PROPERTY

G.R. No. L-50008 August 31, 1987

PRUDENTIAL BANK, petitioner, vs.HONORABLE DOMINGO D. PANIS, Presiding Judge of Branch III, Court of First Instance of Zambales and Olongapo City; FERNANDO MAGCALE & TEODULA BALUYUT-MAGCALE, respondents. PARAS, J.:

This is a petition for review on certiorari of the November 13, 1978 Decision * of the then Court of First Instance of Zambales and Olongapo City in Civil Case No. 2443-0 entitled "Spouses Fernando A. Magcale and Teodula Baluyut-Magcale vs. Hon. Ramon Y. Pardo and Prudential Bank" declaring that the deeds of real estate mortgage executed by respondent spouses in favor of petitioner bank are null and void.

The undisputed facts of this case by stipulation of the parties are as follows:

... on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and Teodula Baluyut Magcale secured a loan in the sum of P70,000.00 from the defendant Prudential Bank. To secure payment of this loan, plaintiffs executed in favor of defendant on the aforesaid date a deed of Real Estate Mortgage over the following described properties:

l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse spaces containing a total floor area of 263 sq. meters, more or less, generally constructed of mixed hard wood and concrete materials, under a roofing of cor. g. i. sheets; declared and assessed in the name of FERNANDO MAGCALE under Tax Declaration No. 21109, issued by the Assessor of Olongapo City with an assessed value of P35,290.00. This building is the only improvement of the lot.

2. THE PROPERTY hereby conveyed by way of MORTGAGE includes the right of occupancy on the lot where the above property is erected, and more particularly described and bounded, as follows:

A first class residential land Identffied as Lot No. 720, (Ts-308, Olongapo Townsite Subdivision) Ardoin Street, East Bajac-Bajac, Olongapo City, containing an area of 465 sq. m. more or less, declared and assessed in the name of FERNANDO MAGCALE under Tax Duration No. 19595 issued by the Assessor of Olongapo City with an assessed value of P1,860.00; bounded on the

NORTH: By No. 6, Ardoin Street

SOUTH: By No. 2, Ardoin Street

EAST: By 37 Canda Street, and

WEST: By Ardoin Street.

All corners of the lot marked by conc. cylindrical monuments of the Bureau of Lands as visible limits. ( Exhibit "A, " also Exhibit "1" for defendant).

Apart from the stipulations in the printed portion of the aforestated deed of mortgage, there appears a rider typed at the bottom of the reverse side of the document under the lists of the properties mortgaged which reads, as follows:

AND IT IS FURTHER AGREED that in the event the Sales Patent on the lot applied for by the Mortgagors as herein stated is released or issued by the Bureau of Lands, the Mortgagors hereby authorize the Register of Deeds to hold the Registration of same until this Mortgage is cancelled, or to annotate this encumbrance on the Title upon authority from the Secretary of Agriculture and Natural Resources, which title with annotation, shall be released in favor of the herein Mortgage.

From the aforequoted stipulation, it is obvious that the mortgagee (defendant Prudential Bank) was at the outset aware of the fact that the mortgagors (plaintiffs) have already filed a Miscellaneous Sales Application over the lot, possessory rights over which, were mortgaged to it.

Exhibit "A" (Real Estate Mortgage) was registered under the Provisions of Act 3344 with the Registry of Deeds of Zambales on November 23, 1971.

On May 2, 1973, plaintiffs secured an additional loan from defendant Prudential Bank in the sum of P20,000.00. To secure payment of this additional loan, plaintiffs executed in favor of the said defendant another deed of Real Estate Mortgage over the same properties previously mortgaged in Exhibit "A." (Exhibit "B;" also Exhibit "2" for defendant). This second deed of Real Estate Mortgage was likewise registered with the Registry of Deeds, this time in Olongapo City, on May 2,1973.

On April 24, 1973, the Secretary of Agriculture issued Miscellaneous Sales Patent No. 4776 over the parcel of land, possessory rights over which were mortgaged to defendant Prudential Bank, in favor of plaintiffs. On the basis of the aforesaid Patent, and upon its transcription in the Registration Book of the Province of Zambales, Original Certificate of Title

No. P-2554 was issued in the name of Plaintiff Fernando Magcale, by the Ex-Oficio Register of Deeds of Zambales, on May 15, 1972.

For failure of plaintiffs to pay their obligation to defendant Bank after it became due, and upon application of said defendant, the deeds of Real Estate Mortgage (Exhibits "A" and "B") were extrajudicially foreclosed. Consequent to the foreclosure was the sale of the properties therein mortgaged to defendant as the highest bidder in a public auction sale conducted by the defendant City Sheriff on April 12, 1978 (Exhibit "E"). The auction sale aforesaid was held despite written request from plaintiffs through counsel dated March 29, 1978, for the defendant City Sheriff to desist from going with the scheduled public auction sale (Exhibit "D")." (Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).

Respondent Court, in a Decision dated November 3, 1978 declared the deeds of Real Estate Mortgage as null and void (Ibid., p. 35).

On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid., pp. 41-53), opposed by private respondents on January 5, 1979 (Ibid., pp. 54-62), and in an Order dated January 10, 1979 (Ibid., p. 63), the Motion for Reconsideration was denied for lack of merit. Hence, the instant petition (Ibid., pp. 5-28).

The first Division of this Court, in a Resolution dated March 9, 1979, resolved to require the respondents to comment (Ibid., p. 65), which order was complied with the Resolution dated May 18,1979, (Ibid., p. 100), petitioner filed its Reply on June 2,1979 (Ibid., pp. 101-112).

Thereafter, in the Resolution dated June 13, 1979, the petition was given due course and the parties were required to submit simultaneously their respective memoranda. (Ibid., p. 114).

On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while private respondents filed their Memorandum on August 1, 1979 (Ibid., pp. 146-155).

In a Resolution dated August 10, 1979, this case was considered submitted for decision (Ibid., P. 158).

In its Memorandum, petitioner raised the following issues:

1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND

2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE RESPONDENTS OF MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24, 1972 UNDER ACT NO. 730 AND THE COVERING ORIGINAL CERTIFICATE OF TITLE NO. P-2554 ON MAY 15,1972 HAVE THE EFFECT OF INVALIDATING THE DEEDS OF REAL ESTATE MORTGAGE. (Memorandum for Petitioner, Rollo, p. 122).

This petition is impressed with merit.

The pivotal issue in this case is whether or not a valid real estate mortgage can be constituted on the building erected on the land belonging to another.

The answer is in the affirmative.

In the enumeration of properties under Article 415 of the Civil Code of the Philippines, this Court ruled that, "it is obvious that the inclusion of "building" separate and distinct from the land, in said provision of law can only mean that a building is by itself an immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30,1958).

Thus, while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such a mortgage would be still a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart from the land (Leung Yee vs. Strong Machinery Co., 37 Phil. 644). In the same manner, this Court has also established that possessory rights over said properties before title is vested on the grantee, may be validly transferred or conveyed as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438 [1961]).

Coming back to the case at bar, the records show, as aforestated that the original mortgage deed on the 2-storey semi-concrete residential building with warehouse and on the right of occupancy on the lot where the building was erected, was executed on November 19, 1971 and registered under the provisions of Act 3344 with the Register of Deeds of Zambales on November 23, 1971. Miscellaneous Sales Patent No. 4776 on the land was issued on April 24, 1972, on the basis of which OCT No. 2554 was issued in the name of private respondent Fernando Magcale on May 15, 1972. It is therefore without question that the original mortgage was executed before the issuance of the final patent and before the government was divested of its title to the land, an event which takes effect only on the issuance of the sales patent and its subsequent registration in the Office of the Register of Deeds (Visayan Realty Inc. vs. Meer, 96 Phil. 515; Director of Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L-14702, May 23, 1961; Pena "Law on Natural Resources", p. 49). Under the foregoing considerations, it is evident that the mortgage executed by private respondent on

his own building which was erected on the land belonging to the government is to all intents and purposes a valid mortgage.

As to restrictions expressly mentioned on the face of respondents' OCT No. P-2554, it will be noted that Sections 121, 122 and 124 of the Public Land Act, refer to land already acquired under the Public Land Act, or any improvement thereon and therefore have no application to the assailed mortgage in the case at bar which was executed before such eventuality. Likewise, Section 2 of Republic Act No. 730, also a restriction appearing on the face of private respondent's title has likewise no application in the instant case, despite its reference to encumbrance or alienation before the patent is issued because it refers specifically to encumbrance or alienation on the land itself and does not mention anything regarding the improvements existing thereon.

But it is a different matter, as regards the second mortgage executed over the same properties on May 2, 1973 for an additional loan of P20,000.00 which was registered with the Registry of Deeds of Olongapo City on the same date. Relative thereto, it is evident that such mortgage executed after the issuance of the sales patent and of the Original Certificate of Title, falls squarely under the prohibitions stated in Sections 121, 122 and 124 of the Public Land Act and Section 2 of Republic Act 730, and is therefore null and void.

Petitioner points out that private respondents, after physically possessing the title for five years, voluntarily surrendered the same to the bank in 1977 in order that the mortgaged may be annotated, without requiring the bank to get the prior approval of the Ministry of Natural Resources beforehand, thereby implicitly authorizing Prudential Bank to cause the annotation of said mortgage on their title.

However, the Court, in recently ruling on violations of Section 124 which refers to Sections 118, 120, 122 and 123 of Commonwealth Act 141, has held:

... Nonetheless, we apply our earlier rulings because we believe that as in pari delicto may not be invoked to defeat the policy of the State neither may the doctrine of estoppel give a validating effect to a void contract. Indeed, it is generally considered that as between parties to a contract, validity cannot be given to it by estoppel if it is prohibited by law or is against public policy (19 Am. Jur. 802). It is not within the competence of any citizen to barter away what public policy by law was to preserve (Gonzalo Puyat & Sons, Inc. vs. De los Amas and Alino supra). ... (Arsenal vs. IAC, 143 SCRA 54 [1986]).

This pronouncement covers only the previous transaction already alluded to and does not pass upon any new contract between the parties (Ibid), as in the case at bar. It should not preclude new contracts that may be entered into between petitioner bank and private respondents that are in accordance with the requirements of the law. After all, private respondents themselves declare that

they are not denying the legitimacy of their debts and appear to be open to new negotiations under the law (Comment; Rollo, pp. 95-96). Any new transaction, however, would be subject to whatever steps the Government may take for the reversion of the land in its favor.

PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales & Olongapo City is hereby MODIFIED, declaring that the Deed of Real Estate Mortgage for P70,000.00 is valid but ruling that the Deed of Real Estate Mortgage for an additional loan of P20,000.00 is null and void, without prejudice to any appropriate action the Government may take against private respondents.

G.R. No. L-58469 May 16, 1983

MAKATI LEASING and FINANCE CORPORATION, petitioner, vs.WEAREVER TEXTILE MILLS, INC., and HONORABLE COURT OF APPEALS, respondents. DE CASTRO, J.:

Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate Appellate Court) promulgated on August 27, 1981 in CA-G.R. No. SP-12731, setting aside certain Orders later specified herein, of Judge Ricardo J. Francisco, as Presiding Judge of the Court of First instance of Rizal Branch VI, issued in Civil Case No. 36040, as wen as the resolution dated September 22, 1981 of the said appellate court, denying petitioner's motion for reconsideration.

It appears that in order to obtain financial accommodations from herein petitioner Makati Leasing and Finance Corporation, the private respondent Wearever Textile Mills, Inc., discounted and assigned several receivables with the former under a Receivable Purchase Agreement. To secure the collection of the receivables assigned, private respondent executed a Chattel Mortgage over certain raw materials inventory as well as a machinery described as an Artos Aero Dryer Stentering Range.

Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the properties mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure failed to gain entry into private respondent's premises and was not able to effect the seizure of the aforedescribed machinery. Petitioner thereafter filed a complaint for judicial foreclosure with the Court of First Instance of Rizal, Branch VI, docketed as Civil Case No. 36040, the case before the lower court.

Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the enforcement of which was however subsequently restrained upon private respondent's filing of a motion for reconsideration. After several incidents, the lower court finally issued on February 11, 1981, an order lifting the restraining order for the enforcement of the writ of seizure and an order to break open the

premises of private respondent to enforce said writ. The lower court reaffirmed its stand upon private respondent's filing of a further motion for reconsideration.

On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private respondent and removed the main drive motor of the subject machinery.

The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein private respondent, set aside the Orders of the lower court and ordered the return of the drive motor seized by the sheriff pursuant to said Orders, after ruling that the machinery in suit cannot be the subject of replevin, much less of a chattel mortgage, because it is a real property pursuant to Article 415 of the new Civil Code, the same being attached to the ground by means of bolts and the only way to remove it from respondent's plant would be to drill out or destroy the concrete floor, the reason why all that the sheriff could do to enfore the writ was to take the main drive motor of said machinery. The appellate court rejected petitioner's argument that private respondent is estopped from claiming that the machine is real property by constituting a chattel mortgage thereon.

A motion for reconsideration of this decision of the Court of Appeals having been denied, petitioner has brought the case to this Court for review by writ of certiorari. It is contended by private respondent, however, that the instant petition was rendered moot and academic by petitioner's act of returning the subject motor drive of respondent's machinery after the Court of Appeals' decision was promulgated.

The contention of private respondent is without merit. When petitioner returned the subject motor drive, it made itself unequivocably clear that said action was without prejudice to a motion for reconsideration of the Court of Appeals decision, as shown by the receipt duly signed by respondent's representative. 1 Considering that petitioner has reserved its right to question the propriety of the Court of Appeals' decision, the contention of private respondent that this petition has been mooted by such return may not be sustained.

The next and the more crucial question to be resolved in this Petition is whether the machinery in suit is real or personal property from the point of view of the parties, with petitioner arguing that it is a personality, while the respondent claiming the contrary, and was sustained by the appellate court, which accordingly held that the chattel mortgage constituted thereon is null and void, as contended by said respondent.

A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this Court, speaking through Justice J.B.L. Reyes, ruled:

Although there is no specific statement referring to the subject house as personal property, yet by ceding, selling or transferring a property by way of chattel mortgage defendants-

appellants could only have meant to convey the house as chattel, or at least, intended to treat the same as such, so that they should not now be allowed to make an inconsistent stand by claiming otherwise. Moreover, the subject house stood on a rented lot to which defendants-appellants merely had a temporary right as lessee, and although this can not in itself alone determine the status of the property, it does so when combined with other factors to sustain the interpretation that the parties, particularly the mortgagors, intended to treat the house as personality. Finally, unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery & Williamson, wherein third persons assailed the validity of the chattel mortgage, it is the defendants-appellants themselves, as debtors-mortgagors, who are attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore applies to the herein defendants-appellants, having treated the subject house as personality.

Examining the records of the instant case, We find no logical justification to exclude the rule out, as the appellate court did, the present case from the application of the abovequoted pronouncement. If a house of strong materials, like what was involved in the above Tumalad case, may be considered as personal property for purposes of executing a chattel mortgage thereon as long as the parties to the contract so agree and no innocent third party will be prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its nature and becomes immobilized only by destination or purpose, may not be likewise treated as such. This is really because one who has so agreed is estopped from denying the existence of the chattel mortgage.

In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of Appeals lays stress on the fact that the house involved therein was built on a land that did not belong to the owner of such house. But the law makes no distinction with respect to the ownership of the land on which the house is built and We should not lay down distinctions not contemplated by law.

It must be pointed out that the characterization of the subject machinery as chattel by the private respondent is indicative of intention and impresses upon the property the character determined by the parties. As stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil. 630, it is undeniable that the parties to a contract may by agreement treat as personal property that which by nature would be real property, as long as no interest of third parties would be prejudiced thereby.

Private respondent contends that estoppel cannot apply against it because it had never represented nor agreed that the machinery in suit be considered as personal property but was merely required and dictated on by herein petitioner to sign a printed form of chattel mortgage which was in a blank form at the time of signing. This contention lacks persuasiveness. As aptly pointed out by petitioner

and not denied by the respondent, the status of the subject machinery as movable or immovable was never placed in issue before the lower court and the Court of Appeals except in a supplemental memorandum in support of the petition filed in the appellate court. Moreover, even granting that the charge is true, such fact alone does not render a contract void ab initio, but can only be a ground for rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court. There is nothing on record to show that the mortgage has been annulled. Neither is it disclosed that steps were taken to nullify the same. On the other hand, as pointed out by petitioner and again not refuted by respondent, the latter has indubitably benefited from said contract. Equity dictates that one should not benefit at the expense of another. Private respondent could not now therefore, be allowed to impugn the efficacy of the chattel mortgage after it has benefited therefrom,

From what has been said above, the error of the appellate court in ruling that the questioned machinery is real, not personal property, becomes very apparent. Moreover, the case of Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily relied upon by said court is not applicable to the case at bar, the nature of the machinery and equipment involved therein as real properties never having been disputed nor in issue, and they were not the subject of a Chattel Mortgage. Undoubtedly, the Tumalad case bears more nearly perfect parity with the instant case to be the more controlling jurisprudential authority.

WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby reversed and set aside, and the Orders of the lower court are hereby reinstated, with costs against the private respondent.

SO ORDERED.

G.R. No. 155076               January 13, 2009

LUIS MARCOS P. LAUREL, Petitioner, vs.HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial Court, Makati City, Branch 150, PEOPLE OF THE PHILIPPINES & PHILIPPINE LONG DISTANCE TELEPHONE COMPANY Respondents.YNARES-SANTIAGO, J.:

On February 27, 2006, this Court’s First Division rendered judgment in this case as follows:

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders of the Regional Trial Court and the Decision of the Court of Appeals are REVERSED and SET ASIDE. The Regional Trial Court is directed to issue an order granting the motion of the petitioner to quash the Amended Information.

