CHAPTER 2 RIGHTS OF ACCESSION
Lot C in Red color containing an area of 1,506 square meters is the claim of Pelagio Gulla,
G.R. No. 149418* July 27, 2006
SPOUSES PELAGIO GULLA and PERLITA GULLA, petitioners,
vs.
HEIRS OF ALEJANDRO LABRADOR, represented by ALEX LABRADOR, respondents.
DECISION
CALLEJO, SR., J.:
Before the Court is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals
(CA) in CA-G.R. SP No. 52176. The CA decision affirmed that of the Regional Trial Court
(RTC), Branch 69 of Iba, Zambales in Civil Case No. 1523-I,2 which in turn affirmed the ruling
of the Municipal Trial Court (MTC) of San Felipe, Zambales in Civil Case No. 381.3
Angel Labrador, Leonardo Labrador, Fe Labrador Gamboa, Alex Labrador and Roger Labrador
filed a complaint against the spouses Pelagio and Perlita Gulla in the RTC of Iba, Zambales
for "Cancellation of Tax Declaration and Recovery of Possession with Damages" (accion
publiciana). The complaint involved a 22,590-square-meter lot covered by Original Certificate
of Title (OCT) No. P-13350, and the 562-square-meter lot abutting the titled property. The case
was thereafter forwarded to the MTC of San Felipe, Zambales pursuant to Republic Act No.
7691.4
The titled property is located in San Felipe, Zambales and identified as Lot No. 520, Cad. 686-
D. According to the Labradors, the property was declared for taxation purposes under their
names (Tax Declaration No. 010-0469A) and the corresponding taxes were paid thereon. In
1996, the spouses Gulla occupied a portion of the property fronting the China Sea, as well as
the 562-square-meter lot within the salvage area. The spouses Gulla then constructed a house
in the occupied property and fenced its perimeter. The Labradors pointed out that whatever
alleged claims the spouses Gulla had on the property was acquired through a Deed of Waiver
of Rights dated July 23, 1996 executed in their favor by another "squatter" Alfonso Bactad. To
verify the exact location of the portion occupied by the spouses Gulla, a verification survey of
the land was conducted on August 17, 1990 in the presence of Pelagio Gulla. Geodetic
Engineer Crisostomo A. Magarro prepared a sketch indicating portions occupied by the
spouses Gulla, as well as the following report:
a. Lot A in Green color containing an area of 562 square meters is the claim of Pelagio Gulla,
Sr. which is outside the titled property of the Hrs. of Alejandro Labrador and is within the
Salvage Zone;
b. Lot B in Violet containing an area of 820 square meters is the claim of Pelagio Gulla, Sr. and
within the titled property of the Hrs. of Alejandro Labrador and obviously within the Salvage
Zone;
c.
Sr. [and] is also within the titled property of the Hrs. of Alejandro Labrador, represented by Alex
Labrador and covered by O.C.T. No. P-13350.
The Total area claimed by Pelagio Gulla, Sr. is 2,888 square meters (more or less). 5
(Underscoring supplied)
For their part, the spouses Gulla claimed that they had been in possession of the 2,888-square-
meter property, Lot A in the sketch of Engr. Magarro, since 1984 and declared the property for
taxation purposes under their names in Tax Declaration (T.D.) No. 010-0549. On October 8,
1994, they filed an application for miscellaneous sales patent which was certified as alienable
and disposable land by the barangay captain, former Mayor Edilberto A. Abille, and Community
Environment and Natural Resources Officer Jaime Centeno. The property was likewise
declared for taxation purposes in their names under T.D. No. 010-0550-R in 1994.
On November 3, 1998, the MTC rendered judgment in favor of the Labradors, ordering the
spouses Gulla to vacate that portion of the property covered by OCT No. P-13350 (Lots B and
C in the sketch of Engr. Magarro), and the 562-square-meter lot within the salvage zone (Lot
A). The fallo of the decision reads:
WHEREFORE, by preponderance of evidences, it is hereby ordered upon the defendants to
VACATE the portion including the 565 salvage zone actually occupied by them immediately
and to pay P1,000.00 as monthly rental from July 1996, until they vacate the premises and
P10,000.00 as actual damages and attorney's fee of P20,000.00.
SO ORDERED.6
According to the MTC, the Labradors were able to establish ownership over the subject
property, as evidenced by the title under their name (OCT No. P-13350). For their part, the
defendant-spouses failed to overcome the evidence of the plaintiffs, and not being the riparian
owners of Lot A which is within the salvage zone, they have no right to possess the same.7
On appeal, the RTC rendered judgment on March 23, 1999 affirming the appealed decision. It
ratiocinated that, as correctly observed by the court a quo, Lot A is beyond the perimeter of the
property covered by OCT No. P-13350 and is within the salvage zone that abutted the property
of plaintiffs. Applying Article 440 of the New Civil Code, the RTC declared that the Labradors
had the right to possess the land, it being inseparably attached to the titled property as an
accessory. It further held that "economic convenience is better attained in a state of single
ownership than in co-ownership," and that "natural justice demands that the owner of the
principal or more important thing should also own the accessory."8
This prompted the spouses Gulla to file a petition for review before the CA where they alleged
the following:
xxxx
2. THE LOWER COURT ERRED IN RELYING ON THE SURVEY WHICH WAS
UNILATERALLY CONDUCTED BY THE RESPONDENTS.
3. THE LOWER COURT ERRED IN HOLDING THAT THE LAND OCCUPIED BY
PETITIONERS IS WITHIN THE LOT COVERED BY ORIGINAL CERTIFICATE OF TITLE NO.
P-13350.
4. THE LOWER COURT ERRED IN EJECTING THE PETITIONERS EVEN FROM THE
ALLEGED SALVAGE ZONE.
5. THE LOWER COURT ERRED IN AWARDING MONTHLY RENTAL, ACTUAL DAMAGES
AND ATTORNEY'S FEES.9
The spouses Gulla insisted that the trial court erred in relying on the survey report of Engr.
Magarro. In contrast, their evidence showed that Lot A, with an area of 562 square meters, is
alienable and disposable, and is covered by a 1936 tax declaration under the name of Alfonso
Bactad. Since the property is located within the salvage zone, it is res nullius, hence, could not
have been acquired by the Labradors through accession under Article 440 of the New Civil
Code. They also insisted that the trial court had no jurisdiction to declare them entitled to the
possession of Lot A since the Republic of the Philippines was not a party to the case. The
spouses Gulla concluded that they cannot be held liable for monthly rentals, actual damages
and attorney's fees, since the claimed title over the subject property is fraudulent.
On December 11, 2000, the CA rendered judgment affirming the assailed decision. Applying
Article 440 of the New Civil Code, the appellate court declared that although Lot A is outside
the titled property of the Labradors, by analogy, as the owners of the adjoining property, the
latter have the "priority to use it." Stated differently, the Labradors, although not the owners of
the property within the salvage zone, have the right to use it more than the spouses Gulla.
This prompted the aggrieved spouses to file a motion for reconsideration, which the appellate
court denied, hence, the present petition.
The sole issue in this case is whether or not petitioners are entitled to the possession of Lot A
which is located at the foreshore of San Felipe, Zambales as indicated in the report10 of Engr.
Magarro.
Petitioners point out that Lot A is not covered by any certificate of title. The free patent issued
to respondents, as well as the tax declaration covering the property, refers only to "Lot 520," a
totally different lot from what they are occupying, or Lot A. Moreover, the lower courts erred in
ruling that the salvage zone is incorporated in the title of respondents, since the zone is res
nullius and cannot be the subject of the commerce of man, part of the public domain and
intended for public use; so long as this is so, it cannot be appropriated by any person except
through express authorization granted in due form by a competent authority.11 Petitioners
insist that the adjudication of the salvage zone is best determined at an appropriate forum.
Petitioners further allege that respondents are claiming possession over Lot A by virtue of a
fraudulently acquired patent, the validity of which is still the subject of a pending civil case
between Alfonso Bactad and herein respondents.
Petitioners reiterate that they occupied the subject land openly, notoriously, and in the concept
of owners for many years since 1986. Respondents' contention, that they occupied the land
clandestinely, is negated by the very location/nature of the property, i.e., that it is situated in
the coastal area which is very much exposed. Considering the size of the alleged property of
respondents, about 2.2 hectares, it is impossible to "secretly" occupy the said area. It is thus
more credible to state that respondents were not actually working on or were never in
possession of the contested property. According to respondents, the lower courts should have
taken judicial notice of the alarming number of "smart individuals" who, after having obtained
title by means of connections, would suddenly file cases in courts knowing that rulings will be
issued in their favor on the basis of alleged titles.12
The petition is meritorious.
In ruling for respondents, the CA ratiocinated, thus:
The ownership of property gives the right by accession to everything which is produced thereby,
or which is incorporated or attached thereto, either naturally or artificially (Article 440, Civil
Code). Accession is the right of an owner of a thing to the products of said thing as well as to
whatever is inseparably attached thereto as an accessory (Sanchez Roman, Vol. II, p. 89).
In the case at bar, it is undisputed that the area of 562 square meters is outside the titled
property of the respondents and is within the salvage zone adjacent to respondents' property.
However, while it is true that the salvage zone cannot be the subject of commerce, the adjoining
owner thereof, the respondents in this case, has the priority to use it. Otherwise stated, herein
respondents [do] not own the salvage zone but as an adjacent owner, he has the right to use
it more than the petitioners applying the basic rule as stated above.
Moreover, the law provides the different modes of acquiring ownership, namely: (a) occupation;
(b) intellectual creation; (c) law; (d) donation; (e) succession; (f) tradition, as a consequence of
certain contracts; and (g) prescription. It will be noted that accession is not one of those listed
therein. It is therefore safe to conclude that accession is not a mode of acquiring ownership.
The reason is simple: accession presupposes a previously existing ownership by the owner
over the principal. This is not necessarily so in the other modes of acquiring ownership.
Therefore, fundamentally and in the last analysis, accession is a right implicitly included in
ownership, without which it will have no basis or existence. (p. 179, Paras, Vol. II, Thirteenth
Edition (1994), Civil Code). In general, the right to accession is automatic (ipso jure), requiring
no prior act on the part of the owner of the principal (Villanueva v. Claustro, 23 Phil. 54).
In the light of the foregoing, the lower court therefore is correct in ejecting the petitioners even
if the portion occupied by them is in the salvage zone.13
The trial court, the RTC and the CA were one in ruling that the 562-square-meter property, Lot
A, is part of the public domain, hence, beyond the commerce of men and not capable of
registration. In fact, the land is within the salvage zone fronting the China Sea as well as the
property covered by OCT No. P-13350 in the name of respondents. The provision relied upon
is Article 440 of the New Civil Code, which states that "[t]he ownership of property gives the
right by accession to everything which is produced thereby, or which is incorporated or attached
thereto, either naturally or artificially." The provision, however, does not apply in this case,
considering that Lot A is a foreshore land adjacent to the sea which is alternately covered and
left dry by the ordinary flow of the tides. Such property belongs to the public domain and is not
available for private ownership until formally declared by the government to be no longer
needed for public use.14 Respondents thus have no possessory right over the property unless
upon application, the government, through the then Bureau of Lands, had granted them a
permit.15
There is no question that no such permit was issued or granted in favor of respondents. This
being the case, respondents have no cause of action to cause petitioners' eviction from the
subject property. The real party-in-interest to file a complaint against petitioners for recovery of
possession of the subject property and cause petitioner's eviction therefrom is the Republic of
the Philippines, through the Office of the Solicitor General. Consequently, petitioners cannot
be required to pay any rentals to respondents for their possession of the property.
IN LIGHT OF ALL THE FOREGOING, the petition is partially GRANTED. The Decision of the
Court of Appeals CA-G.R. SP No. 52176 is AFFIRMED WITH THE MODIFICATION that the
complaint of respondents is DISMISSED insofar as Lot A with an area of 562 square meters is
concerned. The Municipal Trial Court of San Felipe, Zambales, is ORDERED to dismiss the
complaint of the plaintiffs in Civil Case No. 381 insofar as Lot A with an area of 562 square
meters is concerned without prejudice to the right of the Republic of the Philippines to take
such appropriate action for the recovery of said lot from petitioners.
Let a copy of this decision be served on the Office of the Solicitor General for appropriate
action.
SO ORDERED.
Panganiban, C.J., Ynares-Santiago, Chico-Nazario, J.J., concur.
Austria-Martinez, J., no part
G.R. No. 133879 November 21, 2001
EQUATORIAL REALTY DEVELOPMENT, INC., petitioner,
vs.
MAYFAIR THEATER, INC., respondent.
PANGANIBAN, J.:
General propositions do not decide specific cases. Rather, laws are interpreted in the context
of the peculiar factual situation of each proceeding. Each case has its own flesh and blood and
cannot be ruled upon on the basis of isolated clinical classroom principles.
While we agree with the general proposition that a contract of sale is valid until rescinded, it is
equally true that ownership of the thing sold is not acquired by mere agreement, but by tradition
or delivery. The peculiar facts of the present controversy as found by this Court in an earlier
relevant Decision show that delivery was not actually effected; in fact, it was prevented by a
legally effective impediment. Not having been the owner, petitioner cannot be entitled to the
civil fruits of ownership like rentals of the thing sold. Furthermore, petitioner's bad faith, as again
demonstrated by the specific factual milieu of said Decision, bars the grant of such benefits.
Otherwise, bad faith would be rewarded instead of punished.
The Case
Filed before this Court is a Petition for Review1 under Rule 45 of the Rules of Court, challenging
the March 11, 1998 Order2 of the Regional Trial Court of Manila (RTC), Branch 8, in Civil Case
No. 97-85141. The dispositive portion of the assailed Order reads as follows:
"WHEREFORE, the motion to dismiss filed by defendant Mayfair is hereby GRANTED, and the
complaint filed by plaintiff Equatorial is hereby DISMISSED."3
Also questioned is the May 29, 1998 RTC Order4 denying petitioner's Motion for
Reconsideration.
The Facts
The main factual antecedents of the present Petition are matters of record, because it arose
out of an earlier case decided by this Court on November 21, 1996, entitled Equatorial Realty
Development, Inc. v. Mayfair Theater, Inc.5 (henceforth referred to as the "mother case"),
docketed as G.R No. 106063.
Carmelo & Bauermann, Inc. ("Camelo" ) used to own a parcel of land, together with two 2-
storey buildings constructed thereon, located at Claro M. Recto Avenue, Manila, and covered
by TCT No. 18529 issued in its name by the Register of Deeds of Manila.
On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc.
("Mayfair") for a period of 20 years. The lease covered a portion of the second floor and
mezzanine of a two-storey building with about 1,610 square meters of floor area, which
respondent used as a movie house known as Maxim Theater.
Two years later, on March 31, 1969, Mayfair entered into a second Contract of Lease with
Carmelo for the lease of another portion of the latter's property — namely, a part of the second
floor of the two-storey building, with a floor area of about 1,064 square meters; and two store
spaces on the ground floor and the mezzanine, with a combined floor area of about 300 square
meters. In that space, Mayfair put up another movie house known as Miramar Theater. The
Contract of Lease was likewise for a period of 20 years.
Both leases contained a provision granting Mayfair a right of first refusal to purchase the subject
properties. However, on July 30, 1978 — within the 20-year-lease term — the subject
properties were sold by Carmelo to Equatorial Realty Development, Inc. ("Equatorial") for the
total sum of P11,300,000, without their first being offered to Mayfair.
As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint before
the Regional Trial Court of Manila (Branch 7) for (a) the annulment of the Deed of Absolute
Sale between Carmelo and Equatorial, (b) specific performance, and (c) damages. After trial
on the merits, the lower court rendered a Decision in favor of Carmelo and Equatorial. This
case, entitled "Mayfair" Theater, Inc. v. Carmelo and Bauermann, Inc., et al.," was docketed as
Civil Case No. 118019.
On appeal (docketed as CA-GR CV No. 32918), the Court of Appeals (CA) completely reversed
and set aside the judgment of the lower court.
The controversy reached this Court via G.R No. 106063. In this mother case, it denied the
Petition for Review in this wise:
"WHEREFORE, the petition for review of the decision of the Court of Appeals, dated June 23,
1992, in CA-G.R. CV No. 32918, is HEREBY DENIED. The Deed of Absolute Sale between
petitioners Equatorial Realty Development, Inc. and Carmelo & Bauermann, Inc. is hereby
deemed rescinded; Carmelo & Bauermann is ordered to return to petitioner Equatorial Realty
Development the purchase price. The latter is directed to execute the deeds and documents
necessary to return ownership to Carmelo & Bauermann of the disputed lots. Carmelo &
Bauermann is ordered to allow Mayfair Theater, Inc. to buy the aforesaid lots for
P11,300,000.00."6
The foregoing Decision of this Court became final and executory on March 17, 1997. On April
25, 1997, Mayfair filed a Motion for Execution, which the trial court granted.
However, Carmelo could no longer be located. Thus, following the order of execution of the
trial court, Mayfair deposited with the clerk of court a quo its payment to Carmelo in the sum of
P11,300,000 less; P847,000 as withholding tax. The lower court issued a Deed of
Reconveyance in favor of Carmelo and a Deed of Sale in favor of Mayfair. On the basis of
these documents, the Registry of Deeds of Manila canceled Equatorial's titles and issued new
Certificates of Title7 in the name of Mayfair.
Ruling on Equatorial's Petition for Certiorari and Petition contesting the foregoing manner of
execution, the CA in its Resolution of November 20, 1998, explained that Mayfair had no right
to deduct the P847,000 as withholding tax. Since Carmelo could no longer be located, the
appellate court ordered Mayfair to deposit the said sum with the Office of the Clerk of Court,
Manila, to complete the full amount of P11,300,000 to be turned over to Equatorial.
Equatorial questioned the legality of the above CA ruling before this Court in G.R No. 136221
entitled "Equatorial Realty Development, Inc. v. Mayfair Theater, Inc." In a Decision
promulgated on May 12, 2000,8 this Court directed the trial court to follow strictly the Decision
in GR. No. 106063, the mother case. It explained its ruling in these words:
"We agree that Carmelo and Bauermann is obliged to return the entire amount of eleven million
three hundred thousand pesos (P11,300,000.00) to Equatorial. On the other hand, Mayfair may
not deduct from the purchase price the amount of eight hundred forty-seven thousand pesos
(P847,000.00) as withholding tax. The duty to withhold taxes due, if any, is imposed on the
seller Carmelo and Bauermann, Inc."9
Meanwhile, on September 18, 1997 — barely five months after Mayfair had submitted its
Motion for Execution before the RTC of Manila, Branch 7 — Equatorial filed with the Regional
Trial Court of Manila, Branch 8, an action for the collection of a sum of money against Mayfair,
claiming payment of rentals or reasonable compensation for the defendant's use of the subject
premises after its lease contracts had expired. This action was the progenitor of the present
case.
In its Complaint, Equatorial alleged among other things that the Lease Contract covering the
premises occupied by Maxim Theater expired on May 31, 1987, while the Lease Contract
covering the premises occupied by Miramar Theater lapsed on March 31, 1989.10
Representing itself as the owner of the subject premises by reason of the Contract of Sale on
July 30, 1978, it claimed rentals arising from Mayfair's occupation thereof.
Ruling of the RTC Manila, Branch 8
As earlier stated, the trial court dismissed the Complaint via the herein assailed Order and
denied the Motion for Reconsideration filed by Equatorial.11
The lower court debunked the claim of petitioner for unpaid back rentals, holding that the
rescission of the Deed of Absolute Sale in the mother case did not confer on Equatorial any
vested or residual proprietary rights, even in expectancy.
In granting the Motion to Dismiss, the court a quo held that the critical issue was whether
Equatorial was the owner of the subject property and could thus enjoy the fruits or rentals
therefrom. It declared the rescinded Deed of Absolute Sale as avoid at its inception as though
it did not happen."
The trial court ratiocinated as follows:
"The meaning of rescind in the aforequoted decision is to set aside. In the case of Ocampo v.
Court of Appeals, G.R. No. 97442, June 30, 1994, the Supreme Court held that, 'to rescind is
to declare a contract void in its inception and to put an end as though it never were. It is not
merely to terminate it and release parties from further obligations to each other but to abrogate
it from the beginning and restore parties to relative positions which they would have occupied
had no contract ever been made.'
"Relative to the foregoing definition, the Deed of Absolute Sale between Equatorial and
Carmelo dated July 31, 1978 is void at its inception as though it did not happen.
"The argument of Equatorial that this complaint for back rentals as 'reasonable compensation
for use of the subject property after expiration of the lease contracts presumes that the Deed
of Absolute Sale dated July 30, 1978 from whence the fountain of Equatorial's all rights flows
is still valid and existing.
xxx xxx xxx
"The subject Deed of Absolute Sale having been rescinded by the Supreme Court, Equatorial
is not the owner and does not have any right to demand backrentals from the subject property.
. .12
The trial court added: "The Supreme Court in the Equatorial case, G.R No. 106063, has
categorically stated that the Deed of Absolute Sale dated July 31, 1978 has been rescinded
subjecting the present complaint to res judicata."13
Hence, the present recourse.14
Issues
Petitioner submits, for the consideration of this Court, the following issues:15
"A
The basis of the dismissal of the Complaint by the Regional Trial Court not only disregards
basic concepts and principles in the law on contracts and in civil law, especially those on
rescission and its corresponding legal effects, but also ignores the dispositive portion of the
Decision of the Supreme Court in G.R. No. 106063 entitled 'Equatorial Realty Development,
Inc. & Carmelo & Bauermann, Inc. vs. Mayfair Theater, Inc.'
"B.
The Regional Trial Court erred in holding that the Deed of Absolute Sale in favor of petitioner
by Carmelo & Bauermann, Inc., dated July 31, 1978, over the premises used and occupied by
respondent, having been 'deemed rescinded' by the Supreme Court in G.R. No. 106063, is
'void at its inception as though it did not happen.'
"C.
The Regional Trial Court likewise erred in holding that the aforesaid Deed of Absolute Sale,
dated July 31, 1978, having been 'deemed rescinded' by the Supreme Court in G.R. No.
106063, petitioner 'is not the owner and does not have any right to demand backrentals from
the subject property,' and that the rescission of the Deed of Absolute Sale by the Supreme
Court does not confer to petitioner 'any vested right nor any residual proprietary rights even in
expectancy.'
"D.
The issue upon which the Regional Trial Court dismissed the civil case, as stated in its Order
of March 11, 1998, was not raised by respondent in its Motion to Dismiss.
"E.
The sole ground upon which the Regional Trial Court dismissed Civil Case No. 97-85141 is not
one of the grounds of a Motion to Dismiss under Sec. 1 of Rule 16 of the 1997 Rules of Civil
Procedure."
Basically, the issues can be summarized into two: (1) the substantive issue of whether
Equatorial is entitled to back rentals; and (2) the procedural issue of whether the court a quo's
dismissal of Civil Case No. 97-85141 was based on one of the grounds raised by respondent
in its Motion to Dismiss and covered by Rule 16 of the Rules of Court.
This Court's Ruling
The Petition is not meritorious.
First Issue:
Ownership of Subject Properties
We hold that under the peculiar facts and circumstances of the case at bar, as found by this
Court en banc in its Decision promulgated in 1996 in the mother case, no right of ownership
was transferred from Carmelo to Equatorial in view of a patent failure to deliver the property to
the buyer.
Rental — a Civil
Fruit of Ownership
To better understand the peculiarity of the instant case, let us begin with some basic
parameters. Rent is a civil fruit16 that belongs to the owner of the property producing it17 by
right of accession.18 Consequently and ordinarily, the rentals that fell due from the time of the
perfection of the sale to petitioner until its rescission by final judgment should belong to the
owner of the property during that period.
By a contract of sale, "one of the contracting parties obligates himself to transfer ownership of
and to deliver a determinate thing and the other to pay therefor a price certain in money or its
equivalent."19
Ownership of the thing sold is a real right,20 which the buyer acquires only upon delivery of the
thing to him "in any of the ways specified in articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from the vendor to the vendee."21
This right is transferred, not merely by contract, but also by tradition or delivery.22 Non nudis
pactis sed traditione dominia rerum transferantur. And there is said to be delivery if and when
the thing sold "is placed in the control and possession of the vendee."23 Thus, it has been held
that while the execution of a public instrument of sale is recognized by law as equivalent to the
delivery of the thing sold,24 such constructive or symbolic delivery, being merely presumptive,
is deemed negated by the failure of the vendee to take actual possession of the land sold.25
Delivery has been described as a composite act, a thing in which both parties must join and
the minds of both parties concur. It is an act by which one party parts with the title to and the
possession of the property, and the other acquires the right to and the possession of the same.
In its natural sense, delivery means something in addition to the delivery of property or title; it
means transfer of possession.26 In the Law on Sales, delivery may be either actual or
constructive, but both forms of delivery contemplate "the absolute giving up of the control and
custody of the property on the part of the vendor, and the assumption of the same by the
vendee."27
Possession Never
Acquired by Petitioner
Let us now apply the foregoing discussion to the present issue. From the peculiar facts of this
case, it is clear that petitioner never took actual control and possession of the property sold, in
view of respondent's timely objection to the sale and the continued actual possession of the
property. The objection took the form of a court action impugning the sale which, as we know,
was rescinded by a judgment rendered by this Court in the mother case. It has been held that
the execution of a contract of sale as a form of constructive delivery is a legal fiction. It holds
true only when there is no impediment that may prevent the passing of the property from the
hands of the vendor into those of the vendee.28 When there is such impediment, "fiction yields
to reality — the delivery has not been effected."29
Hence, respondent's opposition to the transfer of the property by way of sale to Equatorial was
a legally sufficient impediment that effectively prevented the passing of the property into the
latter's hands.
This was the same impediment contemplated in Vda. de Sarmiento v. Lesaca,30 in which the
Court held as follows:
"The question that now arises is: Is there any stipulation in the sale in question from which we
can infer that the vendor did not intend to deliver outright the possession of the lands to the
vendee? We find none. On the contrary, it can be clearly seen therein that the vendor intended
to place the vendee in actual possession of the lands immediately as can be inferred from the
stipulation that the vendee 'takes actual possession thereof . . . with full rights to dispose, enjoy
and make use thereof in such manner and form as would be most advantageous to herself.'
The possession referred to in the contract evidently refers to actual possession and not merely
symbolical inferable from the mere execution of the document.
"Has the vendor complied with this express commitment? she did not. As provided in Article
1462, the thing sold shall be deemed delivered when the vendee is placed in the control and
possession thereof, which situation does not here obtain because from the execution of the
sale up to the present the vendee was never able to take possession of the lands due to the
insistent refusal of Martin Deloso to surrender them claiming ownership thereof. And although
it is postulated in the same article that the execution of a public document is equivalent to
delivery, this legal fiction only holds true when there is no impediment that may prevent the
passing of the property from the hands of the vendor into those of the vendee. x x x."31
The execution of a public instrument gives rise, therefore, only to a prima facie presumption of
delivery. Such presumption is destroyed when the instrument itself expresses or implies that
delivery was not intended; or when by other means it is shown that such delivery was not
effected, because a third person was actually in possession of the thing. In the latter case, the
sale cannot be considered consummated.
However, the point may be raised that under Article 1164 of the Civil Code, Equatorial as buyer
acquired a right to the fruits of the thing sold from the time the obligation to deliver the property
to petitioner arose.32 That time arose upon the perfection of the Contract of Sale on July 30,
1978, from which moment the laws provide that the parties to a sale may reciprocally demand
performance.33 Does this mean that despite the judgment rescinding the sale, the right to the
fruits34 belonged to, and remained enforceable by, Equatorial?
Article 1385 of the Civil Code answers this question in the negative, because "[r]escission
creates the obligation to return the things which were the object of the contract, together with
their fruits, and the price with its interest; x x x" Not only the land and building sold, but also the
rental payments paid, if any, had to be returned by the buyer.
Another point. The Decision in the mother case stated that "Equatorial x x x has received rents"
from Mayfair "during all the years that this controversy has been litigated." The Separate
Opinion of Justice Teodoro Padilla in the mother case also said that Equatorial was "deriving
rental income" from the disputed property. Even herein ponente's Separate Concurring Opinion
in the mother case recognized these rentals. The question now is: Do all these statements
concede actual delivery?
The answer is "No." The fact that Mayfair paid rentals to Equatorial during the litigation should
not be interpreted to mean either actual delivery or ipso facto recognition of Equatorial's title.
The CA Records of the mother case 35 show that Equatorial — as alleged buyer of the disputed
properties and as alleged successor-in-interest of Carmelo's rights as lessor — submitted two
ejectment suits against Mayfair. Filed in the Metropolitan Trial Court of Manila, the first was
docketed as Civil Case No. 121570 on July 9, 1987; and the second, as Civil Case No. 131944
on May 28, 1990. Mayfair eventually won them both. However, to be able to maintain physical
possession of the premises while awaiting the outcome of the mother case, it had no choice
but to pay the rentals.
The rental payments made by Mayfair should not be construed as a recognition of Equatorial
as the new owner. They were made merely to avoid imminent eviction. It is in this context that
one should understand the aforequoted factual statements in the ponencia in the mother case,
as well as the Separate Opinion of Mr. Justice Padilla and the Separate Concurring Opinion of
the herein ponente.
At bottom, it may be conceded that, theoretically, a rescissible contract is valid until rescinded.
However, this general principle is not decisive to the issue of whether Equatorial ever acquired
the right to collect rentals. What is decisive is the civil law rule that ownership is acquired, not
by mere agreement, but by tradition or delivery. Under the factual environment of this
controversy as found by this Court in the mother case, Equatorial was never put in actual and
effective control or possession of the property because of Mayfair's timely objection.
As pointed out by Justice Holmes, general propositions do not decide specific cases. Rather,
"laws are interpreted in the context of the peculiar factual situation of each case. Each case
has its own flesh and blood and cannot be decided on the basis of isolated clinical classroom
principles."36
In short, the sale to Equatorial may have been valid from inception, but it was judicially
rescinded before it could be consummated. Petitioner never acquired ownership, not because
the sale was void, as erroneously claimed by the trial court, but because the sale was not
consummated by a legally effective delivery of the property sold.
Benefits Precluded by
Petitioner's Bad Faith
Furthermore, assuming for the sake of argument that there was valid delivery, petitioner is not
entitled to any benefits from the "rescinded" Deed of Absolute Sale because of its bad faith.
This being the law of the mother case decided in 1996, it may no longer be changed because
it has long become final and executory. Petitioner's bad faith is set forth in the following
pertinent portions of the mother case:
"First and foremost is that the petitioners acted in bad faith to render Paragraph 8 'inutile.'
xxx xxx xxx
"Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in
question rescissible. We agree with respondent Appellate Court that the records bear out the
fact that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale,
studied the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good
faith, and, therefore, rescission lies.
xxx xxx xxx
"As also earlier emphasized, the contract of sale between Equatorial and Carmelo is
characterized by bad faith, since it was knowingly entered into in violation of the rights of and
to the prejudice of Mayfair. In fact, as correctly observed by the Court of Appeals, Equatorial
admitted that its lawyers had studied the contract of lease prior to the sale. Equatorial's
knowledge of the stipulations therein should have cautioned it to look further into the agreement
to determine if it involved stipulations that would prejudice its own interests.
xxx xxx xxx
"On the part of Equatorial, it cannot be a buyer in good faith because it bought the property
with notice and full knowledge that Mayfair had a right to or interest in the property superior to
its own. Carmelo and Equatorial took unconscientious advantage of Mayfair."37 (Italics
supplied)
Thus, petitioner was and still is entitled solely to he return of the purchase price it paid to
Carmelo; no more, no less. This Court has firmly ruled in the mother case that neither of them
is entitled to any consideration of equity, as both "took unconscientious advantage of
Mayfair."38
In the mother case, this Court categorically denied the payment of interest, a fruit of ownership.
By the same token, rentals, another fruit of ownership, cannot be granted without mocking this
Court's en banc Decision, which has long become final.
Petitioner's claim of reasonable compensation for respondent's use and occupation of the
subject property from the time the lease expired cannot be countenanced. If it suffered any
loss, petitioner must bear it in silence, since it had wrought that loss upon itself. Otherwise, bad
faith would be rewarded instead of punished.@lawphil.net
We uphold the trial court's disposition, not for the reason it gave, but for (a) the patent failure
to deliver the property and (b) petitioner's bad faith, as above discussed.
Second Issue:itc-alf
Ground in Motion to Dismiss
Procedurally, petitioner claims that the trial court deviated from the accepted and usual course
of judicial proceedings when it dismissed Civil Case No. 97-85141 on a ground not raised in
respondent's Motion to Dismiss. Worse, it allegedly based its dismissal on a ground not
provided for in a motion to dismiss as enunciated in the Rules of Court.@lawphil.net
We are not convinced A review of respondent's Motion to Dismiss Civil Case No. 97-85141
shows that there were two grounds invoked, as follows:
"(A)
Plaintiff is guilty of forum-shopping.itc-alf
"(B)
Plaintiff's cause of action, if any, is barred by prior judgment."39
The court a quo ruled, inter alia, that the cause of action of petitioner plaintiff in the case below)
had been barred by a prior judgment of this Court in G.R No. 106063, the mother case.
Although it erred in its interpretation of the said Decision when it argued that the rescinded
Deed of Absolute Sale was avoid," we hold, nonetheless, that petitioner's cause of action is
indeed barred by a prior judgment of this Court. As already discussed, our Decision in G.R No.
106063 shows that petitioner is not entitled to back rentals, because it never became the owner
of the disputed properties due to a failure of delivery. And even assuming arguendo that there
was a valid delivery, petitioner's bad faith negates its entitlement to the civil fruits of ownership,
like interest and rentals.
Under the doctrine of res judicata or bar by prior judgment, a matter that has been adjudicated
by a court of competent jurisdiction must be deemed to have been finally and conclusively
settled if it arises in any subsequent litigation between the same parties and for the same
cause.40 Thus, "[a] final judgment on the merits rendered by a court of competent jurisdiction
is conclusive as to the rights of the parties and their privies and constitutes an absolute bar to
subsequent actions involving the same claim, demand, or cause of action."41 Res judicata is
based on the ground that the "party to be affected, or some other with whom he is in privity,
has litigated the same matter in a former action in a court of competent jurisdiction, and should
not be permitted to litigate it again.42
It frees the parties from undergoing all over again the rigors of unnecessary suits and repetitive
trials. At the same time, it prevents the clogging of court dockets. Equally important, it stabilizes
rights and promotes the rule of law.@lawphil.net
We find no need to repeat the foregoing disquisitions on the first issue to show satisfaction of
the elements of res judicata. Suffice it to say that, clearly, our ruling in the mother case bars
petitioner from claiming back rentals from respondent. Although the court a quo erred when it
declared "void from inception" the Deed of Absolute Sale between Carmelo and petitioner, our
foregoing discussion supports the grant of the Motion to Dismiss on the ground that our prior
judgment in G.R No. 106063 has already resolved the issue of back rentals.
On the basis of the evidence presented during the hearing of Mayfair's Motion to Dismiss, the
trial court found that the issue of ownership of the subject property has been decided by this
Court in favor of Mayfair. We quote the RTC:
"The Supreme Court in the Equatorial case, G.R. No. 106063 has categorically stated that the
Deed of Absolute Sale dated July 31, 1978 has been rescinded subjecting the present
complaint to res judicata."43 (Emphasis in the original)
Hence, the trial court decided the Motion to Dismiss on the basis of res judicata, even if it erred
in interpreting the meaning of "rescinded" as equivalent to "void" In short, it ruled on the ground
raised; namely, bar by prior judgment. By granting the Motion, it disposed correctly, even if its
legal reason for nullifying the sale was wrong. The correct reasons are given in this Decision.
WHEREFORE, the Petition is hereby DENIED. Costs against petitioner.itc-alf
SO ORDERED.
Davide Jr., C.J., Quisumbing, Pardo, Buena, Ynares-Santiago and Carpio, JJ., concur.
Bellosillo, J., I join the dissent of J. Gutierrez.
Melo, J., concurring opinion.
Puno, J., concur and also join the concurring opinion of J. Melo.
Vitug, J., see dissenting opinion.
Kapunan, J., join the dissenting opinions of Justices Vitug and Sandoval-Gutierrez.
Mendoza, J., concur in this and Melo, J.'s concurring opinion.
De Leon, Jr., J., join the dissenting opinion of Justice J.C. Vitug.
Concurring Opinion
MELO, J., concurring:
While I express my conformity to the ponencia of our distinguished colleague, Mr. Justice
Artemio V. Panganiban, I would just like to make the following observations:
1. The issue in this case was squarely resolved in our 1996 En Banc decision in the main
case. What petitioner is asking us to do now is to reverse or modify a judgment which is
accurate in every respect, conformable to law and jurisprudence, and faithful to principles of
fairness and justice.
2. Petitioner's submissions are deceiving. It is trying to collect unjustified and unbelievably
increased rentals by provoking a purely academic discussion, as far as respondent is
concerned, of a non-applicable provision of the Civil Code on contracts.
3. To grant the petition is to reward bad faith, for petitioner has deprived respondent of
the latter's property rights for twenty-three (23) years and has forced it to defend its interests in
case after case during that lengthy period. Petitioner now tries to inflict further injury in the
fantastic and groundless amount of P115,947,867.00. To remand this case to the lower court
in order to determine the back rentals allegedly due to petitioner Equatorial Realty Development
Corporation, Inc. is to encourage continuation of crafty tactics and to allow the further
dissipation of scarce judicial time and resources.
The instant petition arose from a complaint for back rentals, increased rentals and interests
filed by petitioner Equatorial Realty Development, Inc. (Equatorial) against respondent Mayfair
Theater, Inc. (Mayfair). It has to be adjudicated in the context of three earlier petitions decided
by this Court.
A dispute between the two parties over the ownership of a commercial lot and building along
Claro M. Recto Avenue in Manila has led to 23 years of protracted litigation, including the filing
of 4 petitions with the Court, namely, G.R. No. L-106063, decided on November 21, 1996 (264
SCRA 483); G.R. No. 103311 decided on March 4, 1992; G.R. No. 136221, decided on May
12, 2000; and the present petition, G.R. No. 133879.
The case at bar is a classic illustration of how a dubious interpretation of the dispositive portion
of the 1996 decision for petitioner could lead to 5 more years of bitter litigation after the initial
18 years of legal proceedings over the first case.
Lease contracts over the subject property were executed on June 1, 1967 and March 31, 1969
by original owner Carmelo and Bauermann, Inc. (Carmelo) in favor of herein respondent
Mayfair. The leases expired on May 31, 1987 and March 31, 1989, respectively. The lease
contracts embodied provisions giving Mayfair a right-of-first-refusal should Carmelo sell the
property.
In an act characterized as bad faith by this Court, the property, in violation of the right of first
refusal, was sold by Carmelo to herein petitioner Equatorial, on July 31, 1978 for
P11,300,000.00. On September 13, 1978, Mayfair filed the first case for annulment of the
contract of sale, specific performance of the right-of-first-refusal provision, and damages. The
Regional Trial Court (RTC) of Manila decided the case in favor of Equatorial on February 7,
1991. Counterclaims for compensation arising from the use of the premises were awarded to
Equatorial by the 1991 RTC decision.
On June 23, 1992, the Court of Appeals reversed the RTC decision, thus leading to the first
petition, G.R. No. 106063, filed against Mayfair by both Equatorial and Carmelo.
On November 21, 1996, this Court En Banc rendered its decision (264 SCRA 483 [1996]),
disposing:
WHEREFORE, the petition for review of the decision of the Court of Appeals dated June 23,
1992, in CA-G.R. CV No. 32918, is HEREBY DENIED. The Deed of Absolute Sale between
petitioners Equatorial Realty Development, Inc. and Carmelo & Bauermann, Inc. is hereby
rescinded; petitioner Carmelo & Bauermann is ordered to return to petitioner Equatorial Realty
Development the purchase price. The latter is directed to execute the deeds and documents
necessary to return ownership to Carmelo & Bauermann of the disputed lots. Carmelo and
Bauermann is ordered to allow Mayfair Theater, Inc. to buy the aforesaid lots for
P11,300,000.00.
In the Court of Appeals decision (CA-G.R. CV No. 32918, June 23, 1992) in the main case,
raised to this Court, Mayfair was ordered to directly pay P11,300,000.00 to Equatorial
whereupon Equatorial would execute the deeds and documents necessary for the transfer of
ownership to Mayfair and the registration of the property in its name. The execution of
documents and the transfer of the property were directly between Equatorial and Mayfair. Our
decision in 1996 (G.R. No. 106063) affirmed the appellate decision. However, while the 1978
deed of sale questioned by Mayfair was rescinded, we ordered Carmelo to first return to
Equatorial the purchase price of the property, whereupon Equatorial would return ownership to
Carmelo, after which Mayfair would buy the lot for P11,300,000.00 from Carmelo.
When the case was remanded to the RTC for execution of the decision, it was ascertained that
Carmelo and Bauermann, Inc. was no longer in existence. The Sheriff could not enforce the
portions of the judgment calling for acts to be performed by Carmelo. Mayfair, therefore,
deposited the amount of P11,300,000.00 with the RTC for payment to Equatorial, hoping that
the latter would faithfully comply with this Court's decision. In this regard, it may be mentioned
that buyer Mayfair also paid P847,000.00 in taxes which the vendors should have paid. The
RTC ordered the execution of deeds of transfer, the cancellation of Equatorial's titles to the
property, and the issuance of new titles in favor of Mayfair. Accordingly, the property was
registered in the name of Mayfair and titles issued in its favor.
Equatorial, however, saw an opening for further litigation. It questioned the method employed
by the RTC to execute the Court's judgment, arguing that the directives involving Carmelo's
participation were ignored by the trial court. The litigation over the alleged incorrectness of the
execution eventually led to the second petition earlier mentioned — G.R. No. 136221.
It may be mentioned at this point that on July 9, 1987, while the right-of-first-refusal and
cancellation case was pending, Equatorial filed an action for ejectment against Mayfair.
Because the issue of ownership was still pending in the case for rescission of deed of sale
including the enforcement of the right-of-first-refusal provision, the ejectment case was
dismissed. Appeals to the RTC and the Court of Appeals were denied.
On March 26, 1990, still another ejectment case was filed by Equatorial. In decisions which
reached all the way to this Court in G.R. No. 103311, the cases for ejectment did not prosper.
Mayfair won the cases on March 4, 1992.
The three cases decided by the Court in these litigations between Equatorial and Mayfair, all
of them in favor of Mayfair, are antecedents of the present and fourth petition. Equatorial has
been adjudged as having unlawfully and in bad faith acquired property that should have
belonged to Mayfair since 1978. Ownership and title have been unquestionably transferred to
Mayfair.
Seemingly, Equatorial now seeks to profit from its bad faith. While the case involving the
allegedly incorrect execution of the 1996 decision on cancellation of the deed of sale in G.R.
No. 106063 was being litigated, Equatorial filed on September 18, 1997 with the RTC of Manila
two complaints for payment of back and increased rentals arising from the use by Mayfair of
the lot, building, and other fixed improvements. From the time the property was sold by Carmelo
to Equatorial, lessee Mayfair had been paying to Equatorial the rentals fixed in the 1967 and
1969 lease contracts with the original owner. This was during the pendency of the complaint
for annulment of the contract of sale, specific performance of the right-of-first-refusal provision,
and damages.
As found in our 1998 decision in G.R. No. 106063, the disputed property should have actually
belonged to Mayfair at the time. However, to avoid the ejectment cases, which Equatorial
nonetheless later filed, Mayfair was forced to pay rentals to Equatorial. It paid the rentals based
on the rates fixed by Carmelo in the lease contracts.

Equatorial, claiming the 1967 and 1969 rentals to be inadequate, claimed increased amounts
as reasonable compensation. Because the amounts fixed by the lease contract with Carmelo
but paid to Equatorial were only at the rate of P17,966.21 monthly while Equatorial wanted
P210,000.00 every month plus legal interests, the suit was for the payment of P115,947,867.68
as of June 19, 1997.
Citing the 1996 decision in G.R. No. 106063, Mayfair contended that it owned the property
under the decision. It stated that the sale by Carmelo to Equatorial had been cancelled, and,
as owner, Mayfair owed no increased rentals to Equatorial based on said decision.
The present case on back rentals could not be conclusively decided because the execution
and finality of the issue of ownership were being contested for 5 years in the petition on the
proper execution filed in G.R. No. 136221. This petition had to wait for the resolution of G.R.
No. 136221.
In its decision dated May 12, 2000, in G.R. No. 136221 (First Division, per Mr. Justice Pardo;
Davide, Jr., C.J., Kapunan, and Ynares-Santiago, JJ., concurring), this Court reiterated the
judgment in G.R. No. 106063. It emphasized that the 1996 decision awarding the property to
Mayfair was clear. It stated that the decision having attained finality, there was nothing left for
the parties to do but to adhere to the mandates of the decision.
In the dispositive portion, however, the Court ordered the trial court "to carry out the execution
following strictly the terms" of the 1996 decision. However, as earlier stated, this could not be
done because Carmelo had ceased to exist. There was no longer any Carmelo which could
return the P11,300,000.00 consideration of the 1978 sale to Equatorial as ordered in the
dispositive portion of the 1996 decision. Equatorial could not and would not also execute the
deeds returning the property to Carmelo, as directed in the decision. Neither could the defunct
Carmelo sell the property to Mayfair at the sale price in 1978 when the right of first refusal was
violated.
Mayfair had to file a motion for partial reconsideration, emphasizing that it was impossible for
a corporation which has gone out of existence to obey the specific orders of this Court. A
resolution was, therefore, rendered on June 25, 2001 putting an end to the controversy over
the proper implementation of the 1996 judgment.
This June 25, 2001 Resolution in G.R. No. 136221 validated the issuance of new titles in the
name of the adjudicated owner, Mayfair. The Court ordered the direct release to Equatorial of
the P11,300,000.00 deposited in court for the account of the defunct Carmelo.
In the follow-up Resolution of the First Division in G.R. No. 136221 dated June 25, 2001, the
Court, after describing the case as a Promethean one involving the execution of a decision
which has been long final, and after calling the efforts to stave off execution as a travesty of
justice, instructed the trial court:
1. To execute the Court's Decision strictly in accordance with the ruling in G.R. No.
106063 by validating the acts of the sheriff of Manila and the titles in the name of Mayfair
Theater, Inc. issued by the Register of Deeds of Manila consistent therewith;
2. In case of failure of Carmelo and Bauermann to accept the amount of P11,300,000.00
deposited by Mayfair Theater, Inc. with the Clerk of Court, Regional Trial Court, Manila, to
authorize the Clerk of Court to RELEASE the amount of P11,300,000.00 deposited with the
court for the account of Carmelo and Bauermann, Inc. to petitioner;
3. To devolve upon the trial court the determination of other issues that may remain
unresolved among the parties, relating to the execution of this Court's final decision in G.R. No.
106063.
In light of the Court's judgments in G.R. No. 106063 and G.R. No. 136221, the present petition
in G.R. No. 133879 for back rentals should now be finally resolved, applying the rulings in those
earlier decisions.
Indubitably, the 1978 deed of sale executed by Carmelo in favor of Equatorial over the disputed
property has been set aside by this Court. Equatorial was declared a buyer in bad faith. The
contract was characterized as a fraudulent sale and the entirety of the indivisible property sold
to Equatorial was the property we ordered to be conveyed to Mayfair for the same price paid
by Equatorial to Carmelo.
It is also beyond question that the method of execution of the 1996 decision by the RTC, the
direct payment by Mayfair to Equatorial, bypassing and detouring the defunct Carmelo
corporation, has been validated by this Court. There are no longer any procedural obstacles to
the full implementation of the decision.
And finally, the property sold to Equatorial in violation of Mayfair's right of first refusal is now
indisputably possessed by, and owned and titled in the name of, respondent Mayfair.
Parenthetically, the issue on the payment of back and increased rentals, plus interests, was
actually settled in the 1996 decision in G.R. No. 106063. It could not be enforced at the time
only because of the controversy unfortunately raised by Equatorial over the proper execution
of the 1996 decision.
It is now time to reiterate the 1996 decision on interests and settle the dispute between Mayfair
and Equatorial once and for all.
Thus, we reiterate that:
On the question of interest payments on the principal amount of P11,300.000.00, it must be
borne in mind that both Carmelo and Equatorial acted in bad faith. Carmelo knowingly and
deliberately broke a contract entered into with Mayfair. It sold the property to Equatorial with
purpose and intent to withhold any notice or knowledge of the sale coming to the attention of
Mayfair. All the circumstances point to a calculated and contrived plan of non-compliance with
the agreement of first refusal.
On the part of Equatorial, it cannot be a buyer in good faith because it bought the property with
notice and full knowledge the Mayfair had a right to or interest in the property superior to its
own. Carmelo and Equatorial took unconscientious advantage of Mayfair.
Neither may Carmelo and Equatorial avail of consideration based on equity which might
warrant the grant of interests. The vendor received as payment from the vendee what, at the
time, was a full and fair price for the property. It has used the P11,300,000.00 all these years
earning income or interest from the amount. Equatorial, on the other hand, has received rents
and otherwise profited from the use of the property turned over to it by Carmelo. In fact, during
all the years that this controversy was being litigated. Mayfair paid rentals regularly to the buyer
who had an inferior right to purchase the property. Mayfair is under no obligation to pay any
interests arising from this judgment to either Carmelo or Equatorial (264 SCRA 483, pp. 511-
512).
Worthy quoting too is the concurring opinion in our 1996 decision of Mr. Justice Teodoro R.
Padilla as follows:
The equities of the case support the foregoing legal disposition. During the intervening years
between 1 August 1978 and this date, Equatorial (after acquiring the C.M. Recto property for
the price of P11,300,000.00) had been leasing the property and deriving rental income
therefrom. In fact, one of the lessees in the property was Mayfair. Carmelo had, in turn, been
using the proceeds of the sale, investment-wise and/or operation wise in its own business.
It may appear, at first blush, that Mayfair is unduly favored by the solution submitted by this
opinion, because the price of P11,300,000.00 which it has to pay Carmelo in the exercise of its
right of first refusal, has been subjected to the inroads of inflation so that its purchasing power
today is less than when the same amount was paid by Equatorial to Carmelo. But then it cannot
be overlooked that it was Carmelo's breach of Mayfair's right of first refusal that prevented
Mayfair from paying the price of P11,300,000.00 to Carmelo at about the same time the amount
was paid by Equatorial to Carmelo. Moreover, it cannot be ignored that Mayfair had also
incurred consequential or "opportunity" losses by reason of its failure to acquire and use the
property under its right of first refusal. In fine, any loss in purchasing power of the price of
P11,300,000.00 is for Carmelo to incur or absorb on account of its bad faith in breaching
Mayfair's contractual right of first refusal to the subject property. (ibid., pp. 511-512).
It can be seen from the above ruling that the issue of rentals and interests was fully discussed
and passed upon in 1996. Equatorial profited from the use of the building for all the years when
it had no right or, as stated in our decision, had an inferior right over the property. Mayfair,
which had the superior right, continued to pay rent but it was the rate fixed in the lease contract
with Carmelo. We see no reason for us to now deviate from the reasoning given in our main
decision. The decision has been final and executory for five (5) years and petitioner has failed
to present any valid and reasonable ground to reconsider, modify or reverse it. Let that which
has been fairly adjudicated remain final.
My second observation relates to the clever but, to my mind, deceptive argument foisted by
Equatorial on the Court.
Equatorial relies on the Civil Code provision on rescissible contracts to bolster its claim. Its
argument is that a rescissible contract remains valid and binding upon the parties thereto until
the same is rescinded in an appropriate judicial proceeding.
Equatorial conveniently fails to state that the July 31, 1978 Deed of Absolute Sale was between
Equatorial and Carmelo only. Respondent Mayfair was not a party to the contract. The deed of
sale was surreptitiously entered into between Carmelo and Equatorial behind the back and in
violation of the rights of Mayfair. Why should the innocent and wronged party now be made to
bear the consequences of an unlawful contract to which it was not privy? Insofar as Equatorial
and Carmelo are concerned, their 1978 contract may have validly transferred ownership from
one to the other. But not as far as Mayfair is concerned.
Mayfair starts its arguments with a discussion of Article 1381 of the Civil Code that contracts
entered into in fraud of creditors are rescissible. There is merit in Mayfair's contention that the
legal effects are not restricted to the contracting parties only. On the contrary, the rescission is
for the benefit of a third party, a stranger to the contract. Mayfair correctly states that as far as
the injured third party is concerned, the fraudulent contract, once rescinded, is non-existent or
void from its inception. Hence, from Mayfair's standpoint, the deed of absolute sale which
should not have been executed in the first place by reason of Mayfair's superior right to
purchase the property and which deed was cancelled for that reason by this Court, is legally
non-existent. There must be a restoration of things to the condition prior to the celebration of
the contract (Respondent relies on Almeda vs. J. M. & Company, 43072-R, December 16,
1975, as cited in the Philippine Law Dictionary; IV Arturo M. Tolentino, Civil Code of the
Philippines, 570, 1990 Ed., citing Manresa; IV Edgardo L. Paras, Civil Code of the Philippines,
717-718, 1994 Ed.).
It is hard not to agree with the explanations of Mayfair, to wit:
4.22. As a consequence of the rescission of the Deed of Absolute Sale, it was as if Equatorial
never bought and became the lessor of the subject properties. Thus, the court a quo did not
err in ruling that Equatorial is not the owner and does not have any right to demand back rentals
from [the] subject property.
4.23. Tolentino, supra, at 577-578 further explains that the effects of rescission in an accion
pauliana retroact to the date when the credit or right being enforced was acquired.
"While it is necessary that the credit of the plaintiff in the accion pauliana must be prior to the
fraudulent alienation, the date of the judgment enforcing it is immaterial. Even if the judgment
be subsequent to the alienation, it is merely declaratory, with retroactive effect to the date when
the credit was constituted . . ." (emphasis supplied)
4.24. The clear rationale behind this is to prevent conniving parties, such as Equatorial and
Carmelo, from benefiting in any manner from their unlawful act of entering into a contract in
fraud of innocent parties with superior rights like Mayfair. Thus, to allow Equatorial to further
collect rentals from Mayfair is to allow the former to profit from its own act of bad faith. Ex dolo
malo non oritur actio. (Respondent's Comment, pp. 338-339, Rollo).
This brings me to my third and final observation in this case. This Court emphasized in the
main case that the contract of sale between Equatorial and Carmelo was characterized by bad
faith. The Court described the sale as "fraudulent" in its 1996 decision. It stated that the
damages which Mayfair suffered are in terms of actual injury and lost opportunities,
emphasizing that Mayfair should not be given an empty or vacuous victory. Moreover,
altogether too many suits have been filed in this case. Four separate petitions have come
before us, necessitating full length decisions in at least 3 of them. The 1996 decision stressed
that the Court has always been against multiplicity of suits.
There was bad faith from the execution of the deed of sale because Equatorial and Carmelo
affirmatively operated with furtive design or with some motive of self-interest or ill-will or for
ulterior purposes (Air France vs. Carrascoso, 18 SCRA 166 [1966]). There was breach of a
known duty by the two parties to the unlawful contract arising from motives of interests or ill-
will calculated to cause damage to another (Lopez vs. Pan American World Airways, 123 Phil.
264 [1966]).
The presence of bad faith is clear from the records. Our resolution of this issue in 1996 (G.R.
106063) is res judicata.
We stated:
First and foremost is that the petitioners (referring to Equatorial and Carmelo) acted in bad faith
to render Paragraph 8 "inutile".
xxx xxx xxx
Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the property in
question rescissible. We agree with respondent Appellate Court that the records bear out the
fact that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale,
studied the said contracts. As such Equatorial cannot tenably claim to be a purchaser in good
faith and, therefore, rescission lies.
xxx xxx xxx
As also earlier emphasized, the contract of sale between Equatorial and Carmelo is
characterized by bad faith, since it was knowingly entered into in violation of the rights of and
to the prejudice of Mayfair. In fact, as correctly observed by the Court of Appeals, Equatorial
admitted that its lawyers had studied the contract of lease prior to the sale. Equatorial's
knowledge of the stipulations therein should have cautioned it to look further into the agreement
to determine if it involved stipulations that would prejudice its own interests.
xxx xxx xxx
On the part of Equatorial, it cannot be a buyer in good faith because it bought the property with
notice and full knowledge that Mayfair had a right to or interest in the property superior to its
own. Carmelo and Equatorial took unconscientious advantage of Mayfair (264 SCRA 506, 507-
511).
We ruled that because of bad faith, neither may Carmelo and Equatorial avail themselves of
considerations based on equity which might warrant the grant of interests and, in this case,
unconscionably increased rentals.
Verily, if Mayfair were a natural person it could very well have asked for moral damages instead
of facing a lengthy and expensive suit to pay rentals many times higher than those stipulated
in the contract of lease. Under the Civil Code, Mayfair is the victim in a breach of contract where
Carmelo and Equatorial acted fraudulently and in bad faith.
Considering the judgments in our 3 earlier decisions, Mayfair is under no obligation to pay any
interests, whether based on law or equity, to Carmelo or Equatorial. Mayfair is the wronged
entity, the one which has suffered injury since 1978 or for the 23 years it was deprived of the
property.
Equatorial has received rentals and other benefits from the use of the property during these 23
years, rents and benefits which would have accrued to Mayfair if its rights had not been
violated.
There is no obligation on the part of respondent Mayfair to pay any increased, additional, back
or future rentals or interests of any kind to petitioner Equatorial under the circumstances of this
case.
I, therefore, concur with the majority opinion in denying due course and dismissing the petition.
Puno and Mendoza, JJ., concur.
Dissenting Opinion
VITUG, J., dissenting:
Civil Law, in its usual sophistication, classifies defective contracts (unlike the seemingly generic
treatment in Common Law), into, first, the rescissible contracts,1 which are the least infirm;
followed by, second, the voidable contracts;2 then, third, the unenforceable contracts;3 and,
finally, fourth, the worst of all or the void contracts.4 In terms of their efficaciousness, rescissible
contracts are regarded, among the four, as being the closest to perfectly executed contracts.
A rescissible contract contains all the requisites of a valid contract and are considered legally
binding, but by reason of injury or damage to either of the contracting parties or to third persons,
such as creditors, it is susceptible to rescission at the instance of the party who may be
prejudiced thereby. A rescissible contract is valid, binding and effective until it is rescinded. The
proper way by which it can be assailed is by an action for rescission based on any of the causes
expressly specified by law.5
The remedy of rescission in the case of rescissible contracts under Article 1381 is not to be
confused with the remedy of rescission, or more properly termed "resolution," of reciprocal
obligations under Article 1191 of the Civil Code. While both remedies presuppose the existence
of a juridical relation that, once rescinded, would require mutual restitution, it is basically,
however, in this aspect alone when the two concepts coincide.
Resolution under Article 1191 would totally release each of the obligors from compliance with
their respective covenants. It might be worthwhile to note that in some cases, notably Ocampo
vs. Court of Appeals,6 and Velarde vs. Court of Appeals,7 where the Court referred to
rescission as being likened to contracts which are deemed "void at inception," the focal issue
is the breach of the obligation involved that would allow resolution pursuant to Article 1191 of
the Civil Code. The obvious reason is that when parties are reciprocally bound, the refusal or
failure of one of them to comply with his part of the bargain should allow the other party to
resolve their juridical relationship rather than to leave the matter in a state of continuing
uncertainty. The result of the resolution, when decreed, renders the reciprocal obligations
inoperative "at inception."
Upon the other hand, the rescission of a rescissible contract under Article 1381, taken in
conjunction with Article 1385, is a relief which the law grants for the protection of a contracting
party or a third person from injury and damage that the contract may cause, or to protect some
incompatible and preferent right created by the contract.8 Rescissible contracts are not void
ab initio, and the principle, "quod nullum est nullum producit effectum," in void and inexistent
contracts is inapplicable. Until set aside in an appropriate action rescissible contracts are
respected as being legally valid, binding and in force. It would be wrong to say that rescissible
contracts produce no legal effects whatsoever and that no acquisition or loss of rights could
meanwhile occur and be attributed to the terminated contract. The effects of the rescission,
prospective in nature, can come about only upon its proper declaration as such.
Thus when the Court9 held the contract to be "deemed rescinded" in G.R. No. 106063, the
Court did not mean a "declaration of nullity" of the questioned contract. The agreement between
petitioner and Carmelo being efficacious until rescinded, validly transferred ownership over the
property to petitioner from the time the deed of sale was executed in a public instrument on 30
July 1978 up to the time that the decision in G.R. No. 106063 became final on 17 March 1997.
It was only from the latter date that the contract had ceased to be efficacious. The fact that the
subject property was in the hands of a lessee, or for that matter of any possessor with a juridical
title derived from an owner, would not preclude a conferment of ownership upon the purchaser
nor be an impediment from the transfer of ownership from the seller to the buyer. Petitioner,
being the owner of the property (and none other) until the judicial rescission of the sale in its
favor, was entitled to all incidents of ownership inclusive of, among its other elements, the right
to the fruits of the property. Rentals or rental value over that disputed property from 30 July
1978 up to 17 March 1997 should then properly pertain to petitioner. In this respect, the much
abused terms of "good faith" or "bad faith " play no role; ownership, unlike other concepts, is
never described as being either in good faith or in bad faith.
With all due respect, I am thus unable to join in this instance my colleagues in the majority.
Kapunan and De Leon, Jr., JJ., concur.
Dissenting Opinion
SANDOVAL-GUTIERREZ, J., dissenting:
"Stare decisis et non quieta movere — follow past precedents and do not disturb what has
been settled. Adherence to this principle is imperative if this Court is to maintain stability in
jurisprudence.
I regret that I am unable to agree with the majority opinion.
The principal issue in this case is whether a rescissible contract is void and ineffective from its
inception. This issue is not a novel one. Neither is it difficult to resolve as it involves the
application of elementary principles in the law on contracts, specifically on rescissible contracts,
as distinguished from void or inexistent contracts.
The facts are simple.
On June 1, 1967, respondent Mayfair Theater, Inc. (Mayfair) leased portions of the ground,
mezzanine and second floors of a two storey commercial building located along C.M. Recto
Avenue Manila. The building together with the land on which it was constructed was then
owned by Carmelo & Bauermann, Inc. (Carmelo). Respondent used these premises as "Maxim
Theater." The lease was for a period of twenty (20) years.
On March 31, 1969, Mayfair leased from Carmelo another portion of the second floor, as well
as two (2) store spaces on the ground and mezzanine floors of the same building. Respondent
Mayfair used the premises as a movie theater known as "Miramar Theater."
Both leases contained the following identical provisions:
"That if the LESSOR should desire to sell the leased premises, the LESSEE shall be given 30-
days exclusive option to purchase the same.
In the event, however, that the leased premises is sold to someone other than the LESSEE,
the LESSOR is bound and obligated, as it hereby binds and obligates itself, to stipulate in the
Deed of Sale thereof that the purchaser shall recognize this lease and be bound by all the
terms and conditions thereof.
On July 31, 1978, Carmelo entered into a Deed of Absolute Sale whereby it sold the subject
land and two-storey building to petitioner Equatorial Realty Development, Inc. (Equatorial) for
P11,300,000.00. Having acquired from Carmelo ownership of the subject property, Equatorial
received rents from Mayfair for sometime.
Subsequently, Mayfair, claiming it had been denied its right to purchase the leased property in
accordance with the provisions of its lease contracts with Carmelo, filed with the Regional Trial
Court, Branch 7, Manila, a suit for specific performance and annulment of sale with prayer to
enforce its "exclusive option to purchase" the property. The dispute between Mayfair, on the
one hand, and Carmelo and Equatorial on the other, reached this Court in G.R. No. 106063,
"Equatorial Realty Development, Inc. & Carmelo & Bauermann, Inc. vs. Mayfair Theater, Inc."1
On November 21, 1996, this Court rendered a Decision, the dispositive portion of which reads:
"WHEREFORE, the petition for review of the decision of the Court of Appeals, dated June 23,
1992, in CA-G.R. CV No. 32918, is HEREBY DENIED. The Deed of Absolute Sale between
petitioners Equatorial Realty-Development, Inc. and Carmelo & Bauermann, Inc. is hereby
deemed rescinded; Carmelo & Bauermann is ordered to return to petitioner Equatorial Realty
Development the purchase price. The latter is directed to execute the deeds and documents
necessary to return ownership to Carmelo & Bauermann of the disputed lots. Carmelo &
Bauermann is ordered to allow Mayfair Theater, Inc. to buy the aforesaid lots for
P11,300,000.00.
SO ORDERED."
The Decision of this Court in G.R. No. 106063 became final and executory on March 17, 1997.
On April 25, 1997, Mayfair filed with the trial court a motion for execution which was granted.
However, Carmelo could no longer be located. Thus, Mayfair deposited with the trial court its
payment to Carmelo in the sum of P11,300,000.00 less P847,000.00 as withholding tax.
The Clerk of Court of the Manila Regional Trial Court, as sheriff, executed a deed of re-
conveyance in favor of Carmelo and a deed of sale in favor of Mayfair. On the basis of these
documents, the Registry of Deeds of Manila cancelled Equatorial's titles and issued new
Certificates of Title2 in the name of Mayfair.
In G.R. No. 136221,3 "Equatorial Realty Development, Inc. vs. Mayfair Theater, Inc.," this Court
instructed the trial court to execute strictly this Court's Decision in G.R. No. 106063.
On September 18, 1997, or after the execution of this Court's Decision in G.R. No. 106063,
Equatorial filed with the Regional Trial Court of Manila, Branch 8, an action for collection of a
sum of money against Mayfair, docketed as Civil Case No. 97-85141. Equatorial prayed that
the trial court render judgment ordering Mayfair to pay:
(1) the sum of P11,548,941.76 plus legal interest, representing the total amount of unpaid
monthly rentals/reasonable compensation from June 1, 1987 (Maxim Theater) and March
31,1989 (Miramar Theater) to July 31, 1997;
(2) the sums of P849,567.12 and P458,853.44 a month, plus legal interest, as
rental/reasonable compensation for the use and occupation of the subject property from August
1, 1997 to May 31, 1998 (Maxim Theater) and March 31, 1998 (Miramar Theater);
(3) the sum of P500,000.00 as and for attorney's fees, plus other expenses of litigation;
and
(4) the costs of the suit.4
On October 14, 1997, before filing its answer, Mayfair filed a "Motion to Dismiss" Civil Case
No. 97-85141 on the following grounds:
"(A)
PLAINTIFF IS GUILTY OF FORUM SHOPPING.
(B)
PLAINTIFF'S CAUSE OF ACTION, IF ANY, IS BARRED BY PRIOR JUDGMENT."5
On March 11, 1998, the court a quo issued an order dismissing Civil Case No. 97-85141 on
the ground that since this Court, in G.R. No. 106063, rescinded the Deed of Absolute Sale
between Carmelo and Equatorial, the contract is void at its inception.6 Correspondingly,
Equatorial is not the owner of the subject property and, therefore, does not have any right to
demand from Mayfair payment of rentals or reasonable compensation for its use and
occupation of the premises.
Equatorial filed a motion for reconsideration but was denied.
Hence, the present petition.
At this stage, I beg to disagree with the ruling of the majority that (1) Equatorial did not acquire
ownership of the disputed property from Carmelo because of lack of delivery; and that (2)
Equatorial is not entitled to the payment of rentals because of its bad faith.
Firmly incorporated in our Law on Sales is the principle that ownership is transferred to the
vendee by means of delivery, actual or constructive.7 There is actual delivery when the thing
sold is placed in the control and possession of the vendee.8 Upon the other hand, there is
constructive delivery when the delivery of the thing sold is represented by other signs or acts
indicative thereof. Article 1498 of the Civil Code is in point. It provides that "When the sale is
made through a public instrument, the execution thereof shall be equivalent to the delivery of
the thing which is the object of the contract, if from the deed the contrary does not appear or
cannot clearly be inferred."9
Contrary to the majority opinion, the facts and circumstances of the instant case clearly indicate
that there was indeed actual and constructive delivery of the disputed property from Carmelo
to Equatorial.
Let me substantiate my claim.
First, I must take exception to the majority's statement that this Court found in G.R. No.
10606310 that, "no right of ownership was transferred from Carmelo to Equatorial in view of a
patent failure to deliver the property to the buyer."11
A perusal of the Decision dated November 21, 1996 would reveal otherwise.
To say that this Court found no transfer of ownership between Equatorial and Carmelo is very
inaccurate. For one, this Court, in disposing of G.R. No. 106063, explicitly ordered Equatorial
to "execute the deeds and documents necessary to return ownership to Carmelo & Bauermann
of the disputed lots."12 I suppose this Court would not have made such an order if it did not
recognize the transfer of ownership from Carmelo to Equatorial under the contract of sale. For
why would the Court order Equatorial to execute the deeds and documents necessary to return
ownership to Carmelo if, all along, it believed that ownership remained with Carmelo?
Furthermore, is Court explicitly stated in the Decision that Equatorial received rentals from
Mayfair during the pendency of the case. Let me quote the pertinent portion of the Decision,
thus:
". . . Equatorial, on the other hand, has received rents and otherwise profited from the use of
the property turned over to it by Carmelo. In fact, during all the years that this controversy was
being litigated, Mayfair paid rentals regularly to the buyer (Equatorial) who had an inferior right
to purchase the property. Mayfair is under no obligation to pay any interests arising from this
judgment to either Carmelo or Equatorial."13
Justice Teodoro R. Padilla, in his Separate Opinion, made the following similar observations:
"The equities of the case support the foregoing legal disposition. During the intervening years
between 1 August 1978 and this date, Equatorial (after acquiring the C.M. Recto property for
the price of P11,300,000.00) had been leasing the property and deriving rental income
therefrom. In fact, one of the lessees in the property was Mayfair. Carmelo had, in turn, been
using the proceeds of the sale, investment-wise and/or operation-wise in its own business."14
Obviously, this Court acknowledged the delivery of the property from Carmelo to Equatorial.
As aptly described by Justice Panganiban himself, the sale between Carmelo and Equatorial
had not only been "perfected" but also "consummated".15
That actual possession of the property was turned over by Carmelo to Equatorial is clear from
the fact that the latter received rents from Mayfair. Significantly, receiving rentals is an exercise
of actual possession. Possession, as defined in the Civil Code, is the holding of a thing or the
enjoyment of a right.16 It may either be by material occupation or by merely subjecting the
thing or right to the action of our will.17 Possession may therefore be exercised through one's
self or through another.18 It is not necessary that the person in possession should himself be
the occupant of the property, the occupancy can be held by another in the name of the one
who claims possession. In the case at bench, Equatorial exercised possession over the
disputed property through Mayfair. When Mayfair paid its monthly rentals to Equatorial, the said
lessee recognized the superior right of Equatorial to the possession of the property. And even
if Mayfair did not recognize Equatorial's superior right over the disputed property, the fact
remains that Equatorial was then enjoying the fruits of its possession.
At this juncture, it will be of aid to lay down the degrees of possession. The first degree is the
mere holding, or possession without title whatsoever, and in violation of the right of the owner.
Here, both the possessor and the public know that the possession is wrongful. An example of
this is the possession of a thief or a usurper of land. The second is possession with juridical
title, but not that of ownership. This is possession peaceably acquired, such that of a tenant,
depositary, or pledge. The third is possession with a just title, or a title sufficient to transfer
ownership, but not from the true owner. An example is the possession of a vendee of a piece
of land from one who pretends to be the owner but is in fact not the owner thereof. And the
fourth is possession with a just title from the true owner. This is possession that springs from
ownership.19 Undoubtedly, Mayfair's possession is by virtue of juridical title under the contract
of lease, while that of Equatorial is by virtue of its right of ownership under the contract of sale.
Second, granting arguendo that there was indeed no actual delivery, would Mayfair's alleged
"timely objection to the sale and continued actual possession of the property" constitute an
"impediment" that may prevent the passing of the property from Carmelo to Equatorial?20
I believe the answer is no.
The fact that Mayfair has remained in "actual possession of the property," after the perfection
of the contract of sale between Carmelo and Equatorial up to the finality of this Court's Decision
in G.R. No. 106063 (and even up to the present), could not prevent the consummation of such
contract. As I have previously intimated, Mayfair's possession is not under a claim of
ownership. It cannot in any way clash with the ownership accruing to Equatorial by virtue of the
sale. The principle has always been that the one who possesses as a mere holder
acknowledges in another a superior right or right of ownership. A tenant possesses the thing
leased as a mere holder, so does the usufructuary of the thing in usufruct; and the borrower of
the thing loaned in commodatum. None of these holders asserts a claim of ownership in himself
over the thing. Similarly, Mayfair does not claim ownership, but only possession as a lessee
with the prior right to purchase the property.
In G.R. No. 106063, Mayfair's main concern in its action for specific performance was the
recognition of its right of first refusal. Hence, the most that Mayfair could secure from the
institution of its suit was to be allowed to exercise its right to buy the property upon rescission
of the contract of sale. Not until Mayfair actually exercised what it was allowed to do by this
Court in G.R. No. 106063, specifically to buy the disputed property for P11,300,000.00, would
it have any right of ownership. How then, at that early stage, could Mayfair's action be an
impediment in the consummation of the contract between Carmelo and Equatorial?
Pertinently, it does not always follow that, because a transaction is prohibited or illegal, title, as
between the parties to the transaction, does not pass from the seller, donor, or transferor to the
vendee, donee or transferee.21
And third, conformably to the foregoing disquisition, I maintain that Equatorial has the right to
be paid whatever monthly rentals during the period that the contract of sale was in existence
minus the rents already paid. In Guzman v. Court of Appeals,22 this Court decreed that upon
the purchase of the leased property and proper notice by the vendee, the lessee must pay the
agreed monthly rentals to the new owner since, by virtue of the sale the vendee steps into the
shoes of the original lessor to whom the lessee bound himself to pay. His belief that the subject
property should have been sold to him does not justify the unilateral withholding of rental
payments due to the new owner of the property.23 It must be stressed that under Article 1658
of the Civil Code, there are only two instances wherein the lessee may suspend payment of
rent, namely: in case the lessor fails to make the necessary repairs or to maintain the lessee
in peaceful and adequate enjoyment of the property leased.24 In this case, the fact remains
that Mayfair occupied the leased property. It derived benefit from such occupation, thus, it
should pay the corresponding rentals due. Nemo cum alterius detrimento locupletari potest. No
one shall enrich himself at the expense of another.25
Neither should the presence of bad faith prevent the award of rent to Equatorial. While
Equatorial committed bad faith in entering into the contract with Camelo, it has been equitably
punished when this Court rendered the contract rescissible. That such bad faith was the very
reason why the contract was declared rescissible is evident from the Decision itself.26 To utilize
it again, this time, to deprive Equatorial of its entitlement to the rent corresponding to the period
during which the contract was supposed to validly exist, would not only be unjust, it would also
disturb the very nature of a rescissible contract.
Let me elucidate on the matter.
Articles 1380 through 1389 of the Civil Code deal with rescissible contracts. A rescissible
contract is one that is validly entered into, but is subsequently terminated or rescinded for
causes provided for by law.
This is the clear implication of Article 1380 of the same Code which provides:
"Art. 1380. Contracts validly agreed upon may be rescinded in the cases established by
law."
Rescission has been defined as follows:
"Rescission is a remedy granted by law to the contracting parties and even to third persons, to
secure the reparation of damages caused to them by a contract, even if this should be valid,
by means of the restoration of things to their condition at the moment prior to the celebration
of said contract. It is a relief for the protection of one of the contracting parties and third persons
from all injury and damage the contract may cause, or to protect some incompatible and
preferential right created by the contract. It implies a contract which, even if initially valid,
produces a lesion or pecuniary damage to someone. It sets aside the act or contract for
justifiable reasons of equity."27
Necessarily, therefore, a rescissible contract remains valid and binding upon the parties thereto
until the same is rescinded in an appropriate judicial proceeding.
On the other hand, a void contract, which is treated in Articles 1409 through 1422 of the Civil
Code, is inexistent and produces no legal effect whatsoever. The contracting parties are not
bound thereby and such contract is not subject to ratification.
In dismissing petitioner Equatorial's complaint in Civil Case No. 97-85141, the trial court was
apparently of the impression that a rescissible contract has the same effect as a void contract,
thus:
"However, the words in the dispositive portion of the Supreme Court "is hereby deemed
rescinded" does not allow any other meaning. The said Deed of Absolute Sale is void at its
inception.
xxx xxx xxx
The subject Deed of Absolute Sale having been rescinded by the Supreme Court, Equatorial
is not the owner and does not have any right to demand back rentals from subject property.
The law states that only an owner can enjoy the fruits of a certain property or jus utendi which
includes the right to receive from subject property what it produces, . . ."
The trial court erred. In G.R. No. 106063 (involving Mayfair's suit for specific performance), this
Court clearly characterized the Deed of Absolute Sale between Carmelo and petitioner
Equatorial as a rescissible contract. We stated therein that:
"Since Equatorial is a buys in bad faith. this finding renders the sale to it of the property in
question rescissible. We agree with respondent Appellate Court that the records bear out the
fact that Equatorial was aware of the lease contracts because its lawyers had, prior to the sale,
studied the said contracts. As such, Equatorial cannot tenably claim to be a purchaser in good
faith, and therefore, rescission lies."
This Court did not declare the Deed of Absolute Sale between Carmelo and Equatorial void but
merely rescissible. Consequently, the contract was, at inception, valid and naturally, it validly
transferred ownership of the subject property to Equatorial. It bears emphasis that Equatorial
was not automatically divested of its ownership. Rather, as clearly directed in the dispositive
portion of our Decision, Carmelo should return the purchase price to Equatorial which, in turn,
must execute such deeds and documents necessary to enable Carmelo to reacquire its
ownership of the property.
As mentioned earlier, Mayfair deposited with the Regional Trial Court, Branch 7, Manila, the
purchase price of P10,452,000.00 (P11,300,000.00 less P847,000.00 as withholding tax). In
turn, the Clerk of Court executed the deed of sale of the subject property in favor of Mayfair.
In the meantime, Mayfair has continued to occupy and use the premises, the reason why
Equatorial filed against it Civil Case No. 97-85141 for sum of money representing rentals and
reasonable compensation.
At this point, I must reiterate that Equatorial purchased the subject property from Carmelo and
became its owner on July 31, 1978. While the contract of sale was "deemed rescinded" by this
Court in G.R. No. 106063, nevertheless the sale had remained valid and binding between the
contracting parties until March 17, 1997 when the Decision in G.R. No. 106063 became final.
Consequently, being the owner, Equatorial has the right to demand from Mayfair payment of
rentals corresponding to the period from July 31, 1978 up to March 17, 1997.
Records show that the rentals and reasonable compensation which Equatorial demands from
Mayfair are those which accrued from the year 1987 to 1998. As earlier stated, prior thereto,
Mayfair had been paying the rents to Equatorial.
In line with this Court's finding that Equatorial was the owner of the disputed property from July
31, 1978 to March 17, 1997, it is, therefore, entitled to the payment of rentals accruing to such
period.
Consequently, whether or not Mayfair paid Equatorial the rentals specified in the lease
contracts from June 1, 1987 to March 17, 1997 is for the trial court to resolve.
One last word. In effect, the majority have enunciated that:
1. A lessor, in a contract of sale, cannot transfer ownership of his property, occupied by
the lessee, to the buyer because there can be no delivery of such property to the latter; and
2. Not only a possessor, but also an owner, can be in bad faith.
I cannot subscribe to such doctrines.
WHEREFORE, I vote to GRANT the petition.
Bellosillo and Kapunan, JJ., concur.
G.R. No. 170923 January 20, 2009
SULO SA NAYON, INC. and/or PHILIPPINE VILLAGE HOTEL, INC. and JOSE MARCEL E.
PANLILIO, Petitioners,
vs.
NAYONG PILIPINO FOUNDATION, Respondent.
DECISION
PUNO, C.J.:
On appeal are the Court of Appeals’ (CA’s) October 4, 2005 Decision1 in CA-G.R. SP No.
74631 and December 22, 2005 Resolution,2 reversing the November 29, 2002 Decision3 of
the Regional Trial Court (RTC) of Pasay City in Civil Case No. 02-0133. The RTC modified the
Decision4 of the Metropolitan Trial Court (MeTC) of Pasay City which ruled against petitioners
and ordered them to vacate the premises and pay their arrears. The RTC declared petitioners
as builders in good faith and upheld their right to indemnity.
The facts are as follows:
Respondent Nayong Pilipino Foundation, a government-owned and controlled corporation, is
the owner of a parcel of land in Pasay City, known as the Nayong Pilipino Complex. Petitioner
Philippine Village Hotel, Inc. (PVHI), formerly called Sulo sa Nayon, Inc., is a domestic
corporation duly organized and existing under Philippine laws. Petitioner Jose Marcel E.
Panlilio is its Senior Executive Vice President.
On June 1, 1975, respondent leased a portion of the Nayong Pilipino Complex, consisting of
36,289 square meters, to petitioner Sulo sa Nayon, Inc. for the construction and operation of a
hotel building, to be known as the Philippine Village Hotel. The lease was for an initial period
of 21 years, or until May 1996. It is renewable for a period of 25 years under the same terms
and conditions upon due notice in writing to respondent of the intention to renew at least 6
months before its expiration. Thus, on March 7, 1995, petitioners sent respondent a letter
notifying the latter of their intention to renew the contract for another 25 years. On July 4, 1995,
the parties executed a Voluntary Addendum to the Lease Agreement. The addendum was
signed by petitioner Jose Marcel E. Panlilio in his official capacity as Senior Executive Vice
President of the PVHI and by Chairman Alberto A. Lim of the Nayong Pilipino Foundation. They
agreed to the renewal of the contract for another 25 years, or until 2021. Under the new
agreement, petitioner PVHI was bound to pay the monthly rental on a per square meter basis
at the rate of ₱20.00 per square meter, which shall be subject to an increase of 20% at the end
of every 3-year period. At the time of the renewal of the lease contract, the monthly rental
amounted to ₱725,780.00.
Beginning January 2001, petitioners defaulted in the payment of their monthly rental.
Respondent repeatedly demanded petitioners to pay the arrears and vacate the premises. The
last demand letter was sent on March 26, 2001.
On September 5, 2001, respondent filed a complaint for unlawful detainer before the MeTC of
Pasay City. The complaint was docketed as Civil Case No. 708-01. Respondent computed the
arrears of petitioners in the amount of twenty-six million one hundred eighty-three thousand
two hundred twenty-five pesos and fourteen centavos (₱26,183,225.14), as of July 31, 2001.
On February 26, 2002, the MeTC rendered its decision in favor of respondent. It ruled, thus:
. . . . The court is convinced by the evidence that indeed, defendants defaulted in the payment
of their rentals. It is basic that the lessee is obliged to pay the price of the lease according to
the terms stipulated (Art. 1657, Civil Code). Upon the failure of the lessee to pay the stipulated
rentals, the lessor may eject (sic) and treat the lease as rescinded and sue to eject the lessee
(C. Vda[.] De Pamintuan v. Tiglao, 53 Phil. 1). For non-payment of rentals, the lessor may
rescind the lease, recover the back rentals and recover possession of the leased premises. . .
xxx
. . . . Improvements made by a lessee such as the defendants herein on leased premises are
not valid reasons for their retention thereof. The Supreme Court has occasion to address a
similar issue in which it ruled that: "The fact that petitioners allegedly made repairs on the
premises in question is not a reason for them to retain the possession of the premises. There
is no provision of law which grants the lessee a right of retention over the leased premises on
that ground. Article 448 of the Civil Code, in relation to Article 546, which provides for full
reimbursement of useful improvements and retention of the premises until reimbursement is
made, applies only to a possessor in good faith, i.e., one who builds on a land in the belief that
he is the owner thereof. This right of retention does not apply to a mere lessee, like the
petitioners, otherwise, it would always be in his power to "improve" his landlord out of the latter’s
property (Jose L. Chua and Co Sio Eng vs. Court of Appeals and Ramon Ibarra, G.R. No.
109840, January 21, 1999)."
Although the Contract of Lease stipulates that the building and all the improvements in the
leased premises belong to the defendants herein, such will not defeat the right of the plaintiff
to its property as the defendants failed to pay their rentals in violation of the terms of the
contract. At most, defendants can only invoke [their] right under Article 1678 of the New Civil
Code which grants them the right to be reimbursed one-half of the value of the building upon
the termination of the lease, or, in the alternative, to remove the improvements if the lessor
refuses to make reimbursement.
The dispositive portion of the decision reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of Nayong Pilipino
Foundation, and against the defendant Philippine Village Hotel, Inc[.], and all persons claiming
rights under it, ordering the latter to:
1. VACATE the subject premises and surrender possession thereof to plaintiff;
2. PAY plaintiff its rental arrearages in the sum of TWENTY SIX MILLION ONE HUNDRED
EIGHTY THREE THOUSAND TWO HUNDRED TWENTY FIVE PESOS AND 14/100
(P26,183,225.14) incurred as of July 31, 2001;
3. PAY plaintiff the sum of SEVEN HUNDRED TWENTY FIVE THOUSAND SEVEN
HUNDRED EIGHTY PESOS (P725,780.00) per month starting from August 2001 and every
month thereafter by way of reasonable compensation for the use and occupation of the
premises;
4. PAY plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00) by way of attorney’s fees[;
and]
5. PAY the costs of suit.
The complaint against defendant Jose Marcel E. Panlilio is hereby dismissed for lack of cause
of action. The said defendant’s counterclaim however is likewise dismissed as the complaint
does not appear to be frivolous or maliciously instituted.
SO ORDERED.5
Petitioners appealed to the RTC which modified the ruling of the MeTC. It held that:
. . . it is clear and undisputed that appellants-lessees were expressly required to construct a
first-class hotel with complete facilities. The appellants were also unequivocally declared in the
Lease Agreement as the owner of the improvements so constructed. They were even explicitly
allowed to use the improvements and building as security or collateral on loans and credit
accommodations that the Lessee may secure for the purpose of financing the construction of
the building and other improvements (Section 2; pars. "A" to "B," Lease Agreement). Moreover,
a time frame was setforth (sic) with respect to the duration of the lease initially for 21 years and
renewable for another 25 years in order to enable the appellants-lessees to recoup their huge
money investments relative to the construction and maintenance of the improvements.
xxx
Considering therefore, the elements of permanency of the construction and substantial value
of the improvements as well as the undispute[d] ownership over the land improvements, these,
immensely engender the application of Art. 448 of the Civil Code. The only remaining and most
crucial issue to be resolved is whether or not the appellants as builders have acted in good
faith in order for Art. 448 in relation to Art. 546 of the Civil Code may apply with respect to their
rights over improvements.
xxx
. . . it is undeniable that the improvement of the hotel building of appellants (sic) PVHI was
constructed with the written consent and knowledge of appellee. In fact, it was precisely the
primary purpose for which they entered into an agreement. Thus, it could not be denied that
appellants were builders in good faith.
Accordingly, and pursuant to Article 448 in relation to Art. 546 of the Civil Code, plaintiff-
appellee has the sole option or choice, either to appropriate the building, upon payment of
proper indemnity consonant to Art. 546 or compel the appellants to purchase the land whereon
the building was erected. Until such time that plaintiff-appellee has elected an option or choice,
it has no right of removal or demolition against appellants unless after having selected a
compulsory sale, appellants fail to pay for the land (Ignacio vs. Hilario; 76 Phil. 605). This,
however, is without prejudice from the parties agreeing to adjust their rights in some other way
as they may mutually deem fit and proper.
The dispositive portion of the decision of the RTC reads as follows:
WHEREFORE, and in view of the foregoing, judgment is hereby rendered modifying the
decision of [the] MTC, Branch 45 of Pasay City rendered on February 26, 2002 as follows:
1. Ordering plaintiff-appellee to submit within thirty (30) days from receipt of a copy of this
decision a written manifestation of the option or choice it selected, i.e., to appropriate the
improvements upon payment of proper indemnity or compulsory sale of the land whereon the
hotel building of PVHI and related improvements or facilities were erected;
2. Directing the plaintiff-appellee to desist and/or refrain from doing acts in the furtherance or
exercise of its rights and demolition against appellants unless and after having selected the
option of compulsory sale and appellants failed to pay [and] purchase the land within a
reasonable time or at such time as this court will direct;
3. Ordering defendants-appellants to pay plaintiff-appellee [their] arrears in rent incurred as of
July 31, 2001 in the amount of P26,183,225.14;
4. Ordering defendants-appellants to pay to plaintiff-appellee the unpaid monthly rentals for the
use and occupation of the premises pending this appeal from July to November 2002 only at
P725,780.00 per month;
5. The fourth and fifth directives in the dispositive portion of the trial court’s decision including
that the last paragraph thereof JME Panlilio’s complaint is hereby affirmed;
6. The parties are directed to adjust their respective rights in the interest of justice as they may
deem fit and proper if necessary.
SO ORDERED.6
Respondent appealed to the CA which held that the RTC erroneously applied the rules on
accession, as found in Articles 448 and 546 of the Civil Code when it held that petitioners were
builders in good faith and, thus, have the right to indemnity. The CA held:
By and large, respondents are admittedly mere lessees of the subject premises and as such,
cannot validly claim that they are builders in good faith in order to solicit the application of
Articles 448 and 546 of the Civil Code in their favor. As it is, it is glaring error on the part of the
RTC to apply the aforesaid legal provisions on the supposition that the improvements, which
are of substantial value, had been introduced on the leased premises with the permission of
the petitioner. To grant the respondents the right of retention and reimbursement as builders in
good faith merely because of the valuable and substantial improvements that they introduced
to the leased premises plainly contravenes the law and settled jurisprudential doctrines and
would, as stated, allow the lessee to easily "improve" the lessor out of its property.
. . . . Introduction of valuable improvements on the leased premises does not strip the petitioner
of its right to avail of recourses under the law and the lease contract itself in case of breach
thereof. Neither does it deprive the petitioner of its right under Article 1678 to exercise its option
to acquire the improvements or to let the respondents remove the same.
Petitioners’ Motion for Reconsideration was denied.
Hence, this appeal.7
Petitioners assign the following errors:
I
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN
NOT HOLDING THAT PETITIONERS WERE BUILDERS IN GOOD FAITH OVER THE
SUBSTANTIAL AND VALUABLE IMPROVEMENTS WHICH THEY HAD INTRODUCED ON
THE SUBJECT PROPERTY, THUS COMPELLING THE APPLICATION OF ARTICLE 448 OF
THE CIVIL CODE IN RELATION TO ARTICLE 546 OF THE SAME CODE, INSTEAD OF
ARTICLE 1678 OF THE CIVIL CODE.
II
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS REVERSIBLE ERROR
WHEN IT DISREGARDED THE FACT THAT THE LEASE CONTRACT GOVERNS THE
RELATIONSHIP OF THE PARTIES AND CONSEQUENTLY THE PARTIES MAY BE
CONSIDERED TO HAVE IMPLIEDLY WAIVED THE APPLICATION OF ARTICLE 1678 OF
THE CIVIL CODE TO THE INSTANT CASE.
III
ASSUMING ARGUENDO THAT THE PETITIONERS ARE NOT BUILDERS IN GOOD FAITH,
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR
WHEN IT OVERLOOKED THE FACT THAT RESPONDENT ALSO ACTED IN BAD FAITH
WHEN IT DID NOT HONOR AND INSTEAD BREACHED THE LEASE CONTRACT
BETWEEN THE PARTIES, THUS BOTH PARTIES ACTED AS IF THEY ARE IN GOOD
FAITH.
IV
TO SANCTION THE APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE INSTEAD OF
ARTICLE 448 OF THE CIVIL CODE IN RELATION TO ARTICLE 546 OF THE SAME CODE
WOULD NOT ONLY WREAK HAVOC AND CAUSE SUBSTANTIAL INJURY TO THE RIGHTS
AND INTERESTS OF PETITIONER PHILIPPINE VILLAGE HOTEL, INC. WHILE
RESPONDENT NAYONG PILIPINO FOUNDATION, IN COMPARISON THERETO, WOULD
SUFFER ONLY SLIGHT OR INCONSEQUENTIAL INJURY OR LOSS, BUT ALSO WOULD
CONSTITUTE UNJUST ENRICHMENT ON THE PART OF RESPONDENT AT GREAT
EXPENSE AND GRAVE PREJUDICE OF PETITIONERS.
V choose to appropriate the building or trees after proper indemnity. The parties shall agree upon
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN
NOT HOLDING THAT THE COURTS A QUO DID NOT ACQUIRE JURISDICTION OVER THE
UNLAWFUL DETAINER CASE FOR NON-COMPLIANCE WITH JURISDICTIONAL
REQUIREMENTS DUE TO THE ABSENCE OF A NOTICE TO VACATE UPON
PETITIONERS.8
First, we settle the issue of jurisdiction. Petitioners argue that the MeTC did not acquire
jurisdiction to hear and decide the ejectment case because they never received any demand
from respondent to pay rentals and vacate the premises, since such demand is a jurisdictional
requisite. We reiterate the ruling of the MeTC, RTC and CA. Contrary to the claim of petitioners,
documentary evidence proved that a demand letter dated March 26, 2001 was sent by
respondent through registered mail to petitioners, requesting them "to pay the rental arrears or
else it will be constrained to file the appropriate legal action and possess the leased premises."
Further, petitioners’ argument that the demand letter is "inadequate" because it contained no
demand to vacate the leased premises does not persuade. We have ruled that:
. . . . The word "vacate" is not a talismanic word that must be employed in all notices. The
alternatives in this case are clear cut. The tenants must pay rentals which are fixed and which
became payable in the past, failing which they must move out. There can be no other
interpretation of the notice given to them. Hence, when the petitioners demanded that either
he pays ₱18,000 in five days or a case of ejectment would be filed against him, he was placed
on notice to move out if he does not pay. There was, in effect, a notice or demand to vacate.9
In the case at bar, the language of the demand letter is plain and simple: respondent demanded
payment of the rental arrears amounting to ₱26,183,225.14 within ten days from receipt by
petitioners, or respondent will be constrained to file an appropriate legal action against
petitioners to recover the said amount. The demand letter further stated that respondent will
possess the leased premises in case of petitioners’ failure to pay the rental arrears within ten
days. Thus, it is clear that the demand letter is intended as a notice to petitioners to pay the
rental arrears, and a notice to vacate the premises in case of failure of petitioners to perform
their obligation to pay.
Second, we resolve the main issue of whether the rules on accession, as found in Articles 448
and 546 of the Civil Code, apply to the instant case.
Article 448 and Article 546 provide:
Art. 448. The owner of the land on which anything has been built, sown or planted in good faith,
shall have the right to appropriate as his own the works, sowing or planting, after payment of
the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to
pay the price of the land, and the one who sowed, the proper rent. However, the builder or
planter cannot be obliged to buy the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not
the terms of the lease and in case of disagreement, the court shall fix the terms thereof.
Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in
good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same right of
retention, the person who has defeated him in the possession having the option of refunding
the amount of the expenses or of paying the increase in value which the thing may have
acquired by reason thereof.
We uphold the ruling of the CA.
The late Senator Arturo M. Tolentino, a leading expert in Civil Law, explains:
This article [Article 448] is manifestly intended to apply only to a case where one builds, plants,
or sows on land in which he believes himself to have a claim of title,10 and not to lands where
the only interest of the builder, planter or sower is that of a holder, such as a tenant.11
In the case at bar, petitioners have no adverse claim or title to the land. In fact, as lessees, they
recognize that the respondent is the owner of the land. What petitioners insist is that because
of the improvements, which are of substantial value, that they have introduced on the leased
premises with the permission of respondent, they should be considered builders in good faith
who have the right to retain possession of the property until reimbursement by respondent.
We affirm the ruling of the CA that introduction of valuable improvements on the leased
premises does not give the petitioners the right of retention and reimbursement which rightfully
belongs to a builder in good faith. Otherwise, such a situation would allow the lessee to easily
"improve" the lessor out of its property. We reiterate the doctrine that a lessee is neither a
builder in good faith nor in bad faith12 that would call for the application of Articles 448 and 546
of the Civil Code. His rights are governed by Article 1678 of the Civil Code, which reads:
Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use
for which the lease is intended, without altering the form or substance of the property leased,
the lessor upon the termination of the lease shall pay the lessee one-half of the value of the
improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may
remove the improvements, even though the principal thing may suffer damage thereby. He
shall not, however, cause any more impairment upon the property leased than is necessary.
With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement,
but he may remove the ornamental objects, provided no damage is caused to the principal
thing, and the lessor does not choose to retain them by paying their value at the time the lease
is extinguished.
Under Article 1678, the lessor has the option of paying one-half of the value of the
improvements which the lessee made in good faith, which are suitable for the use for which the
lease is intended, and which have not altered the form and substance of the land. On the other
hand, the lessee may remove the improvements should the lessor refuse to reimburse.
Petitioners argue that to apply Article 1678 to their case would result to sheer injustice, as it
would amount to giving away the hotel and its other structures at virtually bargain prices. They
allege that the value of the hotel and its appurtenant facilities amounts to more than two billion
pesos, while the monetary claim of respondent against them only amounts to a little more than
twenty six-million pesos. Thus, they contend that it is the lease contract that governs the
relationship of the parties, and consequently, the parties may be considered to have impliedly
waived the application of Article 1678.
We cannot sustain this line of argument by petitioners. Basic is the doctrine that laws are
deemed incorporated in each and every contract. Existing laws always form part of any
contract. Further, the lease contract in the case at bar shows no special kind of agreement
between the parties as to how to proceed in cases of default or breach of the contract.
Petitioners maintain that the lease contract contains a default provision which does not give
respondent the right to appropriate the improvements nor evict petitioners in cases of
cancellation or termination of the contract due to default or breach of its terms. They cite
paragraph 10 of the lease contract, which provides that:
10. DEFAULT. - . . . Default shall automatically take place upon the failure of the LESSEE to
pay or perform its obligation during the time fixed herein for such obligations without necessity
of demand, or, if no time is fixed, after 90 days from the receipt of notice or demand from the
LESSOR. . .
In case of cancellation or termination of this contract due to the default or breach of its terms,
the LESSEE will pay all reasonable attorney’s fees, costs and expenses of litigation that may
be incurred by the LESSOR in enforcing its rights under this contract or any of its provisions,
as well as all unpaid rents, fees, charges, taxes, assessment and others which the LESSOR
may be entitled to.
Petitioners assert that respondent committed a breach of the lease contract when it filed the
ejectment suit against them. However, we find nothing in the above quoted provision that
prohibits respondent to proceed the way it did in enforcing its rights as lessor. It can rightfully
file for ejectment to evict petitioners, as it did before the court a quo.
IN VIEW WHEREOF, petitioners’ appeal is DENIED. The October 4, 2005 Decision of the Court
of Appeals in CA-G.R. SP No. 74631 and its December 22, 2005 Resolution are AFFIRMED.
Costs against petitioners.
SO ORDERED.
G.R. No. 201354, September 21, 2016
PABLO M. PADILLA, JR. AND MARIA LUISA P. PADILLA, Petitioners, v. LEOPOLDO
MALICSI, LITO CASINO, AND AGRIFINO GUANES, Respondents.
DECISION
LEONEN, J.:
This resolves the Petition for Review on Certiorari1 filed by Spouses Pablo M. Padilla, Jr. and
Maria Luisa P. Padilla (Spouses Padilla) assailing the Decision2 dated March 19, 2012 of the
Court of Appeals, which reversed and set aside the Decision3 dated July 15, 2009 of Branch
30 of the Regional Trial Court of Cabanatuan City.
Spouses Padilla bought a parcel of land in Magsaysay Norte, Cabanatuan City in 1984.4 The
lot was covered by Transfer Certificate Title No. T-45565 and had an area of 150 square
meters.5 It had an assessed value of more than P20,000.00.6
Sometime in 1998, Spouses Padilla discovered that Leopoldo Malicsi, Lito Casino, and Agrifino
Guanes (Malicsi, et al.) constructed houses on their lot.7
Spouses Padilla made repeated verbal and written demands for Malicsi, et al. to vacate the
premises and pay a monthly rental of P2,000.00, but Malicsi, et al. refused to heed Spouses
Padilla's demands.8
The matter was referred to the Katarungang Pambarangay for conciliation proceedings and
amicable settlement, but all efforts at conciliation failed.9
On August 6, 2007, Spouses Padilla filed a complaint for recovery of possession against
Malicsi, et al., along with three (3) others: Larry Marcelo, Diosdado dela Cruz, and Rolando
Pascua.10
In their Answer with Compulsory Counterclaim, Malicsi, et al. alleged that they believed in all
honesty and good faith that the lot belonged to Toribia Vda. De Mossessgeld (De
Mossessgeld).11 They claimed that they possessed the land and built their houses on the lot
only after receiving De Mossessgeld's permission.12
Malicsi, et al. also claimed that they and De Mossessgeld agreed that she would sell them the
areas occupied by their houses, provided that pending full payment, they would pay her P40.00
per month as rent.13
Between 1980 and 1983, Malicsi, et al. constructed their respective houses on the lot in the
belief that they would eventually own the areas they were occupying. Malicsi and Casino even
introduced improvements to the houses they had built.14
Malicsi, et al. stated that they first found out about Spouses Padilla's claim of ownership
sometime in 2002.15 They admitted receiving the demand letters to vacate and pay rentals,
but they refused to leave the premises.16 They denied that conciliation and mediation
proceedings for amicable settlement were ever conducted before the Katarungang
Pambarangay.17
On September 3, 2008, a commission was created to determine the actual valuation of the lot,
including the improvements erected on it.18 In its Report, the Commission found that "the
prevailing valuation of similar lots in the vicinity ranges from P4,000 to P6,000 per [square]
[meter] or an average valuation of P5000.00/[square] [meter] as per information gathered from
several bank appraisers in the locality."19
The Commissioner's Report likewise quoted the appraised value of the improvements on the
lot, thus:
The Computation of the value of the property
The appraised value of the property subject of this case were [sic] computed using the
straightline method of depreciation with the formula:
Appraised Value = Market value x Remaining Life (building)/Life of the building
a. The 2-level residential house occupied by Sps. Angelito & Carmelita Casino:
Appraised Value = P183,040 x 22/25 = P161,075.20
b. The 2-level residential building house occupied by Sps. Larry & Candida Marcelo:
Appraised Value = P199,280 x 22/25 = P175,366.40
c. The bungalow type residential building occupied by Mr. Diosdado dela Cruz:
Appraised Value = P68,000 x 22/25 = P59,840
d. The 2-level residential house occupied by Sps. Leopoldo Malicsi
Appraised Value = P183,040 x 22/25 = P161,075.20
e. [T]he 2-level residential house occupied by Sps. Agri[f]ino & Aida Guane[s]:
Appraised Value = P208,000 x 22/25 = 183,04020 (Emphasis in the original)
On January 30, 2009, Spouses Padilla, exercising their option to sell the land to Malicsi, et al.
under Article 448 of the Civil Code in the amount of P5,000.00 per square meter, filed a Motion
and Manifestation with Offer to Sell. In their Comment, Malicsi, et al. stated that by filing the
Motion and Manifestation, Spouses Padilla had, in effect, recognized Malicsi, et al.'s standing
as builders in good faith. They did not accept the offer to sell.21
In the Decision22 dated July 15, 2009, the Regional Trial Court ruled that Malicsi, et al. cannot
be considered as builders in good faith.23 The dispositive of the Regional Trial Court Decision
reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the [Spouses
Padilla] and against [Malicsi, et al.] ordering the latter:
1. To vacate the property covered by TCT-T-45565 of the Registry of Deeds of
Cabanatuan City and surrender possession of the same to [Spouses Padilla];
2. To pay [Spouses Padilla] jointly and severally attorney's fees in the amount of
P20,000.00 and litigation expenses in the amount of P10,000.00.
SO ORDERED.24 (Emphasis in the original)
Malicsi, et al. appealed to the Court of Appeals. On March 19, 2012, the Court of Appeals
reversed and set aside the Regional Trial Court Decision.25cralawred
The Court of Appeals gave credence to Malicsi, et al.'s allegation that they relied on De
Mossessgeld's representation that she owned the lot and gave them permission to build their
houses on it.26 The dispositive of the Court of Appeals Decision reads:
WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and
SET ASIDE. In lieu thereof, another is entered as follows:
1. Declaring [respondents] as builders in good faith.
2. Ordering [respondents] to purchase the subject land unless the fair market value of the
land is considerably more than the fair market value of the improvements thereon, in
which case, a forced lease shall be created between the parties on terms to be mutually
agreed upon by them or, in case of disagreement, to be fixed by the court.
3. Deleting the award of attorney's fees and litigation expenses for lack of basis.

