Laurel v.

Abrogar
GR# 155076/ Jan. 13, 2009

576 SCRA 41

Facts: On or about September 10-19, 1999, or prio r thereto in Makati City, Laurel was charged with theft for having unlawfully and feloniously take, steal and use the international long distance calls belonging to PLDT by conducting International Simple Resale (ISR), which is a method of routing and completing international long distance calls using lines, cables,
antenae, and/or air wave frequency which connect directly to the local or domestic exchange facilities of the country where the call is destined, effectively stealing this business from PLDT while using its facilities in the estimated amount of P20,370,651.92 to the damage and prejudice of PLDT, in the said amount.

Petitioner contends that they cannot be charged with theft of personal property since international long distance calls and the business of providing telecommunication or telephone services are not personal properties under Article 308 of the Revised Penal Code. PLDT on the other hand insists that the Revised Penal Code should be interpreted in the context of the Civil Codes definition of real and personal property. The enumeration of real properties in Article 415 of the Civil Code is exclusive such that all those not included therein are personal properties. Since Article 308 of the Revised Penal Code used the words personal property without qualification, it follows that all personal properties as understood in the context of the Civil Code, may be the subject of theft under Article 308 of the Revised Penal Code. PLDT alleges that the international calls and business of providing telecommunication or telephone service are personal properties capable of appropriation and can be objects of theft. Thus, the term personal properties under Article 308 of the Revised Penal Code is not limited to only personal properties which are susceptible of being severed from a mass or larger quantity and of being transported from place to place. According to respondent, the international phone calls which are electric currents or sets of electric impulses transmitted through a medium, and carry a pattern representing the human voice to a receiver, are personal properties which may be subject of theft. Article 416(3) of the Civil Code deems forces of nature (which includes electricity) which are brought under the control by science, are personal property. In his Comment to PLDTs motion for reconsideration, petitioner Laurel claims that business is not personal property. It is not the business that is protected but the right to carry on a business. This right is what is considered as property. Since the services of PLDT cannot be considered as property, the same may not be subject of theft. Hence, this case.

Issue: Whether or not telephone calls and business of providing telecommunication services is a personal property. Whether or not telephone calls and business of providing telecommunication services can be a subject of theft under the RPC. Held: Affirmative. Since the passage of the Revised Penal Code on December 8, 1930, the term personal property has had a generally accepted definition in civil law. In Article 335 of the Civil Code of Spain, personal property is defined as anything susceptible of appropriation and not included in the foregoing chapter (not real property). Consequently, any property which is not included in the enumeration of real properties under the Civil Code and capable of appropriation can be the subject of theft under the Revised Penal Code. The business of providing telecommunication or telephone service is likewise personal property which can be the object of theft under Article 308 of the Revised Penal Code. Business may be appropriated under Section 2 of Act No. 3952 (Bulk Sales Law), hence, could be object of theft: Interest in business was not specifically enumerated as personal property in the Civil Code in force at the time the above decision was rendered. Yet, interest in business was declared to be personal property since it is capable of appropriation and not included in the enumeration of real properties. Article 414 of the Civil Code provides that all things which are or may be the object of appropriation are considered either real property or personal property. Business is likewise not enumerated as personal property under the Civil Code. Just like interest in business, however, it may be appropriated. Since it is not included in the exclusive enumeration of real properties under Article 415, it is therefore personal property. But, while it may be conceded that international long distance calls, the matter alleged to be stolen in the instant case, take the form of electrical energy, it cannot be said that such international long distance calls were personal properties belonging to PLDT since the latter could not have acquired ownership over such calls. PLDT merely encodes, augments, enhances, decodes and transmits said calls using its complex communications infrastructure and facilities. PLDT not being the owner of said telephone calls, then it could not validly claim that such telephone calls were taken without its consent. It is the use of these communications facilities without the consent of PLDT that constitutes the crime of theft, which is the unlawful taking of the telephone services and business.

PRUDENTIAL BANK, petitioner, vs. HONORABLE DOMINGO D. PANIS, respondent Facts: November 19, 1971, plaintiffs-spouses Fernando A. Magcale and Teodula Baluyut Magcale secured a loan in the sum of P70,000.00 from the defendant Prudential Bank. To secure payment of this loan, plaintiffs executed in favor of defendant on the aforesaid date a deed of Real Estate Mortgage over the following described properties: l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces containing a total floor area of 263 sq. meters, more or less, generally constructed of mixed hard wood and concrete materials. On May 2, 1973, plaintiffs secured an additional loan from defendant Prudential Bank in the sum of P20,000.00. To secure payment of this additional loan, plaintiffs executed in favor of the said defendant another deed of Real Estate Mortgage over the same properties previously mortgaged. On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the parcel of land, possessory rights over which were mortgaged to defendant Prudential Bank, in favor of plaintiffs. For failure of plaintiffs to pay their obligation to defendant Bank after it became due, and upon application of said defendant, the deeds of Real Estate Mortgage were extrajudicially foreclosed. Consequent to the foreclosure was the sale of the properties therein mortgaged to defendant as the highest bidder in a public auction sale conducted by the defendant City Sheriff on April 12, 1978. The auction sale aforesaid was held despite written request from plaintiffs through counsel dated March 29, 1978, for the defendant City Sheriff to desist from going with the scheduled public auction sale. Respondent Court, in a Decision dated November 3, 1978 declared the deeds of Real Estate Mortgage as null and void (Ibid., p. 35). On December 14, 1978, petitioner filed a Motion for Reconsideration, opposed by private respondents on January 5, 1979 and in an Order dated January 10, 1979 the Motion for Reconsideration was denied for lack of merit. Hence, the instant petition. Issue: The pivotal issue in this case is whether or not a valid real estate mortgage can be constituted on the building erected on the land belonging to another. Held:

The answer is in the affirmative. In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled that, "it is obvious that the inclusion of "building" separate and distinct from the land, in said provision of law can only mean that a building is by itself an immovable property." Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such a mortgage would be still a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart from the land.

SERGS PRODUCTS, INC., and SERGIO T. GOQUIOLAY, petitioners, vs. PCI LEASING AND FINANCE, INC., respondent. Facts: On February 13, 1998, respondent PCI Leasing and Finance, Inc. (PCI Leasing for short) filed with the RTC-QC a complaint for sum of money, with an application for a writ of replevin. On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge issued a writ of replevin its sheriff to seize and deliver the machineries and equipment to PCI Leasing after 5 days and upon the payment of the necessary expenses. On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioners factory, seized one machinery with [the] word that he [would] return for the other machineries. On March 25, 1998, petitioners filed a motion for special protective order invoking the power of the court to control the conduct of its officers and amend and control its processes, praying for a directive for the sheriff to defer enforcement of the writ of replevin. This motion was opposed by PCI Leasing (Annex F), on the ground that the properties [were] still personal and therefore still subject to seizure and a writ of replevin. In their Reply, petitioners asserted that the properties sought to be seized [were] immovable as defined in Article 415 of the Civil Code, the parties agreement to the contrary notwithstanding. They argued that to give effect to the agreement would be prejudicial to innocent third parties. They further stated that PCI Leasing [was] estopped from treating these machineries as personal because the contracts in which the alleged agreement [were] embodied [were] totally sham and farcical. On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take possession of the remaining properties. He was able to take two more, but was prevented by the workers from taking the rest. Hence, this Petition. Issues: Whether or not the machineries purchased and imported by SERGS became real property by virtue of immobilization. Held:

The Petition is not meritorious. Petitioners contend that the subject machines used in their factory were not proper subjects of the Writ issued by the RTC, because they were in fact real property. Serious policy considerations, they argue, militate against a contrary characterization. Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of personal property only On the other hand, Article 415 of the Civil Code enumerates immovable or real property as follows: ART. 415. The following immovable property: (5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; In the present case, the machines that were the subjects of the Writ of Seizure were placed by petitioners in the factory built on their own land. Indisputably, they were essential and principal elements of their chocolate-making industry. Hence, although each of them was movable or personal property on its own, all of them have become immobilized by destination because they are essential and principal elements in the industry. [16] In that sense, petitioners are correct in arguing that the said machines are real, not personal, property pursuant to Article 415 (5) of the Civil Code. [17] Be that as it may, we disagree with the submission of the petitioners that the said machines are not proper subjects of the Writ of Seizure. The Court has held that contracting parties may validly stipulate that a real property be considered as personal. By agreeing to such stipulation, they consequently estopped from claiming otherwise. In the present case, the Lease Agreement clearly provides that the machines in question are to be considered as personal property. Clearly then, petitioners are estopped from denying the characterization of the subject machines as personal property. Under the circumstances, they are proper subjects of the Writ of Seizure. It should be stressed, however, that our holding -- that the machines should be deemed personal property pursuant to the Lease Agreement is good only insofar as the contracting parties are concerned. Hence, while the parties bound by the Agreement, third persons acting in good faith are not affected by its stipulation characterizing the subject machinery as personal.

RUBY L. TSAI, petitioner, vs. HON. COURT OF APPEALS, EVER TEXTILE MILLS, INC. and MAMERTO R VILLALUZ, respondents. Facts: On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a three million peso (P3,000,000.00) loan from petitioner Philippine Bank of Communications (PBCom). As security for the loan, EVERTEX executed in favor of PBCom, a deed of Real and Chattel Mortgage over the lot under TCT No. 372097, where its factory stands, and the chattels located therein as enumerated in a schedule attached to the mortgage contract. The pertinent portions of the Real and Chattel Mortgage are quoted below: Chattels: A. Forty Eight (48) units of Vayrow Knitting Machines-Tompkins made in Hongkong: B. Sixteen (16) sets of Vayrow Knitting Machines made in Taiwan. C. Two (2) Circular Knitting Machines made in West Germany. D. Four (4) Winding Machines. On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to EVERTEX. The loan was secured by a Chattel Mortgage over personal properties enumerated in a list attached thereto. These listed properties were similar to those listed in Annex A of the first mortgage deed. After April 23, 1979, the date of the execution of the second mortgage mentioned above, EVERTEX purchased various machines and equipments. On November 19, 1982, due to business reverses, EVERTEX filed insolvency proceedings. CFI issued an order on November 24, 1982 declaring the corporation insolvent. All its assets were taken into the custody of the Insolvency Court, including the collateral, real and personal, securing the two mortgages as abovementioned. In the meantime, upon EVERTEX's failure to meet its obligation to PBCom, the latter commenced extrajudicial foreclosure proceedings. On December 15, 1982, the first public auction was held where petitioner PBCom emerged as the highest bidder and a Certificate of Sale was issued in its favor on the same date. On December 23, 1982, another public auction was held and again, PBCom was the highest bidder. The sheriff issued a Certificate of Sale on the same day.

