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CASE DIGEST FOR:

Possession:

- Ortiz v. Kayanan
- Escritor Jr. v. IAC

Usufruct:

- Moralidad v. Spouses
- Hemedes v. CA
- Board of Assessment Appeals of Zamboanga del Sur v. Samar Mining

Ortiz v. Cayanan, 92 SCRA 146, 1979

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-32974 July 30, 1979

BARTOLOME ORTIZ, petitioner,


vs.
HON. UNION C. KAYANAN, in his capacity as Judge of the Court of First Instance of Quezon,
Branch IV; ELEUTERIO ZAMORA, QUIRINO COMINTAN, VICENTE FERRO, AND GREGORIO
PAMISARAN, respondents.

Salonga, Ordo;ez, Yap, Sicat & Associates and Salvador, Ulgado & Carbon for petitioner.

Jose A. Cusi for private respondents.

ANTONIO, J.:

Petition for certiorari and Prohibition with Preliminary Injunction to nullify the Order of respondent Judge
directing the execution of the final judgment in Civil Case No. C-90, entitled "Bartolome Ortiz vs.
Secretary of Agriculture and Natural Resources, et al.," and the Writ of Execution issued to implement
said Order, allegedly for being inconsistent with the judgment sought to be enforced.

Civil Case No. C-90 was filed by Bartolome Ortiz who sought the review and/or annulment of the decision
of the Secretary of Agriculture and Natural Resources, giving preference to the sales applications of
private respondents Quirino Comintan and Eleuterio Zamora over Lot No. 5785, PLS-45, located at Barrio
Cabuluan, Calauag, Quezon.

The factual background of the case, as found by respondent Court, is as follows:

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... The lot in controversy was formerly the subject of Homestead Application No.
122417 of Martin Dolorico II, plaintiff's ward who died on August 20, 1931; that
since then it was plaintiff who continued the cultivation and possession of the
property, without however filing any application to acquire title thereon; that in the
Homestead Application No. 122417, Martin Dolorico II named his uncle, Martin
Dolorico I as his heir and successor in interest, so that in 1951 Martin Dolorico I
executed an affidavit relinquishing his rights over the property in favor of
defendants Quirino Comintan and Eleuterio Zamora, his grandson and son-in-law,
respectively, and requested the Director of Lands to cancel the homestead
application; that on the strength of the affidavit, Homestead Application No. 122417
was cancelled and thereafter, defendants Comintan and Zamora filed their
respective sales applications Nos. 8433 and 9258; that plaintiff filed his protest on
November 26, 1951 alleging that he should be given preference to purchase the lot
inasmuch as he is the actual occupant and has been in continuous possession of
the same since 1931; and inspite of plaintiff's opposition, "Portion A" of the property was
sold at public auction wherein defendant Comintan was the only bidder; that on June 8,
1957, investigation was conducted on plaintiff's protest by Assistant Public Lands
Inspector Serapion Bauzon who submitted his report to the Regional Land Officer,
and who in turn rendered a decision on April 9, 1958, dismissing plaintiff's claim
and giving due course to defendants' sales applications on the ground that the
relinquishment of the homestead rights of Martin Dolorico I in favor of Comintan
and Zamora is proper, the former having been designated as successor in interest of
the original homestead applicant and that because plaintiff failed to participate in the
public auction, he is forever barred to claim the property; that plaintiff filed a motion for
reconsideration of this decision which was denied by the Director of Lands in his order
dated June 10, 1959; that, finally, on appeal to the Secretary of Agriculture and Natural
Resources, the decision rendered by the Regional Land Officer was affirmed in toto. 1

On March 22, 1966, respondent Court rendered judgment in the afore-mentioned civil case, the
dispositive portion of which reads as follows:

IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered


awarding Lot No. 5785-A of PLS-45, (Calauag Public Land Subdivision) one-half
portion of the property in litigation located at Bo. Cabuluan, Calauag, Quezon, in
favor of defendant QUIRINO COMINTAN, being the successful bidder in the public
auction conducted by the bureau of Lands on April 18, 1955, and hereby giving due
course to the Sales Application No. 9258 of defendant Eleuterio Zamora over the
other half, Lot No. 5785-B of PLS-45, Calauag, without prejudice to the right of
plaintiff BARTOLOME ORTIZ to participate in the public bidding of the same to be
announced by the Bureau of Lands, Manila. However, should plaintiff Bartolome
Ortiz be not declared the successful bidder thereof, defendants Quirino Comintan
and Eleuterio Zamora are ordered to reimburse jointly said plaintiff the
improvements he has introduced on the whole property in the amount of
THIRTEEN THOUSAND SIX HUNDRED THIRTY-TWO (P13,632.00) PESOS, the latter
having the right to retain the property until after he has been fully paid therefor,
without interest since he enjoys the fruits of the property in question, with
prejudice and with costs again the plaintiff.2

Plaintiff appealed the decision to the Court of Appeals.

Two (2) years after the rendition of the judgment by the court a quo, while the case was pending appeal
and upon petition of private respondents Quirino Comintan and Eleuterio Zamora, respondent Court
appointed respondent Vicente Ferro, Clerk of Court, as Receiver to collect tolls on a portion of the
property used as a diversion road. On August 19, 1969, the Court of Appeals issued a Resolution
annulling the Order appointing the Receiver. Subsequently, on February 19, 1970, the Appellate Court

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affirmed the decision of the trial court. A petition for review on certiorari of the decision of the Court of
Appeals was denied by this Court on April 6, 1970. At this point, private respondents filed a petition for
appointment of a new receiver with the court a quo. This petition was granted and the receiver was
reappointed. Petitioner sought the annulment of this Order with the Court of Appeals, but said Court ruled
that its decision had already become final and that the records of the case were to be remanded to the
trial court.

Not satisfied with such denial, petitioner filed a petitioner for certiorari, prohibition and mandamus with
preliminary injunction before this Court, 3 praying for the annulment of the Order reappointing the
Receiver. On July 13, 1970, the petition was dismissed by this Court on the ground of insufficient showing
of grave abuse of discretion.

II

The judgment having become final and executory private respondents filed a motion for the execution of
the same, praying as follows:

WHEREFORE, it is respectfully prayed of this Honorable Court to order the issuance of a


writ of execution in accordance with the judgment of this Honorable Court, confirmed by
the Court of Appeals and the Supreme Court, commanding any lawful officer to deliver to
defendants Comintan and Zamora the land subject of the decision in this case but
allowing defendants to file a bond in such amount as this Honorable Court may fix, in lieu
of the P13,632.00 required to be paid to plaintiff, conditioned that after the accounting of
the tools collected by plaintiff, there is still an amount due and payable to said plaintiff,
then if such amount is not paid on demand, including the legal interests, said bond shall
be held answerable.

Ordering further the plaintiff to render an accounting of the tolls he collected from March
of 1967 to December 31, 1968 and from September 1969 to March 31, 1970, and deliver
said tolls collected to the receiver and if judgment is already executed, then to Quirino
Comintan and Eleuterio Zamora; and,

Finally, to condemn plaintiff to pay moral damages for withholding the tools which belong
to your movant in an amount this Court may deem just in the premises. 4

Acting upon the foregoing motion, respondent Judge issued an Order, dated September 23, 1970,
stating, among others, the following:

The records further disclosed that from March 1967 to December 31, 1968, piaintiff
Bartolome Ortiz collected tolls on a portion of the propertv in question wherein he
has not introduced anv improvement particularlv on Lot No. 5785-A; PLS-45
awarded to defendant Quirino Comintan, thru which vehicular traffic was detoured
or diverted, and again from September 1969 to March 31, 1970, the plaintiff
resumed the collection of tools on the same portion without rendering any
accounting on said tolls to the Receiver, who, was reappointed after submitting the
required bond and specifically authorized only to collect tolls leaving the
harvesting of the improvements to the plaintiff.

xxx xxx xxx

ln virtue of the findings of this Court as contained in the dispositive portion of its decision,
the defendants are jointly obligated to pay the plaintiff in the amount of P13,632.00 as
reasonable value of the improvements he introduced on the whole property in question,
and that he has the right of retention until fully paid. It can be gleaned from the motion of

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the defendants that if plaintiff submits an accounting of the tolls he collected during the
periods above alluded to, their damages of about P25,000.00 can more than offset their
obligation of P13,362.00 in favor of the plaintiff, thereafter the possession of the land be
delivered to the defendants since the decision of the Supreme Court has already become
final and executory, but in the interregnum pending such accounting and recovery by the
Receiver of the tolls collected by the plaintiff, the defendants pray that they allowed to put
up a bond in lieu of the said P13,632.00 to answer for damages of the former, if any.

On the other hand, plaintiff contends in his opposition, admitting that the decision of the
Supreme Court has become final and executory; (1) the offer of a bond in lieu of payment
of P13,632.00 does not, and cannot, satisfy the condition imposed in the decision of this
Court which was affirmed in toto; (2) the public sale of Portion "B" of the land has still to
take place as ordained before the decision could be executed; and, (3) that whatever
sums plaintiff may derive from the property cannot be set off against what is due him for
the improvements he made, for which he has to be reimbursed as ordered.

xxx xxx xxx

Let it be known that plaintiff does not dispute his having collected tolls during the periods
from March 1967 to December 31, 1968 and from September 1969 to March 31, 1970.
The Supreme Court affirmed the decision of this Court its findings that said tolls belong to
the defendant, considering that the same were collected on a portion of the land question
where the plaintiff did not introduce any improvement. The reimbursement to the plaintiff
pertains only to the value of the improvements, like coconut trees and other plants which
he introduced on the whole property. The tolls collected by the plaintiff on an unimproved
portion naturally belong to the defendants, following the doctrine on accretion. Further,
the reappointment of a Receiver by this Court was upheld by the Supreme Court when it
denied the petition for certiorari filed by the plaintiff, bolstering the legal claim of
defendants over said tolls. Thus, the decision of the Supreme Court rendered the
decision of this Court retroactive from March 22, 1966 although pending accounting of
the tolls collected by the plaintiff is justified and will not prejudice anybody, but certainly
would substantially satisfy the conditions imposed in the decision. However, insofar as
the one-half portion "B" of the property, the decision may be executed only after public
sale by the Bureau of Lands shall be accomplished.

WHEREFORE, finding the Motion for Execution filed by the defendants to be meritorious,
the same is granted; provided, however, that they put up a bond equal the adjudicated
amount of P13,632.00 accruing in favor of the plaintiff, from a reputable or recognized
bonding or surety company, conditioned that after an accounting of the tolls collected by
the plaintiff should there be found out any balance due and payable to him after
reckoning said obligation of P13,632.00 the bond shall be held answerable therefor. 5

Accordingly, a Writ of Execution was issued after private respondent Quirino Comintan had filed the
required bond. The writ directed the Sheriff to enforce the decision of the Court, and stated, part in, the
following:

But should there be found any amount collectible after accounting and deducting the
amount of P3,632.00, you are hereby ordered that of the goods and chattels of Bartolome
Ortiz of Bo. Kabuluan, Calauag, Quezon, be caused to be made any excess in the
above-metioned amount together with your lawful fees and that you render same to
defendant Quirino Comintan. If sufficient personal property cannot be found thereof to
satisfy this execution and lawful fees thereon, then you are commanded that of the lands
and buildings of the said BARTOLOME ORTIZ you make the said excess amount in the
manner required by the Rules of Court, and make return of your proceedings within this
Court within sixty (60) days from date of service.

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You are also ordered to cause Bartolome Ortiz to vacate the property within fifteen (15)
days after service thereof the defendant Quirino Comintan having filed the required bond
in the amount of THIRTEEN THOUSAND SIX HUNDRED THIRTY-TWO (P13,632.00)
PESOS. 6

On October 12, 1970, petitioner filed a Motion for Reconsideration of the aforesaid Order and Writ
of Execution, alleging:

(a) That the respondent judge has no authority to place respondents in possession
of the property;

(b) That the Supreme Court has never affirmed any decision of the trial court that tolls
collected from the diversionary road on the property, which is public land, belong to said
respondents;

(c) That to assess petitioner a P25,000.00 liability for damages is purely punitive
imposition without factual or legal justification.

The foregoing Motion for Reconsideration was denied by respondent Judge per Order dated
November 18, 1970. Saod Order states, in part:

It goes without saying that defendant Comintan is entitled to be placed in


possession of lot No. 5785-A of PLS-45 (Calauag Public Land Subdivision) and
enjoyment of the tolls from March, 1967 to March, 1968 and from September, 1969
to March 31, l970 which were received by plaintiff Bartolome Ortiz, collected from
the property by reason of the diversion road where vehicular traffic was detoured.
To defendant Comintan belongs the tolls thus collected from a portion of the land
awarded to him used as a diversionary road by the doctrine of accretion and his
right over the same is ipso jure, there being no need of any action to possess said
addition. It is so because as consistently maintained by the Supreme Court, an applicant
who has complied with all the terms and conditions which entitle him to a patent for a
particular tract of publlic land, acquires a vested right therein and is to be regarded as
equitable owner thereof so that even without a patent, a perfected homestead or sales
application is a property right in the fullest sense, unaffectcd by the fact that the
paramount title is still in the Government and no subsequent law can deprive him of that
vested right The question of the actual damages suffered by defendant Comintan by
reason of the unaccounted tolls received by plaintiff had already been fully discussed in
the order of September 23, 1970 and the Court is honestly convinced and believes it to
be proper and regular under the circumstances.

Incidentally, the Court stands to correct itself when in the same order, it directed the
execution of he decision with respect to the one-half portion "B" of the property only after
the public sale by the Bureau of Lands, the same being an oversight, it appearing that the
Sales Application of defendant Eleuterio Zamora had already been recognized and full
confirmed by the Supreme Court.

In view thereof, finding the motion filed by plaintiff to be without merit, the Court hereby
denies the same and the order of September 23, 1970 shall remain in full force subject to
the amendment that the execution of the decision with respect to the one-half portion "B"
shall not be conditioned to the public sale by the Bureau of Lands.

SO ORDERED.7

III

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Petitioner thus filed the instant petition, contending that in having issued the Order and Writ of
Execution, respondent Court "acted without or in excess of jurisdiction, and/or with grave abuse of
discretion, because the said order and writ in effect vary the terms of the judgment they purportedly seek
to enforce." He argued that since said judgment declared the petitioner a possessor in good faith, he is
entitled to the payment of the value of the improvements introduced by him on the whole property, with
right to retain the land until he has been fully paid such value. He likewise averred that no payment for
improvements has been made and, instead, a bond therefor had been filed by defendants (private
respondents), which, according to petitioner, is not the payment envisaged in the decision which would
entitle private respondents to the possession of the property. Furthermore, with respect to portion "B",
petitioner alleges that, under the decision, he has the right to retain the same until after he has
participated and lost in the public bidding of the land to be conducted by the Bureau of Lands. It is
claimed that it is only in the event that he loses in the bidding that he can be legally dispossessed thereof.

It is the position of petitioner that all the fruits of the property, including the tolls collected by him
from the passing vehicles, which according to the trial court amounts to P25,000.00, belongs to
petitioner and not to defendant/private respondent Quirino Comintan, in accordance with the
decision itself, which decreed that the fruits of the property shall be in lieu of interest on the
amount to be paid to petitioner as reimbursement for improvements. Any contrary opinion, in his
view, would be tantamount to an amendment of a decision which has long become final and
executory and, therefore, cannot be lawfully done.

Petitioner, therefore, prayed that: (1) a Writ of Preliminary Injunction be issued enjoining the enforcement
of the Orders of September 23, 1970 and November 18, 1970, and the Writ of Execution issued thereto,
or restoring to petitioner the possession of the property if the private respondents had been placed in
possession thereof; (2) annulling said Orders as well as the Writ of Execution, dissolving the receivership
established over the property; and (3) ordering private respondents to account to petitioner all the fruits
they may have gathered or collected from the property in question from the time of petitioiier's illegal
dispossession thereof.

On January 29, 1971, this Court issued the Writ of Preliminary Injunction. On January 30, 1971, private
respondents filed a Motion for Reconsideration and/or Modification of the Order dated January 29, 1971.
This was followed by a Supplemental Motion for Reconsideration and Manifestation on February 3, 1971.
In the latter motion, private respondents manifested that the amount of P14,040.96, representing the
amount decreed in the judgment as reimbursement to petitioner for the improvements, plus interest for six
months, has already been deposited by them in court, "with the understanding that said amount shall be
turned over to the plaintiff after the court a quo shall have determined the improvement on Lot 5785-A,
and subsequently the remaining balance of the deposit shall be delivered to the petitioner (plaintiff
therein) in the event he loses the bid for Lot 5785-B in favor of private respondent Eleuterio
Zamora."8 The deposit is evidenced by a certification made by the Clerk of the Court a quo.9 Contending
that said deposit was a faithful compliance with the judgment of the trial court, private respondent Quirino
Comintan prayed for the dissolution of the Writ of Injunction.

It appears that as a consequence of the deposit made by private respondents, the Deputy, Sheriff of
Calauag, Quezon ousted petitioner's representative from the land in question and put private respondents
in possession thereof. 10

On March 10, 1971, petitioner filed a "Comment on Respondents' 'Motion for Reconsideration' dated
January 29, 1971' and 'Supplemental Motion for Reconsideration and Manifestation,'" contending that the
tender of deposit mentioned in the Suplemental Motion was not really and officially made, "inasmuch as
the same is not supported by any official receipt from the lower court, or from its clerk or cashier, as
required by law;" that said deposit does not constitute sufficient compliance with the judgment sought to
be enforced, neither was it legally and validly made because the requisites for consignation had not been
complied with; that the tender of legal interest for six months cannot substitute petitioner's enjoyment of
the fruits of the property as long as the judgment in Civil Case No. C-90 has not been implemented in the
manner decreed therein; that contrary to the allegations of private respondents, the value of the

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improvements on the whole property had been determined by the lower court, and the segregation of the
improvements for each lot should have been raised by them at the opportune moment by asking for the
modification of the decision before it became final and executory; and that the tolls on the property
constituted "civil fruits" to which the petitioner is entitled under the terms of the decision.

IV

The issue decisive of the controvery isafter the rendition by the trial court of its judgment in
Civil Case No. C-90 on March 22, 1966 confirming the award of one-half of the property to Quirino
Comintanwhether or not petitioner is still entitled to retain for his own exclusive benefit all the
fruits of the property, such as the tolls collected by him from March 1967 to December 1968, and
September 1969 to March 31, 1970, amounting to about P25,000.00. In other words, petitioner
contends that so long as the aforesaid amount of P13,632,00 decreed in the judgment
representing the expenses for clearing the land and the value of the coconuts and fruit trees
planted by him remains unpaid, he can appropriate for his exclusive benefit all the fruits which he
may derive from the property, without any obligation to apply any portion thereof to the payment
of the interest and the principal of the debt.

We find this contention untenable.