SO ORDERED.27 (Emphasis in the original)
Petitioners Spouses Pablo M. Padilla, Jr. and Maria Luisa P. Padilla elevated the case to this
Court. In their Petition for Review on Certiorari,28 they point out that respondents Leopoldo
Malicsi, Lito Casino, and Agrifino Guanes failed to substantiate their claim of being builders in
good faith:
While the law says, that presumption of good faith leans in favor of the respondents and the
burden rests upon the petitioners, yet from the surroundings [sic] circumstances and the
evidenced [sic] adduced before the Regional Trial Court, it appears that respondents'
declaration that Toribia Vda. De Mossessgeld permitted them to stay in the premises in
question is not an evidence at all to prove them to be builders in good faith. Mossessgeld was
never presented as a witness nor there was an evidence [sic], that Mossessgeld is the owner
thereof. Is that sufficient evidence to support the claim of the respondents that they are builders
in good faith?29
In their Comment,30 respondents maintain that the question of whether they were builders in
good faith has already been settled by the Court of Appeals, and that there is no reason to
deviate from its findings.31
The sole issue for this Court's resolution is whether respondents are builders in good faith.
I
The Rules of Court categorically states that a review of appeals filed before this Court is "not a
matter of right, but of sound judicial discretion."32
The Rules of Court further requires that only questions of law should be raised in petitions filed
under Rule 4533 since factual questions are not the proper subject of an appeal by certiorari.
It is not this Court's function to analyze or weigh all over again evidence that has already been
considered in the lower courts.34
However, these rules admit exceptions. Medina v. Mayor Asistio, Jr.35 lists down 10
recognized exceptions:
(1) When the conclusion is a finding grounded entirely on speculation, surmises or conjectures;
(2) When the inference made is manifestly mistaken, absurd or impossible; (3) Where there is
a grave abuse of discretion; (4) When: the judgment is based on a misapprehension of facts;
(5) When the findings of fact are conflicting; (6) When the Court of Appeals, in making its
findings, went beyond the issues of the case and the same is contrary to the admissions of
both appellant and appellee; (7) The findings of the Court of Appeals are contrary to those of
the trial court; (8) When the findings of fact are conclusions without citation of specific evidence
on which they are based; (9) When the facts set forth in the petition as well as in the petitioner's
main and reply briefs are not disputed by the respondents; and (10) The finding of fact of the
Court of Appeals is premised on the supposed absence of evidence and is contradicted by the
evidence on record.36
Pascual v. Burgos37 instructs that parties must demonstrate by convincing evidence that the
case clearly falls under the exceptions to the rule:
Parties praying that this court review the factual findings of the Court of Appeals must
demonstrate and prove that the case clearly falls under the exceptions to the rule. They have
the burden of proving to this court that a review of the factual findings is necessary. Mere
assertion and claim that the case falls under the exceptions do not suffice.38 (Citation omitted)
Petitioners claim that the Court of Appeals erred in reversing the trial court's finding that
respondents were not builders in good faith. However, that the findings of the Court of Appeals
and of the trial court are opposite does not warrant this Court's automatic review of factual
findings.39 This only presents a prima facie basis for recourse to this Court. Fernan v. Court of
Appeals40 cautions that this Court's review of the factual findings of the lower courts "must be
invoked and applied only with great circumspection and upon a clear showing that manifestly
correct findings have been unwarrantedly rejected or reversed."41
A careful study of the records leads this Court to conclude that this case falls under the
exceptions cited in Medina, particularly in that "the inference made is manifestly mistaken";42
and that "[t]he findings of the Court of Appeals are contrary to those of the trial court,
necessitating a review of the question of fact raised before this Court."43
II
A builder in good faith is a builder who was not aware of a defect or flaw in his or her title when
he or she introduced improvements on a lot that turns out to be owned by another.44
Philippine National Bank v. De Jesus45 explains that the essence of good faith is an honest
belief of the strength and validity of one's right while being ignorant of another's superior claim
at the same time:
Good faith, here understood, is an intangible and abstract quality with no technical meaning or
statutory definition, and it encompasses, among other things, an honest belief, the absence of
malice and the absence of design to defraud or to seek an unconscionable advantage. An
individual's personal good faith is a concept of his own mind and, therefore, may not
conclusively be determined by his protestations alone. It implies honesty of intention, and
freedom from knowledge of circumstances which ought to put the holder upon inquiry. The
essence of good faith lies in an honest belief in the validity of one's right, ignorance of a superior
claim, and absence of intention to overreach another[.]46 (Citations omitted)
The following provisions of the Civil Code are relevant as regards the remedies available to a
landowner and builder in good faith:
Article 448. The owner of the land on which anything has been built, sown or planted in good
faith, shall have the right to appropriate as his own the works, sowing or planting, after payment
of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted
to pay the price of the land, and the one who sowed, the proper rent. However, the builder or
planter cannot be obliged to buy the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper indemnity. The parties shall agree upon
the terms of the lease and in case of disagreement, the court shall fix the terms thereof.
....
Article 546. Necessary expenses shall be refunded to every possessor; but only the possessor
in good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same right of
retention, the person who has defeated him in the possession having the option of refunding
the amount of the expenses or of paying the increase in value which the thing may have
acquired by reason thereof.
....
Article 548. Expense for pure luxury or mere pleasure shall not be refunded to the possessor
in good faith; but he may remove the ornaments with which he has embellished the principal
thing if it suffers no injury thereby, and if his successors in the possession do not prefer to
refund the amount expended.
Article 448 of the1 Civil Code gives a builder in good faith the right to compel the landowner to
choose between two (2) options: (1) to appropriate the building by paying the indemnity
required by law; or (2) to sell the land to the builder. Ignacio v. Hilario47 summarized the
respective rights of the landowner and builder in good faith as follows:
The owner of the building erected in good faith on a land owned by another, is entitled to retain
the possession of the land until he is paid the value of his building, under article [546]. The
owner of the land, upon the other hand, has the option, under article [448], either to pay for the
building or to sell his land to the owner of the building. But he cannot, as respondents here did,
refuse both to pay for the building and to sell the land and compel the owner of the building to
remove it from the land where it is erected. He is entitled to such remotion only when, after
having chosen to sell his land, the other party fails to pay for the same.48
Rosales v. Castelltort49 has emphasized that the choice belongs to the landowner, but the
landowner must choose from the two (2) available options:
The choice belongs to the owner of the land, a rule that accords with the principle of accession,
i.e., that the accessory follows the principal and not the other way around. Even as the option
lies with the landowner, the grant to him, nevertheless, is preclusive. The landowner cannot
refuse to exercise either option and compel instead the owner of the building to remove it from
the land.50 (Citations omitted)
Even before the Regional Trial Court rendered its Decision, petitioners had already intimated
their willingness to sell the property to respondents at P5,000.00 per square meter, which was
the valuation recommended in the Commissioner's Report. However, respondents refused to
accept the offer to sell.51
Respondents claim to be builders in good faith because they believed that the lot was owned
by De Mossessgeld.52 Operating under this belief, they entered into an agreement with her
where she would sell them the areas occupied by their respective houses, and pending full
payment, they would each pay her P40.00 monthly as rent.53
However, the Regional Trial Court was not swayed by respondents' assertion of being builders
in good faith since it found that the property was titled, as early as 1963, to petitioner Pablo M.
Padilla, Jr.'s mother, while respondents only entered the lot sometime between 1980 and 1983,
thus:
Undoubtedly, [Malicsi, et al.] can not claim that they were builders in good faith because they
relied on the promise of one Mrs. Toribia Vda. De Mossessgeld who will sell the same to them
but such allegations are contrary to the actual circumstances obtaining in this case.
A check with the Office of the Register of Deeds will show that the property in question had
already been registered in the name of the mother of [Pablo M. Padilla, Jr.] way back in 1963
under TCT-T-8303 such that [Malicsi, et al.] "can not claim good faith when they constructed
their residential houses thereon in 1980 and 1983. Said Mrs. Mossessgeld had never been an
owner thereof to sell the same to them.
[Pablo M. Padilla, Jr.] is merely giving [Malicsi, et al.] some liberalities by allowing them to buy
the lots they occupy but the latter adamantly refused as can be gleaned from their written
Comment dated March 27, 2009.54
Upon appeal, the Court of Appeals reversed the findings of the Regional Trial Court and found
respondents to be builders in good faith:
Here, [Malicsi, et al] constructed their houses on the subject parcel of land on their mistaken
belief that it was owned by Toribia vda de Mossessgeld. It was the latter who gave them
permission to build their houses thereat. This situation is no different from that in Sarmiento vs.
Agana where the private respondents who constructed their residential house on a property
they had mistakenly believed to be owned by their mother but later turned out to belong to
another, were considered as builders in good faith.
This ruling was reiterated in the case of Spouses Ismael and Teresita Macasaet vs. Spouses
Vicente and Rosario Macasaet[.]55 (Emphasis in the original, citations omitted)
We do not agree with the Court of Appeals.
The Court of Appeals relied heavily on Sarmiento v. Agana56 and Spouses Macasaet v.
Spouses Macasaet57 to support its reversal of the Regional Trial Court Decision. A judicious
reading of the cited jurisprudence, however, shows that the facts in this case greatly differ from
those in Sarmiento and Spouses Macasaet.
In Sarmiento, Spouses Ernesto and Rebecca Valentino were allowed by Ernesto's mother to
build a house on what she claimed was her lot. The couple then built their house on the lot, but
later found out that the lot was titled to Mr. and Mrs. Jose C. Santos, who had sold the lot to
Leonila Sarmiento.58 This Court ruled that Spouses Ernesto and Rebecca Valentino were
builders in good faith "in view of the peculiar circumstances under which they had constructed
the residential house."59
In Spouses Macasaet, a mother and father owned a parcel of land. They told their son and
daughter-in-law to build a house on a part of the lot so that the family could live near each other
and they could help out in the family business. After some time, relations became strained
between the family members.60 The parents filed an ejectment suit against their son and
daughter-in-law, saying that their stay was only based on tolerance.61 This Court deemed the
son and daughter-in-law to be builders in good faith as they introduced improvements on the
lot with the knowledge and consent of their parents, the registered lot owners.62
No such peculiar circumstance of close family relations can be found here.
Respondents say that they believed De Mossessgeld when she told them that the lot belonged
to her. Yet, the records show that De Mossessgeld was a complete stranger to them. The lack
of blood relation should have been enough to put respondents on guard and convince them
not to rely on her claim of ownership. If respondents had looked into the ownership of the lot,
they would have easily discovered that it was titled to petitioner Pablo M. Padilla, Jr.'s mother
as early as 1963 under Transfer Certificate of Title No. T-8303.
In Baltazar v. Court of Appeals,63 the burden of proving the status of a purchaser in good faith
lies on the person asserting that status.64 It is not enough to invoke the ordinary presumption
of good faith; that is, that everyone is presumed to act in good faith.65 Respondents, as the
party asserting the status of builder in good faith, must substantiate their claim through
preponderance of evidence.66
To support their assertion, respondents claim that they were made to believe by De
Mossessgeld that she owned the lot. Respondents also claim that they received permission
from De Mossessgeld to build their houses on the land, subject to their eventual purchase of
the portions where their houses stood. However, aside from this naked and self-serving
testimony, respondents failed to present any evidence to bolster their claim.
Respondents likewise failed to adduce evidence that they entered into an agreement to sell
with De Mossessgeld, or that they paid her P40.00 per month as rent, pending full payment of
the areas they were occupying.
Furthermore, respondents neither presented De Mossessgeld herself nor submitted proof on
which she might have based her purported ownership of the lot. If De Mossessgeld proved
elusive, respondents could then have presented statements from disinterested third parties
who could testify that it was so well-known in the community that De Mossessgeld owned the
lot that they had to believe her claim of ownership. Respondents likewise failed to prove that
they exercised the necessary diligence required by their situation. They did not examine the
tax declarations or the title to the property before they built on it.
Failing to substantiate their claim, respondents cannot be considered as builders in good faith.
Therefore, the benefits and rights provided under Article 448 of the Civil Code do not apply.
As builders in bad faith, respondents have no right to recover their expenses over the
improvements they have introduced to petitioners' lot under Article 449 of the Civil Code, which
provides:
Article 449. He who builds, plants or sows in bad faith on the land of another, loses what is
built, planted or sown without right to indemnity.
Under Article 45267 of the Civil Code, a builder in bad faith is entitled to recoup the necessary
expenses incurred for the preservation of the land. However, respondents neither alleged nor
presented evidence to show that they introduced improvements for the preservation of the land.
Therefore, petitioners as landowners became the owners68 of the improvements on the lot,
including the residential buildings constructed by respondents, if they chose to appropriate the
accessions. However, they could instead choose the demolition of the improvements at
respondents' expense or compel respondents to pay the price of the land under Article 450 of
the Civil Code, which provides:
Article 450. The owner of the land on which anything has been built, planted or sown in bad
faith may demand the demolition of the work, or that the planting or sowing be removed, in
order to replace things in their former condition at the expense of the person who built, planted
or sowed; or he may compel the builder or planter to pay the price of the land, and the sower
the proper rent.
Whether petitioners choose to appropriate the improvements, compel their demolition, or
compel respondents to pay the price of the land, they are entitled to damages under Article
45169 of the Civil Code.
Heirs of Durano v. Spouses Uy70 has summarized the remedies available to the landowner:
The Civil Code provides:
Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built,
planted or sown without right of indemnity.
Art. 450. The owner of the land on which anything has been built, planted or sown in bad faith
may demand the demolition of the work, or that the planting or sowing be removed, in order to
replace things in their former condition at the expense of the person who built, planted or
sowed; or he may compel the builder or planter to pay the price of the land, and the sower the
proper rent.
Art. 451. In the cases of the two preceding articles, the landowner is entitled to damages from
the builder, planter or sower.
Based on, these provisions, the owner of the land has three alternative rights: (1) to appropriate
what has been built without any obligation to pay indemnity therefor, or (2) to demand that the
builder remove what he had built, or (3) to compel the-builder to pay the value of the land. In
any case, the landowner is entitled to damages under Article 451, abovecited.71 (Citations
omitted)
Considering that petitioners pray for the reinstatement of the Regional Trial Court Decision
ordering respondents to vacate the lot and surrender its possession to them, petitioners are
deemed to have chosen to appropriate the improvements built on their lot without any obligation
to pay indemnity to respondents.
WHEREFORE, premises considered, the Decision dated March 19, 2012 of the Court of
Appeals in CA-G.R. CV No. 96141 is REVERSED and SET ASIDE. The Decision dated July
15, 2009 of Branch 30 of the Regional Trial Court of Cabanatuan City in Civil Case No. 5469
is REINSTATED IN TOTO.
SO ORDERED.
Brion,** (Acting Chairperson), Del Castillo, and Mendoza, JJ., concur.
Carpio, J., on official leave.
G.R. Nos. 154391-92 September 30, 2004
Spouses ISMAEL and TERESITA MACASAET, petitioners,
vs.
Spouses VICENTE and ROSARIO MACASAET, respondents.
DECISION
PANGANIBAN, J.:
The present case involves a dispute between parents and children. The children were invited
by the parents to occupy the latter’s two lots, out of parental love and a desire to foster family
solidarity. Unfortunately, an unresolved conflict terminated this situation. Out of pique, the
parents asked them to vacate the premises. Thus, the children lost their right to remain on the
property. They have the right, however, to be indemnified for the useful improvements that they
constructed thereon in good faith and with the consent of the parents. In short, Article 448 of
the Civil Code applies.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the March
22, 2002 Decision2 and the June 26, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR
SP Nos. 56205 & 56467. The challenged Decision disposed as follows:
"WHEREFORE, the assailed Decision is AFFIRMED with the following MODIFICATIONS:
‘1. Vicente and Rosario should reimburse Ismael and Teresita one-half of the value of the useful
improvements introduced in the premises prior to demand, which is equivalent to ₱475,000.00.
In case the former refuse to reimburse the said amount, the latter may remove the
improvements, even though the land may suffer damage thereby. They shall not, however,
cause any more impairment upon the property leased than is necessary.
‘2. The award of attorney’s fees is DELETED.
‘3. The records of these consolidated cases are REMANDED to the Court of origin for further
proceedings to determine the option to be taken by Vicente and Rosario and to implement the
same with dispatch."4
The assailed Resolution denied petitioners’ Motion for Reconsideration.
The Facts
Petitioners Ismael and Teresita5 Macasaet and Respondents Vicente and Rosario Macasaet
are first-degree relatives. Ismael is the son of respondents, and Teresita is his wife.6
On December 10, 1997, the parents filed with the Municipal Trial Court in Cities (MTCC) of
Lipa City an ejectment suit against the children.7 Respondents alleged that they were the
owners of two (2) parcels of land covered by Transfer Certificate of Title (TCT) Nos. T-78521
and T-103141, situated at Banay-banay, Lipa City; that by way of a verbal lease agreement,
Ismael and Teresita occupied these lots in March 1992 and used them as their residence and
the situs of their construction business; and that despite repeated demands, petitioners failed
to pay the agreed rental of ₱500 per week.8
Ismael and Teresita denied the existence of any verbal lease agreement. They claimed that
respondents had invited them to construct their residence and business on the subject lots in
order that they could all live near one other, employ Marivic (the sister of Ismael), and help in
resolving the problems of the family.9 They added that it was the policy of respondents to allot
the land they owned as an advance grant of inheritance in favor of their children. Thus, they
contended that the lot covered by TCT No. T-103141 had been allotted to Ismael as advance
inheritance. On the other hand, the lot covered by TCT No. T-78521 was allegedly given to
petitioners as payment for construction materials used in the renovation of respondents’
house.10
The MTCC11 ruled in favor of respondents and ordered petitioners to vacate the premises. It
opined that Ismael and Teresita had occupied the lots, not by virtue of a verbal lease
agreement, but by tolerance of Vicente and Rosario.12 As their stay was by mere tolerance,
petitioners were necessarily bound by an implied promise to vacate the lots upon demand.13
The MTCC dismissed their contention that one lot had been allotted as an advance inheritance,
on the ground that successional rights were inchoate. Moreover, it disbelieved petitioners’
allegation that the other parcel had been given as payment for construction materials.14
On appeal, the regional trial court15 (RTC) upheld the findings of the MTCC. However, the
RTC allowed respondents to appropriate the building and other improvements introduced by
petitioners, after payment of the indemnity provided for by Article 448 in relation to Articles 546
and 548 of the Civil Code.16 It added that respondents could oblige petitioners to purchase the
land, unless its value was considerably more than the building. In the latter situation, petitioners
should pay rent if respondents would not choose to appropriate the building.17
Upon denial of their individual Motions for Reconsideration, the parties filed with the CA
separate Petitions for Review, which were later consolidated.18
Ruling of the Court of Appeals
The CA sustained the finding of the two lower courts that Ismael and Teresita had been
occupying the subject lots only by the tolerance of Vicente and Rosario.19 Thus, possession
of the subject lots by petitioners became illegal upon their receipt of respondents’ letter to
vacate it.20
Citing Calubayan v. Pascual,21 the CA further ruled that petitioners’ status was analogous to
that of a lessee or a tenant whose term of lease had expired, but whose occupancy continued
by tolerance of the owner.22 Consequently, in ascertaining the right of petitioners to be
reimbursed for the improvements they had introduced on respondents’ properties,23 the
appellate court applied the Civil Code’s provisions on lease. The CA modified the RTC Decision
by declaring that Article 448 of the Civil Code was inapplicable. The CA opined that under
Article 1678 of the same Code, Ismael and Teresita had the right to be reimbursed for one half
of the value of the improvements made.24
Not satisfied with the CA’s ruling, petitioners brought this recourse to this Court.25
The Issues
Petitioners raise the following issues for our consideration:
"1. a) Whether or not Section 17[,] Rule 70 of the Rules of Court on Judgment should apply in
the rendition of the decision in this case;
b) Whether or not the Complaint should have been dismissed;
c) Whether or not damages including attorney’s fees should have been awarded to herein
petitioners;
"2. a) Whether or not the rule on appearance of parties during the Pretrial should apply on
appearance of parties during Preliminary Conference in an unlawful detainer suit;
b) Whether or not the case of Philippine Pryce Assurance Corporation vs. Court of Appeals
(230 SCRA 164) is applicable to appearance of parties in an unlawful detainer suit;
"3. Whether or not Article 1678 of the Civil Code should apply to the case on the matters of
improvements, or is it Article 447 of the Civil Code in relation to the Article 453 and 454 thereof
that should apply, if ever to apply the Civil Code;
"4. Whether or not the [D]ecision of the Court of Appeals is supported by evidence, appropriate
laws, rules and jurisprudence;
"5. Whether or not Assisting Judge Norberto Mercado of the MTCC Lipa City should be held
accountable in rendering the MTCC [D]ecision;
"6. Whether or not Atty. Glenn Mendoza and Atty. Andrew Linatoc of the same [l]aw office
should be held accountable for pursuing the [e]jectment case[.]"26
The Court’s Ruling
The Petition is partly meritorious.
First Issue:
Ejectment
Who is entitled to the physical or material possession of the premises? At the outset, we stress
that this is the main issue in ejectment proceedings.27 In the present case, petitioners failed to
justify their right to retain possession of the subject lots, which respondents own. Since
possession is one of the attributes of ownership,28 respondents clearly are entitled to physical
or material possession.
Allegations of the Complaint
Petitioners allege that they cannot be ejected from the lots, because respondents based their
Complaint regarding the nonpayment of rentals on a verbal lease agreement, which the latter
failed to prove.29 Petitioners contend that the lower courts erred in using another ground
(tolerance of possession) to eject them.
In actions for unlawful detainer, possession that was originally lawful becomes unlawful upon
the expiration or termination of the defendant’s right to possess, arising from an express or
implied contract.30 In other words, the plaintiff’s cause of action comes from the expiration or
termination of the defendant’s right to continue possession.31 The case resulting therefrom
must be filed within one year from the date of the last demand.
To show a cause of action in an unlawful detainer, an allegation that the defendant is illegally
withholding possession from the plaintiff is sufficient. The complaint may lie even if it does not
employ the terminology of the law, provided the said pleading is couched in a language
adequately stating that the withholding of possession or the refusal to vacate has become
unlawful.32 It is equally settled that the jurisdiction of the court, as well as the nature of the
action, is determined from the averments of the complaint.33
In the present case, the Complaint alleged that despite demands, petitioners "refused to pay
the accrued rentals and [to] vacate the leased premises."34 It prayed that judgment be
rendered "[o]rdering [petitioners] and all those claiming rights under them to vacate the
properties x x x and remove the structures x x x constructed thereon."35 Effectively then,
respondents averred that petitioners’ original lawful occupation of the subject lots had become
unlawful.
The MTCC found sufficient cause to eject petitioners. While it disbelieved the existence of a
verbal lease agreement, it nevertheless concluded that petitioners’ occupation of the subject
lots was by mere tolerance of respondents. Basing its conclusion on the fact that the parties
were close relatives, the MTCC ruled thus:
"x x x [T]he parties herein are first degree relatives. Because of this relationship, this Court
takes judicial notice of the love, care, concern and protection imbued upon the parents towards
their [children], i.e., in the instant case, the love, care, concern and protection of the
[respondents] to the [petitioners]. With this in mind, this Court is inclined to believe the position
of the [petitioners] that there was no such verbal lease agreement between the parties herein
that took place in 1992. x x x.
"From the allegations of the [petitioners], this Court is convinced that their stay and occupancy
of the subject premises was by mere tolerance of the [respondents], and not by virtue of a
verbal lease agreement between them."36
Having found a cause of action for unlawful detainer, the MTCC (as well as the RTC and the
CA) did not err in ordering the ejectment of petitioners as prayed for by respondents. There
was no violation of Section 17 of Rule 7037 of the Rules of Court. As earlier explained, unlawful
detainer was sufficiently alleged in the Complaint and duly proven during the trial. Significantly,
the issue of whether there was enough ground to eject petitioners was raised during the
preliminary conference.38
Not Merely Tolerated
Possession
Petitioners dispute the lower courts’ finding that they occupied the subject lots on the basis of
mere tolerance. They argue that their occupation was not under such condition, since
respondents had invited, offered and persuaded them to use those properties.39
This Court has consistently held that those who occupy the land of another at the latter’s
tolerance or permission, without any contract between them, are necessarily bound by an
implied promise that the occupants will vacate the property upon demand.40 A summary action
for ejectment is the proper remedy to enforce this implied obligation.41 The unlawful deprivation
or withholding of possession is to be counted from the date of the demand to vacate.42
Toleration is defined as "the act or practice of permitting or enduring something not wholly
approved of."43 Sarona v. Villegas44 described what tolerated acts means, in this language:
"Professor Arturo M. Tolentino states that acts merely tolerated are ‘those which by reason of
neighborliness or familiarity, the owner of property allows his neighbor or another person to do
on the property; they are generally those particular services or benefits which one’s property
can give to another without material injury or prejudice to the owner, who permits them out of
friendship or courtesy.’ x x x. And, Tolentino continues, even though ‘this is continued for a long
time, no right will be acquired by prescription." x x x. Further expounding on the concept,
Tolentino writes: ‘There is tacit consent of the possessor to the acts which are merely tolerated.
Thus, not every case of knowledge and silence on the part of the possessor can be considered
mere tolerance. By virtue of tolerance that is considered as an authorization, permission or
license, acts of possession are realized or performed. The question reduces itself to the
existence or non-existence of the permission."45
We hold that the facts of the present case rule out the finding of possession by mere tolerance.
Petitioners were able to establish that respondents had invited them to occupy the subject lots
in order that they could all live near one other and help in resolving family problems.46 By
occupying those lots, petitioners demonstrated their acceptance of the invitation. Hence, there
was a meeting of minds, and an agreement regarding possession of the lots impliedly arose
between the parties.
The occupancy of the subject lots by petitioners was not merely "something not wholly
approved of" by respondents. Neither did it arise from what Tolentino refers to as
"neighborliness or familiarity." In point of fact, their possession was upon the invitation of and
with the complete approval of respondents, who desired that their children would occupy the
premises. It arose from familial love and a desire for family solidarity, which are basic Filipino
traits.
Right to Use the Lots Terminated
That Ismael and Teresita had a right to occupy the lots is therefore clear. The issue is the
duration of possession. In the absence of a stipulation on this point, Article 1197 of the Civil
Code allows the courts to fix the duration or the period.
"Article 1197. If the obligation does not fix a period, but from its nature and the circumstances
it can be inferred that a period was intended, the courts may fix the duration thereof.
"The courts shall also fix the duration of the period when it depends upon the will of the debtor.
"In every case the courts shall determine such period as may under the circumstances have
been probably contemplated by the parties. Once fixed by the courts, the period cannot be
changed by them."
Article 1197, however, applies to a situation in which the parties intended a period. Such
qualification cannot be inferred from the facts of the present case.
To repeat, when Vicente and Rosario invited their children to use the lots, they did so out of
parental love and a desire for solidarity expected from Filipino parents. No period was intended
by the parties. Their mere failure to fix the duration of their agreement does not necessarily
justify or authorize the courts to do so.47
Based on respondents’ reasons for gratuitously allowing petitioners to use the lots, it can be
safely concluded that the agreement subsisted as long as the parents and the children mutually
benefited from the arrangement. Effectively, there is a resolutory condition in such an
agreement.48 Thus, when a change in the condition existing between the parties occurs -- like
a change of ownership, necessity, death of either party or unresolved conflict or animosity --
the agreement may be deemed terminated. Having been based on parental love, the
agreement would end upon the dissipation of the affection.
When persistent conflict and animosity overtook the love and solidarity between the parents
and the children, the purpose of the agreement ceased.49 Thus, petitioners no longer had any
cause for continued possession of the lots. Their right to use the properties became untenable.
It ceased upon their receipt of the notice to vacate. And because they refused to heed the
demand, ejectment was the proper remedy against them. Their possession, which was
originally lawful, became unlawful when the reason therefor -- love and solidarity -- ceased to
exist between them.
No Right to Retain
Possession
Petitioners have not given this Court adequate reasons to reverse the lower courts’ dismissal
of their contention that Lots T-78521 and T-103141, respectively, were allegedly allotted to
them as part of their inheritance and given in consideration for past debts.
The right of petitioners to inherit from their parents is merely inchoate and is vested only upon
the latters’ demise. Indisputably, rights of succession are transmitted only from the moment of
death of the decedent.50 Assuming that there was an "allotment" of inheritance, ownership
nonetheless remained with respondents. Moreover, an intention to confer title to certain
persons in the future is not inconsistent with the owners’ taking back possession in the
meantime for any reason deemed sufficient.51 Other than their self-serving testimonies and
their affidavits, petitioners offered no credible evidence to support their outlandish claim of
inheritance "allocation."
We also agree with the lower courts that petitioners failed to prove the allegation that, through
a dation in payment, Lot T-78521 had been transferred to the latter as payment for respondents’
debts.52 The evidence presented by petitioners related only to the alleged indebtedness of the
parents arising from the latter’s purported purchases and advances.53 There was no sufficient
proof that respondents had entered into a contract of dation to settle the alleged debt.
Petitioners even stated that there was a disagreement in the accounting of the purported
debt,54 a fact that disproves a meeting of the minds with the parents.
Petitioners also admitted that a portion of the alleged debt is the subject matter of a collection
case against respondents (Civil Case No. 0594-96).55 Thus, the former’s allegation that the
indebtedness has been paid through a dation cannot be given credence, inconsistent as it is
with their action to recover the same debt.
Despite their protestations, petitioners recognized the right of the parents to recover the
premises when they admitted in their Position Paper filed with the MTCC that respondents had
a title to the lots.
"The [respondents] want to get their property because the title is theirs, the [petitioners] do not
object but what is due the [petitioners] including the reparation for the tarnish of their dignity
and honor must be given the [petitioners] for the benefits of their children before the premises
will be turned over."56
As a rule, the right of ownership carries with it the right of possession.
Second Issue:
Appearance at the Preliminary Conference
Section 8 of Rule 70 of the Rules of Court requires the appearance of the plaintiff and the
defendant during the preliminary conference. On the basis of this provision, petitioners claim
that the MTCC should have dismissed the case upon the failure of respondents to attend the
conference. However, petitioners do not dispute that an attorney-in-fact with a written
authorization from respondents appeared during the preliminary conference.57 The issue then
is whether the rules on ejectment allow a representative to substitute for a party’s personal
appearance.
Unless inconsistent with Rule 70, the provisions of Rule 18 on pretrial applies to the preliminary
conference.58 Under Section 4 of this Rule, the nonappearance of a party may be excused by
the showing of a valid cause; or by the appearance of a representative, who has been fully
authorized in writing to enter into an amicable settlement, to submit to alternative modes of
dispute resolution, and to enter into stipulations or admissions of facts and of documents.59
Section 4 of Rule 18 may supplement Section 8 of Rule 70. Thus, the spirit behind the exception
to personal appearance under the rules on pretrial is applicable to the preliminary conference.
If there are valid reasons or if a representative has a "special authority," a party’s appearance
may be waived. As petitioners are challenging only the applicability of the rules on pretrial to
the rule on preliminary conference, the written authorization from respondents can indeed be
readily considered as a "special authorization."
Third Issue:
Rights of a Builder in Good Faith
As applied to the present case, accession refers to the right of the owner to everything that is
incorporated or attached to the property.60 Accession industrial -- building, planting and sowing
on an immovable -- is governed by Articles 445 to 456 of the Civil Code.
Articles 447 and 1678 of the
Civil Code Inapplicable
To buttress their claim of reimbursement for the improvements introduced on the property,
petitioners cite Article 447.61 They allege that the CA erred in applying Article 1678, since they
had no lease agreement with respondents.
We clarify. Article 447 is not applicable, because it relates to the rules that apply when the
owner of the property uses the materials of another. It does not refer to the instance when a
possessor builds on the property of another, which is the factual milieu here.
In view of the unique factual setting of the instant case, the contention of petitioners regarding
the inapplicability of Article 1678 deserves attention. The CA applied the provisions on lease,
because it found their possession by mere tolerance comparable with that of a lessee, per the
pronouncement in Calubayan v. Pascual,62 from which we quote:
"x x x. It has been held that a person who occupies the land of another at the latter’s tolerance
or permission, without any contract between them, is necessarily bound by an implied promise
that he will vacate upon demand, failing which a summary action for ejectment is the proper
remedy against them. The status of defendant is analogous to that of a lessee or tenant whose
term of lease has expired but whose occupancy continued by tolerance of the owner. In such
a case, the unlawful deprivation or withholding of possession is to be counted from the date of
the demand to vacate."63 (Emphasis in the original.)
As explained earlier, Ismael and Teresita’s possession of the two lots was not by mere
tolerance, a circumstance that negates the applicability of Calubayan.
Article 448 Applicable
On the other hand, when a person builds in good faith on the land of another, the applicable
provision is Article 448, which reads:64
"Article 448. The owner of the land on which anything has been built, sown or planted in good
faith, shall have the right to appropriate as his own the works, sowing or planting, after payment
of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted
to pay the price of the land, and the one who sowed, the proper rent. However, the builder or
planter cannot be obliged to buy the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper indemnity. The parties shall agree upon
the terms of the lease and in case of disagreement, the court shall fix the terms thereof."
This Court has ruled that this provision covers only cases in which the builders, sowers or
planters believe themselves to be owners of the land or, at least, to have a claim of title
thereto.65 It does not apply when the interest is merely that of a holder, such as a mere tenant,
agent or usufructuary.66 From these pronouncements, good faith is identified by the belief that
the land is owned; or that -- by some title -- one has the right to build, plant, or sow thereon.67
However, in some special cases, this Court has used Article 448 by recognizing good faith
beyond this limited definition. Thus, in Del Campo v. Abesia,68 this provision was applied to
one whose house -- despite having been built at the time he was still co-owner -- overlapped
with the land of another.69 This article was also applied to cases wherein a builder had
constructed improvements with the consent of the owner. The Court ruled that the law deemed
the builder to be in good faith.70 In Sarmiento v. Agana,71 the builders were found to be in
good faith despite their reliance on the consent of another, whom they had mistakenly believed
to be the owner of the land.72
Based on the aforecited special cases, Article 448 applies to the present factual milieu. The
established facts of this case show that respondents fully consented to the improvements
introduced by petitioners. In fact, because the children occupied the lots upon their invitation,
the parents certainly knew and approved of the construction of the improvements introduced
thereon.73 Thus, petitioners may be deemed to have been in good faith when they built the
structures on those lots.
The instant case is factually similar to Javier v. Javier.74 In that case, this Court deemed the
son to be in good faith for building the improvement (the house) with the knowledge and
consent of his father, to whom belonged the land upon which it was built. Thus, Article 44875
was applied.
Rule on Useful Expenses
The structures built by petitioners were "useful" improvements, because they augmented the
value or income of the bare lots.76 Thus, the indemnity to be paid by respondents under Article
448 is provided for by Article 546, which we quote:
"Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor
in good faith may retain the thing until he has been reimbursed therefor.
"Useful expenses shall be refunded only to the possessor in good faith with the same right of
retention, the person who has defeated him in the possession having the option of refunding
the amount of the expenses or of paying the increase in value which the thing may have
acquired by reason thereof."
Consequently, respondents have the right to appropriate -- as their own -- the building and
other improvements on the subject lots, but only after (1) refunding the expenses of petitioners
or (2) paying the increase in value acquired by the properties by reason thereof. They have the
option to oblige petitioners to pay the price of the land, unless its value is considerably more
than that of the structures -- in which case, petitioners shall pay reasonable rent.
In accordance with Depra v. Dumlao,77 this case must be remanded to the trial court to
determine matters necessary for the proper application of Article 448 in relation to Article 546.
Such matters include the option that respondents would take and the amount of indemnity that
they would pay, should they decide to appropriate the improvements on the lots. We disagree
with the CA’s computation of useful expenses, which were based only on petitioners’ bare
allegations in their Answer.78
Ruling on Improvement Justified
While, ordinarily, the jurisdiction of the MTCC on ejectment proceedings is limited to the issue
of physical or material possession of the property in question, this Court finds it necessary to
abbreviate the issue on the improvements in relation to Article 448. First, the determination of
the parties’ right to those improvements is intimately connected with the MTCC proceedings in
the light of the ejectment of petitioners. Second, there is no dispute that while they constructed
the improvements, respondents owned the land. Third, both parties raised no objection when
the RTC and the CA ruled accordingly on this matter.
Equitable considerations compel us to settle this point immediately, pro hoc vice, to avoid
needless delay. Both parties have already been heard on this issue; to dillydally or equivocate
would not serve the cause of substantial justice.
Other Issues Raised
Given the foregoing rulings, it is no longer necessary to address petitioners’ allegation that the
MTCC judge and respondents’ lawyers should be respectively held personally accountable for
the Decision and for filing the case.79 The insinuation of petitioners that the lawyers
manipulated the issuance of a false barangay certification is unavailing.80 Their contention that
respondents did not attend the barangay conciliation proceedings was based solely on
hearsay, which has little or no probative value.81
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are AFFIRMED
with the following MODIFICATIONS:
1. The portion requiring Spouses Vicente and Rosario Macasaet to reimburse one half of the
value of the useful improvements, amounting to ₱475,000, and the right of Spouses Ismael
and Rosita Macasaet to remove those improvements (if the former refuses to reimburse) is
DELETED.
2. The case is REMANDED to the court of origin for further proceedings to determine the facts
essential to the proper application of Articles 448 and 546 of the Civil Code, specifically to the
following matters:
a. Spouses Vicente and Rosario Macasaet’s option to appropriate -- as their own -- the
improvements on the lots, after paying the indemnity, as provided under Article 546 in relation
to Article 448 of the Civil Code; or in requiring Spouses Ismael and Rosita Macasaet to pay for
the value of the lots, unless it is considerably more than that of the improvements, in which
case petitioners shall pay reasonable rent based upon the terms provided under the Civil Code
b. The value of the useful expenses incurred by Spouses Ismael and Rosita Macasaet in the
construction of the improvements on the lots
c. The increase in value acquired by the lots by reason of the useful improvements
d. Spouses Vicente and Rosario Macasaet’s choice of type of indemnity to be paid (whether b
or c)
e. Whether the value of the lots is considerably more than that of the improvements built
thereon
No pronouncement as to costs.
SO ORDERED.
Sandoval-Gutierrez, Corona, and Carpio Morales, JJ., concur.
G.R. No. 79688 February 1, 1996
PLEASANTVILLE DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, WILSON KEE, C.T. TORRES ENTERPRISES, INC. and ELDRED
JARDINICO, respondents.
DECISION
PANGANIBAN, J.:
Is a lot buyer who constructs improvements on the wrong property erroneously delivered by
the owner's agent, a builder in good faith? This is the main issue resolved in this petition for
review on certiorari to reverse the Decision1 of the Court of Appeals2 in CA-G.R. No. 11040,
promulgated on August 20, 1987.
By resolution dated November 13, 1995, the First Division of this Court resolved to transfer this
case (along with several others) to the Third Division. After due deliberation and consultation,
the Court assigned the writing of this Decision to the undersigned ponente.
The Facts
The facts, as found by respondent Court, are as follows:
Edith Robillo purchased from petitioner a parcel of land designated as Lot 9, Phase II and
located at Taculing Road, Pleasantville Subdivision, Bacolod City. In 1975, respondent Eldred
Jardinico bought the rights to the lot from Robillo. At that time, Lot 9 was vacant.
Upon completing all payments, Jardinico secured from the Register of Deeds of Bacolod City
on December 19, 1978 Transfer Certificate of Title No. 106367 in his name. It was then that he
discovered that improvements had been introduced on Lot 9 by respondent Wilson Kee, who
had taken possession thereof.
It appears that on March 26, 1974, Kee bought on installment Lot 8 of the same subdivision
from C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate agent of petitioner. Under
the Contract to Sell on Installment, Kee could possess the lot even before the completion of all
installment payments. On January 20, 1975, Kee paid CTTEI the relocation fee of P50.00 and
another P50.00 on January 27, 1975, for the preparation of the lot plan. These amounts were
paid prior to Kee's taking actual possession of Lot 8. After the preparation of the lot plan and a
copy thereof given to Kee, CTTEI through its employee, Zenaida Octaviano, accompanied
Kee's wife, Donabelle Kee, to inspect Lot 8. Unfortunately, the parcel of land pointed by
Octaviano was Lot 9. Thereafter, Kee proceeded to construct his residence, a store, an auto
repair shop and other improvements on the lot.
After discovering that Lot 9 was occupied by Kee, Jardinico confronted him. The parties tried
to reach an amicable settlement, but failed.
On January 30, 1981, Jardinico's lawyer wrote Kee, demanding that the latter remove all
improvements and vacate Lot 9. When Kee refused to vacate Lot 9, Jardinico filed with the
Municipal Trial Court in Cities, Branch 3, Bacolod City (MTCC), a complaint for ejectment with
damages against Kee.
Kee, in turn, filed a third-party complaint against petitioner and CTTEI.
The MTCC held that the erroneous delivery of Lot 9 to Kee was attributable to CTTEI. It further
ruled that petitioner and CTTEI could not successfully invoke as a defense the failure of Kee
to give notice of his intention to begin construction required under paragraph 22 of the Contract
to Sell on Installment and his having built a sari-sari store without the prior approval of petitioner
required under paragraph 26 of said contract, saying that the purpose of these requirements
was merely to regulate the type of improvements to be constructed on the Lot.3
However, the MTCC found that petitioner had already rescinded its contract with Kee over Lot
8 for the latter's failure to pay the installments due, and that Kee had not contested the
rescission. The rescission was effected in 1979, before the complaint was instituted. The MTCC
concluded that Kee no longer had any right over the lot subject of the contract between him
and petitioner. Consequently, Kee must pay reasonable rentals for the use of Lot 9, and,
furthermore, he cannot claim reimbursement for the improvements he introduced on said lot.
The MTCC thus disposed:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered as follows:
1. Defendant Wilson Kee is ordered to vacate the premises of Lot 9, covered by TCT No.
106367 and to remove all structures and improvements he introduced thereon;
2. Defendant Wilson Kee is ordered to pay to the plaintiff rentals at the rate of P15.00 a
day computed from the time this suit was filed on March 12, 1981 until he actually vacates the
premises. This amount shall bear interests (sic) at the rate of 12 per cent (sic) per annum.
3. Third-Party Defendant C.T. Torres Enterprises, Inc. and Pleasantville Subdivision are
ordered to pay the plaintiff jointly and severally the sum of P3,000.00 as attorney's fees and
P700.00 as cost and litigation expenses.4
On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC) ruled that petitioner and
CTTEI were not at fault or were not negligent, there being no preponderant evidence to show
that they directly participated in the delivery of Lot 9 to Kee5 . It found Kee a builder in bad
faith. It further ruled that even assuming arguendo that Kee was acting in good faith, he was,
nonetheless, guilty of unlawfully usurping the possessory right of Jardinico over Lot 9 from the
time he was served with notice to vacate said lot, and thus was liable for rental.
The RTC thus disposed:
WHEREFORE, the decision appealed from is affirmed with respect to the order against the
defendant to vacate the premises of Lot No. 9 covered by Transfer Certificate of Title No. T-
106367 of the land records of Bacolod City; the removal of all structures and improvements
introduced thereon at his expense and the payment to plaintiff (sic) the sum of Fifteen (P15.00)
Pesos a day as reasonable rental to be computed from January 30, 1981, the date of the
demand, and not from the date of the filing of the complaint, until he had vacated (sic) the
premises, with interest thereon at 12% per annum. This Court further renders judgment against
the defendant to pay the plaintiff the sum of Three Thousand (P3,000.00) Pesos as attorney's
fees, plus costs of litigation.
The third-party complaint against Third-Party Defendants Pleasantville Development
Corporation and C.T. Torres Enterprises, Inc. is dismissed. The order against Third-Party
Defendants to pay attorney's fees to plaintiff and costs of litigation is reversed.6
Following the denial of his motion for reconsideration on October 20, 1986, Kee appealed
directly to the Supreme Court, which referred the matter to the Court of Appeals.
The appellate court ruled that Kee was a builder in good faith, as he was unaware of the "mix-
up" when he began construction of the improvements on Lot 8. It further ruled that the
erroneous delivery was due to the negligence of CTTEI, and that such wrong delivery was
likewise imputable to its principal, petitioner herein. The appellate court also ruled that the
award of rentals was without basis.
Thus, the Court of Appeals disposed:
WHEREFORE, the petition is GRANTED, the appealed decision is REVERSED, and judgment
is rendered as follows:
1. Wilson Kee is declared a builder in good faith with respect to the improvements he
introduced on Lot 9, and is entitled to the rights granted him under Articles 448, 546 and 548
of the New Civil Code.
2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development
Corporation are solidarily liable under the following circumstances:
A. If Eldred Jardinico decides to appropriate the improvements and, thereafter, remove
these structures, the third-party defendants shall answer for all demolition expenses and the
value of the improvements thus destroyed or rendered useless;
b. If Jardinico prefers that Kee buy the land, the third-party defendants shall answer for
the amount representing the value of Lot 9 that Kee should pay to Jardinico.

3. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development
Corporation are ordered to pay in solidum the amount of P3,000.00 to Jardinico as attorney's
fees, as well as litigation expenses.
4. The award of rentals to Jardinico is dispensed with.
Furthermore, the case is REMANDED to the court of origin for the determination of the actual
value of the improvements and the property (Lot 9), as well as for further proceedings in
conformity with Article 448 of the New Civil Code.7
Petitioner then filed the instant petition against Kee, Jardinico and CTTEI.
The Issues
The petition submitted the following grounds to justify a review of the respondent Court's
Decision, as follows:
1. The Court of Appeals has decided the case in a way probably not in accord with law
or the the (sic) applicable decisions of the Supreme Court on third-party complaints, by ordering
third-party defendants to pay the demolition expenses and/or price of the land;
2. The Court of Appeals has so far departed from the accepted course of judicial
proceedings, by granting to private respondent-Kee the rights of a builder in good faith in
excess of what the law provides, thus enriching private respondent Kee at the expense of the
petitioner;
3. In the light of the subsequent events or circumstances which changed the rights of the
parties, it becomes imperative to set aside or at least modify the judgment of the Court of
Appeals to harmonize with justice and the facts;
4. Private respondent-Kee in accordance with the findings of facts of the lower court is
clearly a builder in bad faith, having violated several provisions of the contract to sell on
installments;
5. The decision of the Court of Appeals, holding the principal, Pleasantville Development
Corporation (liable) for the acts made by the agent in excess of its authority is clearly in violation
of the provision of the law;
6. The award of attorney's fees is clearly without basis and is equivalent to putting a
premium in (sic) court litigation.
From these grounds, the issues could be re-stated as follows:
(1) Was Kee a builder in good faith?
(2) What is the liability, if any, of petitioner and its agent, C.T. Torres Enterprises, Inc.?
and
(3) Is the award of attorney's fees proper?
The First Issue: Good Faith
Petitioner contends that the Court of Appeals erred in reversing the RTC's ruling that Kee was
a builder in bad faith.
Petitioner fails to persuade this Court to abandon the findings and conclusions of the Court of
Appeals that Kee was a builder in good faith. We agree with the following observation of the
Court of Appeals:
The roots of the controversy can be traced directly to the errors committed by CTTEI, when it
pointed the wrong property to Wilson Kee and his wife. It is highly improbable that a purchaser
of a lot would knowingly and willingly build his residence on a lot owned by another, deliberately
exposing himself and his family to the risk of being ejected from the land and losing all
improvements thereon, not to mention the social humiliation that would follow.
Under the circumstances, Kee had acted in the manner of a prudent man in ascertaining the
identity of his property. Lot 8 is covered by Transfer Certificate of Title No. T-69561, while Lot
9 is identified in Transfer Certificate of Title No. T-106367. Hence, under the Torrens system
of land registration, Kee is presumed to have knowledge of the metes and bounds of the
property with which he is dealing. . . .
xxx xxx xxx
But as Kee is a layman not versed in the technical description of his property, he had to find a
way to ascertain that what was described in TCT No. 69561 matched Lot 8. Thus, he went to
the subdivision developer's agent and applied and paid for the relocation of the lot, as well as
for the production of a lot plan by CTTEI's geodetic engineer. Upon Kee's receipt of the map,
his wife went to the subdivision site accompanied by CTTEI's employee, Octaviano, who
authoritatively declared that the land she was pointing to was indeed Lot 8. Having full faith
and confidence in the reputation of CTTEI, and because of the company's positive identification
of the property, Kee saw no reason to suspect that there had been a misdelivery. The steps
Kee had taken to protect his interests were reasonable. There was no need for him to have
acted ex-abundantia cautela, such as being present during the geodetic engineer's relocation
survey or hiring an independent geodetic engineer to countercheck for errors, for the final
delivery of subdivision lots to their owners is part of the regular course of everyday business of
CTTEI. Because of CTTEI's blunder, what Kee had hoped to forestall did in fact transpire. Kee's
efforts all went to naught.8
Good faith consists in the belief of the builder that the land he is building on is his and his
ignorance of any defect or flaw in his title 9 . And as good faith is presumed, petitioner has the
burden of proving bad faith on the part of Kee 10 .

