PROPERTY CASES FOR PRELIMS

1. Who is the builder in good faith?

- Floreza v. Evangelista, 96 SCRA 130

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-25462 February 21, 1980

MARIANO FLOREZA, petitioner,

vs.
MARIA D. de EVANGELISTA and SERGIO EVANGELISTA, respondents.

R.D. Hipolito & B. P. Fabir for petitioner.

E.G. Tanjuatco & Associates for respondents.

MELENCIO-HERRERA, J:

This is a Petition for Review on certiorari of the Decision of the Court of Appeals (CA-G.R. No. 23516-R)
promulgated on November 4, 1965, entitled "Maria de Evangelista and Sergio Evangelists, (now the
respondents) vs. Mariano Floreza (petitioner herein)," reversing the judgment of the Court of First
Instance of Rizal rendered on July 17, 1957, and instead ordering petitioner to vacate respondents'
residential lot, to remove his house at his own expenses and to pay rental from May 5, 1956.

Plaintiffs Maria de Evangelista and Sergio Evangelista, who are mother and son, (the
EVANGELISTAS, for short) are the owners of a residential lot located at Sumilang St., Tanay,
Rizal, with an area of 204.08 sq. ms., assessed at P410.00. In May 1945, the EVANGELISTAS
borrowed from FLOREZA the amount of P100.00. On or about November 1945, with the consent of
the EVANGELISTAS, FLOREZA occupied the above residential lot and built thereon a house of
light materials (barong- barong) without any agreement as to payment for the use of said
residential lot owing to the fact that the EVANGELISTAS has then a standing loan of P100.00 in
favor of FLOREZA. 1

On the following dates, the EVANGELISTAS again borrowed the indicated amounts: September 16, 1946
— P100.00; 2 August 17, 1947 — P200,00; 3 January 30, 1949 — P200.00; 4 April 1, 1949 —
P140.00, 5 or a total of P740.00 including the first loan. The last three items are evidenced by
private documents stating that the residential lot stands as security therefor and that the amounts
covered thereunder are payable within six years from date, without mention of interest. The
document executed on September 16, 1946 stated specifically that the loan was without interest "walang
anumang patubo."

On January 10, 1949, FLOREZA demolished this house of light materials and in its place
constructed one of strong materials assessed in his name at P1,410.00 under Tax Declaration No.
4448. FLOREZA paid no rental as before. 6

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On August 1, 1949, the EVANGELISTAS, for and in consideration of P1,000.00 representing the
total outstanding loan of P740.00 plus P260.00 in cash, sold their residential lot to FLOREZA, with
a right to repurchase within a period of 6 years from date, or up to August 1, 1955, as evidenced
by a notarial document, Exh. B, registered under Act 3344 on December 6, 1949, as Inscription No.
2147. 7

On January 2, 1955, or seven months before the expiry of the repurchase period, the
EVANGELISTAS paid in full the repurchase price of P1,000.00.

On April 25, 1956, the EVANGELISTAS, through their counsel, wrote FLOREZA a letter 8 asking
him to vacate the premises as they wanted to make use of their residential lot besides the fact that
FLOREZA had already been given by them more than one year within which to move his house to
another site. On May 4, 1956, the EVANGELISTAS made a formal written demand to vacate, within five
days from notice, explaining that they had already fully paid the consideration for the repurchase of the
lot. 9 FLOREZA refused to vacate unless he was first reimbursed the value of his house. Hence, the
filing of this Complaint on May 18, 1956 by the EVANGELISTAS.

The EVANGELISTAS prayed that: 1) they be declared the owners of the house of strong materials built
by FLOREZA on their residential lot, without payment of indemnity; or, in the alternative to order
FLOREZA to remove said house; 2) that FLOREZA pay them the sum of P10.00 per month as the
reasonable value for the use and occupation of the same from January 2, 1955 (the date the repurchase
price was paid) until FLOREZA removes the house and delivers the lot to them; and 3) to declare the
transaction between them and FLOREZA as one of mortgage and not of pacto de retro.

In his Answer, FLOREZA admitted the repurchase but controverted by stating that he would execute a
deed of repurchase and leave the premises upon payment to him of the reasonable value of the house
worth P7,000.00.

In a Decision dated July 17, 1957, the Court of First Instance of Rizal opined that the question of whether
the transaction between the parties is one of mortgage or pacto de retro is no longer material as
the indebtedness of P1,000.00 of the EVANGELISTAS to FLOREZA had already been fully paid.
And, applying Article 448 of the Civil Code, 10 it rendered a decision dispositively decreeing:

FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment
granting the plaintiffs the right to elect, as owners of the land, to purchase the
house built, on the said lot in question by the defendant for P2,500 or to sell their
said land to the defendant for P1,500. In the event that the plaintiffs shall decide
not to purchase the house in question the defendant should be allowed to remain
in plaintiffs' premises by, paying a monthly rental of P10.00 which is the
reasonable value for the use of the same per month as alleged by plaintiffs in their
complaint. The Court also orders the defendant to pay a monthly rental of P10.00
for the use of the land in question from May 18, 1956, the date of the
commencement of this action. The counterclaim of the defendant is hereby ordered
dismissed. Without pronouncement as to costs.

SO ORDERED. 11

Both parties appealed to the Court of Appeals.

On November 4, 1965, the Court of Appeals concluded that Article 448 of the Civil Code, supra,
was inapplicable; that FLOREZA was not entitled to reimbursement for his house but that he
could remove the same at his expense; and accordingly rendered judgment thus:

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 WHEREFORE, judgment is hereby rendered: (1) adjudging the defendant-appellant
Mariano Floreza to vacate plaintiffs' residential lot described in the complaint and to pay
rental of P10.00 a month from May 5, 1956, until he (defendant) shall have vacated the
premises; (2) ordering defendant to remove his house from the land in question within 30
days from the time this decision becomes final and executory; (3) ordering the Register of
Deeds of Rizal to cancel inscription No. 2147, Page 210, Vol. 36, in the Registration Book
under Act 3344 upon payment of his lawful fees; and (4) taxing the costs in both
instances against defendant-appellant Mariano Floreza. 12

Hence, this Petition for Review on certiorari by FLOREZA, seeking a reversal of the aforestated
judgment and ascribing the following errors:

1) That the Court of Appeals erred in holding that petitioner Floreza was a builder in bad
faith without likewise holding that respondents as owners of the land in dispute, were
likewise in bad faith and therefore both parties should in accordance with Art. 453 of the
New Civil Code be considered as having acted in good faith.

2) That the Court of Appeals erred in completely ignoring the issue raised on appeal as to
whether or not respondents as owners of the questioned lot, were in bad faith in the
sense that they had knowledge of and acquiseced to the construction of the house of
petitioner on their lot.

3) That the Court of Appeals erred in not applying Art. 448 of the New Civil Code in the
adjudication of the rights of petitioner and respondent.

4) That the Court of Appeals erred in declaring that petitioner is not entitled to
reimbursement for the value of his house and that he should instead remove the same at
his expense.

5) That the Court of Appeals erred in adjudging petitioner to vacate respondents' lot in
question and to pay rentals commencing from May 5, 1956, until he shall have vacated
the premises, notwithstanding that petitioner is entitled under Arts. 448 and 546 of the
New Civil Code, to retention without payment of rental while the corresponding indemnity
of his house had not been paid.

6) That the Court of Appeals erred in taxing costs against petitioner.

7) That the Court of Appeals erred in not awarding petitioner's counterclaim.

During the pendency of this appeal, petitioner Maria D. de Evangelista died and was ordered
substituted by her son, petitioner Sergio, as her legal representative, in a Resolution dated May 14,
1976.

On October 20, 1978. the EVANGELISTAS filed a Motion to Dismiss stating that FLOREZA had
since died and that his heirs had voluntarily vacated the residential lot in question. The date
FLOREZA passed away and the date his heirs had voluntarily vacated the property has not been
stated. Required to comment, "petitioner (represented by his heirs)", through counsel, confirmed
his death and the removal of the house and manifested that thereby the question of
reimbursement had moot and academic. He objected to the dismissal of the case, however, on the
ground that the issue of rentals still pends. On January 21, 1980, complying with a Resolution of 'his
Court, the EVANGELISTAS clarified that the dismissal they were praying for was not of the entire case
but only of this Petition for Review on Certiorari.

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We are not in agreement that the question of reimbursement of the value of the improvement
erected on the subject property has become moot. Petitioner's right of retention of subject
property until he is reimbursed for the value of his house, as he had demanded, is inextricably
linked with the question of rentals. For if petitioner has the right to indemnity, he has the right of
retention and no rentals need be paid. Conversely, if no right of retention exists, damages in the
form of rentals for the continued use and occupation of the property should be allowed.

We uphold the Court of Appeals in its conclusion that Article 448 of the Civil Code is inapplicable
to the factual milieu herein. Said codal provision applies only when the builder, planter, or sower
believes he had the right so to build, plant or sow because he thinks he owns the land or believes
himself to have a claim of title. 13 In this case, petitioner makes no pretensions of ownership
whatsoever.

Petitioner concedes that he was a builder in bad faith but maintains that' the EVANGELISTAS should also
be held in bad faith, so that both of them being in bad faith, Article 453 of the Civil Code 14 should apply.
By the same token, however, that Article 448 of the same Code is not applicable, neither is Article
453 under the ambiance of this case.

Would petitioner, as vendee a retro, then be entitled to the rights granted iii Article 1616 of the
Civil Code (Art. 1518 of the old Code)? To quote:

Art. 1616. The vendor cannot avail himself of the right of repurchase without returning to
the vendee the price of the sale, and in addition:

(1) The expenses of the contract, and any other legitimate payments made by reason of
the sale;

(2) The necessary and useful expenses made on the thing sold.

The question again calls for a negative answer. It should be noted that petitioner did not construct
his house as a vendee a retro. The house had already been constructed as far back as 1949 (1945
for the house of light materials) even before the pacto de retro sale in 1949. Petitioner incurred no
useful expense, therefore, after that sale. The house was already there at the tolerance of the
EVANGELISTAS in consideration of the several loans extended to them. Since petitioner cannot
be classified as a builder in good faith within the purview of Article 448 of the Civil Code, nor as a
vendee a retro, who made useful improvements during the lifetime of the pacto de retro, petitioner
has no right to reimbursement of the value of the house which he had erected on the residential
lot of the EVANGELISTAS, much less to retention of the premises until he is reimbursed.The
rights of petitioner are more akin to those of a usufructuary who, under Article 579 of the Civil
(Art. 487 of the old Code), may make on the property useful improvements but with no right to be
indemnified therefor. He may, however, remove such improvements should it be possible to do so
without damage to the property: For if the improvements made by the usufructuary were subject
to indemnity, we would have a dangerous and unjust situation in which the usufructuary could
dispose of the owner's funds by compelling him to pay for improvements which perhaps he would
not have made. 15

We come now to the issue of rentals. It is clear that from the date that the redemption price had
been paid by the EVANGELISTAS on January 2, 1955, petitioner's right to the use of the
residential lot without charge had ceased. Having retained the property although a redemption
had been made, he should be held liable for damages in the form of rentals for the continued use
of the subject residential lot 16 at the rate of P10.00 monthly from January 3, 1955, and not merely
from the date of demand on May 4, 1956, as held by the Court of Appeals, until the house was
removed and the property vacated by petitioner or his heirs.

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WHEREFORE, the judgment appealed from is hereby affirmed, with the modification that payment
of rentals by the heir, of Mariano Floreza, who are hereby ordered substituted for him, shall
commence on January 3, 1955 until the date that the residential lot in question was vacated.

Costs against petitioner. SO ORDERED.

- Racaza v. Susana Realty, Inc., 18 SCRA 1172

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-20330 December 22, 1966

ADOLFO RACAZA, petitioner,

vs.
SUSANA REALTY, INC., respondent.

Fortunato M. Ejercito for petitioner.

Bausa, Ampil and Associates and Alfredo G. Palacol for respondent.

REGALA, J.:

Petitioner is the lessee of a portion of a piece of land located at San Juan St., Pasay City, and
owned by respondent corporation. He started renting this portion of the lot in 1952 when his wife,
Evarista P. Racaza, bought an unfinished house that had been built on it. On assurance of
respondent that petitioner's family could stay on the land by paying a monthly rent of P15,
petitioner finished the construction of the house and he and his family lived in it. On December 16,
1955, however, petitioner was asked to vacate the land because respondent needed it. The demand
was followed by the filing on February 10, 1956 of a complaint for ejectment in the Municipal Court
of Pasay City. Petitioner and his family remained in the premises as the case was dismissed for
failure of respondent to proceed to trial.

On December 17, 1957, petitioner received another letter from respondent demanding anew the
surrender of the premises. On February 19, 1958, another ejectment suit was filed against him, the
complaint alleging that respondent needed the lot "for the purpose of constructing improvements thereon
and for other uses but that despite repeated demands petitioner refused to leave the premises.

In his answer, petitioner denied that the lease was on a month-to-month basis and claimed that
his understanding with respondent was that he would be allowed to stay on the premises as long
as he paid a monthly rent of P15. As counterclaim, petitioner demanded the payment of P12,000
which he said he had spent to finish the construction of his house.

After trial, the court ordered petitioner to vacate the premises and pay P15 a month until he had
done so, even as it dismissed his counterclaim for lack of merit.

Petitioner appealed to the Court of First Instance of Pasay, reiterating his counterclaim. He asked
for the dismissal of the complaint on the ground of lack of jurisdiction of the municipal court to try it,

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claiming that the complaint was filed more than one year after the alleged unlawful detainer.1 According to
petitioner, the first complaint for ejectment was dismissed on November 23, 1956, while the complaint in
this case was not filed until February 19, 1958.

Again, petitioner was ordered evicted; his counterclaim was thrown out for lack of jurisdiction. It
was held that petitioner's illegal possession should be deemed to have started on December 17, 1957,
when the second demand to vacate was made on him, because the complaint in this case was not
intended to revive the one previously dismissed for lack of prosecution. Since the complaint was filed on
February 19, 1958, jurisdiction over the case was properly acquired by the municipal court. At the same
time, it was held that the counterclaim was correctly dismissed as the amount of the demand (P12,000)
was beyond the jurisdiction of the municipal court to grant.

Petitioner asked for a reconsideration and, failing to secure one, appealed to the Court of
Appeals. First, he contended that the municipal court did not have jurisdiction because by respondent's
own evidence rents had not been paid since July, 1955 and it should be from this date that the one-year
period should be counted. Second, petitioner claimed that, instead of dismissing his counterclaim, the
lower court should have assumed original jurisdiction over it, considering that evidence to support the
counterclaim had been allowed without objection from the respondent.

After stating that in actions for unlawful detainer, notice to vacate need not be alleged but may
merely be shown by evidence, the appellate court ruled that the one year period should not be
counted from July, 1955 because the parties had stipulated that petitioner was up to date in the
payment of rents. Neither should it be reckoned from November 23, 19562 when the first demand to
vacate was made because it was respondent's privilege, as lessor, to waive the right to bring an action
based on the first demand. (Zobel v. Abreu, 98 Phil. 343 [1956]) Rather, the starting point should be
December 17, 1958 when the second demand to quit was made by respondent because, as held
in Cruz vs. Atencio, G.R. No. L-11276, February 28, 1959,

Where despite the lessee's failure to pay rent after the first demand, the lessor did not choose to
bring an action in court but suffered the lessee to continue occupying the land for nearly two
years, after which the lessor made a second demand, the one-year period for bringing the
detainer case in the justice of the peace court should be counted not from the day the lessee
refused the first demand for payment of rent but from the time the second demand for rents and
surrender of possession was not complied with.