On March 7, 1984, PBCom consolidated its ownership over the lot and all the properties in it. In November 1986, it leased the entire factory premises to petitioner Ruby L. Tsai for P50,000.00 A month. On May 3, 1988, PBCom sold the factory, lock, stock and barrel to Tsai for P9,000,000.00, including the contested machineries. On March 16, 1989, EVERTEX filed a complaint for annulment of sale, reconveyance, and damages with the Regional Trial Court against PBCom, alleging inter alia that the extrajudicial foreclosure of subject mortgage was in violation of the Insolvency Law. EVERTEX claimed that no rights having been transmitted to PBCom over the assetsfor reconsideration of the above decision having been denied in the resolution of April 28, 1995, PBCom and Tsai filed their separate petitions for review with this Court. Petitioners contend that the nature of the disputed machineries, i.e., that they were heavy, bolted or cemented on the real property mortgaged by EVERTEX to PBCom, make them ipso facto immovable under Article 415 (3) and (5) of the New Civil Code. In opposition, private respondents argue that the controverted units of machinery are not "real properties" but chattels, and, therefore, they were not part of the foreclosed real properties, rendering the lease and the subsequent sale thereof to Tsai a nullity.12 Issue: The principal issue, in our view, is whether or not the inclusion of the questioned properties in the foreclosed properties is proper. The secondary issue is whether or not the sale of these properties to petitioner Ruby Tsai is valid. Held: While it is true that the controverted properties appear to be immobile, a perusal of the contract of Real and Chattel Mortgage executed by the parties herein gives us a contrary indication. In the case at bar, both the trial and the appellate courts reached the same finding that the true intention of PBCOM and the owner, EVERTEX, is to treat machinery and equipment as chattels. If the machineries in question were contemplated to be included in the real estate mortgage, there would have been no necessity to ink a chattel mortgage specifically mentioning as part III of Schedule A a listing of the machineries covered thereby. It would have sufficed to list them as immovables in the Deed of Real Estate Mortgage of the land and building involved. In the absence of any showing that this conclusion is baseless, erroneous or uncorroborated by the evidence on record, we find no compelling reason to depart therefrom.

Too, assuming arguendo that the properties in question are immovable by nature, nothing detracts the parties from treating it as chattels to secure an obligation under the principle of estoppel. As far back as Navarro v. Pineda, 9 SCRA 631 (1963), an immovable may be considered a personal property if there is a stipulation as when it is used as security in the payment of an obligation where a chattel mortgage is executed over it, as in the case at bar. In the instant case, the parties herein: (1) executed a contract styled as "Real Estate Mortgage and Chattel Mortgage," instead of just "Real Estate Mortgage" if indeed their intention is to treat all properties included therein as immovable, and (2) attached to the said contract a separate "LIST OF MACHINERIES & EQUIPMENT". These facts, taken together, evince the conclusion that the parties' intention is o treat these units of machinery as chattels. A fortiori, the contested after-acquired properties, which are of the same description as the units enumerated under the title "LIST OF MACHINERIES & EQUIPMENT," must also be treated as chattels. And, since the disputed machineries were acquired in 1981 and could not have been involved in the 1975 or 1979 chattel mortgages, it was consequently an error on the part of the Sheriff to include subject machineries with the properties enumerated in said chattel mortgages. As the auction sale of the subject properties to PBCom is void, no valid title passed in its favor. Consequently, the sale thereof to Tsai is also a nullity under the elementary principle of nemo dat quod non habet, one cannot give what one does not have.17

CALTEX (PHILIPPINES) INC., petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS and CITY ASSESSOR OF PASAY, respondents. Facts: This case is about the realty tax on machinery and equipment installed by Caltex (Philippines) Inc. in its gas stations located on leased land. The machines and equipment consists of underground tanks, elevated tank, elevated water tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer, car hoists, truck hoists, air compressors and tireflators. The city assessor described the said equipment and machinery as a real property. The controversial underground tank, depository of gasoline or crude oil, is dug deep about six feet more or less, a few meters away from the shed. This is done to prevent conflagration because gasoline and other combustible oil are inflammable. The city assessor of Pasay City characterized the said items of gas station equipment and machinery as taxable realty. The realty tax on said equipment amounts to P4,541.10 annually. The city board of tax appeals ruled that they are personalty. The assessor appealed to the Central Board of Assessment Appeals. The Board, in its decision of June 3, 1977 that the said machines and equipment are real property within the meaning of sections 3(k) & (m) and 38 of the Real Property Tax Code, Presidential Decree No. 464, which took effect on June 1, 1974, and that the definitions of real property and personal property in articles 415 and 416 of the Civil Code are not applicable to this case. On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside of the Board's decision and for a declaration that the said machines and equipment are personal property not subject to realty tax. Caltex invokes the rule that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner.

Issue:

Whether the pieces of gas station equipment and machinery already enumerated subject to realty tax. Held: We hold that the said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures necessary to the operation of the gas station, for without them the gas station would be useless, and which have been attached or affixed permanently to the gas station site or embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code. Improvements on land are commonly taxed as realty even though for some purposes they might be considered personalty. "It is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property" (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633).

MANILA ELECTRIC COMPANY, petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF BATANGAS and PROVINCIAL ASSESSOR OF BATANGAS, respondents. Facts: This case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by Manila Electric Company on a lot in San Pascual, Batangas which it leased in 1968 from Caltex (Phil.), Inc. The tanks are within the Caltex refinery compound. They have a total capacity of 566,000 barrels. They are used for storing fuel oil for Meralco's power plants. According to Meralco, the storage tanks are made of steel plates welded and assembled on the spot. Their bottoms rest on a foundation consisting of compacted earth as the outermost layer, a sand pad as the intermediate layer and a two-inch thick bituminous asphalt stratum as the top layer. The bottom of each tank is in contact with the asphalt layer, The steel sides of the tank are directly supported underneath by a circular wall made of concrete, eighteen inches thick, to prevent the tank from sliding. Hence, according to Meralco, the tank is not attached to its foundation. It is not anchored or welded to the concrete circular wall. Its bottom plate is not attached to any part of the foundation by bolts, screws or similar devices. The tank merely sits on its foundation. Each empty tank can be floated by flooding its dike-inclosed location with water four feet deep. (pp. 29-30, Rollo.) The Board concludes that while the tanks rest or sit on their foundation, the foundation itself and the walls, dikes and steps, which are integral parts of the tanks, are affixed to the land while the pipelines are attached to the tanks. (pp. 6061, Rollo.) In 1970, the municipal treasurer of Bauan, Batangas, on the basis of an assessment made by the provincial assessor, required Meralco to pay realty taxes on the two tanks. For the five-year period from 1970 to 1974, the tax and penalties amounted to P431,703.96. The Board required Meralco to pay the tax and penalties as a condition for entertaining its appeal from the adverse decision of the Batangas board of assessment appeals. The Central Board of Assessment Appeals (ruled that the tanks together with the foundation, walls, dikes, steps, pipelines and other appurtenances constitute taxable improvements and are taxable as real property. On March 15, 1978, Meralco filed this special civil action of certiorari to annul the Board's decision and resolution. It contends that the Board acted without jurisdiction and committed A grave error of law in holding that its storage tanks are taxable real property.

Meralco contends that the said oil storage tanks do not fall within any of the kinds of real property enumerated in article 415 of the Civil Code and, therefore, they cannot be categorized as realty by nature, by incorporation, by destination nor by analogy. Stress is laid on the fact that the tanks are not attached to the land and that they were placed on leased land, not on the land owned by Meralco. Issue: WON the tanks are real or personal property. We hold that while the two storage tanks are not embedded in the land, they may, nevertheless, be considered as improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the two tanks have been installed with some degree of permanence as receptacles for the considerable quantities of oil needed by Meralco for its operations. For purposes of taxation, the term "real property" may include things which should generally be regarded as personal property. It is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property.

Title II. Ownership - Arts. 427-483; Easement; Sec 70, PD 1529; Arts. 712, 1458, 1497-1501;

TEODORO ACAP, petitioner, vs. COURT OF APPEALS and EDY DE LOS REYES, respondents. Facts: The title to Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental was evidenced by OCT No. R-12179. The lot has an area of 13,720 sq. meters. The title was issued and is registered in the name of spouses Santiago Vasquez and Lorenza Oruma. After both spouses died, their only son Felixberto inherited the lot. In 1975, Felixberto executed a duly notarized document entitled "Declaration of Heirship and Deed of Absolute Sale" in favor of Cosme Pido. The evidence before the court a quo established that since 1960, petitioner Teodoro Acap had been the tenant of a portion of the said land, covering an area of nine thousand five hundred (9,500) meters. When ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap continued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido and thereafter, upon Pido's death, to his widow Laurenciana. The controversy began when Pido died intestate and on 27 November 1981, his surviving heirs executed a notarized document denominated as "Declaration of Heirship and Waiver of Rights of Lot No. 1130 Hinigaran Cadastre," wherein they declared; to quote its pertinent portions, that: Now, therefore, We LAURENCIANA 3, ELY, ELMER, ERVIN and ELECHOR all surnamed PIDO, do hereby waive, quitclaim all our rights, interests and participation over the said parcel of land in favor of EDY DE LOS REYES, of legal age, (f)ilipino, married to VIRGINIA DE LOS REYES, and resident of Hinigaran, Negros Occidental, Philippines. . . . 4 (Emphasis supplied) The document was signed by all of Pido's heirs. Private respondent Edy de los Reyes did not sign said document. It will be noted that at the time of Cosme Pido's death, title to the property continued to be registered in the name of the Vasquez spouses. Upon obtaining the Declaration of Heirship with Waiver of Rights in his favor, private respondent Edy de

