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SOMODIO VS.

COURT OF APPEALS

Accion interdictal
Accion interdictal (forcible entry and unlawful detainer) are not remedies to obtain
ownership of a certain property rather they are remedies to determine who has a
better right to possess the property subject of dispute.

Note: What is important in ejectment cases is the issue of who is entitled to the
physical or material possession of a property and not the question of
ownership.

FACTS:
Jose Ortigas executed an instrument designated as a Transfer of Rights, conveying to
Wilfredo Mangubat, the possession of a residential lot located at General Santos City.
Nicanor Somodio, petitioner, contributed one-half of the purchase price. Mabugat then
executed an Affidavit of Trust expressly recognizing the right of Somodio over
undivided portion of the lot.

Somodio and Mabugat partitioned the property into two portions, with the former
taking the western part. After the partition, Somodio took possession of his portion and
planted thereon ipil-ipil trees, coconut trees, and other fruit bearing trees.

He also began construction of a structure with a dimension of 22 by 18 feet on his lot.
Due to his work, he was transferred to Kidapawan, North Cotabato, and left the
unfinished structure to the care of his uncle. Somodio allowed Ayco, respondent to
transfer his hut to petitioners lot.

Somodio demanded Ayco to vacate the premises but to no avail. He then filed an
action for unlawful detainer with damages before the MTC. Another respondent,
Purisima entered the land and constructed a house thereon. Somodio then filed a
complaint for forcible entry against the latter.

The MTC rendered a decision in favor of Somodio finding that Purisima built a house
almost on the spot where Somodios unfinished house stood through stealth and
strategy. The MTC also held that Somodio was the actual possessor of the lot in
question.

The RTC affirmed the decision of the MTC. CA on the other hand, dismissed petition
of Somodio and held that the latter did not clearly and conclusively established
physical, prior possession over the lot.

ISSUE:
Who is entitled to the physical or material possession of the property? (only issue in
ejectment cases)

RULING:
Anyone who can prove prior possession de facto (physical possession) may recover
such possession even from the owner himself. This is true regardless of the character
of a partys possession provided he has in his favor priority of time entitling him to stay
on the property until he is lawfully ejected by a person having a better right by either
accion publiciana or accion reivindicatoria.
Accrdg. to Art. 531 of NCC, possession is acquired by material occupation of a thing
or the exercise of a right. Somodio then enjoyed priority of possession because
Purisima entered the lot only in 1983 which is later than Somodios possession fo the
property.

In addition, Somodios possession over the property is not synonymous with his right
of ownership over the same. Forcible entry is merely a quieting process and never
determines the actual title to an estate. The MTC and RTCs decision are deemed
reinstated.

SYLLABUS
1. REMEDIAL LAW; APPEALS; FINDINGS OF FACT OF THE COURT OF
APPEALS ARE BINDING ON THE SUPREME COURT; EXCEPTION. As a general
rule, the findings of fact of the Court of Appeals are binding on this Court. This rule,
however, is not without exceptions, one of which is when the factual findings of the
Court of Appeals and the trial court are contrary to each other. In such a case, this
Court may scrutinize the evidence on record in order to arrive at the correct findings
based on the record.
2. CIVIL LAW; EJECTMENT; PRIOR POSSESSION DE FACTO; PROOF
THEREOF ENTITLES A PERSON TO POSSESSION OVER THE PROPERTY. In
ejectment cases, the only issue for resolution is who is entitled to the physical or
material possession of the property involved, independent of any claim of ownership
set forth by any of the party-litigants. Anyone of them who can prove prior possession
de facto may recover such possession even from the owner himself. This rule holds
true regardless of the character of a party's possession, provided that he has in his
favor priority of time which entitles him to stay on the property until he is lawfully
ejected by a person having a better right by either accion publiciana or accion
reivindicatoria.
3. ID.; ID.; ID.; ID.; CASE AT BAR. Petitioner took possession of the
property sometime in 1974 when he planted the property to coconut trees, ipil-ipil
trees and fruit trees. In 1976, he started the construction of a building on the property.
It is immaterial that the building was unfinished and that he left for Kidapawan for
employment reasons and visited the property only intermittently. Possession in the
eyes of the law does not mean that a man has to have his feet on every square meter
of ground before it can be said that he is in possession. It is sufficient that petitioner
was able to subject the property to the action of his will. . . . Even if the Court of
Appeals is correct in its finding that petitioner started introducing improvements on the
land only in 1981, he still enjoyed priority of possession because respondent Purisima
entered the premises only in 1983.
4. ID.; ID.; ID.; AS DISTINGUISHED FROM OWNERSHIP. Petitioner's prior
possession over the property, however, is not synonymous with his right of ownership
over the same. As earlier stated, resolution of the issue of possession is far from the
resolution of the issue of ownership. Forcible entry is merely a quieting process and
never determines the actual title to an estate.





Kasilag vs Rodriguez (69 Phil 217)

FACTS

PROCEDURAL FACTS: This is an appeal taken by the defendant-petitioner (Kasilag)
from the decision of the Court of Appeals which modified that rendered by the court of
First Instance of Bataan. The said court held: that the contract is entirely null and void
and without effect; that the plaintiffs-respondents (Rodriguez, et.al.), then appellants,
are the owners of the disputed land, with its improvements, in common ownership with
their brother Gavino Rodriguez, hence, they are entitled to the possession thereof;
that the defendant-petitioner should yield possession of the land in their favor, with all
the improvements thereon and free from any lien.

SUBSTANTIVE FACTS: The parties entered into a contract of loan to which has an
accompanying accessory contract of mortgage. The executed accessory contract
involved the improvements on a piece land, the land having been acquired by means
of homestead. Petitioner for his part accepted the contract of mortgage.
Believing that there are no violations to the prohibitions in the alienation of lands
Petitioner, acting in good faith took possession of the land. To wit, the Petitioner has
no knowledge that the enjoyment of the fruits of the land is an element of the credit
transaction of Antichresis.

ISSUE
1. Whether or not the principal contract entered into is null and void.
2. Whether or not the subsequent contract is null and void.
3. Whether or not the Kasilag is a possessor in good faith of the land.

HELD
1. The cardinal rule in the interpretation of contracts is to the effect that the
intention of the contracting parties should always prevail because their will
has the force of law between them. Article 1281 (now Art. 1370) of the Civil
Code consecrates this rule and provides, that if the terms of a contract are
clear and leave no doubt as to the intention of the contracting parties, the
literal sense of its stipulations shall be followed; and if the words appear to
be contrary to the evident intention of the contracting parties, the intention
shall prevail. The contract should be interpreted in accordance with these
rules. As the terms thereof are clear and leave no room for doubt, it should
be interpreted according to the literal meaning of its clauses.

2. The words used by the contracting parties in the contract clearly show that
they intended to enter into the principal contract of loan in the amount of
P1,000, with interest at 12 per cent per annum, and into the accessory
contract of mortgage of the improvements on the land acquired as
homestead, the parties having moreover, agreed upon the pacts and
conditions stated in the deed. In other words, the parties entered into a
contract of mortgage of the improvements on the land acquired as
homestead, to secure the payment of the indebtedness for P1,000 and the
stipulated interest thereon.


3. Another fundamental rule in the interpretation of contracts, not less
important than those indicated, is to the effect that the terms, clauses and
conditions contrary to law, morals and public order should be separated
from the valid and legal contract and when such separation can be made
because they are independent of the valid contract which expresses the will
of the contracting parties.

4. Principal contract is that of loan and the accessory that of mortgage of the
improvements upon the land acquired as a homestead. There is no question
that the first of these contract is valid as it is not against the law.

5. Parties entered into another verbal contract whereby the petitioner was
authorized to take possession of the land, to receive the fruits thereof and to
introduce improvements thereon, provided that he would renounce the
payment of stipulated interest and he would assume payment of the land
tax. The possession by the petitioner and his receipt of the fruits of the land,
considered as integral elements of the contract of antichresis, are illegal and
void agreements because the contract of antichresis is a lien and such is
expressly prohibited by section 116 of Act No. 2874.

6. Despite the foregoing, SC found the defendant-petitioner Kasilag as a
possessor of the land in good faith. Sec 433 of the Civil Code of the
Philippines provides Every person who is unaware of any flaw in his title or
in the manner of its acquisition by which it is invalidated shall be deemed a
possessor of good faith. And in this case, the petitioner acted in good faith.
Good faith maybe a basis of excusable ignorance of the law, the petitioner
acted in good faith in his enjoyment of the fruits of the land to which was
done through his apparent acquisition thereof.

