 February 1971 Deed of Sale")9 conveying Lot No. 525-A to Amparo for
P4,500. Amparo subsequently declared Lot No. 525-A in her name for tax purposes and paid
the real estate taxes in 1977 and 1978. Even before the execution of the 22 February 1971
Deed of Sale, Amparo and her family were already occupying a 32-square meter portion of Lot
No. 525-A where her house stands.10
Meanwhile, on 30 January 1979, Pedro Bongalon executed an Extrajudicial Settlement of
Estate ("Extrajudicial Settlement") declaring that Cirila is the only heir of Rosalia and that he
(Pedro Bongalon) is, in turn, the only heir of Cirila. Based on this Extrajudicial Settlement, Pedro
Bongalon secured the cancellation of TCT No. T-67656 and obtained Transfer Certificate of
Title No. T-67780 ("TCT No. T-67780") issued in his name.
In March 1988, Pedro Bongalon sued respondents in the RTC for "Quieting of Title, Recovery of
Portion of Property and Damages." Pedro Bongalon alleged in his complaint that: (1) he is the
registered owner of Lot No. 525-A under TCT No. T-67780; (2) respondents occupied Lot No.
525-A through his tolerance; (3) he had several times asked respondents to vacate Lot No. 525-
A but they refused to do so; and (4) respondents’ occupancy of Lot No. 525-A and their claim of
ownership over the property cast a cloud over his title. Pedro Bongalon prayed that the RTC
declare his title free of any cloud and order respondents to vacate Lot No. 525-A and pay him
damages and litigation expenses.11
In their Answer with Counterclaim, respondents denied Pedro Bongalon’s allegations.
Respondents claimed that Pedro Bongalon fraudulently obtained TCT No. T-67780 by executing
the Extrajudicial Settlement. Amparo claimed that on the contrary, she is the owner of Lot No.
525-A based on the 22 February 1971 Deed of Sale. As counterclaim, respondents sought the
nullification of the Extrajudicial Settlement and of TCT No. T-67780. Respondents also prayed
for the award of damages and attorney’s fees.12
During the trial, Pedro Bongalon introduced in evidence other documents to prove his ownership
of Lot No. 525-A, such as (1) Exhibit B and (2) Conchita’s Affidavit dated 22 May 1978 ("Exhibit
C")13 confirming the sale under Exhibit B. The RTC admitted these documents in evidence over
the objection of respondents.
For their part, respondents also presented in evidence Exhibit 2 to prove that Cirila owned the
entire Lot No. 525-A which she later sold to Amparo in the 22 February 1971 Deed of Sale.
Before the RTC could render judgment, Amparo died and her surviving spouse and six children
substituted for her.14
The Trial Court’s Ruling
On 28 June 1991, the RTC rendered judgment ("RTC Decision") the dispositive portion of which
provides:
WHEREFORE, summing up the evidence, oral and documentary, presented by both
parties, Judgment is rendered for the plaintiff and against the defendants.
The Court orders, as it is hereby ordered, that the plaintiff is declared the rightful
registered owner of the land consisting of One Hundred Forty Nine (149) square meters,
more or less, located at A. A. Berces St., Tabaco, Albay, under Transfer Certificate of
Title No. T-67780, in the name of Pedro Bongalon, said title is free from defect, flaw and
cloud of doubt, therefore, indefeasible.
The defendants are likewise ordered to vacate and to deliver the portion of the land in
question they have occupied to the plaintiff peacefully. And to pay the costs
proportionately.15
The RTC Decision reads:
17

From the documentary evidence adduced during the hearing by both parties, it appeared
that the real property/land in question was formerly and originally owned by Rosalia
Buenaflor, covered by Original Certificate of Title No.[RO-17402 (23825)], then to
[T-]67656, then to [T-67780], containing an area of One Hundred Forty Nine (149)
square meters, more or less, located at then Taylor Street now A. A. Berces Street,
Tabaco, Albay. Rosalia Buenaflor married Cornelio Bonga and begot children, namely:
Cirila, Trinidad, Jacoba, Emilio and Benito, all surnamed Bonga. Daughter Cirila Bonga
got married to Bernabe Bongalon and begot seven (7) children, namely: Pedro, Cecilio,
Amparo, Eleuteria and others, all surnamed Bongalon.
On July 26, 1943, two (2) documents were executed over the same parcel of land, this in
question (sic).
First document, Exhibit-"2" defendants, Absolute Deed of Sale was executed and signed
by vendors Trinidad Bonga, Conchita Faustino, Teodora Bonga, heirs and children of
Rosalia Buenaflor Bonga, [conveying] a part of the property in question xxx in favor of
vendee Cirila Bonga xxx. Said Absolute Deed of Sale was notarized and acknowledged
on July 26, 1943 by a notary public and entered as Doc. No. 2, Page 15, Book No. 1,
Series of 1943.
Second document, Exhibit –"B" – plaintiff, Absolute Deed of Sale was executed and
signed by vendors Trinidad Bonga, Cirila Bonga, Conchita B. Faustino (sic) and Teodora
Bonga, heirs and children of Rosalia Buenaflor Bonga, [conveying] a part of the property
in question in favor of vendee Pedro Bongalon (son of Cirila Bonga Bongalon), xxxx Said
document was notarized and acknowledged on July 26, 1943 by a Notary Public and
entered as Doc. No. 2, Page No. 15, Book No. 1, Series of 1943.
The Exhibit-"2" for the defendants and the Exhibit-"B" for the plaintiff, contained a
handwritten insertion, to wit, "a part of" and initialled, which is unclear, found in the first
paragraph, later portion. Both documents are (sic) prepared/executed/signed by the
same persons/ signatories, acknowledged and notarized by the same Notary Public,
Zosimo R. Almonte. Both documents, Absolute Deed of Sale, printed and expressed
particular same boundaries and description of the whole area which is One Hundred
Forty Nine (149) square meters, more or less, but did not contain expressly the
part/portion of said property [sold].
Circumstances surrounding the execution of these two (2) documents is concluded (sic)
and construed that Exhibit-"B" for the plaintiff has to be given weight and effect. This, the
entire area of 149 square meters, more or less, is the subject of the sale as Cirila Bonga
is now one of the four (4) vendors. Each vendor shared or owned at least 37 square
meters and 25 centimeters of this land in question, to be candid and clear.
In possession of the Deed of Absolute Sale, vendee Pedro Bongalon applied, processed
and managed to have the ownership of said property transferred in his name by
submitting an Affidavit of Confirmation, by Conchita F. Base, one of the vendors, dated
May 22, 1978 duly subscribed and sworn to by Notary Public Julian C. Cargullo, entered
as Doc. No. 92, Page No. 21, Book No. VII, Series of 1978 and an Extrajudicial
Settlement of Estate, this is a requirement. Finally, Transfer Certificate of Title No. T-
67780 in the name of Pedro Bongalon was issued on [January] 25, 1985. This is an
indefeasible title of ownership in favor of the plaintiff.
On February 22, 1971, again Cirila Bonga, vendor again (sic), executed and signed
another Deed of Absolute Sale, Exhibit-"1" for the defendants, in favor of Amparo
Bongalon Cortezano, vendee, married to Atenogenes A. Cortezano of the same entire
parcel of land in question of 149 square meters, more or less, acknowledged and
notarized by Notary Public Joel C. Atadero, entered as Doc. No. 1031, Page No. 77,
Book No. VII, Series of 1971. By virtue of this instrument, Cortezano, Amparo procured
Tax Declaration No. 0020 in her name declaring the entire 149 square meters for
18

taxation purposes for the year 1985 in her name and where a 32 square meters of a
house (sic) is constructed thereon.
Exhibit-"1" for the defendants, Deed of Absolute Sale by vendor Cirila Bonga to the
latter’s daughter vendee Amparo Bonga Cortezano is defective having a flaw or cloud in
the rights of an owner. She, Cirila Bonga, is not the only owner of said land. Previously
on July 26, 1943 said parcel of land was a subject of Absolute Deed of Sale in favor of
Pedro Bongalon, the brother of vendee of Exhibit-"1" Amparo Bongalon Cortezano, by
the rightful owners/vendors of the land in question.
Yet it can be argued that the plaintiff’s Extrajudicial Settlement of Estate is a defect, a
minor one, but what is controlling is Exhibit-"B", Absolute Deed of Sale in his favor dated
July 26, 1943, and the Affidavit of Confirmation of Conchita F. Base.
xxxx
Considering the evidence, and with careful perusal of the same adduced by both parties
at the hearing, the Court honestly believes, so holds and is of the strong opinion, that the
plaintiff’s cause of action is sufficiently impressed with merit supporting his claim of
possession, as well as ownership of the land.16
Respondents appealed to the Court of Appeals.
The Court of Appeals’ Ruling
In its 27 November 1992 Decision, the Court of Appeals reversed the RTC Decision. The Court
of Appeals held:
PREDICATED on the evidence and the law in point, the appeal in this case is sufficiently
impressed with merit.
IN THE FIRST PLACE, the basis of the complaint filed by the plaintiff-appellee is that he
acquired the property in question by inheritance from his predecessors-in-interest and
not by purchase. This fact is shown by the Annotation xxx of the Extrajudicial Settlement
of Estate xxx which was the supporting document that authorized the cancellation of
TCT No. T-67656 xxx in the name of the original registered owner Rosalia Buenaflor and
the issuance of TCT No. T-67780 in favor of and in the name of plaintiff-appellee Pedro
Bongalon. In other words, the Extrajudicial Settlement of Estate (which is by inheritance)
is the basis of both the complaint and the transfer of the certificate of title from the
original owner to the plaintiff-appellee.
SECONDLY, in the trial of the case, what was introduced in evidence were the Deed of
Absolute Sale (Exhibit "B") and the Affidavit of Confirmation (Exhibit "C"), though these
were never alleged in the complaint. What was alleged in the complaint was the
Extrajudicial Settlement of Estate xxx or the mode of inheritance (sic). That is why, the
defendants-appellants’ counsel vigorously objected of (sic) the admission of Exhibit "B"
and Exhibit "C" on the ground that no evidence can be introduced in support of
allegation not found in the pleadings xxx. Consequently, the trial court should not have
admitted Exhibits "B" and "C" as part of the evidence.
THIRDLY, the only ground upon which plaintiff-appellee can base his stand is the Deed
of Absolute Sale (Exh. "B") and the Deed of Confirmation (Exh. "C") after suppressing
the presentation and submission of xxx the Extrajudicial Settlement of Estate. Since
Exhibit "B" and Exhibit "C" should not have been considered or admitted because the
same were not alleged in the complaint xxx, the only remaining issue is TCT No. T-
67780.
FOURTHLY, plaintiff-appellee Pedro Bongalon, as already stated, executed the
Extrajudicial Settlement of Estate xxx falsely alleging that the original registered owner
Rosalia Buenaflor and husband were survived by their only daughter Cirila Bonga
Bongalon, mother of the plaintiff-appellee, when in fact Cirila Bonga Bongalon was
survived by her seven (7) children namely: Amparo, Cecilio, Eleuterio (sic), Jose, Gloria,
Anastacio and Pedro. The first two names are the defendants-appellants and the last
one is the plaintiff-appellee. Consequently, the Extrajudicial Settlement of Estate is
19

tainted with fraud, brazen lies and grave misrepresentation which the lower court
recognized as a defect, though a minor one, in view of Exhibit "B" and Exhibit "C". It is
inevitable that the trial court should have correctly nullified TCT No. T-67780 on the
aforecited grounds. For well-settled is the rule that when a party resorts to falsehood to
advance his suit, it is presumed that he knows perfectly well that his cause is groundless
and this presumption affects the whole mass of evidence presented by such party xxx.
AFTER a careful review of the entire evidence, We perceive no difficulties in sustaining
the validity of defendants-appellants’ claim or posture.
ACCORDINGLY, in the light of the foregoing disquisitions, the decision of the Court a
quo is hereby REVERSED and SET ASIDE and a new one is rendered dismissing the
case, with costs against the plaintiff-appellee.17 (Capitalization and underlining in the
original)
Pedro Bongalon sought reconsideration but the Court of Appeals denied his motion in its 23
February 2000 Resolution.18
Hence, this petition.19
The Issues
Petitioner raises the following issues for resolution:
I. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE
DECISION OF THE TRIAL COURT;
II. WHETHER THE DECISION OF THE COURT OF APPEALS IS IN ACCORD WITH
THE FACTS, EVIDENCE AND THE PERTINENT LAWS, PARTICULARLY THE
PROVISIONS OF THE CIVIL CODE ON SALE, POSSESSION AND OWNERSHIP.20
In their Comment, Cecilio and the heirs of Amparo reiterate their prayer to nullify TCT No. T-
67780 and the Extrajudicial Settlement.
The Ruling of the Court
The petition is partly meritorious.
On the Admissibility of Exhibits B and C
It was error for the Court of Appeals to rule that the RTC should not have admitted in evidence
Exhibits B and C because Pedro Bongalon failed to allege these documents in his complaint.
What was at issue before the RTC, as raised in the pleadings filed by the parties, was the
ownership of Lot No. 525-A. Pedro Bongalon offered the pieces of evidence in question to
support his claim of ownership over Lot No. 525-A. The fact that Pedro Bongalon did not
mention Exhibits B and C in his complaint is not a reason to rule them inadmissible. While TCT
No. T-67780 was Pedro Bongalon’s principal proof of ownership, it did not preclude him from
presenting other pieces of evidence to prove his claim. This is especially relevant because of his
testimony that he executed the Extrajudicial Settlement only because the Register of Deeds of
Albay required it for the issuance of TCT No. T-67780.21
The Basis and Extent of Pedro Bongalon’s Interest in Lot No. 525-A
There is no dispute that Lot No. 525-A was Rosalia’s paraphernal property. Thus, when Rosalia
died intestate, she passed on this piece of property to her surviving spouse Cornelio and their
five children, namely, Cirila, Trinidad, Jacoba, Emilio, and Benito. These heirs inherited Lot No.
525-A in co-ownership, at 1/6 undivided share each.22 After Cornelio died, his 1/6 undivided
share passed to his surviving five children per stirpes, thus increasing their undivided shares to
1/5 each. The 1/5 undivided share of Jacoba, who apparently predeceased her children
Conchita, Catalina, and Leonardo, passed to Jacoba’s children as co-owners in equal shares.
Likewise, the undivided 1/5 share of Emilio, who also apparently predeceased his children
Teodora, Francisca, and Maxima, passed to Emilio’s children as co-owners in equal shares.
Under Exhibit 2, Trinidad, Teodora, and Conchita sold to Cirila "a part" of Lot No. 525-A on 26
July 1943.23 Since these co-owners could alienate their undivided shares,24 they sold under
Exhibit 2 their undivided shares in Lot No. 525-A to Cirila. Similarly, on the same day, Cirila (and
again Trinidad, Teodora, and Conchita), executed Exhibit B conveying to Pedro Bongalon a
"part of" Lot No. 525-A. Thus, Cirila sold to Pedro Bongalon her original 1/5 share and the
20

combined undivided shares of Trinidad, Teodora and Conchita she earlier acquired under
Exhibit 2.25 The participation of Trinidad, Teodora and Conchita in Exhibit B, while superfluous
(as they had earlier sold their undivided shares to Cirila), does not detract from the validity of
Exhibit B. In sum, Pedro Bongalon’s interest in Lot No. 525-A covers only the undivided shares
of Cirila, Trinidad, Teodora, and Conchita.
Thus, contrary to the RTC Decision, Pedro Bongalon did not acquire ownership of the entire Lot
No. 525-A under Exhibit B. As the other co-owners, namely, the heirs of Benito Bongalon, and
the other children of Jacoba (Catalina and Leonardo) and Emilio (Francisca and Maxima) did
not sign either Exhibit B or Exhibit 2, they remained co-owners of Lot No. 525-A. While each co-
owner has full ownership of his part and may alienate it, the alienation affects only the portion
which pertains to him in the division upon the termination of the co-ownership.26
Neither can petitioner invoke Exhibit C to support her claim that Pedro Bongalon owns the entire
Lot No. 525-A. Conchita stated in that document that all the children and descendants of
Rosalia (except for Cirila)27 sold their respective undivided shares to Pedro Bongalon under
Exhibit B. This statement, however, is obviously false since only Cirila, Trinidad, Teodora and
Conchita signed Exhibit B. The other co-owners of Lot No. 525-A who did not affix their
signatures in such document did not sell their shares to Pedro Bongalon.
On Whether the 22 February 1971 Deed of Sale Casts a Cloud on Pedro Bongalon’s Title
A cloud on title to real property or any interest therein is "any instrument, record, claim,
encumbrance or proceeding which is apparently valid or effective but is in truth and in fact
invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title."28 The Court
finds that the 22 February 1971 Deed of Sale casts a cloud on Pedro Bongalon’s interest over
Lot No. 525-A. While apparently valid, the 22 February 1971 Deed of Sale is in fact void and
prejudicial to the interest of Pedro Bongalon and his heirs. This document purports to show that
Amparo was the owner of such property when in fact she was not. This document is void
because at the time of its execution, Cirila had no more interest to sell in Lot No. 525-A because
she had sold all her interest in that property to Pedro Bongalon in 1943 under Exhibit B. Thus,
Cirila’s other children, including Amparo and Cecilio, cannot claim any interest over Lot No. 525-
A, either by contract, in the case of Amparo, or by hereditary rights, in the case of Cecilio.
Amparo’s subsequent declaration of Lot No. 525-A under her name for tax purposes (and her
payment of the real estate taxes in 1977 and 1978) did not change her status as a stranger to
that property. Cecilio and the heirs of Amparo have no right to remain in Lot No. 525-A much
less construct improvements on that property.
On the Validity of the Extrajudicial Settlement and of TCT No. T-67780
Respondents squarely raised in the RTC and in the Court of Appeals the issue of the validity of
the Extrajudicial Settlement and of TCT No. T-67780. It was thus incumbent upon these courts
to resolve this issue. The RTC failed to do so. On the other hand, the Court of Appeals stated in
its 27 November 1992 Decision that the Extrajudicial Settlement contained material
misrepresentations which nullified TCT No. T-67780. However, the Court of Appeals
inexplicably failed to make a ruling on the status of these two documents in the dispositive
portion of its ruling. This is error. Having taken cognizance of an action for quieting of title, both
courts should have "adjust[ed] all equities of all the parties to the action and determine[d] the
status of all controverted claims to or against the property."29
There is no question that Pedro Bongalon falsely stated in the Extrajudicial Settlement that Cirila
was the only heir of Rosalia and that he (Pedro Bongalon), in turn, was the sole heir of Cirila. As
the Court of Appeals correctly noted, this is not a minor defect but in fact renders the document
void. Consequently, TCT No. T-67780, which the Register of Deeds of Albay issued based on
the Extrajudicial Settlement, must be cancelled. In Ramirez v. CA,30 also involving a case for
quieting of title, this Court annulled several Transfer Certificates of Title on the ground that they
were issued based on void documents.
The cancellation of the Extrajudicial Settlement and TCT No. T-67780 does not deprive Pedro
Bongalon or his heirs of the right to maintain this action for quieting of title. Under Article 477 of
21

the Civil Code, it is sufficient that the plaintiff has legal or equitable title to or interest in the real
property which is the subject matter of the action. Pedro Bongalon’s acquisition of the shares of
Cirila, Trinidad, Conchita, and Teodora vested him with the necessary legal interest over Lot No.
525-A.
WHEREFORE, we GRANT the petition in part. We SET ASIDE the Decision dated 27
November 1992 and the Resolution dated 23 February 2000 of the Court of Appeals. We enter
a new judgment as follows:
(1) The Deed of Sale dated 22 February 1971 and the Deed of Extrajudicial Settlement
dated 30 January 1979 are ANNULLED.
(2) Transfer Certificate of Title No. T-67780 is CANCELLED. The Register of Deeds of
Albay is ordered to restore Transfer Certificate of Title No. T-67656 in the name of
Rosalia Buenaflor, without prejudice to the issuance of another Transfer Certificate of
Title in the name of Pedro Bongalon and the other co-owners of Lot No. 525-A, namely,
Benito Bongalon, Catalina Faustino Conlo, Leonardo Faustino, Francisca Bonga
Camba, and Maxima Bonga Diaz.
(3) Respondent Cecilio Bongalon and the heirs of Amparo Bongalon are ordered to
vacate Lot No. 525-A and to remove all the improvements they have constructed on Lot
No. 525-A.
SO ORDERED.

Republic of the Philipppines

SUPREME COURT
Manila
FIRST DIVISION
[G.R. No. 120972. July 19, 1999]
SPOUSES JOSE and EVANGELINE AGUILAR, SPS. DOMINGO and SIXTA AGUILAR,
AMBROSIO DE LOS REYES, and SPS. FRANCISCO DELOS REYES, EMILIA MERCADO-
REYES, SPS. JOSE and ROSA Y VILLARAMA, RUBY IBANEZ, MAGNO MANALO and
VALENTINO MAGSARILI, petitioners, vs. HON. COURT OF APPEALS, SAN MIGUEL
CORPORATION, PAZ G. PALANCA and ROMEO REYES, Clerk of Court and Ex-Officio
Sheriff and Deputy Sheriff In-Charge, respectively, of the Regional Trial Court, National
Capital Judicial Region, Caloocan City, Metro Manila; ESPERANZA T. ECHIVERRI and
FERNANDO G. CRUZ, Clerk of Court and Ex-Officio Sheriff and Deputy Sheriff In-Charge,
respectively, of the Regional Trial Court, National Capital Judicial Region, Valenzuela,
Metro Manila; JOSE R. ORTIZ, JR. and HECTOR L. GALURA, Clerk of Court, and Ex-
Officio Sheriff and Deputy Sheriff In-Charge, respectively, of the Regional Trial Court,
National Capital Judicial Region, Pasay City, Metro Manila; PIO Z. MARTINEZ and
NICANOR D. BLANCO, Ex-Officio Sheriff and Deputy Sheriff In-Charge, respectively, of
the Regional Trial Court, Fourth Judicial Regional, Antipolo, Rizal, Respondents.
RESOLUTION
KAPUNAN, J.:chanroblesvirtualawlibrary
On July 25, 1995, petitioners Spouses Jose and Evangeline Aguilar, et al., through petitioner
Jose Aguilar, filed a Motion for Extension of Time seeking thirty (30) days from July 26, 1995 to
file a petition for review on certiorari assailing the Court of Appeals Decision dated September
30, 1994 in CA-G.R. CV No. 40901 and Resolution dated February 2, 1995 denying their motion
for reconsideration. Petitioners alleged that they received a copy of the February 2, 1995
Resolution on July 11, 1995 upon follow ups.[1] chanroblesvirtualawlibrary
Private respondent San Miguel Corporation opposed the motion alleging that the decision
petitioners sought to elevate for review to this Court attained finality on March 29, 1995, with
entry of judgment made by the Court of Appeals on May 5, 1995.[2] chanroblesvirtualawlibrary
22

The petition was filed with this Court on August 25, 1995. In its comment, private respondent
reiterated that the disputed decision of the Honorable Court of Appeals can no longer be
reviewed as the same had become final and executory.[3] chanroblesvirtualawlibrary
In our Resolution dated October 5, 1998, we required petitioners to submit to this Court the
name and address of their counsel within ten (10) days from notice. In a Motion dated
November 6, 1998, petitioners asked for "at least thirty (30) days within which to find a Lawyer
to assist [them]."[4] We granted petitioner's motion in a Resolution dated February 10, 1999 and
gave them "an extension of thirty (30) days from the expiration of the original period within
which to submit the name and address of counsel."[5] Until the time of the promulgation of this
resolution, however, petitioner has not complied with the February 10, 1999 Resolution.
chanroblesvirtualawlibrary
The Court of Appeals rollo reveals that a copy of the February 2, 1995 Resolution was sent on
February 7, 1995 to petitioners counsel of record, Atty. Almario T. Amador, through registered
mail, at his address appearing on record. The envelope containing the resolution was, however,
returned to sender Court of Appeals stamped unclaimed. On the envelope also appears
stamped boxes with notations second notice/2-13 and third notice/2-14.[6]
chanroblesvirtualawlibrary
A copy of the resolution was then sent on March 2, 1995 to Jose Aguilar, one of the parties, at
his address appearing on record. The mail was, however, returned to the Court of Appeals with
the annotation moved.[7] chanroblesvirtualawlibrary
Subsequently, on May 5, 1995, the Decision dated September 30, 1994 was entered in the
Book of Judgments of the Court of Appeals per Sec. 8, Rule 13, Revised Rules of Court.[8]
chanroblesvirtualawlibrary
The issue to be resolved is whether service upon Atty. Amador, petitioners counsel of record at
the appellate court, and upon petitioner Jose Aguilar may be deemed complete, so that entry of
judgment was duly made. chanroblesvirtualawlibrary
Petitioners allege receipt of the assailed decision on July 11, 1995. Their motion for extension of
time was filed on July 25, 1995. chanroblesvirtualawlibrary
8, Rule 13 of the Revised Rules of Court[9]provides thus: chanroblesvirtualawlibrary
Completeness of service. - Personal service is complete upon actual delivery. Service by
ordinary mail is complete upon the expiration of five (5) days after mailing, unless the court
otherwise provides. Service by registered mail is complete upon actual receipt by the
addressee; but if he fails to claim his mail from the post office within five (5) days from the date
of first notice of the post master, service shall take effect at the expiration of such
time.chanroblesvirtualawlibrary
The general rule is that service by registered mail is complete upon actual receipt thereof by the
addressee. The exception is where the addressee does not claim his mail within five (5) days
from the date of the first notice of the postmaster, in which case the service takes effect upon
the expiration of such period. chanroblesvirtualawlibrary
Inasmuch as the exception only refers to constructive and not actual service, such exception
must be applied upon conclusive proof that a first notice was duly sent by the postmaster to the
addressee.[10] Not only is it required that notice of the registered mail be sent but that it should
also be delivered to and received by the addressee.[11] Notably, the presumption that official
duty has been regularly performed is not applicable in the situation. It is incumbent upon a party
who relies on constructive service or who contends that his adversary was served with a copy of
a final order or judgment upon the expiration of five days from the first notice of registered mail
sent by the postmaster to prove that the first notice was sent and delivered to the addressee.
[12] chanroblesvirtualawlibrary
The best evidence to prove that notice was sent would be a certification from the postmaster,
who should certify not only that the notice was issued or sent but also as to how, when and to
whom the delivery thereof was made.[13] The mailman may also testify that the notice was
actually delivered.[14] chanroblesvirtualawlibrary
23

In Barrameda v. Castillo,[15] we again faulted the trial court for applying the presumption as to
constructive service literally and rigidly, and for failing to require the adverse party to present the
postmasters certification that a first notice was sent to opposing partys counsel and that notice
was received. The envelope containing the unclaimed mail was presented in court. On its face,
the envelope bore the notation Returned to sender. Reason: Unclaimed. On the back-side of the
envelope bore the legend City of San Pablo, Philippines, Jan. 29, 1966 with the dates 2-3-66
and 2-9-66, and R to S, notified 3/3/66. We stated that the mere exhibition in court of the
envelope containing the unclaimed mail is not sufficient proof that a first notice was sent.
chanroblesvirtualawlibrary
In De la Cruz v. De la Cruz,[16] we held as error the trial courts mere reliance on the notations
on the envelope of the returned order consisting of R & S, unclaimed and the stamped box with
the wordings 2nd notice and last notice indicating that the registered mail was returned to
sender because it was unclaimed in spite of the notices sent by the postmaster to the
addressee. No other proof of actual receipt of the first notice was presented in court.
chanroblesvirtualawlibrary
In another case, Johnson & Johnson (Phils.), Inc. v. Court of Appeals,[17] petitioners assailed
the following resolution of the appellate court: chanroblesvirtualawlibrary
Considering that the copy of the resolution dated November 29, 1990 served upon counsel for
respondent was returned unclaimed on January 3, 1991, and afterwards the same copy sent to
the private respondent itself at given address was likewise returned unclaimed on February 28,
1991, the Court RESOLVED to DECLARE service of the said resolution upon the private
respondent complete as of February 28, 1991, pursuant to Sec. 8, Rule 13, Rules of
Court.chanroblesvirtualawlibrary
We held that the Court of Appeals erred in ruling that therein petitioner had been duly served
with a copy of the assailed resolution, as there was utter lack of sufficient evidence to support
the appellate courts conclusion. Nothing in the records showed how, when, and to whom the
delivery of the registry notices of the registered mail addressed to petitioner was made and
whether said notices were received by the petitioner. The envelope containing the unclaimed
mail merely bore the notation return to sender: unclaimed on its face and Return to: Court of
Appeals at the back. We concluded that the respondent court should not have relied solely on
these notations to support the presumption of constructive service, and accordingly, we set
aside the questioned resolution and ordered the appellate court to properly serve the same on
therein petitioner. chanroblesvirtualawlibrary
In the instant case, in the Court of Appeals rollo there is no postmasters certification to the effect
that the registered mail was unclaimed by the addressee Atty. Amador and thus returned to
sender, after first notice was sent to and received by addressee on a specified date. Thus, there
is no conclusive proof that notice was sent to Atty. Amador and actually received by him. Absent
such proof, the disputable presumption of completeness of service does not arise as to the
registered mail addressed to Atty. Amador. chanroblesvirtualawlibrary
However, even absent proof of completeness of service upon Atty. Amador, we must rule that
service upon petitioner Jose Aguilar himself was complete. chanroblesvirtualawlibrary
Jurisprudence provides that when a party is represented by counsel, notice should be made
upon the counsel of record at his given address to which notices of all kinds emanating from the
court should be sent in the absence of a proper and adequate notice to the court of a change of
address,[18] unless service upon the party himself is by court order.[19] This doctrine is founded
on 2, Rule 13 of the Revised Rules of Court[20] which provides thus: chanroblesvirtualawlibrary
Papers to be filed and served. -- Every order required by its terms to be served, every pleading
subsequent to the complaint, every written motion other than one which may be heard ex parte,
and every written notice, appearance, demand, offer of judgment or similar papers shall be filed
with the court, and served upon the parties affected thereby. If any of such parties has appeared
by an attorney or attorneys, service upon him shall be made upon his attorneys or one of them
unless service upon the party himself is ordered by the court. Where one attorney appears for
24

several parties, he shall only be entitled to one copy of any paper served upon him by the
opposite side. (Underlining supplied.)chanroblesvirtualawlibrary
The mailing of a copy of the February 2, 1994 Resolution to Jose Aguilar was effected by the
Court of Appeals,[21] after the resolution could not be served upon Atty. Almario. It is not
disputed that the mail was sent to the address of Mr. Aguilar on record, but that the mail was
returned to the appellate court with the annotation moved.[22] chanroblesvirtualawlibrary
Notably, petitioners admit that after the preparation and filing of their rejoinder before the
appellate court, Atty. Almario took ill and could no longer discharge his functions as their
counsel.[23] Yet, Atty. Almario, at his address on record, received a copy of the appellate courts
decision.[24] Subsequently, it was Mr. Aguilar himself who signed the motion for
reconsideration.[25] Knowing fully well that Atty. Almario may not be physically up to acting on
any pleading, and petitioners having taken over the following up of the case, it was petitioners
and their counsels responsibility to devise a system for the receipt of mail intended for them.[26]
chanroblesvirtualawlibrary
To rule otherwise considering the circumstances in the instant case would be to negate the
purpose of the rule on completeness of service, which is to place the date of receipt of
pleadings, judgments and processes beyond the power of the party being served to determine
at his pleasure. The finality of a decision is a jurisdictional event which cannot be made to
depend on the convenience of a party.[27] chanroblesvirtualawlibrary
ACCORDINGLY, the Court Resolved to DENY the petition, the decision of the Court of Appeals
in CA-G.R. CV No. 40901 having already been entered in the Book of Judgments of the Court of
Appeals on May 5, 1995. chanroblesvirtualawlibrary
SO ORDERED. chanroblesvirtualawlibrary
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 121157 July 31, 1997

HEIRS OF SEGUNDA MANINGDING, represented by DELFIN, GIL, EMMA, MANUEL,
RACQUEL, ESTER, REMEDIOS and JESSIE, all surnamed PARAYNO, MAXIMA
PARAYNO, LEONARDO PARAYNO and FELICISIMA PARAYNO, petitioners,
vs.
COURT OF APPEALS and ROQUE BAUZON (deceased), represented by his heirs and co-
defendants Luis and Eriberta Bauzon; LUIS BAUZON, ERIBERTA BAUZON (deceased),
substituted by her husband PLACIDO ZULUETA, and JOSE PARAYNO, respondents.