On this score, the court overruled petitioner's first assignment of error.

But the court found merit in petitioner's other contention that evidence having been admitted without
objection from respondent, the Court of First Instance, pursuant to Rule 40, section 11, could take
cognizance of the counterclaim in the exercise of its original jurisdiction. Citing article 1678 of the Civil
Code, the court held that petitioner should be reimbursed one-half of what he had spent in building his
house. While petitioner claimed that he had spent P12,000 for the improvement of his house, the
appellate court found that the fair market value of the house was P7,000 and, on the basis of this amount,
awarded P3,500 to petitioner.

Still not satisfied, petitioner asked the appellate court to reconsider its decision. When his motion
was denied, he appealed to this Court.

It is contended that respondent's complaint is defective and did not vest jurisdiction in the municipal court
because it does not state the date when the alleged unlawful detainer started so as to afford a basis for
determining whether the case was filed within a year from the accrual of the cause of action. In this
connection, it is claimed that, according to the evidence, petitioner stopped paying rents in July, 1955 and
that it should be from this date that the one-year period should be counted.

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To begin with, this case was brought not on the theory that petitioner, as lessee, failed to pay
rents, but on the theory that the lease had expired and that respondent had asked petitioner to
vacate the land. Thus, the complaint states that respondent needs the land but that despite his
demands petitioner refused to vacate it. The averment that the lease was on a month-to-month
basis is equivalent to an allegation that the lease expired at the end of every month. 3 It is therefore
immaterial that rents had not been paid since July, 1955, since what made petitioner liable for
ejectment was the expiration of the lease. This being the case, demand to vacate was
unnecessary. As this Court explained in Co Tiamco v. Diaz, 78 Phil. 672 (1946), Rule 70, section 2
requires previous demand only when the action is "for failure to pay rent due or to comply with the
conditions of his lease." Where the action is to terminate the lease because of the expiration of its term,
no such demand is necessary.4 In the latter case, upon the expiration of the term of the lease, the
landlord may go into the property and occupy it, and if the lessee refuses to vacate the premises, an
action for unlawful detainer may immediately be brought against him even before the expiration of the
fifteen or five days provided in Rule 70, section 2.

Accordingly, upon the expiration of the lease in this case, petitioner became a deforciant
unlawfully withholding possession of the property. There was no need for a demand to be served
on him, except to negate any inference that respondent, as lessor, had agreed to an extension of
the term of the lease under article 1687 of the Civil Code.

This brings us to petitioner's next point. As earlier stated, petitioner was twice asked to quit the premises.
The first was on December 16, 1955, but as pointed out in the beginning, the complaint filed afterwards
was dismissed for non-suit. The second time he was asked to move out was on December 19, 1958.
Petitioner insists that respondent's cause of action must be deemed to have accrued on December 16,
1955. But, as already stated, respondent's action is not based on non-profit of rent coupled with a
demand; its action is based on the expiration of the term of the lease and the demand made by it to
vacate the premises merely evidences its determination not to extend the lease. Moreover, even if the
action were based on non-payment of rent, the one-year period should be reckoned from the second
notice, on the theory that respondent has the right to waive his action based on the first demand and to let
the lessee remain in the premises.

Nor is there merit in petitioner's last point that he should have been allowed full reimbursement
for what he had spent by applying to this case article 448 of the Civil Code. It is now settled that
article 448, in relation to article 546, applies only to possessors in good faith and since lessees,
like petitioner, are not possessors in good faith, because they know that their occupation of the
premises continues only during the life of the lease, they cannot recover the value of their
improvements from the lessor, much less retain the premises until they are reimbursed. Their
rights are governed by article 1678 which allows reimbursement of lessees up to one-half of the
value of their useful improvements. (Lopez, Inc. vs. Philippine & Eastern Trading Co., 98 Phil. 348
[1956]) The Court of Appeals correctly applied article 1678 to this case.

WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.

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 - Lopez, Inc. v. Philippine Eastern Trading Company, 98 Phil 348

[G.R. No. L-8010. January 31, 1956.]

LOPEZ INC., represented by DAVID DE LEON in his capacity as in-charge, Plaintiff-Appellant, vs.
PHILIPPINE & EASTERN TRADING CO., INC., Defendant-Appellant.

DECISION
MONTEMAYOR, J.:
There is no serious dispute as to the basic facts in this case, at least not as regards those for purposes of
this decision. Before the last (Pacific) war the Defendant corporation Philippine & Eastern Trading
Co., Inc., as lessee was occupying two doors with mezzanine of what is known as the Lopez
building in the City of Baguio, belonging to the Plaintiff corporation Lopez Inc. of which Atty.
Eugenio Lopez was then the President. Defendant was paying P160 monthly rental and the lease
was from month to month. Said two doors were used as a store. During the bombing of the City of
Baguio during the first months of 1945 by the American Air Forces in trying to liberate the city
from the Japanese occupation forces the Lopez Building including the two doors in question were
burned and seriously damaged leaving only the concrete walls and framework. After liberation,
because the Lopez Inc. did not rehabilitate the building, the Defendant corporation desiring to
resume the lease and use the premises for commercial purposes as it did before the war thought
of rebuilding it. One Mr. Macario Rebodos, Vice-President of the Defendant, went to Manila to
confer with Atty. Eugenio Lopez, President of the Plaintiff, about the rehabilitation of the premises
but he failed to see him on three occasions that he looked for him in the city. So, according to
Rebodos, he left a letter for Mr. Lopez with an inmate of the house. Said letter was never answered
by Attorney Lopez. The Defendant proceeded to repair or rebuild the two doors spending the
amount of P14,583.45. Said improvements were introduced with the knowledge of Mr. Joseph K.
Icard, agent for the Plaintiff. Later, an agreement was entered into between the Plaintiff and
the Defendant whereby the latter re-occupied the premises paying a rental of P300 a month.
In 1947 the Defendant failed to pay the monthly rentals for the months of February to September
of said year, amounting to P2,200. It seems that the Defendant company although admitting its
delinquency was of the belief that inasmuch as it had the right to be reimbursed in the sum of
P14,583.45, value of the improvements introduced by it, the amount of its delinquency (P2,200)
could well be charged against it and so it (Defendant) need not pay the monthly rentals until the
value of the improvements had been exhausted. Because of Defendant’s refusal to pay the
delinquency the Plaintiff brought an action of ejectment in the Municipal Court of Baguio to have
the Defendant vacate the premises pay the back rentals with legal interest, plus P300 incurred by
the Plaintiff for the institution of the suit.
From the judgment rendered by the Municipal Court for the Plaintiff ordering the Defendant to
vacate the premises, to pay P2,200 as back rentals and to pay the monthly rents of P300 from
October 1, 1947 until the premises were vacated, the Defendant appealed to the Court of First
Instance of Baguio. After hearing, said court rendered judgment with the following dispositive part:
“FOR ALL THE FOREGOING CONSIDERATIONS, the Court orders the Defendant Philippine &
Eastern Trading Corporation to vacate the premises immediately. It also orders it to pay
the Plaintiff the sum of P300 monthly rental of the premises in question from the date of this
decision until the premises are completely vacated by the Defendant. Said Defendant, however, is
not obliged to pay the said P300 monthly in cash. It has the right to set off against the rental, part
of the value of the improvements. Regarding the P2,200, back rentals, the court also declares that
this sum is already offset by a part of the amount of the value of the improvements, as stated
above, so that the Defendant is free from paying it in cash. The right of the Defendant corporation
to file a suit against the Plaintiff corporation to recover the remainder of the value of
improvements of P14,583.45, after deducting all the back rentals due to the Plaintiff and the

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rentals which may become due later, is hereby reserved to said Defendant corporation. No special
pronouncement as to costs.”
From said judgment both parties appealed to the Court of Appeals but said Tribunal later certified
the appeal to this Court as involving only questions of law.
The theory of Defendant-Appellant, apparently sustained by the trial court is that under Article 453
of the old Civil Code Defendant was a possessor in good faith and as such introduced the
improvements valued P14,583.45 and had the right to retain the premises until it was reimbursed
the said amount by the owner of the property.
“Necessary expenditures shall be refunded to every possessor; but only the possessor in good
faith may retain the thing until they are repaid to him.
“Useful expenditures shall be paid the possessor in good faith with the same right of retention the
person who has defeated him in his possession having the option of refunding the amount of
such expenditures or paying him the increase in value which the thing has acquired by reason
thereof.” (Article 453, old Civil Code.)
The trial court held that said improvements were introduced in good faith and so
the Defendanthad a right to reimbursement by the Plaintiff-owner; however, from the time that
said Defendant was notified by the Plaintiff to vacate the premises for failure to pay the rent, it
ceased to be a possessor in good faith, and inasmuch as said failure or delinquency justified the
termination of the lease, said Defendant having lost the right of retention, must vacate the
premises but that it must be reimbursed the value of the improvements introduced by it to be
determined in a separate action, for the reason that the Defendant in its answer to the suit filed in the
Municipal Court reserved its right to file the corresponding action for the recovery of said amount.
According to the record on appeal the Defendant not only failed to perfect its appeal from the judgment of
the Municipal Court because it did not file a “sufficient bond to answer for the rents, damages, and costs
up to final judgment” but also neglected to pay the rent corresponding to the month of October, 1947
pending appeal and so Plaintiff filed a motion for execution of the judgment and for the dismissal of the
appeal. The trial court in its order of November 14, 1947 refused to grant the motion and gave
the Defendant “until 9:00 o’clock in the morning of November 17, 1947 to deposit all the rentals due
the Plaintiff to date in accordance with the decision of the lower court on appeal to this Court.” This order
of the trial court is now assigned as error by Plaintiff-Appellant.
As regards the failure of Defendant-Appellant to deposit with the court the rents fixed and ordered to be
paid, in the judgment on appeal as they became due, thereby justifying the execution of the judgment, we
agree with Plaintiff-Appellant. The provisions of Rule 72, section 8, of the Rules of Court, are mandatory
and the Court of First Instance has no discretion in the matter and is not warranted in extending the time
for making such payment. We have a long line of decision on this point (Lapuz vs. Court of First Instance,
46 Phil., 77; Cunanan vs. Rodas, 78 Phil., 800; Galewsky vs. De la Rama, 79 Phil., 583; and Pañgilinan
vs. Peña, 89 Phil., 122). For this reason the trial court should have ordered the execution of the judgment
of the Municipal Court.
As regards the introduction of the improvements by the Defendant, as already stated, Mr.
Rebodos failing to see Atty. Lopez in Manila, according to him, left a letter for Atty. Lopez
supposedly advising him of the introduction of said improvements. Attorney Lopez in his
deposition said that he never received said letter. On the other hand, he said that he had a
conference with Mr. Leopoldo Mabansag, President of the Defendant corporation wherein
Mabansag agreed that his company waived any right to reimbursement for the value of said
improvements. The trial court rejected this evidence or testimony because it involved a supposed
admission made by a person now dead, for Mabansag died before the filing of the suit. The trial
court further said that it was highly improbable that anyone of sound mind would introduce valuable
improvements just to renounce it later in favor of the owner. In rejecting this testimony the trial court must
have had in mind Rule 123, section 26(c) of the Rules of Court which reads as follows:
“Parties or assignors of parties to a case, or persons in whose behalf a case is prosecuted, against an
executor or administrator or other representative of a deceased person or against a person of unsound

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mind upon a claim or demand against the estate of such deceased person or against such person of
unsound mind, cannot testify as to any matter of fact occurring before the death of such deceased person
or before such person became of unsound mind;”
However, the present action was not exactly brought against the executor or administrator or other
representative of Mr. Mabansag but rather against the corporation of which he was the President and so
said Rule 123, section 26(c), is not applicable. On the other hand in the case of Fortiz vs. Gutierrez
Hermanos, 6 Phil., 100, this court said:
“It appeared that Miguel Alonzo Gutierrez, with whom the Plaintiff had made the contract, had died prior
to the trial of the action, and the Defendants claim that by reason of the provisions of section 383,
paragraph 7, of the Code of Civil Procedure (equivalent to section 26[c], Rule 123 of the Rules of
Court), Plaintiff could not be a witness at the trial. That paragraph provides that parties to an action
against an executor or administrator upon a claim or demand against the estate of a deceased person
cannot testify as to any matter of fact occurring before the death of such deceased person. This action
was not brought against the administrator of Miguel Alonzo nor was it brought against a partnership which
was in existence at the time of the trial of the action, and which was a juridical person. The fact that
Miguel Alonzo had been a partner in this company, and that his interests therein might be affected by the
result of this suit, is not sufficient to bring the case within the provisions of the section above-cited.
However, because the evidence sought to be introduced by Plaintiff was only in the form of deposition
and Attorney Lopez did not testify as a witness in the hearing and subjected to cross-examination
by Defendant’s counsel and also by the court, we can well disregard this evidence and consider that there
was no definite understanding or agreement between Plaintiff and Defendantas to who should eventually
pay for said improvements.
Before we conclude, we believe it not only advisable but necessary to clear and resolve the
misconception about the scope and extent of the rule or law on a possessor in good faith, under
which the Defendant and in a way even the trial court had labored. As we have already said, they
both thought that a lessee may be considered a possessor in good faith and that improvements
introduced by him on the leased premises are to be regarded as made in good faith. This rule or
principle contained in the civil law refers only to party who occupies or possess property in the
belief that he is the owner thereof and said good faith ends only when he discovers a flaw in his
title so as to reasonably advise or inform him that after all he may not be the legal owner of said
property. This principle of possessor in good faith naturally cannot apply to a lessee because as
such lessee he knows that he is not the owner of the leased property. Neither can he deny the
ownership or title of his lessor. Knowing that his occupation of the premises continues only
during the life of the lease contract and that he must vacate the property upon termination of the
lease or upon the violation by him of any of its terms, he introduces improvements on said
property at his own risk in the sense that he cannot recover their value from the lessor, much less
retain the premises until such reimbursement. His right to improvements introduced by him is
expressly governed by Articles 1573 and 487 of the old Civil Code which reads as follows:
“Article 1573. A lessee shall have, with respect to useful and voluntary improvements, the same
rights which are granted to usufructuaries.”
“Article 487. The usufructuary may make on the property held in usufruct any improvements,
useful, or recreative, which he may deem proper, provided he does not change its form or
substance; but he shall have up right to be indemnified therefor. He may, however, remove such
improvements should it be possible to do so without injury to the property.”
In the case of Fojas vs. Velasco, 51 Phil., 520, this Court said:
“The case is governed not by articles 361 and 453 of the Civil Code as contended
by Appellants but by articles 1573 and 487 of the same Code, as indicated by Appellees. In this
connection it need only be recalled that the lessees have been holding the land under a rental
contract. Accordingly, upon termination of the lease, the right of the lessees with respect to
improvements placed by then on the leased property is determined by article 487, which entitles
them to remove the improvements, provided they leave the property in substantially the same

Page 10 of 40
condition as when they entered upon it. (Alburo vs. Villanueva, 7 Phil., 277; Cortes vs. Ramos, 46
Phil., 184; Rivera vs. Trinidad, 48 Phil., 396.)”
Then in the case of Rivera vs. Trinidad, 48 Phil., 396 this Court ruled:
“While a tenant was in possession of property under a verbal agreement for occupation for an
indefinite time upon payment of a fixed compensation per month the property was sold and the
purchaser filed an action for unlawful detainer. Held: That the Defendant must he considered as
tenant from month-to-month and upon a lease terminable without the necessity of special notice
upon the expiration of any month and that the Plaintiff was entitled to recover possession.
“The rights of the Defendant with respect to the improvements made on the property by him must
be governed by Article 487 in relation with Article 1573 of the Civil Code. Under Article 487
the Defendant is entitled to remove improvements made by himself so far as it is possible to do so
without injury to the property; and this means that he may remove the improvements provided he
leaves the property in substantially the same condition as when he entered upon it. Articles 361
and 453 of the Civil Code, which define the rights between the owner of land and builders of
improvements thereon in good faith, are not applicable as between landlord and tenant, since the
Code supplies specific provisions designed to cover their rights. Besides the tenant cannot be
said to be a builder in good faith as he has no pretension to be owner. (Manresa Com. ed., Vol. 4,
p. 445).”
In view of the foregoing, the decision appealed from is hereby modified to the effect
that Defendant-Appellant is not entitled to reimbursement for the value of the improvements
introduced by it; that it is ordered to pay to Plaintiff-Appellant the amount of P2,200, with interest
at the legal rate from the date of the filing of the complaint; and to pay the amount of P300 per
month until it actually vacates the premises. Defendant-Appellant is however given the right to
remove the improvements introduced by it without injury to the property, under the provisions of
Article 487 of the old Civil Code. No costs.