SYLLABUS
1. CONTRACTS, INTERPRETATION; MORTGAGE OF
IMPROVEMENTS UPON LAND ACQUIRED AS HOMESTEAD. The
cardinal rule in the interpretation of contracts is to the effect that the
intention of the contracting parties should always prevail because their will
has the force of law between them. Article 1281 of the Civil Code
consecrates this rule and provides, further, that if the terms of a contract are
clear and leave no doubt as to the intention of the contracting parties, the
literal sense of its stipulations shall be followed; and if the words appear to
be contrary to the evident intention of the contracting parties, the intention
shall prevail. The contract set out in Exhibit 1' should be interpreted in
accordance with these rules. As the terms thereof are clear and leave no
room for doubt, it should be interpreted according to the literal meaning of
its clauses. The words used by the contracting parties in Exhibit 1 clearly
show that they intended to enter into the principal contract of loan in the
amount of P1,000, with interest at 12 per cent per annum, and into the
accessory contract of mortgage of the improvements on the land acquired
as homestead, the parties having, moreover, agreed upon the pacts and
conditions stated in the deed. In other words, the parties entered into a
contract of mortgage of the improvements on the land acquired as
homestead, to secure the payment of the indebtedness for P1,000 and the
stipulated interest thereon.
2. ID.; ID.; ID.; ANTICHRESIS. Another fundamental rule in the
interpretation of contracts, not less important than those indicated is to the
effect that the terms, clauses and conditions contrary to law, morals and
public order should be separated from the valid and legal contract when
such separation can be made because they are independent of the valid
contract which expresses the will of the contracting parties. Addressing
ourselves now to the contract entered into by the parties, set out in Exhibit
1, we stated that the principal contract is that of loan and the accessory that
of mortgage of the improvements upon the land acquired as a homestead.
There is no question that the first of these contracts is valid as it is not
against the law. The second, or the mortgage of the improvements, is
expressly authorized by section 116 of Act No. 2874, as amended by
section 23 of Act No. 3517. It will be recalled that by clause VIII of Exhibit 1
the parties agreed that should E. A. fail to redeem the mortgage within the
stipulated period of four and a half years, by paying the loan together with
interest, she would execute in favor of the petitioner an absolute deed of
sale of the land for P1,000, including the interest stipulated and owing. This
stipulation was verbally modified by the same parties after the expiration of
one year, in the sense that the petitioner would take possession of the land
and would benefit by the fruits thereof on condition that he would condone
the payment of interest upon the loan and he would attend to the payment
of the land tax. These pacts made by the parties independently, were
calculated to alter the mortgage contract clearly entered into, converting the
latter into a contract of antichresis (article 1881 of the Civil Code). The
contract of antichresis, being a real incumbrance burdening the land, is
illegal and void because it is condemned by section 116 of Act No. 2874, as
amended, but the clauses regarding the contract of antichresis being
independent and separable from the contract of mortgage, can be
eliminated, thereby leaving the latter in being because it is legal and valid.
3. ID.; ID.; ID.; ID.; POSSESSION IN GOOD FAITH. It is a fact
that the petitioner is not conversant with the laws because he is not a
lawyer. In accepting the mortgage of the improvements he proceeded on
the well-grounded belief that he was not violating the prohibition regarding
the alienation of the land. In taking possession thereof and in consenting to
receive its fruits, he did not know, as clearly as a jurist does, that the
possession and enjoyment of the fruits are attributes of the contract of
antichresis and that the latter, as a lien, was prohibited by section 116.
These considerations again bring us to the conclusion that, as to the
petitioner, his ignorance of the provisions of section 116 is excusable and
may, therefore, be the basis of his good faith. We do not give much
importance to the change of the tax declaration, which consisted in making
the petitioner appear as the owner of the land, because such an act may
only be considered as a sequel to the change of possession and enjoyment
of the fruits by the petitioner, about which we have stated that the
petitioner's ignorance of the law is possible and excusable. We, therefore,
hold that the petitioner acted in good faith in taking possession of the land
and enjoying its fruits.
4. ID.; ID.; ID.; ID.; ID. The petitioner being a possessor in good
faith within the meaning of article 433 of the Civil Code and having
introduced the improvements upon the land as such, the provisions of article
361 of the same Code are applicable; wherefore, the respondents are
entitled to have the improvements and plants upon indemnifying the
petitioner the value thereof which we fix at P3,000, as appraised by the trial
court; or the respondents may elect to compel the petitioner to have the land
by paying its market value to be fixed by the court of origin.







































DIZON VS RODRIGUEZ

D E C I S I O N
BARRERA, J p:

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

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

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

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

In 1950, Jacobo Zobel sold to Antonino Dizon, et al., Lot 49 for which said purchasers
obtained at first TCT No. T-2740 and later T- 4718. Lot 1, on the other hand, was
purchased by Carlos Goco, et al., who, in turn, sold one-half thereof to Manuel Sy-
Juco, et al. Transfer Certificate of Title No. 4159 was issued in the names of the
Gocos and Sy-Jucos.

On May 24, 1952, Miguel Tolentino filed with the Bureau of Fisheries an application for
ordinary fishpond permit or lease for Lot 49, and an application for a similar permit, for
Lot 1, was filed by his daughter Clemencia Tolentino.

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

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

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

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

In its decision of October 31, 1961, as well as the resolution of August 20, 1962, the
appellate court adopted the findings of the lower court, that the lots in question are
part of the foreshore area and affirmed the ruling cancelling the titles issued to
plaintiffs. Although in the decision of October 31, 1961, the Court of Appeals awarded
to applicants Tolentinos damages in the amount of P200.00 per hectare from October
1, 1954, when plaintiffs were notified of the denial of their protest by the Director of
Fisheries, such award was eliminated in the resolution of August 20, 1962, for the
reason that plaintiffs, who relied on the efficacy of their certificates of title, cannot be
considered possessors in bad faith until after the legality of their said titles has been
finally determined. Appellants were thus declared entitled to retention of the properties
until they are reimbursed by the landowner, the Republic of the Philippines, of the
necessary expenses made on the lands, in the sums of P40,000.00 (for Lot 49) and
P25,000.00 (for Lot 1). It is from this portion of the decision as thus modified that
defendants Tolentinos and the intervenor Republic of the Philippines appealed (in
G.R. Nos. L-20355-56), claiming that plaintiffs' possession became in bad faith when
they learned of the flaw in their titles, that is, when their protest against the
applications for lease was denied by the Director of Fisheries. In addition, the
intervenor contends that being such possessors in bad faith, plaintiffs are not entitled
to reimbursement of the expenses made on the properties.
In G.R. Nos. L-20300-01, plaintiffs Dizon, et al. claim that the finding that the lots in
question are part of the seashore or foreshore area was erroneous, because from
defendants' own evidence, the same appear to be marshland before their conversion
into fishponds.

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

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

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

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

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

'ART. 526. . . .
'Mistake upon a doubtful or difficult question of law may be the basis of good faith.'
The legal question whether plaintiffs-appellants' possession in good faith, under the
Torrens Titles acquired in good faith, does not lose this character except in the case
and from the moment their Titles are declared null and void by the Courts, is a difficult
one. Even the members of this Court were for a long time divided, two to one, on the
answer. It was only after several sessions, where the results of exhaustive researches
on both sides were thoroughly discussed, that an undivided Court finally found the
answer given in the next preceding paragraph. Hence, even if it be assumed for the
sake of argument that the Supreme Court would find that the law is not as we have
stated it in the next preceding paragraph and that the plaintiffs-appellants made a
mistake in relying thereon, such mistake on a difficult question of law may be the basis
of good faith. Hence, their possession in good faith does not lose this character except
in the case and from the moment their Torrens Titles are declared null and void by the
Courts."

Under the circumstances of the case, especially where the subdivision plan was
originally approved by the Director of Lands, we are not ready to conclude that the
above reasoning of the Court of Appeals on this point is reversible error. Needless to
state, as such occupants in good faith, plaintiffs have the right to the retention of the
property until they are reimbursed of the necessary expenses made on the lands.
With respect to the contention of the Republic of the Philippines that the order for the
reimbursement by it of such necessary expenses constitutes a judgment against the
government in a suit not consented by it, suffice it to say that the Republic, on its own
initiative, asked and was permitted to intervene in the case and thereby submitted
itself to the jurisdiction of the court.

IN VIEW OF THE FOREGOING CONSIDERATIONS, the decision appealed from is
hereby affirmed in all respects, without costs. So ordered.
Bengzon, C . J ., Bautista Angelo, Concepcion, Reyes, J.B.L., Paredes, Dizon,
Regala, Makalintal and Bengzon, J.P., JJ ., concur.


SYLLABUS
1. LAND REGISTRATION; TORRENS TITLE DEFEASIBLE WHEN LAND
NOT CAPABLE of REGISTRATION. The incontestable and indefeasible character
of a Torrens certificate of title does not operate when the land thus covered, like
foreshore land, is not capable of registration.
2. ID.; ID.; POSSESSION IN GOOD FAITH NOT LOST UNTIL TORREN'S
TITLE DECLARED VOID BY COURT. The possessor with a Torrens Title who is
not aware of any flaw in his title which invalidates it is considered a possessor in good
faith and this possession does not lose this character except in the case and from the
moment his Torrens Title is declared null and void by final judgment of the Courts.
3. POLITICAL LAW; JUDGMENT AGAINST REPUBLIC VALID WHERE IT
SUBMITS TO THE JURISDICTION OF THE COURTS. Where the Republic, on its
own initiative, asked and was permitted to intervene in a case and thereby submitted
itself to the jurisdiction of the court, it may not validly contend later that an order for
reimbursement by it of necessary expenses of a possessor in good faith constitutes a
judgment against the government in a suit not consented by it.












DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. THE HONORABLE
COURT OF APPEALS AND SPOUSES TIMOTEO and SELFIDA S. PIEDA,
respondents.
SYNOPSIS
To secure an agricultural loan which they obtained from the Development Bank of the
Philippines (DBP), spouses Timoteo and Selfida Pieda executed a mortgage over a
certain parcel of land they owned. Because the spouses failed to comply with the
terms and conditions of the mortgage contract, the land was extrajudicially foreclosed.
The property was sold to DBP as the highest bidder in the foreclosure sale, subject to
redemption within 5 years from the date of registration of the certificate of sale. After
the one year redemption period provided for under Act 3135 expired, DBP
consolidated its title over said property. Then it took possession of the foreclosed
property and appropriated its produce On December 21, 1981, the Piedas filed a
complaint against DBP for cancellation of certificate of title and/or specific
performance, accounting and damages with a prayer for the issuance of a writ of
preliminary injunction. According to the spouses, the DBP, in evident bad faith, caused
the consolidation of its title to the parcel of land in question in spite of the fact that the
5-year redemption period expressly stated in the sheriff's certificate of sale had not yet
lapsed. The Regional Trial Court ruled in favor of the Piedas. The Court of Appeals
affirmed the RTC's decision. Hence, this petition.
The period of redemption of extrajudicially foreclosed land is provided under Section 6
of Act No. 3135. If no redemption is made within one year, the purchaser is entitled as
a matter of right to consolidate and to possess the property accordingly, DBP's act of
consolidating its title and taking possession of the subject property after the expiration
of the period of redemption was in accordance with law. Moreover it was in
consonance with Section 4 of the mortgage contract between DBP and the Pinedas
where they agreed to the appointment of DBP as receiver to take charge and to hold
possession of the mortgaged property in case of foreclosure. aTcSID
SYLLABUS
1. CIVIL LAW; PROPERTY, OWNERSHIP AND ITS MODIFICATION;
POSSESSION; POSSESSION IN GOOD FAITH; GOOD FAITH ALWAYS
PRESUMED. A possessor in good faith is one who 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 a possessor rests the
burden of proof. It was therefore incumbent on the PIEDAS to prove that DBP was
aware of the flaw in its title i. e. the nullity of the foreclosure. This, they failed to do.
2. ID.; ID.; ID.; ID.; CONSOLIDATION OF TITLE OVER FORECLOSED
PROPERTY AFTER EXPIRATION OF ONE YEAR PERIOD OF REDEMPTION
DESPITE STATEMENT IN SHERIFF'S CERTIFICATE OF SALE THAT SUBJECT
LAND WAS SUBJECT TO FIVE YEAR REDEMPTION PERIOD, NOT BAD FAITH.
Respondent PIEDAS argue that DBP's bad faith stems from the fact that DBP
consolidated title over the disputed property despite the statement in the Sheriffs
Certificate of Sale to the effect that said land was subject to a five year redemption
period. The period of redemption of extrajudicially foreclosed land is provided under
Section 6 of Act No. 3135. If no redemption is made within one year, the purchaser is
entitled as a matter of right to consolidate and to possess the property. Accordingly,
DBP's act of consolidating its title and taking possession of the subject property after
the expiration of the period of redemption was in accordance with law. Moreover, it
was in consonance with Section 4 of the mortgage contract between DBP and the
PINEDAS where they agreed to the appointment of DBP as receiver to take charge
and to hold possession of the mortgage property in case of foreclosure. DBP's acts
cannot therefore be tainted with bad faith. ISTDAH
3. ID.; ID.; ID.; ID.; ID.; RIGHT TO CONSOLIDATE TITLE NOT AFFECTED
BY MORTGAGOR'S RIGHT TO REPURCHASE PROPERTY WITHIN PERIOD OF
FIVE YEARS. The right of DBP to consolidate its title and take possession of the
subject property is not affected by the PINEDAS' right to repurchase said property
within five years from the date of conveyance granted by Section 119 of C.A. No. 141.
In fact, without the act of DBP consolidating title in its name, the PINEDAS would not
be able to assert their right to repurchase granted under the aforementioned section.
Respondent PIEDAS are of the erroneous belief that said section prohibits a
purchaser of homestead land in a foreclosure sale from consolidating his title over
said property after the one-year period to redeem said property has expired. Section
119 does not contain any prohibition to convey homestead land but grants the
homesteader, his widow or legal heirs a right to repurchase said land within a period
of five years in the event that he conveys said land. This is in consonance with the
policy of homestead laws to distribute disposable agricultural lands of the State to
land-destitute citizens for their home and cultivation. The right to repurchase under
Section 119 aims to preserve and keep in the family of the homesteader that portion of
public land which the State had gratuitously given him. Such right is based on the
assumption that the person under obligation to reconvey the property has the full title
to the property because it was voluntarily conveyed to him or that he consolidated his
title thereto by reason of a redemptioner's failure to exercise his right of redemption. It
is also settled that the five-year period of redemption fixed in Section 119 of the Public
Land Law of homestead sold at extrajudicial foreclosure begins to run from the day
after the expiration of the one-year period of repurchase allowed in an extrajudicial
foreclosure. Thus DBP's consolidation of title did not derogate from or impair the right
of the PIEDAS to redeem the same under C.A. No. 141. DTISaH
4. ID.; ID.; ID.; MISTAKE UPON A DOUBTFUL OR DIFFICULT QUESTION
OF LAW MAY BE BASIS OF GOOD FAITH. It may be argued that P.D. 27 was
already in effect when DBP foreclosed the property. However, the legal propriety of
the foreclosure of the land was put into question only after Opinion No. 92 series of
1978 of the Ministry of Justice declared that said land was covered by P.D. 27 and
could not be subject to foreclosure proceedings. The Opinion of the Ministry of Justice
was issued on July 5, 1978 or almost two months after DBP consolidated its title to the
property on March 10, 1978. By law and jurisprudence, a mistake upon a doubtful or
difficult question of law may properly be the basis of good faith.
5. ID.; ID.; ID.; POSSESSOR ENTITLED TO KEEP FRUITS DURING PERIOD
FOR WHICH IT HELD PROPERTY IN GOOD FAITH. In the case of Maneclang vs.
Baun, we held that when a contract of sale is void, the possessor is entitled to keep
the fruits during the period for which it held the property in good faith. Good faith of the
possessor ceases when an action to recover possession of the property is filed
against him and he is served summons therefore. In the present case, DBP was
served summons on June 30, 1982. By that time, it was no longer in possession of the
disputed land as possession thereof was given back to the PIEDAS after the
foreclosure of DBP was declared null and void on February 22, 1982. Therefore, any
income collected by DBP after it consolidated its title and took possession of the
property on May 30, 1978 up to February 22, 1982 belongs to DBP as a possessor in
good faith since its possession was never legally interrupted. EIDATc
6. CIVIL LAW; DAMAGES; ATTORNEY'S FEES; AWARD DELETED WHERE
MORTGAGEE'S ACTS WERE CLEARLY NOT UNJUSTIFIED. Finally, we delete
the award for attorney's fees. Although attorney's fees. may be awarded if the claimant
is compelled to litigate with third persons or to incur expenses to protect his interest by
reason of an unjustified act or omission of the party from whom it is sought, we hold
that DBP's acts were clearly not unjustified.
D E C I S I O N
GONZAGA-REYES, J p:
Before us is a Petition for Review on Certiorari of the decision of the Court of Appeals
1 in CA-G.R. CV No. 28549 entitled "SPOUSES TIMOTEO PIEDA, ET. AL. vs.
DEVELOPMENT BANK OF THE PHILIPPINES" which affirmed the decision of the
Regional Trial Court (RTC), Branch 16 2 , Roxas City in Civil Case No. V-4590, for
cancellation of certificate of title and/or specific performance, accounting and damages
with a prayer for the issuance of a writ of preliminary injunction. LLpr
The records show that respondent spouses Pieda (PIEDAS) are the registered
owners of a parcel of land (Lot 11-14-1-14) situated at barangay Astorga Dumarao,
Capiz containing an area of 238,406 square meters, more or less, and covered by
Homestead Patent No. 0844 and Original Certificate of Title No. P-1930. On March 7,
1972, the PIEDAS mortgaged the above described parcel of land to petitioner,
Development Bank of the Philippines (DBP) to secure their agricultural loan in the
amount of P20,000.00. The PIEDAS failed to comply with the terms and conditions
of the mortgage compelling DBP to extrajudicially foreclose on February 2, 1977. In
the foreclosure sale, DBP was the highest bidder and a Sheriff Certificate of Sale was
executed in its favor. In the corresponding Certificate of Sale, the sheriff indicated that
"This property is sold subject to the redemption within five (5) years from the date of
registration of this instrument and in the manner provided for by law applicable to this
case". The certificate of sale was registered in the Register of Deeds of Capiz on April
25, 1977. On March 10, 1978, after the expiration of the one-year redemption period
provided for under Section 6, ACT 3135, DBP consolidated its title over the foreclosed
property by executing an Affidavit of Consolidation of Ownership. Subsequently, a
Final Deed of Sale was executed in DBP's favor, which was registered together with
the Affidavit of Consolidation of Ownership with the Register of Deeds of Capiz on
May 30, 1978. Consequently, Original Certificate of Title No. P-1930 was cancelled
and TCT No. T-15559 was issued in the name of DBP. Thereafter, DBP took
possession of the foreclosed property and appropriated the produce thereof. cdphil
On July 5, 1978, the Ministry of Justice issued Opinion No. 92, Series of 1978 3 which
declared that lands covered by P.D. No. 27 4 , like the herein subject property, may
not be the object of foreclosure proceedings after the promulgation of said decree on
Oct. 21, 1972.
On August 24, 1981, the PIEDAS offered to redeem the foreclosed property by
offering P10,000.00 as partial redemption payment. This amount was accepted by
DBP who issued O.R. No. 1665719 and through a letter, conditionally approved the
offer of redemption considering the P10,000.00 as down payment. 5 However, on
November 11, 1981, DBP sent the PIEDAS another letter informing them that
pursuant to P.D. 27, their offer to redeem and/or repurchase the subject property
could not be favorably considered for the reason that said property was tenanted. 6
On November 16, 1981, in deference to the above-mentioned opinion, DBP through
Ramon Buenaflor sent a letter to the Acting Register of Deeds of Capiz requesting the
latter to cancel TCT No. T-15559 and to restore Original Certificate of Title No. P-1930
in the name of the PIEDAS. The Acting Register of Deeds, in reply to such request,
suggested that DBP file a petition in court pursuant to Section 108 of Presidential
Decree 1529 7 . In compliance with said suggestion, DBP petitioned for the
cancellation of TCT No. T-15559 with then Court of First Instance of Capiz, Branch II,
docketed as Special Case No. 2653. The petition was favorably acted upon on
February 22, 1982. Thus, the foreclosure proceeding conducted on February 2, 1977
was declared null and void and the Register of Deeds of Capiz was ordered to cancel
TCT No. 15559; OCT No. 1930 was ordered revived. Cdpr
Meanwhile, on December 21, 1981, the PIEDAS filed the instant complaint against
DBP for cancellation of certificate of title and/or specific performance, accounting and
damages with a prayer for the issuance of a writ of preliminary injunction averring that
DBP, in evident bad faith, caused the consolidation of its title to the parcel of land in
question in spite of the fact that the 5-year redemption period expressly stated in the
Sheriff's Certificate of Sale had not yet lapsed and that their offer to redeem the
foreclosed property was made well within said period of redemption. 8
After trial, the RTC ruled in favor of the PIEDAS stating that DBP violated the
stipulation in the Sheriff's Certificate of Sale which provided that the redemption period
is five (5) years from the registration thereof in consonance with Section 119 9 of CA
No. 141 10 . DBP should therefore assume liability for the fruits that said property
produced from said land considering that it prematurely took possession thereof. The
dispositive portion of the decision reads:
"WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against the
defendant Development Bank of the Philippines as follows:
1. Condemning the defendant DBP to pay the plaintiffs P201,138.28 less
whatever amount the plaintiffs still have to pay the said defendant DBP as balance of
their loan account reckoned up to the date of this decision; P20,000.00 as attorney's