There is no question that a possessor in good faith is entitled to the fruits received before the
possession is legally interrupted. 11 Possession in good faith ceases or is legally interrupted from
the moment defects in the title are made known to the possessor, by extraneous evidence or by
the filing of an action in court by the true owner for the recovery of the property. 12 Hence, all the
fruits that the possessor may receive from the time he is summoned in court, or when he answers
the complaint, must be delivered and paid by him to the owner or lawful possessor. 13

However, even after his good faith ceases, the possessor in fact can still retain the property,
pursuant to Article 546 of the New Civil Code, until he has been fully reimbursed for all the
necessary and useful expenses made by him on the property. This right of retention has been
considered as one of the conglomerate of measures devised by the law for the protection of the
possessor in good faith. Its object is to guarantee the reimbursement of the expenses, such as
those for the preservation of the property,14 or for the enhancement of its utility or
productivity.15 It permits the actual possessor to remain in possession while he has not been
reimbursed by the person who defeated him in the possession for those necessary expenses and
useful improvements made by him on the thing possessed. The principal characteristic of the
right of retention is its accessory character. It is accessory to a principal obligation. Considering
that the right of the possessor to receive the fruits terminates when his good faith ceases, it is
necessary, in order that this right to retain may be useful, to concede to the creditor the right to
secure reimbursement from the fruits of the property by utilizing its proceeds for the payment of
the interest as well as the principal of the debt while he remains in possession. This right of
retention of the property by the creditor, according to Scaevola, in the light of the provisions of
Article 502 of the Spanish Civil Code,16 is considered not a coercive measure to oblige the debtor
to pay, depriving him temporarily of the enjoyment of the fruits of his property, but as a means of
obtainitig compensation for the debt. The right of retention in this case is analogous to a contract
of antichresis and it cati be considered as a means of extinguishing the obligation, inasmuch as
the right to retain the thing lasts only for the period necessary to enable the creditor to be
reimbursed from the fruits for the necessary and useful expenses. 17

According to Manresa, the right of retention is, therefore, analogous to that of a pledge, if the
property retained is a movable, and to that of antichresis, if the property held is immovable. 18 This
construction appears to be in harmony with similar provisions of the civil law which employs the right of
retention as a means or device by which a creditor is able to obtain the payment of a debt. Thus, under
Article 1731 of the New Civil Code, any person who has performed work upon a movable has a
right to retain it by way of pledge until he is paid. Similarly, under Article 1914 of the same Code,

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the agent may retain in pledge the things which are the object of the agency until the principal
effects reimbursement of the funds advanced by the former for the execution of the agency, or he
is indemnified for all damages which he may have suffered as a consequence of the execution of
the agency, provided he is free from fault. To the same effect, the depositary, under Article 1994 of the
same Code, may retain the thing in pledge until the full payment of what may be due him by reason of the
deposit. The usufructuary, pursuant to Article 612 of the same Code, may retain the property until he is
reimbursed for the amount paid for taxes levied on the capital (Article 597) and tor extraordinary repairs
(Article 594).

In all of these cases, the right of retention is used as a means of extinguishing the obligation. As
amply observed by Manresa: "El derecho de retencion, lo hemos dicho, es el derecho de prenda o el de
anticresis constituido por la ley con independencia de las partes." 19 In a pledge, if the thing pledged
earns or produces fruits, income, dividends or interests, the creditor shall compensate what he receives
with those which are owing him.20 In the same manner, in a contract of antichresis, the creditor acquires
the right to receive the fruits of an immovable of his debtor with the obligation to apply them to payment of
the interest, if owing, and thereafter to the principal of his credit. 21 The debtor can not reacquire
enjoyment of the immovable until he has actually paid what he owes the creditor. 22

Applying the afore-cited principles to the case at bar, petitioner cannot appropriate for his own
exclusive benefit the tolls which he collected from the property retained by him. It was his duty
under the law, after deducting the necessary expenses for his administration, to apply such
amount collected to the payment of the interest, and the balance to the payment of the obligation.

We hold, therefore, that the disputed tolls, after deducting petitioner's expenses for
administration, belong to Quirino Comintan, owner of the land through which the toll road passed,
further considering that the same was on portions of the property on which petitioner had not
introduced any improvement. The trial court itself clarified this matter when it placed the toll road
under receivership. The omission of any mention of the tolls in the decision itself may be
attributed to the fact that the tolls appear to have been collected after the rendition of the
judgment of the trial court.

The records further reveal that earnest efforts have been made by private respondents to have the
judgment executed in the most practicable manner. They deposited in court the amount of the judgment
in the sum of P13,632.00 in cash, subject only to the accounting of the tolls collected by the petitioner so
that whatever is due from him may be set off with the amount of reimbursement. This is just and proper
under the circumstances and, under the law, compensation or set off may take place, either totally or
partially. Considering that petitioner is the creditor with respect to the judgment obligation and the debtor
with respect to the tolls collected, Comintan being the owner thereof, the trial court's order for an
accounting and compensation is in accord with law. 23

With respect to the amount of reimbursement to be paid by Comintan, it appears that the dispositive
portion of the decision was lacking in specificity, as it merely provided that Comintan and Zamora are
jointly liable therefor. When two persons are liable under a contract or under a judgment, and no words
appear in the contract or judgment to make each liable for the entire obligation, the presumption is that
their obligation is joint or mancomunada, and each debtor is liable only for a proportionate part of the
obligation. 24 The judgment debt of P13,632.00 should, therefore, be pro-rated in equal shares to
Comintan and Zamora.

Regarding Lot 5785-B, it appears that no public sale has yet been conducted by the Bureau of Lands
and, therefore, petitioner is entitled to remain in possession thereof. This is not disputed by respondent
Eleuterio Zamora. 25 After public sale is had and in the event that Ortiz is not declared the successful
bidder, then he should be reimbursed by respondent Zamora in the corresponding amount for the
improvements on Lot 5785-B.

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WHEREFORE, in view hereof, the Order of respondent Court of November 18, 1970 is hereby
modified to conform to the foregoing judgment. The Writ of Preliminary Injunction, dated January
29, 1971, is hereby dissolved. Without special pronouncement as to costs.

Escritor Jr. v. IAC, 155 SCRA 577, 1987

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 71283 November 12, 1987

MIGUEL ESCRITOR, JR., ANGEL ESCRITOR, RAMON ESCRITOR, JUANA ESCRITOR,


CONCORDIA ESCRITOR, IRENE ESCRITOR, MATILDE ESCRITOR, MERCEDES ESCRITOR, HEIRS
OF LUIS ESCRITOR, represented by RUPERTO ESCRITOR, HEIRS OF PEDO ESCRITOR,
represented by SUSANA VILLAMENA, LINA ESCRITOR, WENDELINA ESCRITOR, ALFREDO
ESCRITOR, SUSANA ESCRITOR and CARMEN ESCRITOR, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and SIMEON ACUNA, respondents.

GANCAYCO, J.:

This is a petition for review on certiorari seeking the reversal of the decision of the Intermediate Appellate
Court in AC-G.R. No. CV-01264-R entitled "Simeon Acuna vs. Miguel Escritor, Jr., et al," a case which
originated from the Court of First Instance of Quezon.

The record of the case discloses the following facts:

Lot No. 2749, located at Atimonan, Quezon, was the subject of cadastral proceedings in the Court
of First Instance of Quezon, Gumaca Branch, Miguel Escritor, as claimant, filed an answer thereto
declaring his ownership over the lot alleging that he acquired it by inheritance from his deceased
father. 1 As required, a notice of hearing was duly published, after which an order of general
default was entered. 2 The lot having become uncontested, only Miguel Escritor appeared in order
to adduce his evidence of ownership.

On May 15, 1958, the Court rendered a decision in the abovementioned case, Cadastral Case No.
72, adjudicating the lot with its improvements in favor of claimant Escritor and confirming his title
thereto. 3 Immediately thereafter, Escritor took possession of the property. On July 15, 1958, the
Court, in an Order, directed the Chief of the General Land Registration Office to issue the
corresponding decree of registration in favor of Escritor, the decision in Cadastral Case No. 72
having become final. 4

On August 2, 1958, Simeon S. Acuna, the herein respondent, filed a petition for review of the
above-mentioned decision contending that it was obtained by claimant Escritor through fraud and
misrepresentation. 5 The petition was granted on July 18, 1960 and a new hearing was set for

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September 13, 1960. 6 While the proceedings were going on, claimant Escritor died. His heirs, the
petitioners in this case, took possession of the property.

On February 16, 1971 or thirteen years after the disputed decision was rendered, the Court
adjudicated Lot No. 2749 in favor of respondent Acuna, ordering petitioners to vacate the land. 7 A
writ of possession was later issued and petitioners voluntarily gave up their possession. 8

More than four years later, or on October 13, 1975 respondent Acuna filed with the same Court in
Civil Case No. 1138-G, a complaint for recovery of damages against petitioners for the fruits of lot
No. 2749 which was allegedly possessed by the latter unlawfully for thirteen years. According to
respondent Acua, the registration of the said lot was effectuated by the deceased claimant
Escritor through fraud, malice, and misrepresentation. The lower court, however, rendered a
decision dismissing Acua's complaint for damages, finding that though petitioners enjoyed the
fruits of the property, they were in good faith possessing under a just title, and the cause of
action, if there was any, has already prescribed. 9

On Appeal to the Intermediate Appellate Court, the judgment of the lower court was reversed in a
decision promulgated on October 31, 1984, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing considerations, the decision appealed from is


hereby REVERSED and set aside and another one entered herein, ordering the
defendants-appellees jointly and severally (a) to pay the plaintiff- appellant the sum of
P10,725.00 representing the value of the fruits appellees received for the 13 years they
have been in unlawful possession of the land subject-matter; (b) to pay plaintiff-appellant
the sum of P3,000.00 for attorney's fees and expenses of litigation, and (c) to pay the
costs.

Hence this petition.

The main issue that has to be resolved in this case is whether or not petitioners should be held
liable for damages.

Contrary to the finding of the trial court, the Intermediate Appellate Court made the
pronouncement that petitioners were possessors in bad faith from 1958 up to 1971 and should be
held accountable for damages. This conclusion was based on the statement of the cadastral court in its
August 21, 1971 decision, readjudicating Lot No. 2749 to respondent Simeon Acuna, that "Miguel Escritor
forcibly took possession of the land in May, 1958, and benefited from the coconut trees thereon. 10 The
Intermediate Appellate Court observed that on the basis of the unimpeached conclusion of the cadastral
court, it must be that the petitioners have wrongfully entered possession of the land. 11 The Intermediate
Appellate Court further explains that as such possessors in bad faith, petitioners must reimburse
respondent Acuna for the fruits of the land they had received during their possession. 12

We cannot affirm the position of the Intermediate Appellate Court. It should be remembered that in
the first decision of the cadastral court dated May 15, 1958, Lot No. 2749 was adjudicated in favor
of claimant Escritor, petitioners' predecessor-in-interest. In this decision, the said court found to
its satisfaction that claimant Escritor acquired the land by inheritance from his father who in turn
acquired it by purchase, and that his open, public, continuous, adverse, exclusive and notorious
possession dated back to the Filipino-Spanish Revolution. 13 It must also be recalled that in its
Order for the issuance of decrees dated July 15, 1958, the same Court declared that the above-
mentioned decision had become final. Significantly, nowhere during the entire cadastral
proceeding did anything come up to suggest that the land belonged to any person other than
Escritor.

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Nevertheless, assuming that claimant Escritor was a possessor in bad faith, this should not
prejudice his successors-in-interest, petitioners herein, as the rule is that only personal
knowledge of the flaw in one's title or mode of acquisition can make him a possessor in bad faith,
for bad faith is not transmissible from one person to another, not even to an heir. 15 As Article 534
of the Civil Code explicitly provides, "one who succeeds by hereditary title shall not suffer the
consequences of the wrongful possession of the decedent, if it is not shown that he was aware of
the flaws affecting it; ..." The reason for this article is that bad faith is personal and
intransmissible. Its effects must, therefore, be suffered only by the person who acted in bad faith;
his heir should not be saddled with such consequences. 16

Under Article 527 of the Civil Code, good faith is always presumed, and upon him who alleges bad faith
on the part of a possessor rests the burden of proof. If no evidence is presented proving bad faith, like in
this case, the presumption of good faith remains.

Respondent Acuna, on the other hand, bases his complaint for damages on the alleged fraud on the part
of the petitioners' predecessor in having the land registered under his (the predecessor's) name. A review
of the record, however, does not indicate the existence of any such fraud. It was not proven in the
cadastral court nor was it shown in the trial court.

Lot No. 2749 was not awarded to Escritor on the basis of his machinations. What is clear is that in
the hearing of January 22, 1958, the Court permitted Escritor to adduce his evidence of ownership
without opposing evidence as the lot had become uncontested. 17 Respondent Acuna himself failed
to appear in this hearing because of a misunderstanding with a lawyer. 18There is no finding that such
failure to appear was caused by petitioners in this case. On the contrary, all the requirements of
publication were followed. Notice of hearing was duly published. Clearly then, the allegation of
fraud is without basis.

Respondent having failed to prove fraud and bad faith on the part of petitioners, We sustain the
trial court's finding that petitioners were possessors in good faith and should, therefore, not be
held liable for damages.

With the above pronouncement, the issue of prescription of cause of action which was also presented
need not be passed upon.

WHEREFORE, the petition is GRANTED and the decision appealed from is hereby REVERSED and SET
ASIDE and another decision is rendered dismissing the complaint. No pronouncement as to costs.

SO ORDERED.

Moralidad v. Sps. Pernes

G.R. No. 152809 August 3, 2006

MERCEDES MORALIDAD, Petitioner,


vs.
SPS. DIOSDADO PERNES and ARLENE PERNES, Respondents.

DECISION

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GARCIA, J.:

Under consideration is this petition for review on certiorari under Rule 45 of the Rules of Court to nullify
and set aside the following issuances of the Court of Appeals (CA) in CA-G.R. SP No. 61610, to wit:

1. Decision dated September 27, 2001, 1 affirming an earlier decision of the Regional Trial Court (RTC) of
Davao City which reversed that of the Municipal Trial Court in Cities (MTCC), Davao City, Branch 1, in an
action for unlawful detainer thereat commenced by the petitioner against the herein respondents; and

2. Resolution dated February 28, 2002, 2 denying petitioners motion for reconsideration.

At the heart of this controversy is a parcel of land located in Davao City and registered in the
name of petitioner Mercedes Moralidad under Transfer Certificate of Title (TCT) No. T-123125 of
the Registry of Deeds of Davao City.

In her younger days, petitioner taught in Davao City, Quezon City and Manila. While teaching in
Manila, she had the good fortune of furthering her studies at the University of Pennsylvania,
U.S.A. While schooling, she was offered to teach at the Philadelphia Catholic Archdiocese, which
she did for seven (7) years. Thereafter, she worked at the Mental Health Department of said
University for the next seventeen (17) years.

During those years, she would come home to the Philippines to spend her two-month summer
vacation in her hometown in Davao City. Being single, she would usually stay in Mandug, Davao
City, in the house of her niece, respondent Arlene Pernes, a daughter of her younger sister,
Rosario.

Back in the U.S.A. sometime in 1986, she received news from Arlene that Mandug at the outskirts
of Davao City was infested by NPA rebels and many women and children were victims of crossfire
between government troops and the insurgents. Shocked and saddened about this development,
she immediately sent money to Araceli, Arlenes older sister, with instructions to look for a lot in
Davao City where Arlene and her family could transfer and settle down. This was why she bought
the parcel of land covered by TCT No. T-123125.

Petitioner acquired the lot property initially for the purpose of letting Arlene move from Mandug to
Davao City proper but later she wanted the property to be also available to any of her kins wishing
to live and settle in Davao City. Petitioner made known this intention in a document she executed
on July 21, 1986. 3 The document reads:

I, MERCEDES VIA MORALIDAD, of legal age, single, having been born on the 29th day of January,
1923, now actually residing at 8021 Lindbergh Boulevard, Philadelphia, Pennsylvania, U.S.A., wishes to
convey my honest intention regarding my properties situated at Palm Village Subdivision, Bajada, Davao
City, 9501, and hereby declare:

1. That it is my desire that Mr. and Mrs. Diosdado M. Pernes may build their house therein and stay as
long as they like;

2. That anybody of my kins who wishes to stay on the aforementioned real property should maintain an
atmosphere of cooperation, live in harmony and must avoid bickering with one another;

3. That anyone of my kins may enjoy the privilege to stay therein and may avail the use thereof. Provided,
however, that the same is not inimical to the purpose thereof;

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4. That anyone of my kins who cannot conform with the wishes of the undersigned may exercise the
freedom to look for his own;

5. That any proceeds or income derived from the aforementioned properties shall be allotted to my
nearest kins who have less in life in greater percentage and lesser percentage to those who are better of
in standing.

xxx xxx xxx

Following her retirement in 1993, petitioner came back to the Philippines to stay with the
respondents on the house they build on the subject property. In the course of time, their relations
turned sour because members of the Pernes family were impervious to her suggestions and
attempts to change certain practices concerning matters of health and sanitation within their
compound. For instance, Arlenes eldest son, Myco Pernes, then a fourth year veterinary medicine
student, would answer petitioner back with clenched fist and at one time hurled profanities when
she corrected him. Later, Arlene herself followed suit. Petitioner brought the matter to the local
barangay lupon where she lodged a complaint for slander, harassment, threat and defamation
against the Pernes Family. Deciding for petitioner, the lupon apparently ordered the Pernes family
to vacate petitioners property but not after they are reimbursed for the value of the house they
built thereon. Unfortunately, the parties could not agree on the amount, thus prolonging the
impasse between them.

Other ugly incidents interspersed with violent confrontations meanwhile transpired, with the petitioner
narrating that, at one occasion in July 1998, she sustained cuts and wounds when Arlene pulled her hair,
hit her on the face, neck and back, while her husband Diosdado held her, twisting her arms in the
process.

Relations having deteriorated from worse to worst, petitioner, on July 29, 1998, lodged a formal complaint
before the Regional Office of the Ombudsman for Mindanao, charging the respondent spouses, who were
both government employees, with conduct unbecoming of public servants. This administrative case,
however, did not prosper.

Then, on August 3, 1998, petitioner filed with the MTCC of Davao City an unlawful detainer suit
against the respondent spouses. Petitioner alleged that she is the registered owner of the land on
which the respondents built their house; that through her counsel, she sent the respondent
spouses a letter demanding them to vacate the premises and to pay rentals therefor, which the
respondents refused to heed.

In their defense, the respondents alleged having entered the property in question, building their house
thereon and maintaining the same as their residence with petitioners full knowledge and express
consent. To prove their point, they invited attention to her written declaration of July 21, 1986, supra,
wherein she expressly signified her desire for the spouses to build their house on her property and stay
thereat for as long as they like.