los Reyes filed the same with the Registry of Deeds as part of a notice of an adverse claim against the original certificate of title. Thereafter, private respondent sought for petitioner (Acap) to personally inform him that he (Edy) had become the new owner of the land and that the lease rentals thereon should be paid to him. Private respondent further alleged that he and petitioner entered into an oral lease agreement wherein petitioner agreed to pay ten (10) cavans of palay per annum as lease rental. In 1982, petitioner allegedly complied with said obligation. In 1983, however, petitioner refused to pay any further lease rentals on the land, prompting private respondent to seek the assistance of the then Ministry of Agrarian Reform (MAR) in Hinigaran, Negros Occidental. The MAR invited petitioner to a conference scheduled on 13 October 1983. Petitioner did not attend the conference but sent his wife instead to the conference. During the meeting, an officer of the Ministry informed Acap's wife about private respondent's ownership of the said land but she stated that she and her husband (Teodoro) did not recognize private respondent's claim of ownership over the land. Petitioner points out that the Declaration of Heirship and Waiver of Rights is not one of the recognized modes of acquiring ownership under Article 712 of the Civil Code. Neither can the same be considered a deed of sale so as to transfer ownership of the land to private respondent because no consideration is stated in the contract (assuming it is a contract or deed of sale). Issue: WON the Declaration of Heirship and Waiver of Rights is not one of the recognized modes of acquiring ownership under Article 712 of the Civil Code. WON it can neither be considered a deed of sale so as to transfer ownership of the land to private respondent because no consideration is stated in the contract (assuming it is a contract or deed of sale). Held: We find the petition impressed with merit. Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode (i.e., through occupation, acquisitive prescription, law or intellectual creation) and the derivative mode (i.e., through succession mortis causa or tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum). In the case at bench, the trial court was obviously confused as to the nature and effect of the Declaration of Heirship and Waiver of Rights, equating the same with a contract (deed) of sale. They are not the same.

In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay a price certain in money or its equivalent. 9 Upon the other hand, a declaration of heirship and waiver of rights operates as A public instrument when filed with the Registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the decedent among themselves as they see fit. It is in effect an extrajudicial settlement between the heirs under Rule 74 of the Rules of Court. 10 Hence, there is a marked difference between a sale of hereditary rights and a waiver of hereditary rights. The first presumes the existence of a contract or deed of sale between the parties. 11 The second is, technically speaking, a mode of extinction of ownership where there is an abdication or intentional relinquishment of a known right with knowledge of its existence and intention to relinquish it, in favor of other persons who are co-heirs in the succession. 12 Private respondent, being then a stranger to the succession of Cosme Pido, cannot conclusively claim ownership over the subject lot on the sole basis of the waiver document which neither recites the elements of either a sale, 13 or a donation, 14 or any other derivative mode of acquiring ownership.

Must be read for exams! HEIRS OF THE LATE JOAQUIN LIMENSE, namely: CONCESA LIMENSE, Surviving Spouse; and DANILO and JOSELITO, both surnamed Limense, children, Petitioners, v. RITA VDA. DE RAMOS et. al Respondents. Facts: Dalmacio Lozada was the registered owner of A parcel of land identified as Lot No. 12, Block No. 1074. Dalmacio Lozada subdivided his property into five (5) lots, namely: Lot Nos. 12-A, 12-B, 12-C, 12-D and 12-E. Through a Deed of Donation dated March 9, 1932,4 he donated the subdivided lots to his daughters, namely: Isabel, Salud, Catalina, and Felicidad, all surnamed Lozada. The Deed of Donation was registered with the office of the Register of Deeds of Manila on March 15, 1932. Under the said Deed of Donation, the lots were adjudicated to Dalmacio's daughters in the following manner: a. Lot No. 12-A in favor of Isabel Lozada, married to Isaac Limense; b. Lot No. 12-B in favor of Catalina Lozada, married to Sotero Natividad; c. Lot No. 12-C in favor of Catalina Lozada, married to Sotero Natividad; Isabel Lozada, married to Isaac Limense; and Salud Lozada, married to Francisco Ramos, in equal parts; d. Lot No. 12-D in favor of Salud Lozada, married to Francisco Ramos; and e. Lot No. 12-E in favor of Isabel Lozada, married to Isaac Limense, and Felicidad Lozada, married to Galicano Centeno. TCT No. 40043, which covered Lot No. 12-C, was issued in the name of its co-owners Catalina Lozada, married to Sotero Natividad; Isabel Lozada, married to Isaac Limense; and Salud Lozada, married to Francisco Ramos. It covered an area of

68.60 square meters, more or less. On May 16, 1969, TCT No. 968866 was issued in the name of Joaquin Limense covering the same area of Lot No. 12-C. On October 1, 1981, Joaquin Limense secured a building permit for the construction of a hollow block fence on the boundary line between his aforesaid property and the adjacent parcel of land designated as Lot No. 12-D, which was being occupied by Respondents. The fence, however, could not be constructed because a substantial portion of respondents' RITA VDA. DE RAMOS residential building in Lot No. 12-D encroached upon portions of Joaquin Limense's property in Lot No. 12-C. Joaquin Limense demanded the removal of the encroached area; however, respondent ignored both oral and written demands. The parties failed to amicably settle the differences between them despite referral to the barangay. Thus, on March 9, 1983, Joaquin Limense, duly represented by his Attorney-in-Fact, Teofista L. Reyes, instituted a Complaint7 against respondents before the Regional Trial Court (RTC) of Manila, Branch 15, for removal of obstruction and damages. After trial on the merits, the RTC rendered a Decision10 dated September 21, 1990 dismissing the complaint of Joaquin Limense. It ruled that an apparent easement of right of way existed in favor of Respondents. The Court finds that an apparent easement of right of way exists in favor of the defendants under Article 624 of the Civil Code. It cannot be denied that there is an alley which shows its existence. It is admitted that this alley was established by the original owner of Lot 12 and that in dividing his property, the alley established by him continued to be used actively and passively as such. Even when the division of the property occurred, the non-existence of the easement was not expressed in the corresponding titles nor were the apparent sign of the alley made to disappear before the issuance of said titles. The Court also finds that when plaintiff acquired the lot (12-C) which forms the alley, he knew that said lot could serve no other purpose than as an alley. That is why even after he acquired it in 1969, the lot continued to be used by defendants and occupants of the other adjoining lots as an alley. The existence of the easement of right of way was therefore known to plaintiff who must respect the same in spite of the fact that his transfer certificate of title does not mention the lot of defendants as among those listed therein as entitled to such right of way. It is an established principle that actual notice or knowledge is as binding as registration.11 Aggrieved by said decision, Joaquin Limense filed a notice of appeal. The CA, dismissed the appeal and affirmed in toto the decision of the RTC. Hence, this present petition. Respondents allege that it was possible that TCT No. 96886, in the name of Joaquin Limense, was obtained thru fraud, misrepresentation or falsification of documents because the donees of said property could not possibly execute any valid transfer of

title to Joaquin Limense, as they were already dead prior to the issuance of TCT No. 96886 in 1969. Respondents further allege that petitioners failed to produce proof substantiating the issuance of TCT No. 96886 in the name of Joaquin Limense. Petitioners contend that respondents are not entitled to an easement of right of way over Lot No. 12-C, because their Lot No. 12-D is not duly annotated at the back of TCT No. 96886 which would entitle them to enjoy the easement, unlike Lot Nos. 12A-1, 12-A-2, 12-A-3, 12-A-4, 12-A-5, and 12-A-6. Respondents, on the other hand, allege that they are entitled to an easement of right of way over Lot No. 12-C, which has been continuously used as an alley by the heirs of Dalmacio Lozada, the residents in the area and the public in general from 1932 up to the present. Since petitioners are fully aware of the long existence of the said alley or easement of right of way, they are bound to respect the same. Held: Apparently, respondents are questioning the legality of TCT No. 96886, an issue that this Court cannot pass upon in the present case. It is a rule that the validity of a torrens title cannot be assailed collaterally. [a] certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law. In the case at bar, the action filed before the RTC against respondents was an action for removal of obstruction and damages. Respondents raised the defense that Joaquin Limense's title could have been obtained through fraud and misrepresentation in the trial proceedings before the RTC. Such defense is in the nature of a collateral attack, which is not allowed by law. Further, it has been held that a certificate of title, once registered, should not thereafter be impugned, altered, changed, modified, enlarged or diminished, except in a direct proceeding permitted by law. Otherwise, the reliance on registered titles would be lost. The title became indefeasible and incontrovertible after the lapse of one year from the time of its registration and issuance. Due to the foregoing, Joaquin Limense, as the registered owner of Lot 12-C, and his successors-in-interest, may enclose or fence his land or tenements by means of walls, ditches, live or dead hedges, or by any other means without detriment to servitudes constituted thereon.21 cra However, although the owner of the property has the right to enclose or fence his property, he must respect servitudes constituted thereon. The question now is whether respondents entitled to an easement of right of way. As defined, an easement is a real right on another's property, corporeal and immovable, whereby the owner of the latter must refrain from doing or allowing

somebody else to do or something to be done on his property, for the benefit of another person or tenement.22 Easements may be continuous or discontinuous, apparent or non-apparent. Continuous easements are those the use of which is or may be incessant, without the intervention of any act of man. Discontinuous easements are those which at intervals and depend upon the acts of man. Apparent easements are those which made known and continually kept in view by external signs that reveal the use and enjoyment of the same. Non-apparent easements are those which show no external indication of their existence.2 In the present case, the easement of right of way is discontinuous and apparent. It is discontinuous, as the use depends upon the acts of respondents and other persons passing through the property. Being an alley that shows a permanent path going to and from Beata Street, the same is apparent. Being a discontinuous and apparent easement, the same can be acquired only by virtue of a title. In the case at bar, TCT No. 96886, issued in the name of Joaquin Limense, does not contain any annotation that Lot No. 12-D was given an easement of right of way over Lot No. 12-C. However, Joaquin Limense and his successors-in-interests fully aware that Lot No. 12-C has been continuously used and utilized as an alley by respondents and residents in the area for a long period of time. In Mendoza v. Rosel,26 this Court held that: Petitioners claim that inasmuch as their transfer certificates of title do not mention any lien or encumbrance on their lots, they are purchasers in good faith and for value, and as such have a right to demand from respondents some payment for the use of the alley. However, the Court of Appeals found, as a fact, that when respondents acquired the two lots which form the alley, they knew that said lots could serve no other purpose than as an alley. The existence of the easement of right of way was therefore known to petitioners who must respect the same, in spite of the fact that their transfer certificates of title do not mention any burden or easement. It is an established principle that actual notice or knowledge is as binding as registration. Every buyer of a registered land who takes a certificate of title for value and in good faith shall hold the same free of all encumbrances except those noted on said certificate. It has been held, however, that "where the party has knowledge of A