At the time he built improvements on Lot 8, Kee believed that said lot was what he bought from
petitioner. He was not aware that the lot delivered to him was not Lot 8. Thus, Kee's good faith.
Petitioner failed to prove otherwise.
To demonstrate Kee's bad faith, petitioner points to Kee's violation of paragraphs 22 and 26 of
the Contract of Sale on Installment.
We disagree. Such violations have no bearing whatsoever on whether Kee was a builder in
good faith, that is, on his state of mind at the time he built the improvements on Lot 9. These
alleged violations may give rise to petitioner's cause of action against Kee under the said
contract (contractual breach), but may not be bases to negate the presumption that Kee was a
builder in good faith.
Petitioner also points out that, as found by the trial court, the Contract of Sale on Installment
covering Lot 8 between it and Kee was rescinded long before the present action was instituted.
This has no relevance on the liability of petitioner, as such fact does not negate the negligence
of its agent in pointing out the wrong lot. to Kee. Such circumstance is relevant only as it gives
Jardinico a cause of action for unlawful detainer against Kee.
Petitioner next contends that Kee cannot "claim that another lot was erroneously pointed out
to him" because the latter agreed to the following provision in the Contract of Sale on
installment, to wit:
13. The Vendee hereby declares that prior to the execution of his contract he/she has
personally examined or inspected the property made subject-matter hereof, as to its location,
contours, as well as the natural condition of the lots and from the date hereof whatever
consequential change therein made due to erosion, the said Vendee shall bear the expenses
of the necessary fillings, when the same is so desired by him/her. 11
The subject matter of this provision of the contract is the change of the location, contour and
condition of the lot due to erosion. It merely provides that the vendee, having examined the
property prior to the execution of the contract, agrees to shoulder the expenses resulting from
such change.
We do not agree with the interpretation of petitioner that Kee contracted away his right to
recover damages resulting from petitioner's negligence. Such waiver would be contrary to
public policy and cannot be allowed. "Rights may be waived, unless the waiver is contrary to
law, public order, public policy, morals, or good customs, or prejudicial to a third person with a
right recognized by law." 12
The Second Issue: Petitioner's Liability
Kee filed a third-party complaint against petitioner and CTTEI, which was dismissed by the
RTC after ruling that there was no evidence from which fault or negligence on the part of
petitioner and CTTEI can be inferred. The Court of Appeals disagreed and found CTTEI
negligent for the erroneous delivery of the lot by Octaviano, its employee.
Petitioner does not dispute the fact that CTTEI was its agent. But it contends that the erroneous
delivery of Lot 9 to Kee was an act which was clearly outside the scope of its authority, and
consequently, CTTEI I alone should be liable. It asserts that "while [CTTEI] was authorized to
sell the lot belonging to the herein petitioner, it was never authorized to deliver the wrong lot to
Kee" 13 .
Petitioner's contention is without merit.
The rule is that the principal is responsible for the acts of the agent, done within the scope of
his authority, and should bear the damage caused to third persons 14 . On the other hand, the
agent who exceeds his authority is personally liable for the damage 15
CTTEI was acting within its authority as the sole real estate representative of petitioner when
it made the delivery to Kee. In acting within its scope of authority, it was, however, negligent. It
is this negligence that is the basis of petitioner's liability, as principal of CTTEI, per Articles
1909 and 1910 of the Civil Code.
Pending resolution of the case before the Court of Appeals, Jardinico and Kee on July 24, 1987
entered into a deed of sale, wherein the former sold Lot 9 to Kee. Jardinico and Kee did not
inform the Court of Appeals of such deal.
The deed of sale contained the following provision:
1. That Civil Case No. 3815 entitled "Jardinico vs. Kee" which is now pending appeal with
the Court of Appeals, regardless of the outcome of the decision shall be mutually disregarded
and shall not be pursued by the parties herein and shall be considered dismissed and without
effect whatso-ever; 16
Kee asserts though that the "terms and conditions in said deed of sale are strictly for the parties
thereto" and that "(t)here is no waiver made by either of the parties in said deed of whatever
favorable judgment or award the honorable respondent Court of Appeals may make in their
favor against herein petitioner Pleasantville Development Corporation and/or private
respondent C.T. Torres Enterprises; Inc." 17
Obviously, the deed of sale can have no effect on the liability of petitioner. As we have earlier
stated, petitioner's liability is grounded on the negligence of its agent. On the other hand, what
the deed of sale regulates are the reciprocal rights of Kee and Jardinico; it stressed that they
had reached an agreement independent of the outcome of the case.
Petitioner further assails the following holding of the Court of Appeals:
2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development
Corporation are solidarily liable under the following circumstances:
 by the appellate Court, to remand the case to the court of origin "for determination of the actual
a. If Eldred Jardinico decides to appropriate the improvements and, thereafter, remove value of the improvements and the property (Lot 9), as well as for further proceedings in
these structures, the third-party defendants shall answer for all demolition expenses and the conformity with Article 448 of the New Civil Code."
value of the improvements thus destroyed or rendered useless;
WHEREFORE , the petition is partially GRANTED. The Decision of the Court of Appeals is
b. If Jardinico prefers that Kee buy the land, the third-party defendants shall answer for hereby MODIFIED as follows:
the amount representing the value of Lot 9 that Kee should pay to Jardinico. 18
(1) Wilson Kee is declared a builder in good faith;
Petitioner contends that if the above holding would be carried out, Kee would be unjustly
enriched at its expense. In other words, Kee would be able to own the lot, as buyer, without (2) Petitioner Pleasantville Development Corporation and respondent C.T. Torres
having to pay anything on it, because the aforequoted portion of respondent Court's Decision Enterprises, Inc. are declared solidarily liable for damages due to negligence; however, since
would require petitioner and CTTEI jointly and solidarily to "answer" or reimburse Kee therefor. the amount and/or extent of such damages was not proven during the trial, the same cannot
now be quantified and awarded;
We agree with petitioner.
(3) Petitioner Pleasantville Development Corporation and respondent C.T. Torres
Petitioner' s liability lies in the negligence of its agent CTTEI. For such negligence, the petitioner Enterprises, Inc. are ordered to pay in solidum the amount of P3,000.00 to Jardinico as
should be held liable for damages. Now, the extent and/or amount of damages to be awarded attorney's fees, as well as litigation expenses; and
is a factual issue which should be determined after evidence is adduced. However, there is no
showing that such evidence was actually presented in the trial court; hence no damages could (4) The award of rentals to Jardinico is dispensed with.
flow be awarded.
SO ORDERED.
The rights of Kee and Jardinico vis-a-vis each other, as builder in good faith and owner in good
faith, respectively, are regulated by law (i.e., Arts. 448, 546 and 548 of the Civil Code). It was Navasa, C.J., Davide, Jr. and Melo, JJ., concur.
error for the Court of Appeals to make a "slight modification" in the application of such law, on Francisco, J., took no part.
the ground of "equity". At any rate, as it stands now, Kee and Jardinico have amicably settled
through their deed of sale their rights and obligations with regards to Lot 9. Thus, we delete
items 2 (a) and (b) of the dispositive portion of the Court of Appeals' Decision [as reproduced G.R. No. 211845
above] holding petitioner and CTTEI solidarily liable.
PEN DEVELOPMENT CORPORATION and LAS BRISAS RESORT CORPORATION,
The Third Issue: Attorney's Fees Petitioners,
vs.
The MTCC awarded Jardinico attorney's fees and costs in the amount of P3,000.00 and MARTINEZ LEYBA, INC.,, Respondent
P700.00, respectively, as prayed for in his complaint. The RTC deleted the award, consistent
with its ruling that petitioner was without fault or negligence. The Court of Appeals, however, DECISION
reinstated the award of attorney's fees after ruling that petitioner was liable for its agent's
negligence. DEL CASTILLO, J.:

The award of attorney's fees lies within the discretion of the court and depends upon the
circumstances of each case 19 . We shall not interfere with the discretion of the Court of
Appeals. Jardinico was compelled to litigate for the protection of his interests and for the
recovery of damages sustained as a result of the negligence of petitioner's agent 20 .
In sum, we rule that Kee is a builder in good faith. The disposition of the Court of Appeals that
Kee "is entitled to the rights granted him under Articles 448, 546 and 548 of the New Civil Code"
is deleted, in view of the deed of sale entered into by Kee and Jardinico, which deed now
governs the rights of Jardinico and Kee as to each other. There is also no further need, as ruled
Assailed in this Petition for Review on Certiorari1 are the July 17, 2013 Decision2 of the Court
of Appeals (CA) in CA-G.R. CV No. 97478 which affirmed with modification the January 20,
2009 Decision3 of the Regional Trial Court of Antipolo City, Branch 71 (RTC) in Civil Case No.
97-4386, and the CA's March 28, 2014 Resolution4 denying herein petitioners' Motion for
Reconsideration.
Factual Antecedents
As found by the CA, the facts are as follows:

Plaintiff-Appellee Martinez Leyba, Inc. (hereafter Martinez) is a corporation organized and
existing under Philippine laws and the registered owner of three (3) contiguous parcels of land
situated in Antipolo, Rizal, surveyed and identified as Lot Nos. 29, 30 and 31, Block 3, (LRC)
Pcs-7305 and registered under Transfer Certificate of Title Nos. 250212, 25044 and 250243,
respectively, with the Register of Deeds of Rizal.
Defendants-Appellants Pen Development Corporation and Las Brisas Resorts Corporation are
also domestic corporations duly organized and existing under Philippine laws. Appellants,
facreafter, merged into one corporate entity under the name Las Brisas Resmis Corporation
(hereafter Las Brisas). Las Brisas is the registered owner of a parcel of land under TCT No.
153101 which is situated adjacent to the lMds owned by Martinez. Las Brisas occupied the said
land in 1967 and fenced the same.
In l 968, Martinez noticed that the construction of Las Brisas' fence seemed to encroach on its
land. Upon verification by surveyors, Martinez was informed that the fence of Las Brisas
overlaps its property. On 11 March 1968, Martinez sent a Letter informing Las Brisas that the
fence it constructed encroaches [sic] on Martinez's land and requested Las Brisas to refrain
from further intruding on the same. Las Brisa5 did not respond to Martinez's letter and
continued developing its land.
Martinez sent two (2) more Letters dated 31 March 1970 and 3 November 1970 to Las Brisas
informing the latter of the encroachment of its structures and improvements over Martinez's
titled land.
On 31 July 1971, Las Brisas, through a certain Paul Naidas, sent a letter to Martinez, claiming
that it 'can not [sic] trace the origin of these titles' (pertaining to Martinez's land).
Martinez sent two (2) Letters to Las Bdsas reiterating its ownership over the land that Las
Brisas' improvements h.ave encroached upon. Despite the notices, Las Brisas continued
developing its property.
Martinez sought the services of a licensed geodetic engineer to survey the boundaries of its
land. The verification survey plan Vs.,Q4,Q0034, which was approved by the Regional
Technical Director for Lands of the Department of Environment and Natural Resources
(DENR), revealed that the building and improvements constructed by Las Brisas occupied
portions of Martinez's lands: 567 square meters of Lot No. 29, Block 3, (LRC) Pcs. 7305; a
portion of 1,389 square meters of Lot No. 30, Block 3, (LRC) Pcs.
On 24 November 1994, Martinez sent a letter to Las Brisas demanding the latter to cease and
desist from unlawfully holding portions of Martinez's land occupied by Las Brisas structures
and improvements. Despite the said demand, no action was taken by Las Brisa.
On 24 March 1997, Martinez filed a Complaint for Quieting of Title, Cancellation of Title and
Recovery of Ownership with Damages against Las Brisas before the Regional Trial Court of
Antipolo City, docketed as Civil Case No. 97-4386. The case was raffled to, and heard by,
Branch 71 thereof x x x.
In its Answer, Las Brisas denied that it encroached on Martinez's land and that it constructed
the Las Brisas Resort Complex within the land covered by TCT No. 153101.6
its Complaint,7 Martinez added that Transfer Certificate of Title (TCT) Nos. 250242, 250244
and 250243 (or the Martinez titles - totaling 9,796 square meters )8 emanated from Decree No.
1921 issued by the General Land Registration Office pursuant to Land Registration Case No.
3296, which was transcribed as Original Certificate of Title (OCT) No. 756 by the Register of
Deeds of Rizal on August 14, 1915; that Las Brisas "constructed a riprapping on the northern
portion of Lot No. 29, a building straddling Lots 30 and 31, and are now constructing a new
building on Lot No. 31,"9 which acts constitute an encroachment on lands covered by the
Martinez titles; that Las Brisas' s title, TCT 15310110 (TCT 153101), was originally registered
on September 14, 1973, under OCT 9311 pursuant to Decree No. N-147380, LRC Case No.
N-7993, Rec. No. N-43097; that the encroachment is confirmed per verification survey
conducted by a geodetic engineer and approved by the Regional Technical Director for Lands
of the Department of Environment and Natural Resources (DENR); and that TCT 153101 thus
casts a cloud on the Martinez titles, which must be removed in order to quiet title to the latter.
Las Brisas countered in its Answer11 that it bought the land covered by TCT 153101 (consisting
of 3,606 square meters) on May 18, 1967 from Republic Bank; that it took possession thereof
in good faith that very same year; and that it is actually Martinez that was encroaching upon its
land.
Ruling of the Regional Trial Court
After trial, the RTC issued its Decision dated January 20, 2009, containing the following
pronouncement:
To clarify matters, the plaintiff12 engaged the services of Ricardo S. Cruz, a licensed Geodetic
Engineer, to plot and verify the plans and technical descriptions to determine the relative
geographic positions of the land covered by the titles of plaintiff and defendant.13 This
verification survey was approved by the Regional Technical Director of Lands on May 23, 1996,
under plan VS-04- 000394. (Exh. T-1, T-2, T-3, T-4, T-5). 'Ibis plan revealed that Psu-234002,
in relation to T.C.T. No. 153101 of the defendant overlapped thus:
a. A portion of 567 square meters of Lot No. 29, Block 3, (LRC) Pcs- 7305, covered by plaintiff's
T.C.T. No. 250242. This is the portion where the defendant built a riprapping.
b. A portion of 1,389 square meters of Lot No. 30, Block 3, (LRC) Pcs- 7305, covered by
plaintiff's T.C.T. No. 250243. This is the portion where the defendant had constructed an old
building.
c. A portion of 1,498 square meters of Lot No. 31, Block 3, (LRC) Pcs- 7305, covered by
plaintiff's T.C.T. No. 250244. This is the portion where the defendant constructed a new multi-
story edifice.
xxxx
The issues sought to be resolved x x x can be read in the respective memorandum [sic]
submitted by the parties.
For the plaintiff, the statement of issues are as follows:
1. Whether x x x the Certificate of Title of the defendant overlapped and thus created a cloud
on plaintiff T.C.T. Nos. 250242, 250243, 250244, covering lots nos. 29, 30, and 31, block 3
(LRC) PCS-7305, which should be removed under Article 476 of the Civil Code of the
Philippines;
2. Whether x x x defendant's T.C.T. No. 153101 should be cancelled insofar as it overlapped
Lots 29, 30 and 31, Block 3, (LRC) PCS- 7305;
3. Whether x x x the defendant is a builder in bad faith and is liable for the consequence of his
acts;
4. Whether x x x the plaintiff is entitled to collect actual or compensatory and moral damages
in the amount of ₱5,000,000.00, exemplary damage in the amount of ₱1,000,000.00, nominal
damage in the amount of ₱l,000,000.00, and attorney's fees in the amount of ₱300,000.00,
exclusive of appearance fee of ₱3,000.00 per hearing or unferome [sic] attended.
For defendants, the issues presented are:
1. Whether x x x defendant's title over the property is valid and effective;
2. Whether x x x defendant is an innocent purchaser for value;
3. Whether x x x defendant is entitled to reimbursement for expenses in developing the
property.
For its evidence in chief, plaintiff presented Nestor Quesada (direct, June 7, 2001; cross July
26, 2001) rested its case on October 4, 2001. Its Formal Offer of Evidence as filed with the
Couit on November l 5, 2001 wherein Court Order dated January 15, 2002, Exhibits A to U.
inclusive of their submarkings were admitted over the objections of defendant.
The defendant presented Eu:fracia Naidas (direct/cross on July 11, 2004), then rested its case
on May 11, 2005, the Formal Offer of Evidence was filed in Court on June 10, 2005 wherein
the Court Order dared June 27, 2005, Exhibits 1 to 7 inclusive of submarkings were all admitted
over plaintiff's objections.
xxxx
Considering that the defendant has raised the defense of the validity of T.C.T. No. N-21871 of
the Registry of Deeds, Marikina (Exhibit 1), and subsequently cancelled by T.C.T. No. 153101
as transferred to the Pen Development Corp. (Exh. 2) and introduced substantial improvements
thereon which from the facts established and evidence presented during the hearings of the
case it cannot be denied that said title over the property in question is genuine and valid.
Moreover, the defendant obtained the property as innocent purchasers for value, having no
knowledge of any irregularity, defect, or duplication in the title.
Defendant further argued that there is no proof to plaintiff's claim that it had sent notices and
claims to defendant. Assuming that notices were sent to defendant as early as 1968, it took
plaintiff almost thirty (30) years to file the action to quiet its title. Therefore, by the principle of
laches it should suffer the consequence of its failure to do so within a reasonable period of
time. x x x
Defendant, having introduced substantial improvements on the property, if on the ground or
assumption that the case will be decided in favor of the plaintiff, that defendant should be, by
law, entitled to be reimbursed for the expenses incurred in purchasing and developing the
property, the construction cost of the building alone estimated to be Fifty-Five Million Pesos
(₱55,000,000.00) x x x.
Defendant also cited Articles 544, 546, 548 of the New Civil Code of the Philippines in further
support of its defense.
It is incumbent upon the plaintiff to adduce evidence in support of his complaint x x x. Likewise,
the trial shall be limited to the issues stated in the pretrial order.
As earlier stated, the Court shall rule on whether x x x plaintiff has discharged its obligation to
do so in compliance with the Rules of Court. Having closely examined, evaluated and passed
upon the evidence presented by both the plaintiff and defendant the Court is convinced that
the plaintiff has successfully discharged said obligation and is inclined to grant the reliefs
prayed for.
Clearly this is a valid complaint for quieting of title specifically defined under Article 476 of the
Civil Code and as cited in the cases of Vda. De Angeles v. CA, G.R. No. 95748, November 21,
1996; Tan vs. Valdehuesa, 66 SCRA 61 (1975).
As claimed by the plaintiff, defendant's T.C.T. No. 153101 is an instrument, record or claim
which constitutes or casts a cloud upon its T.C.T. Nos. 250242, 250243, and 250244. Sufficient
and competent evidence has been introduced by the plaintiff that upon plotting verification of
the technical description of both parcels of land conducted by Geodetic Engineer Ricardo Cruz,
duly approved by the Regional Technical Director of Lands of the DENR that Psu-234002,
covered by defendant's T.C.T. No. 153101 overlapped a portion of 567 square meters of Lot
No. 29 x x x, a portion of 1,389 square meter of Lot No. 30 x x x covered by plaintiff's T.C.T.
Nos. 250242, 250243and 250244, respectively. Surprisingly, defendant has not disputed nor
has it adduced evidence to disprove these findings.
It was likewise established that plaintiffs T.C.T. No[s]. 250242, 250243 and 250244 emanated
from O.C.T. No. 756, which was originally registered on August 14, 1915, whereas, from
defendant's own evidence, its T.C.T. No. 153101 was derived from O.C.T. No. 9311, which
was originally registered on September 14, 1973, pursuant to Decree No. D-147380, in LRC
Case No. N- 7993, Rec. No. 43097.
Plaintiffs mother title was registered 58 years ahead of defendant's mother title. Thus, while
defendant's T.C.T. No. 153101 and its mother title are apparently valid and effective in the
sense that they were issued in consequence of a land registration proceeding, they are in truth
and in fact invalid, ineffective, voidable, and unforceable [sic] insofar as it overlaps plaintiffs
prior and subsisting titles.
xxxx
In the cases of Chan vs. CA, 298 SCRA 713, de Villa vs. Trinidad, 20 SCRA 1167, Gotian vs.
Gaffud, 27 SCRA 706, again the Supreme Court held:
'When two certificates of title are issued to different persons covering the same land, in whole
or in part, the earlier in date must prevail and in cases of successive registrations where more
than one certificate of title is issued over the same land, the person holding a prior certificate
is entitled to the land as against a person who relies on a subsequent certificate. '
xxxx
Article 526 of the Civil Code defines a possession in good faith as 'one who is not aware that
there exists in his title or mode of acquisition any flaw which invalidates it, and a possession in
bad faith as one who possesses in any case contrary to the foregoing.
xxxx
In the case of Ortiz vs. Fuentebella, 27 Phil. 537, the Supreme Court held.
'Thus, where defendant received a letter from the daughter of the plaintiff, advising defendant
to desist from planting coconut on a land in possession of defendant, and which letter the
defendant answered by saying she did not intend to plant coconuts on the land belonging to
plaintiff, it was held that the possession [in] bad faith began from the receipt of such letter.'
A close similarity exists in Fuentebella above cited with the facts obtaining in this case. The
pieces evidence [sic] show that while defendant was in good faith when it bought the land from
the Republic Bank as a foreclosed property, the plaintiff in a letter dated as early as March 11,
1968 x x x had advised the defendant that the land it was trying to fence is within plaintiff’s
property and that the defendant should refrain from occupying and building improvements
thereon and from doing any act in derogation of plaintiff's property rights. Six other letters
followed suit x x x. The records show that defendant received these letters but chose to ignore
them and the only communication in writing from the defendant thru Paul Naidas was a letter
dated July 31, 1971, stating that he (Naidas) was all the more confused about plaintiff's claim
to the land. The defendant cannot dispute the letters sent because it sent a response dated
July 31, 1970. It is very clear that while defendant may have been [in] good faith when it
purchased the land from Republic Bank on December 6, 1977, such good faith ceased upon
being informed in writing about plaintiff's title or claim over the same land, and, worse, it acted
with evident bad faith when it proceed [sic] to build the structures on the land despite such
notice.
Consequently, the rule on the matter can be found in Articles 449, 450 of the Civil Code of the
Philippines which provide:
'Article 449. - He who builds, plants, or sows in bad faith on the land of another, loses what is
built, planted or sown without right to indemnity. "
Article 450. - The owner of the land on which anything has been built, planted or sown in bad
faith may demand the demolition of the work, or that the planting or sowing be removed, in
order to replace things in their former condition at the expense of the person who built, planted
or sowed, or he may compel the builder or planter to pay the price of the land, and the sower
the proper rent.'
In the case of Tan Queto vs. CA, 122 SCRA 206, the Supreme Court held:
'A builder in bad faith loses the building he builds on another's property without right of refund,
'x x x
xxxx
As to defendant's claim that they had obtained title to the property as innocent purchasers for
value, lack of knowledge of any irregularity, effect or duplication of title, they could have
discovered the overlapping had they only bothered to engage a licensed geodetic engineer to
check the accuracy of their plan Psu-234002. To that extent, defendant has failed to exercise
the diligence to be entitled to the status as an innocent purchaser for value. It was clearly
established that defendant's certificate of title emanated from a mother title that partially
overlapped the plaintiff's prior and subsisting title. Hence, defendant's certificate of title is void
abinittio [sic] insofar as the overlapped areas are concerned.
Defendant's claim of lack of notice on the claim of the plaintiff on the overlapped properties is
belied by the evidence presented by plaintiff which consisted by [sic] a letter dated as early as
March 11, 1968 (Exh. N, N-1, N-2) advising defendant that the land it was trying to fence of
[sic] is within plaintiff's property, and at the same time asking the defendant to refrain from
occupying and building improvements thereon and from doing any act in derogation of plaintiff's
property rights. Five (5) succeeding let1ers addressed to defendant
followed suit and the evidence clearly show that the san1e were received by defendant and no
less than Paul Naidas wrote a reply letter to plaintiff's counsel, Alfonso Roldan on July 31, 1971
which conclusively affi1m the fact that defendant is well aware of plaintiffs claim to the portion
of the land encroached. Thus, the defendant's claim that it is a builder in good faith finds no
factual nor legal basis. On the contrary, the defendant's continued construction and introduction
of improvements on the questioned portion of plaintiff's property clearly negates good faith.
The claim for damages prayed for by plaintiff as a result of defendant's obstinate refusal to
recognize [the] plaintiff's title to the land insofar as the encroachments were made and to turn
over the possession thereof entitles the plaintiff to the award of moral, exemplary damages and
attorney's fees. However, since no sufficient evidence was presented that the plaintiff suffered
actual damages, the Court cannot award any pursuant to [Article] 2199 of the New Civil Code
of the Philippines.
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against 1he defendant
as follows:
1. Quieting its T.C.T. Nos. 250242, 240243 and 250[2]44, and removing the clouds thereon
created by the issuance of T.C.T. No. 153101 insofar as the said titles are overlapped by the
T.C.T. No. : 153101;
2. Ordering the cancellation or annulment of portions of T.C.T. No. 153101 insofar as it overlaps
plaintiff's T.C.T. No. 250242, to Lot 29, Block 3, (LRC) Pcs-7305; plaintiff's T.C.T. No. 250243
to Lot 30, Block 3 (LRC) Pcs- 7305; and plaintiff's [TCT] No. 250244 to Lot 31, Block 3, (LRC)
Pcs-7305;
3. Ordering the defendant to vac1.ite and turn over the possession of said portions in favor of
the plaintiff: and to remove the building or structures it has constructed thereon at its own
expense without right to indemnity [therefor]; to allow the plaintiff to appropriate what the
defendant has built or to compel the defendant to pay for the value of the land encroached
upon;
4. Ordering the defendant to pay moral damages to the plaintiff in thy amount of ₱
1,000,000.00; exemplary damages in the amount of ₱1,000,000.00 and attorney's fees in 1he
amount of ₱100,000.00.
5. Ordering the defendant to pay for the cost of suit.
SO ORDERED.14
Petitioners filed a joint Motion for Reconsideration.15 However, in an August 7, 2009 Order,16
the RTC held its ground.
Ruling of the Court of Appeals
Petitioners interposed an appeal before the CA, docketed as CA-G.R. CV No. 97478. They
argued that the trial court erred in- giving probative value to respondent's documentary
evidence despite its hearsay character; that the trial court erred in declaring them builders in
bad faith; that the respondent is guilty of laches; and that the lower court erred in awarding
damages to respondent.
On July 17, 2013, the CA rendered the assailed Decision declaring as follows:
The appeal fails.
Good faith is an intangible and abstract quality with no technical meaning or statutory definition,
and it encompasses, among other things, an honest belief, the absence of malice and the
absence of design to defraud or to seek an unconscionable advantage. An individual's personal
good faith is a concept of his own mind and, therefore, may not conclusively be determined by
his protestations alone. It implies honesty of intention, and freedom from knowledge of
circumstances which ought to put the holder upon inquiry. The essence of good faith lies in an
honest belief in the validity of one's right, ignorance of a superior claim, and absence of
intention to overreach another.
Article 528 of the New Civil Code provide that possession acquired in good faith does not lose
1his character, except in a case and from the moment facts exist which show 1hat the
possessor is not unaware that he possesses the thing improperly or wrongfully. Possession in
good faith ceases from the moment defects in the title are made known to the possessors, by
extraneous evidence or by suit for recovery of the property by the true owner. Whatever may
be the cause or the fact from which it can be deduced that the possessor has knowledge of the
defect of his title or mode of acquisition, it must be considered sufficient to show bad faith.
In the instant case, as early as 1968, Martinez sent several letters to Las Brisas informing the
latter of Martinez's Ownership over the land covered by TCT Nos. 250242, 250243 and 250244
and that the buildings and improvements Las Brisas made have encroached on the said
property. In the Letter dated 11 March 1968, Martinez informed Las Brisas that the latter's fence
had overlapped into the former's land and requested that Las Brisas refrain from entering
Martinez's property. However, Las Brisas did not heed Martinez's demand and continued
developing its property. Martinez sent six (6) more letters to Las Brisas reiterating that the
latter's structures and improvements encroached on Martinez land. Records show that Las
Brisas received these notices and in fact, made a reply to one of Martint1z's letters. Clearly,
Las Brisas was informed on several occasions about Martinez's title x x x over its land and,
despite such notices, Las Brisas chose to ignore Martinez's demand and continued
constructing other buildings and improvements that intruded into Martinez's property. Hence,
Las Brisas cannot claim that it had no knowledge of the defects of its title and, consequently,
cannot be considered in good faith.
Neither did Las Brisas bother to have its property surveyed in order to discover, for its own
benefit, the actual boundaries of its land (TCT No. 153101). It is doctrinal in land registration
law that possession of titled property adverse to the registered owner is necessarily tainted
with bad faith. Thus, proceeding with the construction works on the overlapped portions of TCT
Nos. 250242, 250243 and 250244 despite knowledge of Martinez's ownership thereof puts Las
Brisas in bad faith.
Las Brisas further argues that Martinez is guilty of laches as it failed to assert its right over the
encroached portions of TCT Nos. 250242, 250243 and 250244 within reasonable time.
We disagree.
xxxx
Furthermore, Martinez is the registered owner of TCT Nos. 250242, 250243 and 250244 (and,
as such, its right to demand to recover the portions thereof encroached by Las Brisas is never
barred by laches. In the case of Arroyo vs. Bocage Inland Dev't Corp., the Supreme Court held:
'As registered owners of the lots in question, the private respondents have a right to eject any
person illegally occupying their property. This right is in1prescriptible. Even if it be supposed
that they were aware of the petitioners' occupation of the property, and regardless of the length
of that possession, the lawful owners have right to demand the return of their property at any
time as long as the possession was unauthorized or merely tolerated, if at all. This right is never
barred by laches.'
Las Brisas argues that the court a quo erred in admitting Martinez's Relocation Survey of tot
Nos. 28, 29 and 30 and the Verification Plan Vs-04-00394 as they constitute hearsay evidence
and as such are inadmissible.
We are not persuaded.
It bears noting that this issue of hearsay evidence was raised for the first time on appeal. It is
a fundamental rule that no question will be entertained on appeal unless it has been raised
below Stated differently, issues of fact and arguments not adequately brought to the attention
of the lower courts will not be considered by the reviewing courts as they cannot be raised for
the first time on appeal. An issue, which was neither averred in the complaint nor raised during
the trial in the lower courts, cannot be raised for the first time on appeal because it would be
offensive to the basic rule of fair play and justice, and would be violative of the constitutional
right to due process of the other party. In fact, the determination of issues at the pre-trial bars
consideration of other issues or questions on appeal,
In this case, Las Brisas failed to raise this argument during pre-trial and in the trial proper. Las
Brisas even failed to [raise] its objection during Martinez's fom1al offer of evidence. Clearly,
Las Brisas waived its right to object on [sic] the admissibility of Martinez's evidence. Thus, We
cannot bend backwards to examine this issue raised by Las Brisas at this late stage of the
proceedings as it would violate Martinez's right to due process and should thus be disregarded.
Anent the award of moral damages of Php1,000,000.00 and exemplary damages of
Php1,000,000.00, We find the same without factual or legal basis.
A juridical person is generally not entitled to moral damages because, unlike a natural person,
it cannot experience physical suffering, or such sentiment as wounded feelings, serious
anxiety, mental anguish or moral shock. While the courts may allow the grant of moral damages
to corporations in exceptional situations, it is not automatically granted because there must still
be proof of the existence of the factual basis of the damage and its causal relation to the
defendant's acts. Moral damages, though incapable of pecuniary estimation, are in the
category of an award designed to compensate the claimant for actual injury suffered and not
to impose a penalty 0n the wrongdoer. In this case, We find no evidence that Martinez suffered
besmirched reputation on account of the Las Brisas encroachment on Martinez's land. Hence,
the award of moral damages should be deleted.
Neither is Martinez entitled to exemplary damages. Exemplary damages may only be awarded
if it has been shown that wrongful act was accompanied by bad faith or done in a wanton,
fraudulent and reckless or malevolent manner. Exemplary damages are allowed only in
addition to moral damages such that no exemplary damage can be awarded unless the
claimant first establishes his clear right to moral damages. As the moral damages are improper
in the instant case, so is the award of exemplary damages.
Nevertheless, an award of nominal damages of Php100,000.00 is warranted since Las Brisas
violated the property rights of Martinez. The New Civil Code provides:
Art. 2221. Nominal damages are adjudicated in order that a right of the plaintiff; which has been
violated or invaded by the defendan4 may be vindicated or recognized, and not for the purpose
of indemnifying the plaintiff for any loss suffered by him.
Art. 2222. The court may award nominal damages in every obligation arising from any source
enumerated in Article 1157, or in every case where any property right has been invaded.
The award of damages is also in accordance with Article 451 of the New Civil Code which
states that the landowner is entitled to damages from the builder in bad faith.
WHEREFORE, the Decision dated 20 January 2009 of the Regional Trial Court of Antipolo
City, Branch 71, in Civil Case No. 97-4386 is AFFIRMED with MODIHCATION, as follows:
1.) deleting the award of moral damages and exemplary damages to Martinez Leyba, Inc.; and
2.) ordering Las Brisas Resort Corporation to pay Martinez Leyba, Inc., Php 100,000.00, as
nominal damages.
SO ORDERED.17 (Citations omitted)
Petitioners sought to reconsider, but were rebuffed. Hence, the present Petition.
Issues
In a June 15, 2015 Resolution,18 this Court resolved to give due course to the Petition, which
contains the following assignment of errors:
A. THE HONORALBE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT
PETITIONER IS A POSSESSOR/BUILDER IN BAD FAITH.
B. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO RULE
THAT THE RESPONDENT INCURRED LACHES IN ENFORCING ITS PUTATIVE RIGHTS.
C. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT THE
ISSUE ON HEARSAY CANNOT BE RAISED FOR THE FIRST TIME ON APPEAL.19
Petitioners' Arguments
In praying that the assailed CA and trial court dispositions be set aside and that Civil Case No.
97-4386 be dismissed instead, petitioners argue in their Petition and Reply20 that they are not
builders in bad faith; that in constructing the improvements subject of the instant case, they
merely relied on the validity and indefeasibility of their title, TCT 153101; that until their title is
nullified and invalidated, the same subsists; that as builders in good faith, they are entitled
either to a) a refund and reimbursement of the necessary expenses, and full retention of the
land until they are paid by respondent, or b) removal of the improvements without damage to
respondent's property; that contrary to the CA's pronouncement, respondent may be held
accountable for laches in filing a case only after the lapse of thirty years; and that the Survey
Plan of Lots 29, 30 and 31 and the Verification Survey Plan Vs-04-000394 are inadmissible in
evidence for being hearsay, as they were not authenticated in court.
Respondent's Arguments
Respondent, on the other hand, counters in its Comment21 that the CA is correct in declaring
that petitioners are possessors and builders in bad faith; that while petitioners may have been
innocent purchasers for value, they were not possessors and builders in good faith because
despite having been regularly informed in writing that they encroached on respondent's land
and are building illegal structures thereon, they continued with their illegal occupation and
construction; that under the Civil Code, petitioners are not entitled to retention or
reimbursement for being bi1ilders in bad faith; that the principle of laches does not apply
against owners of land registered under the Torrens system of land registration; and that
petitioners cannot be allowed to argue for the first time on appeal that the pieces of
documentary evidence it presented before the trial court are hearsay.
Our Ruling
The Court denies the Petition.
Under the Manual on Land Survey Procedures of the Philippines, on Verification Surveys,
particularly, it is provided, thus:
Section 146. The Regional Technical Director for Lands may issue order to conduct a
verification survey whenever any approved survey is reported to be erroneous, or when titled
lands are reported to overlap or where occupancy is reported to encroach another property.
xxx
xxxx
Section 149. All survey work undertaken for verification purposes shall be subject of verification
and approval in the DENR~LMS Regional Office concerned and shall be designated as
Verification Surveys (Vs). x x x
Pursuant to these provisions, respondent caused its property to be surveyed, and on May 23,
1996, the Regional Technical Director of Lands approved the verification survey under
Verification Survey Plan Vs-04-000394.22 This Verification Survey Plan revealed that
petitioners encroached on respondent's land to the following extent:
a. A portion of 567 square meters of Lot No. 29, Block 3, (LRC) Pcs-7305, covered by
respondent's TCT-250242. This is the portion where the petitioners built a riprapping.
b. A p01tion of 1,389 square meters of Lot No. 30, Block 3, (LRC) Pcs-7305, covered by
respondent's TCT 250243. This is the portion where the petitioners had constructed an old
building.
c. A portion of 1,498 square meters of Lot No. 31, Block 3, (LRC) Pcs7305, covered by
respondent's TCT 250244. This is the portion where the petitioners constructed & new multi-
story edifice.
On this basis, respondent filed Civil Case No. 97·"4386. Respondent's main evidence is the
said Verification Survey Plan V s-04-000394, which is a public document. As a public
document, it is admissible in evidence even without further proof of its due execution and
genuineness,23 and had in its favor the presumption of regularity. To contradict the same,
there must be evidence that is clear, convincing and more than merely preponderant, otherwise
the document should be upheld,24 The certification and approval by the Regional Technical
Director of Lands signifies the technical correctness of the survey plotted in the said plan."25
On the other hand, petitioners' evidence consists mainly of the claim that their TCT 153101 is
a valid title and that they purchased the land covered by it in good faith and for value. They did
not present evidence to contradict respondent's Verification Survey Plan VS-Q4-000394; in
other words, no evidence was presented to disprove respondent's claim of overlapping. Their
evidence only goes so far as proving that they acquired the land covered by TCT 153101 in
good faith. However, while it may be true that they acquired TCT 153101 in good faith and for
value, this does not prove that they did not encroach upon respondent's lands.
In effect, respondent's Verification Survey Plan Vs-04-000394 remains unrefuted. Petitioners'
sole objection to this piece of evidence that it was not authenticated during trial is of no
significance considering that the said documentary evidence is a public document.

Although "[i]n overlapping of titles disputes, it has always been the practice for the [trial] court
to appoint a surveyor from the government land agencies [such as] the Land Registration
Authority or the DENR to act as commissioner,"26 this is not mandatory procedure; the trial
court may rely on the parties' respective evidence to resolve the case.27 In this case,
respondent presented the results of a verification survey conducted on its lands. On the other
hand, petitioners did not present proof like the results of a survey conducted upon their initiative
to contradict respondent's evidence; nor did they move for the appointment by the trial court of
government or private surveyors to act as commissioners. Their sole defense is that they
acquired their land in good faith and for value; but this does not squarely address respondent's
claim of overlapping.
For the RTC and CA, respondent's undisputed evidence proved its claim of overlapping. This
Court agrees. As a public document containing the certification and approval by the Regional
Technical Director of Lands, Verification Survey Plan Vs-Q4-000394 can be relied upon as
proof of the encroachment over respondent's lands. More so when petitioners could not present
contradictory proof.
On the issue of being a builder in had faith, there is no question that petitioners should be held
liable to respondent for their obstinate refusal to abide by the latter's repeated demands to
cease and desist from continuing their construction upon the encroached area. Petitioners' sole
defense is that they purchased their property in good faith and for value; but this does not
squarely address the issue of encroachment or overlapping. To repeat, while petitioners may
have been innocent purchasers for value with respect to their land, this does not prove that
they are equally innocent of the claim of encroachment upon respondent's lands. The evidence
suggests otherwise: despite being apprised of the encroachment, petitioners turned a blind eye
and deaf ear and continued to construct on the disputed area. They did not bother to conduct
their own survey to put the issue to rest, and to avoid the possibility of being adjudged as
builders in bad faith upon land that did not belong to them.
Under the Civil Code,
Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built,
planted or sown without right to indemnity.
Art. 450. Tue owner of the land on which anything has been built, planted or sown in bad faith
may demand the demolition of the work, or that the planting or sowing be removed, in order to
replace things in their former condition at the expense of the person who built, planted or
sowed; or he may compel the builder or planter to pay the price of the land, and the sower the
proper rent.
Art. 451. In the cases of the two preceding articles, the landowner is entitled to damages from
the builder planter or sower.
Moreover, it has been declared that
The right of the owner of the land to recover damages from a builder in bad faith is clearly
provided for in Article 451 of the Civil Code. Although said Article 451 does not elaborate on
the basis for damages, the Court perceives that it should reasonably correspond with the value
of the properties lost or destroyed as a result of the occupation in bad faith, as well as the fruits
(natural, industrial or civil) from those properties that the owner of the land reasonably expected
to obtain. x x x28
For their part, petitioners are not entitled to reimbursement for necessary expenses. Indeed,
under Article 452 of the Civil Code,29 the builder, planter or sower in bad faith is entitled to
reimbursement for the necessary expenses of preservation of the land. However, in this case,
respondent's lands were not preserved: petitioners' construction and use thereof in fact caused
dan1age, which must be undone or simply endured by respondent by force of law and
circumstance. Respondent did not in any way benefit from petitioners' occupation of its lands.
Finally, on the question of laches, the CA correctly held that as owners of the subject property,
respondent has the imprescriptible right to recover possession thereof from any person illegally
occupying its lands. Even if petitioners have been occupying these lands for a significant period
of time, respondent as the registered and lawful owner has the right to demand the return
thereof at any time.
Jurisprudence consistently holds that ‘prescription and laches cannot apply to registered land
covered by the Torrens system' because 'under the Property Registration Decree, no title to
registered land in derogation to that of the registered owner shall be acquired by prescription
or adverse possession.’30
Under Section 47 of the Property Registration Decree, or Presidential Decree No. 1529, "(n)o
title to registered land in derogation of the title of the registered owner shall be acquired by
prescription or adverse possession."
WHEREFORE, the Petition is DENIED. The July 17, 2013 Decision and March 28i 2014
Resolution of the Court of Appeals in CA-G.R. CV No. 97478 are AFFIRMEDin toto.
SO ORDERED.
G.R. No. 211170
SPOUSES MAXIMO ESPINOZA and WINIFREDA DE VERA, Petitioners
vs.
SPOUSES ANTONIO MAYANDOC and ERLINDA CAYABYAB MAYANDOC, Respondents
DECISION
PERALTA, J.:
Before this Court is the Petition for Review on Certiorari under Rule 45, dated March 21, 2014,
of petitioners-spouses Maximo Espinoza and Winifreda De Vera, that seeks to reverse and set
aside the Decision1 dated September 17, 2013 and Resolution dated January 28, 2014, both
of the Court of Appeals (CA) which, in turn, affirmed with modifications the Decision2 dated
February 18, 2011 of the Regional Trial Court (RTC), Branch 42, Dagupan City, in a complaint
for useful expenses under Articles 4483 and 5464 of the New Civil Code of the Philippines.
The facts follow.
A parcel of land located in Dagupan City was originally owned by Eusebio Espinoza. After the
death of Eusebio, the said parcel of land was divided among his heirs, namely: Pastora
Espinoza, Domingo Espinoza and Pablo Espinoza. Petitioner Maximo is the son of Domingo
Espinoza, who died on November 3, 1965, and Agapita Cayabyab, who died on August 11,
1963.
Thereafter, on May 25, 1972, Pastora Espinoza executed a Deed of Sale conveying her share
of the same property to respondents and Leopoldo Espinoza. However, on that same date, a
fictitious deed of sale was executed by petitioner Maximo's father, Domingo Espinoza,
conveying the three-fourth (3/4) share in the estate in favor of respondent Erlinda Cayabyab
Mayandoc's parents; thus, TCT No. 28397 was issued in the names of the latter.
On July 9, 1977, a fictitious deed of sale was executed by Nemesio Cayabyab, Candida Cruz,
petitioners-spouses Maximo Espinoza and Winifreda De Vera and Leopoldo Espinoza over the
land in favor of respondents- spouses Antonio and Erlinda Mayandoc; thus, TCT No. 37403
was issued under the names of the latter.
As a result of the foregoing, petitioners filed an action for annulment of document with prayer
for the nullification of TCT No. 37403 and, on August 16, 1999, the RTC, Branch 40, Dagupan
City rendered a Decision in favor of petitioners and ordering respondents to reconvey the land
in dispute and to pay attorney's fees and the cost of the suit.
Respondents appealed, but the CA, in its Decision dated February 6, 2004, affirmed the RTC
with modifications that the award of attorney's fees and litigation expenses be deleted for lack
of factual basis. The said CA Decision became final and executory on March 8, 2004.
Thus, respondents filed a complaint for reimbursement for useful expenses, pursuant to
Articles 448 and 546 of the New Civil Code, alleging that the house in question was built on the
disputed land in good faith sometime in 1995 and was finished in 1996. According to
respondents, they then believed themselves to be the owners of the land with a claim of title
thereto and were never prevented by the petitioners in constructing the house. They added
that the new house was built after the old house belonging to respondent Erlinda Mayandoc's
father was torn down due to termite infestation and would not have reconstructed the said
house had they been aware of the defect in their title. As such, they claimed that they are
entitled to reimbursement of the construction cost of the house in the amount of ₱800,000.00.
They further asserted that at the time that their house was constructed, they were possessors
in good faith, having lived over the land in question for many years and that petitioners
questioned their ownership and possession only in 1997 when a complaint for nullity of
documents was filed by the latter.
Petitioners, in their Answer, argued that respondents can never be considered as builders in
good faith because the latter were aware that the deeds of sale over the land in question were
fictitious and, therefore, null and void; thus, as builders in bad faith, they lose whatever has
been built over the land without right to indemnity.
Respondents, on January 5, 2011, manifested their option to buy the land where the house
stood, but petitioners expressed that they were not interested to sell the land or to buy the
house in question.
The RTC, on February 18, 2011, rendered its Decision with the following dispositive portion:
WHEREFORE, judgment is hereby rendered requiring the defendants to sell the land, where
the plaintiffs' house stands, to the latter at a reasonable price based on the zonal value
determined by the Bureau of Internal Revenue (BIR).
SO ORDERED.5
Petitioners appealed to the CA, but the latter, in its Decision dated September 17, 2013,
affirmed the decision of the RTC with modifications. The dispositive portion of the Decision
reads:
WHEREFORE, the Decision dated February 18, 2011 by the Regional Trial Court, Branch 42
of Dagupan City, in Civil Case No. 2005- 0271-D is hereby AFFIRMED with MODIFICATIONS.
Let the case be REMANDED to the aforementioned trial court for further proceedings
consistent with the proper application of Articles 448, 546 and 548 of the New Civil Code and
to render a complete judgment of the case.
SO ORDERED.6
The motion for reconsideration of petitioners were subsequently denied by the CA in its
Resolution dated January 28, 2014.
Hence, the present petition.
Petitioners raise the following issues:
I.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
PETITIONERS WERE NOT ABLE TO PROVE BAD FAITH ON THE PART OF THE
RESPONDENTS.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT
RES JUDJCATA DOES NOT APPLY IN THE INST ANT CASE.
According to petitioners, whether or not respondents were in bad faith in introducing
improvements on the subject land is already moot, since the judgment rendered by the RTC of
Dagupan City, Branch 40 and affirmed by the CA, that declared the two Deeds of Definite/
Absolute Sale dated May 25, 1972 and July 9, 1977 as null and void, had long become final
and executory on March 8, 2004. They also argue that respondents had not successfully shown
any right to introduce improvements on the said land as their claim of laches and acquisitive
prescription have been rejected by the CA on appeal; thus, it follows that the respondents were
builders in bad faith because knowing that the land did not belong to them and that they had
no right to build thereon, they still caused the house to be erected. They further insist that
respondents are deemed builders in bad faith because their house has been built and
reconstructed into a bigger one after respondent Erlinda's parents forged a fictitious sale.
Finally, they claim that the principle of res judicata in the mode of "conclusiveness of judgment"
applies in this case.
The petition lacks merit.
The findings of facts of the Court of Appeals are conclusive and binding on this Court7 and
they carry even more weight when the said court affirms the factual findings of the trial court.8
Stated differently, the findings of the Court of Appeals, by itself, which are supported by
substantial evidence, are almost beyond the power of review by this Court.9 Although this rule
is subject to certain exceptions, this Court finds none that is applicable in this case.
Nevertheless, the petition still fails granting that an exception obtains.
To be deemed a builder in good faith, it is essential that a person asserts title to the land on
which he builds, i.e., that he be a possessor in the concept of owner, and that he be unaware
that there exists in his title or mode of acquisition any flaw which invalidates it.10 The RTC, as
affirmed by the CA, found respondents to be builders in good faith, thus:
The plaintiffs are builders in good faith. As asserted by plaintiffs and not rebutted by defendants,
the house of plaintiffs was built on the lot owned by defendants in 1995. The complaint for
nullity of documents and reconveyance was filed in 1997, about two years after the subject
conjugal house was constructed. Defendants-spouses believed that at the time when they
constructed their house on the lot of defendants, they have a claim of title. Art. 526, New Civil
Code, states that a possessor in good faith is one who has no knowledge of any flaw or defect
in his title or mode of acquisition. This determines whether the builder acted in good faith or
not. Surely, plaintiffs would not have constructed the subject house which plaintiffs claim to
have cost them ₱800,000.00 to build if they knew that there is a flaw in their claim of title.
Nonetheless, Art. 527, New Civil Code, states clearly that good faith is always presumed, and
upon him who alleges bad faith on the part of the possessor lies the burden of proof. The
records do not show that the burden of proof was successfully discharged by the defendants.
xxxx
Plaintiffs are in good faith in building their conjugal house in 1995 on the lot they believed to be
their own by purchase. They also have in their favor the legal presumption of good faith. It is
the defendants who had the burden to prove otherwise. They failed to discharge such burden
until the Regional Trial Court, Br. 40, Dagupan City, promulgated an adverse ruling in Civil
Case No. 97-0187-D. Thus, Art. 448 comes in to protect the plaintiffs-owners of their
improvement without causing injustice to the lot owner. Art. 448 comes in to protect the plaintiff-
owners of their improvement without causing injustice to the lot owner. Art. 448 provided a just
resolution of the resulting "forced-ownership" by giving the defendants lot owners the option to
acquire the conjugal house after payment of the proper indemnity or to oblige the builder
plaintiffs to pay for the lot. It is the defendants-lot owners who are authorized to exercise the
option as their right is older, and under the principle of accession where the accessory (house)
follows the principal. x x x.11
The settled rule is bad faith should be established by clear and convincing evidence since the
law always presumes good faith.12 In this particular case, petitioners were not able to prove
that respondents were in bad faith in constructing the house on the subject land. Bad faith does
not simply connote bad judgment or negligence.13 It imports a dishonest purpose or some
moral obliquity and conscious doing of a wrong.14 It means breach of a known duty through
some motive, interest or ill will that partakes of the nature of fraud.15 For anyone who claims
that someone is in bad faith, the former has the duty to prove such. Hence, petitioners err in
their argument that respondents failed to prove that they are builders in good faith in spite of
the findings of the RTC and the CA that they are.
As such, Article 44816 of the Civil Code must be applied. It applies when the builder believes
that he is the owner of the land or that by some title he has the right to build thereon,17 or that,
at least, he has a claim of title thereto.18 In Tuatzs v. Spouses Escol, et al.,19 this Court ruled
that the seller (the owner of the land) has two options under Article 448: (1) he may appropriate
the improvements for himself after reimbursing the buyer (the builder in good faith) the
necessary and useful expenses under Articles 54620 and 54821 of the Civil Code; or (2) he
may sell the land to the buyer, unless its value is considerably more than that of the
improvements, in which case, the buyer shall pay reasonable rent, thus:
The rule that the choice under Article 448 of the Civil Code belongs to the owner of the land is
in accord with the principle of accession, i.e., that the accessory follows the principal and not
the other way around. Even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. The landowner cannot refuse to exercise either option and compel
instead the owner of the building to remove it from the land.
The raison d'etre for this provision has been enunciated thus: Where the builder, planter or
sower has acted in good faith, a conflict of rights arises between the owners, and it becomes
necessary to protect the owner of the improvements without causing injustice to the owner of
the land. In view of the impracticability of creating a state of forced co-ownership, the law has
provided a just solution by giving the owner of the land the option to acquire the improvements
after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and
the sower the proper rent. He cannot refuse to exercise either option. It is the owner of the land
who is authorized to exercise the option, because his right is older, and because, by the
principle of accession, he is entitled to the ownership of the accessory thing.22
The CA, therefore, did not err in its ruling that instead of requiring the petitioners to sell the
land, the R TC must determine the option which the petitioners would choose.1âwphi1 As aptly
ruled by the CA:
The rule that the right of choice belongs to the owner of the land is in accordance with the
principle of accession. However, even if this right of choice is exclusive to the land owner, he
cannot refuse to exercise either option and demand, instead for the removal of the building.
Instead of requiring defendants-appellants to sell the land, the court a quo must determine the
option which they would choose. The first option to appropriate the building upon payment of
indemnity or the second option, to sell the land to the plaintiffs-appellees. Moreover, the court
a quo should also ascertain: (a) under the first option, the amount of indemnification for the
building; or (b) under the second option, the value of the subject property vis-a-vis that of the
building, and depending thereon, the price of, or the reasonable rent for, the subject prope1iy.
Hence, following the ruling in the recent case of Briones v. Macabagdal, this case must be
remanded to the court a quo for the conduct of further proceedings to assess the current fair
market of the land and to determine other matters necessary for the proper application of Article
448, in relation to Articles 546 and 548 of the New Civil Code.23
Therefore, this Court agrees with the CA that there is a need to remand the case to the RTC
for further proceedings, specifically, in assessing the current fair market value of the subject
land and other matters that are appropriate in the application of Article 448, in relation to Articles
546 and 548 of the New Civil Code.
As to the issue of res judicata, the CA is correct in its ruling that there is no identity of subject
matter and cause of action between the prior case of annulment of document and the present
case, thus:
In the instant case, res judicata will not apply since there is no identity of subject matter and
cause of action. The first case is for annulment of document, while the instant case is for
reimbursement of useful expenses as builders in good faith under article 448 in relation to
Articles 546 and 548 of the New Civil Code.
Moreover, We are not changing or reversing any findings of the RTC and by this Court in Our
6 February 2004 decision. The Court is still bound by this judgment insofar as it found the
Deeds of Absolute Sale null and void, and that defendants-appellants are the rightful owners
of the lot in question.
However, if the court a quo did not take cognizance of the instant case, plaintiffs-appellees
shall lose ownership of the building worth Php316,400.00 without any compensation. While,
the defendant-appellants not only will recover the land but will also acquire a house without
payment of indemnity. The fairness of the rules enunciated in Article 448 is explained by the
Supreme Court in the case of Depra v. Dumlao, viz.:
Where the builder, planter or sower has acted in good faith, a conflict of rights arises between
the owners, and it becomes necessary to protect the owner of the improvements without
causing injustice to the owner of the land. In view of the impracticability of creating a state of
forced ownership, the law has provided a just solution by giving the owner of the land the option
to acquire the improvements after payment of the proper indemnity, or to oblige the builder or
planter to pay for the land and the sower to pay the proper rent. It is the owner of the land who
is authorized to exercise the option, because his right is older, and because, by the principle of
accession, he is entitled to the ownership of the accessory thing.
Finally, "the decision of the court a quo should not be viewed as a denigration of the doctrine
of immutability of final judgments, but a recognition of the equally sacrosanct doctrine that a
person should not be allowed Io profit or enrich himself inequitably at anal her's expense."24
The well-settled rule is that the principle or rule of res judicata is primarily one of public policy.
It is based on the policy against multiplicity of suits,26 whose primary objective is to avoid
unduly burdening the dockets of the courts.27 In this case, however, such principle is
inapplicable.
WHEREFORE, the Petition for Review on Certiorari under Rule 45, dated March 21, 2014, of
petitioners-spouses Maximo Espinoza and Winifreda De Vera, is DENIED. Consequently, the
Decision dated September 17, 2013 and Resolution dated January 28, 2014, both of the Court
of Appeals are AFFIRMED.
SO ORDERED.
G.R. No. 95907 April 8, 1992
JOSE REYNANTE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, THE HON. VALENTIN CRUZ, as Presiding
Judge, Regional Trial Court of Bulacan, Branch VIII, and the HEIRS OF LEONCIO
CARLOS and DOLORES A. CARLOS, and HEIRS OF GORGONIO CARLOS and
CONCEPCION CARLOS, respondents.
PARAS, J.:
This is a petition for review on certiorari which seeks the reversal of: a) decision 1 of the Court
of Appeals dated February 28, 1990 in CA-G.R. No. 1917 entitled "JOSE REYNANTE versus
HON. VALENTIN CRUZ, Judge, RTC of Malolos, Bulacan, and HEIRS OF LEONCIO AND
DOLORES CARLOS, et al.", affirming the decision 2 of the Regional Trial Court
of Malolos, Bulacan, Branch 8, Third Judicial Region which reversed the decision 3 of the
Municipal Trial Court of Meycauayan, Bulacan, Branch 1, Third Judicial Region in Civil Case
No. 1526 entitled "HEIRS OF LEONCIO CARLOS & DOLORES A. CARLOS and HEIRS OF
GORGONIO A. CARLOS & CONCEPCION CARLOS versus JOSE REYNANTE: and b) the
resolution denying the motion for reconsideration.
The facts as culled from the records of the case are as follows:
More than 50 years ago, petitioner Jose Reynante was taken as tenant by the late Don Cosme
Carlos, owner and father-in-law of herein private respondents, over a fishpond located at Barrio
Liputan, Meycauayan, Bulacan with an area of 188.711 square meters, more or less and
covered by Transfer Certificate of Title No. 25618, Land Registry of Bulacan.
During the tenancy, petitioner Jose Reynante constructed a nipa hut where he and his family
lived and took care of the nipa palms (sasahan) he had planted on lots 1 and 2 covering an
area of 5,096 square meters and 6,011 square meters respectively. These lots are located
between the fishpond covered by TCT No. 25618 and the Liputan (formerly Meycauayan)
River. Petitioner harvested and sold said nipa palms without interference and prohibition from
anybody. Neither did the late Don Cosme Carlos question his right to plant the nipa palms near
the fishpond or to harvest and appropriate them as his own.
After the death of Don Cosme Carlos, his heirs (private respondents' predecessors-in-interest)
entered into a written agreement denominated as "SINUMPAANG SALAYSAY NG
PAGSASAULI NG KARAPATAN" dated November 29, 1984 with petitioner Jose Reynante
whereby the latter for and in consideration of the sum of P200,000.00 turned over the fishpond
he was tenanting to the heirs of Don Cosme Carlos and surrendered all his rights therein as
caretaker or "bantay-kasama at tagapamahala" (Rollo, p. 77).
Pursuant to the said written agreement, petitioner surrendered the fishpond and the two huts
located therein to private respondents. Private respondents thereafter leased the said fishpond
to one Carlos de la Cruz. Petitioner continued to live in the nipa hut constructed by him on lots
1 and 2 and to take care of the nipa palms he had planted therein.
On February 17, 1988, private respondents formally demanded that the petitioner vacate said
portion since according to them petitioner had already been indemnified for the surrender of
his rights as a tenant. Despite receipt thereof, petitioner refused and failed to relinquish
possession of lots 1 and 2.
Hence, on April 22, 1988, private respondents filed a complaint for forcible entry with
preliminary mandatory injunction against petitioner alleging that the latter by means of strategy
and stealth, took over the physical, actual and material possession of lots 1 and 2 by residing
in one of the kubos or huts bordering the Liputan River and cutting off and/or disposing of the
sasa or nipa palms adjacent thereto.
On January 10, 1989, the trial court rendered its decision dismissing the complaint and finding
that petitioner had been in prior possession of lots 1
and 2.
Private respondents appealed to the Regional Trial Court and on August 8, 1989 it rendered
its decision, the dispositive portion of which reads as follows:
WHEREFORE, this Court renders judgment in favor of the plaintiffs and against defendant and
hereby reverses the decision of the Court a quo. Accordingly, the defendant is ordered to
restore possession of that piece of land particularly described and defined as Lots 1 & 2 of the
land survey conducted by Geodetic Engineer Restituto Buan on March 2, 1983, together with
the sasa or nipa palms planted thereon. No pronouncement as to attorney's fees. Each party
shall bear their respective costs of the suit.
SO ORDERED. (Rollo, p. 55; Decision, p. 4).
From said decision, petitioner filed with the Court of Appeals a petition for review (Rollo, p. 30;
Annex "A"). On February 28, 1990, the Court of Appeals rendered its decision, the dispositive
portion of which reads as follows:
WHEREFORE, the decision of the court a quo, being consistent with law and jurisprudence, is
hereby AFFIRMED in toto. The instant petition seeking to issue a restraining order is hereby
denied.
SO ORDERED. (Rollo, p. 30; Decision, p. 3).
On November 5, 1990, the Court of Appeals denied the motion for reconsideration filed by
petitioner (Rollo, p. 35; Annex "B").
Hence, this petition.
In its resolution dated May 6, 1991, the Second Division of this court gave due course to the
petition and required both parties to file their respective memoranda (Rollo, p. 93).
The main issues to be resolved in this case are: a) who between the petitioner and private
respondents has prior physical possession of lots 1 and 2; and b) whether or not the disputed
lots belong to private respondents as a result of accretion.
An action for forcible entry is merely a quieting process and actual title to the property is never
determined. A party who can prove prior possession can recover such possession even against
the owner himself. Whatever may be the character of his prior possession, if he has in his favor
priority in time, he has the security that entitles him to remain on the property until he is lawfully
ejected by a person having a better right by accion publiciana or accion reivindicatoria (German
Management & Services, Inc. v. Court of Appeals, G.R. No. 76216, September 14, 1989, 177
SCRA 495, 498, 499). On the other hand, if a plaintiff cannot prove prior physical possession,
he has no right of action for forcible entry and detainer even if he should be the owner of the
property (Lizo v. Carandang, 73 Phil. 469 [1942]).
Hence, the Court of Appeals could not legally restore private respondents' possession over lots
1 and 2 simply because petitioner has clearly proven that he had prior possession over lots 1
and 2.
The evidence on record shows that petitioner was in possession of the questioned lots for more
than 50 years. It is undisputed that he was the caretaker of the fishpond owned by the late Don
Cosme Carlos for more than 50 years and that he constructed a nipa hut adjacent to the
fishpond and planted nipa palms therein. This fact is bolstered by the "SINUMPAANG
SALAYSAY" executed by Epifanio Lucero (Records, p. 66), Apolonio D. Morte (Records, p.
101) and Carling Dumalay (Records, p. 103), all of whom are disinterested parties with no
motive to falsify that can be attributed to them, except their desire to tell the truth.
Moreover, an ocular inspection was conducted by the trial court dated December 2, 1988 which
was attended by the parties and their respective counsels and the court observed the following:
The Court viewed the location and the distance of the constructed nipa hut and the subject
"sasahan" which appears exists (sic) long ago, planted and stands (sic) adjacent to the
fishpond and the dikes which serves (sic) as passage way of water river of lot 1 and lot 2.
During the course of the hearing, both counsel observed muniment of title embedded on the
ground which is located at the inner side of the "pilapil" separating the fishpond from the subject
"sasa" plant with a height of 20 to 25 feet from water level and during the ocular inspection it
was judicially observed that the controversial premises is beyond the titled property of the
plaintiffs but situated along the Liputan, Meycauayan River it being a part of the public domain.
(Rollo, p. 51; Decision, p. 12).
On the other hand, private respondents based their claim of possession over lots 1 and 2 simply
on the written agreement signed by petitioner whereby the latter surrendered his rights over
the fishpond.
Evidently, the trial court did not err when it ruled that:
An examination of the document signed by the defendant (Exhibit "B"), shows that what was
surrendered to the plaintiffs was the fishpond and not the "sasahan" or the land on which he
constructed his hut where he now lives. That is a completely different agreement in which a
tenant would return a farm or a fishpond to his landlord in return for the amount that the landlord
would pay to him as a disturbance compensation. There is nothing that indicates that the tenant
was giving other matters not mentioned in a document like Exhibit "B". Moreover, when the
plaintiffs leased the fishpond to Mr. Carlos de La Cruz there was no mention that the lease
included the hut constructed by the defendant and the nipa palms planted by him (Exhibit "1"),
a circumstance that gives the impression that the nipa hut and the nipa palms were not included
in the lease to Mr. de la Cruz, which may not belong to the plaintiffs. (Rollo, p. 49; Decision, p.
9).
With regard to the second issue, it must be noted that the disputed lots involved in this case
are not included in Transfer Certificate of Title No. 25618 as per verification made by the Forest
Management Bureau, Department of Environment and Natural Resources. That tract of land
situated at Barrio Liputan, Meycauayan, Bulacan containing an area of 1.1107 hectares as
described in the plan prepared and surveyed by Geodetic Engineer Restituto Buan for Jose
Reynante falls within Alienable and Disposable Land (for fishpond development) under Project
No. 15 per B.F.L.C. Map No. 3122 dated May 8, 1987 (Rollo, p. 31; Decision, p. 2).
The respondent Court of Appeals ruled that lots 1 and 2 were created by alluvial formation and
hence the property of private respondents pursuant to Article 457 of the New Civil Code, to wit:
Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion which
they gradually receive from the effects of the current of the waters.
Accretion benefits a riparian owner when the following requisites are present: (1) that the
deposit be gradual and imperceptible; (2) that it resulted from the effects of the current of the
water; and (c) that the land where accretion takes place is adjacent to the bank of a river
(Republic v. Court of Appeals, G.R. No. L-61647, October 12, 1984, 132 SCRA 514, cited in
Agustin v. Intermediate Appellate Court, G.R. Nos. 66075-76, July 5, 1990, 187 SCRA 218).
Granting without conceding that lots 1 and 2 were created by alluvial formation and while it is
true that accretions which the banks of rivers may gradually receive from the effect of the
current become the property of the owner of the banks, such accretion to registered land does
not preclude acquisition of the additional area by another person through prescription.
This Court ruled in the case of Ignacio Grande, et al. v. Hon. Court of Appeals, et al., G.R. No.
L-17652, June 30, 1962, 115 Phil. 521 that:
An accretion does not automatically become registered land just because the lot which receives
such accretion is covered by a Torrens Title. Ownership of a piece of land is one thing;
registration under the Torrens system of that ownership is another. Ownership over the
accretion received by the land adjoining a river is governed by the Civil Code. Imprescriptibility
of registered land is provided in the registration law. Registration under the Land Registration
and Cadastral Act does not vest or give title to the land, but merely confirms and, thereafter,
protects the title already possessed by the owner, making it imprescriptible by occupation of
third parties. But to obtain this protection, the land must be placed under the operation of the
registration laws, wherein certain judicial procedures have been provided.
Assuming private respondents had acquired the alluvial deposit (the lot in question), by
accretion, still their failure to register said accretion for a period of fifty (50) years subjected
said accretion to acquisition through prescription by third persons.
It is undisputed that petitioner has been in possession of the subject lots for more than fifty (50)
years and unless private respondents can show a better title over the subject lots, petitioner's
possession over the property must be respected.
PREMISES CONSIDERED, the decision of the respondent Court of Appeals dated February
28, 1990 is REVERSED and SET ASIDE and the decision of the Municipal Trial Court of
Meycauayan, Bulacan, Branch I, is hereby REINSTATED.