fees; P5,000.00 as litigation expenses and costs. llcd
SO ORDERED." 11
DBP appealed to the Court of Appeals, which affirmed the decision of the RTC. The
Court of Appeals stated that since DBP was in evident bad faith when it unlawfully
took possession of the property subject of the dispute and defied what was written on
the Sheriff's Certificate of Sale, the PIEDAS were entitled to recover the fruits
produced by the property or its equivalent valued at P72,000.00 per annum or a total
of P216,000.00 for the three-year period. Respondent court stated that said amount
was not rebutted by DBP and was fair considering the size of the land in question. The
court added that any discussion with respect to the redemption period was of little
significance since the foreclosure proceeding was declared null and void in Special
Civil Case No. 2653 12 on February 22, 1982. Thus, the right of the PIEDAS to
redeem the property has become moot and academic. Finally, the award of attorney's
fees amounting to P10,000.00 13 was justified considering that the PIEDAS were
compelled to protect their interests. 14
DBP's Motion for Reconsideration 15 was denied; hence this petition where it assigns
the following errors:
"Ground No. 1 The Honorable Court Of Appeals Gravely Erred In Affirming The
Court A Quo's Decision Awarding Actual Damages In The Amount Of P216,000.00 In
Favor Of The Private Respondents Notwithstanding The Absence Of Evidence
Substantiating Said Award. Thus, The Honorable Court Of Appeals Had Decided This
Instant Case In A Way Not In Accord With Applicable Law And Jurisprudence. cdrep
2. Ground No. 2 The Honorable Court Of Appeals Gravely Erred In
Affirming The Court A Quo's Finding That DBP Was In Bad Faith When It Took
Possession Of The Property In Question Notwithstanding the Contrary Evidence
Adduced By Petitioner DBP. Thus, The Honorable Court Of Appeals Departed From
The Accepted And Usual Course f Judicial Proceedings.
3. Ground No. 3 The Honorable Court Of Appeals Gravely Erred In
Affirming The Court A Quo's Decision Awarding Attorney's Fees And Litigation Costs
In Favor Of The Private Respondents Notwithstanding Absence Of Evidence Proving
the Same. Clearly, The Lower Court Committed Misapprehension Of Facts That Can
Be Considered A Question Of Law." 16
DBP maintains that the valuation of the income derived from the property in dispute
allegedly amounting to P216,000.00 was not proven by the PIEDAS. DBP argues
that they granted the PIEDAS a loan of P20,000.00 in March 7, 1972 and up to the
time of the foreclosure of the property, the PIEDAS have paid only P2,000.00 on
their principal. The failure of the PIEDAS to pay this loan is attributable to the fact
that said property did not produce income amounting to P72,000.00 per annum.
According to DBP, in the absence of receipts or other evidence to support such a
claim, the Court of Appeals should not have granted said amount considering that the
PIEDAS had the burden of proving actual damages. Furthermore, Selfida Pieda
herself admitted that the property never produced income amounting to P72,000.00
per annum. At any rate, the actual amount earned by the property in terms of rentals
turned over by the tenant-farmers or caretakers of the land were duly receipted and
were duly accounted for by the DBP. prLL
DBP also alleges that the mere fact that DBP took possession and administration of
the property does not warrant a finding that DBP was in bad faith. First, records show
that the PIEDAS consented to and approved the takeover of DBP. Second, Sec. 7
17 of Act No. 3135 18 allows the mortgagee-buyer to take possession of the
mortgaged property even during the redemption period. Third, DBP's act of
consolidating the title of the property in its name does not constitute bad faith as there
is no law which prohibits the purchaser at public auction from consolidating title in its
name after the expiration of the one (1) year redemption period reckoned from the
time the Certificate of Sale was registered; and neither is there any law or
jurisprudence which prohibits the PIEDAS from exercising their right of redemption
over said property within five (5) years even if title is consolidated in the name of the
purchaser. When DBP consolidated title over the property in its name, the new TCT
issued in its favor was subject to the lien i.e. the right of redemption of the PIEDAS; if
there was a failure to register this in the TCT, DBP should not be faulted. Besides,
even if the five (5) year period of redemption was not indicated therein, Sec. 44 19 and
46 20 of Presidential Decree No. 1529 21 attaches such lien by operation of law even
in the absence of an annotation in the title. Moreover, Sec. 119 of CA No. 141 also
makes said right of redemption a statutory lien, which subsists and binds the whole
world despite the absence of registration.
DBP also could not have been in bad faith when it denied the PIEDAS' offer to
redeem the property since the denial was premised on Opinion No. 92 of the Minister
of Justice series of 1978 which stated that said land was covered under P.D. 27 and
could not be the subject of foreclosure proceedings. For this reason, DBP immediately
filed a petition to nullify the foreclosure proceedings which was favorably acted upon
prior to the service of summons and the complaint in the present case on DBP on
June 30, 1982. If DBP was really in bad faith, it would not have filed said petition for
said petition was against its own interests.
Further, DBP asserts that PIEDAS appointed DBP as their attorney-in-fact or agent
in case of foreclosure of the property under Section 4 of the mortgage contract, which
provides: prcd
"4. . . . In case of foreclosure, the Mortgagor hereby consents to the
appointment of the mortgagee or any of its employees as receiver, without any bond,
to take charge of the mortgage property at once, and to hold possession of the case
and the rents and profits derived from the mortgaged property before the sale. . . ." 22
DBP was therefore entitled to take possession of the property pursuant to the
mortgage contract.
Finally, considering that DBP lawfully had material possession of the property after it
consolidated its title, DBP was entitled to the fruits and income thereof pursuant to
Section 34, Rule 39 of the Rules of Court:
"Sec. 34. Rents and Profits Pending Redemption. Statement thereof and credit
therefor on redemption. The purchaser, from the time of the sale until a redemption,
and a redemptioner, from the time of his redemption until another redemption, is
entitled to receive the rents of the property sold or the value of the use or occupation
thereof when such property is in the possession of a tenant. . . ."
Taking all this into consideration, DBP cannot be faulted for taking over possession of
the property in question. prLL
The core issue in this case is whether DBP was in bad faith when it took possession of
the disputed lot.
We rule in the negative and find DBP's contentions meritorious.
A possessor in good faith is one who is not aware that there exists in his title or mode
of acquisition any flaw, which invalidates it. 23 Good faith is always presumed, and
upon him who alleges bad faith on the part of a possessor rests the burden of proof.
24 It was therefore incumbent on the PIEDAS to prove that DBP was aware of the
flaw in its title i.e. the nullity of the foreclosure. This, they failed to do.
Respondent PIEDAS argue that DBP's bad faith stems from the fact that DBP
consolidated title over the disputed property despite the statement in the Sheriff's
Certificate of Sale to the effect that said land was subject to a five year redemption
period. The period of redemption of extrajudicially foreclosed land is provided under
Section 6 of ACT No. 3135 to wit:
"Sec. 6. In all cases in which an extrajudicial sale is made under the special power
hereinbefore referred to, the debtor, his successors in interest or any judicial creditor
or judgment creditor of said debtor, or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the property is sold, may
redeem the same at any time within the term of one year from and after the date of
sale; and such redemption shall be governed by the provisions of section four hundred
and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure
25 , in so far as these are not inconsistent with the provisions of this Act." cdtai
If no redemption is made within one year, the purchaser is entitled as a matter of right
to consolidate 26 and to possess 27 the property. 28 Accordingly, DBP's act of
consolidating its title and taking possession of the subject property after the expiration
of the period of redemption was in accordance with law. Moreover, it was in
consonance with Section 4 of the mortgage contract between DBP and the PIEDAS
where they agreed to the appointment of DBP as receiver to take charge and to hold
possession of the mortgage property in case of foreclosure. DBP's acts cannot
therefore be tainted with bad faith.
The right of DBP to consolidate its title and take possession of the subject property is
not affected by the PIEDAS' right to repurchase said property within five years from
the date of conveyance granted by Section 119 of CA No. 141. In fact, without the act
of DBP consolidating title in its name, the PIEDAS would not be able to assert their
right to repurchase granted under the aforementioned section. Respondent PIEDAS
are of the erroneous belief that said section prohibits a purchaser of homestead land
in a foreclosure sale from consolidating his title over said property after the one-year
period to redeem said property has expired. Section 119 does not contain any
prohibition to convey homestead land but grants the homesteader, his widow or legal
heirs a right to repurchase said land within a period of five years in the event that he
conveys said land. This is in consonance with the policy of homestead laws to
distribute disposable agricultural lands of the State to land-destitute citizens for their
home and cultivation. 29 The right to repurchase under Section 119 aims to preserve
and keep in the family of the homesteader that portion of public land which the State
had gratuitously given him. 30 Such right is based on the assumption that the person
under obligation to reconvey the property has the full title to the property because it
was voluntarily conveyed to him or that he consolidated his title thereto by reason of a
redemptioner's failure to exercise his right of redemption. 31 It is also settled that "the
five-year period of redemption fixed in Section 119 of the Public Land Law of
homestead sold at extrajudicial foreclosure begins to run from the day after the
expiration of the one-year period of repurchase allowed in an extrajudicial
foreclosure". 32 Thus DBP's consolidation of title did not derogate from or impair the
right of the PIEDAS to redeem the same under C.A. No. 141.
It may be argued that P.D. 27 was already in effect when DBP foreclosed the property.
However, the legal propriety of the foreclosure of the land was put into question only
after Opinion No. 92 series of 1978 of the Ministry of Justice declared that said land
was covered by P.D. 27 and could not be subject to foreclosure proceedings. The
Opinion of the Ministry of Justice was issued on July 5, 1978 or almost two months
after DBP consolidated its title to the property on March 10, 1978. By law and
jurisprudence, a mistake upon a doubtful or difficult question of law may properly be
the basis of good faith. 33 LLjur
In the case of Maneclang vs. Baun, 34 we held that when a contract of sale is void,
the possessor is entitled to keep the fruits during the period for which it held the
property in good faith. Good faith of the possessor ceases when an action to recover
possession of the property is filed against him and he is served summons therefore.
35 In the present case, DBP was served summons on June 30, 1982. 36 By that time,
it was no longer in possession of the disputed land as possession thereof was given
back to the PIEDAS after the foreclosure of DBP was declared null and void on
February 22, 1982. Therefore, any income collected by DBP after it consolidated its
title and took possession of the property on May 30, 1978 up to February 22, 1982
belongs to DBP as a possessor in good faith since its possession was never legally
interrupted.
Finally, we delete the award for attorney's fees. Although attorney's fees may be
awarded if the claimant is compelled to litigate with third persons or to incur expenses
to protect his interest by reason of an unjustified act or omission of the party from
whom it is sought, 37 we hold that DBP's acts were clearly not unjustified.
WHEREFORE, the instant petition is hereby GRANTED, and the appealed decision of
the Court of Appeals is REVERSED. The Development Bank of the Philippines is
absolved from any liability to Timoteo and Selfida Pieda in so far as it orders the DBP
to pay the PIEDAS P216,000.00 as annual produce value of the land; P20,000.00 in
attorney's fees, P5,000.00 in litigation expenses and the costs of the suit. This
decision is without prejudice to whatever liability the PIEDAS may still have to the
DBP with respect to their loan. LexLib
SO ORDERED.


















