- Vda. (Viuda) de Nazareno v. CA, 257 SCRA 598

[G.R. No. 98045. June 26, 1996]

DESAMPARADO VDA. DE NAZARENO and LETICIA NAZARENO TAPIA, petitioners, vs. THE
COURT OF APPEALS, MR. & MRS. JOSE SALASALAN, MR. & MRS. LEO RABAYA,
AVELINO LABIS, HON. ROBERTO G. HILARIO, ROLLEO I. IGNACIO, ALBERTO M.
GILLERA and HON. ABELARDO G. PALAD, JR., in their official and/or private
capacities, respondents.
SYLLABUS
1. CIVIL LAW; OWNERSHIP; RIGHTS OF ACCESSION WITH RESPECT TO IMMOVABLE
PROPERTY; ARTICLE 457; REQUISITES.- In the case of Meneses vs. CA, this Court held that
accretion, as a mode of acquiring property under Art. 457 of the Civil Code, requires the
concurrence of these requisites: (1) that the deposition of soil or sediment be gradual and
imperceptible; (2) that it be the result of the action of the waters of the river (or sea); and (3)
that the land where accretion takes place is adjacent to the banks of rivers (or the sea
coast). These are called the rules on alluvion which if present in a case, give to the owners of lands
adjoining the banks of rivers or streams any accretion gradually received from the effects of the
current of waters.

Page 11 of 40
2. ID.; ID.; ID.; ID.; ID.; NOT PRESENT IN CASE AT BAR.- Where the accretion was formed by the
dumping of boulders, soil and other filling materials on portions of the Balacanas Creek and the
Cagayan River bounding petitioner's land, it cannot be claimed that the accumulation was gradual
and imperceptible, resulting from the action of the waters or the current of the creek and the
river. In Hilario vs. City of Manila, this Court held that the word current indicates the participation of
the body of water in the ebb and flow of waters due to high and low tide. Not having met the first and
second requirements of the rules of alluvion, petitioners cannot claim the rights of a riparian owner.
3. ID.; ID.; ID.; ID.; ID.; THAT DEPOSIT IS DUE TO THE CURRENT OF THE RIVER, MANDATORY.-
In Republic vs. CA, this Court ruled that the requirement that the deposit should be due to the effect
of the current of the river is indispensable. This excludes from Art. 457 of the Civil Code all deposits
caused by human intervention. Putting it differently, alluvion must be the exclusive work of
nature. Thus, in Tiongco vs. Director of Lands, et al., where the land was not formed solely by the
natural effect of the water current of the river bordering said land but is also the consequence of the
direct and deliberate intervention of man, it was deemed a man-made accretion and, as such, part of
the public domain. In the case at bar, the subject land was the direct result of the dumping of
sawdust by the Sun Valley Lumber Co. consequent to its sawmill operations.
4. ID.; PUBLIC LANDS; FINDINGS AS SUCH BY THE BUREAU OF LANDS, RESPECTED.- The mere
filing of the Miscellaneous Sales Application constituted an admission that the land being applied for
was public land, having been the subject of a Survey Plan wherein said land was described as an
orchard. Furthermore, the Bureau of Lands classified the subject land as an accretion area which
was formed by deposits of sawdust in the Balacanas Creek and the Cagayan river, in accordance
with the ocular inspection conducted by the Bureau of Lands. This Court has often enough held that
findings of administrative agencies which have acquired expertise because their jurisdiction is
confined to specific matters are generally accorded not only respect but even finality. Again, when
said factual findings are affirmed by the Court of Appeals, the same are conclusive on the parties
and not reviewable by this Court.
5. ID.; PUBLIC LAND LAW; JURISDICTION OVER PUBLIC LANDS.- Having determined that the
subject land is public land, a fortiori, the Bureau of Lands, as well as the Office of the Secretary of
Agriculture and Natural Resources have jurisdiction over the same in accordance with the Public
Land Law. Under Sections 3 and 4 thereof, the Director of Lands has jurisdiction, authority and
control over public lands. Here respondent Palad as Director of Lands, is authorized to exercise
executive control over any form of concession, disposition and management of the lands of the
public domain. He may issue decisions and orders as he may see fit under the circumstances as
long as they are based on the findings of fact. In the case of Calibo vs. Ballesteros, this Court held
that where, in the disposition of public lands, the Director of Lands bases his decision on the
evidence thus presented, he clearly acts within his jurisdiction, and if he errs in appraising the
evidence, the error is one of judgment, but not an act of grave abuse of discretion annullable by
certiorari.
6. ADMINISTRATIVE LAW; ADMINISTRATIVE REMEDIES; EXHAUSTED IN CASE AT BAR.- The
administrative remedies have been exhausted. Petitioners could not have intended to appeal to
respondent Ignacio as an Officer-In-Charge of the Bureau of Lands. The decision being appealed
from was the decision of respondent Hilario who was the Regional Director of the Bureau of
Lands. Said decision was made "for and by authority of the Director of Lands." It would be
incongruous to appeal the decision of the Regional Director of the Bureau of Lands acting for the
Director of the Bureau of Lands to an Officer-In-Charge of the Bureau of Lands. In any case,
respondent Ignacio's official designation was "Undersecretary of the Department of Agriculture and
Natural Resources." He was only an "Officer-In-Charge" of the Bureau of Lands. When he acted on
the late Antonio Nazareno's motion for reconsideration by affirming or adopting respondent Hilario's
decision, he was acting on said motion as an Undersecretary on behalf of the Secretary of the
Department. In the case ofHamoy vs. Secretary of Agriculture and Natural Resources, this Court
held that the Undersecretary of Agriculture and Natural Resources may modify, adopt, or set aside
the orders or decisions of the Director of Lands with respect to questions involving public lands under
the administration and control of the Bureau of Lands and the Department of Agriculture and Natural

Page 12 of 40
 Resources. He cannot, therefore, be said to have acted beyond the bounds of his jurisdiction under
Sections 3, 4 and 5 of Commonwealth Act No. 141.
APPEARANCES OF COUNSEL
Manolo L. Tagarda, Sr. for petitioners.
Arturo R. Legaspi for private respondents.

DECISION
ROMERO, J.:

Petitioners Desamparado Vda. de Nazareno and Leticia Nazareno Tapia challenge the decision of
the Court of Appeals which affirmed the dismissal of petitioners' complaint by the Regional Trial Court of
Misamis Oriental, Branch 22. The complaint was for annulment of the verification, report and
recommendation, decision and order of the Bureau of Lands regarding a parcel of public land.
The only issue involved in this petition is whether or not petitioners exhausted administrative
remedies before having recourse to the courts.
The subject of this controversy is a parcel of land situated in Telegrapo, Puntod, Cagayan de
Oro City. Said land was formed as a result of sawdust dumped into the dried-up Balacanas Creek
and along the banks of the Cagayan river.
Sometime in 1979, private respondents Jose Salasalan and Leo Rabaya leased the subject
lots on which their houses stood from one Antonio Nazareno, petitioners' predecessor-in-
interest. In the latter part of 1982, private respondents allegedly stopped paying rentals. As a
result, Antonio Nazareno and petitioners filed a case for ejectment with the Municipal Trial Court of
Cagayan de Oro City, Branch 4. A decision was rendered against private respondents, which
decision was affirmed by the Regional Trial Court of Misamis Oriental, Branch 20.
The case was remanded to the municipal trial court for execution of judgment after the same became
final and executory. Private respondents filed a case for annulment of judgment before the Regional Trial
Court of Misamis Oriental, Branch 24 which dismissed the same. Antonio Nazareno and petitioners again
moved for execution of judgment but private respondents filed another case for certiorari with prayer for
restraining order and/or writ of preliminary injunction with the Regional Trial Court of Misamis Oriental,
Branch 25 which was likewise dismissed. The decision of the lower court was finally enforced with the
private respondents being ejected from portions of the subject lots they occupied.
Before he died, Antonio Nazareno caused the approval by the Bureau of Lands of the survey
plan designated as Plan Csd-106-00571 with a view to perfecting his title over the accretion area
being claimed by him. Before the approved survey plan could be released to the applicant,
however, it was protested by private respondents before the Bureau of Lands.
In compliance with the order of respondent District Land Officer Alberto M. Gillera, respondent Land
Investigator Avelino G. Labis conducted an investigation and rendered a report to the Regional
Director recommending that Survey Plan No. MSI-10-06-000571-D (equivalent to Lot No. 36302,
Cad. 237) in the name of Antonio Nazareno, be cancelled and that private respondents be directed
to file appropriate public land applications.
Based on said report, respondent Regional Director of the Bureau of Lands Roberto Hilario
rendered a decision ordering the amendment of the survey plan in the name of Antonio Nazareno
by segregating therefrom the areas occupied by the private respondents who, if qualified, may file
public land applications covering their respective portions.
Antonio Nazareno filed a motion for reconsideration with respondent Rolleo Ignacio, Undersecretary
of the Department of Natural Resources and Officer-in-Charge of the Bureau of Lands who denied the
motion. Respondent Director of Lands Abelardo Palad then ordered him to vacate the portions

Page 13 of 40
adjudicated to private respondents and remove whatever improvements they have introduced
thereon. He also ordered that private respondents be placed in possession thereof.
Upon the denial of the late Antonio Nazareno's motion for reconsideration, petitioners
Desamparado Vda. de Nazareno and Leticia Tapia Nazareno, filed a case before the RTC, Branch
22 for annulment of the following: order of investigation by respondent Gillera, report and
recommendation by respondent Labis, decision by respondent Hilario, order by respondent Ignacio
affirming the decision of respondent Hilario and order of execution by respondent Palad. The RTC
dismissed the complaint for failure to exhaust administrative remedies which resulted in the
finality of the administrative decision of the Bureau of Lands.
On appeal, the Court of Appeals affirmed the decision of the RTC dismissing the
complaint. Applying Section 4 of C.A. No. 141, as amended, it contended that the approval of the
survey plan belongs exclusively to the Director of Lands. Hence, factual findings made by the
Metropolitan Trial Court respecting the subject land cannot be held to be controlling as the preparation
and approval of said survey plans belong to the Director of Lands and the same shall be conclusive when
approved by the Secretary of Agriculture and Natural Resources.[1]
Furthermore, the appellate court contended that the motion for reconsideration filed by Antonio
Nazareno cannot be considered as an appeal to the Office of the Secretary of Agriculture and Natural
Resources, as mandated by C.A. No. 141 inasmuch as the same had been acted upon by respondent
Undersecretary Ignacio in his capacity as Officer-in-Charge of the Bureau of Lands and not as
Undersecretary acting for the Secretary of Agriculture and Natural Resources. For the failure of Antonio
Nazareno to appeal to the Secretary of Agriculture and Natural Resources, the present case does not fall
within the exception to the doctrine of exhaustion of administrative remedies. It also held that there was
no showing of oppressiveness in the manner in which the orders were issued and executed.
Hence, this petition.
Petitioners assign the following errors:
I. PUBLIC RESPONDENT COURT OF APPEALS IN A WHIMSICAL, ARBITRARY AND
CAPRICIOUS MANNER AFFIRMED THE DECISION OF THE LOWER COURT WHICH IS
CONTRARY TO THE PREVAILING FACTS AND THE LAW ON THE MATTER;
II. PUBLIC RESPONDENT COURT OF APPEALS IN A WHIMSICAL, ARBITRARY AND
CAPRICIOUS MANNER AFFIRMED THE DECISION OF THE LOWER COURT
DISMISSING THE ORIGINAL CASE WHICH FAILED TO CONSIDER THAT THE
EXECUTION ORDER OF PUBLIC RESPONDENT ABELARDO G. PALAD, JR., DIRECTOR
OF LANDS, MANILA, PRACTICALLY CHANGED THE DECISION OF PUBLIC
RESPONDENT ROBERTO HILARIO, REGIONAL DIRECTOR, BUREAU OF LANDS,
REGION 10, THUS MAKING THE CASE PROPER SUBJECT FOR ANNULMENT WELL
WITHIN THE JURISDICTION OF THE LOWER COURT.
The resolution of the above issues, however, hinges on the question of whether or not the
subject land is public land. Petitioners claim that the subject land is private land being an
accretion to his titled property, applying Article 457 of the Civil Code which provides:

"To the owners of lands adjoining the banks of rivers belong the accretion which they gradually
receive from the effects of the current of the waters."

In the case of Meneses v. CA,[2] this Court held that accretion, as a mode of acquiring
property under Art. 457 of the Civil Code, requires the concurrence of these requisites: (1) that the
deposition of soil or sediment be gradual and imperceptible; (2) that it be the result of the action
of the waters of the river (or sea); and (3) that the land where accretion takes place is adjacent to
the banks or rivers (or the sea coast). These are called the rules on alluvion which if present in a
case, give to the owners of lands adjoining the banks of rivers or streams any accretion gradually
received from the effects of the current of waters.