The MTCC, resolving the ejectment suit in petitioners favor, declared that the respondent
spouses, although builders in good faith vis--vis the house they built on her property, cannot
invoke their bona fides as a valid excuse for not complying with the demand to vacate. To the
MTCC, respondents continued possession of the premises turned unlawful upon their receipt of
the demand to vacate, such possession being merely at petitioners tolerance, and sans any
rental. Accordingly, in its decision dated November 17, 1999, 4 the MTCC rendered judgment for
the petitioner, as plaintiff therein, to wit:

WHEREFORE, judgment is hereby rendered in favor of herein plaintiff and against the defendants, as
follows:

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a) Directing the defendants, their agents and other persons acting on their behalf to vacate the premises
and to yield peaceful possession thereof to plaintiff;

b) Ordering defendants to pay P2,000.00 a month from the filing of this complaint until they vacate
premises;

c) Sentencing defendants to pay the sum of P120,000.00 5 as attorneys fees and to pay the cost of suit.

Defendants counterclaim are hereby dismissed except with respect to the claim for reimbursement of
necessary and useful expenses which should be litigated in an ordinary civil actions. (sic)

Dissatisfied, the respondent spouses appealed to the RTC of Davao City.

In the meantime, petitioner filed a Motion for Execution Pending Appeal. The motion was initially granted
by the RTC in its Order of February 29, 2000, but the Order was later withdrawn and vacated by its
subsequent Order dated May 9, 2000 6 on the ground that immediate execution of the appealed decision
was not the prudent course of action to take, considering that the house the respondents constructed on
the subject property might even be more valuable than the land site.

Eventually, in a decision 7 dated September 30, 2000, the RTC reversed that of the MTCC, holding
that respondents possession of the property in question was not, as ruled by the latter court, by
mere tolerance of the petitioner but rather by her express consent. It further ruled that Article 1678
of the Civil Code on reimbursement of improvements introduced is inapplicable since said
provision contemplates of a lessor-lessee arrangement, which was not the factual milieu
obtaining in the case. Instead, the RTC ruled that what governed the parties relationship are
Articles 448 and 546 of the Civil Code, explaining thus:

Since the defendants-appellees [respondents] are admittedly possessors of the property by


permission from plaintiff [petitioner], and builders in good faith, they have the right to retain
possession of the property subject of this case until they have been reimbursed the cost of the
improvements they have introduced on the property.

Indeed, this is a substantive right given to the defendants by law, and this right is superior to the
procedural right to [sic] plaintiff to immediately ask for their removal by a writ of execution by virtue of a
decision which as we have shown is erroneous, and therefore invalid. (Words in brackets supplied),

and accordingly dismissed petitioners appeal, as follows:

WHEREFORE, in view of the foregoing, the Decision appealed from is REVERSED and declared invalid.
Consequently, the motion for execution pending appeal is likewise denied.

Counter-claims of moral and exemplary damages claimed by defendants are likewise dismissed.
However, attorneys fees in the amount of fifteen thousand pesos is hereby awarded in favor of
defendants-appellants, and against plaintiffs.

SO ORDERED. 8

Therefrom, petitioner went to the CA in CA-G.R. SP No. 61610.

On September 27, 2001, the CA, while conceding the applicability of Articles 448 and 546 of the Civil
Code to the case, ruled that it is still premature to apply the same considering that the issue of whether
respondents right to possess a portion of petitioners land had already expired or was already terminated
was not yet resolved. To the CA, the unlawful detainer suit presupposes the cessation of respondents

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right to possess. The CA further ruled that what governs the rights of the parties is the law on usufruct but
petitioner failed to establish that respondents right to possess had already ceased. On this premise, the
CA concluded that the ejectment suit instituted by the petitioner was premature. The appellate court
thus affirmed the appealed RTC decision, disposing:

WHEREFORE, premises considered, the instant petition for review is hereby denied for lack of merit.
Accordingly, the petitioners complaint for Unlawful Detainer is DISMISSED.

SO ORDERED.

With the CAs denial of her motion for reconsideration in its Resolution of February 28, 2002,
petitioner is now before this Court raising the following issues:

I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN DISMISSING THE UNLAWFUL


DETAINER CASE FOR BEING PREMATURE WHICH DECISION IS NOT IN ACCORDANCE WITH
LAW AND JURISPRUDENCE.

II. WHETHER OR NOT THE COURT OF APPEALS ERRED IN APPLYING ARTICLES 448 AND 546
AND THE PROVISIONS OF THE CODE ON USUFRUCT INSTEAD OF ARTICLE 1678 OF THE CIVIL
CODE.

The Court rules for the petitioner.

The Court is inclined to agree with the CA that what was constituted between the parties herein is
one of usufruct over a piece of land, with the petitioner being the owner of the property upon
whom the naked title thereto remained and the respondents being two (2) among other unnamed
usufructuaries who were simply referred to as petitioners kin. The Court, however, cannot go
along with the CAs holding that the action for unlawful detainer must be dismissed on ground of
prematurity.

Usufruct is defined under Article 562 of the Civil Code in the following wise:

ART. 562. Usufruct gives a right to enjoy the property of another with the obligation of preserving
its form and substance, unless the title constituting it or the law otherwise provides.

Usufruct, in essence, is nothing else but simply allowing one to enjoy anothers property. 9 It is
also defined as the right to enjoy the property of another temporarily, including both the jus
utendi and the jus fruendi, 10 with the owner retaining the jus disponendi or the power to alienate
the same. 11

It is undisputed that petitioner, in a document dated July 21, 1986, supra, made known her
intention to give respondents and her other kins the right to use and to enjoy the fruits of her
property. There can also be no quibbling about the respondents being given the right "to build
their own house" on the property and to stay thereat "as long as they like." Paragraph #5 of the
same document earmarks "proceeds or income derived from the aforementioned properties" for
the petitioners "nearest kins who have less in life in greater percentage and lesser percentage to
those who are better of (sic) in standing." The established facts undoubtedly gave respondents
not only the right to use the property but also granted them, among the petitioners other kins, the
right to enjoy the fruits thereof. We have no quarrel, therefore, with the CAs ruling that usufruct
was constituted between petitioner and respondents. It is thus pointless to discuss why there was
no lease contract between the parties.

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Page 16 of 54

However, determinative of the outcome of the ejectment case is the resolution of the next issue, i.e.,
whether the existing usufruct may be deemed to have been extinguished or terminated. If the question is
resolved in the affirmative, then the respondents right to possession, proceeding as it did from their right
of usufruct, likewise ceased. In that case, petitioners action for ejectment in the unlawful detainer case
could proceed and should prosper.

The CA disposed of this issue in this wise:

xxx Section 1, Rule 70 of the 1997 Rules of Civil Procedure, as amended, provides xxx

xxx xxx xxx

From the foregoing provision, it becomes apparent that for an action for unlawful detainer to prosper, the
plaintiff [petitioner] needs to prove that defendants [respondents] right to possess already expired and
terminated. Now, has respondents right to possess the subject portion of petitioners property expired or
terminated? Let us therefore examine respondents basis for occupying the same.

It is undisputed that petitioner expressly authorized respondents o occupy portion of her property on
which their house may be built. Thus "it is my desire that Mr. and Mrs. Diosdado M. Pernes may build
their house therein and stay as long as they like." From this statement, it seems that petitioner had given
the respondents the usufructuary rights over the portion that may be occupied by the house that the latter
would build, the duration of which being dependent on how long respondents would like to occupy the
property. While petitioner had already demanded from the respondents the surrender of the premises,
this Court is of the opinion that the usufructuary rights of respondents had not been terminated by the
said demand considering the clear statement of petitioner that she is allowing respondents to occupy
portion of her land as long as the latter want to. Considering that respondents still want to occupy the
premises, petitioner clearly cannot eject respondents. 12

We disagree with the CAs conclusion of law on the matter. The term or period of the usufruct
originally specified provides only one of the bases for the right of a usufructuary to hold and
retain possession of the thing given in usufruct. There are other modes or instances whereby the
usufruct shall be considered terminated or extinguished. For sure, the Civil Code enumerates such
other modes of extinguishment:

ART. 603. Usufruct is extinguished:

(1) By the death of the usufructuary, unless a contrary intention clearly appears;

(2) By expiration of the period for which it was constituted, or by the fulfillment of any resolutory
condition provided in the title creating the usufruct;

(3) By merger of the usufruct and ownership in the same person;

(4) By renunciation of the usufructuary;

(5) By the total loss of the thing in usufruct;

(6) By the termination of the right of the person constituting the usufruct;

(7) By prescription. (Emphasis supplied.)

The document executed by the petitioner dated July 21, 1986 constitutes the title creating, and sets forth
the conditions of, the usufruct. Paragraph #3 thereof states "[T]hat anyone of my kins may enjoy the

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privilege to stay therein and may avail the use thereof. Provided, however, that the same is not inimical to
the purpose thereof" (Emphasis supplied). What may be inimical to the purpose constituting the usufruct
may be gleaned from the preceding paragraph wherein petitioner made it abundantly clear "that anybody
of my kins who wishes to stay on the aforementioned property should maintain an atmosphere of
cooperation, live in harmony and must avoid bickering with one another." That the maintenance of a
peaceful and harmonious relations between and among kin constitutes an indispensable condition for the
continuance of the usufruct is clearly deduced from the succeeding Paragraph #4 where petitioner stated
"[T]hat anyone of my kins who cannot conform with the wishes of the undersigned may exercise the
freedom to look for his own." In fine, the occurrence of any of the following: the loss of the atmosphere of
cooperation, the bickering or the cessation of harmonious relationship between/among kin constitutes a
resolutory condition which, by express wish of the petitioner, extinguishes the usufruct.

From the pleadings submitted by the parties, it is indubitable that there were indeed facts and
circumstances whereby the subject usufruct may be deemed terminated or extinguished by the
occurrence of the resolutory conditions provided for in the title creating the usufruct, namely, the
document adverted to which the petitioner executed on July 21, 1986.

As aptly pointed out by the petitioner in her Memorandum, respondents own evidence before the MTCC
indicated that the relations between the parties "have deteriorated to almost an irretrievable
level." 13 There is no doubt then that what impelled petitioner to file complaints before the local barangay
lupon, the Office of the Ombudsman for Mindanao, and this instant complaint for unlawful detainer before
the MTCC is that she could not live peacefully and harmoniously with the Pernes family and vice versa.

Thus, the Court rules that the continuing animosity between the petitioner and the Pernes family
and the violence and humiliation she was made to endure, despite her advanced age and frail
condition, are enough factual bases to consider the usufruct as having been terminated.

To reiterate, the relationship between the petitioner and respondents respecting the property in question
is one of owner and usufructuary. Accordingly, respondents claim for reimbursement of the
improvements they introduced on the property during the effectivity of the usufruct should be governed by
applicable statutory provisions and principles on usufruct. In this regard, we cite with approval what
Justice Edgardo Paras wrote on the matter:

If the builder is a usufructuary, his rights will be governed by Arts. 579 and 580. In case like this, the
terms of the contract and the pertinent provisions of law should govern (3 Manresa 215-216; se also
Montinola vs. Bantug, 71 Phil. 449). 14 (Emphasis ours.)

By express provision of law, respondents, as usufructuary, do not have the right to


reimbursement for the improvements they may have introduced on the property. We quote
Articles 579 and 580 of the Civil Code:

Art. 579. The usufructuary may make on the property held in usufruct such useful improvements
or expenses for mere pleasure as he may deem proper, provided he does not alter its form or
substance; but he shall have no right to be indemnified therefor. He may, however, remove such
improvements, should it be possible to do so without damage to the property. (Emphasis
supplied.)

Art. 580. The usufructuary may set off the improvements he may have made on the property
against any damage to the same.

Given the foregoing perspective, respondents will have to be ordered to vacate the premises
without any right of reimbursement. If the rule on reimbursement or indemnity were otherwise,
then the usufructuary might, as an author pointed out, improve the owner out of his

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property. 15 The respondents may, however, remove or destroy the improvements they may have
introduced thereon without damaging the petitioners property.

Out of the generosity of her heart, the petitioner has allowed the respondent spouses to use and enjoy
the fruits of her property for quite a long period of time. They opted, however, to repay a noble gesture
with unkindness. At the end of the day, therefore, they really cannot begrudge their aunt for putting an
end to their right of usufruct. The disposition herein arrived is not only legal and called for by the law and
facts of the case. It is also right.

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the CA are
REVERSED and SET ASIDE. Accordingly, the decision of the MTCC is REINSTATED with
MODIFICATION that all of respondents counterclaims are dismissed, including their claims for
reimbursement of useful and necessary expenses.

No pronouncement as to costs.

SO ORDERED.

Hermedes v. Court of Appeals

DECISION
GONZAGA_REYES, J.:

Assailed in these petitions for review on certiorari is the decision[1] of the eleventh division of the
Court of Appeals in CA-G.R. CV No. 22010 promulgated on September 11, 1992 affirming in totothe
decision of Branch 24 of the Regional Trial Court of Laguna in Civil Case No. B-1766 dated February 22,
1989,[2] and the resolution dated December 29, 1992 denying petitioner R & B Insurance Corporations (R
& B Insurance) motion for reconsideration. As the factual antecedents and issues are the same, we shall
decide the petitions jointly.
The instant controversy involves a question of ownership over an unregistered parcel of land,
identified as Lot No. 6, plan Psu-111331, with an area of 21,773 square meters, situated in Sala,
Cabuyao, Laguna. It was originally owned by the late Jose Hemedes, father of Maxima Hemedes
and Enrique D. Hemedes. On March 22, 1947 Jose Hemedes executed a document entitled
Donation Inter Vivos With Resolutory Conditions [3] whereby he conveyed ownership over the
subject land, together with all its improvements, in favor of his third wife, Justa Kauapin, subject
to the following resolutory conditions:

(a) Upon the death or remarriage of the DONEE, the title to the property donated shall revert to any
of the children, or their heirs, of the DONOR expressly designated by the DONEE in a public
document conveying the property to the latter; or

(b) In absence of such an express designation made by the DONEE before her death or remarriage
contained in a public instrument as above provided, the title to the property shall automatically
revert to the legal heirs of the DONOR in common.

Pursuant to the first condition abovementioned, Justa Kausapin executed on September 27,
1960 a Deed of Conveyance of Unregistered Real Property by Reversion [4] conveying to Maxima
Hemedes the subject property under the following terms -

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That the said parcel of land was donated unto me by the said Jose Hemedes, my deceased husband, in a
deed of DONATION INTER VIVOS WITH RESOLUTORY CONDITIONS executed by the donor in my
favor, and duly accepted by me on March 22, 1947, before Notary Public Luis Bella in Cabuyao, Laguna;

That the donation is subject to the resolutory conditions appearing in the said deed of DONATION INTER
VIVOS WITH RESOLUTORY CONDITIONS, as follows:

(a) Upon the death or remarriage of the DONEE, the title to the property donated shall revert to any of the
children, or their heirs, of the DONOR expressly designated by the DONEE in a public document
conveying the property to the latter; or

(b) In absence of such an express designation made by the DONEE before her death or remarriage
contained in a public instrument as above provided, the title to the property shall automatically revert to
the legal heirs of the DONOR in common.

That, wherefore, in virtue of the deed of donation above mentioned and in the exercise of my right and
privilege under the terms of the first resolutory condition therein contained and hereinabove reproduced,
and for and in consideration of my love and affection, I do hereby by these presents convey, transfer, and
deed unto my designee, MAXIMA HEMEDES, of legal age, married to RAUL RODRIGUEZ, Filipino and
resident of No. 15 Acacia Road, Quezon City, who is one of the children and heirs of my donor, JOSE
HEMEDES, the ownership of, and title to the property hereinabove described, and all rights and interests
therein by reversion under the first resolutory condition in the above deed of donation; Except the
possession and enjoyment of the said property which shall remain vested in me during my lifetime, or
widowhood and which upon my death or remarriage shall also automatically revert to, and be transferred
to my designee, Maxima Hemedes.

Maxima Hemedes, through her counsel, filed an application for registration and confirmation
of title over the subject unregistered land. Subsequently, Original Certificate of Title (OCT) No. (0-
941) 0-198[5] was issued in the name of Maxima Hemedes married to Raul Rodriguez by the
Registry of Deeds of Laguna on June 8, 1962, with the annotation that Justa Kausapin shall have
the usufructuary rights over the parcel of land herein described during her lifetime or widowhood.
It is claimed by R & B Insurance that on June 2, 1964, Maxima Hemedes and her husband
Raul Rodriguez constituted a real estate mortgage over the subject property in its favor to serve
as security for a loan which they obtained in the amount of P6,000.00. On February 22, 1968, R & B
Insurance extrajudicially foreclosed the mortgage since Maxima Hemedes failed to pay the loan
even after it became due on August 2, 1964. The land was sold at a public auction on May 3, 1968
with R & B Insurance as the highest bidder and a certificate of sale was issued by the sheriff in its
favor. Since Maxima Hemedes failed to redeem the property within the redemption period, R & B
Insurance executed an Affidavit of Consolidation dated March 29, 1974 and on May 21, 1975 the
Register of Deeds of Laguna cancelled OCT No. (0-941) 0-198 and issued Transfer Certificate of
Title (TCT) No. 41985 in the name of R & B Insurance. The annotation of usufruct in favor of Justa
Kausapin was maintained in the new title.[6]
Despite the earlier conveyance of the subject land in favor of Maxima Hemedes, Justa
Kausapin executed a Kasunduan on May 27, 1971 whereby she transferred the same land to her
stepson Enrique D. Hemedes, pursuant to the resolutory condition in the deed of donation
executed in her favor by her late husband Jose Hemedes. Enrique D. Hemedes obtained two
declarations of real property - in 1972, and again, in 1974, when the assessed value of the property was
raised. Also, he has been paying the realty taxes on the property from the time Justa Kausapin conveyed
the property to him in 1971 until 1979. In the cadastral survey of Cabuyao, Laguna conducted from
September 8, 1974 to October 10, 1974, the property was assigned Cadastral No. 2990, Cad. 455-D,
Cabuyao Cadastre, in the name of Enrique Hemedes. Enrique Hemedes is also the named owner of
the property in the records of the Ministry of Agrarian Reform office at Calamba, Laguna.