HEIRS OF NIETO VS MUN OF MEYCUAYAN
NACHURA, J .:

This is a petition for review on certiorari of the Decision of the Court of Appeals,
dated October 30, 2001, which dismissed the petition for review of the Decision of the
Regional Trial Court (RTC) of Malolos, Bulacan. The latter dismissed a complaint to
recover possession of a registered land on the ground of prescription and laches.
The antecedents are as follows:
Anacleto Nieto was the registered owner of a parcel of land, consisting of
3,882 square meters, situated at Poblacion, Meycauayan, Bulacan and covered by
TCT No. T-24.055 (M). The property is being used by respondent, Municipality of
Meycauayan, Bulacan, which constructed an extension of the public market therein.
Upon Anacletos death on July 26, 1993, his wife, Sixta P. Nieto, and their
three children, namely, Eulalio P. Nieto, Gaudencio Nieto and Corazon Nieto-Ignacio,
herein petitioners, collated all the documents pertaining to his estate. When
petitioners failed to locate the owners duplicate copy of TCT No. T-24.055 (M), they
filed a petition for the issuance of a second owners copy with the RTC, Malolos,
Bulacan. In that case, petitioners discovered that the missing copy of the title was in
the possession of the respondent. Consequently, petitioners withdrew the petition and
demanded from respondent the return of property and the certificate of title
On February 23, 1994, petitioners formally demanded from respondent the
return of the possession and full control of the property, and payment of a monthly rent
with interest from January 1964. Respondent did not comply with petitioners demand.
On December 28, 1994, petitioners filed a complaint for recovery of possession
and damages against respondent alleging that the latter was in possession of the
owners copy of TCT No. T-24.055 (M). They averred that, in 1966, respondent
occupied the subject property by making it appear that it would expropriate the same.
Respondent then used the land as a public market site and leased the stalls therein to
several persons without paying Anacleto Nieto the value of the land or rent therefor.
Petitioners prayed that respondent be ordered to surrender to them the owners copy
of TCT No. T-24.055 (M), vacate the property, and pay them the rents thereon from
1966 until the date of the filing of the complaint for the total of P1,716,000.00, and
P10,000.00 a month thereafter, as well as P300,000.00 as moral damages, and
P100,000.00 as attorneys fees.
In its Answer, respondent alleged that the property was donated to it and that
the action was already time-barred because 32 years had elapsed since it possessed
the property.
Respondent and counsel failed to appear during the scheduled pre-trial
conference. Upon petitioners motion, respondent was declared as in default and
petitioners were allowed to present evidence ex parte. Respondent filed a motion for
reconsideration which the RTC granted. Respondent was then allowed to cross-
examine petitioners lone witness and present its own evidence. However, despite
notice, respondent failed again to appear during the scheduled hearing. Hence, the
RTC considered respondent to have waived its right to cross-examine petitioners
witness and present its own evidence. The case was then submitted for decision.
On August 1, 1995, the RTC rendered a Decision dismissing the complaint as
well as respondents counterclaims for damages. For lack of proof, the RTC
disregarded respondents claim that Anacleto Nieto donated the property to it in light
of the fact that the title remained in the name of Anacleto. Nonetheless, the RTC did
not rule in favor of petitioners because of its finding that the case was already barred
by prescription. It held that the imprescriptibility of actions to recover land covered by
the Torrens System could only be invoked by the registered owner, Anacleto Nieto,
and that the action was also barred by laches.
Petitioners appealed the case to the Court of Appeals (CA). On October 30,
2001, the CA rendered a Decision dismissing the case for lack of jurisdiction.
According to the CA, the petition involved a pure question of law; hence, petitioners
should have filed a petition directly with this Court.
Accordingly, petitioners elevated the case to this Court through a petition for
review on certiorari, raising the following issues:
A. Are lands covered by the Torrens System subject to
prescription?

B. May the defense of [l]aches be invoked in this specific case?
C. May the defense of imprescriptibility only be invoked by the
registered owner to the exclusion of his legitimate heirs?
The petition is meritorious.
Respondent argues that the action of petitioner to recover possession of the
property is already barred by prescription.
We do not agree.
An action to recover possession of a registered land never prescribes in
view of the provision of Section 44 of Act No. 496 to the effect that no title to
registered land in derogation of that of a registered owner shall be acquired by
prescription or adverse possession. It follows that an action by the registered owner
to recover a real property registered under the Torrens System does not prescribe.
Despite knowledge of this avowed doctrine, the trial court ruled that
petitioners cause of action had already prescribed on the ground that the
imprescriptibility to recover lands registered under the Torrens System can only be
invoked by the person under whose name the land is registered.
Again, we do not agree. It is well settled that the rule on imprescriptibility of
registered lands not only applies to the registered owner but extends to the heirs of
the registered owner as well. Recently in Mateo v. Diaz, the Court held that
prescription is unavailing not only against the registered owner, but also against his
hereditary successors because the latter step into the shoes of the decedent by
operation of law and are the continuation of the personality of their predecessor-in-
interest. Hence, petitioners, as heirs of Anacleto Nieto, the registered owner, cannot
be barred by prescription from claiming the property.
Aside from finding that petitioners cause of action was barred by
prescription, the trial court reinforced its dismissal of the case by holding that the
action was likewise barred by laches.


Laches has been defined as the failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence could or
should have been done earlier. It is negligence or omission to assert a right within a
reasonable time, warranting the presumption that the party entitled to assert his right
has either abandoned or declined to assert it.
In a number of cases, the Court has held that an action to recover
registered land covered by the Torrens System may not be barred by laches. Laches
cannot be set up to resist the enforcement of an imprescriptible legal right. Laches,
which is a principle based on equity, may not prevail against a specific provision of
law, because equity, which has been defined as justice outside legality, is applied in
the absence of and not against statutory law or rules of procedure.
In recent cases, however, the Court held that while it is true that a Torrens
title is indefeasible and imprescriptible, the registered landowner may lose his right to
recover possession of his registered property by reason of laches.
Yet, even if we apply the doctrine of laches to registered lands, it would still
not bar petitioners claim. It should be stressed that laches is not concerned only with
the mere lapse of time. The following elements must be present in order to constitute
laches:
(1) conduct on the part of the defendant, or of one under whom
he claims, giving rise to the situation of which complaint
is made for which the complaint seeks a remedy;
(2) delay in asserting the complainants rights, the complainant
having had knowledge or notice, of the defendants
conduct and having been afforded an opportunity to
institute a suit;
(3) lack of knowledge or notice on the part of the defendant that
the complainant would assert the right on which he bases
his suit; and
(4) injury or prejudice to the defendant in the event relief is
accorded to the complainant, or the suit is not held to be
barred.