Page 14 of 40
 For petitioners to insist on the application of these rules on alluvion to their case, the above-
mentioned requisites must be present. However, they admit that the accretion was formed by the
dumping of boulders, soil and other filling materials on portions of the Balacanas Creek and the
Cagayan River bounding their land.[3] It cannot be claimed, therefore, that the accumulation of
such boulders, soil and other filling materials was gradual and imperceptible, resulting from the
action of the waters or the current of the Balacanas Creek and the Cagayan River. In Hilario v. City
of Manila,[4] this Court held that the word "current" indicates the participation of the body of water in the
ebb and flow of waters due to high and low tide. Petitioners' submission not having met the first and
second requirements of the rules on alluvion, they cannot claim the rights of a riparian owner.
In any case, this court agrees with private respondents that petitioners are estopped from denying
the public character of the subject land, as well as the jurisdiction of the Bureau of Lands when the late
Antonio Nazareno filed his Miscellaneous Sales Application MSA (G-6) 571.[5] The mere filing of said
Application constituted an admission that the land being applied for was public land, having been the
subject of Survey Plan No. MSI-10-06-000571-D (Equivalent to Lot No. 36302, Cad-237) which was
conducted as a consequence of Antonio Nazareno's Miscellaneous Sales Application wherein said land
was described as an orchard. Said description by Antonio Nazareno was, however, controverted by
respondent Labis in his investigation report to respondent Hilario based on the findings of his ocular
inspection that said land actually covers a dry portion of Balacanas Creek and a swampy portion of
Cagayan River. The investigation report also states that except for the swampy portion which is fully
planted to nipa palms, the whole area is fully occupied by a part of a big concrete bodega of petitioners
and several residential houses made of light materials, including those of private respondents which were
erected by themselves sometime in the early part of 1978.[6]
Furthermore, the Bureau of Lands classified the subject land as an accretion area which was formed
by deposits of sawdust in the Balacanas Creek and the Cagayan river, in accordance with the ocular
inspection conducted by the Bureau of Lands.[7] This Court has often enough held that findings of
administrative agencies which have acquired expertise because their jurisdiction is confined to specific
matters are generally accorded not only respect but even finality. [8] Again, when said factual findings are
affirmed by the Court of Appeals, the same are conclusive on the parties and not reviewable by this
Court.[9]
It is this Court's irresistible conclusion, therefore, that the accretion was man-made or
artificial. In Republic v. CA,[10] this Court ruled that the requirement that the deposit should be due
to the effect of the current of the river is indispensable. This excludes from Art. 457 of the Civil
Code all deposits caused by human intervention. Putting it differently, alluvion must be the
exclusive work of nature. Thus, in Tiongco v. Director of Lands, et al.,[11] where the land was not
formed solely by the natural effect of the water current of the river bordering said land but is also
the consequence of the direct and deliberate intervention of man, it was deemed a man-made
accretion and, as such, part of the public domain.
In the case at bar, the subject land was the direct result of the dumping of sawdust by the
Sun Valley Lumber Co. consequent to its sawmill operations.[12] Even if this Court were to take
into consideration petitioners' submission that the accretion site was the result of the late Antonio
Nazareno's labor consisting in the dumping of boulders, soil and other filling materials into the
Balacanas Creek and Cagayan River bounding his land, [13] the same would still be part of the
public domain.
Having determined that the subject land is public land, a fortiori, the Bureau of Lands, as well as the
Office of the Secretary of Agriculture and Natural Resources have Jurisdiction over the same in
accordance with the Public Land Law. Accordingly, the court a quo dismissed petitioners' complaint for
non-exhaustion of administrative remedies which ruling the Court of Appeals affirmed.
However, this Court agrees with petitioners that administrative remedies have been
exhausted. Petitioners could not have intended to appeal to respondent Ignacio as an Officer-in-Charge
of the Bureau of Lands. The decision being appealed from was the decision of respondent Hilario who
was the Regional Director of The Bureau of Lands. Said decision was made "for and by authority of the
Director of Lands."[14] It would be incongruous to appeal the decision of the Regional Director of the

Page 15 of 40
Bureau of Lands acting for the Director of the Bureau of Lands to an Officer-In-Charge of the Bureau of
Lands.
In any case, respondent Rolleo Ignacio's official designation was "Undersecretary of the Department
of Agriculture and Natural Resources." He was only an "Officer-In-Charge" of the Bureau of Lands. When
he acted on the late Antonio Nazareno's motion for reconsideration by affirming or adopting respondent's
Hilario's decision, he was acting on said motion as an Undersecretary on behalf of the Secretary of the
Department. In the case of Hamoy v. Secretary of Agriculture and Natural Resources,[15] This Court held
that the Undersecretary of Agriculture and Natural Resources may modify, adopt, or set aside the orders
or decisions of the Director of Lands with respect to questions involving public lands under the
administration and control of the Bureau of Lands and the Department of Agriculture and Natural
Resources. He cannot therefore, be said to have acted beyond the bounds of his jurisdiction under
Sections 3, 4 and 5 of Commonwealth Act No. 141.[16]
As borne out by the administrative findings, the controverted land is public land, being an artificial
accretion of sawdust. As such, the Director of Lands has jurisdiction, authority and control over the same,
as mandated under Sections 3 and 4 of the Public Land Law (C.A. No. 141) which states, thus:

"Sec. 3. The Secretary of Agriculture and Natural Resources shall be the exclusive officer charged with
carrying out the provisions of this Act through the Director of Lands who shall act under his immediate
control.

Sec. 4. Subject to said control, the Director of Lands shall have direct executive control of the survey,
classification, lease, sale or any other form of concession or disposition and management of the lands of
the public domain, and his decisions as to questions of fact shall be conclusive when approved by the
Secretary of Agriculture and Natural Resources."

In connection with the second issue, petitioners ascribe whim, arbitrariness or capriciousness in the
execution order of public respondent Abelardo G. Palad, the Director of Lands. This Court finds otherwise
since said decision was based on the conclusive finding that the subject land was public land. Thus, this
Court agrees with the Court of Appeals that the Director of Lands acted within his rights when he issued
the assailed execution order, as mandated by the aforecited provisions.
Petitioners' allegation that respondent Palad's execution order directing them to vacate the subject
land practically changed respondent Hilario's decision is baseless. It is incorrect for petitioners to assume
that respondent Palad awarded portions of the subject land to private respondents Salasalans and
Rayabas as they had not yet been issued patents or titles over the subject land. The execution order
merely directed the segregation of petitioners' titled lot from the subject land which was actually being
occupied by private respondents before they were ejected from it. Based on the finding that private
respondents were actually in possession or were actually occupying the subject land instead of
petitioners, respondent Palad, being the Director of Lands and in the exercise of this administrative
discretion, directed petitioners to vacate the subject land on the ground that private respondents have a
preferential right, being the occupants thereof.
While private respondents may not have filed their application over the land occupied by them, they
nevertheless filed their protest or opposition to petitioners' Miscellaneous Sales Application, the same
being preparatory to the filing of an application as they were in fact directed to do so. In any case,
respondent Palad's execution order merely implements respondent Hilario's order. It should be noted that
petitioners' own application still has to be given due course.[17]
As Director of lands, respondent Palad is authorized to exercise executive control over any form of
concession, disposition and management of the lands of the public domain.[18] He may issue decisions
and orders as he may see fit under the circumstances as long as they are based on the findings of fact.
In the case of Calibo v. Ballesteros,[19] this Court held that where, in the disposition of public lands,
the Director of Lands bases his decision on the evidence thus presented, he clearly acts within his
jurisdiction, and if he errs in appraising the evidence, the error is one of judgment, but not an act or grave

Page 16 of 40
abuse of discretion annullable by certiorari. Thus, except for the issue of non-exhaustion of administrative
remedies, this Court finds no reversible error nor grave abuse of discretion in the decision of the Court of
Appeals.
WHEREFORE, the petition is DISMISSED for lack of merit.
SO ORDERED.

2. Quieting Title
- Calacala, et. al. v. RP, GR 154415, July 28, 2005

[G.R. No. 154415. July 28, 2005]

GASPAR CALACALA, BALTAZAR CALACALA, MELCHOR CALACALA, SOLOMON CALACALA,

FELICIDAD CALACALA, PETRONILA CALACALA and SALOME CALACALA, petitioners,
vs. REPUBLIC OF THE PHILIPPINES, represented by the Solicitor General, and SHERIFF
JUAN C. MARQUEZ, respondents.

DECISION
GARCIA, J.:

In this appeal by way of a petition for review on certiorari under Rule 45 of the Rules of Court,
petitioners urge us to annul and set aside the resolution dated 31 October 2001 and the order dated 2
July 2002 of the Regional Trial Court at Rosales, Pangasinan which respectively dismissed petitioners
complaint in Civil Case No. 1239-R and denied their motion for reconsideration.
The material facts are not at all disputed:
The spouses Camilo Calacala and Conchita Calacala, predecessors-in-interest of the herein
petitioners, are the registered owners of a parcel of land situated at Barangay Balincanaway,
Rosales, Pangasinan and covered by Transfer Certificate of Title No. T-21204 of the Registry of
Deeds of Pangasinan.
To secure the provisional release of an accused in a criminal case then pending before the
then Court of First Instance (CFI) of Pangasinan, the spouses offered their aforementioned parcel
of land as a property bond in said case. For failure of the accused to appear at his scheduled
arraignment on 4 November 1981, the CFI ordered the bond forfeited in favor of the government,
and, following the bondmans failure to produce in court the body of the accused, rendered
judgment against the bond in the amount of P3,500.00. Thereafter, the court issued a Writ of
Execution[1] directing the provincial sheriff to effect a levy on the subject parcel of land and to sell
the same at a public auction to satisfy the amount of the bond. In compliance with the writ, the
deputy provincial sheriff issued on 26 July 1982 a Notice of Levy[2] addressed to the Register of Deeds of
Pangasinan who, on 19 August 1982, caused the annotation thereof on TCT No. T-21204 as Entry No.
83188.
Not long thereafter, a public auction of the subject parcel of land was held on 24 September 1982, at
which respondent Republic submitted its bid for P3,500, which is the amount of the judgment on the
bond. Hence, on that same day, a Sheriffs Certificate of Sale [3] was issued in favor of the Republic
as the winning bidder.

Page 17 of 40
 On 5 October 1982, the same Certificate of Sale was registered and annotated on TCT No. T-
21204 as Entry No. 83793, thereby giving the spouses Calacala a period of one (1) year therefrom
within which to redeem their property. Unfortunately, they never did up to the time of their
respective deaths on 13 January 1988 and 8 January 1994.
Claiming ownership of the same land as legal heirs of the deceased spouses, petitioners filed
with the Regional Trial Court at Rosales, Pangasinan a complaint [4] for Quieting of Title and
Cancellation of Encumbrance on TCT No. T-21204 against respondents Republic and Sheriff Juan
C. Marquez. In their complaint, docketed as Civil Case No. 1239-R and raffled to Branch 53 of the court,
petitioners prayed, inter alia, for the cancellation of Entries No. 83188 and 83793 on TCT No. T-21204 or
the declaration of said entries as null and void.
To the complaint, respondent Republic interposed a Motion to Dismiss[5] grounded on the (1)
complaints failure to state a cause of action and (2) prescription of petitioners right to redeem.
In their Opposition,[6] petitioners contend that when respondent Republic moved to dismiss the
complaint for failure to state a cause of action, it thereby hypothetically admitted all the allegations
therein, specifically the averment that despite the lapse of nineteen (19) years, respondent did not secure
the necessary Certificate of Final Sale and Writ of Possession and failed to execute an Affidavit of
Consolidation of Ownership. Petitioners thus submit that the Republics rights over the land in question
had either prescribed, been abandoned or waived. They add that by filing a motion to dismiss, respondent
Republic likewise admitted the allegation in the same complaint that petitioners and their predecessors-in-
interest have been in continuous possession of the subject land and paying the realty taxes thereon.
In the herein assailed resolution[7] dated 31 October 2001, the trial court granted the
Republics motion to dismiss and accordingly dismissed petitioners complaint. Petitioners moved
for a reconsideration but their motion was denied by the same court in its equally challenged
order[8] of 2 July 2002.
Hence, petitioners present recourse, it being their contentions that -
I.

THE INSTANT COMPLAINT FOR QUIETING OF TITLE AND CANCELLATION OF ENCUMBRANCE ON

TCT NO. T-21204, FILED BEFORE THE TRIAL COURT, RGIONAL [sic] TRIAL COURT, BRANCH 53,
ROSALES, PANGASINAN WAS THE PROPER REMEDY.

II.

THE COMPLAINT STATES SUFFICIENT CAUSE OF ACTION.

III.

THE CASE FOR QUIETING OF TITLE HAS NOT PRESCRIBED.

IV.

AND THE RESPONDENT REPUBLIC OF THE PHILIPPINES HAS NOT PERFECTED ITS TITLE TO
THE LAND IN QUESTION.

In the main, it is petitioners submission that their complaint a quo sufficiently states a cause
of action because they are still the owners of the subject parcel of land despite their failure to
redeem it within the 1-year redemption period. They premise their argument on the Republics
failure to secure the Certificate of Final Sale, execute an Affidavit of Consolidation of Ownership
and obtain a writ of possession over the same property within ten (10) years from the registration
of the Certificate of Sale on 5 October 1982. Prescinding therefrom, they thus argue that the

Page 18 of 40
Republics right over the property in question has already prescribed or has been abandoned and
waived, citing, in support thereof, Article 1142 of the Civil Code. In short, it is petitioners thesis
that respondent Republic failed to perfect its title.
On the other hand, it is respondents posture that its rights and title as owner of the same
property are already perfected by the mere failure of petitioners and/or their predecessors-in-
interest to redeem the same within one (1) year from the registration/annotation of the Sheriffs
Certificate of Sale on TCT No. T-21204, in accordance with Section 33, Rule 39 of the 1997 Rules of
Civil Procedure.
As we see it, the only question which commends itself for our resolution is whether the trial
courts dismissal of petitioners complaint for Quieting of Title was proper. It thus behooves us to
determine if, in the first place, petitioners have a cause of action in their complaint.
We rule for respondent Republic.
To begin with, it bears emphasis that an action for quieting of title is essentially a common law
remedy grounded on equity. As we held in Baricuatro, Jr. vs. CA:[9]

Regarding the nature of the action filed before the trial court, quieting of title is a common law remedy for
the removal of any cloud upon or doubt or uncertainty with respect to title to real property. Originating in
equity jurisprudence, its purpose is to secure x x x an adjudication that a claim of title to or an interest in
property, adverse to that of the complainant, is invalid, so that the complainant and those claiming under
him may be forever afterward free from any danger of hostile claim. In an action for quieting of title, the
competent court is tasked to determine the respective rights of the complainant and other claimants, x x x
not only to place things in their proper place, to make the one who has no rights to said
immovable respect and not disturb the other, but also for the benefit of both, so that he who has the right
would see every cloud of doubt over the property dissipated, and he could afterwards without
fear introduce the improvements he may desire, to use, and even to abuse the property as he deems best
xxx (Italics supplied).

Under Article 476 of the New Civil Code, the remedy may be availed of only when, by reason
of any instrument, record, claim, encumbrance or proceeding, which appears valid but is, in fact,
invalid, ineffective, voidable or unenforceable, a cloud is thereby casts on the complainants title
to real property or any interest therein. The codal provision reads:

Article 476. Whenever there is a cloud on title to real property or any interest therein, by reason of
any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective
but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to
said title, an action may be brought to remove such cloud or to quiet the title.

An action may also be brought to prevent a cloud from being cast upon title to real property or
any interest therein.

In turn, Article 477 of the same Code identifies the party who may bring an action to quiet
title, thus:

Article 477. The plaintiff must have legal or equitable title to, or interest in the real property which
is the subject-matter of the action. He need not be in possession of said property.

It can thus be seen that for an action for quieting of title to prosper, the plaintiff must first
have a legal, or, at least, an equitable title on the real property subject of the action and that the
alleged cloud on his title must be shown to be in fact invalid. So it is that in Robles, et al. vs.
CA,[10] we ruled:

Page 19 of 40
It is essential for the plaintiff or complainant to have a legal title or an equitable title to or interest
in the real property which is the subject matter of the action. Also, the deed, claim, encumbrance
or proceeding that is being alleged as a cloud on plaintiffs title must be shown to be in fact invalid
or inoperative despite its prima facie appearance of validity or legal efficacy.