BELLOSILLO, J.:
This is an action for annulment of documents, accounting and partition of two (2) parcels of
land, a riceland and a sugarland, situated in Calasiao, Pangasinan. Petitioners claim that they,
together with private respondents Luis and Eriberta Bauzon, own the disputed lots in common
and pro-indiviso. Luis and Eriberta, the latter represented by her husband Placido Zulueta, aver
that their father Roque Bauzon was the owner of the subject lots by virtue of a deed of donation
propter nuptias. Roque, together with Juan Maningding, Maria Maningding and Segunda
Maningding were the surviving children of Ramon Bauzon y Untalan who died intestate in 1948.
According to petitioners, Roque Bauzon repudiated the co-ownership over the sugarland in
1965 and adjudicated it to himself, 1 and that in 1970 Juan and Maria Maningding renounced
and quitclaimed their shares over the riceland in favor of Roque Bauzon by virtue of an Affidavit
of Quitclaim and Renunciation. 2 Subsequently, Roque Bauzon transferred the riceland to his
son Luis Bauzon and the sugarland to his daughter Eriberta Bauzon, both transactions being
evidenced by deeds of sale.
25

On 31 July 1979 Segunda Maningding died. Her heirs allegedly discovered the transfers made
by Roque Bauzon in favor of his children only in 1986. Consequently, the heirs sought the
partition of the properties as well as the accounting of the produce but were unsuccessful.
On the other hand private respondents aver that the Affidavit of Quitclaim and Renunciation
over the riceland was executed not only by Juan Maningding and Maria Maningding but also by
Segunda Maningding. With regard to the sugarland, Roque Bauzon denied having executed the
Affidavit of Self-Adjudication presented by petitioners. He claimed that he acquired ownership
over both the sugarland and the riceland by donation propter nuptias from his parents Ramon
Bauzon and Sotera Zulueta on 21 April 1926 in consideration of his marriage to Petra Loresco.
Since the death of Ramon Bauzon in 1948, Roque had been in open, continuous, notorious,
adverse and actual possession of the subject properties.
The trial court found that the parcels of land formed part of the estate of Ramon Bauzon and his
wife Sotera Zulueta which, upon their death, devolved by right of succession to their children
Segunda Maningding, Maria Maningding, Juan Maningding and Roque Bauzon in equal pro-
indiviso shares. The court a quo however awarded both parcels to Segunda Maningding and
Roque Bauzon as co-owners in equal shares after finding that Juan Maningding and Maria
Maningding had already executed an Affidavit of Quitclaim and Renunciation. It rejected the
deed of donation for failure to prove its due execution and authenticity and ruled that the same
was negated by the Affidavit of Quitclaim and Renunciation of Juan Maningding and Maria
Maningding in favor of Roque Bauzon and nullified the deed of sale by Roque Bauzon in favor
of Luis Bauzon as regards the riceland and to Eriberta Bauzon with respect to the sugarland. It
concluded that Roque Bauzon could not have validly conveyed both parcels as one-half (1/2) of
each parcel rightfully belonged to Segunda Maningding and her heirs.
The Court of Appeals however ruled that the properties validly pertained to Roque Bauzon by
virtue of the donation propter nuptias. Consequently, the transfers made by Roque Bauzon must
be given effect. However, upon motion for reconsideration, the same deed of donation was
declared null and void by the appellate court for failure to comply with Art. 633 of the old Civil
Code, the law then applicable, which required for the validity of the deed of donation to be in a
public instrument. Nevertheless, the same court maintained that the properties belonged to
Roque Bauzon by virtue of acquisitive prescription.
We agree with the Court of Appeals. Rogue Bauzon acquired ownership over the subject
properties by acquisitive prescription. Prescription, in general, is a mode of acquiring (or losing)
ownership and other real rights through the lapse of time in the manner and under conditions
laid down by law, namely, that the possession should be in the concept of an owner, public,
peaceful, uninterrupted and adverse. 3 Acquisitive prescription is either ordinary or extraordinary.
4
Ordinary acquisitive prescription requires possession in good faith and with just title for ten
(10) years. In extraordinary prescription ownership and other real rights over immovable
property are acquired through uninterrupted adverse possession thereof for thirty (30) years,
without need of title or of good faith. 5
The disputed lots are unregistered lands, both parcels being covered only by tax declarations
formerly in the name of Ramon Bauzon and now transferred to Luis and Eriberta Bauzon. While
tax declarations and receipts are not conclusive evidence of ownership, yet, when coupled with
proof of actual possession, as in the instant case, tax declarations and receipts are strong
evidence of ownership. 6
Even assuming that the donation proper nuptias is void for failure to comply with formal
requisites, 7 it could still constitute a legal basis for adverse possession. With clear and
convincing evidence of possession, a private document of donation may serve as basis for a
claim of ownership. 8 In Pensader v. Pensader 9 we ruled that while the verbal donation under
which the defendant and his predecessors-in-interest have been in possession of the lands in
question is not effective as a transfer of title, still it is a circumstance which may explain the
adverse and exclusive character of the possession. In Espique v. Espique 10 we held —
26

There is no question that the donation in question is invalid because it involves an

immovable property and the donation was not made in a public document as required by
Article 633 of the old Civil Code, in connection with Article 1328 of the same Code
(concerning gifts propter nuptias), but it does not follow that said donation may not serve
as basis of acquisitive prescription when on the strength thereof the done has taken
possession of the property adversely and in the concept of owner, or, as this Court well
said: "While the verbal donation, under which the defendants and his predecessors-in-
interest have been in possession of the lands in question, is not effective as a transfer of
title, yet it is a circumstances which may explain the adverse and exclusive character of
the possession' (Pensader v. Pensader, 47 Phil. 673, 680). This also an action for
partition. It was shown that the donation of the property was made not even in a private
document but only verbally. It was also shown that the defendants, through their
predecessors-in-interest, were in adverse and continuous possession of the lands for a
period of over 30 years. Yet, the court decided the case in favor of defendants on the
ground of acquisitive prescription. There is a close parallelism between the facts of this
case and the present.
xxx xxx xxx
We do not need to stretch our mind to see that under such allegations plaintiffs intended
to convey the idea that defendant has possessed the lands openly, adversely and
without interruption from 1916 to 1949 for he is the one who has possessed and reaped
the whole benefit thereof. As to the character of the possession held by defendant during
that period one cannot also deny that it is in the concept of owner considering that the
lands were donated to him by his predecessors-in-interest on the occasion of his
marriage even if the same was not embodied in a public instrument. The essential
elements constituting acquisitive prescription are therefore present which negative the
right of plaintiffs to ask for partition of said properties. On this point we find pertinent the
following observation of the trial court; "Any person who claims right of ownership over
immovable properties and does not invoke that right but instead tolerated others in
possession for thirty years is guilty of laches and negligence and he must suffer the
consequence of his acts."
In the instant case, Roque Bauzon possessed the subject parcels of land in the concept of
owner by virtue of the donation propter nuptias. The possession was public as it was Roque
Bauzon who personally tilled and cultivated the lots. The acts of reaping the benefits of
ownership were manifest and visible to all. These acts were made more pronounced and public
considering that the parcels of land are located in a municipality wherein ownership and
possession are particularly and normally known to the community. Roque peacefully possessed
the properties as he was never ousted therefrom nor prevented from enjoying their fruits. His
possession was uninterrupted and in good faith because of his well-founded belief that the
donation propter nuptias was properly executed and the grantors were legally allowed to convey
their respective shares in his favor. He likewise appropriated to himself the whole produce of the
parcels of land to the exclusion of all others.
The donation propter nuptias was effected as early as 21 April 1926. It was only in 1986 when
the heirs of Segunda Maningding demanded partition of the properties and conveyance of the
produce. Sixty (60) years have already elapsed. Even granting that Roque Bauzon possessed
the properties only upon the death of his father in 1948, more than thirty (30) years have already
passed. In either case, acquisitive prescription has already set in in favor of Roque Bauzon.
Again, even if we assume the absence of good faith and just title, the ownership of the two (2)
parcels would still appertain to Roque Bauzon. As testified to by Delfin Parayno, one of
petitioners, Roque Bauzon and his heirs had been in continuous, adverse and public
possession of the property since 1948 up to 1986, or a period of thirty-six (36) years, which is
more than the required thirty-year extraordinary prescription.
27

Prescription, as a rule, does not run in favor of a co-heir or co-owner as long as he expressly or
impliedly recognizes the co-ownership. 11 Co-owners cannot acquire by prescription the share of
the other co-owners, absent a clear repudiation of the co-ownership. In order that title may
prescribe in favor of one of the co-owners, it must be clearly shown that he has repudiated the
claims of the others, and that they were apprised of his claim of adverse and exclusive
ownership, before the prescriptive period would begin to run. Mere refusal to accede to a
partition, without specifying the grounds for such refusal, cannot be considered as notice to the
other co-owners of the occupant's claim of title in himself in repudiation of the co-ownership.
The evidence relative to the possession, as a fact upon which the alleged prescription is based,
must be clear, complete and conclusive in order to establish said prescription without any
shadow of doubt; and when upon trial it is not shown that the possession of the claimant has
been adverse and exclusive and opposed to the rights of the others, the case is not one of
ownership, and partition will lie. 12
Therefore while prescription among co-owners cannot take place when the acts of ownership
exercised are vague and uncertain, such prescription arises and produces all its effects when
the acts of ownership do not evince any doubt as to the ouster of the rights of the other co-
owners. 13 As disclosed by the records, Roque Bauzon and his heirs possessed the property
from 1948 to 1986 to the exclusion of petitioners who were never given their shares of the fruits
of the properties, for which reason they demanded an accounting of the produce and the
conveyance to them of their shares. Unfortunately they slept on their rights and allowed almost
thirty-six (36) years to lapse before attempting to assert their right. Perforce, they must suffer
the consequence of their inaction.
WHEREFORE, the petition is DENIED. The Resolution of the Court of Appeals of 7 July 1995
which modified its Decision of 29 November 1994 and holding that the deceased Roque Bauzon
acquired the disputed two (2) parcels of land by acquisitive prescription is AFFIRMED. Costs
against petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 78178 April 15, 1988
DELIA BAILON-CASILAO, LUZ PAULINO-ANG, EMMA PAULINO-YBANEZ, NILDA
PAULINO-TOLENTINO, and SABINA BAILON, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and CELESTINO AFABLE, respondents.
Veronico E. Rubio for petitioners.
Mario G. Fortes for private-respondent.

CORTES, J.:
The fate of petitioners' claim over a parcel of land rests ultimately on a determination of whether
or not said petitioners are chargeable with such laches as may effectively bar their present
action.
The petitioners herein filed a case for recovery of property and damages with notice of lis
pendens on March 13, 1981 against the defendant and herein private respondent, Celestino
Afable. The parcel of land involved in this case, with an area of 48,849 square meters, is
covered by Original Certificate of Title No. 1771 issued on June 12, 1931, in the names of
Rosalia, Gaudencio, Sabina Bernabe, Nenita and Delia, all surnamed Bailon, as co-owners,
each with a 1/6 share. Gaudencio and Nenita are now dead, the latter being represented in this
case by her children. Luz, Emma and Nilda. Bernabe went to China in 1931 and had not been
heard from since then [Decision of the Court of Appeals, Rollo, p. 39].
28

It appears that on August 23, 1948, Rosalia Bailon and Gaudencio Bailon sold a portion of the
said land consisting of 16,283 square meters to Donato Delgado. On May 13, 1949, Rosalia
Bailon alone sold the remainder of the land consisting of 32,566 square meters to Ponciana V.
Aresgado de Lanuza. On the same date, Lanuza acquired from Delgado the 16,283 square
meters of land which the latter had earlier acquired from Rosalia and Gaudencio. On December
3, 1975, John Lanuza, acting under a special power of attorney given by his wife, Ponciana V.
Aresgado de Lanuza, sold the two parcels of land to Celestino Afable, Sr.
In all these transfers, it was stated in the deeds of sale that the land was not registered under
the provisions of Act No. 496 when the fact is that it is. It appears that said land had been
successively declared for taxation first, in the name of Ciriaca Dellamas, mother of the
registered co-owners, then in the name of Rosalia Bailon in 1924, then in that of Donato
Delgado in 1936, then in Ponciana de Lanuza's name in 1962 and finally in the name of
Celestino Afable, Sr. in 1983.
In his answer to the complaint filed by the herein petitioners, Afable claimed that he had
acquired the land in question through prescription and contended that the petitioners were guilty
of laches.He later filed a third-party complaint against Rosalia Bailon for damages allegedly
suffered as a result of the sale to him of the land.
After trial, the lower court rendered a decision:
1. Finding and declaring Celestino Afable, a co-owner of the land described in
paragraph III of the complaint having validly bought the two-sixth (2/6) respective
undivided shares of Rosalia Bailon and Gaudencio Bailon;
2. Finding and declaring the following as pro-indiviso co-owners, having 1/6
share each, of the property described in paragraph III of the complaint, to wit:
a. Sabina Bailon
b. Bernabe Bailon
c. Heirs of Nenita Bailon-Paulino
d. Delia Bailon-Casilao;
3. Ordering the segregation of the undivided interests in the property in order to
terminate co-ownership to be conducted by any Geodetic Engineer selected by
the parties to delineate the specific part of each of the co-owners.
4. Ordering the defendant to restore the possession of the plaintiffs respective
shares as well as all attributes of absolute dominion;
5. Ordering the defendant to pay the following:
a. P5,000.00 as damages;
b. P2,000.00 as attorney's fees and;
c. to pay the costs.
[Decision of the Trial Court, Rollo, p. 37-38].
On appeal, the respondent Court of Appeals affirmed the decision of the lower court insofar as it
held that prescription does not he against plaintiffs-appellees because they are co-owners of the
original vendors. However, the appellate court declared that, although registered property
cannot be lost by prescription, nevertheless, an action to recover it may be barred by laches,
citing the ruling in Mejia de Lucaz v. Gamponia [100 Phil. 277 (1956)]. Accordingly, it held the
petitioners guilty of laches and dismissed their complaint. Hence, this petition for review on
certiorari of the decision of the Court of Appeals.
The principal issue to be resolved in this case concerns the applicability of the equitable
doctrine of laches. Initially though, a determination of the effect of a sale by one or more co-
owners of the entire property held in common without the consent of all the co-owners and of
the appropriate remedy of the aggrieved co-owners is required.
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 acts
and benefits pertaining thereto, and he may therefore alienate assign or
29

mortgage it and even substitute another person in its enjoyment, except when
personal rights are involved. But the effect of the alienation or mortgage, with
respect to the co-owners, shall be limited to the portion which may be allotted to
him in the division upon the termination of the co-ownership. [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.
The proper action in cases like this is not for the nullification of the sale or for the recovery of
possession of the thing owned in common from the third person who substituted the co-owner
or co-owners who alienated their shares, but the DIVISION of the common property as if it
continued to remain in the possession of the co-owners who possessed and administered it
[Mainit v. Bandoy, supra.]
Thus, it is now settled that the appropriate recourse of co-owners in cases where their consent
were not secured in a sale of the entire property as well as in a sale merely of the undivided
shares of some of the co-owners is an action. for PARTITION under Rule 69 of the Revised
Rules of Court. Neither recovery of possession nor restitution can be granted since the
defendant buyers are legitimate proprietors and possessors in joint ownership of the common
property claimed [Ramirez v. Bautista, supra].
As to the action for petition, neither prescription nor laches can be invoked.
In the light of the attendant circumstances, defendant-appellee's defense of prescription is a
vain proposition. Pursuant to Article 494 of the Civil Code, '(n)o co-owner shall be obliged to
remain in the co-ownership. Such co-owner may demand at anytime the partition of the thing
owned in common, insofar as his share is concerned.' [Emphasis supplied.] In Budiong v.
Bondoc [G.R. No. L-27702, September 9, 1977, 79 SCRA 241, this Court has interpreted said
provision of law to mean that the action for partition is imprescriptible or cannot be barred by
prescription. For Article 494 of the Civil Code explicitly declares: "No prescription shall lie in
favor of a co-owner or co- heir so long as he expressly or impliedly recognizes the co-
ownership."
Furthermore, the disputed parcel of land being registered under the Torrens System, the
express provision of Act No. 496 that '(n)o title to registered land in derogation to that of the
registered owner shall be acquired by prescription or adverse possession' is squarely
applicable. Consequently, prescription will not lie in favor of Afable as against the petitioners
who remain the registered owners of the disputed parcel of land.
It is argued however, that as to the petitioners Emma, Luz and Nelda who are not the registered
co-owners but merely represented their deceased mother, the late Nenita Bailon, prescription
lies.Respondents bolster their argument by citing a decision of this Court in Pasion v. Pasion
[G.R.No. L-15757, May 31, 1961, 2 SCRA 486, 489] holding that "the imprescriptibility of a
Torrens title can only be invoked by the person in whose name the title is registered" and that
30

'one who is not the registered owner of a parcel of land cannot invoke imprescriptibility of action
to claim the same.'
Reliance on the aforesaid Pasion case is futile. The ruling therein applies only against
transferees other than direct issues or heirs or to complete strangers. The rational is clear:
If prescription is unavailing against the registered owner, it must be equally
unavailing against the latter's hereditary successors, because they merely step
into the shoes of the decedent by operation of law (New Civil Code, Article 777;
Old Civil Code, Article 657), the title or right undergoing no change by its
transmission mortis causa [Atus, et al., v. Nunez, et al., 97 Phil. 762, 764].
The latest pronouncement of this Court in Umbay v. Alecha [G. R. No. 67284, March 18, 1985,
135 SCRA 427, 429], which was promulgated subsequent to the Pasion case reiterated the
Atus doctrine. Thus:
Prescription is unavailing not only against the registered owner but also against
his hereditary successors, because they merely step into the shoes of the
decedent by operation of law and are merely the continuation of the personality
of their predecessor-in-interest. [Barcelona v. Barcelona, 100 Phil. 251, 257].
Laches is likewise unavailing as a shield against the action of herein petitioners.
Well-stated in this jurisdiction are the four basic elements of laches, namely: (1) conduct on the
part of the defendant or of one under whom he claims, giving rise to the situation of which
complaint is made and for which the complainant seeks a remedy; (2) delay in asserting the
corporations complainant's rights, the complainant having had knowledge or notice of the
defendant's conduct and having been afforded an opportunity to institute suit; (3) lack of
knowledge or notice on the part of the defendant that the complainant would assert the right on
which he bases his suit; and, (4) injury or prejudice to the defendant in the event relief is
accorded to the complainant, or the suit is not held to be barred [Go China Gun, et al. v. Co Cho
et al., 96 Phil. 622 (1955)].
While the first and last elements are present in this case, the second and third elements are
missing.
The second element speaks of delay in asserting the complainant's rights. However, the mere
fact of delay is insufficient to constitute, laches. It is required that (1) complainant must have had
knowledge of the conduct of defendant or of one under whom he claims and (2) he must have
been afforded an opportunity to institute suit. This court has pointed out that laches is not
concerned with the mere lapse of time. Thus:
Laches has been defined as the failure or neglect, for an unreasonable length of
time to do that which by exercising due diligence could or should have been done
earlier; it is negligence or omission to assert a right within a reasonable time
warranting a presumption that the party entitled to assert it either has abandoned
it or declined to assert it. Tijam, et al., v. Sibonghanoy, G.R. No. L-21450, April
25, 1968, 23 SCRA 29,35; Tendo v. Zamacoma, G.R. No. L-63048, August 7,
1985, 138 SCRA 78, 90].
The doctrine of "laches" or of "stale demands" is based upon grounds of public
policy which requires for the peace of society, the discouragement of stale claims
and unlike the statute of limitations, is not a mere question of time but is
principally a question of inequity or unfairness of permitting a right or claim to be
enforced or asserted," [Tijam v. Sibonghanoy, supra, p. 35]. [Emphasis supplied.]
It must be noted that while there was delay in asserting petitioners' rights, such delay was not
attended with any knowledge of the sale nor with any opportunity to bring suit. In the first place,
petitioners had no notice of the sale made by their eldest sister. It is undisputed that the
petitioner co-owners had entrusted the care and management of the parcel of land to Rosalia
Bailon who was the oldest among them [TSN, July 27, 1983, p. 14]. In fact, Nicanor Lee, a son
of Rosalia, who was presented as a witness by the plaintiffs-petitioners, testified on cross-
examination that his mother was only the administrator of the land as she is the eldest and her
31

brothers and sisters were away [TSN, October 5, 1983, p. 15]. Indeed, when Delia Bailon-
Casilao left Sorsogon in 1942 after she got married, it was only in 1983 that she returned.
Sabina on the other hand, is said to be living in Zamboanga while Bernabe who left for China in
1931 has not been heard from since then. Consequently, when Rosalia, from whom the private
respondent derived his title, made the disputed sales covering the entire property, the herein
petitioners were unaware thereof.
In the second place, they were not afforded an opportunity to bring suit inasmuch as until 1981,
they were kept in the dark about the transactions entered into by their sister. It was only when
Delia Bailon-Casilao returned to Sorsogon in 1981 that she found out about the sales and
immediately, she and her co-petitioners filed the present action for recovery of property. The
appellate court thus erred in holding that 'the petitioners did nothing to show interest in the
land." For the administration of the parcel of land was entrusted to the oldest co-owner who was
then in possession thereof precisely because the other co-owners cannot attend to such a task
as they reside outside of Sorsogon where the land is situated. Her co-owners also allowed her
to appropriate the entire produce for herself because it was not even enough for her daily
consumption [TSN, October 5, 1983, pp. 17-18]. And since petitioner was the one receiving the
produce, it is but natural that she was the one to take charge of paying the real estate taxes.
Now, if knowledge of the sale by Rosalia was conveyed to the petitioners only later, they cannot
be faulted for the acts of their co-owner who failed to live up to the trust and confidence
expected of her. In view of the lack of knowledge by the petitioners of the conduct of Rosalia in
selling the land without their consent in 1975 and the absence of any opportunity to institute the
proper action until 1981, laches may not be asserted against the petitioners.
The third element of laches is likewise absent. There was no lack of knowledge or notice on the
part of the defendant that the complainants would assert the right on which they base the suit.
On the contrary, private respondent is guilty of bad faith in purchasing the property as he knew
that the property was co-owned by six persons and yet, there were only two signatories to the
deeds of sale and no special authorization to self was granted to the two sellers by the other co-
owners.
Even as the land here was misrepresented in the deeds of sale as "unregistered," the truth was
that Afable already had notice that the land was titled in the name of six persons by virtue of the
Certificate of Title which was already in his possession even before the sale. Such fact is
apparent from his testimony before the court a quo:
COURT:
Q: From whom did you get the certificate of Title?
A: When it was mortgaged by Ponciana Aresgado.
Q: It was mortgaged to you before you bought it?
A: Yes, Your Honor. (TSN, March 5, 1984, p. 12) When cross-
examined, he stated:
Q: Mr. Witness, the original Certificate of Title was given to you in
the year 1974, was it not?
A: 1975.
Q: In 1975, you already discovered that the title was in the name
of several persons, is it not?
A: Yes, sir.
Q: When you discovered that it is in the name of several persons,
you filed a case in court for authority to cancel the title to be
transferred in your name, is it not?
A: Yes, sir.
Q: And that was denied by the Court of First Instance of Sorsogon
because there was ordinary one signatory to the deed of sale
instead of six, was it not?
A: Not one but two signatories.
32

[Decision of the Regional Trial Court of Sorsogon, Rollo, p. 35]

Such actual knowledge of the existence of other co-owners in whose names the lot subject of
the sale was registered should have prompted a searching inquiry by Afable considering the
well- known rule in this jurisdiction that:
... a person dealing with a registered land has a right to rely upon the face of the
Torrens certificate of title and to dispense with the need of inquiring further,
except when the party concerned has actual knowledge of facts and
circumstances that would impel a reasonably cautions man to make such inquiry.
[Gonzales v. IAC and Rural Bank of Pavia, Inc., G.R. No. 69622, January 29,
1988).
Moreover, the undisputed fact is that petitioners are relatives of his wife. As a genuine gesture
of good faith, he should have contacted the petitioners who were still listed as co-owners in the
certificate of title which was already in his possession even before the sale. In failing to exercise
even a minimum degree of ordinary prudence required by the situation, he is deemed to have
bought the lot at his own risk. Hence any prejudice or injury that may be occasioned to him by
such sale must be borne by him.
Indeed, aware of the flaws impairing his title, Afable went to the herein petitioner Delia Bailon-
Casilao, asking the latter to sign a document obviously to cure the flaw [TSN, July 27, 1983,
p.6]. Later, he even filed a petition in the Court of First Instance to register the title in his name
which was denied as aforesaid.
It may be gleaned from the foregoing examination of the facts that Celestino Afable is not a
buyer in good faith. Laches being an equitable defense, he who invokes it must come to the
court with clean hands.
WHEREFORE, the petition for certiorari is hereby GRANTED, the challenged decision of the
Court of Appeals is SET ASIDE, and the decision of the trial court is REINSTATED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 131520 January 28, 2000
ESTELITA AGUIRRE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS and PRIVADO TUPAS and TEOFISTA TUPAS
(deceased) substituted by ROGELIA TUPAS-BARBERS, FRANCISCO SACAPAÑO,
PATERNO SACAPAÑO, GLORIA SACAPAÑO SAMAR, PRODITO SACAPAÑO and
JOSEBEL SACAPAÑO, respondents.
YNARES-SANTIAGO, J.:
The instant Petition for Review on Certiorari seeks a review of the July 15, 1996 Decision of the
Court of Appeals in CA-G.R. CV No. 34715,1 which affirmed the August 21, 1991 Decision of
the Regional Trial Court of Kalibo, Aklan, Branch 8,2 dismissing petitioner's Complaint for
Quieting of Title. Also sought to be reviewed is respondent Court's November 20, 1997
Resolution3 denying petitioner's Motion for Reconsideration.1âwphi1.nêt
The antecedent facts:
On April 30, 1972, petitioner Estelita Aguirre and private respondent Teofista S. Tupas entered
into a Deed of Absolute Sale4 covering a 3,230 square meter parcel of land located in Balabag,
Malay, Aklan, in what is more popularly known as Boracay Island. Immediately thereafter,
petitioner took possession and occupied the said parcel of land. On August 15, 1984, however,
claiming to have been disturbed in the possession of the subject land, petitioner filed a
Complaint for Quieting of Title and/or Recovery of Possession with Damages5 against the
spouses Privado Tupas and Teofista S. Tupas. The other private respondents then came in as
intervenors,6 being co-owners with their sister, Teofista S. Tupas, of the subject land.
33

On August 21, 1991, the Regional Trial Court of Kalibo, Aklan rendered judgment dismissing the
Complaint for lack of merit. It found that the contract between the parties was one of equitable
mortgage and not of sale. On appeal, the Court of Appeals affirmed the Decision. With the
denial of her Motion for Reconsideration, petitioner is now before this Court with the instant
Petition for Review on Certiorari anchored upon the following grounds —
I. THE COURT OF APPEALS COMMITTED GRAVE ERROR WHEN IT AFFIRMED
THE FINDING OF THE TRIAL COURT THAT THE EXECUTION OF THE DEED OF
SALE WAS HIGHLY IRREGULAR BECAUSE THE EVIDENCE ON RECORD DOES
NOT SUPPORT SAID CONCLUSION.
II. THE COURT OF APPEALS ERRED IN CONCLUDING THAT AN HEIR SUCH AS IN
THE CASE OF TEOFISTA SACAPAÑO TUPAS CANNOT ALIENATE HER PART OF
THE INHERITANCE WITHOUT THE CONFORMITY OF HER OTHER CO-HEIRS, ONE
OF WHICH IS IN THE PERSON OF GLORIA SAMAR.
III. THE COURT OF APPEALS ERRED IN CONCLUDING THAT THE TRANSACTION
BETWEEN THE PARTIES WAS NOT A SALE BUT AN EQUITABLE MORTGAGE AS
THE SAME IS NOT SUPPORTED BY THE EVIDENCE ON RECORD AS NONE OF
THE CIRCUMSTANCES IN ARTICLE 1602 OF THE CIVIL CODE EXISTS IN THIS
CASE.7
The Petition must be denied.
Although the instant Petition deals mainly with factual questions which generally are beyond the
reach of the review power of this Court, nevertheless, we shall proceed to discuss the validity of
the findings of fact and conclusions of the lower court and the Court of Appeals.
Petitioner argues that the terms of the contract are clear that it is one of sale. It is firmly settled
in jurisprudence, however, that clarity of contract terms and the name given to it does not bar us
from determining the true intent of the parties. Indeed, in Zamora vs. Court of Appeals,8 it was
reiterated that —
In determining the nature of a contract, courts are not bound by the title or name given
by the parties. The decisive factor in evaluating such agreement is the intention of the
parties, as shown not necessarily by the terminology used in the contract but by their
conduct, words, actions and deeds prior to, during and immediately after executing the
agreement. As such therefore, documentary and parol evidence may be submitted and
admitted to prove such intention.
Art. 1602 of the Civil Code enumerates the instances when a contract, regardless of its
nomenclature, may be presumed to be an equitable mortgage, as follows:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another
instrument extending the period of redemption or granting a new period is
executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation.
In any of the foregoing cases, any money, fruits or other benefit to be received by the
vendee as rent or otherwise shall be considered as interest which shall be subject to the
usury laws.
By the terms of Art. 1604, the foregoing provisions "shall also apply to a contract
purporting to be an absolute sale." . . . .
34

This leads us to the pivotal question of whether or not the transaction between the parties was
indeed one of sale, as held out by petitioner, or one of mortgage, as claimed by private
respondents and upheld by both courts below.
As already stated above, Article 1604 of the Civil Code provides that the provisions of Article
1602 shall also apply to a contract purporting to be an absolute sale. The presence of even one
of the circumstances in Article 1602 is sufficient basis to declare a contract as one of equitable
mortgage. The explicit provision of Article 1602 that any of those circumstances would suffice to
construe a contract of sale to be one of equitable mortgage is in consonance with the rule that
the law favors the least transmission of property rights.9 To stress, the existence of any one of
the conditions under Article 1602, not a concurrence, or an overwhelming number of such
circumstances, suffices to give rise to the presumption that the contract is an equitable
mortgage.10
Art. 1602(6), in relation to Article 1604 provides that a contract of sale is presumed to be an
equitable mortgage in any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the performance of any
other obligation. After a careful review of the records of the case, we are convinced that it
qualifies as an equitable mortgage under Article 1602(6). This may be gleaned from the
following circumstances surrounding the transaction —
First, it is not disputed that private respondents spouses Tupas built two cottages on the subject
land as well as operated a sari-sari store and grew banana plants on the same,11 such that, per
petitioner's own account, almost 1/2 half of the area had been occupied by them.12 Despite this
bold possession, petitioner admits that no demand to vacate the land was ever made upon the
spouses Tupas.13 Neither was rent ever collected from them for their occupancy of the land.14
Their possession remained undisturbed for years, until the action below was filed in 1984.
Coming now to the temporary possession of the subject land by petitioner, we find credibility in
private respondents' claim that the spouses Tupas gave petitioner a ten (10) year period to
occupy the subject land as part of their mortgage agreement. That period of time may well be
deemed as the time allotted to the spouses Tupas, as mortgagors, to pay their indebtedness to
petitioner. That petitioner vacated the subject land after having occupied the same15 only
underscores the fact that no sale took place between the parties. Otherwise, why would she, as
rightful owner, abandon the property she already was in possession of, only to leave possession
of the same to her vendor?
It is also of record that private respondents had continued paying tax on the subject land even
after the same had been supposedly "sold" to petitioner.16 On the other hand, while petitioner
presented tax declarations in her favor, the same would show that the taxes for the years 1974-
1980 were only made by petitioner on June 4, 1985,17 almost a year after she had already filed
the suit below.
Yet another indication of their continued ownership of the subject land is Exhibit "E-6", a Sworn
Statement executed by private respondent Teofista Tupas on June 21, 1973, more than a year
after the transaction of April 30, 1972. This Statement was executed in compliance with
Presidential Decree No. 76, issued during the Martial Law period, requiring all land owners to
submit statements of their assets and their corresponding values. Included as an asset in the
Statement is the subject land.
In arguing that the transaction was one of sale, petitioner points out that private respondent
Teofista Tupas was not a debtor at any time prior to the sale; hence, it cannot be held that the
subject land was being used as security for a debt. However, it may be that the debt was given
at the very moment of the mortgage transaction.
All told, we see no reason to depart from the findings and conclusions of both the lower court
and the Court of Appeals.
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 34715 is hereby
AFFIRMED in toto. No pronouncement as to costs.1âwphi1.nêt
SO ORDERED.
35

Possession

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 140228 November 19, 2004
FRANCISCO MEDINA, MARIA MEDINA, RAYMUNDO MEDINA, ENRIQUE MEDINA,
EDGARDO MEDINA, EVELYN MEDINA, ERNIE MEDINA, ELPIDIO MEDINA, EDWIN
MEDINA, ELEONOR MEDINA, TEOFILO MEDINA, JR., EUGENE MEDINA, ELVIRA
MEDINA, ANATALIO MEDINA, MARIO MEDINA, CORNELIO MEDINA, ERNESTO MEDINA,
IGNACIO CONSTANTINO, SANTOS CONSTANTINO, HERMOGENES CONSTANTINO,
FLORENCIO CONSTANTINO, VIRGINIA CONSTANTINO, MARCELO GEREMILLO, ROSILA
GEREMILLO, ERNESTO GEREMILLO, MERCEDES GEREMILLO, MELENCIO GEREMILLO,
BALBINO MEDINA, CRISANTA MEDINA, YOLANDA MEDINA, LYDIA MEDINA, RENATO
MEDINA, EUFEMIA MEDINA, VIRGILIO MEDINA, SONIA MEDINA, LUZVIMINDA MEDINA,
CRISPIN MEDINA, REMIGIO M. RODOLFO, MILAGROS M. RODOLFO, NIDA M. RODOLFO,
BELEN M. RODOLFO, MANUEL M. RODOLFO, ALFREDO M. RODOLFO, SALLY
AREVALO, ELMER AREVALO, CELSO AREVALO, JR., VINCENT AREVALO, NENE
AREVALO, THE HEIRS OF NAZARIA CRUZ and SANTOS AREVALO, petitioners,
vs.
GREENFIELD DEVELOPMENT CORPORATION, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:
The propriety of the writ of preliminary injunction issued by the Regional Trial Court of
Muntinlupa City (Branch 276) in Civil Case No. 98-233 is the sole issue in this petition for review
on certiorari, assailing the decision of the Court of Appeals nullifying said writ.
Petitioners are the grandchildren of Pedro Medina from two marriages. In his first marriage to
Isadora San Jose, Pedro sired three children: Rafael, Rita and Remegia; in his second
marriage, this time to Natalia Mullet, Pedro had five: Cornelio, Brigida, Balbino, Crisanta and
Rosila. Except for Balbino and Crisanta, all of Pedro's children likewise bore children, the
petitioners in this case.1
On June 5, 1962, Pedro, his brother Alberto Medina and his niece Nazaria Cruz (Alberto's
daughter) executed a notarized Contract to Sell in favor of respondent Greenfield Development
Corporation over a parcel of land located in Muntinlupa City, then in the Province of Rizal,
covered by Transfer Certificate of Title (TCT) No. 100177 (Lot 90-A) and measuring 17,121
square meters.2 A notarized Deed of Sale covering said property was subsequently entered into
on June 27, 1962, in favor of respondent, and this time signed by Pedro, Cornelio, Brigida,
Balbino, Gregoria, Crisanta, Rosila, and Alberto, all surnamed Medina, and Nazaria Cruz, as
vendors.3
Thereafter, a notarized Deed of Absolute Sale with Mortgage was executed on September 4,
1964 in favor of respondent over Lot 90-B covered by TCT No. 100178, measuring 16,291
square meters. Signing as vendors were Pedro, Cornelio, Brigida, Balbino, Gregoria, Crisanta,
Rosila, and Alberto, all surnamed Medina, and Nazaria Cruz.4
By virtue of these sales, respondent was able to register in its name the title to the two parcels
of land with TCT No. 100578 covering Lot 90-A and TCT No. 133444 covering Lot 90-B. These
properties were consolidated with other lots and were eventually registered on July 19, 1995, in
the name of respondent under TCT Nos. 202295, 202296 and 202297.5
On November 6, 1998, petitioners instituted Civil Case No. 98-233, an action for annulment of
titles and deeds, reconveyance, damages with preliminary injunction and restraining order,
36

against respondent and the Register of Deeds of Makati.6 Included in the complaint are the heirs
of Nazaria Cruz, as unwilling co-plaintiffs.7 Petitioners allege in their complaint that they are co-
owners of these two parcels of land. While the titles were registered in the names of Pedro,
Alberto, Cornelio, Brigida and Gregoria, all surnamed Medina, they alleged that they were
recognized as co-owners thereof. In support of their case, petitioners maintain that the deeds of
sale on these properties were simulated and fictitious, and the signatures of the vendors therein
were fake. Despite the transfer of the title to respondent's name, they remained in possession
thereof and in fact, their caretaker, a certain Santos Arevalo and his family still reside on a
portion of the property. On July 13, 1998, petitioners caused an adverse claim to be annotated
on the titles. After discovering the annotation, respondent constructed a fence on the property
and posted security personnel, barring their ingress and egress. Thus, petitioners sought,
among others, the issuance of a temporary restraining order and a writ of preliminary injunction
enjoining respondent and its agents and representatives from preventing petitioners to exercise
their rights over the properties.8
Respondent denied the allegations, stating that petitioners have no valid claim on the properties
as it is already titled in its name by virtue of the public documents executed by their
predecessors. As counterclaim, respondent alleged that Santos Arevalo is not petitioners'
caretaker and it was them who employed him as caretaker.9
On January 18, 1999, the trial court issued its resolution granting petitioners' prayer for
injunctive relief. The dispositive portion of the resolution reads:
Let therefore an injunction issue, enjoining and directing defendant GREENFIELD
DEVELOPMENT CORPORATION, its security guards, agents, representatives, and all
those claiming rights under it, from preventing plaintiffs and their caretaker Santos
Arevalo, from entering and going out of the subject premises, and from preventing them
to exercise their property rights, upon payment of a bond in the amount of P100,000.00.
It is SO ORDERED.10
Respondent filed a special civil action for certiorari and prohibition with the Court of Appeals,
docketed as CA-G.R. SP No. 52015. On July 16, 1999, the Court of Appeals11 rendered its
decision nullifying the trial court's resolution, the dispositive portion of which provides:
IN THE (sic) LIGHT OF ALL THE FOREGOING, the petition is hereby GRANTED. The
assailed Resolution of the Public Respondent Judge, dated January 18, 1999, in Civil
Case No. 98-233 is hereby NULLIFIED.
SO ORDERED.12
Petitioners now seek recourse with this Court, alleging the following grounds:
I
THE COURT OF APPEALS ERRED IN RELYING HEAVILY ON THE ANTECEDENT
FACTS NARRATED IN THE PETITION OF THE RESPONDENT IN CA-G.R. SP NO.
52015 AND ADOPTED THE SAME AS ITS OWN WITHOUT EVIDENTIARY SUPPORT
II
THE COURT OF APPEALS COMMITTED A GRAVE ERROR IN UPHOLDING THE
VALIDITY OF THE DEEDS OF SALE IN FAVOR OF THE RESPONDENT AND IN
HOLDING THAT RESPONDENT'S TRANSFER CERTIFICATES OF TITLE ARE VALID
DESPITE THE FACT THAT THE SAID ISSUES ARE YET TO BE TRIED
III
THE COURT OF APPEALS ERRED IN PRESUMING THAT NOTARIZED
DOCUMENTS ARE VALID AND THAT RESPONDENT'S TORRENS TITLES ARE
INDEFEASIBLE ON THE WRONG NOTION THAT THE RESPONDENT WAS
PRESUMED INNOCENT PERSON
IV
THE COURT OF APPEALS COMMITTED A MISTAKE IN HOLDING THAT
RESPONDENT WAS IN CONSTRUCTIVE POSSESSION OF THE SUBJECT
37