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On February 28, 1979, Enriques D. Hemedes sold the property to Dominium Realty and
Construction Corporation (Dominium). On April 10, 1981, Justa Kausapin executed an affidavit
affirming the conveyance of the subject property in favor of Enrique D. Hemedes as embodied in
the Kasunduan dated May 27, 1971, and at the same time denying the conveyance made to
Maxima Hemedes.
On May 14, 1981, Dominium leased the property to its sister corporation Asia Brewery, Inc.
(Asia Brewery) who, even before the signing of the contract of lease, constructed two warehouses
made of steel and asbestos costing about P10,000,000.00 each. Upon learning of Asia Brewerys
constructions upon the subject property, R & B Insurance sent it a letter on March 16, 1981
informing the former of its ownership of the property as evidenced by TCT No. 41985 issued in its
favor and of its right to appropriate the constructions since Asia Brewery is a builder in bad
faith. On March 27, 1981, a conference was held between R & B Insurance and Asia Brewery but
they failed to arrive at an amicable settlement.
On May 8, 1981, Maxima Hemedes also wrote a letter addressed to Asia Brewery wherein she
asserted that she is the rightful owner of the subject property by virtue of OCT No. (0-941) 0-198
and that, as such, she has the right to appropriate Asia Brewerys constructions, to demand its
demolition, or to compel Asia Brewery to purchase the land. In another letter of the same date
addressed to R & B Insurance, Maxima Hemedes denied the execution of any real estate mortgage
in favor of the latter.
On August 27, 1981, Dominium and Enrique D. Hemedes filed a complaint [7] with the Court of
First Instance of Binan, Laguna for the annulment of TCT No. 41985 issued in favor of R & B
Insurance and/or the reconveyance to Dominium of the subject property. Specifically, the complaint
alleged that Dominium was the absolute owner of the subject property by virtue of the February 28, 1979
deed of sale executed by Enrique D. Hemedes, who in turn obtained ownership of the land from Justa
Kausapin, as evidenced by the Kasunduan dated May 27, 1971. The plaintiffs asserted that Justa
Kausapin never transferred the land to Maxima Hemedes and that Enrique D. Hemedes had no
knowledge of the registration proceedings initiated by Maxima Hemedes.
After considering the merits of the case, the trial court rendered judgment on February 22,
1989 in favor of plaintiffs Dominium and Enrique D. Hemedes, the dispositive portion of which states

WHEREFORE, judgment is hereby rendered:

(a) Declaring Transfer Certificate of Title No. 41985 of the Register of Deeds of Laguna null and
void and ineffective;
(b) Declaring Dominium Realty and Construction Corporation the absolute owner and possessor
of the parcel of land described in paragraph 3 of the complaint;
(c) Ordering the defendants and all persons acting for and/or under them to respect such
ownership and possession of Dominium Realty and Construction Corporation and to forever
desist from asserting adverse claims thereon nor disturbing such ownership and possession;
and
(d) Directing the Register of Deeds of Laguna to cancel said Transfer Certificate of Title No.
41985 in the name of R & B Insurance Corporation, and in lieu thereof, issue a new transfer
certificate of title in the name of Dominium Realty and Construction Corporation. No
pronouncement as to costs and attorneys fees.[8]
Both R & B Insurance and Maxima Hemedes appealed from the trial courts decision. On
September 11, 1992 the Court of Appeals affirmed the assailed decision in toto and on December
29, 1992, it denied R & B Insurances motion for reconsideration. Thus, Maxima Hemedes and R &
B Insurance filed their respective petitions for review with this Court on November 3, 1992 and
February 22, 1993, respectively.

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In G.R. No. 107132[9], petitioner Maxima Hemedes makes the following assignment of errors as
regards public respondents ruling
I

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN APPLYING ARTICLE 1332 OF THE NEW
CIVIL CODE IN DECLARING AS SPURIOUS THE DEED OF CONVEYANCE OF UNREGISTERED
REAL PROPERTY BY REVERSION EXECUTED BY JUSTA KAUSAPIN IN FAVOR OF PETITIONER
MAXIMA HEMEDES.

II

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AS VOID AND OF NO


LEGAL EFFECT THE KASUNDUAN DATED 27 MAY 1971 EXECUTED BY JUSTA KAUSAPIN IN
FAVOR OF RESPONDENT ENRIQUE HEMEDES AND THE SALE OF THE SUBJECT PROPERTY BY
RESPONDENT ENRIQUE HEMEDES IN FAVOR OF RESPONDENT DOMINIUM REALTY AND
CONSTRUCTION CORPORATION.

III

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING RESPONDENTS


ENRIQUE AND DOMINIUM IN BAD FAITH.

IV

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT ORIGINAL


CERTIFICATE OF TITLE NO. (0-941) 0-198 ISSUED IN THE NAME OF PETITIONER MAXIMA
HEMEDES NULL AND VOID.

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT NO LOAN WAS OBTAINED BY
PETITIONER MAXIMA HEMEDES FROM RESPONDENT R & B INSURANCE CORPORATION.

VI

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT NO REAL ESTATE


MORTGAGE OVER THE SUBJECT PROPERTY WAS EXECUTED BY PETITIONER MAXIMA
HEMEDES IN FAVOR OF RESPONDENT R & B INSURANCE CORPORATION.

VII

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT THE VALID TITLE COVERING
THE SUBJECT PROPERTY IS THE ORIGINAL CERTIFICATE OF TITLE NO. (0-941) 0-198 IN THE
NAME OF PETITIONER MAXIMA HEMEDES AND NOT THE TRANSFER CERTIFICATE OF TITLE
(TCT) NO. 41985 IN THE NAME OF R & B INSURANCE CORPORATION.[10]

Meanwhile, in G.R. No. 108472[11], petitioner R & B Insurance assigns almost the same errors,
except with regards to the real estate mortgage allegedly executed by Maxima Hemedes in its favor.
Specifically, R & B Insurance alleges that:
I

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RESPONDENT COURT ERRONEOUSLY ERRED IN APPLYING ARTICLE 1332 OF THE CIVIL CODE.

II

RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON (sic) THE KASUNDUAN BY


AND BETWEEN JUSTA KAUSAPIN AND ENRIQUE NOTWITHSTANDING THE FACT THAT JUSTA
KAUSAPIN BY WAY OF A DEED OF CONVEYANCE OF UNREGISTERED REAL PROPERTY BY
REVERSION CEDED THE SUBJECT PROPERTY TO MAXIMA SOME ELEVEN (11) YEARS EARLIER.

III

RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON (sic) THE AFFIDAVIT OF


REPUDIATION OF JUSTA KAUSAPIN NOTWITHSTANDING THE FACT THAT SHE IS A BIAS (sic)
WITNESS AND EXECUTED THE SAME SOME TWENTY-ONE (21) YEARS AFTER THE EXECUTION
OF THE DEED OF CONVEYANCE IN FAVOR OF MAXIMA.

IV

RESPONDENT COURT SERIOUSLY ERRED IN NOT FINDING THAT THE COMPLAINT OF ENRIQUE
AND DOMINIUM HAS PRESCRIBED AND/OR THAT ENRIQUE AND DOMINIUM WERE GUILTY OF
LACHES.

RESPONDENT COURT SERIOUSLY ERRED IN FINDING R & B AS A MORTGAGEE NOT IN GOOD


FAITH.

VI

RESPONDENT COURT SERIOUSLY ERRED IN NOT GRANTING THE DAMAGES PRAYED FOR BY R
& B IN ITS COUNTERCLAIM AND CROSSCLAIM.[12]

The primary issue to be resolved in these consolidated petitions is which of the two
conveyances by Justa Kausapin, the first in favor of Maxima Hemedes and the second in favor of
Enrique D. Hemedes, effectively transferred ownership over the subject land.
The Register of Deeds of Laguna issued OCT No. (0-941) 0-198 in favor of Maxima Hemedes on the
strength of the Deed of Conveyance of Unregistered Real Property by Reversion executed by Justa
Kausapin. Public respondent upheld the trial courts finding that such deed is sham and spurious and has
no evidentiary value under the law upon which claimant Maxima Hemedes may anchor a valid claim of
ownership over the property. In ruling thus, it gave credence to the April 10, 1981 affidavit executed by
Justa Kausapin repudiating such deed of conveyance in favor of Maxima Hemedes and affirming the
authenticity of the Kasunduan in favor of Enrique D. Hemedes. Also, it considered as pivotal the fact that
the deed of conveyance in favor of Maxima Hemedes was in English and that it was not explained to
Justa Kausapin, although she could not read nor understand English; thus, Maxima Hemedes failed to
discharge her burden, pursuant to Article 1332 of the Civil Code, to show that the terms thereof were fully
explained to Justa Kausapin. Public respondent concluded by holding that the registration of the property
on the strength of the spurious deed of conveyance is null and void and does not confer any right of
ownership upon Maxima Hemedes. [13]
Maxima Hemedes argues that Justa Kausapins affidavit should not be given any credence since she
is obviously a biased witness as it has been shown that she is dependent upon Enrique D. Hemedes for
her daily subsistence, and she was most probably influenced by Enrique D. Hemedes to execute the
Kasunduan in his favor. She also refutes the applicability of article 1332. It is her contention that for such

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a provision to be applicable, there must be a party seeking to enforce a contract; however, she is not
enforcing the Deed of Conveyance of Unregistered Real Property by Reversion as her basis in claiming
ownership, but rather her claim is anchored upon OCT No. (0-941) 0-198 issued in her name, which
document can stand independently from the deed of conveyance. Also, there exist various circumstances
which show that Justa Kausapin did in fact execute and understand the deed of conveyance in favor of
Maxima Hemedes. First, the Donation Intervivos With Resolutory Conditions executed by Jose Hemedes
in favor of Justa Kausapin was also in English, but she never alleged that she did not understand such
document. Secondly, Justa Kausapin failed to prove that it was not her thumbmark on the deed of
conveyance in favor of Maxima Hemedes and in fact, both Enrique D. Hemedes and Dominium objected
to the request of Maxima Hemedes counsel to obtain a specimen thumbmark of Justa Kausapin. [14]
Public respondents finding that the Deed of Conveyance of Unregistered Real Property By
Reversion executed by Justa Kausapin in favor of Maxima Hemedes is spurious is not supported by the
factual findings in this case.. It is grounded upon the mere denial of the same by Justa Kausapin. A party
to a contract cannot just evade compliance with his contractual obligations by the simple expedient of
denying the execution of such contract. If, after a perfect and binding contract has been executed
between the parties, it occurs to one of them to allege some defect therein as a reason for annulling it, the
alleged defect must be conclusively proven, since the validity and fulfillment of contracts cannot be left to
the will of one of the contracting parties.[15]
Although a comparison of Justa Kausapins thumbmark with the thumbmark affixed upon the deed of
conveyance would have easily cleared any doubts as to whether or not the deed was forged, the records
do not show that such evidence was introduced by private respondents and the lower court decisions do
not make mention of any comparison having been made.[16] It is a legal presumption that evidence
willfully suppressed would be adverse if produced. [17] The failure of private respondents to refute
the due execution of the deed of conveyance by making a comparison with Justa Kausapins
thumbmark necessarily leads one to conclude that she did in fact affix her thumbmark upon the
deed of donation in favor of her stepdaughter.
Moreover, public respondents reliance upon Justa Kausapins repudiation of the deed of conveyance
is misplaced for there are strong indications that she is a biased witness. The trial court found that Justa
Kausapin was dependent upon Enrique D. Hemedes for financial assistance.[18] Justa Kausapins own
testimony attests to this fact -
Atty. Conchu:
Q: Aling Justa, can you tell the Honorable Court why you donated this particular property to Enrique
Hemedes?
A: Because I was in serious condition and he was the one supporting me financially.
Q: As of today, Aling Justa are you continuing to receive any assistance from Enrique Hemedes?
A: Yes Sir.
(TSN pp. 19 and 23, November 17, 1981)[19]
Even Enrique Hemedes admitted that Justa Kausapin was dependent upon him for financial support. The
transcripts state as follows:
Atty. Mora:
Now you said that Justa Kausapin has been receiving from you advances for food, medicine & other
personal or family needs?
E. Hemedes:
A: Yes.
Q: Was this already the practice at the time this Kasunduan was executed?
A: No that was increased, no, no, after this document.

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xxx xx xxx
Q: And because of these accommodations that you have given to Justa Kausapin; Justa Kausapin has
in turn treated you very well because shes very grateful for that, is it not?
A: I think thats human nature.
Q: Answer me categorically, Mr. Hemedes shes very grateful?
A: Yes she might be grateful but not very grateful.
(TSN, p. 34, June 15, 1984)[20]
A witness is said to be biased when his relation to the cause or to the parties is such that he has an
incentive to exaggerate or give false color to his statements, or to suppress or to pervert the truth, or to
state what is false.[21] At the time the present case was filed in the trial court in 1981, Justa Kausapin was
already 80 years old, suffering from worsening physical infirmities and completely dependent upon her
stepson Enrique D. Hemedes for support. It is apparent that Enrique D. Hemedes could easily have
influenced his aging stepmother to donate the subject property to him. Public respondent should not have
given credence to a witness that was obviously biased and partial to the cause of private
respondents. Although it is a well-established rule that the matter of credibility lies within the province of
the trial court, such rule does not apply when the witness credibility has been put in serious doubt, such
as when there appears on the record some fact or circumstance of weight and influence, which has been
overlooked or the significance of which has been misinterpreted.[22]
Finally, public respondent was in error when it sustained the trial courts decision to nullify the Deed
of Conveyance of Unregistered Real Property by Reversion for failure of Maxima Hemedes to comply with
article 1332 of the Civil Code, which states:

When one of the parties is unable to read, or if the contract is in a language not understood by him, and
mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been
fully explained to the former.

Article 1332 was intended for the protection of a party to a contract who is at a disadvantage due to
his illiteracy, ignorance, mental weakness or other handicap. [23] This article contemplates a situation
wherein a contract has been entered into, but the consent of one of the parties is vitiated by mistake or
fraud committed by the other contracting party.[24] This is apparent from the ordering of the provisions
under Book IV, Title II, Chapter 2, section 1 of the Civil Code, from which article 1332 is taken. Article
1330 states that -

A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is
voidable.

This is immediately followed by provisions explaining what constitutes mistake, violence, intimidation,
undue influence, or fraud sufficient to vitiate consent.[25] In order that mistake may invalidate consent, it
should refer to the substance of the thing which is the object of the contract, or to those conditions which
have principally moved one or both parties to enter into the contract.[26] Fraud, on the other hand, is
present when, through insidious words or machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he would not have agreed to. [27]Clearly, article 1332
assumes that the consent of the contracting party imputing the mistake or fraud was given, although
vitiated, and does not cover a situation where there is a complete absence of consent.
In this case, Justa Kausapin disclaims any knowledge of the Deed of Conveyance of Unregistered
Real Property by Reversion in favor of Maxima Hemedes. In fact, she asserts that it was only during the
hearing conducted on December 7, 1981 before the trial court that she first caught a glimpse of the deed
of conveyance and thus, she could not have possibly affixed her thumbmark thereto.[28] It is private
respondents own allegations which render article 1332 inapplicable for it is useless to determine whether
or not Justa Kausapin was induced to execute said deed of conveyance by means of fraud employed by

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Maxima Hemedes, who allegedly took advantage of the fact that the former could not understand English,
when Justa Kausapin denies even having seen the document before the present case was initiated in
1981.
It has been held by this Court that mere preponderance of evidence is not sufficient to overthrow a
certificate of a notary public to the effect that the grantor executed a certain document and acknowledged
the fact of its execution before him. To accomplish this result, the evidence must be so clear, strong and
convincing as to exclude all reasonable controversy as to the falsity of the certificate, and when the
evidence is conflicting, the certificate will be upheld.[29] In the present case, we hold that private
respondents have failed to produce clear, strong, and convincing evidence to overcome the positive value
of the Deed of Conveyance of Unregistered Real Property by Reversion a notarized document. The mere
denial of its execution by the donor will not suffice for the purpose.
In upholding the deed of conveyance in favor of Maxima Hemedes, we must concomitantly
rule that Enrique D. Hemedes and his transferee, Dominium, did not acquire any rights over the
subject property. Justa Kausapin sought to transfer to her stepson exactly what she had earlier
transferred to Maxima Hemedes the ownership of the subject property pursuant to the first
condition stipulated in the deed of donation executed by her husband. Thus, the donation in favor
of Enrique D. Hemedes is null and void for the purported object thereof did not exist at the time of
the transfer, having already been transferred to his sister.[30] Similarly, the sale of the subject
property by Enrique D. Hemedes to Dominium is also a nullity for the latter cannot acquire more
rights than its predecessor-in-interest and is definitely not an innocent purchaser for value since
Enrique D. Hemedes did not present any certificate of title upon which it relied.
The declarations of real property by Enrique D. Hemedes, his payment of realty taxes, and his being
designated as owner of the subject property in the cadastral survey of Cabuyao, Laguna and in the
records of the Ministry of Agrarian Reform office in Calamba, Laguna cannot defeat a certificate of title,
which is an absolute and indefeasible evidence of ownership of the property in favor of the person whose
name appears therein.[31] Particularly, with regard to tax declarations and tax receipts, this Court has held
on several occasions that the same do not by themselves conclusively prove title to land. [32]
We come now to the question of whether or not R & B Insurance should be considered an innocent
purchaser of the land in question. At the outset, we note that both the trial court and appellate court found
that Maxima Hemedes did in fact execute a mortgage over the subject property in favor of R & B
Insurance. This finding shall not be disturbed because, as we stated earlier, it is a rule that the factual
findings of the trial court, especially when affirmed by the Court of Appeals, are entitled to respect, and
should not be disturbed on appeal.[33]
In holding that R & B Insurance is not a mortgagee in good faith, public respondent stated that the
fact that the certificate of title of the subject property indicates upon its face that the same is subject to an
encumbrance, i.e. usufructuary rights in favor of Justa Kausapin during her lifetime or widowhood, should
have prompted R & B Insurance to ...investigate further the circumstances behind this encumbrance on
the land in dispute, but which it failed to do. Also, public respondent considered against R & B Insurance
the fact that it made it appear in the mortgage contract that the land was free from all liens, charges,
taxes and encumbrances.[34]
R & B Insurance alleges that, contrary to public respondents ruling, the presence of an
encumbrance on the certificate of title is not reason for the purchaser or a prospective mortgagee
to look beyond the face of the certificate of title. The owner of a parcel of land may still sell the
same even though such land is subject to a usufruct; the buyers title over the property will simply
be restricted by the rights of the usufructuary. Thus, R & B Insurance accepted the mortgage
subject to the usufructuary rights of Justa Kausapin. Furthermore, even assuming that R & B
Insurance was legally obliged to go beyond the title and search for any hidden defect or inchoate
right which could defeat its right thereto, it would not have discovered anything since the
mortgage was entered into in 1964, while the Kasunduan conveying the land to Enrique D.
Hemedes was only entered into in 1971 and the affidavit repudiating the deed of conveyance in
favor of Maxima Hemedes was executed by Justa Kausapin in 1981.[35]