SO ORDERED.1

By way of brief background, petitioner is one of the accused in Criminal Case No. 99-2425, filed with the Regional Trial Court of Makati City, Branch 150. The Amended Information charged the accused with theft under Article 308 of the Revised Penal Code, committed as follows:

On or about September 10-19, 1999, or prior thereto in Makati City, and within the jurisdiction of this Honorable Court, the accused, conspiring and confederating together and all of them mutually helping and aiding one another, with intent to gain and without the knowledge and consent of the Philippine Long Distance Telephone (PLDT), did then and there willfully, unlawfully and feloniously take, steal and use the international long distance calls belonging to PLDT by conducting International Simple Resale (ISR), which is a method of routing and completing international long distance calls using lines, cables, antenae, and/or air wave frequency which connect directly to the local or domestic exchange facilities of the country where the call is destined, effectively stealing this business from PLDT while using its facilities in the estimated amount of P20,370,651.92 to the damage and prejudice of PLDT, in the said amount.

CONTRARY TO LAW.2

Petitioner filed a "Motion to Quash (with Motion to Defer Arraignment)," on the ground that the factual allegations in the Amended Information do not constitute the felony of theft. The trial court denied the Motion to Quash the Amended Information, as well petitioner’s subsequent Motion for Reconsideration.

Petitioner’s special civil action for certiorari was dismissed by the Court of Appeals. Thus, petitioner filed the instant petition for review with this Court.

In the above-quoted Decision, this Court held that the Amended Information does not contain material allegations charging petitioner with theft of personal property since international long distance calls and the business of providing telecommunication or telephone services are not personal properties under Article 308 of the Revised Penal Code.

Respondent Philippine Long Distance Telephone Company (PLDT) filed a Motion for Reconsideration with Motion to Refer the Case to the Supreme Court En Banc. It maintains that the Amended Information charging petitioner with theft is valid and sufficient; that it states the names of all the accused who were specifically charged with the crime of theft of PLDT’s international calls and business of providing telecommunication or telephone service on or about September 10 to 19, 1999 in Makati City by conducting ISR or International Simple Resale; that it identifies the international calls and business of providing telecommunication or telephone service of PLDT as the personal properties which were unlawfully taken by the accused; and that it satisfies the test of sufficiency as it enabled a person of common understanding to know the charge against him and the court to render judgment properly.

PLDT further insists that the Revised Penal Code should be interpreted in the context of the Civil Code’s definition of real and personal property. The enumeration of real properties in Article 415 of the Civil Code is exclusive such that all those not included therein are personal properties. Since Article 308 of the Revised Penal Code used the words "personal property" without qualification, it follows that all "personal properties" as understood in the context of the Civil Code, may be the subject of theft under Article 308 of the Revised Penal Code. PLDT alleges that the international calls and business of providing telecommunication or telephone service are personal properties capable of appropriation and can be objects of theft.

PLDT also argues that "taking" in relation to theft under the Revised Penal Code does not require "asportation," the sole requisite being that the object should be capable of "appropriation." The element of "taking" referred to in Article 308 of the Revised Penal Code means the act of depriving another of the possession and dominion of a movable coupled with the intention, at the time of the "taking," of withholding it with the character of permanency. There must be intent to appropriate, which means to deprive the lawful owner of the thing. Thus, the term "personal properties" under Article 308 of the Revised Penal Code is not limited to only personal properties which are "susceptible of being severed from a mass or larger quantity and of being transported from place to place."

PLDT likewise alleges that as early as the 1930s, international telephone calls were in existence; hence, there is no basis for this Court’s finding that the Legislature could not have contemplated the theft of international telephone calls and the unlawful transmission and routing of electronic voice signals or impulses emanating from such calls by unlawfully tampering with the telephone device as within the coverage of the Revised Penal Code.

According to respondent, the "international phone calls" which are "electric currents or sets of electric impulses transmitted through a medium, and carry a pattern representing the human voice to a receiver," are personal properties which may be subject of theft. Article 416(3) of the Civil Code deems "forces of nature" (which includes electricity) which are brought under the control by science, are personal property.

In his Comment to PLDT’s motion for reconsideration, petitioner Laurel claims that a telephone call is a conversation on the phone or a communication carried out using the telephone. It is not synonymous to electric current or impulses. Hence, it may not be considered as personal property susceptible of appropriation. Petitioner claims that the analogy between generated electricity and telephone calls is misplaced. PLDT does not produce or generate telephone calls. It only provides the facilities or services for the transmission and switching of the calls. He also insists that "business" is not personal property. It is not the "business" that is protected but the "right to carry on a business." This right is what is considered as property. Since the services of PLDT cannot be considered as "property," the same may not be subject of theft.

The Office of the Solicitor General (OSG) agrees with respondent PLDT that "international phone calls and the business or service of providing international phone calls" are subsumed in the enumeration and definition of personal property under the Civil Code hence, may be proper subjects of theft. It noted that the cases of United States v. Genato,3 United States v. Carlos4 and United States v. Tambunting,5 which recognized intangible properties like gas and electricity as personal properties, are deemed incorporated in our penal laws. Moreover, the theft provision in the Revised Penal Code was deliberately couched in broad terms precisely to be all-encompassing and embracing even such scenario that could not have been easily anticipated.

According to the OSG, prosecution under Republic Act (RA) No. 8484 or the Access Device Regulations Act of 1998 and RA 8792 or the Electronic Commerce Act of 2000 does not preclude prosecution under the Revised Penal Code for the crime of theft. The latter embraces unauthorized appropriation or use of PLDT’s international calls, service and business, for personal profit or gain, to the prejudice of PLDT as owner thereof. On the other hand, the special laws punish the surreptitious and advanced technical means employed to illegally obtain the subject service and business. Even assuming that the correct indictment should have been under RA 8484, the quashal of the information would still not be proper. The charge of theft as alleged in the Information should be taken in relation to RA 8484 because it is the elements, and not the designation of the crime, that control.

Considering the gravity and complexity of the novel questions of law involved in this case, the Special First Division resolved to refer the same to the Banc.

We resolve to grant the Motion for Reconsideration but remand the case to the trial court for proper clarification of the Amended Information.

Article 308 of the Revised Penal Code provides:

Art. 308. Who are liable for theft. – Theft is committed by any person who, with intent to gain but without violence against, or intimidation of persons nor force upon things, shall take personal property of another without the latter’s consent.

The elements of theft under Article 308 of the Revised Penal Code are as follows: (1) that there be taking of personal property; (2) that said property belongs to another; (3) that the taking be done with intent to gain; (4) that the taking be done without the consent of the owner; and (5) that the taking be accomplished without the use of violence against or intimidation of persons or force upon things.

Prior to the passage of the Revised Penal Code on December 8, 1930, the definition of the term "personal property" in the penal code provision on theft had been established in Philippine jurisprudence. This Court, in United States v. Genato, United States v. Carlos, and United States v. Tambunting, consistently

ruled that any personal property, tangible or intangible, corporeal or incorporeal, capable of appropriation can be the object of theft.

Moreover, since the passage of the Revised Penal Code on December 8, 1930, the term "personal property" has had a generally accepted definition in civil law. In Article 335 of the Civil Code of Spain, "personal property" is defined as "anything susceptible of appropriation and not included in the foregoing chapter (not real property)." Thus, the term "personal property" in the Revised Penal Code should be interpreted in the context of the Civil Code provisions in accordance with the rule on statutory construction that where words have been long used in a technical sense and have been judicially construed to have a certain meaning, and have been adopted by the legislature as having a certain meaning prior to a particular statute, in which they are used, the words used in such statute should be construed according to the sense in which they have been previously used.6 In fact, this Court used the Civil Code definition of "personal property" in interpreting the theft provision of the penal code in United States v. Carlos.

Cognizant of the definition given by jurisprudence and the Civil Code of Spain to the term "personal property" at the time the old Penal Code was being revised, still the legislature did not limit or qualify the definition of "personal property" in the Revised Penal Code. Neither did it provide a restrictive definition or an exclusive enumeration of "personal property" in the Revised Penal Code, thereby showing its intent to retain for the term an extensive and unqualified interpretation.1avvphi1.zw+ Consequently, any property which is not included in the enumeration of real properties under the Civil Code and capable of appropriation can be the subject of theft under the Revised Penal Code.

The only requirement for a personal property to be the object of theft under the penal code is that it be capable of appropriation. It need not be capable of "asportation," which is defined as "carrying away."7 Jurisprudence is settled that to "take" under the theft provision of the penal code does not require asportation or carrying away.8

To appropriate means to deprive the lawful owner of the thing.9 The word "take" in the Revised Penal Code includes any act intended to transfer possession which, as held in the assailed Decision, may be committed through the use of the offenders’ own hands, as well as any mechanical device, such as an access device or card as in the instant case. This includes controlling the destination of the property stolen to deprive the owner of the property, such as the use of a meter tampering, as held in Natividad v. Court of Appeals,10 use of a device to fraudulently obtain gas, as held in United States v. Tambunting, and the use of a jumper to divert electricity, as held in the cases of United States v. Genato, United States v. Carlos, and United States v. Menagas.11

As illustrated in the above cases, appropriation of forces of nature which are brought under control by science such as electrical energy can be achieved by tampering with any apparatus used for generating or measuring such forces of

nature, wrongfully redirecting such forces of nature from such apparatus, or using any device to fraudulently obtain such forces of nature. In the instant case, petitioner was charged with engaging in International Simple Resale (ISR) or the unauthorized routing and completing of international long distance calls using lines, cables, antennae, and/or air wave frequency and connecting these calls directly to the local or domestic exchange facilities of the country where destined.

As early as 1910, the Court declared in Genato that ownership over electricity (which an international long distance call consists of), as well as telephone service, is protected by the provisions on theft of the Penal Code. The pertinent provision of the Revised Ordinance of the City of Manila, which was involved in the said case, reads as follows:

Injury to electric apparatus; Tapping current; Evidence. – No person shall destroy, mutilate, deface, or otherwise injure or tamper with any wire, meter, or other apparatus installed or used for generating, containing, conducting, or measuring electricity, telegraph or telephone service, nor tap or otherwise wrongfully deflect or take any electric current from such wire, meter, or other apparatus.

No person shall, for any purpose whatsoever, use or enjoy the benefits of any device by means of which he may fraudulently obtain any current of electricity or any telegraph or telephone service; and the existence in any building premises of any such device shall, in the absence of satisfactory explanation, be deemed sufficient evidence of such use by the persons benefiting thereby.

It was further ruled that even without the above ordinance the acts of subtraction punished therein are covered by the provisions on theft of the Penal Code then in force, thus:

Even without them (ordinance), the right of the ownership of electric current is secured by articles 517 and 518 of the Penal Code; the application of these articles in cases of subtraction of gas, a fluid used for lighting, and in some respects resembling electricity, is confirmed by the rule laid down in the decisions of the supreme court of Spain of January 20, 1887, and April 1, 1897, construing and enforcing the provisions of articles 530 and 531 of the Penal Code of that country, articles 517 and 518 of the code in force in these islands.

The acts of "subtraction" include: (a) tampering with any wire, meter, or other apparatus installed or used for generating, containing, conducting, or measuring electricity, telegraph or telephone service; (b) tapping or otherwise wrongfully deflecting or taking any electric current from such wire, meter, or other apparatus; and (c) using or enjoying the benefits of any device by means of which one may fraudulently obtain any current of electricity or any telegraph or telephone service.

In the instant case, the act of conducting ISR operations by illegally connecting various equipment or apparatus to private respondent PLDT’s telephone system,

through which petitioner is able to resell or re-route international long distance calls using respondent PLDT’s facilities constitutes all three acts of subtraction mentioned above.

The business of providing telecommunication or telephone service is likewise personal property which can be the object of theft under Article 308 of the Revised Penal Code. Business may be appropriated under Section 2 of Act No. 3952 (Bulk Sales Law), hence, could be object of theft:

Section 2. Any sale, transfer, mortgage, or assignment of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor, mortgagor, transferor, or assignor, or any sale, transfer, mortgage, or assignment of all, or substantially all, of the business or trade theretofore conducted by the vendor, mortgagor, transferor or assignor, or all, or substantially all, of the fixtures and equipment used in and about the business of the vendor, mortgagor, transferor, or assignor, shall be deemed to be a sale and transfer in bulk, in contemplation of the Act. x x x.

In Strochecker v. Ramirez,12 this Court stated:

With regard to the nature of the property thus mortgaged which is one-half interest in the business above described, such interest is a personal property capable of appropriation and not included in the enumeration of real properties in article 335 of the Civil Code, and may be the subject of mortgage.

Interest in business was not specifically enumerated as personal property in the Civil Code in force at the time the above decision was rendered. Yet, interest in business was declared to be personal property since it is capable of appropriation and not included in the enumeration of real properties. Article 414 of the Civil Code provides that all things which are or may be the object of appropriation are considered either real property or personal property. Business is likewise not enumerated as personal property under the Civil Code. Just like interest in business, however, it may be appropriated. Following the ruling in Strochecker v. Ramirez, business should also be classified as personal property. Since it is not included in the exclusive enumeration of real properties under Article 415, it is therefore personal property.13

As can be clearly gleaned from the above disquisitions, petitioner’s acts constitute theft of respondent PLDT’s business and service, committed by means of the unlawful use of the latter’s facilities. In this regard, the Amended Information inaccurately describes the offense by making it appear that what petitioner took were the international long distance telephone calls, rather than respondent PLDT’s business.

A perusal of the records of this case readily reveals that petitioner and respondent PLDT extensively discussed the issue of ownership of telephone calls. The prosecution has taken the position that said telephone calls belong to respondent PLDT. This is evident from its Comment where it defined the issue of this case as whether or not "the unauthorized use or appropriation of PLDT international telephone calls, service and facilities, for the purpose of generating personal profit or gain that should have otherwise belonged to PLDT, constitutes theft."14

In discussing the issue of ownership, petitioner and respondent PLDT gave their respective explanations on how a telephone call is generated.15 For its part, respondent PLDT explains the process of generating a telephone call as follows:

38. The role of telecommunication companies is not limited to merely providing the medium (i.e. the electric current) through which the human voice/voice signal of the caller is transmitted. Before the human voice/voice signal can be so transmitted, a telecommunication company, using its facilities, must first break down or decode the human voice/voice signal into electronic impulses and subject the same to further augmentation and enhancements. Only after such process of conversion will the resulting electronic impulses be transmitted by a telecommunication company, again, through the use of its facilities. Upon reaching the destination of the call, the telecommunication company will again break down or decode the electronic impulses back to human voice/voice signal before the called party receives the same. In other words, a telecommunication company both converts/reconverts the human voice/voice signal and provides the medium for transmitting the same.

39. Moreover, in the case of an international telephone call, once the electronic impulses originating from a foreign telecommunication company country (i.e. Japan) reaches the Philippines through a local telecommunication company (i.e. private respondent PLDT), it is the latter which decodes, augments and enhances the electronic impulses back to the human voice/voice signal and provides the medium (i.e. electric current) to enable the called party to receive the call. Thus, it is not true that the foreign telecommunication company provides (1) the electric current which transmits the human voice/voice signal of the caller and (2) the electric current for the called party to receive said human voice/voice signal.

40. Thus, contrary to petitioner Laurel’s assertion, once the electronic impulses or electric current originating from a foreign telecommunication company (i.e. Japan) reaches private respondent PLDT’s network, it is private respondent PLDT which decodes, augments and enhances the electronic impulses back to the human voice/voice signal and provides the medium (i.e. electric current) to enable the called party to receive the call. Without private respondent PLDT’s network, the human voice/voice signal of the calling party will never reach the called party.16

In the assailed Decision, it was conceded that in making the international phone calls, the human voice is converted into electrical impulses or electric current which are transmitted to the party called. A telephone call, therefore, is electrical

energy. It was also held in the assailed Decision that intangible property such as electrical energy is capable of appropriation because it may be taken and carried away. Electricity is personal property under Article 416 (3) of the Civil Code, which enumerates "forces of nature which are brought under control by science."17

Indeed, while it may be conceded that "international long distance calls," the matter alleged to be stolen in the instant case, take the form of electrical energy, it cannot be said that such international long distance calls were personal properties belonging to PLDT since the latter could not have acquired ownership over such calls. PLDT merely encodes, augments, enhances, decodes and transmits said calls using its complex communications infrastructure and facilities. PLDT not being the owner of said telephone calls, then it could not validly claim that such telephone calls were taken without its consent. It is the use of these communications facilities without the consent of PLDT that constitutes the crime of theft, which is the unlawful taking of the telephone services and business.

Therefore, the business of providing telecommunication and the telephone service are personal property under Article 308 of the Revised Penal Code, and the act of engaging in ISR is an act of "subtraction" penalized under said article. However, the Amended Information describes the thing taken as, "international long distance calls," and only later mentions "stealing the business from PLDT" as the manner by which the gain was derived by the accused. In order to correct this inaccuracy of description, this case must be remanded to the trial court and the prosecution directed to amend the Amended Information, to clearly state that the property subject of the theft are the services and business of respondent PLDT. Parenthetically, this amendment is not necessitated by a mistake in charging the proper offense, which would have called for the dismissal of the information under Rule 110, Section 14 and Rule 119, Section 19 of the Revised Rules on Criminal Procedure. To be sure, the crime is properly designated as one of theft. The purpose of the amendment is simply to ensure that the accused is fully and sufficiently apprised of the nature and cause of the charge against him, and thus guaranteed of his rights under the Constitution.