prior existing interest that was unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him." In the case at bar, Lot No. 12-C has been used as an alley ever since it was donated by Dalmacio Lozada to his heirs. It is undisputed that prior to and after the registration of TCT No. 96886, Lot No. 12-C has served as a right of way in favor of respondents and the public in general. Thus, petitioners are bound by the easement of right of way over Lot No. 12-C, even though no registration of the servitude has been made on TCT No. 96886. However, respondents' right to have access to the property of petitioners does not include the right to continually encroach upon the latter's property. It is not disputed that portions of respondents' house on Lot No. 12-D encroach upon Lot No. 12-C. Geodetic Engineer Jose Agres, Jr. testified on the encroachment of respondents' house on Lot No. 12-C, which he surveyed.29 In order to settle the rights of the parties relative to the encroachment, We should determine whether respondents were builders in good faith. Applied to possession, one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any flaw which invalidates it. Good faith is always presumed, and upon him who alleges bad faith on the part of the possessor rests the burden of proof.31 It is a matter of record that respondents' predecessor-in-interest constructed their residential building on Lot No. 12-D, adjacent to Lot No. 12-C, in 1932.32 Respondents' predecessor-ininterest owned the 1/3 portion of Lot No. 12-C at the time the property was donated to them by Dalmacio Lozada in 1932. The portions of Lot No. 12-D, particularly the overhang, covering 1 meter in width and 17 meters in length; the stairs; and the concrete structures are all within the 1/3 share alloted to them by their donor Dalmacio Lozada and, hence, there was absence of a showing that respondents acted in bad faith when they built portions of their house on Lot No. 12-C. Using the above parameters, we are convinced that respondents' predecessors-ininterest acted in good faith when they built portions of their house on Lot 12-C. Respondents being builders in good faith, we shall now discuss the respective rights of the parties relative to the portions encroaching upon respondents' house. Articles 448 and 546 of the New Civil Code provide:cra:nad Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who

sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and, in case of disagreement, the court shall fix the terms thereof. Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor. Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof. In Spouses Del Campo v. Abesia,34 this provision was applied to one whose house, despite having been built at the time he was still co-owner, overlapped with the land of another. In that case, this Court ruled: The court a quo correctly held that Article 448 of the Civil Code cannot apply where a co-owner builds, plants or sows on the land owned in common for then he did not build, plant or sow upon the land that exclusively belongs to another but of which he is a co-owner. The co-owner is not a third person under the circumstances, and the situation is governed by the rules of co-ownership. However, when, as in this case, the ownership is terminated by the partition and it appears that the house of defendants overlaps or occupies a portion of 5 square meters of the land pertaining to plaintiffs which the defendants obviously built in good faith, then the provisions of Article 448 of the new Civil Code should apply. x x x35 cra In other words, when the co-ownership is terminated by a partition, and it appears that the house of an erstwhile co-owner has encroached upon a portion pertaining to another co-owner, but the encroachment was in good faith, then the provisions of Article 448 should apply to determine the respective rights of the parties. In this case, the co-ownership was terminated due to the transfer of the title of the whole property in favor of Joaquin Limense. Under the foregoing provision, petitioners have the right to appropriate said portion of the house of respondents upon payment of indemnity to respondents, as provided for in Article 546 of the Civil Code. Otherwise, petitioners may oblige respondents to pay the price of the land occupied by their house. However, if the price asked for is considerably much more than the value of the portion of the house of respondents built thereon, then the latter cannot be obliged to buy the land. Respondents shall then pay the reasonable rent to petitioners upon such terms and conditions that they may agree. In case of disagreement, the trial court

shall fix the terms thereof. Of course, respondents may demolish or remove the said portion of their house, at their own expense, if they so decide.36 cra The choice belongs to the owner of the land, a rule that accords with the principle of accession that the accessory follows the principal and not the other way around.37 Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. He must choose one. He cannot, for instance, compel the owner of the building to instead remove it from the land.38 cra The obvious benefit to the builder under this article is that, instead of being outrightly ejected from the land, he can compel the landowner to make A choice between two options: (1) to appropriate the building by paying the indemnity required by law, or (2) to sell the land to the builder.39 cra

MARGARITA F. CASTRO, Petitioner, vs. NAPOLEON A. MONSOD, Respondent. Facts: Petitioner is the registered owner of a parcel of land located on Garnet Street, Manuela Homes, Pamplona, Las Pias City, and covered by Transfer Certificate of Title (TCT) No. T-36071. Respondent, on the other hand, is the owner of the property adjoining the lot of petitioner. There is a concrete fence, more or less two (2) meters high, dividing Manuela Homes from Moonwalk Village. Respondent claimed that he and his family had been residing in Moonwalk Village since June 1984. Adjacent to his property is the land of petitioner in Manuela Homes. When he bought the property in 1983, the land elevation of Moonwalk

Village was almost on the same level as Manuela Homes. However, sometime in 1985 and 1986, Pilar Development Corporation, the developer of Manuela Homes, bulldozed, excavated, and transferred portions of the elevated land to the lower portions of Manuela Homes. Thus, Manuela Homes became lower than Moonwalk Village.9

Prior to the filing of the case before the RTC, there were deposits of soil and rocks about two (2) meters away from the front door of the house of petitioner. As such, petitioner was not able to park her vehicle at the dead-end portion of Garnet Street. When petitioner noticed a leak that caused the front portion of her house to be slippery, she hired construction workers to see where the leak was coming from. The workers had already started digging when police officers sent by respondent came and stopped the workers from finishing their job.7 Before the said excavation, respondent personally complained to Pilar Development Corporation and was assured that, as provided by the National Building Code, an embankment will be retained at the boundary of Manuela Homes and Moonwalk Village, which is more or less fifteen (15) feet higher than Manuela Homes.10 Manuela Homes retained the embankment consisting of soil and rocks. Respondent had the open space riprapped with stones as reinforcement against any potential soil erosion, earthquake, and possible digging by any person.

Petitioner averred that when she bought the property from Manuela Homes in 1994, there was no annotation or existence of any easement over the property. Respondent neither asked permission nor talked to her with regard to the use of 65 sq.m. of her property as easement. On February 29, 2000, respondent caused the annotation of an adverse claim against sixty-five (65) sq.m. of the property of petitioner. The adverse claim was filed without any claim of ownership over the property. Respondent was merely asserting the existing legal easement of lateral and subjacent support at the rear portion of his estate to prevent the property from collapsing, since his property is located at an elevated plateau of fifteen (15) feet, more or less, above the level of petitioners property.4 Respondent asserted that the affidavit of adverse claim was for the annotation of the lateral and subjacent easement of his property over the property of petitioner, in view of the latters manifest determination to remove the embankment left by the developer of Manuela Homes.

On October 11, 2004, the RTC rendered a decision, in favor of the petitioner.The trial court ratiocinated that the adverse claim of respondent was non-registrable considering that the basis of his claim was an easement and not an interest adverse to the registered owner, and neither did he contest the title of petitioner. On appeal, the CA reversed the decision of the trial court. The Court ordered the retention of the annotation at the back of Transfer Certificate of Title No. T-36071, not as an adverse claim, but a recognition of the existence of A legal easement of subjacent and lateral support constituted on the lengthwise or horizontal land support/embankment area of sixty-five (65) square meters, more or less, of the property of [petitioner] Margarita Castro. The CA ruled that while respondents adverse claim could not be sanctioned because it did not fall under the requisites for registering an adverse claim, the same might be duly annotated in the title as recognition of the existence of a legal easement of subjacent and lateral support. The purpose of the annotation was to prevent petitioner from making injurious excavations on the subject embankment as to deprive the residential house and lot of respondent of its natural support and cause it to collapse. Respondent only asked that petitioner respect the legal easement already existing thereon.16 Hence, this petition. Issue: Whether the easement of lateral and subjacent support can be annotated at the back of the title of a property as a notice of adverse claim.

Held: No. Article 437 of the Civil Code provides that the owner of a parcel of land is the owner of its surface and of everything under it, and he can construct thereon any works, or make any plantations and excavations which he may deem proper. However, such right of the owner is not absolute and is subject to the following limitations: (1) servitudes or easements,18 (2) special laws,19 (3) ordinances,20 (4) reasonable requirements of aerial navigation,21 and (5) rights of third persons. Respondents assertion that he has an adverse claim over the 65 sq.m. property of petitioner is misplaced since he does not have a claim over the ownership of the land. The annotation of an adverse claim over registered land under Section 70 of Presidential Decree 152924 requires a claim on the title of the disputed land. Annotation is done to apprise third persons that there is a controversy over the ownership of the land and to preserve and protect the right of the adverse claimant during the pendency of the controversy. It is a notice to third persons that any

transaction regarding the disputed land is subject to the outcome of the dispute.25 In reality, what respondent is claiming is a judicial recognition of the existence of the easement of subjacent and lateral support over the 65 sq. m. portion of petitioners property covering the land support/embankment area. His reason for the annotation is only to prevent petitioner from removing the embankment or from digging on the property for fear of soil erosion that might weaken the foundation of the rear portion of his property which is adjacent to the property of petitioner. An easement or servitude is an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner.26 There are two kinds of easements according to source. An easement is established either by law or by will of the owners.27 The courts cannot impose or constitute any servitude where none existed. They can only declare its existence if in reality it exists by law or by the will of the owners. There are therefore no judicial easements.28 Article 684 of the Civil Code provides that no proprietor shall make such excavations upon his land as to deprive any adjacent land or building of sufficient lateral or subjacent support. An owner, by virtue of his surface right, may make excavations on his land, but his right is subject to the limitation that he shall not deprive any adjacent land or building of sufficient lateral or subjacent support. Between two adjacent landowners, each has an absolute property right to have his land laterally supported by the soil of his neighbor, and if either, in excavating on his own premises, he so disturbs the lateral support of his neighbors land as to cause it, or, in its natural state, by the pressure of its own weight, to fall away or slide from its position, the one so excavating is liable.29 In the instant case, an easement of subjacent and lateral support exists in favor of respondent.1avvphi1 It was established that the properties of petitioner and respondent adjoin each other. The residential house and lot of respondent is located on an elevated plateau of fifteen (15) feet above the level of petitioners property. The embankment and the riprapped stones have been in existence even before petitioner became the owner of the property. It was proven that petitioner has been making excavations and diggings on the subject embankment and, unless restrained, the continued excavation of the embankment could cause the foundation of the rear portion of the house of respondent to collapse, resulting in the destruction of a huge part of the family dwelling.30 We sustain the CA in declaring that a permanent injunction on the part of petitioner from making injurious excavations is necessary in order to protect the interest of respondent. However, an annotation of the existence of the subjacent and lateral support is no longer necessary. It exists whether or not it is annotated or registered in the registry of property. A judicial recognition of the same already binds the property and the owner of the same, including her successors-in-interest.