We note that the certificate of title in the name of Anacleto Nieto was found
in respondents possession but there was no evidence that ownership of the property
was transferred to the municipality either through a donation or by expropriation, or
that any compensation was paid by respondent for the use of the property. Anacleto
allegedly surrendered the certificate of title to respondent upon the belief that the
property would be expropriated. Absent any showing that this certificate of title was
fraudulently obtained by respondent, it can be presumed that Anacleto voluntarily
delivered the same to respondent. Anacletos delivery of the certificate of title to
respondent could, therefore, be taken to mean acquiescence to respondents plan to
expropriate the property, or a tacit consent to the use of the property pending its
expropriation
This Court has consistently held that those who occupy the land of another
at the latters tolerance or permission, without any contract between them, are
necessarily bound by an implied promise that the occupants will vacate the property
upon demand. The status of the possessor is analogous to that of a lessee or tenant
whose term of lease has expired but whose occupancy continues by tolerance of the
owner. In such case, the unlawful deprivation or withholding of possession is to be
counted from the date of the demand to vacate. Upon the refusal to vacate the
property, the owners cause of action accrues.
In this case, the first element of laches occurred the moment respondent
refused to vacate the property, upon petitioners demand, on February 23, 1994. The
filing of the complaint on December 28, 1994, after the lapse of a period of only ten
months, cannot be considered as unreasonable delay amounting to laches.
Moreover, case law teaches that if the claimants possession of the land is merely
tolerated by its lawful owner, the latters right to recover possession is never barred by
laches. Even if it be supposed that petitioners were aware of respondents occupation
of the property, and regardless of the length of that possession, the lawful owners
have a right to demand the return of their property at any time as long as the
possession was unauthorized or merely tolerated, if at all.
Furthermore, the doctrine of laches cannot be invoked to defeat justice or to
perpetrate fraud and injustice. It is the better rule that courts, under the principle of
equity, will not be guided or bound strictly by the statute of limitations or the doctrine of
laches when by doing so, manifest wrong or injustice would result.
Finally, we find that the rentals being prayed for by petitioners are
reasonable considering the size and location of the subject property. Accordingly, the
award of rentals is warranted.
WHEREFORE, premises considered, the petition is GRANTED. The
Decision of the Regional Trial Court of Malolos, Bulacan, dated August 1, 1995, is
REVERSED and SET ASIDE. Respondent is ORDERED (a) to vacate and surrender
peaceful possession of the property to petitioners, or pay the reasonable value of the
property; (b) to pay P1,716,000.00 as reasonable compensation for the use of the
property from 1966 until the filing of the complaint and P10,000.00 monthly rental
thereafter until it vacates the property, with 12% interest from the filing of the
complaint until fully paid; and (c) to return to petitioners the duplicate copy of TCT No.
T-24.055 (M).