SO ORDERED.
Melencio-Herrera, Padilla, Regalado and Nocon, JJ., concur.
G.R. No. 178411 June 23, 2010
OFFICE OF THE CITY MAYOR OF PARAÑAQUE CITY, OFFICE OF THE CITY
ADMINISTRATOR OF PARAÑAQUE CITY, OFFICE OF THE CITY ENGINEER OF
PARAÑAQUE CITY, OFFICE OF THE CITY PLANNING AND DEVELOPMENT
COORDINATOR, OFFICE OF THE BARANGAY CAPTAIN AND SANGGUNIANG
PAMBARANGAY OF BARANGAY VITALEZ, PARAÑAQUE CITY, TERESITA A.
GATCHALIAN, ENRICO R. ESGUERRA, ERNESTO T. PRACALE, JR., MANUEL M.
ARGOTE, CONRADO M. CANLAS, JOSEPHINE S. DAUIGOY, ALLAN L. GONZALES,
ESTER C. ASEHAN, MANUEL A. FUENTES, and MYRNA P. ROSALES, Petitioners,
vs.
MARIO D. EBIO AND HIS CHILDREN/HEIRS namely, ARTURO V. EBIO, EDUARDO V.
EBIO, RENATO V. EBIO, LOURDES E. MAGTANGOB, MILA V. EBIO, and ARNEL V. EBIO,
Respondents.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, assailing the January 31, 2007 Decision1 and June 8, 2007
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 91350 allegedly for being contrary
to law and jurisprudence. The CA had reversed the Order3 of the Regional Trial Court (RTC)
of Parañaque City, Branch 196, issued on April 29, 2005 in Civil Case No. 05-0155.
Below are the facts.
Respondents claim that they are the absolute owners of a parcel of land consisting of 406
square meters, more or less, located at 9781 Vitalez Compound in Barangay Vitalez,
Parañaque City and covered by Tax Declaration Nos. 01027 and 01472 in the name of
respondent Mario D. Ebio. Said land was an accretion of Cut-cut creek. Respondents assert
that the original occupant and possessor of the said parcel of land was their great grandfather,
Jose Vitalez. Sometime in 1930, Jose gave the land to his son, Pedro Vitalez. From then on,
Pedro continuously and exclusively occupied and possessed the said lot. In 1966, after
executing an affidavit declaring possession and occupancy,4 Pedro was able to obtain a tax
declaration over the said property in his name.5 Since then, respondents have been religiously
paying real property taxes for the said property.6
Meanwhile, in 1961, respondent Mario Ebio married Pedro’s daughter, Zenaida. Upon Pedro’s
advice, the couple established their home on the said lot. In April 1964 and in October 1971,
Mario Ebio secured building permits from the Parañaque municipal office for the construction
of their house within the said compound.7 On April 21, 1987, Pedro executed a notarized
Transfer of Rights8 ceding his claim over the entire parcel of land in favor of Mario Ebio.
Subsequently, the tax declarations under Pedro’s name were cancelled and new ones were
issued in Mario Ebio’s name.9
On March 30, 1999, the Office of the Sangguniang Barangay of Vitalez passed Resolution No.
08, series of 199910 seeking assistance from the City Government of Parañaque for the
construction of an access road along Cut-cut Creek located in the said barangay. The proposed
road, projected to be eight (8) meters wide and sixty (60) meters long, will run from Urma Drive
to the main road of Vitalez Compound11 traversing the lot occupied by the respondents. When
the city government advised all the affected residents to vacate the said area, respondents
immediately registered their opposition thereto. As a result, the road project was temporarily
suspended.12
In January 2003, however, respondents were surprised when several officials from the
barangay and the city planning office proceeded to cut eight (8) coconut trees planted on the
said lot. Respondents filed letter-complaints before the Regional Director of the Bureau of
Lands, the Department of Interior and Local Government and the Office of the Vice Mayor.13
On June 29, 2003, the Sangguniang Barangay of Vitalez held a meeting to discuss the
construction of the proposed road. In the said meeting, respondents asserted their opposition
to the proposed project and their claim of ownership over the affected property.14 On
November 14, 2003, respondents attended another meeting with officials from the city
government, but no definite agreement was reached by and among the parties.15
On March 28, 2005, City Administrator Noli Aldip sent a letter to the respondents ordering them
to vacate the area within the next thirty (30) days, or be physically evicted from the said
property.16 Respondents sent a letter to the Office of the City Administrator asserting, in sum,
their claim over the subject property and expressing intent for a further dialogue.17 The request
remained unheeded.1avvphi1
Threatened of being evicted, respondents went to the RTC of Parañaque City on April 21, 2005
and applied for a writ of preliminary injunction against petitioners.18 In the course of the
proceedings, respondents admitted before the trial court that they have a pending application
for the issuance of a sales patent before the Department of Environment and Natural
Resources (DENR).19
On April 29, 2005, the RTC issued an Order20 denying the petition for lack of merit. The trial
court reasoned that respondents were not able to prove successfully that they have an
established right to the property since they have not instituted an action for confirmation of title
and their application for sales patent has not yet been granted. Additionally, they failed to
implead the Republic of the Philippines, which is an indispensable party.
Respondents moved for reconsideration, but the same was denied.21
Aggrieved, respondents elevated the matter to the Court of Appeals. On January 31, 2007, the
Court of Appeals issued its Decision in favor of the respondents. According to the Court of
Appeals--
The issue ultimately boils down to the question of ownership of the lands adjoining Cutcut
Creek particularly Road Lot No. 8 (hereinafter RL 8) and the accreted portion beside RL 8.
The evidentiary records of the instant case, shows that RL 8 containing an area of 291 square
meters is owned by Guaranteed Homes, Inc. covered by TCT No. S-62176. The same RL 8
appears to have been donated by the Guaranteed Homes to the City Government of
Parañaque on 22 March 1966 and which was accepted by the then Mayor FLORENCIO
BERNABE on 5 April 1966. There is no evidence however, when RL 8 has been intended as
a road lot.
On the other hand, the evidentiary records reveal that PEDRO VITALEZ possessed the
accreted property since 1930 per his Affidavit dated 21 March 1966 for the purpose of declaring
the said property for taxation purposes. The property then became the subject of Tax
Declaration No. 20134 beginning the year 1967 and the real property taxes therefor had been
paid for the years 1966, 1967, 1968, 1969, 1970, 1972, 1973, 1974, 1978, 1980, 1995, 1996,
1997, 1998, 1999, 2000, 2001, 2002, 2003, and 2004. Sometime in 1964 and 1971,
construction permits were issued in favor of Appellant MARIO EBIO for the subject property.
On 21 April 1987, PEDRO VITALEZ transferred his rights in the accreted property to MARIO
EBIO and his successors-in-interest.
Applying [Article 457 of the Civil Code considering] the foregoing documentary evidence, it
could be concluded that Guaranteed Homes is the owner of the accreted property considering
its ownership of the adjoining RL 8 to which the accretion attached. However, this is without
the application of the provisions of the Civil Code on acquisitive prescription which is likewise
applicable in the instant case.
xxxx
The subject of acquisitive prescription in the instant case is the accreted portion which [was]
duly proven by the Appellants. It is clear that since 1930, Appellants together with their
predecessor-in-interest, PEDRO VITALEZ[,] have been in exclusive possession of the subject
property and starting 1964 had introduced improvements thereon as evidenced by their
construction permits. Thus, even by extraordinary acquisitive prescription[,] Appellants have
acquired ownership of the property in question since 1930 even if the adjoining RL 8 was
subsequently registered in the name of Guaranteed Homes. x x x.
xxxx
Further, it was only in 1978 that Guaranteed Homes was able to have RL 8 registered in its
name, which is almost fifty years from the time PEDRO VITALEZ occupied the adjoining
accreted property in 1930. x x x.
xxxx
We likewise note the continuous payment of real property taxes of Appellants which bolster
their right over the subject property. x x x.
xxxx
In sum, We are fully convinced and so hold that the Appellants [have] amply proven their right
over the property in question.
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The challenged
Order of the court a quo is REVERSED and SET ASIDE.
SO ORDERED.22
On June 8, 2007, the appellate court denied petitioners’ motion for reconsideration. Hence, this
petition raising the following assignment of errors:
I. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE COURT
OF APPEALS THAT RESPONDENTS HAVE A RIGHT IN ESSE IS IN ACCORD WITH THE
LAW AND ESTABLISHED JURISPRUDENCE[;]
II. WHETHER OR NOT THE DECISION AND RESOLUTION OF THE HONORABLE COURT
OF APPEALS THAT THE SUBJECT LOT IS AVAILABLE FOR ACQUISITIVE
PRESCRIPTION IS IN ACCORD WITH THE LAW AND ESTABLISHED JURISPRUDENCE[;]
AND
III. WHETHER OR NOT THE STATE IS AN INDISPENSABLE PARTY TO THE COMPLAINT
… FILED BY RESPONDENTS IN THE LOWER COURT.23
The issues may be narrowed down into two (2): procedurally, whether the State is an
indispensable party to respondents’ action for prohibitory injunction; and substantively, whether
the character of respondents’ possession and occupation of the subject property entitles them
to avail of the relief of prohibitory injunction.
The petition is without merit.
An action for injunction is brought specifically to restrain or command the performance of an
act.24 It is distinct from the ancillary remedy of preliminary injunction, which cannot exist except
only as part or as an incident to an independent action or proceeding. Moreover, in an action
for injunction, the auxiliary remedy of a preliminary prohibitory or mandatory injunction may
issue.25
In the case at bar, respondents filed an action for injunction to prevent the local government of
Parañaque City from proceeding with the construction of an access road that will traverse
through a parcel of land which they claim is owned by them by virtue of acquisitive prescription.
Petitioners, however, argue that since the creek, being a tributary of the river, is classified as
part of the public domain, any land that may have formed along its banks through time should
also be considered as part of the public domain. And respondents should have included the
State as it is an indispensable party to the action.
We do not agree.
It is an uncontested fact that the subject land was formed from the alluvial deposits that have
gradually settled along the banks of Cut-cut creek. This being the case, the law that governs
ownership over the accreted portion is Article 84 of the Spanish Law of Waters of 1866, which
remains in effect,26 in relation to Article 457 of the Civil Code.
Article 84 of the Spanish Law of Waters of 1866 specifically covers ownership over alluvial
deposits along the banks of a creek. It reads:
ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams, rivers, and
lakes, by accessions or sediments from the waters thereof, belong to the owners of such
lands.27
Interestingly, Article 457 of the Civil Code states:
Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion which they
gradually receive from the effects of the current of the waters.
It is therefore explicit from the foregoing provisions that alluvial deposits along the banks of a
creek do not form part of the public domain as the alluvial property automatically belongs to the
owner of the estate to which it may have been added. The only restriction provided for by law
is that the owner of the adjoining property must register the same under the Torrens system;
otherwise, the alluvial property may be subject to acquisition through prescription by third
persons.28
In contrast, properties of public dominion cannot be acquired by prescription. No matter how
long the possession of the properties has been, there can be no prescription against the State
regarding property of public domain.29 Even a city or municipality cannot acquire them by
prescription as against the State.30
Hence, while it is true that a creek is a property of public dominion,31 the land which is formed
by the gradual and imperceptible accumulation of sediments along its banks does not form part
of the public domain by clear provision of law.
Moreover, an indispensable party is one whose interest in the controversy is such that a final
decree would necessarily affect his/her right, so that the court cannot proceed without their
presence.32 In contrast, a necessary party is one whose presence in the proceedings is
necessary to adjudicate the whole controversy but whose interest is separable such that a final
decree can be made in their absence without affecting them.33
In the instant case, the action for prohibition seeks to enjoin the city government of Parañaque
from proceeding with its implementation of the road construction project. The State is neither a
necessary nor an indispensable party to an action where no positive act shall be required from
it or where no obligation shall be imposed upon it, such as in the case at bar. Neither would it
be an indispensable party if none of its properties shall be divested nor any of its rights
infringed.
We also find that the character of possession and ownership by the respondents over the
contested land entitles them to the avails of the action.
A right in esse means a clear and unmistakable right.34 A party seeking to avail of an injunctive
relief must prove that he or she possesses a right in esse or one that is actual or existing.35 It
should not be contingent, abstract, or future rights, or one which may never arise.36
In the case at bar, respondents assert that their predecessor-in-interest, Pedro Vitalez, had
occupied and possessed the subject lot as early as 1930. In 1964, respondent Mario Ebio
secured a permit from the local government of Parañaque for the construction of their family
dwelling on the said lot. In 1966, Pedro executed an affidavit of possession and occupancy
allowing him to declare the property in his name for taxation purposes. Curiously, it was also
in 1966 when Guaranteed Homes, Inc., the registered owner of Road Lot No. 8 (RL 8) which
adjoins the land occupied by the respondents, donated RL 8 to the local government of
Parañaque.
From these findings of fact by both the trial court and the Court of Appeals, only one conclusion
can be made: that for more than thirty (30) years, neither Guaranteed Homes, Inc. nor the local
government of Parañaque in its corporate or private capacity sought to register the accreted
portion. Undoubtedly, respondents are deemed to have acquired ownership over the subject
property through prescription. Respondents can assert such right despite the fact that they
have yet to register their title over the said lot. It must be remembered that the purpose of land
registration is not the acquisition of lands, but only the registration of title which the applicant
already possessed over the land. Registration was never intended as a means of acquiring
ownership.37 A decree of registration merely confirms, but does not confer, ownership.38
Did the filing of a sales patent application by the respondents, which remains pending before
the DENR, estop them from filing an injunction suit?
We answer in the negative.
Confirmation of an imperfect title over a parcel of land may be done either through judicial
proceedings or through administrative process. In the instant case, respondents admitted that
they opted to confirm their title over the property administratively by filing an application for
sales patent.
Respondents’ application for sales patent, however, should not be used to prejudice or
derogate what may be deemed as their vested right over the subject property. The sales patent
application should instead be considered as a mere superfluity particularly since ownership
over the land, which they seek to buy from the State, is already vested upon them by virtue of
acquisitive prescription. Moreover, the State does not have any authority to convey a property
through the issuance of a grant or a patent if the land is no longer a public land.39
Nemo dat quod dat non habet. No one can give what he does not have. Such principle is
equally applicable even against a sovereign entity that is the State.
WHEREFORE, the petition is DENIED for lack of merit. The January 31, 2007 Decision, as
well as the July 8, 2007 Resolution, of the Court of Appeals in CA-G.R. SP No. 91350 are
hereby AFFIRMED.
With costs against petitioners.
SO ORDERED.
G.R. Nos. L-66075-76 July 5, 1990
EULOGIO AGUSTIN, HEIRS OF BALDOMERO LANGCAY, ARTURO BALISI & JUAN
LANGCAY, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, MARIA MELAD, TIMOTEO MELAD, PABLO
BINAYUG & GERONIMA UBINA, respondents.
Antonio N. Laggui for petitioners.
Pedro R. Perez, Jr. for private respondents.
GRIÑO-AQUINO, J.:
The Cagayan River separates the towns of Solana on the west and Tuguegarao on the east in
the province of Cagayan. According to the unrebutted testimony of Romeo Rigor, Geodetic
Engineer of the Bureau of Lands, in 1919 the lands east of the river were covered by the
Tuguegarao Cadastre. In 1925, Original Certificate of Title No. 5472 was issued for land east
of the Cagayan River owned by defendant-petitioner Eulogio Agustin (Exh. 2-Agustin).
As the years went by, the Cagayan River moved gradually eastward, depositing silt on the
western bank. The shifting of the river and the siltation continued until 1968.
In 1950, all lands west of the river were included in the Solana Cadastre. Among these
occupying lands covered by the Solana Cadastre were plaintiffs-private respondents, namely,
Pablo Binayug, who has been in possession of Lots 3349, 7876, 7877, 7878, 7879, 7875, 7881,
7882, 7883, 7884, 7885, 7891 and 7892, and Maria Melad, who owns Lot 3351 (Exh. 3-
Binayug; Exh. B-Melad). Pablo Binayug began his possession in 1947. An area of eight (8)
hectares was planted to tobacco and corn while 12 hectares were overgrown with talahib (Exh.
C-1 Binayug.) Binayug's Homestead Application No. W-79055 over this land was approved in
1959 (Exh. B-Binayug). Binayug's possession was recognized in the decision in Civil Case No.
101 (Exh. F-Binayug). On the other hand, as a result of Civil Case No. 343-T, Macario Melad,
the predecessor-in-interest of Maria Melad and Timoteo Melad, was issued Original Certificate
of Title No. P-5026 for Lot 3351 of Cad. 293 on June 1, 1956.
Through the years, the Cagayan River eroded lands of the Tuguegarao Cadastre on its eastern
bank among which was defendant-petitioner Eulogio Agustin's Lot 8457 (Exh. E-Melad),
depositing the alluvium as accretion on the land possessed by Pablo Binayug on the western
bank.
However, in 1968, after a big flood, the Cagayan River changed its course, returned to its 1919
bed, and, in the process, cut across the lands of Maria Melad, Timoteo Melad, and the spouses
Pablo Binayug and Geronima Ubina whose lands were transferred on the eastern, or
Tuguegarao, side of the river. To cultivate those lots they had to cross the river.
In April, 1969, while the private respondents and their tenants were planting corn on their lots
located on the eastern side of the Cagayan River, the petitioners, accompanied by the mayor
and some policemen of Tuguegarao, claimed the same lands as their own and drove away the
private respondents from the premises.
On April 21, 1970, private respondents Maria Melad and Timoteo Melad filed a complaint (Civil
Case No. 343-T) to recover Lot No. 3351 with an area of 5 hectares and its 6.6-hectare
accretion. On April 24, 1970, private respondent Pablo Binayug filed a separate complaint (Civil
Case No. 344-T) to recover his lots and their accretions.
On June 16, 1975, the trial court rendered a decision, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby made:
In Civil Case No. 343-T, commanding Eulogio Agustin, Gregorio Tuliao, Jacinto Buquel and
Octavio Bancud, or anybody acting as their representative[s] or agents to vacate Lot No. 3351
of Solana Cadastre together with its accretion consisting of portions of Lots 9463, 9462 and
9461 of Tuguegarao Cadastre and for these defendants to restore ownership in favor of Maria
Melad and Timoteo Melad who are the only interested heirs of Macario Melad.
In Civil Case No. 344-T, commanding defendants Justo Adduru, Andres Pastor, Teofilo
Tagacay, Vicente Camilan, Nicanor Mora, Baldomero Cagurangan, Domingo Quilang, Cesar
Cabalza, Elias Macababbad, Titong Macababbad, Arturo Balisi, Jose Allabun, Eulogio Agustin,
Banong Aquino, Junior Cambri and Juan Langoay, or any of their agents or representatives to
vacate the Lots 3349, 7876, 7877, 7878, 7879, 7875, 7881, 7882, 7883, 7884, 7885, 7891 and
7892, together with its accretion and to restore possession to plaintiffs Pablo Binayug and
Geronima Ubina. Without pronouncement as to damages which were not properly proven and
to costs.
SO ORDERED. (As amended by the order dated August 15, 1975.) (pp. 24-25, Rollo.)
Only defendant-petitioner Eulogio Agustin appealed in Civil Case No. 343-T, while in Civil Case
No. 344-T, only defendants-petitioners Eulogio Agustin, Baldomero Cagurangan (substituted
by his heir), Arturo Balisi and Juan Langcay appealed. But upon motion of plaintiffs-private
respondents, the trial court ordered the execution pending appeal of the judgment in Civil Case
No. 344-T against Cagurangan, Balisi and Langcay on the ground that their appeal was dilatory
as they had not presented evidence at the trial (Order dated August 15, 1975).
On November 29, 1983, the Intermediate Appellate Court rendered a decision affirming in toto
the judgment of the trial court, with costs against the defendants-appellants.
In their petition for review of that decision, the petitioners allege that the Court of Appeals erred:
1. in declaring that the land in question had become part of private respondents' estate
as a result of accretion;
2. in declaring that the accretion to private respondents' estate which used to pertain to
petitioners' estate cannot preclude the private respondents from being the owners thereof; and
3. in declaring that the ownership of private respondents over the accretion is not affected
by the sudden and abrupt change in the course of the Cagayan River when it reverted to its
old bed
The petition is unmeritorious and must be denied.
The finding of the Court of Appeals that there had been accretions to the lots of the private
respondents who did not lose the ownership of such accretions even after they were separated
from the principal lots by the sudden change of course of the river, is a finding of fact which is
conclusive on this Court. That finding is supported by Art. 457 of the New Civil Code which
provides:
Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion which
they gradually receive from the effects of the current of the waters. (366)
Accretion benefits a riparian owner when the following requisites are present: (1) that the
deposit be gradual and imperceptible; (2) that it resulted from the effects of the current of the
water; and (3) that the land where accretion takes place is adjacent to the bank of a river
(Republic vs. CA, 132 SCRA 514).
All these requisites of accretion are present in this case for, as the trial court found:
. . . Cagayan River did move year by year from 1919 to 1968 or for a period of 49 years. Within
this period, the alluvium (sic) deposited on the other side has become greater in area than the
original lands of the plaintiffs in both cases. Still the addition in every year is imperceptible in
nature, one could not discern it but can be measured after the lapse of a certain time. The
testimonial evidence in these cases that said Cagayan River moved eastward year by year is
overwhelming as against the denial of defendant Eulogio Agustin alone. Cesar Caronan, one
time mayor of Solana, Cagayan, said so. Arturo Taguian said so. Timoteo Melad said so.
Francisco Ubina said so. Geodetic Engineer Rigor impliedly said so when he testified that when
Solana Cadastre was executed in 1950 it overlapped portions of Tuguegarao Cadastre
executed in 1919. This could not have happened if that part of Tuguegarao Cadastre was not
eroded by the overflow of the Cagayan River. These testimonies cannot be destroyed by the
denials of Vicente Cauilan, Marcelo Agustin and Eulogio Agustin alone . . . . (p. 27, Rollo.)
The appellate court confirmed that the accretion on the western bank of the Cagayan River
had been going on from 1919 up to 1968 or for a period of 49 years. It was gradual and
imperceptible. Only when Lot No. 3351, with an original area of 5 hectares described in the
free patent that was issued to Macario Melad in June 1956, was resurveyed in 1968 did it
become known that 6.6 hectares had been added to it. Lot No. 3351, covered by a homestead
patent issued in June, 1950 to Pablo Binayug, grew from its original area of 18 hectares, by an
additional 50 hectares through alluvium as the Cagayan River gradually moved to the east.
These accretions belong to riparian owners upon whose lands the alluvial deposits were made
(Roxas vs. Tuason, 9 Phil. 408; Director of Lands vs. Rizal, 87 Phil. 806). The reason for this
principle is because, if lands bordering on streams are exposed to floods and other damage
due to the destructive force of the waters, and if by virtue of law they are subject to
encumbrances and various kinds of easements, it is only just that such risks or dangers as may
prejudice the owners thereof should in some way be compensated by the right of accretion
(Cortes vs. City of Manila, 10 Phil. 567).i•t•c-aüsl
The private respondents' ownership of the accretion to their lands was not lost upon the sudden
and abrupt change of the course of the Cagayan River in 1968 or 1969 when it reverted to its
old 1919 bed, and separated or transferred said accretions to the other side (or eastern bank)
of the river. Articles 459 and 463 of the New Civil Code apply to this situation.
Art. 459. Whenever the current of a river, creek or torrent segregates from an estate on
its bank a known portion of land and transfers it to another estate, the owner of the land to
which the segregated portion belonged retains the ownership of it, provided that he removes
the same within two years.
Art. 463. Whenever the current of a river divides itself into branches, leaving a piece of
land or part thereof isolated, the owner of the land retains his ownership. He also retains it if a
portion of land is separated from the estate by the current. (Emphasis supplied).
In the case at bar, the sudden change of course of the Cagayan River as a result of a strong
typhoon in 1968 caused a portion of the lands of the private respondents to be "separated from
the estate by the current." The private respondents have retained the ownership of the portion
that was transferred by avulsion to the other side of the river.
WHEREFORE, the petition is denied for lack of merit. The decision of the Intermediate
Appellate Court, now Court of Appeals, is hereby affirmed. Costs against the petitioners.
SO ORDERED.
Narvasa, C.J., Cruz, Gancayco and Medialdea, JJ., concur.
G.R. No. 184746 August 8, 2012
SPOUSES CRISPIN GALANG and CARlOAD GALANG, Petitioners,
vs.
SPOUSES CONRADO S. REYES AND FE DE KASTRO REYES (As substituted by their
legal heir: Hermenigildo K. Reyes), Respondents.
REYES,*
DECISION
MENDOZA, J.:
This petition for review on certiorari under Rule 45 seeks to reverse and set aside the April 9,
2008 Decision1 of the Court of Appeals (CA) and its October 6, 2008 Resolution,2 in CA-G.R.
CV. No. 85660.
The Facts
On September 4, 1997, spouses Conrado S. Reyes and Fe de Kastro Reyes (the Reyeses)
filed a case for the annulment of Original Certificate of Title (OCT) No. P-928 against spouses
Crispin and Caridad Galang (the Galangs) with the Regional Trial Court, Antipolo, Rizal
(RTC),docketed as Civil Case No. 97-4560.
In their Complaint,3 the Reyeses alleged that they owned two properties: (1) a subdivision
project known as Ponderosa Heights Subdivision (Ponderosa), and (2) an adjoining property
covered by Transfer Certificate of Title (TCT) No. 185252, with an area of 1,201 sq.m.;4 that
the properties were separated by the Marigman Creek, which dried up sometime in 1980 when
it changed its course and passed through Ponderosa; that the Galangs, by employing
manipulation and fraud, were able to obtain a certificate of title over the dried up creek bed
from the Department of Environment and Natural Resources (DENR), through its Provincial
Office (PENRO); that, specifically, the property was denominated as Lot 5735, Cad 29 Ext.,
Case-1, with an area of 1,573 sq.m. covered by OCT No. P-928; that they discovered the
existence of the certificate of title sometime in March 1997 when their caretaker, Federico
Enteroso (Enteroso), informed them that the subject property had been fraudulently titled in the
names of the Galangs; that in 1984, prior to such discovery, Enteroso applied for the titling of
the property, as he had been occupying it since 1968 and had built his house on it; that, later,
Enteroso requested them to continue the application because of financial constraints on his
part;5 that they continued the application, but later learned that the application papers were
lost in the Assessor’s Office;6 and that as the owners of the land where the new course of
water passed, they are entitled to the ownership of the property to compensate them for the
loss of the land being occupied by the new creek.
The Galangs in their Answer7 denied that the land subject of the complaint was part of a creek
and countered that OCT No. P-928 was issued to them after they had complied with the free
patent requirements of the DENR, through the PENRO; that they and their predecessor-in-
interest had been in possession, occupation, cultivation, and ownership of the land for quite
some time; that the property described under TCT No. 185252 belonged to Apolonio Galang,
their predecessor-in-interest, under OCT No. 3991; that the property was transferred in the
names of the Reyeses through falsified document;8 that assuming ex gratia argumenti that the
creek had indeed changed its course and passed through Ponderosa, the Reyeses had already
claimed for themselves the portion of the dried creek which adjoined and co-existed with their
property; that Enteroso was able to occupy a portion of their land by means of force, coercion,
machinations, and stealth in 1981; that such unlawful entry was then the subject of an Accion
Publiciana before the RTC of Antipolo City (Branch 72); and that at the time of the filing of the
Complaint, the matter was still subject of an appeal before the CA, under CA-G.R. CV No.
53509.
The RTC Decision
In its Decision,9 dated July 16, 2004, the RTC dismissed the complaint for lack of cause of
action and for being an erroneous remedy. The RTC stated that a title issued upon a patent
may be annulled only on grounds of actual and intrinsic fraud, which much consist of an
intentional omission of fact required by law to be stated in the application or willful statement
of a claim against the truth. In the case before the trial court, the Reyeses presented no
evidence of fraud despite their allegations that the Galangs were not in possession of the
property and that it was part of a dried creek. There being no evidence, these contentions
remained allegations and could not defeat the title of the Galangs. The RTC wrote:
A title issued upon patent may be annulled only on ground of actual fraud.
Such fraud must consist [of] an intentional omission of fact required by law to be stated in the
application or willful statement of a claim against the truth. It must show some specific facts
intended to deceive and deprive another of his right. The fraud must be actual and intrinsic, not
merely constructive or intrinsic; the evidence thereof must be clear, convincing and more than
merely preponderant, because the proceedings which are being assailed as having been
fraudulent are judicial proceedings, which by law, are presumed to have been fair and regular.
(Libudan v. Palma Gil 45 SCRA 17)
However, aside from allegations that defendant Galang is not in possession of the property and
that the property was part of a dried creek, no other sufficient evidence of fraud was presented
by the plaintiffs. They have, thus, remained allegations, which cannot defeat the defendants
title.10
The RTC added that the land, having been acquired through a homestead patent, was
presumably public land. Therefore, only the State can institute an action for the annulment of
the title covering it.
It further opined that because the Reyeses claimed to have acquired the property by right of
accretion, they should have filed an action for reconveyance, explaining "[t]hat the remedy of
persons whose property had been wrongly or erroneously registered in another’s name is not
to set aside the decree/title, but an action for reconveyance, or if the property has passed into
the hands of an innocent purchaser for value, an action for damages."11
The Court of Appeals Decision
In its Decision, dated April 9, 2008, the CA reversed and set aside the RTC decision and
ordered the cancellation of OCT No. P-928 and the reconveyance of the land to the Reyeses.
The CA found that the Reyeses had proven by preponderance of evidence that the subject
land was a portion of the creek bed that was abandoned through the natural change in the
course of the water, which had now traversed a portion of Ponderosa. As owners of the land
occupied by the new course of the creek, the Reyeses had become the owners of the
abandoned creek bed ipso facto. Inasmuch as the subject land had become private, a free
patent issued over it was null and void and produced no legal effect whatsoever. A posteriori,
the free patent covering the subject land, a private land, and the certificate of title issued
pursuant thereto, are null and void.12
The Galangs moved for a reconsideration,13 but their motion was denied in a Resolution dated
October 6, 2008.
Hence, this petition.
Issues
The Galangs present, as warranting a review of the questioned CA decision, the following
grounds:
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN NOT RESOLVING THAT THE OFFICE OF
THE SOLICITOR GENERAL, NOT THE PRIVATE RESPONDENTS, HAS THE SOLE
AUTHORITY TO FILE [CASES FOR] ANNULMENT OF TITLE INVOLVING PUBLIC LAND.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN HOLDING THAT PRIVATE RESPONDENTS
HAVE [A] CAUSE OF ACTION AGAINST PETITIONERS EVEN WITHOUT EXHAUSTION OF
ADMINISTRATIVE REMED[IES].
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN DEVIATING FROM THE FINDINGS OF FACT
OF THE TRIAL COURT AND INTERPRETING ARTICLE 420 IN RELATION TO ARTICLE 461
OF THE CIVIL CODE OF THE PHILIPPINES BY SUBSTITUTING ITS OWN OPINION BASED
ON ASSUMPTION OF FACTS.14
A reading of the records discloses that these can be synthesized into two principal issues, to
wit: (1) whether the Reyeses can file the present action for annulment of a free patent title and
reconveyance; and (2) if they can, whether they were able to prove their cause of action against
the Galangs.
The Court’s Ruling
Regarding the first issue, the Galangs state that the property was formerly a public land, titled
in their names by virtue of Free Patent No. 045802-96-2847 issued by the DENR. Thus, they
posit that the Reyeses do not have the personality and authority to institute any action for
annulment of title because such authority is vested in the Republic of the Philippines, through
the Office of the Solicitor General.15
In this regard, the Galangs are mistaken. The action filed by the Reyeses seeks the transfer to
their names of the title registered in the names of the Galangs. In their Complaint, they alleged
that: first, they are the owners of the land, being the owners of the properties through which the
Marigman creek passed when it changed its course; and second, the Galangs illegally
dispossessed them by having the same property registered in their names. It was not an action
for reversion which requires that the State be the one to initiate the action in order for it to
prosper. The distinction between the two actions was elucidated in the case of Heirs of
Kionisala v. Heirs of Dacut,16 where it was written:
An ordinary civil action for declaration of nullity of free patents and certificates of title is not the
same as an action for reversion. The difference between them lies in the allegations as to the
character of ownership of the realty whose title is sought to be nullified. In an action for
reversion, the pertinent allegations in the complaint would admit State ownership of the
disputed land. Hence in Gabila v. Barriga where the plaintiff in his complaint admits that he has
no right to demand the cancellation or amendment of the defendant’s title because even if the
title were cancelled or amended the ownership of the land embraced therein or of the portion
affected by the amendment would revert to the public domain, we ruled that the action was for
reversion and that the only person or entity entitled to relief would be the Director of Lands.
On the other hand, a cause of action for declaration of nullity of free patent and certificate of
title would require allegations of the plaintiff’s ownership of the contested lot prior to the
issuance of such free patent and certificate of title as well as the defendant’s fraud or mistake;
as the case may be, in successfully obtaining these documents of title over the parcel of land
claimed by plaintiff. In such a case, the nullity arises strictly not from the fraud or deceit but
from the fact that the land is beyond the jurisdiction of the Bureau of Lands to bestow and
whatever patent or certificate of title obtained therefor is consequently void ab initio. The real
party in interest is not the State but the plaintiff who alleges a pre-existing right of ownership
over the parcel of land in question even before the grant of title to the defendant. In Heirs of
Marciano Nagano v. Court of Appeals we ruled –
x x x x from the allegations in the complaint x x x private respondents claim ownership of the
2,250 square meter portion for having possessed it in the concept of an owner, openly,
peacefully, publicly, continuously and adversely since 1920. This claim is an assertion that the
lot is private land x x x x Consequently, merely on the basis of the allegations in the complaint,
the lot in question is apparently beyond the jurisdiction of the Director of the Bureau of Lands
and could not be the subject of a Free Patent. Hence, the dismissal of private respondents’
complaint was premature and trial on the merits should have been conducted to thresh out
evidentiary matters. It would have been entirely different if the action were clearly for reversion,
in which case, it would have to be instituted by the Solicitor General pursuant to Section 101
of C.A. No. 141 x x x x
It is obvious that private respondents allege in their complaint all the facts necessary to seek
the nullification of the free patents as well as the certificates of title covering Lot 1015 and Lot
1017. Clearly, they are the real parties in interest in light of their allegations that they have
always been the owners and possessors of the two (2) parcels of land even prior to the
issuance of the documents of title in petitioners’ favor, hence the latter could only have
committed fraud in securing them –
x x x x That plaintiffs are absolute and exclusive owners and in actual possession and
cultivation of two parcels of agricultural lands herein particularly described as follows [technical
description of Lot 1017 and Lot 1015 x x x x 3. That plaintiffs became absolute and exclusive
owners of the abovesaid parcels of land by virtue of inheritance from their late father, Honorio
Dacut, who in turn acquired the same from a certain Blasito Yacapin and from then on was in
possession thereof exclusively, adversely and in the concept of owner for more than thirty (30)
years x x x x 4. That recently, plaintiff discovered that defendants, without the knowledge and
consent of the former, fraudulently applied for patent the said parcels of land and as a result
thereof certificates of titles had been issued to them as evidenced by certificate of title No. P-
19819 in the name of the Hrs. of Ambrocio Kionisala, and No. P- 20229 in the name of Isabel
Kionisala x x x x 5. That the patents issued to defendants are null and void, the same having
been issued fraudulently, defendants not having been and/or in actual possession of the
litigated properties and the statement they may have made in their application are false and
without basis in fact, and, the Department of Environment and Natural Resources not having
any jurisdiction on the properties the same not being anymore public but already private
property x x x x
It is not essential for private respondents to specifically state in the complaint the actual date
when they became owners and possessors of Lot 1015 and Lot 1017. The allegations to the
effect that they were so preceding the issuance of the free patents and the certificates of title,
i.e., "the Department of Environment and Natural Resources not having any jurisdiction on the
properties the same not being anymore public but already private property," are unquestionably
adequate as a matter of pleading to oust the State of jurisdiction to grant the lots in question to
petitioners. If at all, the oversight in not alleging the actual date when private respondents’
ownership thereof accrued reflects a mere deficiency in details which does not amount to a
failure to state a cause of action. The remedy for such deficiency would not be a motion to
dismiss but a motion for bill of particulars so as to enable the filing of appropriate responsive
pleadings.
With respect to the purported cause of action for reconveyance, it is settled that in this kind of
action the free patent and the certificate of title are respected as incontrovertible. What is
sought instead is the transfer of the property, in this case the title thereof, which has been
wrongfully or erroneously registered in the defendant’s name. All that must be alleged in the
complaint are two (2) facts which admitting them to be true would entitle the plaintiff to recover
title to the disputed land, namely, (1) that the plaintiff was the owner of the land and, (2) that
the defendant had illegally dispossessed him of the same.
We rule that private respondents have sufficiently pleaded (in addition to the cause of action
for declaration of free patents and certificates of title) an action for reconveyance, more
specifically, one which is based on implied trust. An implied trust arises where the defendant
(or in this case petitioners) allegedly acquires the disputed property through mistake or fraud
so that he (or they) would be bound to hold and reconvey the property for the benefit of the
person who is truly entitled to it. In the complaint, private respondents clearly assert that they
have long been the absolute and exclusive owners and in actual possession and cultivation of
Lot 1015 and Lot 1017 and that they were fraudulently deprived of ownership thereof when
petitioners obtained free patents and certificates of title in their names. These allegations
certainly measure up to the requisite statement of facts to constitute an action for
reconveyance.17 [Emphases supplied]
In this case, the complaint instituted by the Reyeses before the RTC was for the annulment of
the title issued to the Galangs, and not for reversion. Thus, the real party in interest here is not
the State but the Reyeses who claim a right of ownership over the property in question even
before the issuance of a title in favor of the Galangs. Although the Reyeses have the right to
file an action for reconveyance, they have failed to prove their case. Thus, on the second issue,
the Court agrees with the RTC that the Reyeses failed to adduce substantial evidence to
establish their allegation that the Galangs had fraudulently registered the subject property in
their names.
The CA reversed the RTC decision giving the reason that the property was the former bed of
Marigman Creek, which changed its course and passed through their Ponderosa property,
thus, ownership of the subject property was automatically vested in them.
The law in this regard is covered by Article 461 of the Civil Code, which provides:
Art. 461. River beds which are abandoned through the natural change in the course of the
waters ipso facto belong to the owners whose lands are occupied by the new course in
proportion to the area lost. However, the owners of the lands adjoining the old bed shall have
the right to acquire the same by paying the value thereof, which value shall not exceed the
value of the area occupied by the new bed.
If indeed a property was the former bed of a creek that changed its course and passed through
the property of the claimant, then, pursuant to Article 461, the ownership of the old bed left to
dry by the change of course was automatically acquired by the claimant.18 Before such a
conclusion can be reached, the fact of natural abandonment of the old course must be shown,
that is, it must be proven that the creek indeed changed its course without artificial or man-
made intervention. Thus, the claimant, in this case the Reyeses, must prove three key elements
by clear and convincing evidence. These are: (1) the old course of the creek, (2) the new course
of the creek, and (3) the change of course of the creek from the old location to the new location
by natural occurrence.
In this regard, the Reyeses failed to adduce indubitable evidence to prove the old course, its
natural abandonment and the new course. In the face of a Torrens title issued by the
government, which is presumed to have been regularly issued, the evidence of the Reyeses
was clearly wanting. Uncorroborated testimonial evidence will not suffice to convince the Court
to order the reconveyance of the property to them. This failure did not escape the observation
of the Office of the Solicitor General. Thus, it commented:
In the case at bar, it is not clear whether or not the Marigman Creek dried-up naturally back in
1980. Neither did private respondents submit any findings or report from the Bureau of Lands
or the DENR Regional Executive Director, who has the jurisdiction over the subject lot,
regarding the nature of change in the course of the creek’s waters. Worse, what is even
uncertain in the present case is the exact location of the subject matter of dispute. This is
evident from the decision of the Regional Trial Court which failed to specify which portion of
the land is actually being disputed by the contending parties.
xxx
Since the propriety of the remedy taken by private respondents in the trial court and their legal
personality to file the aforesaid action depends on whether or not the litigated property in the
present case still forms part of the public domain, or had already been converted into a private
land, the identification of the actual portion of the land subject of the controversy becomes
necessary and indispensable in deciding the issues herein involved.
xxx
Notably, private respondents failed to submit during trial any convincing proof of a similar
declaration by the government that a portion of the Marigman Creek had already dried-up and
that the same is already considered alienable and disposable agricultural land which they could
acquire through acquisitive prescription.
Indeed, a thorough investigation is very imperative in the light of the conflicting factual issues
as to the character and actual location of the property in dispute. These factual issues could
properly be resolved by the DENR and the Land Management Bureau, which have the authority
to do so and have the duty to carry out the provisions of the Public Land Act, after both parties
have been fully given the chance to present all their evidence.19 [Emphases supplied]
Moreover, during cross-examination, Conrado S. Reyes admitted that the plan surveyed for Fe
de Castro Reyes and Jose de Castro, marked before the RTC as Exhibit "A-2," was prepared
by a geodetic engineer without conducting an actual survey on the ground:
COUNSEL FOR DEFENDANTS:
I am showing to you Exhibit "A-2" which is a plan surveyed for Fe de Kastro Reyes and Jose
de Kastro. This plan was prepared by the geodetic engineer without conducting actual survey
on the ground, is it not?
A: I cannot agree to that question.
Q: But based on the certification of the geodetic engineer, who prepared this it appears that
this plan was plotted only based on the certification on this plan marked as Exhibit "A-2", is it
not?
A: Yes, sir.
Q: So, based on this certification that the geodetic engineer conducted the survey of this plan
based on the technical description without conducting actual survey on the ground?
A: Yes, sir.20
At some point, Mr. Reyes admitted that he was not sure that the property even existed:
COUNSEL FOR DEFENDANTS:
The subject matter of this document Exhibit I is that, that property which at present is titled in
the name of Fe de Castro Reyes married to Conrado Reyes, et.al. is that correct?
A: Yes.
Q: The subject matter of this case now is the adjoining lot of this TCT 185252, is that correct?
A: I do not know.
Q: You mean you do not know the lot subject matter of this case?
A: I do not know whether it really exists.
Q: Just answer the question, you do not know?
A: Yes.21
The conflicting claims here are (1) the title of the Galangs issued by the DENR, through the
PENRO, and (2) the claim of the Reyeses, based on unsubstantiated testimony, that the land
in question is the former bed of a dried up creek. As between these two claims, this Court is
inclined to decide in favor of the Galangs who hold a valid and subsisting title to the property
which, in the absence of evidence to the contrary, the Court presumes to have been issued by
the PENRO in the regular performance of its official duty.
The bottom line here is that, fraud and misrepresentation, as grounds for cancellation of patent
and annulment of title, should never be presumed, but must be proved by clear and convincing
evidence, with mere preponderance of evidence not being adequate. Fraud is a question of
fact which must be proved.22
In this case, the allegations of fraud were never proven. There was no evidence at all
specifically showing actual fraud or misrepresentation. Thus, the Court cannot sustain the
findings of the CA.
WHEREFORE, the petition 1s GRANTED. The April 9, 2008 Decision and the October 6, 2008
Resolution .of the Court of Appeals, in CA-G.R. CV. No. -85660, are hereby REVERSED and
SET ASIDE. Civil Case No. 97-4560 of the Regional Trial Court of Anti polo City, Branch 73, is
hereby ordered DISMISSED for lack of merit.
SO ORDERED.
[G.R. No. 142595. October 15, 2003.]
RACHEL C. CELESTIAL, Petitioner, v. JESSE CACHOPERO, Respondent.
DECISION
CARPIO MORALES, J.:
In the instant appeal by petition for review on certiorari, 1 petitioner Rachel Cachopero Celestial
assails the February 15, 1999 Decision of the Court of Appeals in CA-G.R. SP No. 45927,
"Jesse C. Cachopero v. Regional Executive Director of DENR, Region XII and Rachel C.
Celestial," which reversed and set aside the Order of the Regional Trial Court (RTC) of
Midsayap, Cotabato, Branch 18 dismissing respondent’s petition for certiorari, prohibition and
mandamus, and mandated the Regional Executive Director of the Department of Environment
and Natural Resources (DENR), Region XII to process the Miscellaneous Sales Application
(MSA) of respondent Jesse Cachopero in DENR Claim No. XII-050-90 to which petitioner filed
a protest.
Respondent, brother of petitioner, filed an MSA (Plan No. (XII-6)-1669) with the Bureau of
Lands covering a 415 square meter parcel of land located at Barrio 8, Midsayap, Cotabato and
formerly part of the Salunayan Creek in Katingawan, Midsayap.
In his MSA, respondent alleged that he had, since 1968, been occupying the land whereon he
built a residential house and introduced other improvements.
Petitioner filed a protest against respondent’s MSA, claiming preferential right over the land
subject thereof since it is adjacent to, and is the only outlet from, her residential house situated
at Lot No. 2586-G-28 (LRC) Psd-105462, Poblacion 8, Midsayap.
Following an ocular inspection, the Bureau of Lands, finding the land subject of respondent’s
MSA to be outside the commerce of man, dismissed petitioner’s protest and denied
respondent’s MSA, to wit:
In the ocular inspection, it was verified that the land in dispute with an area of 415 square
meters was formerly a part of the Salunayan Creek that became dry as a result of the
construction of an irrigation canal by the National Irrigation Administration. However, it was
certified by Project Engineer Reynaldo Abeto of the said office in his certification dated May
19, 1982, that only a portion of the same containing an area of 59.40 square meters more or
less was taken as part of the National Irrigation Administration service road. It was also
ascertained that the P20,000.00 residential house wherein Jesse Cachopero and his family are
living is not within the 69-meters width of the national highway. However, per the certification
of the local office of the District Engineer for Public Works and Highways, the government may
need the area where the house stands for expansion in the future. Moreover, it was also
certified by the Office of Municipal Mayor that the whole area covered by the miscellaneous
sales application of Jesse Cachopero is needed by the municipal government for future public
improvements.
From the foregoing facts, it is clear that the subject land is outside the commerce of man and
therefore, not susceptible of private acquisition under the provision of the Public Land Act.
However, in keeping with the policy of our compassionate society in tilting the balance of social
forces by favoring the disadvantaged in life, we may allow Jesse Cachopero to temporarily
occupy the land in dispute, after excluding therefrom the portion needed for the existing right
of way being claimed by Rachel Celestial to be [the] only adequate outlet to the public highway
until such time that the land is needed by the government for expansion of the road.
WHEREFORE, it is ordered that this case, be, as hereby it is, dismissed and this case (sic),
dropped from the records. The Miscellaneous Sales Application (New) of Jesse Cachopero is
hereby rejected and in lieu thereof, he shall file a revocable permit application for the land in
question after excluding from the southern part of the land the area of five (5) meters for right
of way purposes as shown in the sketch drawn at the back of this order. The segregation survey
of the area shall be at the pro-rata expense of the parties.
SO ORDERED. 2 (Emphasis and Italics supplied)
Petitioner thereafter instituted an action for ejectment against respondent and his wife before
the Municipal Trial Court of Midsayap, Cotabato, docketed as Civil Case No. 711. A judgment
based on a compromise was rendered in said case under the following terms and conditions:
That Spouses Jesse Cachopero and Bema Cachopero, defendants in this case, are going to
vacate the premises in question and transfer the old house subject of this ejectment case at
the back of Lot No. 2586-G-28 (LRC) Psd-105462, located at 8, Midsayap, Cotabato, within
eight (8) months from today, but not later than April 30, 1990;
x x x

That plaintiff is willing to give a two (2)-meter wide exit alley on the eastern portion of said lot
as road-right-of-way up to the point of the NIA road on the west of Lot No. 2586-G-28, (LRC)
Psd-105462;
That defendants hereby promise to remove all their improvements introduced fronting the
residence of the plaintiff before August 31, 1989; and the plaintiff shall likewise remove all her
existing improvements on the same area;
x x x 3 (Emphasis supplied)
Subsequently or on May 21, 1991, respondent filed another MSA with the DENR Regional
Office of Cotabato involving a portion of the same lot subject of his first MSA, covering an area
of 334 square meters, more or less (the subject land), and docketed as DENR-XII-Claim No.
050-90. This time, the MSA was supported by a certification 4 dated January 9, 1989 issued
by the Office of the Mayor of Midsayap and an Indorsement 5 dated January 16, 1989 by the
District Engineer of the Department of Public Works and Highways stating that the subject land
is suitable for residential purposes and no longer needed by the municipal government.
Petitioner likewise filed a protest against her brother-respondent’s second MSA, alleging a
preferential right over the subject land, she being the adjacent and riparian owner, and
maintaining that it is her only access to the national highway. She thus reiterated her demand
for a five (5)-meter road right of way through the land.
After another investigation of the subject land, DENR Regional Executive Director Macorro
Macumbal issued an Order dated February 17, 1994 stating that it was suitable for residential
purposes but that, in light of the conflicting interest of the parties, it be sold at public auction.
Respondent’s second MSA was accordingly dismissed, viz:
In the ocular investigation of the premises, it was established that the said property is a dried
bed of Salunayan Creek resulting from the construction of the irrigation canal by the National
Irrigation Administration; that it is suitable for residential purpose . . .
x x x With all the above foregoing, we find no reversible error to reconsider our Order of February
It is evident that under the law, property of the public domain situated within the first (1st) to
fourth class municipalities are disposable by sales only. Since municipality of Midsayap,
Cotabato is classified as third (3rd) class municipality and the property in dispute, Lot no. (MSA-
XII-6)-1669, is situated in the poblacion of Midsayap, Cotabato, and considering the conflicting
interest of the herein parties, it is therefore equitable to dispose the same by sale at a public
auction pursuant to Section 67, C.A. No. 141, as amended, pertinent clause of which provides:
. . . sale shall be made through oral bidding; and adjudication shall be made to the highest
bidder, . . .
WHEREFORE, in view of all the foregoing, it is ordered as hereby is ordered that the instant
protest is dismissed and dropped from the records, and the Miscellaneous Sales Application
(New) of Jesse C. Cachopero is rejected and returned unrecorded. Accordingly, the CENR
Officer of CENRO XII-4B shall cause the segregation survey of a portion of five (5) meters in
width running parallel to line point C-1 of the approved survey plan (MSA-XII-6)-1669, sketch
is shown at the dorsal side hereof, as a permanent easement and access road for the
occupants of Lot No. 2386-G-28, (LRC) Psd-105462 to the national highway. Thereafter, and
pursuant to paragraph G.2.3 of Department Administrative Order No. 38, Series of 1990, the
CENRO XII 4B shall dispose the remaining area of the lot in question through oral bidding.
SO ORDERED." 6 (Emphasis and Italics supplied)
Respondent filed a Motion for Reconsideration of the above-said order of the DENR Regional
Executive Director, but it was denied by Order of February 27, 1995 by the OIC Regional
Executive Director of Region XII, Cotabato City in this wise:
A meticulous scrutiny of the records disclosed that Civil Case No. 711 for ejectment, decided
on the basis of compromise agreement of the parties dated August 10, 1989, involved "transfer
of the house from Lot No. MSA XII-6-1669 to the litigant’s parents’ property situated at the back
of protestant property, Lot No. 2586-G-28 (LRC), Psd-105462." Whereas the issue in DENR
XII Claim No. 050-90 involved the disposition of lot no. (MSA II-6)-1669 a residential public land
being exclusively vested with the Director of Lands (Sec. 4, C.A. 141).
The two (2) meters wide exit alley provided in the compromise agreement was established by
the protestant from her private property (Lot No. 2586-G-28 (LRC), Psd-105462) for the benefit
of her brother, herein respondent, upon his transfer to their parents property at the back of Lot
No. 2586-G-28 (LRC), Psd-105462. Whereas the five (5) meters wide easement imposed on
Lot No. (MSA-XII-6)-1669, a public land, provided in the decision in DENR Claim No. 050-90
is in accordance with Article 670 of the New Civil Code . . .
x x x
17, 1994.
WHEREFORE, the instant motion for reconsideration is DENIED. 7
Respondent thereupon filed on April 3, 1995 with the RTC of Midsayap, Cotabato a petition for
certiorari, prohibition and mandamus with preliminary mandatory injunction and temporary
restraining order assailing the Orders dated February 17, 1994 and February 27, 1995 of the
DENR Regional Executive Director and OIC Regional Executive Director of Region XII,
Cotabato, attributing grave abuse of discretion in the issuance thereof.
Petitioner moved for the dismissal of the petition, alleging lack of jurisdiction and non-
exhaustion of administrative remedies.