ACCORDINGLY, the motion for reconsideration is GRANTED. The assailed Decision dated February 27, 2006 is RECONSIDERED and SET ASIDE. The Decision of the Court of Appeals in CA-G.R. SP No. 68841 affirming the Order issued by Judge Zeus C. Abrogar of the Regional Trial Court of Makati City, Branch 150, which denied the Motion to Quash (With Motion to Defer Arraignment) in Criminal Case No. 99-2425 for theft, is AFFIRMED. The case is remanded to the trial court and the Public Prosecutor of Makati City is hereby DIRECTED to amend the Amended Information to show that the property subject of the theft were services and business of the private offended party.

SO ORDERED.

G.R. No. L-61311 September 2l, 1987

FELICIDAD VILLANUEVA, FERNANDO CAISIP, ANTONIO LIANG, FELINA MIRANDA, RICARDO PUNO, FLORENCIO LAXA, and RENE OCAMPO, petitioners, vs.HON. MARIANO CASTAÑEDA, JR., Presiding Judge of the Court of First Instance of Pampanga, Branch III, VICENTE A. MACALINO, Officer-in-Charge, Office of the Mayor, San Fernando, Pampanga, respondents. CRUZ, J.:

There is in the vicinity of the public market of San Fernando, Pampanga, along Mercado Street, a strip of land measuring 12 by 77 meters on which stands a conglomeration of vendors stalls together forming what is commonly known as a talipapa. This is the subject of the herein petition. The petitioners claim they have a right to remain in and conduct business in this area by virtue of a previous authorization granted to them by the municipal government. The respondents deny this and justify the demolition of their stalls as illegal constructions on public property. At the petitioners' behest, we have issued a temporary restraining order to preserve the status quo between the parties pending our decision. 1 Now we shall rule on the merits.

This dispute goes back to November 7, 1961, when the municipal council of San Fernando adopted Resolution No. 218 authorizing some 24 members of the Fernandino United Merchants and Traders Association to construct permanent stags and sell in the above-mentioned place. 2 The action was protested on November 10, 1961, in Civil Case No. 2040, where the Court of First Instance of Pampanga, Branch 2, issued a writ of preliminary injunction that prevented the defendants from constructing the said stalls until final resolution of the controversy. 3 On January 18, 1964, while this case was pending, the municipal council of San Fernando adopted Resolution G.R. No. 29, which declared the subject area as "the parking place and as the public plaza of the municipality, 4 thereby impliedly revoking Resolution No. 218, series of 1961. Four years later, on November 2, 1968, Judge Andres C. Aguilar decided the aforesaid case and held that the land occupied by the petitioners, being public in nature, was beyond the commerce of man and therefore could not be the subject of private occupancy. 5 The writ of preliminary injunction was made permanent. 6

The decision was apparently not enforced, for the petitioners were not evicted from the place; in fact, according to then they and the 128 other persons were in 1971 assigned specific areas or space allotments therein for which they paid daily fees to the municipal government. 7 The problem appears to have festered for some more years under a presumably uneasy truce among the protagonists, none of whom made any move, for some reason that does not appear in the record. Then, on January 12, 1982, the Association of Concerned Citizens and Consumers of San Fernando filed a petition for the immediate implementation of Resolution No. 29, to restore the subject property "to its original and customary use as a public plaza. 8

Acting thereon after an investigation conducted by the municipal attorney, 9 respondent Vicente A. Macalino, as officer-in-charge of the office of the mayor of San Fernando, issued on June 14, 1982, a resolution requiring the municipal treasurer and the municipal engineer to demolish the stalls in the subject place beginning July 1, 1982. 10 The reaction of the petitioners was to file a petition for prohibition with the Court of First Instance of Pampanga, docketed as Civil Case No. 6470, on June 26, 1982. The respondent judge denied the petition on July 19, 1982, 11 and the motion for reconsideration on August 5, 1982, 12 prompting the petitioners to come to this Court on certiorari to challenge his decision. 13

As required, respondent Macalino filed his comment 14 on the petition, and the petitioners countered with their reply. 15 In compliance with our resolution of February 2, 1983, the petitioners submitted their memorandum 16 and respondent Macalino, for his part, asked that his comment be considered his memorandum. 17 On July 28, 1986, the new officer-in-charge of the office of the mayor of San Fernando, Paterno S. Guevarra, was impleaded in lieu of Virgilio Sanchez, who had himself earlier replaced the original respondent Macalino. 18

After considering the issues and the arguments raised by the parties in their respective pleadings, we rule for the respondents. The petition must be dismissed.

There is no question that the place occupied by the petitioners and from which they are sought to be evicted is a public plaza, as found by the trial court in Civil Case No. 2040. This finding was made after consideration of the antecedent facts as especially established by the testimony of former San Fernando Mayor Rodolfo Hizon, who later became governor of Pampanga, that the National Planning Commission had reserved the area for a public plaza as early as 1951. This intention was reiterated in 1964 through the adoption of Resolution No. 29. 19

It does not appear that the decision in this case was appealed or has been reversed. In Civil Case G.R. No. 6740, which is the subject of this petition, the respondent judge saw no reason to disturb the finding in Civil Case No. 2040 and indeed used it as a basis for his own decision sustaining the questioned order. 20

The basic contention of the petitioners is that the disputed area is under lease to them by virtue of contracts they had entered into with the municipal government, first in 1961 insofar as the original occupants were concerned, and later with them and the other petitioners by virtue of the space allocations made in their favor in 1971 for which they saw they are paying daily fees. 21 The municipal government has denied making such agreements. In any case, they argue, since the fees were collected daily, the leases, assuming their validity, could be terminated at will, or any day, as the claimed rentals indicated that the period of the leases was from day to day. 22

The parties belabor this argument needlessly.

A public plaza is beyond the commerce of man and so cannot be the subject of lease or any other contractual undertaking. This is elementary. Indeed, this point was settled as early as in Municipality of Cavite vs. Rojas, 23 decided in 1915, where the Court declared as null and void the lease of a public plaza of the said municipality in favor of a private person.

Justice Torres said in that case:

According to article 344 of the Civil Code: "Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by said towns or provinces.

The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use the plaintiff municipality exceeded its authority in the exercise of its powers by executing a contract over a thing of which it could not dispose, nor is it empowered so to do.

The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may be the object of a contract, and plazas and streets are outside of this commerce, as was decided by the supreme court of Spain in its decision of February 12, 1895, which says: "communal things that cannot be sold because they are by their very nature outside of commerce are those for public use, such as the plazas, streets, common lands, rivers, fountains, etc."

Therefore, it must be concluded that the contract, Exhibit C, whereby the municipality of Cavite leased to Hilaria Rojas a portion of the Plaza Soledad is null and void and of no force or effect, because it is contrary to the law and the thing leased cannot be the object of a was held that the City of contract.

In Muyot vs. de la Fuente, 24 it was held that the City of Manila could not lease a portion of a public sidewalk on Plaza Sta. Cruz, being likewise beyond the commerce of man.

Echoing Rojas, the decision said:

Appellants claim that they had obtained permit from the present of the City of Manila, to connect booths Nos. 1 and 2, along the

premises in question, and for the use of spaces where the booths were constructed, they had paid and continued paying the corresponding rentals. Granting this claim to be true, one should not entertain any doubt that such permit was not legal, because the City of Manila does not have any power or authority at all to lease a portion of a public sidewalk. The sidewalk in question, forming part of the public plaza of Sta. Cruz, could not be a proper subject matter of the contract, as it was not within the commerce of man (Article 1347, new Civil Code, and article 1271, old Civil Code). Any contract entered into by the City of Manila in connection with the sidewalk, is ipso facto null and ultra vires. (Municipality of Cavite vs. Roxas, et a1, 30 Phil. 603.) The sidewalk in question was intended for and was used by the public, in going from one place to another. "The streets and public places of the city shall be kept free and clear for the use of the public, and the sidewalks and crossings for the pedestrians, and the same shall only be used or occupied for other purpose as provided by ordinance or regulation; ..." (Sec. 1119, Revised Ordinances of the City of Manila.) The booths in question served as fruit stands for their owners and often, if not always, blocked the fire passage of pedestrians who had to take the plaza itself which used to be clogged with vehicular traffic.

Exactly in point is Espiritu vs. Municipal Council of Pozorrubio, 25 where the Supreme Court declared:

There is absolutely no question that the town plaza cannot be used for the construction of market stalls, specially of residences, and that such structures constitute a nuisance subject to abatement according to law. Town plazas are properties of public dominion, to be devoted to public use and to be made available to the public in general They are outside the common of man and cannot be disposed of or even leased by the municipality to private parties.

Applying this well-settled doctrine, we rule that the petitioners had no right in the first place to occupy the disputed premises and cannot insist in remaining there now on the strength of their alleged lease contracts. They should have realized and accepted this earlier, considering that even before Civil Case No. 2040 was decided, the municipalcouncil of San Fernando had already adopted Resolution No. 29, series of 1964, declaring the area as the parking place and public plaza of the municipality.

It is the decision in Civil Case No. 2040 and the said resolution of the municipal council of San Fernando that respondent Macalino was seeking to enforce when he ordered the demolition of the stags constructed in the disputed area. As officer-

in-charge of the office of the mayor, he had the duty to clear the area and restore it to its intended use as a parking place and public plaza of the municipality of San Fernando, conformably to the aforementioned orders from the court and the council. It is, therefore, not correct to say that he had acted without authority or taken the law into his hands in issuing his order.

Neither can it be said that he acted whimsically in exercising his authority for it has been established that he directed the demolition of the stalls only after, upon his instructions, the municipal attorney had conducted an investigation, to look into the complaint filed by the Association of Concerned Citizens and Consumers of San Fernando. 26 There is evidence that the petitioners were notified of this hearing, 27which they chose to disregard. Photographs of the disputed area, 28 which does look congested and ugly, show that the complaint was valid and that the area really needed to be cleared, as recommended by the municipal attorney.

The Court observes that even without such investigation and recommendation, the respondent mayor was justified in ordering the area cleared on the strength alone of its status as a public plaza as declared by the judicial and legislative authorities. In calling first for the investigation (which the petitioner saw fit to boycott), he was just scrupulously paying deference to the requirements of due process, to remove an taint of arbitrariness in the action he was caged upon to take.

Since the occupation of the place in question in 1961 by the original 24 stallholders (whose number later ballooned to almost 200), it has deteriorated increasingly to the great prejudice of the community in general. The proliferation of stags therein, most of them makeshift and of flammable materials, has converted it into a veritable fire trap, which, added to the fact that it obstructs access to and from the public market itself, has seriously endangered public safety. The filthy condition of the talipapa, where fish and other wet items are sold, has aggravated health and sanitation problems, besides pervading the place with a foul odor that has spread into the surrounding areas. The entire place is unsightly, to the dismay and embarrassment of the inhabitants, who want it converted into a showcase of the town of which they can all be proud. The vendors in the talipapa have also spilled into the street and obstruct the flow of traffic, thereby impairing the convenience of motorists and pedestrians alike. The regular stallholders in the public market, who pay substantial rentals to the municipality, are deprived of a sizable volume of business from prospective customers who are intercepted by the talipapa vendors before they can reach the market proper. On top of all these, the people are denied the proper use of the place as a public plaza, where they may spend their leisure in a relaxed and even beautiful environment and civic and other communal activities of the town can be held.

The problems caused by the usurpation of the place by the petitioners are covered by the police power as delegated to the municipality under the general welfare clause. 29 This authorizes the municipal council "to enact such ordinances

and make such regulations, not repugnant to law, as may be necessary to carry into effect and discharge the powers and duties conferred upon it by law and such as shall seem necessary and proper to provide for the health and safety, promote the prosperity, improve the morals, peace, good order, comfort, and convenience of the municipality and the inhabitants thereof, and for the protection of property therein." This authority was validly exercised in this casethrough the adoption of Resolution No. 29, series of 1964, by the municipal council of San Fernando.

Even assuming a valid lease of the property in dispute, the resolution could have effectively terminated the agreement for it is settled that the police power cannot be surrendered or bargained away through the medium of a contract. 30 In fact, every contract affecting the public interest suffers a congenital infirmity in that it contains an implied reservation of the police power as a postulate of the existing legal order. 31 This power can be activated at any time to change the provisions of the contract, or even abrogate it entirely, for the promotion or protection of the general welfare. Such an act will not militate against the impairment clause, which is subject to and limited by the paramount police power. 32

We hold that the respondent judge did not commit grave abuse of discretion in denying the petition for prohibition. On the contrary, he acted correctly in sustaining the right and responsibility of the mayor to evict the petitioners from the disputed area and clear it of an the structures illegally constructed therein.

The Court feels that it would have been far more amiable if the petitioners themselves, recognizing their own civic duty, had at the outset desisted from their original stance and withdrawn in good grace from the disputed area to permit its peaceful restoration as a public plaza and parking place for the benefit of the whole municipality. They owned this little sacrifice to the community in general which has suffered all these many years because of their intransigence. Regrettably, they have refused to recognize that in the truly democratic society, the interests of the few should yield to those of the greater number in deference to the principles that the welfare of the people is the supreme law and overriding purpose. We do not see any altruism here. The traditional ties of sharing are absent here. What we find, sad to say, is a cynical disdaining of the spirit of "bayanihan," a selfish rejection of the cordial virtues of "pakikisama " and "pagbibigayan" which are the hallmarks of our people.

WHEREFORE, the petition is DISMISSED. The decision dated July 19, 1982, and the order-dated August 5, 1982, are AFFIRMED. The temporary restraining order dated August 9, 1982, is LIFTED. This decision is immediately executory. Costs against the petitioners.

SO ORDERED.

G.R. No. L-66575 May 24, 1988

ADRIANO MANECLANG, JULIETA, RAMONA, VICTOR, ANTONINA, LOURDES, TEODORO and MYRNA, all surnamed MANECLANG, petitioners, vs.THE INTERMEDIATE APPELLATE COURT and ALFREDO MAZA, CORLETO CASTRO, SALOME RODRIGUEZ, EDUCARDO CUISON, FERNANDO ZARCILLA, MARIANO GABRIEL, NICOMEDES CORDERO, CLETO PEDROZO, FELIX SALARY and JOSE PANLILIO, respondents. FERNAN, J.:

Petitioners Adriano Maneclang, et al. filed before the then Court of First Instance of Pangasinan, Branch XI a complaint for quieting of title over a certain fishpond located within the four [4] parcels of land belonging to them situated in Barrio Salomague, Bugallon, Pangasinan, and the annulment of Resolutions Nos. 38 and 95 of the Municipal Council of Bugallon, Pangasinan. The trial court dismmissed the complaint in a decision dated August 15, 1975 upon a finding that the body of water traversing the titled properties of petitioners is a creek constituting a tributary of the Agno River; therefore public in nature and not subject to private appropriation. The lower court likewise held that Resolution No. 38, ordering an ocular inspection of the Cayangan Creek situated between Barrios Salomague Sur and Salomague Norte, and Resolution No. 95 authorizing public bidding for the lease of all municipal ferries and fisheries, including the fishpond under consideration, were passed by respondents herein as members of the Municipal Council of Bugallon, Pangasinan in the exercise of their legislative powers.

Petitioners appealed said decision to the Intermediate Appellate Court, which affirmed the same on April 29,1983. Hence, this petition for review on certiorari.

Acting on the petition, the Court required the respondents to comment thereon. However, before respondents could do so, petitioners manifested that for lack of interest on the part of respondent Alfredo Maza, the awardee in the public bidding of the fishpond, the parties desire to amicably settle the case by submitting to the Court a Compromise Agreement praying that judgment be rendered recognizing the ownership of petitioners over the land the body of water found within their titled properties, stating therein, among other things, that "to pursue the case, the same will not amount to any benefit of the parties, on the other hand it is to the advantage and benefit of the municipality if the ownership of the land and the water found therein belonging to petitioners be recognized in their favor as it is now clear that after the National Irrigation Administration [NIA] had built the dike around the land, no water gets in or out of the land. 1

The stipulations contained in the Compromise Agreement partake of the nature of an adjudication of ownership in favor of herein petitioners of the fishpond in dispute, which, as clearly found by the lower and appellate courts, was originally a creek forming a txibutary of the Agno River. Considering that as held in the case of Mercado vs. Municipal President of Macabebe, 59 Phil. 592 [1934], a creek,

defined as a recess or arm extending from a river and participating in the ebb and flow of the sea, is a property belonging to the public domain which is not susceptible to private appropriation and acquisitive prescription, and as a public water, it cannot be registered under the Torrens System in the name of any individual [Diego v. Court of Appeals, 102 Phil. 494; Mangaldan v. Manaoag, 38 Phil. 455]; and considering further that neither the mere construction of irrigation dikes by the National Irrigation Administration which prevented the water from flowing in and out of the subject fishpond, nor its conversion into a fishpond, alter or change the nature of the creek as a property of the public domain, the Court finds the Compromise Agreement null and void and of no legal effect, the same being contrary to law and public policy.

The finding that the subject body of water is a creek belonging to the public domain is a factual determination binding upon this Court. The Municipality of Bugallon, acting thru its duly-constituted municipal council is clothed with authority to pass, as it did the two resolutions dealing with its municipal waters, and it cannot be said that petitioners were deprived of their right to due process as mere publication of the notice of the public bidding suffices as a constructive notice to the whole world.