AUREA BAEZ and RAMON BAEZ Substituted by their legal heir, OSCAR
VIRATA BAEZ, petitioners,
vs.
COURT OF APPEALS and PIO ARCILLA, respondents.
ZALDIVAR, J .:p
A petition for review of the decision of the Court of Appeals in C.A. G.R. No. 36227-R
(Pio Arcilla, plaintiff-appellant, versus Aurea Baez, Ramon Baez and People's
Homesite and Housing Corporation, defendants-appellees).
The pertinent facts or the case are as follows: In 1956 respondent Pio Arcilla occupied
a parcel of land, later known as Lot 5, Block E-130 East Avenue Subdivision, Diliman,
Quezon City, owned by the People's Homesite and Housing Corporation (hereinafter
referred to as PHHC). He fenced the lot with wire, and erected a house and made
some plantings thereon. His moves to apply for the acquisition of the lot from the
PHHC when the same became available for disposition came to naught because the
employees of the PHHC whose help he sought merely regaled him with promises that
the matter would be attended to. Nevertheless, his occupancy was made a matter of
record with the PHHC in connection with a census of occupants and squatters taken
some time later.
Notwithstanding respondent Arcilla's occupancy, the lot was awarded, on May 20,
1960, to Cristeta L. Laquihon pursuant to a conditional contract to sell executed by the
PHHC, subject to the standard resolutory conditions imposed upon grants of similar
nature, including the grantee's undertaking to eject trespassers, intruders or squatters
on the land, and to construct a residential house on the lot within a period of one year
from the signing of the contract, non-compliance with, which conditions would result in
the contract being "deemed annulled and cancelled". Respondent Arcilia had no
notice of this award, and neither did the grantee nor the PHHC take any step to oust
him from the premises occupied by him. It was only on April 29, 1963 that he was first
required to leave the area aforesaid.
Meanwhile, on May 9, 1962, grantee Cristeta L. Laquihon died, survived by her father,
Basilio Laquihon, who, on July 27, 1962, executed a deed of adjudication in his favor
of the rights and interests thus far acquired by his deceased daughter over the lot in
question. In said deed Basilio Laquihon also acknowledged an indebtedness of the
deceased to herein petitioner Aurea V. Baez in the sum of P3,000.00 and agreed to
assign the rights thus adjudicated by way of payment of the debt. The corresponding
request for the transfer of the rights from Cristeta to Basilio L. Laquihon was made by
the latter to the PHHC on August 9, 1962, while an undated request for the approval of
the assignment of said land to Aurea V. Baez as above stated was similarly filed with
the PHHC.
The PHHC referred the requests for transfer and for assignment to its Head Executive
Assistant, Olimpio N. Epis, for study. Mr. Epis. in his memorandum, opined that,
because the grantee failed, among others, to construct a residential house on the land
within the period provided in the conditional contract, the grantee's rights under the
contract were forfeited and, accordingly, she did not acquire any right which could be
transmitted upon her death to her alleged successor, Basilio Laquihon. Hence, he
recommended the disapproval of the petition for transfer. It appears, however, that the
unfavorable recommendation of Mr. Epis was not acted upon by the Board of the
PHHC but, instead, was returned by the General Manager to Mr. Epis with verbal
instructions to restudy the matter. After a restudy, Mr. Epis changed his opinion, and
considered the transfers from Cristeta L. Laquihon to Basilio Laquihon, and from the
latter to Aurea V. Baez, to be proper and meritorious, and recommended the
approval of the same. This was in conformity with a previous recommendation made
by PHHC's Homesite Sales Supervisor, Roman Carreaga, to the PHHC's General
Manager. On November 15, 1962, PHHC's Board of Directors adopted Resolution No.
200 approving the transfer of rights from Basilio Laquihon to Aurea V. Baez as a
meritorious case. The transfer thus approved, petitioner Aurea V. Baez continued
paying the installments on the purchase price of the land.
Respondent Pio Arcilia did not know of the foregoing developments until sometime in
1963 when he was given notice to vacate the lot occupied by him. He then interposed
a protest against the award and transfer to petitioner Aurea V. Baez, claiming that
the original awardee acquired no rights to the aforesaid lot and that the transferee was
disqualified from acquiring lots of the PHHC. Since the PHHC's Board of Directors had
theretofore approved the transfer objected to, the Administrative Investigating
Committee, to whom the protest was referred for resolution, considered itself without
any further power to review the action of the Board, and accordingly dismissed the
protest. In the meantime, petitioner Aurea V. Baez completed the installment
payments on the land, and on October 29, 1964, the PHHC executed the
corresponding deed of sale over the lot in her favor.
Thus left without recourse before the PHHC, respondent Arcilla went to court with his
complaint to nullify the award of the lot in question in favor of petitioner Aurea V.
Baez and to compel the PHHC to award the same to him, with prayer for attorney's
fees and costs. After trial on the merits, the court a quo found for petitioners and
accordingly decreed the dismissal of respondent's complaint, without costs.
Respondent Arcilla appealed to the Court of Appeals, which rendered the decision
sought to be reviewed, the dispositive portion of which decision reads thus:
WHEREFORE, the judgment appealed from is hereby reversed
and, in lieu thereof, another is hereby rendered declaring null and
void the transfer of rights over and award of lot 5, Block B-130,
East Avenue Subdivision of appellee PHHC, in favor of appellee
Aurea Baez and ordering appellee People's Homesite and
Housing Corporation to afford appellant Pio Arcilla the
opportunity, within thirty (30) days from the finality of this decision,
to perfect his preferential right to purchase said lot and thereafter
to execute and deliver such deed and documents necessary to
consummate the sale to said appellant.
Seeking a review of the decision, petitioners filed the instant petition. During its
pendency, petitioner Ramon Baez died on March 30, 1972, and petitioner Aurea
Baez also died on August 11, 1972, and the motion to have their heir, Oscar Virata
Baez, substituted for them, was granted by this Court on October 9, 1972.
Petitioners in their Brief made assignments of error, as follows:
1. That the Court of Appeals erred in holding that the respondent
Pio Arcilla has the personality to seek the annulment of the award
and sale, of Lot 5, Block E-130, East Avenue Subdivision,
Diliman, Quezon City, belonging to the PHHC, to the applicant
Cristela L. Laquihon on May 20, 1960, by PHHC, and the transfer
of her rights over the lot by her father Basilio Laquihon to the
petitioner Aurea Baez in payment of the indebtedness of Cristeta
L. Laquihon to the petitioner Aurea Baez in the amount of
P3,000.00;
2. The Court of Appeals erred in holding that the respondent Pio
Arcilla has a preferential right to purchase the lot in question, lot
5, block E-130, East Avenue Subdivision, Quezon City, of the
People's Homesite and Housing Corporation;
3. That the Court of Appeals erred in holding that the award of the
lot in question to Cristeta L. Laquihon, made on May 20, 1960
was null and void, because said awardee failed to construct a
house in the lot within a period of one (1) year from the signing of
the contract to sell and, therefore, upon the death of Cristeta L.
Laquihon on May 9, 1962, she transferred no rights to her father
Basilio Laquihon and said Basilio Laquihon could not validly sell
his rights of the lot in question to the petitioners;
4. That the Court of Appeals erred in holding that the approval of
the transfer of rights of the late Cristeta L. Laquihon by her father
Basilio Laquihon to the petitioner Aurea Baez was due to the
intercession of the then Senator Estanislao Fernandez; and
5. That the Court of Appeals erred in holding that the petitioners
are not qualified to acquire the lot in question for having allegedly
a lot in San Juan, Rizal.
1. Article 1397 of the Civil Code provides that the action for annulment of contracts
may be instituted by all who are thereby obliged principally or subsidiarily. Hence
strangers to the contract who are not bound thereby have neither the right nor the
personality to bring an action to annul such contract. It cannot be gainsaid that
respondent Pio Arcilla was a stranger to, and not bound principally or subsidiarily by,
the conditional contract to sell executed on May 20, 1960 by the PHHC in favor of
Cristeta L. Laquihon, and the transfer of rights over the same lot from Basilio Laquihon
to Aurea V. Baez. Hence respondent Pio Arcilla could not bring an action to annul the
same.
There is, however, an exception to the rule laid down in Article 1397. This Court,
in Teves vs. People's Homesite and Housing Corporation, L-21498, June 27,
1968
1
citing Ibaez vs. Hongkong and Shanghai Bank
2
, held that "a person who is
not a partly obliged principally or subsidiarily in a contract may exercise an action for
nullity of the contract if he is prejudiced in his rights with respect to one of the
contracting parties, and can show the detriment which would positively result to him
from the contract in which he had no intervention." Pursuant to said doctrine, in order
that respondent Pio Arcilla might bring an action for the nullity of the contracts
aforesaid, he should have been not only prejudiced in his rights with respect to one of
the contracting parties, but must have also shown the detriment which he would
positively suffer from the contracts. It becomes, therefore, necessary to inquire,
whether respondent Pio Arcilla's rights were prejudiced by the aforesaid contracts,
and as to what detriment, if any, he suffered because of those contracts.
What rights of respondent Pio Arcilla were prejudiced? The Court of Appeals found
that Pio Arcilla "makes no pretense that he entered into and built his land upon
appellee PHHC's land with the consent of the latter." Pio Arcilia was, therefore, a
trespasser, or a squatter, he being a person who settled or located on land, in closed
or uninclosed with "no bona fide claim or color of title and without consent of the
owner."
3
He began his material possession of the lot in bad faith, knowing that he did
not have a right thereto, and it is presumed that his possession continued to be
enjoyed in the same character in which it was acquired, i.e. in bad faith until the
contrary is proved.
4
And what right can a squatter have to the land into which he has
intruded against the owner of the land? The answer is not hard to find, A squatter can
have no possessory rights whatsoever, and his occupancy of the land is only at the
owner's sufferance, his acts are merely tolerated and cannot affect the owner's
possession.
5
The squatter is necessarily bound to an implied promise, that he will
vacate upon demand.
This Court, in Bernardo et al. vs. Bernardo and Court of Appeals
6
, laid down the
doctrine that:
In carrying out its social re-adjustment policies, the government
could not simply lay aside moral standards, and aim to favor
usurpers, squatters, and intruders, unmindful of the lawful or
unlawful origin and character of their occupancy. Such a policy
would perpetuate conflicts instead of attaining their just solution.
Respondent Pio Arcilla, having no possessory rights whatsoever, what detriment could
be have suffered from the aforesaid contracts?
The Court of Appeals, however, held that respondent Pio Arcilia had a right to
purchase the lot occupied by him. The discussion of this alleged right brings us to the
second assignment of error.
2. We find merit in petitioners' second assignment of error. Relying on the decision of
the Court of Appeals, respondent Arcilia anchored his alleged preferential right to
purchase Lot 5, Block E-130 on Resolution No. 562 of PHHC's Board of Directors,
dated June 27, 1963, which reads as follows:
(1) No preference, advantage or benefit shall be given to
squatters in the allocation of PHHC residential lots by reason
alone of their prior occupancy thereof, but they shall be treated on
the same footing as other qualified applicants. Squatters who are
found qualified and deserving shall be given preferential awards
only in PHHC resettlement projects, if they voluntarily comply with
PHHC rules and policies without waiting to be evicted thru court
proceedings.
and on Resolution No. 558, dated April 16, 1962, which approved the
recommendations of its Acting Legal Officer. The recommendations included the
proposed "Application Forms No. 6-D and No. 6-F" for non-occupants and occupants
or squatters, respectively, and provided, among others, that:
(6) The Sales and Management Department should have a ready
and up-to- date census of all lots occupied by squatters within
PHHC subdivisions open for sale or award, in order that lots
occupied by squatters who are not qualified to buy the same, or
who do not merit an award shall not be awarded to anybody until
the PHHC has obtained a final court decision for the eviction of
such squatter. (Exhibit 1-B).
It should not be lost sight of, however, that according to the decision of the Court of
Appeals, "Time there may have been, perhaps, when occupancy of a lot without the
consent of said appellee was not recognized at all as basis for a claim to a right to
purchase said lot;" and that "on the face of the evidence presented before us in this
case, we note a clear shift in policy in the disposition of lots of appellee PHHC," and
the shift in policy was evidenced by the afore-quoted resolutions.
If the afore-quoted resolutions relied upon by respondent Arcilla were evidence of the
shift of policy, then, it stands to reason that before the adoption of said resolutions, the
policy of the PHHC was different; otherwise, there would have been no reason for a
change of policy. Resolution No. 562 was dated June 27, 1963. Hence the policy
before June 27, 1963 was different. In fact even the Court of Appeals noted that
before said date, "occupancy of a lot" was perhaps "not recognized at all as a basis
for a claim of a right to purchase said lot." Hence at the time Lot No. 5 was awarded to
Cristeta L. Laquihon on May 20, 1960, and at the time the PHHC approved the
transfer of original awardee's rights to herein petitioners on Nov. 15, 1962, it was not
yet the policy of the PHHC to recognize mere occupancy of a lot as giving a right to
purchase the same, for said Policy was adopted only later, i.e. on June 27, 1963.
Moreover, it is not stated expressly in the above-quoted resolutions, and neither can it
be necessarily implied therefrom, that the occupant was given a preferential right to
purchase the lot he occupied. In fact Resolution No. 562 explicitly states that although
a squatter shall be treated on the same footing as other qualified applicants, said
occupant has no preference at all by reason of said occupancy. In the instant case, it
is not even shown, although it was taken for granted, that respondent Pio Arcilia was a
qualified applicant who should be treated on the Same footing as others. The fact is
that said respondent never filed an application for the lot, so he cannot be a qualified
applicant. A squatter found to be qualified and deserving was to be given preferential