By Order of March 26, 1997, the RTC denied respondent’s petition for certiorari for lack of merit
and non-exhaustion of administrative remedies, as it did deny his motion for reconsideration.
The Court of Appeals, before which respondent assailed the RTC orders by petition for
certiorari, prohibition and mandamus, granted said petition, and accordingly reversed and set
aside the assailed orders of the RTC and ordered the DENR to process the MSA of
Respondent. 8
Petitioner’s Motion for Reconsideration 9 of the appellate court’s decision having been denied
by Resolution of March 2, 2000, 10 she lodged the present petition, alleging that the Court of
Appeals acted contrary to law and jurisprudence 1) in holding that the RTC of Midsayap had
jurisdiction over respondent’s petition, the doctrine of exhaustion of administrative remedies
was not applicable to the instant case, and the contested land is public land; and 2) in ordering
the processing of respondent’s MSA pursuant to R.A. 730. 11
Petitioner contends that the RTC of Midsayap had no jurisdiction over respondent’s petition for
certiorari as (a) it "is in the nature of an appeal" 12 falling within the jurisdiction of the Court of
Appeals under Section 9(3) 13 of Batas Pambansa Blg. 129 (B.P. 129), as amended; and (b)
respondent failed to exhaust administrative remedies when he failed to appeal the questioned
Orders to the Secretary of Environment and Natural Resources. 14
Petitioner’s petition fails.
Petitioner has apparently confused the separate and distinct remedies of an appeal (i.e.
through a petition for review of a decision of a quasi judicial agency under Rule 43 of the Rules
of Court) and a special civil action for certiorari (i.e. through a petition for review under Rule 65
of the Rules of Court). In Silverio v. Court of Appeals, 15 this Court, speaking through then
Chief Justice Claudio Teehankee, distinguished between these two modes of judicial review
as follows:
The provisions of the Rules of Court permit an aggrieved party, in the general types of cases,
to take a cause and apply for relief to the appellate courts by way of either of two distinctly
different and dissimilar modes — through the broad process of appeal or the limited special
civil action of certiorari. An appeal brings up for review errors of judgment committed by a court
with jurisdiction over the subject of the suit and the persons of the parties or any such error
committed by the court in the exercise of its jurisdiction amounting to nothing more than an
error of judgment. On the other hand, the writ of certiorari issues for the correction of errors of
jurisdiction only or grave abuse of discretion amounting to lack or excess of jurisdiction. The
writ of certiorari "cannot legally be used for any other purpose." In terms of its function, the writ
of certiorari serves "to keep an inferior court within the bounds of its jurisdiction or to prevent it
from committing such a grave abuse of discretion amounting to excess of jurisdiction" or to
relieve parties from arbitrary acts of courts — acts which courts have no power or authority in
law to perform. 16 (Italics, emphasis and underscoring supplied)
Concomitantly, appellate jurisdiction is separate and distinct from the jurisdiction to issue the
prerogative writ of certiorari. An appellate jurisdiction refers to a process which is a continuation
of the original suit and not a commencement of a new action. In contrast, to invoke a court’s
jurisdiction to issue the writ of certiorari requires the commencement of a new and original
action therefor, independent of the proceedings which gave rise to the questioned decision or
order. 17 As correctly held by the Court of Appeals, 18 the RTCs have concurrent jurisdiction
with the Court of Appeals and the Supreme Court over original petitions for certiorari, prohibition
and mandamus 19 under Section 21 20 of B.P. 129.
A perusal of respondent’s Petition dated April 3, 1995 filed before the RTC clearly shows that
it alleged that the DENR Regional Executive Director and OIC Regional Executive Director
acted with "grave abuse of discretion and without or in excess of jurisdiction amounting to lack
of jurisdiction" when they issued the questioned Orders dated February 17, 1994 and February
27, 1995. Evidently, respondent sought a judicial review of the questioned Orders through a
special civil action for certiorari which, as aforementioned, was within the jurisdiction of the
RTC of Midsayap, Cotabato. 21
Additionally, this Court finds no reason to disturb the Court of Appeals’ conclusion that the
instant case falls under the recognized exceptions to the rule on exhaustion of administrative
remedies, to wit:
The rule of exhaustion of administrative remedies is inapplicable if it should appear that an
irreparable injury or damage will be suffered by a party if he should await, before taking court
action, the final action of the administrative official concerned on the matter as a result of a
patently illegal order (Vivo v. Cloribel, 18 SCRA 713; De Lara v. Cloribel, 14 SCRA 269); or
where appeal would not prove to be speedy and adequate remedy. 22
True, the doctrine of exhaustion of administrative remedies calls for resort first to the
appropriate administrative authorities in the resolution of a controversy falling under their
jurisdiction before the same may be elevated to the courts of justice for review, and non-
observance thereof is a ground for the dismissal of the complaint, 23 the rationale being:
The thrust of the rule on exhaustion of administrative remedies is that the courts must allow the
administrative agencies to carry out their functions and discharge their responsibilities within
the specialized areas of their respective competence. It is presumed that an administrative
agency, if afforded an opportunity to pass upon a matter, will decide the same correctly, or
correct any previous error committed in its forum. Furthermore, reasons of law, comity and
convenience prevent the courts from entertaining cases proper for determination by
administrative agencies. Hence, premature resort to the courts necessarily becomes fatal to
the cause of action of the petitioner. 24
However, this requirement of prior exhaustion of administrative remedies is not absolute, there
being instances when it may be dispensed with and judicial action may be validly resorted to
immediately, among which are: 1) when the question raised is purely legal; 2) when the
administrative body is in estoppel; 3) when the act complained of is patently illegal; 4) when
there is urgent need for judicial intervention; 5) when the claim involved is small; 6) when
irreparable damage will be suffered; 7) when there is no other plain, speedy and adequate
remedy; 8) when strong public interest is involved; and 9) in quo warranto
proceedings.25cralaw:red
Hence, where the act complained of is patently illegal since the administrative body acted
without or in excess of jurisdiction or with such grave abuse of discretion as to be tantamount
to lack of jurisdiction, as was alleged in respondent’s petition before the RTC, prior exhaustion
of administrative remedies is not required and resort to the courts through a special civil action
for certiorari under Rule 65 is permitted:
We hold that it was an error for the court a quo to rule that the petitioners should have
exhausted its remedy of appeal from the orders denying their application for waiver/suspension
to the Board of Trustees and thereafter to the Court of Appeals pursuant to the Rules. Certiorari
is an appropriate remedy to question the validity of the challenged issuances of the HDMF
which are alleged to have been issued with grave abuse of discretion amounting to lack of
jurisdiction.
Moreover, among the accepted exceptions to the rule on exhaustion of administrative remedies
are: (1) where the question in dispute is purely a legal one; and (2) where the controverted act
is patently illegal or was performed without jurisdiction or in excess of jurisdiction. Moreover,
while certiorari as a remedy may not be used as a substitute for an appeal, especially for a lost
appeal, this rule should not be strictly enforced if the petition is genuinely meritorious. It has
been said that where the rigid application of the rules would frustrate substantial justice, or bar
the vindication of a legitimate grievance, the courts are justified in exempting a particular case
from the operation of the rules. 26 (Emphasis supplied)
To justify the issuance of the writ of certiorari, however, it must be clearly shown that there is a
patent and grave abuse of discretion amounting to an evasion of a positive duty or to a virtual
refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as where the
power is exercised in an arbitrary and despotic manner by reason of passion or personal
hostility. 27
The crux of the case at bar is, therefore, whether the DENR Regional Executive Director and
OIC Regional Director acted with grave abuse of discretion amounting to lack or excess of
jurisdiction in issuing the questioned Orders dated February 17, 1994 and February 27, 1995,
respectively.
In resolving respondent’s second MSA and petitioner’s protest thereto, the DENR Regional
Executive Director, after considering the conflicting interest of the parties, found it equitable to
resolve the same by directing the sale of the subject land at public auction pursuant to Section
67, C.A. No. 141, as amended.
Section 67 of Commonwealth Act No. 141, otherwise known as "The Public Land Act," provides
the procedure for the disposition of lands of the public domain which are open to disposition or
concession and intended to be used for residential, commercial, industrial or other productive
purposes other than agricultural, to wit:
SEC. 67. The lease or sale shall be made through oral bidding; and adjudication shall
be made to the highest bidder. However, where an applicant has made improvements on the
land by virtue of a permit issued to him by competent authority, the sale or lease shall be made
by sealed bidding as prescribed in Section twenty-six of this Act, the provisions of which shall
be applied wherever applicable. If all or part of the lots remain unleased or unsold, the Director
of Lands shall from time to time announce in the Official Gazette or in any other newspapers
of general circulation, the lease or sale of those lots, if necessary. (Emphasis supplied)
With the enactment of Republic Act No. 730 28 on June 18, 1952, however, an exception to
the foregoing procedure was created by authorizing disposition of lands of the public domain
by private sale, instead of bidding, provided that: (1) the applicant has in his favor the conditions
specified therein and (2) the area applied for is not more than 1,000 square meters. 29 The
pertinent provision of R.A. 730 thus provides:
SEC. 1. Notwithstanding the provisions of Sections 61 and 67 of Commonwealth Act No. 141,
as amended by Republic Act No. 293, any Filipino citizen of legal age who is not the owner of
a home lot in the municipality or city in which he resides and who has in good faith established
his residence on a parcel of the public land of the Republic of the Philippines which is not
needed for the public service, shall be given preference to purchase at a private sale of which
reasonable notice shall be given to him not more than one thousand square meters at a price
to be fixed by the Director of Lands with the approval of the Secretary of Agriculture and Natural
Resources. It shall be an essential condition of this sale that the occupant has constructed his
house on the land and actually resided therein. Ten percent of the purchase price shall be paid
upon the approval of the sale and the balance may be paid in full, or in ten equal annual
installments.
SEC. 2. Land acquired under the provisions of this Act shall not be subject to any restrictions
against encumbrance or alienation before and after the issuance of the patents thereon. 30
SEC. 3. The provisions of the Public Land Act with respect to the sale of lands for residential
purposes which are not inconsistent herewith shall be applicable.
SEC. 4. This Act shall take effect upon its approval.
Approved, June 18, 1952. (Emphasis supplied)
Given the foregoing provisions of R.A. 730 which took effect on June 18, 1952, and the DENR
Regional Executive Director’s February 17, 1994 finding that the subject land was "suitable for
residential purposes," it was incumbent upon him to determine whether the provisions of R.A.
730 were applicable to respondent’s MSA. As held by the Court of Appeals:
Finally, petitioner contends that the DENR Regional Executive Director and OIC Regional
Executive Director gravely erred in ordering the sale of the subject lot through oral bidding
applying Section 67, Commonwealth Act No. 141 and not Republic Act 730 authorizing the sale
of public land without bidding.
We agree with the petitioner.
x x x set forth in an MSA are true:
Apropos is the case of Reyes v. Court of Appeals, 125 SCRA 785, ruling that:jgc:
"When public land lots of not more than 1,000 sq. ms. are used, or to be used as a residence
. . . they can be sold on private sales under the provisions of Republic Act No. 730."cralaw
virtua1aw library
In Agura v. Serfino, Sr., (204 SCRA 569), the Supreme Court held that:jgc:
"R.A. 730 authorizes a sale by private sale, as an exception to the general rule that it should
be by bidding, if the area applied for does not exceed 1,000 square meters, . . ."cralaw
virtua1aw library
We see no reason why these ruling should not be applied in this case which involves 415
[should have been 334] square meters only. 31
The Regional Director, however, summarily chose to apply Section 67 of the Public Land Act
upon a finding that it was more "equitable" in light of the "conflicting interest" of the parties. In
his "Answer" to respondent’s petition before the RTC, the Director justified his non-application
of R.A. 730 in this wise:
. . . Republic Act No. 730 is not applicable to the case at bar, the land being disputed, Republic
Act No. 730 requisite (sic) vas not meet (sic) that for this law to apply to a particular case, the
land must be in the first place not a land in conflict. There being a pending protest for final
adjudication, the said conflict continues to exist thus an impediment to the application of
Republic Act 730 32 (Emphasis supplied)
which justification he reiterated in his Opposition 33 to respondent’s Motion for Reconsideration
of the RTC decision.
The Director’s reliance on equity as basis for his action was misplaced, however. It is well-
settled that "equity follows the law." 34 Described as "justice outside legality," it is applied only
in the absence of, and never against, statutory law or legal pronouncements. 35 Where
pertinent positive rules are present, they should pre-empt and prevail over all abstract
arguments based only on equity. 36
A reading of R.A. 730 (or of the Public Land Act for that matter) shows nothing therein to support
the Director’s contention that the pendency of a protest is a bar to the application of R.A. 730
to an MSA. Indeed, that Section 1 of R.A. 730 gives a qualified applicant preference to
purchase alienable public land suitable for residential purposes implies that there may be more
than one party interested in purchasing it.
What is more, under Section 91 of the Public Land Act, it is the duty of the Director of the Lands
Management Bureau (formerly the Director of Lands) to determine whether the material facts
SEC. 91. The statements made in the application shall be considered as essential
conditions and parts of any concession, title, or permit issued on the basis of such application,
and any false statement therein or omission of facts altering, changing, or modifying the
consideration of the facts set forth in such statements, and any subsequent modification,
alteration, or change of the material facts set forth in the application shall ipso facto produce
the cancellation of the concession, title, or permit granted. It shall be the duty of the Director of
Lands, from time to time and whenever he may deem it advisable, to make the necessary
investigations for the purpose of ascertaining whether the material facts set out in the
application are true, or whether they continue to exist and are maintained and preserved in
good faith, and for the purposes of such investigation, the Director of Lands is hereby
empowered to issue subpoenas and subpoenas duces tecum and, if necessary, to obtain
compulsory process from the courts. In every investigation made in accordance with this
section, the existence of bad faith, fraud, concealment, or fraudulent and illegal modification of
essential facts shall be presumed if the grantee or possessor of the land shall refuse or fail to
obey a subpoena or subpoena duces tecum lawfully issued by the Director of Lands or his
authorized delegates or agents, or shall refuse or fail to give direct and specific answers to
pertinent questions, and on the basis of such presumption, an order of cancellation may issue
without further proceedings. (Emphasis supplied)
Likewise, under Section 102 of the same Public Land Act, it is the duty of the Director of the
Lands Management Bureau to, after due hearing, verify whether the grounds of a protest or
objection to an MSA are well founded, and, if so, to cancel the MSA:
SEC. 102. Any person, corporation, or association may file an objection under oath to any
application or concession under this Act, grounded on any reason sufficient under this Act for
the denial or cancellation of the application or the denial of the patent or grant. If, after the
applicant or grantee has been given suitable opportunity to be duly heard, the objection is found
to be well founded, the Director of Lands shall deny or cancel the application or deny patent or
grant, and the person objecting shall, if qualified, be granted a prior right of entry for a term of
sixty days from the date of the notice. (Emphasis supplied)
There was thus clearly a positive duty on the part of the DENR Director to process respondent’s
MSA, and to ascertain, particularly in light of petitioner’s protest, whether respondent was
qualified to purchase the subject land at a private sale pursuant to R.A. 730. This, he did not
do.
In fine, by abdicating his duty to process respondent’s MSA and summarily ordering, without
factual or legal basis, that the subject land be disposed of via oral bidding pursuant to Section
67 of the Public Land Act, the Director acted with patent grave abuse of discretion amounting
to lack or excess of jurisdiction. As the Court of Appeals held:
Considering that the assailed Orders of public respondent DENR Regional Executive Director
applying Section 67 of Commonwealth Act No. 141 and ordering the sale of the subject lot by
oral bidding are patently erroneous, the authority of the court to issue writs of certiorari,
prohibition and mandamus is warranted. 37
The Director’s commission of grave abuse of discretion does not, however, mean that
respondent automatically has the better right to the subject land. As mandated by law, the
Director must process respondent’s MSA, conduct an investigation, and determine whether the
material facts set forth therein are true to bring it within the coverage of R.A. 730.
A thorough investigation is all the more imperative considering that petitioner’s protest raises
serious factual issues regarding respondent’s qualification to purchase the subject land — in
particular, whether he already owns a home lot in Midsayap and whether he has, in good faith,
constructed his house on the subject land and actually resided therein. These factual issues
are properly within the authority of the DENR and the Land Management Bureau, which are
tasked with carrying out the provisions of the Public Land Act and R.A. 730, 38 do determine,
after both parties have been given an opportunity to fully present their evidence.
As for petitioner’s claim of ownership over the subject land, admittedly a dried-up bed of the
Salunayan Creek, based on (1) her alleged long term adverse possession and that of her
predecessor-in-interest, Marcelina Basadre, even prior to October 22, 1966, when she
purchased the adjoining property from the latter, and (2) the right of accession under Art. 370
of the Spanish Civil Code of 1889 and/or Article 461 of the Civil Code, the same must fail.
Since property of public dominion is outside the commerce of man 39 and not susceptible to
private appropriation and acquisitive prescription, 40 the adverse possession which may be the
basis of a grant of title in the confirmation of an imperfect title refers only to alienable or
disposable portions of the public domain. 41 It is only after the Government has declared the
land to be alienable and disposable agricultural land that the year of entry, cultivation and
exclusive and adverse possession can be counted for purposes of an imperfect title. 42
A creek, like the Salunayan Creek, is a recess or arm extending from a river and participating
in the ebb and flow of the sea. 43 As such, under Articles 420(1) 44 and 502(1) 45 of the Civil
Code, the Salunayan Creek, including its natural bed, is property of the public domain which is
not susceptible to private appropriation and acquisitive prescription. 46 And, absent any
declaration by the government, that a portion of the creek has dried-up does not, by itself, alter
its inalienable character.
This, in fact, was the very reason behind the denial of respondent’s first MSA, the District
Engineer having certified that the government may need the subject land for future expansion,
and the office of the Municipal Mayor having certified that it was needed by the municipal
government for future public improvements. 47 Consequently, it was only after the same offices
subsequently certified 48 that the subject land was suitable for residential purposes and no
longer needed by the municipal government that it became alienable and disposable.
Confronted with similar factual circumstances, this Court in Bracewell v. Court of Appeals 49
held:
Clear from the above is the requirement that the applicant must prove that the land is alienable
public land. On this score, we agree with respondents that petitioner failed to show that the
parcels of land subject of his application are alienable or disposable. On the contrary, it was
conclusively shown by the government that the same were only classified as alienable or
disposable on March 27, 1972. Thus, even granting that petitioner and his predecessors-in-
interest had occupied the same since 1908, he still cannot claim title thereto by virtue of such
possession since the subject parcels of land were not yet alienable land at that time nor capable
of private appropriation. The adverse possession which may be the basis of a grant of title or
confirmation of an imperfect title refers only to alienable or disposable portions of the public
domain. 50 (Emphasis supplied)
With respect to petitioner’s invocation of the principle of accession under either Article 370 of
the Spanish Civil Code of 1889 or Article 461 of the Civil Code, the same does not apply to
vest her with ownership over subject land.
Under Article 370 51 of the Spanish Civil Code of 1889 which took effect in the Philippines on
December 7, 1889, 52 the beds of rivers which remain abandoned because the course of the
water has naturally changed belong to the owners of the riparian lands throughout their
respective lengths. If the abandoned bed divided estates belonging to different owners, the
new dividing line shall run at equal distance therefrom. 53
When the present Civil Code took effect on August 30, 1950, 54 the foregoing rule was
abandoned in favor of the present Article 461, which provides:
ART. 461. River beds which are abandoned through the natural change in the course of
the waters ipso facto belong to the owners whose lands are occupied by the new course in
proportion to the area lost. However, the owners of the lands adjoining the old bed shall have
the right to acquire the same by paying the value thereof, which value shall not exceed the
value of the area occupied by the new bed. (Emphasis supplied)
Article 461 provides for compensation for the loss of the land occupied by the new bed since it
is believed more equitable to compensate the actual losers than to add land to those who have
lost nothing. 55 Thus, the abandoned river bed is given to the owner(s) of the land(s) onto
which the river changed its course instead of the riparian owner(s). 56
Petitioner claims that on October 22, 1966, when she purchased the property adjoining the
subject land from Marcelina Basadre, the said subject land was already a dried-up river bed
such that "almost one-half portion of the residential house . . . was so already built and is still
now situated at the said dried-up portion of the Salunayan Creek bed . . ." 57 She failed to
allege, however, when the subject portion of the Salunayan Creek dried up, a fact essential to
determining whether the applicable law is Article 370 of the Spanish Civil Code of 1889 or
Article 461 of the Civil Code.
Had the disputed portion of the Salunayan Creek dried up after the present Civil Code took
effect, the subject land would clearly not belong to petitioner or her predecessor-in-interest
since under the aforementioned provision of Article 461, "river beds which are abandoned
through the natural change in the course of the waters ipso facto belong to the owners of the
land occupied by the new course," and the owners of the adjoining lots have the right to acquire
them only after paying their value. 58
And both Article 370 of the Old Code and Article 461 of the present Civil Code are applicable
only when" [r]iver beds are abandoned through the natural change in the course of the waters."
It is uncontroverted, however, that, as found by both the Bureau of Lands and the DENR
Regional Executive Director, the subject land became dry as a result of the construction of an
irrigation canal by the National Irrigation Administration. Thus, in Ronquillo v. Court of Appeals,
59 this Court held:
The law is clear and unambiguous. It leaves no room for interpretation. Article 370 applies only
if there is a natural change in the course of the waters. The rules on alluvion do not apply to
man-made or artificial accretions nor to accretions to lands that adjoin canals or esteros or
artificial drainage systems. Considering our earlier finding that the dried-up portion of Estero
Calubcub was actually caused by the active intervention of man, it follows that Article 370 does
not apply to the case at bar and, hence, the Del Rosarios cannot be entitled thereto supposedly
as riparian owners.
The dried-up portion of Estero Calubcub should thus be considered as forming part of the land
of the public domain which cannot be subject to acquisition by private ownership. . . 60
(Emphasis supplied)
Furthermore, both provisions pertain to situations where there has been a change in the course
of a river, not where the river simply dries up. In the instant Petition, it is not even alleged that
the Salunayan Creek changed its course. In such a situation, commentators are of the opinion
that the dry river bed remains property of public dominion. 61
Finally, while this Court notes that petitioner offered to purchase the subject land from the
government, 62 she did so through an informal letter dated August 9, 1989 63 instead of the
prescribed form. By such move, she is deemed to have acknowledged that the subject land is
public land, for it would be absurd for her to have applied for its purchase if she believed it was
hers. She is thus stopped from claiming otherwise. 64
WHEREFORE, the petition is hereby DENIED for lack of merit.
SO ORDERED.
Puno, Panganiban, and Sandoval-Gutierrez, JJ., concur.
Corona, J., is on leave.
G.R. No. 123586 August 12, 2004
SPOUSES BEDER MORANDARTE and MARINA FEBRERA, petitioners,
vs.
COURT OF APPEALS, REPUBLIC OF THE PHILIPPINES, and SPOUSES VIRGINIO B.
LACAYA and NENITA LACAYA, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court which seeks
the reversal of the Decision,1 dated August 23, 1995, of the Court of Appeals (CA for brevity)
in CA-G.R. CV No. 36258, affirming the Decision, dated November 5, 1991, rendered by the
Regional Trial Court (Branch 7), Dipolog City, Zamboanga del Norte (RTC for brevity) in Civil
Case No. 3890, declaring Free Patent No. (IX-8) 7852 and Original Certificate of Title No. P-
21972, in the name of petitioner Beder Morandarte (Morandarte for brevity), and all its
derivative titles, null and void ab initio.
The factual antecedents are as follows:
Morandarte filed an application for free patent, dated December 5, 1972, before the Bureau of
Lands, Dipolog City District Land Office (BOL for brevity), covering a parcel of land located at
Sta. Filomena, Dipolog City with an area of 4.5499 hectares and described as a portion of Lot
1038 of Dipolog Cadastre No. 85.3
On July 27, 1976, the District Land Officer of the BOL approved the free patent application of
Morandarte and directed the issuance of a free patent in his favor.4 Accordingly, Free Patent
No. (IX-8) 785 for Lot No. 7, Csd-09-05-00078-D was issued in the name of Morandarte. On
September 20, 1976, the Register of Deeds of Zamboanga del Norte issued the corresponding
Original Certificate of Title No. (P-21972) 5954.5
Subsequently, Morandarte caused a subdivision survey of the lot, dividing the same into Lot
No. 6781-A, with an area of 13,939 square meters, and Lot No. 6781-B, with an area of 32,819
square meters. As a result of the subdivision survey, Transfer Certificates of Title Nos. T-1835
and T-1836 covering Lots 6781-A and 6781-B, respectively, were issued in favor of Morandarte
on May 12, 1980 by the Registry of Deeds of Dipolog City.6
On May 22, 1981, Morandarte and his wife, Marina Febrera, executed a real estate mortgage
over Lot 6781-B, subject of TCT No. 1836, in favor of the Development Bank of the Philippines,
Dipolog City branch (DBP for brevity), in consideration of a loan in the amount of P52,160.00.7
More than ten years after the issuance of the OCT in Morandarte's name, or on March 19,
1987, respondent Republic of the Philippines (Republic for brevity), represented by the Director
of Lands, filed before the RTC a Complaint for Annulment of Title and Reversion against the
Morandarte spouses, the Register of Deeds of Zamboanga del Norte, the Register of Deeds of
Dipolog City, and DBP, docketed as Civil Case No. 3890.8
The Republic alleged that the BOL found that the subject land includes a portion of the Miputak
River which cannot be validly awarded as it is outside the commerce of man and beyond the
authority of the BOL to dispose of. It claimed that the Morandarte spouses deliberately and
intentionally concealed such fact in the application to ensure approval thereof. Considering that
the Morandarte spouses are guilty of fraud and misrepresentation in the procurement of their
title, the Republic stressed that their title is void.9
The Register of Deeds of Dipolog City filed a Motion to Dismiss, dated April 7, 1987, praying
for the dismissal of the complaint as against her since the complaint failed to state a claim
against her.10
In their Answer dated April 13, 1987, the Morandarte spouses denied the allegations of the
complaint and claimed that they were able to secure the title in accordance and in compliance
with the requirements of the law. They alleged that the land is a portion of inherited property
from Antonio L. Morandarte whose ownership thereof is covered by Tax Declaration No. 2296.
As regards the Miputak River, they argued that the river changed its course brought about by
the fact that a portion of the Miputak River was leased by the Bureau of Fisheries (BOF for
brevity) to a certain Aguido Realiza whose rights were subsequently transferred to Virginio
Lacaya. They alleged that they indicated in their survey plan the actual location of the Miputak
River in relation to the property but the BOL returned the survey with the directive that the
existence of the river should not be indicated as the original survey did not show its existence,
to which they complied with by submitting a new survey plan which did not indicate the
existence of the river.
In the alternative, they alleged that inclusion of the Miputak River should not render the title
void; only the portion of the property covered by the Miputak River should be nullified but their
title to the remaining portion should be maintained.11
For its part, DBP filed its Answer dated April 13, 1987 praying for the dismissal of the complaint
as against it since it had nothing to do with the issuance of the title to the spouses.12 DBP
interposed a cross-claim against the spouses for the payment of their outstanding
obligations.13 The Morandarte spouses filed an Answer to the Crossclaim dated April 29,
1987.14
No answer was filed by the Register of Deeds of Zamboanga del Norte.
On March 4, 1988, upon prior leave of court, herein respondent spouses Virginio B. Lacaya
and Nenita Lacaya filed their Complaint-In-Intervention which alleged that they are holders of
a fishpond lease agreement covering a fishpond area of about 5.0335 hectares, 1.2681
hectares of which have been included in the title issued to the Morandarte spouses.
Considering that the land of the Morandarte spouses encroaches on the area leased to them,
the Lacaya spouses submit that the former's title thereto is void.15
In their Answer to the complaint-in-intervention, dated March 19, 1988, the Morandarte
spouses denied the allegations of the Lacaya spouses.16 They maintained that the portion of
the fishpond originally belonged to Antonio L. Morandarte, their predecessor-in-interest, and
the Lacaya spouses have never been in possession thereof but are actually squatters therein.
On the other hand, the Republic, in its Answer to the complaint-in-intervention, dated March
21, 1988, adopted the allegations of the complaint-in-intervention to further support its claim
that the title of the Morandarte spouses is void.17 The Lacaya spouses filed their Reply and
Answer on March 30, 1988, denying the arguments of the Morandarte spouses and reiterating
the allegations in their complaint-in-intervention.18
Following trial on the merits, on November 5, 1992, the RTC rendered a Decision19 in favor of
the Republic and the Lacaya spouses. The RTC declared that while fraud in the procurement
of the title was not established by the State, Morandarte's title is, nonetheless, void because it
includes a portion of the Miputak River which is outside the commerce of man and beyond the
authority of the BOL to dispose of. In addition, the RTC sustained the fishpond rights of the
Lacaya spouses over a portion included in Morandarte's title based on a Deed of Transfer of
Fishpond Rights from Felipe B. Lacaya and a Fishpond Lease Agreement with the BOF.
The dispositive portion of the decision of the trial court reads:
WHEREFORE, judgment is hereby rendered:
1. Declaring null and void ab initio Free Patent No. (IX-5) (sic) 785 and Original Certificate of
Title No. P-21972 in the name of Beder Morandarte, as well as all derivative titles issued
thereafter;
2. Ordering defendants spouses Beder Morandarte and Marina Febrera to surrender their
owner's duplicate copies of Transfer Certificate of Title Nos. T-1835 and T-1836, which were
the derivative titles of Original Certificate of Title No. P-21972;
3. Directing the Register of Deeds of Zamboanga del Norte to cancel Original Certificate of Title
No. P-21972 in the name of Beder Morandarte, and the Register of Deeds of Dipolog City to
cancel Transfer Certificate of Title Nos. T-1835 and T-1836 in the name of the same defendant;
4. Ordering the reversion of the land in question to the state, free from liens and encumbrances;
5. Enjoining defendants spouses Beder Morandarte and Marina Febrera from exercising any
act of ownership or possession of the subject property;
6. Dismissing the Cross-Claim of defendant Development Bank of the Philippines against
Cross Defendants Spouses Beder Morandarte and Marina Febrera, for being premature, but
ordering the latter cross defendants to give a substitute security in favor of DBP as indicated in
this decision;
7. Declaring valid and enforceable the Lease Agreement for a period of twenty five years over
the fishpond area of Intervenors;
8. Denying Intervenors' prayer for damages against defendants-spouses Morandarte; and
9. Dismissing, for lack of merit, the counterclaim and prayer for damages of defendants
spouses Morandarte against the Intervenors.
No costs against defendant-spouses Morandarte.
IT IS SO ORDERED.20
Dissatisfied, the Morandarte spouses appealed to the CA.21 In a Decision dated August 23,
1995, the CA affirmed the decision of the RTC,22 ratiocinating, as follows:
The present controversial Miputak River used to occupy the area adjacent to the northern and
western boundaries of Lot No. 6781 Cad-85 (Exh. J). As time passed, it changed its course
and occupies (sic) Lot No. 6781 Cad-85 (identical to Lot 7, Exh. H). This will explain Beder
Morandarte's argument that when he applied for the Sales Patent Lot 7 (identical to Lot 6781),
the original technical description did not show the Miputak River. But it is inescapable though,
that while originally, Lot 6781 is not occupied by the river, at the time that the Sales Application
was filed by Beder Morandarte, the Miputak River was actually occupying said Lot 6781 or Lot
7 covered by his Sales Application and the titles sought to be annulled in this case.
Rivers and their natural beds are undoubtedly properties of public dominion (Art. 502 par. 1,
Civil Code of the Philippines). Whether navigable or not, rivers belong to the public and cannot
be acquired by prescription (Com vs. Meneses, 38 O.G. 2839, Paras, Civil Code, p. 328, Vol.
II, 12th Edition). In fact, a stream located within private land is still property of public dominion,
even if the Torrens Title of the land does not show the existence of said stream (Talion vs. Sec.
of Public Works and Highways, L-24281, May 16, 1967; Paras, supra).
Correspondingly, Art. 462 of the same Civil Code provides:
Art. 462. Whenever a river, changing its course by natural causes, opens a new bed through a
private estate, this bed shall become of public dominion.
The rule is the same that even if the new bed is on private property. The bed becomes property
of public dominion. Just as the old bed had been of public dominion before the abandonment,
the new riverbed shall likewise be of public dominion (Hilario vs. City of Manila, L-19570, April
27, 1967).23
On October 10, 1995, the Morandarte spouses filed a motion for reconsideration.24 In its
Resolution dated January 19, 1996, the CA found no justifiable cause or reason to modify or
reverse its decision.25
Hence, the instant petition for review anchored on the following assigned errors:
A.
RESPONDENT COURT COMMITTED A GRAVE ERROR OF LAW IN APPLYING ARTICLE
462 OF THE CIVIL CODE TO THIS CASE WHEN THE CHANGE IN COURSE OF THE OLD
MIPUTAK RIVER WAS NOT DUE TO NATURAL CAUSES BUT WAS ACCIDENTAL.
B.
ASSUMING ARGUENDO THAT THE CHANGE OF COURSE OF THE OLD MIPUTAK RIVER
WAS DUE TO NATURAL CAUSE ONLY A PORTION OF THE SUBJECT PROPERTY OF
PETITIONERS WAS AFFECTED THEREBY SO THAT THE TITLE OF PETITIONERS TO
THE REMAINING PORTION IS VALID AND CANNOT BE NULLIFIED AS IT REMAINED
PRIVATE PROPERTY.
C.
RESPONDENT COURT GRAVELY ERRED IN ORDERING THE REVERSION OF LOT 7,
CSD-09-05-00078-D TO THE PUBLIC DOMAIN.
D.
RESPONDENT COURT GRAVELY ERRED IN NOT DECLARING AS NULL AND VOID THE
LEASE AGREEMENT EXECUTED IN FAVOR OF INTERVENORS.
E.
RESPONDENT COURT GRAVELY ERRED IN NOT DISMISSING THE COMPLAINT
CONSIDERING THAT NO FRAUD OR MISREPRESENTATION WAS EMPLOYED BY THE
SPOUSES MORANDARTE IN OBTAINING THE TITLE.26
The Morandarte spouses emphatically argue that the CA failed to take into consideration the
true state of the present Miputak River in relation to Lot 7. They contend that the Miputak River
changed its course due to the closure of the river bed through the construction of dikes by the
Lacaya spouses, forcing the river to be diverted into Lot 6781-B. Thus, they submit that the
applicable provision is Article 77 of the Law of Waters, which provides that "[l]ands accidentally
inundated by the waters of lakes, or by creeks, rivers and other streams shall continue to be
the property of their respective owners."
Furthermore, they staunchly claim that the Miputak River does not actually correspond to Lot
7. The Miputak River occupies only 12,162 square meters of Lot 7 which has an area of 45,499
square meters. Also, they insist that the lower courts made capital, albeit erroneously, of their
agreement to a reversion. The reversion agreed to refers only to the 12,162 square meters
portion covered by the Miputak River, which should be voided, while the portion unaffected by
the Miputak River is valid and their title thereto should be maintained and respected.
Moreover, they vigorously contend that the CA erred in sustaining the validity of fishpond rights
of the Lacaya spouses. They aver that the Lacaya spouses violated the terms of the lease
agreement by constructing dikes for the fishponds which caused the Miputak River to traverse
the property of the Morandarte spouses.
Prefatorily, it must be stated that in petitions for review on certiorari, only questions of law may
be raised by the parties and passed upon by this Court.27 Factual findings of the trial court,
when adopted and confirmed by the CA, are binding and conclusive upon the Supreme Court
and generally will not be reviewed on appeal.28 Inquiry upon the veracity of the CA's factual
findings and conclusion is not the function of the Supreme Court for the Court is not a trier of
facts.29
While this Court has recognized several exceptions to this rule, to wit: (1) when the findings
are grounded entirely on speculation, surmises, or conjectures; (2) when the inference made
is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4)
when the judgment is based on a misapprehension of facts; (5) when the findings of facts are
conflicting; (6) when in making its findings, the CA went beyond the issues of the case, or its
findings are contrary to the admissions of both the appellant and the appellee; (7) when the
findings are contrary to the trial court; (8) when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the facts set forth in the petition as well
as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the
findings of fact are premised on the supposed absence of evidence and contradicted by the
evidence on record; and (11) when the CA manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, would justify a different conclusion,30
none of these exceptions find application here.
A complaint for reversion involves a serious controversy, involving a question of fraud and
misrepresentation committed against the government and it seeks the return of the disputed
portion of the public domain. It seeks to cancel the original certificate of registration, and nullify
the original certificate of title, including the transfer certificate of title of the successors-in-
interest because the same were all procured through fraud and misrepresentation.31
The State, as the party alleging that fraud and misrepresentation attended the application for
free patent, bears the burden of proof. The circumstances evidencing fraud and
misrepresentation are as varied as the people who perpetrate it in each case. It assumes
different shapes and forms and may be committed in as many different ways.32 Therefore,
fraud and misrepresentation are never presumed but must be proved by clear and convincing
evidence;33 mere preponderance of evidence not even being adequate.34
In this case, the State failed to prove that fraud and misrepresentation attended the application
for free patent. The RTC, in fact, recognized that no fraud attended the application for free
patent35 but declared reversion based on the judicial admission of the Morandarte spouses
that reversion is warranted due to the inalienability of the Miputak River. Ordinarily, a judicial
admission requires no proof and a party is precluded from denying it except when it is shown
that such admission was made through palpable mistake or that no such admission was
made.36 In this case, the exception finds application since the records lay bare that such
admission was made through mistake and not in the context it was considered. As reflected in
the Order dated May 25, 1998,37 the Morandarte spouses essentially agreed only to a
reconveyance of the portion covering the Miputak River. Undoubtedly, such acquiescence to
return the portion covering the Miputak River is not, and cannot be considered, an admission
that fraud and misrepresentation attended the application for free patent. This fact, standing
alone, does not prove fraud and misrepresentation.
Besides, it is undisputed that the original survey plan submitted by Morandarte to the BOL
reflected the true state of the Miputak River in Lot 1038 but the BOL did not approve the plan
because a 1916 survey did not so indicate the existence of a river traversing Lot 1038 such
that Morandarte was directed to submit an amended plan deleting the existence of the Miputak
River. This mothered the subsequent error of the BOL of approving the amended plan as CAS-
09-05-000078-D.
This error could have been discovered through a thorough ocular inspection of the property
claimed under the free patent application. However, Aurelio F. Bureros, Hearing Officer I of the
BOL, surprisingly failed to notice the existence of the river traversing Lot 1038 in the field
investigation he conducted on January 10, 1976.38
Neither did Bureros note the 13,339 square meter portion already covered by an existing
fishpond lease agreement granted by the BOF in favor of Felipe B. Lacaya, the predecessor-
in-interest of the Lacaya spouses.39
The records reveal that as early as 1948, 4.6784 hectares40 of the public land have been
leased for fishpond purposes. Aguido S. Realiza was the initial grantee of a fishpond lease
agreement.41 Amor A. Realiza, Aguido's son, acquired his fishpond permit on May 29, 1953.42
Amor A. Realiza transferred his fishpond rights to Felipe B. Lacaya on May 14, 1956.43 By
1960, the public land leased for fishpond purposes had increased to 5.0335 hectares.44 Felipe
B. Lacaya transferred his fishpond rights to Virgilio B. Lacaya on October 25, 1977.45 Thus,
the fishpond rights have been in existence since 1948, prior to the 1972 free patent application
of Morandarte.
Regardless of the foregoing, Aurelio F. Bureros, concluded that Morandarte is a qualified
applicant and recommended that a free patent be granted to him. This error culminated in the
erroneous grant of a free patent on July 27, 1976 covering the Miputak River and land subject
of the fishpond rights of Felipe B. Lacaya.46
Be that as it may, the mistake or error of the officials or agents of the BOL in this regard cannot
be invoked against the government with regard to property of the public domain. It has been
said that the State cannot be estopped by the omission, mistake or error of its officials or
agents.47
It is well-recognized that if a person obtains a title under the Public Land Act which includes,
by oversight, lands which cannot be registered under the Torrens system, or when the Director
of Lands did not have jurisdiction over the same because it is a public domain, the grantee
does not, by virtue of the said certificate of title alone, become the owner of the land or property
illegally included.48 Otherwise stated, property of the public domain is incapable of registration
and its inclusion in a title nullifies that title.49
The present controversy involves a portion of the public domain that was merely erroneously
included in the free patent. A different rule would apply where fraud is convincingly shown. The
absence of clear evidence of fraud will not invalidate the entire title of the Morandarte spouses.
Accordingly, the 12,162-square meter portion traversed by the Miputak River and the 13,339-
square meter portion covered by the fishpond lease agreement of the Lacaya spouses which
were erroneously included in Free Patent No. (IX-8) 785 and Original Certificate of Title No. P-
21972 should be reconveyed back to the State.
The Morandarte spouses cannot seek refuge in their claim that Antonio A. Morandarte, their
predecessor-in-interest, was already the owner of that portion of Lot 1038 when the fishpond
application of Aguido S. Realiza was approved in 1948 because Lot 1038 was still part of the
public domain then. It was only in 1972, through Forestry Administrative Order No. 4-1257,
which was approved August 14, 1972, when Lot 1038 was declared alienable or disposable
property of the State.50
It is a settled rule that unless a public land is shown to have been reclassified as alienable or
actually alienated by the State to a private person, that piece of land remains part of the public
domain. Hence, Antonio A. Morandarte's occupation thereof, however long, cannot ripen into
private ownership.51
The Morandarte spouses also unsuccessfully harp on the inapplicability of Article 462 of the
Civil Code by claiming that the change of course of the Miputak River was due to a man-made
cause and not by natural means. They offered no iota of evidence to substantiate this claim,
other than the bare testimony of Beder Morandarte. Neither is there proof that the movement
of the river was caused by accident or calamity, such as a typhoon, and not by the natural
movements thereof. General statements, which are mere conclusions of law and not proofs,
are unavailing and cannot suffice.
Besides, at the time of the filing of the application for free patent in 1972, a portion of the
Miputak River was already in its present course, traversing Lot 1038, particularly Lot 7 of the
amended plan submitted by Morandarte.
We need not delve on the question of whether the Lacaya spouses violated the terms of the
fishpond lease agreement. It is not material in this case in the sense that it was not made an
issue by the parties. Neither is there evidence to corroborate the bare allegation of petitioners
that the Lacaya spouses constructed dikes for the fishponds which caused the Miputak River
to traverse Lot 7. What is significant here is the established fact that there was an existing
fishpond lease agreement between Felipe Lacaya and the Bureau of Fisheries at the time of
Morandarte's application for free patent; in effect, proving that the area covering the fishpond
belongs to the Government and petitioners have no rights thereto.
In closing, we cannot but decry the carelessness of the BOL in having issued the Free Patent
in Morandarte's favor which covered the Miputak River and the fishpond rights of Felipe B.
Lacaya. Surely, a more diligent search into their records and thorough ocular inspection of Lot
7 would have revealed the presence of the Miputak River traversing therein and an existing
fishpond right thereon. Had more vigilance been exercised by the BOL, the government agency
entrusted specifically with the task of administering and disposing of public lands, the present
litigation could have been averted.
WHEREFORE, the petition is partly GRANTED. The assailed Decision of the Court of Appeals,
dated August 23, 1995, in CA G.R. No. 36258 is REVERSED insofar only as it affirmed the
nullity of Free Patent No. (IX-8) 785 and Original Certificate of Title No. P-21972, in the name
of petitioner Beder Morandarte. In its stead, petitioners Spouses Beder Morandarte and Marina
Febrera are directed to reconvey to the respondent Republic of the Philippines within thirty (30)
days from the finality of this Decision the 12,162-square meter portion traversed by the Miputak
River and the 13,339-square meter portion covered by the fishpond lease agreement of the
Lacaya spouses. No pronouncement as to costs.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ., concur.
G.R. No. 94283 March 4, 1991
MAXIMO JAGUALING, ANUNCITA JAGUALING and MISAMIS ORIENTAL CONCRETE
PRODUCTS, INC., petitioners,
vs.
COURT OF APPEALS (FIFTEENTH DIVISION), JANITA F. EDUAVE and RUDYGONDO
EDUAVE, respondents.
Cabanlas, Resma & Cabanlas Law Offices for petitioners.
Jaime Y Sindiong for private respondents.
GANCAYCO, J.:
Between the one who has actual possession of an island that forms in a non-navigable and
non-flotable river and the owner of the land along the margin nearest the island, who has the
better right thereto? This is the issue to be resolved in this petition.
The parties to this case dispute the ownership of a certain parcel of land located in Sta. Cruz,
Tagoloan, Misamis Oriental with an area of 16,452 square meters, more or less, forming part
of an island in a non-navigable river, and more particularly described by its boundaries as
follows:
North — by the Tagoloan River,
South — by the Tagoloan River,
East — by the Tagoloan River and
West — by the portion belonging to Vicente Neri.
Private respondents filed with the Regional Trial Court of Misamis Oriental1 an action to quiet
title and/or remove a cloud over the property in question against petitioners.
Respondent Court of Appeals2 summarized the evidence for the parties as follows:
The appellant [private respondent Janita Eduave] claims that she inherited the land from his
[sic] father, Felomino Factura, together with his co-heirs, Reneiro Factura and Aldenora
Factura, and acquired sole ownership of the property by virtue of a Deed of Extra Judicial
Partition with sale (Exh. D). The land is declared for tax purposes under Tax Decl. No. 26137
(Exh. E) with an area of 16,452 square meters more or less (Exh. D). Since the death of her
father on May 5, 1949, the appellant had been in possession of the property although the tax
declaration remains in the name of the deceased father.
The appellants further state that the entire land had an area of 16,452 square meters appearing
in the deed of extrajudicial partition, while in [the] tax declaration (Exh. E) the area is only 4,937
square meters, and she reasoned out that she included the land that was under water. The
land was eroded sometime in November 1964 due to typhoon Ineng, destroying the bigger
portion and the improvements leaving only a coconut tree. In 1966 due to the movement of the
river deposits on the land that was not eroded increased the area to almost half a hectare and
in 1970 the appellant started to plant bananas [sic].
In 1973 the defendants-appellees [petitioners herein] asked her permission to plant corn and
bananas provided that they prevent squatters to come to the area.
The appellant engaged the services of a surveyor who conducted a survey and placed concrete
monuments over the land. The appellant also paid taxes on the land in litigation, and mortgaged
the land to the Luzon Surety and Co., for a consideration of P6,000.00.
The land was the subject of a reconveyance case, in the Court of First Instance of Misamis
Oriental, Branch V, at Cagayan de Oro City, Civil Case No. 5892, between the appellant Janita
Eduave vs. Heirs of Antonio Factura which was the subject of judgment by compromise in view
of the amicable settlement of the parties, dated May 31, 1979. (Exh. R);
That the heirs of Antonio Factura, who are presently the defendants-appellees in this case had
ceded a portion of the land with an area of 1,289 square meters more or less, to the appellant,
Janita Eduave, in a notarial document of conveyance, pursuant to the decision of the Court of
First Instance, after a subdivision of the lot No. 62 Pls-799, and containing 1,289 square meters
more or less was designated as Lot No. 62-A [sic], and the subdivision plan was approved as
Pls-799-Psd-10-001782. (Exh. R; R-1 and R-2);
The portion Lot No. 62-A, is described as follows:
A parcel of land (Lot No. 62-A, Psd-10-001782 being a portion of Lot 62, Pls-799, Tagoloan
Public Land Subdivision) situated in Bo. Sta. Cruz, Municipality of Tagoloan, Province of
Misamis Oriental. Bounded on the W, and on the N along lines 4-5-1 by Lot 62-B of the
subdivision plan 10-001782; on the E by line 1-2 by Lot 64; Pls-799; on the S, along line 2-3-4
by Saluksok Creek, containing an area of one thousand two hundred eighty nine (1,289) square
meters more or less.
Appellant also applied for concession with the Bureau of Mines to extract 200 cubic meters of
gravel (Exh. G & G-1); and after an ocular inspection the permit was granted (Exh. K, and K-1
and K-2). That the appellant after permit was granted entered into an agreement with Tagoloan
Aggregates to extract sand and gravel (Exh. L; L-1; and L-2), which agreement was registered
in the office of the Register of Deeds (Exh. M; M-1; and M-2);
The defendants-appellees [petitioners herein] denied the claim of ownership of the appellant,
and asserted that they are the real owners of the land in litigation containing an area of 18,000
square meters more or less. During the typhoon Ineng in 1964 the river control was washed
away causing the formation of an island, which is now the land in litigation. The defendants
started occupying the land in 1969, paid land taxes as evidenced by tax declaration No. 26380
(Exh. 4) and tax receipts (Exhs. 7 to 7-G), and tax clearances (Exhs. 8 & 9). Photographs
showing the actual occupation of the land by the defendants including improvements and the
house were presented as evidence (Exh. 11 to 11-E). The report of the Commissioner who
conducted the ocular inspection was offered as evidence of the defendants (Exh. G).
The sketch plan prepared by Eng. Romeo Escalderon (Exh. 12) shows that the plaintiffs'
[private respondents'] land was across the land in litigation (Exh. 12-A), and in going to the land
of the plaintiff, one has to cross a distance of about 68 meters of the Tagoloan river to reach
the land in litigation.3
On 17 July 1987 the trial court dismissed the complaint for failure of private respondents as
plaintiffs therein to establish by preponderance of evidence their claim of ownership over the
land in litigation. The court found that the island is a delta forming part of the river bed which
the government may use to reroute, redirect or control the course of the Tagoloan River.
Accordingly, it held that it was outside the commerce of man and part of the public domain,
citing Article 420 of the Civil Code.4
As such it cannot be registered under the land registration law or be acquired by prescription.
The trial court, however, recognized the validity of petitioners' possession and gave them
preferential rights to use and enjoy the property. The trial court added that should the State
allow the island to be the subject of private ownership, the petitioners have rights better than
that of private respondents.5
On appeal to the Court of Appeals, respondent court found that the island was formed by the
branching off of the Tagoloan River and subsequent thereto the accumulation of alluvial
deposits. Basing its ruling on Articles 463 and 465 of the Civil Code6 the Court of Appeals
reversed the decision of the trial court, declared private respondents as the lawful and true
owners of the land subject of this case and ordered petitioners to vacate the premises and
deliver possession of the land to private respondents.7
In the present petition, petitioners raise the following as errors of respondent court, to wit:
1. Whether [or not] respondent court correctly applied the provisions of Articles 463 and
465 of the new Civil Code to the facts of the case at bar; and
2. Whether [or not] respondent court gravely abused its discretion in the exercise of its
judicial authority in reversing the decision appealed from.8
Petitioners point out as merely speculative the finding of respondent court that the property of
private respondents was split by the branching off or division of the river. They argue that
because, as held by the trial court, private respondents failed to prove by preponderance of
evidence the identity of their property before the same was divided by the action of the river,
respondent court erred in applying Article 463 of the Civil Code to the facts of this case.
It must be kept in mind that the sole issue decided by respondent court is whether or not the
trial court erred in dismissing the complaint for failure of private respondents (plaintiffs below]
to establish by preponderance of evidence their claim of ownership over the island in question.
Respondent court reversed the decision of the trial court because it did not take into account
the other pieces of evidence in favor of the private respondents. The complaint was dismissed
by the trial court because it did not accept the explanation of private respondents regarding the
initial discrepancy as to the area they claimed: i.e., the prior tax declarations of private
respondents refer to an area with 4,937 square meters, white the Extra-judicial Partition with
Sale, by virtue of which private respondents acquired ownership of the property, pertains to
land of about 16,452 square meters.
The trial court favored the theory of petitioners that private respondents became interested in
the land only in 1979 not for agricultural purposes but in order to extract gravel and sand. This,
however, is belied by other circumstances tantamount to acts of ownership exercised by private
respondents over the property prior to said year as borne out by the evidence, which apparently
the trial court did not consider at all in favor of private respondents. These include, among
others, the payment of land taxes thereon, the monuments placed by the surveyor whose
services were engaged by the private respondent, as evidenced by the pictures submitted as
exhibits, and the agreement entered into by private respondents and Tagoloan Aggregates to
extract gravel and sand, which agreement was duly registered with the Register of Deeds.
Private respondents also presented in evidence the testimony of two disinterested witnesses:
Gregorio Neri who confirmed the metes and bounds of the property of private respondents and
the effects of the typhoon on the same, and Candida Ehem who related on the agreement
between private respondents and petitioners for the latter to act as caretakers of the former.9
The trial court disregarded their testimony without explaining why it doubted their credibility and
instead merely relied on the self-serving denial of petitioners.10
From the evidence thus submitted, respondent court had sufficient basis for the finding that the
property of private respondents actually existed and was Identified prior to the branching off or
division of the river. The Court of Appeals, therefore, properly applied Article 463 of the Civil
Code which allows the ownership over a portion of land separated or isolated by river
movement to be retained by the owner thereof prior to such separation or isolation.11
Notwithstanding the foregoing and assuming arguendo as claimed by petitioners that private
respondents were not able to establish the existence and identity of the property prior to the
branching off or division of the Tagoloan River, and hence, their right over the same, private
respondents are nevertheless entitled under the law to their respective portion of the island.
It is clear petitioners do not dispute that the land in litigation is an island that appears in a non-
flotable and non-navigable river; they instead anchor their claim on adverse possession for
about fifteen years. It is not even controverted that private respondents are the owners of a
parcel of land along the margin of the river and opposite the island. On the other hand, private
respondents do not dispute that the island in question has been in the actual physical
possession of petitioners; private respondents insist only that such possession by petitioners
is in the concept of caretakers thereof with the permission of private respondents.
This brings Us, as phrased earlier in this opinion, to the underlying nature of the controversy in
this case: between the one who has actual possession of an island that forms in a non-
navigable and non-flotable river and the owner of the land along the margin nearest the island,
who has the better light thereto?
The parcel of land in question is part of an island that formed in a non-navigable and non-
flotable river; from a small mass of eroded or segregated outcrop of land, it increased to its
present size due to the gradual and successive accumulation of alluvial deposits. In this regard
the Court of Appeals also did not err in applying Article 465 of the Civil Code.12 Under this
provision, the island belongs to the owner of the land along the nearer margin as sole owner
thereof; or more accurately, because the island is longer than the property of private
respondents, they are deemed ipso jure to be the owners of that portion which corresponds to
the length of their property along the margin of the river.
What then, about the adverse possession established by petitioners? Are their rights as such
not going to be recognized? It is well-settled that lands formed by accretion belong to the
riparian owner.13 This preferential right is, under Article 465, also granted the owners of the
land located in the margin nearest the formed island for the reason that they are in the best
position to cultivate and attend to the exploitation of the same.14 In fact, no specific act of
possession over the accretion is required.15 If, however, the riparian owner fails to assert his
claim thereof, the same may yield to the adverse possession of third parties, as indeed even
accretion to land titled under the torrens system must itself still be registered.16
Petitioners may therefore, acquire said property by adverse possession for the required
plumber of years under the doctrine of acquisitive prescription. Their possession cannot be
considered in good faith, however, because they are presumed to have notice of the status of
private respondents as riparian owners who have the preferential right to the island as
recognized and accorded by law; they may claim ignorance of the law, specifically Article 465
of the Civil Code, but such is not, under Articles 3 and 526 of the same code, an adequate and
valid defense to support their claim of good faith.17 Hence, not qualifying as possessors in
good faith, they may acquire ownership over the island only through uninterrupted adverse
possession for a period of thirty years.18 By their own admission, petitioners have been in
possession of the property for only about fifteen years. Thus, by this token and under the theory
adopted by petitioners, the island cannot be adjudicated in their favor.
This case is not between parties as opposing riparian owners contesting ownership over an
accession but rather between a riparian owner and the one in possession of the island. Hence,
there is no need to make a final determination regarding the origins of the island, i.e., whether
the island was initially formed by the branching off or division of the river and covered by Article
463 of the Civil Code, in which case there is strictly no accession because the original owner
retains ownership, or whether it was due to the action of the river under Article 465, or, as
claimed by petitioners, whether it was caused by the abrupt segregation and washing away of
the stockpile of the river control, which makes it a case of avulsion under Article 459.19
We are not prepared, unlike the trial court, to concede that the island is a delta which should
be outside the commerce of man and that it belongs to the State as property of the public
domain in the absence of any showing that the legal requirements to establish such a status
have been satisfied, which duty properly pertains to the State.20 However, We are also well
aware that this petition is an upshot of the action to quiet title brought by the private respondents
against petitioners. As such it is not technically an action in rem or an action in personam, but
characterized as quasi in rem which is an action in personam concerning real property.22 Thus,
the judgment in proceedings of this nature is conclusive only between the parties23 and does
not bind the State or the other riparian owners who may have an interest over the island
involved herein.
WHEREFORE, We find no error committed by respondent court and DENY the petition for lack
of sufficient merit. The decision of respondent Court of Appeals is hereby AFFIRMED, without
pronouncement as to costs.
SO ORDERED.
Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.
CHAPTER 3 QUIETING OF TITLE & 4 RUINOUS BUILDING AND TREES IN DANGER OF
FALLING
G.R. No. 176929 July 4, 2008
INOCENCIO Y. LUCASAN for himself and as the Judicial Administrator of the Intestate
Estate of the late JULIANITA SORBITO LUCASAN, petitioner,
vs.
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) as receiver and liquidator of
the defunct PACIFIC BANKING CORPORATION, respondents.
DECISION
NACHURA, J.:
On appeal is the March 23, 2006 Decision1 of the Court of Appeals (CA) in CA-G.R. CV No.
81518, affirming the July 24, 2003 Order2 of the Regional Trial Court (RTC) of Bacolod City,
Branch 43, granting respondent’s motion to dismiss, as well as its subsequent Resolution3
denying petitioner’s motion for reconsideration.
The factual antecedents are as follows.
Petitioner Inocencio Y. Lucasan (Lucasan) and his wife Julianita Sorbito (now deceased) were
the owners of Lot Nos. 1500-A and 229-E situated in Bacolod City, respectively covered by
TCT Nos. T-68115 and T-13816.
On August 3, 1972, Pacific Banking Corporation (PBC) extended a P5,000.00 loan to Lucasan,
with Carlos Benares as his co-maker. Lucasan and Benares failed to pay the loan when it
became due and demandable. Consequently, PBC filed a collection case with the RTC of
Bacolod City, docketed as Civil Case No. 12188.
On April 30, 1979, the RTC rendered a decision ordering Lucasan and Benares to jointly and
severally pay PBC P7,199.99 with interest at 14% per annum computed from February 7, 1979,
until the full payment of the obligation. Lucasan failed to pay the monetary award; thus, to
satisfy the judgment, the RTC issued a writ of execution directing the sheriff to effect a levy on
the properties owned by Lucasan and sell the same at public auction.
In compliance with the writ, the City Sheriff of Bacolod issued a Notice of Embargo on January
8, 1981, which was annotated on Lucasan’s TCT Nos. T-68115 and T-13816 as Entry No.
110107. Annotated as prior encumbrances on the same titles were the mortgages in favor of
Philippine National Bank (PNB) and Republic Planter’s Bank (RPB) executed to secure
Lucasan’s loans with the banks.
On May 13, 1981, the lots were sold at public auction and were awarded to PBC as the highest
bidder. A certificate of sale was executed in its favor and was registered and annotated on TCT
Nos. T- 68115 and T-13816 as Entry No. 112552 on June 5, 1981. Neither PNB nor RPB, the
mortgagees, assailed the auction sale.
Lucasan, as well as the mortgagee banks, PNB and RPB, did not redeem the properties within
the redemption period. Nevertheless, PBC did not file a petition for consolidation of ownership.
In January 1997, Lucasan, through counsel, wrote a letter to the Philippine Deposit Insurance
Corporation (PDIC), PBC’s receiver and liquidator seeking the cancellation of the certificate of
sale and offering to pay PBC’s claim against Lucasan.4
Not long thereafter, Lucasan paid his loans with the PNB and RPB. Consequently, the
mortgagee banks executed their respective releases of mortgage, resulting in the cancellation
of the prior encumbrances in favor of PNB and RPB.
On August 13, 2001, PDIC denied Lucasan’s request for the cancellation of the certificate of
sale stating:
Please be informed that based on our records, TCT Nos. T-68115 and T-13816 have already
become part of the acquired assets of Pacific Banking Corporation by virtue of a Certificate of
Sale dated May 13, 1981 executed by the City Sheriff of Bacolod. Subsequently, this document
was registered on the titles on June 5, 1981 so that the last day of the redemption period was
June 5, 1982.
With regard to your request, we regret to inform you that reacquisition of the subject properties
have to be through sale following PDIC’s policy on disposal. Accordingly, these properties can
be disposed through public bidding using the latest appraised value in the total amount of
P2,900,300.00 as of March 29, 2000 as a minimum bid. If you are still interested to acquire the
properties, please get in touch with our Asset Management Group x x x.5
Lucasan then filed a petition denominated as declaratory relief with the RTC of Bacolod City
docketed as Civil Case No. 02-11874.6 He sought confirmation of his rights provided in the
second paragraph of Section 1, Rule 63 of the Rules of Court in relation to Section 75 of
Presidential Decree (P.D.) No. 1529. Lucasan also pleaded for the lifting and/or cancellation of
the notice of embargo and the certificate of sale annotated on TCT Nos. T-68115 and T-13816,
and offered to pay P100,000.00 or such amount as may be determined by the RTC, as
consideration for the cancellation.
PDIC moved to dismiss the complaint for lack of cause of action. It averred that an action to
quiet title under Section 1 of Rule 63 may only be brought when there is a cloud on, or to
prevent a cloud from being cast upon, the title to real property. It asseverated that a cloud on
the title is an outstanding instrument record, claim, encumbrance or proceeding which is
actually invalid or inoperative, but which may nevertheless impair or affect injuriously the title
to property. PDIC claimed that the notice of embargo was issued pursuant to a writ of execution
in Civil Case No. 12188, while the certificate of sale was executed as a result of a public bidding.
Thus, their annotations on the titles were valid, operative or effective. PDIC asserted that
Lucasan’s petition is nothing but a disguised attempt to compel PDIC to resell the properties at
a reduced price of P100,000.00. Accordingly, it prayed for the dismissal of the petition.7
Lucasan opposed the motion.8 He countered that the subject properties were still in his
possession, and neither PBC nor PDIC instituted an action for consolidation of ownership.
Since the certificate of title was still in his name, he contended that he could pursue all legal
and equitable remedies, including those provided for in Section 1, Rule 63 of the Rules of Court
to reacquire the properties. He also claimed that PDIC’s policy of disposing the subject
properties through public bidding at the appraised value of P2,900,300.00 was unjust,
capricious and arbitrary, considering that the judgment debt amounted only to P7,199.99 with
interest at 14% per annum. Lucasan urged the RTC to apply the liberal construction of the
redemption laws stressed in Cometa v. Court of Appeals.9
In its Order10 dated July 24, 2003, the RTC granted PDIC’s motion to dismiss, thus:
The clouds contemplated by the provision of law under Article 476 of the Civil Code is one
where the instrument, record, claim, encumbrance or proceeding is apparently valid or effective
on its face that nothing appears to be wrong, but in reality, is null and void. Hence, the petition
filed by [Lucasan] pursuant to the said article is equivalent to questioning the validity of the
subsequent annotation of Entry No. 110107 and Entry No. 112522 in TCT Nos. T-13816 and
T-68115.
Records disclose that Entry No. 110107 which is a Notice of Embargo was issued by virtue of
a valid judgment rendered in Civil Case No. 12188 entitled "Pacific Banking Corporation vs.
[Inocencio] Lucasan, et al.," whereby the Court found [Lucasan] liable in favor of [PBC] the sum
of P7,199.99 with 14% interest per annum to be computed from February 7, 1979 until fully
paid.
As mandated in Sec. 12, Rule 39 of the Revised Rules of Court, such levy on execution create
a lien in favor of [PBC] over the right, title and interest of [Lucasan] over the two (2) subject
parcels of land covered by TCT Nos. T-13816 and T-68115, subject to liens and encumbrances
then existing. The fact that [Lucasan] has redeemed the mortgage properties from the first
mortgages (sic), PNB and PNB (sic) Republic Bank, does not vest him any title free from the
lien of [PBC].
While the law requires that the judgment debtor, [Lucasan] must be served with a notice of levy
and even if not served therewith, the defect is cured by service on him of the notice of sale
prior to the sale, nowhere in the petition which alleges that [Lusasan] refutes the validity of the
execution sale. Thus, he is deemed to have received and recognized the same.
As support for his thesis, [Lucasan] cites the case of Balanga vs. Ca., et al. (supra). However
this Court is unable to agree that it is applicable to the present case. As correctly argued by
[PDIC], in that case the proceedings under execution suffered infirmity from the very start as
the levy and sale made by the sheriff of the land of petitioner Balanga included the house
erected on the land [and] constituted as a family home which, under the law, exempt from
execution. In the case at bar, no objection was interposed by [Lucasan] as a valid levy has
been made pursuant to Sec. 7, Rule 57 of the Revised Rules of Court, as a consequence of
which, the sale made pursuant to Sec. 11 of the same rule is also valid and effective.11
The dispositive portion of the RTC Order reads:
WHEREFORE, finding the claim of any cloud over the titles of [Lucasan] to be bereft of basis
in fact and in law, the Motion to Dismiss filed by [PDIC] is granted. Accordingly, this is hereby
ordered DISMISSED.
SO ORDERED.12
Lucasan filed a motion for reconsideration, but the RTC denied it on October 20, 2003.13
On appeal, the CA affirmed in toto the RTC ruling. It declared that Lucasan already lost his
right to redeem the properties when he failed to exercise it within the prescribed period. The
effect of such failure was to vest in PBC absolute ownership over the subject properties.14
The CA disposed, thus:
WHEREFORE, in view of all the foregoing premises, the appeal is hereby DENIED.
Accordingly, the assailed Order of the Regional Trial Court of Bacolod City, Branch 43 dated
24 July 2003 dismissing [Lucasan’s] Petition for Declaratory Relief and the subsequent Order
of the same Court dated 20 October 2003 denying [Lucasan’s] motion for reconsideration from
the Order of Denial (sic) are hereby affirmed in toto. No costs.
SO ORDERED.15
Lucasan sought a reconsideration of the CA Decision, but the same was denied on February
7, 2007.16
Before us, Lucasan impugns the CA Decision on the following grounds:
1- THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS DISCRETION IN
AFFIRMING THE ORDER OF DISMISSAL OF THE PETITIONER’S PETITION IN THE
REGIONAL TRIAL COURT WHEN IT DISREGARDED THE CLEAR PROVISION OF
SECTION 75 OF PRESIDENTIAL DECREE NO. 1529 AND PUT TO NAUGHT THE
APPLICABLE JURISPRUDENCE IN ZACARIAS COMETA x x x AND THE CASES CITED
THEREIN, INSPITE (sic) OF THE CLEAR AND OUTSTANDING SIMILARITY OF FACTS
WITH THE CASE UNDER CONSIDERATION.
2- THE COURT OF APPEALS ALSO ERRED AND GRAVELY ABUSED ITS DISCRETION
WHEN IT FAILED TO CONSIDER THAT THE NOTICE OF EMBARGO AND CERTIFICATE
OF SALE ISSUED BY THE CITY SHERIFF WERE ONLY LEVY ON THE INTEREST OF THE
PETITIONER ON THE TWO (2) SUBJECT LOTS, AS DECREED IN QUEZON BEARING &
PARTS CORPORATION, x x x, WHICH IS LIKEWISE APPLICABLE TO THE CASE AT
BAR.17
Lucasan posits that he has sufficient cause of action against PDIC; thus, he chides the RTC
for dismissing his complaint, and the CA for affirming the dismissal. In support of his thesis, he
cites Section 75 of Presidential Decree (PD) No. 1529, or the Property Registration Decree18
and Cometa v. Court of Appeals.19
As gleaned from the averments of the complaint, Lucasan’s action was one for quieting of title
under Rule 63 of the Rules of Court. Essentially, he sought the cancellation of the notice of
embargo and the certificate of sale annotated on TCT Nos. T-68115 and T-13816 claiming that
the said annotations beclouded the validity and efficacy of his title. The RTC, however,
dismissed his complaint for lack of cause of action which was affirmed by the CA in its assailed
Decision. Thus, the key issue for our consideration is whether the dismissal of Lucasan’s
complaint was proper.
Quieting of title is a common law remedy for the removal of any cloud of doubt or uncertainty
with respect to real property. The Civil Code authorizes the said remedy in the following
language:
ART. 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.
ART. 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.
To avail of the remedy of quieting of title, 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
a cloud on his title must be shown to be in fact invalid or inoperative despite its prima facie
appearance of validity or legal efficacy.20 Stated differently, the plaintiff must show that he has
a legal or at least an equitable title over the real property in dispute, and that some deed or
proceeding beclouds its validity or efficacy.
Unfortunately, the foregoing requisites are wanting in this case.
Admittedly, the subject parcels of land were levied upon by virtue of a writ of execution issued
in Civil Case No. 12188. On May 13, 1981, a public auction of the subject parcels of land was
held and the lots were awarded to PBC as the highest bidder. A certificate of sale in favor of
PBC was issued on the same day, and was registered and annotated on TCT Nos. T-68115
and T-13816 as Entry No. 112552 on June 5, 1981.
Under the 1964 Rules of Court, which were in effect at that time, the judgment debtor or
redemptioner had the right to redeem the property from PBC within twelve (12) months from
the registration of the certificate of sale.21 With the expiration of the twelve-month period of
redemption and no redemption having been made, as in this case, the judgment debtor or the
redemptioner lost whatever right he had over the land in question.22
Lucasan admitted that he failed to redeem the properties within the redemption period, on
account of his then limited financial situation.23 It was only in January 1997 or fifteen (15) years
later that he manifested his desire to reacquire the properties. Clearly thus, he had lost
whatever right he had over Lot Nos. 1500-A and 229-E.
The payment of loans made by Lucasan to PNB and RPB in 1997 cannot, in any way, operate
to restore whatever rights he had over the subject properties. Such payment only extinguished
his loan obligations to the mortgagee banks and the liens which Lucasan claimed were
subsisting at the time of the registration of the notice of embargo and certificate of sale.
Neither can Lucasan capitalize on PBC’s failure to file a petition for consolidation of ownership
after the expiration of the redemption period. As we explained in Calacala v. Republic:24
[P]etitioners' predecessors-in-interest lost whatever right they had over [the] land in question
from the very moment they failed to redeem it during the 1-year period of redemption. Certainly,
the Republic's 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.
xxxx
Moreover, with the rule that the expiration of the 1-year redemption period forecloses the
obligor's 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.:
Note must be taken of the fact that under the Rules of Court the expiration of that one-year
period forecloses the owner's right to redeem, thus making the sheriff's sale absolute. The
issuance thereafter 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.)
Certainly, Lucasan no longer possess any legal or equitable title to or interest over the subject
parcels of land; hence, he cannot validly maintain an action for quieting of title.
Furthermore, Lucasan failed to demonstrate that the notice of embargo and the certificate of
sale are invalid or inoperative. In fact, he never put in issue the validity of the levy on execution
and of the certificate of sale duly registered on June 5, 1981. It is clear, therefore, that the
second requisite for an action to quiet title is, likewise, absent.
Concededly, Lucasan can pursue all the legal and equitable remedies to impeach or annul the
execution sale prior to the issuance of a new certificate of title in favor of PBC. Unfortunately,
the remedy he had chosen cannot prosper because he failed to satisfy the requisites provided
for by law for an action to quiet title. Hence, the RTC rightfully dismissed Lucasan’s complaint.
Lucasan tries to find solace in our ruling in Cometa v. Court of Appeals. Sadly for him, that
case is not on all fours with his case, for it was not for quieting of title but a petition for issuance
of a writ of possession and cancellation of lis pendens. Likewise, in Cometa the registered
owner assailed the validity of the levy and sale, which Lucasan failed to do.
Undoubtedly, Lucasan’s right to redeem the subject properties had elapsed on June 5, 1982.
His offer to redeem the same in 1997 or long after the expiration of the redemption period is
not really one for redemption but for repurchase. Thus, PBC and PDIC, its receiver and
liquidator, are no longer bound by the bid price. It is entirely within their discretion to set a
higher price. As we explained in De Robles v. Court of Appeals:25
The right to redeem becomes functus officio on the date of its expiry, and its exercise after the
period is not really one of redemption but a repurchase. Distinction must be made because
redemption is by force of law; the purchaser at public auction is bound to accept redemption.
Repurchase however of foreclosed property, after redemption period, imposes no such
obligation. After expiry, the purchaser may or may not re-sell the property but no law will compel
him to do so. And, he is not bound by the bid price; it is entirely within his discretion to set a
higher price, for after all, the property already belongs to him as owner.
Accordingly, the condition imposed by the PDIC for the re-acquisition of the property cannot be
considered unjust or unreasonable.
Verily, in several cases,26 this Court allowed redemption even after the lapse of the redemption
period. But in those cases a valid tender was made by the original owners within the redemption
period. Even in Cometa, the redemption was allowed beyond the redemption period because
a valid tender of payment was made within the redemption period. The same is not true in the
case before us.
In fine, we find that the RTC correctly dismissed Lucasan’s complaint for quieting of title. Thus,
the CA committed no reversible error in sustaining the RTC.
WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals
in CA-G.R. CV No. 81518, are AFFIRMED. Costs against the petitioner.
SO ORDERED.
Ynares-Santiago, Chairperson, Austria-Martinez, Chico-Nazario, Reyes, JJ., concur.
G.R. No. 150025 July 23, 2008
SPS. NARCISO BARNACHEA and JULITA BARNACHEA (now heirs of deceased Julita
Barnachea), Petitioners,
vs.
HON. COURT OF APPEALS, HON. OSCAR C. HERRERA, JR., Presiding Judge, RTC
Branch 20, Malolos, Bulacan, HON., HORACIO T. VIOLA, Presiding Judge, MTC Pulilan,
Bulacan, and SPS. AVELINO and PRISCILLA IGNACIO, Respondents.
DECISION
BRION, J.:
Before us is the Petition for Review by Certiorari filed by the spouses Narciso and Julita
Barnachea1 (petitioners) against the spouses Avelino and Priscilla Ignacio (respondents),
rooted in the ejectment complaint the respondents filed against the petitioners before the
Municipal Trial Court (MTC) of Pulilan, Bulacan. The petition prays that we nullify the Decision2
of the Court of Appeals (CA) and its Resolution3 denying the motion for reconsideration, and
that we suspend the ejectment proceedings in light of a pending action for quieting of title
involving the disputed property.
BACKGROUND FACTS
The respondents filed their complaint for ejectment against the petitioners before the MTC on
October 20, 1998. The subject matter of the complaint were lots titled in respondent Avelino
Ignacio’s name (Subdivision Lot 16 covered by TCT No. 86821, and Subdivision Lot 17 covered
by TCT No. 86822), which lots are adjacent to the property that the petitioners own and occupy.
These properties were originally part of a piece of land owned by a certain Luis Santos and
subsequently inherited by his daughter Purificacion Santos Imperial. The land was subdivided
and transferred to tenant-farmers Santiago Isidro (EP No. A-050545 with TCT No. T-188-EP)
and Procopio de Guzman (EP No. 445440 with TCT No. T-185-EP). The property that the
petitioners own and occupy was derived from the land transferred to Santiago Isidro.
Respondent Ignacio’s properties were derived, on the other hand, from the land originally
transferred to Procopio de Guzman.
The complaint was dismissed on December 8, 1999, but was revived on April 5, 2000. The
petitioners received summons on April 13, 2000 and, instead of filing a new Answer, filed on
April 18, 2000 a Motion for Extension of Time to File Answer which the MTC denied on May 5,
2000. The petitioners responded to this denial by filing a motion for reconsideration on May 23,
2000. Meanwhile, the respondents filed a Motion for the Issuance of a Writ of Execution dated
May 24, 2000, which the petitioners received on May 26, 2000.
To avert the implementation of the writ of execution, the petitioners filed a Notice of Appeal.
The MTC issued a subpoena dated June 5, 2000 setting the hearing on the petitioners’ Motion
for Reconsideration and the respondents’ Motion for Issuance of Writ of Execution on June 19,
2000. The petitioners subsequently filed a Compliance that prayed, among others, that the
pending resolution on the incident and the Notice of Appeal be deemed to have been filed ex
abundanti cautela. The respondents, for their part, filed a Manifestation and Motion praying,
among others, that the petitioner’s Motion for Reconsideration of the May 5, 2000 Order be
denied for being moot and academic.
On July 21, 2000, the MTC issued an order declaring the petitioners’ Motion for
Reconsideration abandoned because of the Notice of Appeal they previously filed. Thereafter,
the MTC forwarded the entire record of Civil Case No. 818 to the Regional Trial Court, Branch
20 (RTC Branch 20), Malolos, Bulacan. On August 24, 2000, petitioners submitted their Appeal
Memorandum to the RTC Branch 20 which affirmed the MTC decision on September 20, 2000.
On October 5, 2000, the petitioner Julita's sister, Leticia, representing herself to be the sole
owner of EP No. A-050545 (TCT No. T-188-EP), filed a Petition for Quieting of Title with the
Regional Trial Court, Branch 19 (RTC Branch 19), Malolos, Bulacan, docketed as Civil Case
No. 694-M-2000. On October 9, 2000, prior to their receipt of the RTC Branch 20’s September
20, 2000 decision, the petitioners filed an Urgent Motion for the Suspension of Proceedings
(referred to for purposes of this decision as the urgent motion).
RTC Branch 20 denied on October 17, 2000 the petitioners’ urgent motion and their subsequent
Motion for Reconsideration. The petitioners brought the denials to the CA via a petition for
certiorari under Rule 65 of the Rules of Court on the issue of "whether the pendency of an
action involving the issue of ownership is sufficient basis for [the] suspension of an ejectment
proceeding between the same parties and relating to the same subject matter".
THE CA’S DECISION
The CA denied the petition and the petitioners' subsequent motion for reconsideration,
essentially on the grounds that (1) the issue in an ejectment suit is limited to the physical
possession of real property and is separate and distinct from the issue of ownership and
possession de jure that either party may set forth in his or her pleading; (2) the pendency of an
action for reconveyance of title over the same property or for annulment of deed of sale does
not divest the MTC of its jurisdiction to try the forcible entry or unlawful detainer case before it,
and that ejectment actions generally cannot be suspended pending the resolution of a case for
quieting of title between the same parties over the same subject property; and (3) the case
does not fall under the exception provided by the case of Amagan v. Marayag4, where the
Court allowed the suspension of ejectment proceedings because of strong reasons of equity
applicable to the case – the demolition of the petitioner’s house unless the proceedings would
be suspended. The CA ruled that the petitioners’ reliance on Amagan was inappropriate
because the said case only applies to unlawful detainer actions while the petitioners’ ejectment
suit is an action for forcible entry. To the CA, the initial tolerance on the part of the private
respondents did not convert the nature of their ejectment suit from forcible entry into unlawful
detainer, following the reasoning this Court applied in Munoz v. Court of Appeals.5
ASSIGMENT OF ERRORS
The petitioners impute the following error to the CA:
[T]he Honorable Court of Appeals erred when it ruled that the said ejectment proceeding was
not a suit for illegal detainer but one of forcible entry, thus, denied application to the exceptional
rule on suspension of ejectment proceedings, at any stage thereof, until the action on
ownership is finally settled.6
From this general assignment of error, the petitioners submitted in their memorandum the
following specific issues for our resolution:
1) whether or not the ejectment case filed by the respondents against petitioners with the MTC
of Pulilan is for unlawful detainer or for forcible entry;
2) whether the MTC of Pulilan had validly acquired and exercised jurisdiction over the ejectment
case considering that the complaint was filed beyond one year from the demand to vacate the
subject premises; and
3) whether or not the ejectment proceedings should be suspended at any stage until the action
on ownership of the disputed portion of the subject property is finally settled.
OUR RULING
We find the petition without merit.
1. Nature of the Action before the MTC.
The best indicator of what the plaintiff in an ejectment case intends with respect to the nature
of his or her complaint can be found in the complaint itself. In this case, the complaint states:7
"That plaintiffs are the registered owners in fee simple of several residential lots identified as
lots 16 and 17 covered by Certificate of Title Nos. 86821 and 86822 issued in the name of the
spouses by the Register of Deeds of Bulacan, with a total aggregate area of 254 square meters
situated at Cutcut, Pulilan, Bulacan. Copy of the said titles are hereto attached and marked as
Annex "A" and "A-1"
"That in a portion of the lots 16 and 17, a portion of the house of the defendants was erected
and built thus usurping the said portion and this was made known to the defendants when the
plaintiffs caused the relocation of the subject lots, however, considering that the latter were not
yet in need of that portion, they allowed the former to stay on the portion by tolerance;
"That last July 1998, when the plaintiffs were in the process of fencing the boundary of their
lots, to their surprise, they were not allowed by the defendants to extend the fence up to the
portions they illegally occupied;
"That despite the advice given to them by several Geodetic Engineers commissioned by both
the plaintiffs and the herein defendants, for them to give way and allow the plaintiffs to fence
their lot, same proved futile as they stubbornly refused to surrender possession of the subject
portion;
The actions for forcible entry and unlawful detainer are similar because they are both summary
actions where the issue is purely physical possession.8 Other than these commonalities,
however, they possess dissimilarities that are clear, distinct, and well established in law.9
In forcible entry, (1) the plaintiff must prove that he was in prior physical possession of the
property until he was deprived of possession by the defendant; (2) the defendant secures
possession of the disputed property from the plaintiff by means of force, intimidation, threat,
strategy or stealth; hence, his possession is unlawful from the beginning; (3) the law does not
require a previous demand by the plaintiff for the defendant to vacate the premises; and (4) the
action can be brought only within one-year from the date the defendant actually and illegally
entered the property.10
In marked contrast, unlawful detainer is attended by the following features: (1) prior possession
of the property by the plaintiff is not necessary; (2) possession of the property by the defendant
at the start is legal but the possession becomes illegal by reason of the termination of his right
to possession based on his or her contract or other arrangement with the plaintiff; (3) the
plaintiff is required by law to make a demand as a jurisdictional requirement; and (4) the one-
year period to bring the complaint is counted from the date of the plaintiff’s last demand on the
defendant.11
Under these standards, we do not hesitate to declare the Court of Appeals in error when it held
that the present case involves forcible entry rather than unlawful detainer. A plain reading of
the complaint shows the respondents’ positions that the petitioners were in prior possession of
the disputed property; that the respondents allowed them to occupy the disputed property by
tolerance; that the respondents eventually made a demand that the petitioners vacate the
property (on August 26, 1998, which demand the petitioners received on August 31, 1998);
and that the petitioners refused to vacate the property in light of the defenses they presented.
Separately from the complaint, the respondents characterized the action they filed against the
petitioners in the MTC as an unlawful detainer when they stated in their memorandum that "as
alleged in the complaint, what was filed by the respondents [was] an ejectment suit for unlawful
detainer."12
A critical point for us in arriving at our conclusion is the complete absence of any allegation of
force, intimidation, strategy or stealth in the complaint with respect to the petitioners’
possession of the respondents’ property. While admittedly no express contract existed between
the parties regarding the petitioners’ possession, the absence does not signify an illegality in
the entry nor an entry by force, intimidation, strategy or stealth that would characterize the entry
as forcible. It has been held that a person who occupies land of another at the latter’s tolerance
or permission, without any contract between them, is necessarily bound by an implied promise
that he will vacate upon demand, failing which a summary action for ejectment is the proper
remedy. The status of the defendant is analogous to that of a lessee or tenant whose terms
has expired but whose occupancy continues by tolerance of the owner.13
To be sure, we are aware of the Munoz v. Court of Appeals14 ruling that the CA relied upon to
reach the conclusion that the present case involves forcible entry, not unlawful detainer. What
the CA apparently misread in Munoz was the allegation of stealth in the complaint; anchored
on this finding, the Court concluded that the defendant’s possession was illegal from the
beginning so that there could be no possession by tolerance. The allegation of stealth, of
course, is not present in the present case. On the contrary, tolerance was alleged in the
ejectment complaint itself. Thus, there is no reason for the Munoz ruling to apply to the present
case; there is no basis nor occasion to conclude that the respondents filed a forcible entry case.
2. The Jurisdictional Issue –
Was the Ejectment Complaint
Seasonably Filed?
We point out at the outset that what the petitioners directly appealed to this Court is the
appellate court’s affirmation of the RTC’s refusal to suspend the ejectment proceedings based
on the quieting of title case the petitioners cited. Hence, we are not reviewing the merits of the
main ejectment case, particularly the question of the MTC’s jurisdiction, as these aspects of
the case were not appealed to us. If we touch the jurisdictional aspect of the case at all, it is
only for purposes of fully responding to the parties’ arguments.
The petitioners’ jurisdictional argument cannot succeed as the respondents’ ejectment
complaint was filed within the one-year period for bringing an action for unlawful detainer or
forcible entry that Section 1, Rule 70 of the Rules of Court requires. Section 1 specifically
states:
Section 1. Who may institute proceedings, and when.
Subject to the provisions of the next succeeding section, a person deprived of the possession
of any land or building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor,
vendee, or other person against whom the possession of any land or building is unlawfully
withheld after the expiration or termination of the right to hold possession, by virtue of any
contract, express or implied, or the legal representatives or assigns of any such lessor, vendor,
vendee, or other person, may, at any time within one (1) year after such unlawful deprivation
or withholding of possession, bring an action in the proper Municipal Trial Court against the
person or persons unlawfully withholding or depriving of possession, or any person or persons
claiming under them, for the restitution of such possession, together with damages and costs.
On the basis of this provision, the petitioners argue that the respondents’ cause of action –
whether for forcible entry or for unlawful detainer – had prescribed when the ejectment
complaint was filed on April 5, 2000. They point out that the last demand letter (the reckoning
date for unlawful detainer15) was dated Aug. 26, 1998 and was received by the petitioners on
August 31, 1998; the complaint was only filed on April 5, 2000 or more than 1 year after August
31, 1998. On the other hand, if the action had been for forcible entry, the prescriptive period
commenced on the discovery of the usurpation and the computation period would have
commenced either during the relocation survey of the lots or in July 1998 when the respondents
were prevented from fencing the disputed property.
The one-year period within which to commence an ejectment proceeding is a prescriptive
period as well as a jurisdictional requirement. Hence, Article 1155 of the Civil Code on the
manner of reckoning the prescriptive period must necessarily come into play. Under this Article,
the filing of a complaint in court interrupts the running of prescription of actions. As an action
for unlawful detainer, the one-year prescription period started running after August 31, 1998 –
the date of receipt of the respondents’ demand letter. The period ran for almost two months
until it was interrupted on October 20, 1998 when the respondents filed their ejectment
complaint. This complaint, however, was dismissed on December 8, 1999. Upon this dismissal,
the prescriptive period again began to run for about four months when another interruption
intervened – the revival of the complaint on April 5, 2000. Evidently, under these undisputed
facts, the period when the prescriptive period effectively ran does not add up to the one-year
prescriptive period that would jurisdictionally bar the ejectment case.
3. Suspension of the Ejectment
Proceedings until Resolution
of the Ownership Issue.
The issue in an unlawful detainer case is limited to physical possession. When a claim of
ownership is used as a basis for de facto possession or to assert a better possessory right, the
court hearing the case may provisionally rule on the issue of ownership. As a rule, however, a
pending civil action involving ownership of the same property does not justify the suspension
of the ejectment proceedings. Only in rare cases has this Court allowed a suspension of the
ejectment proceedings and one of these is in the case of Amagan v. Marayag16 that the
petitioners cite. To quote from Amagan –
[i]ndisputably, the execution of the MCTC Decision would have resulted in the demolition of the
house subject of the ejectment suit; thus, by parity of reasoning, considerations of equity
require suspension of the ejectment proceedings. xxx [L]ike Vda. de Legaspi, the respondent’s
suit is one of unlawful detainer and not of forcible entry, and most certainly, the ejectment of
petitioners would mean a demolition of their house, a matter that is likely to create "confusion,
disturbance, inconvenience and expenses" mentioned in the said exceptional case.1awphi1
Necessarily, the affirmance of the MCTC Decision would cause the respondent to go through
the whole gamut of enforcing it by physically removing the petitioners from the premises they
claim to have been occupying since 1937. (Respondent is claiming ownership only of the land,
not of the house) Needlessly, the litigants as well as the courts will be wasting much time and
effort by proceeding at a stage wherein the outcome is at best temporary, but the result of
enforcement is permanent, unjust and probably irreparable.17
However, we do not find these same circumstances present in this case for the reasons we
shall discuss in detail below.
First. In Amagan, the party refusing to vacate the disputed premises (or the deforciant in the
action for unlawful detainer) was the same party seeking to quiet his title. In the present case,
the petitioners are not parties to the civil action (for quieting of title) whose result they seek to
await; the plaintiff in the quieting of title case is Leticia, the petitioner Julita’s sister. No proof
whatsoever was offered to show that petitioner Julita is asserting her own title to the property;
there is only the allegation that Leticia was appointed as the representative of Julita and the
other heirs of Isidro in their various recourses at law to vindicate their landowners’ rights.18
The respondents in fact actively disputed petitioner Julita’s identification with the quieting of
title case in their Comment since Leticia claimed to be the sole owner of TCT No. T-188-EP in
her action to quiet title. The respondents also pointed to the document entitled "Kasulatan ng
Pagmamana ng Lupa sa Labas ng Hukuman na May Pagtalikod sa Bahagi" executed on May
27, 1995, showing that Julita had relinquished her share over TCT No. T-188-EP in favor of
her sister Leticia. A desperation argument the petitioners advanced in their Memorandum is
that the Kasulatan was only executed "pursuant to the agrarian reform policy proscribing the
parceling of the awarded landholding into smaller units to preserve its viability".19 In other
words, the petitioners are disavowing, for purposes of this case, the representation they made
in completing their submission before the agrarian reform authorities. We cannot of course
recognize this line of argument as justification for the suspension of the ejectment proceedings
as the petitioners are bound by their representations before the agrarian reform authorities and
cannot simply turn their back on these representations as their convenience requires. No less
decisive against the petitioners’ argument for suspension is the decision itself of RTC Branch
19 that the respondents attached to their Comment. This decision shows that Civil Case No.
694-M-2000, instead of being a case for quieting of title, is in fact a mere boundary dispute.20
Second. In Amagan, the MCTC decision involved the demolition of the petitioners’ house – a
result that this Court found to be "permanent, unjust and probably irreparable"; in the present
case, only a portion of the petitioners’ house is apparently affected as the petitioners occupy
the lot adjoining the disputed property. Significantly, the height, width and breadth of the portion
of the house that would be affected by the execution of the RTC Branch 20 decision does not
appear anywhere in the records, thus, unavoidably inviting suspicion that the potential damage
to the petitioners is not substantial. More important than the fact of omission is its implication;
the omission constitutes a missing link in the chain of equitable reasons for suspension that
the petitioners wish to establish. Thus, the equitable consideration that drove us to rule as we
did in Amagan does not obtain in the present case.
In the absence of a concrete showing of compelling equitable reasons at least comparable and
under circumstances analogous to Amagan, we cannot override the established rule that a
pending civil action for ownership shall not ipso facto suspend an ejectment proceeding.
Additionally, to allow a suspension on the basis of the reasons the petitioners presented in this
case would create the dangerous precedent of allowing an ejectment suit to be suspended by
an action filed in another court by parties who are not involved or affected by the ejectment
suit.
WHEREFORE, premises considered, we hereby DISMISS the petition for lack of merit. Costs
against the petitioners.
SO ORDERED.
G.R. No. 175375 June 23, 2009
CONRADO O. LASQUITE and TEODORA I. ANDRADE, Petitioners,
vs.
VICTORY HILLS, INC., Respondent.
DECISION
QUISUMBING, J.:
This appeal seeks to annul the Decision1 dated November 8, 2006 of the Court of Appeals in
CA G.R. CV No. 77599. The Court of Appeals had set aside the Decision2 dated July 2, 2002
of the Regional Trial Court (RTC) of San Mateo, Rizal, Branch 77 in Civil Case No. 548 which
upheld Original Certificate of Title (OCT) Nos. NP-1973 and NP-198,4 in the names of
petitioners Andrade and Lasquite, respectively.
The antecedent facts are as follows:
On May 4, 1971, Jose Manahan5 executed a Deed of Quitclaim/Assignment of Rights6 over a
parcel of land designated as Lot No. 3050 at Barrio Ampid, San Mateo, Rizal in favor of
Conrado O. Lasquite. Lasquite applied for a free patent over the lot, and pending approval of
the application, sold half of the land to Juanito L. Andrade on January 11, 1981.7 Upon the
grant of the patent application, OCT Nos. NP-197 and NP-198 were issued in the names of
Andrade and Lasquite, respectively, on June 18, 1981.
Thereafter, on August 22, 19838 and October 22, 1983,9 Simeona, Armentina, Herminia,
Zenaida, Gloria, Yolanda and Rodolfo, all surnamed Prescilla, filed a protest with the Bureau
of Lands to question the grant of free patent in favor of petitioners. They claimed to have been
in possession in concepto de dueno of Lot No. 3050, planting and cultivating crops thereon
since 1940. On March 8, 1989, the Prescillas also instituted a case for reconveyance and
damages against petitioners before the RTC of San Mateo, Rizal, Branch 77 which was
docketed as Civil Case No. 548-SM. They alleged that Lasquite forged the signature of Jose
M. Manahan in the Deed of Quitclaim/Assignment of Rights since the latter has died on April
11, 1968.10
It also appears that a second complaint,11 for annulment of title, reconveyance and damages,
was filed by Roberto and Raquel Manahan, Maria Gracia M. Natividad, the heirs of Leocadio
Manahan, and the heirs of Joaquin Manahan against petitioners on June 1, 1990. The
Manahans asserted title over Lot No. 3050 as successors of Jose S. Manahan whom they
claimed to have died on October 12, 1947.12 The case was docketed as Civil Case No. 680-
90-SM and raffled to Branch 76 of the San Mateo, Rizal RTC. Upon learning of Civil Case No.
548-SM initiated by the Prescillas against petitioners, the Manahans filed a Complaint in
Intervention13 on June 23, 1993, and Civil Case No. 680-90-SM was consolidated with Civil
Case No. 548-SM.
It also appears that on January 11, 1994, respondent Victory Hills, Inc. (Victory Hills) also
intervened in Civil Case No. 548-SM. Victory Hills likewise claimed to be the owner of the
subject lot. Victory Hills traced its title to Lot No. 3050 to OCT No. 38014 which was allegedly
registered on January 4, 1937 to Jose H. Manahan by virtue of Homestead Patent No. H-
1956215 dated December 14, 1936. According to Victory Hills, Jose H. Manahan sold Lot No.
3050 to Rufino Hieras on May 17, 1944 to whom Transfer Certificate of Title (TCT) No. 4621916
was issued. Hieras then conveyed the lot to spouses Serafin and Veronica Angeles, and
Catalina Cayetano who obtained TCT No. 8508217 in their names. Later, the lot was
transferred to Victory Hills on September 6, 1961 under TCT No. 90816.18
On November 27, 1991, Victory Hills filed an Ex-Parte Motion for Relocation Survey19 with the
Department of Environment and Natural Resources (DENR). Upon grant of the motion, the
DENR released a Narration Report of the Relocation Survey20 on December 9, 1993. The
report noted that:
xxxx
1. H-19562 and H-19887 had been accepted by Cad. 375-D, San Mateo Cadastre and identical
to Lot [No.] 3050 and Lot [No.] 258 respectively[;]
2. H-19562 had been issued a free patent and Original Certificate of Title No. 380 in favor [of]
Jose Manahan on June 4, 1937. That said title was transferred to Rufin[o] Hieras on May 17,
1944 with TCT [No.] 46219, cancelling O[CT] [No.] 3[8]0. Again TCT [No.] 46219-T-237 was
cancelled and TCT [No.] [8]5082 was issued to [Spouses] Serafin Angeles and [Veronica] D.
Angeles and Catalina Cayetano [on] March 17, 1961;
3. A consolidate[d] subdivision survey of H-19562 and H-19887 had been approved by the LRC
designated as plan (LRC) Pcs [-] [1586] surveyed June 1-15, 1961; which was not projected in
Cad. 375-D, San Mateo Cadastre;
4. Lot [No.] 3050 which is identical to H-19562 was subdivided and designated as plan Cad-
04-002023-D, into two lots. (Emphasis supplied.)21
xxxx
Notwithstanding the said report, Branch 77 of the Rizal RTC, on July 2, 2002, promulgated a
Decision which upheld the title of petitioners to Lot No. 3050. It decreed:
Accordingly, the title of defendants, Conrado Lasquite and Jose Andrade, involving the subject
parcel of land under OCT No. NP-198 and OCT No. NP-197 registered on June 18, 1981, are
sustained. Likewise, the title issued to plaintiffs Prescilla, under OCT No. ON-333 involving Lot
3052 is sustained.
WHEREFORE, premises considered, judgment is hereby rendered dismissing these cases.
No Costs.
SO ORDERED.22
The trial court disregarded OCT No. 380 and ruled that it was spurious as it lacked the signature
of then Secretary of Agriculture and Commerce Eulogio Rodriguez. The RTC also ruled that
the complaints for reconveyance of the Precillas, the Manahans and Victory Hills, which were
all founded on extrinsic fraud, had prescribed since more than four (4) years have elapsed
since the land was registered before they filed cases in court.
The Prescillas, the Manahans and Victory Hills interposed an appeal to the Court of Appeals.
On November 8, 2006, the appellate court set aside the ruling of the RTC and declared Victory
Hills the absolute owner of Lot No. 3050. The appellate court ruled:
WHEREFORE, the Decision dated July 2, 2002 rendered by the Regional Trial Court of San
Mateo, Rizal, Branch 77 is ANNULLED and SET ASIDE and a new one entered DECLARING
VICTORY HILLS, INC. the absolute owner of the parcel of land designated as Lot 3050 subject
of the instant case and ORDERING the Register of Deeds of Rizal to cancel OCT No. NP-198
and OCT No. NP-197 in the names of defendants-appellees Conrado Lasquite and Juanito
Andrade.
SO ORDERED.23
Aggrieved, petitioners elevated the case to us. Petitioners contend that the Court of Appeals
erred in
I.
…HOLDING THAT RESPONDENT’S OCT NO. 380 AND HOMESTEAD PATENT NO. H-
19562 ARE VALIDLY ISSUED;
II.
…HOLDING THAT RESPONDENT VICTORY HILLS, INC. HAS A BETTER RIGHT OF TITLE
AND OWNERSHIP OVER THE SUBJECT PROPERTY VIS-A-VIS PETITIONERS CONRADO
O. LASQUITE AND TEODORA I. ANDRADE;
III.
…GIVING WEIGHT AND CREDENCE TO RESPONDENT’S HOMESTEAD PATENT NO. H-
19562 DESPITE THE FACT THAT A COPY OF SAID HOMESTEAD PATENT WAS NEVER
PRESENTED DURING THE TRIAL NOR IN THE APPEAL;
IV.
…HOLDING THAT OCT NO. 380 IS AN EN TOTO TRANSCRIPTION OF HOMESTEAD
PATENT NO. H-19562 NOTWITHSTANDING THE FACT THAT NO EVIDENCE RELATIVE
THERETO WAS ADDUCED IN THE LOWER COURT;
V.
…NOT RESOLVING THE ISSUE THAT RESPONDENT’S CLAIM HAD ALREADY
PRESCRIBED.24
Condensed, the twin issues for our determination are: (1) whether respondent Victory Hills, Inc.
is entitled to reconveyance of Lot No. 3050; and (2) whether respondent’s claim had prescribed.
Petitioners assail the validity of OCT No. 380 as the source of respondent’s derivative title.
They fault the appellate court for according weight to the certificate of title even if it does not
bear the signature of the Secretary of Agriculture and Commerce. They stress that the Bureau
of Lands has no record of Patent No. H-19562 which respondent cited as the basis for the
issuance of its title to Lot No. 3050 and yet the appellate court still concluded that the
transcription of Patent No. H-19562 in OCT No. 380 was conclusive proof of its due execution.
Petitioners likewise call for a review of the facts in this case owing to the conflicting findings of
the RTC and the Court of Appeals.
On the other hand, respondent relies on OCT No. 380 as evidence of the earlier registration of
Lot No. 3050 in the name of its predecessor, Jose H. Manahan. Such recording, respondent
asserts, has rendered OCT No. 380 indefeasible one year following its issuance on January 4,
1937 and has effectively segregated Lot No. 3050 from the domain of public lands. Respondent
further justifies that the notation "sgd" in OCT No. 380 was sufficient indication that the original
copy of Homestead Patent No. H-19562 had been signed by then Secretary of Agriculture and
Commerce Eulogio Rodriguez. In any case, respondent invokes the presumption of regularity
in the performance of duty by the Register of Deeds in issuing OCT No. 380. It finally argues
against the issue of prescription since petitioners raised the same only for the first time on
appeal.
Often cited but rarely heeded is the rule that the Supreme Court is not a trier of facts. In the
exercise of its power of review, the Court does not normally undertake a re-examination of the
evidence presented by the contending parties during the trial of the case considering that the
findings of fact of the Court of Appeals are conclusive and binding on the Court. However, there
are several recognized exceptions25 in which factual issues may be resolved by this Court.
Two of these exceptions find application in the present case, to wit: (1) when the findings of
fact of the appellate court are contrary to those of the trial court;26 and (2) when the findings
of fact are premised on the supposed absence of evidence and contradicted by the evidence
on record.
The assailed Decision of the Court of Appeals upheld OCT No. 380 as the origin of TCT No.
90816 in the name of respondent Victory Hills. The appellate court ruled that the homestead
patent which was awarded to respondent’s predecessor, Jose H. Manahan, in 1936 cannot
simply be defeated by the subsequent grant of free patent to petitioners 45 years later. It
accepted the transcript of Homestead Patent No. H-19562 in OCT No. 380 as a faithful
reproduction of the original. Also, the Court of Appeals recognized the notation "sgd" in OCT
No. 380 as customary to signify that the original copy of the patent had been signed by the
Secretary of Agriculture and Commerce.1avvphi1
After carefully poring over all the evidence submitted in this case, we find the petition to be
impressed with merit.
The relocation survey conducted by the DENR on October 25, 1993 positively confirmed that
the mother title of respondent’s TCT and the OCTs of petitioners cover the same land. We are
confronted, therefore, with a case of successive registration, in the event of which we have
been constantly guided that:
In successive registrations, where more than one certificate is issued in respect of a particular
estate or interest in land, the person claiming under the prior certificate is entitled to the estate
or interest; and the person is deemed to hold under the prior certificate who is the holder of, or
whose claim is derived directly or indirectly from the person who was the holder of the earliest
certificate issued in respect thereof.27
However, we find that the circumstances attendant in this case militate against a forthright
application of this rule.
Section 105 of Act No. 2874,28 the governing law when Homestead Patent No. H-19562 was
purportedly issued, speaks of who must sign the patents and certificates granted pursuant to
the Act:
Sec. 105. All patents or certificates for lands granted under this Act shall be prepared in the
Bureau of Lands and shall issue in the name of the Government of the Philippine Islands under
the signature of the Governor-General, countersigned by the Secretary of Agriculture and
Natural Resources, but such patents or certificates shall be effective only for the purposes
defined in section one hundred and twenty-two of the Land Registration Act; and the actual
conveyance of the land shall be effected only as provided in said section. (Emphasis supplied.)
Noteworthy, Section 4729 of Act No. 496 or the Land Registration Act30 provides that a
certified true copy of an original certificate of title shall be admissible as evidence in our courts
and shall be conclusive as to all matters contained therein except as otherwise provided by the
Act. This is complementary to the rule on the admissibility of public documents as evidence
under Section 23, Rule 132 of the Rules of Court:
SEC. 23. Public documents as evidence. -Documents consisting of entries in public records
made in the performance of a duty by a public officer are prima facie evidence of the facts
therein stated. All other public documents are evidence, even against a third person, of the fact
which gave rise to their execution and of the date of the latter.1avvphi1
Thus, the evidentiary value of public documents must be sustained in the absence of strong,
complete and conclusive proof of its falsity or nullity.31
In the case at bar, the appellate court gave credence to the certified true copy of OCT No. 380
as proof of ownership of respondent’s predecessor. Yet, it is readily apparent from a cursory
reading of said copy that OCT No. 380 was supposedly signed,32 not by the Secretary of
Agriculture and Natural Resources, as mandated by law, but by the Secretary of Agriculture
and Commerce. Hence, it is plain to see that to give OCT No. 380 probative value in court
would be to allow variance or an evasion or circumvention of the requirement laid down in
Section 105 of Act No. 2874. We are thus warned that any title sourced from the flawed OCT
No. 380 could be void. On this basis, we are justified to consider with great care any claims
derived therefrom.
What taints OCT No. 380 even more is the fact that the records of the Community Environment
and Natural Resources Office (CENRO) are devoid of evidence to prove that Homestead
Patent No. H-19562,33 much less a patent application34 for Lot No. 3050 with the Bureau of
Lands ever existed. The certification35 from the Bureau of Lands that Lot No. 3050 was
surveyed in the name of Jose Manahan suggests, at best, that he was a survey claimant.
Neither do we find the derivative titles of OCT No. 380 free from any taint of irregularity. While
TCT No. 46219 in the name of Hieras indicated January 4, 1937 as the original registration
date of Lot No. 3050, the TCTs of subsequent transferees designated a different date – May
17, 1944.
True, a duly-registered certificate of title is considered a public document and the entries found
in it are presumed correct, unless the party who contests its accuracy can produce evidence
establishing otherwise.36 Even then, records of public officers which are admissible in
evidence are limited to those matters which the public officer has authority to record.37
Indisputably, it was beyond the power of the Register of Deeds to register a public land based
on an invalid, much worse, a non-existent patent. To sanction an otherwise invalid document
in the guise of upholding the stability of our land registration system would run counter to the
judicial devotion towards purging the system of illicit titles, in accordance with our base task as
the ultimate citadel of justice and legitimacy.38
The established legal principle in actions for annulment or reconveyance of title is that a party
seeking it should establish not merely by a preponderance of evidence but by clear and
convincing evidence that the land sought to be reconveyed is his.39 It is rather obvious from
the foregoing disquisition that respondent failed to dispense such burden. Indeed, the records
are replete with proof that respondent declared the lots comprising Lot No. 3050 for taxation
purposes only after it had instituted the present case in court. This is not to say of course that
tax receipts are evidence of ownership, since they are not, albeit they are good indicia of
possession in the concept of owner, for no one would ordinarily be paying taxes for a property
not in his actual or at least constructive possession.40
Other than paying taxes from 1994-1997, however, respondent has not shown that it exercised
dominion over Lot No. 3050. In contrast, petitioner Lasquite has been continuously paying
taxes on the land since 1972,41 and has utilized the land as a farm, planted fruit trees and
raised goats thereon. Petitioners have likewise built structures and managed to entrust the
property to the care of certain individuals without any objection from respondent.1avvphi1
Respondent avers that petitioner Lasquite forged the Deed of Quitclaim/Assignment of Rights
to make it appear that Jose Manahan conveyed Lot No. 3050 to him. It must be stressed,
however, that whoever alleges forgery has the burden of proving the same. Forgery cannot be
presumed but should be substantiated with clear and convincing evidence.42
Regrettably, Victory Hills was unable to establish that the Jose H. Manahan from whom it
derived its title is the same Jose Manahan from whom petitioner Lasquite bought Lot No. 3050.
During the trial of this case, several death certificates had been proferred by the parties, albeit,
inconclusive to establish the identity of Jose Manahan as the common origin of all their titles.
Respondent Victory Hills obtained its title from Jose H. Manahan. Meanwhile, the records
disclose that the Jose S. Manahan from whom the Manahans derived title was 54 years old
and married when he died of infectious hepatitis on October 12, 1947.43 For their part, the
Prescillas traced their title from Jose M. Manahan, who was supposedly 68 years old and single
when he succumbed to acute myocardial infarction on April 11, 1968.44 This was however
belied by the List of Register of Deaths in the Municipality of San Mateo Rizal for the year
1968.451awphi1
Relevant to the issue of prescription, we have ruled that to determine when the prescriptive
period commenced in an action for reconveyance, the plaintiff’s possession of the disputed
property is material. An action for reconveyance based on an implied trust prescribes in 10
years. The reference point of the 10-year prescriptive period is the date of registration of the
deed or the issuance of the title. The prescriptive period applies only if there is an actual need
to reconvey the property as when the plaintiff is not in possession of the property. However, if
the plaintiff, as the real owner of the property also remains in possession of the property, the
prescriptive period to recover title and possession of the property does not run against him. In
such a case, an action for reconveyance, if nonetheless filed, would be in the nature of a suit
for quieting of title, an action that is imprescriptible.46
The records reveal that it was only on January 11, 1994 or nearly 13 years after OCT Nos. NP-
197 and NP-198 were issued that respondent filed a Motion for Leave to Admit Complaint in
Intervention47 and Complaint in Intervention48 before the RTC of Rizal. Nevertheless,
respondent claimed to be in actual possession in concepto de dueno of a sizeable portion of
Lot No. 3050. Thus, the action assumed the nature of a suit to quiet title; hence, imprescriptible.
However, in our view, respondent Victory Hills has failed to show its entitlement to a
reconveyance of the land subject of the action.
WHEREFORE, the petition is GRANTED. The Decision dated November 8, 2006 of the Court
of Appeals in CA G.R. CV No. 77599 is hereby REVERSED and SET ASIDE. The Decision
dated July 2, 2002 of the Regional Trial Court of San Mateo, Rizal, Branch 77, is REINSTATED.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 177594 July 23, 2009
UNIVERSITY OF SAN AGUSTIN, INC. Petitioners,
vs.
UNIVERSITY OF SAN AGUSTIN EMPLOYEES UNION- FFW, Respondent.
DECISION
CARPIO MORALES, J.:
The University of San Agustin, Inc. (petitioner) seeks via the present petition for review on
certiorari partial reconsideration of the Court of Appeals Decision of April 28, 20061 and
Resolution of April 18, 20072 which modified the Voluntary Arbitrator’s Decision dated June
16, 20033 and Resolution dated July 17, 20034 in VA Case No. 139-06-03-2003.
On July 27, 2000, petitioner forged with the University of San Agustin Employees Union-FFW
(respondent) a Collective Bargaining Agreement5 (CBA) effective for five (5) years or from July,
2000 to July, 2005. Among other things, the parties agreed to include a provision on salary
increases based on the incremental tuition fee increases or tuition incremental proceeds (TIP)
and pursuant to Republic Act No. 6728, The Tuition Fee Law. The said provision on salary
increases reads:
ARTICLE VIII
Economic Provisions
xxxx
Section 3. Salary Increases. The following shall be the increases under this Agreement.
SY 2000-2001 – P2,000.00 per month, across the board.
SY 2001-2002 – P1,500.00 per month or 80% of the TIP, whichever is higher, across the board.
SY 2002-2003 – P1,500.00 per month or 80% of the TIP, whichever is higher, across the board.
(Emphasis supplied)
It appears that for the School Year 2001-2002, the parties disagreed on the computation of the
salary increases.
Respondent refused to accept petitioner’s proposed across-the-board salary increase of
₱1,500 per month and its subtraction from the computation of the TIP of the scholarships and
tuition fee discounts it grants to deserving students and its employees and their dependents.
Respondent likewise rejected petitioner’s interpretation of the term "salary increases" as
referring not only to the increase in salary but also to corresponding increases in other benefits.
Respondent argued that the provision in question referred to "salary increases" alone, hence,
the phrase "P1,500.00 or 80% of the TIP, whichever is higher," should apply only to salary
increases and should not include the other increases in benefits received by employees.
Resort to the existing grievance machinery having failed, the parties agreed to submit the case
to voluntary arbitration.
By Decision of June 16, 2003, Voluntary Arbitrator (VA) Indalecio P. Arriola of the Department
of Labor and Employment- National Conciliation and Mediation Board, Sub-Regional Office No.
VI found for respondent, holding that the salary increases shall be paid out of 80% of the TIP
should the same be higher than ₱1,500. The VA ratiocinated that the existing CBA is the law
between the parties, and as it is not contrary to law, morals and public policy and it having been
shown that the parties entered into it voluntarily, it should be respected.
As to petitioner’s deduction of scholarship grants and tuition fee discounts from the TIP, the VA
ruled that it is invalid, petitioner having waived the collection thereof when it granted the same
– a waiver which its employees had nothing to do with – and the employees should not be
made to bear or suffer from the burden.
Petitioner’s move to reconsider the VA Decision was denied by Order of July 27, 2003, hence,
it appealed to the Court of Appeals.
By Decision of April 28, 2006, the appellate court sustained the VA’s interpretation of the
questioned CBA provision but reversed its finding on the TIP computation.
The appellate court held that the questioned CBA provision is clear and unambiguous, hence,
it should be interpreted literally to mean that 80% of the TIP or ₱1,500, whichever is higher, is
to be allotted for the employees’ salary increases.
Respecting the deduction of scholarship grants and tuition fee discounts from the computation
of the TIP, the appellate court held that by its very nature, the TIP excludes any sum which
petitioner did not obtain or realize, hence, it is only fair that the same be deducted. The
appellate court noted, however, that as to scholarship grants and tuition fee discounts which
are fully or partly subsidized by the government or private institutions and individuals, petitioner
should include them in the TIP computation.
Petitioner’s motion for partial reconsideration of the appellate court’s Decision on the
interpretation of the questioned CBA provision, as well respondent’s motion for reconsideration
of the Decision on computation of the TIP, was denied.
Hence, the present petition which seeks only the review of the appellate court’s interpretation
of the questioned provision of the CBA.
Petitioner maintains that, like the VA, the appellate court erred in interpreting the questioned
provision of the above-quoted Sec. 3, Art. VIIII of the CBA, since Sec. 5(2) of R.A. 6728 only
mandates that 70% of the TIP of academic institutions is to be set aside for employees’ salaries,
allowances and other benefits, while at least 20% thereof is to go to the improvement,
modernization of buildings, equipment, libraries and other school facilities.
Petitioner adds that the interpretation of the provision that 80% of the TIP should go to salary
increases alone, to the exclusion of other benefits, is contrary to R.A. 6728, citing Cebu Institute
of Medicine v. Cebu Institute of Medicine Employees’ Union-NFL.6
Petitioner thus concludes that the general principle that the CBA is the law between the parties
is unavailing as it is the law, not the stipulations of the parties, which should prevail.
Upon the other hand, respondent, in its Comment7, maintains that the questioned provision
speaks of salary increases alone and was not intended to include other benefits. It asserts that
petitioner, in refusing to utilize the 80% of the TIP for salary increases alone, does not want to
honor what it voluntarily and knowingly agreed upon in the CBA.
Additionally, respondent points out that petitioner never claimed that its consent to the CBA
was vitiated with fraud, mistake or intimidation, and that petitioner has always been aware of
the provisions of R.A. 6728 and was even assisted by its accountants, internal and external
legal counsels during the CBA negotiations, hence, it can not now renege on its commitment
under Sec. 3. Art. VIII of the CBA.
The petition is bereft of merit.
Sec. 3, Art. VIII of the 2000-20005 CBA reads:
ARTICLE VIII
Economic Provisions
xxxx
Section 3. Salary Increases. The following shall be the increases under this Agreement.
SY 2000-2001 – P2,000.00 per month, across the board.
SY 2001-2002 – P1,500.00 per month or 80% of the TIP, whichever is higher, across the board.
SY 2002-2003 – P1,500.00 per month or 80% of the TIP, whichever is higher, across the board.
(Emphasis supplied)
It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties
and they are obliged to comply with its provisions.8 If the terms of a contract, in this case the
CBA, are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of their stipulations shall control.9
A reading of the above-quoted provision of the CBA shows that the parties agreed that 80% of
the TIP or at the least the amount of ₱1,500 is to be allocated for individual salary increases.
The CBA does not speak of any other benefits or increases which would be covered by the
employees’ share in the TIP, except salary increases. The CBA reflects the incorporation of
different provisions to cover other benefits such as Christmas bonus (Art. VIII, Sec. 1), service
award (Art. VIII, Sec.5), leaves (Article IX), educational benefits (Sec.2, Art. X), medical and
hospitalization benefits (Secs. 3, 4 and 5, Art. 10), bereavement assistance (Sec. 6, Art. X),
and signing bonus (Sec. 8, Art. VIII), without mentioning that these will likewise be sourced
from the TIP. Thus, petitioner’s belated claim that the 80% TIP should be taken to mean as
covering ALL increases and not merely the salary increases as categorically stated in Sec. 3,
Art. VIII of the CBA does not lie.1avvphi1
Apropos is the ruling in St. John Colleges, Inc., vs. St. John Academy Faculty and Employees’
Union10 where the Court held that the school committed Unfair Labor Practice (ULP) when it
unceremoniously closed down allegedly because of the union’s unreasonable demands
including its insistence on having 100% of the incremental tuition fee increase allotted for their
members’ benefits to be embodied in the CBA. In striking down the school’s defense, the Court
held:
That SJCI agreed to appropriate 100% of the tuition fee increase to the workers’ benefits
sometime in 1995 does not mean that it was helpless in the face of the Union’s demands
because neither party is obligated to precipitately give in to the proposal of the other party
during collective bargaining. (Emphasis supplied)
In the present case, petitioner could have, during the CBA negotiations, opposed the inclusion
of or renegotiated the provision allotting 80% of the TIP to salary increases alone, as it was
and is not under any obligation to accept respondent’s demands hook, line and sinker. Art. 252
of the Labor Code is clear on the matter:
ART. 252. Meaning of duty to bargain collectively. – The duty to bargain collectively means the
performance of a mutual obligation to meet and convene promptly and expeditiously in good
faith for the purpose of negotiating an agreement with respect to wages, hours, of work and all
other terms and conditions of employment including proposals for adjusting any grievances or
questions arising under such agreement and executing a contract incorporating such
agreements if requested by either party but such duty does not compel any party to agree to a
proposal or to make any concession. (Emphasis supplied)
The records are thus bereft of any showing that petitioner had made it clear during the CBA
negotiations that it intended to source not only the salary increases but also the increases in
other employee benefits from the 80% of the TIP. Absent any proof that petitioner’s consent
was vitiated by fraud, mistake or duress, it is presumed that it entered into the CBA voluntarily,
had full knowledge of the contents thereof, and was aware of its commitments under the
contract.
Contrary to petitioner’s assertion, the rulings in Cebu Institute of Medicine v. Cebu Institute of
Medicine Employees Union-NFL and in Centro Escolar University Faculty and Allied Workers
Union-Independent v. Court of Appeals11 are not applicable to the present case.