Verily, for an action to quiet title to prosper, two (2) indispensable requisites must concur,
namely: (1) the plaintiff or complainant has a legal or an equitable title to or interest in the real
property subject of the action; and (2) the deed, claim, encumbrance or proceeding claimed to be
casting cloud on his title must be shown to be in fact invalid or inoperative despite its prima
facie appearance of validity or legal efficacy.
Unfortunately, the foregoing requisites are wanting in this case.
To start with, petitioners base their claim of legal title not on the strength of any independent writing
in their favor but simply and solely on respondent Republics failure to secure the Certificate of Final Sale,
execute an Affidavit of Consolidation of Ownership and obtain a writ of possession over the property in
dispute within ten (10) years from the registration of the Certificate of Sale.
Petitioners reliance on the foregoing shortcomings or inactions of respondent Republic cannot stand.
For one, it bears stressing that petitioners predecessors-in-interest lost whatever right they
had over land in question from the very moment they failed to redeem it during the 1-year period
of redemption. Certainly, the Republics failure to execute the acts referred to by the petitioners
within ten (10) years from the registration of the Certificate of Sale cannot, in any way, operate to
restore whatever rights petitioners predecessors-in-interest had over the same. For sure,
petitioners have yet to cite any provision of law or rule of jurisprudence, and we are not aware of any, to
the effect that the failure of a buyer in a foreclosure sale to secure a Certificate of Final Sale, execute an
Affidavit of Consolidation of Ownership and obtain a writ of possession over the property thus acquired,
within ten (10) years from the registration of the Certificate of Sale will operate to bring ownership back to
him whose property has been previously foreclosed and sold. As correctly observed by the trial court,
the Republics failure to do anything within ten (10) years or more following the registration of the
Sheriffs Certificate of Sale cannot give rise to a presumption that it has thereby waived or
abandoned its right of ownership or that it has prescribed, for prescription does not lie against the
government, nor could it be bound or estopped by the negligence or mistakes of its officials and
employees.
Quite the contrary, Section 33,[11] Rule 39 of the 1997 Rules of Civil Procedure explicitly provides
that [u]pon the expiration of the right of redemption, the purchaser or redemptioner shall be substituted to
and acquire all the rights, title, interest and claim of the judgment obligor to the property as of the time of
the levy.
Concededly, the 1997 Rules of Civil Procedure was yet inexistent when the facts of this case
transpired. Even then, the application thereof to this case is justified by our pronouncement in Lascano
vs. Universal Steel Smelting Co., Inc., et al.,[12] to wit:

Procedural laws are construed to be applicable to actions pending and undetermined at the time of their
passage, and are deemed retroactive in that sense and to that extent. As a general rule, the retroactive
application of procedural laws cannot be considered violative of any personal rights because no vested
right may attach to nor arise therefrom.

Moreover, with the rule that the expiration of the 1-year redemption period forecloses the
obligors right to redeem and that the sale thereby becomes absolute, the issuance thereafter of a
final deed of sale is at best a mere formality and mere confirmation of the title that is already
vested in the purchaser. As this Court has said in Manuel vs. Philippine National Bank, et al.:[13]

Note must be taken of the fact that under the Rules of Court the expiration of that one-year period
forecloses the owners right to redeem, thus making the sheriffs sale absolute. The issuance thereafter

Page 20 of 40
of a final deed of sale becomes a mere formality, an act merely confirmatory of the title that is
already in the purchaser and constituting official evidence of that fact. (Emphasis supplied)

With the reality that petitioners are not holders of any legal title over the property subject of
this case and are bereft of any equitable claim thereon, the very first requisite of an action to quiet
title, i.e., that the plaintiff or complainant has a legal or an equitable title to or interest in the real
property subject matter of the action, is miserably wanting in this case.
For another, and worse, petitioners never put in issue, as in fact they admit in their pleadings, the
validity of the Sheriffs Certificate of Sale duly registered on 5 October 1982. On this score, the second
requisite of an action to quiet title, namely, that the deed, claim, encumbrance or proceeding alleged to
cast cloud on a plaintiff's title is in fact invalid or inoperative despite its prima facie appearance of validity
or legal efficacy, is likewise absent herein.
WHEREFORE, the instant petition is DENIED and the assailed resolution and order of the trial
court AFFIRMED.
Costs against petitioners.
SO ORDERED.

- David v. Malay, 318 SCRA 711

[G.R. No. 132644. November 19, 1999]

ERNESTO DAVID, RICARDO DAVID, NELIA DAVID, EMILIA DAVID, LOLITA DAVID, BASILIO
LEMQUE, NICANOR LEMQUE, FELIX LEMQUE, NORMA LEMQUE, WILFREDO LEMQUE,
RODOLFO LEMQUE, ROGELIO LEMQUE, VICTORIA LEMQUE, ESTATE OF MARIA
ESPIRITU and ANDRES ADONA, MILAGROS DE UBAGO-UMALI, FELISA GUBALLA DE
UBAGO, VANESSA DE UBAGO-UMALI, ANTONIO DE UBAGO, JR., JOSEPH GUBALLA DE
UBAGO, MARIETTA DE UBAGO-TAN, and REGISTER OF DEEDS OF
ZAMBALES, petitioners, vs. CRISTITO MALAY and NORA MALAY, DIONISIO MALAY,
FRANCISCA T. CAPACILLO, PEPITO ALCANTARA, NICOLAS SORIANO and JUAN
MORA, respondents.

DECISION
VITUG, J.:

The instant case is an appeal from a decision of the Court of Appeals reversing that of the
Regional Trial Court on an action for reconveyance of property. The issues submitted by the parties
may not really be all that novel.
The spouses Andres Adona and Leoncia Abad, husband and wife for a good number of years,
were blessed with five children among them being Carmen Adona. Carmen married Filomeno
Malay; three children were begotten by the marriage, namely, Cristito, Nora and Dionisio (among
the herein private respondents). Following the death of Leoncia Abad in 1923, Andres Adona
cohabited with Maria Espiritu, herself a widow, apparently without the benefit of marriage. Andres

Page 21 of 40
and Maria sired two children, Esperanza, represented herein by her heirs all surnamed David, and
Vicente Adona. Maria Espiritu likewise had a child by her previous marriage, Fulgencio Lemque,
now herein represented also by his own heirs.
During his lifetime, Andres Adona applied for a homestead patent over a parcel of agricultural
land located at Dirita, Iba, Zambales, containing an area of 22.5776 hectares. After Andres Adona
had died, Maria Espiritu, predecessor-in-interest of herein petitioners, succeeded in obtaining
Original Certificate of Title No. 398 over the land in her name. After Maria Espiritu had died in
1945, the children, as well as descendants of Andres Adona by his marriage with Leoncia Abad,
continued to be in peaceful and quiet possession of the subject land.
Sometime in 1989, petitioners executed a deed of Extrajudicial Settlement with Sale over the
subject property in favor of Mrs. Venancia Ungson. Private respondents protested the sale
claiming that they were the true owners of the land. Ultimately, in any event, the sale in favor of
Mrs. Ungson was rescinded in view of the latters failure to pay in full the consideration agreed
upon. Subsequently, petitioners executed another deed of Extrajudicial Settlement with Sale. In
this new instrument, dated 15 December 1990, petitioners divided the land equally among
themselves and sold their respective shares to their co-petitioners herein, Antonio de Ubago, Jr.,
Milagros de Ubago-Umali, Felisa Guballa de Ubago, Vanessa de Ubago-Umali and Marietta de Ubago-
Tan and Joseph Guballa de Ubago. On 27 November 1992, Transfer Certificate of Title No. T-42320 was
issued in favor of the de Ubagos.
Less than a month later, or on 07 December 1992, private respondents filed a complaint,
docketed Civil Case No. RTC-905-I, for Annulment of Sale with Restraining Order, Injunction and
Damages against petitioners before Branch 71 of the Regional Trial Court of Zambales. In their
complaint, private respondents averred that the disputed land sold by the heirs of Maria Espiritu
to the de Ubagos was the subject of a homestead application by their great grandfather, Andres
Adona, but that Original Certificate of Title No. 398 was instead fraudulently issued to Maria
Espiritu, on 04 December 1933, upon her false representation that she was the widow of Andres
Adona.
In its decision of 25 July 1995 after a hearing on the merits of the case, the trial court dismissed
the complaint for lack of cause of action and on the ground of prescription. It opined that the
action being one for annulment of sale anchored on a fraudulent titling of the subject property, the
cause of action constituted a collateral attack on the Torrens Certificate of Title. The court a
quo added that even if the action were to be treated as being one for reconveyance, the suit would
still have to fail since an action for reconveyance could only be brought within ten (10) years
counted from the date of issuance of the certificate of title (in 1933).
On appeal, the Court of Appeals, in its judgment of 11 February 1998,[1] set aside the order of
dismissal of the case decreed by the trial court and directed the cancellation of Transfer
Certificate of Title No. T-42320 in the name of the de Ubagos and the reconveyance of the property
to the estate of Andres Adona. Petitioners were additionally ordered to pay damages and attorneys
fees to private respondents.The appellate court, more particularly ruled:

The evidence on record shows that OCT No. 398 issued in favor of Maria Espiritu was obtained by
her fraudulent concealment of the existence of Adonas first marriage to Leoncia Abad, as shown
by the affidavit she executed on September 21, 1928 and filed with the Director of Lands.

Consequently, Maria Espiritus fraudulent concealment of material facts created an implied or

constructive trust in favor of the plaintiffs, the excluded co-heirs and actual possessors of the
subject land. Article 1456 of the Civil Code reads:

'If property is acquired through mistake or fraud, the person obtaining it is by force of law,
considered a trustee of an implied trust for the benefit of the person from whom the property
comes.

Page 22 of 40
Although it is true that after the lapse of one year, a decree of registration is no longer open to
review or attack, although its issuance was tainted with fraud; however, the aggrieved party is not
without a remedy at law. Notwithstanding the irrevocability of the Torrens Title already issued in
favor of Maria Espiritu, she and her successors-in-interest, although the registered owner under
the Torrens system, may still be compelled under the law to reconvey the subject property to the
real owners. The Torrens system was not designed to shield and protect one who had committed
fraud or misrepresentation and thus holds title in bad faith.(Amerol vs. Bagumbaran, 154 SCRA
396, 404 [1987]);

In an action for reconveyance, the decree of registration is respected as incontrovertible. What is sought
instead is the transfer of the property, which has been wrongfully or erroneously registered in another
persons name, to its rightful and legal owner, or to one with a better right. (Amerol, supra.)

However, the right to seek reconveyance based on an implied or constructive trust is not absolute. It is
subject to extinctive prescription. (Amerol, supra.; Caro vs. Court of Appeals, 180 SCRA 401, 405-407
[1989]; Ramos vs. Court of Appeals, 112 SCRA 542, 550 [1982]; Ramos vs. Ramos, 61 SCRA 284, 299-
300 [1974])

An action for reconveyance of a parcel of land based on an implied trust prescribes in ten years, the point
of reference being the date of registration of the deed or the date of the issuance of the certificate of title
over the property. (Amerol, supra.; Caro, supra., Casipit vs. Court of Appeals, 204 SCRA 684, 694
[1991]) This rule applies only when the plaintiff or the person enforcing the trust is not in possession of
the property. If a person claiming to be the owner thereof is in actual possession of the property,
the right to seek reconveyance does not prescribe. The reason for this is one who is in actual
possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed
or his title is attacked before taking steps to vindicate his right. His undisturbed possession gives him the
continuing right to seek the aid of a court of equity to ascertain the nature of the adverse claim of third
party and its effect on his title, which right can be claimed only by one who is in possession. (Vda. de
Cabrera vs. Court of Appeals, G.R. 108547, February 3, 1997)

Hence, the undisturbed possession by plaintiffs and their predecessors-in-interest gave them the
continuing right to resort to judicial intervention once their claim to ownership was challenged. It
was therefore the defendant Heirs act of executing the `Extrajudicial Settlement of Estate with
Sale which constituted the express act of repudiation of the constructive trust which gave rise to
plaintiffs cause of action.[2]

Aggrieved, petitioners have come to this Court and seek to dispute the judgment of the Court
of Appeals ordering the cancellation of Original Certificate of Title No. 398 issued on 16 November
1933. It is the contention of petitioners that to allow private respondents to question Original
Certificate of Title No. 398 fifty-nine years after its issuance would undermine the Torrens system
and sanctity of the certificate of title.
Private respondents, upon the other hand, asks this Court to sustain the decision of the
Court of Appeals on the thesis that the property in question indubitably belongs to the estate of
Andres Adona whose incontestable right to it is derived from the perfected homestead application
two years prior to his death as so admitted by Maria Espiritu herself in her affidavit submitted to
the Director of Lands.
The Court rules for the affirmance of the challenged decision.
A certificate of title issued under an administrative proceeding pursuant to a homestead
patent covering a disposable public land within the contemplation of the Public Land Law or
Commonwealth Act No. 141 is as indefeasible as a certificate of title issued under a judicial
registration proceeding. Under the Land Registration Act, title to the property covered by a
Torrens certificate becomes indefeasible after the expiration of one year from the entry of the
decree of registration. Such decree of registration is incontrovertible and becomes binding on all

Page 23 of 40
persons whether or not they were notified of, or participated in, the in rem registration
process.[3] There is no specific provision in the Public Land Law or the Land Registration Act (Act
496), now Presidential Decree 1529, fixing a similar one-year period within which a public land
patent can be considered open to review on the ground of actual fraud, such as that provided for
in Section 38 of the Land Registration Act, and now Section 32 of Presidential Decree 1529, and
clothing a public land patent certificate of title with indefeasibility. Nevertheless, this Court has
repeatedly applied Section 32 of Presidential Decree 1529 to a patent issued in accordance with
the law by the Director of Lands, approved by the Secretary of Natural Resources, under the
signature of the President of the Philippines. [4] The date of the issuance of the patent corresponds
to the date of the issuance of the decree in ordinary cases. Just as the decree finally awards the
land applied for registration to the party entitled to it, so also, the patent issued by the Director of
Lands equally and finally grants and conveys the land applied for to the applicant. [5]
Original Certificate of Title No. 398 was issued in the name of Maria Espiritu on 04 December
1933 and would have become indefeasible a year thereafter had not its issuance been attended
with fraud. The attendance of fraud created an implied trust in favor of private respondents and
gave them the right of action to seek the remedy of reconveyance of the property wrongfully
obtained.[6] In Javier vs. Court of Appeals[7]this Court ruled:

x x x The basic rule is that after the lapse of one (1) year, a decree of registration is no longer
open to review or attack although its issuance is attended with actual fraud. This does not mean
however that the aggrieved party is without a remedy at law. If the property has not yet passed to
an innocent purchaser for value, an action for reconveyance is still available. The decree becomes
incontrovertible and can no longer be reviewed after one (1) year from the date of the decree so
that the only remedy of the landowner whose property has been wrongfully or erroneously
registered in anothers name is to bring an ordinary action in court for reconveyance, which is an
action in personam and is always available as long as the property has not passed to an innocent
third party for value. If the property has passed into the hands of an innocent purchaser for value,
the remedy is an action for damages[8]