Otherwise, every adjoining landowner would come to court or have the easement of subjacent and lateral support registered in order for it to be recognized and respected.

Sta. Lucia v. Pasig GR# 166838/ June 15, 2011 Facts: Petitioner Sta. Lucia Realty & Development, Inc. (Sta. Lucia) is the registered owner of several parcels of land with Transfer Certificates of Title (TCT) Nos. 39112, 39110

and 38457, all of which indicated that the lots were located in Barrio Tatlong Kawayan, Municipality of Pasig [5] (Pasig). The parcel of land covered by TCT No. 39112 was consolidated with that covered by TCT No. 518403, which was situated in Barrio Tatlong Kawayan, Municipality of Cainta. The two combined lots were subsequently partitioned into three, for which TCT Nos. 532250, 598424, and 599131, now all bearing the Cainta address, were issued. TCT No. 39110 was also divided into two lots, becoming TCT Nos. 92869 and 92870. Upon Pasigs petition to correct the location stated in TCT Nos. 532250, 598424, and 599131, the Land Registration Court, on June 9, 1995, ordered the amendment of the TCTs to read that the lots with respect to TCT No. 39112 were located in Barrio Tatlong Kawayan, Pasig City. [7] On January 31, 1994, Cainta filed a petition [8] for the settlement of its land boundary dispute with Pasig before the RTC, Branch 74 of Antipolo City (Antipolo RTC). This case, docketed as Civil Case No. 94-3006, is still pending up to this date. On November 28, 1995, Pasig filed a Complaint, against Sta. Lucia for the collection of real estate taxes, including penalties and interests, on the lots covered by TCT Nos. 532250, 598424, 599131, 92869, 92870 and 38457, including the improvements thereon (the subject properties). Sta. Lucia, in its Answer, alleged that it had been religiously paying its real estate taxes to Cainta, just like what its predecessors-in-interest did, by virtue of the demands and assessments made and the Tax Declarations issued by Cainta on the claim that the subject properties were within its territorial jurisdiction. Sta. Lucia further argued that since 1913, the real estate taxes for the lots covered by the above TCTs had been paid to Cainta. [10]

Cainta was allowed to file its own Answer-in-Intervention when it moved to intervene on the ground that its interest would be greatly affected by the outcome of the case. It averred that it had been collecting the real property taxes on the subject properties even before Sta. Lucia acquired them. Cainta further asseverated that the establishment of the boundary monuments would show that the subject properties are within its metes and bounds. [11] Sta. Lucia and Cainta thereafter moved for the suspension of the proceedings, and claimed that the pending petition in the Antipolo RTC, for the settlement of boundary dispute between Cainta and Pasig, presented a prejudicial question to the resolution of the case. [12]

The RTC denied this for lack of merit. Holding that the TCTs were conclusive evidence as to its ownership and location, the RTC, rendered a Decision in favor of Pasig.

On October 16, 1998, Pasig filed a Motion for Execution Pending Appeal, to which both Sta. Lucia and Cainta filed several oppositions, on the assertion that there were no good reasons to warrant the execution pending appeal. On April 15, 1999, the RTC ordered the issuance of a Writ of Execution against Sta. Lucia. On May 21, 1999, Sta. Lucia filed a Petition for Certiorari under Rule 65 of the Rules of Court with the Court of Appeals to assail the RTCs order granting the execution. Granted. The Court of Appeals added that the boundary dispute case presented a prejudicial question which must be decided before Pasig can collect the realty taxes due over the subject properties. [19] Upon Motion for Reconsideration, C.A. reversed itself and ruled that there was no proper legal basis to suspend the proceedings. Elucidating on the legal meaning of a prejudicial question, it held that there can be no prejudicial question when the cases involved are both civil. Hence this petition. Pasig maintains that the boundary dispute case before the Antipolo RTC is independent of the complaint for collection of realty taxes which was filed before the Pasig RTC. It avers that the doctrine of prejudicial question, which has a definite meaning in law, cannot be invoked where the two cases involved are both civil. Cainta also filed its own comment reiterating its legal authority over the subject properties, which fall within its territorial jurisdiction. Cainta claims that while it has been collecting the realty taxes over the subject properties since way back 1913, Pasig only covered the same for real property tax purposes in 1990, 1992, and 1993. Issue: WON the outcome of the case over the boundary dispute is a prejudicial question on Pasigs right to collect real property tax. Held: We agree with the First Division of the Court of Appeals that the resolution of the boundary dispute between Pasig and Cainta would determine which local government unit is entitled to collect realty taxes from Sta. Lucia. While a local

government unit is authorized under several laws to collect real estate tax on properties falling under its territorial jurisdiction, it is imperative to first show that these properties are unquestionably within its geographical boundaries. Accentuating on the importance of delineating territorial boundaries, this Court, in Mariano, Jr. v. Commission on Elections [30] said: The importance of drawing with precise strokes the territorial boundaries of A local unit of government cannot be overemphasized. The boundaries must be clear for they define the limits of the territorial jurisdiction of a local government unit. It can legitimately exercise powers of government only within the limits of its territorial jurisdiction. Beyond these limits, its acts ultra vires.

Clearly therefore, the local government unit entitled to collect real property taxes from Sta. Lucia must undoubtedly show that the subject properties situated within its territorial jurisdiction; otherwise, it would be acting beyond the powers vested to it by law. While we fully agree that a certificate of title is conclusive as to its ownership and location, this does not preclude the filing of an action for the very purpose of attacking the statements therein. Although it is true that Pasig is the locality stated in the TCTs of the subject properties, both Sta. Lucia and Cainta aver that the metes and bounds of the subject properties, as they are described in the TCTs, reveal that they are within Caintas boundaries. [40] This only means that there may be a conflict between the location as stated and the location as technically described in the TCTs. Mere reliance therefore on the face of Mayor of Paraaque v. Ebio GR #. 178411/June 23, 2010 621 SCRA 555

Facts: Respondents claim that they are the absolute owners of a parcel of land consisting of 406 square meters, more or less, located at 9781 Vitalez Compound in Barangay Vitalez, Paraaque City and covered by Tax Declaration Nos. 01027 and 01472 in the name of respondent Mario D. Ebio. Said land was an accretion of Cut-cut creek.

Respondents assert that the original occupant and possessor of the said parcel of land was their great grandfather, Jose Vitalez. Sometime in 1930, Jose gave the land to his son, Pedro Vitalez. From then on, Pedro continuously and exclusively occupied and possessed the said lot. In 1966, after executing an affidavit declaring possession and occupancy,[4] Pedro was able to obtain a tax declaration over the said property in his name.[5] Since then, respondents have been religiously paying real property taxes for the said property.[6] Meanwhile, in 1961, respondent Mario Ebio married Pedros daughter, Zenaida. Upon Pedros advice, the couple established their home on the said lot. In April 1964 and in October 1971, Mario Ebio secured building permits from the Paraaque municipal office for the construction of their house within the said compound.[7] On April 21, 1987, Pedro executed a notarized Transfer of Rights[8] ceding his claim over the entire parcel of land in favor of Mario Ebio. Subsequently, the tax declarations under Pedros name were cancelled and new ones were issued in Mario Ebios name.[9] On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed Resolution No. 08, series of 1999[10] seeking assistance from the City Government of Paraaque for the construction of an access road along Cut-cut Creek located in the said barangay. The proposed road, projected to be eight (8) meters wide and sixty (60) meters long, will run from Urma Drive to the main road of Vitalez Compound[11] traversing the lot occupied by the respondents. When the city government advised all the affected residents to vacate the said area, respondents immediately registered their opposition thereto. As a result, the road project was temporarily suspended.[12] In January 2003, however, respondents were surprised when several officials from the barangay and the city planning office proceeded to cut eight (8) coconut trees planted on the said lot. Respondents filed letter-complaints before the Regional Director of the Bureau of Lands, the Department of Interior and Local Government and the Office of the Vice Mayor.[13] On June 29, 2003, the Sangguniang Barangay of Vitalez held a meeting to discuss the construction of the proposed road. In the said meeting, respondents asserted their opposition to the proposed project and their claim of ownership over the affected property.[14] On November 14, 2003, respondents attended another meeting with officials from the city government, but no definite agreement was reached by and among the parties.[15] On March 28, 2005, City Administrator Noli Aldip sent a letter to the respondents ordering them to vacate the area within the next thirty (30) days, or be physically evicted from the said property.[16] Respondents sent a letter to the Office of the City Administrator asserting, in sum, their claim over the subject property and expressing intent for a further dialogue.[17] The request remained unheeded.