In Cebu Institute, the Court held that SSS contributions and other benefits can be charged to
the 70% and that the academic institution has the discretion to dispose of the said 70% with
the precondition that the disposition goes to the payment of salaries, wages, allowances and
other benefits of its personnel, viz:
For sure, the seventy percent (70%) is not to be delivered whole to the employees but
packaged in the form of salaries, wages, allowances, and other benefits which may be in the
form of SSS, Medicare and Pag-Ibig premiums, all intended for the benefit of the employees.
In other words, the private educational institution concerned has the discretion on the
disposition of the seventy percent (70%) incremental tuition fee increase. It enjoys the privilege
of determining how much increase in salaries to grant and the kind and amount of allowances
and other benefits to give. The only precondition is that seventy percent (70%) of the
incremental tuition fee increase goes to the payment of salaries, wages, allowances and other
benefits of teaching and non-teaching personnel. (Emphasis supplied)1avvphi1
Significantly, this ruling was arrived at in the absence of a CBA between the parties, unlike in
the present case.
On the other hand, in Centro Escolar University, the issue was whether the University may
source from the 70% incremental proceeds (IP) the integrated IP incorporated into the salaries
of its teaching and non-teaching staff pursuant to the CBAs entered into by their union. The
controversy arose because the CBA provided different types of salary increases – some
sourced from the University fund and the salary increases brought about by the IP integration
which are deducted from the IP. The Court held that the charging of the integrated IP against
the 70% is not violative of the CBA which prohibits the deduction of the CBA-won benefits from
the 70% of the IP because the integrated IP provided for in the CBAs of the teaching and the
non-teaching staff is actually the share of the employees in the 70% of the IP that is
incorporated into their salaries as a result of the negotiation between the university and its
personnel.
Clearly, the above-cited cases have totally different milieus from the case at bar.
Even a perusal of the law will show that it does not make 70% as the mandated ceiling. It reads:
SEC. 5. Tuition Fee Supplement for Student in Private High School
(1) Financial assistance for tuition for students in private high schools shall be provided by the
government through a voucher system in the following manners:
(a) For students enrolled in schools charging less than one thousand five hundred pesos
(P1,500) per year in tuition and other fees during school year 1988-89 or such amount in
subsequent years as may be determined from time to time by the State Assistance Council:
The Government shall provide them with a voucher equal to two hundred ninety pesos
P290.00: Provided, That the student pays in the 1989-1990 school year, tuition and other fees
equal to the tuition and other fees paid during the preceding academic year: Provided, further,
That the Government shall reimburse the vouchers from the schools concerned within sixty
(60) days from the close of the registration period: Provided, furthermore, That the student's
family resides in the same city or province in which the high school is located unless the student
has been enrolled in that school during the previous academic year.
(b) For students enrolled in schools charging above one thousand five hundred pesos (P1,500)
per year in tuition and other fees during the school year 1983-1989 or such amount in
subsequent years as may be determined from time to time by the State Assistance Council, no
assistance for tuition fees shall be granted by the Government: Provided, however, That the
schools concerned may raise their tuition fee subject to Section 10 hereof.
(2) Assistance under paragraph (1), subparagraphs (a) and (b) shall be granted and tuition fee
under subparagraph (c) may be increased, on the condition that seventy percent (70%) of the
amount subsidized allotted for tuition fee or of the tuition fee increases shall go to the payment
of salaries, wages, allowances and other benefits of teaching and non-teaching personnel
except administrators who are principal stockholders of the school, and may be used to cover
increases as provided for in the collective bargaining agreements existing or in force at the time
when this Act is approved and made effective: Provided, That government subsidies are not
used directly for salaries of teachers of nonsecular subjects. At least twenty percent (20%) shall
go to the improvement or modernization of buildings, equipment, libraries, laboratories,
gymnasia and similar facilities and to the payment of other costs of operation. For this purpose,
schools shall maintain a separate record of accounts for all assistance received from the
government, any tuition fee increase, and the detailed disposition and use thereof, which record
shall be determined by the State Assistance Council, during business hours, by the faculty, the
non-teaching personnel, students of the school concerned, and Department of Education,
Culture and Sports and other concerned government agencies.12
Unmistakably, what the law sets is the minimum, not the maximum percentage, and there is
even a 10% portion the disposition of which the law does not regulate. Hence, if academic
institutions wish to allot a higher percentage for salary increases and other benefits, nothing in
the law prohibits them from doing so.
It is axiomatic that labor laws setting employee benefits only mandate the minimum that an
employer must comply with, but the latter is not proscribed from granting higher or additional
benefits if it so desires, whether as an act of generosity or by virtue of company policy or a
CBA, as it would appear in this case. While, in following to the letter the subject CBA provision
petitioner will, in effect, be giving more than 80% of the TIP as its personnel’s share in the
tuition fee increase, petitioner’s remedy lies not in the Court’s invalidating the provision, but in
the parties’ clarifying the same in their subsequent CBA negotiations.
WHEREFORE, the Decision of the Court of Appeals dated April 28, 2006 and the Resolution
dated April 18, 2007, which modified the Decision and Resolution dated July 17, 2003 of the
Voluntary Arbitrator in VA Case No. 139-06-03-2003, are AFFIRMED.
SO ORDERED.
G.R. No. 144208 September 11, 2007
EFREN TANDOG, FELIX TANDOG, FELIPE TANDOG, JOSEFINO TANDOG, HELEN
TANDOG, CATALINA TANDOG, ROMEO TANDOG, DOMINGO TANDOG, CATALINA
SANTOS, MARIA BAUTISTA CATANYAG, ARTEMIO CATANYAG, ANGELES
CATANYAG, APOLONIA CATANYAG, ADORACION CATANYAG, ARCELY CATANYAG,
and AMPARO CATANYAG, all represented by EFREN TANDOG, petitioners,
vs.
RENATO MACAPAGAL, SPOUSES ALFONSO and MARINA CALDERON, and the LANDS
MANAGEMENT BUREAU, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure,
as amended, assailing the Decision1 dated July 31, 2000 of the Court of Appeals in CA-G.R.
CV No. 57812.
The facts as found by the Court of Appeals are:
The subject of the controversy is a land consisting of 147,991 square meters situated at Sitio
Inarawan, Barangay Inuman, San Isidro, Antipolo City.
The above-named petitioners claim that they and their predecessors-in-interest have been in
actual, open, continuous, exclusive, and notorious possession of the land since time
immemorial. They trace their rights to Casimiro Policarpio, unmarried, who died in 1945. He
was survived by his nephews and nieces, now deceased, except Maria Bautista Catanyag.
She and Casimiro’s grand nieces and grand nephews (herein petitioners) have continued
possessing and cultivating the land.
When petitioners decided to apply for the judicial registration of the property, they found that
portions of the land have been occupied by spouses Alfonso and Marina Calderon and Renato
Macapagal, respondents. According to petitioners, spouses Calderon used falsified documents
to justify their possession of 20,116 square meters of the land which they sold to the
government. For his part, Renato Macapagal applied for and was granted Free Patent No.
045802-1165 which led to the issuance to him of Original Certificate of Title (OCT) No. P-665
over an area of 18,787 square meters. Because of these incidents, petitioners filed with the
Regional Trial Court, Bracnh 73, Antipolo City a complaint for quieting of title, docketed as Civil
Case No. 92-2418.
Respondent Marina Calderon, in her answer, specifically denied petitioners’ allegations in their
complaint. She alleged that she and her husband bought their property in 1958 and, since then,
have been in possession of the same. They planted trees and crops thereon. Also, they have
been paying the corresponding realty taxes. She does not know petitioners who are all
strangers in the place.
Before the hearing of the case, or on July 20, 1993, petitioners and Macapagal entered into a
Compromise Agreement.2 Petitioners acknowledged therein his ownership of the portions of
the land consisting of 18,787 square meters covered by OCT No. P-665. This agreement was
approved by the trial court.
After petitioners had presented their evidence, spouses Calderon filed a demurrer to evidence.
In an Order dated March 20, 1995, the trial court granted their motion and dismissed the
complaint.
On appeal by petitioners, the Court of Appeals rendered a Decision dated July 31, 2000
affirming the Order of the trial court dismissing their complaint. The appellate court held:
Under Article 476 of the Civil Code, a claimant must show that there is an instrument, record,
claim, encumbrance or proceeding which constitutes or casts a cloud, doubt, question or
shadow upon the owner’s title to or interest in real property. The ground or reason for filing a
complaint for quieting of title must therefore be "an instrument, record, claim, encumbrance or
proceeding." Under the maxim "expresio unius est exclusio alterius," these grounds are
exclusive so that other reasons outside of the purview of these reasons may not be considered
valid for the same action. (Titong v. CA, G.R. No. 111141, March 6, 1998)
The appellants had nothing to show for this. The most that they did was to mark a DEED OF
ABSOLUTE SALE OF REAL PROPERTY & OR RIGHTS OR INTERESTS THEREIN as Exh.
"D" and a SPECIAL POWER OF ATTORNEY as Exh. "E", which allegedly are the falsified
documents used by the appellees as basis for their claim over the subject lot. x x x
xxx
Under Section 34 of Rule 132 of the Rules of Court, it is clear that for the evidence to be
considered, the same must be formally offered. Corollarily, the mere fact that a particular
document is identified and marked as an exhibit does not mean that it has already been offered
as part of the evidence of a party. (Vda de Oñate v. CA, G.R. 116149, Nov. 23, 1995) Any
evidence which a party desires to submit for the consideration of the court must formally be
offered by him, otherwise it is excluded and rejected. x x x
It does not help either that the testimonies presented are on the whole hearsay and unreliable
as to the existence and right of the amorphous Casimero Policarpio and the hereditary link
between him and the appellants.
Hence, this present petition.
Petitioners contend that the allegations of spouses Calderon that they purchased their property
and Macapagal’s claim that he applied for a Free Patent are judicial admissions which they
(petitioners) consider as cloud upon their interest in the disputed property.
The petition must fail.
Article 476 of the Civil Code provides:
Art. 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.
As a general rule, a cloud which may be removed by suit to quiet title is not created by mere
verbal or parol assertion of ownership of or an interest in property. This rule is subject to
qualification, where there is a written or factual basis for the asserted right. Thus, a claim of
right based on acquisitive prescription or adverse possession has been held to constitute a
removable cloud on title.3
While petitioners alleged that respondents’ claim of adverse possession is a cloud on their
(petitioners’) interest in the land, however, such allegation has not been proved. The alleged
falsified documents relied upon by respondents to justify their possession were merely marked
as exhibits but were never formally offered in evidence by petitioners. We have consistently
ruled that documents which may have been marked as exhibits during the hearing, but which
were not formally offered in evidence, cannot be considered as evidence, nor can they be given
any evidentiary value.4
It is important that petitioners must first establish their legal or equitable title to, or interest in
the real property which is the subject matter of the action.5 Petitioners failed to do so.
Parenthetically, they did not present any evidence to prove that Casimiro Policarpio "existed"
and that he is their predecessor-in-interest. Their testimonies can not be considered
declarations about pedigree. In order that pedigree may be proved by acts or declarations of
relatives under Section 39 of the Revised Rules of Evidence, it is necessary that (a) the actor
or declarant is dead or unable to testify; (b) the act or declaration is made by a person related
to the subject by birth or marriage; (c) the relationship between the declarant or the actor and
the subject is shown by evidence other than such act or declaration; and (d) the act or
declaration was made ante litem motam, or prior to the controversy.6
Records show that petitioners failed to establish by evidence any or all the above requisites.
WHEREFORE, we DENY the petition and AFFIRM the assailed Decision of the Court of
Appeals in CA-G.R. CV No. 57812. Costs against petitioners.
SO ORDERED.
Puno, C.J., Chairperson, Corona, Azcuna, Garcia, JJ., concur.
G.R. No. 168222 April 18, 2006
SPS. TEODULO RUMARATE, (deceased) and ROSITA RUMARATE; deceased TEODULO
RUMARATE is represented herein by his Heirs/Substitutes, namely, ANASTACIA
RUMARATE, CELSO RUMARATE, MARINA RUMARATE, ROMEO RUMARATE,
GUILLERMO RUMARATE, FIDEL RUMARATE, MERLINDA RUMARATE, MARISSA
RUMARATE, CLEMENCIA RUMARATE, SANCHO RUMARATE and NENITA RUMARATE,
Petitioners,
vs.
HILARIO HERNANDEZ, JOAQUIN HERNANDEZ, SALVADOR HERNANDEZ, BENJAMIN
HERNANDEZ, LEONORA HERNANDEZ-LAZA, VICTORIA HERNANDEZ-MERCURIO,
RODRIGOHERNANDEZ, BERNARDO HERNANDEZ, LOURDES HERNANDEZ-CABIDA,
MARIO SALVATIERRA, ADELAIDA FONTILA-CIPRIANO, and THE REGISTER OF DEEDS
OF QUEZON PROVINCE, Respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review is the May 26, 2005 Decision1 of the Court of Appeals in CA-
G.R. CV No. 57053, which reversed and set aside the March 31, 1997 Decision2 of the
Regional Trial Court of Calauag, Quezon, Branch 63, in Civil Case No. C-964, declaring
petitioners as owners of Lot No. 379 with an area of 187,765 square meters and located in
Barrio Catimo,3 Municipality of Guinayangan, Province of Quezon.
The facts show that on September 1, 1992, petitioner spouses Teodulo Rumarate (Teodulo)
and Rosita Rumarate filed an action for reconveyance of real property and/or quieting of title
with damages against respondent heirs of the late spouses Cipriano Hernandez and Julia
Zoleta.4 Teodulo averred that Lot No. 379 was previously possessed and cultivated by his
godfather, Santiago Guerrero (Santiago), a bachelor, who used to live with the Rumarate family
in San Pablo City. Between 1923 and 1924, Santiago and the Rumarate family transferred
residence to avail of the land distribution in Catimo, Guinayangan, Quezon. From 1925 to 1928,
Santiago occupied Lot No. 379 cultivating five hectares thereof. Before moving to Kagakag,
Lopez, Quezon in 1929, Santiago orally bequeathed his rights over Lot No. 379 to Teodulo and
entrusted to him a copy of a Decision of the Court of First Instance (CFI) of Tayabas dated April
21, 1925 recognizing his (Santiago) rights over Lot No. 379.5 Since Teodulo was only 14 years
old then, his father helped him cultivate the land.6 Their family thereafter cleared the land, built
a house7 and planted coconut trees, corn, palay and vegetables thereon.8 In 1960, Santiago
executed an "Affidavit (quit-claim)"9 ratifying the transfer of his rights over Lot No. 379 to
Teodulo. Between 1960 and 1970, three conflagrations razed the land reducing the number of
coconut trees growing therein to only 400, but by the time Teodulo testified in 1992, the
remaining portions of the land was almost entirely cultivated and planted with coconuts, coffee,
jackfruits, mangoes and vegetables.10 From 1929, Teodulo and later, his wife and 11 children
possessed the land as owners and declared the same for taxation, the earliest being in 1961.11
In 1970, Teodulo discovered that spouses Cipriano Hernandez and Julia Zoleta, respondents’
predecessors-in-interest, were able to obtain a title over Lot No. 379. He did not immediately
file a case against respondents because he was advised to just remain on the land and pay
the corresponding taxes thereon.12
Respondents, on the other hand, claimed that on November 11, 1964, Santiago sold the
questioned lot to their parents, the spouses Cipriano Hernandez and Julia Zoleta, for
P9,000.00.13 Respondents alleged that on April 21, 1925, the CFI of Tayabas rendered a
Decision written in Spanish, declaring Lot No. 379 as a public land and recognizing Santiago
as claimant thereof in Cadastral Proceeding No. 12. However, no title was issued to Santiago
because he failed to file an Answer. Spouses Cipriano Hernandez and Julia Zoleta filed a
motion to re-open Cadastral Proceeding No. 12, alleging that though no title was issued in the
name of Santiago, the same decision is, nevertheless, proof that Santiago was in possession
of Lot No. 379 since 1925 or for more than 30 years. Having succeeded in the rights of
Santiago, the spouses prayed that Cadastral Proceeding No. 12 be re-opened and that the
corresponding title over Lot No. 379 be issued in their name. On September 13, 1965, the CFI
of Tayabas rendered a decision adjudicating Lot No. 379 in favor of the spouses, in whose
name Original Certificate of Title (OCT) No. O-1184414 was issued on the same date.15
Cipriano Hernandez planted coconut trees on the land through the help of a certain Fredo16
who was instituted as caretaker. In 1970, Fredo informed Cipriano Hernandez that he will no
longer stay on the land because there are people instructing him to discontinue tilling the
same.17
After the death of the spouses,18 respondents executed a deed of partition over the subject lot
and were issued TCT No. T- 237330 on June 28, 1988 in lieu of OCT No. O-11844.19
Respondent Joaquin Hernandez (Joaquin) testified that in 1964, he accompanied his father in
inspecting the lot which was then planted with coconut trees.20 Thereafter, he visited the land
twice, once in 1966 and the other in 1970. From 1966 up to the time he testified, his family
declared the lot for taxation and paid the taxes due thereon.21 Joaquin explained that after the
death of his father in 1971, he no longer visited the land and it was only when the complaint
was filed against them when he learned that petitioners are in actual possession of the
property.22 He added that his siblings had planned to convert Lot No. 379 into a grazing land
for cattle but decided to put it off for fear of the rampant operations then of the New People’s
Army between the years 1965-1970.23 1avvphil.net
On March 31, 1997, the trial court rendered a decision in favor of petitioners. It held that since
the latter possessed the land in the concept of an owner since 1929, they became the owners
thereof by acquisitive prescription after the lapse of 10 years, pursuant to the Code of Civil
Procedure. Thus, when Santiago sold the lot to respondents’ parents in 1964, the former no
longer had the right over the property and therefore transmitted no title to said respondents.
The dispositive portion of the trial court’s decision, reads:
WHEREFORE, in the light of all the foregoing considerations judgment is hereby rendered in
favor of the plaintiffs and against the defendants, to wit:
1. Declaring that the parcel of land (Lot No. 379 of the Cadastral Survey of Guinayangan,
Cadastral Case No. 12, LRC Cadastral Record No. 557), situated in Brgy. Katimo,
Tagkawayan, Quezon had been fraudulently, deceitfully and mistakenly registered in the
names of the spouses Cipriano Hernandez and Julia Zoleta;
2. Declaring that herein defendants [heirs] of spouses Cipriano Hernandez and Julia Zoleta
have no better rights than their parents/predecessors-in-interest, they having stepped only on
(sic) their shoes;
3. Declaring that the plaintiff Rosita Victor Rumarate and substitute plaintiffs-[heirs] of the
deceased Teodulo Rumarate are the true, real and legal owners/or the owners in fee simple
absolute of the above described parcel of land;
4. Ordering the defendants to convey the above-described parcel of land to plaintiff Rosita
Victor Rumarate and to the substitute plaintiffs (heirs) of the deceased Teodulo Rumarate;
5. Ordering the Register of Deeds for Quezon Province in Lucena City to cancel Transfer
Certificate of Title No. T-237330 and to issue in lieu thereof a new certificate of title in favor of
plaintiff Rosita Victor Rumarate and the substitute plaintiffs (heirs) of the deceased plaintiff
Teodulo Rumarate, in accordance with law and settled jurisprudence; and
6. Ordering the defendants to pay the costs of the suit.1avvphil.net
SO ORDERED.24
Respondents appealed to the Court of Appeals which on May 26, 2005, reversed and set aside
the decision of the trial court. It ruled that Teodulo did not acquire title over Lot No. 379, either
by donation or acquisitive prescription; that Teodulo’s bare allegation that Santiago orally
bequeathed to him the litigated lot is insufficient to prove such transfer of ownership; and that
even assuming that the property was truly donated by Santiago to Teodulo in 1929, or in the
1960 Affidavit, said conveyance is void for not complying with the formalities of a valid donation
which require the donation and the acceptance thereof by the donee to be embodied in a public
instrument. Both requirements, however, are absent in this case because in 1929, the alleged
donation was not reduced to writing while the purported 1960 donation was never accepted in
a public document by Teodulo. The appellate court thus surmised that since it was not
established that Santiago donated Lot No. 379 to Teodulo, it follows that the latter also failed
to prove that he possessed the land adversely, exclusively and in the concept of an owner, a
vital requisite before one may acquire title by acquisitive prescription. In conclusion, the Court
of Appeals ruled that even assuming further that Teodulo had a right over the property, his
cause of action is now barred by laches because he filed an action only in 1992 notwithstanding
knowledge as early as 1970 of the issuance of title in the name of spouses Cipriano Hernandez
and Julia Zoleta. The decretal portion of the decision states:
WHEREFORE, premises considered, the instant appeal is GRANTED. The assailed March 31,
1997 decision of the Regional Trial Court of Calauag, Quezon, Branch 63, in Civil Case No. C-
964 is hereby REVERSED and SET ASIDE. No costs.
SO ORDERED.25

Hence, the instant appeal.
The issue to be resolved is to whom should Lot No. 379 be awarded? To petitioners who
possessed and cultivated the lot since 1929 up to the present, but do not have a certificate of
title over the property, or to respondents who have a certificate of title but are not in possession
of the controverted lot?
In an action for quieting of title, the court is tasked to determine the respective rights of the
parties so that the complainant and those claiming under him may be forever free from any
danger of hostile claim.26 Under Article 47627 of the 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
cast on the complainant’s title to real property or any interest therein. Article 477 of the same
Code states that the plaintiff must have legal or equitable title to, or interest in the real property
which is the subject matter of the suit.
For an action to quiet title to prosper, two 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.28
In Evangelista v. Santiago,29 it was held that title to real property refers to that upon which
ownership is based. It is the evidence of the right of the owner or the extent of his interest, by
which means he can maintain control and, as a rule, assert a right to exclusive possession and
enjoyment of the property.
In the instant case, we find that Teodulo’s open, continuous, exclusive, notorious possession
and occupation of Lot No. 379, in the concept of an owner for more than 30 years vested him
and his heirs title over the said lot. The law applicable at the time Teodulo completed his 30-
year possession (from 1929 to 1959) of Lot No. 379, in the concept of an owner was Sec. 48(b)
of Commonwealth Act No. 141 or the Public Land Act, as amended by Republic Act (RA) No.
1942, effective June 22, 195730 which provides:
Sec. 48. The following-described citizens of the Philippines, occupying lands of the public
domain or claiming to own any such lands or an interest therein, but whose titles have not been
perfected or completed, may apply to the Court of First Instance (now Regional Trial Courts)
of the province where the land is located for confirmation of their claims and the issuance of a
certificate of title thereafter, under the Land Registration Act (now Property Registration
Decree), to wit:
xxxx
(b) Those who by themselves or through their predecessors-in-interest have been, in
continuous, exclusive, and notorious possession and occupation of agricultural lands of the
public domain, under a bona fide claim of acquisition or ownership, for at least thirty years
immediately preceding the filing of the application for confirmation of title, except when
prevented by war or force majeure. Those shall be conclusively presumed to have performed
all the conditions essential to a government grant and shall be entitled to a certificate of title
under the provisions of this chapter.
When the conditions specified therein are complied with, the possessor is deemed to have
acquired, by operation of law, a right to a government grant, without necessity of a certificate
of title being issued, and the land ceases to be part of the public domain. The confirmation
proceedings would, in truth be little more than a formality, at the most limited to ascertaining
whether the possession claimed is of the required character and length of time; and registration
thereunder would not confer title, but simply recognize a title already vested. The proceedings
would not originally convert the land from public to private land, but only confirm such
conversion already effected by operation of law from the moment the required period of
possession became complete. 31
In the instant case, the trial court gave full faith and credence to the testimony of Teodulo and
his witnesses that his (Teodulo’s) possession of the land since 1929 was open, continuous,
adverse, exclusive, and in the concept of an owner. It is a settled rule in civil cases as well as
in criminal cases that in the matter of credibility of witnesses, the findings of the trial courts are
given great weight and highest degree of respect by the appellate court considering that the
latter is in a better position to decide the question, having heard the witnesses themselves and
observed their deportment and manner of testifying during the trial.32
A careful examination of the evidence on record shows that Teodulo possessed and occupied
Lot No. 379 in the concept of an owner. Since 1929, Teodulo cultivated the controverted land,
built his home, and raised his 11 children thereon. In 1957, he filed a homestead application
over Lot No. 379 but failed to pursue the same.33 After his demise, all his 11 children, the
youngest being 28 years old,34 continued to till the land. From 1929 to 1960, Santiago never
challenged Teodulo’s possession of Lot No. 379 nor demanded or received the produce of said
land. For 31 years Santiago never exercised any act of ownership over Lot No. 379. And, in
1960, he confirmed that he is no longer interested in asserting any right over the land by
executing in favor of Teodulo a quitclaim.
Indeed, all these prove that Teodulo possessed and cultivated the land as owner thereof since
1929. While the oral donation in 1929 as well as the 1960 quitclaim ceding Lot No. 379 to
Teodulo are void for non-compliance with the formalities of donation, they nevertheless explain
Teodulo and his family’s long years of occupation and cultivation of said lot and the nature of
their possession thereof.
In Bautista v. Poblete,35 the Court sustained the registration of a parcel of land in the name of
the successors-in-interest of the donee notwithstanding the invalidity of the donation inasmuch
as said donee possessed the property in the concept of an owner. Thus –
There is no question that the donation in question is invalid because it involves an immovable
property and the donation was not made in a public document as required by Article 633 of the
old Civil Code, in connection with Article 1328 of the same Code (concerning gifts propter
nuptias), but it does not follow that said donation may not serve as basis of acquisitive
prescription when on the strength thereof the donee has taken possession of the property
adversely and in the concept of owner.
It follows therefore that Teodulo’s open, continuous, exclusive, and notorious possession and
occupation of Lot No. 379 for 30 years, or from 1929 to 1959 in the concept of an owner, earned
him title over the lot in accordance with Sec. 48 (b) of the Public Land Act. Considering that Lot
No. 379 became the private property of Teodulo in 1959, Santiago had no more right to sell the
same to spouses Cipriano Hernandez and Julia Zoleta in 1964. Consequently, the latter and
herein respondents did not acquire ownership over Lot No. 379 and the titles issued in their
name are void.
Interestingly, respondents adopted the theory that Santiago acquired title over Lot No. 379 not
from the April 21, 1925 Decision of the CFI of Tayabas which merely recognized his rights over
said lot, but from his more than 30 years of possession since 1925 up to 1964 when he sold
same lot to their (respondents) predecessors-in-interest, the spouses Cipriano Hernandez and
Julia Zoleta. On the basis of said claim, said spouses filed an action for, and successfully
obtained, confirmation of imperfect title over Lot No. 379, pursuant to Sec. 48 (b) of the Public
Land Act.
However, the records do not support the argument of respondents that Santiago’s alleged
possession and cultivation of Lot No. 379 is in the nature contemplated by the Public Land Act
which requires more than constructive possession and casual cultivation. As explained by the
Court in Director of Lands v. Intermediate Appellate Court:36
It must be underscored that the law speaks of "possession and occupation." Since these words
are separated by the conjunction and, the clear intention of the law is not to make one
synonymous with the other. Possession is broader than occupation because it includes
constructive possession. When, therefore, the law adds the word occupation, it seeks to delimit
the all-encompassing effect of constructive possession. Taken together with the words open,
continuous, exclusive and notorious, the word occupation serves to highlight the fact that for
one to qualify under paragraph (b) of the aforesaid section, his possession of the land must not
be mere fiction. As this Court stated, through then Mr. Justice Jose P. Laurel, in Lasam vs. The
Director of Lands:
"x x x Counsel for the applicant invokes the doctrine laid down by us in Ramos vs. Director of
Lands (39 Phil. 175, 180). (See also Rosales vs. Director of Lands, 51 Phil. 302, 304). But it
should be observed that the application of the doctrine of constructive possession in that case
is subject to certain qualifications, and this court was careful to observe that among these
qualifications is ‘one particularly relating to the size of the tract in controversy with reference to
the portion actually in possession of the claimant.’ While, therefore, ‘possession in the eyes of
the law does not mean that a man has to have his feet on every square meter of ground before
it can be said that he is in possession’, possession under paragraph 6 of section 54 of Act No.
926, as amended by paragraph (b) of section 45 of Act No. 2874, is not gained by mere nominal
claim. The mere planting of a sign or symbol of possession cannot justify a Magellan-like claim
of dominion over an immense tract of territory. Possession as a means of acquiring ownership,
while it may be constructive, is not a mere fiction x x x."
Earlier, in Ramirez vs. The Director of Lands, this Court noted:
"x x x The mere fact of declaring uncultivated land for taxation purposes and visiting it every
once in a while, as was done by him, does not constitute acts of possession."
In the instant case, Santiago’s short-lived possession and cultivation of Lot No. 379 could not
vest him title. While he tilled the land in 1925, he ceased to possess and cultivate the same
since 1928. He abandoned the property and allowed Teodulo to exercise all acts of ownership.
His brief possession of Lot No. 379 could not thus vest him title. Nemo potest plus juris ad
alium transferre quam ipse habet. No one can transfer a greater right to another than he himself
has. Hence, spouses Cipriano Hernandez and Julia Zoleta and herein respondents did not
acquire any right over the questioned lot and the title issued in their names are void, because
of the legal truism that the spring cannot rise higher than the source.37
Furthermore, spouses Cipriano Hernandez and Julia Zoleta cannot be considered as
purchasers in good faith because they had knowledge of facts and circumstances that would
impel a reasonably cautious man to make such inquiry.38 The Court notes that Santiago was
not residing in Lot No. 379 at the time of the sale. He was already 81 years old, too old to
cultivate and maintain an 18-hectare land. These circumstances should have prompted the
spouses to further inquire who was actually tilling the land. Had they done so, they would have
found that Teodulo and his family are the ones possessing and cultivating the land as owners
thereof.
In the same vein, respondents could not be considered as third persons or purchasers in good
faith and for value or those who buy the property and pay a full and fair price for the same39
because they merely inherited Lot No. 379 from spouses Cipriano Hernandez and Julia Zoleta.
Then too, even if Santiago acquired title over Lot No. 379 by virtue of the April 21, 1925
Decision of the CFI of Tayabas, and not on account of his alleged 30-year possession thereof,
we will still arrive at the same conclusion. This is so because the declaration of this Court that
petitioners are the rightful owners of the controverted lot is based on Teodulo’s own possession
and occupation of said lot under a bona fide claim of acquisition of ownership, regardless of
the manner by which Santiago acquired ownership over same lot.
On the issue of prescription, the settled rule is that an action for quieting of title is
imprescriptible, as in the instant case, where the person seeking relief is in possession of the
disputed property. 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.40 Considering that petitioners herein continuously possessed Lot No. 379
since 1929 up to the present, their right to institute a suit to clear the cloud over their title cannot
be barred by the statute of limitations.

Neither could petitioners’ action be barred by laches because they continuously enjoyed the
possession of the land and harvested the fruits thereof up to the present to the exclusion of
and without any interference from respondents. They cannot therefore be said to have slept on
their rights as they in fact exercised the same by continuously possessing Lot No. 379.
On the contrary, we find that it is respondents who are actually guilty of laches. Though not
specifically pleaded, the Court can properly address the issue of laches based on petitioners’
allegation in the complaint that "[n]either spouses Cipriano Hernandez and Julia Zoleta x x x
nor [herein respondents] had taken steps to possess or lay adverse claim to said parcel of land
from the date of their registration of title in November, 1965 up to the present."41 Such
averment is sufficient to impute abandonment of right on the part of respondents. At any rate,
laches need not be specifically pleaded. On its own initiative, a court may consider it in
determining the rights of the parties.42
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 constitutes laches. It is negligence or omission
to assert a right within a reasonable time, warranting a presumption that the party entitled to
assert it has either abandoned it or declined to assert it. While it is by express provision of law
that no title to registered land in derogation of that of the registered owner shall be acquired by
prescription or adverse possession, it is likewise an enshrined rule that even a registered owner
may be barred from recovering possession of property by virtue of laches.43
In applying the doctrine of laches, we have ruled that where a party allows the following number
of years to lapse from the emergence of his cause of action without enforcing his claim, laches
sets in: 36 years; 12 years; 50 years; 34 years; 37 years; 32 years; 20 years; 47 years; 11
years; 25 years; 40 years; 19 years; 27 years; 7 years; 44 years; 4 years; and 67 years.44
The elements of laches are: (1) conduct of a party on the basis of which the other party seeks
a remedy; (2) delay in asserting one’s rights, despite having had knowledge or notice of the
other party’s conduct and having been afforded an opportunity to institute a suit; (3) lack of
knowledge or notice on the part of a party that the person against whom laches is imputed
would assert the right; and (4) injury or prejudice to the party asserting laches in the event the
suit is allowed to prosper.45
All these elements are present in this case. Petitioners’ continuous possession and occupation
of Lot No. 379 should have prompted the respondents to file an action against petitioners, but
they chose not to. Respondents cannot deny knowledge of said possession by petitioners as
they even asserted in their Answer that in 1970, Teodulo ousted the tenant they (respondents)
instituted in the lot. From 1970 up to the filing of petitioners’ complaint in 1992, or after 22 years,
respondents never bothered to assert any right over Lot No. 379. Respondent Joaquin
Hernandez testified that he and his siblings had a plan to convert the land into a grazing land
for cattle but decided to put it off for fear of the rampant operations of the New People’s Army
between the years 1965-1970. However, even after said years, respondents took no step to
implement their plan. Worse, among the siblings of spouses Cipriano Hernandez and Julia
Zoleta who are all living in the Philippines,46 only Joaquin Hernandez visited the land and only
thrice, i.e., once in each years of 1964, 1966 and 1970. Thereafter, not one of them paid visit
to Lot No. 379, up to the time Joaquin Hernandez testified in 1996,47 despite the fact that two
of them are living only in Calauag, Quezon; one in Agdangan, Quezon;48 and two in Lucena
City.49 Neither did they send a notice or correspondence to petitioners invoking their right over
the property. From all indications, the late spouses Cipriano Hernandez and Julia Zoleta as
well respondents, have neglected Lot No. 379. Were it not for this action instituted by petitioners
in 1992, their conflicting claims over the property could not have been settled. It goes without
saying that to lose a property that has been in the family from 1929 up to the present, or for 77
years will certainly cause irreparable pecuniary and moral injury to petitioners, especially so if
the same ancestral land will be lost under most unfair circumstances in favor of respondents
who appear to have no real interest in cultivating the same.
Finally, payment of taxes alone will not save the day for respondents. Only a positive and
categorical assertion of their supposed rights against petitioners would rule out the application
of laches. It means taking the offensive by instituting legal means to wrest possession of the
property which, however, is absent in this case. Respondents’ payment of taxes alone, without
possession could hardly be construed as an exercise of ownership. What stands out is their
overwhelming passivity by allowing petitioners to exercise acts of ownership and to enjoy the
fruits of the litigated lot for 22 years without any interference.
In sum, the Court finds that Lot No. 379 should be adjudicated in favor of petitioners.
One last point. Notwithstanding this Court’s declaration that Lot No. 379 should be awarded in
favor of petitioners, their title over the same is imperfect and is still subject to the filing of the
proper application for confirmation of title under Section 48 (b) of the Public Land Act, where
the State and other oppositors may be given the chance to be heard. It was therefore premature
for the trial court to direct the Register of Deeds of Lucena City to issue a certificate of title in
the name of petitioners.
Nevertheless, the imperfect title of petitioners over Lot No. 379 is enough to defeat the
certificate of title issued to respondents.50
WHEREFORE, the petition is GRANTED and the May 26, 2005 Decision of the Court of
Appeals in C.A. GR. CV No. 57053, is REVERSED and SET ASIDE. The March 31, 1997
Decision of the Regional Trial Court of Calauag, Quezon, Branch 63, in Civil Case No. C-964,
awarding Lot No. 379 in favor petitioners and ordering the cancellation of respondents’ Transfer
Certificate of Title No. T- 237330, is REINSTATED with the MODIFICATION deleting the trial
court’s order directing the Register of Deed of Lucena City to issue a certificate of title in the
name of petitioners.
SO ORDERED.
G.R. No. 141970 September 10, 2001
METROPOLITAN BANK, & TRUST COMPANY, petitioner,
vs.
Hon. FLORO T. ALEJO, in His Capacity as Presiding Judge of Branch 172 of the Regional
Trial Court of Valenzuela; and SY TAN SE, represented by his Attorney-in-Fact, SIAN
SUAT NGO, respondents.
PANGANIBAN, J.:
In a suit to nullify an existing Torrens Certificate of Title (TCT) in which a real estate mortgage
is annotated, the mortgagee is an indispensable party. In such suit, a decision canceling the
TCT and the mortgage annotation is subject to a petition for annulment of judgment, because
the non-joinder of the mortgagee deprived the court of jurisdiction to pass upon the controversy.
The Case
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court,
assailing the March 25, 1999 Resolution of the Court of Appeals (CA) in CA-GR SP No. 50638,
which states in full:
"This resolves the petition for annulment of judgment based on ‘external (sic) fraud’ filed by
petitioner Metropolitan Bank and Trust Company seeking to annul the Decision dated August
12, 1998 rendered by respondent judge, Honorable Floro T. Alejo, Presiding Judge of the
Regional Trial Court, Branch 172, Valenzuela, Metro Manila, in Civil Case No. 4930-V-96
entitled ‘Sy Tan Se, represented by his attorney-in-fact Sian Suat Ngo v. Raul Acampado, et
al.
"This Court has observed that petitioner knew of the questioned Decision sometime [i]n
October 1998 (Petition, Rollo, p. 3). This being the case, petitioner should have first sought
recourse by way of petition for relief from judgment under Rule 38 of the 1997 Rules of Civil
Procedure. Accordingly, the petition for annulment of judgment is DENIED DUE COURSE and
DISMISSED outright for being insufficient in form and substance (Section 2, Rule 47, 1997
Rules of Civil Procedure)."
Also challenged is the January 27, 2000 CA Resolution2 denying petitioner’s Motion for
Reconsideration.
The Facts
On November 21, 19953 and January 30, 1996,4 Spouses Raul and Cristina Acampado
obtained loans from petitioner in the amounts of P5,000,000 and P2,000,000, respectively. As
security for the payment of these credit accommodations, the Acampados executed in favor of
petitioner a Real Estate Mortgage5 and an Amendment of Real Estate Mortgage6 over a parcel
of land registered in their names. The land was covered by TCT No. V-41319 in the Registry
of Deeds of Valenzuela City, where the contracts were also registered on November 20, 1995
and January 23, 1996, respectively.7
On June 3, 1996, a Complaint for Declaration of Nullity of TCT No. V-41319 was filed by
Respondent Sy Tan Se against Spouses Acampado. In the Regional Trial Court (RTC) of
Valenzuela, Branch 172, it was docketed as Civil Case No. 4930-V-96,8 the progenitor of the
present controversy.
Despite being the registered mortgagee of the real property covered by the title sought to be
annulled, petitioner was not made a party to Civil Case No. 4930-V-96,9 nor was she notified
of its existence.
Because the spouses defaulted in the payment of their loan, extrajudicial foreclosure
proceedings over the mortgaged property were initiated on April 19, 1997.
On June 17, 1997, the sheriff of Valenzuela conducted an auction sale of the property, during
which petitioner submitted the highest and winning bid.10 On July 15, 1997, a Certificate of
Sale was issued in its favor.11 This sale was entered in the Registry of Deeds of Valenzuela
on July 28, 1997.
When the redemption period lapsed exactly a year after, on July 28, 1998, petitioner executed
an Affidavit of Consolidation of Ownership to enable the Registry of Deeds of Valenzuela to
issue a new TCT in its name.
Upon presentation to the Register of Deeds of the Affidavit of Consolidation of Ownership,
petitioner was informed of the existence of the August 12, 1998 RTC Decision in Civil Case
No. 4930-V-96, annulling TCT No. V-41319. The dispositive portion of the Decision12 stated:
"WHEREFORE, judgment is hereby rendered declaring as null and void Transfer Certificate of
Title No.V-41319 in the name of defendant Raul Acampado for having proceeded from an
illegitimate source. With costs against the defendant.
SO ORDERED."
On January 27, 1999, petitioner filed with the Court of Appeals a Petition for Annulment of the
RTC Decision.
Ruling of the Court of Appeals
For being insufficient in form and substance, the Petition for Annulment was outrightly
dismissed by the CA. It ruled that petitioner ought to have filed, instead, a petition for relief from
judgment or an action for quieting of title.
Hence, this Petition.13
Issues
In its Memorandum, petitioner presents the following issues:

"I
x x x [W]hether or not a petition for annulment of judgment under Rule 47 of the 1997 Rules of
Civil Procedure is the proper remedy available to petitioner under the circumstances."
"II
x x x [W]hether or not the judgment of the trial court in Civil Case No. 4930-V-96 should be
annulled."14
The Court’s Ruling
The Petition is meritorious.
First Issue:
Proper Remedy
Respondents aver that a petition for annulment is not proper, because there were three
different remedies available but they were not resorted to by petitioner.
We are not persuaded. First, a petition for relief, the remedy pointed to by the Court of Appeals,
was not available to petitioner. Section 1, Rule 38 of the Rules of Court, states:
"Petition for relief from judgment, order, or other proceedings.-When a judgment or final order
is entered, or any other proceeding is thereafter taken against a party in any court through
fraud, accident, mistake, or excusable negligence, he may file a petition in such court and in
the same case praying that the judgment, order or proceeding be set aside." (Italics supplied)
It must be emphasized that petitioner was never a party to Civil Case No. 4930-V-96. In Lagula
et al. v. Casimiro et al.,15 the Court held that -- relative to a motion for relief on the ground of
fraud, accident, mistake, or excusable negligence -- Rule 38 of the Rules of Court "only applies
when the one deprived of his right is a party to the case." Since petitioner was never a party to
the case or even summoned to appear therein, then the remedy of relief from judgment under
Rule 38 of the Rules of Court was not proper. This is plainly provided in the italicized words of
the present provision just quoted.
Second, in denying petitioner’s Motion for Reconsideration of the Decision dismissing the
Petition for Annulment of Judgment, the Court of Appeals reasoned that another remedy, an
action for quieting of title, was also available to petitioner.
We do not agree. It should be stressed that this case was instituted to ask for relief from the
peremptory declaration of nullity of TCT No. V-41319, which had been issued without first giving
petitioner an opportunity to be heard. Petitioner focused on the judgment in Civil Case No.
4930-V-96 which adversely affected it, and which it therefore sought to annul. Filing an action
for quieting of title will not remedy what it perceived as a disregard of due process; it is therefore
not an appropriate remedy.
Equally important, an action for quieting of title is filed only when there is a cloud on title to real
property or any interest therein. As defined, a "cloud on title is a semblance of title which
appears in some legal form but which is in fact unfounded."16 In this case, the subject judgment
cannot be considered as a cloud on petitioner’s title or interest over the real property covered
by TCT No. V-41319, which does not even have a semblance of being a title.
It would not be proper to consider the subject judgment as a cloud that would warrant the filing
of an action for quieting of title, because to do so would require the court hearing the action to
modify or interfere with the judgment or order of another co-equal court. Well-entrenched in our
jurisdiction is the doctrine that a court has no power to do so, as that action may lead to
confusion and seriously hinder the administration of justice.17 Clearly, an action for quieting of
title is not an appropriate remedy in this case.
Third, private respondent cites a last remedy: the intervention by petitioner in Civil Case No.
4930-V-96. The availability of this remedy hinges on petitioner’s knowledge of the pendency of
that case, which would have otherwise been alerted to the need to intervene therein. Though
presumed by private respondent, any such knowledge prior to October 1998 is, however,
emphatically denied by petitioner.
The Petition for Annulment before the Court of Appeals precisely alleged that private
respondent purposely concealed the case by excluding petitioner as a defendant in Civil Case
No. 4930-V-96, even if the latter was an indispensable party. Without due process of law, the
former intended to deprive petitioner of the latter’s duly registered property right. Indeed, the
execution of the Decision in Civil Case No. 4930-V-96 necessarily entailed its enforcement
against petitioner, even though it was not a party to that case. Hence, the latter concludes that
annulment of judgment was the only effective remedy open to it.
The allegation of extrinsic fraud, if fully substantiated by a preponderance of evidence, may be
the basis for annulling a judgment.18 The resort to annulment becomes proper because of
such allegation, coupled with the unavailability of the other remedies pointed to by respondents.
Second Issue:
Lack of Jurisdiction
It is undisputed that the property covered by TCT No. V-41319 was mortgaged to petitioner,
and that the mortgage was annotated on TCT No. V-41319 before the institution of Civil Case
No. 4930-V-96. It is also undisputed that all subsequent proceedings pertaining to the
foreclosure of the mortgage were entered in the Registry of Deeds. The nullification and
cancellation of TCT No. V-41319 carried with it the nullification and cancellation of the mortgage
annotation.
Although a mortgage affects the land itself and not merely the TCT covering it, the cancellation
of the TCT and the mortgage annotation exposed petitioner to real prejudice, because its rights
over the mortgaged property would no longer be known and respected by third parties.
Necessarily, therefore, the nullification of TCT No. V-41319 adversely affected its property
rights, considering that a real mortgage is a real right and a real property by itself.19
Evidently, petitioner is encompassed within the definition of an indispensable party; thus, it
should have been impleaded as a defendant in Civil Case No. 4930-V-96.
"An indispensable party is a party who has such an interest in the controversy or subject matter
that a final adjudication cannot be made, in his absence, without injuring or affecting that
interest[;] a party who has not only an interest in the subject matter of the controversy, but also
has an interest of such nature that a final decree cannot be made without affecting his interest
or leaving the controversy in such a condition that its final determination may be wholly
inconsistent with equity and good conscience. It has also been considered that an
indispensable party is a person in whose absence there cannot be a determination between
the parties already before the court which is effective, complete, or equitable. Further, an
indispensable party is one who must be included in an action before it may properly go forward.
"A person is not an indispensable party, however, if his interest in the controversy or subject
matter is separable from the interest of the other parties, so that it will not necessarily be directly
or injuriously affected by a decree which does complete justice between them."20
The joinder of indispensable parties to an action is mandated by Section 7, Rule 3 of the
Revised Rules of Civil Procedures, which we quote:
"SEC 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no
final determination can be had of an action shall be joined either as plaintiffs or defendants."
Aside from the above provision, jurisprudence requires such joinder, as the following excerpts
indicate:
"Indispensable parties must always be joined either as plaintiffs or defendants, for the court
cannot proceed without them. x x x. Indispensable parties are those with such an interest in
the controversy that a final decree would necessarily affect their rights, so that the courts cannot
proceed without their presence."21
"x x x. Without the precence of indispensable parties to a suit or proceeding, a judgment of a
Court cannot attain real finality."22
"Whenever it appears to the court in the course of a proceeding that an indispensable party
has not been joined, it is the duty of the court to stop the trial and to order the inclusion of such
party. (The Revised Rules of Court, Annotated & Commented by Senator Vicente J. Francisco,
Vol. I, p. 271, 1973 ed., See also Cortez vs. Avila, 101 Phil. 705.) Such an order is unavoidable,
for the ‘general rule with reference to the making of parties in a civil action requires the joinder
of all necessary parties wherever possible, and the joinder of all indispensable parties under
any and all conditions, the presence of those latter parties being a sine qua non of the exercise
of judicial power.’ (Borlasa vs. Polistico, 47 Phil. 345, at p. 347.) It is precisely ‘when an
indispensable party is not before the court (that) the action should be dismissed.’ (People vs.
Rodriguez, 106 Phil. 325. at p. 327.) The absence of an indispensable party renders all
subsequent actuations of the court null and void, for want of authority to act, not only as to the
absent parties but even as to those present."23 (emphasis supplied)
"The evident aim and intent of the Rules regarding the joinder of indispensable and necessary
parties is a complete determination of all possible issues, not only between the parties
themselves but also as regards to other persons who may be affected by the judgment. A valid
judgment cannot even be rendered where there is want of indispensable parties."24
From the above, it is clear that the presence of indispensable parties is necessary to vest the
court with jurisdiction, which is "the authority to hear and determine a cause, the right to act in
a case."25 We stress that the absence of indispensable parties renders all subsequent
actuations of the court null and void, because of that court’s want of authority to act, not only
as to the absent parties but even as to those present.
It is argued that petitioner cannot possibly be an indispensable party, since the mortgage may
not even be valid because of the possible absence of compliance with the requirement26 that
the mortgagor be the absolute owner of the thing mortgaged. It should be emphasized,
however, that at the time the mortgage was constituted, there was an existing TCT (No. V-
41319), which named the mortgagors, the Acampado spouses, as the registered owners of the
property. In Seno v. Mangubat27 this Court held as follows:
"The well-known rule in this jurisdiction is that a person dealing with a registered land has a
right to rely upon the face of the Torrens Certificate of Title and to dispense with the need of
inquiring further, except when the party concerned has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such inquiry.
xxx xxx xxx
"Thus, where innocent third persons relying on the correctness of the certificate of title issued,
acquire rights over the property, the court cannot disregard such rights and order the total
cancellation of the certificate for that would impair public confidence in the certificate of title;
otherwise everyone dealing with property registered under the Torrens system would have to
inquire in every instance as to whether the title ha[s] been regularly or irregularly issued by the
court. Indeed this is contrary to the evident purpose of the law."
The peremptory disregard of the annotations registered and entered in TCT No. V-41319
constituted a deprivation of private property without due process of law and was therefore
unquestionably unjust and iniquitous. This, we cannot countenance.
Clearly, it was the trial court’s duty to order petitioner’s inclusion as a party to Civil Case No.
4930-V-96. This was not done. Neither the court nor private respondents bothered to implead
petitioner as a party to the case. In the absence of petitioner, an indispensable party, the trial
court had no authority to act on the case. Its judgment therein was null and void due to lack of
jurisdiction over an indispensable party.
In Leonor v. Court of Appeals28 and Arcelona v. Court of Appeals,29 we held thus:
"A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any
right nor the creator of any obligation. All acts performed pursuant to it and all claims emanating
from it have no legal effect. Hence, it can never become final and any writ of execution based
on it is void:"x x x it may be said to be a lawless thing which can be treated as an outlaw and
slain at sight, or ignored wherever and whenever it exhibits its head."
WHEREFORE, the Petition is GRANTED and the assailed Resolutions of the Court of Appeals
are REVERSED. The Decision of the Regional Trial Court in Civil Case No. 4930-V-41319 is
hereby NULLIFIED and SET ASIDE. No costs.
SO ORDERED.
Melo, Vitug, Gonzaga-Reyes, and Sandoval-Gutierrez, JJ., concur.
G.R. No. 143365 December 4, 2008
GENEROSO SALIGUMBA, ERNESTO SALIGUMBA, and HEIRS OF SPOUSES VALERIA
SALIGUMBA AND ELISEO SALIGUMBA, SR., petitioners,
vs.
MONICA PALANOG, respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review of the Decision dated 24 May 2000 of the Regional Trial Court,
Branch 5, Kalibo, Aklan (RTC-Branch 5) in Civil Case No. 5288 for Revival of Judgment. The
case is an offshoot of the action for Quieting of Title with Damages in Civil Case No. 2570.
The Facts
Monica Palanog, assisted by her husband Avelino Palanog (spouses Palanogs), filed a
complaint dated 28 February 1977 for Quieting of Title with Damages against defendants,
spouses Valeria Saligumba and Eliseo Saligumba, Sr. (spouses Saligumbas), before the
Regional Trial Court, Branch 3, Kalibo, Aklan (RTC-Branch 3). The case was docketed as Civil
Case No. 2570. In the complaint, spouses Palanogs alleged that they have been in actual,
open, adverse and continuous possession as owners for more than 50 years of a parcel of land
located in Solido, Nabas, Aklan. The spouses Saligumbas allegedly prevented them from
entering and residing on the subject premises and had destroyed the barbed wires enclosing
the land. Spouses Palanogs prayed that they be declared the true and rightful owners of the
land in question.
When the case was called for pre-trial on 22 September 1977, Atty. Edilberto Miralles (Atty.
Miralles), counsel for spouses Saligumbas, verbally moved for the appointment of a
commissioner to delimit the land in question. Rizalino Go, Deputy Sheriff of Aklan, was
appointed commissioner and was directed to submit his report and sketch within 30 days.1
Present during the delimitation were spouses Palanogs, spouses Saligumbas, and Ernesto
Saligumba, son of spouses Saligumbas.2
After submission of the Commissioner’s Report, spouses Palanogs, upon motion, were granted
10 days to amend their complaint to conform with the items mentioned in the report.3
Thereafter, trial on the merits ensued. At the hearing on 1 June 1984, only the counsel for
spouses Palanogs appeared. The trial court issued an order resetting the hearing to 15 August
1984 and likewise directed spouses Saligumbas to secure the services of another counsel who
should be ready on that date.4 The order sent to Eliseo Saligumba, Sr. was returned to the
court unserved with the notation "Party–Deceased" while the order sent to defendant Valeria
Saligumba was returned with the notation "Party in Manila."5
At the hearing on 15 August 1984, spouses Palanogs’ direct examination was suspended and
the continuation of the hearing was set on 25 October 1984. The trial court stated that Atty.
Miralles, who had not withdrawn as counsel for spouses Saligumbas despite his appointment
as Municipal Circuit Trial Court judge, would be held responsible for the case of spouses
Saligumbas until he formally withdrew as counsel. The trial court reminded Atty. Miralles to
secure the consent of spouses Saligumbas for his withdrawal.6 A copy of this order was sent
to Valeria Saligumba but the same was returned unserved with the notation "Party in Manila."7
The hearing set on 25 October 1984 was reset to 25 January 1985 and the trial court directed
that a copy of this order be sent to Eliseo Saligumba, Jr. at COA, PNB, Manila.8
The presentation of evidence for spouses Palanogs resumed on 25 January 1985 despite the
motion of Atty. Miralles for postponement on the ground that his client was sick. The exhibits
were admitted and plaintiffs spouses Palanogs rested their case. Reception of evidence for the
defendants spouses Saligumbas was scheduled on 3, 4, and 5 June 1985.9
On 3 June 1985, only spouses Palanogs and counsel appeared. Upon motion of the spouses
Palanogs, spouses Saligumbas were deemed to have waived the presentation of their
evidence.
On 3 August 1987, after a lapse of more than two years, the trial court considered the case
submitted for decision.
On 7 August 1987, RTC-Branch 3 rendered a judgment in Civil Case No. 2570 declaring
spouses Palanogs the lawful owners of the subject land and ordering spouses Saligumbas,
their agents, representatives and all persons acting in privity with them to vacate the premises
and restore possession to spouses Palanogs.
The trial court, in a separate Order dated 7 August 1987, directed that a copy of the court’s
decision be furnished plaintiff Monica Palanog and defendant Valeria Saligumba.
Thereafter, a motion for the issuance of a writ of execution of the said decision was filed but
the trial court, in its Order dated 8 May 1997, ruled that since more than five years had elapsed
after the date of its finality, the decision could no longer be executed by mere motion.
Thus, on 9 May 1997, Monica Palanog (respondent), now a widow, filed a Complaint seeking
to revive and enforce the Decision dated 7 August 1987 in Civil Case No. 2570 which she
claimed has not been barred by the statute of limitations. She impleaded petitioners Generoso
Saligumba and Ernesto Saligumba, the heirs and children of the spouses Saligumbas, as
defendants. The case was docketed as Civil Case No. 5288 before the RTC-Branch 5.
Petitioner Generoso Saligumba, for himself and in representation of his brother Ernesto who
was out of the country working as a seaman, engaged the services of the Public Attorney’s
Office, Kalibo, Aklan which filed a motion for time to allow them to file a responsive pleading.
Petitioner Generoso Saligumba filed his Answer10 alleging that: (1) respondent had no cause
of action; (2) the spouses Saligumbas died while Civil Case No. 2570 was pending and no
order of substitution was issued and hence, the trial was null and void; and (3) the court did not
acquire jurisdiction over the heirs of the spouses Saligumbas and therefore, the judgment was
not binding on them.
Meanwhile, on 19 December 1997, the trial court granted respondent’s motion to implead
additional defendants namely, Eliseo Saligumba, Jr. and Eduardo Saligumba, who are also the
heirs and children of spouses Saligumbas.11 They were, however, declared in default on 1
October 1999 for failure to file any responsive pleading.12
The Trial Court’s Ruling
On 24 May 2000, the RTC-Branch 5 rendered a decision in favor of respondent ordering the
revival of judgment in Civil Case No. 2570. The trial court ruled that the non-substitution of the
deceased spouses did not have any legal significance. The land subject of Civil Case No. 2570
was the exclusive property of defendant Valeria Saligumba who inherited the same from her
deceased parents. The death of her husband, Eliseo Saligumba, Sr., did not change the
complexion of the ownership of the property that would require his substitution. The spouses
Saligumbas’ children, who are the petitioners in this case, had no right to the property while
Valeria Saligumba was still alive. The trial court further found that when defendant Valeria
Saligumba died, her lawyer, Atty. Miralles, did not inform the court of the death of his client.
The trial court thus ruled that the non-substitution of the deceased defendant was solely due
to the negligence of counsel. Moreover, petitioner Ernesto Saligumba could not feign ignorance
of Civil Case No. 2570 as he was present during the delimitation of the subject land. The trial
court likewise held that the decision in Civil Case No. 2570 could not be the subject of a
collateral attack. There must be a direct action for the annulment of the said decision.
Petitioners elevated the matter directly to this Court. Hence, the present petition.
The Court’s Ruling
The instant case is an action for revival of judgment and the judgment sought to be revived in
this case is the decision in the action for quieting of title with damages in Civil Case No. 2570.
This is not one for annulment of judgment.
An action for revival of judgment is no more than a procedural means of securing the execution
of a previous judgment which has become dormant after the passage of five years without it
being executed upon motion of the prevailing party. It is not intended to re-open any issue
affecting the merits of the judgment debtor’s case nor the propriety or correctness of the first
judgment.13 An action for revival of judgment is a new and independent action, different and
distinct from either the recovery of property case or the reconstitution case, wherein the cause
of action is the decision itself and not the merits of the action upon which the judgment sought
to be enforced is rendered.14 Revival of judgment is premised on the assumption that the
decision to be revived, either by motion or by independent action, is already final and
executory.15
The RTC-Branch 3 Decision dated 7 August 1987 in Civil Case No. 2570 had been rendered
final and executory by the lapse of time with no motion for reconsideration nor appeal having
been filed. While it may be true that the judgment in Civil Case No. 2570 may be revived and
its execution may be had, the issue now before us is whether or not execution of judgment can
be issued against petitioners who claim that they are not bound by the RTC-Branch 3 Decision
dated 7 August 1987 in Civil Case No. 2570.
Petitioners contend that the RTC-Branch 3 Decision of 7 August 1987 in Civil Case No. 2570
is null and void since there was no proper substitution of the deceased spouses Saligumbas
despite the trial court’s knowledge that the deceased spouses Saligumbas were no longer
represented by counsel. They argue that they were deprived of due process and justice was
not duly served on them.
Petitioners argue that the trial court even acknowledged the fact of death of spouses
Saligumbas but justified the validity of the decision rendered in that case despite lack of
substitution because of the negligence or fault of their counsel. Petitioners contend that the
duty of counsel for the deceased spouses Saligumbas to inform the court of the death of his
clients and to furnish the name and address of the executor, administrator, heir or legal
representative of the decedent under Rule 3 presupposes adequate or active representation
by counsel. However, the relation of attorney and client was already terminated by the
appointment of counsel on record, Atty. Miralles, as Municipal Circuit Trial Court judge even
before the deaths of the spouses Saligumbas were known. Petitioners invoke the Order of 1
June 1984 directing the spouses Saligumbas to secure the services of another lawyer to
replace Atty. Miralles. The registered mail containing that order was returned to the trial court
with the notation that Eliseo Saligumba, Sr. was "deceased." Petitioners thus question the
decision in Civil Case No. 2570 as being void and of no legal effect because their parents were
not duly represented by counsel of record. Petitioners further argue that they have never taken
part in the proceedings in Civil Case No. 2570 nor did they voluntarily appear or participate in
the case. It is unfair to bind them in a decision rendered against their deceased parents.
Therefore, being a void judgment, it has no legal nor binding effect on petitioners.
Civil Case No. 2570 is an action for quieting of title with damages which is an action involving
real property. It is an action that survives pursuant to Section 1, Rule 8716 as the claim is not
extinguished by the death of a party. And when a party dies in an action that survives, Section
17 of Rule 3 of the Revised Rules of Court17 provides for the procedure, thus:
Section 17. Death of Party. - After a party dies and the claim is not thereby extinguished, the
court shall order, upon proper notice, the legal representative of the deceased to appear and
to be substituted for the deceased, within a period of thirty (30) days, or within such time as
may be granted. If the legal representative fails to appear within said time, the court may order
the opposing party to procure the appointment of a legal representative of the deceased within
a time to be specified by the court, and the representative shall immediately appear for and on
behalf of the interest of the deceased. The court charges involved in procuring such
appointment, if defrayed by the opposing party, may be recovered as costs. The heirs of the
deceased may be allowed to be substituted for the deceased, without requiring the appointment
of an executor or administrator and the court may appoint guardian ad litem for the minor heirs.
(Emphasis supplied)
Under the express terms of Section 17, in case of death of a party, and upon proper notice, it
is the duty of the court to order the legal representative or heir of the deceased to appear for
the deceased. In the instant case, it is true that the trial court, after receiving an informal notice
of death by the mere notation in the envelopes, failed to order the appearance of the legal
representative or heir of the deceased. There was no court order for deceased’s legal
representative or heir to appear, nor did any such legal representative ever appear in court to
be substituted for the deceased. Neither did the respondent ever procure the appointment of
such legal representative, nor did the heirs ever ask to be substituted.
It appears that Eliseo Saligumba, Sr. died on 18 February 1984 while Valeria Saligumba died
on 2 February 1985. No motion for the substitution of the spouses was filed nor an order issued
for the substitution of the deceased spouses Saligumbas in Civil Case No. 2570. Atty. Miralles
and petitioner Eliseo Saligumba, Jr., despite notices sent to them to appear, never confirmed
the death of Eliseo Saligumba, Sr. and Valeria Saligumba. The record is bereft of any evidence
proving the death of the spouses, except the mere notations in the envelopes enclosing the
trial court’s orders which were returned unserved.
Section 17 is explicit that the duty of the court to order the legal representative or heir to appear
arises only "upon proper notice." The notation "Party-Deceased" on the unserved notices could
not be the "proper notice" contemplated by the rule. As the trial court could not be expected to
know or take judicial notice of the death of a party without the proper manifestation from
counsel, the trial court was well within its jurisdiction to proceed as it did with the case.
Moreover, there is no showing that the court’s proceedings were tainted with irregularities.18
Likewise, the plaintiff or his attorney or representative could not be expected to know of the
death of the defendant if the attorney for the deceased defendant did not notify the plaintiff or
his attorney of such death as required by the rules.19 The judge cannot be blamed for sending
copies of the orders and notices to defendants spouses in the absence of proof of death or
manifestation to that effect from counsel.20
Section 16, Rule 3 of the Revised Rules of Court likewise expressly provides:
SEC. 16. Duty of attorney upon death, incapacity or incompetency of party. - Whenever a party
to a pending case dies, becomes incapacitated or incompetent, it shall be the duty of his
attorney to inform the court promptly of such death, incapacity or incompetency, and to give
the name and residence of his executor, administrator, guardian or other legal representative.
It is the duty of counsel for the deceased to inform the court of the death of his client. The failure
of counsel to comply with his duty under Section 16 to
inform the court of the death of his client and the non-substitution of such party will not invalidate
the proceedings and the judgment thereon if the action survives the death of such party. The
decision rendered shall bind the party’s successor-in-interest.21
The rules operate on the presumption that the attorney for the deceased party is in a better
position than the attorney for the adverse party to know about the death of his client and to
inform the court of the name and address of his legal representative.22
Atty. Miralles continued to represent the deceased spouses even after the latter’s demise.
Acting on their behalf, Atty. Miralles even asked for postponement of the hearings and did not
even confirm the death of his clients nor his appointment as Municipal Circuit Trial Court judge.
These clearly negate petitioners’ contention that Atty. Miralles ceased to be spouses
Saligumbas’ counsel.
Atty. Miralles still remained the counsel of the spouses Saligumbas despite the alleged
appointment as judge. Records show that when Civil Case No. 2570 was called for trial on 25
October 1984, Atty. Miralles appeared and moved for a postponement. The 25 October 1984
Order reads:
ORDER
Upon petition of Judge Miralles who is still the counsel on record of this case and who is held
responsible for anything that will happen in this case, postpone the hearing of this case to
JANUARY 25, 1985 AT 8:30 in the morning. x x x23
The trial court issued an Order dated 1 June 1984 directing the defendants to secure the
services of another counsel. This order was sent to Eliseo Saligumba, Sr. by registered mail
but the same was returned with the notation "Party-Deceased" while the notice to Valeria
Saligumba was returned with the notation "Party in Manila."24 Eliseo Saligumba, Sr. died on
18 February 1984. When Atty. Miralles appeared in court on 25 October 1984, he did not affirm
nor inform the court of the death of his client. There was no formal substitution. The trial court
issued an order resetting the hearing to 25 January 1985 and directed that a copy of the order
be furnished petitioner Eliseo Saligumba, Jr. at COA, PNB, Manila by registered mail.25 When
the case was called on 25 January 1985, Atty. Miralles sought for another postponement on
the ground that his client was sick and under medical treatment in Manila.26 Again, there was
no manifestation from counsel about the death of Eliseo Saligumba, Sr. The trial court issued
an Order dated 25 January 1985 setting the reception of evidence for the defendants on 3, 4,
and 5 June 1985. A copy of this order was sent to Eliseo Saligumba, Jr. by registered mail.
Nonetheless, as the trial court in Civil Case No. 5288 declared, the non-substitution of Eliseo
Saligumba, Sr. did not have any legal significance as the land subject of Civil Case No. 2570
was the exclusive property of Valeria Saligumba who inherited it from her deceased parents.
This notwithstanding, when Valeria Saligumba died on 2 February 1985, Atty. Miralles again
did not inform the trial court of the death of Valeria Saligumba. There was no formal substitution
nor submission of proof of death of Valeria Saligumba. Atty. Miralles was remiss in his duty
under Section 16, Rule 3 of the Revised Rules of Court. The counsel of record is obligated to
protect his client’s interest until he is released from his professional relationship with his client.
For its part, the court could recognize no other representation on behalf of the client except
such counsel of record until a formal substitution of attorney is effected.27
An attorney must make an application to the court to withdraw as counsel, for the relation does
not terminate formally until there is a withdrawal of record; at least, so far as the opposite party
is concerned, the relation otherwise continues until the end of the litigation.28 Unless properly
relieved, the counsel is responsible for the conduct of the case.29 Until his withdrawal shall
have been approved, the lawyer remains counsel of record who is expected by his client as
well as by the court to do what the interests of his client require. He must still appear on the
date of hearing for the attorney-client relation does not terminate formally until there is a
withdrawal of record.30
Petitioners should have questioned immediately the validity of the proceedings absent any
formal substitution. Yet, despite the court’s alleged lack of jurisdiction over the persons of
petitioners, petitioners never bothered to challenge the same, and in fact allowed the
proceedings to go on until the trial court rendered its decision. There was no motion for
reconsideration, appeal or even an action to annul the judgment in Civil Case No. 2570.
Petitioners themselves could not feign ignorance of the case since during the pendency of Civil
Case No. 2570, petitioner Ernesto Saligumba, son of the deceased spouses, was among the
persons present during the delimitation of the land in question before the Commissioner held
on 5 November 1977.31 Petitioner Eliseo Saligumba, Jr. was likewise furnished a copy of the
trial court’s orders and notices. It was only the Answer filed by petitioner Generoso Saligumba
in Civil Case No. 5288 that confirmed the dates when the spouses Saligumbas died and named
the latter’s children. Consequently, Atty. Miralles was responsible for the conduct of the case
since he had not been properly relieved as counsel of record. His acts bind his clients and the
latter’s successors-in-interest.
In the present case for revival of judgment, the other petitioners have not shown much interest
in the case. Petitioners Eliseo Saligumba, Jr. and Eduardo Saligumba were declared in default
for failure to file their answer. Petitioner Ernesto Saligumba was out of the country working as
a seaman. Only petitioner Generoso Saligumba filed an Answer to the complaint. The petition
filed in this Court was signed only by petitioner Generoso Saligumba as someone signed on
behalf of petitioner Ernesto Saligumba without the latter’s authority to do so.
WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 24 May 2000 of the
Regional Trial Court, Branch 5, Kalibo, Aklan in Civil Case No. 5288. Costs against petitioners.
SO ORDERED.
G.R. No. 163876 July 9, 2008
ROSALINA CLADO-REYES, ALICIA REYES-POTENCIANO, ANTONIO C. REYES,
BERNARDO C. REYES, JOVITO C. REYES, MARIA REYES-DIZON, BERNARDA REYES-
LLANZA, deceased represented by BONG R. LLANZA and REYNALDO C. REYES
(deceased), represented by NINO R. REYES, Petitioners,
vs.
SPOUSES JULIUS and LILY LIMPE, Respondents.
DECISION
QUISUMBING, J.:
This petition for review seeks to set aside the Decision1 dated February 20, 2004 and the
Resolution2 dated June 9, 2004, of the Court of Appeals in CA-G.R. CV No. 70170, which had
affirmed the Decision3 dated January 9, 2001 of the Regional Trial Court (RTC), Branch 81, of
Malolos, Bulacan in Civil Case No. 61-M-95 for quieting of title, reconveyance and damages.
Subject of the present controversy is a 2,445-square meter portion of a certain lot in Guiguinto,
Bulacan covered by Transfer Certificate of Title (TCT) No. RT-32498 (T-199627),4 having a
total lot area of 20,431 square meters, more or less.
On February 1, 1995,5 petitioners filed an action to quiet title, reconveyance and damages
against respondents and alleged that they have been occupying the disputed lot since 1945
through their predecessor-in-interest, Mamerto B. Reyes. They claimed that during his lifetime,
Mamerto had accepted a verbal promise of the former lot owner, Felipe Garcia, to give the
disputed lot to him in exchange for the surrender of his tenancy rights as a tiller thereof. To
prove that Mamerto was a former tenant of Felipe; that during his lifetime he had worked on
the lot; and that he owned and possessed the same,6 petitioners presented two documents,
namely: (1) Certification7 dated October 12, 1979 and (2) "Pagpapatunay"8 dated November
17, 1982 allegedly executed by Simeon I. Garcia, the eldest son of Felipe, attesting to such
facts. Petitioners also alleged that whenever respondents visited the lot, respondent Julius
Limpe would promise to deliver the certificate of title to them. However, sometime in October
1994, petitioners received a letter9 from respondents asserting ownership over the disputed
lot.
In their answer, respondents contended that they are the legal owners of the lot by virtue of a
Deed of Exchange of Real Estate10 and Deed of Absolute Sale11 executed on July 5, 1974
and February 28, 1974, respectively, between them and Farm-Tech Industries, Incorporated.
To further assert ownership over the lot, they presented TCT No. T-199627, Tax Declaration
Nos. 1517212 and 952913 and realty tax receipts14 of the lot, which were all registered and
declared in their names.
In its Decision dated January 9, 2001, the trial court ruled in favor of respondents and held that
the certificate of title, tax declarations and realty tax receipts presented in court indisputably
established respondents’ ownership over the lot. The certificate of title was registered in
respondents’ names and the realty tax receipts showed that respondents consistently paid the
corresponding real property taxes. These pieces of evidence, said the trial court, prevail over
petitioners’ allegation of an "undocumented promise" by the former lot owner, which in itself, is
ineffective or unenforceable under the law. Accordingly, the trial court ordered petitioners to
reconvey the disputed lot to respondents.
On February 20, 2004, the Court of Appeals affirmed the trial court’s ruling and held that
petitioners have no title whatsoever upon which respondents’ title could cast a cloud, as they
were the ones casting doubt on respondents’ title.15 It held that the documents allegedly
executed by Simeon I. Garcia showed no indicia that the alleged owner, Felipe Garcia, donated
the disputed lot to them. It further held that Simeon I. Garcia was not the real owner of the lot;
thus, he could not make an effective conveyance thereof. Consequently, it upheld respondents’
title over the disputed lot. The decretal portion of the decision reads,
WHEREFORE, the appeal is hereby DISMISSED. The decision of the Regional Trial Court of
Malolos, Bulacan, Branch 81, dated January 9, 2001 is AFFIRMED.
SO ORDERED.16
Petitioners now before this Court raise the sole issue of:
WHETHER THE [PETITIONERS] HAVE A CAUSE OF ACTION TO QUIET TITLE,
RECONVEYANCE AND DAMAGES AGAINST RESPONDENTS.17
Petitioners cite Section 418 of Article XIII of the 1987 Constitution and Section 219 of the
Comprehensive Agrarian Reform Law and state that their title was founded upon those
provisions, which were enacted for the benefit of farmers, majority of whom are educationally
deficient, if not uneducated. Next, they contend that respondents are not purchasers in good
faith because they were fully aware of petitioners’ actual possession of the lot when they
purchased the same. Conformably, according to petitioners, respondents are liable for
damages under Article 1920 of the Civil Code of the Philippines.
Respondents counter that they are the true and lawful owners of the disputed lot as evidenced
by TCT No. RT-32498 (T-199627), Tax Declaration Nos. 15172 and 9529 and realty tax
receipts, all registered and declared in their names. They claim that they are buyers in good
faith when they purchased the lot from Farm-Tech Industries, Incorporated, free from all liens
and encumbrances. They aver that they are not obliged to go beyond the face of a TCT in the
absence of any cloud therein.
Respondents also argue that petitioners’ cause of action must fail because they failed to prove
(1) that their predecessor-in-interest, Mamerto B. Reyes, was a farmer; (2) that the lot was
agricultural and not a commercial lot; and (3) that they are qualified beneficiaries under the
agrarian reform law. They point out that Simeon I. Garcia, who allegedly executed the
Certification and "Pagpapatunay," was not presented in court to prove the veracity of the
contents of those two documents. They also aver that the property mentioned in the document
"Pagpapatunay" was not specifically described as the property litigated herein. Thus, according
to respondents, those documents have no binding effect on third persons, are hearsay, and
have no probative value.
After considering the submissions of the parties and the issue before us, we are in agreement
that the petition lacks merit.
To begin with, an action for quieting of title originated in equity jurisprudence to secure 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 free from any
danger of hostile claim. Thus, our courts are tasked to determine the respective rights of the
contending parties, not only to put things in their proper places, but also to benefit both parties,
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 may deem best.211avvphi1
Under Articles 47622 and 47723 of the New Civil Code, there are two indispensable requisites
in order that an action to quiet title could prosper: (1) that the plaintiff or complainant has a legal
or an equitable title to or interest in the real property subject of the action; and (2) that 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.24
To prove their case, petitioners merely cited Section 4 of Article XIII of the 1987 Constitution
and Section 2 of the Comprehensive Agrarian Reform Law and stated that their title was
founded upon those provisions. They hardly argued on the matter. Neither was there positive
evidence (1) that their predecessor had legal title, i.e., a certificate of land transfer;25 (2) that
the lot was an agricultural lot and not a commercial one as contended by respondents; and (3)
that they are qualified beneficiaries under the Agrarian Reform Law. Time and again we have
held that a mere allegation is not evidence, and he who alleges has the burden of proving the
allegation with the requisite quantum of evidence.26
Next, the documentary evidence petitioners presented, namely, the "Certification" and
"Pagpapatunay," did not confirm their title over the disputed lot. First, original copies of those
documents were not presented in court.27 Second, as the appellate court pointed out, Simeon
I. Garcia, the declarant in those documents, was not presented in court to prove the veracity of
their contents.28 Third, even a cursory examination of those documents would not show any
transfer or intent to transfer title or ownership of the disputed lot from the alleged owner, Felipe
Garcia, to petitioners or their predecessor-in-interest, Mamerto B. Reyes. Fourth, petitioners
did not bother to adduce evidence that Simeon I. Garcia, as the eldest son of the late Felipe
Garcia, inherited the entire lot as to effectively convey title or ownership over the disputed lot,
i.e. thru extrajudicial settlement of the estate of the late Felipe Garcia. Accordingly, we agree
that the documents allegedly executed by Simeon I. Garcia are purely hearsay and have no
probative value.
In contrast, respondents presented evidence which clearly preponderates in their favor. First,
the transfer certificate of title, tax declarations and realty tax receipts were all in their names.
Second, pursuant to the Torrens System, TCT No. RT-32498 (T-199627) enjoys the conclusive
presumption of validity and is the best proof of ownership of the lot.29 Third, although tax
declarations or realty tax receipts are not conclusive evidence of ownership, nevertheless, they
are good indicia of possession in the concept of an owner, for no one in his right mind would
be paying taxes for a property that is not in his actual or at least constructive possession. As
we previously held, such realty tax payments constitute proof that the holder has a claim of title
over the property.30
Worth stressing, in civil cases, the plaintiff must establish his cause of action by preponderance
of evidence; otherwise, his suit will not prosper.31 After carefully considering the arguments of
the parties, as well as their respective evidence, we unanimously agree that the petitioners
were not able to prove that they have any legal or equitable title over the disputed lot. Thus,
we find no reversible error in the assailed decisions of the courts below.
WHEREFORE, the instant petition is DENIED for utter lack of merit. The Decision dated
February 20, 2004 and the Resolution dated June 9, 2004, of the Court of Appeals in CA-G.R.
CV No. 70170 are AFFIRMED. Costs against petitioners.
SO ORDERED.
G.R. No. 173415 March 28, 2008
MARIANO TANENGLIAN, Petitioner,
vs.
SILVESTRE LORENZO, MARIO DAPNISAN, TIMOTEO DAPNISAN, FELIX DAPNISAN,
TONAS TAMPIC, REGINA TOBANES, NORMA SIMEON, RODOLFO LACHICA, ARNES
SERIL, RODOLFO LAVARO, FAUSTINO SALANGO, PEDRO SANTIAGO, TEOFILO
FULMANO, GEORGE KITOYAN, PEPTIO GAPAD, DAMIAN PENERIA, MIKE FERNANDEZ,
PABLO SACPA, WILFREDO AQUINO, ANDREW HERRERO, ROGELIO CARREON,
MANUEL LAGARTERA AND LORENTINO SANTOS, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is an appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure seeking the
reversal and setting aside of the Resolution1 dated 5 April 2006 of the Court of Appeals in CA-
G.R. SP No. 93668 dismissing outright the petition for certiorari filed therewith by petitioner
Mariano Tanenglian on the grounds that it was the wrong remedy and it was filed beyond the
15-day reglementary period. Likewise assailed herein is the Resolution2 dated 4 July 2006 of
the appellate court denying petitioner’s Motion for Reconsideration.
This case involves two parcels of land (subject properties), located and adjacent to the Sto.
Tomas Baguio Road, with areas of 7,860 square meters and 21,882 square meters, covered
respectively by Transfer Certificates of Title (TCT) No. T-29281 and T-29282 registered in the
Registry of Deeds of Baguio City both in the name of petitioner.
Respondents Silvestre Lorenzo, et al., members of the Indigenous Cultural Minority of the
Cordillera Administrative Region, filed a Petition3 for Redemption under Sec. 12, Republic Act
No. 38444 dated 29 July 1998 before the Department of Agrarian Reform Adjudication Board
(DARAB) praying that: (1) they be allowed to exercise their right of redemption over the subject
properties; (2) TCTs No. T-29281and T-29282 in the name of petitioner be declared null and
void; (3) the subject properties be declared as ancestral land pursuant to Section 9 of Republic
Act No. 6657;5 and (4) petitioner be ordered to pay disturbance compensation to respondents.
In a Decision dated 16 August 1999, the Regional Adjudicator held:
WHEREFORE, ALL THE PREMISES CONSIDERED AND IN THE BEST INTEREST OF
AGRARIAN JUSTICE, JUDGMENT IS HEREBY RENDERED IN FAVOR OF [HEREIN
RESPONDENTS] AND AGAINST [HEREIN PETITIONER] AS FOLLOWS:
1. Declaring that the parcels of land respectively occupied by [respondents] as ancestral lands
pursuant to the provisions of Section 9 of Republic Act No. 6657.
2. Declaring [respondents] as the ancestral landowners of the parcels of land which they are
occupying and tilling;
3. Ordering the Department of Agrarian Reform through its Regional Office, the Cordillera
Administrative Region, Baguio City to acquire the said parcels of land respectively occupied by
[respondents] for distribution to them in order to ensure their economic, social and cultural well-
being pursuant to provisions of Section 9 of RA No. 6657;
4. Ordering the Regional Engineering Office of DAR-CAR, Baguio City to conduct subdivision
survey on the said parcels of land occupied by [respondents] and for DAR-CAR to issue
individual Certificate of Land Ownership Awards (CLOA’s) and have the same registered with
the Office of the Registry of Deeds of Baguio City;
5. Ordering [petitioner] or anybody under his command not to disturb the peaceful possession
of [respondents]’ ancestral landholdings; and
6. Ordering the Office of the Register of Deeds, Baguio City to cancel Transfer Certificates of
Title Nos. T-29281 and T-29282 both in the name of [petitioner] and for the latter to surrender
to the Office of the Register of Deeds of Baguio City the owner’s duplicate certificate copies of
said titles.6
Petitioner received a copy of the afore-quoted Decision on 27 August 1999. He filed with the
Regional Adjudicator a motion for reconsideration thereof on 13 September 1999, which the
Regional Adjudicator denied in his Order dated 11 October 1999. Petitioner received the
Regional Adjudicator’s Order denying his motion on 19 October 1999. On the same day, 19
October 1999, petitioner filed a Notice of Appeal,7 but the appeal fee of ₱500.00 in postal
money order was postmarked 20 October 1999. Petitioner’s Notice of Appeal was denied by
the Regional Adjudicator in his Order dated 26 October 1999.8 The Regional Adjudicator’s
latest Order reads:
ORDER
Submitted before the Board through this Adjudicator is a "NOTICE OF APPEAL," dated
October 19, 1999, of the DECISION in the above-entitled case dated August 16, 1999 with a
POSTAL MONEY ORDER in the amount of FIVE HUNDRED PESOS (₱500.00) ONLY
(APPEAL FEE) POSTMARKED Makati Central Post Office, M.M., dated October 20, 1999 filed
by [herein petitioner] through counsel.
It is noteworthy that both the aforesaid "NOTICE OF APPEAL" and "APPEAL FEE" were not
filed and paid, respectively, within the REGLEMENTARY PERIOD as provided for by the
DARAB NEW RULES OF PROCEDURE under Section 5, Rule XIII which states:
SECTION 5. Requisites and perfection of the Appeal.
a) The Notice of Appeal shall be filed within the reglementary period as provided for in Section
1 of this Rule. x x x
b) An appeal fee of Five Hundred Pesos (₱500.00) shall be paid by the appellant within the
reglementary period to the DAR Cashier where the Office of the Adjudicator is situated. x x x.
Under the 3rd paragraph of said SECTION 5, it further states:
Non-compliance with the above-mentioned requisites shall be a ground for the dismissal of the
appeal."
The records of this case show that the [petitioner] through counsel filed his "Motion for
Reconsideration" of the Decision of this case on September 13, 1999 which was the 15th day
of said Reglementary Period. The 15th day was supposed to have been on September 11,
1999 counted from August 28, 1999, the following day after [petitioner] through counsel
received a copy of the Decision on August 27, 1999 but because September 11, 1999 was a
Saturday, the 15th day was September 13, 1999, the following working day. Now, nowhere on
the records of this case show that the required "Appeal Fee" was paid on or before the 15th
day of the Reglementary Period.
The records of this case also show that this instant "NOTICE OF APPEAL" was filed on October
19, 1999, (Postmarked Makati Central P.O., M.M.) the day when [petitioner] through counsel
received copy of the Denial of the said "MOTION FOR RECONSIDERATION." Since
September 13, 1999 was the 15th day of said 15-day reglementary period, this instant ‘NOTICE
OF APPEAL" is considered filed out of time. Even the "Appeal Fee" of Five Hundred Pesos
(₱500.00) in POSTAL MONEY ORDER, it is postmarked October 20, 1999, MAKATI
CENTRAL P.O. M.M. Since September 13, 1999 was the 15th day of said 15-day reglementary
period, this "APPEAL FEE" is considered paid out of time.
Additionally, even granting without admitting that this instant "NOTICE OF APPEAL" and
"APPEAL FEE" were filed and paid, respectively, within the required reglementary period,
[petitioner] through counsel miserably failed to state any ground in the Notice of Appeal as
provided for under SECTION 2, RULE XIII of the DARAB NEW RULES OF PROCEDURE.9
WHEREFORE, premises considered, and pursuant to the provisions of SECTION 5 and
SECTION 2, Rule XIII of the DARAB NEW RULES OF PROCEDURE, this instant "NOTICE
OF APPEAL" is hereby DENIED.10
Petitioner filed a Motion for Reconsideration on 5 November 1999 but the same was denied by
the Regional Adjudicator on 15 November 1999.
Respondents filed a Motion for Execution on 27 October 1999. The Regional Adjudicator
issued a Writ of Execution dated 17 November 1999.11
Petitioner thereafter filed an original action for certiorari before the DARAB to annul the Order
dated 26 October 1999, Order dated 15 November 1999 and the Writ of Execution dated 17
November 1999, all issued by the Regional Adjudicator. In a Resolution dated 5 May 2005, the
DARAB denied petitioner’s petition for certiorari for lack of merit,12 holding that:
While it is true that the filing of the Notice of Appeal dated October 19, 1999 was made within
the reglementary period to perfect the same, however, the required appeal fee was not paid
within the reglementary period because the last day to perfect an appeal is October 19, 1999,
while the appeal fee in a form of postal money order is postmarked October 20, 1999. Precisely,
there is no payment of appeal fee within the 15-day reglementary period to perfect an appeal.
Therefore, the order of the [Regional Adjudicator] denying the notice of appeal of the petitioner
is well within the ambit of the provisions of the above-quoted Rule, particularly the last
paragraph thereof, hence the instant petition must necessarily fail.13
Petitioner’s motion for reconsideration of the foregoing resolution was denied by the DARAB in
another Resolution dated 17 January 2006,14 a copy of which was received by petitioner on 2
February 2006.
Refusing to concede, petitioner filed a Petition for Certiorari15 under Rule 65 with the Court of
Appeals on 17 March 2006.
In a Resolution dated 5 April 2006, the Court of Appeals dismissed the Petition, reasoning as
follows:
Sections 1 and 4, Rule 43 of the 1997 Rules of Civil Procedure provide that an appeal from the
award, judgment, final order or resolution of the Department of Agrarian Reform under Republic
Act No. 6657, among other quasi-judicial agencies, shall be taken by filing with the Court of
Appeals a petition for review within fifteen (15) days from notice thereof, or of the denial of the
motion for new trial or reconsideration duly filed in accordance with the governing law of the
court or agency a quo.
xxxx
Even if we consider the instant petition for certiorari as a petition for review, the same must still
be dismissed for having been filed beyond the reglementary period of fifteen (15) days from
receipt of a copy of the Resolution dated January 17, 2006. As pointed out in the above-cited
case, appeals from all quasi-judicial bodies shall be made by way of petition for review with the
Court of Appeals regardless of the nature of the question raised.
Well-settled is the rule that certiorari is not available where the proper remedy is appeal in due
course and such remedy was lost because of respondent’s failure to take an appeal. The
special civil action of certiorari is not and can not be made a substitute for appeal or a lost
appeal.16
Petitioner’s motion for reconsideration of the afore-quoted ruling was denied by the appellate
court in a Resolution dated 4 July 2006.
Hence, the present Petition, raising the following issues:
(a) Whether or not the Court of Appeals correctly dismissed the Petition under Rule 65 filed by
the Petitioner mainly on the ground that the proper remedy is a Petition under Rule 43 of the
Rules of Court.
(b) Whether or not the Regional Adjudicator acted within his authority when he declared the
subject parcels of land as "ancestral lands."
(c) Whether or not the Regional Adjudicator acted within his authority when he declared that
the titles of the petitioner should be declared null and void.
Preliminarily, petitioner is actually asking us to rule on the propriety of (1) the denial of his
Notice of Appeal by the Regional Adjudicator, affirmed by the DARAB; and (2) the dismissal of
his Petition for Certiorari by the Court of Appeals.
The Regional Adjudicator denied petitioner’s Notice of Appeal because the latter was delayed
for one day in the payment of appeal fee.
The 2003 Rules of Procedure of the DARAB lays down the following procedure:
RULE XIV
APPEALS
Section 1. Appeal to the Board. An appeal may be taken to the Board from a resolution,
decision or final order of the Adjudicator that completely disposes of the case by either or both
of the parties within a period of fifteen (15) days from receipt of the resolution/decision/final
order appealed from or of the denial of the movant’s motion for reconsideration in accordance
with Section 12, Rule IX, by:
1.1 filing a Notice of Appeal with the Adjudicator who rendered the decision or final order
appealed from;
1.2 furnishing copies of said Notice of Appeal to all parties and
the Board; and
1.3 paying an appeal fee of Seven Hundred Pesos (Php700.00) to the DAR Cashier where the
Office of the Adjudicator is situated or through postal money order, payable to the DAR Cashier
where the Office of the Adjudicator is situated, at the option of the appellant.
A pauper litigant shall be exempt from the payment of the appeal fee.
Proof of service of Notice of Appeal to the affected parties and to the Board and payment of
appeal fee shall be filed, within the reglementary period, with the Adjudicator a quo and shall
form part of the records of the case.
Non-compliance with the foregoing shall be a ground for dismissal of the appeal.
SECTION 4. Perfection of Appeal. An appeal is deemed perfected upon compliance with
Section 1 of this Rule.
A pauper litigant’s appeal is deemed perfected upon the filing of the Notice of Appeal in
accordance with said Section 1 of this Rule.
The general rule is that appeal is perfected by filing a notice of appeal and paying the requisite
docket fees and other lawful fees.17
However, all general rules admit of certain exceptions. In Mactan Cebu International Airport
Authority v. Mangubat18 where the docket fees were paid six days late, we said that where the
party showed willingness to abide by the rules by immediately paying the required fees and
taking into consideration the importance of the issues raised in the case, the same calls for
judicial leniency, thus:
In all, what emerges from all of the above is that the rules of procedure in the matter of paying
the docket fees must be followed. However, there are exceptions to the stringent requirement
as to call for a relaxation of the application of the rules, such as: (1) most persuasive and
weighty reasons; (2) to relieve a litigant from an injustice not commensurate with his failure to
comply with the prescribed procedure; (3) good faith of the defaulting party by immediately
paying within a reasonable time from the time of the default; (4) the existence of special or
compelling circumstances; (5) the merits of the case; (6) a cause not entirely attributable to the
fault or negligence of the party favored by the suspension of the rules; (7) a lack of any showing
that the review sought is merely frivolous and dilatory; (8) the other party will not be unjustly
prejudiced thereby; (9) fraud, accident, mistake or excusable negligence without appellant’s
fault; (10) peculiar legal and equitable circumstances attendant to each case; (11) in the name
of substantial justice and fair play; (12) importance of the issues involved; and (13) exercise of
sound discretion by the judge guided by all the attendant circumstances. Concomitant to a
liberal interpretation of the rules of procedure should be an effort on the part of the party
invoking liberality to adequately explain his failure to abide by the rules. Anyone seeking
exemption from the application of the Rule has the burden of proving that exceptionally
meritorious instances exist which warrant such departure.19
We have not been oblivious to or unmindful of the extraordinary situations that merit liberal
application of the Rules, allowing us, depending on the circumstances, to set aside technical
infirmities and give due course to the appeal. In cases where we dispense with the
technicalities, we do not mean to undermine the force and effectivity of the periods set by law.
In those rare cases where we did not stringently apply the procedural rules, there always
existed a clear need to prevent the commission of a grave injustice. Our judicial system and
the courts have always tried to maintain a healthy balance between the strict enforcement of
procedural laws and the guarantee that every litigant be given the full opportunity for the just
and proper disposition of his cause.20 If the Highest Court of the land itself relaxes its rules in
the interest of substantive justice, then what more the administrative bodies which exercise
quasi-judicial functions? It must be emphasized that the goal of courts and quasi-judicial
bodies, above else, must be to render substantial justice to the parties.
In this case, petitioner was only one day late in paying the appeal fee, and he already stands
to lose his titles to the subject properties. We find this too harsh a consequence for a day’s
delay. Worthy to note is the fact that petitioner actually paid the appeal fee; only, he was a day
late. That petitioner immediately paid the requisite appeal fee a day after the deadline displays
his willingness to comply with the requirement therefor.
When petitioner sought recourse to the Court of Appeals via a Petition for Certiorari under Rule
65 of the Rules of Court, his Petition was dismissed. The Court of Appeals held that the
petitioner availed himself of the wrong remedy as an appeal from the order, award, judgment
or final order of the DARAB shall be taken to the Court of Appeals by filing a petition for review
under Rule 43 of the Rules of Court and not a petition for certiorari under Rule 65.
On this point, we agree with the Court of Appeals.
Pertinent provisions of Rule 43 of the Rules of Court governing appeals from quasi-judicial
agencies to the Court of Appeals, provide:
SECTION 1. Scope. – This Rule shall apply to appeals from judgments or final orders of the
Court of Tax Appeals and from awards, judgments, final orders or resolutions of or authorized
by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these
agencies are the Civil Service Commission, Central Board of Assessment Appeals, Securities
and Exchange Commission, Office of the President, Land Registration Authority, Social
Security Commission, Civil Aeronautics Board, Bureau of Patents, Trademarks and
Technology Transfer, National Electrification Administration, Energy Regulatory Board,
National Telecommunications Commission, Department of Agrarian Reform under Republic
Act No. 6657, Government Service Insurance System, Employees Compensation Commission,
Agricultural Inventions Board, Insurance Commission, Philippine Atomic Energy Commission,
Board of Investments, Construction Industry Arbitration Commission, and voluntary arbitrators
authorized by law.
xxxx
SEC. 3. Where to appeal. – An appeal under this Rule may be taken to the Court of Appeals
within the period and in the manner herein provided, whether the appeal involves questions of
fact, of law, or mixed questions of fact and law.
SEC. 4. Period of appeal. – The appeal shall be taken within fifteen (15) days from notice of
the award, judgment, final order or resolution, or from the date of its last publication, if
publication is required by law for its effectivity, or of the denial of petitioner’s motion for new
trial or reconsideration duly filed in accordance with the governing law of the court or agency a
quo. Only one (1) motion for reconsideration shall be allowed. Upon proper motion and the
payment of the full amount of the docket fee before the expiration of the reglementary period,
the Court of Appeals may grant an additional period of fifteen (15) days only within which to file
the petition for review. No further extension shall be granted except for the most compelling
reason and in no case to exceed fifteen (15) days.
In Nippon Paint Employees Union-Olalia v. Court of Appeals,21 we clarified:
It is elementary in remedial law that the use of an erroneous mode of appeal is cause for
dismissal of the petition for certiorari and it has been repeatedly stressed that a petition for
certiorari is not a substitute for a lost appeal. This is due to the nature of a Rule 65 petition for
certiorari which lies only where there is "no appeal," and "no plain, speedy and adequate
remedy in the ordinary course of law." As previously ruled by this Court:
x x x We have time and again reminded members of the bench and bar that a special civil
action for certiorari under Rule 65 lies only when "there is no appeal nor plain, speedy and
adequate remedy in the ordinary course of law." Certiorari can not be allowed when a party to
a case fails to appeal a judgment despite the availability of that remedy, certiorari not being a
substitute for lost appeal. The remedies of appeal and certiorari are mutually exclusive and not
alternative or successive.
Petitioner clearly availed himself of the wrong mode of appeal in bringing his case before the
Court of Appeals for review.
Petitioner filed with the Court of Appeals the special civil action of certiorari under Rule 65 of
the Rules of Court instead of a petition for review under Rule 43, not because it was the only
plain, speedy, and adequate remedy available to him under the law, but, obviously, to make up
for the loss of his right to an ordinary appeal. It is elementary that the special civil action of
certiorari is not and cannot be a substitute for an appeal, where the latter remedy is available,
as it was in this case. A special civil action under Rule 65 of the Rules of Court cannot cure a
party’s failure to timely file a petition for review under Rule 43 of the Rules of Court. Rule 65 is
an independent action that cannot be availed of as a substitute for the lost remedy of an
ordinary appeal, including that under Rule 43, especially if such loss or lapse was occasioned
by a party’s neglect or error in the choice of remedies.22
All things considered, however, we do not agree in the conclusion of the Court of Appeals
dismissing petitioner’s Petition based on a procedural faux pax. While a petition for certiorari is
dismissible for being the wrong remedy, there are exceptions to this rule, to wit: (a) when public
welfare and the advancement of public policy dictates; (b) when the broader interest of justice
so requires; (c) when the writs issued are null and void; or (d) when the questioned order
amounts to an oppressive exercise of judicial authority.23
In Sebastian v. Morales,24 we ruled that rules of procedure must be faithfully followed except
only when, for persuasive reasons, they may be relaxed to relieve a litigant of an injustice not
commensurate with his failure to comply with the prescribed procedure, thus:
[C]onsidering that the petitioner has presented a good cause for the proper and just
determination of his case, the appellate court should have relaxed the stringent application of
technical rules of procedure and yielded to consideration of substantial justice.25
The Court has allowed some meritorious cases to proceed despite inherent procedural defects
and lapses. This is in keeping with the principle that rules of procedure are mere tools designed
to facilitate the attainment of justice and that strict and rigid application of rules which would
result in technicalities that tend to frustrate rather than promote substantial justice must always
be avoided. It is a far better and more prudent cause of action for the court to excuse a technical
lapse and afford the parties a review of the case to attain the ends of justice, rather than dispose
of the case on technicality and cause grave injustice to the parties, giving a false impression of
speedy disposal of cases while actually resulting in more delay, if not a miscarriage of justice.26
We find that petitioner’s case fits more the exception rather than the general rule. Taking into
account the importance of the issues raised in the Petition, and what petitioner stands to lose,
the Court of Appeals should have given due course to the said Petition and treated it as a
petition for review. By dismissing the Petition outright, the Court of Appeals absolutely
foreclosed the resolution of the issues raised therein. Indubitably, justice would have been
better served if the Court of Appeals resolved the issues that were raised in the Petition.
Conspicuously, the period to appeal had lapsed so that even if the Court of Appeals considered
the petition as one for review under Rule 43 of the Rules of Court, still the petition was filed
beyond the reglementary period. But, there can be no blinking at the fact that under Rule 43,
Section 4 of the Rules of Court, "the Court of Appeals may grant an additional period of fifteen
(15) days only within which to file the petition for review." By any reckoning, the Court of
Appeals may even grant an additional period of fifteen (15) days within which to file the petition
under Rule 43 of the Rules of Court. In other words, the period to appeal from quasi-judicial
agencies to the Court of Appeals under Rule 43 is neither an impregnable nor an unyielding
rule.
The issue involved in this case is no less than the jurisdiction of the Regional Arbitrator to
render its Decision dated 16 August 1999 declaring the subject properties as ancestral lands.
As well, it is too flagrant to be ignored that these lands are covered by a Torrens title in the
name of the petitioner. The Court of Appeals should have looked past rules of technicality to
resolve the case on its merits.
For DARAB to have jurisdiction over a case, there must exist a tenancy relationship between
the parties. A tenancy relationship cannot be presumed. There must be evidence to prove the
tenancy relations such that all its indispensable elements must be established, to wit: (1) the
parties are the landowner and the tenant; (2) the subject is agricultural land; (3) there is consent
by the landowner; (4) the purpose is agricultural production; (5) there is personal cultivation;
and (6) there is sharing of the harvests. All these requisites are necessary to create tenancy
relationship, and the absence of one or more requisites will not make the alleged tenant a de
facto tenant.27
In Heirs of Rafael Magpily v. De Jesus,28 tenants are defined as persons who - in themselves
and with the aid available from within their immediate farm householders – they cultivate the
lands belonging to or possessed by another with the latter’s consent; for purposes of
production, they share the produce with the landholder under the share tenancy system, or pay
to the landholder a price certain or ascertainable in produce of money or both under the
leasehold tenancy system.
In this case, respondents did not allege much less prove that they are tenants of the subject
properties. There is likewise no independent evidence to prove any of the requisites of a
tenancy relationship between petitioner and respondents. What they insist upon is that they
are occupying their ancestral lands covered by the protection of the law.
In his Decision, the Regional Adjudicator himself found that there was no tenancy relationship
between petitioner and respondents, to wit:
[Herein petitioner] pleaded for his defense to the claims of [herein respondents] right of
redemption contending that the [respondents] have not proven any tenurial relationship with
him. Indeed, the records show that herein [respondents] have not proven their tenurial
relationship with [petitioner], hence Section 12 of Republic Act No. 3844, as amended, does
not apply to the said claim of right of redemption.
As to the claim of [respondents], that is, for "disturbance compensation" under Section 36(1) of
Republic Act No. 3844, said provision of law to the opinion of the Board through this
Adjudicator, cannot apply in the said claim since [respondents] have not also proven tenancy-
relationship which is a requirement to be entitled to "disturbance compensation."29
Under law and settled jurisprudence, and based on the records of this case, the Regional
Adjudicator evidently has no jurisdiction to hear and resolve respondents’ complaint. In the
absence of a tenancy relationship, the case falls outside the jurisdiction of the DARAB; it is
cognizable by the Regular Courts.30
Moreover, the Regional Adjudicator in his Decision dated 16 August 1999 found that:
The third claim of herein Petitioners as prayed for is their right to "ancestral lands" under
Section 9 of Republic Act No. 6657 which provides as follows:
SECTION 9. ANCESTRAL LANDS. – For purposes of this act, ancestral lands of each
indigenous cultural community shall include but not limited to lands in the actual, continuous
and open possession and occupation of the community and its members: Provided, that the
Torrens System shall be respected.
The rights of these communities of their ancestral land shall be protected to insure their
economic, social and cultural well-being. In line with the principles of self-determination and
autonomy, the system of land ownership, land use and the modes of settling land disputes of
all these communities must be recognized and respected. (Underscoring Supplied.)
Any provision of law to the contrary notwithstanding, the PARC may suspend the
implementation of the act with respect to ancestral lands for the purpose of identifying and
delineating such lands; Provided, that in the autonomous regions, the respective legislatures
may enact their own laws in ancestral domain subject to the provisions of the constitution and
the principles enumerated, initiated in this Act and other (sic).
Applying the aforecited provisions of law, it is clear without fear of contradiction that herein
Petitioners are members of the indigenous cultural community (the Kankanais and Ibalois) of
the Cordillera Administrative Region (CAR). It is also clear that they have been in the actual,
continuous and in open possession and occupation of the community as evidenced by
residential houses, tax declarations and improvements as seen during the ocular inspection
(the property in question).
While it is true that the aforecited provisions of law provides an exception – that is: "Provided,
that the Torrens System shall be respected," so that in this instant case, there is a CONFLICT
in that while the property in question is occupied by herein Petitioners, the same property is
titled (T-29281 and T-29282) in the name of herein Respondent, MARIANO TAN ENG LIAN
married to ALETA SO TUN (a Chinese) who are not members of the cultural minority.
In this case, the Torrens System shall be respected. But under the 2nd paragraph of said law,
it went further to say, "THE RIGHT OF THESE COMMUNITIES TO THEIR ANCESTRAL
LANDS SHALL BE PROTECTED TO ENSURE THEIR ECONOMIC, SOCIAL AND
CULTURAL WELL-BEING. IN LINE WITH THE PRINCIPLES OF SELF-DETERMINATION
AND AUTONOMY, THE SYSTEM OF LAND OWNERSHIP, LAND USE AND THE MODES
OF SETTLING LAND DISPUTES OF ALL THESE COMMUNITIES MUST BE RECOGNIZED
AND RESPECTED. (Underscoring supplied.) It is therefore the considered opinion of the Board
through this Adjudicator that the property subject of this case which is an ancestral land be
acquired by the government (through the Regional Office of the Department of Agrarian Reform
of the Cordillera Administrative Region, Baguio City), for eventual distribution to the herein
Petitioners. This is the spirit of the law.31
It is worthy to note that the Regional Adjudicator, in ruling that the subject properties are
ancestral lands of the respondents, relied solely on the definition of ancestral lands under
Section 9 of Republic Act No. 6657. However, a special law, Republic Act No. 8371, otherwise
known as the Indigenous People’s Rights Act of 1997, specifically governs the rights of
indigenous people to their ancestral domains and lands.
Section 3(a) and (b)32 of Republic Act No. 8371 provides a more thorough definition of
ancestral domains and ancestral lands:
SECTION 3. Definition of Terms. – For purposes of this Act, the following terms shall mean:
a) Ancestral Domains – Subject to Section 56 hereof, refers to all areas generally belonging to
ICCs/IPs comprising lands, inland waters, coastal areas, and natural resources therein, held
under a claim of ownership, occupied or possessed by ICCs/IPs, by themselves or through
their ancestors, communally or individually since time immemorial, continuously to the present
except when interrupted by war, force majeure or displacement by force, deceit, stealth or as
a consequence of government projects or any other voluntary dealings entered into by
government and private individuals/corporations, and which are necessary to ensure their
economic, social and cultural welfare. It shall include ancestral lands, forests, pasture,
residential, agricultural, and other lands individually owned whether alienable and disposable
or otherwise, hunting grounds, burial grounds, worship areas, bodies of water, mineral and
other natural resources, and lands which may no longer be exclusively occupied by ICCs/IPs
but from which they traditionally had access to for their subsistence and traditional activities,
particularly the home ranges of ICCs/IPs who are still nomadic and/or shifting cultivators;
b) Ancestral Lands – Subject to Section 56 hereof, refers to lands occupied, possessed and
utilized by individuals, families and clans who are members of the ICCs/IPs since time
immemorial, by themselves or through their predecessors-in-interest, under claims of individual
or traditional group ownership, continuously, to the present except when interrupted by war,
force majeure or displacement by force, deceit, stealth, or as a consequence of government
projects and other voluntary dealings entered into by government and private
individuals/corporations, including, but not limited to, residential lots, rice terraces or paddies,
private forests, swidden farms and tree lots.
Republic Act No. 8371 creates the National Commission on Indigenous Cultural
Communities/Indigenous People (NCIP) which shall be the primary government agency
responsible for the formulation and implementation of policies, plans and programs to promote
and protect the rights and well-being of the indigenous cultural communities/indigenous people
(ICCs/IPs) and the recognition of their ancestral domains as well as their rights thereto.33
Prior to Republic Act No. 8371, ancestral domains and lands were delineated under the
Department of Environment and Natural Resources (DENR) and governed by DENR
Administrative Order No. 2, series of 1993. Presently, the process of delineation and
recognition of ancestral domains and lands is guided by the principle of self-delineation and is
set forth under Sections 52 and 53, Chapter VIII of Republic Act No. 8371;34 and in Part I, Rule
VII of NCIP Administrative Order No. 01-98 (Rules and Regulations Implementing Republic Act
No. 8371).35 Official delineation is under the jurisdiction of the Ancestral Domains Office (ADO)
of the NCIP.36
It is irrefragable, therefore, that the Regional Adjudicator overstepped the boundaries of his
jurisdiction when he made a declaration that the subject properties are ancestral lands and
proceeded to award the same to the respondents, when jurisdiction over the delineation and
recognition of the same is explicitly conferred on the NCIP.
The Regional Adjudicator even made the following disposition on petitioner’s TCTs:
As to the two (2) TCT’s (T-29281 and T-29282) issued to herein respondent, the records
(Annex "C" for Respondent) of this case show under the 3rd and 4th paragraphs of the
DECISION dated June 28, 1991 provides:
The subject parcels of land were originally titled in the name of ULBANA ALSIO under Original
Certificate of Title No. 0-131 which she obtained on July 15, 1965 (Exhibit "D") through a
petition for the judicial reopening of Civil Reservation Case No. 1, G.L.R.O. Record No. 211`
(Exhibits "A" and "B") that was granted by the Court of First Instance of the City of Baguio in its
decision dated February 08, 1965 (Exhibit "C") subsequently by Alsio to Jose Perez (Exhibit
"I") in turn to Rosario Oreta (Exhibit "J") and then to Lutgarda Platon on April 30, 1972 (Exhibit
"K"). At the time Platon acquired the property, it was already subdivided into two (2) lots hence,
she was issued TCT Nos. T-20830 (Exhibit "G") and T-20831 (Exhibit "H").
Meanwhile, on December 22, 1977, P.D. 1271 was issued nullifying all decrees of registration
and certificates of title issued pursuant to decisions of the Court of First Instance of Baguio and
Benguet in petition for the judicial reopening of Civil Reservation Case No. 1, G.L.R.O. Record
No. 211 on the ground of lack of jurisdiction but allowed time to the title holders concerned to
apply for the validation of their titles under certain conditions.
The aforecited two (2) paragraphs give credence to the allegation of the Petitioners in their
original petition (nos. 16, 17 and 18) that the titles of Respondent’s predecessors-in-interest
were secured through fraud. They referred as an example a letter (Annex "E" for Petitioners)
coming from the Land Management Bureau, Manila which made the recommendation as
follows:
RECOMMENDATION
In view of the foregoing findings, it is respectfully recommended that the steps be taken in the
proper court of justice for the cancellation of the Original Certificates of Title No. 0-131 of
Ulbano Alsio and its corresponding derivative titles so that the land be reverted to the mass of
the public domain and thereafter, dispose the same to qualified applicants under the provisions
of RA No. 730.37
Once more, the Regional Adjudicator acted without jurisdiction in entertaining a collateral attack
on petitioner’s TCTs.
In an earlier case for quieting of title instituted by the petitioner before the trial court, which
reached this Court as G.R. No. 118515,38 petitioner’s ownership and titles to the subject
properties had been affirmed with finality, with entry of judgment having been made therein on
15 January 1996. A suit for quieting of title is an action quasi in rem,39 which is conclusive only
to the parties to the suit. It is too glaring to escape our attention that several of the respondents
herein were the defendants in the suit for quieting of title before the trial court and the
subsequent petitioners in G.R. No. 118515.40 The finality of the Decision in G.R. No. 118515
is therefore binding upon them.41 Although the Decision in G.R. No. 118515 is not binding on
the other respondents who were not parties thereto, said respondents are still confronted with
petitioner’s TCTs which they must directly challenge before the appropriate tribunal.
Respondents, thus, cannot pray for the Regional Adjudicator to declare petitioner’s TCTs null
and void, for such would constitute a collateral attack on petitioner’s titles which is not allowed
under the law. A Torrens title cannot be collaterally attacked.42 A collateral attack is made
when, in another action to obtain a different relief, an attack on the judgment is made as an
incident to said action,43 as opposed to a direct attack against a judgment which is made
through an action or proceeding, the main object of which is to annul, set aside, or enjoin the
enforcement of such judgment, if not yet carried into effect; or, if the property has been
disposed of, the aggrieved party may sue for recovery.441avvphi1
The petitioner’s titles to the subject properties have acquired the character of indeafeasibility,
being registered under the Torrens System of registration. Once a decree of registration is
made under the Torrens System, and the reglementary period has passed within which the
decree may be questioned, the title is perfected and cannot be collaterally questioned later
on.45 To permit a collateral attack on petitioner’s title, such as what respondents attempt, would
reduce the vaunted legal indeafeasibility of a Torrens title to meaningless verbiage.46 It has,
therefore, become an ancient rule that the issue on the validity of title, i.e., whether or not it
was fraudulently issued, can only be raised in an action expressly instituted for that purpose.47
Any decision rendered without jurisdiction is a total nullity and may be struck down anytime.48
In Tambunting, Jr. v. Sumabat,49 we declared that a void judgment is in legal effect no
judgment, by which no rights are divested, from which no rights can be obtained, which neither
binds nor bonds anyone, and under which all acts performed and all claims flowing therefrom
are void. In the Petition at bar, since the Regional Adjudicator is evidently without jurisdiction
to rule on respondents’ complaint without the existence of a tenancy relationship between them
and the petitioner, then the Decision he rendered is void.
Wherefore, premises considered, the instant petition is Granted. The Resolutions of the Court
of Appeals dated 5 April 2006 and 4 July 2006 are REVERSED and SET ASIDE. The Decision
dated 16 August 1999 of the Regional Adjudicator in Cases No. DCN NO 0117-98 B CAR to
DCN 0140-98 B CAR is declared NULL and VOID, and the respondents’ petition therein is
ordered DISMISSED, without prejudice to the filing of the proper case before the appropriate
tribunal. No costs.
SO ORDERED.