IN VIEW OF THE FOREGOING, the Court Resolved to set aside the Compromise Agreement and declare the same null and void for being contrary to law and public policy. The Court further resolved to DISMISS the instant petition for lack of merit.

SO ORDERED.

G.R. No. L-57461 September 11, 1987

THE DIRECTOR OF LANDS, petitioner, vs.MANILA ELECTRIC COMPANY and HON. RIZALINA BONIFACIO VERA, as Presiding Judge, Court of First Instance of Rizal, Pasig, Branch XXIII, respondents. CORTES, J.:

This is an appeal by certiorari of a decision of the respondent Judge in Land Registration Case No. N-10317 LRC Record No. N-54803 entitled "In Re: Application for Registration of Title, Manila Electric Company, applicant," dated May 29, 1981.

The facts are not disputed. Manila Electric Company filed an amended application for registration of a parcel of land located in Taguig, Metro Manila on December 4, 1979. On August 17, 1976, applicant acquired the land applied for registration by purchase from Ricardo Natividad (Exhibit E) who in turn acquired the same from his father Gregorio Natividad as evidenced by a Deed of Original Absolute Sale executed on December 28, 1970 (Exhibit E). Applicant's predecessors-in-interest have possessed the property under the concept of an owner for more than 30 years. The property was declared for taxation purposes under the name of the

applicant (Exhibit 1) and the taxes due thereon have been paid (Exhibits J and J-1).

On May 29, 1981 respondent Judge rendered a decision ordering the registration of the property in the name of the private respondent. The Director of Lands interposed this petition raising the issue of whether or not a corporation may apply for registration of title to land. After comments were filed by the respondents, the Court gave the petition due course. The legal issue raised by the petitioner Director of Lands has been squarely dealt with in two recent cases (The Director of Lands v. Intermediate Appellate Court and Acme Plywood & Veneer Co., Inc., etc., No. L-73002 (December 29, 1986), 146 SCRA 509. The Director of Lands v. Hon. Bengzon and Dynamarine Corporation, etc., No. 54045 (July 28, 1987)], and resolved in the affirmative. There can be no different answer in the case at bar.

In the Acme decision, this Court upheld the doctrine that open, exclusive and undisputed possession of alienable public land for the period prescribed by law creates the legal fiction whereby the land, upon completion of the requisite period ipso jure and without the need of judicial or other sanction, ceases to be public land and becomes private property.

As the Court said in that case:

Nothing can more clearly demonstrate the logical inevitability of considering possession of public land which is of the character and duration prescribed by statute as the equivalent of an express grant from the State than the dictum of the statute itself that the possessor(s) "... shall be conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title .... " No proof being admissible to overcome a conclusive presumption, 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 a conversion already affected (sic) from the moment the required period of possession became complete.

Coming to the case at bar, if the land was already private at the time Meralco bought it from Natividad, then the prohibition in the 1973 Constitution against corporations holding alienable lands of the public domain except by lease (1973 Const., Art. XIV, See. 11) does not apply.

Petitioner, however, contends that a corporation is not among those that may apply for confirmation of title under Section 48 of Commonwealth Act No. 141, the Public Land Act.

As ruled in the Acme case, the fact that the confirmation proceedings were instituted by a corporation is simply another accidental circumstance, "productive of a defect hardly more than procedural and in nowise affecting the substance and merits of the right of ownership sought to be confirmed in said proceedings." Considering that it is not disputed that the Natividads could have had their title confirmed, only a rigid subservience to the letter of the law would deny private respondent the right to register its property which was validly acquired.

WHEREFORE, the petition is DENIED. The questioned decision of the respondent Judge is AFFIRMED.

SO ORDERED.

G.R. No. 150755               June 28, 2005

RENE GANILA,* EDUARDO DUMADA-OG, SR., RAFAEL GANILA, JOSE PASTRANA, LOURDES GANILA, FLORENTINO GANILA, SERAFIN GANILA, LORETO ARELLANO, CONRADO GANILA, VIVENCIO ALVIOR, EDUARDO GANTALA, AMPARO VILLANUEVA, ELEUTERIO SILVA, ADELINA GANILA, FELIZARDO GANILA, SR., ENRIQUE GANILA, ABRAHAM TANONG, EMILIO ALFARAS, JR., BAPTIST CHRISTIAN LEARNING CENTER, petitioners, vs.HON. COURT OF APPEALS AND VIOLETA C. HERRERA, respondents.QUISUMBING, J.:

For review on certiorari are the D E C I S I O N1 dated March 30, 2001 of the Court of Appeals in CA-G.R. SP No. 58191, and its Resolution2 dated October 18, 2001 denying the motion for reconsideration. The assailed decision denied the petition to set aside the Resolution3 of the Regional Trial Court (RTC) of San Miguel, Jordan, Guimaras, Branch 65, affirming the Order of the Municipal Circuit Trial Court (MCTC) for the 19 petitioners to vacate the contested parcel of land.

The facts are as follows:

On March 19, 1997, private respondent Violeta Herrera filed 21 ejectment Complaints4 before the 16th MCTC, Jordan-Buenavista-Nueva Valencia, Jordan, Guimaras. Private respondent alleged that she owns Lot 1227 of the Cadastral Survey of Jordan, Guimaras, with an area of 43,210 square meters; that she inherited the lot from her parents; and that she only tolerated petitioners to construct residential houses or other improvements on certain portions of the lot without rental. Sometime in September or October 1996, private respondent demanded that the petitioners vacate the lot and remove their houses and other improvements thereon. Petitioners refused, despite offer of money by way of assistance to them. After the barangay conciliation failed, private respondent filed the complaints.

In their Answers,5 eight6 of the petitioners claimed that Lot 1227 was formerly a shoreline which they developed when they constructed their respective houses. Another eight7 maintained that their houses stood on Lot 1229 of the Cadastral Survey of Jordan, Guimaras. The other three8 asserted that Lot 1227 is a social forest area.

At the preliminary conference, the parties agreed to designate two geodetic engineers as commissioners of the MCTC to conduct a relocation survey of Lot 1227 and to identify who among the petitioners have houses within the lot.9

The commissioners reported that: (1) the house of Henry Gabasa, defendant in Civil Case No. 288-J, is almost outside Lot 1227; (2) the house of Ludovico Amatorio, defendant in Civil Case No. 289-J, diagonally traversed the boundary; and (3) the houses of the 19 petitioners are inside Lot 1227.10

Eight months after herein petitioners’ failure to comment on the manifestation of private respondent to terminate the preliminary conference, the MCTC terminated the preliminary conference.11 Thereafter, petitioners’ counsel Atty. Nelia Jesusa L. Gonzales failed to file her clients’ position papers and affidavits, even after they sought a 30-day extension to file the same.12

Consequently, the MCTC decided the cases as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff whereby each of the twenty-one (21) defendants are hereby ordered:

1. To vacate Lot 1227 of the Cadastral Survey of Jordan, Guimaras;

2. To pay Two Hundred Pesos (P200.00) per month from October, 1996 as compensation for the use of the property until the same is vacated; and

3. To pay Two Thousand Pesos (P2,000.00) as attorney’s fees and litigation expenses.

SO ORDERED.13

Petitioners appealed to the RTC, Branch 65, at Jordan, Guimaras, which decided as follows:

WHEREFORE, premises considered, the decision in Civil Cases Nos. 0270-J, 0272-J, 0273-J, 0274-J, 0275-J, 0276-J, 0277-J, 0278-J, 0279-J, 0280-J, 0281-J, 0282-J, 0283-J, 0284-J, 0285-J, 0286-J, 0287-J, 0291-J and 0292-J are hereby affirmed.

The decision of the court below in Civil Cases Nos. 0288-J and 0289-J are set aside. Civil Cases Nos. 0288-J and 0289-J are hereby DISMISSED.

SO ORDERED.14

The RTC ruled that the evidence showed the better right of private respondent to possess Lot 1227. Private respondent’s position paper, affidavit and tax declaration supported her allegations. In addition, the commissioners’ report and sketch plan showed that indeed petitioners occupy Lot 1227. On the other hand, according to the RTC, the petitioners failed to present evidence which would show that they are entitled to possess the lot.

Based on the sketch plan, the RTC dismissed the cases against Gabasa and Amatorio since their houses occupy only a small area of Lot 1227. It declared that Gabasa and Amatorio believed in good faith that the whole area they occupied was part of the seashore.

The 19 petitioners, who were ordered to vacate the lot, filed a joint petition for review with the Court of Appeals. The appellate court denied the petition. Petitioners moved for reconsideration and filed an amended petition. The Court of Appeals, however, affirmed the factual findings and conclusions arrived at by the trial courts and denied the amended petition for lack of merit.15 It also denied the motion for reconsideration.

Petitioners are now before us, on a petition for review, alleging that:

The Honorable Court of Appeals, with due respect and deference, committed a reversible error in the interpretation/application of the law in the instant case and in the appreciation of the facts and evidence presented. The Court of Appeals gravely abused its discretion when it denied and dismissed the petition filed by the petitioners.16

After considering the parties’ submissions, we find three basic issues: (1) Did the MCTC err in taking jurisdiction over and deciding the cases? (2) Did the RTC err in sustaining the MCTC’s judgment? (3) Did the CA err in denying the petition for review filed by the 19 petitioners ordered to be ejected?

Petitioners insist that private respondent should have filed an action to recover possession de jure, not a mere complaint for ejectment, for two reasons. One, they possessed Lot 1227 in good faith for more than 30 years in the concept of owners. And two, there was no withholding of possession since private respondent was not in prior possession of the lot.

Private respondent states in her Comment before us that the allegations in her Complaints make out a clear case of unlawful detainer which is cognizable by the MCTC. We are in agreement with her stance. There was no error in the choice of

the complainant’s remedy, a matter left to her determination as the suitor. And the complaint itself is defined by the allegations therein, not the allegations of the defendants.

At the outset, we note that petitioners question the MCTC’s jurisdiction yet they admit in their preliminary statement that the Complaints filed are indeed for unlawful detainer, and that the only issue to be determined is mere physical possession (possession de facto) and not juridical possession (possession de jure), much less ownership.17

While petitioners assert that this case involves only deprivation of possession, they confuse the remedy of an action for forcible entry with that of unlawful detainer. In unlawful detainer, prior physical possession by the plaintiff is not necessary. It is enough that plaintiff has a better right of possession. Actual, prior physical possession of a property by a party is indispensable only in forcible entry cases. In unlawful detainer cases, the defendant is necessarily in prior lawful possession of the property but his possession eventually becomes unlawful upon termination or expiration of his right to possess.18 Thus, the fact that petitioners are in possession of the lot does not automatically entitle them to remain in possession. And the issue of prior lawful possession by the defendants does not arise at all in a suit for unlawful detainer, simply because prior lawful possession by virtue of contract or other reasons is given or admitted. Unlike in forcible entry where defendants, by force, intimidation, threat, strategy or stealth, deprive the plaintiff or the prior physical possessor of possession. Here there is no evidence to show that petitioners entered the lot by any of these acts.

If only to stress the fundamental principles related to present controversy, jurisdiction over unlawful detainer suits is vested in municipal trial courts.19 And in ejectment cases, the jurisdiction of the court is determined by the allegations of the complaint.20

In this case for ejectment, private respondent’s allegations sufficiently present a case of unlawful detainer. She alleged that (1) she owns Lot 1227; (2) she tolerated petitioners to construct their houses thereon; (3) she withdrew her tolerance; and (4) petitioners refused to heed her demand to vacate the lot. The Complaints were also filed within one year from the date of her demand. The cause of action for unlawful detainer between the parties springs from the failure of petitioners to vacate the lot upon lawful demand of the private respondent. When they refused to vacate the lot after her demand, petitioners’ continued possession became unlawful. Her complaint for ejectment against respondent, to put it simply, is not without sufficient basis.

Petitioners’ contention that private respondent should have filed an action to recover possession de jure with the RTC is not supported by law or jurisprudence. The distinction between a summary action of ejectment and a plenary action for recovery of possession and/or ownership of the land is settled in our jurisprudence.

What really distinguishes an action for unlawful detainer from a possessory action (accion publiciana) and from a reinvindicatory action (accion reinvindicatoria) is that the first is limited to the question of possession de facto. An unlawful detainer suit (accion interdictal) together with forcible entry are the two forms of an ejectment suit that may be filed to recover possession of real property. Aside from the summary action of ejectment, accion publiciana or the plenary action to recover the right of possession and accion reinvindicatoria or the action to recover ownership which includes recovery of possession, make up the three kinds of actions to judicially recover possession.21

It is not up to defendants, now petitioners herein, to dictate upon plaintiff, now the private respondent, what her initial recourse should be. Her choice of an action for ejectment against so-called squatters is well within her rights.

Petitioners cite the case of Bayubay v. Court of Appeals,22 and argue that the MCTC’s decision was without jurisdictional or legal basis because the MCTC did not issue a preliminary conference order. They assert that the 10-day period to file position papers and affidavits only starts after the parties had received a preliminary conference order. They insist they were denied due process when the MCTC decided the cases based merely on private respondent’s Complaints and affidavit, without considering their Answers.

For her part, private respondent maintains that there was substantial compliance with the rules in the MCTC’s conduct of the preliminary conference, hence there was no violation of due process nor disregard of its proper jurisdiction.

Petitioners’ present contention was first raised only in their appeal to the RTC. Raising it before the appellate tribunal is barred by estoppel.23 They should have raised it in the proceedings before the MCTC. In our view, this issue is a mere afterthought, when the MCTC decided against them. Basic rules of fair play, justice and due process require that as a rule an issue cannot be raised by the petitioners for the first time on appeal.24

Besides, petitioners did not question initially the MCTC’s Order dated February 19, 1999, when they moved for an extension of time to file their position papers and affidavits. They wanted another 30 days on top of the 30 days set by the MCTC, which strictly should have been 10 days only. In this regard, petitioners could not claim that they were denied sufficient time to file their position papers and affidavits before the trial court. Further, they cannot validly invoke our ruling25 in Bayubay, for in that case there was no order at all terminating the preliminary conference and requiring the parties to submit position papers and affidavits.

We note with dismay petitioners’ insistence that we order the MCTC "to conduct the requisite preliminary conference." The summary character of ejectment suits will be disregarded if we allow petitioners to further delay this case by allowing a second preliminary conference. Ejectment by way of forcible entry and unlawful detainer cases are summary proceedings, designed to provide an expeditious

means of protecting actual possession or the right to possession over the property involved. It is a timely procedure designed to remedy the delay in the resolution of such cases.26

Lastly, petitioners aver that private respondent failed to prove her allegation of ownership of Lot 1227 as it is only based on a tax declaration which is not an evidence of ownership. They also claim that their possession of the lot was not and could not be by mere tolerance. However, this is a factual matter best left to the trial courts.

What we have now is sufficient evidence showing that private respondent has a better right to possess Lot 1227. The commissioners’ report and sketch plan show that the 19 petitioners occupy the lot, which corroborate private respondent’s allegation and disprove petitioners’ defense that Lot 1227 is a shoreline; or that Lot 1227 is a social forest area. While not a conclusive evidence of ownership, private respondent’s tax declaration constitutes proof that she has a claim of title over the lot. It has been held that:

Although tax declarations or realty tax payment of property are not conclusive evidence of ownership, nevertheless, they are good indicia of possession in the concept of 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. They constitute at least proof that the holder has a claim of title over the property. The voluntary declaration of a piece of property for taxation purposes manifests not only one’s sincere and honest desire to obtain title to the property and announces his adverse claim against the State and all other interested parties, but also the intention to contribute needed revenues to the Government. Such an act strengthens one’s bona fide claim of acquisition of ownership.27

The lower courts did not err in adjudicating the issue of possession. Mere absence of title over the lot is not a ground for the courts to withhold relief from the parties in an ejectment case. Plainly stated, the trial court has validly exercised its jurisdiction over the ejectment cases below. The policy behind ejectment suits is to prevent breaches of the peace and criminal disorder, and to compel the party out of possession to respect and resort to the law alone to obtain what she claims is hers. The party deprived of possession must not take the law into his or her own hands.28 For their part, herein petitioners could not be barred from defending themselves before the court adequately, as a matter of law and right.

However, petitioners in their defense should show that they are entitled to possess Lot 1227. If they had any evidence to prove their defenses, they should have presented it to the MCTC with their position papers and affidavits. But they ignored the court’s order and missed the given opportunity to have their defenses heard, the very essence of due process.29 Their allegations were not only unsubstantiated but were also disproved by the plaintiff’s evidence.

In sum, we find no reversible error much less any grave abuse of discretion committed by the Court of Appeals. 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 him.30 His status 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 date of unlawful deprivation or withholding of possession is to be counted from the date of the demand to vacate.31

WHEREFORE, the instant petition is DENIED for lack of merit. The Decision of the Court of Appeals dated March 30, 2001 and its Resolution dated October 18, 2001 are AFFIRMED.

Costs against petitioners.