The caption of the case before the court a quo while denominated as being one for Annulment of
Sale with Damages is in reality an action for reconveyance since the ultimate relief sought by private
respondents would be for the property covered by Original Certificate of Title No. 398 to be reconveyed to
the estate of Andres Adona. In this jurisdiction, the dictum adhered to is that the nature of an action is
determined, more importantly, by the body of the pleading or complaint itself [9] than by its title or
heading. The Court of Appeals did not err in treating the action brought by private respondents as one for
reconveyance or as one that seeks the transfer of the property, wrongfully registered by another, to its
rightful and legal owner.[10] It would seem that Andres Adona did perfect his homestead application prior
to his death,[11] the right to the issuance of the patent on which vests after complying with all the
requirements of the law.[12]
The next crucial issue focuses on the ruling of the Court of Appeals to the effect that if a
person who claims to be the owner of the property is in actual possession thereof, the right to
seek reconveyance does not prescribe.
There is no doubt about the fact that an action for reconveyance based on an implied trust
ordinarily prescribes in ten years.[13] This rule assumes, however, that there is an actual need to
initiate that action, for when the right of the true and real owner is recognized, expressly or
implicitly such as when he remains undisturbed in his possession, the statute of limitation would
yet be irrelevant. An action for reconveyance, if nonetheless brought, would be in the nature of a
suit for quieting of title, or its equivalent, an action that is imprescriptible. In Faja vs. Court of
Appeals,[14] the Court has held that a person in actual possession of a piece of land under claim of
ownership may wait until his possession is disturbed or his title is attacked before taking steps to
vindicate his right, and that his undisturbed possession gives him the continuing right to seek the aid of a
court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on
his title. In the words of the Court -

Page 24 of 40
x x x There is settled jurisprudence that one who is in actual possession of a piece of land claiming to be
owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to
vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing
right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a
third party and its effect on his own title, which right can be claimed only by one who is in possession. No
better situation can be conceived at the moment for Us to apply this rule on equity than that of herein
petitioners whose mother, Felipa Faja, was in possession of the litigated property for no less than 30
years and was suddenly confronted with a claim that the land she had been occupying and cultivating all
these years, was titled in the name of a third person. We hold that in such a situation the right to quiet title
to the property, to seek its reconveyance and annul any certificate of title covering it, accrued only from
the time the one in possession was made aware of a claim adverse to his own, and it is only then that the
statutory period of prescription commences to run against such possessor. [15]

The same dictum is reiterated in Heirs of Jose Olviga vs. Court of Appeals;[16] thus -

With regard to the issue of prescription, this Court has ruled a number of times before that an action for
reconveyance of a parcel of land based on implied or constructive trust prescribes in ten years, the point
of reference being the date of registration of the deed or the date of the issuance of the certificate of title
over the property (Vda de Portugal vs. IAC, 159 SCRA 178) But this rule applies only when the plaintiff is
not in possession of the property, since if a person claiming to be the owner thereof is in actual
possession of the property, the right to seek reconveyance, which in effect seeks to quiet title to the
property, does not prescribe.[17]

Finally, this Court sees no cogent reasons to disturb the finding of the Court of Appeals that
the de Ubagos may not be considered buyers in good faith. Said the Appellate Court.

x x x An innocent purchaser for value is one who buys 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 or interest of some other persons in the property. He
buys the property with the belief that the person from whom he receives the thing was the owner and
could convey title to the property. A purchaser can not close his eyes to facts which should put a
reasonable man on his guard and still claim he acted in good faith (Sandoval vs. Court of Appeals, 260
SCRA 283, 296 [1996])

It is well settled that one who deals with property registered under the Torrens system need not
go beyond the same, but only has to rely on the title. He is charged with notice only of such
burdens and claims as are annotated on the title. (Sandoval, supra., at p. 295)

The aforestated principle admits of an unchallenged exception: that a person dealing with
registered land has a right to rely on the Torrens certificate of title and to dispense with the need
of inquiring further except when the party has actual knowledge of facts and circumstances that
would impel a reasonably cautious man to make such inquiry or when the purchaser has some
knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably
prudent man to inquire into the status of the title of the property in litigation. The presence of
anything which excites or arouses suspicion should then prompt the vendee to look beyond the
certificate and investigate the title of the vendor appearing on the face of said certificate. One who
falls within the exception can neither be denominated an innocent purchaser for value nor a
purchaser in good faith and hence does not merit the protection of the law. (Sandoval, supra.)
(Underscoring supplied)

Applying the aforequoted jurisprudence, the defendant buyers can not be considered as innocent
purchasers for value. A perusal of defendant buyers TCT No. 42320 reveals that it contains an
entry by the Register of Deeds which provides that their ownership over the land is subject to

Page 25 of 40
prospective claims by any possible heirs and creditors who might have been deprived of their
lawful participation in the estate. The said entry reads as follows:

Entry No. 102385 Section 4 The property described in this certificate of title is subject to the
provisions of Section 4, Rule 74 of the Rules of Court for the period of two
years in favor of in any other possible heir or heirs and creditors who
might have been deprived of his or their lawful participations in the said
estate.

Date of instrument December 15, 1990.

Date of Inscription November 27, 1992 at 2:00 p.m.

(Exh. E; Rollo, p. 137)

Section 4, Rule 74 of the Rules of Court reads, in part, as follows:

Sec. 4. Liability of distributees and estate. - If it shall appear at any time within (2) years after the
settlement and distribution of an estate in accordance with the provisions of either of the first two
sections of this rule, that an heir or other person has been unduly deprived of his lawful participation in
the estate, such heir or such other person may compel the settlement of the estate in the courts in the
manner hereinafter provided for the purpose of satisfying such lawful participation. x x x.

The record shows that the Extrajudicial Settlement of Estate with Sale was executed on December 15,
1990. Plaintiffs complaint for Reconveyance was filed on December 7, 1992. Hence, the two-year period
has not yet elapsed.

It likewise appears that the subject land was the object of a sale between the defendant Heirs and one
Mrs. Venancia Ungson which was subsequently aborted due to the intervention of defendant Vicente
Adona and plaintiff Cristito Malay. (Exhs. K, K-1 and L) However, defendant Heirs nevertheless executed
another sale in favor of defendant buyers who are admittedly relatives of Mrs. Venancia Ungson. (TSN,
January 23, 1995, p.14) Plaintiff Cristito Malays intervention in the previous sale should have put
defendant buyers on their guard.

Moreover, it is unbelievable that the defendant buyers would not have noticed the plaintiffs who were in
possession of the land when the defendant buyers inspected the same. Had they made further
investigations, they would have discovered that plaintiffs were in possession of the land under a claim of
ownership.

The rule is settled that a buyer of real property which is in the possession of persons other than
the seller must be wary and should investigate the rights of those in possession. Otherwise,
without such inquiry, the buyer can hardly be regarded as a buyer in good faith. The buyer who
has failed to know or discover that the land sold to him is in the adverse possession of another
buyer in bad faith. (Embrado vs. Court of Appeals, 233 SCRA 335, 347 [1994]). [18]

Altogether, the Court sees no reversible error on the part of the Court of Appeals in its assailed
decision.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED. Costs against petitioners.
SO ORDERED.

Page 26 of 40
 3. Legal Redemption
- Si v. CA, 342 SCRA 653

[G.R. No. 122047. October 12, 2000]

SPOUSES SERAFIN SI AND ANITA BONODE SI, petitioners, vs. COURT OF APPEALS, SPOUSES
JOSE ARMADA and REMEDIOS ALMANZOR (deceased, and substituted by heirs: Cynthia
Armada, Danilo Armada and Vicente Armada) respondents.

DECISION
QUISUMBING, J.:

This petition for certiorari under Rule 45 assails the Decision[1] dated March 25, 1994, of the Court of
Appeals and its Resolutions[2] dated March 24, 1995 and September 6, 1995 in CA-G.R. CV No.
30727. The Court of Appeals reversed the decision of the Regional Trial Court of Pasig City, Branch
113, and nullified the sale of the subject lot by the spouses Crisostomo and Cresenciana Armada
to spouses Serafin and Anita Si. The dispositive portion of the respondent court's decision reads:

"WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED, and a new
one is rendered:

1) Annulling and declaring as invalid the registration of the Deed of Absolute Sale dated March
27, 1979 executed by Cresenciana V. Alejo in favor of Anita Bonode Si.
2) Ordering the Register of Deeds of Pasay City to annul and cancel Transfer Certificate of Title
No. 24751, issued in the name of Anita Bonode Si, married to Serafin D. Si., Jose R.
Armada, married to Remedios Almanzor and Dr. Severo R. Armada Jr., single.
3) Ordering the Register of Deeds of Pasay City to reconstitute and revive Transfer Certificate
of Title No. 16007 in the names of Jose, Crisostomo and Severo, Jr.
4) That plaintiffs be allowed to repurchase or redeem the share corresponding to the share of
Crisostomo Armada within thirty (30) days from notice in writing by Crisostomo Armada.
5) The defendants-appellees are jointly and severally ordered to pay the plaintiffs-appellants the
sum of P10,000.00 as moral damages.
6) The defendants-appellees are jointly and severally ordered to pay the plaintiff-appellants the
sum of P10,000.00 as attorney's fees and litigation expenses and costs of suit.

SO ORDERED."[3]

The factual background of the case is as follows:

The 340 square meters of land, situated in San Jose District, Pasay City, the property in
dispute, originally belonged to Escolastica, wife of Severo Armada, Sr. This was covered by
Transfer Certificate of Title (TCT) No. (17345) 2460. During the lifetime of the spouses, the property
was transferred to their children and the Registry of Deeds, Pasay City, issued TCT No. 16007 in
the names of the three sons, as follows : "DR. CRISOSTOMO R. ARMADA, married to Cresenciana V.
Alejo, 113.34 Square Meters; JOSE R. ARMADA, married to Remedios Almanzor, 113.33 Square Meters;

Page 27 of 40
and DR. SEVERO R. ARMADA, Jr., single, all of legal age, Filipinos."[4] Annotated also in the title is the
total cancellation of said title "... by virtue of the Deed of Sale, (P.E. 77952/T-24751), dated March
28, 1979, executed by CRESENCIANA V. ALEJO, as attorney-in-fact of CRISOSTOMO R. ARMADA,
conveying 113.34 square meters of the property herein, in favor of ANITA BONODE SI, married to
Serafin D. Si, for the sum of P75,000.00, issuing in lieu thereof Transfer Certificate of Title No. 24751,
Reg. Book T-102. (Doc. No. 17, Page No. 5, Book No. 253 of Notary Public of Pasay City, Manila, Julian
Florentino)."[5]
On April 15, 1980, herein spouses Jose Armada and Remedios Almanzor, filed a complaint for
Annulment of Deed of Sale and Reconveyance of Title with Damages, against herein petitioners
Anita and Serafin Si and Conrado Isada, brother-in-law of Cresenciana. Isada brokered the sale.
The complaint alleged that Conrado Isada sold Crisostomo's share by making it appear that
Cresenciana, the attorney-in-fact of her husband, is a Filipino citizen, residing with Isada at No. 13-4th
Camarilla Street, Murphy, Cubao, Quezon City. By this time, Crisostomo and Cresenciana had migrated
and were already citizens of the United States of America. It also stated that when petitioners registered
the deed of absolute sale they inserted the phrase "... and that the co-owners are not interested in buying
the same in spite of notice to them.", and that petitioners knew of the misrepresentations of
Conrado. Further, the complaint alleged that the other owners, Jose and Severo, Jr., had no written
notice of the sale; and that all upon learning of the sale to the spouses Si, private respondents filed a
complaint for annulment of sale and reconveyance of title with damages, claiming they had a right of
redemption.
Petitioners, on the other hand, alleged that on October 2, 1954, Escolastica, with the consent of her
husband executed three separate deeds of sale (Exhibits 1, 2, and 3) [6] conveying 113.34 square meters
of the property to Severo, and 113.33 square meters each to Crisostomo and Jose. The three deeds of
sale particularly described the portion conveyed to each son in metes and bounds. Petitioners contend
that since the property was already three distinct parcels of land, there was no longer co-ownership
among the brothers. Hence, Jose and Severo, Jr. had no right of redemption when Crisostomo sold his
share to the spouses Si. Petitioners point out that it was only because the Armada brothers failed to
submit the necessary subdivision plan to the Office of the Register of Deeds in Pasay City that separate
titles were not issued and TCT No. 16007 was issued and registered in the names of Jose, Crisostomo,
and Severo, Jr.
After trial on the merits, the court ruled for petitioners:

"IN VIEW OF ALL THE FOREGOING, the complaint is hereby DISMISSED. With costs against the
plaintiffs."[7]

Private respondents appealed to the Court of Appeals. On March 25, 1994, the appellate court
issued the decision now assailed by petitioners. In reversing the decision of the trial court and
ruling for private respondents, the Court of Appeals found that:

"A careful examination of TCT No. 16007 (Exh. 'A') shows that the portion sold by virtue of the Deeds of
Sale (Exh. 1, 2, & 3) to the Armada brothers do not appear in the said title, neither does it indicate the
particular area sold. Moreover, no evidence was presented to show that the Register of Deeds issued
TCT No. 16007 (Exh. 'A') on the basis of the said deeds of Sale. In fact, TCT No. 16007 (Exh. 'A') shows
that the lot is co-owned by Jose, Crisostomo and Severo, Jr. in the proportion of 113.33, 113.34 and
113.33 sq. m. respectively.

Furthermore, the evidence on record shows that the Deed of Absolute Sale (Exh. 'B'), executed by
Cresencia Armada in favor of defendants Si, stated that the portion sold was the 'undivided one hundred
thirteen & 34/100 (113.34) square meters' of the parcel of land covered by TCT NO. 16007 of the Registry
of Deeds for Pasay City, which means that what was sold to defendants are still undetermined and
unidentifiable, as the area sold remains a portion of the whole.