G.R. No. 151016 August 6, 2008
SPOUSES SOFRONIO SANTOS and NATIVIDAD SANTOS, FROILAN SANTOS, CECILIA
M. MACASPAC, and R TRANSPORT CORPORATION, petitioners,
vs.
HEIRS OF DOMINGA LUSTRE, namely TARCISIO MANIQUIZ, TERESITA BURGOS,
FLORITA M. REYES and LERMIE MANIQUIZ, respondents.
DECISION
NACHURA, J.:
This petition for review seeks the reversal of the Court of Appeals (CA) Decision1 dated August
23, 2001, and Resolution dated December 10, 2001, which denied petitioners’ Motion to
Dismiss Civil Case No. 2115, an action for Annulment of Transfer Certificate of Title and Deed
of Absolute Sale.
The facts, as borne by the records, are as follows:
Dominga Lustre, who died on October 15, 1989, owned a residential lot which is located in San
Antonio, Nueva Ecija, with an area of 390 square meters, and covered by Transfer Certificate
of Title (TCT) No. NT-50384. On September 20, 1974, Dominga Lustre mortgaged the lot to
spouses Sofronio and Natividad Santos (spouses Santos) for P38,000.00.2
On May 16, 1976, Dominga Lustre sold the property to Natividad M. Santos for P15,000.00
through a Deed of Absolute Sale.3 The mortgage appears to have been canceled on March
20, 1976.4 The cancellation of the mortgage and the sale of the property were both inscribed
at the back of TCT No. NT-50384 on April 17, 1984.
As a result of the sale, TCT No. NT-50384 was canceled and TCT No. NT-183029 was issued
in the name of the spouses Santos. Subsequently, the latter executed a Deed of Sale
transferring the property to their son, Froilan M. Santos (petitioner). By virtue of this deed, TCT
No. NT-183029 was canceled and TCT No. 1939735 issued in the name of Froilan Santos.
On April 14, 1994, Cecilia Macaspac (also a petitioner) and Tarcisio Maniquiz, both heirs of
Dominga Lustre, filed with the Regional Trial Court (RTC) of Gapan, Nueva Ecija, a Complaint
for Declaration of the Inexistence of Contract, Annulment of Title, Reconveyance and
Damages6 against Froilan M. Santos. That case was docketed as Civil Case No. 1330. Later,
the plaintiffs sought the amendment of the complaint to include Eusebio Maniquiz as plaintiff
and to include a certification against forum shopping. However, the records in this case are
bereft of any information as to whether the same was allowed by the trial court.7 We note,
however, that only Cecilia Macaspac executed a Verification and Certification against Forum
Shopping8 in that case.
According to the Amended Complaint in Civil Case No. 1330, plaintiffs Cecilia and Tarcisio are
the legitimate children, while Eusebio is the spouse of Dominga Lustre, who allegedly left them
the subject property when she died on October 15, 1989. They averred that the sale of the
property to Natividad Santos was simulated, spurious or fake, and that they discovered that
spouses Santos transferred the property to Froilan Santos when the latter filed an ejectment
suit against them. Thereafter, Froilan Santos, through fraud and deceit, succeeded in
transferring the property. On the mistaken belief that the sale between Dominga Lustre and
Natividad Santos occurred on April 17, 1984, plaintiffs prayed that the trial court issue judgment
—
1. Ordering the inexistence of sale dated April 17, 1984 between Dominga Lustre and Natividad
Santos and subsequent thereto;
2. Ordering the cancellation of TCT No. NT-193973 in favor of defendant and reconvey the
same to the plaintiff;
3. Ordering the defendant to pay plaintiffs the sum of P20,000.00 as attorney’s fee, P20,000.00
as moral damages; P20,000.00 as litigation expenses; P20,000.00 as exemplary damages;
4. Ordering defendant to pay the cost of the suit;
5. General relief[s] are likewise prayed for in the premises. (Emphasis ours.)9
On September 12, 1994, the RTC, Branch 87, to which Civil Case No. 1330 was raffled,
ordered the records of the case to be referred to the municipal trial court for adjudication on the
ground that the assessed value of the subject property was below the amount within its
jurisdiction.10
On May 14, 1999, while Civil Case No. 1330 was still pending, Dominga Lustre’s other heirs,
namely, Eusebio Maniquiz, Teresita Burgos, Tarcisio Maniquiz, Florita M. Reyes and Lermie
Maniquiz filed a Complaint for Annulment of Transfer Certificate of Title and Deed of Absolute
Sale11 against spouses Sofronio and Natividad Santos, Froilan Santos, Cecilia M. Macaspac,
R Transport Corporation, and the Register of Deeds of Cabanatuan City, with the same RTC.
Cecilia Macaspac, plaintiff in Civil Case No. 1330, was impleaded as defendant because she
refused to join the other heirs as plaintiffs. The case was docketed as Civil Case No. 2115 and
was raffled to Branch 34.
The complaint alleged that the spouses Santos simulated the Deed of Sale dated May 16, 1976
by forging Dominga Lustre’s signature; that thereafter, the spouses Santos simulated another
Deed of Sale transferring the property to Froilan Santos, which led to the issuance of TCT No.
193973 in his name; that this title became the basis of Froilan’s ejectment suit against them;
and that R Transport Corporation (also a petitioner), was claiming that it bought the property
from Froilan but there was no evidence to prove such claim. According to the plaintiffs (herein
respondents), they had been residing in the property since birth and the house standing on the
lot was built by their ancestors. They posited that the transferees of the property could not be
considered as buyers in good faith. The complaint prayed that judgment be rendered:

a. Annulling and declaring null and void the Deed of Absolute Sale, Annex C hereof; that
between spouses Santos and their son Froilan; and that purportedly between defendant Froilan
and defendant corporation;
b. Annulling and declaring null and void Transfer Certificate of Title No. NT-183029 appearing
to be in the name of defendant spouses; TCT No. NT-193973 in the name of defendant Froilan
M. Santos and Transfer Certificate of Title, if any, in the name of defendant corporation;
c. Reinstating Transfer Certificate of Title No. NT-50384 in the name of Dominga Lustre and
directing the Register of Deeds to do so or to issue [a] new one in the name of the deceased
Dominga Lustre and canceling all titles mentioned in the immediately preceding paragraph
which [were] made to cancel Lustre’s title;
d. Ordering defendants, jointly and severally, to pay plaintiffs the following:
1.) Moral damages of P200,000.00;
2.) Exemplary damages of P100,000.00;
3.) Attorney’s fee of P50,000.00, plus cost of suit.
Plaintiffs further pray for such other affirmative reliefs as are deemed just and equitable in the
premises. 12
Alleging that the plaintiffs’ right of action for annulment of the Deed of Sale and TCT Nos.
183029 and 193973 had long prescribed and was barred by laches, petitioners filed a Motion
to Dismiss Civil Case No. 2115.13 They later filed an Omnibus/Supplemental Motion to Dismiss
on the ground of litis pendentia.14
On January 11, 2000, the RTC denied the Motion to Dismiss as well as the Supplemental
Motion to Dismiss for lack of merit.15 On April 5, 2000, the RTC denied the Joint Motion for
Reconsideration filed by petitioners.16
They then filed a petition for certiorari with the Court of Appeals (CA), assailing the denial of
their motion to dismiss. On August 23, 2001, the CA dismissed the petition for lack of merit
based on its finding that the RTC did not commit grave abuse of discretion in denying the
motion to dismiss.17 On December 10, 2001, the CA denied petitioners’ motion for
reconsideration.18
In the assailed decision, the CA pronounced that the respondents were not guilty of forum
shopping. There was no identity of parties because Cecilia Macaspac, who was a plaintiff in
Civil Case No. 1330, was a defendant in Civil Case No. 2115; and there was only one defendant
in Civil Case No. 1330, while there were several additional defendants in Civil Case No. 2115.
Moreover, the reliefs demanded in the two cases differed. In Civil Case No. 1330, plaintiffs
were seeking the declaration of the inexistence of a sale dated April 17, 1984, cancellation of
Froilan M. Santos’ certificate of title, and the reconveyance of the property to plaintiffs. On the
other hand, plaintiffs in Civil Case No. 2115 were praying for the annulment of the Deed of
Absolute Sale dated May 16, 1976, cancellation of TCT No. NT-183029 and the succeeding
TCTs, and reinstatement of TCT No. NT-50384 in the name of Dominga Lustre.19
On the issue of prescription and laches, the CA declared that an action for the declaration of
the inexistence of a contract does not prescribe, and laches could not have set in since there
was no unreasonable delay in the filing of the case.20
In this petition for review, the sole issue submitted for resolution is whether the RTC committed
grave abuse of discretion in not dismissing the case based on forum shopping and prescription
or laches.21
The petition has no merit. The RTC did not commit grave abuse of discretion in denying
petitioners’ motion to dismiss.
Forum shopping exists when the elements of litis pendentia are present or when a final
judgment in one case will amount to res judicata in the other.22 Among its elements are identity
of the parties, identity of the subject matter and identity of the causes of action in the two
cases.23
The dispute in this case centers on whether there exist identity of causes of action and identity
of parties between Civil Case No. 1330 and Civil Case No. 2115.
Concededly, the causes of action in Civil Case No. 1330 and Civil Case No. 2115 are identical.
There is identity of causes of action if the same evidence needed in the first case will sustain
the second action, and this principle applies even if the reliefs sought in the two cases are
different.24 Without a doubt, the same evidence will be necessary to sustain the causes of
action in these two cases which are substantially based on the same series of transactions. In
fact, similar reliefs are prayed for in the two cases. Both complaints ultimately seek the
cancellation of the title of the alleged transferees and the recovery of the subject property.
Despite this similarity, however, we hold that respondents are not guilty of forum shopping
because the element of identity of parties is not present.
In insisting that the parties are identical, petitioners stress that all the plaintiffs are heirs of
Dominga Lustre, while the defendants are past and present holders of the certificates of title
covering the subject property. They argue that Cecilia Macaspac’s being a defendant in the
second case does not change whatever interest she has in the former case, considering that
she is an indispensable party in both cases. They posit that additional parties will not prevent
the application of the rule on res judicata.25
While we agree with the CA that there is no identity of parties in the two cases, we do not agree
with the rationale behind its conclusion. To recall, the CA ratiocinated that there was no identity
of parties because Cecilia Macaspac, while a plaintiff in Civil Case No. 1330, is a defendant in
Civil Case No. 2115, and there are several additional defendants in Civil Case No. 2115.
The CA appears to have overlooked the principle that what is required is only substantial, and
not absolute, identity of parties. There is substantial identity of parties when there is a
community of interest between a party in the first case and a party in the second case, even if
the latter was not impleaded in the first case.26 Moreover, the fact that the positions of the
parties are reversed, i.e., the plaintiffs in the first case are the defendants in the second case,
or vice versa, does not negate the identity of parties for purposes of determining whether the
case is dismissible on the ground of litis pendentia.27
Following these legal principles, it appears that there is identity of parties in the two cases.
However, a closer look at the facts and a deeper understanding of pertinent jurisprudence will
lead to a different conclusion: there is actually no identity of parties because the plaintiff in Civil
Case No. 1330 does not, in fact, share a common interest with the plaintiffs in Civil Case No.
2115.
As pointed out by petitioners, plaintiffs in both cases are the heirs of Dominga Lustre; they are
therefore co-owners of the property. However, the fact of being a co-owner does not
necessarily mean that a plaintiff is acting for the benefit of the co-ownership when he files an
action respecting the co-owned property. Co-owners are not parties inter se in relation to the
property owned in common. The test is whether the "additional" party, the co-owner in this
case, acts in the same capacity or is in privity with the parties in the former action. 28
Notably, plaintiff Cecilia Macaspac in Civil Case No. 1330 filed the complaint seeking the
reconveyance of the property to her, and not to Dominga Lustre or her heirs. This is a clear act
of repudiation of the co-ownership which would negate a conclusion that she acted in privity
with the other heirs or that she filed the complaint in behalf of the co-ownership. In contrast,
respondents were evidently acting for the benefit of the co-ownership when they filed the
complaint in Civil Case No. 2115 wherein they prayed that TCT No. NT-50384 in the name of
Dominga Lustre be reinstated, or a new certificate of title be issued in her name.
The petitioners and respondents have squabbled over whether the additional parties in the
second case are indispensable or necessary parties on the assumption that the proper
characterization of the parties will have a bearing on the determination of the existence of
identity of parties. In support of their position, the petitioners cite Juan v. Go Cotay29 when
they theorize that "there is still identity of parties although in the second action there is one
party who was not joined in the former action, if it appears that such party is not a necessary
party either in the first or in the second action."30
We note, however, that the party who was not impleaded in Go Cotay was, technically
speaking, a necessary party (as opposed to an indispensable party as defined under the Rules
of Court), being the plaintiff’s wife who also had an interest in the case. Possibly, and, indeed,
it seems probable that the petitioners may not have used the term "necessary party" in the strict
legal sense. They could really have been referring to an "indispensable party." In challenging
petitioners’ allegation, respondents obviously understood the statement as referring to an
indispensable party. They were, therefore, quick to point out that the additional plaintiffs in Civil
Case No. 2115 are indispensable parties, being co-owners of the property.31
By this debate, the parties have only muddled the issue. The determination of whether there is
identity of parties rests on the commonality of the parties’ interest, regardless of whether they
are indispensable parties or not. The issue of whether the additional parties are indispensable
parties or not acquires real significance only when considering the validity of the judgment that
will be rendered in the earlier case. This is so, because if the additional parties are
indispensable parties, then no valid judgment can be rendered against them in the earlier case
in which they did not participate, and this will foreclose the application of res judicata which
requires the existence of a final judgment.
Without question, a co-owner may bring an action to recover the co-owned property without
the necessity of joining all the other co-owners as co-plaintiffs because the suit is deemed to
be instituted for the benefit of all. In such case, the other heirs are merely necessary parties.
Parenthetically, the inclusion among the defendants of Cecilia Macaspac, who refused to join
the other heirs as plaintiffs in Civil Case No. 2115, was not actually necessary.
However, if the action is for the benefit of the plaintiff alone, as in Civil Case No. 1330, the
action will not prosper unless he impleads the other co-owners who are indispensable
parties.32 The absence of an indispensable party renders all subsequent actions of the court
null and void for want of authority to act, not only as to the absent parties but even as to those
present.33 The trial court does not acquire jurisdiction over the indispensable parties who are
not impleaded in the case, and judgment thereon cannot be valid and binding against them. A
decision that is null and void for want of jurisdiction on the part of the trial court is not a decision
in contemplation of law; hence, it can never become final and executory.34
Worth mentioning is the doctrine that any adverse ruling in the earlier case will not, in any way,
prejudice the heirs who did not join, even if such case was actually filed in behalf of all the co-
owners. In fact, if an action for recovery of property is dismissed, a subsequent action by a co-
heir who did not join the earlier case should not be barred by prior judgment.35 Any judgment
of the court in favor of the co-owner will benefit the others, but if the judgment is adverse, the
same cannot prejudice the rights of the unimpleaded co-owners.36
Applying these principles to the instant case, we rule that there is no identity of parties and
thus, the second action is not barred by litis pendentia.
On the issue of prescription and laches, we fully agree with the CA. The action for
reconveyance on the ground that the certificate of title was obtained by means of a fictitious
deed of sale is virtually an action for the declaration of its nullity, which does not prescribe.37
Moreover, a person acquiring property through fraud becomes, by operation of law, a trustee
of an implied trust for the benefit of the real owner of the property. An action for reconveyance
based on an implied trust prescribes in ten years. And in such case, the prescriptive period
applies only if there is an actual need to reconvey the property as when the plaintiff is not in
possession of the property. Otherwise, if plaintiff is in possession of the property, prescription
does not commence to run against him. Thus, when an action for reconveyance is nonetheless
filed, it would be in the nature of a suit for quieting of title, an action that is imprescriptible.38
It follows then that the respondents’ present action should not be barred by laches. Laches is
a doctrine in equity, which may be used only in the absence of, and never against, statutory
law. Obviously, it cannot be set up to resist the enforcement of an imprescriptible legal right.39
Finally, it is true that an action for reconveyance will not prosper when the property sought to
be reconveyed is in the hands of an innocent purchaser for value. In this case, however, the
protection of the rights of any alleged innocent purchaser is a matter that should be threshed
out in the main case and not in these proceedings.
WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision
dated August 23, 2001, and Resolution dated December 10, 2001, are AFFIRMED.
SO ORDERED.
G.R. No. 158121 December 12, 2007
HEIRS OF VALERIANO S. CONCHA, SR. NAMELY: TERESITA CONCHA-PARAN,
VALERIANO P. CONCHA, JR., RAMON P. CONCHA, EDUARDO P. CONCHA,
REPRESENTED BY HIS LEGAL GUARDIAN, REYNALDO P. CONCHA, ALBERTO P.
CONCHA, BERNARDO P. CONCHA and GLORIA, petitioners,
vs.
SPOUSES GREGORIO J. LUMOCSO1 and BIENVENIDA GUYA, CRISTITA J. LUMOCSO
VDA. DE DAAN, AND SPOUSES JACINTO J. LUMOCSO and BALBINA T. LUMOCSO,2
respondents.
DECISION
PUNO, C.J.:
On appeal by certiorari under Rule 45 of the Rules of Court are the decision3 and resolution4
of the Court of Appeals (CA) in CA-G.R. SP No. 59499, annulling the resolutions5 and order6
of the Regional Trial Court (RTC) of Dipolog City, Branch 9, in Civil Case Nos. 5188, 5433 and
5434 which denied the separate motions to dismiss and Joint Motion for Reconsideration filed
by the respondents.
The relevant facts are undisputed.
Petitioners, heirs of spouses Dorotea and Valeriano Concha, Sr., claim to be the rightful owners
of Lot No. 6195 (Civil Case No. 5188), a one-hectare portion of Lot No. 6196-A (Civil Case No.
5433), and a one-hectare portion of Lot Nos. 6196-B and 7529-A (Civil Case No. 5434), all
situated in Cogon, Dipolog City, under Section 48(b) of Commonwealth Act No. 141 (C.A. No.
141), otherwise known as the Public Land Act. Respondent siblings Gregorio Lumocso (Civil
Case No. 5188), Cristita Lumocso Vda. de Daan (Civil Case No. 5433) and Jacinto Lumocso
(Civil Case No. 5434), are the patent holders and registered owners of the subject lots.
The records show that on August 6, 1997, Valeriano Sr.7 and his children, petitioners Valeriano
Jr., Ramon, Eduardo, Alberto, Bernardo, Teresita, Reynaldo, and Gloria, all surnamed Concha,
filed a complaint for Reconveyance and/or Annulment of Title with Damages against "Spouses
Gregorio Lomocso and Bienvenida Guya." They sought to annul Free Patent No. (IX-8)985 and
the corresponding Original Certificate of Title (OCT) No. P-22556 issued in the name of
"Gregorio Lumocso" covering Lot No. 6195. The case was raffled to the RTC of Dipolog City,
Branch 9, and docketed as Civil Case No. 5188. In their Amended Complaint, petitioners
prayed that judgment be rendered:
1. Declaring Free Patent No. (IX-8)985 and Original Certificate of Title No. 22556 issued to
defendants as null and void ab initio;
2. Declaring Lot No. 6195 or 1.19122-hectare as private property of the plaintiffs under Sec.
48(b) of CA No. 141 otherwise known as the Public Land Act as amended by RA 1942;
3. Ordering the defendant Lomocsos to reconvey the properties (sic) in question Lot No. 6195
or the 1.19122 hectares in favor of the plaintiffs within 30 days from the finality of the decision
in this case and if they refuse, ordering the Clerk of Court of this Honorable Court to execute
the deed of reconveyance with like force and effect as if executed by the defendant[s]
themselves;
4. Ordering defendant Lomocsos to pay P60,000.00 for the 21 forest trees illegally cut;
P50,000.00 for moral damages; P20,000.00 for Attorney’s fees; P20,000.00 for litigation
expenses; and to pay the cost of the proceedings;
5. Declaring the confiscated three (sic) flitches kept in the area of the plaintiffs at Dampalan
San Jose, Dipolog with a total volume of 2000 board feet a[s] property of the plaintiff [they]
being cut, collected and taken from the land possessed, preserved, and owned by the plaintiffs;
6. The plaintiffs further pray for such other reliefs and remedies which this Honorable Court
may deem just and equitable in the premises.8
On September 3, 1999, two separate complaints for Reconveyance with Damages were filed
by petitioners,9 this time against "Cristita Lomocso Vda. de Daan" for a one-hectare portion of
Lot No. 6196-A and "Spouses Jacinto Lomocso and Balbina T. Lomocso" for a one-hectare
portion of Lot Nos. 6196-B and 7529-A. The two complaints were also raffled to Branch 9 of
the RTC of Dipolog City and docketed as Civil Case Nos. 5433 and 5434, respectively. In Civil
Case No. 5433, petitioners prayed that judgment be rendered:
1. Declaring [a] portion of Lot 6196-A titled under OCT (P23527) 4888 equivalent to one hectare
located at the western portion of Lot 4888 as private property of the plaintiffs under Sec. 48(B)
CA 141 otherwise known as Public Land OCT (sic) as amended by RA No. 1942;
2. Ordering the defendant to reconvey the equivalent of one (1) hectare forested portion of her
property in question in favor of the plaintiffs within 30 days from the finality of the decision in
this case segregating one hectare from OCT (P23527) 4888, located at its Western portion and
if she refuse (sic), ordering the Clerk of Court of this Honorable Court to execute the deed of
reconveyance with like force and effect, as if executed by the defenda[n]t herself;
3. Ordering defendant to pay P30,000.00 for the 22 forest trees illegally cut; P20,000.00 for
moral damages; P20,000.00 for Attorney's fees; P20,000.00 for litigation expenses; and to pay
the cost of the proceedings.10
In Civil Case No. 5434, petitioners prayed that judgment be rendered:
1. Declaring [a] portion of Lot 7529-A under OCT (P-23207) 12870 and Lot 6196-B OCT (P-
20845) 4889 equivalent to one hectare located as (sic) the western portion of said lots as
private property of the plaintiffs under Sec. 48(b) of [C.A. No.] 141 otherwise know[n] as the
[P]ublic [L]and [A]ct as amended by RA 1942;
2. Ordering the defendants to reconvey the equivalent of one (1) hectare forested portion of
their properties in question in favor of the plaintiffs within 30 days from the finality of the decision
in this case segregating one hectare from OCT (P-23207) 12870 and OCT (T-20845)-4889 all
of defendants, located at its Western portion and if they refuse, ordering the Clerk of Court of
this Honorable Court to execute the deed of reconveyance with like force and effect as if
executed by the defendants themselves[;]
3. Ordering defendants to pay P20,000.00 for the six (6) forest trees illegally cut; P20,000.00
for moral damages; P20,000.00 for Attorney's fees; P20,000.00 for litigation expenses; and to
pay the cost of the proceedings.11
The three complaints12 commonly alleged: a) that on May 21, 1958, petitioners' parents
(spouses Valeriano Sr. and Dorotea Concha) acquired by homestead a 24-hectare parcel of
land situated in Cogon, Dipolog City; b) that since 1931, spouses Concha "painstakingly
preserved" the forest in the 24-hectare land, including the excess four (4) hectares "untitled
forest land" located at its eastern portion; c) that they possessed this excess 4 hectares of land
(which consisted of Lot No. 6195, one-hectare portion of Lot No. 6196-A and one-hectare
portion of Lot Nos. 6196-B and 7529-A) "continuously, publicly, notoriously, adversely,
peacefully, in good faith and in concept of the (sic) owner since 1931;" d) that they continued
possession and occupation of the 4-hectare land after the death of Dorotea Concha on
December 23, 1992 and Valeriano Sr. on May 12, 1999; e) that the Concha spouses "have
preserved the forest trees standing in [the subject lots] to the exclusion of the defendants
(respondents) or other persons from 1931" up to November 12, 1996 (for Civil Case No. 5188)
or January 1997 (for Civil Case Nos. 5433 and 5434) when respondents, "by force, intimidation,
[and] stealth forcibly entered the premises, illegally cut, collected, [and] disposed" of 21 trees
(for Civil Case No. 5188), 22 trees (for Civil Case No. 5433) or 6 trees (for Civil Case No. 5434);
f) that "the land is private land or that even assuming it was part of the public domain, plaintiffs
had already acquired imperfect title thereto" under Sec. 48(b) of C.A. No. 141, as amended by
Republic Act (R.A.) No. 1942; g) that respondents allegedly cut into flitches the trees felled in
Lot No. 6195 (Civil Case No. 5188) while the logs taken from the subject lots in Civil Case Nos.
5433 and 5434 were sold to a timber dealer in Katipunan, Zamboanga del Norte; h) that
respondents "surreptitiously" filed free patent applications over the lots despite their full
knowledge that petitioners owned the lots; i) that the geodetic engineers who conducted the
original survey over the lots never informed them of the survey to give them an opportunity to
oppose respondents' applications; j) that respondents' free patents and the corresponding
OCTs were issued "on account of fraud, deceit, bad faith and misrepresentation"; and k) that
the lots in question have not been transferred to an innocent purchaser.
On separate occasions, respondents moved for the dismissal of the respective cases against
them on the same grounds of: (a) lack of jurisdiction of the RTC over the subject matters of the
complaints; (b) failure to state causes of action for reconveyance; (c) prescription; and (d)
waiver, abandonment, laches and estoppel.13 On the issue of jurisdiction, respondents
contended that the RTC has no jurisdiction over the complaints pursuant to Section 19(2) of
Batas Pambansa Blg. (B.P.) 129, as amended by R.A. No. 7691, as in each case, the assessed
values of the subject lots are less than P20,000.00.
Petitioners opposed,14 contending that the instant cases involve actions the subject matters
of which are incapable of pecuniary estimation which, under Section 19(1) of B.P. 129, as
amended by R.A. 7691, fall within the exclusive original jurisdiction of the RTCs. They also
contended that they have two main causes of action: for reconveyance and for recovery of the
value of the trees felled by respondents. Hence, the totality of the claims must be considered
which, if computed, allegedly falls within the exclusive original jurisdiction of the RTC.
The trial court denied the respective motions to dismiss of respondents.15 The respondents
filed a Joint Motion for Reconsideration,16 to no avail.17
Dissatisfied, respondents jointly filed a Petition for Certiorari, Prohibition and Preliminary
Injunction with Prayer for Issuance of Restraining Order Ex Parte18 with the CA, docketed as
CA-G.R. SP No. 59499. In its Decision,19 the CA reversed the resolutions and order of the trial
court. It held that even assuming that the complaints state a cause of action, the same have
been barred by the statute of limitations. The CA ruled that an action for reconveyance based
on fraud prescribes in ten (10) years, hence, the instant complaints must be dismissed as they
involve titles issued for at least twenty-two (22) years prior to the filing of the complaints. The
CA found it unnecessary to resolve the other issues.
Hence, this appeal in which petitioners raise the following issues, viz:
FIRST - WHETHER OR NOT RESPONDENT COURT OF APPEALS (FORMER FIRST
DIVISION) ERRED IN REVERSING THE ORDER OF THE COURT A QUO DENYING THE
MOTION FOR DISMISSAL, CONSIDERING THE DISMISSAL OF A PARTY COMPLAINT IS
PREMATURE AND TRIAL ON THE MERITS SHOULD BE CONDUCTED TO THRESH OUT
EVIDENTIARY MATTERS.
SECOND - WHETHER OR NOT THE RESPONDENT COURT OF APPEALS (FORMER
FIRST DIVISION) ERRED IN DISMISSING THE PETITIONERS' COMPLAINTS ON [THE]
GROUND OF PRESCRIPTION.
THIRD - WHETHER OR NOT THE RESPONDENT COURT OF APPEALS (FORMER FIRST
DIVISION) ERRED IN CONCLUDING THAT THERE IS NO DOCUMENTARY EVIDENCE ON
RECORD TO SHOW THAT PETITIONERS OWN THE SUBJECT FOREST PORTION OF
THE PROPERTIES ERRONEOUSLY INCLUDED IN THE TITLES OF PRIVATE
RESPONDENTS.
FOURTH - WHETHER OR NOT THE PETITION OF HEREIN PRIVATE RESPONDENTS
FILED WITH THE RESPONDENT COURT OF APPEALS (FORMER FIRST DIVISION)
SHOULD HAVE BEEN DISMISSED OUTRIGHTLY FOR PRIVATE RESPONDENTS'
THEREIN FAILURE TO COMPLY WITH THE MANDATORY REQUIREMENT OF SECTION
1 RULE 65 OF THE RULES OF COURT TO SUBMIT CERTIFIED TRUE COPIES OF THE
ASSAILED ORDERS OF THE TRIAL COURT WHICH RENDERED THEIR PETITION (CA
G.R. 59499) DEFICIENT IN FORM AND SUBSTANCE CITING THE CASE OF CATUIRA VS.
COURT OF APPEALS (172 SCRA 136).20
In their memorandum,21 respondents reiterated their arguments in the courts below that: a)
the complaints of the petitioners in the trial court do not state causes of action for reconveyance;
b) assuming the complaints state causes of action for reconveyance, the same have already
been barred by prescription; c) the RTC does not have jurisdiction over the subject matter of
the instant cases; d) the claims for reconveyance in the complaints are barred by waiver,
abandonment, or otherwise extinguished by laches and estoppel; and e) there is no special
reason warranting a review by this Court.
Since the issue of jurisdiction is determinative of the resolution of the instant case yet the CA
skirted the question, we resolved to require the parties to submit their respective Supplemental
Memoranda on the issue of jurisdiction.22
In their Supplemental Memorandum,23 petitioners contend that the nature of their complaints,
as denominated therein and as borne by their allegations, are suits for reconveyance, or
annulment or cancellation of OCTs and damages. The cases allegedly involve more than just
the issue of title and possession since the nullity of the OCTs issued to respondents and the
reconveyance of the subject properties were also raised as issues. Thus, the RTC has
jurisdiction under Section 19(1) of B.P. 129, which provides that the RTC has jurisdiction "[i]n
all civil actions in which the subject of the litigation is incapable of pecuniary estimation."
Petitioners cited: a) Raymundo v. CA24 which set the criteria for determining whether an action
is one not capable of pecuniary estimation; b) Swan v. CA25 where it was held that an action
for annulment of title is under the jurisdiction of the RTC; c) Santos v. CA26 where it was
similarly held that an action for annulment of title, reversion and damages was within the
jurisdiction of the RTC; and d) Commodities Storage and ICE Plant Corporation v. CA27 where
it was held that "[w]here the action affects title to the property, it should be filed in the RTC
where the property is located." Petitioners also contend that while it may be argued that the
assessed values of the subject properties are within the original jurisdiction of the municipal
trial court (MTC), they have included in their prayers "any interest included therein" consisting
of 49 felled natural grown trees illegally cut by respondents. Combining the assessed values
of the properties as shown by their respective tax declarations and the estimated value of the
trees cut, the total amount prayed by petitioners exceeds twenty thousand pesos (P20,000.00).
Hence, they contend that the RTC has jurisdiction under Section 19(2) of B.P. 129.
Jurisdiction over the subject matter is the power to hear and determine cases of the general
class to which the proceedings in question belong.28 It is conferred by law and an objection
based on this ground cannot be waived by the parties.29 To determine whether a court has
jurisdiction over the subject matter of a case, it is important to determine the nature of the cause
of action and of the relief sought.30
The trial court correctly held that the instant cases involve actions for reconveyance.31 An
action for reconveyance respects the decree of registration as incontrovertible but seeks the
transfer of property, which has been wrongfully or erroneously registered in other persons'
names, to its rightful and legal owners, or to those who claim to have a better right.32 There is
no special ground for an action for reconveyance. It is enough that the aggrieved party has a
legal claim on the property superior to that of the registered owner33 and that the property has
not yet passed to the hands of an innocent purchaser for value.34
The reliefs sought by the petitioners in the instant cases typify an action for reconveyance. The
following are also the common allegations in the three complaints that are sufficient to
constitute causes of action for reconveyance, viz:
(a) That plaintiff Valeriano S. Concha, Sr. together with his spouse Dorotea Concha have
painstakingly preserve[d] the forest standing in the area [of their 24-hectare homestead]
including the four hectares untitled forest land located at the eastern portion of the forest from
1931 when they were newly married, the date they acquired this property by occupation or
possession;35
(b) That spouses Valeriano S. Concha Sr. and Dorotea P. Concha have preserved the forest
trees standing in [these parcels] of land to the exclusion of the defendants Lomocsos or other
persons from 1931 up to November 12, 1996 [for Civil Case No. 5188] and January 1997 [for
Civil Case Nos. 5433 and 5434] when defendants[,] by force, intimidation, [and] stealth[,]
forcibly entered the premises, illegal[ly] cut, collected, disposed a total of [twenty-one (21) trees
for Civil Case No. 5188, twenty-two (22) trees for Civil Case No. 5433 and six (6) trees for Civil
Case No. 5434] of various sizes;36
(c) That this claim is an assertion that the land is private land or that even assuming it was part
of the public domain, plaintiff had already acquired imperfect title thereto under Sec. 48(b) of
[C.A.] No. 141[,] otherwise known as the Public Land Act[,] as amended by [R.A.] No. [7691];37
(d) That [respondents and their predecessors-in-interest knew when they] surreptitiously
filed38 [their respective patent applications and were issued their respective] free patents and
original certificates of title [that the subject lots belonged to the petitioners];39
(e) [That respondents' free patents and the corresponding original certificates of titles were
issued] on account of fraud, deceit, bad faith and misrepresentation;40 and
(f) The land in question has not been transferred to an innocent purchaser.41
These cases may also be considered as actions to remove cloud on one's title as they are
intended to procure the cancellation of an instrument constituting a claim on petitioners' alleged
title which was used to injure or vex them in the enjoyment of their alleged title.42
Being in the nature of actions for reconveyance or actions to remove cloud on one's title, the
applicable law to determine which court has jurisdiction is Section 19(2) of B.P. 129, as
amended by R.A. No. 7691, viz:
Section 19. Jurisdiction in Civil Cases.-- Regional Trial Courts shall exercise exclusive original
jurisdiction: x x x
(2) In all civil actions which involve the title to, or possession of, real property, or any interest
therein, where the assessed value of the property involved exceeds Twenty thousand pesos
(P20,000.00) or for civil actions in Metro Manila, where such value exceeds Fifty thousand
pesos (P50,000.00) except actions for forcible entry into and unlawful detainer of lands or
buildings, original jurisdiction over which is conferred upon the Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts;
x x x.
In the cases at bar, it is undisputed that the subject lots are situated in Cogon, Dipolog City and
their assessed values are less than P20, 000.00, to wit:
Hence, the MTC clearly has jurisdiction over the instant cases.
Petitioners' contention that this case is one that is incapable of pecuniary estimation under the
exclusive original jurisdiction of the RTC pursuant to Section 19(1) of B.P. 129 is erroneous.
In a number of cases, we have held that actions for reconveyance44 of or for cancellation of
title45 to or to quiet title46 over real property are actions that fall under the classification of
cases that involve "title to, or possession of, real property, or any interest therein."
The original text of Section 19(2) of B.P. 129 as well as its forerunner, Section 44(b) of R.A.
296,47 as amended, gave the RTCs (formerly courts of first instance) exclusive original
jurisdiction "[i]n all civil actions which involve the title to, or possession of, real property, or any
interest therein, except actions for forcible entry into and unlawful detainer of lands or buildings,
original jurisdiction over which is conferred upon Metropolitan Trial Courts, [MTCs], and
Municipal Circuit Trial Courts (conferred upon the city and municipal courts under R.A. 296, as
amended)." Thus, under the old law, there was no substantial effect on jurisdiction whether a
case is one, the subject matter of which was incapable of pecuniary estimation, under Section
19(1) of B.P. 129 or one involving title to property under Section 19(2). The distinction between
the two classes became crucial with the amendment introduced by R.A. No. 769148 in 1994
which expanded the exclusive original jurisdiction of the first level courts to include "all civil
actions which involve title to, or possession of, real property, or any interest therein where the
assessed value of the property or interest therein does not exceed Twenty thousand pesos
(P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed
Fifty thousand pesos (P50,000.00) exclusive of interest, damages of whatever kind, attorney's
fees, litigation expenses and costs." Thus, under the present law, original jurisdiction over
cases the subject matter of which involves "title to, possession of, real property or any interest
therein" under Section 19(2) of B.P. 129 is divided between the first and second level courts,
with the assessed value of the real property involved as the benchmark. This amendment was
introduced to "unclog the overloaded dockets of the RTCs which would result in the speedier
administration of justice."49
The cases of Raymundo v. CA50 and Commodities Storage and ICE Plant Corporation v.
CA,51 relied upon by the petitioners, are inapplicable to the cases at bar. Raymundo involved
a complaint for mandatory injunction, not one for reconveyance or annulment of title. The bone
of contention was whether the case was incapable of pecuniary estimation considering
petitioner's contention that the pecuniary claim of the complaint was only attorney's fees of
P10,000, hence, the MTC had jurisdiction. The Court defined the criterion for determining
whether an action is one that is incapable of pecuniary estimation and held that the issue of
whether petitioner violated the provisions of the Master Deed and Declaration of Restriction of
the Corporation is one that is incapable of pecuniary estimation. The claim for attorney's fees
was merely incidental to the principal action, hence, said amount was not determinative of the
court's jurisdiction. Nor can Commodities Storage and ICE Plant Corporation provide any
comfort to petitioners for the issue resolved by the Court in said case was venue and not
jurisdiction. The action therein was for damages, accounting and fixing of redemption period
which was filed on October 28, 1994, before the passage of R.A. No. 7691. In resolving the
issue of venue, the Court held that "[w]here the action affects title to property, it should be
instituted in the [RTC] where the property is situated. The Sta. Maria Ice Plant & Cold Storage
is located in Sta. Maria, Bulacan. The venue in Civil Case No. 94-727076 was therefore
improperly laid."
Worse, the cases of Swan v. CA52 and Santos v. CA53 cited by the petitioners, contradict their
own position that the nature of the instant cases falls under Section 19(1) of B.P. 129. The
complaints in Swan and Santos were filed prior to the enactment of R.A. No. 7691. In Swan,
the Court held that the action being one for annulment of title, the RTC had original jurisdiction
under Section 19(2) of B.P. 129. In Santos, the Court similarly held that the complaint for
cancellation of title, reversion and damages is also one that involves title to and possession of
real property under Section 19(2) of B.P. 129. Thus, while the Court held that the RTC had
jurisdiction, the Court classified actions for "annulment of title" and "cancellation of title,
reversion and damages" as civil actions that involve "title to, or possession of, real property, or
any interest therein" under Section 19(2) of B.P. 129.
Petitioners' contention that the value of the trees cut in the subject properties constitutes "any
interest therein (in the subject properties)" that should be computed in addition to the respective
assessed values of the subject properties is unavailing. Section 19(2) of B.P. 129, as amended
by R.A. No. 7691, is clear that the RTC shall exercise jurisdiction "in all civil actions which
involve the title to, or possession of, real property, or any interest therein, where the assessed
value of the property involved exceeds Twenty thousand pesos (P20,000.00) or for civil actions
in Metro Manila, where such value exceeds Fifty thousand pesos (P50,000.00)." It is true that
the recovery of the value of the trees cut from the subject properties may be included in the
term "any interest therein." However, the law is emphatic that in determining which court has
jurisdiction, it is only the assessed value of the realty involved that should be computed.54 In
this case, there is no dispute that the assessed values of the subject properties as shown by
their tax declarations are less than P20,000.00. Clearly, jurisdiction over the instant cases
belongs not to the RTC but to the MTC.
IN VIEW WHEREOF, the decision of the Court of Appeals is hereby AFFIRMED that the RTC
of Dipolog City, Branch 9, has no jurisdiction in Civil Case Nos. 5188, 5433 and 5434.
SO ORDERED.
Ynares-Santiago, Sandoval-Gutierrez, Corona, Azcuna, JJ., concur.
G.R. No. 141964 June 30, 2006
SPOUSES EDESITO and CONSORCIA RAGASA, Petitioners,
vs.
SPOUSES GERARDO and RODRIGA ROA and the EX-OFFICIO SHERIFF OF QUEZON
CITY, Respondents.
DECISION
CORONA, J.:
Edesito and Consorcia Ragasa filed a complaint1 against private respondents Gerardo and
Rodriga Roa and the public respondent ex-officio sheriff of Quezon City founded on the
following allegations:
On May 10, 1989, plaintiffs [petitioners here] entered into a contract with Oakland Development
Resources Corporation for the purchase in installments of a piece of property, with
improvements, located at No. 06, Garnet St., Prater Village II, Diliman, Q.C. covered by TCT
No. 27946 of the Registry of Deeds for Quezon City and more particularly described in a
photocopy of TCT No. 27946 […];
Immediately thereafter, plaintiffs took possession of the property covered by TCT No. 27946 of
the Registry of Deeds for Quezon City and resided thereat together with their relatives who
continued to occupy the same whenever the plaintiffs would leave for Italy where they both
worked. Hence, from May of 1989 up to the present date, plaintiffs were in continuous and
notorious possession of the property covered by TCT No. 27946 of the Registry of Deeds for
Quezon City to the exclusion of others and in the concept of an owner;
In March of 1992, plaintiffs were able to fully pay for the agreed purchase price of the property
covered by TCT No. 27946 of the Registry of Deeds for Quezon City and accordingly, a Deed
of Absolute Sale dated March 12, 1992 was executed by and between Oakland Development
Resources Corporation […] and the original owner’s copy of TCT No. 27946 of the Registry of
Deeds for Quezon City accordingly turned over to them;
However, despite the execution of the Deed of Absolute Sale, Oakland Development
Resources Corporation failed to cause the transfer of title to plaintiffs. On the part of plaintiffs,
all the while they thought that the Deed of Absolute Sale and possession of the original of the
owner’s copy of TCT No. 27946 of Registry of Deeds for Quezon City was more than sufficient
to protect their rights and interests over the property;
Sometime March of 1999, during one of the trips of plaintiff Consorcia Ragasa to the Philippines
from Italy, upon learning that Oakland Development Resources Corporation was no longer
functional as a corporate entity, she decided to cause the transfer of registration of TCT No.
27946 of Registry of Deeds for Quezon City herself since the vendor thereof was apparently in
no position to undertake the same;
She was thus surprised to learn from the Registry of Deeds for Quezon City that on April 14,
1995, the property in question was sold by defendant Ex-Officio Sheriff of Quezon City [a
respondent here] to defendants Sps. Roa [respondents here] as the highest bidder for the price
and consideration of P511,000.00 as shown in the Sheriff’s Final Deed of Sale […].
xxx xxx xxx
The levy on attachment and the execution sale undertaken by the Ex-Officio Sheriff’s Office of
Quezon City is clearly illegal there being no notice given by said individual to the occupants of
the property in question.
Furthermore, a casual perusal of the Sheriff’s Deed of Sale will reveal that the execution price
of P511,000.00 is grossly inadequate to pay for real properties listed therein with fair market
values conservatively estimated at P3,000,000.00
The case was raffled to Branch 2202 of the Quezon City Regional Trial Court (RTC) and was
docketed as Civil Case No. Q-99-37908.
Instead of filing an answer, private respondents moved for the dismissal of the complaint on
the grounds of prescription and laches. In an order3 dated February 3, 2000, the RTC granted
the motion. Characterizing the suit as an action "upon an injury to the rights of the plaintiff"
which, according to Article 1146 of the Civil Code,4 must be filed within four years, the RTC
held that petitioners’ action was barred by prescription for having been filed more than four
years after the registration of the execution sale.
Seeking a reversal of the trial court’s order dismissing their complaint, petitioners proceeded
forthwith to this Court with the present petition for review on certiorari5 raising only a pure
question of law.6
We grant the petition.
The trial court’s order of dismissal was predicated on the theory that the suit petitioners
commenced was an "action upon an injury to their rights" contemplated in Article 1146 of the
Civil Code. That premise was erroneous. A reading of the allegations in petitioners’ complaint
reveals that the action was essentially one for quieting of title to real property under Article 476
of the Civil Code which states:
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 being cast upon title to real property or any
interest therein.
To make out an action to quiet title under the foregoing provision, the initiatory pleading has
only to set forth allegations showing that (1) the plaintiff has "title to real property or any interest
therein"7 and (2) the defendant claims an interest therein adverse to the plaintiff’s arising from
an "instrument, record, claim, encumbrance, or proceeding which is apparently valid or
effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable."8 Thus, the
averments in petitioners’ complaint that (1) they acquired ownership of a piece of land by
tradition or delivery as a consequence of sale and (2) private respondents subsequently
purchased the same piece of land at an allegedly void execution sale were sufficient to make
out an action to quiet title under Article 476.
This being the case, Article 1146 (which refers to actions "upon an injury to the rights of the
plaintiff" and "upon a quasi-delict")9 did not apply. Rather, considering petitioners’ allegation in
their complaint that "from May of 1989 up to the present date, plaintiffs [had been] in continuous
and notorious possession of the property…to the exclusion of others and in the concept of
owner[s]"10 ― an assertion private respondents never bothered to dispute ― our ruling in
Sapto v. Fabiana11 should apply:
[I]t is an established rule of American jurisprudence (made applicable in this jurisdiction by Art.
480 of the New Civil Code)12 that actions to quiet title to property in the possession of the
plaintiff are imprescriptible.
"The prevailing rule is that the right of a plaintiff to have his title to land quieted, as against one
who is asserting some adverse claim or lien thereon, is not barred while the plaintiff or his
grantors remain in actual possession of the land, claiming to be owners thereof, the reason for
this rule being that while the owner in fee continues liable to an action, proceeding, or suit upon
the adverse claim, he has a continuing right to the aid of a court of equity to ascertain and
determine the nature of such claim and its effect on his title, or to assert any superior equity in
his favor. He may wait until his possession is disturbed or his title is attacked before taking
steps to vindicate his right. But the rule that the statute of limitations is not available as a
defense to an action to remove a cloud from title can only be invoked by a complain[ant] when
he is in possession. One who claims property which is in the possession of another must, it
seems, invoke his remedy within the statutory period." (citations omitted)13
Accordingly, petitioners’ action was not subject to prescription.
WHEREFORE, the petition is GRANTED. The February 3, 2000 order of the Regional Trial
Court, Branch 220, Quezon City dismissing petitioners’ complaint is hereby REVERSED and
SET ASIDE. Let this case be REMANDED to the court a quo for further proceedings.
SO ORDERED.
G.R. No. 168943 October 27, 2006
IGLESIA NI CRISTO, petitioner,
vs.
HON. THELMA A. PONFERRADA, in her capacity as Presiding Judge, Regional Trial
Court, Br. 104, Quezon City, and HEIRS OF ENRIQUE G. SANTOS, respondents.
DECISION
CALLEJO, SR, J.:
This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-
G.R. SP No. 72686 and its Resolution2 denying the motion for reconsideration of the said
decision.
On October 24, 2001, Alicia, Alfredo, Roberto, Enrique and Susan, all surnamed Santos, and
Sonia Santos-Wallin, represented by Enrique G. Santos, filed a complaint3 for Quieting of Title
and/or Accion Reinvindicatoria before the Regional Trial Court (RTC) of Quezon City against
the Iglesia Ni Cristo (INC), defendant therein.
Plaintiffs alleged therein that, during his lifetime, Enrique Santos was the owner of a 936-
square-meter parcel of land located in Tandang Sora, Quezon City covered by Transfer
Certificate of Title (TCT) No. 57272 issued by the Register of Deeds on July 27, 1961 which
cancelled TCT No. 57193-289. He had been in possession of the owner’s duplicate of said title
and had been in continuous, open, adverse and peaceful possession of the property. He died
on February 9, 1970 and was survived by his wife, Alicia Santos, and other plaintiffs, who were
their children. Thereafter, plaintiffs took peaceful and adverse possession of the property, and
of the owner’s duplicate of said title. When the Office of the Register of Deeds of Quezon City
was burned on June 11, 1988, the original copy of said title was burned as well. The Register
of Deeds had the title reconstituted as TCT No. RT-110323, based on the owner’s duplicate of
TCT No. 57272. Sometime in February 1996, plaintiffs learned that defendant was claiming
ownership over the property based on TCT No. 321744 issued on September 18, 1984 which,
on its face, cancelled TCT No. 320898, under the name of the Philippine National Bank, which
allegedly cancelled TCT No. 252070 in the names of the spouses Marcos and Romana dela
Cruz. They insisted that TCT Nos. 321744, 320898 and 252070 were not among the titles
issued by the Register of Deeds of Quezon City and even if the Register of Deeds issued said
titles, it was contrary to law. Enrique Santos, during his lifetime, and his heirs, after his death,
never encumbered or disposed the property. In 1996, plaintiffs had the property fenced but
defendant deprived them of the final use and enjoyment of their property.
Plaintiffs prayed that, after due proceedings, judgment be rendered in their favor, thus:
WHEREFORE, it is respectfully prayed that, after due hearing, judgment be rendered quieting
the title of plaintiffs over and/or recover possession of their said property in the name of
deceased Enrique Santos, covered by said TCT No. RT-110323(57272) of the Register of
Deeds at Quezon City and that:
1. The title of defendant, TCT No. 321744 be ordered cancelled by the Register of Deeds of
Quezon City;
2. The defendant be ordered to pay plaintiffs’ claims for actual damages in the sum of
P100,000.00;
3. The defendant be ordered to pay plaintiffs’ claims for compensatory damages in the sum of
at least P1,000,000.00;
4. The defendant be ordered to pay plaintiffs’ claims for reimbursement of the lawyer’s
professional fees consisting of the aforesaid P50,000.00 acceptance fee and reimbursement
of the said success fee in par. 10 above; and lawyer’s expenses of P2,000.00 for each hearing
in this case;
5. The defendant be ordered to pay expenses and costs of litigation in the sum of at least
P200,000.00.
Other reliefs that are just and equitable in the premises are, likewise, prayed for.4
As gleaned from the caption of the complaint, plaintiffs appear to be the heirs of Enrique
Santos, represented by Enrique G. Santos. The latter signed the Verification and Certificate of
Non-Forum Shopping which reads:
I, ENRIQUE G. SANTOS, of legal age, under oath, state that I am one of the children of the
late Enrique Santos and I represent the heirs of said Enrique Santos who are my co-plaintiffs
in the above-captioned case and that I directed the preparation of the instant complaint, the
contents of which are true and correct to the best of my knowledge and the attachments are
faithful reproductions of the official copies in my possession.
I hereby certify that I have not commenced any other action or proceeding involving the same
issues in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other
tribunal or agency, and to the best of my knowledge, no such action or proceeding is pending
in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal
or agency, and that I shall notify this Commission within three days from notice that a similar
action or proceeding has been filed or is pending thereat.
IN WITNESS WHEREOF, I hereby affix my signature this 23rd day of October 2001 at Pasig
City, Metro Manila.
(Sgd.)
ENRIQUE G. SANTOS
SUBSCRIBED AND SWORN to before me this 23rd day of October 2001 at Pasig City, affiant
exhibiting to me his CTC No. 07303074 issued at Sta. Cruz, Laguna on April 16, 2001.
(Sgd.)
PETER FRANCIS G. ZAGALA
Notary Public
Until December 31, 2002
PTR No. 0287069
Issued on 1-10-01
At Pasig City5
Defendant moved to dismiss plaintiffs’ complaint on the following grounds: (1) plaintiffs failed
to faithfully comply with the procedural requirements set forth in Section 5, Rule 7 of the 1997
Rules of Civil Procedure; (2) the action (either Quieting of Title or Accion Reinvindicatoria) had
prescribed, the same having been filed only on October 24, 2001 beyond the statutory ten-year
period therefor; and (3) that the complaint is defective in many respects.6
Defendant asserted that the case involved more than one plaintiff but the verification and
certification against forum shopping incorporated in the complaint was signed only by Enrique
Santos. Although the complaint alleges that plaintiffs are represented by Enrique Santos, there
is no showing that he was, indeed, authorized to so represent the other plaintiffs to file the
complaint and to sign the verification and certification of non-forum shopping.7 Thus, plaintiffs
failed to comply with Section 5, Rule 7 of the Rules of Court. Defendant cited the ruling of this
Court in Loquias v. Office of the Ombudsman.8
Defendant maintained that the complaint is defective in that, although there is an allegation
that Enrique Santos represents the other heirs, there is nothing in the pleading to show the
latter’s authority to that effect; the complaint fails to aver with particularity the facts showing the
capacity of defendant corporation to sue and be sued; and the pleading does not state the
address of plaintiffs. Defendant likewise averred that the complaint should be dismissed on the
ground of prescription. It argued that plaintiffs anchor their claim on quieting of title and
considering that they are not in possession of the land in question, their cause of action
prescribed after ten years. On the other hand, if the supposed right of plaintiffs is based on
accion reinvindicatoria, prescription would set in after 10 years from dispossession. In both
cases, defendant asserts, the reckoning point is 1984 when defendant acquired TCT No.
321744 and possession of the land in question.
In their Comment9 on the motion, plaintiffs averred that the relationship of a co-owner to the
other co-owners is fiduciary in character; thus, anyone of them could effectively act for another
for the benefit of the property without need for an authorization. Consequently, Enrique Santos
had the authority to represent the other heirs as plaintiffs and to sign the verification and
certification against forum shopping.10 On the issue of prescription, plaintiffs argued that the
prescriptive period for the actions should be reckoned from 1996, when defendant claimed
ownership over the property and barred plaintiffs from fencing their property, not in 1984 when
TCT No. 321744 was issued by the Register of Deeds in the name of defendant as owner.
In its reply, defendant averred that absent any authority from his co-heirs, Enrique Santos must
implead them as plaintiffs as they are indispensable parties. In response, plaintiffs aver that a
co-owner of a property can execute an action for quieting of title without impleading the other
co-owners.
The trial court issued an Order11 denying defendant’s motion to dismiss. It declared that since
Enrique Santos was one of the heirs, his signature in the verification and certification
constitutes substantial compliance with the Rules. The court cited the ruling of this Court in Dar
v. Alonzo-Legasto.12 The court, likewise, held that prescription had not set in and that failure
to state the address of plaintiffs in the complaint does not warrant the dismissal of the
complaint.
Defendant filed a motion for reconsideration, which the court likewise denied in an Order13
dated July 10, 2002.
Unsatisfied, defendant, as petitioner, filed a Petition for Certiorari and Prohibition with Prayer
for the Issuance of a Temporary Restraining Order and/or Preliminary Injunction14 before the
CA, raising the following issues:
I.
WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER
DISCRETION WHEN SHE HELD THAT THE CERTIFICATION OF NON-FORUM SHOPPING
SIGNED BY ENRIQUE G. SANTOS ALONE IS A SUBSTANTIAL COMPLIANCE WITH
SECTION 5, RULE 7 OF THE 1997 RULES OF CIVIL PROCEDURE, IN CLEAR
CONTRAVENTION OF THE RULES OF COURT, AND THE RULING IN LOQUIAS V. OFFICE
OF THE OMBUDSMAN, G.R. NO. 1399396 (SIC), AUGUST 16, 2000, 338 SCRA 62, AND
ORTIZ V. COURT OF APPEALS, G.R. NO. 127393, 299 SCRA 708 (DECEMBER 4, 1998).
II.
WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER
DISCRETION IN APPLYING THE RULING IN DAR, ET. AL. V. HON. ROSE MARIE ALONZO-
LEGASTO, ET. AL., G.R. NO. 143016, AUGUST 30, 2000 TO THE INSTANT CASE.
III.
WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER
DISCRETION WHEN SHE HELD THAT THE AUTHORITY OF ENRIQUE G. SANTOS TO
REPRESENT HIS CO-HEIRS IN THE FILING OF THE COMPLAINT AGAINST THE "INC" IS
A MATTER OF EVIDENCE.
IV.
WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER
DISCRETION WHEN SHE HELD THAT THE ACTION FOR QUIETING OF TITLE AND/OR
ACCION REINVINDICATORIA (CIVIL CASE NO. Q-01-45415) HAS NOT YET
PRESCRIBED.15
Petitioner averred that, of the plaintiffs below, only plaintiff Enrique Santos signed the
verification and certification of non-forum shopping. Under Section 5, Rule 7 of the 1997 Rules
of Civil Procedure, all the plaintiffs must sign, unless one of them is authorized by a special
power of attorney to sign for and in behalf of the others. Petitioner argues that the bare claim
of Enrique Santos that he signed the verification and certification in his behalf and of the other
plaintiffs who are his co-heirs/co-owners of the property does not even constitute substantial
compliance of the rule. Contrary to the ruling of the trial court, the absence or existence of an
authority of Enrique Santos to sign the verification and certification for and in behalf of his co-
plaintiffs is not a matter of evidence. The defect is fatal to the complaint of respondents and
cannot be cured by an amendment of the complaint. The trial court erred in applying the ruling
of this Court in Dar v. Alonzo-Legasto.16
Petitioner maintained that the action of respondents, whether it be one for quieting of title or an
accion reinvindicatoria, had prescribed when the complaint was filed on October 24, 2001.
Petitioner asserts that this is because when respondents filed their complaint, they were not in
actual or physical possession of the property, as it (petitioner) has been in actual possession
of the property since 1984 when TCT No. 321744 was issued to it by the Register of Deeds.
This is evident from the nature of a reinvindicatory action itself – which is an action whereby
plaintiff alleges ownership over the subject parcel of land and seeks recovery of its full
possession. By their action, respondents thereby admitted that petitioner was in actual
possession of the property, and as such, respondents’ action for quieting of title or accion
reinvindicatoria may prescribe in ten (10) years from 1984 or in 1994, it appearing that it acted
in good faith when it acquired the property from the registered owner, conformably with Article
555(4) of the New Civil Code.
On April 7, 2005, the CA rendered the assailed decision17 dismissing the petition, holding that
the RTC did not commit grave abuse of its discretion amounting to lack or excess of jurisdiction
in denying petitioner’s motion to dismiss. As the Court held in DAR v. Alonzo-Legasto18 and
in Gudoy v. Guadalquiver,19 the certification signed by one with respect to a property over
which he shares a common interest with the rest of the plaintiffs (respondents herein)
substantially complied with the Rules. As to the issue of prescription, the appellate court held
that the prescriptive period should be reckoned from 1996, when petitioner claimed ownership
and barred respondents from fencing the property.
Petitioner is now before this Court on petition for review on certiorari, raising the following
issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE
CERTIFICATION OF NON-FORUM SHOPPING SIGNED BY RESPONDENT ENRIQUE G.
SANTOS ALONE IS A SUBSTANTIAL COMPLIANCE WITH SECTION 5, RULE 7 OF THE
1997 RULES OF CIVIL PROCEDURE AND IN APPLYING THE CASE OF GUDOY V.
GUADALQUIVER, 429 SCRA 723, WITHOUT REGARD TO MORE RECENT
JURISPRUDENCE.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT THE
AUTHORITY OF RESPONDENT ENRIQUE G. SANTOS TO REPRESENT HIS CO-HEIRS IN
THE FILING OF THE COMPLAINT AGAINST THE PETITIONER IS A MATTER OF
EVIDENCE.
III.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT THE ACTION
FOR QUIETING OF TITLE AND/OR ACCION REINVINDICATORIA (CIVIL CASE NO. Q-01-
45415) HAS NOT YET PRESCRIBED.20
Petitioner reiterated its arguments in support of its petition in the CA as its arguments in support
of its petition in the present case.
Sections 4 and 5, Rule 7 of the Revised Rules of Court on verification and certification against
forum shopping read:
Sec. 4. Verification. – Except when otherwise specifically required by law or rule, pleadings
need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his personal knowledge or based on authentic
records.
A pleading required to be verified which contains a verification based on "information and belief"
or upon "knowledge, information and belief," or lacks a proper verification, shall be treated as
an unsigned pleading.
Sec. 5. Certification against forum shopping. – The plaintiff or principal party shall certify under
oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn
certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore
commenced any action or filed any claim involving the same issues in any court, tribunal or
quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending
therein; (b) if there is such other pending action or claim, a complete statement of the present
status thereof; and (c) if he should thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report that fact within five (5) days therefrom to the court
wherein his aforesaid complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of
the complaint or other initiatory pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings therein shall constitute indirect
contempt of court, without prejudice to the corresponding administrative and criminal actions.
If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping,
the same shall be ground for summary dismissal with prejudice and shall constitute direct
contempt, as well as a cause for administrative sanctions.
The purpose of verification is simply to secure an assurance that the allegations of the petition
(or complaint) have been made in good faith; or are true and correct, not merely speculative.
This requirement is simply a condition affecting the form of pleadings, and noncompliance
therewith does not necessarily render it fatally defective. Indeed, verification is only a formal,
not a jurisdictional requirement.21
The issue in the present case is not the lack of verification but the sufficiency of one executed
by only one of plaintiffs. This Court held in Ateneo de Naga University v. Manalo,22 that the
verification requirement is deemed substantially complied with when, as in the present case,
only one of the heirs-plaintiffs, who has sufficient knowledge and belief to swear to the truth of
the allegations in the petition (complaint), signed the verification attached to it. Such verification
is deemed sufficient assurance that the matters alleged in the petition have been made in good
faith or are true and correct, not merely speculative.
The same liberality should likewise be applied to the certification against forum shopping. The
general rule is that the certification must be signed by all plaintiffs in a case and the signature
of only one of them is insufficient. However, the Court has also stressed in a number of cases
that the rules on forum shopping were designed to promote and facilitate the orderly
administration of justice and thus should not be interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objective. The rule of substantial compliance may be
availed of with respect to the contents of the certification. This is because the requirement of
strict compliance with the provisions merely underscores its mandatory nature in that the
certification cannot be altogether dispensed with or its requirements completely disregarded.23