PREMISES NOTWITHSTANDING THAT PETITIONERS ARE IN ACTUAL

POSSESSION THEREOF
V
THE COURT OF APPEALS ERRED IN FINDING THAT PETITIONERS' RIGHT TO
IMPUGN RESPONDENT'S TITLES HAVE (SIC) PRESCRIBED SINCE AN ACTION OR
DEFENSE BASED ON THE INEXISTENCE OF A CONTRACT DOES NOT
PRESCRIBE13
As stated at the outset, the sole issue in this case is whether or not the trial court erred in
granting petitioners' prayer for injunctive relief. This Court's resolution will revolve only on the
propriety of the injunction. Any reference to the validity or invalidity of the transfers and the titles
is merely preliminary, as the matter should be resolved after trial on the merits.
It was the trial court's opinion that petitioners are entitled to the injunction for the following
reasons:
The Court however holds suspect the acquisition by Greenfield Development
Corporation of the two parcels. Lot 90-A covered by Transfer Certificate of Title No.
100177, was promised to be sold to defendant under a contract to sell but the other co-
owners did not sign this Contract to Sell, who all denied knowledge of the same. No
contract of Sale followed this Contract to Sell which cannot be the bases of the issuance
of a new title. A Contract to Sell is only a promise to sell, and is not a deed of sale,
specially as this Contact to Sell is not signed by all of the registered owners.
This Court cannot also understand how the document, denominated as DEED OF
ABSOLUTE SALE WITH MORTGAGE can be the bases (sic) of a new title. The
absoluteness of the sale, is contradicted by the mortgage it also provides. There is
absoluteness of sale only when the buyer upon execution of the contract, pay (sic) in full
the consideration and ownership passes to the Vendee. The registered owners of Lot
90-B covered by Transfer Certificate of Title No. 100178 even deny having executed this
document of Deed of Absolute Sale with Mortgage.
Until these matters are threshed out at the trial on the merits, and after this is fully
explained and determined, whether the properties were actually sold to Defendant
Greenfield Development Corporation, irreparable injury will visit the landowner if the
claim of ownership by Greenfield Development Corporation is allowed and not
enjoined.14
The Court of Appeals, however, disagreed with the trial court. It noted that the trial court relied
mainly on petitioners' allegations in the complaint, which were not supported by substantial
evidence, and ignored the presumption of validity ascribed to the duly notarized deeds of
conveyances and the titles issued to respondent. The Court of Appeals also found that
respondent is in constructive possession of the properties in dispute considering that it is
already the registered owner thereof since 1962. Lastly, the Court of Appeals held that
petitioners' right to impugn respondent's title to the property has already prescribed.15
Section 3, Rule 58 of the Rules of Court provides for the grounds justifying the issuance of a
preliminary injunction, to wit:
SEC. 3. Grounds for issuance of preliminary injunction. - A preliminary injunction may be
granted when it is established:
(a) That the applicant is entitled to the relief demanded, and the whole or part of such
relief consists in restraining the commission or continuance of the act or acts complained
of, or in requiring the performance of an act or acts, either for a limited period or
perpetually;
(b) That the commission, continuance or non-performance of the act or acts complained
of during the litigation would probably work injustice to the applicant; or
(c) That a party, court, agency or a person is doing, threatening or is attempting to do, or
is procuring or suffering to be done, some act or acts probably in violation of the rights of
38

the applicant respecting the subject of the action or proceeding, and tending to render
the judgment ineffectual.
The purpose of a preliminary injunction is to prevent threatened or continuous irremediable
injury to some of the parties before their claims can be thoroughly studied and adjudicated. Its
sole aim is to preserve the status quo until the merits of the case can be heard fully.16 Thus, to
be entitled to an injunctive writ, the petitioner has the burden to establish the following
requisites:17
1) a right in esse or a clear and unmistakable right to be protected;
(2) a violation of that right;
(3) that there is an urgent and permanent act and urgent necessity for the writ to prevent
serious damage.
Hence, petitioners' entitlement to the injunctive writ hinges on their prima facie legal right to the
properties subject of the present dispute. The Court notes that the present dispute is based
solely on the parties' allegations in their respective pleadings and the documents attached
thereto. We have on one hand, petitioners' bare assertion or claim that they are co-owners of
the properties sold by their predecessors to respondent, and on the other, respondent's claim of
ownership supported by deeds of conveyances and torrens titles in their favor. From these
alone, it is clear that petitioners failed to discharge the burden of clearly showing a clear and
unmistakable right to be protected. Where the complainant's right or title is doubtful or disputed,
injunction is not proper. The possibility of irreparable damage without proof of actual existing
right is not a ground for an injunction.18
Petitioners contend that the Court of Appeals should not have relied on respondent's allegations
regarding the circumstances surrounding the sales and the transfer of the titles. Petitioners point
out that trial on the merits of the case is still ongoing and respondent is yet to adduce evidence
in support of its contention. The same, however, applies to petitioners' cause of action. They
only have their own allegations and are yet to prove their claim. And as stated earlier, the only
bases from which the propriety of the injunction can be determined are their respective
pleadings and documents. What tilt the balance in respondent's favor are the notarized
documents and the titles to the properties. The well-settled rule is that a document
acknowledged before a notary public enjoys the presumption of regularity. It is a prima facie
evidence of the facts therein stated. To overcome this presumption, there must be presented
evidence that is clear and convincing. Absent such evidence, the presumption must be upheld.19
In addition, the titles in the name of respondent, having been registered under the Torrens
system, are generally a conclusive evidence of the ownership of the land referred to therein,20
and a strong presumption exists that the titles are regularly issued and valid.21 Therefore, until
and unless petitioners show that the documents are indeed spurious and the titles invalid, then
the presumptions must prevail at this juncture.
Petitioners, however, argue that the presumption of validity of the notarized documents and
titles cannot be applied in respondent's case as it is not an innocent purchaser.22 According to
petitioners, respondent is fully aware that at the time that the Contract to Sell was entered into in
1962, Leon Medina who is a co-owner of the property then covered by TCT No. 21314, was
already dead. Suffice it to say that these arguments already involve the merits of the main case
pending before the trial court, which should not even be preliminarily dealt with, as it would be
premature.
Equally pertinent is the rule that courts should avoid issuing a writ of preliminary injunction,
which in effect, would dispose of the main case without trial.23 The ground relied upon by the
trial court in issuing the writ of preliminary injunction in this case is its doubt over the acquisition
of the properties by respondent.24 Such basis would be virtually recognizing petitioners' claim
that the deeds of conveyances and the titles are a nullity without further proof, to the detriment
of the doctrine of presumption of validity in favor of these documents. There would, in effect, be
a prejudgment of the main case and a reversal of the rule on the burden of proof since it would
assume the proposition which the petitioners are inceptively duty bound to prove.25
39

Petitioners also claim that they are in actual possession of the property. As alleged in their
complaint, they instituted Santos Arevalo, a co-petitioner, as caretaker.26 They also alleged in
their petition filed before this Court that Balbino and Yolanda Medina and their respective
families are still residing on a portion of the property.27 Respondent belies their claim, declaring
that it employed Arevalo as caretaker. Respondent presented a notarized Receipt and Quitclaim
dated April 26, 1994, signed by Arevalo, who attested that he was employed by respondent as
caretaker and that his stay on the property was a mere privilege granted by respondent.
Possession and ownership are two different legal concepts. Just as possession is not a definite
proof of ownership, neither is non-possession inconsistent with ownership. Even assuming that
petitioners' allegations are true, it bears no legal consequence in the case at hand because the
execution of the deeds of conveyances is already deemed equivalent to delivery of the property
to respondent, and prior physical delivery or possession is not legally required.28 Under Article
1498 of the Civil Code, "when the sale is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the object of the contract, if from the deed the
contrary does not appear or cannot be inferred." Possession is also transferred, along with
ownership thereof, to respondent by virtue of the notarized deeds of conveyances.29
In sum, the trial court committed grave abuse of discretion in issuing the writ of preliminary
injunction, and the Court of Appeals was correct in nullifying the same.
The Court, however, finds that it was precipitate for the Court of Appeals to rule that petitioners'
action is barred by prescription. As previously stressed, the parties are yet to prove their
respective allegations and the trial court is yet to receive the evidence. There is nothing on
record that can conclusively support the conclusion that the action is barred by prescription.
Hence, the Court of Appeals should not have made such ruling.
WHEREFORE, the petition is hereby DENIED for lack of merit. The Decision dated July 16,
1999 rendered by the Court of Appeals in CA-G.R. SP No. 52015 is AFFIRMED, except as to its
view on prescription, as discussed in the body of the text.
Let the original records of this case be remanded to the Regional Trial Court of Muntinlupa City
(Branch 276) with dispatch for further proceedings.
SO ORDERED
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 149844 October 13, 2004
MIGUEL CUENCO, Substituted by MARIETTA C. CUYEGKENG, petitioner,
vs.
CONCEPCION CUENCO Vda. DE MANGUERRA, respondent.
DECISION
PANGANIBAN, J.:
Inasmuch as the facts indubitably and eloquently show an implied trust in favor of respondent,
the Court of Appeals did not err in affirming the Decision of the Regional Trial Court ordering
petitioner to convey the subject property to her. That Decision satisfied the demands of justice
and prevented unjust enrichment.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, challenging the August
22, 2001 Decision2 of the Court of Appeals (CA) in CA-GR CV No. 54852. The assailed
Decision disposed as follows:
"WHEREFORE, the decision appealed from is AFFIRMED."3
On the other hand, the Regional Trial Court (RTC) Decision affirmed by the CA disposed as
follows:
"WHEREFORE, considering that this action is essentially one for reconveyance or
enforcement of a trust, judgment is hereby rendered ordering the substituted defendant
40

Marietta Cuenco Cuyegkeng to reconvey or transfer, in a duly registrable public

instrument, Lot No 903-A-6 under TCT No. 113781 of the Registry of Deeds of Cebu
City, of the Banilad Estate with an area of 834 square meters, in favor of plaintiff
Concepcion Cuenco Vda. De Manguerra; or should the substituted defendant, for one
reason or another, fail to execute the necessary instrument once the decision becomes
final, the Clerk of Court of this Court (RTC) is hereby instructed, in accordance with the
Rules of Court, to prepare and execute the appropriate and requisite conveyance and
instrument in favor of herein plaintiff which, in either case, shall be registered with the
Office of the Register of Deeds of Cebu City.
Without costs in this instance."4
The Facts
The facts were summarized by the appellate court as follows:
"On September 19, 1970, the [respondent] filed the initiatory complaint herein for specific
performance against her uncle [Petitioner] Miguel Cuenco which averred, inter alia that
her father, the late Don Mariano Jesus Cuenco (who became Senator) and said
[petitioner] formed the ‘Cuenco and Cuenco Law Offices’; that on or around August 4,
1931, the Cuenco and Cuenco Law Offices served as lawyers in two (2) cases entitled
‘Valeriano Solon versus Zoilo Solon’ (Civil Case 9037) and ‘Valeriano Solon versus
Apolonia Solon’ (Civil Case 9040) involving a dispute among relatives over ownership of
lot 903 of the Banilad Estate which is near the Cebu Provincial Capitol; that records of
said cases indicate the name of the [petitioner] alone as counsel of record, but in truth
and in fact, the real lawyer behind the success of said cases was the influential Don
Mariano Jesus Cuenco; that after winning said cases, the awardees of Lot 903
subdivided said lot into three (3) parts as follows:
Lot 903-A: 5,000 [square meters]: Mariano Cuenco’s attorney’s fees
Lot 903-B: 5,000 [square meters]: Miguel Cuenco’s attorney’s fees
Lot 903-C: 54,000 [square meters]: Solon’s retention
"That at the time of distribution of said three (3) lots in Cebu, Mariano Jesus Cuenco was
actively practicing law in Manila, and so he entrusted his share (Lot 903-A) to his brother
law partner (the [petitioner]); that on September 10, 1938, the [petitioner] was able to
obtain in his own name a title for Lot 903-A (Transfer Certificate of Title [TCT] RT-6999
[T-21108]); that he was under the obligation to hold the title in trust for his brother
Mariano’s children by first marriage; that sometime in 1947, the Cuenco family was
anticipating Mariano’s second marriage, and so on February 1, 1947, they partitioned
Lot 903-A into six (6) sub-lots (Lots 903-A-1 to 903-A-6) to correspond to the six (6)
children of Mariano’s first marriage (Teresita, Manuel, Lourdes, Carmen, Consuelo, and
Concepcion); that the [petitioner] did not object nor oppose the partition plan; that on
June 4, 1947, the [petitioner] executed four (4) deeds of donation in favor of Mariano’s
four (4) children: Teresita, Manuel, Lourdes, and Carmen, pursuant to the partition plan
(per notary documents 183, 184, 185, 186, Book III, Series 1947 of Cebu City Notary
Public Candido Vasquez); that on June 24, 1947, the [petitioner] executed the fifth deed
of donation in favor of Mariano’s fifth child – Consuelo (per notary document 214, Book
III, Series 1947 of Cebu City Notary Public Candido Vasquez) (Exhibits ‘2’ to ‘5’); that
said five (5) deeds of donation left out Mariano’s sixth child – Concepcion – who later
became the [respondent] in this case; that in 1949, [respondent] occupied and fenced a
portion of Lot 903-A-6 for taxation purposes (Exhibit ‘F’, Exhibit ‘6’); that she also paid
the taxes thereon (Exhibit ‘G’); that her father died on February 25, 1964 with a Last Will
and Testament; that the pertinent portion of her father’s Last Will and Testament
bequeaths the lot.
‘… near the Cebu provincial capitol, which were my attorney’s fees from my
clients, Victoria Rallos and Zoilo Solon, respectively – have already long been
41

disposed of, and distributed by me, through my brother, Miguel, to all my said
children in the first marriage;’
"That on June 3, 1966, the [petitioner] wrote a letter petitioning the Register of Deeds of
Cebu to transfer Lot 903-A-6 to his name on the ground that Lot 903-A-6 is a portion of
Lot 903-A; that on April 6, 1967, the [respondent] requested the Register of Deeds to
annotate an affidavit of adverse claim against the [petitioner’s] TCT RT-6999 (T-21108)
which covers Lot 903-A; that on June 3, 1967, the Register of Deeds issued TCT 35275
covering Lot 903-A-6 in the name of the [petitioner] but carrying the earlier annotation of
adverse claim; that in 1969, the [petitioner] tore down the wire fence which the
[respondent] constructed on Lot 903-A-6 which compelled the latter to institute the
instant complaint dated August 20, 1970 on September 19, 1970.
"On December 5, 1970, the answer with counterclaim dated December 3, 1970 of
[petitioner] Miguel Cuenco was filed where he alleged that he was the absolute owner of
Lot 903-A-6; that this lot was a portion of Lot 903-A which in turn was part of Lot 903
which was the subject matter of litigation; that he was alone in defending the cases
involving Lot 903 without the participation of his brother Mariano Cuenco; that he
donated five (5) of the six (6) portions of Lot 903-A to the five (5) children of his brother
Mariano out of gratitude for the love and care they exhibited to him (Miguel) during the
time of his long sickness; that he did not give or donate any portion of the lot to the
[respondent] because she never visited him nor took care of him during his long
sickness; that he became critically ill on February 11, 1946 and was confined at the
Singian’s Clinic in Manila and then transferred to Cebu where he nearly died in 1946;
that his wife Fara Remia Ledesma Cuenco had an operation on January 1951 and was
confined at the University of Santo Tomas Hospital and John Hopkins Hospital in the
United States; that two of his children died at the University of Santo Tomas Hospital in
1951 and 1952; and that his wife was blind for many months due to malignant
hypertension but [respondent] never remembered her nor did she commiserate with him
and his wife in their long period of sorrow.
"[Petitioner] Miguel Cuenco took the witness stand as early as September 13, 1974. His
self-conducted direct examination lasted until 1985, the last one on November 22, 1985.
Unfortunately, he died5 before he was able to submit himself for cross-examination and
so his testimony had to be stricken off the record. His only surviving daughter, Marietta
Cuyegkeng, stood as the substitute [petitioner] in this case. She testified that she
purchased Lot 903-A-6 (the property subject matter of this case) from her late father
sometime in 1990 and constructed a house thereon in the same year; that she became
aware of this case because her late father used to commute to Cebu City to attend to
this case; and that Lot 903-A-6 is in her name per Transfer Certificate of Title #113781 of
the Registry of Deeds for Cebu."6
Ruling of the Court of Appeals
The CA found respondent’s action not barred by res judicata, because there was "no identity of
causes of action between the Petition for cancellation of adverse claim in L.R.C. Records 5988
and the Complaint for specific performance to resolve the issue of ownership in Civil Case No.
R-11891."
The appellate court further found no reason to disturb the findings of the trial court that
respondent "has the legal right of ownership over lot 903-A-6." The CA ruled that the subject
land "is part of the attorney’s fees of Don Mariano Cuenco, predecessor-in-interest of
[Respondent] Concepcion Cuenco vda. de Manguerra and [petitioner] merely holds such
property in trust for [her], his title there[to] notwithstanding."
Finally, the CA held that the right of action of respondent "has not yet prescribed as she was in
possession of the lot in dispute and the prescriptive period to file the case commences to run
only from the time she acquired knowledge of an adverse claim over [her] possession."
Hence, this Petition.7
42

The Issues
In her Memorandum, petitioner raises the following issues for our consideration:
"I.
On question of law, the Court of Appeals failed to consider facts of substance and
significance which, if considered, will show that the preponderance of evidence is in
favor of the petitioner.
"II.
On question of law, the Court of Appeals failed to appreciate the proposition that,
contrary to the position taken by the trial court, no constructive or implied trust exists
between the parties, and neither is the action one for reconveyance based upon a
constructive or implied trust.
"III.
On question of law, the Court of Appeals erred in not finding that even where implied
trust is admitted to exist the respondent’s action for relief is barred by laches and
prescription.
"IV.
On question of law, the trial court and the appellate court erred in expunging from the
records the testimony of Miguel Cuenco."8
This Court’s Ruling
The Petition has no merit.
First Issue:
Evaluation of Evidence
Petitioner asks us to appreciate and weigh the evidence offered in support of the finding that Lot
903-A-6 constituted a part of Mariano Cuenco’s share in the attorney’s fees. In other words, she
seeks to involve us in a reevaluation of the veracity and probative value of the evidence
submitted to the lower court. What she wants us to do is contrary to the dictates of Rule 45 that
only questions of law may be raised and resolved in a petition for review. "Absent any whimsical
or capricious exercise of judgment, and unless the lack of any basis for the conclusions made
by the lower courts be amply demonstrated, the Supreme Court will not disturb such factual
findings."9
As a rule, findings of fact of the Court of Appeals affirming those of the trial court are binding
and conclusive. Normally, such factual findings are not disturbed by this Court, to which only
questions of law may be raised in an appeal by certiorari.10 This Court has consistently ruled
that these questions "must involve no examination of the probative value of the evidence
presented by the litigants or any of them."11 Emphasizing the difference between the two types
of question, it has explained that "there is a question of law in a given case when the doubt or
difference arises as to what the law is pertaining to a certain state of facts, and there is a
question of fact when the doubt arises as the truth or the falsity of alleged facts."12
Indeed, after going over the records of the present case, we are not inclined to disturb the
factual findings of the trial and the appellate courts, just because of the insistent claim of
petitioner. His witnesses allegedly testified that Civil Case No. 9040 involving Lot 903 had not
been handled by Mariano for defendants therein -- Apolonia Solon, Zoilo Solon, et al. It has
sufficiently been proven, however, that these defendants were represented by the Cuenco and
Cuenco Law Office, composed of Partners Mariano Cuenco and Miguel Cuenco.
Given as attorney’s fees was one hectare of Lot 903, of which two five-thousand square meter
portions were identified as Lot 903-A and Lot 903-B. That only Miguel handled Civil Case No.
9040 does not mean that he alone is entitled to the attorney’s fees in the said cases. "When a
client employs the services of a law firm, he does not employ the services of the lawyer who is
assigned to personally handle the case. Rather, he employs the entire law firm."13 Being a
partner in the law firm, Mariano -- like Miguel -- was likewise entitled14 to a share in the
attorney’s fees from the firm’s clients. Hence, the lower courts’ finding that Lot 903-A was a part
of Mariano Cuenco’s attorney’s fees has ample support.
43

Second Issue:
Implied Trust
Petitioner then contends that no constructive or implied trust exists between the parties.
A trust is a legal relationship between one having an equitable ownership in a property and
another having legal title to it.15
Trust relations between parties may either be express or implied.16 Express trusts are created
by the direct and positive acts of the parties, indicated through some writing, deed, will, or words
evidencing an intention to create a trust.17 On the other hand, implied trusts are those that,
"without being express, are deducible from the nature of the transaction as matters of intent[;] or
which are superinduced on the transaction by operation of law as a matter of equity,
independently of the particular intention of the parties. Implied trusts may either be resulting or
constructive trusts, both coming into being by operation of law."18
Resulting trusts are presumed to have been contemplated by the parties and are based on the
equitable doctrine that valuable consideration, not legal title, determines the equitable title or
interest.19 These trusts arise from the nature of or the circumstances involved in a transaction,20
whereby legal title becomes vested in one person, who is obligated in equity to hold that title for
the benefit of another.
Constructive trusts are "created by the construction of equity in order to satisfy the demands of
justice and prevent unjust enrichment. They arise contrary to intention against one who, by
fraud, duress or abuse of confidence, obtains or holds the legal right to property which he ought
not, in equity and good conscience, to hold."21
A review of the records shows that indeed there is an implied trust between the parties.
Although Lot 903-A was titled in Miguel’s name, the circumstances surrounding the acquisition
and the subsequent partial dispositions of this property eloquently speak of the intent that the
equitable or beneficial ownership of the property should belong to Mariano and his heirs.
First, Lot 903-A was one half of the one-hectare portion of Lot 903 given as attorney’s
fees by a client of the law firm of Partners Miguel and Mariano Cuenco. It constituted the
latter’s share in the attorney’s fees and thus equitably belonged to him, as correctly
found by the CA. That Lot 903-A had been titled in the name of Miguel gave rise to an
implied trust between him and Mariano, specifically, the former holds the property in trust
for the latter. In the present case, it is of no moment that the implied trust arose from the
circumstance -- a share in the attorney’s fees -- that does not categorically fall under
Articles 1448 to 1456 of the Civil Code. The cases of implied trust enumerated therein
"does not exclude others established by the general law of trust."22
Second, from the time it was titled in his name in 1938,23 Lot 903-A remained undivided
and untouched24 by Miguel. Only on February 3, 1947, did Lourdes Cuenco,25 upon the
instruction of Mariano, have it surveyed and subdivided into six almost equal portions --
903-A-1 to 903-A-6. Each portion was specifically allocated to each of the six children of
Mariano with his first wife.26
Third, Miguel readily surrendered his Certificate of Title27 and interposed no objection28 to
the subdivision and the allocation of the property to Mariano’s six children, including
Concepcion.
Fourth, Mariano’s children, including Concepcion,29 were the ones who shouldered the
expenses incurred for the subdivision of the property.
Fifth, after the subdivision of the property, Mariano’s children -- including Concepcion30 --
took possession of their respective portions thereof.
Sixth, the legal titles to five portions of the property were transferred via a gratuitous
deed of conveyance to Mariano’s five children, following the allocations specified in the
subdivision plan prepared for Lourdes Cuenco.31
With respect to Lot 903-A-6 in particular, the existence of Concepcion’s equitable ownership
thereof is bolstered, not just by the above circumstances, but also by the fact that respondent
fenced the portion allocated to her and planted trees thereon.32
44

More significantly, she also paid real property taxes on Lot 903-A-6 yearly, from 1956 until
196933 -- the year when she was dispossessed of the property. "Although tax declarations or
realty tax payments of property are not conclusive evidence of ownership, nevertheless, they
are good indicia of possession in the concept of owner, for no one in his right mind would be
paying taxes for a property that is not in his actual or at least constructive possession."34 Such
realty tax payments constitute proof that the holder has a claim of title over the property.
Tellingly, Miguel started paying real property taxes on Lot 903-A-6 only on April 4, 1964,35 after
the death of Mariano.36 This fact shows that it was only in that year that he was emboldened to
claim the property as his own and to stop recognizing Mariano’s, and subsequently
Concepcion’s, ownership rights over it. It was only by then that the one who could have easily
refuted his claim had already been silenced by death. Such a situation cannot be permitted to
arise, as will be explained below.
Estoppel
From the time Lot 903-A was subdivided and Mariano’s six children -- including Concepcion --
took possession as owners of their respective portions, no whimper of protest from petitioner
was heard until 1963. By his acts as well as by his omissions, Miguel led Mariano and the
latter’s heirs, including Concepcion, to believe that Petitioner Cuenco respected the ownership
rights of respondent over Lot 903-A-6. That Mariano acted and relied on Miguel’s tacit
recognition of his ownership thereof is evident from his will, executed in 1963, which states:
"I hereby make it known and declare that x x x all properties which my first wife and I had
brought to, or acquired during our marriage, or which I had acquired during the years I
was a widower – including jewelry, war damage compensation, and two other lots also
located at Cebu City, one near the South-Western University and the other near the
Cebu provincial capitol, which were my attorney’s fees from my clients, Victoria Rallos
and Zoilo Solon, respectively – have already long been disposed of, and distributed by
me, through my brother, Miguel, to all my said six children in the first marriage."37
(emphasis supplied)
Indeed, as early as 1947, long before Mariano made his will in 1963, Lot 903-A -- situated along
Juana Osmeña Extension, Kamputhaw, Cebu City,38 near the Cebu Provincial Capitol -- had
been subdivided and distributed to his six children in his first marriage. Having induced him and
his heirs to believe that Lot 903-A-6 had already been distributed to Concepcion as her own,
petitioner is estopped from asserting the contrary and claiming ownership thereof.
The principle of estoppel in pais applies when -- by one’s acts, representations, admissions, or
silence when there is a need to speak out -- one, intentionally or through culpable negligence,
induces another to believe certain facts to exist; and the latter rightfully relies and acts on such
belief, so as to be prejudiced if the former is permitted to deny the existence of those facts.39
Third Issue:
Laches
Petitioner claims that respondent’s action is already barred by laches.
We are not persuaded. Laches is negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to it has either abandoned or declined to
assert it.40 In the present case, respondent has persistently asserted her right to Lot 903-A-6
against petitioner.
Concepcion was in possession as owner of the property from 1949 to 1969.41 When Miguel took
steps to have it separately titled in his name, despite the fact that she had the owner’s duplicate
copy of TCT No. RT-6999 -- the title covering the entire Lot 903-A -- she had her adverse claim
annotated on the title in 1967. When petitioner ousted her from her possession of the lot by
tearing down her wire fence in 1969,42 she commenced the present action on September 19,
1970,43 to protect and assert her rights to the property. We find that she cannot be held guilty of
laches, as she did not sleep on her rights.
Fourth Issue:
Expunging of Testimony
45

Petitioner Cuyegkeng questions the expunging of the direct testimony of Miguel Cuenco.
Respondent points out that this issue was not raised before the CA. Neither had petitioner
asked the trial court to reconsider its Order expunging the testimony. Hence, this issue cannot
for the first time be raised at this point of the appeal. Issues, arguments and errors not
adequately and seriously brought below cannot be raised for the first time on appeal.44 "Basic
considerations of due process impel this rule."45
WHEREFORE, the Petition is DENIED, and the assailed Decision AFFIRMED. Costs against
petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 146364 June 3, 2004
COLITO T. PAJUYO, petitioner,
vs.
COURT OF APPEALS and EDDIE GUEVARRA, respondents.
DECISION
CARPIO, J.:
The Case
Before us is a petition for review of the 21 June 2000 Decision2 and 14 December 2000
1

Resolution of the Court of Appeals in CA-G.R. SP No. 43129. The Court of Appeals set aside
the 11 November 1996 decision3 of the Regional Trial Court of Quezon City, Branch 81,4
affirming the 15 December 1995 decision5 of the Metropolitan Trial Court of Quezon City,
Branch 31.6
The Antecedents
In June 1979, petitioner Colito T. Pajuyo ("Pajuyo") paid P400 to a certain Pedro Perez for the
rights over a 250-square meter lot in Barrio Payatas, Quezon City. Pajuyo then constructed a
house made of light materials on the lot. Pajuyo and his family lived in the house from 1979 to 7
December 1985.
On 8 December 1985, Pajuyo and private respondent Eddie Guevarra ("Guevarra") executed a
Kasunduan or agreement. Pajuyo, as owner of the house, allowed Guevarra to live in the house
for free provided Guevarra would maintain the cleanliness and orderliness of the house.
Guevarra promised that he would voluntarily vacate the premises on Pajuyo’s demand.
In September 1994, Pajuyo informed Guevarra of his need of the house and demanded that
Guevarra vacate the house. Guevarra refused.
Pajuyo filed an ejectment case against Guevarra with the Metropolitan Trial Court of Quezon
City, Branch 31 ("MTC").
In his Answer, Guevarra claimed that Pajuyo had no valid title or right of possession over the lot
where the house stands because the lot is within the 150 hectares set aside by Proclamation
No. 137 for socialized housing. Guevarra pointed out that from December 1985 to September
1994, Pajuyo did not show up or communicate with him. Guevarra insisted that neither he nor
Pajuyo has valid title to the lot.
On 15 December 1995, the MTC rendered its decision in favor of Pajuyo. The dispositive
portion of the MTC decision reads:
WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff and
against defendant, ordering the latter to:
A) vacate the house and lot occupied by the defendant or any other person or
persons claiming any right under him;
B) pay unto plaintiff the sum of THREE HUNDRED PESOS (P300.00) monthly as
reasonable compensation for the use of the premises starting from the last
demand;
46