G.R. No. 4223            August 19, 1908

NICOLAS LUNOD, ET AL., plaintiffs-appellees, vs.HIGINO MENESES, TORRES, J.:

On the 14th of March, 1904, Nicolas Lunod, Juan de la Vega, Evaristo Rodriguez, Fernando Marcelo, Esteban Villena, Benito Litao, Ventura Hernandez, and Casimiro Pantanilla, residents of the town of Bulacan, province of the same name, filed a written complaint against Higino Meneses, alleging that they each owned and possessed farm lands, situated in the places known as Maytunas and Balot, near a small lake named Calalaran; that the defendant is the owner of a fish-pond and a strip of land situated in Paraanan, adjoining the said lake on one side, and the River Taliptip on the other; that from time immemorial, and consequently for more than twenty years before 1901, there existed and still exists in favor of the rice fields of the plaintiffs a statutory easement permitting the flow of water over the said land in Paraanan, which easement the said plaintiffs enjoyed until the year 1901 and consisted in that the water collected upon their lands and in the Calalaran Lake flow through Paraanan into the Taliptip River. From that year however, the defendant, without any right or reason, converted the land in Paraanan into a fishpond and by means of a dam and a bamboo net, prevented the free passage of the water through said place into the Taliptip River, that in consequence the lands of the plaintiff became flooded and damaged by the stagnant waters, there being no outlet except through the land in Paraanan; that their plantation were destroyed, causing the loss and damages to the extent of about P1,000, which loss and damage will continue if the obstructions to the flow of the water are allowed to remain, preventing its passage through said land and injuring the rice plantations of the plaintiffs. They therefore asked that judgment be entered against the defendant, declaring that the said tract of land in Paraanan is subject to a statutory easement permitting the flow of water from the property of the plaintiffs, and that, without prejudice to the issuing of a preliminary injunction, the defendant be ordered to remove and destroy the obstructions that impede the

passage of the waters through Paraanan, and that in future, and forever, he abstain from closing in any manner the aforesaid tract of land; that, upon judgment being entered, the said injunction be declared to be final and that the defendant be sentenced to pay to the plaintiffs an indemnity of P1,000, and the costs in the proceedings; that they be granted any other and further equitable or proper remedy in accordance with the facts alleged and proven.

In view of the demurrer interposed by the plaintiffs to the answer of the defendant, the latter, on the 29th of August, 1904, filed an amended answer, denying each and everyone of the allegations of the complaint, and alleged that no statutory easement existed nor could exist in favor of the lands described in the complaint, permitting the waters to flow over the fish pond that he, together with his brothers, owned in the sitio of Bambang, the area and boundaries of which were stated by him, and which he and his brothers had inherited from their deceased mother.

Apolinara de Leon; that the same had been surveyed by a land surveyor in September, 1881, he also denied that he had occupied or converted any land in the barrio of Bambang into a fishpond; therefore, and to sentence the plaintiffs to pay the costs and corresponding damages.

Upon the evidence adduced by both parties to the suit, the court, on the 13th of March, 1907, entered judgment declaring that the plaintiffs were entitled to a decision in their favor, and sentenced the defendant to remove the dam placed on the east of the Paraanan passage on the side of the Taliptip River opposite the old dam in the barrio of Bambang, as well as to remove and destroy the obstacles to the free passage of the waters through the strip of land in Paraanan; to abstain in future, and forever, from obstructing or closing in any manner the course of the waters through the said strip of land. The request that the defendant be sentenced to pay an indemnity was denied, and no ruling was made as to costs.

The defendant excepted to the above judgment and furthermore asked for a new trial which was denied and also excepted to, and, upon approval of the bill of exceptions, the question was submitted to this court.

Notwithstanding the defendant's denial in his amended answer, it appears to have been clearly proven in this case that the lands owned by the plaintiffs in the aforesaid barrio, as well as the small adjoining lake, named Calalaran, are located in places relatively higher than the sitio called Paraanan where the land and fish pond of the defendant are situated, and which border on the Taliptip River; that during the rainy season the rain water which falls on he land of the plaintiffs, and which flows toward the small Calalaran Lake at flood time, has no outlet to the Taliptip River other than through the low land of Paraanan: that the border line between Calalaran and Paraanan there has existed from time immemorial a dam, constructed by the community for the purpose of preventing the salt waters from the Taliptip River, at high tide, from flooding the land in Calalaran, passing through the lowlands of Paraanan; but when rainfall was abundant, one of the residents was designated in his turn by the lieutenant or justice of the barrio to

open the sluice gate in order to let out the water that flooded the rice fields, through the land of Paraanan to the above-mentioned river, that since 1901, the defendant constructed another dam along the boundary of this fishpond in Paraanan, thereby impeding the outlet of the waters that flood the fields of Calalaran, to the serious detriment of the growing crops.

According to article 530 of the Civil Code, an easement is charge imposed upon one estate for the benefit of another estate belonging to a different owner, and the realty in favor of which the easement is established is called the dominant estate, and the one charged with it the servient estate.

The lands of Paraanan being the lower are subject to the easement of receiving and giving passage to the waters proceeding from the higher lands and the lake of Calalaran; this easement was not constituted by agreement between the interested parties; it is of a statutory nature, and the law had imposed it for the common public utility in view of the difference in the altitude of the lands in the barrio Bambang.

Article 552 of the Civil code provides:

Lower estates must receive the waters which naturally and without the intervention of man descend from the higher estates, as well as the stone or earth which they carry with them.

Neither may the owner of the lower estates construct works preventing this easement, nor the one of the higher estate works increasing the burden.

Article 563 of the said code reads also:

The establishment, extent, form, and conditions of the easements of waters to which this section refers shall be governed by the special law relating thereto in everything not provided for in this code.

The special law cited in the Law of Waters of August 3, 1866, article 111 of which, treating of natural easements relating to waters, provides:

Lands situated at a lower level are subject to receive the waters that flow naturally, without the work of man, from the higher lands together with the stone or earth which they carry with them.

Hence, the owner of the lower lands can not erect works that will impede or prevent such an easement or charge, constituted and imposed by the law upon his estate for the benefit of the higher lands belonging to different owners; neither can the latter do anything to increase or extend the easement.

According to the provisions of law above referred to, the defendant, Meneses, had no right to construct the works, nor the dam which blocks the passage, through his lands and the outlet to the Taliptip River, of the waters which flood the higher lands of the plaintiffs; and having done so, to the detriment of the easement charged on his estate, he has violated the law which protects and guarantees the respective rights and regulates the duties of the owners of the fields in Calalaran and Paraanan.

It is true that article 388 of said code authorizes every owner to enclose his estate by means of walls, ditches fences or any other device, but his right is limited by the easement imposed upon his estate.

The defendant Meneses might have constructed the works necessary to make and maintain a fish pond within his own land, but he was always under the strict and necessary obligation to respect the statutory easement of waters charged upon his property, and had no right to close the passage and outlet of the waters flowing from the lands of the plaintiffs and the lake of Calalaran into the Taliptip River. He could not lawfully injure the owners of the dominant estates by obstructing the outlet to the Taliptip River of the waters flooding the upper lands belonging to the plaintiffs.

It is perhaps useful and advantageous to the plaintiffs and other owners of high lands in Calalaran, in addition to the old dike between the lake of said place and the low lands in Paraanan, to have another made by the defendant at the border of Paraanan adjoining the said river, for the purpose of preventing the salt waters of the Taliptip River flooding, at high tide, not only the lowlands in Paraanan but also the higher ones of Calalaran and its lake, since the plaintiffs can not prevent the defendant from protecting his lands against the influx of salt water; but the defendant could never be permitted to obstruct the flow of the waters through his lands to the Taliptip River during the heavy rains, when the high lands in Calalaran and the lake in said place are flooded, thereby impairing the right of the owners of the dominant estates.

For the above reasons, and accepting the findings of the court below in the judgment appealed from in so far as they agree with the terms of this decision, we must and do hereby declare that the defendant, Higino Meneses, as the owner of the servient estate, is obliged to give passage to and allow the flow of the waters descending from the Calalaran Lake and from the land of the plaintiffs through his lands in Paraanan for their discharge into the Taliptip River; and he is hereby ordered to remove any obstacle that may obstruct the free passage of the waters whenever there may be either a small or large volume of running water through his lands in the sitio of Paraanan for their discharge into the Taliptip River; and in future to abstain from impeding, in any manner, the flow of the waters coming from the higher lands. The judgment appealed from is affirmed, in so far as it agrees with decision, and reversed in other respects, with the costs of this instance against the appellants. So ordered.

G.R. No. L-1592            September 20, 1949

In the estate of E.M. Bachrach, deceased. MARY MCDONALD BACHRACH, petitioner-appellee, vs.SOPHIE M. SEIFERT, ELISA ELIANOFF, AND THE HEIRS OF THE DECEASED GINDA M. SKUNDINA, oppositors-appellants.MONTEMAYOR, J.:

In testate proceedings, civil case No. 51955 of the Court of First Instance of Manila, the will of E. M. Bachrach, who died on September 28, 1937, provided for the distribution of the considerable property which he had left. The provisions of the will which are important in this case are contained in the sixth and eighth paragraphs which read as follows:

Sixth: It is my will and do herewith bequeath and devise to my beloved wife Mary McDonald Bachrach for life all the fruits and usufruct of the remainder of all my estate after payment of the legacies, bequests and gifts provided for above; and she may enjoy such usufruct and use or spend such fruits as she may in any manner wish.

Eighth: It is my wish that upon the death of my beloved wife, Mary McDonald Bachrach, all my estate, personal, real and otherwise, and all the fruits and usufruct thereof which during her life pertained to her, shall be divided as follows:

One-half thereof shall be given to such charitable hospitals in the Philippines as she may designate; in case she fails to designate, then said sum shall be given to the Chief Executive of these Islands who shall distribute it, share and share alike to all charitable hospitals in the Philippines excluding those belonging to the governments of the Philippines or of the United States;

One-half thereof shall be divided, share and share alike by and between my legal heirs, to the exclusion of my brothers.

The widow Mary McDonald Bachrach as administratrix and executrix had been administering the property left by her deceased husband and enjoying the usufruct thereof. The other heirs Sophie M. Seifert, Ginda M. Skundina, Elisa Elianoff and Annie Bachrach Levine on September 14, 1940, filed a petition, agreed to by usufructuary Mary McDonald Bachrach, and the Solicitor General representing the Government of the Philippines, asking that the administratrix "be authorized to pay your petitioners from and after July 1, 1940, and until they receive their share of the estate left by the deceased E.M. Bachrach upon the death of his widow, a monthly allowance of P500, P250, P250, and P250, respectively, and the additional sum of P3,000 to the heir Sophie M. Seifert, who is in poor health, the said allowances to be deducted from your petitioners' share of the estate of the deceased E.M. Bachrach upon the death of the widow." Acting

upon the said petition, the Court of First Instance of Manila issued an order dated October 2, 1940 granting the petition in the following words:

Petition granted; and the administratrix and usufructuary Mary McDonald Bachrach is hereby authorized and instructed forthwith to pay to the said Sophie M. Seifert, Ginda M. Skundina, Elisa Elianoff and Annie Bachrach Levine a monthly allowance of Five Hundred (P500) Pesos; Two Hundred Fifty (P250) Pesos; Two Hundred Fifty (P250) Pesos, and Two Hundred Fifty (P250) Pesos, respectively, beginning July 1, 1940, and until the said heirs receive their share of the estate left by the deceased E. M. Bachrach upon the death of his widow, and the additional sum of Three Thousand (P3,000) Pesos to the heir Sophie M. Seifert.

From July 1, 1940 to December 31, 1941, the administratrix made the payments as ordered, having paid the total amount of P40,250. Payments during the Japanese occupation which would have amounted to P32,500, was suspended. Then payments were resumed from August, 1945 to January, 1947. Thereafter, the executrix declined to make further payments. The heirs petitioned the lower court for a writ of execution, ordering the administratrix to pay the allowances for February, 1947 and those in arrears for the period comprising from January 1, 1942 to July 31, 1945. This petition was denied and the heirs filed a petition for mandamus in the Supreme Court under G. R. No. L-1379. 1 The petition for mandamus was granted by this Court and the lower court was ordered to proceed in the execution of its order of October 2, 1940 and to issue the proper writ.

In the meantime, the administratrix Mary McDonald Bachrach, filed in the same case No. 51955 in the Court of First Instance of Manila a petition on February 19, 1947, recommending the liquidation of the assets of the estate of her deceased husband destined for charity because due to the havoc and miseries brought about by the last war, the charitable institutions to be benefited badly needed the property bequeathed to them under the will.

In another petition by the same administratrix Mary McDonald filed on February 18, 1947, she alleged that under the order of the court of October 2, 1940, she had already paid to the heirs P40,250; that besides that amount the heirs were demanding the amount of P32,500 representing the allowances that had accrued during the Japanese occupation while the estate was financially and economically prostrate; that the allowances paid to said heirs were taken from the fruits and income of the estate which belong exclusively to her as a usufructuary, that is to say, that the allowances paid to the heirs were advances from her personal funds; and that unless the heirs gave sufficient security for the protection of the administratrix, the ½ of the property corresponding to the heirs which consists mainly of shares of stock, when sold later, may not be sufficient to reimburse her estate after her death for the allowances made or given to the heirs from her personal funds. On the basis of said allegations, the administratrix prayed the court that she be relieved from the obligation to pay the heirs the monthly allowances ordered by the court in its order of October 2, 1940, and in the

alternative, in the event that the court ordered her to continue the payments of said allowances, that she be authorized to sell as much of the assets of the ½ destined for the instituted heirs as may be necessary to enable her to continue the payment of said allowances.

Evidently, acting upon these two petitioners, the lower court issued its order dated February 27, 1947, expressing its opinion that pending the determination of the proceedings, it would be advisable to sell the property destined for charities but also the one-half adjudicated to the instituted heirs, the proceeds thereof, to be distributed accordingly later on. Acting upon a motion for reconsideration filed on behalf of the heirs, the lower court denied said motion, justifying its order sought to be reconsidered with the allegation that the case had been pending for several years: that the sale of said properties included in the testate proceedings and distribution of the proceeds of the sale to the beneficiaries was one way of winding up said proceedings and the beneficiaries would be benefited in that they would receive their shares earlier. The heirs appealed from that order of February 27, 1947, and the order denying their motion for reconsideration. That appeal under G.R. No. L-1592 of this Court, is now the case under consideration.

Our first impression was that the appellants had no valid reason for objecting to the sale of the ½ of the estate adjudicated to them because in that way they would receive their shares earlier; furthermore, that the administratrix was warranted in asking for the sale of said ½ of the property adjudicated to the heirs or as much thereof as was sufficient to reimburse for the allowances being paid by her to the heirs from her personal funds or from the fruit of the said ½ which, as a usufructuary, be longed to her. Upon a closer scrutiny of the record however, not only of this case (G. R. No. L-1592) but also of G. R. No. L-1379 of which we take judicial notice, for which reason, said last case was cited and referred to for purposes of background so as to give a clear understanding of the facts in this case, we find that the allowance being paid to the heirs are really not paid from the personal funds of the administratrix but from the cash corresponding to the ½ of the estate adjudicated to the heirs, which cash, is deposited in the bank. According to the decision of the Supreme Court in the mandamus case (G. R. No. L-1379) promulgated on December 19, 1947, the administratrix had in her possession the sum of P351,116.91 which has already been adjudicated to and belongs, although pro indiviso, to the heirs of the deceased E. M. Bachrach and that furthermore, the monthly allowances being paid to the heirs or due them should be paid from this sum and not from the personal funds of the administratrix Mary McDonald Bachrach. Furthermore, the very order of the lower court of October 2, 1940, authorizing the administratrix to pay to the heirs the monthly allowances already mentioned, stipulated in its fourth paragraph that said allowances should be taken from the properties to be turned over to the heirs of the deceased E. M. Bachrach and shall be deducted from the share of said heirs upon the death of the widow..

In the opinion of this Court, the cash in the possession of the administratrix corresponding to the ½ of the estate adjudicated to the heirs is sufficient for the monthly allowances being paid to the heirs and that there is no necessity for the

sale of the ½ of the estate corresponding to them. The main objection to the heirs to the sale of ½ of the estate adjudicated to them, which ½ besides the cash already mentioned, consist mostly of shares of stock, is that said shares if sold now may not command a good price and that furthermore said heirs prefer to keep said shares intact as long as there is no real necessity for their sale. Of course, once said cash in the hands of the administratrix, corresponding to the heirs is exhausted because of the payment of the allowances made to the heirs, some other arrangements might be necessary. The administratrix would then have a right and reason to refuse the payment of said allowances from her said personal funds or from the fruits of the estate, which as a usufructuary, belong to her during her lifetime. But, until that point is reached, we see no valid reason for ordering the sale of the ½ of the estate belonging to the heirs over their objection.

In view of the foregoing, the order appealed from, insofar as it directs the sale of the one-half share of the estate destined and adjudicated to the instituted heirs, is hereby reversed. With costs.

G.R. No. 35223           September 17, 1931

THE BACHRACH MOTOR CO., INC., plaintiff-appellee, vs.TALISAY-SILAY MILLING CO., ET AL., defendants-appellees. THE PHILIPPINE NATIONAL BANK, intervenor-appellant.ROMUALDEZ, J.:

This proceeding originated in a complaint filed by the Bachrach Motor Co., Inc., against the Talisay-Silay Milling Co., Inc., for the delivery of the amount P13,850 or promissory notes or other instruments or credit for that sum payable on June 30, 1930, as bonus in favor of Mariano Lacson Ledesma; the complaint further prays that the sugar central be ordered to render an accounting of the amounts it owes Mariano Lacson Ledesma by way of bonus, dividends, or otherwise, and to pay the plaintiff a sum sufficient to satisfy the judgment mentioned in the complaint, and that the sale made by said Mariano Lacson Ledesma be declared null and void.

The Philippine National Bank filed a third party claim alleging a preferential right to receive any amount which Mariano Lacson Ledesma might be entitled to from the Talisay-Silay Milling Co. as bonus, because that would be civil fruits of the land mortgaged to said bank by said debtor for the benefit of the central referred to, and by virtue of a deed of assignment, and praying that said central be ordered to delivered directly to the intervening bank said sum on account of the latter's credit against the aforesaid Mariano Lacson Ledesma.