Threatened of being evicted, respondents went to the RTC of Paraaque City on April 21, 2005 and applied for a writ of preliminary injunction against petitioners.[18] In the course of the proceedings, respondents admitted before the trial court that they have a pending application for the issuance of a sales patent before the Department of Environment and Natural Resources (DENR).[19] On April 29, 2005, the RTC issued an Order[20] denying the petition for lack of merit. The trial court reasoned that respondents were not able to prove successfully that they have an established right to the property since they have not instituted an action for confirmation of title and their application for sales patent has not yet been granted. Additionally, they failed to implead the Republic of the Philippines, which is an indispensable party. Respondents moved for reconsideration, but the same was denied.[21] Aggrieved, respondents elevated the matter to the Court of Appeals. On January 31, 2007, the Court of Appeals issued its Decision in favor of the respondents. On June 8, 2007, the appellate court denied petitioners motion for reconsideration. Hence, this petition. In the case at bar, respondents filed an action for injunction to prevent the local government of Paraaque City from proceeding with the construction of an access road that will traverse through a parcel of land which they claim is owned by them by virtue of acquisitive prescription. Petitioners, however, argue that since the creek, being a tributary of the river, is classified as part of the public domain, any land that may have formed along its banks through time should also be considered as part of the public domain. And respondents should have included the State as it is an indispensable party to the action Issue: Whether the State is an indispensable party to respondents action for prohibitory injunction. Whether the character of respondents possession and occupation of the subject property entitles them to avail of the relief of prohibitory injunction. Ruling: The petition is without merit. It is an uncontested fact that the subject land was formed from the alluvial deposits that have gradually settled along the banks of Cut-cut creek. This being the case, the law that governs ownership over the

accreted portion is Article 84 of the Spanish Law of Waters of 1866, which remains in effect,[26] in relation to Article 457 of the Civil Code. Article 84 of the Spanish Law of Waters of 1866 specifically covers ownership over alluvial deposits along the banks of a creek. It reads: ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams, rivers, and lakes, by accessions or sediments from the waters thereof, belong to the owners of such lands.[27] Interestingly, Article 457 of the Civil Code states: Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion which they gradually receive from the effects of the current of the waters. It is therefore explicit from the foregoing provisions that alluvial deposits along the banks of a creek do not form part of the public domain as the alluvial property automatically belongs to the owner of the estate to which it may have been added. The only restriction provided for by law is that the owner of the adjoining property must register the same under the Torrens system; otherwise, the alluvial property may be subject to acquisition through prescription by third persons.[28] Hence, while it is true that a creek is a property of public dominion,[31] the land which is formed by the gradual and imperceptible accumulation of sediments along its banks does not form part of the public domain by clear provision of law. From these findings of fact by both the trial court and the Court of Appeals, only one conclusion can be made: that for more than thirty (30) years, neither Guaranteed Homes, Inc. nor the local government of Paraaque in its corporate or private capacity sought to register the accreted portion. Undoubtedly, respondents are deemed to have acquired ownership over the subject property through prescription. Respondents can assert such right despite the fact that they have yet to register their title over the said lot. It must be remembered that the purpose of land registration is not the acquisition of lands, but only the registration of title which the applicant already possessed over the land. Registration was never intended as a means of acquiring ownership.[37] A decree of registration merely confirms, but does not confer, ownership.[38]

Regent v. Tanjuatco GR# 168800 /April 16, 2009 585 SCRA 329

Facts: Petitioner New Regent Sources, Inc. (NRSI) filed a Complaint[3] for Rescission/Declaration of Nullity of Contract, Reconveyance and Damages against respondent Tanjuatco and the Register of Deeds of Calamba before the RTC of Calamba, Laguna. NRSI alleged that in 1994, it authorized Vicente P. Cuevas III, its Chairman and President, to apply on its behalf, for the acquisition of two parcels of land by virtue of its right of accretion. Cuevas purportedly applied for the lots in his name by paying P82,400.38 to the Bureau of Lands. On January 2, 1995, Cuevas and his wife executed a Voting Trust Agreement[4] over their shares of stock in the corporation. Then, pending approval of the application with the Bureau of Lands, Cuevas assigned his right to Tanjuatco for the sum ofP85,000.[5] On March 12, 1996, the Director of Lands released an Order,[6] which approved the transfer of rights from Cuevas to Tanjuatco. Transfer Certificates of Title Nos. T369406[7] and T-369407[8] were then issued in the name of Tanjuatco.

In his Answer with Counterclaim,[9] Tanjuatco advanced the affirmative defense that the complaint stated no cause of action against him. According to Tanjuatco, it was Cuevas who was alleged to have defrauded the corporation. He averred further that the complaint did not charge him with knowledge of the agreement between Cuevas and NRSI. Upon Tanjuatcos motion, the trial court conducted a preliminary hearing on the affirmative defense, but denied the motion to dismiss, and ordered petitioner to amend its complaint and implead Cuevas as a defendant.[10] Summons was served on respondent Cuevas through publication,[11] but he was later declared in default for failure to file an answer.[12] After NRSI completed presenting evidence, Tanjuatco filed a Demurrer to Evidence,[13] which the RTC granted in an Order dated February 12, 2005. In dismissing NRSIs complaint,[14] the RTC cited the Order of the Director of Lands and certain insufficiencies in the allegations in the complaint. The trial court further held that Tanjuatco is an innocent purchaser for value. In a nutshell, the issue for our determination is whether the trial court erred in dismissing the case on demurrer to evidence. NRSI argues that the supposed insufficiency of allegations in the complaint did not justify its dismissal on demurrer to evidence. It contends that a dismissal on demurrer to evidence should be grounded on insufficiency of evidence presented at trial. NRSI contends that the sufficiency of its allegations was affirmed when the trial court denied the motion to dismiss. It likewise asserts that the RTC erred in declaring Tanjuatco a buyer in good faith. It stressed that the Order of the Director of Lands, as the basis for such finding, was not formally offered in evidence. Hence, it should not have been considered by the trial court in accordance with Section 34,[17] Rule 132 of the Rules of Court. Tanjuatco, for his part, maintains that NRSI failed to make a case for reconveyance against him. He insists that the complaint stated no cause of action, and the evidence presented established, rather than refuted, that he was an innocent purchaser. Tanjuatco adds that the RTCs denial of the motion to dismiss, and admission of evidence negated NRSIs claim that it relied on the complaint alone to decide the case. Lastly, Tanjuatco argues that the Order of the Director of Lands was a matter of judicial notice. Thus, under Section 1,[18] Rule 129 of the Rules of Court, there was no need to identify, mark, and offer it in evidence. After serious consideration, we find the instant petition utterly without merit. In its petition, NRSI questions the trial courts dismissal of its complaint upon a demurrer to evidence and invites a calibration of the evidence on record to determine the sufficiency of the factual basis for the trial courts order. This factual

analysis, however, would involve questions of fact which improper in a petition for review under Rule 45 of the Rules of Court. It is well established that in an appeal by certiorari, only questions of law may be reviewed.[19] A question of law exists when there is doubt or difference as to what the law is on a certain state of facts. A question of fact exists if the doubt centers on the truth or falsity of the alleged facts.[20] There is a question of law when the issue does not call for an examination of the probative value of evidence presented, the truth or falsehood of facts being admitted, and the doubt concerns the correct application of law and jurisprudence on the matter.[21] Otherwise, there is a question of fact. Since it raises essentially questions of fact, the instant petition must be denied. In any event, we find that based on the examination of the evidence at hand, we are in agreement that the trial court correctly dismissed NRSIs complaint on demurrer to evidence. Petitioner filed a complaint for rescission/declaration of nullity of contract, reconveyance and damages against respondents. An action for reconveyance is one that seeks to transfer property, wrongfully registered by another, to its rightful and legal owner.[22] In an action for reconveyance, the certificate of title is respected as incontrovertible. What is sought instead is the transfer of the property, specifically the title thereof, which has been wrongfully or erroneously registered in another persons name, to its rightful and legal owner, or to one with a better right.[23] To warrant a reconveyance of the land, the following requisites must concur: (1) the action must be brought in the name of a person claiming ownership or dominical right over the land registered in the name of the defendant; (2) the registration of the land in the name of the defendant was procured through fraud[24] or other illegal means;[25] (3) the property has not yet passed to an innocent purchaser for value;[26] and (4) the action is filed after the certificate of title had already become final and incontrovertible[27] but within four years from the discovery of the fraud,[28] or not later than 10 years in the case of an implied trust.[29] Petitioner failed to show the presence of these requisites. Primarily, NRSI anchors its claim over the lands subjects of this case on the right of accretion. It submitted in evidence, titles[30] to four parcels of land, which allegedly adjoin the lots in the name of Tanjuatco. But it must be stressed that accretion as a mode of acquiring property under Article 457[31] of the Civil Code requires the concurrence of the following requisites: (1) that the deposition of soil or sediment be gradual and imperceptible; (2) that it be the result of the action of the waters of the river; and (3) that the land where accretion takes place is adjacent to the banks of rivers.[32] Thus, it is not enough to be a riparian owner in order to enjoy the benefits of accretion. One who claims the right of accretion must show by preponderant evidence that he has met all the

conditions provided by law. Petitioner has notably failed in this regard as it did not offer any evidence to prove that it has satisfied the foregoing requisites. Further, it is undisputed that Tanjuatco derived his title to the lands from Original Certificate of Title (OCT) No. 245 registered in the name of the Republic of thePhilippines. Said parcels of land formed part of the Dried San Juan River Bed,[33] which under Article 502 (1)[34] of the Civil Code rightly pertains to the public dominion. The Certification[35] issued by Forester III Emiliano S. Leviste confirms that said lands were verified to be within the Alienable and Disposable Project No. 11-B of Calamba, Laguna per BFD LC Map No. 3004, certified and declared as such on September 28, 1981. Clearly, the Republic is the entity which had every right to transfer ownership thereof to respondent. More importantly, petitioner introduced in evidence TCT Nos. T-369406 and T369407 in the name of respondent Tanjuatco. These titles bear a certification that Tanjuatcos titles were derived from OCT No. 245 in the name of no less than the Republic of the Philippines. Hence, we cannot validly and fairly rule that in relying upon said title, Tanjuatco acted in bad faith. A person dealing with registered land may safely rely upon the correctness of the certificate of title issued therefor and the law will in no way oblige him to go behind the certificate to determine the condition of the property.[39] This applies even more particularly when the seller happens to be the Republic, against which, no improper motive can be ascribed. The law, no doubt, considers Tanjuatco an innocent purchaser for value. An innocent purchaser for value is one who buys the property of another, without notice that some other person has a right or interest in such property and pays the full price for the same, at the time of such purchase or before he has notice of the claims or interest of some other person in the property.[40]

Torbela v. Rosario GR# 140528/Dec. 7, 2011 661 SCRA 633

Facts:

The controversy began with a parcel of land, with an area of 374 square meters, located in Urdaneta City, Pangasinan (Lot No. 356-A). It was originally part of a larger parcel of land, known as Lot No. 356 of the Cadastral Survey of Urdaneta, measuring 749 square meters, and covered by Original Certificate of Title (OCT) No. 16676,[8] in the name of Valeriano Semilla (Valeriano), married to Potenciana Acosta.