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We sustain petitioner R & B Insurances claim that it is entitled to the protection of a


mortgagee in good faith.
It is a well-established principle that every person dealing with registered land may safely rely on the
correctness of the certificate of title issued and the law will in no way oblige him to go behind the
certificate to determine the condition of the property. [36] An innocent purchaser for value[37] is one who
buys the property of another without notice that some other person has a right to or interest in such
property and pays a full and fair price for the same at the time of such purchase or before he has notice of
the claim of another person.[38]
The annotation of usufructuary rights in favor of Justa Kausapin upon Maxima Hemedes OCT
does not impose upon R & B Insurance the obligation to investigate the validity of its mortgagors
title. Usufruct gives a right to enjoy the property of another with the obligation of preserving its
form and substance.[39] The usufructuary is entitled to all the natural, industrial and civil fruits of
the property[40]and may personally enjoy the thing in usufruct, lease it to another, or alienate his
right of usufruct, even by a gratuitous title, but all the contracts he may enter into as such
usufructuary shall terminate upon the expiration of the usufruct.[41]
Clearly, only the jus utendi and jus fruendi over the property is transferred to the usufructuary.[42] The
owner of the property maintains the jus disponendi or the power to alienate, encumber, transform, and
even destroy the same.[43] This right is embodied in the Civil Code, which provides that the owner of
property the usufruct of which is held by another, may alienate it, although he cannot alter the propertys
form or substance, or do anything which may be prejudicial to the usufructuary.[44]
There is no doubt that the owner may validly mortgage the property in favor of a third person
and the law provides that, in such a case, the usufructuary shall not be obliged to pay the debt of
the mortgagor, and should the immovable be attached or sold judicially for the payment of the
debt, the owner shall be liable to the usufructuary for whatever the latter may lose by reason
thereof.[45]
Based on the foregoing, the annotation of usufructuary rights in favor of Justa Kausapin is
not sufficient cause to require R & B Insurance to investigate Maxima Hemedes title, contrary to
public respondents ruling, for the reason that Maxima Hemedes ownership over the property
remained unimpaired despite such encumbrance. R & B Insurance had a right to rely on the
certificate of title and was not in bad faith in accepting the property as a security for the loan it
extended to Maxima Hemedes.
Even assuming in gratia argumenti that R & B Insurance was obligated to look beyond the certificate
of title and investigate the title of its mortgagor, still, it would not have discovered any better rights in favor
of private respondents. Enrique D. Hemedes and Dominium base their claims to the property upon the
Kasunduan allegedly executed by Justa Kausapin in favor of Enrique Hemedes. As we have already
stated earlier, such contract is a nullity as its subject matter was inexistent. Also, the land was mortgaged
to R & B Insurance as early as 1964, while the Kasunduan was executed only in 1971 and the affidavit of
Justa Kausapin affirming the conveyance in favor of Enrique D. Hemedes was executed in 1981. Thus,
even if R & B Insurance investigated the title of Maxima Hemedes, it would not have discovered any
adverse claim to the land in derogation of its mortgagors title. We reiterate that at no point in time could
private respondents establish any rights or maintain any claim over the land.
It is a well-settled principle that where innocent third persons rely upon the correctness of a
certificate of title and acquire rights over the property, the court cannot just disregard such
rights. Otherwise, public confidence in the certificate of title, and ultimately, the Torrens system, would be
impaired for everyone dealing with registered property would still have to inquire at every instance
whether the title has been regularly or irregularly issued. [46] Being an innocent mortgagee for value, R & B
Insurance validly acquired ownership over the property, subject only to the usufructuary rights of Justa
Kausapin thereto, as this encumbrance was properly annotated upon its certificate of title.
The factual findings of the trial court, particularly when affirmed by the appellate court, carry great
weight and are entitled to respect on appeal, except under certain circumstances. [47] One such
circumstance that would compel the Court to review the factual findings of the lower courts is where the

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lower courts manifestly overlooked certain relevant facts not disputed by the parties and which, if properly
considered, would justify a different conclusion.[48] Also, it is axiomatic that the drawing of the proper legal
conclusions from such factual findings are within the peculiar province of this Court. [49]
As regards R & B Insurances prayer that Dominium be ordered to demolish the warehouses or that it
be declared the owner thereof since the same were built in bad faith, we note that such warehouses were
constructed by Asia Brewery, not by Dominium. However, despite its being a necessary party in the
present case, the lower courts never acquired jurisdiction over Asia Brewery, whether as a plaintiff or
defendant, and their respective decisions did not pass upon the constructions made upon the subject
property. Courts acquire jurisdiction over a party plaintiff upon the filing of the complaint, while jurisdiction
over the person of a party defendant is acquired upon the service of summons in the manner required by
law or by his voluntary appearance. As a rule, if a defendant has not been summoned, the court acquires
no jurisdiction over his person, and any personal judgment rendered against such defendant is null and
void.[50] In the present case, since Asia Brewery is a necessary party that was not joined in the action, any
judgment rendered in this case shall be without prejudice to its rights. [51]
As to its claim for moral damages, we hold that R & B Insurance is not entitled to the same for it has
not alleged nor proven the factual basis for the same. Neither is it entitled to exemplary damages, which
may only be awarded if the claimant is entitled to moral, temperate, liquidated or compensatory
damages.[52] R & B Insurances claim for attorneys fees must also fail. The award of attorneys fees is the
exception rather than the rule and counsels fees are not to be awarded every time a party wins a suit. Its
award pursuant to article 2208 of the Civil Code demands factual, legal and equitable justification and
cannot be left to speculation and conjecture.[53] Under the circumstances prevailing in the instant case,
there is no factual or legal basis for an award of attorneys fees.
WHEREFORE, the assailed decision of public respondent and its resolution dated February
22, 1989 are REVERSED. We uphold petitioner R & B Insurances assertion of ownership over the
property in dispute, as evidenced by TCT No. 41985, subject to the usufructuary rights of Justa
Kausapin, which encumbrance has been properly annotated upon the said certificate of title. No
pronouncement as to costs.
SO ORDERED.

Board of Assessment Appeals v. Samar Mining Co.

DECISION

ZALDIVAR, J.:

Appeal from the decision of the Court of Tax Appeals, in its CTA Case No. 1705, declaring respondent
Samar Mining Company, Inc. (hereinafter referred to as Samar, for short) exempt from paying the real
property tax assessed against it by the Provincial Assessor of Zamboanga del Sur.

There is no dispute as to the facts of this case. Samar is a domestic corporation engaged in the
mining industry. As the mining claims and the mill of Samar are located inland and at a great
distance from the loading point or pier site, it decided to construct a gravel road as a convenient
means of hauling its ores from the mine site at Buug to the pier area at Pamintayan, Zamboanga
del Sur; that as an initial step in the construction of a 42-kilometer road which would traverse
public lands Samar, in 1958 and 1959, filed with the Bureau of Lands and the Bureau of Forestry
miscellaneous lease applications for a road right of way on lands under the jurisdiction of said
bureaus where the proposed road would traverse; that having been given temporary permit to
occupy and use the lands applied for by it, said respondent constructed a road thereon, known as

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the Samico road; that although the gravel road was finished in 1959, and had since then been
used by the respondent in hauling its iron from its mine site to the pier area, and that its lease
applications were approved on October 7, 1965, the execution of the corresponding lease
contracts were held in abeyance even up to the time this case was brought to the Court of Tax
Appeals. 1

On June 5, 1964, Samar received a letter from the Provincial Assessor of Zamboanga del Sur
assessing the 13.8 kilometer road 2 constructed by it for real estate tax purposes in the total sum
of P1,117,900.00. On July 14, 1964, Samar appealed to the Board of Assessment Appeals of
Zamboanga del Sur, (hereinafter referred to as Board, for short), contesting the validity of the
assessment upon the ground that the road having been constructed entirely on a public land
cannot be considered an improvement subject to tax within the meaning of section 2 of
Commonwealth Act 470, and invoking further the decision of this Court in the case of Bislig Bay Lumber
Company, Inc. v. The Provincial Government of Surigao, G.R. No. L-9023, promulgated on November 13,
1956. On February 10, 1965, after the parties had submitted a stipulation of facts, Samar received a
resolution of the Board, dated December 22, 1964, affirming the validity of the assessment made by the
Provincial Assessor of Zamboanga del Sur under tax declaration No. 3340, but holding in abeyance its
enforceability until the lease contracts were duly executed.

On February 16, 1965, Samar moved to reconsider the resolution of the Board, praying for the
cancellation of tax declaration No. 3340, and on August 3, 1965, Samar received Resolution No. 13 not
only denying its motion for reconsideration but modifying the Boards previous resolution of December 22,
1964 declaring the assessment immediately enforceable, and that the taxes to be paid by Samar should
accrue or commence with the year 1959. When its second motion for reconsideration was again denied
by the Board, Samar elevated the case to the Court of Tax Appeals.

The jurisdiction of the Court of Tax Appeals to take cognizance of the case was assailed by herein
petitioners (the Board and the Provincial Assessor of Zamboanga del Sur) due to the failure of Samar to
first pay the realty tax imposed upon it before interposing the appeal, and prayed that the resolution of the
Board appealed from be affirmed. On June 28, 1967, the Court of Tax Appeals ruled that it had
jurisdiction to entertain the appeal and then reversed the resolution of the Board. The Court of Tax
Appeals ruled that since the road is constructed on public lands such that it is an integral part of
the land and not an independent improvement thereon, and that upon the termination of the lease
the road as an improvement will automatically be owned by the national government, Samar
should be exempt from paying the real estate tax assessed against it. Dissatisfied with the
decision of the Court of Tax Appeals, petitioners Board and Placido L. Lumbay, as Provincial
Assessor of Zamboanga del Sur, interposed the present petition for review before this Court.

The issue to be resolved in the present appeal is whether or not respondent Samar should pay
realty tax on the assessed value of the road it constructed on alienable or disposable public lands
that are leased to it by the government.

Petitioners maintain that the road is an improvement and, therefore, taxable under Section 2 of the
Assessment Law (Commonwealth Act No. 470) which provides as follows:

"Sec. 2. Incidence of real property tax. Except in chartered cities, there shall be levied, assessed, and
collected, an annual, ad valorem tax on real property including land, buildings, machinery, and other
improvements not hereinafter specifically exempted."

There is no question that the road constructed by respondent Samar on the public lands leased to
it by the government is an improvement. But as to whether the same is taxable under the
aforequoted provision of the Assessment Law, this question has already been answered in the
negative by this Court. In the case of Bislig Bay Lumber Co., Inc. v. Provincial Government of
Surigao, 100 Phil. 303, where a similar issue was raised as to whether the timber concessionaire
should be required to pay realty tax for the road it constructed at its own expense within the
territory of the lumber concession granted to it, this Court, after citing Section 2 of

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Commonwealth Act 470, held:

"Note that said section authorizes the levy of real tax not only on lands, buildings, or machinery
that may be erected thereon, but also on any other improvements, and considering the road
constructed by appellee on the timber concession granted to it as an improvement, appellant
assessed the tax now in dispute upon the authority of the above provision of the law.

"It is the theory of appellant that, inasmuch as the road was constructed by appellee for its own
use and benefit it is subject to real tax even if it was constructed on a public land. On the other
hand, it is the theory of appellee that said road exempt from real tax because (1) the road belongs
to the national government by right of accession, (2) the road belongs to the be removed or
separated from the land on which it is constructed and so it is part and parcel of the public land,
and (3), according to the evidence, the road was built not only for the use and benefit of appellee
but also of the public in general.

"We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the
ownership of the road that was constructed by appellee belongs to the government by right of
accession not only because it is inherently incorporated or attached to the timber land leased to
appellee but also because upon the expiration of the concession, said road would ultimately pass
to the national government (Articles 440 and 445, new Civil Code; Tobatabo v. Molero, 22 Phil.,
418). In the second place, while the road was constructed by appellee primarily for its use and
benefit, the privilege is not exclusive, for, under the lease contract entered into by the appellee
and the government, its use can also be availed of by the employees of the government and by
the public in general. . . . In other words, the government has practically reserved the rights to use
the road to promote its varied activities. Since, as above shown, the road in question cannot be
considered as an improvement which belongs to appellee, although in part is for its benefit, it is
clear that the same cannot be the subject of assessment within the meaning of section 2 of
Commonwealth Act No. 470.

"We are not oblivious of the fact that the present assessment was made by appellant on the strength of
an opinion rendered by the Secretary of Justice, but we find that the same is predicated on authorities
which are not in point, for they refer to improvements that belong to the lessees although constructed on
lands belonging to the government. It is well settled that a real tax, being a burden upon the capital,
should be paid by the owner of the land and not by a usufructuary (Mercado v. Rizal, 67 Phil., 608; Article
597, new Civil Code). Appellee is but a partial usufructuary of the road in question."

Again, in the case of Municipality of Cotabato, Et. Al. v. Santos, Et Al., 105 Phil. 963, this Court
ruled that the lessee who introduced improvements consisting of dikes, gates and guard-houses
on swamp lands leased to him by the Bureau of Fisheries, in converting the swamps into
fishponds, is exempt from payment of realty taxes on those improvements. This Court held:

"We however believe that the assessment on the improvements introduced by defendant on the fishpond
has included more than what is authorized by law. The improvements as assessed consist of dikes, gates
and guard-houses and bodegas totals P6,850.00 which appellants are not now questioning, but they
dispute the assessment on the dikes and gates in this wise: After the swamps were leased to appellants,
the latter cleared the swamps and built dikes, by pushing the soil to form these dikes in the same way that
paddies are built on lands intended for the cultivation of palay, the only difference being that dikes used in
fishponds are relatively much larger than the dikes used in ricelands. We believe this contention to be
correct, because those dikes can really be considered as integral parts of the fishponds and not as
independent improvements. They cannot be taxed under the assessment law. The assessment,
therefore, with regard to improvements should be modified excluding the dikes and gates."

It is contended by petitioners that the ruling in the Bislig case is not applicable in the present case
because if the concessionaire in the Bislig case was exempt from paying the realty tax it was because the
road in that case was constructed on a timberland or on an indisposable public land, while in the instant
case what is being taxed is 13.8 kilometer portion of the road traversing alienable public lands. This

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contention has no merit. The pronouncement in the Bislig case contains no hint whatsoever that the road
was not subject to tax because it was constructed on inalienable public lands. What is emphasized in the
lease is that the improvement is exempt from taxation because it is an integral part of the public land on
which it is constructed and the improvement is the property of the government by right of accession.
Under Section 3(a) of the Assessment Law (Com. Act 470), all properties owned by the government,
without any distinction, are exempt from taxation.

It is also contended by petitioners that the Court of Tax Appeals can not take cognizance of the appeal of
Samar from the resolution of the Board assessing realty tax on the road in question, because Samar had
not first paid under protest the realty tax assessed against it as required under the provisions of Section
54 of the Assessment Law (Com. Act 470), which partly reads as follows:

"SEC. 54. Restriction upon power of Court to impeach tax. No court shall entertain any suit assailing
the validity of a tax assessment under this Act until the taxpayer shall have paid under protest the taxes
assessed against him, no shall any court declare any tax invalid by reason . . ."

The extent and scope of the jurisdiction of the Court of Tax Appeals regarding matters related to
assessment or real property taxes are provided for in Section 7, paragraph (3) and Section 11 of Republic
Act No. 1125, which partly read as follows:

"SEC. 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review
by appeal, as herein provided

x x x

(3) Decisions of provincial or city Board of Assessment Appeals in cases involving the assessment and
taxation of real property or other matters arising under the Assessment Law, including rules and
regulations relative thereto."

"SEC. 11. Who may appeal; effect of appeal. Any person, association or corporation adversely
affected by a decision or ruling of . . . any provincial or city Board of Assessment Appeals may file an
appeal in the Court of Tax Appeals within thirty days after the receipt of such decision or ruling."

In this connection the Court of Tax Appeals, in the decision appealed from, said:

"Prior to the enactment of Republic Act No. 1125, all civil actions involving the legality of any tax, impost
or assessment were under the jurisdiction of the Court of First Instance (Sec. 44, Republic Act No. 296). It
is clear, therefore, that before the creation of the Court of Tax Appeals all cases involving the legality of
assessments for real property taxes, as well as the refund thereof, were properly brought and taken
cognizance by the said court. However, with the passage by Congress and the approval by the President
of Republic Act No. 1125, the jurisdiction over cases involving the validity of realty tax assessment were
transferred from the Court of First Instance to the Court of Tax Appeals (See Sec. 22, Rep. Act No. 1125).
The only exception to the grant of exclusive appellate jurisdiction to the Tax Court relates to cases
involving the refund of real property taxes which remained with the Court of First Instance (See of
Cabanatuan, Et. Al. v. Gatmaitan, Et Al., G.R. No. L-19129, February 28, 1963).

"A critical and analytical study of Section 7 of Republic Act No. 1125, in relation to subsections (1), (2)
and (3) thereof, will readily show that it was the intention of Congress to lodge in the Court of Tax Appeals
the exclusive appellate jurisdiction over cases involving the legality of real property tax assessment. as
distinguished from cases involving the refund of real property taxes. To require the taxpayer, as
contended by respondents, to pay first the disputed real property tax before he can file an appeal
assailing the legality and validity of the realty tax assessment will render nugatory the appellate
jurisdictional power of the Court of Tax Appeals as envisioned in Section 7 (3), in relation to Section 11, of
Republic Act No. 1125. If we follow the contention of respondents to its logical conclusion, we cannot
conceive of a case involving the legality and validity of real property tax assessment, decided by the

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Board of Assessment Appeals, which can be appealed to the Court of Tax Appeals, The position taken by
respondents is, therefore, in conflict with the Explanatory Note contained in House Bill No. 175, submitted
during the First Session, Third Congress of the Republic of the Philippines, and the last paragraph of
Section 21 of Republic Act No. 1125 which provide as follows:chanrob1es virtual 1aw library

SEC. 21. General provisions.

x x x

Any law or part of law, or any executive order, rule or regulation or part thereof, inconsistent with the
provisions of this Act is hereby repealed.

"Accordingly, we hold that this Court can entertain and give due course to petitioners appeal assailing the
legality and validity of the real property tax assessment here in question without paying first the disputed
real property tax as required by Section 54 of the Assessment Law."

We agree with the foregoing view of the Court of Tax Appeals. It should be noted that what is involved in
the present case is simply an assessment of realty tax, as fixed by the Provincial Assessor of Zamboanga
del Sur, which was disputed by Samar before the Board of Assessment Appeals of said province. There
was no demand yet for payment of the realty tax. In fact the letter of Provincial Assessor, of June 5, 1964,
notifying Samar of the assessment, states as follows:

"Should you find the same to be not in accordance with law or its valuation to be not satisfactory, you may
appeal this assessment under Section 17 of Commonwealth Act 470 to the Board of Assessment
Appeals, through the Municipal Treasurer of Buug, Zamboanga del Sur, within 60 days from the date of
your receipt hereof." 3

Accordingly Samar appealed to the Board questioning the validity of the assessment. The Board
rendered a resolution over-ruling the contention of Samar that the assessment was illegal. Then Samar
availed of its right to appeal from the decision of the Board to the Court of Tax Appeals as provided in
Section 11 of Republic Act 1125. Section 11 does not require that before an appeal from the decision of
the Board of Assessment Appeals can be brought to the Court of Tax Appeals it must first be shown that
the party disputing the assessment had paid under protest the realty tax assessed. In the absence of
such a requirement under the law, all that is necessary for a party aggrieved by the decision of the Board
of Assessment Appeals is to file his notice of appeal to the Court of Tax Appeals within 30 days after
receipt of the decision of the Board of Assessment Appeals, as provided in Section 11 of Republic Act
1125.