award, not necessarily to the same lot he occupies but only in PHHC resettlement
projects; and it does not appear that Lot 5, Block E-130, in question, is in a
resettlement project.
Furthermore, said preferential award in resettlement projects is granted only in case
the squatter is not evicted through court proceedings. In the instant case, respondent
Arcilla had been ejected from the lot through court proceedings in Civil Case No. IV-
11691 of the City Court of Quezon City. If a squatter was given a Preferential right to
the lot he occupies, how come that the same resolution No. 562 also provided that
"No administrative case shall be entertained on the basis alone of a squatter's claim of
prior or actual occupancy of PHHC lot?"
We hold that the claim, of respondent Pio Arcilla to the alleged preferential right to
purchase Lot 5, Block E-130, had not been substantiated.
3. Respondent Arcilla argues that the awardee of the lot, Cristeta L. Laquihon, did not
comply with the resolutory condition of building a house; so, she acquired no rights
that could be transmitted to her father.
This Court cannot sustain respondent's stand.
This Court of Appeals stated in its decision that the contract to sell, dated May 20,
1960, executed by the PHHC in favor of Cristeta L. Laquihon was.
Subject to the standard resolutory conditions imposed upon
grants of similar nature, including the grantee's undertaking to
eject trespassers, intruders or squatters on the land and to
'construct a residential house on the lot and shall complete the
same within a period of (1) year from the signing of this contract
with no extension,' the non-compliance with which results in the
contract being 'deemed annulled and cancelled (Exhibit 7).
Because no residential house, continued the Court of Appeals, was ever erected by
the awardee on the premises not even until she died on May 9, 1962, "she failed to
comply with a condition of the award, the non-compliance with which has a resolutory
effect upon the award," such that when Cristeta L. Laquihon died, she acquired no
vested right in the land, and she transmitted nothing to her father, Basilio Laquihon,
who, on his part, could not have transferred any right to petitioners Baez.
It is granted that by virtue of the resolutory condition, the resolution of the contract
took place by force of law and that there was no need of judicial declaration to resolve
the contract. Civilists, however, are not agreed on whether the injured party retains the
option of demanding fulfillment or rescission of the obligation as provided in Article
1191 or not. Thus Collin y Capitant, Curson Elemental de Derecho Civil, Vol. III, p. 750
says:
En la hipotesis de una clausula del contrato que pronuncie una
resolucion eventual, hay que proclamar la validez de tal clausula
en el Derecho espanol siempre que no aparezca por sus
circumstancias como contraria a la ley o a las buenas
costumbres.
El efecto de tal clausula sera que la resolucion se produzca de
pleno derecho, sin intervencion judicial; pero entendemos que, a
pesar de ella el acreedor conservara el derecho de opcion que le
concede el art. 1124 [Art. 1191 of the Civil Code of the
Philippines] a no ser que la clausula misma resulte otra cosa.
Manresa, in Commentaries al Codigo Civil Espanol, 1967, Vol. VIII, p. 416, however,
says that the stipulated resolution of the contract in case one of the parties does not
comply with his undertaking is produced by force of law, but the option of the injured
party disappears.
If the creditor could still demand, in spite of the resolution ipso jure of the contract,
then the resolution would not be mandatory on the creditor and the resolution would
produce its effect when the creditor notified the debtor of his decision. (Tolentino, Civil
Code of the Philippines, Vol. IV, p. 175.)
It is certain, therefore, that the said contract to sell in the instant case was by virtue of
the stipulated resolutory conditions resolved by operation of law. But the Court of
Appeals overlooked in the instant case the express provision of the contract to sell
that said resolution becomes effective only from the date written notice thereof is sent
by the PHHC to the applicant. Thus paragraph 12 of the contract to sell (Exhibit 7)
provides:
12. Should the APPLICANT violate, refuse or fail to comply with
any of the terms and conditions stipulated herein or default in the
payment of three monthly installments as provided for in
paragraph 1 hereof, this contract shall be deemed annulled and
cancelled and the CORPORATION shall be at liberty to dispose
of said property to any other person in the same manner as if the
contract had never been made ... The annulment and cancellation
and the right of the CORPORATION to repossess the property
shall become effective from the date written notice thereof is sent
by the CORPORATION to the APPLICANT at his last known post-
office address ...
The record does not show, and the decision of the Court of Appeals does not state,
that the PHHC ever notified in writing the awardee of the cancellation of the contract to
sell. Hence, the resolution of the contract never became effective. Consequently,
whatever rights the original awardee Cristeta Laquihon had over the disputed lot were
transmitted upon her death to her only legal and compulsory heir, her father Basilio
(Art. 777, Civil Code) which rights the latter could also convey to herein petitioners.
But even if it be assumed gratia argumenti, that the original awardee Cristeta
Laquihon acquired no vested right to the lot upon her death because of her failure to
comply with the resolutory condition of constructing a house on the lot, and the lot had
to revert to the PHHC, still it cannot be denied that the PHHC waived the effects of
said resolutory condition when its Board of Directors approved, on November 15,
1962, the transfer to Aurea Baez. In consenting to the transfer, the PHHC
necessarily waived any right that might have accrued to it by virtue of the resolution of
the contract before the transfer.
Regarding the other resolutory condition mentioned by the decision sought to be
reviewed, and emphasized by private respondent, that the original awardee did not file
an action for ejectment, it is to be noted that the awardee was not obliged to file said
ejectment suit against respondent, the latter having squatted on the land since 1956
and the award to Cristeta Laquihon having been made only on May 20, 1960. On this
matter, the Constitutional Contract to Sell (Exhibit 7) explicitly provides that:
3. ... The applicant shall undertake the ejectment of any
trespasser, intruder or squatter who shall build on the lot or who
shall deprive him of the right to possess the same from the date of
this contract.
The awardee was obliged to eject squatters 44 who shall build on the lot ... from the
date of this contract." Hence, respondent Arcilla having built his house or squatted on
the land very much before, i.e. 4 years before the land was awarded to awardee, the
latter was not under contractual obligation to eject him.
Resolution No. 558 does not require, furthermore, that the applicant for, or transferee
of, a PHHC lot should reside in Quezon City. What the Resolution requires is that he
should have his "permanent residence or principal place of work or business in
Quezon City, Manila or suburbs ..." San Juan, the address of petitioners herein, is
certainly included in the term "suburbs."
4. In support of their fourth assignment of error, that the Court of
Appeals erred in holding that the approval of the transfer of the
rights to the lot to petitioners was due to the intercession of the
then Senator Estanislao Fernandez, petitioners argued that the
issue of whether the letter of Senator Fernandez influenced the
approval of the transfer was not assigned as error in respondent
Arcilla's brief in the Court of Appeals, and neither was such
influence alleged in the complaint, hence the Court of Appeals
could not decide said issue; and that the Board of Directors,
uninfluenced by politicians, used its discretion in approving the
transfer.
Section 7 of Rule 51 of the Rules of Court provides that in order that a question may
be considered by the Court of Appeals, said question must be stated in the
assignment of errors and it must be properly argued in the brief. (Traders Insurance
and Surety Co. vs. Golangco, et al., 95 Phil. 824, 830; Tan Si Kick v. Tiacho, 79 Phil.
696, 698.) We note that there were only two errors assigned in appellant's brief in the
Court of Appeals, namely: that the trial court erred in holding that (1) the claim of
plaintiff that defendant was disqualified to acquire lot 5 for she already owned lot in
San Juan was not substantiated, and (2) there was a valid perfected contract of sale
between the PHHC and the late Cristeta Laquihon, and between the PHHC and Aurea
Baez and Ramon Baez, and that they are bound by the terms and conditions
thereof. Hence the alleged intercession of the then Senator Estanislao Fernandez in
the transfer of right by Basilio Laquihon to petitioners, which was not stated in the
assignment of errors and not argued in the brief, should have not been considered by
the Court of Appeals.
Moreover, the evidence on which the finding of the Court of Appeals that the PHHC
accommodated petitioners because of the intercession of whoever wrote "Exhibit C,
has no evidentiary basis, for Exhibit C was rejected by the trial court "for being
immaterial, irrelevant, impertinent and not properly identified (TSN, Nov. 4, 1964, p.
90)." The party introducing it did not even ask permission from the Court that the same
be attached to the record so that the appellate court may review the ruling of the trial
court (U.S. vs. Cabaraban, 36 Phil. 251, 253-254; Velez vs. Chaves, 50 Phil. 676,
678-679). Evidence ruled out at the trial of the case cannot be taken into consideration
in the decision, for that would infringe the constitutional right of the adverse party to
due process of law (Tinsay vs. Yusay and Yusay, 47 Phil. 639, 643). Documents
forming no part of the proofs before the appellate court will not be considered in
disposing of the issues of an action (De Castro v. Court of Appeals, 75 Phil., 824, 835,
citing Dayrit v. Gonzalez, 7 Phil. 182; 5 Encyc. of Evidence, 469). Although said letter
was written on stationery bearing the letterhead of the then Senator Fernandez, it
does not conclusively follow that it was Senator Fernandez himself who wrote the
letter. Even the signature of the letter was "illegible".
But assuming that the letter was written by Senator Fernandez, it cannot be implied
from the facts of the case that the transfer of rights from Basilio Laquihon to petitioners
herein was approved solely on the strength of such letter, for the approval of the
transfer was recommended as "extremely meritorious" by the Head Executive
Assistant (Exh. "2"), and by the Homesite Sales Supervisor (Exh. F). Neither can it be
said that the approval of the transfer by the Board of Directors was vitiated by undue
influence or that it was illegal. That letter, even if it was written really by Senator
Fernandez, could not destroy the free agency of the PHHC Board of Directors, and it
could not have interfered with the exercise of Board's independent discretion. This
Court has already said that solicitation, importunity, argument and persuasion are not
undue influence, and a contract is not to be set aside merely because one party used
these means to obtain the consent of the others. Influence obtained by persuasion or
argument or by appeals to the affections is not prohibited either in law or morals, and i
s not obnoxious even in courts of equity. Such may be termed "due influence."
(Martinez vs. Hongkong and Shanghai Bank, 15 Phil. 252, 270.)
5. In support of their fifth assignment of error, petitioners argued that the Court of
Appeals erred in relying merely on the certification of the Municipal Treasurer of San
Juan to the effect that his office "has a record of real property holding of Ramon and
Aurea Baez" consisting of a lot located at M. J. Paterno Street and assessed at
P31,190.00 under Tax Declaration No. 23804 of the land records of said municipality,
for a tax declaration is not evidence of title of property, and respondent Arcilla did not
present any other evidence to prove that petitioners are really owners of a lot in San
Juan, Rizal; that even granting that they are owners of a lot, still as maintained by the
PHHC, they are not disqualified to acquire the lot in question as they merely stepped
into the shoes of the original purchaser Cristeta Laquihon; that R. A. No. 498, relied
upon by respondent in his complaint in asserting that the award of the lot to petitioner
Aurea Baez was null and void, is not applicable to the case and could not therefore
have been violated.
In the decision under review, the Court of Appeals said that to be an awardee of
PHHC's lots, one must not "already own or hold under a contract to buy residential lot
or lots in any subdivision situated in ... San Juan ... (Exhibits D-2 and Z)."
Paragraph 9 of the Conditional Contract to Sell (Exhibit 7) also provides that "any
transfer that may be authorized or permitted by the CORPORATION shall be under
the condition that the transferee is qualified to acquire a lot under the rules and
regulations of the CORPORATION ..."
The sole evidence submitted by respondent Arcilla to prove that petitioners herein
were disqualified to be transferees of the lot in question was the certification of the
Treasurer of San Juan (Exhibit I) that there is a tax declaration No. 23804 of the land
records of said municipality in the name of Ramon and Aurea Baez. Said Tax
declaration is insufficient to prove ownership. It has been held anent this matter that
Assessment alone is of little value as proof of title. Mere tax
declaration does not vest ownership of the property in the
declarant" (Province of Camarines Sur vs. Director of Lands, 64
Phil. 600, 613 citing Evangelista vs. Tabayuyong, 7 Phil., 607;
Casimiro vs. Fernandez, 9 Phil., 562; Elumbaring vs. Elumbaring,
12 Phil. 384).
It is well-settled that neither tax receipts nor declaration of ownership for taxation
purposes are evidence of ownership or of the right to possess realty when not
supported by other effective proofs. (Elumbaring vs. Elumbaring, 12 Phil. 384,
388389).
It has not been proven, therefore, that petitioners herein are owners of a lot in San
Juan, and consequently disqualified to be transferees of the questioned lot.
R.A. No. 498, relied upon by herein respondent in his complaint, in asserting that the
award to petitioners was null and void, is not applicable to the instant case. Said Act
authorizes cities, municipalities and provinces to purchase and/or expropriate home
sites and landed estates and subdivide them for resale at cost, and provides in
Section 3 that 14 no such lot shall be sold to any person, who already owns a
residential lot, and any sale made to such person shall be void." The PHHC not being
a city, municipality, or province, it is apparent that Act is not applicable to the instant
case.
IN VIEW OF THE FOREGOING, the decision of the Court of Appeals, dated January
9, 1969, in CA-G. R. No. 36227-R, is set aside, and the decision of the Court of First
Instance of Quezon City in Civil Case No. Q-7679, is affirmed. Costs against
respondent Pio Arcilla.
IT IS SO ORDERED.
Fernando, Barredo, Antonio and Aquino, JJ., concur.
Fernandez, J., took no part.