The substantial compliance rule has been applied by this Court in a number of cases: Cavile
v. Heirs of Cavile,24 where the Court sustained the validity of the certification signed by only
one of petitioners because he is a relative of the other petitioners and co-owner of the
properties in dispute; Heirs of Agapito T. Olarte v. Office of the President of the Philippines,25
where the Court allowed a certification signed by only two petitioners because the case
involved a family home in which all the petitioners shared a common interest; Gudoy v.
Guadalquiver,26 where the Court considered as valid the certification signed by only four of
the nine petitioners because all petitioners filed as co-owners pro indiviso a complaint against
respondents for quieting of title and damages, as such, they all have joint interest in the
undivided whole; and Dar v. Alonzo-Legasto,27 where the Court sustained the certification
signed by only one of the spouses as they were sued jointly involving a property in which they
had a common interest.
It is noteworthy that in all of the above cases, the Court applied the rule on substantial
compliance because of the commonality of interest of all the parties with respect to the subject
of the controversy.
Applying the doctrines laid down in the above cases, we find and so hold that the CA did not
err in affirming the application of the rule on substantial compliance. In the instant case, the
property involved is a 936-square-meter real property. Both parties have their respective TCTs
over the property. Respondents herein who are plaintiffs in the case below have a common
interest over the property being the heirs of the late Enrique Santos, the alleged registered
owner of the subject property as shown in one of the TCTs. As such heirs, they are considered
co-owners pro indiviso of the whole property since no specific portion yet has been adjudicated
to any of the heirs. Consequently, as one of the heirs and principal party, the lone signature of
Enrique G. Santos in the verification and certification is sufficient for the RTC to take
cognizance of the case. The commonality of their interest gave Enrique G. Santos the authority
to inform the RTC on behalf of the other plaintiffs therein that they have not commenced any
action or claim involving the same issues in another court or tribunal, and that there is no other
pending action or claim in another court or tribunal involving the same issues. Hence, the RTC
correctly denied the motion to dismiss filed by petitioner.
Considering that at stake in the present case is the ownership and possession over a prime
property in Quezon City, the apparent merit of the substantive aspects of the case should be
deemed as a special circumstance or compelling reason to allow the relaxation of the rule.
Time and again, this Court has held that rules of procedure are established to secure
substantial justice. Being instruments for the speedy and efficient administration of justice, they
may be used to achieve such end, not to derail it. In particular, when a strict and literal
application of the rules on non-forum shopping and verification will result in a patent denial of
substantial justice, these may be liberally construed.28 The ends of justice are better served
when cases are determined on the merits – after all parties are given full opportunity to ventilate
their causes and defenses – rather than on technicality or some procedural imperfections.29
Indeed, this Court strictly applied the rules on verification and certification against forum
shopping as in the cases of Loquias v. Office of the Ombudsman30 and Tolentino v. Rivera.31
However, in both cases, the commonality of interest between or among the parties is wanting.
In Loquias, the co-parties were being sued in their individual capacities as mayor, vice mayor
and members of the municipal board. In Tolentino, the lone signature of Tolentino was held
insufficient because he had no authority to sign in behalf of the Francisco spouses. In such
case, the Court concluded that Tolentino merely used the spouses’ names for whatever
mileage he thought he could gain. It is thus clear from these cases that the commonality of
interest is material in the relaxation of the Rules.
Anent the issue of the authority of Enrique G. Santos to represent his co-heirs/co-plaintiffs, we
find no necessity to show such authority. Respondents herein are co-owners of the subject
property. As such co-owners, each of the heirs may properly bring an action for ejectment,
forcible entry and detainer, or any kind of action for the recovery of possession of the subject
properties. Thus, a co-owner may bring such an action, even without joining all the other co-
owners as co-plaintiffs, because the suit is deemed to be instituted for the benefit of all.32
We uphold the validity of the complaint because of the following circumstances: (1) the caption
of the instant case is Heirs of Enrique Santos v. Iglesia ni Cristo;33 (2) the opening statement
of the complaint states that plaintiffs are the heirs of Enrique Santos and likewise names the
particular heirs of the latter who instituted the complaint below;34 (3) the case involves a
property owned by the predecessor-in-interest of plaintiffs therein;35 and (4) the verification
signed by Enrique G. Santos clearly states that he is one of the children of the late Enrique
Santos and that he represents the heirs of said Enrique Santos.36
On the issue of prescription of action, petitioner avers that the action of respondents is one to
quiet title and/or accion reinvindicatoria, and that respondents asserted ownership over the
property and sought the recovery of possession of the subject parcel of land. It insists that the
very nature of the action presupposes that respondents had not been in actual and material
possession of the property, and that it was petitioner which had been in possession of the
property since 1984 when it acquired title thereon. The action of respondent prescribed in ten
years from 1984 when petitioner allegedly dispossessed respondents, in accordance with
Article 555(4) of the New Civil Code.
The contention of petitioner has no merit. The nature of an action is determined by the material
allegations of the complaint and the character of the relief sought by plaintiff, and the law in
effect when the action was filed irrespective of whether he is entitled to all or only some of such
relief.37 As gleaned from the averments of the complaint, the action of respondents was one
for quieting of title under Rule 64 of the Rules of Court, in relation to Article 476 of the New Civil
Code. The latter provision reads:
Art. 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 x x x one who is in actual possession of a piece of land claiming to be the owner thereof may
any interest therein. 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
A cloud is said to be a semblance of a title, either legal or equitable, or a cloud of an interest in to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim
land appearing in some legal form but which is, in fact, unfounded, or which it would be of a third party and its effect on his own title, which right can be claimed only by one who is in
inequitable to enforce.38 An action for quieting of title is imprescriptible until the claimant is possession.42
ousted of his possession.39
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of
The owner of a real property, as plaintiff, is entitled to the relief of quieting of title even if, at the Appeals in CA-G.R. SP No. 72686 is AFFIRMED. Costs against petitioner.
time of the commencement of his action, he was not in actual possession of real property. After
all, under Article 477 of the New Civil Code, the owner need not be in possession of the SO ORDERED.
property. If on the face of TCT No. 321744 under the name of plaintiff, its invalidity does not
appear but rests partly in pais, an action for quieting of title is proper.40 Panganiban, C.J. (Chairperson), Ynares-Santiago, Austria-Martinez, and Chico-Nazario, JJ.,
concur.
In the present case, respondents herein, as plaintiffs below, alleged in their complaint, that their
father, Enrique Santos, was the owner of the property based on TCT No. 57272 issued on July
27, 1961; and that, after his death on February 9, 1970, they inherited the property; Enrique
Santos, during his lifetime, and respondents, after the death of the former, had been in actual,
continuous and peaceful possession of the property until 1994 when petitioner claimed
ownership based on TCT No. 321744 issued on September 18, 1984 and barred respondents
from fencing their property.

Petitioner’s claim that it had been in actual or material possession of the property since 1984
when TCT No. 321744 was issued in its favor is belied by the allegations in the complaint that
respondents had been in actual and material possession of the property since 1961 up to the
time they filed their complaint on October 24, 2001.

Admittedly, respondents interposed the alternative reinvindicatory action against petitioner. An

accion reinvindicatoria does not necessarily presuppose that the actual and material
possession of the property is on defendant and that plaintiff seeks the recovery of such
possession from defendant. It bears stressing that an accion reinvindicatoria is a remedy
seeking the recovery of ownership and includes jus possidendi, jus utendi, and jus fruendi as
well. It is an action whereby a party claims ownership over a parcel of land and seeks recovery
of its full possession.41 Thus, the owner of real property in actual and material possession
thereof may file an accion reinvindicatoria against another seeking ownership over a parcel of
land including jus vindicandi, or the right to exclude defendants from the possession thereof.
In this case, respondents filed an alternative reinvindicatory action claiming ownership over the
property and the cancellation of TCT No. 321744 under the name of petitioner. In fine, they
sought to enforce their jus utendi and jus vindicandi when petitioner claimed ownership and
prevented them from fencing the property.

Since respondents were in actual or physical possession of the property when they filed their
complaint against petitioner on October 24, 2001, the prescriptive period for the reinvindicatory
action had not even commenced to run, even if petitioner was able to secure TCT No. 321744
over the property in 1984. The reason for this is that
G.R. No. L-18103 June 8, 1922 (Sgd.) RAFAEL LOPEZ,
Treasurer
PHILIPPINE NATIONAL BANK, plaintiff-appellee,
vs. The Manila Oil Refining and By-Products Company, Inc. failed to pay the promissory note on
MANILA OIL REFINING & BY-PRODUCTS COMPANY, INC., defendant-appellant. demand. The Philippine National Bank brought action in the Court of First Instance of Manila,
to recover P61,000, the amount of the note, together with interest and costs. Mr. Elias N.
Antonio Gonzalez for appellant. Rector, an attorney associated with the Philippine National Bank, entered his appearance in
Roman J. Lacson for appellee. representation of the defendant, and filed a motion confessing judgment. The defendant,
Hartigan and Welch; Fisher and De Witt; Perkins and Kincaid; Gibbs, Mc Donough and however, in a sworn declaration, objected strongly to the unsolicited representation of attorney
Johnson; Julian Wolfson; Ross and Lawrence; Francis B. Mahoney, and Jose A. Espiritu, amici Recto. Later, attorney Antonio Gonzalez appeared for the defendant and filed a demurrer, and
curiae. when this was overruled, presented an answer. The trial judge rendered judgment on the
motion of attorney Recto in the terms of the complaint.
MALCOLM, J.:
The foregoing facts, and appellant's three assignments of error, raise squarely the question
The question of first impression raised in this case concerns the validity in this jurisdiction of a which was suggested in the beginning of this opinion. In view of the importance of the subject
provision in a promissory note whereby in case the same is not paid at maturity, the maker to the business community, the advice of prominent attorneys-at-law with banking connections,
authorizes any attorney to appear and confess judgment thereon for the principal amount, with was solicited. These members of the bar responded promptly to the request of the court, and
interest, costs, and attorney's fees, and waives all errors, rights to inquisition, and appeal, and their memoranda have proved highly useful in the solution of the question. It is to the credit of
all property exceptions. the bar that although the sanction of judgement notes in the Philippines might prove of
immediate value to clients, every one of the attorneys has looked upon the matter in a big way,
On May 8, 1920, the manager and the treasurer of the Manila Oil Refining & By-Products with the result that out of their independent investigations has come a practically unanimous
Company, Inc., executed and delivered to the Philippine National Bank, a written instrument protest against the recognition in this jurisdiction of judgment notes.1
reading as follows:
Neither the Code of Civil Procedure nor any other remedial statute expressly or tacitly
RENEWAL. recognizes a confession of judgment commonly called a judgment note. On the contrary, the
P61,000.00 provisions of the Code of Civil Procedure, in relation to constitutional safeguards relating to the
right to take a man's property only after a day in court and after due process of law, contemplate
MANILA, P.I., May 8, 1920. that all defendants shall have an opportunity to be heard. Further, the provisions of the Code
of Civil Procedure pertaining to counter claims argue against judgment notes, especially as the
On demand after date we promise to pay to the order of the Philippine National Bank sixty-one Code provides that in case the defendant or his assignee omits to set up a counterclaim, he
thousand only pesos at Philippine National Bank, Manila, P.I. cannot afterwards maintain an action against the plaintiff therefor. (Secs. 95, 96, 97.) At least
one provision of the substantive law, namely, that the validity and fulfillment of contracts cannot
Without defalcation, value received; and to hereby authorize any attorney in the Philippine be left to the will of one of the contracting parties (Civil Code, art. 1356), constitutes another
Islands, in case this note be not paid at maturity, to appear in my name and confess judgment indication of fundamental legal purposes.
for the above sum with interest, cost of suit and attorney's fees of ten (10) per cent for collection,
a release of all errors and waiver of all rights to inquisition and appeal, and to the benefit of all The attorney for the appellee contends that the Negotiable Instruments Law (Act No. 2031)
laws exempting property, real or personal, from levy or sale. Value received. No. ____ Due expressly recognizes judgment notes, and that they are enforcible under the regular procedure.
____ The Negotiable Instruments Law, in section 5, provides that "The negotiable character of an
instrument otherwise negotiable is not affected by a provision which ". . . (b) Authorizes a
MANILA OIL REFINING & BY-PRODUCTS CO., INC., confession of judgment if the instrument be not paid at maturity." We do not believe, however,
that this provision of law can be taken to sanction judgments by confession, because it is a
(Sgd.) VICENTE SOTELO, portion of a uniform law which merely provides that, in jurisdiction where judgment notes are
Manager. recognized, such clauses shall not affect the negotiable character of the instrument. Moreover,
the same section of the Negotiable Instruments. Law concludes with these words: "But nothing
MANILA OIL REFINING & BY-PRODUCTS CO., INC., in this section shall validate any provision or stipulation otherwise illegal."
The court is thus put in the position of having to determine the validity in the absence of statute
of a provision in a note authorizing an attorney to appear and confess judgment against the
maker. This situation, in reality, has its advantages for it permits us to reach that solution which
is best grounded in the solid principles of the law, and which will best advance the public
interest.
The practice of entering judgments in debt on warrants of attorney is of ancient origin. In the
course of time a warrant of attorney to confess judgement became a familiar common law
security. At common law, there were two kinds of judgments by confession; the one a judgment
by cognovit actionem, and the other by confession relicta verificatione. A number of jurisdictions
in the United States have accepted the common law view of judgments by confession, while
still other jurisdictions have refused to sanction them. In some States, statutes have been
passed which have either expressly authorized confession of judgment on warrant of attorney,
without antecedent process, or have forbidden judgments of this character. In the absence of
statute, there is a conflict of authority as to the validity of a warrant of attorney for the confession
of judgement. The weight of opinion is that, unless authorized by statute, warrants of attorney
to confess judgment are void, as against public policy.
Possibly the leading case on the subject is First National Bank of Kansas City vs. White ([1909],
220 Mo., 717; 16 Ann. Cas., 889; 120 S. W., 36; 132 Am. St. Rep., 612). The record in this
case discloses that on October 4, 1990, the defendant executed and delivered to the plaintiff
an obligation in which the defendant authorized any attorney-at-law to appear for him in an
action on the note at any time after the note became due in any court of record in the State of
Missouri, or elsewhere, to waive the issuing and service of process, and to confess judgement
in favor of the First National Bank of Kansas City for the amount that might then be due thereon,
with interest at the rate therein mentioned and the costs of suit, together with an attorney's fee
of 10 per cent and also to waive and release all errors in said proceedings and judgment, and
all proceedings, appeals, or writs of error thereon. Plaintiff filed a petition in the Circuit Court to
which was attached the above-mentioned instrument. An attorney named Denham appeared
pursuant to the authority given by the note sued on, entered the appearance of the defendant,
and consented that judgement be rendered in favor of the plaintiff as prayed in the petition.
After the Circuit Court had entered a judgement, the defendants, through counsel, appeared
specially and filed a motion to set it aside. The Supreme Court of Missouri, speaking through
Mr. Justice Graves, in part said:
But going beyond the mere technical question in our preceding paragraph discussed, we come
to a question urged which goes to the very root of this case, and whilst new and novel in this
state, we do not feel that the case should be disposed of without discussing and passing upon
that question.
xxx xxx xxx
And if this instrument be considered as security for a debt, as it was by the common law, it has
never so found recognition in this state. The policy of our law has been against such hidden
securities for debt. Our Recorder's Act is such that instruments intended as security for debt
should find a place in the public records, and if not, they have often been viewed with suspicion,
and their bona fides often questioned.
Nor do we thing that the policy of our law is such as to thus place a debtor in the absolute
power of his creditor. The field for fraud is too far enlarged by such an instrument. Oppression
and tyranny would follow the footsteps of such a diversion in the way of security for debt. Such
instruments procured by duress could shortly be placed in judgment in a foreign court and
much distress result therefrom.
Again, under the law the right to appeal to this court or some other appellate court is granted
to all persons against whom an adverse judgment is rendered, and this statutory right is by the
instrument stricken down. True it is that such right is not claimed in this case, but it is a part of
the bond and we hardly know why this pound of flesh has not been demanded. Courts guard
with jealous eye any contract innovations upon their jurisdiction. The instrument before us,
considered in the light of a contract, actually reduces the courts to mere clerks to enter and
record the judgment called for therein. By our statute (Rev. St. 1899, sec. 645) a party to a
written instrument of this character has the right to show a failure of consideration, but this right
is brushed to the wind by this instrument and the jurisdiction of the court to hear that controversy
is by the whose object is to oust the jurisdiction of the courts are contrary to public policy and
will not be enforced. Thus it is held that any stipulation between parties to a contract
distinguishing between the different courts of the country is contrary to public policy. The
principle has also been applied to a stipulation in a contract that a party who breaks it may not
be sued, to an agreement designating a person to be sued for its breach who is nowise liable
and prohibiting action against any but him, to a provision in a lease that the landlord shall have
the right to take immediate judgment against the tenant in case of a default on his part, without
giving the notice and demand for possession and filing the complaint required by statute, to a
by-law of a benefit association that the decisions of its officers on claim shall be final and
conclusive, and to many other agreements of a similar tendency. In some courts, any
agreement as to the time for suing different from time allowed by the statute of limitations within
which suit shall be brought or the right to sue be barred is held void.
xxx xxx xxx
We shall not pursue this question further. This contract, in so far as it goes beyond the usual
provisions of a note, is void as against the public policy of the state, as such public policy is
found expressed in our laws and decisions. Such agreements are iniquitous to the uttermost
and should be promptly condemned by the courts, until such time as they may receive express
statutory recognition, as they have in some states.
xxx xxx xxx
From what has been said, it follows that the Circuit Court never had jurisdiction of the
defendant, and the judgement is reversed.
The case of Farquhar and Co. vs. Dehaven ([1912], 70 W. Va., 738; 40 L.R.A. [N. S.], 956; 75
S.E., 65; Ann. Cas. [1914-A], 640), is another well-considered authority. The notes referred to
in the record contained waiver of presentment and protest, homestead and exemption rights
real and personal, and other rights, and also the following material provision: "And we do
hereby empower and authorize the said A. B. Farquhar Co. Limited, or agent, or any
prothonotary or attorney of any Court of Record to appear for us and in our name to confess
judgement against us and in favor of said A. B. Farquhar Co., Limited, for the above named
sum with costs of suit and release of all errors and without stay of execution after the maturity
of this note." The Supreme Court of West Virginia, on consideration of the validity of the
judgment note above described, speaking through Mr. Justice Miller, in part said:
As both sides agree the question presented is one of first impression in this State. We have no
statutes, as has Pennsylvania and many other states, regulating the subject. In the decision
we are called upon to render, we must have recourse to the rules and principles of the common
law, in force here, and to our statute law, applicable, and to such judicial decisions and
practices in Virginia, in force at the time of the separation, as are properly binding on us. It is
pertinent to remark in this connection, that after nearly fifty years of judicial history this question,
strong evidence, we think, that such notes, if at all, have never been in very general use in this
commonwealth. And in most states where they are current the use of them has grown up under
statutes authorizing them, and regulating the practice of employing them in commercial
transactions.
xxx xxx xxx
It is contended, however, that the old legal maxim, qui facit per alium, facit per se, is as
applicable here as in other cases. We do not think so. Strong reasons exist, as we have shown,
for denying its application, when holders of contracts of this character seek the aid of the courts
and of their execution process to enforce them, defendant having had no day in court or
opportunity to be heard. We need not say in this case that a debtor may not, by proper power
of attorney duly executed, authorize another to appear in court, and by proper endorsement
upon the writ waive service of process, and confess judgement. But we do not wish to be
understood as approving or intending to countenance the practice employing in this state
commercial paper of the character here involved. Such paper has heretofore had little if any
currency here. If the practice is adopted into this state it ought to be, we think, by act of the
Legislature, with all proper safeguards thrown around it, to prevent fraud and imposition. The
policy of our law is, that no man shall suffer judgment at the hands of our courts without proper
process and a day to be heard. To give currency to such paper by judicial pronouncement
would be to open the door to fraud and imposition, and to subject the people to wrongs and
injuries not heretofore contemplated. This we are unwilling to do.
A case typical of those authorities which lend support to judgment notes is First National Bank
of Las Cruces vs. Baker ([1919], 180 Pac., 291). The Supreme Court of New Mexico, in a per
curiam decision, in part, said:
In some of the states the judgments upon warrants of attorney are condemned as being against
public policy. (Farquhar and Co. vs. Dahaven, 70 W. Va., 738; 75 S.E., 65; 40 L.R.A. [N. S.],
956; Ann. Cas. [1914 A]. 640, and First National Bank of Kansas City vs. White, 220 Mo., 717;
120 S. W., 36; 132 Am. St. Rep., 612; 16 Ann. Cas., 889, are examples of such holding.) By
just what course of reasoning it can be said by the courts that such judgments are against
public policy we are unable to understand. It was a practice from time immemorial at common
law, and the common law comes down to us sanctioned as justified by the reason and
experience of English-speaking peoples. If conditions have arisen in this country which make
the application of the common law undesirable, it is for the Legislature to so announce, and to
prohibit the taking of judgments can be declared as against the public policy of the state. We
are aware that the argument against them is that they enable the unconscionable creditor to
take advantage of the necessities of the poor debtor and cut him off from his ordinary day in
court. On the other hand, it may be said in their favor that it frequently enables a debtor to
obtain money which he could by no possibility otherwise obtain. It strengthens his credit, and
may be most highly beneficial to him at times. In some of the states there judgments have been
condemned by statute and of course in that case are not allowed.
Our conclusion in this case is that a warrant of attorney given as security to a creditor
accompanying a promissory note confers a valid power, and authorizes a confession of
judgment in any court of competent jurisdiction in an action to be brought upon said note; that
our cognovit statute does not cover the same field as that occupied by the common-law practice
of taking judgments upon warrant of attorney, and does not impliedly or otherwise abrogate
such practice; and that the practice of taking judgments upon warrants of attorney as it was
pursued in this case is not against any public policy of the state, as declared by its laws.
With reference to the conclusiveness of the decisions here mentioned, it may be said that they
are based on the practice of the English-American common law, and that the doctrines of the
common law are binding upon Philippine courts only in so far as they are founded on sound
principles applicable to local conditions.
Judgments by confession as appeared at common law were considered an amicable, easy,
and cheap way to settle and secure debts. They are a quick remedy and serve to save the
court's time. They also save the time and money of the litigants and the government the
expenses that a long litigation entails. In one sense, instruments of this character may be
considered as special agreements, with power to enter up judgments on them, binding the
parties to the result as they themselves viewed it.
On the other hand, are disadvantages to the commercial world which outweigh the
considerations just mentioned. Such warrants of attorney are void as against public policy,
because they enlarge the field for fraud, because under these instruments the promissor
bargains away his right to a day in court, and because the effect of the instrument is to strike
down the right of appeal accorded by statute. The recognition of such a form of obligation would
bring about a complete reorganization of commercial customs and practices, with reference to
short-term obligations. It can readily be seen that judgement notes, instead of resulting to the
advantage of commercial life in the Philippines might be the source of abuse and oppression,
and make the courts involuntary parties thereto. If the bank has a meritorious case, the
judgement is ultimately certain in the courts.
We are of the opinion that warrants of attorney to confess judgment are not authorized nor
contemplated by our law. We are further of the opinion that provisions in notes authorizing
attorneys to appear and confess judgments against makers should not be recognized in this
jurisdiction by implication and should only be considered as valid when given express
legislative sanction.
The judgment appealed from is set aside, and the case is remanded to the lower court for
further proceedings in accordance with this decision. Without special finding as to costs in this
instance, it is so ordered.
Araullo, C.J., Avanceña, Villamor, Ostrand, Johns and Romualdez, JJ., concur.
Footnotes
1MEMORANDA OF "AMICI CURIAE"
Attorney Thos. L. Hartigan, of Hartigan and Welch, states:
"Though we are attorneys for two of the large banks here and keenly interested in the
introduction of any improvements that would make for simplication of procedure and rapidity of
practice, we cannot favor the introduction of confessions of judgment in the Philippine islands.
In our opinion, it would open the doors to fraud to an extent that would more than
counterbalance any advantages of its use.
"With our lack of system in recording judgments and with the practice of keeping merchants'
books in various foreign languages, there would be ample opportunity for a debtor to make
preferences by confessions of judgment which could not be discovered by the creditors until
too late and which would be nearly impossible to set aside even when discovered in time.
"Although, as representatives of the banks, we are representing the creditor class, we believe
the introduction of confessions of judgment would ultimately cause much more loss than benefit
to that class."
Attorney Clyde A. DeWitt, of Fisher and DeWitt, states:
"There is no statutory sanction in this jurisdiction for such provisions in negotiable instruments.
Section 5 (b) of the Negotiable Instruments Law does not constitute such sanction because (1)
it merely provides that such clauses will not affect the negotiable character of the instrument,
and (2) it concludes with language showing that the Legislature did not intend thereby to
validate any provision otherwise unlawful. The language is: 'But nothing in this section shall
validate any provision or stipulation otherwise illegal.'
"The question then is whether or not, in the absence of express legislative sanction, such
warrants of attorney are valid. There are not many American cases in which this precise
question has been considered, and in those cases in which the question has been raised, the
reasoning of the courts has been colored by the fact that the commercial use of these warrants
of attorney as security for debt was sanctioned at common law, and the procedural statutes
are held to be merely cumulative and not in derogation of the common law remedies. We, of
course, have no such situation here.
"The cases are collected in a note to First National Bank vs. White (220 Mo., 717), found in 16
Ann. Cas., 893, and it is there shown that in Missouri and Kansas such provisions are held to
be void as against the public policy of the State as expressed in its laws and the decisions of
its courts, while in Colorado and Illinois their validity was upheld as a familiar common-law
security not affected by the procedural statutes. Yet it is there pointed out that in Kahn vs.
Lesser (97 Wis., 217, 72 N.W., 739), the court, in referring to a judgment by confession under
warrant of attorney in a promissory note, said:
"'The judgment in this case must stand, if at all, by the authority of the statute. The proceeding
by which it was entered was outside and in derogation of the common-law practice of courts;
and the statute, as well as the proceedings under it, must be strictly construed.'"
"In Iowa, in an early case, McClish vs. Manning (3 Green, 233), the validity of these warrants
of attorney was upheld, referring to a statute authorizing any person to confess a judgment, by
himself or his attorney. In a later decision, Hamilton vs. Schoenberger (47 Ilowa, 385), it was
expressly held that such a provision, in a note could not be enforced in the courts of that State,
and was not authorized or contemplated by its laws. And in Tolman vs. Jansen (106 Iowa, 455),
it was held that such a provision, being void, would not affect the negotiability of a note, even
though its effect would be to make uncertain the time of payment.
"The reasoning in First National Bank vs. White, supra, is persuasive. The court there held that
these warrants of attorney are void as against the public policy of the state on the ground, first,
that their effect is to enlarge the field for fraud; second, that under such an instrument the
promissor bargains away his right to his day in court; third, that the effect of the instrument is
to strike down the right to appeal accorded by statute, and, fourth, that there was no provision
for the public recording of such an instrument if regarded as a security for a debt.
"It seems to me that on the precise grounds stated in the White case, these warrants of attorney
should be held void as against public policy in this jurisdiction. If given effect, they bargain away
the jurisdiction of the courts to try and determine the liability of the maker of the note on its
merits. To uphold them would be to facilitate the operations of usurers, the collection of
gambling debts, and would make difficult, if not impossible under our procedure, the setting
aside of judgments entered in virtue thereof where the execution of the instrument was obtained
by fraud, duress, or where there had been an entire failure of consideration. I can think of no
advantage which would result to the commercial world from upholding these warrants of
attorney which would outweigh the foregoing considerations."
Attorney e. Arthur Perkins, of Perkins and Kincaid, states:
"Leaving aside entirely the legal considerations involved, I feel that there is only one answer to
your inquiry, and that is, that the best interests of the commercial life of the Philippines require
the non-recognition of such a form of judgment note. Feeling that you would want to know the
reasons which impell me to adopt such a conclusion, I will say briefly that if the Supreme Court
should, by a decision, recognize such a judgment note and thereby place the stamp of approval
upon transactions of such a nature, the entire business population of the Philippine Islands
would be justified in their future transactions with debtors in requiring, in all instances, the
execution of notes of a similar tenor, with the consequence that the debtor would thereby be
deprived, to all intents and purposes, upon ignorant debtors. It will prove a serious drawback
to the campaign being now waged against usury.
"There is the further fear that the banks and money lenders having accounts now outstanding
will immediately require every debtor to execute that form of note and to refuse further
extensions of credit unless sit is done, which the debtor under the stress of circumstances will
be compelled to accept, amounting in effect to duress.
"The recognition of such a form of obligation would be so revolutionary in character as to bring
about a complete reorganization of commercial customs and practices with reference to short-
term obligations.
"Having in mind that the Philippine National Bank is practically the only institution which can
assist the farmers and agriculturists, the practice of requiring a judgment note would place the
latter wholly at the mercy of the bank, and this is stated without any reflection on the bank, but
merely to point out one of the consequent evils which will necessarily follow if the practice
should receive the high judicial sanction which a judgment of the Supreme Court would
necessarily give to it.
"Another feature which occurs to me is that where any new enterprise is being launched, it is
universally the custom for such company to arrange with some banking institution for credit
facilities, over and above the capital with which it brings business. Should it become the custom
here to require the execution of so-called judgment notes, organizers of corporations,
partnerships and the like, who have in mind to secure additional working capital or credit
facilities from banks, will be very reluctant to put their funds into any enterprises which could
be destroyed without warning by the creditor exercising the rights which that form of transaction
would give him. This is would act therefore as a deterrent to new enterprises and the
development of industry through individual initiative and with private funds.
"Let us take a very simple illustration of his. Suppose that you and I should form a partnership,
with a capital of P50,000 to buy hemp and , in connection with our business, we went to some
banking institution for the purpose of securing credit facilities, as is customary, in the conduct
of our business. Let us then suppose that the bank, taking into consideration the capital which
we ourselves had furnished and our standing in the community, was willing to allow us a credit
in the further sum of P50,000 upon our signing a so-called judgment note. Would not you and
I consider a long time before we would so far obligate ourselves as to place it in the power of
the bank to send their attorney over to court, upon the least provocation or at the first
unfavorable rumor, and to confess judgment in our names, which would permit the sheriff to
close us out without even an opportunity to be heard?
"The sum and substance of the whole proposition is that such a practice is contrary to good
morals."
Attorney David C. Johnson, of Gibbs, McDonough and Johnson, states:
"It seems that under the common law a confession of judgment was only allowable by the
defendant himself, either before or after appearance and answer. The confession of judgment
by warrant of attorney is a statutory development (15 R.C.L., 656, 657; 17 Am. and Eng. Encyc.
of Law [2d ed.], 765; Pl. and Pr., 973-975; Masson vs. Ward, 80 Vt., 290; 130 A. S. R., 987,988).
"The procedure contemplated in the note quoted in your letter is contrary to that contemplated
in our code of procedure, which gives to all defendants an opportunity at least to be heard. An
action on the note in question could be so presented that the defendant would never be
summoned or notified, since an appearance and confession of judgment might be filed
simultaneously. We believe that this procedure should not be recognized in this jurisdiction by
implication, but should have legislative sanction with the rights of the defendant amply
safeguarded. We believe that section 5 of Act No. 2031 does not of itself sanction any of the
acts mentioned in that section, but is only a statement regarding the negotiable character of
the instrument. Subsection A of section 5 states that the authority to sell collateral security does
not affect negotiability. As we understand the decision of the Supreme Court in the case of
Mahoney vs. Tuason(39 Phil., 952), the creditor in this jurisdiction is not authorized by law to
sell collateral security except in the manner provided in section 14 of Act No. 1508. This would
seem to reinforce our opinion.
"There are some favorable features of a judgment note or warrant for confession of judgment,
but we believe that there are many objections which outweigh any of the advantages. Forgery
and usury are more prevalent in these Islands than in the United States. The sanctioning of
this procedure would add an additional weapon to the money lender who desires to overreach
his debtor.
"We have delayed answering your letter in order that we might consult our Mr. Gibbs, who
returned from Baguio yesterday.
"The foregoing is the consensus of opinion of the member of this firm."
Attorney Julian Wolfson states:
"It is assumed that the only question propounded is :
"'Admitting that there may be some doubt, as to a correct solution, which solution, the
recognition of a confession of judgment, or a non-recognition of a confession of judgment,
would be for the best interest of the commercial life of the Philippines? and that no opinion is
required upon the incidental questions previously asked, as same have already been
determined by an examination of such authorities as: 23 Cyc., pp. 699, 701-2-3-5-6-7, 723-5;
6 C. J., pp. 645-6 (Notes 35 & 42); 8 C. J., p. 128 (Notes 43-47); 12 C. J., p. 418 (Note 37);
and such leading textbooks as 'Brannan's Negotiable Instruments Law' and 'Selover on
Negotiable Instruments.' "Everyone is entitled to 'his day in court.' This right may be waved
after an opportunity has been given to exercise the right, but must not and cannot be taken
away before an opportunity has been given to exercise the right.
"The ordinary ship's bill of lading and the ordinary fire and marine insurance policy are generally
printed on forms prepared by the carrier and the insurer respectively, and generally contain a
clause making it a condition precedent to the institution of an action to first submit the matter
to a board of arbitration. The Supreme Court has never recognized this clause. The reasons
are stated in the opinions. Once submitted to arbitration, then another question is raised.
"Special defenses to written instruments are common. Need we do more than cite the following
cases: Maulini vs. Serrano (28 Phil., 640); Henry W. Peabody and Co. vs. Bromfield and Ross
(38 Phil., 841); Cuyugan vs. Santos (34 Phil., 100; 39 Phil., 970).
"If the judgment note (this term is used throughout for brevity and as it is the recognized term)
is to be recognized, what chance has defendant of defending as did the defendants in the
above cited cases? Non!
"Often a promissory note is a mere formality taken by a bank as evidence of indebtedness,
while the real indebtedness may be for a superior or inferior amount incurred by way of
overdraft, letters of credit outstanding, acceptances to mature, or a thousand other forms of
banking credit. Such "judgment notes" are generally made payable on demand. In the case at
bar, the note is made payable on demand. The real indebtedness may be partially paid, or the
liquidation may be going along too slow to suit the bank and then use is made of the judgment
note. The defendant might have perfect defense except for the judgment note. Would not article
1269 of the Civil Code here apply?
"The 'judgment notes,' is not once in a thousand times signed at the time of receiving money
from the bank. The indebtedness represented thereby is incurred in prior transactions, the
obligation became past due and the bank, as a forcible measure, produces one of these
'judgment notes,' when the debtor is absolutely helpless, and says 'Sign on the dotted line' and
the debtor has no option, he signs. The minds of the parties never met. The debtor owes the
money, knows that the bank must have evidence of the indebtedness to pass the auditors and
the debtor further realizes he must accept that bank's dictation, because if he declines, he is
liable to immediate ruin, or if not that, he will never get further accommodation from the bank.
He does not realize, even if he knows, what is meant by a 'judgment note.' Again, would not
article 1269 of the Civil Code here apply?
"Just a few months ago there was a suit instituted by a local bank for a large sum of money,
based on a written instrument which, on its face, seemed absolute. Special defenses were
pleaded, setting up that the instrument did not express the real understanding of the parties
and the real understanding was set up. The special defenses were fully proved and the lower
court dismissed the bank's suit. The bank did not even attempt to appeal to the Supreme Court
(See Cause No. 18239 of the Docket of the Court of First Instance of Manila). Suppose the
instrument sued on had contained a clause of confession of judgment, what chance would
defendant have had to prove his defense? None!
"Let us go a step further and see where this leads us. A is a dealer in hardware and sells B a
bill of goods. A prints a form, which he has B to sign, in which B acknowledges receipt of the
goods and in consideration thereof premises to pay A and "a confession of judgment" clause
is inserted. The goods turn out entirely different from those ordered and invoiced. B refuses to
pay. A sues on his "judgment note." What change has B? None!
"Very often a promissory note is only one of a series of documents given as security for the
debt. What about considering the other documents which bear on the transaction?
"A bank may have made certain advances and may have undertaken to make more, but fails
to do so, to the damage and prejudice of debtor. Let us assume that the bank agreed to
advance several hundred thousand pesos in installments of P60,000 each, and had advanced
only the first installments, taking a "judgment note" for said first installment, and had failed to
advance further, to the damage of the debtor. What would become of section 97 of the Code
of Civil Procedure? How would debtor be able to exercise his right of counterclaim? Was it ever
contemplated at the time of signing the judgment note that the debtor would not only waive
defense, but absolutely shut himself out of court, as he would, according to section 97 above
cited, on his counterclaim? Yet again, would not article 1269 of the Civil Code here apply?
"We dare not attempt to elaborate on what would happen in the provinces of the Philippines
should a "judgment note" be held valid.
"What about the Usury Law? How could a defense be offered there? The usurious rate might
not appear on the face of the "judgment note," but it may be there all the same.
"Examples could be multiplied until the very absurdity of the proposition would be clearly seen,
even by a blind man.
"Of what possible benefit would the recognition of a "judgment note" serve "the best interest of
the commercial life of the Philippines? None! An honest creditor is willing to let his debtor have
his day in court and is willing to prove to the court his case. It might take slightly longer to go
through with a trial, but that cannot be considered a set-back. But, on the other hand, a
dishonest creditor would take unfair advantage of a "judgment note" and would use it to the
utmost to harass and take advantage of the poor and helpless debtor. The real consequences
likely, in fact sure, to arise from such recognition are horrible beyond words to contemplate.
"There can be but one answer to the proposition and that is: The non-recognition of a
confession of judgment would be for the best interests of the commercial life of the Philippines."
Attorney J. G. Lawrence, of Ross and Lawrence, states:
"We are aware of no expression of our Legislature or courts which would indicate that
confessions of judgment under powers given in a promissory note are contrary to public policy.
This action was regularly brought in accordance with the provisions of the Code of Civil
Procedure and the defendant served with process. The answer, confessing judgment, was filed
in strict accordance with the powers contained in the note — a power coupled with an interest
which defendant would be estopped of denying. We think that no express legal sanction is
necessary to legalize such a proceeding.
"On the question of what ought to be the public policy of the Philippines, we hold quite a
different opinion. While the use of judgment notes might in some cases expedite the collection
of just debts, we believe that under conditions as exist here, their use should be discouraged.
The lend themselves easily to fraud in the hands of friends of a dishonest debtor, and to
extortion in the hands of usurers who are already too well equipped with the pacto de retro.
"While we believe that the position of the bank is sound legally, we should be very glad to be
proven mistaken."
Attorney Francis B. Mahoney, of the Philippine Trust Company, states:
"I have not gone into the law and cases, except to take a glance at the subject of judgments in
Volume 15 of Ruling Case Law. However, the reasons indicated on page 651 thereof are
significant.
"Unquestionably, if our Legislature provided in unmistakable terms for confession of judgment
as herein indicated, the validity and constitutionality of the enactment might be questioned as
failing to provide those constitutional safeguards of taking a man's property only after a day in
court and after the due process of law.
"This conclusion is stronger — a fortiori — where the enacting provision — if such section 5 of
Act. No. 2031 may be called — is of a lefthanded nature, apparently relating only to negotiability
— incidentally thus answering here your first inquiry. Whatever legal principles there might be
in favor of recognizing a confession of judgment — for example, the matter of expediency —
stronger and more vital principles oppose such recognition.
"By refusing to recognize confession of judgment under existing statutes or under general legal
principles, at the worst phase from the point of view of the plaintiff bank, there would result only
possible delay, costs and attorney's fees, which, after all, are only passed on to the clients of
the bank in the shape of interests, charges. etc. If the bank has a meritorious case, the
judgment is ultimately certain as courts.
"If the defendant debtor has any defense of merit, he is given an opportunity to present it, as,
for example, in the matter of usury so common, so difficult to uncover an such an unscrupulous
rival of legitimate banking, the courts may keep their doors open to the equities of each
individual case. Whereas, if defendant, who theoretically may allege fraud an who practically
has great difficulty in proving it, must rely upon a defense of fraud, he has little chance and the
doors of the court are closed to any other defense.
"In the final analysis, the matter simmers down to: 1. Possible delay in judgment with costs,
etc. 2. Certain justice in the end. 3. The eyes and doors of courts open to the equities of each
individual case. 4. Equality before the law,
or
(a) Expediting judgment. (b) Defendant debtor practically kept out of court by additional
expense and difficulty in securing a hearing. (c) Putting a strong weapon in the hands of
unscrupulous persons and taking the strength necessary to wield this weapon from the courts.
"At first glance, if a debtor signs a document throwing away his right to be heard, the average
man has a feeling such debtor deserves to suffer the consequences. If that were the entire
story, probably he should. But what man, needing money badly enough — facing strenuous
necessity — will not in the circumstances be inclined to look on the cheerful side-to sign and
get the money, letting the future take care of itself? Such is the frailty of human nature. Then,
as the usual thing, the rich and powerful can take care of themselves, and it is usually others
who have need of courts, just laws and liberal interpretation of them.
"No doubt, banks would favor expediting judgments against their debtors, other things being
equal. And no doubt, additional delay in courts and the incidental costs thereof will be borne by
the clients of the bank. But sound banking is not established and enhanced by harsh law which
put strong weapons in powerful hands. Contented peoples, safe laws and sound banking
usually go hand in hand."
Professor Jose A. Espiritu, of the University of the Philippines, states:
"Permit me to cite first of all the authorities that I have gathered concerning the principal
question at issue in the case mentioned in your letter, namely, 'The Effect and Validity of
Confession of Judgement in the Philippines.'
"1. Confession of judgment has been defined as "a voluntary submission to the jurisdiction of
the court, giving by consent and without the service of process, what could otherwise be
obtained by summons and complaint, and other formal proceedings, an acknowledgment of
indebtedness, upon which it is contemplated that a judgment may and will be rendered." (8
Cyc., pp. 563, 564.)
"2. As to the general effects of confession of judgment, the following statements may be
mentioned: 'A warrant to confess judgment does not destroy the negotiability of the note. Such
a note is commonly called a "judgement note." Decisions to the contrary in the States where
the Negotiable Instruments Law is now in force are abrogated thereby, since it expressly
provides that the negotiable character of an instrument otherwise negotiable is not affected by
a provision which authorizes a confession of judgment, if the instrument is not paid at maturity.
However, this statutory provision does not apply to stipulations for the confession of judgment
"prior" to maturity.' (8 C.J., p. 128, sec. 222.)
"3. Nature of Requisites. "A judgment may be rendered upon the confession of defendant,
either in an action regularly commenced against him by the issuance and service of process,
in which case the confession may be made by his attorney of record, or, without the institution
of a suit, upon a confession by defendant in person or by his attorney in fact. It implies
something more than a mere admission of a debt to plaintiff; in addition, it is defendant's
consent that a judgment shall be entered against him. . . . ." (23 cyc., 699.)
"4. Statutory Provisions, "Statutes regulating the confession of judgments without action, or
otherwise than according to the course of the common law, are strictly construed, and a strict
compliance with their provisions must be shown in order to sustain the validity of the judgment."
(Chapin vs. Tompson, 20 Cla., 681.) "And this applies also to statutory restriction upon the right
to confess judgment, as that authority to confess judgment shall not be given in the same
instrument which contains the promise or obligation to pay the debt, or that such confession
shall not be authorized by any instrument executed prior to suit brought." (23 Cyc., 699, 700.)
"5. Warrant or Power of Attorney — Validity and Necessity. 'A judgment by confession may be
entered upon a written authority, called a warrant or letter of attorney, by which the debtor
empowers an attorney to enter an appearance for him, waive process, and confess judgment
against him for a designated sum, except where this method of proceeding is prohibited by
statute. The warrant as the basis of judgment is generally required to be placed on file in the
clerk's office, and no judgment can be so entered until it is so filed.' (23 Cyc., 703.)
"6. Requisites and Sufficiency. 'A warrant or power of attorney to confess judgement should be
in writing and should conform to the requirements of the statute in force at the time of its
execution, although in the absence of specific statutory directions it is sufficient, without much
regard to its form, if it contains the essential of a good power and clearly states its purpose. It
must be signed by the person against whom the judgment is to be entered . . . .' (23 Cyc., 704.)
"The above quoted authorities are among the various authorities I found bearing on the
question at issue. As it can be readily seen none of them decides squarely and definitely the
questions propounded in your letter. One thing, however, seems to be clear, from the very
provision of section 5 (b) of the Negotiable Instruments Law and from the quotation No. 2 of
this letter, that a provision in a note or bill of exchange authorizing a confession of judgment in
default of payment at its maturity has particular reference, in so far as Act No. 2031 is
concerned, only to the negotiable character of an instrument. I do not believe that the
Legislature had the intention in passing the said Act No. 2031 to introduce in the Philippines a
new practice in our Remedial Law, namely, that of confession of judgment, which is purely
procedural in nature.
"Now as to the second question, to wit: 'Does the silence of the Code of Civil Procedure on the
subject mean that a confession of judgement cannot be recognized in this jurisdiction, or can
a judgment by confession be imported into the Philippines under general legal principles?'
Before answering this question attention is respectfully called to the quotation No. 4 of this
letter, which expressly provides that statutes regulating confession of judgments must be
strictly construed and their provisions strictly complied with to sustain the validity of judgments
rendered under such statutes. Now it being admitted that there is no express provision in our
Code of Civil Procedure authorizing or sanctioning this mode of practice in this jurisdiction, and
consequently there are no regulations provided to be followed in this particular remedy, I am
therefore of the opinion that confession of judgment should not be deemed as imported in the
Philippines under the general legal principles. The remedy itself is a most summary one, and
when the defendant-debtor, instead of admitting or allowing a judgment be taken against him,
presents his appearance and answers the complaint filed against him, it seems that the trial
court should not render a judgement without first hearing the evidence that the parties may
wish to submit before him, for it may happen that the defendant-debtor may have some valid
or good defenses against the plaintiff-creditor. This is especially true in the case of a
counterclaim that the defendant may have against the plaintiff as provided in sections 95 and
96 of the Code of Civil Procedure. The same Code provides that in case of an omission to set
up his counterclaim, the defendant or his assignee loses all his right to bring further suit on
such claim. (Sec. 97, Act No. 190.)
"In answer to the last question, namely: "Admitting that there may be some doubt, as to the
correct solution, which solution, the recognition of a confession of judgement, or the non-
recognition of a confession of judgment, would be for the best interests of the commercial life
of the Philippines?" I wish first of all to state that a confession of judgment is a quick remedy.
It saves time and money as far as the parties to the suit are concerned if the same is properly
and legally brought. It saves the court's time and the government the expense that a long
litigation entails. As to its disadvantages we may say among other things the following: 1. It
may be abused in the same way as the usurious rates of interest on loans are now in the
Philippines, because a borrower who is in great need of money might be induced, if not actually
compelled, to sign such a burdensome obligation; 2. It deprives the defendant of his day in
court, and as a consequence it will prevent him to set up and prove before the court his just
claims and other lawful defenses against the plaintiff; 3. It will create multiplicity of actions in
this jurisdiction, for if the confession of judgment has been wrongfully or unjustly entered, the
judgment debtor may start another litigation on the same subject-matter that might have been
brought before the court in case a proper trial was formally held before the rendition of such a
judgment; and 4. It does not really hold the plaintiff who has a good cause of action against the
defendant as his proofs will surely establish his claims and consequently a judgment must
necessarily be rendered in his favor.
"From the above statements, I am of the opinion that unless proper regulations are first duly
introduced and incorporated in our remedial law, confession of judgments, instead of resulting
advantageous to our commercial life in the Philippines, might be the sources of abuse and
oppression. The very fact that confession of judgement is almost summary and in fact a violent
remedy, it should first of all be properly regulated by statute, and those regulations must be
strictly complied with, before the court should concede to such a remedy."
G.R. No. 111190 June 27, 1995
LORETO D. DE LA VICTORIA, as City Fiscal of Mandaue City and in his personal capacity
as garnishee, petitioner,
vs.
HON. JOSE P. BURGOS, Presiding Judge, RTC, Br. XVII, Cebu City, and RAUL H.
SESBREÑO, respondents.
BELLOSILLO, J.:
RAUL H. SESBREÑO filed a complaint for damages against Assistant City Fiscals Bienvenido
N. Mabanto, Jr., and Dario D. Rama, Jr., before the Regional Trial Court of Cebu City. After
trial judgment was rendered ordering the defendants to pay P11,000.00 to the plaintiff, private
respondent herein. The decision having become final and executory, on motion of the latter,
the trial court ordered its execution. This order was questioned by the defendants before the
Court of Appeals. However, on 15 January 1992 a writ of execution was issued.
On 4 February 1992 a notice of garnishment was served on petitioner Loreto D. de la Victoria
as City Fiscal of Mandaue City where defendant Mabanto, Jr., was then detailed. The notice
directed petitioner not to disburse, transfer, release or convey to any other person except to
the deputy sheriff concerned the salary checks or other checks, monies, or cash due or
belonging to Mabanto, Jr., under penalty of law. 1 On 10 March 1992 private respondent filed
a motion before the trial court for examination of the garnishees.
On 25 May 1992 the petition pending before the Court of Appeals was dismissed. Thus the trial
court, finding no more legal obstacle to act on the motion for examination of the garnishees,
directed petitioner on 4 November 1992 to submit his report showing the amount of the
garnished salaries of Mabanto, Jr., within fifteen (15) days from receipt 2 taking into
consideration the provisions of Sec. 12, pars. (f) and (i), Rule 39 of the Rules of Court.
On 24 November 1992 private respondent filed a motion to require petitioner to explain why he
should not be cited in contempt of court for failing to comply with the order of 4 November 1992.
On the other hand, on 19 January 1993 petitioner moved to quash the notice of garnishment
claiming that he was not in possession of any money, funds, credit, property or anything of
value belonging to Mabanto, Jr., except his salary and RATA checks, but that said checks were
not yet properties of Mabanto, Jr., until delivered to him. He further claimed that, as such, they
were still public funds which could not be subject to garnishment.
On 9 March 1993 the trial court denied both motions and ordered petitioner to immediately
comply with its order of 4 November 1992. 3 It opined that the checks of Mabanto, Jr., had
already been released through petitioner by the Department of Justice duly signed by the officer
concerned. Upon service of the writ of garnishment, petitioner as custodian of the checks was
under obligation to hold them for the judgment creditor. Petitioner became a virtual party to, or
a forced intervenor in, the case and the trial court thereby acquired jurisdiction to bind him to
its orders and processes with a view to the complete satisfaction of the judgment. Additionally,
there was no sufficient reason for petitioner to hold the checks because they were no longer
government funds and presumably delivered to the payee, conformably with the last sentence
of Sec. 16 of the Negotiable Instruments Law.
With regard to the contempt charge, the trial court was not morally convinced of petitioner's
guilt. For, while his explanation suffered from procedural infirmities nevertheless he took pains
in enlightening the court by sending a written explanation dated 22 July 1992 requesting for the
lifting of the notice of garnishment on the ground that the notice should have been sent to the
Finance Officer of the Department of Justice. Petitioner insists that he had no authority to
segregate a portion of the salary of Mabanto, Jr. The explanation however was not submitted
to the trial court for action since the stenographic reporter failed to attach it to the record. 4
On 20 April 1993 the motion for reconsideration was denied. The trial court explained that it
was not the duty of the garnishee to inquire or judge for himself whether the issuance of the
order of execution, writ of execution and notice of garnishment was justified. His only duty was
to turn over the garnished checks to the trial court which issued the order of execution. 5
Petitioner raises the following relevant issues: (1) whether a check still in the hands of the
maker or its duly authorized representative is owned by the payee before physical delivery to
the latter: and, (2) whether the salary check of a government official or employee funded with
public funds can be subject to garnishment.
Petitioner reiterates his position that the salary checks were not owned by Mabanto, Jr.,
because they were not yet delivered to him, and that petitioner as garnishee has no legal
obligation to hold and deliver them to the trial court to be applied to Mabanto, Jr.'s judgment
debt. The thesis of petitioner is that the salary checks still formed part of public funds and
therefore beyond the reach of garnishment proceedings.
Petitioner has well argued his case.
Garnishment is considered as a species of attachment for reaching credits belonging to the
judgment debtor owing to him from a stranger to the litigation. 6 Emphasis is laid on the phrase
"belonging to the judgment debtor" since it is the focal point in resolving the issues raised.
As Assistant City Fiscal, the source of the salary of Mabanto, Jr., is public funds. He receives
his compensation in the form of checks from the Department of Justice through petitioner as
City Fiscal of Mandaue City and head of office. Under Sec. 16 of the Negotiable Instruments
Law, every contract on a negotiable instrument is incomplete and revocable until delivery of
the instrument for the purpose of giving effect thereto. As ordinarily understood, delivery means
the transfer of the possession of the instrument by the maker or drawer with intent to transfer
title to the payee and recognize him as the holder thereof.7
According to the trial court, the checks of Mabanto, Jr., were already released by the
Department of Justice duly signed by the officer concerned through petitioner and upon service
of the writ of garnishment by the sheriff petitioner was under obligation to hold them for the
judgment creditor. It recognized the role of petitioner as custodian of the checks. At the same
time however it considered the checks as no longer government funds and presumed delivered
to the payee based on the last sentence of Sec. 16 of the Negotiable Instruments Law which
states: "And where the instrument is no longer in the possession of a party whose signature
appears thereon, a valid and intentional delivery by him is presumed." Yet, the presumption is
not conclusive because the last portion of the provision says "until the contrary is proved."
However this phrase was deleted by the trial court for no apparent reason. Proof to the contrary
is its own finding that the checks were in the custody of petitioner. Inasmuch as said checks
had not yet been delivered to Mabanto, Jr., they did not belong to him and still had the character
of public funds. In Tiro v. Hontanosas 8 we ruled that —
The salary check of a government officer or employee such as a teacher does not belong to
him before it is physically delivered to him. Until that time the check belongs to the government.
Accordingly, before there is actual delivery of the check, the payee has no power over it; he
cannot assign it without the consent of the Government.
As a necessary consequence of being public fund, the checks may not be garnished to satisfy
the judgment. 9 The rationale behind this doctrine is obvious consideration of public policy. The
Court succinctly stated in Commissioner of Public Highways v. San Diego 10 that —
The functions and public services rendered by the State cannot be allowed to be paralyzed or
disrupted by the diversion of public funds from their legitimate and specific objects, as
appropriated by law.
In denying petitioner's motion for reconsideration, the trial court expressed the additional
ratiocination that it was not the duty of the garnishee to inquire or judge for himself whether the
issuance of the order of execution, the writ of execution, and the notice of garnishment was
justified, citing our ruling in Philippine Commercial Industrial Bank v. Court of Appeals. 11 Our
precise ruling in that case was that "[I]t is not incumbent upon the garnishee to inquire or to
judge for itself whether or not the order for the advance execution of a judgment is valid." But
that is invoking only the general rule. We have also established therein the compelling reasons,
as exceptions thereto, which were not taken into account by the trial court, e.g., a defect on the
face of the writ or actual knowledge by the garnishee of lack of entitlement on the part of the
garnisher. It is worth to note that the ruling referred to the validity of advance execution of
judgments, but a careful scrutiny of that case and similar cases reveals that it was applicable
to a notice of garnishment as well. In the case at bench, it was incumbent upon petitioner to
inquire into the validity of the notice of garnishment as he had actual knowledge of the non-
entitlement of private respondent to the checks in question. Consequently, we find no difficulty
concluding that the trial court exceeded its jurisdiction in issuing the notice of garnishment
concerning the salary checks of Mabanto, Jr., in the possession of petitioner.
WHEREFORE, the petition is GRANTED. The orders of 9 March 1993 and 20 April 1993 of the
Regional Trial Court of Cebu City, Br. 17, subject of the petition are SET ASIDE. The notice of
garnishment served on petitioner dated 3 February 1992 is ordered DISCHARGED.
SO ORDERED.
Quiason and Kapunan, JJ., concur.
Separate Opinions
DAVIDE, JR., J., concurring and dissenting:
This Court may take judicial notice of the fact that checks for salaries of employees of various
Departments all over the country are prepared in Manila not at the end of the payroll period,
but days before it to ensure that they reach the employees concerned not later than the end of
the payroll period. As to the employees in the provinces or cities, the checks are sent through
the heads of the corresponding offices of the Departments. Thus, in the case of Prosecutors
and Assistant Prosecutors of the Department of Justice, the checks are sent through the
Provincial Prosecutors or City Prosecutors, as the case may be, who shall then deliver the
checks to the payees.
Involved in the instant case are the salary and RATA checks of then Assistant City Fiscal
Bienvenido Mabanto, Jr., who was detailed in the Office of the City Fiscal (now Prosecutor) of
Mandaue City. Conformably with the aforesaid practice, these checks were sent to Mabanto
thru the petitioner who was then the City Fiscal of Mandaue City.
The ponencia failed to indicate the payroll period covered by the salary check and the month
to which the RATA check corresponds.
I respectfully submit that if these salary and RATA checks corresponded, respectively, to a
payroll period and to a month which had already lapsed at the time the notice of garnishment
was served, the garnishment would be valid, as the checks would then cease to be property of
the Government and would become property of Mabanto. Upon the expiration of such period
and month, the sums indicated therein were deemed automatically segregated from the
budgetary allocations for the Department of Justice under the General Appropriations Act.
It must be recalled that the public policy against execution, attachment, or garnishment is
directed to public funds.
Thus, in the case of Director of the Bureau of Commerce and Industry vs. Concepcion 1 where
the core issue was whether or not the salary due from the Government to a public officer or
employee can, by garnishment, be seized before being paid to him and appropriated to the
payment of his judgment debts, this Court held:
A rule, which has never been seriously questioned, is that money in the hands of public officers,
although it may be due government employees, is not liable to the creditors of these employees
in the process of garnishment. One reason is, that the State, by virtue of its sovereignty, may
not be sued in its own courts except by express authorization by the Legislature, and to subject
its officers to garnishment would be to permit indirectly what is prohibited directly. Another
reason is that moneys sought to be garnished, as long as they remain in the hands of the
disbursing officer of the Government, belong to the latter, although the defendant in
garnishment may be entitled to a specific portion thereof. And still another reason which covers
both of the foregoing is that every consideration of public policy forbids it.
The United States Supreme Court, in the leading case of Buchanan vs. Alexander ([1846], 4
How., 19), in speaking of the right of creditors of seamen, by process of attachment, to divert
the public money from its legitimate and appropriate object, said:
To state such a principle is to refute it. No government can sanction it. At all times it would be
found embarrassing, and under some circumstances it might be fatal to the public service. . . .
So long as money remains in the hands of a disbursing officer, it is as much the money of the
United States, as if it had not been drawn from the treasury. Until paid over by the agent of the
government to the person entitled to it, the fund cannot, in any legal sense, be considered a
part of his effects." (See, further, 12 R.C.L., p. 841; Keene vs. Smith [1904], 44 Ore., 525; Wild
vs. Ferguson [1871], 23 La. Ann., 752; Bank of Tennessee vs. Dibrell [1855], 3 Sneed [Tenn.],
379). (emphasis supplied)
The authorities cited in the ponencia are inapplicable. Garnished or levied on therein were
public funds, to wit: (a) the pump irrigation trust fund deposited with the Philippine National
Bank (PNB) in the account of the Irrigation Service Unit in Republic vs. Palacio; 2 (b) the
deposits of the National Media Production Center in Traders Royal Bank vs. Intermediate
Appellate Court; 3 and (c) the deposits of the Bureau of Public Highways with the PNB under
a current account, which may be expended only for their legitimate object as authorized by the
corresponding legislative appropriation in Commissioner of Public Highways vs. Diego. 4
Neither is Tiro vs. Hontanosas 5 squarely in point. The said case involved the validity of Circular
No. 21, series of 1969, issued by the Director of Public Schools which directed that "henceforth
no cashier or disbursing officer shall pay to attorneys-in-fact or other persons who may be
authorized under a power of attorney or other forms of authority to collect the salary of an
employee, except when the persons so designated and authorized is an immediate member of
the family of the employee concerned, and in all other cases except upon proper authorization
of the Assistant Executive Secretary for Legal and Administrative Matters, with the
recommendation of the Financial Assistant." Private respondent Zafra Financing Enterprise,
which had extended loans to public school teachers in Cebu City and obtained from the latter
promissory notes and special powers of attorney authorizing it to take and collect their salary
checks from the Division Office in Cebu City of the Bureau of Public Schools, sought, inter alia,
to nullify the Circular. It is clear that the teachers had in fact assigned to or waived in favor of
Zafra their future salaries which were still public funds. That assignment or waiver was contrary
to public policy.
I would therefore vote to grant the petition only if the salary and RATA checks garnished
corresponds to an unexpired payroll period and RATA month, respectively.
Padilla, J., concurs.
Separate Opinions
DAVIDE, JR., J., concurring and dissenting:
This Court may take judicial notice of the fact that checks for salaries of employees of various
Departments all over the country are prepared in Manila not at the end of the payroll period,
but days before it to ensure that they reach the employees concerned not later than the end of
the payroll period. As to the employees in the provinces or cities, the checks are sent through
the heads of the corresponding offices of the Departments. Thus, in the case of Prosecutors
and Assistant Prosecutors of the Department of Justice, the checks are sent through the
Provincial Prosecutors or City Prosecutors, as the case may be, who shall then deliver the
checks to the payees.
Involved in the instant case are the salary and RATA checks of then Assistant City Fiscal
Bienvenido Mabanto, Jr., who was detailed in the Office of the City Fiscal (now Prosecutor) of
Mandaue City. Conformably with the aforesaid practice, these checks were sent to Mabanto
thru the petitioner who was then the City Fiscal of Mandaue City.
The ponencia failed to indicate the payroll period covered by the salary check and the month
to which the RATA check corresponds.
I respectfully submit that if these salary and RATA checks corresponded, respectively, to a
payroll period and to a month which had already lapsed at the time the notice of garnishment
was served, the garnishment would be valid, as the checks would then cease to be property of
the Government and would become property of Mabanto. Upon the expiration of such period
and month, the sums indicated therein were deemed automatically segregated from the
budgetary allocations for the Department of Justice under the General Appropriations Act.
It must be recalled that the public policy against execution, attachment, or garnishment is
directed to public funds.
Thus, in the case of Director of the Bureau of Commerce and Industry vs. Concepcion 1 where
the core issue was whether or not the salary due from the Government to a public officer or
employee can, by garnishment, be seized before being paid to him and appropriated to the
payment of his judgment debts, this Court held:
A rule, which has never been seriously questioned, is that money in the hands of public officers,
although it may be due government employees, is not liable to the creditors of these employees
in the process of garnishment. One reason is, that the State, by virtue of its sovereignty, may
not be sued in its own courts except by express authorization by the Legislature, and to subject
its officers to garnishment would be to permit indirectly what is prohibited directly. Another
reason is that moneys sought to be garnished, as long as they remain in the hands of the
disbursing officer of the Government, belong to the latter, although the defendant in
garnishment may be entitled to a specific portion thereof. And still another reason which covers
both of the foregoing is that every consideration of public policy forbids it.
The United States Supreme Court, in the leading case of Buchanan vs. Alexander ([1846], 4
How., 19), in speaking of the right of creditors of seamen, by process of attachment, to divert
the public money from its legitimate and appropriate object, said:
To state such a principle is to refute it. No government can sanction it. At all times it would be
found embarrassing, and under some circumstances it might be fatal to the public service. . . .
So long as money remains in the hands of a disbursing officer, it is as much the money of the
United States, as if it had not been drawn from the treasury. Until paid over by the agent of the
government to the person entitled to it, the fund cannot, in any legal sense, be considered a
part of his effects." (See, further, 12 R.C.L., p. 841; Keene vs. Smith [1904], 44 Ore., 525; Wild
vs. Ferguson [1871], 23 La. Ann., 752; Bank of Tennessee vs. Dibrell [1855], 3 Sneed [Tenn.],
379). (emphasis supplied)
The authorities cited in the ponencia are inapplicable. Garnished or levied on therein were
public funds, to wit: (a) the pump irrigation trust fund deposited with the Philippine National
Bank (PNB) in the account of the Irrigation Service Unit in Republic vs. Palacio; 2 (b) the
deposits of the National Media Production Center in Traders Royal Bank vs. Intermediate
Appellate Court; 3 and (c) the deposits of the Bureau of Public Highways with the PNB under
a current account, which may be expended only for their legitimate object as authorized by the
corresponding legislative appropriation in Commissioner of Public Highways vs. Diego. 4
Neither is Tiro vs. Hontanosas 5 squarely in point. The said case involved the validity of Circular
No. 21, series of 1969, issued by the Director of Public Schools which directed that "henceforth
no cashier or disbursing officer shall pay to attorneys-in-fact or other persons who may be
authorized under a power of attorney or other forms of authority to collect the salary of an
employee, except when the persons so designated and authorized is an immediate member of
the family of the employee concerned, and in all other cases except upon proper authorization
of the Assistant Executive Secretary for Legal and Administrative Matters, with the
recommendation of the Financial Assistant." Private respondent Zafra Financing Enterprise,
which had extended loans to public school teachers in Cebu City and obtained from the latter
promissory notes and special powers of attorney authorizing it to take and collect their salary
checks from the Division Office in Cebu City of the Bureau of Public Schools, sought, inter alia,
to nullify the Circular. It is clear that the teachers had in fact assigned to or waived in favor of
Zafra their future salaries which were still public funds. That assignment or waiver was contrary
to public policy.
I would therefore vote to grant the petition only if the salary and RATA checks garnished
corresponds to an unexpired payroll period and RATA month, respectively.
Padilla, J., concurs.
G.R. No. 85419 March 9, 1993
DEVELOPMENT BANK OF RIZAL, plaintiff-petitioner,
vs.
SIMA WEI and/or LEE KIAN HUAT, MARY CHENG UY, SAMSON TUNG, ASIAN
INDUSTRIAL PLASTIC CORPORATION and PRODUCERS BANK OF THE PHILIPPINES,
defendants-respondents.
Yngson & Associates for petitioner.
Henry A. Reyes & Associates for Samso Tung & Asian Industrial Plastic Corporation.
Eduardo G. Castelo for Sima Wei.
Monsod, Tamargo & Associates for Producers Bank.
Rafael S. Santayana for Mary Cheng Uy.
CAMPOS, JR., J.:
On July 6, 1986, the Development Bank of Rizal (petitioner Bank for brevity) filed a complaint
for a sum of money against respondents Sima Wei and/or Lee Kian Huat, Mary Cheng Uy,
Samson Tung, Asian Industrial Plastic Corporation (Plastic Corporation for short) and the
Producers Bank of the Philippines, on two causes of action:
(1) To enforce payment of the balance of P1,032,450.02 on a promissory note executed
by respondent Sima Wei on June 9, 1983; and
(2) To enforce payment of two checks executed by Sima Wei, payable to petitioner, and
drawn against the China Banking Corporation, to pay the balance due on the promissory note.
Except for Lee Kian Huat, defendants filed their separate Motions to Dismiss alleging a
common ground that the complaint states no cause of action. The trial court granted the
defendants' Motions to Dismiss. The Court of Appeals affirmed this decision, * to which the
petitioner Bank, represented by its Legal Liquidator, filed this Petition for Review by Certiorari,
assigning the following as the alleged errors of the Court of Appeals:1
(1) THE COURT OF APPEALS ERRED IN HOLDING THAT THE PLAINTIFF-
PETITIONER HAS NO CAUSE OF ACTION AGAINST DEFENDANTS-RESPONDENTS
HEREIN.

(2) THE COURT OF APPEALS ERRED IN HOLDING THAT SECTION 13, RULE 3 OF
THE REVISED RULES OF COURT ON ALTERNATIVE DEFENDANTS IS NOT APPLICABLE
TO HEREIN DEFENDANTS-RESPONDENTS.
The antecedent facts of this case are as follows:
In consideration for a loan extended by petitioner Bank to respondent Sima Wei, the latter
executed and delivered to the former a promissory note, engaging to pay the petitioner Bank
or order the amount of P1,820,000.00 on or before June 24, 1983 with interest at 32% per
annum. Sima Wei made partial payments on the note, leaving a balance of P1,032,450.02. On
November 18, 1983, Sima Wei issued two crossed checks payable to petitioner Bank drawn
against China Banking Corporation, bearing respectively the serial numbers 384934, for the
amount of P550,000.00 and 384935, for the amount of P500,000.00. The said checks were
allegedly issued in full settlement of the drawer's account evidenced by the promissory note.
These two checks were not delivered to the petitioner-payee or to any of its authorized
representatives. For reasons not shown, these checks came into the possession of respondent
Lee Kian Huat, who deposited the checks without the petitioner-payee's indorsement (forged
or otherwise) to the account of respondent Plastic Corporation, at the Balintawak branch,
Caloocan City, of the Producers Bank. Cheng Uy, Branch Manager of the Balintawak branch
of Producers Bank, relying on the assurance of respondent Samson Tung, President of Plastic
Corporation, that the transaction was legal and regular, instructed the cashier of Producers
Bank to accept the checks for deposit and to credit them to the account of said Plastic
Corporation, inspite of the fact that the checks were crossed and payable to petitioner Bank
and bore no indorsement of the latter. Hence, petitioner filed the complaint as aforestated.
The main issue before Us is whether petitioner Bank has a cause of action against any or all
of the defendants, in the alternative or otherwise.
A cause of action is defined as an act or omission of one party in violation of the legal right or
rights of another. The essential elements are: (1) legal right of the plaintiff; (2) correlative
obligation of the defendant; and (3) an act or omission of the defendant in violation of said legal
right.2
The normal parties to a check are the drawer, the payee and the drawee bank. Courts have
long recognized the business custom of using printed checks where blanks are provided for
the date of issuance, the name of the payee, the amount payable and the drawer's signature.
All the drawer has to do when he wishes to issue a check is to properly fill up the blanks and
sign it. However, the mere fact that he has done these does not give rise to any liability on his
part, until and unless the check is delivered to the payee or his representative. A negotiable
instrument, of which a check is, is not only a written evidence of a contract right but is also a
species of property. Just as a deed to a piece of land must be delivered in order to convey title
to the grantee, so must a negotiable instrument be delivered to the payee in order to evidence
its existence as a binding contract. Section 16 of the Negotiable Instruments Law, which
governs checks, provides in part:
Every contract on a negotiable instrument is incomplete and revocable until delivery of the
instrument for the purpose of giving effect thereto. . . .
Thus, the payee of a negotiable instrument acquires no interest with respect thereto until its
delivery to him.3 Delivery of an instrument means transfer of possession, actual or constructive,
from one person to another.4 Without the initial delivery of the instrument from the drawer to
the payee, there can be no liability on the instrument. Moreover, such delivery must be intended
to give effect to the instrument.
The allegations of the petitioner in the original complaint show that the two (2) China Bank
checks, numbered 384934 and 384935, were not delivered to the payee, the petitioner herein.
Without the delivery of said checks to petitioner-payee, the former did not acquire any right or
interest therein and cannot therefore assert any cause of action, founded on said checks,
whether against the drawer Sima Wei or against the Producers Bank or any of the other
respondents.
In the original complaint, petitioner Bank, as plaintiff, sued respondent Sima Wei on the
promissory note, and the alternative defendants, including Sima Wei, on the two checks. On
appeal from the orders of dismissal of the Regional Trial Court, petitioner Bank alleged that its
cause of action was not based on collecting the sum of money evidenced by the negotiable
instruments stated but on quasi-delict — a claim for damages on the ground of fraudulent acts
and evident bad faith of the alternative respondents. This was clearly an attempt by the
petitioner Bank to change not only the theory of its case but the basis of his cause of action. It
is well-settled that a party cannot change his theory on appeal, as this would in effect deprive
the other party of his day in court.5
Notwithstanding the above, it does not necessarily follow that the drawer Sima Wei is freed
from liability to petitioner Bank under the loan evidenced by the promissory note agreed to by
her. Her allegation that she has paid the balance of her loan with the two checks payable to
petitioner Bank has no merit for, as We have earlier explained, these checks were never
delivered to petitioner Bank. And even granting, without admitting, that there was delivery to
petitioner Bank, the delivery of checks in payment of an obligation does not constitute payment
unless they are cashed or their value is impaired through the fault of the creditor.6 None of
these exceptions were alleged by respondent Sima Wei.
Therefore, unless respondent Sima Wei proves that she has been relieved from liability on the
promissory note by some other cause, petitioner Bank has a right of action against her for the
balance due thereon.
However, insofar as the other respondents are concerned, petitioner Bank has no privity with
them. Since petitioner Bank never received the checks on which it based its action against said
respondents, it never owned them (the checks) nor did it acquire any interest therein. Thus,
anything which the respondents may have done with respect to said checks could not have
prejudiced petitioner Bank. It had no right or interest in the checks which could have been
violated by said respondents. Petitioner Bank has therefore no cause of action against said
respondents, in the alternative or otherwise. If at all, it is Sima Wei, the drawer, who would have
a cause of action against her
co-respondents, if the allegations in the complaint are found to be true.

With respect to the second assignment of error raised by petitioner Bank regarding the
applicability of Section 13, Rule 3 of the Rules of Court, We find it unnecessary to discuss the
same in view of Our finding that the petitioner Bank did not acquire any right or interest in the
checks due to lack of delivery. It therefore has no cause of action against the respondents, in
the alternative or otherwise.

In the light of the foregoing, the judgment of the Court of Appeals dismissing the petitioner's
complaint is AFFIRMED insofar as the second cause of action is concerned. On the first cause
of action, the case is REMANDED to the trial court for a trial on the merits, consistent with this
decision, in order to determine whether respondent Sima Wei is liable to the Development Bank
of Rizal for any amount under the promissory note allegedly signed by her.

SO ORDERED.

Narvasa, C.J., Padilla, Regalado and Nocon, JJ., concur.