Under unexplained circumstances, Valeriano gave Lot No. 356-A to his sister Marta Semilla, married to Eugenio Torbela (spouses Torbela). Upon the deaths of the spouses Torbela, Lot No. 356-A was adjudicated in equal shares among their children, the Torbela siblings, by virtue of a Deed of Extrajudicial Partition[9] dated December 3, 1962.

On December 12, 1964, the Torbela siblings executed a Deed of Absolute Quitclaim[10] over Lot No. 356-A in favor of Dr. Rosario. According to the said Deed, the Torbela siblings for and in consideration of the sum of NINE PESOS (P9.00) x x x transfer[red] and convey[ed] x x x unto the said Andres T. Rosario, that undivided portion of THREE HUNDRED SEVENTY-FOUR square meters of that parcel of land embraced in Original Certificate of Title No. 16676 of the land records of Pangasinan x x x.[11] Four days later, on December 16, 1964, OCT No. 16676

in Valerianos name was partially cancelled as to Lot No. 356-A and TCT No. 52751[12] was issued in Dr. Rosarios name covering the said property.

Another Deed of Absolute Quitclaim[13] was subsequently executed on December 28, 1964, this time by Dr. Rosario, acknowledging that he only borrowed Lot No. 356-A from the Torbela siblings and was already returning the same to the latter for P1.00.

The aforequoted Deed was notarized, but was not immediately annotated on TCT No. 52751.

Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan from the Development Bank of the Philippines (DBP) on February 21, 1965 in the sum of P70,200.00, secured by a mortgage constituted on Lot No. 356-A. The mortgage was annotated on TCT No. 52751 on September 21, 1965 as Entry No. 243537.[15] Dr. Rosario used the proceeds of the loan for the construction of improvements on Lot No. 356-A.

On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit of Adverse Claim,[16] on behalf of the Torbela siblings. Cornelio deposed in said Affidavit:

3. That ANDRES T. ROSARIO later quitclaimed his rights in favor of the former owners by virtue of a Deed of Absolute Quitclaim which he executed before Notary Public Banaga, and entered in his Notarial Registry as Dec. No. 43; Page No. 9; Book No. I; Series of 1964;

4. That it is the desire of the parties, my aforestated kins, to register ownership over the above-described property or to perfect their title over the same but their Deed could not be registered because the registered owner now, ANDRES T. ROSARIO mortgaged the property with the DEVELOPMENT BANK OF THE PHILIPPINES, on September 21, 1965, and for which reason, the Title is still impounded and held by the said bank;

The very next day, on May 17, 1967, the Torbela siblings had Cornelios Affidavit of Adverse Claim dated May 16, 1967 and Dr. Rosarios Deed of Absolute Quitclaim dated December 28, 1964 annotated on TCT No. 52751 as Entry Nos. 274471[18] and 274472,[19] respectively.

The construction of a four-storey building on Lot No. 356-A was eventually completed. The building was initially used as a hospital, but was later converted to a commercial building. Part of the building was leased to PT&T; and the rest to Mrs. Andrea Rosario-Haduca, Dr. Rosarios sister, who operated the Rose Inn Hotel and Restaurant.

Dr. Rosario was able to fully pay his loan from DBP. Under Entry No. 520197 on TCT No. 52751[20] dated March 6, 1981, the mortgage appearing under Entry No. 243537 was cancelled per the Cancellation and Discharge of Mortgage executed by DBP in favor of Dr. Rosario and ratified before a notary public on July 11, 1980.

In the meantime, Dr. Rosario acquired another loan from the Philippine National Bank (PNB) sometime in 1979-1981. Records do not reveal though the original amount of the loan from PNB, but the loan agreement was amended on March 5, 1981 and the loan amount was increased to P450,000.00. The loan was secured by mortgages constituted on the following properties: (1) Lot No. 356-A, covered by TCT No. 52751 in Dr. Rosarios name; (2) Lot No. 4489, with an area of 1,862 square meters, located in Dagupan City, Pangasinan, covered by TCT No. 24832; and (3) Lot No. 5-F-8-C-2-B-2-A, with an area of 1,001 square meters, located in Nancayasan, Urdaneta, Pangasinan, covered by TCT No. 104189.[21] The amended loan agreement and mortgage on Lot No. 356-A was annotated on TCT No. 52751 on March 6, 1981 as Entry No. 520099.[22]

Five days later, on March 11, 1981, another annotation, Entry No. 520469,[23] was made on TCT No. 52751, canceling the adverse claim on Lot No. 356-A under Entry Nos. 274471-274472, on the basis of the Cancellation and Discharge of Mortgage executed by Dr. Rosario on March 5, 1981. Entry No. 520469 consisted of both stamped and handwritten portions, and exactly reads:

On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario (spouses Rosario), acquired a third loan in the amount of P1,200,000.00 from Banco Filipino Savings and Mortgage Bank (Banco Filipino). To secure said loan, the spouses Rosario again constituted mortgages on Lot No. 356-A, Lot No. 4489, and Lot No. 5-F-8-C-2-B-2A. The mortgage on Lot No. 356-A was annotated on TCT No. 52751 as Entry No. 533283[25] on December 18, 1981. Since the construction of a two-storey commercial building on Lot No. 5-F-8-C-2-B-2-A was still incomplete, the loan value thereof as collateral was deducted from the approved loan amount. Thus, the spouses Rosario could only avail of the maximum loan amount of P830,064.00 from Banco Filipino.

Because Banco Filipino paid the balance of Dr. Rosarios loan from PNB, the mortgage on Lot No. 356-A in favor of PNB was cancelled per Entry No. 533478[26] on TCT No. 52751 dated December 23, 1981.

On February 13, 1986, the Torbela siblings filed before the Regional Trial Court (RTC) of Urdaneta, Pangasinan, a Complaint for recovery of ownership and possession of Lot No. 356-A, plus damages, against the spouses Rosario, which was docketed as Civil Case No. U-4359. On the same day, Entry Nos. 593493 and 593494 were made on TCT No. 52751 that read as follows:

Entry No. 593494 Complaint Civil Case No. U-4359 (For: Recovery of Ownership and Possession and Damages. (Sup. Paper). Entry No. 593493 Notice of Lis Pendens The parcel of land described in this title is subject to Lis Pendens executed by Liliosa B. Rosario, CLAO, Trial Attorney dated February 13, 1986. Filed to TCT No. 52751

The spouses Rosario afterwards failed to pay their loan from Banco Filipino. As of April 2, 1987, the spouses Rosarios outstanding principal obligation and penalty charges amounted to P743,296.82 and P151,524.00, respectively.[28]

Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-A, Lot No. 4489, and Lot No. 5-F-8-C-2-B-2-A. During the public auction on April 2, 1987, Banco Filipino was the lone bidder for the three foreclosed properties for the price of P1,372,387.04. The Certificate of Sale[29] dated April 2, 1987, in favor of Banco Filipino, was annotated on TCT No. 52751 on April 14, 1987 as Entry No. 610623.[30]

On December 9, 1987, the Torbela siblings filed before the RTC their Amended Complaint,[31] impleading Banco Filipino as additional defendant in Civil Case No. U-4359 and praying that the spouses Rosario be ordered to redeem Lot No. 356-A from Banco Filipino.

The spouses Rosario instituted before the RTC on March 4, 1988 a case for annulment of extrajudicial foreclosure and damages, with prayer for a writ of preliminary injunction and temporary restraining order, against Banco Filipino, the Provincial Ex Officio Sheriff and his Deputy, and the Register of Deeds of Pangasinan. The case was docketed as Civil Case No. U-4667. Another notice of lis pendens was annotated on TCT No. 52751 on March 10, 1988 as Entry No. 627059.

The Torbela siblings intervened in Civil Case No. U-4667. Eventually, on October 17, 1990, the RTC issued an Order[33] dismissing without prejudice Civil Case No. U4667 due to the spouses Rosarios failure to prosecute.

Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from Banco Filipino, but their efforts were unsuccessful. Upon the expiration of the one-year redemption period in April 1988, the Certificate of Final Sale[34] and Affidavit of Consolidation[35] covering all three foreclosed properties were executed on May 24, 1988 and May 25, 1988, respectively.

On June 7, 1988, new certificates of title were issued in the name of Banco Filipino, particularly, TCT No. 165812 for Lot No. 5-F-8-C-2-B-2-A and TCT No. 165813 for Lot No. 356-A .[36]

The Torbela siblings thereafter filed before the RTC on August 29, 1988 a Complaint[37] for annulment of the Certificate of Final Sale dated May 24, 1988, judicial cancelation of TCT No. 165813, and damages, against Banco Filipino, the Ex

Officio Provincial Sheriff, and the Register of Deeds of Pangasinan, which was docketed as Civil Case No. U-4733.

On June 19, 1991, Banco Filipino filed before the RTC of Urdaneta City a Petition for the issuance of a writ of possession. In said Petition, docketed as Pet. Case No. U822, Banco Filipino prayed that a writ of possession be issued in its favor over Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A, plus the improvements thereon, and the spouses Rosario and other persons presently in possession of said properties be directed to abide by said writ.