C) pay plaintiff the sum of P3,000.00 as and by way of attorney’s fees; and
D) pay the cost of suit.
SO ORDERED.7
Aggrieved, Guevarra appealed to the Regional Trial Court of Quezon City, Branch 81 ("RTC").
On 11 November 1996, the RTC affirmed the MTC decision. The dispositive portion of the RTC
decision reads:
WHEREFORE, premises considered, the Court finds no reversible error in the decision
appealed from, being in accord with the law and evidence presented, and the same is
hereby affirmed en toto.
SO ORDERED.8
Guevarra received the RTC decision on 29 November 1996. Guevarra had only until 14
December 1996 to file his appeal with the Court of Appeals. Instead of filing his appeal with the
Court of Appeals, Guevarra filed with the Supreme Court a "Motion for Extension of Time to File
Appeal by Certiorari Based on Rule 42" ("motion for extension"). Guevarra theorized that his
appeal raised pure questions of law. The Receiving Clerk of the Supreme Court received the
motion for extension on 13 December 1996 or one day before the right to appeal expired.
On 3 January 1997, Guevarra filed his petition for review with the Supreme Court.
On 8 January 1997, the First Division of the Supreme Court issued a Resolution9 referring the
motion for extension to the Court of Appeals which has concurrent jurisdiction over the case.
The case presented no special and important matter for the Supreme Court to take cognizance
of at the first instance.
On 28 January 1997, the Thirteenth Division of the Court of Appeals issued a Resolution10
granting the motion for extension conditioned on the timeliness of the filing of the motion.
On 27 February 1997, the Court of Appeals ordered Pajuyo to comment on Guevara’s petition
for review. On 11 April 1997, Pajuyo filed his Comment.
On 21 June 2000, the Court of Appeals issued its decision reversing the RTC decision. The
dispositive portion of the decision reads:
WHEREFORE, premises considered, the assailed Decision of the court a quo in Civil
Case No. Q-96-26943 is REVERSED and SET ASIDE; and it is hereby declared that the
ejectment case filed against defendant-appellant is without factual and legal basis.
SO ORDERED.11
Pajuyo filed a motion for reconsideration of the decision. Pajuyo pointed out that the Court of
Appeals should have dismissed outright Guevarra’s petition for review because it was filed out
of time. Moreover, it was Guevarra’s counsel and not Guevarra who signed the certification
against forum-shopping.
On 14 December 2000, the Court of Appeals issued a resolution denying Pajuyo’s motion for
reconsideration. The dispositive portion of the resolution reads:
WHEREFORE, for lack of merit, the motion for reconsideration is hereby DENIED. No
costs.
SO ORDERED.12
The Ruling of the MTC
The MTC ruled that the subject of the agreement between Pajuyo and Guevarra is the house
and not the lot. Pajuyo is the owner of the house, and he allowed Guevarra to use the house
only by tolerance. Thus, Guevarra’s refusal to vacate the house on Pajuyo’s demand made
Guevarra’s continued possession of the house illegal.
The Ruling of the RTC
The RTC upheld the Kasunduan, which established the landlord and tenant relationship
between Pajuyo and Guevarra. The terms of the Kasunduan bound Guevarra to return
possession of the house on demand.
The RTC rejected Guevarra’s claim of a better right under Proclamation No. 137, the Revised
National Government Center Housing Project Code of Policies and other pertinent laws. In an
ejectment suit, the RTC has no power to decide Guevarra’s rights under these laws. The RTC
47

declared that in an ejectment case, the only issue for resolution is material or physical
possession, not ownership.
The Ruling of the Court of Appeals
The Court of Appeals declared that Pajuyo and Guevarra are squatters. Pajuyo and Guevarra
illegally occupied the contested lot which the government owned.
Perez, the person from whom Pajuyo acquired his rights, was also a squatter. Perez had no
right or title over the lot because it is public land. The assignment of rights between Perez and
Pajuyo, and the Kasunduan between Pajuyo and Guevarra, did not have any legal effect.
Pajuyo and Guevarra are in pari delicto or in equal fault. The court will leave them where they
are.
The Court of Appeals reversed the MTC and RTC rulings, which held that the Kasunduan
between Pajuyo and Guevarra created a legal tie akin to that of a landlord and tenant
relationship. The Court of Appeals ruled that the Kasunduan is not a lease contract but a
commodatum because the agreement is not for a price certain.
Since Pajuyo admitted that he resurfaced only in 1994 to claim the property, the appellate court
held that Guevarra has a better right over the property under Proclamation No. 137. President
Corazon C. Aquino ("President Aquino") issued Proclamation No. 137 on 7 September 1987. At
that time, Guevarra was in physical possession of the property. Under Article VI of the Code of
Policies Beneficiary Selection and Disposition of Homelots and Structures in the National
Housing Project ("the Code"), the actual occupant or caretaker of the lot shall have first priority
as beneficiary of the project. The Court of Appeals concluded that Guevarra is first in the
hierarchy of priority.
In denying Pajuyo’s motion for reconsideration, the appellate court debunked Pajuyo’s claim
that Guevarra filed his motion for extension beyond the period to appeal.
The Court of Appeals pointed out that Guevarra’s motion for extension filed before the Supreme
Court was stamped "13 December 1996 at 4:09 PM" by the Supreme Court’s Receiving Clerk.
The Court of Appeals concluded that the motion for extension bore a date, contrary to Pajuyo’s
claim that the motion for extension was undated. Guevarra filed the motion for extension on time
on 13 December 1996 since he filed the motion one day before the expiration of the
reglementary period on 14 December 1996. Thus, the motion for extension properly complied
with the condition imposed by the Court of Appeals in its 28 January 1997 Resolution. The
Court of Appeals explained that the thirty-day extension to file the petition for review was
deemed granted because of such compliance.
The Court of Appeals rejected Pajuyo’s argument that the appellate court should have
dismissed the petition for review because it was Guevarra’s counsel and not Guevarra who
signed the certification against forum-shopping. The Court of Appeals pointed out that Pajuyo
did not raise this issue in his Comment. The Court of Appeals held that Pajuyo could not now
seek the dismissal of the case after he had extensively argued on the merits of the case. This
technicality, the appellate court opined, was clearly an afterthought.
The Issues
Pajuyo raises the following issues for resolution:
WHETHER THE COURT OF APPEALS ERRED OR ABUSED ITS AUTHORITY AND
DISCRETION TANTAMOUNT TO LACK OF JURISDICTION:
1) in GRANTING, instead of denying, Private Respondent’s Motion for an
Extension of thirty days to file petition for review at the time when there was no
more period to extend as the decision of the Regional Trial Court had already
become final and executory.
2) in giving due course, instead of dismissing, private respondent’s Petition for
Review even though the certification against forum-shopping was signed only by
counsel instead of by petitioner himself.
3) in ruling that the Kasunduan voluntarily entered into by the parties was in fact
a commodatum, instead of a Contract of Lease as found by the Metropolitan Trial
48

Court and in holding that "the ejectment case filed against defendant-appellant is
without legal and factual basis".
4) in reversing and setting aside the Decision of the Regional Trial Court in Civil
Case No. Q-96-26943 and in holding that the parties are in pari delicto being
both squatters, therefore, illegal occupants of the contested parcel of land.
5) in deciding the unlawful detainer case based on the so-called Code of Policies
of the National Government Center Housing Project instead of deciding the same
under the Kasunduan voluntarily executed by the parties, the terms and
conditions of which are the laws between themselves.13
The Ruling of the Court
The procedural issues Pajuyo is raising are baseless. However, we find merit in the substantive
issues Pajuyo is submitting for resolution.
Procedural Issues
Pajuyo insists that the Court of Appeals should have dismissed outright Guevarra’s petition for
review because the RTC decision had already become final and executory when the appellate
court acted on Guevarra’s motion for extension to file the petition. Pajuyo points out that
Guevarra had only one day before the expiry of his period to appeal the RTC decision. Instead
of filing the petition for review with the Court of Appeals, Guevarra filed with this Court an
undated motion for extension of 30 days to file a petition for review. This Court merely referred
the motion to the Court of Appeals. Pajuyo believes that the filing of the motion for extension
with this Court did not toll the running of the period to perfect the appeal. Hence, when the Court
of Appeals received the motion, the period to appeal had already expired.
We are not persuaded.
Decisions of the regional trial courts in the exercise of their appellate jurisdiction are appealable
to the Court of Appeals by petition for review in cases involving questions of fact or mixed
questions of fact and law.14 Decisions of the regional trial courts involving pure questions of law
are appealable directly to this Court by petition for review.15 These modes of appeal are now
embodied in Section 2, Rule 41 of the 1997 Rules of Civil Procedure.
Guevarra believed that his appeal of the RTC decision involved only questions of law. Guevarra
thus filed his motion for extension to file petition for review before this Court on 14 December
1996. On 3 January 1997, Guevarra then filed his petition for review with this Court. A perusal of
Guevarra’s petition for review gives the impression that the issues he raised were pure
questions of law. There is a question of law when the doubt or difference is on what the law is
on a certain state of facts.16 There is a question of fact when the doubt or difference is on the
truth or falsity of the facts alleged.17
In his petition for review before this Court, Guevarra no longer disputed the facts. Guevarra’s
petition for review raised these questions: (1) Do ejectment cases pertain only to possession of
a structure, and not the lot on which the structure stands? (2) Does a suit by a squatter against
a fellow squatter constitute a valid case for ejectment? (3) Should a Presidential Proclamation
governing the lot on which a squatter’s structure stands be considered in an ejectment suit filed
by the owner of the structure?
These questions call for the evaluation of the rights of the parties under the law on ejectment
and the Presidential Proclamation. At first glance, the questions Guevarra raised appeared
purely legal. However, some factual questions still have to be resolved because they have a
bearing on the legal questions raised in the petition for review. These factual matters refer to the
metes and bounds of the disputed property and the application of Guevarra as beneficiary of
Proclamation No. 137.
The Court of Appeals has the power to grant an extension of time to file a petition for review. In
Lacsamana v. Second Special Cases Division of the Intermediate Appellate Court,18 we
declared that the Court of Appeals could grant extension of time in appeals by petition for
review. In Liboro v. Court of Appeals,19 we clarified that the prohibition against granting an
extension of time applies only in a case where ordinary appeal is perfected by a mere notice of
49

appeal. The prohibition does not apply in a petition for review where the pleading needs
verification. A petition for review, unlike an ordinary appeal, requires preparation and research
to present a persuasive position.20 The drafting of the petition for review entails more time and
effort than filing a notice of appeal.21 Hence, the Court of Appeals may allow an extension of
time to file a petition for review.
In the more recent case of Commissioner of Internal Revenue v. Court of Appeals,22 we held
that Liboro’s clarification of Lacsamana is consistent with the Revised Internal Rules of the
Court of Appeals and Supreme Court Circular No. 1-91. They all allow an extension of time for
filing petitions for review with the Court of Appeals. The extension, however, should be limited to
only fifteen days save in exceptionally meritorious cases where the Court of Appeals may grant
a longer period.
A judgment becomes "final and executory" by operation of law. Finality of judgment becomes a
fact on the lapse of the reglementary period to appeal if no appeal is perfected.23 The RTC
decision could not have gained finality because the Court of Appeals granted the 30-day
extension to Guevarra.
The Court of Appeals did not commit grave abuse of discretion when it approved Guevarra’s
motion for extension. The Court of Appeals gave due course to the motion for extension
because it complied with the condition set by the appellate court in its resolution dated 28
January 1997. The resolution stated that the Court of Appeals would only give due course to the
motion for extension if filed on time. The motion for extension met this condition.
The material dates to consider in determining the timeliness of the filing of the motion for
extension are (1) the date of receipt of the judgment or final order or resolution subject of the
petition, and (2) the date of filing of the motion for extension.24 It is the date of the filing of the
motion or pleading, and not the date of execution, that determines the timeliness of the filing of
that motion or pleading. Thus, even if the motion for extension bears no date, the date of filing
stamped on it is the reckoning point for determining the timeliness of its filing.
Guevarra had until 14 December 1996 to file an appeal from the RTC decision. Guevarra filed
his motion for extension before this Court on 13 December 1996, the date stamped by this
Court’s Receiving Clerk on the motion for extension. Clearly, Guevarra filed the motion for
extension exactly one day before the lapse of the reglementary period to appeal.
Assuming that the Court of Appeals should have dismissed Guevarra’s appeal on technical
grounds, Pajuyo did not ask the appellate court to deny the motion for extension and dismiss
the petition for review at the earliest opportunity. Instead, Pajuyo vigorously discussed the
merits of the case. It was only when the Court of Appeals ruled in Guevarra’s favor that Pajuyo
raised the procedural issues against Guevarra’s petition for review.
A party who, after voluntarily submitting a dispute for resolution, receives an adverse decision
on the merits, is estopped from attacking the jurisdiction of the court.25 Estoppel sets in not
because the judgment of the court is a valid and conclusive adjudication, but because the
practice of attacking the court’s jurisdiction after voluntarily submitting to it is against public
policy.26
In his Comment before the Court of Appeals, Pajuyo also failed to discuss Guevarra’s failure to
sign the certification against forum shopping. Instead, Pajuyo harped on Guevarra’s counsel
signing the verification, claiming that the counsel’s verification is insufficient since it is based
only on "mere information."
A party’s failure to sign the certification against forum shopping is different from the party’s
failure to sign personally the verification. The certificate of non-forum shopping must be signed
by the party, and not by counsel.27 The certification of counsel renders the petition defective.28
On the other hand, the requirement on verification of a pleading is a formal and not a
jurisdictional requisite.29 It is intended simply to secure an assurance that what are alleged in the
pleading are true and correct and not the product of the imagination or a matter of speculation,
and that the pleading is filed in good faith.30 The party need not sign the verification. A party’s
50

representative, lawyer or any person who personally knows the truth of the facts alleged in the
pleading may sign the verification.31
We agree with the Court of Appeals that the issue on the certificate against forum shopping was
merely an afterthought. Pajuyo did not call the Court of Appeals’ attention to this defect at the
early stage of the proceedings. Pajuyo raised this procedural issue too late in the proceedings.
Absence of Title over the Disputed Property will not Divest the Courts of Jurisdiction to
Resolve the Issue of Possession
Settled is the rule that the defendant’s claim of ownership of the disputed property will not divest
the inferior court of its jurisdiction over the ejectment case.32 Even if the pleadings raise the
issue of ownership, the court may pass on such issue to determine only the question of
possession, especially if the ownership is inseparably linked with the possession.33 The
adjudication on the issue of ownership is only provisional and will not bar an action between the
same parties involving title to the land.34 This doctrine is a necessary consequence of the nature
of the two summary actions of ejectment, forcible entry and unlawful detainer, where the only
issue for adjudication is the physical or material possession over the real property.35
In this case, what Guevarra raised before the courts was that he and Pajuyo are not the owners
of the contested property and that they are mere squatters. Will the defense that the parties to
the ejectment case are not the owners of the disputed lot allow the courts to renounce their
jurisdiction over the case? The Court of Appeals believed so and held that it would just leave the
parties where they are since they are in pari delicto.
We do not agree with the Court of Appeals.
Ownership or the right to possess arising from ownership is not at issue in an action for
recovery of possession. The parties cannot present evidence to prove ownership or right to
legal possession except to prove the nature of the possession when necessary to resolve the
issue of physical possession.36 The same is true when the defendant asserts the absence of title
over the property. The absence of title over the contested lot is not a ground for the courts to
withhold relief from the parties in an ejectment case.
The only question that the courts must resolve in ejectment proceedings is - who is entitled to
the physical possession of the premises, that is, to the possession de facto and not to the
possession de jure.37 It does not even matter if a party’s title to the property is questionable,38 or
when both parties intruded into public land and their applications to own the land have yet to be
approved by the proper government agency.39 Regardless of the actual condition of the title to
the property, the party in peaceable quiet possession shall not be thrown out by a strong hand,
violence or terror.40 Neither is the unlawful withholding of property allowed. Courts will always
uphold respect for prior possession.
Thus, a party who can prove prior possession can recover such possession even against the
owner himself.41 Whatever may be the character of his possession, if he has in his favor prior
possession in time, he has the security that entitles him to remain on the property until a person
with a better right lawfully ejects him.42 To repeat, the only issue that the court has to settle in an
ejectment suit is the right to physical possession.
In Pitargue v. Sorilla,43 the government owned the land in dispute. The government did not
authorize either the plaintiff or the defendant in the case of forcible entry case to occupy the
land. The plaintiff had prior possession and had already introduced improvements on the public
land. The plaintiff had a pending application for the land with the Bureau of Lands when the
defendant ousted him from possession. The plaintiff filed the action of forcible entry against the
defendant. The government was not a party in the case of forcible entry.
The defendant questioned the jurisdiction of the courts to settle the issue of possession
because while the application of the plaintiff was still pending, title remained with the
government, and the Bureau of Public Lands had jurisdiction over the case. We disagreed with
the defendant. We ruled that courts have jurisdiction to entertain ejectment suits even before the
resolution of the application. The plaintiff, by priority of his application and of his entry, acquired
prior physical possession over the public land applied for as against other private claimants.
51

That prior physical possession enjoys legal protection against other private claimants because
only a court can take away such physical possession in an ejectment case.
While the Court did not brand the plaintiff and the defendant in Pitargue44 as squatters, strictly
speaking, their entry into the disputed land was illegal. Both the plaintiff and defendant entered
the public land without the owner’s permission. Title to the land remained with the government
because it had not awarded to anyone ownership of the contested public land. Both the plaintiff
and the defendant were in effect squatting on government property. Yet, we upheld the courts’
jurisdiction to resolve the issue of possession even if the plaintiff and the defendant in the
ejectment case did not have any title over the contested land.
Courts must not abdicate their jurisdiction to resolve the issue of physical possession because
of the public need to preserve the basic policy behind the summary actions of forcible entry and
unlawful detainer. The underlying philosophy behind ejectment suits is to prevent breach of the
peace and criminal disorder and to compel the party out of possession to respect and resort to
the law alone to obtain what he claims is his.45 The party deprived of possession must not take
the law into his own hands.46 Ejectment proceedings are summary in nature so the authorities
can settle speedily actions to recover possession because of the overriding need to quell social
disturbances.47
We further explained in Pitargue the greater interest that is at stake in actions for recovery of
possession. We made the following pronouncements in Pitargue:
The question that is before this Court is: Are courts without jurisdiction to take
cognizance of possessory actions involving these public lands before final award is
made by the Lands Department, and before title is given any of the conflicting
claimants? It is one of utmost importance, as there are public lands everywhere and
there are thousands of settlers, especially in newly opened regions. It also involves a
matter of policy, as it requires the determination of the respective authorities and
functions of two coordinate branches of the Government in connection with public land
conflicts.
Our problem is made simple by the fact that under the Civil Code, either in the old, which
was in force in this country before the American occupation, or in the new, we have a
possessory action, the aim and purpose of which is the recovery of the physical
possession of real property, irrespective of the question as to who has the title thereto.
Under the Spanish Civil Code we had the accion interdictal, a summary proceeding
which could be brought within one year from dispossession (Roman Catholic Bishop of
Cebu vs. Mangaron, 6 Phil. 286, 291); and as early as October 1, 1901, upon the
enactment of the Code of Civil Procedure (Act No. 190 of the Philippine Commission) we
implanted the common law action of forcible entry (section 80 of Act No. 190), the object
of which has been stated by this Court to be "to prevent breaches of the peace and
criminal disorder which would ensue from the withdrawal of the remedy, and the
reasonable hope such withdrawal would create that some advantage must accrue
to those persons who, believing themselves entitled to the possession of
property, resort to force to gain possession rather than to some appropriate
action in the court to assert their claims." (Supia and Batioco vs. Quintero and Ayala,
59 Phil. 312, 314.) So before the enactment of the first Public Land Act (Act No. 926) the
action of forcible entry was already available in the courts of the country. So the question
to be resolved is, Did the Legislature intend, when it vested the power and authority to
alienate and dispose of the public lands in the Lands Department, to exclude the courts
from entertaining the possessory action of forcible entry between rival claimants or
occupants of any land before award thereof to any of the parties? Did Congress intend
that the lands applied for, or all public lands for that matter, be removed from the
jurisdiction of the judicial Branch of the Government, so that any troubles arising
therefrom, or any breaches of the peace or disorders caused by rival claimants, could be
inquired into only by the Lands Department to the exclusion of the courts? The answer to
52

this question seems to us evident. The Lands Department does not have the means to
police public lands; neither does it have the means to prevent disorders arising
therefrom, or contain breaches of the peace among settlers; or to pass promptly upon
conflicts of possession. Then its power is clearly limited to disposition and
alienation, and while it may decide conflicts of possession in order to make
proper award, the settlement of conflicts of possession which is recognized in the
court herein has another ultimate purpose, i.e., the protection of actual
possessors and occupants with a view to the prevention of breaches of the peace.
The power to dispose and alienate could not have been intended to include the
power to prevent or settle disorders or breaches of the peace among rival settlers
or claimants prior to the final award. As to this, therefore, the corresponding branches
of the Government must continue to exercise power and jurisdiction within the limits of
their respective functions. The vesting of the Lands Department with authority to
administer, dispose, and alienate public lands, therefore, must not be understood
as depriving the other branches of the Government of the exercise of the
respective functions or powers thereon, such as the authority to stop disorders
and quell breaches of the peace by the police, the authority on the part of the
courts to take jurisdiction over possessory actions arising therefrom not
involving, directly or indirectly, alienation and disposition.
Our attention has been called to a principle enunciated in American courts to the effect
that courts have no jurisdiction to determine the rights of claimants to public lands, and
that until the disposition of the land has passed from the control of the Federal
Government, the courts will not interfere with the administration of matters concerning
the same. (50 C. J. 1093-1094.) We have no quarrel with this principle. The
determination of the respective rights of rival claimants to public lands is different from
the determination of who has the actual physical possession or occupation with a view to
protecting the same and preventing disorder and breaches of the peace. A judgment of
the court ordering restitution of the possession of a parcel of land to the actual occupant,
who has been deprived thereof by another through the use of force or in any other illegal
manner, can never be "prejudicial interference" with the disposition or alienation of public
lands. On the other hand, if courts were deprived of jurisdiction of cases involving
conflicts of possession, that threat of judicial action against breaches of the
peace committed on public lands would be eliminated, and a state of lawlessness
would probably be produced between applicants, occupants or squatters, where
force or might, not right or justice, would rule.
It must be borne in mind that the action that would be used to solve conflicts of
possession between rivals or conflicting applicants or claimants would be no other than
that of forcible entry. This action, both in England and the United States and in our
jurisdiction, is a summary and expeditious remedy whereby one in peaceful and quiet
possession may recover the possession of which he has been deprived by a stronger
hand, by violence or terror; its ultimate object being to prevent breach of the peace and
criminal disorder. (Supia and Batioco vs. Quintero and Ayala, 59 Phil. 312, 314.) The
basis of the remedy is mere possession as a fact, of physical possession, not a legal
possession. (Mediran vs. Villanueva, 37 Phil. 752.) The title or right to possession is
never in issue in an action of forcible entry; as a matter of fact, evidence thereof is
expressly banned, except to prove the nature of the possession. (Second 4, Rule 72,
Rules of Court.) With this nature of the action in mind, by no stretch of the imagination
can conclusion be arrived at that the use of the remedy in the courts of justice would
constitute an interference with the alienation, disposition, and control of public lands. To
limit ourselves to the case at bar can it be pretended at all that its result would in any
way interfere with the manner of the alienation or disposition of the land contested? On
the contrary, it would facilitate adjudication, for the question of priority of possession
53

having been decided in a final manner by the courts, said question need no longer waste
the time of the land officers making the adjudication or award. (Emphasis ours)
The Principle of Pari Delicto is not Applicable to Ejectment Cases
The Court of Appeals erroneously applied the principle of pari delicto to this case.
Articles 1411 and 1412 of the Civil Code48 embody the principle of pari delicto. We explained the
principle of pari delicto in these words:
The rule of pari delicto is expressed in the maxims ‘ex dolo malo non eritur actio’ and ‘in
pari delicto potior est conditio defedentis.’ The law will not aid either party to an illegal
agreement. It leaves the parties where it finds them.49
The application of the pari delicto principle is not absolute, as there are exceptions to its
application. One of these exceptions is where the application of the pari delicto rule would
violate well-established public policy.50
In Drilon v. Gaurana,51 we reiterated the basic policy behind the summary actions of forcible
entry and unlawful detainer. We held that:
It must be stated that the purpose of an action of forcible entry and detainer is that,
regardless of the actual condition of the title to the property, the party in peaceable quiet
possession shall not be turned out by strong hand, violence or terror. In affording this
remedy of restitution the object of the statute is to prevent breaches of the peace and
criminal disorder which would ensue from the withdrawal of the remedy, and the
reasonable hope such withdrawal would create that some advantage must accrue to
those persons who, believing themselves entitled to the possession of property, resort to
force to gain possession rather than to some appropriate action in the courts to assert
their claims. This is the philosophy at the foundation of all these actions of forcible entry
and detainer which are designed to compel the party out of possession to respect and
resort to the law alone to obtain what he claims is his.52
Clearly, the application of the principle of pari delicto to a case of ejectment between squatters
is fraught with danger. To shut out relief to squatters on the ground of pari delicto would openly
invite mayhem and lawlessness. A squatter would oust another squatter from possession of the
lot that the latter had illegally occupied, emboldened by the knowledge that the courts would
leave them where they are. Nothing would then stand in the way of the ousted squatter from re-
claiming his prior possession at all cost.
Petty warfare over possession of properties is precisely what ejectment cases or actions for
recovery of possession seek to prevent.53 Even the owner who has title over the disputed
property cannot take the law into his own hands to regain possession of his property. The owner
must go to court.
Courts must resolve the issue of possession even if the parties to the ejectment suit are
squatters. The determination of priority and superiority of possession is a serious and urgent
matter that cannot be left to the squatters to decide. To do so would make squatters receive
better treatment under the law. The law restrains property owners from taking the law into their
own hands. However, the principle of pari delicto as applied by the Court of Appeals would give
squatters free rein to dispossess fellow squatters or violently retake possession of properties
usurped from them. Courts should not leave squatters to their own devices in cases involving
recovery of possession.
Possession is the only Issue for Resolution in an Ejectment Case
The case for review before the Court of Appeals was a simple case of ejectment. The Court of
Appeals refused to rule on the issue of physical possession. Nevertheless, the appellate court
held that the pivotal issue in this case is who between Pajuyo and Guevarra has the "priority
right as beneficiary of the contested land under Proclamation No. 137."54 According to the Court
of Appeals, Guevarra enjoys preferential right under Proclamation No. 137 because Article VI of
the Code declares that the actual occupant or caretaker is the one qualified to apply for
socialized housing.
The ruling of the Court of Appeals has no factual and legal basis.
54

First. Guevarra did not present evidence to show that the contested lot is part of a relocation
site under Proclamation No. 137. Proclamation No. 137 laid down the metes and bounds of the
land that it declared open for disposition to bona fide residents.
The records do not show that the contested lot is within the land specified by Proclamation No.
137. Guevarra had the burden to prove that the disputed lot is within the coverage of
Proclamation No. 137. He failed to do so.
Second. The Court of Appeals should not have given credence to Guevarra’s unsubstantiated
claim that he is the beneficiary of Proclamation No. 137. Guevarra merely alleged that in the
survey the project administrator conducted, he and not Pajuyo appeared as the actual occupant
of the lot.
There is no proof that Guevarra actually availed of the benefits of Proclamation No. 137. Pajuyo
allowed Guevarra to occupy the disputed property in 1985. President Aquino signed
Proclamation No. 137 into law on 11 March 1986. Pajuyo made his earliest demand for
Guevarra to vacate the property in September 1994.
During the time that Guevarra temporarily held the property up to the time that Proclamation No.
137 allegedly segregated the disputed lot, Guevarra never applied as beneficiary of
Proclamation No. 137. Even when Guevarra already knew that Pajuyo was reclaiming
possession of the property, Guevarra did not take any step to comply with the requirements of
Proclamation No. 137.
Third. Even assuming that the disputed lot is within the coverage of Proclamation No. 137 and
Guevarra has a pending application over the lot, courts should still assume jurisdiction and
resolve the issue of possession. However, the jurisdiction of the courts would be limited to the
issue of physical possession only.
In Pitargue,55 we ruled that courts have jurisdiction over possessory actions involving public
land to determine the issue of physical possession. The determination of the respective rights of
rival claimants to public land is, however, distinct from the determination of who has the actual
physical possession or who has a better right of physical possession.56 The administrative
disposition and alienation of public lands should be threshed out in the proper government
agency.57
The Court of Appeals’ determination of Pajuyo and Guevarra’s rights under Proclamation No.
137 was premature. Pajuyo and Guevarra were at most merely potential beneficiaries of the
law. Courts should not preempt the decision of the administrative agency mandated by law to
determine the qualifications of applicants for the acquisition of public lands. Instead, courts
should expeditiously resolve the issue of physical possession in ejectment cases to prevent
disorder and breaches of peace.58
Pajuyo is Entitled to Physical Possession of the Disputed Property
Guevarra does not dispute Pajuyo’s prior possession of the lot and ownership of the house built
on it. Guevarra expressly admitted the existence and due execution of the Kasunduan. The
Kasunduan reads:
Ako, si COL[I]TO PAJUYO, may-ari ng bahay at lote sa Bo. Payatas, Quezon City, ay
nagbibigay pahintulot kay G. Eddie Guevarra, na pansamantalang manirahan sa nasabing
bahay at lote ng "walang bayad." Kaugnay nito, kailangang panatilihin nila ang kalinisan at
kaayusan ng bahay at lote.
Sa sandaling kailangan na namin ang bahay at lote, sila’y kusang aalis ng walang reklamo.
Based on the Kasunduan, Pajuyo permitted Guevarra to reside in the house and lot free of rent,
but Guevarra was under obligation to maintain the premises in good condition. Guevarra
promised to vacate the premises on Pajuyo’s demand but Guevarra broke his promise and
refused to heed Pajuyo’s demand to vacate.
These facts make out a case for unlawful detainer. Unlawful detainer involves the withholding by
a person from another of the possession of real property to which the latter is entitled after the
expiration or termination of the former’s right to hold possession under a contract, express or
implied.59
55

Where the plaintiff allows the defendant to use his property by tolerance without any contract,
the defendant is necessarily bound by an implied promise that he will vacate on demand, failing
which, an action for unlawful detainer will lie.60 The defendant’s refusal to comply with the
demand makes his continued possession of the property unlawful.61 The status of the defendant
in such a case is similar to that of a lessee or tenant whose term of lease has expired but whose
occupancy continues by tolerance of the owner.62
This principle should apply with greater force in cases where a contract embodies the
permission or tolerance to use the property. The Kasunduan expressly articulated Pajuyo’s
forbearance. Pajuyo did not require Guevarra to pay any rent but only to maintain the house and
lot in good condition. Guevarra expressly vowed in the Kasunduan that he would vacate the
property on demand. Guevarra’s refusal to comply with Pajuyo’s demand to vacate made
Guevarra’s continued possession of the property unlawful.
We do not subscribe to the Court of Appeals’ theory that the Kasunduan is one of commodatum.
In a contract of commodatum, one of the parties delivers to another something not consumable
so that the latter may use the same for a certain time and return it.63 An essential feature of
commodatum is that it is gratuitous. Another feature of commodatum is that the use of the thing
belonging to another is for a certain period.64 Thus, the bailor cannot demand the return of the
thing loaned until after expiration of the period stipulated, or after accomplishment of the use for
which the commodatum is constituted.65 If the bailor should have urgent need of the thing, he
may demand its return for temporary use.66 If the use of the thing is merely tolerated by the
bailor, he can demand the return of the thing at will, in which case the contractual relation is
called a precarium.67 Under the Civil Code, precarium is a kind of commodatum.68
The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not
essentially gratuitous. While the Kasunduan did not require Guevarra to pay rent, it obligated
him to maintain the property in good condition. The imposition of this obligation makes the
Kasunduan a contract different from a commodatum. The effects of the Kasunduan are also
different from that of a commodatum. Case law on ejectment has treated relationship based on
tolerance as one that is akin to a landlord-tenant relationship where the withdrawal of
permission would result in the termination of the lease.69 The tenant’s withholding of the
property would then be unlawful. This is settled jurisprudence.
Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum,
Guevarra as bailee would still have the duty to turn over possession of the property to Pajuyo,
the bailor. The obligation to deliver or to return the thing received attaches to contracts for
safekeeping, or contracts of commission, administration and commodatum.70 These contracts
certainly involve the obligation to deliver or return the thing received.71
Guevarra turned his back on the Kasunduan on the sole ground that like him, Pajuyo is also a
squatter. Squatters, Guevarra pointed out, cannot enter into a contract involving the land they
illegally occupy. Guevarra insists that the contract is void.
Guevarra should know that there must be honor even between squatters. Guevarra freely
entered into the Kasunduan. Guevarra cannot now impugn the Kasunduan after he had
benefited from it. The Kasunduan binds Guevarra.
The Kasunduan is not void for purposes of determining who between Pajuyo and Guevarra has
a right to physical possession of the contested property. The Kasunduan is the undeniable
evidence of Guevarra’s recognition of Pajuyo’s better right of physical possession. Guevarra is
clearly a possessor in bad faith. The absence of a contract would not yield a different result, as
there would still be an implied promise to vacate.
Guevarra contends that there is "a pernicious evil that is sought to be avoided, and that is
allowing an absentee squatter who (sic) makes (sic) a profit out of his illegal act."72 Guevarra
bases his argument on the preferential right given to the actual occupant or caretaker under
Proclamation No. 137 on socialized housing.
We are not convinced.
56

Pajuyo did not profit from his arrangement with Guevarra because Guevarra stayed in the
property without paying any rent. There is also no proof that Pajuyo is a professional squatter
who rents out usurped properties to other squatters. Moreover, it is for the proper government
agency to decide who between Pajuyo and Guevarra qualifies for socialized housing. The only
issue that we are addressing is physical possession.
Prior possession is not always a condition sine qua non in ejectment.73 This is one of the
distinctions between forcible entry and unlawful detainer.74 In forcible entry, the plaintiff is
deprived of physical possession of his land or building by means of force, intimidation, threat,
strategy or stealth. Thus, he must allege and prove prior possession.75 But in unlawful detainer,
the defendant unlawfully withholds possession after the expiration or termination of his right to
possess under any contract, express or implied. In such a case, prior physical possession is not
required.76
Pajuyo’s withdrawal of his permission to Guevarra terminated the Kasunduan. Guevarra’s
transient right to possess the property ended as well. Moreover, it was Pajuyo who was in actual
possession of the property because Guevarra had to seek Pajuyo’s permission to temporarily
hold the property and Guevarra had to follow the conditions set by Pajuyo in the Kasunduan.
Control over the property still rested with Pajuyo and this is evidence of actual possession.
Pajuyo’s absence did not affect his actual possession of the disputed property. Possession in
the eyes of the law does not mean that a man has to have his feet on every square meter of the
ground before he is deemed in possession.77 One may acquire possession not only by physical
occupation, but also by the fact that a thing is subject to the action of one’s will.78 Actual or
physical occupation is not always necessary.79
Ruling on Possession Does not Bind Title to the Land in Dispute
We are aware of our pronouncement in cases where we declared that "squatters and intruders
who clandestinely enter into titled government property cannot, by such act, acquire any legal
right to said property."80 We made this declaration because the person who had title or who had
the right to legal possession over the disputed property was a party in the ejectment suit and
that party instituted the case against squatters or usurpers.
In this case, the owner of the land, which is the government, is not a party to the ejectment
case. This case is between squatters. Had the government participated in this case, the courts
could have evicted the contending squatters, Pajuyo and Guevarra.
Since the party that has title or a better right over the property is not impleaded in this case, we
cannot evict on our own the parties. Such a ruling would discourage squatters from seeking the
aid of the courts in settling the issue of physical possession. Stripping both the plaintiff and the
defendant of possession just because they are squatters would have the same dangerous
implications as the application of the principle of pari delicto. Squatters would then rather settle
the issue of physical possession among themselves than seek relief from the courts if the
plaintiff and defendant in the ejectment case would both stand to lose possession of the
disputed property. This would subvert the policy underlying actions for recovery of possession.
Since Pajuyo has in his favor priority in time in holding the property, he is entitled to remain on
the property until a person who has title or a better right lawfully ejects him. Guevarra is
certainly not that person. The ruling in this case, however, does not preclude Pajuyo and
Guevarra from introducing evidence and presenting arguments before the proper administrative
agency to establish any right to which they may be entitled under the law.81
In no way should our ruling in this case be interpreted to condone squatting. The ruling on the
issue of physical possession does not affect title to the property nor constitute a binding and
conclusive adjudication on the merits on the issue of ownership.82 The owner can still go to court
to recover lawfully the property from the person who holds the property without legal title. Our
ruling here does not diminish the power of government agencies, including local governments,
to condemn, abate, remove or demolish illegal or unauthorized structures in accordance with
existing laws.
Attorney’s Fees and Rentals
57