Page 28 of 40
Moreover, plaintiff Remedi[o]s Armada testified that on March 27, 1979, Crisostomo Armada, thru his
attorney-in-fact and co-defendant, Cresenciana Alejo, sold his undivided 113.34 share to defendants,
Sps. Si as evidenced by a Deed of Absolute Sale (Exh. 'B'), and presented for registration with the
Register of Deeds (Exh. 'B-1') without notifying plaintiffs of the sale (TSN, pp. 6-8, December 20,
1988). Instead, it appears that the phrase 'and that the co-owners are not interested in buying the same
inspite of notice to them', was inserted in the Deed of Sale (Exh. 'B').

xxx

Otherwise stated, the sale by a (sic) co-owner of his share in the undivided property is not invalid,
but shall not be recorded in the Registry Property, unless accompanied by an affidavit of the
Vendor that he has given written notice thereof to all possible redemptioners." [8]

On August 29, 1994, petitioners' counsel on record, Atty. Roberto B. Yam received a copy of the CA
decision. On October 14, 1994, he filed a motion for reconsideration, but it was denied by the Court of
Appeals on November 21, 1994, for being filed out of time.
On December 5, 1994, petitioners filed their motion for new trial under Section 1, Rule 53 of the
Revised Rules of Court.[9] Petitioners presented new evidence, TCT No. (17345) 2460, registered in the
name of Escolastica de la Rosa, married to Severo Armada, Sr., with annotation at the back stating that
the cancellation was by virtue of three deeds of sale in favor of Escolastica's sons. On March 24, 1995,
respondent court denied the motion, reasoning that when the motion was filed, the reglementary period
had lapsed and the decision had become final and executory. Petitioners' motion for reconsideration of
said resolution was denied.
Hence, the present petition, alleging that:
"1. Respondent Court of Appeals committed a reversible error in ruling that a co-ownership still
existed.
"2. Respondent Court of Appeals committed a reversible error in denying the Motion for
Reconsideration of its Decision of 25 March 1994 on purely technical grounds.
"3. Respondent Court of Appeals committed a reversible error in denying the Motion for New
Trial.
"4. Respondent Court of Appeals committed a reversible error in ordering petitioners to pay
moral damages, attorney's fees, litigation expenses and the costs of the suit."[10]
In essence, this Court is asked to resolve: (1) whether respondent court erred in denying petitioners'
motion for reconsideration and/or the Motion for New Trial; (2) whether private respondents are co-
owners who are legally entitled to redeem the lot under Article 1623 of the Civil Code; [11] and (3) whether
the award of moral damages, attorney's fees and costs of suit is correct.
The pivotal issue is whether private respondents may claim the right of redemption under Art.
1623 of the Civil Code. The trial court found that the disputed land was not part of an undivided
estate. It held that the three deeds of absolute sale[12]technically described the portion sold to
each son. The portions belonging to the three sons were separately declared for taxation
purposes with the Assessor's Office of Pasay City on September 21, 1970. [13] Jose's testimony that
the land was undivided was contradicted by his wife when she said they had been receiving rent from the
property specifically allotted to Jose.[14] More significantly, on January 9, 1995, the Registry of Deeds of
Pasay City cancelled TCT 24751 and issued three new titles as follows: (1) TCT 134594[15] in favor of
Severo Armada, Jr.; (2) TCT 134595[16] under the name of Anita Bonode Si, married to Serafin Si; and (3)
TCT 134596[17] owned by Jose Armada, married to Remedios Almanzor. All these are on record.
However, the Court of Appeals' decision contradicted the trial court's findings. [18]
In instances when the findings of fact of the Court of Appeals are at variance with those of the trial
court, or when the inference drawn by the Court of Appeals from the facts is manifestly mistaken, this

Page 29 of 40
Court will not hesitate to review the evidence in order to arrive at the correct factual conclusion. [19] This we
have done in this case. It is our considered view now, that the trial court is correct when it found that:

"Rightfully, as early as October 2, 1954, the lot in question had already been partitioned when
their parents executed three (3) deed of sales (sic) in favor of Jose, Crisostomo and Severo, all
surnamed Armada (Exh. 1, 2, & 3), which documents purports to have been registered with the
Register of Deeds of Pasay City, on September 18, 1970, and as a consequence TCT No. 16007
(Exh. A) was issued. Notably, every portion conveyed and transferred to the three sons was
definitely described and segregated and with the corresponding technical description (sic). In
short, this is what we call extrajudicial partition. Moreover, every portion belonging to the three
sons has been declared for taxation purposes with the Assessor's Office of Pasay City on
September 21, 1970. These are the unblinkable facts that the portion sold to defendant spouses Si
by defendants Crisostomo Armada and Cresenciana Armada was concretely determined and
identifiable. The fact that the three portions are embraced in one certificate of title does not make
said portions less determinable or identifiable or distinguishable, one from the other, nor that
dominion over each portion less exclusive, in their respective owners. Hence, no right of
redemption among co-owners exists."[20] (citation omitted)

". . . [T]he herein plaintiffs cannot deny the fact that they did not have knowledge about the impending
sale of this portion. The truth of the matter is that they were properly notified. Reacting to such knowledge
and notification they wrote defendant Dr. Crisostomo Armada on February 22, 1979, a portion of said
letter is revealing: 'Well you are the king of yourselves, and you can sell your share of
Levereza."[21] (emphasis omitted)

After the physical division of the lot among the brothers, the community ownership
terminated, and the right of preemption or redemption for each brother was no longer available. [22]
Under Art. 484 of the Civil Code,[23] there is co-ownership whenever the ownership of an
undivided thing or right belongs to different persons. There is no co-ownership when the different
portions owned by different people are already concretely determined and separately identifiable,
even if not yet technically described.[24] This situation makes inapplicable the provision on the
right of redemption of a co-owner in the Civil Code, as follows:

"Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty
days from the notice in writing by the prospective vendor, or by the vendor, as the case may
be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an
affidavit of the vendor that he has given written notice thereof to all possible redemptioners.

The right of redemption of co-owners excludes that of adjoining owners."

Moreover, we note that private respondent Jose Armada was well informed of the impending
sale of Crisostomo's share in the land. In a letter dated February 22, 1979, Jose told his brother
Crisostomo: "Well you are the king of yourselves, and you can sell your share of Leveriza."[25] Co-owners
with actual notice of the sale are not entitled to written notice. A written notice is a formal
requisite to make certain that the co-owners have actual notice of the sale to enable them to
exercise their right of redemption within the limited period of thirty days. But where the co-owners
had actual notice of the sale at the time thereof and/or afterwards, a written notice of a fact already
known to them, would be superfluous. The statute does not demand what is unnecessary.[26]
Considering that respondent Court of Appeals erred in holding that herein private respondent could
redeem the lot bought by petitioners, the issue of whether the appellate court erred in denying petitioners'
motions for reconsideration and new trial need not be delved into. The same is true with respect to the
questioned award of damages and attorney's fees. Petitioners filed their complaint in good faith and as
repeatedly held, we cannot put a premium on the right to litigate.

Page 30 of 40
 WHEREFORE, the petition is GRANTED, the Decision of the Court of Appeals dated March 25,
1994 and its Resolutions dated March 24, 1995 and September 6, 1995 in CA-G.R. CV No. 30727
are ANNULLED and SET ASIDE. Civil Case No. 8023-P is DISMISSED for lack of merit. The
decision of the Regional Trial Court of Pasay City, Branch 113, promulgated on August 29, 1989,
is REINSTATED.
SO ORDERED.

- Sering v. Plazo, 166 SCRA 84

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-49731 September 29, 1988

ALFREDO SERING, petitioner,

vs.
RESTITUTO PLAZO and GERTRUDES SUAN, respondents.

Manuel Tesiorna and Noel P. Catre for petitioner.

Timoteo R. Quimpo, Jr. for respondents.

NARVASA, J.:

The application of settled principles is all that is needed to resolve the instant appeal. Article 487
of the Civil Code provides that anyone of the co-owners of an immovable may bring an action in
ejectment. A co-owner may thus bring an ejectment action without joining the other co-owners,
the suit being deemed instituted for the benefit of all. 1And the term, "action in ejectment,"
includes a suit of forcible entry (detentacion) or unlawful detainer (desahucio). 2

The proceeding at bar had its inception in a forcible entry suit filed by petitioner Sering against
respondent Spouses Restituto Plazo and Gertrudes Suan with the then Municipal Court of del
Carmen, Surigao del Norte. 3 The case resulted in a judgment against the Plazos who thereupon
appealed to the Court of First Instance of Surigao del Norte. In the latter court the Plazos learned
that the property subject of the suit was not owned solely by Sering but was owned in common by
him and others. This prompted the Plazos to move for the impleading of the other co-owners as
parties plaintiff, on the theory that they were indispensable parties. 4 The Court agreed and
ordered Sering to amend his complaint so as to include his co-owners as co-plaintiffs. Sering
demurred claiming that under the law anyone of the co-owners could bring suit for ejectment
without joining the others. 5 The Plazos contended, on the other hand, that the provision invoked
by Sering had no application to forcible entry actions, but only to suits of unlawful detainer.
Because Sering failed to comply with the Courts order for amendment of the complaint, the Trial
Court dismissed his complaint. 6 It also thereafter denied his motion for reconsidereration 7 Sering
has come to this Court praying for the nullification and reversal of said order of dismissal and that
denying his plea for reconsideration.

Page 31 of 40
The orders complained of are indeed tainted by serious error and should therefore be reversed
and set aside, upon the considerations set out in the opening paragraph of this resolution. The
same issues had been raised and resolved as early as eight (8) years before promulgation of the
contested orders. In Vencilao v. Camarento, decided in 1969, 8 this Court pertinently ruled as
follows: 9

2. Anent the question of whether an action of forcible entry and detainer should be
brought in the name of all co-owners, We hold that under Article 487 of the new
Civil Code, any of the co-owners may bring the action ... . In forcible entry and
detainer action(s) the matter to be determined is simply the question of prior
physical possession. It having been alleged in the complaint that the plaintiff was
in actual possession of the properties, certainly the plaintiff alone, who was in
actual possession, could file the complaint.

The Court has been cited to no reason of substance for modifying or overruling this doctrine.

WHEREFORE, the challenged Orders dismissing the petitioner's complaint for ejectment and
denying reconsideration of the dismissal decree 10 are REVERSED AND SET ASIDE, and the case
is REMANDED to the Regional Trial Court for resolution, with all deliberate dispatch, of the
respondents' appeal from the judgment of the inferior court. This Resolution is immediately
executory.

- Bailon – Casilao v. CA, 160 SCRA 738

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 78178 April 15, 1988

DELIA BAILON-CASILAO, LUZ PAULINO-ANG, EMMA PAULINO-YBANEZ, NILDA PAULINO-

TOLENTINO, and SABINA BAILON, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and CELESTINO AFABLE, respondents.

Veronico E. Rubio for petitioners.

Mario G. Fortes for private-respondent.

CORTES, J.:

The fate of petitioners' claim over a parcel of land rests ultimately on a determination of whether
or not said petitioners are chargeable with such laches as may effectively bar their present action.

Page 32 of 40
The petitioners herein filed a case for recovery of property and damages with notice of lis
pendens on March 13, 1981 against the defendant and herein private respondent, Celestino
Afable. The parcel of land involved in this case, with an area of 48,849 square meters, is covered
by Original Certificate of Title No. 1771 issued on June 12, 1931, in the names of Rosalia,
Gaudencio, Sabina Bernabe, Nenita and Delia, all surnamed Bailon, as co-owners, each with a 1/6
share. Gaudencio and Nenita are now dead, the latter being represented in this case by her children.
Luz, Emma and Nilda. Bernabe went to China in 1931 and had not been heard from since then [Decision
of the Court of Appeals, Rollo, p. 39].

It appears that on August 23, 1948, Rosalia Bailon and Gaudencio Bailon sold a portion of the said
land consisting of 16,283 square meters to Donato Delgado. On May 13, 1949, Rosalia Bailon
alone sold the remainder of the land consisting of 32,566 square meters to Ponciana V. Aresgado
de Lanuza. On the same date, Lanuza acquired from Delgado the 16,283 square meters of land
which the latter had earlier acquired from Rosalia and Gaudencio. On December 3, 1975, John
Lanuza, acting under a special power of attorney given by his wife, Ponciana V. Aresgado de
Lanuza, sold the two parcels of land to Celestino Afable, Sr.

In all these transfers, it was stated in the deeds of sale that the land was not registered under the
provisions of Act No. 496 when the fact is that it is. It appears that said land had been
successively declared for taxation first, in the name of Ciriaca Dellamas, mother of the registered
co-owners, then in the name of Rosalia Bailon in 1924, then in that of Donato Delgado in 1936,
then in Ponciana de Lanuza's name in 1962 and finally in the name of Celestino Afable, Sr. in 1983.

In his answer to the complaint filed by the herein petitioners, Afable claimed that he had acquired
the land in question through prescription and contended that the petitioners were guilty of laches.
He later filed a third-party complaint against Rosalia Bailon for damages allegedly suffered as a result of
the sale to him of the land.

After trial, the lower court rendered a decision:

1. Finding and declaring Celestino Afable, a co-owner of the land described in

paragraph III of the complaint having validly bought the two-sixth (2/6) respective
undivided shares of Rosalia Bailon and Gaudencio Bailon;

2. Finding and declaring the following as pro-indiviso co-owners, having 1/6 share
each, of the property described in paragraph III of the complaint, to wit:

a. Sabina Bailon

b. Bernabe Bailon

c. Heirs of Nenita Bailon-Paulino

d. Delia Bailon-Casilao;

3. Ordering the segregation of the undivided interests in the property in order to terminate
co-ownership to be conducted by any Geodetic Engineer selected by the parties to
delineate the specific part of each of the co-owners.

4. Ordering the defendant to restore the possession of the plaintiffs respective shares as
well as all attributes of absolute dominion;

5. Ordering the defendant to pay the following:

Page 33 of 40
 a. P5,000.00 as damages;

b. P2,000.00 as attorney's fees and;

c. to pay the costs.

[Decision of the Trial Court, Rollo, p. 37-38].

On appeal, the respondent Court of Appeals affirmed the decision of the lower court insofar as it
held that prescription does not he against plaintiffs-appellees because they are co-owners of the
original vendors. However, the appellate court declared that, although registered property cannot
be lost by prescription, nevertheless, an action to recover it may be barred by laches, citing the
ruling in Mejia de Lucaz v. Gamponia [100 Phil. 277 (1956)]. Accordingly, it held the petitioners
guilty of laches and dismissed their complaint. Hence, this petition for review on certiorari of the
decision of the Court of Appeals.

The principal issue to be resolved in this case concerns the applicability of the equitable doctrine
of laches. Initially though, a determination of the effect of a sale by one or more co-owners of the
entire property held in common without the consent of all the co-owners and of the appropriate
remedy of the aggrieved co-owners is required.

The rights of a co-owner of a certain property are clearly specified in Article 493 of the Civil
Code.Thus:

Art. 493. Each co-owner shall have the full ownership of his part and of the acts
and benefits pertaining thereto, and he may therefore alienate assign or
mortgage it and even substitute another person in its enjoyment, except when
personal rights are involved. But the effect of the alienation or mortgage, with
respect to the co-owners, shall be limited to the portion which may be allotted to
him in the division upon the termination of the co-ownership. [Emphasis supplied.]

As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the
sale will affect only his own share but not those of the other co-owners who did not consent to the
sale [Punsalan v. Boon Liat 44 Phil. 320 (1923)]. This is because under the aforementioned codal
provision, the sale or other disposition affects only his undivided share and the transferee gets
only what would correspond to his grantor in the partition of the thing owned in common.[Ramirez
v. Bautista, 14 Phil. 528 (1909)]. Consequently, by virtue of the sales made by Rosalia and
Gaudencio Bailon which are valid with respect to their proportionate shares, and the subsequent
transfers which culminated in the sale to private respondent Celestino Afable, the said Afable
thereby became a co-owner of the disputed parcel of land as correctly held by the lower court
since the sales produced the effect of substituting the buyers in the enjoyment thereof [Mainit v.
Bandoy, 14 Phil. 730 (1910)].

From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided
share, a sale of the entire property by one co-owner without the consent of the other co-owners is
not null and void. However, only the rights of the co-owner-seller are transferred, thereby making
the buyer a co-owner of the property.

The proper action in cases like this is not for the nullification of the sale or for the recovery of
possession of the thing owned in common from the third person who substituted the co-owner or
co-owners who alienated their shares, but the DIVISION of the common property as if it continued
to remain in the possession of the co-owners who possessed and administered it [Mainit v.
Bandoy, supra.]

Page 34 of 40
Thus, it is now settled that the appropriate recourse of co-owners in cases where their consent were not
secured in a sale of the entire property as well as in a sale merely of the undivided shares of some of the
co-owners is an action. for PARTITION under Rule 69 of the Revised Rules of Court. Neither recovery of
possession nor restitution can be granted since the defendant buyers are legitimate proprietors and
possessors in joint ownership of the common property claimed [Ramirez v. Bautista, supra].