This Court, in the case of City of Cabanatuan v. Gatmaitan, 4 said:

". . . if the real estate tax has already been paid it is futile for a taxpayer to take the matter to the City
Board of Assessment Appeals for the jurisdiction of that body is merely confined to the determination of
the reasonableness of the assessment or taxation of the property and is not extended to the authority of
requiring the refund of the tax unlike cases involving assessment of internal revenue taxes. In the
circumstances, we hold that this case comes under the jurisdiction of the proper court of first instance it
involving the refund of a real estate tax which does not come under the appellate jurisdiction of the Court
of Tax Appeals."

From the aforequoted portion of the decision of this Court, We gather that the only question that may be
brought before the City or Provincial Board of Assessment Appeals is the question which relates to the
reasonableness or legality of the realty tax that is assessed against a taxpayer. Such being the case, it
would be unjust to require the realty owner to first pay the tax, that he precisely questions, before he can
lodge an appeal to the Court of Tax Appeals. We believe that it is not the intendment of the law that in
questioning before the Court of Tax Appeals the validity or reasonableness of the assessment approved
by the Board of Assessment Appeals the taxpayer should first pay the questioned tax. It is Our view that

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in so far as appeals from the decision or resolution of the Board of Assessment Appeals, Section 54 of
Commonwealth Act 470 does not apply, and said section can be considered as impliedly repealed by
Sections 7, 11 and 21 of Republic Act 1125.

IN VIEW OF THE FOREGOING, the decision of the Court of Tax Appeals, appealed from, is
affirmed, without pronouncement as to costs. It is so ordered.

Yu v. Pacleb, G.R. No. 130316, January 24, 2007

Republic of the Philippines


SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 130316 January 24, 2007

ERNESTO V. YU and ELSIE O. YU, Petitioners,


vs.
BALTAZAR PACLEB,1 Respondent.

DECISION

CORONA, J.:

The present petition filed under Rule 45 of the Rules of Court originated from an action for forcible entry
and damages filed by petitioners Ernesto and Elsie Yu against respondent Baltazar Pacleb.

The antecedent facts follow.

Sometime in September 1992, Ruperto Javier allegedly offered to sell Lot No. 6853-D to petitioners
for P75 per sq.m.lawphil.net The lot was approximately 18,000 square meters and was located in
Barangay Langkaan, Dasmarias, Cavite. Javier supposedly purchased the lot from one Rebecca del
Rosario who, in turn, acquired it from respondent and his wife. The title of the property (Transfer
Certificate of Title [TCT] No. T-118375), however, remained in the names of respondent and his wife. The
instruments in support of the series of alleged sales were not registered.

On September 11, 1992, petitioners accepted the offer and gave Javier P200,000 as downpayment for
the lot. Javier then delivered his supposed muniments of title to petitioners. After the execution of a
contract to sell, he formally turned over the property to petiti oners.

At the time of the turn-over, a portion of the lot was occupied by Ramon C. Pacleb, respondents son, and
his wife as tenants. On September 12, 1992, Ramon and his wife allegedly surrendered possession of
their portion to petitioners. Later on, petitioners appointed Ramon as their trustee over the subject lot.

Aside from taking possession of the property, petitioners also caused the annotation on TCT No. T-
118375 of a decision rendered in their favor in Civil Case No. 741-93.2 This decision attained finality on
April 19, 1995.

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Petitioners alleged that they exercised ownership rights as well as enjoyed open, public and peaceful
possession over the property from September 12, 1992 until the early part of September 1995. During
this time, respondent was in the United States.

Upon respondents return to the Philippines in May 1995, he allegedly entered the property by means of
force, threat, intimidation, strategy and stealth thereby ousting petitioners and their trustee, Ramon.

Despite repeated demands, respondent, asserting his rights as registered owner of the property, refused
to vacate the premises and surrender its possession to petitioners.

Petitioners filed an action for forcible entry3 in the Municipal Trial Court (MTC) of Dasmarias, Cavite on
November 23, 1995. Respondent filed an answer with compulsory counterclaim dated December 8, 1995.
After the issues were joined, the MTC required the submission of the parties position papers at a
preliminary conference on March 11, 1996. Respondent failed to comply.

On June 17, 1996, the MTC ruled:

WHEREFORE, in view of the foregoing, the [respondent] and other persons claiming right under him are
hereby ordered to surrender physical possession of Lot No. 6853-D in favor of the [petitioners] and to pay
the sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as attorneys fees.

SO ORDERED.4

On appeal,5 the Regional Trial Court (RTC) of Imus, Cavite rendered a decision affirming the MTC
decision in toto.6

Respondent elevated his case to the Court of Appeals (CA)7 which rendered the assailed decision on
March 18, 1997:

WHEREFORE, the Petition is GRANTED; the Decision dated October 25, 1996 of the [RTC] of Imus,
Cavite in Civil Case No. 052-96 and the Decision of the [MTC] of Dasmarias, Cavite in Civil Case No.
182 are SET ASIDE; and Civil Case No. 182 for Forcible Entry and Damages is hereby ordered
DISMISSED. No pronouncement as to costs.

SO ORDERED.8

In a resolution dated August 20, 1997, the CA denied petitioners motion for reconsideration for lack of
merit.

Before us now come petitioners who claim that the appellate court erred in finding that respondent had
prior physical possession of the subject property.lawphil.net

"In an action for forcible entry, the plaintiff must prove that he was in prior possession of the land or
building and that he was deprived thereof by means of force, intimidation, threat, strategy or stealth." 9 The
plaintiff, however, cannot prevail where it appears that, as between himself and the defendant, the latter
had possession antedating his own.10 We are generally precluded in a Rule 45 petition from reviewing
factual evidence tracing the events prior to the first act of spoliation.11 However, the conflicting factual
findings of the MTC and RTC on one hand, and the CA on the other, require us to make an exception.

We overrule petitioners contentions.

The Civil Code states that possession is the holding of a thing or the enjoyment of a right. 12 In the
grammatical sense, to possess means to have, to actually and physically occupy a thing, with or without

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right.13 "Possession always includes the idea of occupation x x x. It is not necessary that the person in
possession should himself be the occupant. The occupancy can be held by another in his
name."14 Without occupancy, there is no possession.15

Two things are paramount in possession.16 First, there must be occupancy, apprehension or taking.
Second, there must be intent to possess (animus possidendi).17

Here, petitioners failed to establish that they had prior physical possession to justify a ruling in their favor
in the complaint for forcible entry against respondent.

In the decision in Civil Case No. 741-93 (a case for specific performance and damages against Javier, the
alleged vendor of the lot in question) upon which petitioners based their right to possess in the first place,
the trial court categorically stated:

The [petitioners were never placed] in possession of the subject property on which [was] planned to
be [site of] a piggery, nor [were they] given a clearance or certification from the Municipal Agrarian
Reform Officer.18(emphasis ours)

The claim that the lot was turned over to petitioners in 1992 was self-serving in the face of this factual
finding. On the other hand, the tax declarations and receipts in the name of respondent in 1994 and 1995
established the possession of respondent.19 The payment of real estate tax is one of the most persuasive
and positive indications showing the will of a person to possess in concepto de dueo or with claim of
ownership.20

"[P]ossession in the eyes of the law does not mean that a man has to have his feet on every square
meter of the ground before he is deemed in possession."21 In this case, Ramon, as respondents son, was
named caretaker when respondent left for the United States in 1983.22 Due to the eventual loss of trust
and confidence in Ramon, however, respondent transferred the administration of the land to his other
son, Oscar, in January 1995 until his return in May 1995.23 In other words, the subject land was in the
possession of the respondents sons during the contested period.

Petitioners cite an alleged document (Kusangloob na Pagsasauli ng Lupang Sakahan at Pagpapahayag


ng Pagtalikod sa Karapatan) dated March 10, 1995 executed by them and Ramon to prove a turn over of
possession. They also seek to prove their exercise of rights over the land through alleged frequent visits
and the designation of Ramon as their own trustee as declared in a joint affidavit attached to their position
paper filed with the MTC. These instruments, however, fail to convince us of petitioners actual occupancy
of the subject land. First, petitioners themselves acknowledged that Ramon and his wife occupied part of
the land as tenants of respondent. Second, Ramon, a mere tenant, had no authority to sign such
document dated March 10, 1995 waiving all rights to the land. Third, there was no clear proof in the
records of the appointment of Ramon as petitioners trustee save their self-serving statements to this
effect. Finally, at the time the Kusangloob na Pagsasauli document was executed, the caretaker of the
land was no longer Ramon but Oscar.24

Most important, the title of the land in question (TCT No. T-118375) remained in the name of
respondent.25 "As the registered owner, petitioner had a right to the possession of the property, which is
one of the attributes of ownership."26 The Civil Code states:

Art. 538. Possession as a fact cannot be recognized at the same time in two different personalities except
in the cases of co-possession. Should a question arise regarding the fact of possession, the present
possessor shall be preferred; if there are two possessors, the one longer in possession; if the dates of the
possession are the same, the one who presents a title; and if all these conditions are equal, the thing
shall be placed in judicial deposit pending determination of its possession or ownership through proper
proceedings.

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In view of the evidence establishing respondents continuing possession of the subject property,
petitioners allegation that respondent deprived them of actual possession by means of force, intimidation
and threat was clearly untenable. In Gaza v. Lim, we held that:

Where a dispute over possession arises between two persons, the person first having actual possession
is the one who is entitled to maintain the action granted by law; otherwise, a mere usurper without any
right whatever, might enter upon the property of another and, by allowing himself to be ordered off, could
acquire the right to maintain the action of forcible entry and detainer, however momentary his intrusion
might have been.27

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals dated March 18,
1997 in CA-G.R. SP No. 42604 is AFFIRMED.

Costs against petitioners.

SO ORDERED.

PNB v. De Jesus, G.R. No. 149295, September 23, 2003

[G.R. No. 149295. September 23, 2003]

PHILIPPINE NATIONAL BANK, petitioner, vs. GENEROSO DE JESUS, represented by his Attorney-
in-Fact, CHRISTIAN DE JESUS, respondent.

DECISION
VITUG, J.:

Petitioner Philippine National Bank disputes the decision handed down by the Court of Appeals
promulgated on 23 March 2001 in CA-G.R. CV No. 56001, entitled Generoso De Jesus, represented by
his Attorney-in-Fact, Christian De Jesus, versus Philippine National Bank. The assailed decision has
affirmed the judgment rendered by the Regional Trial Court, Branch 44, of Mamburao, Occidental
Mindoro, declaring respondent Generoso de Jesus as being the true and lawful owner of the 124-square-
meter portion of the land covered by Transfer Certificate of Title (TCT) No. T-17197 and ordering
petitioner bank to vacate the premises, to deliver possession thereof to respondent, and to remove the
improvement thereon.
It would appear that on 10 June 1995, respondent filed a complaint against petitioner before the
Regional Trial Court of Occidental Mindoro for recovery of ownership and possession, with damages,
over the questioned property. In his complaint, respondent stated that he had acquired a parcel of land
situated in Mamburao, Occidental Mindoro, with an area of 1,144 square meters covered by TCT No. T-
17197, and that on 26 March 1993, he had caused a verification survey of the property and discovered
that the northern portion of the lot was being encroached upon by a building of petitioner to the extent of
124 square meters. Despite two letters of demand sent by respondent, petitioner failed and refused to
vacate the area.

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Petitioner, in its answer, asserted that when it acquired the lot and the building sometime in 1981
from then Mayor Bienvenido Ignacio, the encroachment already was in existence and to remedy the
situation, Mayor Ignacio offered to sell the area in question (which then also belonged to Ignacio) to
petitioner at P100.00 per square meter which offer the latter claimed to have accepted. The sale,
however, did not materialize when, without the knowledge and consent of petitioner, Mayor Ignacio later
mortgaged the lot to the Development Bank of the Philippines.
The trial court decided the case in favor of respondent declaring him to be the rightful owner of the
disputed 124-square-meter portion of the lot and ordering petitioner to surrender possession of the
property to respondent and to cause, at its expense, the removal of any improvement thereon.
The Court of Appeals, on appeal, sustained the trial court but it ordered to be deleted the award to
respondent of attorneys fees, as well as moral and exemplary damages, and litigation expenses.
Petitioner went to this Court, via a petition for review, after the appellate court had denied the banks
motion for reconsideration, here now contending that -

1. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN ADJUDGING PNB A BUILDER IN BAD
FAITH OVER THE ENCROACHED PROPERTY IN QUESTION;

2. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN NOT APPLYING IN FAVOR OF PNB THE
PROVISION OF ARTICLE 448 OF THE CIVIL CODE AND THE RULING IN TECNOGAS PHILIPPINES
MANUFACTURING CORP. VS. COURT OF APPEALS, G.R. No. 108894, February 10, 1997, 268 SCRA
7.[1]

The Regional Trial Court and the Court of Appeals have both rejected the idea that petitioner can be
considered a builder in good faith. In the context that such term is used in particular reference to Article
448, et seq., of the Civil Code, a builder in good faith is one who, not being the owner of the land, builds
on that land believing himself to be its owner and unaware of any defect in his title or mode of acquisition.
The various provisions of the Civil Code, pertinent to the subject, read:

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

Article 449. He who builds, plants, or sows in bad faith on the land of another, loses what is built, planted
or sown without right to indemnity.

Article 450. The owner of the land on which anything has been built, planted or sown in bad faith may
demand the demolition of the work, or that the planting or sowing be removed, in order to replace things
in their former condition at the expense of the person who built, planted or sowed; or he may compel the
builder or planter to pay the price of the land, and the sower the proper rent.

A builder in good faith can, under the foregoing provisions, compel the landowner to make a choice
between appropriating the building by paying the proper indemnity or obliging the builder to pay the price
of the land. The choice belongs to the owner of the land, a rule that accords with the principle of
accession, i.e., that the accessory follows the principal and not the other way around. [2] Even as the
option lies with the landowner, the grant to him, nevertheless, is preclusive. He much choose one. He
cannot, for instance, compel the owner of the building to instead remove it from the land. [3] In order,

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however, that the builder can invoke that accruing benefit and enjoy his corresponding right to demand
that a choice be made by the landowner, he should be able to prove good faith on his part.
Good faith, here understood, is an intangible and abstract quality with no technical meaning or
statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and
the absence of design to defraud or to seek an unconscionable advantage. An individuals personal good
faith is a concept of his own mind and, therefore, may not conclusively be determined by his protestations
alone. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put
the holder upon inquiry.[4] The essence of good faith lies in an honest belief in the validity of ones right,
ignorance of a superior claim, and absence of intention to overreach another. [5] Applied to possession,
one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any
flaw which invalidates it.[6]
Given the findings of both the trial court and the appellate court, it should be evident enough that
petitioner would fall much too short from its claim of good faith. Evidently, petitioner was quite aware, and
indeed advised, prior to its acquisition of the land and building from Ignacio that a part of the building sold
to it stood on the land not covered by the land conveyed to it.
Equally significant is the fact that the building, constructed on the land by Ignacio, has in actuality
been part of the property transferred to petitioner. Article 448, of the Civil Code refers to a piece of land
whose ownership is claimed by two or more parties, one of whom has built some works (or sown or
planted something) and not to a case where the owner of the land is the builder, sower, or planter
who then later loses ownership of the land by sale or otherwise for, elsewise stated, where the
true owner himself is the builder of works on his own land, the issue of good faith or bad faith is
entirely irrelevant. [7]
In fine, petitioner is not in a valid position to invoke the provisions of Article 448 of the Civil
Code. The Court commiserates with petitioner in its present predicament; upon the other hand,
respondent, too, is entitled to his rights under the law, particularly after having long been deprived of the
enjoyment of his property. Nevertheless, the Court expresses hope that the parties will still be able to
come up with an arrangement that can be mutually suitable and acceptable to them.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 56001 is AFFIRMED. No
costs.
SO ORDERED.

Parilla v. Pilar, G.R. No. 167680, November 30, 2006

THIRD DIVISION

SAMUEL PARILLA, CHINITA PARILLA and G.R. No. 167680


DEODATO PARILLA,
Petitioners, Present:

QUISUMBING, Chairperson,
CARPIO,
- versus - CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

DR. PROSPERO PILAR,

Page 37 of 54
Page 38 of 54

Respondent. Promulgated:

November 30, 2006

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

DECISION

CARPIO MORALES, J.:

Assailed via Petition for Review on Certiorari is the Court of Appeals Decision [1] of January 19,
2005 reversing that of the Regional Trial Court (RTC) of Vigan City, Branch 20[2] which affirmed the
Decision[3] of February 3, 2003 of the Municipal Trial Court (MTC) of Bantay, Ilocos Sur.
Petitioner-spouses Samuel and Chinita Parilla and their co-petitioner-son Deodato Parilla, as dealers[4] of
Pilipinas Shell Petroleum Corporation (Pilipinas Shell), have been in possession of a parcel of land (the
property) located at the poblacion of Bantay, Ilocos Sur which was leased to it by respondent Dr.
Prospero Pilar under a 10-year Lease Agreement[5] entered into in 1990.

When the lease contract between Pilipinas Shell and respondent expired in 2000, petitioners
remained in possession of the property on which they built improvements consisting of a billiard hall and a
restaurant, maintained a sari-sari store managed by Leonardo Dagdag, Josefina Dagdag and Edwin
Pugal, and allowed Flor Pelayo, Freddie Bringas and Edwin Pugal to use a portion thereof as parking
lot.[6]

Despite demands to vacate, petitioners[7] and the other occupants[8] remained in the property.

Hence, respondent who has been residing in the United States,[9] through his attorney-in-fact Marivic Paz
Padre, filed on February 4, 2002 a complaint for ejectment before the Bantay MTC with prayer for the
issuance of a writ of preliminary injunction with damages [10] against petitioners and the other occupants of
the property.

After trial, the MTC, by Decision of February 3, 2003, ordered herein petitioners and their co-defendants
and all persons claiming rights under them to vacate the property and to pay the plaintiff-herein
respondent the amount of P50,000.00 as reasonable compensation for the use of the property
and P10,000.00 as attorneys fees and to pay the cost of suit.And it ordered the plaintiff-herein
respondent to reimburse defendants Samuel Parilla, Chinita Parilla and Deodato Parilla the amount of
Two Million Pesos (P2,000,000.00) representing the value of the improvements introduced on the
property.

Respondent appealed to the RTC of Vigan City that portion of the trial courts decision ordering him to
reimburse petitioners the amount of Two Million Pesos. The RTC affirmed the MTC Decision, however.[11]

On respondents petition for review, the Court of Appeals set aside the questioned order for respondent to
reimburse petitioners Two Million Pesos.[12] In setting aside the questioned order, the appellate court,
applying Article 546 of the New Civil Code which provides:

ART. 546. Necessary expenses shall be refunded to every possessor; but


only the possessor in good faith may retain the thing until he has been reimbursed
therefor.