The MTC and RTC failed to justify the award of P3,000 attorney’s fees to Pajuyo. Attorney’s
fees as part of damages are awarded only in the instances enumerated in Article 2208 of the
Civil Code.83 Thus, the award of attorney’s fees is the exception rather than the rule.84 Attorney’s
fees are not awarded every time a party prevails in a suit because of the policy that no premium
should be placed on the right to litigate.85 We therefore delete the attorney’s fees awarded to
Pajuyo.
We sustain the P300 monthly rentals the MTC and RTC assessed against Guevarra. Guevarra
did not dispute this factual finding of the two courts. We find the amount reasonable
compensation to Pajuyo. The P300 monthly rental is counted from the last demand to vacate,
which was on 16 February 1995.
WHEREFORE, we GRANT the petition. The Decision dated 21 June 2000 and Resolution
dated 14 December 2000 of the Court of Appeals in CA-G.R. SP No. 43129 are SET ASIDE.
The Decision dated 11 November 1996 of the Regional Trial Court of Quezon City, Branch 81 in
Civil Case No. Q-96-26943, affirming the Decision dated 15 December 1995 of the Metropolitan
Trial Court of Quezon City, Branch 31 in Civil Case No. 12432, is REINSTATED with
MODIFICATION. The award of attorney’s fees is deleted. No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 133140 August 10, 1999
JOSE MA. T. GARCIA, petitioner,
vs.
COURT OF APPEALS, SPS. LUISITO & MA. LUISA MAGPAYO AND PHILIPPINE BANK OF
COMMUNICATIONS, respondents.
PUNO, J.:
This is a petition for review under Rule 45 of the Rules of Court to set aside the decision
rendered by the Court of Appeals in CA-G.R. No. 44707 entitled "Jose Ma. T. Garcia, Plaintiff-
Appellee versus Spouses Luisito and Ma. Luisa Magpayo and Sheriff of Makati, Defendants,
Philippine Bank of Communications, Defendant-Appellant".1
The facts are as succinctly summarized by the appellate court, viz.:
Atty. Pedro V. Garcia, in whose name TCT No. S-31269 covering a parcel of land
identified as Lot 17 situated at Bel Air II Village, Makati, was registered, sold with the
consent of his wife Remedios T. Garcia, the same to their daughter Ma. Luisa Magpayo
and her husband Luisito Magpayo (the Magpayos).
On March 5, 1981, the Magpayos mortgaged the land to the Philippine Bank of
Communications (PBCom) to secure a loan, Five Hundred Sixty Four Thousand
(P564,000.00) Pesos according to them, One Million Two Hundred Thousand
(P1,200,000.00) Pesos according to PBCom.1âwphi1.nêt
On March 9, 1981, Atty. Garcia's Title was cancelled and in its stead Transfer Certificate
of Title No. S-108412/545 was issued in the name of the Magpayos.
The Deed of Real Estate Mortgage was registered at the Makati Register of Deeds and
annotated on the Magpayos title.
The Magpayos failed to pay their loan upon its maturity, hence, the mortgage was
extrajudicially foreclosed and at the public auction sale, PBCom which was the highest
bidder bought the land.
The redemption period of the foreclosed mortgage expired without the Magpayos
redeeming the same, hence, title over the land was consolidated in favor of PBCom
58

which cancelled the Magpayo's title and Transfer Certificate of Title No. 138233 was
issued in its name.
On October 4, 1985, the Magpayos filed at the RTC of Makati a complaint seeking the
nullification of the extrajudicial foreclosure of mortgage, public auction sale, and
PBCom's title docketed as Civil Case No. 11891. This complaint was dismissed for
failure to prosecute.
On October 15, 1985, PBCom filed at the Regional Trial Court (RTC) of Makati a petition
for the issuance of a writ of possession over the land, docketed as LRC Case No. M-
731, which Branch 148 thereof granted.
Upon service of the writ of possession, Mrs. Magpayo's brother, Jose Ma. T. Garcia
(Garcia), who was in possession of the land, refused to honor it and filed a motion for
Intervention in the above-said PBCom petition, which motion was denied.
Garcia thereupon filed against PBCom, the Magpayos, and the RTC Sheriff the instant
suit for recovery of realty and damages wherein he alleged, inter alia, that he inherited
the land as one of the heirs of his mother Remedios T. Garcia, and that PBCom
acquired no right thereover.
In its answer, PBCom averred, inter alia, that Garcia's claim over the land is belied by
the fact that it is not among the properties owned by his mother listed in the Inventory of
Real Estate filed at the then CFI of Pasay City, Branch 27, in SP Proc. No. 2917-P, "In
the Matter of the Intestate Estate of Remedios T. Garcia Petition for Letters of
Administration, Pedro V. Garcia Petitioner-Administrator.
The Magpayos, on the other hand, asserted that title over the land was transferred to
them by Mrs. Magpayo's parents to enable them (Magpayos) to borrow from PBCom.
Garcia filed a Motion for Summary Judgment praying that judgment be rendered in his
favor to which PBCom counter-motioned that judgment should be rendered in its favor.
The court a quo denied the motion for summary judgment on the ground that PBCom
raised in its answer both factual and legal issues which could only be ventilated in a full-
blown trial.
The court a quo, however, later issued a summary judgment.2
In its summary judgment, the lower court held that the mortgage executed by the Magpayo
spouses in favor of PBCom was void. It found that:
. . . [A]t the time that the defendants Magpayo spouses executed the mortgage in favor
of the defendant PBCom on March 5, 1981, the said spouses were not yet the owners of
the property. This finding is evident from the other undisputed fact that a new Torrens
title was issued to the defendants Magpayo spouses only on March 9, 1981 . . . . The
Magpayo spouses could not have acquired the said property merely by the execution of
the Deed of Sale because the property was in the possession of the plaintiff. The
vendor, Pedro V. Garcia, was not in possession and hence could not deliver the property
merely by the execution of the document (MANALILI V. CESAR, 39 PHIL. 134). The
conclusion is therefore inescapable that the said mortgage is null and void for lack of
one of the essential elements of a mortgage as required by Art. 2085 of our Civil Code . .
. .3
Thus, it invalidated the foreclosure sale and nullified TCT No. 138233 issued to PBCom.
Dissatisfied, PBCom appealed. In reversing the trial court, the Court of Appeals held:
(P)laintiff-appellee's assertion that ownership over the disputed property was not
transmitted to his sister and her husband-Magpayo spouses at the time of the execution
of the Deed of Sale as he was still in actual and adverse possession thereof does not lie.
For in his complaint, plaintiff-appellee alleged that he entered into possession of the
disputed property only upon the demise of his mother, from whom he alleges to have
inherited it but who was not the registered owner of the property, that is, on October 31,
1980 (Certificate of Death, p. 17, Records), by which admission he is bound. Since the
execution of the deed of sale by Atty. Pedro V. Garcia in favor of the Magpayos took
59

place earlier or on August 1, 1980, then contrary to his claim, plaintiff-appellee was not
in possession of the property at the time of the execution of said public instrument.
Furthermore, it appearing that the vendor Atty. Garcia had control of the property which
was registered in his name and that the deed of sale was likewise registered, then the
sale was consummated and the Magpayos were free to exercise the attributes of
ownership including the right to mortgage the land.
When the land is registered in the vendor's name, and the public instrument of sale is
also registered, the sale may be considered consummated and the buyer may exercise
the actions of an owner (Tolentino, Commentaries and Jurisprudence on the Civil Code
of the Philippines, 1992 Ed., p. 55).
That the Magpayos' title, TCT No. S-108412, was issued four (4) days following the
execution of the deed of real estate mortgage is of no moment, for registration under the
Torrens system does not vest ownership but is intended merely to confirm and register
the title which one may already have on the land (Municipality of Victorias v. Court of
Appeals, 149 SCRA 32, 44-45 [1987]).
Petitioner Garcia moved for a reconsideration of above decision which was denied. He now
comes before us raising the following errors committed by the Court Appeals:
I
The respondent Court of Appeals has departed from the accepted and usual course of
proceedings when it decided the appeal subject of this case based on issues which were raised
neither in the trial court nor in the appellant's brief.
II
The Court of Appeals decided the appeal in a manner not in accord with applicable
jurisprudence when it disregarded the admissions of the private respondents and, despite ruling
that Summary Judgment was proper, made its own findings of facts which were contrary to the
said admissions.
III
The Decision of the respondent Court of Appeals was not in accord with established
jurisprudence and even contradicts itself, as far as the issue of the propriety of the Summary
Judgment is concerned.
The petition has no merit.
Anent the first assignment of error, petitioner alleged that the Court of Appeals resolved the
issues "ownership" and "possession" though they were not raised by PBCom in its appellant's
brief. The allegation is belied by page 17 of PBCom's appellate brief, viz.:
Due to the wrong cited case, the trial court opined erroneously that "Magpayo Spouses
could not have acquired the property merely by the execution of the deed of sale
because the property was in the possession of the plaintiff" (Order, p. 10).
Again, the trial court could not distinguish ownership from possession. Ownership and
possession are two entirely different legal concepts.
Plaintiff-appellee's possession as found by the trial court, started only "at the time of the
filing of the complaint in this present case up to the present." (page 2, Summary
Judgment).
Assuming that to be true, plaintiff-appellee's possession which started only in 1986 could
not ripen into ownership. He has no valid title thereto. His possession in fact was that of
an intruder, one done in bad faith (to defeat PBCom's Writ of Possession). His
possession is certainly not in the concept of an owner. This is so because as early as
1981, title thereto was registered in the name of the Magpayo Spouses which title was
subsequently cancelled when the property was purchased by PBCom in a public auction
sale resulting in the issuance of title in favor of the latter in 1985.
Anent the second-assignment of error, petitioner contends that the following facts were admitted
by the parties in the trial court:
60

1. The petitioner is a compulsory heir of the late spouses Atty. Pedro V. Garcia and
Remedios Tablan Garcia;
2. The property subject of this dispute was previously the conjugal property of the said
spouses;
3. The petitioner and his family have been and are continuously to the present in actual
physical possession of the property. At the time of the alleged sale to the Magpayo
spouses, petitioner was in possession of the property;
4. When his mother Remedios Tablan (sic) Garcia died, sometime in October, 1980, he
became, by operation of law, a co-owner of the property;
5. Atty. Pedro V. Garcia, at the time of the execution of the instrument in favor of the
Magpayo spouses was not in possession of the subject property.4
We reject the contention of petitioner for a perusal of the records shows that these alleged
admitted facts are his own paraphrased portions of the findings of fact listed by the trial court in
the summary judgment.5 Indeed petitioner did not cite any page number of the records or refer
to any documentary Exhibit to prove how and who admitted the said facts.
Petitioner's third assignment of error that he alone as plaintiff in the trial court is entitled to a
summary judgment merits scant attention. A summary judgment is one granted by the court,
upon motion by either party, for an expeditious settlement of the case, there appearing from the
pleadings, depositions, admissions, and affidavits that no important questions or issues of fact
are involved (except the determination of the amount of damages) and that therefore the moving
party is entitled to a judgment as a matter of law.6 Under Rule 34, either party may move for a
summary judgment — the claimant by virtue of Section 1 and the defending party by virtue of
Section 2, viz.:
Sec. 1. Summary judgment for claimant. — A party seeking to recover upon a claim,
counter-claim, or cross-claim or to obtain a declaratory relief may, at any time after the
pleading in answer thereto has been served, move with supporting affidavits for a
summary judgment in his favor upon all or any part thereof.
Sec. 2. Summary judgment for defending party. — A party against whom a claim,
counterclaim, or cross-claim is asserted or a declaratory relief is sought may, at any
time, move with supporting affidavits for a summary judgment in his favor as to all or any
part thereof.
It is true that petitioner made the initial move for summary judgment. Nonetheless, PBCom
likewise moved for a summary judgment with supporting affidavit and documentary exhibits, to
wit:
COUNTER-MOTION FOR SUMMARY JUDGMENT
PBCom Is Entitled To A Summary Judgment
The procedure for summary judgment may be availed of also by the defending parties
who may be the object of unfounded claims as clearly shown in Sections 1 and 2 of Rule
34.
xxx xxx xxx
WHEREFORE, it is respectfully prayed of this Honorable Court to render summary
judgment in PBCom's favor by DISMISSING plaintiff's Complaint as well as Sps.
Magpayo's Cross-Claim for being sham and frivolous.7
Needless to state, there was no error on the part of the appellate court in resorting to summary
judgment as prayed for by both parties.
We stress again that possession and ownership are distinct legal concepts. Ownership exists
when a thing pertaining to one person is completely subjected to his will in a manner not
prohibited by law and consistent with the rights of others.8 Ownership confers certain rights to
the owner, one of which is the right to dispose of the thing by way of sale.9 Atty. Pedro Garcia
and his wife Remedios exercised their right to dispose of what they owned when they sold the
subject property to the Magpayo spouses. On the other hand, possession is defined as the
holding of a thing or the enjoyment of a right.10 Literally, to possess means to actually and
61

physically occupy a thing with or without right. Possession may be had in one of two ways:
possession in the concept of an owner and possession of a holder.11 "A possessor in the
concept of an owner may be the owner himself or one who claims to be so."12 On the other
hand, "one who possesses as a mere holder acknowledges in another a superior right which he
believes to be ownership, whether his belief be right or wrong."13 The records show that
petitioner occupied the property not in the concept of an owner for his stay was merely tolerated
by his parents. We held in Caniza v. Court of Appeals 14 that an owner's act of allowing another
to occupy his house, rent-free does not create a permanent and indefeasible right of possession
in the latter's favor. Consequently, it is of no moment that petitioner was in possession of the
property at the time of the sale to the Magpayo spouses. It was not a hindrance to a valid
transfer of ownership. On the other hand, petitioner's subsequent claim of ownership as
successor to his mother's share in the conjugal asset is belied by the fact that the property was
not included in the inventory of the estate submitted by his father to the intestate court. This
buttresses the ruling that indeed the property was no longer considered owned by petitioner's
parents. We also uphold the Court of Appeals in holding that the mortgage to PBCom by the
Magpayo spouses is valid notwithstanding that the transfer certificate of title over the property
was issued to them after the mortgage contract was entered into. Registration does not confer
ownership, it is merely evidence of such ownership over a particular property.15 The deed of
sale operates as a formal or symbolic delivery of the property sold and authorizes the buyer to
use the document as proof of ownership.16 All said, the Magpayo spouses were already the
owners when they mortgaged the property to PBCom.17
IN VIEW WHEREOF, the decision of the Court of Appeals in CA-G.R. No. 44707 is AFFIRMED.
Costs against petitioner.1âwphi1.nêt
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 95815 March 10, 1999

SERVANDO MANGAHAS, petitioner,
vs.
THE HON. COURT OF APPEALS and SPOUSES SIMEON and LEONORA CAYME,
respondents.

PURISIMA, J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court seeking to
nullify the decision of the Court of Appeals 1 dated May 25, 1990 2 and the Court of Appeals'
Resolution of October 12, 1990, 3 denying petitioner's motion for reconsideration.
From the records on hand, the antecedent facts that matter can be culled as follows:
Since April 1955, 4 the spouses, Severo S. Rodil and Caridad S. Rodil, occupied and possessed
the subject property, 5 which is an agricultural land with an area of 15.0871 hectares. 6 On
February 1,1971, they sold the said piece of land to the spouses, Pablo Simeon and Leonora
Cayme, for Seven Thousand (P7,000.00) Pesos, as evidenced by the affidavit 7 executed by the
former in favor of the latter in the presence of the herein petitioner, Servando Mangahas 8
During the trial below, the lower court gave credence to the evidence on record that it was the
herein petitioner himself who approached the buyer and offered to sell subject parcel of land
and he was also the one who received said consideration of P7,000,000.
On the same day, the private respondents filed with the Bureau of Lands a Free Patent
application for the same land in dispute, which application was approved on August 27, 1975 by
the Bureau of Lands under Free Patent No. 576411. 9 Pursuant thereto the Register of Deeds in
62

Mamburao, Occidental Mindoro issued the corresponding Original Certificate of Title No. P-
6924. 10
Records show that before the sale, the spouses Rodil had already applied for subject tract of
land with the Bureau of Lands which application was not acted upon even until the aforesaid
sale. It was also shown that petitioner, Servando Mangahas, had been in possession thereof by
virtue of the agreement between him and the spouses Rodil, allowing him (petitioner) to occupy
and cultivate the said parcel of land. 11 For allowing him to occupy and cultivate the same,
petitioner Servando Mangahas paid the amount of P7,000.00 to the Rodils, as mentioned in the
"Kasulatan ng Pagtanggap ng Salapi 12 Twelve (12) hectares of the property were then
developed into a fishpond, two (2) hectares planted to rice and one (1) hectare used as
"tumana" with a house erected thereon.
Petitioner was permitted by the private respondents to continue possessing and working on the
same land, even after the sale, upon the request of the private respondents themselves
because they were then busy in their palay business. Private respondents did not get any share
in the fruits or harvest of the land except on one occasion, when the petitioner gave them one-
half (1/2) "tiklis" (big basket) of "tilapia". However, the private respondents had long before
demanded from the petitioner the return of the premises in question but the latter refused to
vacate the place. Private respondents tolerated petitioner's possession until February 5, 1985,
when they commenced the present action for recovery of ownership and the possession of real
property, docketed as Civil Case No. R-528 before Branch 45 of the Regional Trial Court in San
Jose, Occidental Mindoro.
Petitioner theorized that he entered into the possession of the land under controversy,
sometime in 1969, by virtue of a prior sale he inked with the spouses Rodil on December 7,
1969, and since then, he has been in continuous occupation and possession in concepto de
dueño up to the present, enjoying the fruits thereof to the exclusion of all others, his right thereto
being evidenced by the "Kasulatan ng Pagtangap ng Salapi" dated December 7, 1969.
Petitioner denied having offered the same land for sale to the private respondents or ever
receiving the amount of P7,000.00, the consideration of the alleged sale of February 1, 1971. 13
He further averred that respondent Leonora Cayme misled the Bureau of Lands into granting
her a Free Patent for subject parcel of land on the basis of a "Deed of Relinquishment of
Rights", supposedly executed by Severe Rodil, and to which document the signature of
petitioner as a witness was procured through fraud, deceit and misrepresentation. 14
In due time, the parties went to trial which culminated in the rendition by the court a quo of its
decision of November 14, 1986, in favor of the plaintiffs (now the private respondents),
disposing as follows:
WHEREFORE, premises considered, judgment is hereby rendered:
(a) Declaring the plaintiffs to be the absolute and registered owners of the land in
question covered by and described in OCT No. P-6924 (Free Patent NO.
576411) of the Office of the Register of Deeds for the Province of Occidental
Mindoro;
(b) Ordering defendant and all persons claiming under him to remove their
respective houses constructed thereon, and to deliver the possession of the land
in question together with all the improvements thereon unto the plaintiffs;
(c) Ordering the defendant to pay the plaintiffs the sum of
P5, 000. 00 as and for attorney's fees; and
(d) Ordering the defendant to pay the costs of suit.
SO ORDERED. 15
With the denial 16 of his Motion for Reconsideration and/or New Trial, petitioner seasonably
appealed to the Court of Appeals which came out with a judgment of affirmance on May 25,
1990. 17
The issues posited by petitioner boil down to:
63

I WHETHER THE LOWER COURT ERRED IN NOT HOLDING THAT THE

LAND IN QUESTION IS NO LONGER PART OF THE PUBLIC DOMAIN FOR
THE REASON THAT DEFENDANT IS ALREADY, BY OPERATION OF LAW,
THE OWNER THEREOF BY VIRTUE OF A GOVERNMENT GRANT IN
ACCORDANCE WITH THE LAW AND EXISTING JURISPRUDENCE.
II. WHETHER THE LOWER COURT ERRED IN NOT FINDING PLAINTIFF
LEONORA CAYM E GUILTY OF FRAUD AND MISREPRESENTATION IN
SECURING FREE PATENT NO. 576411 FROM THE BUREAU OF LANDS.
The first issue is mainly predicated on the theory that the petitioner acquired ownership of the
disputed land by acquisitive prescription. Petitioner theorized that with the length of possession
of his predecessors-in-interest, the spouses Rodil, tacked to his own possession, the total
period of possession in his favor would suffice to vest in him the ownership of the property
under the law on prescription. 18 So also, citing the early case of Cariño vs. Insular Government
19
up to and including the more recent cases of The Director of Lands vs. Bengzon, et al. 20 and
The Director of Lands vs. Manila Electric Company, et al. 21, petitioner stressed that by
prescription, he became the owner of subject property ipso jure, which land became a private
property by operation of law, and had been withdrawn and segregated from the alienable and
disposable part of the public domain. Consequently, the Bureau of Lands had no authority to
issue the Free Patent in question, which was then null and void; 22 petitioner argued.
The factual milieu obtaining with respect to the petition under scrutiny has rendered petitioner's
reliance on the applicability of the aforestated principles misplaced. In disposing of the issue,
the Court of Appeals opined:
. . . Even if we were to disregard the need for a proper application, Article 1138 of
the Civil Code provides,
In the computation of time necessary for prescription the following
rules srules shall be observed:
(1) The present possessor may complete the period
necessary for prescription by tacking his
possession to that of his grantor or predecessor in
interest . . .
The defendant-appellant's grantor or predecessor in interest (Severo Rodil)
possession of the property, subject matter of the litigation, on April 1955 (Exhibit
"F" for the plaintiff-appellees and exhibit "5" for the defendant). Since the
complaint in the case at bar was filed on February 25, 1985, 23 the requirement of
at least thirty years continuous possession has not been complied with even if
We were to tack Rodil's period of possession. . . . 24
As found by the lower court below, petitioner had admitted, 25 contrary to his disclaimer, that the
possession of the spouses Rodil, from whom he traces the origin of his supposed title,
commenced only in April 1955. Petitioner can not now feign ignorance of such judicial
admission which he has resolutely repudiated in his present petition. 26 Acquisition of ownership
under the law on prescription cannot be pleaded in support of petitioner's submission that
subject land has ipso jure become his private property.
As regards the issue of fraud tainting the acquisition of the questioned Free Patent, the Court
discerns no basis for disturbing the finding by the lower court as affirmed by the Court of
Appeals. Findings of fact by the trial court are not to be disturbed on appeal, except for cogent
reasons, as when the findings of fact are not duly supported by evidence. 27 On the other hand,
findings by the Court of Appeals on factual questions are conclusive and ought not to be
disregarded. But the rule admits of some exceptions as when such findings of fact are contrary
to what the trial court found. 28 Mere allegation of error without more will not prevail over the
findings by the trial court, especially when affirmed by the Court of Appeals, as in the case
under consideration.
64

Petitioner has not adduced before the lower court a preponderance of evidence of fraud. It is
well settled that a party who alleges a fact has the burden of proving it. 29 Thus, whoever alleges
fraud or mistake affecting a transaction must substantiate his allegation, since it is presumed
that a person takes ordinary care of his concerns and private transactions have been fair and
regular. 30 The requirement that fraud must be established by clear and convincing evidence has
been reiterated in Cuizon vs. Court of Appeals, 31 viz.:
We are not, however, inclined to toe the line of the trial court's finding that private
respondents are liable for fraud. Fraud is the deliberate or intentional evasion of
the normal fulfillment of an obligation. The mere failure of private respondents to
execute a deed of sale because they demanded first an accounting of the lots
used as collaterals by petitioner and the amount of loans secured could not be
considered as fraud. Fraud is never presumed. It must be alleged and proven.
Fraus est odiosa et non praesumeda . . . (Emphasis ours).
In the petition under scrutiny, the fraud theorized upon by petitioner is belied by what the Court
of Appeals found, to wit:
This court has found that the defendant-appellant is a person whose credibility is
much in doubt. On the other hand, We have found the plaintiff-appellee Leonora
Simeon Cayme to be straightforward and credible. She has convincingly shown
to this court, through her testimony and the supporting documentary evidence,
that she is in fact the rightful owner of the property in dispute . . . 32 (Emphasis
supplied.)
WHEREFORE, the petition is DENIED and the decision appealed from AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 131803 April 14, 1999

SOTERA PAULINO MARCELO, GABRIELA M. ANGELES, SIMEONA CUENCO, EMILIA
MARCELO and RUBEN MARCELO, petitioners,
vs.
HON. COURT OF APPEALS, FERNANDO CRUZ and SERVANDO FLORES, respondents.

VITUG, J
The reversal of the 28th November 1996 decision 1 of the Court of Appeals setting aside that of
the Regional Trial Court ("RTC"), Branch 19, of Malolos, Bulacan, is sought in this petition for
review on certiorari. Petitioners seek the reinstatement of the RTC decision which has ordered
respondents Fernando Cruz and Servando Flores to return the ownership and possession of a
portion of unregistered and untitled land located in Sta. Lucia, Angat, Bulacan, to herein
petitioners.
It would appear that on 06 October 1982, herein petitioners, heirs of the deceased Jose
Marcelo, filed with the Regional Trial Court of Malolos, Bulacan, an action for the recovery of a
portion of unregistered land in Sta. Lucia, Angat, Bulacan. The complaint, later amended on 12
October 1983, averred that two parcels of land in Sta. Lucia, declared for taxation purposes
under Tax Declarations No. 2880 and No. 2882, owned by the late Jose Marcelo and his
spouse, Sotera Paulino-Marcelo, had been encroached, to the extent of 7,540 2 square meters
thereof, by respondents Fernando Cruz and Servando Flores.
In their answer, respondents Cruz and Flores denied the allegations of petitioners, assailing at
the same time the jurisdiction of the trial court to act on the complaint which, it was claimed, had
effectively asserted a cause of action for ejectment (unlawful detainer).
65

The appellate court adopted the summary of evidence made by the trial court; thus:
Evidence adduced by the plaintiffs through the testimony of plaintiff Gabriela
Angeles showed that the parcel of land subject of litigation covering Lot 3098 and
embraced under Tax Declaration No. 2882 (Exh. A) was originally owned by
spouses Jose Marcelo and Sotera Paulino and they had been in continuous
possession of said property since 1939. Following the death of plaintiffs' father in
1965, they discovered in 1967 that a portion of said property had been
encroached by defendant Fernando Cruz. Plaintiffs caused the relocation survey
of said property and per plan of Lot 3096 and Lot 3098 of the Angat Cadastre as
surveyed for the heirs of Jose Marcelo (Exh. B), 7540 square meters of Lot 3098
had been encroached by defendant Fernando Cruz as indicated in the shaded
portion of said plan (Exh. B-1).
Defendant Fernando Cruz sold his property with an area of 13,856 square
meters to defendant Servando Flores pursuant to a deed of sale (Kasulatan ng
Bilihan) dated November 3, 1968 (Exh. C) which sale, includes the encroached
portion (7,540 square meters of plaintiffs' property). Defendant Fernando Cruz
heretofore purchased the said property from Engracia de la Cruz and Vicente,
Marta, and Florentino all surnamed Sarmiento, pursuant to a "Kasulatan ng
Partisyon sa Labas ng Hukuman at Bilihang Patulayan" dated November 19,
1960 (Exh. D) covering an area of 6,000 square meters. The Tax Declaration No.
4482 (Exh. E) covering the property in the name of Jorge Sarmiento and
Engracia Cruz covered an area of 6,800 3 square meters. As soon as the said
property was sold to Fernando Cruz, the adjoining property described and
classified as "parang" with an area of 7,856 square meters was declared by said
Fernando Cruz in his name which circumstance, increased his landholding to
13,856 square meters (Exh. F). The said property was subsequently sold by
defendant Fernando Cruz to defendant Servando Flores.
According to Gabriela, they attempted to cultivate the disputed portion sometime
in 1968, but were barred from doing so by defendant Servando Flores who
claimed that the area was part of the land he bought from co-defendant
Fernando Cruz.
On the other hand, both defendants testified to refute plaintiffs' evidence. They
invariably declared that the portion sought to be recovered by plaintiffs is part of
the land which defendant Fernando Cruz acquired in 1960 from the Heirs of
Jorge Sarmiento; that as stated in their document (Exh. 2), the land sold to
defendant Fernando Cruz contained 6,000 square meters of "palayero" or
riceland and 7,856 square meters of "parang" or pasture land, that defendant
Fernando Cruz caused the entire parcel to be surveyed sometime in 1967 (Exhs.
3 & 4), which he then declared for taxation purposes under Tax Declaration No.
8505 (Exh. F); that on November 3, 1968 defendant Fernando Cruz sold the
whole lot to defendant Servando Flores (Exh. I), who thereupon occupied and
cultivated it. 4
Evaluating the evidence of the contending parties, the trial court found and ratiocinated:
The crux of the matter at issue apparently revolves on the so-called pasture land
(parang) supposedly sold by the Sarmientos and Engracia dela Cruz to
defendant Fernando Cruz. The said "parang" was never included and/or
embraced in the Tax Declaration No. 4882 (Exh E) of the Sarmientos at the time
of the said sale in favor of defendant Fernando Cruz pursuant to an extrajudicial
partition with sale dated November 19, 1960 (Exh. D). This is evident as
indicated by the fact that the same was only declared by Fernando Cruz in his
name in 1961 as evidence by the tax declaration issued in his favor (Exh F). On
the other hand, the said "parang" is a part and parcel of plaintiffs' property to
66

which they had been in possession thereof prior to World War II and evidenced
by Tax Declaration No. 2882 (Exh A). The plan of Lot 3096 and Lot 3098 of the
Angat Cadastre (Exhs B and B-1) inevitably indicated that what has been
encroached by defendants refers to the "parang" of 7,540 square meters which
defendant Fernando Cruz declared the same in his name in 1961. This explains
the unnecessary increase of his property from 6,000 square meters which he
purchased from the Sarmientos pursuant to an extrajudicial partition with sale
and embraced under Tax Declaration No. 4882 (Exh. E), to 13,856 square
meters. 5
The trial court thereupon ruled in favor of petitioners; the dispositive portion of its
decision concluded:
WHEREFORE, judgment is hereby rendered against the defendants ordering the
following:
a. To return the ownership and possession of 7,540
square meters to the plaintiffs as indicated in the
relocation survey plan; and
b. To pay attorney's fees in the amount of
P5.000.00;
No actual and/or moral damages (sic) is awarded for lack of
factual evidence.
The counterclaims is hereby dismissed for lack of factual and/or
legal basis. 6
Respondent Cruz and Flores went to the Court of Appeals; in its now assailed decision, the
appellate court reversed the judgment of the court a quo. Petitioner moved for a
reconsideration; the motion, however, was denied.
In this latest recourse, petitioners assails the holding of the Court of Appeals that the action
initiated in 1982 by petitioners against respondent Flores would not prosper on the theory that
Flores already has acquired ownership of the disputed land by ordinary acquisitive prescription.
Petitioners argue that —
1. The respondent court erred in not applying the doctrine laid down by this
Honorable Court in Tero vs. Tero, 131 SCRA 105 considering that the
respondents never acquired the 7,540 square meters lawfully, as the respondent
court already stated that was sold to respondent Cruz was the 6,800 square
meters which he then sold to respondent Flores, hence respondents can not
account as to how they acquire said lot, whereas the petitioner proved the 7,540
square meters formed part of 19,231 square meters of their parents in their
possession since 1939.
2. The respondent court erred in disregarding the findings of facts of the trial
court, and substitute its own perception of the facts contrary to the
incontrovertible evidence. 7
Petitioners assert that the property sold by the Sarmientos to respondent Cruz on 19
November 1950, under a "Kasulatan ng Partisyon sa Labas ng Hukuman at Bilihang
Patuluyan," covers only the "palayero" or riceland, which measures about 6,000 square
meters, and that the "parang," containing 7,856 square meters, has not been included.
The petition must be denied.
Contrary to the insistence of petitioners, the "Kasulatan ng Partisyon sa Labas ng Hukuman at
Bilihang Patuluyan," executed on 19 March 1960 by Engracia de la Cruz (widow of Jorge
Sarmiento) and her children Vicente Sarmiento. Maria Sarmiento and Florentino Sarmiento,
pertained not only to the "palayero" but also to the "parang" as well; this agreement provided
thus:
67

1. Na akong si Engracia de la Cruz at ang aking yumao ng asawang si Jorge

Sarmiento (nuong nabubuhay ito) ay nakapagpundar ng isang lupa na ang
buong description ay gaya ang sumusunod.
Isang parselang lupang PALAYERO na may kasamang PARANG (Cogonales)
na matatagpuan sa Barrio ng Santa Lucia, Angat, Bulacan, P.I.
Ang Palayero ay may sukat na 6,000 metros cuadrados, klasipikado 2-b,
amillarado P270.00 Tax No. 4482; at ang parang ay may sukat na 7,856 metros
cuadrados. Humahangga sa Norte, key Antonio de la Rosa; Este, kina Fabian
Garcia at Juan Geronimo; Sur, Kina Miguel Illescas, Ciriaco Reyes, y Juan de la
Cruz; Oeste, Juan de la Cruz hoy Jose Marcelo y Mariano de la Cruz hoy Felipe
de Leon. Walang mejoras at ang hangganan sa paligid ay makikilala sa
pamamagitan ng mga matutuwid na sikang o pilapil na buhay.
2. Ayon sa Tax No. 4482 ay lupang palayero lamang ang nakatala, subalit ito'y
mayroong kasamang parang na hindi lamang naipatala niyang nakaraang
pasukan ng lupa sa tanggapan ng Assessor Provincial, kaya't ngayon ay
magalang naming hinihiling na matala ang naturang
parang. 8 (Emphasis supplied).
Shortly after the execution of the deed of sale in his favor, respondent Cruz declared
both parcels. i.e., the palayero and the parang, for taxation purposes in 1960 in the
Office of the Provincial Assessor and forthwith a new tax declaration was issued in his
name for the entire 13,856 square-meter property. The trial court itself likewise found
that the sale by the Sarmientos to respondent Cruz covered both the riceland and the
pasture land, it said:
. . . It is worthy to note that the ownership of the adjoining property by defendant
Fernando Cruz originated from an extrajudicial partition with sale (Kasulatan ng
Partisyon sa Labas ng Hukuman at Bilihang Patuluyan dated November 19, 1960
. . . . Under the said document, Engracia de la Cruz and her children Vicente,
Marta, and Florentino, all surnamed Sarmiento, sold to defendant Fernando Cruz
a rice land containing an area of 6,000 square meters and embraced under Tax
Declaration No. 4482 and a pasture land (parang) containing an area of 7,856
square meters. . . . 9
In turn, respondent Cruz sold, on 03 November 1968, the 13,856 square meters of land to
respondent Flores under a "Kasulatan ng Bilihan." Respondent Flores immediately took
possession of the property to the exclusion of all others and promptly paid the realty taxes
thereon. From that time on, Flores had been in possession of the entire area in the concept of
an owner and holding it in that capacity for almost fourteen (14) years before petitioners initiated
their complaint on 06 October 1982.
Acquisitive prescription is a mode of acquiring ownership by a possessor through the requisite
lapse of time. In order to ripen into ownership, possession must be in the concept of an owner,
public, peaceful and uninterrupted. 10 Thus, mere possession with a juridical title, such as, to
exemplify, by a usufructuary, a trustee, a lessee, an agent or a pledgee, not being in the
concept of an owner, cannot be ripen into ownership by acquisitive prescription. 11 unless the
juridical relation is first expressly repudiated and such repudiation has been communicated to
the other party. 12 Acts of possessory character executed due to license or by mere tolerance of
the owner would likewise be inadequate. 13 Possession, to constitute the foundation of a
prescriptive right, must be en concepto de dueno, or, to use the common law equivalent of the
term, that possession should be adverse; if not, such possessory acts, no matter how long, do
not start the running of the period of prescription. 14
Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary.
Ordinary acquisitive prescription requires possession of things in good faith and with just title for
the time fixed by law; 15 without good faith and just title, acquisitive prescription can only be
extraordinary in character.
68