The corporation Talisay-Silay Milling Co., Inc., answered the complaint stating that of Mariano Lacson Ledesma's credit, P7,500 belonged to Cesar Ledesma because he had purchased it, and praying that it be absolved from the complaint and that the proper party be named so that the remainder might be delivered.

Cesar Ledesma, in turn, claiming to be the owner by purchase in good faith an for a reconsideration of the P7,500 which is a part of the credit referred to above, answered praying that he be absolved from the complaint.

The plaintiff Bachrach Motor Co., Inc., answered the third party claim alleging that its credit against Mariano Lacson Ledesma was prior and preferential to that of the intervening bank, and praying that the latter's complaint be dismissed.

At the trial all the parties agreed to recognize and respect the sale made in favor of Cesar Ledesma of the P7,500 part of the credit in question, for which reason the trial court dismissed the complaint and cross-complaint against Cesar Ledesma authorizing the defendant central to deliver to him the aforementioned sum of P7,500. And upon conclusion of the hearing, the court held that the Bachrach Motor Co., Inc., had a preferred right to receive the amount of P11,076.02 which was Mariano Lacson Ledesma's bonus, and it ordered the defendant central to deliver said sum to the plaintiff.

The Philippine National Bank appeals, assigning the following alleged errors as committed by the trial court:

1. In holding that the bonus which the Talisay-Silay Milling Co., Inc., bound itself to pay the planters who had mortgaged their land to the Philippine National Bank to secure the payment of the debt of said central to said bank is not civil fruits of said land.

2. In not holding that said bonus became subject to the mortgage executed by the defendant Mariano Lacson Ledesma to the Philippine National Bank to secure the payment of his personal debt to said bank when it fell due.

3. In holding that the assignment (Exhibit 9, P.N.B.) of said bonus made on March 7, 1930, by Mariano Lacson Ledesma to the Philippine National Bank to be applied to the payment of his debt to said Philippine National Bank is fraudulent.

4. In holding that the Bachrach Motor Co. Inc., in civil case No. 31597 of the Court of First Instance of Manila levied a valid attachment upon the bonus in question.

5. In admitting and considering the supplementary complaint filed by the Bachrach Motor Co., Inc., alleging as a cause of action the attachment of the bonus in question which said Bachrach Motor Co., Inc., in civil case No. 31821 of the Court of First Instance of Manila levied after the filing of the original complaint in this case, and after Mariano Lacson Ledesma in this case had been declared in default.

6. In holding that the Bachrach Motor Co., Inc., has a preferential right to receive from the Talisay-Silay Milling Co., Inc., the amount of P11,076.02 which is in the possession of said corporation as the bonus to be paid to Mariano Lacson Ledesma, and in ordering the Talisay-Silay Milling Co., Inc., to deliver said amount to the Bachrach Motor Co., Inc.

7. In not holding that the Philippine National Bank has a preferential right to receive from the Talisay-Silay Milling Co., Inc., the amount of P11,076.02 held by said corporation as Mariano Lacson Ledesma's bonus, and in not ordering said Talisay-Silay Milling Co., Inc., to deliver said amount to the Philippine National Bank.

8. In not holding that the amended complaint and the supplementary complaint of the Bachrach Motor Co., Inc., do not state facts sufficient to constitute a cause of action in favor of the Bachrach Motor Co., Inc., and against the Talisay-Silay Milling Co., Inc., or against the Philippine National Bank.

The appellant bank bases its preferential right upon the contention that the bonus in question is civil fruits of the lands which the owners had mortgaged for the benefit of the central giving the bonus, and that, as civil fruits of said land, said bonus was assigned by Mariano Lacson Ledesma on March 7, 1930, by virtue of the document Exhibit 9 of said intervening institution, which admitted in its brief that "if the bonus in question is not civil fruits or rent which became subject to the mortgage in favor of the Philippine National Bank when Mariano Lacson Ledesma's personal obligation fell due, the assignment of March 7, 1930 (Exhibit 9, P.N.B.), is null and void, not because it is fraudulent, for there was no intent of fraud in executing the deed, but that the cause or consideration of the assignment was erroneous, for it was based upon the proposition that the bonus was civil fruits of the land mortgaged to the Philippine National Bank." (P. 31.)

The fundamental question, then, submitted to our consideration is whether or not the bonus in question is civil fruits.

This is how the bonus came to be granted: On December 22, 1923, the Talisay-Silay Milling Co., Inc., was indebted to the Philippine National Bank. To secure the payment of its debt, it succeeded in inducing its planters, among whom was Mariano Lacson Ledesma, to mortgage their land to the creditor bank. And in order to compensate those planters for the risk they were running with their property under the mortgage, the aforesaid central, by a resolution passed on that same date, i.e., December 22, 1923, undertook to credit the owners of the plantation thus mortgaged every year with a sum equal to two per centum of the debt secured according to yearly balance, the payment of the bonus being made at once, or in part from time to time, as soon as the central became free of its obligations to the aforesaid bank, and of those contracted by virtue of the contract of supervision, and had funds which might be so used, or as soon as it obtained from said bank authority to make such payment. (Exhibits 5, 6; P.N.B.)

Article 355 of the Civil Code considers three things as civil fruits: First, the rents of buildings; second, the proceeds from leases of lands; and, third, the income from perpetual or life annuities, or other similar sources of revenue. It may be noted that according to the context of the law, the phrase "u otras analogas" refers only to rent or income, for the adjectives "otras" and "analogas" agree with the noun "rentas," as do also the other adjectives "perpetuas" and "vitalicias." That is why we say that by "civil fruits" the Civil Code understands one of three and only three things, to wit: the rent of a building, the rent of land, and certain kinds of income.

As the bonus in question is not rent of a building or of land, the only meaning of "civil fruits" left to be examined is that of "income."

Assuming that in broad juridical sense of the word "income" it might be said that the bonus in question is "income" under article 355 of the Civil Code, it is obvious to inquire whether it is derived from the land mortgaged by Mariano Lacson Ledesma to the appellant bank for the benefit of the central; for it is not obtained from that land but from something else, it is not civil fruits of that land, and the bank's contention is untenable.

It is to be noted that the said bonus bears no immediate, but only a remote accidental relation to the land mentioned, having been granted as compensation for the risk of having subjected one's land to a lien in favor of the bank, for the benefit of the entity granting said bonus. If this bonus be income or civil fruits of anything, it is income arising from said risk, or, if one chooses, from Mariano Lacson Ledesma's generosity in facing the danger for the protection of the central, but certainly it is not civil fruits or income from the mortgaged property, which, as far as this case is concerned, has nothing to do with it. Hence, the amount of the bonus, according to the resolution of the central granting it, is not based upon the value, importance or any other circumstance of the mortgaged property, but upon the total value of the debt thereby secured, according to the annual balance, which is something quite distinct from and independent of the property referred to.

Finding no merit in this appeal, the judgment appealed from is affirmed, without express finding as to costs. So ordered.

G.R. No. L-57348 May 16, 1985

FRANCISCO DEPRA, plaintiff-appellee, vs.AGUSTIN DUMLAO, defendant-appellant. MELENCIO-HERRERA, J.:

This is an appeal from the Order of the former Court of First Instance of Iloilo to the then Court of Appeals, which the latter certified to this instance as involving pure questions of law

Plaintiff-appellee, Francisco Depra, is the owner of a parcel of land registered under Transfer Certificate of Title No. T3087, known as Lot No. 685, situated in

the municipality of Dumangas, Iloilo, with an area of approximately 8,870 square meters. Agustin Dumlao, defendant-appellant, owns an adjoining lot, designated as Lot No. 683, with an approximate area of 231 sq. ms.

Sometime in 1972, when DUMLAO constructed his house on his lot, the kitchen thereof had encroached on an area of thirty four (34) square meters of DEPRA's property, After the encroachment was discovered in a relocation survey of DEPRA's lot made on November 2,1972, his mother, Beatriz Depra after writing a demand letter asking DUMLAO to move back from his encroachment, filed an action for Unlawful Detainer on February 6,1973 against DUMLAO in the Municipal Court of of Dumangas, docketed as Civil Case No 1, Said complaint was later amended to include DEPRA as a party plain. plaintiff.

After trial, the Municipal Court found that DUMLAO was a builder in good faith, and applying Article 448 of the Civil Code, rendered judgment on September 29, 1973, the dispositive portion of which reads:

Ordering that a forced lease is created between the parties with the plaintiffs, as lessors, and the defendants as lessees, over the disputed portion with an area of thirty four (34) square meters, the rent to be paid is five (P5.00) pesos a month, payable by the lessee to the lessors within the first five (5) days of the month the rent is due; and the lease shall commence on the day that this decision shall have become final.

From the foregoing judgment, neither party appeal so that, ff it were a valid judgment, it would have ordinarily lapsed into finality, but even then, DEPRA did not accept payment of rentals so that DUMLAO deposited such rentals with the Municipal Court.

On July 15,1974, DEPRA filed a Complaint for Quieting of Title against DUMLAO before the then Court of First Instance of Iloilo, Branch IV (Trial Court), involving the very same 34 square meters, which was the bone of contention in the Municipal Court. DUMLAO, in his Answer, admitted the encroachment but alleged, in the main, that the present suit is barred by res judicata by virtue of the Decision of the Municipal Court, which had become final and executory.

After the case had been set for pre-trial, the parties submitted a Joint Motion for Judgment based on the Stipulation of Facts attached thereto. Premised thereon, the Trial Court on October 31, 1974, issued the assailed Order, decreeing:

WHEREFORE, the Court finds and so holds that the thirty four (34) square meters subject of this litigation is part and parcel of Lot 685 of the Cadastral Survey of Dumangas of which the plaintiff is owner as evidenced by Transfer Certificate of Title No. 3087 and such plaintiff is entitled to possess the same.

Without pronouncement as to costs.

SO ORDERED.

Rebutting the argument of res judicata relied upon by DUMLAO, DEPRA claims that the Decision of the Municipal Court was null and void ab initio because its jurisdiction is limited to the sole issue of possession, whereas decisions affecting lease, which is an encumbrance on real property, may only be rendered by Courts of First Instance.

Addressing out selves to the issue of validity of the Decision of the Municipal Court, we hold the same to be null and void. The judgment in a detainer case is effective in respect of possession only (Sec. 7, Rule 70, Rules of Court). 1 The Municipal Court over-stepped its bounds when it imposed upon the parties a situation of "forced lease", which like "forced co-ownership" is not favored in law. Furthermore, a lease is an interest in real property, jurisdiction over which belongs to Courts of First Instance (now Regional Trial Courts) (Sec. 44(b), Judiciary Act of 1948; 2 Sec. 19 (2) Batas Pambansa Blg. 129). 3 Since the Municipal Court, acted without jurisdiction, its Decision was null and void and cannot operate as res judicata to the subject complaint for Queting of Title. Besides, even if the Decision were valid, the rule on res judicata would not apply due to difference in cause of action. In the Municipal Court, the cause of action was the deprivation of possession, while in the action to quiet title, the cause of action was based on ownership. Furthermore, Sec. 7, Rule 70 of the Rules of Court explicitly provides that judgment in a detainer case "shall not bar an action between the same parties respecting title to the land. " 4

Conceded in the Stipulation of Facts between the parties is that DUMLAO was a builder in good faith. Thus,

8. That the subject matter in the unlawful detainer case, Civil Case No. 1, before the Municipal Court of Dumangas, Iloilo involves the same subject matter in the present case, the Thirty-four (34) square meters portion of land and built thereon in good faith is a portion of defendant's kitchen and has been in the possession of the defendant since 1952 continuously up to the present; ... (Emphasis ours)

Consistent with the principle that our Court system, like any other, must be a dispute resolving mechanism, we accord legal effect to the agreement of the parties, within the context of their mutual concession and stipulation. They have, thereby, chosen a legal formula to resolve their dispute to appeal ply to DUMLAO the rights of a "builder in good faith" and to DEPRA those of a "landowner in good faith" as prescribed in Article 448. Hence, we shall refrain from further examining whether the factual situations of DUMLAO and DEPRA conform to the juridical positions respectively defined by law, for a "builder in good faith" under Article

448, a "possessor in good faith" under Article 526 and a "landowner in good faith' under Article 448.

In regards to builders in good faith, Article 448 of the Civil Code provides:

ART. 448. The owner of the land on which anything has been built sown or planted in good faith,

shall have the right

to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or

to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent.

However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof (Paragraphing supplied)

Pursuant to the foregoing provision, DEPRA has the option either to pay for the encroaching part of DUMLAO's kitchen, or to sell the encroached 34 square meters of his lot to DUMLAO. He cannot refuse to pay for the encroaching part of the building, and to sell the encroached part of his land, 5 as he had manifested before the Municipal Court. But that manifestation is not binding because it was made in a void proceeding.

However, the good faith of DUMLAO is part of the Stipulation of Facts in the Court of First Instance. It was thus error for the Trial Court to have ruled that DEPRA is "entitled to possession," without more, of the disputed portion implying thereby that he is entitled to have the kitchen removed. He is entitled to such removal only when, after having chosen to sell his encroached land, DUMLAO fails to pay for the same. 6 In this case, DUMLAO had expressed his willingness to pay for the land, but DEPRA refused to sell.

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 453 (now Article 546). The owner of the land, upon the other hand, has the option, under article 361 (now 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 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 (italics ours).

We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners to remove their buildings from the land belonging to plaintiffs-respondents only because the latter chose neither to pay for such buildings nor to sell the land, is null and void, for it amends substantially the judgment sought to be executed and is. furthermore, offensive to articles 361 (now Article 448) and 453 (now Article 546) of the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608[1946]).

A word anent the philosophy behind Article 448 of the Civil rode.

The original provision was found in Article 361 of the Spanish Civil Code; which provided:

ART. 361. The owner of land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the work, sowing or planting, after the payment of the indemnity stated in Articles 453 and 454, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent.

As will be seen, the Article favors the owner of the land, by giving him one of the two options mentioned in the Article. Some commentators have questioned the preference in favor of the owner of the land, but Manresa's opinion is that the Article is just and fair.

. . . es justa la facultad que el codigo da al dueno del suelo en el articulo 361, en el caso de edificacion o plantacion? Algunos comentaristas la conceptuan injusta, y como un extraordinario privilegio en favor de la propiedad territorial. Entienden que impone el Codigo una pena al poseedor de buena fe y como advierte uno de los comentaristas aludidos 'no se ve claro el por que de tal pena . . . al obligar al que obro de buena fe a quedarse con el edificio o plantacion, previo el pago del terreno que ocupa, porque si bien es verdad que cuando edifico o planto demostro con este hecho, que queria para si el edificio o plantio tambien lo es que el que edifico o planto de buena fe lo hizo en la erronea inteligencia de creerse dueno del terreno Posible es que, de saber lo contrario, y de tener noticia de que habia que comprar y pagar el terreno, no se hubiera decidido a plantar ni a edificar. La ley obligandole a hacerlo fuerza su

voluntad, y la fuerza por un hecho inocente de que no debe ser responsable'. Asi podra suceder pero la realidad es que con ese hecho voluntario, aunque sea inocente, se ha enriquecido torticeramente con perjuicio de otro a quien es justo indemnizarle,

En nuestra opinion, el Codigo ha resuelto el conflicto de la manera mas justa y equitativa y respetando en lo possible el principio que para la accesion se establece en el art. 358. 7

Our own Code Commission must have taken account of the objections to Article 361 of the Spanish Civil Code. Hence, the Commission provided a modification thereof, and Article 448 of our Code has been made to 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 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.

Additional benefits were extended to the builder but the landowner retained his options.

The fairness of the rules in Article 448 has also been explained as follows:

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 to pay for 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. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs. Chan Chico, G.R. No. 49167, April 30, 1949; Article applied:

see Cabral, et al vs. Ibanez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050). 8

WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is hereby ordered remanded to the Regional Trial Court of Iloilo for further proceedings consistent with Articles 448 and 546 of the Civil Code, as follows:

1. The trial Court shall determine

a) the present fair price of DEPRA's 34 square meter area of land;

b) the amount of the expenses spent by DUMLAO for the building of the kitchen;

c) the increase in value ("plus value") which the said area of 34 square meters may have acquired by reason thereof, and

d) whether the value of said area of land is considerably more than that of the kitchen built thereon.