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Page 39 of 54

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

held that [herein petitioners] tolerated occupancy . . . could not be interpreted to mean . . . that they are
builders or possessors in good faith[13] and that for one to be a builder in good faith, it is assumed that he
claims title to the property which is not the case of petitioners.

Hence, the present petition which faults the appellate court to have erred

. . . WHEN IT SET ASIDE THE DECISIONS OF THE TRIAL COURTS WHICH


ORDERED THE RESPONDENT TO REIMBURSE PETITIONERS THE AMOUNT OF
TWO MILLION (P2,000,000.00) PESOS FOR THE SUBSTANTIAL IMPROVEMENTS
INTRODUCED BY THEM ON THE SUBJECT PREMISES.

II

. . . IN NOT HOLDING THAT PETITIONERS ARE BUILDERS IN GOOD FAITH OF THE


SUBSTANTIAL IMPROVEMENTS THEY HAD INTRODUCED ON THE PREMISES,
HENCE, THEY ARE ENTITLED TO REIMBURSEMENT OF SUCH IMPROVEMENTS.

III

. . . IN NOT HOLDING THAT THE BUILDING WHICH PETITIONERS ERECTED ON


THE PREMISES WAS WORTH, AND THAT THE PETITIONERS ACTUALLY SPENT,
THE AMOUNT OF TWO MILLION (P2,000,000.00) PESOS.

IV

. . . IN NOT HOLDING THAT PETITIONERS HAVE THE RIGHT OF RETENTION OF


THE PREMISES UNTIL THEY ARE REIMBURSED OF THE SAID AMOUNT
ADJUDGED IN THEIR FAVOR BY THE COURTS A QUO.[14]

Petitioners, proffering that neither respondent nor his agents or representatives performed any act to
prevent them from introducing the improvements,[15] contend that the appellate court should have applied
Article 453 of the New Civil Code which provides that [i]f there was bad faith not only on the part of the
person who built, planted or sowed on the land of another, but also on the part of the owner of such land,
the rights of one and the other shall be the same as though both had acted in good faith. [16]

Petitioners thus conclude that being builders in good faith, until they are reimbursed of the Two
Million Peso-value of the improvements they had introduced on the property, they have the right of
retention or occupancy thereof pursuant to Article 448, in relation to Article 546, of the New Civil
Code,[17] otherwise, respondent would be unjustly enriched at their expense.

The petition fails in light of the following discussions.

The evidence shows that in 1960, a lease contract over the property was forged between Shell Company
of the Philippines Limited and respondents predecessors-in-interest. In 1990, the lease contract was
renewed by Pilipinas Shell and respondent.

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Page 40 of 54

Petitioners, being dealers of Pilipinas Shells petroleum products, were allowed to occupy the
property. Petitioners are thus considered agents[18] of Pilipinas Shell. The factual milieu of the instant case
calls then for the application of the provisions on lease under the New Civil Code.

The right of the lessor upon the termination of a lease contract with respect to useful improvements
introduced on the leased property by a lessee is covered by Article 1678 which reads:

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

x x x x (Emphasis supplied)

The foregoing provision is a modification of the old Code under which the lessee had no right at all to be
reimbursed for the improvements introduced on the leased property, he being entitled merely to the rights
of a usufructuary right of removal and set-off, but not of reimbursement.[19]

The modification introduced in the above-quoted paragraph of Article 1678 on partial reimbursement was
intended to prevent unjust enrichment of the lessor which now has to pay one-half of the value of the
improvements at the time the lease terminates because the lessee has already enjoyed the same,
whereas the lessor could enjoy them indefinitely thereafter.[20]

As the law on lease under the New Civil Code has specific rules concerning useful improvements
introduced by a lessee on the property leased, it is erroneous on the part of petitioners to urge this Court
to apply Article 448, in relation to Article 546, regarding their claim for reimbursement and to invoke the
right of retention before reimbursement is made. Article 448 and Article 546 read:

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

ART. 546. Necessary expenses shall be refunded to every possessor; but


only the possessor in good faith may retain the thing until he has been reimbursed
therefor.

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

Jurisprudence is replete with cases[21] which categorically declare that Article 448 covers only cases in
which the builders, sowers or planters believe themselves to be owners of the land or, at least, have a
claim of title thereto, but not when the interest is merely

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Page 41 of 54

that of a holder, such as a mere tenant, agent or usufructuary. A tenant cannot be said to be a builder in
good faith as he has no pretension to be owner.[22]
In a plethora of cases,[23] this Court has held that Articles 448 of the Civil Code, in relation
to Article 546 of the same Code, which allows full reimbursement of useful improvements
and retention of the premises until reimbursement is made, applies only to a possessor in
good faith, i.e., one who builds on land with the belief that he is the owner thereof. It
does not apply where ones only interest is that of a lessee under a rental contract;
otherwise, it would always be in the power of the tenant to improve his landlord out of his
property. [24] (Underscoring supplied)

Sia v. Court of Appeals,[25] which cites Cabangis v. Court of Appeals,[26] exhaustively explains the
applicability of Article 1678 on disputes relating to useful improvements introduced by a lessee on leased
premises, viz:

xxxx

Second. Petitioner stubbornly insists that he may not be ejected from private
respondent's land because he has the right, under Articles 448 and 546 of the New Civil
Code, to retain possession of the leased premises until he is paid the full fair market
value of the building constructed thereon by his parents. Petitioner is wrong, of course.
The Regional Trial Court and the Court of Appeals correctly held that it is Article 1678 of
the New Civil Code that governs petitioner's right vis-a-vis the improvements built by his
parents on private respondent's land.

In the 1991 case of Cabangis v. Court of Appeals where the subject of the lease contract
was also a parcel of land and the lessee's father constructed a family residential house
thereon, and the lessee subsequently demanded indemnity for the improvements built on
the lessor's land based on Articles 448 and 546 of the New Civil Code, we pointed out
that reliance on said legal provisions was misplaced.

"The reliance by the respondent Court of Appeals on Articles 448 and 546 of the Civil
Code of the Philippines is misplaced. These provisions have no application to a contract
of lease which is the subject matter of this controversy. Instead, Article 1678 of the Civil
Code applies. . . .

xxxx

On the other hand, Article 448 governs the right of accession while Article 546 pertains to
effects of possession. The very language of these two provisions clearly manifest their
inapplicability to lease contracts. . . .

xxxx

Thus, the improvements that the private respondent's father had introduced in the leased
premises were done at his own risk as lessee. The right to indemnity equivalent to one-
half of the value of the said improvements the house, the filling materials, and the hollow
block fence or wall is governed, as earlier adverted to, by the provisions of Art. 1678, first

Page 41 of 54
Page 42 of 54

paragraph of the Civil Code above quoted. But this right to indemnity exists only if the
lessor opts to appropriate the improvements (Alburo v. Villanueva, supra, note 10 at 279-
280; Valencia v. Ayala de Roxas, supra, note 10 at 46). The refusal of the lessor to pay
the lessee one-half of the value of the useful improvements gives rise to the right of
removal. On this score, the commentary of Justice Paras is enlightening.

'Note that under the 1st paragraph of Art. 1678, the law on the right of
REMOVAL says that 'should the lessor refuse to reimburse said amount, the
lessee may remove the improvements, even though the principal thing may
suffer thereby.' While the phrase 'even though' implies that Art. 1678 always
applies regardless of whether or not the improvements can be removed without
injury to the leased premises, it is believed that application of the Article cannot
always be done. The rule is evidently intended for cases where a true
accession takes place as when part of the land leased is, say, converted into a
fishpond; and certainly not where as easily removable

thing (such as a wooden fence) has been introduced. There is no doubt that in
a case involving such a detachable fence, the lessee can take the same away
with him when the lease expires (5 E. Paras, Civil Code of the Philippines
Annotated 345 [11th ed., 1986]).'

xxxx

Clearly, it is Article 1678 of the New Civil Code which applies to the present case.

Petitioners claim for reimbursement of the alleged entire value of the improvements does not thus lie
under Article 1678. Not even for one-half of such alleged value, there being no
substantial evidence, e.g., receipts or other documentary evidence detailing costs of
construction. Besides, by petitioners admission, of the structures they originally built the billiard hall,
restaurant, sari-sari store and a parking lot, only the bodega-like sari-sari store and the parking lot now
exist.[27]

At all events, under Article 1678, it is the lessor who is given the option, upon termination of the lease
contract, either to appropriate the useful improvements by paying one-half of their value at that time, or to
allow the lessee to remove the improvements. This option solely belongs to the lessor as the law is
explicit that [s]hould the lessor refuse to reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer damage thereby. It appears that the lessor has
opted not to reimburse.

WHEREFORE, the petition is DENIED. The Court of Appeals Decision of January 19,
2005 is AFFIRMED in light of the foregoing discussions.

Costs against petitioners.

SO ORDERED.

Cequea v. Bolante, G.R. No. 137944, April 6, 2000

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Page 43 of 54

THIRD DIVISION

[G.R. No. 137944. April 6, 2000]

FERNANDA MENDOZA CEQUENA and RUPERTA MENDOZA LIRIO, petitioners, vs. HONORATA
MENDOZA BOLANTE, respondent. J lexj

DECISION

PANGANIBAN, J.:

Tax receipts and declarations are prima facie proofs of ownership or possession of the property for which
such taxes have been paid. Coupled with proof of actual possession of the property, they may become
the basis of a claim for ownership. By acquisitive prescription, possession in the concept of owner --
public, adverse, peaceful and uninterrupted -- may be converted to ownership. On the other hand, mere
possession and occupation of land cannot ripen into ownership.

The Case

Before us is a Petition for Review on Certiorari of the March 19, 1999 Decision[1] of the Court of
Appeals[2] (CA) in CA-GR CV No. 43423. The assailed Decision disposed as follows:[3]

"WHEREFORE, for all the foregoing, the decision of the trial court appealed from
is REVERSED and SET ASIDE. In lieu thereof, judgment is hereby rendered declaring x
x x Honorata Mendoza Bolante the rightful owner and possessor of the parcel of land
which is the subject of this appeal." Lexj uris

The Facts

The Petition herein refers to a parcel of land situated in Barangay Bangad, Binangonan, Province of
Rizal, having an area of 1,728 square meters and covered by Tax Declaration No. 26-0027.

The undisputed antecedents of this case are narrated by the Court of Appeals as follows: [4]

"The facts not disputed revealed that prior to 1954, the land was originally declared for
taxation purposes in the name of Sinforoso Mendoza, father of [respondent] and married
to Eduarda Apiado. Sinforoso died in 1930. [Petitioners] were the daughters of Margarito
Mendoza. On the basis of an affidavit, the tax declaration in the name of Sinforoso
Mendoza of the contested lot was cancelled and subsequently declared in the name of
Margarito Mendoza. Margarito and Sinforoso are brothers. [Respondent] is the present
occupant of the land. Earlier, on October 15, 1975, [respondent] and Miguel Mendoza,
another brother of [petitioners], during the cadastral survey had a dispute on [the]
ownership of the land. Juri smis

"During the pre-trial conference, parties stipulated the following facts:

1) The land subject of the case was formerly declared for taxation purposes in the name
of Sinforoso Mendoza prior to 1954 but is now declared in the name of Margarito
Mendoza.

2) The parties agree[d] as to the identity of the land subject of instant case.

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3) [Petitioners] are the daughters of Margarito Mendoza while the [respondent] is the only
daughter of Sinforoso Mendoza.

'4) Margarito Mendoza and Sinforoso Mendoza [were] brothers, now deceased.

5) During the cadastral survey of the property on October 15, 1979 there was already a
dispute between Honorata M. Bolante and Miguel Mendoza, brother of [petitioners].

6) [Respondent was] occupying the property in question.

The only issue involved [was] who [was] the lawful owner and possessor
of the land subject of the case.

"After trial, the court a quo rendered its judgment in favor of [petitioners], the dispositive
portion of which reads as follows:

Wherefore, in view of the foregoing considerations, judgment is hereby


rendered for the [petitioners] and against the [respondent]:

1. Declaring that the parcel of land situated in Bangad, Binangonan, Rizal covered by tax
declaration no. 26-0027 in the name of Margarito Mendoza belong to his heirs, the
[petitioners] herein;

2. Ordering [respondent] to vacate the property subject of the case and deliver
possession thereof to the heirs of Margarito Mendoza. Jjj uris

3. Ordering the [respondent] to indemnify the [petitioners] in the sum of P10,000.00, as


actual damages.

4. Ordering the [respondent] to pay the costs."

Ruling of the Court of Appeals

The Court of Appeals reversed the trial court because the genuineness and the due execution of the
affidavit allegedly signed by the respondent and her mother had not been sufficiently established. The
notary public or anyone else who had witnessed the execution of the affidavit was not presented. No
expert testimony or competent witness ever attested to the genuineness of the questioned signatures.

The CA further ruled that the affidavit was insufficient to overcome the denial of respondent and her
mother. The former testified that the latter, never having attended school, could neither read nor write.
Respondent also said that she had never been called "Leonor," which was how she was referred to in the
affidavit.

Moreover, the appellate court held that the probative value of petitioners tax receipts and declarations
paled in comparison with respondents proof of ownership of the disputed parcel. Actual, physical,
exclusive and continuous possession by respondent since 1985 indeed gave her a better title under
Article 538 of the Civil Code. lex

Hence, this Petition.[5]

Issues

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Page 45 of 54

Insisting that they are the rightful owners of the disputed land, the petitioners allege that the CA
committed these reversible errors:[6]

"1. xxx [I]n not considering the affidavit as an exception to the general rule that an
affidavit is classified as hearsay evidence, unless the affiant is placed on the witness
stand; and Jksm

"2. xxx [I]n holding that respondent has been in actual and physical possession, coupled
with xxx exclusive and continuous possession of the land since 1985, which are evidence
of the best kind of circumstance proving the claim of the title of ownership and enjoys the
presumption of preferred possessor."

The Court's Ruling

The Petition has no merit.

First Issue: Admissibility of the Affidavit

Petitioners dispute the CA's ruling that the affidavit was not the best evidence of their father's ownership
of the disputed land, because the "affiant was not placed on the witness stand." They contend that it was
unnecessary to present a witness to establish the authenticity of the affidavit because it was a declaration
against respondent's interest and was an ancient document. As a declaration against interest, it was an
exception to the hearsay rule. As a necessary and trustworthy document, it was admissible in evidence.
And because it was executed on March 24, 1953, it was a self-authenticating ancient document. Chief

We quote below the pertinent portion of the appellate court's ruling:[7]

"While it is true that the affidavit was signed and subscribed before a notary public, the
general rule is that affidavits are classified as hearsay evidence, unless affiants are
placed on the witness stand (People's Bank and Trust Company vs. Leonidas, 207 SCRA
164). Affidavits are not considered the best evidence, if affiants are available as
witnesses (Vallarta vs. Court of Appeals, 163 SCRA 587). The due execution of the
affidavit was not sufficiently established. The notary public or others who saw that the
document was signed or at least [could] confirm its recitals [were] not presented. There
was no expert testimony or competent witness who attested to the genuineness of the
questioned signatures. Worse, [respondent] denied the genuineness of her signature and
that of her mother xxx. [Respondent] testified that her mother was an illiterate and as far
as she knew her mother could not write because she had not attended school (p. 7, ibid).
Her testimony was corroborated by Ma. Sales Bolante Basa, who said the [respondent's]
mother was illiterate."

The petitioners allegations are untenable. Before a private document offered as authentic can be received
in evidence, its due execution and authenticity must be proved first. [8] And before a document is admitted
as an exception to the hearsay rule under the Dead Man's Statute, the offeror must show (a) that the
declarant is dead, insane or unable to testify; (b) that the declaration concerns a fact cognizable by the
declarant; (c) that at the time the declaration was made, he was aware that the same was contrary to his
interest; and (d) that circumstances render improbable the existence of any motive to falsify. [9]Esmsc

In this case, one of the affiants happens to be the respondent, who is still alive and who testified that the
signature in the affidavit was not hers. A declaration against interest is not admissible if the declarant is
available to testify as a witness.[10] Such declarant should be confronted with the statement against
interest as a prior inconsistent statement.

Page 45 of 54
Page 46 of 54

The affidavit cannot be considered an ancient document either. An ancient document is one that is (1)
more than 30 years old, (2) found in the proper custody, and (3) unblemished by any alteration or by any
circumstance of suspicion.[11] It must on its face appear to be genuine. The petitioners herein failed,
however, to explain how the purported signature of Eduarda Apiado could have been affixed to the
subject affidavit if, according to the witness, she was an illiterate woman who never had any formal
schooling. This circumstance casts suspicion on its authenticity.

Not all notarized documents are exempted from the rule on authentication. Thus, an affidavit does not
automatically become a public document just because it contains a notarial jurat. Furthermore, the
affidavit in question does not state how the ownership of the subject land was transferred from Sinforoso
Mendoza to Margarito Mendoza. By itself, an affidavit is not a mode of acquiring ownership.

Second Issue: Preference of PossessionEsmmis

The CA ruled that the respondent was the preferred possessor under Article 538 of the Civil Code
because she was in notorious, actual, exclusive and continuous possession of the land since 1985.
Petitioners dispute this ruling. They contend that she came into possession through force and violence,
contrary to Article 536 of the Civil Code.

We concede that despite their dispossession in 1985, the petitioners did not lose legal possession
because possession cannot be acquired through force or violence. [12] To all intents and purposes, a
possessor, even if physically ousted, is still deemed the legal possessor.[13] Indeed, anyone who can
prove prior possession, regardless of its character, may recover such possession. [14]

However, possession by the petitioners does not prevail over that of the respondent. Possession by the
former before 1985 was not exclusive, as the latter also acquired it before 1985. The records show that
the petitioners father and brother, as well as the respondent and her mother were simultaneously in
adverse possession of the land. Es-mso

Before 1985, the subject land was occupied and cultivated by the respondent's father (Sinforoso), who
was the brother of petitioners' father (Margarito), as evidenced by Tax Declaration No. 26425. [15] When
Sinforoso died in 1930, Margarito took possession of the land and cultivated it with his son Miguel. At the
same time, respondent and her mother continued residing on the lot.

When respondent came of age in 1948, she paid realty taxes for the years 1932-1948.[16] Margarito
declared the lot for taxation in his name in 1953[17] and paid its realty taxes beginning 1952.[18] When he
died, Miguel continued cultivating the land. As found by the CA, the respondent and her mother were
living on the land, which was being tilled by Miguel until 1985 when he was physically ousted by the
respondent.[19]

Based on Article 538 of the Civil Code, the respondent is the preferred possessor because, benefiting
from her father's tax declaration of the subject lot since 1926, she has been in possession thereof for a
longer period. On the other hand, petitioners' father acquired joint possession only in 1952. Ms-esm

Third Issue: Possession of Better Right

Finally, the petitioners challenge the CA ruling that "actual and physical coupled with the exclusive and
continuous possession [by respondent] of the land since 1985" proved her ownership of the disputed
land. The respondent argues that she was legally presumed to possess the subject land with a just title
since she possessed it in the concept of owner. Under Article 541 of the Code, she could not be obliged
to show or prove such title.