As regards. real or immovable property, Article 1134 of the Civil Code provides:
Art. 1134. Ownership and other real rights over the immovable property are
acquired by ordinary prescription through possession of ten years.
Ordinary acquisitive prescription demands, as aforesaid, that the possession be "in good
faith and with just title." 16 The good faith of the possessor consists in the reasonable
belief that the person from whom the thing is received has been the owner thereof and
could thereby transmit that ownership. 17 There is, upon the other hand, just title when
the adverse claimant comes into possession of the property through any of the modes
recognized by law for the acquisition of ownership or other real rights, but that the
grantor is neither the owner nor in a position to transmit the right. 18 In Doliendo vs.
Biarnesa, 19 the Supreme Court has explained the law in Article 1130 of the Civil Code
which states that the "title for prescription must be true and valid." Thus:
We think that this contention is based on a misconception of the scope and effect
of the provisions of this article of the Code in its application to "ordinary
prescription." It is evident that by a "titulo verdadero y valido" in this connection
we are not to understand a "titulo que por si solo tiene fuerza de transferir el
dominio sin necesidad de la prescripcion" (a title which of itself is sufficient to
transfer the ownership without the necessity of the lapse of the prescription
period); and we accept the opinion of a learned Spanish law writer who holds that
the "titulo verdadero y valido" as used in this article of the code prescribes a
"titulo colorado" and not merely "putativo;" a "titulo colorado" being one "which a
person has when he buys a thing, in good faith, from one whom he believes to be
the owner," and a "titulo putativo" "being one which is supposed to have
preceded the acquisition of a thing, although in fact it did not, as might happen
when one is in possession of a thing in the belief that it had been beoueathed to
him." (Viso Derecho Civil, Parte Segunda, p. 541). 20
The records of the case amply supports the holding of the appellate court that the requirements
for ordinary prescription hereinabove described have indeed been duly met; it explained:
In the instant case, appellant Servando Flores took possession of the
controverted portion in good faith and with just title. This is so because the said
portion of 7,540 square meters was an integral part of that bigger tract of land
which he bought from Fernando Cruz under public document (Exh I). As explicitly
mentioned in the document of sale (Exh. I) executed in 1968, the disputed
portion referred to as "parang" was included in the sale to appellant Flores.
Parenthetically, at the time of the sale, the whole area consisting of the riceland
and pasture land was already covered by a tax declaration in the name of
Fernando Cruz (Exh. F) and further surveyed in his favor (Exhs. 3 & 4). Hence,
appellant Flores' possession of the entire parcel which includes the portion
sought to be recovered by appellees was not only in the concept of an owner but
also public, peaceful and uninterrupted. While it is true that the possession of the
entire area by his predecessor-in-interest (Fernando Cruz) may not have been
peaceful as it was indeed characterized with violence which resulted in the death
of Jose Marcelo, this cannot be said of appellant Flores' possession of the
property, in respect of which no evidence to the contrary appears on record. 21
The Court finds no cogent reasons to reverse the above findings of the appellate court
and thus gives its affirmance to the assailed decision.
WHEREFORE, the petition for review on certiorari is DENIED. No cost.1âwphi1.nêt
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
69

G.R. No. 105630 February 23, 2000

REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
ENRIQUE P. DE GUZMAN, Spouses RIO RIVERA and CAROLINA R. DE GUZMAN, THE
CITY REGISTER OF DEEDS OF GENERAL SANTOS CITY and HOECHST PHILS., INC.,
respondents,
RIO RIVERA and CAROLINA DE GUZMAN, respondents.
PARDO, J.:
This is a petition for review assailing the decision of the Court of Appeals,1 reversing and setting
aside that of the Regional Trial Court, Branch 22, General Santos City,2 and dismissing the
complaint for reversion of lot 5249, Ts-217, situated at Dadiangas. General Santos City and
cancellation of titles, for lack of merit.
The facts are as follows:
After public bidding held on March 18, 1950, the Board of Liquidators,3 awarded Lot 5249 Ts-
217, a 450 square meter land situated in Dadiangas, General Santos City, to Eusebio Diones of
Takurong, Bubon, Cotabato. On March 11, 1955, Eusebio Diono transferred his rights over the
lot to Enrique P. de Guzman (de Guzman, for brevity) for P700.00, evidenced by an Agreement
of Transfer of Right.4 On November 12, 1956, the Board of Liquidators cancelled the award
previously given to Eusebio Diones.5
From the time he purchased the lot, de Guzman did not occupy it. In 1963, Lucena Ong Ante,
another claimant of Lot 5249 Ts-217, authorized Carmen Ty to occupy the land. Ong Ante paid
the corresponding real estate taxes from 1963 until 1980. Carmen Ty remained the occupant of
the land until this time.
On August 12, 1967, de Guzman filed with the Board of Liquidators, Miscellaneous Sales
Application No. 00222-E,6 and submitted supporting documents.
On August 29, 1967, the Director of Lands ordered the awards and issuance of a patent in favor
of de Guzman.7 On September 5, 1967, the Department of Agriculture and Natural Resources
approved and issued Miscellaneous Sales Patent No. 814 to de Guzman.8 On September 26,
1967, the Register of Deeds, General Santos, issued Original Certificate of Title No. P-29712 in
the name of de Guzman.9
Sometime in 1973, de Guzman sold the lot to his married daughter and her husband, Carolina
R. de Guzman and Rio Rivera for P5,000.00. The covering deed of sale could not be located10
and Rio Rivera admitted that his father-in-law Enrique P. de Guzman was not in occupation of
the lot in question.11 On September 4, 1973, the Register of Deeds of General Santos City
issued Transfer Certificate of Title No. T-7203 to spouses Rio Rivera and Carolina R. de
Guzman.12 On March 21, 1974, Lucena Ong-Ante's adverse claim was annotated on the title of
the lot.13
Meanwhile, on February 13, 1974, spouses Rivera and Hoeschst, Phils., Inc., as mortgagor and
mortgagee, respectively, executed a deed of real estate mortgage involving the lot. For failure to
settle their obligation, on October 29, 1977, mortgagee Hoechst Phils., Inc., foreclosed on the
mortgage and acquired the lot at the foreclosure sale. A certificate of sale was issued in favor of
Hoechst Phils., Inc. However, for unknown reasons, the real estate mortgage and certificate of
sale were not registered with the Register of Deeds. Thus, the transfer certificate of title
remained in the name of spouses Rivera.
On January 14, 1981, petitioner Republic of the Philippines filed with the Court of First Instance,
16th Judicial District, General Santos City re-amended complaint14 for reversion of Lot 5249 Ts-
217 and cancellation of titles against Enrique P. de Guzman, spouses Rio Rivera and Carolina
R. de Guzman, the City Registrar of Deeds, General Santos City and Hoechst Phils., Inc.
In its re-amended complaint,15 petitioner Republic of the Philippines averred that Enrique P. de
Guzman obtained Original Certificate of Title No. P-29712 through fraudulent means. Petitioner
contended since Lot 5249 Ts-217 was awarded to Eusebio Diones, hence, Eusebio Diono had
no right to execute a deed of transfer in favor of Enrique de Guzman. Petitioner maintained that
70

the documents presented by de Guzman to support his miscellaneous sales application were
either issued by fictitious persons who were not employees of the Board of Liquidators, or
contained inconsistencies that cast doubt on their authenticity.
De Guzman was neither in actual possession of the land, nor made improvements thereto, as
he alleged in his sales application. Actual possession of the land by the applicant and making
improvements thereto were among the legal requirements to be complied with by an applicant.
Thus, Miscellaneous Sales Patent No. 814 and Original Certificate of Title No. P-29712 issued
to de Guzman pursuant thereto were null and void. Also, Transfer Certificate of Title No. T-2703
in the name of spouses Rivera was null and void for they were not innocent purchasers for
value. Admittedly, they knew that their vendor de Guzman was not in possession of the lot.
Petitioner asserted that Lot 5249 Ts-217 must be reverted back to the mass of public domain.
On July 9, 1987, the trial court rendered decision in favor of petitioner.16 It held that the
supporting documents submitted by de Guzman were falsified, hence, OCT No. P-29712 issued
in his name was obtained through fraudulent means. Furthermore, the fact that de Guzman was
not in possession of the property disqualified him from being awarded the sales patent. The trial
court ruled that Rio Rivera and Carolina R. de Guzman were not innocent purchasers for value
since their close relationship with Enrique P. de Guzman put them on notice of knowledge of a
defect in the acquisition of title to the land. The trial Court ordered the reversion of the land to
the mass of public domain.
The dispositive portion decreed as follows:
WHEREFORE, IN VIEW OF ALL THE FOREGOING, plaintiff having preponderantly
proven the allegations of the complaint, judgment is hereby rendered:
1. Declaring the Miscellaneous Sales Patent No. 814 and OCT No. P-29712 in
the name of Enrique de Guzman covering Lot 5249, Ts-217, situated at
Dadiangas, General Santos City, and TCT No. T-7203 in the name of Rio Rivera
and Carolina de Guzman and the Certificate of Sale executed by the City Sheriff,
General Santos City, dated October 29, 1977, in favor (sic) Hoechst Philippines,
Inc., null and void;
2. Ordering Rio Rivera and Carolina de Guzman and/or Hoechst Philippines, Inc.,
to Surrender to the Register of Deeds, General Santos City, the Owner's
Duplicate of said TCT No. T-7203 or any subsequent transfer certificate of title
issued in the name of Hoechst Philippines, Inc. if any, and once surrendered,
ordering the Register of Deeds, General Santos City, to cancel the owner's
duplicate original of said Title No. P-29712 in the name of Enrique de Guzman
and owner's duplicate of TCT No. T-2703 in the name of Rio Rivera and Carolina
de Guzman on file with this (Register of Deeds) Office;
3. Ordering the Register of Deeds, General Santos City, to cancel OCT No. P-
29712 and TCT No. T-7203 in the name of Enrique de Guzman and Rio Rivera,
respectively, and all other subsequent transfer certificate of titles derived
therefrom should said defendants Enrique P. de Guzman, Rio Rivera and
Carolina de Guzman or Hoechst Philippines, Inc. fail to surrender their respective
certificate of titles over Lot No. 5249, Ts-217;
4. Ordering the reversion of Lot No. 5249, Ts-217 situated at Dadiangas, General
Santos City, to the mass of public domain, subject to the administration and
disposition of the Director of Lands or the Board of Liquidators as the case
maybe, giving preference to qualified and actual occupant; and
5. Dismissing the counterclaim with costs against the defendants.
SO ORDERED.
General Santos City, July 9, 1987.
(s/t) ABEDNEGO O. ADRE
Judge17
On November 10, 1988, spouses Rivera appealed the decision to the Court of Appeals.18
71

On May 25, 1992, the Court of Appeals rendered decision reversing the decision of the trial
court.19 The Court of Appeals ruled that when Enrique P. de Guzman obtained Original
Certificate of Title No. P-29712, the land ceased to be part of the public domain. The land
became registered under the Torrens system, converted into a private registered land, and
governed by the Property Registration Decree (P.D. 1529). Being a private land, the Director of
Lands had neither control nor jurisdiction over the land. Furthermore, the title became
indefeasible after the expiration of one (1) year from issuance thereof.
The Court of Appeals found that no fraud attended the issuance of the patent and Original
Certificate of Title to de Guzman. It stated that the discrepancy in the name Diono and Diones
appearing in the records was a mere typographical error.
The appellate court gave little credit to the investigation report relied upon by the trial court. It
held that no other evidence, whether testimonial or documentary, was presented to prove that
the documents presented by de Guzman were issued by fictitious persons or entirely fabricated.
However, the Court of Appeals sustained the finding of the trial court that Enrique P. de
Guzman and spouses Rivera were not in possession of the property. The Court of Appeals
concluded that de Guzman misrepresented facts in his application since he was not the
possessor at the time he applied for the sales patent. Nonetheless, the Court of Appeals ruled
that title founded on fraud or misrepresentation could not be assailed since more than one year
had lapsed from the issuance of the public land patent.
At any rate, the Court of Appeals held that the land has passed to innocent purchasers for
value, namely, spouses Rivera. The Court of Appeals argued that mere relationship to de
Guzman, without any other proof of bad faith on the part of spouses Rivera, did not dispute the
presumption that they were innocent purchasers for value.
On August 19, 1992, the Republic of the Philippines filed with this Court, a petition for review on
certiorari of the Court of Appeals' decision.20
On February 17, 1993, we gave due course to the petition and required the parties to file their
respective memoranda.21 The parties have complied.
Petitioner Republic of the Philippines contends that Enrique de Guzman obtained the
Miscellaneous Sales Patent No. 814 and OCT No. P-29712 through fraudulent means.
Petitioner avers that the supporting documents submitted by de Guzman together with his sales
application, were either fabricated or issued by fictitious persons. Thus, both the sales
application and original certificate of title issued in favor of Enrique P. de Guzman were null and
void. Petitioner avers that respondent spouses Rivera being related by consanguinity and
affinity to de Guzman were not innocent purchasers for value.
We grant the petition.
Initially, we resolve the question of whether or not the Director of Lands loses authority over the
land the moment an original certificate of title is issued covering the same. The Court of Appeals
ruled that the issuance of the original certificate of title converted the lot into a private land,
thereby placing it beyond the authority of the Director of Lands.
We disagree. The authority of the Director of Lands to investigate conflicts over public lands is
derived from Section 91 of the Public Land Act. In fact, it is not merely his right but his specific
duty to conduct investigations of alleged fraud in securing patents and the corresponding titles
thereto. While title issued on the basis of a patent is as indefeasible as one judicially secured,
such indefeasibility is not a bar to an investigation by the Director of Lands as to how such title
had been acquired, if the purpose of such investigation is to determine whether or not fraud had
been committed in securing such title, in order that the appropriate action for reversion may be
filed by the Government.22
The next issue to determine is whether or not Enrique P. de Guzman validly obtained the sales
patent and the original certificate of title.
We rule in the negative. There is no question that de Guzman was not in possession of the
property. Hence, de Guzman misrepresented facts in his application for sales patent. Even the
Court of Appeals sustained the factual finding of the trial court on this point. However, the Court
72

of Appeals held that an action for cancellation of patent or title could not be maintained after the
lapse of one year from the date of issuance thereof. As heretofore stated, the ruling is
erroneous.
The next issue is whether or not the validity of the patent and the original certificate of title can
still be assailed after the lapse of one year from the issuance of the disputed title.
We rule that the State can assail a patent fraudulently issued by the Director of Lands. "Where
public land is acquired by an applicant through fraud and misrepresentation, the State may
institute reversion proceedings even after the lapse of one year."23 "The indefeasibility of a title
does not attach to titles secured by fraud and misrepresentation."24
The last issue to resolve is whether the spouses Rivera are innocent purchasers for value.
We agree with the trial court that spouses Rivera are not innocent purchasers for value.
Spouses Rivera are related by consanguinity and affinity to Enrique P. de Guzman knew that de
Guzman was not in possession of the land. In fact, Rio Rivera testified that his father-in-law was
not in possession of the lot in question. Carmen Ty was in possession of the land since 1963
and paid the real estate taxes thereon. We do not agree with the Court of Appeals that the
presumption of a buyer in good faith must prevail. "The burden of proving the status of a
purchaser in good faith and for value lies upon him who asserts that status. In discharging the
burden, it is not enough to invoke the ordinary presumption of good faith."25 "The rule is settled
that a buyer of real property which is in the possession of persons other than the seller must be
wary and should investigate the rights of those in possession. Otherwise, without such inquiry,
the buyer can hardly be regarded as buyer in good faith."26
"A purchaser or mortgagee 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 or mortgagor. 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 the vendors or
mortgagor's title, will not make him an innocent purchaser or mortgagee for value, if it
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 the measure of precaution
which may be required of a prudent man in a like situation."27
WHEREFORE, we GRANT the petition and REVERSE the decision of the Court of Appeals. We
declare Miscellaneous Sales Patent No. 814 and Original Certificate of Title No. P-29712 in the
name of Enrique P. de Guzman, and Transfer Certificate of Title No. T-7203 in the name of
spouses Rio Rivera and Carolina R. de Guzman, and all subsequent transfer certificates of title
derived therefrom, as null and void. We order the reversion to the mass of public domain of Lot
5249, Ts-217, located in Dadiangas, General Santos City.1âwphi1.nêt
No costs.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 120303 July 24, 1996

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

DAVIDE, JR. J.:p

This petition for review on certiorari has its origins in Civil Case No. 9214 of Branch 3 of
the Municipal Trial Court in Cities (MTCC) in Dagupan City for unlawful detainer and
damages. The petitioners ask the Court to set aside the decision of the Court of Appeals
73

affirming the decision of Branch 40 of the Regional Trial Court (RTC) of Dagupan City,
which, in turn, reversed the MTCC; ordered the petitioners to reimburse the private
respondents the value of the house in question and other improvements; and allowed
the latter to retain the premises until reimbursement was made.
It appears that Lot No. 3765-B-1 containing an area of 314 square meters was originally
owned by the petitioners' mother, Paulina Amado vda. de Geminiano. On a 12-square-
meter portion of that lot stood the petitioners' unfinished bungalow, which the petitioners
sold in November 1978 to the private respondents for the sum of P6,000.00, with an
alleged promise to sell to the latter that portion of the lot occupied by the house.
Subsequently, the petitioners' mother executed a contract of lease over a 126 square-
meter portion of the lot, including that portion on which the house stood, in favor of the
private respondents for P40.00 per month for a period of seven years commencing on
15 November 1978. 1 The private respondents then introduced additional improvements
and registered the house in their names. After the expiration of the lease contract in
November 1985, however, the petitioners' mother refused to accept the monthly rentals.
It turned out that the lot in question was the subject of a suit, which resulted in its
acquisition by one Maria Lee in 1972. In 1982, Lee sold the lot to Lily Salcedo, who in
turn sold it in 1984 to the spouses Agustin and Ester Dionisio.
On 14 February 1992, the Dionisio spouses executed a Deed of Quitclaim over the said
property in favor of the petitioners. 2 As such, the lot was registered in the latter's name. 3
On 9 February 1993, the petitioners sent, via registered mail, a letters addressed to
private respondent Mary Nicolas demanding that she vacate the premises and pay the
rentals in arrears within twenty days from notice. 4
Upon failure of the private respondents to heed the demand, the petitioners filed with the
MTCC of Dagupan City a complaint for unlawful detainer and damages.
During the pre-trial conference, the parties agreed to confine the issues to: (1) whether
there was an implied renewal of the lease which expired in November 1985; (2) whether
the lessees were builders in good faith and entitled to reimbursement of the value of the
house and improvements; and (3) the value of the house.
The parties then submitted their respective position papers and the case was heard
under the Rule on Summary Procedure.
On the first issue, the court held that since the petitioners' mother was no longer the
owner of the lot in question at the time the lease contract was executed in 1978, in view
of its acquisition by Maria Lee as early as 1972, there was no lease to speak of, much
less, a renewal thereof. And even if the lease legally existed, its implied renewal was not
for the period stipulated in the original contract, but only on a month-to-month basis
pursuant to Article 1687 of the Civil Code. The refusal of the petitioners' mother to
accept the rentals starting January 1986 was then a clear indication of her desire to
terminate the monthly lease. As regard the petitioners' alleged failed promise to sell to
the private respondents the lot occupied by the house, the court held that such should
be litigated in a proper case before the proper forum, not an ejectment case where the
only issue was physical possession of the property.
The court resolved the second issue in the negative, holding that Articles 448 and 546 of
the Civil Code, which allow possessors in good faith to recover the value of
improvements and retain the premises until reimbursed, did not apply to lessees like the
private respondents, because the latter knew that their occupation of the premises would
continue only during the life of the lease. Besides, the rights of the private respondents
were specifically governed by Article 1678, which allow reimbursement of up to one-half
of the value of the useful improvements, or removal of the improvements should the
lessor refuse to reimburse.
74

On the third issue, the court deemed as conclusive the private respondents' allegation
that the value of the house and improvements was P180,000.00, there being no
controverting evidence presented.
The trial court thus ordered the private respondents to vacate the premises, pay the
petitioners P40.00 a month as reasonable compensation for their stay thereon from the
filing of the complaint on 14 April 1993 until they vacated, and to pay the sum of
P1,000.00 as attorney's fees, plus costs. 5
On appeal by the private respondents, the RTC of Dagupan City reversed the trial
court's decision and rendered a new judgment: (1) ordering the petitioners to reimburse
the private respondents for the value of the house and improvements in the amount of
P180,000.00 and to pay the latter P10,000.00 as attorney's fees and P2,000.00 as
litigation expenses; and (2) allowing the private respondents to remain in possession of
the premises until they were fully reimbursed for the value of the house. 6 It ruled that
since the private respondents were assured by the petitioners that the lot they leased
would eventually be sold to them, they could be considered builders in good faith, and as
such, were entitled to reimbursed of the value of the house and improvements with the
right of retention until reimbursement and had been made.
On appeal, this time by the petitioners, the Court of Appeals affirmed the decision of the
RTC 7 and denied 8 the petitioners' motion for reconsideration. Hence, the present
petition.
The Court is confronted with the issue of which provision of law governs the case at
bench: Article 448 or Article 1678 of the Civil Code? The said articles read as follows:
Art 448. The owner of the land on which anything has been built, sown or planted
in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or plantercannot 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 if disagreement, the court shall fix the
terms thereof.
xxx xxx xxx
Art 1678. If the lessee makes, in good faith, useful improvements which are
suitable to the use for which the lease is intended, without altering the form or
substance of the property leased, the lessor upon the termination of the lease
shall pay the lessee one-half of the value of the improvements at that time.
Should the lessor refuse to reimburse said amount, the lessee may remover the
improvements, even though the principal thing may suffer damage thereby. He
shall not, however, cause any more impairment upon the property leased than is
necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursed, but he may remove the ornamental objects, provided no damage is
caused to the principal thing, and the lessor does not choose to retain them by
paying their value at the time the lease is extinguished.
The crux of the said issue then is whether the private respondents are builder in good
faith or mere lessees.
The private respondents claim they are builders in good faith, hence, Article 448 of the
Civil Code should apply. They rely on the lack of title of the petitioners' mother at the
time of the execution of the contract of lease, as well as the alleged assurance made by
the petitioners that the lot on which the house stood would be sold to them.
75

It has been said that while the right to let property is an incident of title and possession, a
person may be lessor and occupy the position of a landlord to the tenant although he is
not the owner of the premises let. 9 After all, ownership of the property is not being
transferred, 10 only the temporary use and enjoyment thereof. 11
In this case, both parties admit that the land in question was originally owned by the
petitioners' mother. The land was allegedly acquired later by one Maria Lee by virtue of
an extrajudicial foreclosure of mortage. Lee, however, never sought a writ of possession
in order that she gain possession of the property in question. 12 The petitioners' mother
therefore remained in possession of the lot.
It is undisputed that the private respondents came into possession of 126 square-meter
portion of the said lot by virtue of contract of lease executed by the petitioners' mother as
lessor, and the private respondents as lessees, is therefore well-established, and carries
with it a recognition of the lessor's title. 13 The private respondents, as lessees who had
undisturbed possession for the entire term under the lease, are then estopped to deny
their landlord's title, or to assert a better title not only in themselves, but also in some
third person while they remain in possession of the leased premises and until they
surrender possession to the landlord. 14 This estoppel applies even though the lessor
had no title at the time the relation of lessor and lessee was created, 15 and may be
asserted not only by the original lessor, but also by those who succeed to his title. 16
Being mere lessees, the private respondents knew that their occupation of the premises
would continue only for the life of the lease. Plainly, they cannot be considered as
possessors nor builders in good faith. 17
In a plethora of cases, 18 this Court has held that Article 448 of the Civil Code, in relation
to Article 546 of the same Code, which allows full reimbursement of useful
improvements and retention of the premises until reimbursement is made, applies only
to a possessor in good faith, i.e., one who builds on land with the belief that he is the
owner thereof. It does not apply where one's only interest is that of a lessee under a
rental contract; otherwise, it would always be in the power of the tenant to "improve" his
landlord out of his property.
Anent the alleged promise of the petitioners to sell the lot occupied by the private
respondents' house, the same was not substantiated by convincing evidence. Neither
the deed of sale over the house nor the contract of lease contained an option in favor of
the respondent spouses to purchase the said lot. And even if the petitioners indeed
promised to sell, it would not make the private respondents possessors or builders in
good faith so as to covered by the provision of Article 448 of the Civil Code. The latter
cannot raise the mere expectancy or ownership of the aforementioned lot because the
alleged promise to sell was not fulfilled nor its existence even proven. The first thing that
the private respondents should have done was to reduce the alleged promise into
writing, because under Article 1403 of the Civil Code, an agreement for the sale of real
property or an interest therein is unenforceable, unless some note or memorandum
thereof be produced. Not having taken any steps in order that the alleged promise to sell
may be enforced, the private respondents cannot bank on the promise and profess any
claim nor color of title over the lot in question.
There is no need to apply by analogy the provisions of Article 448 on indemnity as was
done in Pecson vs. Court of Appeals, 19 because the situation sought to be avoided and
which would justify the application of that provision, is not present in this case. Suffice it
to say, "a state of forced coownership" would not be created between the petitioners and
the private respondents. For, as correctly pointed out by the petitioners, the right of the
private respondents as lessees are governed by Article 1678 of the Civil Code which
allows reimbursement to the extent of one-half of the value of the useful improvements.
It must be stressed, however, that the right to indemnity under Article 1678 of the Civil
Code arises only if the lessor opts to appropriate the improvements. Since the
76

petitioners refused to exercise that option, 20 the private respondents cannot compel
them to reimburse the one-half value of the house and improvements. Neither can they
retain the premises until reimbursement is made. The private respondents' sole right
then is to remove the improvements without causing any more impairment upon the
property leased than is necessary. 21
WHEREFORE, judgment is hereby rendered GRANTING the instant petition,
REVERSING and SETTING ASIDE the decision of the Court of Appeals of 27 January
1995 in CA-G.R. SP No. 34337; and REINSTATING the decision of Branch 3 of the
Municipal Trial Court in Cities of Dagupan City in Civil Case No. 9214 entitled "Federico
Geminiano, et al. vs. Dominador Nicolas, et al."
Cost against the private respondents.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 138660 February 5, 2004
HEIRS OF TRINIDAD DE LEON VDA. DE ROXAS, petitioners
vs.
COURT OF APPEALS and MAGUESUN MANAGEMENT AND DEVELOPMENT
CORPORATION, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition to cite for indirect contempt the officers of Meycauayan Central Realty
Corporation ("Meycauayan") for defying the final and executory Decision and Resolution of this
Court in G.R. No. 118436 entitled "Heirs of Manuel A. Roxas and Trinidad de Leon Vda. De
Roxas v. Court of Appeals and Maguesun Management & Development Corporation" ("G.R. No.
118436").1
The Antecedents
This petition stems from a case filed by Trinidad de Leon Vda. De Roxas to set aside the decree
of registration over two unregistered parcels of land in Tagaytay City granted to Maguesun
Management and Development Corporation ("Maguesun") before the Regional Trial Court on
the ground of actual fraud. The trial court dismissed the petition to set aside the decree of
registration. On appeal, the Court of Appeals denied the petition for review and affirmed the
findings of the trial court. On 21 March 1997, this Court reversed the appellate court's decision
in G.R. No. 118436. The dispositive portion reads:
WHEREFORE, the instant petition is hereby GRANTED. The Decision of the Court of Appeals
in C.A. G.R. CV No. 38328 ("Trinidad de Leon Vda. de Roxas v. Maguesun Management &
Development Corporation, et al.") promulgated on December 8, 1994 is hereby REVERSED
AND SET ASIDE. Accordingly, registration of title over the subject parcels of land, described in
Plan AS-04-000108, Lot Nos. 7231 and 7239, with an area of 3,461 and 10,674 square meters,
respectively, as shown and supported by the corresponding technical descriptions now forming
part of the Records of LRC No. TG-373, is awarded to herein petitioner Trinidad de Leon vda.
de Roxas and her heirs, herein substituted as petitioners. Upon finality of this Decision, the
Land Registration Authority is hereby directed to ISSUE with reasonable dispatch the
corresponding decree of registration and certificate of title pursuant to Section 39 of Presidential
Decree No. 1529.2
On 22 May 1997, Meycauayan filed a Petition for Intervention in G.R. No. 118436. Meycauayan
alleged that on 14 May 1992, it purchased three parcels of land from Maguesun which form part
of the property awarded to the heirs of Trinidad de Leon Vda. De Roxas ("Roxas heirs").
Meycauayan contended that since it is a purchaser in good faith and for value, the Court should
77

afford it the opportunity to be heard. Meycauayan contends that the adverse decision in G.R.
No. 118436 cannot impair its rights as a purchaser in good faith and for value.
On 25 June 1997, this Court denied the Petition for Intervention. This Court also denied the
Motion for Reconsideration filed by Maguesun. Thus, on 21 August 1997, the Decision dated 21
March 1997 in G.R. No. 118436 became final and executory.
On 13 April 1998, the Land Registration Authority ("LRA") submitted a Report to the Regional
Trial Court of Tagaytay City, Branch 18 ("land registration court"), in LR Case No. TG-373,
praying that the land registration court:
a) Order the LRA to cancel Decree No. N-197092 in the name of Maguesun to enable it
to issue another decree in favor of the heirs of Manuel A. Roxas and Trinidad de Leon
Vda. de Roxas;
b) Order the Register of Deeds to cancel OCT No. 0-515 and all its derivative titles; and
c) Order the issuance of the Decree with respect to the decision of the Supreme Court
dated 21 March 1997.
Meycauayan filed with the land registration court a "Motion For Leave To Intervene And For
Period Of Time To File Opposition To The Report Dated March 25, 1998 Filed By The LRA And
To File Complaint-in-Intervention."
On 4 June 1998, the Roxas heirs filed a Motion for Clarification with this Court raising the
following issues:
a) Whether it is necessary for the trial court to first order the LRA "to cancel Decree No.
N-197092 in the name of Maguesun Management and Development Corporation to
enable (the LRA) to issue another decree in favor of the Heirs of Manuel A. Roxas and
Trinidad de Leon Vda. de Roxas"? Or is that order necessarily included in the dispositive
portion of the Supreme Court decision directing the LRA "to issue with reasonable
dispatch the corresponding decree of registration and certificate of title" in favor of the
Roxas heirs? Please note that this necessary implication is a consequence of the
Supreme Court finding that the decree in favor of Maguesun was wrongfully issued
because it was "not entitled to the registration decree" as it had no registrable title, since
"Zenaida Melliza (from whom Maguesun supposedly bought the lots) conveyed no title
over the subject parcels of land to Maguesun Corporation as she was not the owner
thereof."
b) Whether an order from the trial court is necessary for "the Register of Deeds
concerned to cancel OCT No. 0-515 and all its derivative titles"? Or is that order
necessarily included in the dispositive portion of the Supreme Court decision directing
the LRA to issue the corresponding decree of registration and certificate of title in favor
of the Roxas heirs, considering that the original certificate of title issued to Maguesun
was based on an illegal decree of registration as found by this Honorable Court. Further,
the unconditional order of the Supreme Court to LRA to issue the corresponding
certificate of title to the Roxas heirs necessarily implies that the OCT issued to
Maguesun and its derivative titles shall be canceled, for it cannot [be] assumed that the
Supreme Court intended that the same parcel of land shall be covered by more than one
certificate of title.
c) Whether an order from the trial court is necessary before the LRA can comply with the
Supreme Court decision directing the LRA "to issue with reasonable dispatch the
corresponding decree of registration and certificate of title" in favor of the Roxas heirs?
On 23 June 1998, the Roxas heirs filed a Supplement to Motion for Clarification, the pertinent
portions of which are:
1. In petitioners' Motion for Clarification, one of the items sought to be clarified is whether
the derivative titles (i.e., the titles derived from Maguesun Management and
Development Corporation's ["Maguesun"] Original Certificate of Title No. 0-515 and
issued to Meycauayan Central Realty Corp.) should be canceled, together with
Maguesun's certificates of title, so that new decree of registration and certificate of title
78

can be issued to petitioners, as ordered in the decision of this Honorable Court dated 21
March 1997, which has become final and executory?
2. From the Petition for Intervention filed by Meycauayan Central Realty Corporation
("Meycauayan") with this Honorable Court on 22 May 1997, the following statements,
among others, are alleged:
a. "That on May 14, 1992, the intervenor purchased for value several parcels of
real property from private respondent Maguesun Management and Development
Corp. covered by TCT Nos. 24294, 24295 and 24296 containing an area of 2,019
square meters each, more or less."
b. "That prior to paying the agreed purchase price in full to respondent
Maguesun, an investigation with the Tagaytay City Office of the Register of
Deeds was made to determine and ascertain the authenticity, status and
condition of the titles of Maguesun over the aforesaid properties."
c. "That investigation made by the intervenor with the Office of Register of Deeds
of Tagaytay City showed that in all the certified true copies of the titles to the
properties above-mentioned which were registered in the name of Maguesun, the
last entry which appeared was the following, to wit: x x x".
d. "Appearing that the properties to be purchased by the herein intervenor from
respondent Maguesun have no existing liens and/or encumbrances and
considering that the properties do not appear to be the subject of a pending case
which would affect the titles of those who may subsequently purchase the same,
the herein intervenor proceeded to pay, in full, the total amount of ONE MILLION
FIVE HUNDRED THOUSAND PESOS (P1,500,000.00) to Maguesun.
Immediately thereafter, Maguesun, through its duly authorized officer, executed
the corresponding Deeds of Absolute Sale."
e. "That after the corresponding taxes and/or fees were paid by herein intervenor,
the aforementioned TCT Nos. T-24294, 24295 and 24296, were canceled and in
lieu thereof, new titles in the name of intervenor were issued by the Register of
Deeds of Tagaytay City."
f. "That on March 25, 1997, an officer of the intervenor corporation was informed
of a newspaper report stating, in big bold letters, the following sub-headline, to
wit:
SC RULES ON ROXAS FAMILY
LAND ROW IN TAGAYTAY".
g. "The President of herein intervenor right after secured from the Tagaytay City
Office of the Register of Deeds certified true copies of torrens titles over its
Tagaytay City properties."
h. "That only then, after it secured certified true copies of the titles mentioned in
the preceding paragraph from the Office of the Register of Deeds of Tagaytay
City, did intervenor come to know of the existence of a case involving the
properties sold to it by respondent Maguesun on May 14, 1992."
3. Meycauayan's Petition for Intervention was denied by this Honorable Court in its
Resolution dated 25 June 1997, a denial that has since become final and executory.
However, as stated in petitioners' Motion for Clarification, Meycauayan committed the
proscribed act of forum-shopping by filing with the trial court a motion for leave to
intervene raising again the issue of its alleged ownership of portions of the land.
4. In order to settle once and for all Meycauayan's allegation that it was a buyer in good
faith, and to show that its derivative titles should be declared void and canceled by this
Honorable Court, petitioners will show herein that the sale to Meycauayan was spurious
or, at the very least, it was a buyer in bad faith.
In a Resolution dated 29 July 1998, this Court acted favorably on the Roxas heirs' Motion for
Clarification and its Supplement. The pertinent portions of the Resolution read:
79