As to the action for petition, neither prescription nor laches can be invoked.

In the light of the attendant circumstances, defendant-appellee's defense of prescription is a vain

proposition. Pursuant to Article 494 of the Civil Code, '(n)o co-owner shall be obliged to remain in the co-
ownership. Such co-owner may demand at anytime the partition of the thing owned in common, insofar as
his share is concerned.' [Emphasis supplied.] In Budiong v. Bondoc [G.R. No. L-27702, September 9,
1977, 79 SCRA 241, this Court has interpreted said provision of law to mean that the action for partition is
imprescriptible or cannot be barred by prescription. For Article 494 of the Civil Code explicitly declares:
"No prescription shall lie in favor of a co-owner or co- heir so long as he expressly or impliedly recognizes
the co-ownership."

Furthermore, the disputed parcel of land being registered under the Torrens System, the express
provision of Act No. 496 that '(n)o title to registered land in derogation to that of the registered owner shall
be acquired by prescription or adverse possession' is squarely applicable. Consequently, prescription will
not lie in favor of Afable as against the petitioners who remain the registered owners of the disputed
parcel of land.

It is argued however, that as to the petitioners Emma, Luz and Nelda who are not the registered co-
owners but merely represented their deceased mother, the late Nenita Bailon, prescription
lies.Respondents bolster their argument by citing a decision of this Court in Pasion v. Pasion [G.R.No. L-
15757, May 31, 1961, 2 SCRA 486, 489] holding that "the imprescriptibility of a Torrens title can only be
invoked by the person in whose name the title is registered" and that 'one who is not the registered owner
of a parcel of land cannot invoke imprescriptibility of action to claim the same.'

Reliance on the aforesaid Pasion case is futile. The ruling therein applies only against transferees other
than direct issues or heirs or to complete strangers. The rational is clear:

If prescription is unavailing against the registered owner, it must be equally unavailing

against the latter's hereditary successors, because they merely step into the shoes of the
decedent by operation of law (New Civil Code, Article 777; Old Civil Code, Article 657),
the title or right undergoing no change by its transmission mortis causa [Atus, et al., v.
Nunez, et al., 97 Phil. 762, 764].

The latest pronouncement of this Court in Umbay v. Alecha [G. R. No. 67284, March 18, 1985, 135 SCRA
427, 429], which was promulgated subsequent to the Pasion case reiterated the Atus doctrine. Thus:

Prescription is unavailing not only against the registered owner but also against his
hereditary successors, because they merely step into the shoes of the decedent by
operation of law and are merely the continuation of the personality of their predecessor-
in-interest. [Barcelona v. Barcelona, 100 Phil. 251, 257].

Laches is likewise unavailing as a shield against the action of herein petitioners.

Well-stated in this jurisdiction are the four basic elements of laches, namely: (1) conduct on the part of the
defendant or of one under whom he claims, giving rise to the situation of which complaint is made and for
which the complainant seeks a remedy; (2) delay in asserting the corporations complainant's rights, the
complainant having had knowledge or notice of the defendant's conduct and having been afforded an
opportunity to institute suit; (3) lack of knowledge or notice on the part of the defendant that the

Page 35 of 40
complainant would assert the right on which he bases his suit; and, (4) injury or prejudice to the
defendant in the event relief is accorded to the complainant, or the suit is not held to be barred [Go China
Gun, et al. v. Co Cho et al., 96 Phil. 622 (1955)].

While the first and last elements are present in this case, the second and third elements are missing.

The second element speaks of delay in asserting the complainant's rights. However, the mere fact of
delay is insufficient to constitute, laches. It is required that (1) complainant must have had knowledge of
the conduct of defendant or of one under whom he claims and (2) he must have been afforded
an opportunity to institute suit. This court has pointed out that laches is not concerned with the mere lapse
of time. Thus:

Laches has been defined as the failure or neglect, for an unreasonable length of time to
do that which by exercising due diligence could or should have been done earlier; it is
negligence or omission to assert a right within a reasonable time warranting a
presumption that the party entitled to assert it either has abandoned it or declined to
assert it. Tijam, et al., v. Sibonghanoy, G.R. No. L-21450, April 25, 1968, 23 SCRA 29,35;
Tendo v. Zamacoma, G.R. No. L-63048, August 7, 1985, 138 SCRA 78, 90].

The doctrine of "laches" or of "stale demands" is based upon grounds of public policy
which requires for the peace of society, the discouragement of stale claims and unlike the
statute of limitations, is not a mere question of time but is principally a question of
inequity or unfairness of permitting a right or claim to be enforced or asserted," [Tijam v.
Sibonghanoy, supra, p. 35]. [Emphasis supplied.]

It must be noted that while there was delay in asserting petitioners' rights, such delay was not attended
with any knowledge of the sale nor with any opportunity to bring suit. In the first place, petitioners had no
notice of the sale made by their eldest sister. It is undisputed that the petitioner co-owners had entrusted
the care and management of the parcel of land to Rosalia Bailon who was the oldest among them [TSN,
July 27, 1983, p. 14]. In fact, Nicanor Lee, a son of Rosalia, who was presented as a witness by the
plaintiffs-petitioners, testified on cross-examination that his mother was only the administrator of the land
as she is the eldest and her brothers and sisters were away [TSN, October 5, 1983, p. 15]. Indeed, when
Delia Bailon-Casilao left Sorsogon in 1942 after she got married, it was only in 1983 that she returned.
Sabina on the other hand, is said to be living in Zamboanga while Bernabe who left for China in 1931 has
not been heard from since then. Consequently, when Rosalia, from whom the private respondent derived
his title, made the disputed sales covering the entire property, the herein petitioners were unaware
thereof.

In the second place, they were not afforded an opportunity to bring suit inasmuch as until 1981, they were
kept in the dark about the transactions entered into by their sister. It was only when Delia Bailon-Casilao
returned to Sorsogon in 1981 that she found out about the sales and immediately, she and her co-
petitioners filed the present action for recovery of property. The appellate court thus erred in holding that
'the petitioners did nothing to show interest in the land." For the administration of the parcel of land was
entrusted to the oldest co-owner who was then in possession thereof precisely because the other co-
owners cannot attend to such a task as they reside outside of Sorsogon where the land is situated. Her
co-owners also allowed her to appropriate the entire produce for herself because it was not even enough
for her daily consumption [TSN, October 5, 1983, pp. 17-18]. And since petitioner was the one receiving
the produce, it is but natural that she was the one to take charge of paying the real estate taxes. Now, if
knowledge of the sale by Rosalia was conveyed to the petitioners only later, they cannot be faulted for the
acts of their co-owner who failed to live up to the trust and confidence expected of her. In view of the lack
of knowledge by the petitioners of the conduct of Rosalia in selling the land without their consent in 1975
and the absence of any opportunity to institute the proper action until 1981, laches may not be asserted
against the petitioners.

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The third element of laches is likewise absent. There was no lack of knowledge or notice on the part of
the defendant that the complainants would assert the right on which they base the suit. On the contrary,
private respondent is guilty of bad faith in purchasing the property as he knew that the property was co-
owned by six persons and yet, there were only two signatories to the deeds of sale and no special
authorization to self was granted to the two sellers by the other co-owners.

Even as the land here was misrepresented in the deeds of sale as "unregistered," the truth was that
Afable already had notice that the land was titled in the name of six persons by virtue of the Certificate of
Title which was already in his possession even before the sale. Such fact is apparent from his testimony
before the court a quo:

COURT:

Q: From whom did you get the certificate of Title?

A: When it was mortgaged by Ponciana Aresgado.

Q: It was mortgaged to you before you bought it?

A: Yes, Your Honor. (TSN, March 5, 1984, p. 12) When cross-examined,

he stated:

Q: Mr. Witness, the original Certificate of Title was given to you in the
year 1974, was it not?

A: 1975.

Q: In 1975, you already discovered that the title was in the name of
several persons, is it not?

A: Yes, sir.

Q: When you discovered that it is in the name of several persons, you

filed a case in court for authority to cancel the title to be transferred in
your name, is it not?

A: Yes, sir.

Q: And that was denied by the Court of First Instance of Sorsogon

because there was ordinary one signatory to the deed of sale instead of
six, was it not?

A: Not one but two signatories.

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

Such actual knowledge of the existence of other co-owners in whose names the lot subject of the sale
was registered should have prompted a searching inquiry by Afable considering the well- known rule in
this jurisdiction that:

... a person dealing with a registered land has a right to rely upon the face of the Torrens
certificate of title and to dispense with the need of inquiring further, except when the party

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 concerned has actual knowledge of facts and circumstances that would impel a
reasonably cautions man to make such inquiry. [Gonzales v. IAC and Rural Bank of
Pavia, Inc., G.R. No. 69622, January 29, 1988).

Moreover, the undisputed fact is that petitioners are relatives of his wife. As a genuine gesture of good
faith, he should have contacted the petitioners who were still listed as co-owners in the certificate of title
which was already in his possession even before the sale. In failing to exercise even a minimum degree
of ordinary prudence required by the situation, he is deemed to have bought the lot at his own risk. Hence
any prejudice or injury that may be occasioned to him by such sale must be borne by him.

Indeed, aware of the flaws impairing his title, Afable went to the herein petitioner Delia Bailon-Casilao,
asking the latter to sign a document obviously to cure the flaw [TSN, July 27, 1983, p.6]. Later, he even
filed a petition in the Court of First Instance to register the title in his name which was denied as
aforesaid.

It may be gleaned from the foregoing examination of the facts that Celestino Afable is not a buyer in good
faith. Laches being an equitable defense, he who invokes it must come to the court with clean hands.

WHEREFORE, the petition for certiorari is hereby GRANTED, the challenged decision of the Court
of Appeals is SET ASIDE, and the decision of the trial court is REINSTATED.

SO ORDERED.

- Mariano v.. De Vega, 148 SCRA 342

[G.R. No. L-59974. March 9, 1987.]

TEODORA, MARTA, JOSE, SIXTO, RICARDO, ROBERTO, PILAR, VIRGILIO, all surnamed
MARIANO and AURORA EUGENIO, Petitioners, v. THE HON. JUDGE JESUS R. DE VEGA,
PRESIDING JUDGE, COURT OF FIRST INSTANCE OF BULACAN, BRANCH II, PILAR, REGINA,
FELISA and DOMINADOR all surnamed PANGANIBAN, Respondents.

Ernesto T. Zshornack, Jr., for Petitioners.

Emiliano S. Samson for Private Respondents.

DECISION

PARAS, J.:

This is an appeal from the order of the then Court of First Instance of Bulacan in Civil Case No. 6200-M **
for partition and delivery of possession of certain shares in the conjugal assets. The dispositive
portion of the order which herein petitioners assail states:

"Upon due research and study, the Court finds sustainable the position of the defendants

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 that the settled prevailing rule at present as laid down in latest decisions of the Supreme
Court is that the right or action to enforce an implied or constructive trust (which is the
situation indicated in the case at bar) in one’s favor prescribes in ten (10) years. The
citation of authorities made by defendants appears to be correct. (Carontes v. C.A., 76
SCRA 514; Dela Cerna v. Dela Cerna, 72 SCRA 514). In other words, the rule of
imprescriptibility of actions based on constructive trust invoked by plaintiffs has been
reversed and abandoned.

For the foregoing premises, this case has to be resolved for defendants-movants. Case is
accordingly dismissed. No costs."

The records show that spouses Urbano Panganiban and Roberta Espino owned, as
conjugal property, during their lifetime 29 parcels of unregistered land with improvements
thereon, all situated in Dampol 1st, Pulilan, Bulacan. On February 18, 1903, Roberta Espino
died intestate and without debts in Pulilan, Bulacan, where she was a resident before and
at the time of her death. She left her husband, Urbano Panganiban, and their two legitimate
children, Mercedes and Gaudencia as her only forced heirs. On September 18, 1952,
Urbano Panganiban died also intestate and without debts in Pulilan, Bulacan, leaving as
his only compulsory heirs the children of Gaudencia (who together with her sister
Mercedes, had predeceased their father) who are now petitioners herein and his legitimate
children with his second wife, Atanacia Agustin, who are the private respondents herein.

The records also disclose that on June 19, 1981, or 28 years, 9 months and 1 day after Urbano’s
death, petitioners instituted an action with the then CFI of Bulacan for partition and delivery of
possession of their corresponding shares in the conjugal estate of decedents-spouses Urbano
and Roberta consisting of subject 29 parcels of unregistered land.

On September 30, 1981 or around three (3) months from the filing of the civil case, respondent
judge issued the questioned order. Petitioners’ motion for reconsideration of the same was
denied on January 12, 1982.

Hence, this petition which petitioners filed on April 5, 1982 praying for the revocation of
the questioned order and the reinstatement of this case in the trial court.

Petitioners anchor their petition on the following grounds:

1. The subject parcels of land being unregistered lands do not come within the applicability of the
decisions invoked which involve registered lands;

2. Assuming that the ten-year prescriptive period applies even in cases of unregistered lands, the
prescriptive period did not commence to run against petitioners since there is no allegation, much less
evidence, that private respondents had openly and effectively repudiated the co-ownership or
constructive trust over the subject property;

3. There can be no constructive notice of an adverse claim of ownership in favor of private respondents
by placing the subject lands in their names in the office of the Provincial Assessor; and

4. Petitioners’ action for partition is still timely despite the lapse of almost 29 years during which private
respondents had been in possession of the property.

Private respondents, on the other hand, contend that the order appealed from has already become final
and no longer appealable; and, that the petition is not meritorious because of the following:

1. The theory of constructive trust was brought out by petitioners themselves;

2. Petitioners cannot contradict their own admissions in the pleadings;

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3. Petitioners slept on their alleged rights; and

4. Contrary to petitioners’ claim, the jurisprudence cited by private respondents apply to unregistered
lands.

The resolution of this case hinges on the focal issue of prescription.

We find the order of the trial court dismissing petitioners’ complaint on the ground of prescription
under Section 40 of Public Act No. 190 to be inaccurate.

As We see it, this case is governed by the rules on co-ownership, since both parties are clearly
co-owners of the disputed properties, having inherited the same from a common ancestor.

Now then, Art. 494 (last paragraph) of the Civil Code provides:

"x x x

"No prescription shall run in favor of a co-owner or co-heir against his co-owners or co-heirs so
long as he expressly or impliedly recognizes the co-ownership."

In view of their lack of a clear repudiation of the co-ownership, duly communicated to the
petitioners (the other co-owners), private respondents cannot acquire the shares of the petitioners
by prescription. The record in the Office of the Assessor is not the sufficient repudiation and
communication contemplated by the law. Neither may the private respondents’ possession of the
premises militate against petitioners’ claim. After all, co-owners are entitled to be in possession of the
premises.

The existence of the co-ownership here argues against the theory of implied trust, for then a co-
owner possesses co-owned property not in behalf of the other co-owners but in his own behalf.

Anent the contention that the judgment of the trial court has already become final and executory, the
records reveal the contrary. The appeal was filed on time on April 5, 1982 or before April 28, 1982, the
last day granted by this Court for the filing of the appeal.chanrobles law library

WHEREFORE, the assailed Order is SET ASIDE, and a new one is rendered remanding this case to
the lower court for adjudication on the merits.

SO ORDERED.

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