Page 46 of 54
Page 47 of 54

The respondent's contention is untenable. The presumption in Article 541 of the Civil Code is merely
disputable; it prevails until the contrary is proven.[20] That is, one who is disturbed in one's possession
shall, under this provision, be restored thereto by the means established by law. [21] Article 538 settles only
the question of possession, and possession is different from ownership. Ownership in this case should be
established in one of the ways provided by law. E-xsm

To settle the issue of ownership, we need to determine who between the claimants has proven acquisitive
prescription.[22]

Ownership of immovable property is acquired by ordinary prescription through possession for ten
years.[23] Being the sole heir of her father, respondent showed through his tax receipt that she had been in
possession of the land for more than ten years since 1932. When her father died in 1930, she continued
to reside there with her mother. When she got married, she and her husband engaged in kaingin inside
the disputed lot for their livelihood.[24]

Respondent's possession was not disturbed until 1953 when the petitioners' father claimed the land. But
by then, her possession, which was in the concept of owner -- public, peaceful, and uninterrupted[25] --
had already ripened into ownership. Furthermore she herself, after her father's demise, declared and paid
realty taxes for the disputed land. Tax receipts and declarations of ownership for taxation, when coupled
with proof of actual possession of the property, can be the basis of a claim for ownership through
prescription.[26]Ky-le

In contrast, the petitioners, despite thirty-two years of farming the subject land, did not acquire ownership.
It is settled that ownership cannot be acquired by mere occupation.[27] Unless coupled with the element of
hostility toward the true owner,[28] occupation and use, however long, will not confer title by prescription or
adverse possession. Moreover, the petitioners cannot claim that their possession was public, peaceful
and uninterrupted. Although their father and brother arguably acquired ownership through extraordinary
prescription because of their adverse possession for thirty-two years (1953-1985),[29] this supposed
ownership cannot extend to the entire disputed lot, but must be limited to the portion that they actually
farmed.

We cannot sustain the petitioners' contention that their ownership of the disputed land was established
before the trial court through the series of tax declarations and receipts issued in the name of Margarito
Mendoza. Such documents prove that the holder has a claim of title over the property. Aside from
manifesting a sincere desire to obtain title thereto, they announce the holder's adverse claim against the
state and other interested parties.[30]Ky-calr

However, tax declarations and receipts are not conclusive evidence of ownership.[31] At most, they
constitute mere prima facie proof of ownership or possession of the property for which taxes have been
paid.[32] In the absence of actual public and adverse possession, the declaration of the land for tax
purposes does not prove ownership.[33] In sum, the petitioners' claim of ownership of the whole parcel has
no legal basis.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs
against petitioners.

SO ORDERED.

Heirs of Pedro Laurora et. al. v. Sterling Technopark III et al., G.R. No. 146815, April 9, 2003

Page 47 of 54
Page 48 of 54

THIRD DIVISION

[G.R. No. 146815. April 9, 2003]

HEIRS OF PEDRO LAURORA and LEONORA LAURORA, petitioners, vs. STERLING TECHNOPARK III
and S.P. PROPERTIES, INC., respondents.

DECISION
PANGANIBAN, J.:

The owners of a property have no authority to use force and violence to eject alleged usurpers who
were in prior physical possession of it. They must file the appropriate action in court and should not take
the law into their own hands.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set aside the
June 27, 2000 Decision[2] and the January 22, 2001 Resolution[3] of the Court of Appeals[4] (CA) in CA-GR
SP No. 54667. The dispositive part of the Decision reads:

WHEREFORE, the [P]etition is GRANTED and the RTC [D]ecision dated 06 May 1999 and the RTC
[O]rder dated 03 August 1999 are hereby REVERSED and SET ASIDE, and corollarily, the MCTC
[D]ecision is AFFIRMED. [5]

The assailed Resolution denied petitoners Motion for Reconsideration.

The Facts

The factual antecedents are summarized by the CA as follows:

In a [C]omplaint for Forcible Entry with Damages filed on 27 September 1997 before the Fifth Municipal
Circuit Trial Court of Carmona and Gen. Mariano Alvarez, plaintiffs therein, x x x Pedro Laurora and
Leonora Laurora [herein petitioners] alleged that they [were] the owners of Lot 1315-G, SWD-40763 of
the Yaptinchay Estate with an area of 39,771 sq. meters and located in Carmona, Cavite. Pedro Laurora
planted trees and has possessed the land up to the present.On 15 September 1997, [respondents]
Sterling Technopark III and S.P. Properties, Inc. x x x through their Engr. Bernie Gatchalian bulldozed
and uprooted the trees and plants, and with the use of armed men and by means of threats and
intimidation, succeeded in forcibly ejecting [petitioners]. As a result of their dispossession, [petitioners]
suffered actual damages in the amount of P3,000,000.00 and P10,000.00 as attorneys fees.

In their [A]nswer to the [C]omplaint, [respondents] averred that [petitioners were] not the owners of the
land because they disposed of it sometime in 1976 as shown by legal documents. On 02 April 1969, the
Land Authority issued an order of award in favor of [petitioners], approving the application of Pedro
Laurora to buy the subject Lot 1315-G from the government. On 01 March 1974, [petitioners] requested
the Department of Agrarian Reform for the transfer of the lot to Juan Manaig. Favorably acted upon, the

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DAR issued a permit to transfer dated 03 June 1975 through its Regional Director Benjamin R.
Estrellado. On 03 July 1975, Juan Manaig, as transferee and buyer, paid the required amount of
P10,643.65 under Official Receipt No. 8304707 to the government as full payment for the transfer of said
lot to him. On 26 March 1976, the [petitioners] as sellers and witnessed by their sons, Efren Laurora and
Dominador Laurora, executed a Kasulatan ng Paglilipatan ng Lupa transferring the land to Juan Manaig
as buyer. On 11 June 1976, the [petitioners] again witnessed by their sons, Efren and Dominador,
executed a Kasulatan ng Bilihang Tuluyan or Deed of Sale wherein they sold Lot 1315-G including all
improvements therein, in favor of Juan Manaig. The Deed of Absolute Sale was approved by the
Department of Agrarian Reform on 14 June 1976 in DAR Approval of Transfer of Rights signed by DAR
Regional Director, Benjamin R. Estrellado. After the approval of the sale from the [petitioners] to Juan
Manaig, the latter paid its real estate taxes. The tax declarations of the land in the name of its previous
owners, Yaptinchays, were cancelled and transferred in the name of [petitioner] Pedro Laurora as owner-
transferee. Thereupon, the heirs of the late JUAN MANAIG sold the land to Golden Mile Resources
Development Corporation which likewise sold it to [respondent] S. P. Properties, Inc.

After summary proceedings in the MCTC, x x x, a judgment was rendered dismissing the complaint. The
case was elevated to the Regional Trial Court. In due course, the said court rendered a decision
reversing the MCTC judgment. x x x[6]

Ruling of the Court of Appeals

The CA reversed the Regional Trial Court (RTC) and reinstated the Order of dismissal issued by the
Municipal Circuit Trial Court (MCTC). It held that there was no evidence to support the claim of petitioners
to the prior physical possession of the property. The evidence allegedly showed that they had already
sold the land with the approval of the Department of Agrarian Reform (DAR). Accordingly, their
subsequent entry into and possession of the land constituted plain usurpation, which could not be the
source of any right to occupy it. Being planters in bad faith, they had no right to be reimbursed for
improvements on the land, in accordance with Article 449 of the New Civil Code.
Hence, this Petition.[7]

The Issue

In their Memorandum,[8] petitioners raise this sole issue for our consideration:

x x x [W]hether [p]rivate [r]espondent[s] ha[ve] a valid and legal right to forcibly eject petitioners from the
premises despite their resistance and objection, through the use of arm[ed] men and by bulldozing,
cutting, and destroying trees and plants planted by petitioners, without court order, to the damage and
prejudice of the latter.[9]

The Courts Ruling

The Petition is meritorious.

Main Issue:
Physical Possession of the Land

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The only issue in forcible entry cases is the physical or material possession of real property --
possession de facto, not possession de jure.[10] Only prior physical possession, not title, is the issue.[11] If
ownership is raised in the pleadings, the court may pass upon such question, but only to determine the
question of possession.[12]
The ownership claim of respondents upon the land is based on the evidence they presented. Their
evidence, however, did not squarely address the issue of prior possession. Even if they succeed in
proving that they are the owners of the land,[13] the fact remains that they have not alleged or proved that
they physically possess it by virtue of such ownership. On the other hand, petitioners prior possession of
the land was not disputed by the CA, which merely described it as usurpation. [14]
We stress that the issue of ownership in ejectment cases is to be resolved only when it is intimately
intertwined with the issue of possession,[15] to such an extent that the question of who had prior
possession cannot be determined without ruling on the question of who the owner of the land is. [16] No
such intertwinement has been shown in the case before us. Since respondents claim of ownership is not
being made in order to prove prior possession, the ejectment court cannot intrude or dwell upon the issue
of ownership.[17]
Notwithstanding the actual condition of the title to the property, a person in possession cannot be
ejected by force, violence or terror -- not even by the owners.[18] If such illegal manner of ejectment is
employed, as it was in the present case, the party who proves prior possession -- in this case, petitioners
-- can recover possession even from the owners themselves. [19]
Granting arguendo that petitioners illegally entered into and occupied the property in question,
respondents had no right to take the law into their own hands and summarily or forcibly eject the
occupants therefrom.
Verily, even if petitioners were mere usurpers of the land owned by respondents, still they are
entitled to remain on it until they are lawfully ejected therefrom. Under appropriate circumstances,
respondents may file, other than an ejectment suit, an accion publiciana -- a plenary action intended to
recover the better right to possess;[20] or an accion reivindicatoria -- an action to recover ownership of real
property.[21]
The availment of the aforementioned remedies is the legal alternative to prevent breaches of peace
and criminal disorder resulting from the use of force by claimants out to gain possession. [22] The rule of
law does not allow the mighty and the privileged to take the law into their own hands to enforce their
alleged rights. They should go to court and seek judicial vindication.
WHEREFORE, the Petition is GRANTED and the assailed Decision REVERSED and SET
ASIDE. No costs.
SO ORDERED.

Carlos v. Republic of the Philippines, 468 SCRA 709

SECOND DIVISION

MARIA CARLOS, represented by G.R. No. 164823


TERESITA CARLOS VICTORIA,
Petitioner, Present:

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Puno, J.
Chairman,
Austria-Martinez,
- versus - Callejo, Sr.,
Tinga, and
Chico-Nazario, JJ.

Promulgated:
REPUBLIC OF THE PHILIPPINES,
Respondent. August 31, 2005

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

DECISION

Puno, J.:

This is a petition for review on certiorari to annul the decision of the Court of Appeals in CA-G.R. CV No.
76824 entitled Re: Application for Land Registration of a Parcel of Land in Taguig, Metro Manila, Maria
Carlos represented by Teresita Carlos Victoria, Applicant-Appellee vs. Republic of the Philippines through
the Office of the Solicitor General, Oppositor-Appellant.

On December 19, 2001, petitioner Maria Carlos, represented by her daughter, Teresita Carlos Victoria,
filed an application for registration and confirmation of title over a parcel of land with an area of 3,975
square meters located at Pusawan, Ususan, Taguig, Metro Manila, covered by Plan Psu-244418.
Petitioner alleged, among others, that she is the owner of said parcel of land which she openly,
exclusively and notoriously possessed and occupied since July 12, 1945 or earlier under a bona
fide claim of ownership; that there is no mortgage or encumbrance affecting said property, nor is it part of
any military or naval reservation; that the property is being used for industrial purposes; and that there are
no tenants or lessees on the property. Petitioner further claimed that she has been in possession of the
subject land in the concept of an owner; that her possession has been peaceful, public, uninterrupted and
continuous since 1948 or earlier; and tacking her possession with that of her predecessors-in-interest,
petitioner has been in possession of the land for more than 50 years. [1]

The Republic of the Philippines, represented by the Director of Lands, filed an opposition to petitioners
application.[2]

During the initial hearing, however, only petitioner and her counsel appeared. They presented
documentary evidence to prove the jurisdictional
requirements.[3]

Petitioner later presented testimonial evidence consisting of the testimonies of her neighbors, Sergio Cruz
and Daniel Castillo, and Teresita Carlos Victoria herself.[4]

Sergio Cruz, 83 years old, a native of Ususan, Taguig, and neighbor of Maria Carlos, testified that the
property subject of the application was previously owned and possessed by Jose Carlos. He planted it
with palay and sold the harvest. Everyone in the community knew him as the owner of said parcel of land.
He also paid the taxes thereon. After the death of Jose Carlos in 1948, his daughter, Maria Carlos,
inherited the property and immediately took possession thereof. Her possession was peaceful, open,
public, continuous, uninterrupted, notorious, adverse and in the concept of an owner. When Maria Carlos
died, her heirs took over the property.[5]

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Cruzs testimony was corroborated by Daniel Castillo, 76 years old, Barangay Captain of Ususan,
Taguig.[6]

Teresita Carlos Victoria stated on the witness stand that her mother, Maria Carlos, was in possession of
the subject property until she passed away on January 6, 2001. Upon the demise of Maria Carlos,
Victoria took possession of the property with the consent of her brothers and sisters. She characterized
Maria Carloss possession as peaceful, open, public, continuous, adverse, notorious and in the concept of
an owner. She has never been disturbed in her possession; the whole community recognized her as the
owner of the land; she declared the land for tax purposes; and she paid the taxes thereon. In addition,
Victoria informed the court that the heirs of Maria Carlos have not yet instituted a settlement of her estate.
However, they have agreed to undertake the titling of the property and promised to deliver the certificate
of title to Ususan Development Corporation which bought the property from Maria Carlos. Victoria
admitted that her mother had sold the land to Ususan Development Corporation in 1996 but failed to
deliver the title. Hence, the heirs of Maria Carlos made a commitment to the corporation to deliver the
certificate of title so that they could collect the unpaid balance of the purchase price.[7]

Petitioner also presented in court the concerned officers of the Department of Environment and Natural
Resources (DENR) to establish that the land in question is alienable and disposable.

Elvira R. Reynaldo, Records Officer, DENR Lands Management Bureau, appeared to certify that their
office has no record of any kind of public land application/land patent covering the parcel of land situated
at
Ususan, Taguig, Rizal, identified/described in Plan Psu-244418.[8]

Ulysses Sigaton, Land Management Inspector, DENR National Capital Region, stated that he conducted
an ocular inspection of the subject property and found that it is within the alienable and disposable area
under Project No. 27-B, LC Map No. 2623, certified by the Bureau of Forest Development on January 4,
1968. He also noted that the land is being used for industrial purposes. It had several warehouses, four
big water tanks and is enclosed by a fence.[9]

The trial court granted the application in its decision dated October 24, 2002. It held:
After considering the applicants evidence ex-parte which is based on factual and
meritorious grounds, and considering that the applicant acquired the property under
registration through inheritance from her father, Jose Carlos, and considering further that
her possession thereof, tacked with that of her predecessor-in-interest, is open,
continuous, exclusive, notorious and undisturbed, under claim of ownership since time
immemorial up to the present time; and considering further that the subject parcel of land
is part of the disposable and alienable land (Tsn, July 3, 2002, p.6) and considering
further that the realty taxes due thereon have been religiously paid (Exhs. HH, II, JJ, and
JJ-1), and considering finally that the subject parcel of land belong[s] to the applicant and
that she possess[es] a perfect title thereto which may be confirmed and registered in her
name under the (P)roperty Registration Decree (P.D. 1529), the herein application is
hereby GRANTED.[10]

On appeal, the Court of Appeals reversed and set aside the decision of the trial court. It noted that:
In the instant case, the applicant at the time she filed her application for registration of
title was no longer in possession and occupation of the land in question since on October
16, 1996, the applicants mother and predecessor-in-interest sold the subject land to
Ususan Development Corporation. This was admitted by witness Teresita Carlos Victoria
xxx

Clearly, as early as 1996, possession and occupation of the land in question pertains not
to the applicant but to Ususan Development Corporation, thus it can be said that the
applicant has no registrable title over the land in question.[11]

Hence, this petition.

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We affirm the findings of the appellate court.

Applicants for confirmation of imperfect title must prove the following: (a) that the land forms part of the
disposable and alienable agricultural lands of the public domain; and (b) that they have been in open,
continuous, exclusive, and notorious possession and occupation of the same under a bona fide claim of
ownership either since time immemorial or since June 12, 1945. [12]

As found by the Court of Appeals, petitioner has met the first requirement but not the second.

The Court held in Republic vs. Alconaba[13] that the applicant must show that he is in actual
possession of the property at the time of the application, thus:
The law speaks of possession and occupation. Since these words are separated by the
conjunction []and[], the clear intention of the law is not to make one synonymous with the
other. Possession is broader than occupation because it includes constructive
possession. When, therefore, the law adds the word occupation, it seeks to delimit the
all-encompassing effect of constructive possession. Taken together with the words open,
continuous, exclusive and notorious, the word occupation serves to highlight the fact that
for an applicant to qualify, his possession must not be a mere fiction. Actual possession
of a land consists in the manifestation of acts of dominion over it of such a nature as a
party would naturally exercise over his own property.

It is clear in the case at bar that the applicant, Maria Carlos, no longer had possession of the property at
the time of the application for the issuance of a certificate of title. The application was filed in court on
December 19, 2001. Teresita Carlos Victoria, the daughter of Maria Carlos, admitted during the hearing
that her mother had sold the property to Ususan Development Corporation in 1996. They also presented
as evidence the deed of absolute sale executed by and between Maria Carlos and Ususan Development
Corporation on October 16, 1996.[14] The document states, among others:
xxx

4. That the VENDOR, by this Deed hereby transfer(s) possession of the property to the
VENDEE.[15]

This contradicts petitioners claim that she was in possession of the property at the time that she applied
for confirmation of title.

Nonetheless, even if it were true that it was petitioner who had actual possession of the land at that time,
such possession was no longer in the concept of an owner. Possession may be had in one of two ways:
possession in the concept of an owner and possession of a holder. A possessor in the concept of an
owner may be the owner himself or one who claims to be so. On the other hand, one who possesses as a
mere holder acknowledges in another a superior right which he believes to be ownership, whether his
belief be right or wrong.[16] Petitioner herein acknowledges the sale of the property to Ususan
Development Corporation in 1996 and in fact promised to deliver the certificate of title to the corporation
upon its obtention. Hence, it cannot be said that her possession since 1996 was under a bona fide claim
of ownership. Under the law, only he who possesses the property under a bona fide claim of ownership is
entitled to confirmation of title.

We therefore find that the Court of Appeals did not err in denying the issuance of a certificate of title to
petitioner.

IN VIEW WHEREOF, the petition is DENIED.

SO ORDERED.

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