Upon careful consideration of the points made by petitioners in their motions, this Court finds
the same meritorious and, hence, a clarification is in order. We, therefore, declare that our
directive on the LRA to issue with reasonable dispatch the corresponding decree of registration
and certificate of title also includes, as part thereof, the cancellation, without need of an order of
the land registration court, of Decree No. N-197092, as well as OCT No. 0-515, and all its
derivative titles. This is a necessary consequence of the Court's earlier finding that the foregoing
documents were illegally issued in the name of respondent. But in light of Section 39 of
Presidential Decree No. 1529 (the "Property Registration Decree"), Decree No. N-197092 which
originated from the LRA must be cancelled by the LRA itself. On account of this cancellation, it
is now incumbent upon the LRA to issue in lieu of the cancelled decree a new one in the name
of petitioners as well as the corresponding original certificate of title. Cancellation of OCT No. 0-
515, on the other hand, properly devolves upon the Register of Deeds who, under Section 40 of
P.D. No. 1529, has earlier entered a copy thereof in his record book. OCT No. 0-515 having
been nullified, all titles derived therefrom must also be considered void it appearing that there
had been no intervening rights of an innocent purchaser for value involving the lots in dispute.
ACCORDINGLY, the Court hereby resolves to GRANT petitioners' Motion for Clarification
together with the Supplement thereto. For this reason, the dispositive portion of our decision
dated March 21, 1997 is clarified, thus:
First, the Register of Deeds shall CANCEL OCT No. 0-515 and all its derivative titles, namely,
TCT Nos. T-25625, T-25626, T-25627, T-25628, T-25688, T-25689, and T-25690, the latter
three being already in the name of Meycauayan Realty and Development Corporation (also
designated as "Meycauayan Central Realty, Inc." and "Meycauayan Realty Corporation").
Thereafter, the Land Registration Authority shall:
(a) CANCEL Decree No. N-197092 originally issued in the name of Maguesun
Management and Development Corporation without need of an order from the land
registration court; and
(b) ISSUE with reasonable dispatch a new decree of registration and a new original
certificate of title (OCT) in favor of petitioners pursuant to Section 39 of Presidential
Decree No. 1529. (Emphasis added)
On 11 December 1998, the land registration court issued an order denying the LRA Report
dated 25 March 1998 and the Motion for Leave to Intervene filed by Meycauayan since the
Supreme Court Resolution of 29 July 1998 had rendered them moot.
The Register of Deeds of Tagaytay City then canceled TCT Nos. T-25626, T-25627, T-25628,
T-25688, T-25689, T-25690 and T-27390.3 TCT Nos. T-25688, T-25689, T-25690 and T-27390
were derivative titles already in the name of Meycauayan.
On 5 April 1999, the Roxas heirs filed a Motion for Issuance of Writ of Possession with the land
registration court.
On 20 April 1999, Meycauayan filed a Complaint for reconveyance, damages and quieting of
title with the trial court entitled "Meycauayan Central Realty Corp. v. Heirs of Manuel A. Roxas
and Trinidad de Leon Vda. de Roxas, Maguesun Management and Development Corp.,
Register of Deeds of Tagaytay City, City Assessor of Tagaytay City and Land Registration
Authority."4 The Complaint is almost an exact reproduction of the Petition for Intervention filed
by Meycauayan before this Court. The Complaint prayed for judgment:
1. Ordering the defendants Land Registration Authority and the Register of Deeds of
Tagaytay City to cancel the titles and decree of registration they issued in lieu of TCT
Nos. 25688, 25689, 25690 and 27390 registered in the name of plaintiff Meycauayan
Central Realty Corporation and reconvey said properties to the plaintiff corporation by
reinstating the said cancelled titles or if the same not be possible, cause the issuance of
new decrees and titles thereto;
2. Ordering the defendant City Assessor of Tagaytay City to reinstate the Assessments
for real estate taxes it previously cancelled covering the properties of plaintiff;
80

3. Ordering the defendants Roxas and Maguesun to jointly and solidarily pay the plaintiff
actual and/or compensatory damages in the total amount of FIVE HUNDRED
THOUSAND PESOS (P500,000.00);
4. Ordering the defendants Roxas and Maguesun to jointly and solidarily pay the plaintiff
the amount of TWO HUNDRED THOUSAND PESOS (P200,000.00) as and by way of
nominal damages;
5. Ordering the defendants Roxas and Maguesun to jointly and solidarily pay the plaintiff
exemplary damages in the amount of TWO HUNDRED THOUSAND PESOS
(P200,000.00);
6. Ordering the defendants Roxas and Maguesun to jointly and solidarily pay the plaintiff
Attorney's fees in the amount of ONE HUNDRED THOUSAND PESOS (P100,000.00);
and
7. Ordering the defendants Roxas and Maguesun to jointly and solidarily pay the plaintiff
the costs of suit.5
On 6 May 1999, Meycauayan filed a "Special Appearance Questioning Court Jurisdiction and
Opposition to the Motion for Issuance of Writ of Possession Against Meycauayan Central Realty
Corporation" with the land registration court.
On 2 September 1999, the land registration court issued an order, the dispositive portion of
which reads:
WHEREFORE, in the light of the foregoing, let a Writ of Possession be issued against
Maguesun Management and Development Corporation in these cases. However, insofar as
Meycauayan Central Realty is concerned, let a resolution of the motion filed by the movants
herein be deferred until the Supreme Court had resolved with finality the petition for contempt of
herein movant in G.R. No. 138660.
On 7 March 2000, the trial court dismissed for lack of merit Meycauayan's complaint for
reconveyance, damages and quieting of title. The trial court held that (1) the nullity of OCT No.
0-515, which is the source of Meycauayan's titles, is now res judicata; (2) the complaint's prayer
for the trial court to annul the decision of the Supreme Court in G.R. No. 118436 is beyond the
trial court's jurisdiction; and (3) Meycauayan is guilty of forum shopping.6 The trial court likewise
denied Meycauayan's Motion for Reconsideration in an Order dated 20 June 2000.7 On 24
August 2000, Meycauayan filed a petition for certiorari under Rule 65 of the Rules of Court with
the Court of Appeals assailing the trial court's dismissal of the complaint.
Meanwhile, the Roxas heirs filed on 2 June 1999 this petition to cite for indirect contempt the
officers of Meycauayan.
The Issues
The parties raised the following issues:
1. Whether this Court's Decision and Resolution in G.R. No. 118436 bind Meycauayan;
2. Whether Meycauayan's act of filing with the trial court a complaint for reconveyance,
damages and quieting of title involving parcels of land, which were the subject of this
Court's Decision and Resolution in G.R. No. 118436, constitutes indirect contempt under
Section 3, Rule 71 of the Rules of Civil Procedure; and
3. Whether Meycauayan is guilty of forum shopping.
The Court's Ruling
The petition is meritorious. We find Meycauayan's Executive Vice-President Juan M. Lamson,
Jr. guilty of indirect contempt. We also find that Meycauayan committed forum shopping, and
thus Meycauayan and its Executive Vice President Juan M. Lamson, Jr. are guilty of direct
contempt.
The Roxas heirs allege that the following acts of Meycauayan constitute indirect contempt under
Section 3, Rule 71 of the Rules of Civil Procedure: (1)Meycauayan's defiance of the final and
executory Decision and Resolution of this Court in G.R. No. 118436; (2) its act of filing
pleadings before the land registration court to prevent execution of the Decision and Resolution;
(3) its act of filing a Complaint raising the same issues in its Petition for Intervention which this
81

Court had already denied and urging the trial court to ignore and countermand the orders of this
Court.
On the other hand, Meycauayan alleges that the Decision in G.R. No. 118436 does not bind
Meycauayan because it was not a party in the case. According to Meycauayan, the Decision in
G.R. No. 118436 may be enforced against Maguesun but not against Meycauayan which is a
stranger to the case. Meycauayan insists that as a purchaser in good faith and for value its
rights cannot be prejudiced by the alleged fraudulent acquisition by Maguesun of the subject
properties. Meycauayan, therefore, is not liable for contempt of court for filing an action for
reconveyance, quieting of title and damages.
The issue of whether the Decision in G.R. No. 118436 binds Meycauayan was already
addressed by this Court when it denied Meycauayan's Petition for Intervention. Furthermore,
this Court's Resolution dated 29 July 1998 clarified the Decision dated 21 March 1997 by
ordering the Register of Deeds to CANCEL OCT No. 0-515 and all its derivative titles, namely,
TCT Nos. T-25625, T-25626, T-25627, T-25628, T-25688, T-25689, and T-25690, the latter
three already in the name of Meycauayan Realty and Development Corporation (also
designated as "Meycauayan Central Realty, Inc." and "Meycauayan Realty Corporation"). This
Court also found that there had been no intervening rights of an innocent purchaser for value
involving the lots in dispute.
Indirect Contempt
Meycauayan's obstinate refusal to abide by the Court's Decision in G.R. No. 118436 has no
basis in view of this Court's clear pronouncement to the contrary. The fact that this Court
specifically ordered the cancelation of Meycauayan's titles to the disputed parcels of land in the
Resolution dated 29 July 1998 should have laid to rest the issue of whether the Decision and
Resolution in G.R. No. 118436 is binding on Meycauayan. Clearly, Meycauayan's defiance of
this Court's Decision and Resolution by filing an action for reconveyance, quieting of title and
damages involving the same parcels of land which this Court already decided with finality
constitutes indirect contempt under Section 3(d), Rule 71 of the Rules of Civil Procedure.
Section 3(d) of Rule 71 reads:
SEC. 3. Indirect contempt to be punished after charge and hearing. - After a charge in writing
has been filed, and an opportunity given to the respondent to comment thereon within such
period as may be fixed by the court and to be heard by himself or counsel, a person guilty of
any of the following acts may be punished for indirect contempt:
xxx
(d) Any improper conduct tending, directly or indirectly, to impede, obstruct, or degrade the
administration of justice;
In Halili, et al. v. CIR, et al.,8 this Court explained the concept of contempt of court:
Contempt of court is a defiance of the authority, justice or dignity of the court; such conduct as
tends to bring the authority and administration of the law into disrespect or to interfere with or
prejudice parties litigant or their witnesses during litigation (12 Am. Jur. 389, cited in 14 SCRA
813).
Contempt of court is defined as a disobedience to the Court by acting in opposition to its
authority, justice and dignity. It signifies not only a willful disregard or disobedience of the court's
orders, but such conduct as tends to bring the authority of the court and the administration of
law into disrepute or in some manner to impede the due administration of justice (17 C.J.S. 4).
This Court has thus repeatedly declared that the power to punish for contempt is inherent in all
courts and is essential to the preservation of order in judicial proceedings and to the
enforcement of judgments, orders, and mandates of the court, and consequently, to the due
administration of justice (Slade Perkins vs. Director of Prisons, 58 Phil. 271; In re Kelly, 35 Phil.
944; Commissioner of Immigration vs. Cloribel, 20 SCRA 1241; Montalban vs. Canonoy, 38
SCRA 1).
Meycauayan's continuing resistance to this Court's judgment is an affront to the Court and to the
sovereign dignity with which it is clothed.9 Meycauayan's persistent attempts to raise issues long
82

since laid to rest by a final and executory judgment of no less than the highest tribunal of the
land constitute contumacious defiance of the authority of this Court and impede the speedy
administration of justice.10
Well-settled is the rule that when a court of competent jurisdiction has tried and decided a right
or fact, so long as the decision remains unreversed, it is conclusive on the parties and those in
privity with them.11 More so where the Supreme Court has already decided the issue since the
Court is the final arbiter of all justiciable controversies properly brought before it.12 As held in
Buaya v. Stronghold Insurance Co., Inc.:13
x x x An existing final judgment or decree - rendered upon the merits, without fraud or collusion,
by a court of competent jurisdiction acting upon a matter within its authority - is conclusive of the
rights of the parties and their privies. This ruling holds in all other actions or suits, in the same or
any other judicial tribunal of concurrent jurisdiction, touching on the points or matters in issue in
the first suit.
xxx
Courts will simply refuse to reopen what has been decided. They will not allow the same parties
or their privies to litigate anew a question, once it has been considered and decided with finality.
Litigations must end and terminate sometime and somewhere. The effective and efficient
administration of justice requires that once a judgment has become final, the prevailing party
should not be deprived of the fruits of the verdict by subsequent suits on the same issues filed
by the same parties.
This is in accordance with the doctrine of res judicata which has the following elements: (1) the
former judgment must be final; (2) the court which rendered it had jurisdiction over the subject
matter and the parties; (3) the judgment must be on the merits; and (4) there must be between
the first and the second actions, identity of parties, subject matter and causes of action.14 The
application of the doctrine of res judicata does not require absolute identity of parties but merely
substantial identity of parties.15 There is substantial identity of parties when there is community
of interest or privity of interest between a party in the first and a party in the second case even if
the first case did not implead the latter.16
The Court ruled in G.R. No. 118436 that Meycauayan's predecessor-in-interest, Maguesun,
committed actual fraud in obtaining the decree of registration of the subject properties. The
Decision in G.R. No. 118436 binds Meycauayan under the principle of "privity of interest" since
it was a successor-in-interest of Maguesun. Meycauayan, however, insists that it was a
purchaser in good faith because it had no knowledge of any pending case involving the lots.
Meycauayan claims that the trial court had already canceled the notice of lis pendens on the
titles when it purchased the lots from Maguesun. In its Memorandum, Meycauayan stresses that
to ensure the authenticity of the titles and the annotations appearing on the titles, particularly the
cancelation of the notice of lis pendens, Meycauayan checked with the Register of Deeds and
the Regional Trial Court of Tagaytay City.17 Since Meycauayan checked with the Regional Trial
Court of Tagaytay City, Meycauayan then had actual knowledge, before it purchased the lots, of
the pending case involving the lots despite the cancelation of the notice of lis pendens on the
titles.
Furthermore, as found by this Court in G.R. No. 118436, the Roxas family has been in
possession of the property uninterruptedly through their caretaker, Jose Ramirez, who resided
on the property.18 Where the land sold is in the possession of a person other than the vendor,
the purchaser must go beyond the certificates of title and make inquiries concerning the rights of
the actual possessor.19 Meycauayan therefore cannot invoke the right of a purchaser in good
faith and could not have acquired a better right than its predecessor-in-interest. This Court has
already rejected Meycauayan's claim that it was a purchaser in good faith when it ruled in G.R.
No. 118436 that there had been no intervening rights of an innocent purchaser for value
involving the lots in dispute. As held in Heirs of Pael v. Court of Appeals:20
In the case of Santiago Land Development Corporation vs. Court of Appeals (G.R. No. 106194,
276 SCRA 674 [1997]), petitioner maintained that as a purchaser pendente lite of the land in
83

litigation, it had a right to intervene under Rule 12, Section 2. We rejected this position and said
that "since petitioner is not a stranger to the action between Quisumbing and the PNB, petitioner
in fact having stepped into the shoes of PNB in a manner of speaking, it follows that it cannot
claim any further right to intervene in the action." As in the instant Petition, it was argued that
the denial of the Motion to Intervene would be a denial likewise of due process. But this, too,
was struck down in Santiago Land where we held that "petitioner is not really denied protection.
It is represented in the action by its predecessor in interest." Indeed, since petitioner is a
transferee pendente lite with notice of the pending litigation between Reyes and private
respondent Carreon, petitioner stands exactly in the shoes of Reyes and is bound by any
judgment or decree which may be rendered for or against the latter.
Indeed, one who buys property with full knowledge of the flaws and defects of the title of his
vendor and of a pending litigation over the property gambles on the result of the litigation and is
bound by the outcome of his indifference.21 A purchaser cannot close his eyes to facts which
should put a reasonable man on guard and then claim that he acted in good faith believing that
there was no defect in the title of the vendor.22
For the penalty for indirect contempt, Section 7 of Rule 71 of the Rules of Court provides:
SEC. 7. Punishment for indirect contempt. - If the respondent is adjudged guilty of indirect
contempt committed against a Regional Trial Court or a court of equivalent or higher rank, he
may be punished by a fine not exceeding thirty thousand pesos or imprisonment not exceeding
six (6) months or both. x x x
In this case, Meycauayan Executive Vice President Juan M. Lamson, Jr. caused the preparation
and the filing of the Petition for Intervention in G.R. No. 118436 and the Complaint for
Reconveyance, Damages and Quieting of Title with the trial court.23 Juan M. Lamson, Jr. signed
the verification and certification of non-forum shopping for the Petition for Intervention and the
Complaint for Reconveyance, Damages and Quieting of Title. "Even though a judgment,
decree, or order is addressed to the corporation only, the officers, as well as the corporation
itself, may be punished for contempt for disobedience to its terms, at least if they knowingly
disobey the court's mandate, since a lawful judicial command to a corporation is in effect a
command to the officers."24 Thus, for improper conduct tending to impede the orderly
administration of justice, Meycauayan Executive Vice President Juan M. Lamson, Jr. should be
fined ten thousand pesos (P10,000).25
Direct Contempt
Meycauayan's act of filing a Complaint for Reconveyance, Quieting of Title and Damages
raising the same issues in its Petition for Intervention, which this Court had already denied, also
constitutes forum shopping. Forum shopping is the act of a party against whom an adverse
judgment has been rendered in one forum, seeking another and possibly favorable opinion in
another forum other than by appeal or special civil action of certiorari. There is also forum
shopping when a party institutes two or more actions based on the same cause on the
expectation that one or the other court might look with favor on the party.26
In this case, the Court had already rejected Meycauayan's claim on the subject lots when the
Court denied Meycauayan's Petition for Intervention in G.R. No. 118436. The Court ruled that
there had been no intervening rights of an innocent purchaser for value involving the lots in
dispute. The Decision of this Court in G.R. No. 118436 is already final and executory. The filing
by Meycauayan of an action to re-litigate the title to the same property, which this Court had
already adjudicated with finality, is an abuse of the court's processes and constitutes direct
contempt.
Section 5 of Rule 7 of the Rules of Court provides that "if the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be a ground for summary
dismissal with prejudice and shall constitute direct contempt, as well as a cause for
administrative sanctions." The fact that Meycauayan did mention in its certification of non-forum
shopping its attempt to intervene in G.R. No. 118436, which this Court denied,27 does not
negate the existence of forum shopping. This disclosure does not exculpate Meycauayan for
84

deliberately seeking a friendlier forum for its case and re-litigating an issue which this Court had
already decided with finality.28
The general rule is that a corporation and its officers and agents may be held liable for
contempt. A corporation and those who are officially responsible for the conduct of its affairs
may be punished for contempt in disobeying judgments, decrees, or orders of a court made in a
case within its jurisdiction.29
Under Section 1 of Rule 71 of the Rules of Court, direct contempt is punishable by a fine not
exceeding two thousand pesos (P2,000) or imprisonment not exceeding ten (10) days, or both,
if committed against a Regional Trial Court or a court of equivalent or higher rank. Hence,
Meycauayan30 and its Executive Vice President Juan M. Lamson, Jr. are each fined P2,000 for
direct contempt of court for forum shopping.
WHEREFORE, we find Meycauayan Central Realty Corporation's Executive Vice President
Juan M. Lamson, Jr. GUILTY of INDIRECT CONTEMPT and FINE him TEN THOUSAND
PESOS (P10,000). Furthermore, we find Meycauayan Central Realty Corporation and its
Executive Vice President Juan M. Lamson, Jr. GUILTY of DIRECT CONTEMPT for forum
shopping and FINE them TWO THOUSAND PESOS (P2,000) each. The Court warns them that
a repetition of the same or similar offense shall merit a more severe penalty.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 127797 January 31, 2000
ALEJANDRO MILLENA, petitioner,
vs.
COURT OF APPEALS and FELISA JACOB, represented herein by her attorney-in-fact
JAIME LLAGUNO, respondents.
BELLOSILLO, J.:
This case involves a 3,934-square meter parcel of land in far-flung Bgy. Balinad, Daraga, Albay.
It was originally a part of Lot 1874, a 14,282-square meter land that was subject of a cadastral
proceeding during the 1920's before the Court of First Instance of Albay. Among the claimants
in the cadastral case were Gregoria Listana and her sister-in-law Potenciana Maramba,
together with the latter's seven (7) children, namely, Felix, Marcela, Ruperta, Emeteria,
Florencio, Gaspar and Nicomedes, all surnamed Listana.
On 17 August 1926 the claimants reached a compromise agreement to divide Lot 1874 among
themselves. Approximately one-fourth (1/4) of the lot went to Gregoria Listana while the
remaining three-fourths (3/4) portion, to Potenciana Maramba and her seven (7) children.1 The
compromise agreement was submitted to the cadastral court on 17 August 1926 and on even
date adjudication was rendered in accordance with the terms of the agreement.2 Thus the
northern portion of Lot 1874 with an area of approximately 3,934 square meters was awarded to
Gregoria Listana.
Gregoria Listana was at that time seriously ill of tuberculosis. To her death was inevitable.
Gregoria executed on 9 October 1926 a power of attorney in favor of her cousin Antonio Lipato
which authorized the attorney-in-fact to sell the portion of Lot 1874 belonging to his principal.
Conformably with Gregoria's instruction, the proceeds of the sale would be used for her
interment.
On 23 October 1926 Antonio Lipato in his capacity as attorney-in-fact sold the portion of
Gregoria Listana to Gaudencio Jacob. Incidentally, Gregoria died on the same day the land was
sold. Thereafter Gaudencio entered the portion of Lot 1874 that was sold to him and started
harvesting the coconuts found therein. When Potenciana Maramba learned about Gaudencio's
entering the land and harvesting the coconuts she confronted him. But Gaudencio explained
85

that he had every right to do whatever he pleased with the land since he had lawfully bought it
from Gregoria Listana.
Potenciana Maramba filed an ejectment case against Gaudencio Jacob before the Justice of the
Peace in Legazpi, Albay. However, on 31 December 1926 the court ruled that Gaudencio
entered the land in question without force and intimidation since he had with him a document of
sale over the land which authorized him to take possession thereof.3 Thus, the Justice of the
Peace dismissed the case.1âwphi1.nêt
After the dismissal of the case, Gaudencio Jacob continued with his possession of the one-
fourth (1/4) portion of Lot 1874. His continuous, actual and peaceful possession lasted for
almost forty (40) years until 4 April 1966, when he and his children executed an extrajudicial
settlement of the estate of his deceased wife Brigida Jacob. The extrajudicial settlement
adjudicated to respondent Felisa Jacob, daughter of Gaudencio Jacob, the 3,934-square meter
portion of Lot 1874.4 Thereafter, respondent Felisa Jacob had the land annually declared as her
property and paid the corresponding real property taxes.
However, sometime in November 1981 respondent Felisa Jacob discovered that Florencio
Listana, son of Potenciana Maramba, acquired from the Bureau of Lands in Legazpi City Free
Patent Certificate of Title No. VH-23536 dated 28 August 1980 covering the entire 14,284-
square meter area of Lot 1874 which included the portion adjudicated to Felisa Jacob in 1966.5
On 6 November 1981 respondent Felisa Jacob immediately filed a protest before the Bureau of
Lands in Legazpi City alleging that she was the absolute owner of a one-fourth (1/4) portion of
Lot 1874 having acquired it through an extrajudicial partition in 1966, and that through
misrepresentation and deceit Florencio Listana was able to secure title for the whole of Lot
1874. Felisa Jacob prayed that an investigation be conducted and that the Free Patent issued in
the name of Florencio Listaria covering Lot 1874 be annulled and set aside.
After the death of Florencio Listana and notwithstanding the protest filed by Felisa Jacob, the
heirs of Florencio Listana sold the entire Lot 1874 including the portion sold by Gregoria Listana
to Gaudencio Jacob to petitioner Alejandro Millena on 30 September 1986 for P6,000.00.
Alejandro Millena, a nephew of Florencio Listana and grandson of Potenciana Maramba, was
eventually issued Transfer Certificate of Title No. T-71657 covering the whole of Lot 1874.
Thus on 17 March 1992 respondent Felisa Jacob through her attorney-in-fact Jaime Llaguno
filed a complaint against petitioner Alejandro Millena for annulment of title with preliminary
injunction and damages before the Regional Trial Court of Legazpi City which she subsequently
amended on 19 March 1992 by including a claim for reconveyance with preliminary injunction
and damages. She prayed for judgment (a) declaring her the lawful and absolute owner of the
one-fourth (1/4) northern portion of Lot 1874; (b) ordering Alejandro Millena to reconvey the
aforesaid portion of Lot 1874 to her; (c) enjoining the construction of a house on said lot by
Alejandro Millena and, after trial, making the injunction permanent; and, (d) ordering Alejandro
Millena to pay damages in the amount of P50,000.00.
On 3 October 1994 Judge Wenceslao R. Villanueva Jr. of the Regional Trial Court of Legazpi
City, Br. 3, rendered a decision ordering petitioner Alejandro Millena to reconvey by proper
document the portion of 3,934 square meters in question from Lot 1874 to respondent Felisa
Jacob and awarded to her P10,000.00 for attorney's fees.
Petitioner Alejandro Millena appealed to the Court of Appeals which on 12 August 1996 affirmed
the trial court but deleted the award of P10,000.00 for attorney's fees.6 After the appellate court
denied petitioner's motion for reconsideration, he filed with this Court a Petition for Review on
Certiorari under Rule 45 of the Rules of Court.
Petitioner raises the following issues: (a) whether prescription has now barred the action for
reconveyance; (b) whether the documents and pieces of evidence used by respondent Court of
Appeals as basis in its assailed Decision were duly authenticated and proved by private
respondent, Felisa Jacob; and, (c) whether respondent appellate court correctly affirmed the
order of reconveyance by the trial court.
We resolve.
86

First. An action for reconveyance can indeed be barred by prescription. When an action for
reconveyance is based on fraud, it must be filed within four (4) years from discovery of the
fraud, and such discovery is deemed to have taken place from the issuance of the original
certificate of title.7 On the other hand, an action for reconveyance based on an implied or
constructive trust prescribes in ten (10) years from the date of the issuance of the original
certificate of title or transfer certificate of title. For the rule is that the registration of an instrument
in the Office of the Register of Deeds constitutes constructive notice to the whole world and
therefore the discovery of the fraud is deemed to have taken place at the time of registration.8
In his petition Alejandro Millena argues that both the Regional Trial Court and the Court of
Appeals failed to pass upon the issue of prescription. According to him, the issue of prescription
is pivotal considering that title to the property was procured in 1980 while the action for
reconveyance was filed only in 1992. This interim period, he submits, had a span of more than
twelve (12) years; thus, the action for reconveyance had clearly prescribed.
But, nonetheless, it must be stressed that prescription cannot be invoked in an action for
reconveyance when the plaintiff is in possession of the land to be reconveyed.9 In view of this,
can it be said that Felisa Jacob was in possession of the contested portion of Lot 1874? Article
523 of the Civil Code states that possession is the holding of a thing or the enjoyment of a right.
In order to possess, one must first have control of the thing and, second, a deliberate intention
to possess it. These are the elements of possession.
The records of the case show that respondent Felisa Jacob had exercised dominion over the
contested parcel of land. Immediately after acquiring the property through an extrajudicial
settlement in 1966, she instructed her nephew Jaime Llaguno to continue working as caretaker
of the land. Felisa made improvements on the land and paid its property taxes. In fact the
municipal treasurer of Daraga, Albay, issued a certification dated 10 March 1992 that
respondent Felisa Jacob was the declared owner of Lot 1874-P — the litigated portion — and
that she had been paying its real property taxes since 1967.10
Apparently Felisa Jacob met the requisite elements of possession. She exercised control over
the parcel of land in litigation through her caretaker, her nephew, Jaime Llaguno. Moreover, her
declaration that the land was her property and the payment of real property taxes manifested
clearly that she was in possession of the land. Consequently, petitioner may not validly invoke
prescription as defense against respondent Feliza Jacob.
Second. Petitioner Alejandro Millena questioned the very existence and authenticity of several
documents which according to him the Court of Appeals used as basis for its assailed Decision.
These documents were (a) the compromise agreement dated 17 August 1926 between
Gregoria Listana and Potenciana Maramba over Lot 1874; (b) the Justice of the Peace decision
dated 31 December 1926 dismissing the ejectment suit filed by Potenciana Maramba against
Gaudencio Jacob; (c) the power of attorney executed by Gregoria Listana authorizing her
cousin Antonio Lipato to sell her one-fourth portion of Lot 1874; and, (d) the deed of sale
executed by Antonio Lipato in favor of Gaudencio Jacob.
Alejandro Millena assailed the authenticity and even the existence of the decision of the Justice
of the Peace of Legazpi dated 31 December 1926 in which the court dismissed the suit filed by
Potenciana Maramba against Gaudencio Jacob, predecessor-in-interest of Felisa Jacob. The
court decided in favor of Gaudencio Jacob and held that he had the right to possess the
contested one-fourth (1/4) portion of Lot 1874.
Likewise, Alejandro Millena questioned the genuineness of the compromise agreement dated
17 August 1926 among the claimants of Lot 1874. Petitioner Millena averred that the alleged
compromise agreement did not bear the signatures of the contracting parties except for the
thumb mark of Gregoria Listana from whom Gaudencio Jacob bought the property.
As to the special power of attorney and the deed of sale, Alejandro Millena insisted that
respondent Felisa Jacob never proved the existence of these documents. Thus, according to
petitioner, the Court of Appeals erred in assuming their existence and using them to support its
assailed Decision.
87

Questions of authenticity of documents being one of fact, this Court will not ordinarily disturb the
conclusions of the Court of Appeals on this matter.11 However for the sake of substantial justice
we shall thoroughly discuss the points raised by petitioner.
The focal issue that needs to be answered and which would ultimately resolve the other issues
raised by petitioner is the genuineness of the decision of the Justice of the Peace dated 31
December 1926. Being a public document the decision is admissible in evidence without further
proof of its due execution or genuineness. Such decision may be evidenced by an official
publication thereof or by a copy attested by the officer having the legal custody of the record or
by his deputy.12
We have examined the copy of the decision and found it to be genuine.13 The decision, which
was penned in Spanish, was duly signed by Justice of the Peace Manuel M. Calleja. It also bore
the seal of the court and an attestation that such was a true copy.14 Moreover, petitioner
Alejandro Millena failed to adduce any evidence demonstrating the spurious character of the
decision.
Having resolved the issue of genuineness, it can therefore be said that the facts enumerated by
the Justice of the Peace in its decision are likewise correct. This is because a judgment is
conclusive as to the facts admitted by the pleadings or assumed by the decision, where they
were essential to the judgment, and were such that the judgment could not legally have been
rendered without them.15 The Justice of the Peace found that —
[P]lainfiff Potenciana Maramba and Gregoria Listana . . . were co-owners [of Lot 1874].
The land [subject matter of this suit for unlawful detainer] was claimed by one and the
other, finally they arrived at a compromise agreement whereby Potenciana Maramba
ceded to Gregoria Listana one-fourth (1/4) portion of the land referred to. This
compromise agreement was submitted to the Cadastral Court . . . and an adjudication
was rendered in accordance with the tenor of the compromise agreement . . . . [T]he
land was surveyed and . . . the northern portion equivalent to one-fourth part was
delivered to Gregoria Listana. The latter was seriously sick of tuberculosis. And
foreseeing that someday she would die . . . she executed a power-of-attorney (Exh "1")
in favor of her cousin Antonio Lipato in order that in case of her death he would sell the
land and the proceeds thereof be paid for the expenses of her interment . . . . In fact on
October 23, 1926 on which date Gregoria Listana died, Antonio Lipato executed a
document of sale over the land in favor of defendant herein [Gaudencio Jacob].16
The foregoing pronouncements of the Justice of the Peace confirmed the existence of the
compromise agreement, the power of attorney and the deed of sale. And since no appeal was
made, the 31 December 1926 decision of the Justice of the Peace had long become final and
the findings of fact therein conclusive.
Third. The basic rule is that after the lapse of one (1) year from entry, a decree of registration is
no longer open for review or attack, even though the issuance thereof may have been attended
by fraud and that the title may be inherently defective. The law nevertheless safeguards the
rightful party's or the aggrieved party's interest in the titled land from fraud and improper
technicalities by allowing such party to bring an action for reconveyance to him of whatever he
has been deprived as long as the property has not been transferred or conveyed to an innocent
purchaser for value. The action, while respecting the decree as incontrovertible, seeks to
transfer or reconvey the land from the registered owner to the rightful owner.
In an action for reconveyance the issue involved is one of ownership, and for this purpose,
evidence of title may be introduced. In fact, respondent Felisa Jacob had submitted evidence
showing a strong claim of ownership over the contested parcel of land. She testified before the
trial court that she had been in actual possession of the land since 1966. Moreover, proof was
adduced showing that her predecessor-in-interest, her father Gaudencio Jacob, had lawfully
possessed the property from 1926. She likewise offered as evidence a certification from the
municipal treasurer that she had been declaring the land as her property for tax purposes since
1967.
88

The evidence on record without doubt tilts in favor of respondent Felisa Jacob. Although
petitioner Alejandro Millena holds a certificate of title covering the contested parcel of land, such
possession of a certificate of title alone does not necessarily make the holder thereof the true
owner of all the property described therein. Land registration proceedings cannot be made a
shield for fraud or for enriching a person at the expense of another. The inclusion of an area in a
certificate of title which the registered owner or successful applicant has placed no claim on and
has never asserted any right of ownership thereof is void and of no effect.17 Thus, the
incorporation of the 3,934-square meter northern portion of Lot 1874 in the Free Patent
Certificate Title issued to Florencio Listana on 28 August 1980 was clearly erroneous and
irregular.
Petitioner also avers that he is an innocent purchaser for value and that an action for
reconveyance cannot prosper against him. He argues that the finding of respondent appellate
court of bad faith was not supported by evidence. A purchaser in good fait is one who buys
property of another, without notice that some other person has a right to, or interest in, such
property at the time of such purchase, or before he has notice of the claim or interest of some
other persons in the property. Good faith, or the lack of it, is in the final 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. Truly, good faith 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 by
actual or fancied tokens or signs. Otherwise stated, good faith is the opposite of fraud and it
refers to the state of mind which is manifested by the acts of the individual concerned.18
Certain pieces of evidence when put together would prove that petitioner Alejandro Millena had
actual knowledge of facts that would have made an ordinary prudent purchaser of land go
beyond what appears on the face of the certificate of title and inquire into its genuineness. The
first evidence to be considered is the 3 October 1994 decision of the Regional Trial Court of
Legazpi City wherein it ruled —
[D]uring the ocular inspection conducted by this court, it was noted that only a portion of
the defendant's [Alejandro Millena's] kitchen encroached a small portion of the lot in
question and his house merely occupied an abandoned road adjoining the lot in question
which cast doubt to the defendant's claim of possession and ownership of the property in
question.19
Prescinding from this pronouncement we can conclude that petitioner Alejandro Millena lived
right beside the contested portion of Lot 1874. And since he himself insisted that his house was
constructed in 1980,20 it would have been difficult, if not impossible, for him not to have noticed
Felisa Jacob's nephew and caretaker Jaime Llaguno planting and harvesting crops in the
disputed land.
In fact Bgy. Secretary Lucio Londonio, who is also a brother-in-law of petitioner Alejandro
Millena, testified in court that he has been living near the contested parcel of land for thirty-
seven (37) years. Londonio told the court that the land was originally owned by Gaudencio
Jacob and that ownership hereof was later transferred to Felisa Jacob. He further testified that
he would often see Jaime Llaguno, the caretaker of the land, planting banana and coconut trees
on the land.21
We are hard-pressed to believe the claim of petitioner that he purchased Lot 1874 in good faith.
Having lived adjacent to the contested lot six (6) years prior to his purchase of Lot 1874 in 1986,
petitioner Alejandro Millena would have seen and noticed the crops and fruit trees planted by
Jaime Llaguno on the land. Thus, contrary to his asseverations, petitioner was not a purchaser
in good faith since there were circumstances sufficient to arouse his curiosity and prod him to
inquire into the real status of his sellers' title.
Finally, a perusal of the records reveals that petitioner Alejandro Millena prior to his purchase of
the land in 1986 had knowledge of the protest filed by Feliza Jacob before the Bureau of Lands
89

against Florencio Listana in 1981. This he admitted during his cross-examination on 7 February
1994 —
Atty. Ludovico:
Are you aware of the protest that was filed by Felisa Jacob . . . before the Bureau of
Lands at Legazpi City in connection with Lot No. 1874, the lot in question?
Alejandro Millena: Yes, sir.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals dated 12
August 1996 as well as its Resolution of 6 December 1996 denying petitioner Alejandro
Millena's motion for reconsideration is AFFIRMED. Consequently, petitioner is ORDERED to
reconvey within thirty (30) days from the finality of this Decision that northern portion in question
of Lot 1874 consisting of 3,934 square meters as shown in the location map (Exhs. "L" and "L-
1") in favor of private respondent Felisa Jacob, represented herein by her attorney-in-fact Jaime
Llaguno, with costs against petitioner.1âwphi1.nêt
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 110644 October 30, 1998

THE HEIRS OF SALUD DIZON SALAMAT, represented by Lucio Salamat and Danilo
Salamat, VALENTA DIZON GARCIA, represented by Raymundo D. Garcia, Jr. as Attorney-
in-Fact, THE HEIRS OF ANSELMA REYES DIZON, represented by Catalina Dizon
Espinosa, petitioners,
vs.
NATIVIDAD DIZON TAMAYO, represented by Angela R. Dizon, THE HEIRS OF
GAUDENCIO DIZON, represented by Maria Dizon Jocson, respondents.