2. After said amounts shall have been determined by competent evidence, the Regional, Trial Court shall render judgment, as follows:

a) The trial Court shall grant DEPRA a period of fifteen (15) days within which to exercise his option under the law (Article 448, Civil Code), whether to appropriate the kitchen as his own by paying to DUMLAO either the amount of tile expenses spent by DUMLAO f or the building of the kitchen, or the increase in value ("plus value") which the said area of 34 square meters may have acquired by reason thereof, or to oblige DUMLAO to pay the price of said area. The amounts to be respectively paid by DUMLAO and DEPRA, in accordance with the option thus exercised by written notice of the other party and to the Court, shall be paid by the obligor within fifteen (15) days from such notice of the option by tendering the amount to the Court in favor of the party entitled to receive it;

b) The trial Court shall further order that if DEPRA exercises the option to oblige DUMLAO to pay the price of the land but the latter rejects such purchase because, as found by the trial Court, the value of the land is considerably more than that of the kitchen, DUMLAO shall give written notice of such rejection to DEPRA and to the Court within fifteen (15) days from notice of DEPRA's option to sell the land. In that event, the parties shall be given a period of fifteen (15) days from such notice of

rejection within which to agree upon the terms of the lease, and give the Court formal written notice of such agreement and its provisos. If no agreement is reached by the parties, the trial Court, within fifteen (15) days from and after the termination of the said period fixed for negotiation, shall then fix the terms of the lease, provided that the monthly rental to be fixed by the Court shall not be less than Ten Pesos (P10.00) per month, payable within the first five (5) days of each calendar month. The period for the forced lease shall not be more than two (2) years, counted from the finality of the judgment, considering the long period of time since 1952 that DUMLAO has occupied the subject area. The rental thus fixed shall be increased by ten percent (10%) for the second year of the forced lease. DUMLAO shall not make any further constructions or improvements on the kitchen. Upon expiration of the two-year period, or upon default by DUMLAO in the payment of rentals for two (2) consecutive months, DEPRA shall be entitled to terminate the forced lease, to recover his land, and to have the kitchen removed by DUMLAO or at the latter's expense. The rentals herein provided shall be tendered by DUMLAO to the Court for payment to DEPRA, and such tender shall constitute evidence of whether or not compliance was made within the period fixed by the Court.

c) In any event, DUMLAO shall pay DEPRA an amount computed at Ten Pesos (P10.00) per month as reasonable compensation for the occupancy of DEPRA's land for the period counted from 1952, the year DUMLAO occupied the subject area, up to the commencement date of the forced lease referred to in the preceding paragraph;

d) The periods to be fixed by the trial Court in its Precision shall be inextendible, and upon failure of the party obliged to tender to the trial Court the amount due to the obligee, the party entitled to such payment shall be entitled to an order of execution for the enforcement of payment of the amount due and for compliance with such other acts as may be required by the prestation due the obligee.

No costs,

G.R. Nos. L-42699 to L-42709 May 26, 1981

THE HEIRS OF THE LATE FLORENTINA NUGUID VDA. DE HABERER, petitioner, vs.COURT OF APPEALS, ** FEDERICO MARTINEZ, BALDOMERO MANALO, FAUSTINO BAGALAWIS, FEDERICO STA. TERESA, ANGELITO KING, GREGORIO DEL ROSARIO, LEODOVICO TORRES, LEON SORIANO, SANTIAGO TUMANG, LUIS PASTOR and CRISTINO LIBRAMANTE, respondents.TEEHANKEE, J.:

The Court grants the petition for review by way of appeal from the Resolutions of respondent Court of Appeals dated November 24, 1975 and January 15, 1976 dismissing the appeal of the late Florentino Nuguid Vda. de Haberer in CA-G. R. No. 53680—90-R and ordering all pleadings filed in said cases after the death of said appellant stricken off the records, for having been issued with grave error of law if not with grave abuse of discretion and remands the case for proper proceedings and determination of the appeal on the merits.

This case originated from the Court of First Instance of Rizal where the late Florentina Nuguid Vda. de Haberer as the duly registered owner filed in 1964 and 1965 (11) complaints for recovery of possession of the parcel of land evidenced by Transfer Certificate of Title No. 15043 of the Register of Deeds of Rizal issued in her name, situated at Mandaluyong, Rizal, alleging that private respondents had surreptitiously entered the land and built their houses thereon.

The lower court, after trial on the merits, rendered a consolidated decision, dated May 26, 197 l, dismissing all the complaints. On motion of the late Florentina Nuguid Vda. de Haberer the cases were reopened and retried on grounds of newly discovered evidence. On September 15, 1972, the lower court issued an order reviving its decision of May 26, 1971. The decision was thus appealed to the Court of Appeals.

In the Court of Appeals, the cases were erroneously dismissed once before, on the ground that the appeal was allegedly filed out of time. The issue was brought to this Court in Cases Nos. L-39366 and L-39620-29, entitled "Florentina Nuguid Vda. de Haberer vs. Federico Martinez, et al., 1 On January 29, 1975, this Court rendered its judgment setting aside the appellate court's dismissal of the appeal and ordering the reinstatement of the same for proper disposition on the merits, having found "that contrary to respondent court's erroneous premises and computation, petitioner duly and timely perfected her appeal within the reglementary period and in compliance with the material data rule requiring that the Record on Appeal state such data as will show that the appeal was perfected on time. "

The cases were remanded to the Court of Appeals where appellant was required to file printed brief within forty-five days from her receipt of notice. Three days before the period was to expire, or on June 18, 1975, appellant's counsel requested for an extension of time within which to file appellant's brief.

Respondent court in a resolution dated June 23, 1975 granted the request and gave appellant a 90-day extension (with warning of no further extension) from receipt on June 27, 1975 or up to September 25, 1975 within which to file the appellant's printed brief. On June 23, 1975, private respondent opposed the extension by filing a "Motion to Set Aside Order Granting Extension of Time to File Brief." Appellant was directed by respondent court to comment on the said opposition and appellant's counsel complied by submitting its comments on July 15, 1975.

In the meantime, appellant Florentina Nuguid Vda. de Haberer had died on May 26, 1975. Appellant's counsel Attorneys Bausa, Ampil and Suarez accordingly gave respondent court notice of the death of their client in their motion of June 28, 1975 and asked for the suspension of the running of the period within which to file the appellant's brief pending the appointment of an executor of the estate left by their client in the Court of First Instance of Quezon City (Sp. Proc. No. Q-2026) where a petition for the probate of the alleged will of the deceased had been filed by another lawyer, Atty. Sergio Amante. Respondents in turn contended that the lawyers of he deceased had "no longer any legal standing and her atorneys could no longer act for and in her behalf for the reason that their client-attorney relationship had been automatically erminated or severed" and asked that the appeal be dismissed for failure to prosecute." 2

Since their motion of June 28, 1975 remained unacted upon and the original extension granted by the respondent court for the deceased appellant to file her printed brief was about to expire, her counsel filed on September 18, 1975 a manifestation and/or motion asking either for an extension of sixty (60) days and/or resolution suspending the running of the period within which to submit appellant's printed brief. Still, respondent, court remained silent.

Not certain whether their services would still be retained by the heirs of the deceased, counsel for the late Florentina Nuguid Vda. de Haberer reiterated their request in a motion dated November 14, 1975 either for an extension of time to file appellant's brief or for the issuance of a resolution suspending the running of the period for filing the same, pending the appointment of an administrator or executor of the estate of the deceased appellant.

Finally, acting on counsel's motion of November 14, 1975, respondent court denied the request for extension and at the same time dismissed the appeal, ruling in its resolution dated November 24, 1975 as follows:1äwphï1.ñët

Upon consideration of the manifestation and/or for another extension to file appellant's brief dated November 14, 1975, filed by counsel for the appellant on the grounds therein stated, and considering that appellant has already been given a total of one hundred ninety-five (195) days within which to file brief, the Court Resolved to deny the motion for another extension to file brief and to dismiss the appeal.

Counsel for the deceased appellant forthwith filed their urgent motion for reconsideration of December 8, 1975 explaining their predicament that the requests for extension/suspension of period to file brief was due to the uncertainty that their services may no longer be retained by the heirs or legal representatives of their deceased client but they felt obligated to preserve the right of such heirs/successors to continue the appeal pursuant to Rule 3, Section 17 of the Rules of Court, pending the settlement of the question of who among them should be the executor of the deceased's estate and presented therewith, for admission, the printed "brief for the appellant" the printing of which they had deferred "for professional ethical considerations," pending respondent court's action on their request for suspension of the period. They further submitted therewith copies of 2 separate orders of September 3, 1975 and August 26, 1975 issued by the Court of Agrarian Relations and the Court of First Instance both at Guimba, Nueva Ecija, respectively, wherein the deceased Florentina Nuguid Vda. de Haberer was party-defendant, granting the deceased's counsel's prayer to hold in abeyance further proceedings therein pending the appointment of an administrator for the estate of the deceased.

Respondent court, however, denied reconsideration, per its Resolution of January 15, 1976 citing the general principle that "litigants have no right to assume that such extensions will be granted as a matter of course." But respondent court erred in applying this general principle and summarily denying reconsideration and denying admission of the appellant's brief conditioned upon the administrator of the deceased's estate making his appearance upon his appointment and being granted leave to file his supplemental brief/memorandum, 3 in view of the intervening event of appellant's death and the interposition of the equally established principle that the relation of attorney and client is terminated by the death of the client, as acknowledged by respondent court itself as well as respondents. ln the absence of a retainer from the heirs or authorized representatives of his deceased client, the attorney would thereafter have no further power or authority to appear or take any further action in the case, save to inform the court of the client's death and take the necessary steps to safeguard the deceased's rights in the case.

This is what the deceased's counsel did in the case at bar. They properly informed respondent court of the death of the appellant and sought suspension of the proceedings and of the period for filing appeliant's brief pending the appointment of the executor of the deceased's estate in the proper probate proceedings filed with the Court of First Instance of Quezon City. Section 17, Rule 3 of the Rules of Court 4 sets the rule on substitution of parties in case of death of any of the parties. Under the Rule, it is the court that is called upon, after notice of a party's death and the claim is not thereby extinguished, to order upon proper notice the legal representative of the deceased to appear within a period of 30 days or such tlnie as it may grant. Since no administrator of the estate of the deceased appellant had yet been appointed as the same was still pending determination in the Court of First Instance of Quezon City, the motion of the deceased's counsel for the suspension of the running of the period within which to file appellant's brief was well-taken. More, under the Rule, it should have set a period for the

substitution of the deceased party with her legal representative or heirs, failing which, the court is called upon to order the opposing party to procure the appointment of a legal representative of the deceased at the cost of the deceased's estate, and such representative shall then "immediately appear for and on behalf of the interest of the deceased."

Respondent court gravely erred in not following the Rule and requiring the appearance of the legal representative of the deceased and instead dismissing the appeal of the deceased who yet had to be substituted in the pending appeal. Thus, it has been held that when a party dies in an action that survives, and no order is issued by the court for the appearance of the legal representative or of the heirs of the deceased in substitution of the deceased, and as a matter of fact no such substitution has ever been effected, the trial held by the court without such legal representatives or heirs and the judgment rendered after such trial are null and void because the court acquired no jurisdiction over the persons of the legal representatives or of the heirs upon whom the trial and the judgment would be binding. 5

Respondent court therefore erred in ruling that since upon the demise of the party-appellant, the attorney-client relationship between her and her counsels "was automatically severed and terminated," whatever pleadings filed by said counsel with it after the death of said appellant "are mere scraps of paper." 6 If at all, due to said death on May 25, 1975 and severance of the attorney-client relationship, further proceedings and specifically the running of the original 45-day period for filing the appellnt's brief should be legally deemed as having been automatically suspended, until the proper substitution of the deceased appellant by her executor or administrator or her heirs shall have been effected within the time set by respondent court pursuant to the cited Rule.

Respondent court likewise gravely erred in dismissing the appeal on "(its) belief that the supervening death of the appellant Florentina Nuguid Vda. de Haberer rendered the continuance of the appeal unnecessary" on the basis of a totally inapplicable citation of a ruling in Velasco vs. Rosenberg, 29 Phil. 212, 214 that "If pending appeal, an event occurs which renders it impossible for the appellate court to grant any relief, the appeal will be dismissed." Manifestly, the appenant's death in no way impedes that the deceased's appeal to recover the parcel of land registered in her name be continued and determined for the benefit of her estate and heirs.

Prescinding from the foregoing, justice and equity dictate under the circumstances of the case at bar that the rules, while necessary for the speedy and orderly administration of justice, should not be applied with the rigidity and inflexibility of respondent court's resolutions. 7 What should guide judicial action is the principle that a party litigant is to be given the fullest opportunity to establish the merits of his complaint or defense rather than for him to lose life, liberty, honor or property on technicalities. 8 A liberal, rather than a strict and inflexible adherence to the Rules, is justified not only because appellant (in this case, her estate and/or heirs)

should be given every opportunity to be heard but also because no substantial injury or prejudice can well be caused to the adverse parties principally, since they are in actual possession of the disputed land. 9 The better and certainly the more prudent course of action in every judicial proceeding is to hear both sides and decide on the merits rather than dispose of a case on technicalities, 10 especially where no substantial prejudice is caused to the adverse party. 11

The dismissal of an appeal based on the appellant's failure to file brief is based on a power granted to respondent Court of Appeals and not on a specific and mandatory duty imposed upon it by the Rules. 12 Since the power or authority is not mandatory but merely directory, the exercise thereof requires a great deal of circumspection, considering all the attendant circumstances. 13 The failure of an appellant to file his brief within the time prescribed does not have the effect of dismissing the appeal automatically. 14 Rather, the Court of Appeals has the discretion to dismiss or not to dismiss appellant's appeal, which discretion must be a sound one to be exercised in accordance with the tenets of justice and fair play having in mind the circumstances obtaining in each case. l5

Paraphrasing what the Court stressed in the leading case of Berkenkotter vs. Court of Appeals, 16 a reading of the appellant's brief discloses that petitioners-appellants have a prima facie meritorious case which should be properly determined on the merits and "the element of rigidity should not be affixed to procedural concepts and made to cover the matter," 17 for to dismiss the appeal would not serve the ends of justice.

A final note: On March 19, 1976, counsels submitted with their Manifestation the written authority dated January 20, 1976 individually signed by instituted heirs and/or legal representatives of the testate estate of the deceased Florentina Nuguid Vda. de Haberer granting said counsels full authority to file and prosecute the case and any other incidental cases for and in their behalf, 18 which was duly noted in the Court's Resolution of March 26, 1976. Such manifestation and authority may be deemed the formal substitution of the deceased by her heirs, as in fact they appear as petitioners in the title of the case at bar. Hence, the proper determination of the pending appeal may now proceed, as herein directed.

ACCORDINGLY, the petition is granted and respondent court's resolutions of November 24, 1975 and January 15, 1976 are set aside. The appellant's brief filed with respondent court in the pending appeal in CA-G.R. Nos. 53680-90-R is ordered admitted and the cases are remanded to respondent, Court of Appeals for further proceedings and proper determination of the appeal on the merits. With costs against private respondents.

The Court has noted that upon recommendation of the Solicitor General in Adm. Case No. 2148 entitled "Francisco Ortigas, Jr., et al. vs. Atty. Felipe C. Navarro" that counsel for respondents Felipe C. Navarro be disbarred for "gross misconduct and/or malpractice," he has been suspended from the practice of law during the pendency of said proceedings. The Court, however, directs that copy of

this decision be served on said counsel for the sole purpose of apprising private respondents through him of the promulgation of this judgment and to require respondents (1) to inform the Court of their new counsel, if any, and to direct him to enter his appearance or (2) if they have no new or other counsel, to inform the Court of their respective addresses for purposes of service of the Court's processes, within ten (10) days from notice hereof.

G.R. No. 151815             February 23, 2005

SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID, petitioners, vs.HON. COURT OF APPEALS AND PEDRO P. PECSON, respondents.QUISUMBING, J.:

This is a petition for review on certiorari of the Decision1 dated May 21, 2001, of the Court of Appeals in CA-G.R. CV No. 64295, which modified the Order dated July 31, 1998 of the Regional Trial Court (RTC) of Quezon City, Branch 101 in Civil Case No. Q-41470. The trial court ordered the defendants, among them petitioner herein Juan Nuguid, to pay respondent herein Pedro P. Pecson, the sum of P1,344,000 as reimbursement of unrealized income for the period beginning November 22, 1993 to December 1997. The appellate court, however, reduced the trial court’s award in favor of Pecson from the said P1,344,000 to P280,000. Equally assailed by the petitioners is the appellate court’s Resolution2 dated January 10, 2002, denying the motion for reconsideration.

It may be recalled that relatedly in our Decision dated May 26, 1995, in G.R. No. 115814, entitled Pecson v. Court of Appeals, we set aside the decision of the Court of Appeals in CA-G.R. SP No. 32679 and the Order dated November 15, 1993, of the RTC of Quezon City, Branch 101 and remanded the case to the trial court for the determination of the current market value of the four-door two-storey apartment building on the 256-square meter commercial lot.

The antecedent facts in this case are as follows:

Pedro P. Pecson owned a commercial lot located at 27 Kamias Road, Quezon City, on which he built a four-door two-storey apartment building. For failure to pay realty taxes, the lot was sold at public auction by the City Treasurer of Quezon City to Mamerto Nepomuceno, who in turn sold it for P103,000 to the spouses Juan and Erlinda Nuguid.

Pecson challenged the validity of the auction sale before the RTC of Quezon City in Civil Case No. Q-41470. In its Decision,3 dated February 8, 1989, the RTC upheld the spouses’ title but declared that the four-door two-storey apartment building was not included in the auction sale.4 This was affirmed in toto by the Court of Appeals and thereafter by this Court, in its Decision5 dated May 25, 1993, in G.R. No. 105360 entitled Pecson v. Court of Appeals.

On June 23, 1993, by virtue of the Entry of Judgment of the aforesaid decision in G.R. No. 105360, the Nuguids became the uncontested owners of the 256-square meter commercial lot.

As a result, the Nuguid spouses moved for delivery of possession of the lot and the apartment building.

In its Order6 of November 15, 1993, the trial court, relying upon Article 5467 of the Civil Code, ruled that the Spouses Nuguid were to reimburse Pecson for his construction cost of P53,000, following which, the spouses Nuguid were entitled to immediate issuance of a writ of possession over the lot and improvements. In the same order the RTC also directed Pecson to pay the same amount of monthly rentals to the Nuguids as paid by the tenants occupying the apartment units or P21,000 per month from June 23, 1993, and allowed the offset of the amount of P53,000 due from the Nuguids against the amount of rents collected by Pecson from June 23, 1993 to September 23, 1993 from the tenants of the apartment.8

Pecson duly moved for reconsideration, but on November 8, 1993, the RTC issued a Writ of Possession,9 directing the deputy sheriff to put the spouses Nuguid in possession of the subject property with all the improvements thereon and to eject all the occupants therein.