The RTC jointly heard Civil Case Nos. U-4359 and U-4733 and Pet. Case No. U822. The Decision[38] on these three cases was promulgated on January 15, 1992, the dispositive portion of which reads:

1. Declaring the real estate mortgage over Lot 356-A covered by TCT 52751 executed by Spouses Andres Rosario in favor of Banco Filipino, legal and valid;

2. Declaring the sheriffs sale dated April 2, 1987 over Lot 356-A covered by TCT 52751 and subsequent final Deed of Sale dated May 14, 1988 over Lot 356A covered by TCT No. 52751 legal and valid;

3. Declaring Banco Filipino the owner of Lot 356-A covered by TCT No. 52751 (now TCT 165813);

4. Banco Filipino is entitled to a Writ of Possession over Lot 356-A together with the improvements thereon (Rose Inn Building). The Branch Clerk of Court is hereby ordered to issue a writ of possession in favor of Banco Filipino;

5. [The Torbela siblings] are hereby ordered to render accounting to Banco Filipino the rental they received from tenants of Rose Inn Building from May 14, 1988;

7. Banco Filipino is hereby ordered to give [the Torbela siblings] the right of first refusal over Lot 356-A. The Register of Deeds is hereby ordered to annotate the right of [the Torbela siblings] at the back of TCT No. 165813 after payment of the required fees;

8. Dr. Rosario and Lena Rosario are hereby ordered to reimburse [the Torbela siblings] the market value of Lot 356-A as of December, 1964 minus payments made by the former;

9. Dismissing the complaint of [the Torbela siblings] against Banco Filipino, Pedro Habon and Rufino Moreno in Civil Case No. U-4733; and against Banco Filipino in Civil Case No. U-4359.[39]

The Court of Appeals, in a Resolution[44] dated October 22, 1999, denied the separate Motions for Reconsideration of the Torbela siblings and Dr. Rosario.

The Torbela siblings come before this Court via the Petition for Review.

Issue:

The Court now looks into the merits of Civil Case No. U-4359.

There was an express trust between the Torbela siblings and Dr. Rosario.

There is no dispute that the Torbela sibling inherited the title to Lot No. 356-A from their parents, the Torbela spouses, who, in turn, acquired the same from the first registered owner of Lot No. 356-A, Valeriano.

When Dr. Rosario was able to register Lot No. 356-A in his name under TCT No. 52751 on December 16, 1964, an implied trust was initially established between him and the Torbela siblings under Article 1451 of the Civil Code, which provides:

ART. 1451. When land passes by succession to any person and he causes the legal title to be put in the name of another, a trust is established by implication of law for the benefit of the true owner.

Dr. Rosarios execution of the Deed of Absolute Quitclaim on December 28, 1964, containing his express admission that he only borrowed Lot No. 356-A from the Torbela siblings, eventually transformed the nature of the trust to an express one. The express trust continued despite Dr. Rosario stating in his Deed of Absolute Quitclaim that he was already returning Lot No. 356-A to the Torbela siblings as Lot No. 356-A remained registered in Dr. Rosarios name under TCT No. 52751 and Dr. Rosario kept possession of said property, together with the improvements thereon.

Regardless of whether or not the Register of Deeds should have inscribed Entry No. 520469 on TCT No. 52751, Banco Filipino could not invoke said inscription in support of its claim of good faith. There were several things amiss in Entry No. 520469 which should have already aroused suspicions in Banco Filipino, and compelled the bank to look beyond TCT No. 52751 and inquire into Dr. Rosarios title. First, Entry No. 520469 does not mention any court order as basis for the cancellation of the adverse claim. Second, the adverse claim was not a mortgage which could be cancelled with Dr. Rosarios Cancellation and Discharge of Mortgage. And third, the adverse claim was against Dr. Rosario, yet it was cancelled based on a document also executed by Dr. Rosario.

It is a well-settled rule that 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 vendor's 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.[81]

Banco Filipino cannot be deemed a mortgagee in good faith, much less a purchaser in good faith at the foreclosure sale of Lot No. 356-A. Hence, the right of the Torbela siblings over Lot No. 356-A is superior over that of Banco Filipino; and as the true owners of Lot No. 356-A, the Torbela siblings are entitled to a reconveyance of said property even from Banco Filipino.

Nonetheless, the failure of Banco Filipino to comply with the due diligence requirement was not the result of a dishonest purpose, some moral obliquity, or breach of a known duty for some interest or ill will that partakes of fraud that would justify damages.[84]

Given the reconveyance of Lot No. 356-A to the Torbela siblings, there is no more need to address issues concerning redemption, annulment of the foreclosure sale and certificate of sale (subject matter of Civil Case No. U-4733), or issuance of a writ of possession in favor of Banco Filipino (subject matter of Pet. Case No. U-822) insofar as Lot No. 356-A is concerned. Such would only be superfluous. Banco Filipino, however, is not left without any recourse should the foreclosure and sale of the two other mortgaged properties be insufficient to cover Dr. Rosarios loan, for the bank may still bring a proper suit against Dr. Rosario to collect the unpaid balance.

The rules on accession shall govern the improvements on Lot No. 356-A and the rents thereof.

The accessory follows the principal. The right of accession is recognized under Article 440 of the Civil Code which states that [t]he ownership of property gives the right by accession to everything which is produced thereby, or which is incorporated or attached thereto, either naturally or artificially.

When it comes to the improvements on Lot No. 356-A, both the Torbela siblings (as landowners) and Dr. Rosario (as builder) are deemed in bad faith. The Torbela siblings were aware of the construction of a building by Dr. Rosario on Lot No. 356A, while Dr. Rosario proceeded with the said construction despite his knowledge that Lot No. 356-A belonged to the Torbela siblings. This is the case contemplated under Article 453 of the Civil Code, which reads:

ART. 453. If there was bad faith, not only on the part of the person who built, planted or sowed on the land of another, but also on the part of the owner of such land, the rights of one and the other shall be the same as though both had acted in good faith.

It is understood that there is bad faith on the part of the landowner whenever the act was done with his knowledge and without opposition on his part. (Emphasis supplied.)

When both the landowner and the builder are in good faith, the following rules govern:

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

ART. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof.

ART. 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he may remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if his successor in the possession does not prefer to refund the amount expended.

Whatever is built, planted, or sown on the land of another, and the improvements or repairs made thereon, belong to the owner of the land. Where, however, the planter, builder, or sower has acted in good faith, a conflict of rights arises between the owners and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating what Manresa calls a state of "forced co-ownership," the law has provided a just and equitable solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity or to oblige the builder or planter to pay for the land and the sower to pay the proper rent. It is the owner of the land who is allowed to exercise the option because his right is older and because, by the principle of accession, he is entitled to the ownership of the accessory thing.[85]

The landowner has to make a choice between appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land. But even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. He must choose one. He cannot, for instance, compel the owner of the building to remove the building from the land without first exercising either option. It is only if the owner chooses to sell his land, and the builder or planter fails to purchase it where its value is not more than the value of the improvements, that the owner may remove the improvements from the land. The owner is entitled to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same.[86]

This case then must be remanded to the RTC for the determination of matters necessary for the proper application of Article 448, in relation to Article 546, of the Civil Code. Such matters include the option that the Torbela siblings will choose; the amount of indemnity that they will pay if they decide to appropriate the improvements on Lot No. 356-A; the value of Lot No. 356-A if they prefer to sell it to Dr. Rosario; or the reasonable rent if they opt to sell Lot No. 356-A to Dr. Rosario but the value of the land is considerably more than the improvements. The determination made by the Court of Appeals in its Decision dated June 29, 1999 that the current value of Lot No. 356-A is P1,200,000.00 is not supported by any evidence on record.

Should the Torbela siblings choose to appropriate the improvements on Lot No. 356-A, the following ruling of the Court in Pecson v. Court of Appeals[87] is relevant in the determination of the amount of indemnity under Article 546 of the Civil Code.

Article 546 does not specifically state how the value of the useful improvements should be determined. The respondent court and the private respondents espouse the belief that the cost of construction of the apartment building in 1965, and not its current market value, is sufficient reimbursement for necessary and useful improvements made by the petitioner. This position is, however, not in consonance with previous rulings of this Court in similar cases. In Javier vs. Concepcion, Jr., this Court pegged the value of the useful improvements consisting of various fruits, bamboos, a house and camarin made of strong material based on the market value of the said improvements. In Sarmiento vs. Agana, despite the finding that the useful improvement, a residential house, was built in 1967 at a cost of between eight thousand pesos (P8,000.00) to ten thousand pesos (P10,000.00), the landowner was ordered to reimburse the builder in the amount of forty thousand pesos (P40,000.00), the value of the house at the time of the trial. In the same way, the landowner was required to pay the "present value" of the house, a useful improvement, in the case of De Guzman vs. De la Fuente, cited by the petitioner.

The objective of Article 546 of the Civil Code is to administer justice between the parties involved. In this regard, this Court had long ago stated in Rivera vs. Roman Catholic Archbishop of Manila that the said provision was formulated in trying to adjust the rights of the owner and possessor in good faith of a piece of land, to administer complete justice to both of them in such a way as neither one nor the other may enrich himself of that which does not belong to him. Guided by this

precept, it is therefore the current market value of the improvements which should be made the basis of reimbursement. A contrary ruling would unjustly enrich the private respondents who would otherwise be allowed to acquire a highly valued income-yielding four-unit apartment building for a measly amount. Consequently, the parties should therefore be allowed to adduce evidence on the present market value of the apartment building upon which the trial court should base its finding as to the amount of reimbursement to be paid by the landowner.[88] (Emphases supplied.)

Still following the rules of accession, civil fruits, such as rents, belong to the owner of the building.[89] Thus, Dr. Rosario has a right to the rents of the improvements on Lot No. 356-A and is under no obligation to render an accounting of the same to anyone. In fact, it is the Torbela siblings who are required to account for the rents they had collected from the lessees of the commercial building and turn over any balance to Dr. Rosario. Dr. Rosarios right to the rents of the improvements on Lot No. 356-A shall continue until the Torbela siblings have chosen their option under Article 448 of the Civil Code. And in case the Torbela siblings decide to appropriate the improvements, Dr. Rosario shall have the right to retain said improvements, as well as the rents thereof, until the indemnity for the same has been paid.[90]