ROMERO, J.:
Before us is a petition for certiorari under Rule 45 of the Rules of Court seeking the reversal of
the decision rendered by the Court of Appeals dated June 15, 1993.
Agustin Dizon died intestate on May 15, 1942 leaving behind his five children Eduardo,
Gaudencio, Salud, Valenta and Natividad as surviving heirs. Among the properties left by the
decedent was a parcel of land in Barrio San Nicolas, Hagonoy, Bulacan, with an area of 2,188
square meters covered by Original Certificate of Title No. 10384. 1
On January 8, 1944, Eduardo sold his hereditary rights in the sum of P3,000 to his sister Salud
Dizon Salamat. The sale was evidenced by a private document bearing the signatures of his
sisters Valenta and Natividad as witnesses. 2
On June 2, 1949, Gaudencio likewise sold his hereditary rights for the sum of P4,000 to his
sister Salud. The sale was evidenced by a notarized document which bore the signature of
Eduardo Dizon and a certain Angela Ramos as witnesses. 3 Gaudencio died on May 30, 1951
leaving his daughters Priscila D. Rivera and Maria D. Jocson as heirs.
Sometime in 1987, petitioners instituted an action for compulsory judicial partition of real
properties registered in the name of Agustin Dizon with the Regional Trial Court, Branch 18 of
Malolos, Bulacan. The action was prompted by the refusal of herein respondent Natividad Dizon
Tamayo to agree to the formal distribution of the properties of deceased Agustin Dizon among
his heirs. Respondent's refusal stemmed from her desire to keep for herself the parcel of land
covered by OCT 10384 where she presently resides, claiming that her father donated it to her
sometime in 1936 with the conformity of the other heirs. The subject property is also declared
for taxation purposes under Tax Declaration No. 10376 in the name of respondent.
The trial court noted that the alleged endowment which was made orally by the deceased
Agustin Dizon to herein respondent partook of the nature of a donation which required the
90

observance of certain formalities set by law. Nevertheless, the trial court rendered judgment in
favor of respondent, the dispositive portion of which reads as follows:
WHEREFORE, finding that the partition of the estate of Agustin Dizon is in order,
let a project of partition be drawn pursuant to Sec 2, Rule 69, Rules of Court
assigning to each heir the specific share to which he is entitled taking into
consideration the disposition made in favor of Salud Dizon Salamat and the
adjudication of Lot 2557, Hagonoy Cadastre 304-D owned by Natividad Dizon
Tamayo, together with the improvements thereon, in her favor and the house
owned by Valenta Dizon Garcia, executing, if necessary, proper instruments of
conveyance for confirmation and approval by the Court.
Parties are enjoined to draw the prospect of partition as equitably and equally as
possible with the least inconvenience and disruption of those in possession or in
actual occupation of the property. Should the parties fail to come up with an
acceptable of partition, the Court will appoint commissioners as authorized by
Sec 3, Rule 69, Rules of Court, who will be guided by the dispositive portion
hereof.
All costs and expenses incurred in connection with the partition are to be shared
equally by the parties.
SO ORDERED.
Petitioners contend that Lot 2557, Cad 304-D, described and covered by OCT 10384 in the
name of the heirs of Agustin Dizon is part of the Dizon estate while respondent claims that her
father donated it to her sometime in 1936 with the consent of her co-heirs. In support of her
claim, respondent Natividad presented a private document of conformity which was allegedly
signed and executed by her elder brother, Eduardo, in 1936.
Petitioners, however, question the authenticity of the document inasmuch as it is marred by
unexplained erasures and alterations.
The Court of Appeals, in affirming the decision of the RTC, stated that notwithstanding the
unexplained erasures and alterations, a cursory reading of the signed statement of Eduardo
Dizon, which execution is undisputed, showed that there was an oral donation of the litigated
land from Agustin Dizon to Natividad Dizon Tamayo 4 in 1936.
The Court of Appeals further stated that the attestation by Eduardo, of the oral donation of the
subject land made by his father to respondent Natividad, in 1936, coupled with the tax
declaration and payment of taxes in respondent's name would show that the trial court did not
err in ruling that the subject land should pertain to Natividad Tamayo as inheritance from her
parents.
We reverse.
Art 749 of the Civil Code reads:
In order that the donation of an immovable may be valid, it must be made in a
public document, specifying therein the property donated and the value of the
charges which the donee must satisfy.
The acceptance may be made in the same deed of donation or in a separate
public document, unless it is done during the lifetime of the donor.
If the acceptance is made in a separate instrument, the donor shall be notified
thereof in an authentic form and this step shall be noted in both instruments.
It is clear from Article 749 that a transfer of real property from one person to another cannot take
effect as a donation unless embodied in a public document.
The alleged donation in the case at bar was done orally and not executed in a public document.
Moreover, the document which was presented by respondent in support of her claim that her
father donated the subject parcel of land to her was a mere private document of conformity
which was executed by her elder brother, Eduardo in 1956. 5 It may not be amiss to point out
that the brothers Eduardo and Gaudencio had already ceded their hereditary interests to
petitioner Salud Dizon Salamat even before 1950.
91

The Court of Appeals, however, placed much reliance on the said document and made the
dubious observation that ". . . a cursory reading of the signed statement of Eduardo Dizon,
which execution is undisputed, shows that there was an oral donation . . . ."
Significantly, the document relied upon by the Court of Appeals could hardly satisfy the
requirements of the rule on ancient documents on account of unexplained alterations.
An anciert document refers to a private document which is more than thirty (30) years old,
produced from a custody in which it would naturally be found if genuine, and is unblemished by
alteration or circumstances of suspicion. 6
To repeat, the document which was allegedly executed by Eduardo was marred by unexplained
erasures and alterations. While the document was originally penned in black ink, the number
thirty-six (36) in blue ink was superimposed on the number fifty-six (56) to make it appear that
the document was executed in 1936 instead of in 1956. Moreover, a signature was blotted out
with a black pentel pen and the three other signatures 7 of the alleged witnesses to the
execution of the document at the lower portion of the document were dated June 1, 1951. This
could only mean that the witnesses attested to the veracity of the document 5 years earlier, if
the document was executed in 1956 or 15 years later, if we are to give credence to
respondent's claim, that the document was executed in 1936. Curiously, two of the signatories,
namely, Priscila D. Rivera and Maria D. Jocson signed the document as witnesses two days
after the death of their father Gaudencio, who, as earlier mentioned, had already sold his
hereditary rights to his sister Salud in 1949.
In any case, assuming that Agustin really made the donation to respondent, albeit orally,
respondent cannot still claim ownership over the property. While it is true that a void donation
may be the basis of ownership which may ripen into title by prescription, 8 it is well settled that
possession, to constitute the foundation of a prescriptive right, must be adverse and under a
claim of title.
Respondent was never in adverse and continous possession of the property. It is undeniable
that petitioners and respondent, being heirs of the deceased, are co-owners of the properties
left by the latter. A co-ownership is a form of a trust, with each owner being a trustee for each
other 9 and possession of a co-owner shall not be regarded as adverse to other co-owner but in
fact is beneficial to them. Mere actual possession by one will not give rise to the inference that
the possession was adverse because a co-owner is, after all, entitled to possession of the
property.
In the case of Salvador v. Court of Appeals, 10 we had occasion to state that 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.
The elements in order that a co-owner's possession may be deemed adverse to the cestui que
trust or the co-owner are: (1) that he has performed unequivocal acts of repudiation amounting
to ouster of the cestui que trust or other co-owners (2) that such positive acts or repudiation
have been made known to the cestui que trust or other co-owners and (3) that the evidence
thereon must be clear and convincing. 11
Not one of the aforesaid requirements is present in the case at bar. There are two houses
standing on the subject property. One is the house where respondent presently resides while
the other is a house built by respondent's sister Valenta. Records show that the house on Lot
227 where the respondent lives is actually the ancestral house of the Dizons although
respondent has remodelled it, constructed a piggery and has planted trees thereon. 12
Respondent herself testified:
xxx xxx xxx
Q: Now who is in possession of this particular residential land in
Bo. San Nicolas, Hagonoy, Bulacan?
92

A: I am in possession of that land, Sir.

Q: Do you have your residential house there?
A: Yes, sir.
Q: Now, you said that you have your residential house there, since
when have you stayed there?
A: I was born there, Sir.
Q: And you are staying there up to the present?
A: Yes, Sir.
xxx xxx xxx. 13
It is obvious from the foregoing that since respondent never made unequivocal acts of
repudiation, she cannot acquire ownership over said property through acquisitive prescription.
The testimony of her son that she merely allowed her sister Valenta to build a house on the lot 14
is pure hearsay as respondent herself could have testified on the matter but chose not to.
Finally, the fact that the subject property is declared for taxation purposes in the name of
respondent who pays realty taxes thereon under Tax Declaration No. 14376 is of no moment. It
is well settled that tax declarations or realty tax payments are not conclusive evidence of
ownership. 15
As regards the improvements introduced by the respondent on the questioned lot, the parties
should be guided by Article 500 of the Civil Code which states that: "Upon partition, there shall
be a mutual accounting for benefits received and reimbursements for expenses made. . . ."
WHEREFORE, the decision of the Court of Appeals is hereby REVERSED. Lot 2557, Hagonoy
Cadastre 304-D covered by Original Certificate of Title No. 10384 is hereby declared to belong
the estate of Agustin Dizon. No costs.
SO ORDERED.
Donations

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 152317 November 10, 2004
VICTORIA MOREÑO-LENTFER,* GUNTER LENTFER and JOHN CRAIGIE YOUNG CROSS,
petitioners,
vs.
HANS JURGEN WOLFF, respondent.

DECISION

QUISUMBING, J.:
For review on certiorari are the Decision1 dated June 14, 2001, and Resolution2 dated February
22, 2002, of the Court of Appeals in CA-G.R. CV No. 48272. The decision reversed the
judgment3 of the Regional Trial Court of Calapan City, Oriental Mindoro, Branch 39, in Civil
Case No. R-4219.
The facts are as follows:
The petitioners are Gunter Lentfer, a German citizen; his Filipina wife, Victoria Moreño-Lentfer;
and John Craigie Young Cross, an Australian citizen, all residing in Sabang, Puerto Galera,
Oriental Mindoro. Respondent Hans Jurgen Wolff is a German citizen, residing in San Lorenzo
Village, Makati City.
Petitioners alleged that with respondent, on March 6, 1992, they engaged the notarial services
of Atty. Rodrigo C. Dimayacyac for: (1) the sale of a beach house owned by petitioner Cross in
Sabang, Puerto Galera, Oriental Mindoro, and (2) the assignment of Cross' contract of lease on
the land where the house stood. The sale of the beach house and the assignment of the lease
93

right would be in the name of petitioner Victoria Moreño-Lentfer, but the total consideration of
220,000 Deutschmarks (DM) would be paid by respondent Hans Jurgen Wolff. A promissory
note was executed by said respondent in favor of petitioner Cross.
According to respondent, however, the Lentfer spouses were his confidants who held in trust for
him, a time deposit account in the amount of DM 200,0004 at Solid Bank Corporation. Apprised
of his interest to own a house along a beach, the Lentfer couple urged him to buy petitioner
Cross' beach house and lease rights in Puerto Galera. Respondent agreed and through a bank-
to-bank transaction, he paid Cross the amount of DM 221,7005 as total consideration for the
sale and assignment of the lease rights. However, Cross, Moreño-Lentfer and Atty. Dimayacyac
surreptitiously executed a deed of sale whereby the beach house was made to appear as sold
to Moreño-Lentfer for only P100,000.6 The assignment of the lease right was likewise made in
favor of Moreño-Lentfer.7 Upon learning of this, respondent filed a Complaint docketed as Civil
Case No. R-4219 with the lower court for annulment of sale and reconveyance of property with
damages and prayer for a writ of attachment.
After trial, the court a quo dismissed the complaint for failure to establish a cause of action, thus:
ACCORDINGLY, judgment is hereby rendered in favor of the defendants and against
the plaintiff, dismissing the complaint for the reason that plaintiff has not established a
cause of action against the defendants with costs against the plaintiff.
SO ORDERED.8
Aggrieved, respondent appealed to the Court of Appeals.9
But in its Decision10 dated June 14, 2001, the appellate court reversed the decision of the trial
court, thus:
WHEREFORE, the judgment appealed from is hereby REVERSED and a new one is hereby
rendered, as follows:
1. Defendants-appellees spouses Genter11 and Victoria Moreno-Lentfer and John
Craigie Young Cross are jointly and severally held liable to pay plaintiff-appellant
the amount of 220,000.00 DM German Currency or its present peso equivalent
plus legal interest starting from March 8, 1993, the date of the last final demand
letter;
2. The above defendants-appellees are jointly and severally held liable to pay
plaintiff-appellant the amount of P200,000.00 Philippine Currency, representing
the amount of expenses incurred in the repairs and maintenance of the property
plus legal interest starting from October 28, 1992, the date the amount was
received by defendant-appellee Victoria Moreno-Lentfer; and
3. The case against defendant-appellee Rodrigo Dimayacyac is dismissed.
SO ORDERED.12
Hence, the instant petition raising the following issues:
1) DOES ARTICLE 1238 OF THE NEW CIVIL CODE APPLY IN THE CASE AT BAR?13
2) DOES THE PRINCIPLE OF SOLUTIO INDEBITI UNDER ARTICLE 2154 OF THE
NEW CIVIL CODE, THE PRINCIPLE OF JUSTICE AND EQUITY, APPLY IN THE CASE
AT BAR?14
Article 1238 of the New Civil Code provides:
ART. 1238. Payment made by a third person who does not intend to be reimbursed by
the debtor is deemed to be a donation, which requires the debtor's consent. But the
payment is in any case valid as to the creditor who has accepted it.
Petitioners posit that in a contract of sale, the seller is the creditor, who in this case is Cross,
and the buyer is the debtor, namely Moreño-Lentfer in this case. Respondent is the third person
who paid the consideration on behalf of Moreño-Lentfer, the debtor. Petitioners insist that
respondent did not intend to be reimbursed for said payment and debtor Moreño-Lentfer
consented to it. Thus, by virtue of Article 1238, payment by respondent is considered a
donation.
94

Respondent counters that Article 1238 bears no relevance to the case since it applies only to
contracts of loan where payment is made by a third person to a creditor in favor of a debtor of a
previously incurred obligation. The instant case, in contrast, involves a contract of sale where no
real creditor-debtor relationship exists between the parties. Further, respondent argues his
conduct never at any time intimated any intention to donate in favor of petitioner Moreño-
Lentfer.
Moreover, respondent contends that the alleged donation is void for non-compliance with the
formal requirements set by law. Citing Article 74815 of the New Civil Code, respondent avers that
since the amount involved exceeds P5,000, both the donation and its acceptance must be in
writing for the donation to be valid. Respondent further says there was no simultaneous delivery
of the money as required by Art. 748 for instances of oral donation. Respondent also calls our
attention to the sudden change in petitioners' theory. Previously, before the Court of Appeals,
the petitioners claimed that what was donated were the subject properties. But before this
Court, they insist that what was actually donated was the money used in the purchase of subject
properties.
On this point, we find petitioners' stance without merit. Article 1238 of the New Civil Code is not
applicable in this case.
Trying to apply Art. 1238 to the instant case is like forcing a square peg into a round hole. The
absence of intention to be reimbursed, the qualifying circumstance in Art. 1238, is negated by
the facts of this case. Respondent's acts contradict any intention to donate the properties to
petitioner Moreño-Lentfer. When respondent learned that the sale of the beach house and
assignment of the lease right were in favor of Victoria Moreño-Lentfer, he immediately filed a
complaint for annulment of the sale and reconveyance of the property with damages and prayer
for a writ of attachment. Respondent Moreño-Lentfer at that time claimed the beach house,
together with the lease right, was donated to her. Noteworthy, she had changed her theory, to
say that it was only the money used in the purchase that was donated to her. But in any event,
respondent actually stayed in the beach house in the concept of an owner and shouldered the
expenses for its maintenance and repair amounting to P200,000 for the entire period of his stay
for ten weeks. Moreover, the appellate court found that respondent is not related or even close
to the Lentfer spouses. Obviously, respondent had trusted the Lentfer spouses to keep a time
deposit account for him with Solid Bank for the purpose of making the purchase of the cited
properties.
Petitioner Moreño-Lentfer's claim of either cash or property donation rings hollow. A donation is
a simple act of liberality where a person gives freely of a thing or right in favor of another, who
accepts it.16 But when a large amount of money is involved, equivalent to P3,297,800, based on
the exchange rate in the year 1992, we are constrained to take the petitioners' claim of liberality
of the donor with more than a grain of salt.
Petitioners could not brush aside the fact that a donation must comply with the mandatory
formal requirements set forth by law for its validity. Since the subject of donation is the purchase
money, Art. 748 of the New Civil Code is applicable. Accordingly, the donation of money
equivalent to P3,297,800 as well as its acceptance should have been in writing. It was not.
Hence, the donation is invalid for non-compliance with the formal requisites prescribed by law.
Anent the second issue, petitioners insist that since the deed of sale in favor of Moreño-Lentfer
was neither identified or marked nor formally offered in evidence, the same cannot be given any
evidentiary value. They add that since it was not annulled, it remains valid and binding. Hence,
petitioners argue, the principle of solutio indebiti under Article 215417 of the New Civil Code
should be the applicable provision in the resolution of this controversy. If so, the parties unjustly
enriched would be liable to the other party who suffered thereby by being correspondingly
injured or damaged.
The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall enrich
himself unjustly at the expense of another.18 It applies where (1) a payment is made when there
exists no binding relation between the payor, who has no duty to pay, and the person who
95

received the payment, and (2) the payment is made through mistake, and not through liberality
or some other cause.19
In the instant case, records show that a bank-to-bank payment was made by respondent Wolff
to petitioner Cross in favor of co-petitioner Moreño-Lentfer. Respondent was under no duty to
make such payment for the benefit of Moreño-Lentfer. There was no binding relation between
respondent and the beneficiary, Moreño-Lentfer. The payment was clearly a mistake. Since
Moreño-Lentfer received something when there was no right to demand it, she had an obligation
to return it.20
Following Article 2221 of the New Civil Code, two conditions must concur to declare that a
person has unjustly enriched himself or herself, namely: (a) a person is unjustly benefited, and
(b) such benefit is derived at the expense of or to the damage of another.22
We are convinced petitioner Moreño-Lentfer had been unjustly enriched at the expense of
respondent. She acquired the properties through deceit, fraud and abuse of confidence. The
principle of justice and equity does not work in her favor but in favor of respondent Wolff.
Whatever she may have received by mistake from and at the expense of respondent should
thus be returned to the latter, if the demands of justice are to be served.
The Court of Appeals held that respondent was not entitled to the reconveyance of the
properties because, inter alia, of the express prohibition under the Constitution23 that non-
Filipino citizens cannot acquire land in the Philippines. We note, however, that subject
properties consist of a beach house and the lease right over the land where the beach house
stands. The constitutional prohibition against aliens from owning land in the Philippines has no
actual bearing in this case. A clear distinction exists between the ownership of a piece of land
and the mere lease of the land where the foreigner's house stands. Thus, we see no legal
reason why reconveyance could not be allowed.
Since reconveyance is the proper remedy, respondent's expenses for the maintenance and
repair of the beach house is for his own account as owner thereof. It need not be an issue for
now.
However, we deem it just and equitable under the circumstances to award respondent nominal
damages in the amount of P50,000,24 pursuant to Articles 222125 and 222226 of the New Civil
Code, since respondent's property right has been invaded through defraudation and abuse of
confidence committed by petitioners.
WHEREFORE, the petition is hereby DENIED. The assailed Decision, dated June 14, 2001 and
Resolution dated February 22, 2002, of the Court of Appeals in CA-G.R. CV No. 48272
reversing the lower court's judgment are AFFIRMED with MODIFICATION. Petitioners--
particularly the spouses Gunter Lentfer and Victoria Moreño-Lentfer--are hereby ORDERED to:
1. RECONVEY to respondent Hans Jurgen Wolff the beach house and the lease right
over the land on which it is situated; and
2. PAY respondent Wolff nominal damages in the amount of P50,000.00.
Costs against petitioners.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 148775 January 13, 2004
SHOPPER’S PARADISE REALTY & DEVELOPMENT CORPORATION, petitioner,
vs.
EFREN P. ROQUE, respondent.
DECISION
VITUG, J.:
On 23 December 1993, petitioner Shopper’s Paradise Realty & Development Corporation,
represented by its president, Veredigno Atienza, entered into a twenty-five year lease with Dr.
96

Felipe C. Roque, now deceased, over a parcel of land, with an area of two thousand and thirty
six (2,036) square meters, situated at Plaza Novaliches, Quezon City, covered by Transfer of
Certificate of Title (TCT) No. 30591 of the Register of Deeds of Quezon City in the name of Dr.
Roque. Petitioner issued to Dr. Roque a check for P250,000.00 by way of "reservation
payment." Simultaneously, petitioner and Dr. Roque likewise entered into a memorandum of
agreement for the construction, development and operation of a commercial building complex
on the property. Conformably with the agreement, petitioner issued a check for another
P250,000.00 "downpayment" to Dr. Roque.
The contract of lease and the memorandum of agreement, both notarized, were to be annotated
on TCT No. 30591 within sixty (60) days from 23 December 1993 or until 23 February 1994.
The annotations, however, were never made because of the untimely demise of Dr. Felipe C.
Roque. The death of Dr. Roque on 10 February 1994 constrained petitioner to deal with
respondent Efren P. Roque, one of the surviving children of the late Dr. Roque, but the
negotiations broke down due to some disagreements. In a letter, dated 3 November 1994,
respondent advised petitioner "to desist from any attempt to enforce the aforementioned
contract of lease and memorandum of agreement". On 15 February 1995, respondent filed a
case for annulment of the contract of lease and the memorandum of agreement, with a prayer
for the issuance of a preliminary injunction, before Branch 222 of the Regional Trial Court of
Quezon City. Efren P. Roque alleged that he had long been the absolute owner of the subject
property by virtue of a deed of donation inter vivos executed in his favor by his parents, Dr.
Felipe Roque and Elisa Roque, on 26 December 1978, and that the late Dr. Felipe Roque had
no authority to enter into the assailed agreements with petitioner. The donation was made in a
public instrument duly acknowledged by the donor-spouses before a notary public and duly
accepted on the same day by respondent before the notary public in the same instrument of
donation. The title to the property, however, remained in the name of Dr. Felipe C. Roque, and it
was only transferred to and in the name of respondent sixteen years later, or on 11 May 1994,
under TCT No. 109754 of the Register of Deeds of Quezon City. Respondent, while he resided
in the United States of America, delegated to his father the mere administration of the property.
Respondent came to know of the assailed contracts with petitioner only after retiring to the
Philippines upon the death of his father.
On 9 August 1996, the trial court dismissed the complaint of respondent; it explained:
"Ordinarily, a deed of donation need not be registered in order to be valid between the
parties. Registration, however, is important in binding third persons. Thus, when Felipe
Roque entered into a leased contract with defendant corporation, plaintiff Efren Roque
(could) no longer assert the unregistered deed of donation and say that his father,
Felipe, was no longer the owner of the subject property at the time the lease on the
subject property was agreed upon.
"The registration of the Deed of Donation after the execution of the lease contract did not
affect the latter unless he had knowledge thereof at the time of the registration which
plaintiff had not been able to establish. Plaintiff knew very well of the existence of the
lease. He, in fact, met with the officers of the defendant corporation at least once before
he caused the registration of the deed of donation in his favor and although the lease
itself was not registered, it remains valid considering that no third person is involved.
Plaintiff cannot be the third person because he is the successor-in-interest of his father,
Felipe Roque, the lessor, and it is a rule that contracts take effect not only between the
parties themselves but also between their assigns and heirs (Article 1311, Civil Code)
and therefore, the lease contract together with the memorandum of agreement would be
conclusive on plaintiff Efren Roque. He is bound by the contract even if he did not
participate therein. Moreover, the agreements have been perfected and partially
executed by the receipt of his father of the downpayment and deposit totaling to
P500,000.00."1
97

The Trial court ordered respondent to surrender TCT No. 109754 to the Register of Deeds of
Quezon City for the annotation of the questioned Contract of Lease and Memorandum of
Agreement.
On appeal, the Court of Appeals reversed the decision of the trial court and held to be invalid
the Contract of Lease and Memorandum of Agreement. While it shared the view expressed by
the trial court that a deed of donation would have to be registered in order to bind third persons,
the appellate court, however, concluded that petitioner was not a lessee in good faith having
had prior knowledge of the donation in favor of respondent, and that such actual knowledge had
the effect of registration insofar as petitioner was concerned. The appellate court based its
findings largely on the testimony of Veredigno Atienza during cross-examination, viz;
"Q. Aside from these two lots, the first in the name of Ruben Roque and the second, the
subject of the construction involved in this case, you said there is another lot which was
part of development project?
"A. Yes, this was the main concept of Dr. Roque so that the adjoining properties of his
two sons, Ruben and Cesar, will comprise one whole. The other whole property belongs
to Cesar.
"Q. You were informed by Dr. Roque that this property was given to his three (3) sons;
one to Ruben Roque, the other to Efren, and the other to Cesar Roque?
"A. Yes.
"Q. You did the inquiry from him, how was this property given to them?
"A. By inheritance.
"Q. Inheritance in the form of donation?
"A. I mean inheritance.
"Q. What I am only asking you is, were you told by Dr. Felipe C. Roque at the time of
your transaction with him that all these three properties were given to his children by way
of donation?
"A. What Architect Biglang-awa told us in his exact word: "Yang mga yan pupunta sa
mga anak. Yong kay Ruben pupunta kay Ruben. Yong kay Efren palibhasa nasa
America sya, nasa pangalan pa ni Dr. Felipe C. Roque."
"x x x xxx xxx
"Q. When was the information supplied to you by Biglang-awa? Before the execution of
the Contract of Lease and Memorandum of Agreement?
"A. Yes.
"Q. That being the case, at the time of the execution of the agreement or soon before,
did you have such information confirmed by Dr. Felipe C. Roque himself?
"A. Biglang-awa did it for us.
"Q. But you yourself did not?
"A. No, because I was doing certain things. We were a team and so Biglang-awa did it
for us.
"Q. So in effect, any information gathered by Biglang-awa was of the same effect as if
received by you because you were members of the same team?
"A. Yes."2
In the instant petition for review, petitioner seeks a reversal of the decision of the Court of
Appeals and the reinstatement of the ruling of the Regional Trial Court; it argues that the
presumption of good faith it so enjoys as a party dealing in registered land has not been
overturned by the aforequoted testimonial evidence, and that, in any event, respondent is
barred by laches and estoppel from denying the contracts.
The existence, albeit unregistered, of the donation in favor of respondent is undisputed. The trial
court and the appellate court have not erred in holding that the non-registration of a deed of
donation does not affect its validity. As being itself a mode of acquiring ownership, donation
results in an effective transfer of title over the property from the donor to the donee.3 In
donations of immovable property, the law requires for its validity that it should be contained in a
98

public document, specifying therein the property donated and the value of the charges which the
donee must satisfy.4 The Civil Code provides, however, that "titles of ownership, or other rights
over immovable property, which are not duly inscribed or annotated in the Registry of Property
(now Registry of Land Titles and Deeds) shall not prejudice third persons."5 It is enough,
between the parties to a donation of an immovable property, that the donation be made in a
public document but, in order to bind third persons, the donation must be registered in the
registry of Property (Registry of Land Titles and Deeds).6 Consistently, Section 50 of Act No.
496 (Land Registration Act), as so amended by Section 51 of P.D. No. 1529 (Property
Registration Decree), states:
"SECTION 51. Conveyance and other dealings by registered owner.- An owner of
registered land may convey, mortgage, lease, charge or otherwise deal with the same in
accordance with existing laws. He may use such forms of deeds, mortgages, leases or
other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other
voluntary instrument, except a will purporting to convey or affect registered land shall take
effect as a conveyance or bind the land, but shall operate only as a contract between the
parties and as evidence of authority to the Register of Deeds to make registration.
"The act of registration shall be the operative act to convey or affect the land insofar as third
persons are concerned, and in all cases under this Decree, the registration shall be made in
the office of the Register of Deeds for the province or city where the land lies." (emphasis
supplied)
A person dealing with registered land may thus safely rely on the correctness of the certificate of title
issued therefore, and he is not required to go beyond the certificate to determine the condition of the
property7 but, where such party has knowledge of a prior existing interest which is unregistered at
the time he acquired a right thereto, his knowledge of that prior unregistered interest would have the
effect of registration as regards to him.8
The appellate court was not without substantial basis when it found petitioner to have had
knowledge of the donation at the time it entered into the two agreements with Dr. Roque. During
their negotiation, petitioner, through its representatives, was apprised of the fact that the subject
property actually belonged to respondent.
It was not shown that Dr. Felipe C. Roque had been an authorized agent of respondent.
In a contract of agency, the agent acts in representation or in behalf of another with the consent of
the latter.9 Article 1878 of the Civil Code expresses that a special power of attorney is necessary to
lease any real property to another person for more than one year. The lease of real property for
more than one year is considered not merely an act of administration but an act of strict dominion or
of ownership. A special power of attorney is thus necessary for its execution through an
agent.1awphil.ne+
The Court cannot accept petitioner’s argument that respondent is guilty of laches. Laches, in its real
sense, is the failure or neglect, for an unreasonable and unexplained length of time, to do that which,
by exercising due diligence, could or should have been done earlier; it is negligence or omission to
assert a right within a reasonable time, warranting a presumption that the party entitled to assert it
either has abandoned or declined to assert it.10
Respondent learned of the contracts only in February 1994 after the death of his father, and in the
same year, during November, he assailed the validity of the agreements. Hardly, could respondent
then be said to have neglected to assert his case for unreasonable length of time.
Neither is respondent estopped from repudiating the contracts. The essential elements of estoppel in
pais, in relation to the party sought to be estopped, are: 1) a clear conduct amounting to false
representation or concealment of material facts or, at least, calculated to convey the impression that
the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to
assert; 2) an intent or, at least, an expectation, that this conduct shall influence, or be acted upon by,
the other party; and 3) the knowledge, actual or constructive, by him of the real facts.11 With respect
to the party claiming the estoppel, the conditions he must satisfy are: 1) lack of knowledge or of the
means of knowledge of the truth as to the facts in question; 2) reliance, in good faith, upon the
conduct or statements of the party to be estopped; and 3) action or inaction based thereon of such
character as to change his position or status calculated to cause him injury or prejudice.12 It has not
99

been shown that respondent intended to conceal the actual facts concerning the property; more
importantly, petitioner has been shown not to be totally unaware of the real ownership of the subject
property.
Altogether, there is no cogent reason to reverse the Court of Appeals in its assailed decision.
WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals declaring the
contract of lease and memorandum of agreement entered into between Dr. Felipe C. Roque and
Shopper’s Paradise Realty & Development Corporation not to be binding on respondent is
AFFIRMED. No costs.
SO ORDERED.