Aggrieved, Pecson then filed a special civil action for certiorari and prohibition docketed as CA-G.R. SP No. 32679 with the Court of Appeals.

In its decision of June 7, 1994, the appellate court, relying upon Article 44810 of the Civil Code, affirmed the order of payment of construction costs but rendered the issue of possession moot on appeal, thus:

WHEREFORE, while it appears that private respondents [spouses Nuguid] have not yet indemnified petitioner [Pecson] with the cost of the improvements, since Annex I shows that the Deputy Sheriff has enforced the Writ of Possession and the premises have been turned over to the possession of private respondents, the quest of petitioner that he be restored in possession of the premises is rendered moot and academic, although it is but fair and just that private respondents pay petitioner the construction cost of P53,000.00; and that petitioner be ordered to account for any and all fruits of the improvements received by him starting on June 23, 1993, with the amount of P53,000.00 to be offset therefrom.

IT IS SO ORDERED.11 [Underscoring supplied.]

Frustrated by this turn of events, Pecson filed a petition for review docketed as G.R. No. 115814 before this Court.

On May 26, 1995, the Court handed down the decision in G.R. No 115814, to wit:

WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679 and the Order of 15 November 1993 of the Regional Trial Court, Branch 101, Quezon City in Civil Case No. Q-41470 are hereby SET ASIDE.

The case is hereby remanded to the trial court for it to determine the current market value of the apartment building on the lot. For this purpose, the parties shall be allowed to adduce evidence on the current market value of the apartment building. The value so determined shall be forthwith paid by the private respondents [Spouses Juan and Erlinda Nuguid] to the petitioner [Pedro Pecson] otherwise the petitioner shall be restored to the possession of the apartment building until payment of the required indemnity.

No costs.

SO ORDERED.12 [Emphasis supplied.]

In so ruling, this Court pointed out that: (1) Article 448 of the Civil Code is not apposite to the case at bar where the owner of the land is the builder, sower, or planter who then later lost ownership of the land by sale, but may, however, be applied by analogy; (2) the current market value of the improvements should be made as the basis of reimbursement; (3) Pecson was entitled to retain ownership of the building and, necessarily, the income therefrom; (4) the Court of Appeals erred not only in upholding the trial court’s determination of the indemnity, but also in ordering Pecson to account for the rentals of the apartment building from June 23, 1993 to September 23, 1993.

On the basis of this Court’s decision in G.R. No. 115814, Pecson filed a Motion to Restore Possession and a Motion to Render Accounting, praying respectively for restoration of his possession over the subject 256-square meter commercial lot and for the spouses Nuguid to be directed to render an accounting under oath, of the income derived from the subject four-door apartment from November 22, 1993 until possession of the same was restored to him.

In an Order13 dated January 26, 1996, the RTC denied the Motion to Restore Possession to the plaintiff averring that the current market value of the building should first be determined. Pending the said determination, the resolution of the Motion for Accounting was likewise held in abeyance.

With the submission of the parties’ assessment and the reports of the subject realty, and the reports of the Quezon City Assessor, as well as the members of the duly constituted assessment committee, the trial court issued the following Order14 dated October 7, 1997, to wit:

On November 21, 1996, the parties manifested that they have arrived at a compromise agreement that the value of the said improvement/building is P400,000.00 The Court notes that the plaintiff has already received P300,000.00.

However, when defendant was ready to pay the balance of P100,000.00, the plaintiff now insists that there should be a rental to be paid by defendants. Whether or not this should be paid by defendants, incident is hereby scheduled for hearing on November 12, 1997 at 8:30 a.m.

Meantime, defendants are directed to pay plaintiff the balance of P100,000.00.

SO ORDERED.15

On December 1997, after paying the said P100,000 balance to Pedro Pecson the spouses Nuguid prayed for the closure and termination of the case, as well as the cancellation of the notice of lis pendens on the title of the property on the ground that Pedro Pecson’s claim for rentals was devoid of factual and legal bases.16

After conducting a hearing, the lower court issued an Order dated July 31, 1998, directing the spouses to pay the sum of P1,344,000 as reimbursement of the unrealized income of Pecson for the period beginning November 22, 1993 up to December 1997. The sum was based on the computation of P28,000/month rentals of the four-door apartment, thus:

The Court finds plaintiff’s motion valid and meritorious. The decision of the Supreme Court in the aforesaid case [Pecson vs. Court of Appeals, 244 SCRA 407] which set aside the Order of this Court of November 15, 1993 has in effect upheld plaintiff’s right of possession of the building for as long as he is not fully paid the value thereof. It follows, as declared by the Supreme Court in said decision that the plaintiff is entitled to the income derived therefrom, thus –

. . .

Records show that the plaintiff was dispossessed of the premises on November 22, 1993 and that he was fully paid the value of his building in December 1997. Therefore, he is entitled to the income thereof beginning on November 22, 1993, the time he was dispossessed, up to the time of said full payment, in December 1997, or a total of 48 months.

The only question left is the determination of income of the four units of apartments per month. But as correctly pointed out by plaintiff, the defendants have themselves submitted their affidavits attesting that the income derived from three of the four units of the apartment building is P21,000.00 or P7,000.00 each per month, or P28,000.00 per month for the whole four units. Hence, at P28,000.00 per month, multiplied by 48 months, plaintiff is entitled to be paid by defendants the amount of P1,344,000.00.17

The Nuguid spouses filed a motion for reconsideration but this was denied for lack of merit.18

The Nuguid couple then appealed the trial court’s ruling to the Court of Appeals, their action docketed as CA-G.R. CV No. 64295.

In the Court of Appeals, the order appealed from in CA-G.R. CV No. 64295, was modified. The CA reduced the rentals from P1,344,000 to P280,000 in favor of the appellee.19 The said amount represents accrued rentals from the determination of the current market value on January 31, 199720 until its full payment on December 12, 1997.

Hence, petitioners state the sole assignment of error now before us as follows:

THE COURT OF APPEALS ERRED IN HOLDING PETITIONERS LIABLE TO PAY RENT OVER AND ABOVE THE CURRENT MARKET VALUE OF THE IMPROVEMENT WHEN SUCH WAS NOT PROVIDED FOR IN THE DISPOSITIVE PORTION OF THE SUPREME COURT’S RULING IN G.R. No. 115814.

Petitioners call our attention to the fact that after reaching an agreed price of P400,000 for the improvements, they only made a partial payment of P300,000. Thus, they contend that their failure to pay the full price for the improvements will, at most, entitle respondent to be restored to possession, but not to collect any rentals. Petitioners insist that this is the proper interpretation of the dispositive portion of the decision in G.R. No. 115814, which states in part that "[t]he value so determined shall be forthwith paid by the private respondents [Spouses Juan and Erlinda Nuguid] to the petitioner [Pedro Pecson] otherwise the petitioner shall be restored to the possession of the apartment building until payment of the required indemnity."21

Now herein respondent, Pecson, disagrees with herein petitioners’ contention. He argues that petitioners are wrong in claiming that inasmuch as his claim for rentals was not determined in the dispositive portion of the decision in G.R. No. 115814, it could not be the subject of execution. He points out that in moving for an accounting, all he asked was that the value of the fruits of the property during the period he was dispossessed be accounted for, since this Court explicitly recognized in G.R. No. 115814, he was entitled to the property. He points out that this Court ruled that "[t]he petitioner [Pecson] not having been so paid, he was entitled to retain ownership of the building and, necessarily, the income therefrom."22 In other words, says respondent, accounting was necessary. For accordingly, he was entitled to rental income from the property. This should be given effect. The Court could have very well specifically included rent (as fruit or income of the property), but could not have done so at the time the Court pronounced judgment because its value had yet to be determined, according to him. Additionally, he faults the appellate court for modifying the order of the RTC, thus defeating his right as a builder in good faith entitled to rental from the period of his dispossession to full payment of the price of his improvements, which spans from November 22, 1993 to December 1997, or a period of more than four years.

It is not disputed that the construction of the four-door two-storey apartment, subject of this dispute, was undertaken at the time when Pecson was still the owner of the lot. When the Nuguids became the uncontested owner of the lot on June 23, 1993, by virtue of entry of judgment of the Court’s decision, dated May 25, 1993, in G.R. No. 105360, the apartment building was already in existence and occupied by tenants. In its decision dated May 26, 1995 in G.R. No. 115814, the Court declared the rights and obligations of the litigants in accordance with Articles 448 and 546 of the Civil Code. These provisions of the Code are directly applicable to the instant case.

Under Article 448, the landowner is given the option, either to appropriate the improvement as his own upon payment of the proper amount of indemnity or to sell the land to the possessor in good faith. Relatedly, Article 546 provides that a builder in good faith is entitled to full reimbursement for all the necessary and useful expenses incurred; it also gives him right of retention until full reimbursement is made.

While the law aims to concentrate in one person the ownership of the land and the improvements thereon in view of the impracticability of creating a state of forced co-ownership,23 it guards against unjust enrichment insofar as the good-faith builder’s improvements are concerned. The right of retention is considered as one of the measures devised by the law for the protection of builders in good faith. Its object is to guarantee full and prompt reimbursement as it permits the actual possessor to remain in possession while he has not been reimbursed (by the person who defeated him in the case for possession of the property) for those necessary expenses and useful improvements made by him on the thing possessed.24 Accordingly, a builder in good faith cannot be compelled to pay rentals during the period of retention25 nor be disturbed in his possession by ordering him to vacate. In addition, as in this case, the owner of the land is prohibited from offsetting or compensating the necessary and useful expenses with the fruits received by the builder-possessor in good faith. Otherwise, the security provided by law would be impaired. This is so because the right to the expenses and the right to the fruits both pertain to the possessor, making compensation juridically impossible; and one cannot be used to reduce the other.26

As we earlier held, since petitioners opted to appropriate the improvement for themselves as early as June 1993, when they applied for a writ of execution despite knowledge that the auction sale did not include the apartment building, they could not benefit from the lot’s improvement, until they reimbursed the improver in full, based on the current market value of the property.

Despite the Court’s recognition of Pecson’s right of ownership over the apartment building, the petitioners still insisted on dispossessing Pecson by filing for a Writ of Possession to cover both the lot and the building. Clearly, this resulted in a violation of respondent’s right of retention. Worse, petitioners took advantage of the situation to benefit from the highly valued, income-yielding, four-unit apartment

building by collecting rentals thereon, before they paid for the cost of the apartment building. It was only four years later that they finally paid its full value to the respondent.

Petitioners’ interpretation of our holding in G.R. No. 115814 has neither factual nor legal basis. The decision of May 26, 1995, should be construed in connection with the legal principles which form the basis of the decision, guided by the precept that judgments are to have a reasonable intendment to do justice and avoid wrong.27

The text of the decision in G.R. No. 115814 expressly exempted Pecson from liability to pay rentals, for we found that the Court of Appeals erred not only in upholding the trial court’s determination of the indemnity, but also in ordering him to account for the rentals of the apartment building from June 23, 1993 to September 23, 1993, the period from entry of judgment until Pecson’s dispossession. As pointed out by Pecson, the dispositive portion of our decision in G.R. No. 115814 need not specifically include the income derived from the improvement in order to entitle him, as a builder in good faith, to such income. The right of retention, which entitles the builder in good faith to the possession as well as the income derived therefrom, is already provided for under Article 546 of the Civil Code.

Given the circumstances of the instant case where the builder in good faith has been clearly denied his right of retention for almost half a decade, we find that the increased award of rentals by the RTC was reasonable and equitable. The petitioners had reaped all the benefits from the improvement introduced by the respondent during said period, without paying any amount to the latter as reimbursement for his construction costs and expenses. They should account and pay for such benefits.

We need not belabor now the appellate court’s recognition of herein respondent’s entitlement to rentals from the date of the determination of the current market value until its full payment. Respondent is clearly entitled to payment by virtue of his right of retention over the said improvement.

WHEREFORE, the instant petition is DENIED for lack of merit. The Decision dated May 21, 2001 of the Court of Appeals in CA-G.R. CV No. 64295 is SET ASIDE and the Order dated July 31, 1998, of the Regional Trial Court, Branch 101, Quezon City, in Civil Case No. Q-41470 ordering the herein petitioners, Spouses Juan and Erlinda Nuguid, to account for the rental income of the four-door two-storey apartment building from November 1993 until December 1997, in the amount of P1,344,000, computed on the basis of Twenty-eight Thousand (P28,000.00) pesos monthly, for a period of 48 months, is hereby REINSTATED. Until fully paid, said amount of rentals should bear the legal rate of interest set at six percent (6%) per annum computed from the date of RTC judgment. If any portion thereof shall thereafter remain unpaid, despite notice of finality of this Court’s judgment, said remaining unpaid amount shall bear the rate of interest set

at twelve percent (12%) per annum computed from the date of said notice. Costs against petitioners.

SO ORDERED.

G.R. No. L-57288 April 30, 1984

LEONILA SARMINETO, petitioner, vs.HON. ENRIQUE A. AGANA, District Judge, Court of First Instance of Rizal, Seventh Judicial District, Branch XXVIII, Pasay City, and SPOUSES ERNESTO VALENTINO and REBECCA LORENZO-VALENTINO, respondents.MELENCIO-HERRERA, J.:

This Petition for certiorari questions a March 29, 1979 Decision rendered by the then Court of First Instance of Pasay City. The Decision was one made on memoranda, pursuant to the provisions of RA 6031, and it modified, on October 17, 1977, a judgment of the then Municipal Court of Paranaque, Rizal, in an Ejectment suit instituted by herein petitioner Leonila SARMIENTO against private respondents, the spouses ERNESTO Valentino and Rebecca Lorenzo. For the facts, therefore, we have to look to the evidence presented by the parties at the original level.

It appears that while ERNESTO was still courting his wife, the latter's mother had told him the couple could build a RESIDENTIAL HOUSE on a lot of 145 sq. ms., being Lot D of a subdivision in Paranaque (the LAND, for short). In 1967, ERNESTO did construct a RESIDENTIAL HOUSE on the LAND at a cost of P8,000.00 to P10,000.00. It was probably assumed that the wife's mother was the owner of the LAND and that, eventually, it would somehow be transferred to the spouses.

It subsequently turned out that the LAND had been titled in the name of Mr. & Mrs. Jose C. Santo, Jr. who, on September 7 , 1974, sold the same to petitioner SARMIENTO. The following January 6, 1975, SARMIENTO asked ERNESTO and wife to vacate and, on April 21, 1975, filed an Ejectment suit against them. In the evidentiary hearings before the Municipal Court, SARMIENTO submitted the deed of sale of the LAND in her favor, which showed the price to be P15,000.00. On the other hand, ERNESTO testified that the then cost of the RESIDENTIAL HOUSE would be from P30,000.00 to P40,000.00. The figures were not questioned by SARMIENTO.

The Municipal Court found that private respondents had built the RESIDENTIAL HOUSE in good faith, and, disregarding the testimony of ERNESTO, that it had a value of P20,000.00. It then ordered ERNESTO and wife to vacate the LAND after SARMIENTO has paid them the mentioned sum of P20,000.00.

The Ejectment suit was elevated to the Court of First Instance of Pasay where, after the submission of memoranda, said Court rendered a modifying Decision

under Article 448 of the Civil Code. SARMIENTO was required, within 60 days, to exercise the option to reimburse ERNESTO and wife the sum of 40,000.00 as the value of the RESIDENTIAL HOUSE, or the option to allow them to purchase the LAND for P25,000.00. SARMIENTO did not exercise any of the two options within the indicated period, and ERNESTO was then allowed to deposit the sum of P25,000.00 with the Court as the purchase price for the LAND. This is the hub of the controversy. SARMIENTO then instituted the instant certiorari proceedings.

We agree that ERNESTO and wife were builders in good faith in view of the peculiar circumstances under which they had constructed the RESIDENTIAL HOUSE. As far as they knew, the LAND was owned by ERNESTO's mother-in-law who, having stated they could build on the property, could reasonably be expected to later on give them the LAND.

In regards to builders in good faith, Article 448 of the Code provides:têñ.£îhqwâ£

ART. 448. The owner of the land on which anything has been built, sown or planted in good faith,

shall have the right

to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or

to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent.

However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. (Paragraphing supplied)

The value of the LAND, purchased for P15,000.00 on September 7, 1974, could not have been very much more than that amount during the following January when ERNESTO and wife were asked to vacate. However, ERNESTO and wife have not questioned the P25,000.00 valuation determined by the Court of First Instance.

In regards to the valuation of the RESIDENTIAL HOUSE, the only evidence presented was the testimony of ERNESTO that its worth at the time of the trial should be from P30,000.00 to P40,000.00. The Municipal Court chose to assess its value at P20,000.00, or below the minimum testified by ERNESTO, while the

Court of First Instance chose the maximum of P40,000.00. In the latter case, it cannot be said that the Court of First Instance had abused its discretion.

The challenged decision of respondent Court, based on valuations of P25,000.00 for the LAND and P40,000.00 for the RESIDENTIAL HOUSE, cannot be viewed as not supported by the evidence. The provision for the exercise by petitioner SARMIENTO of either the option to indemnify private respondents in the amount of P40,000.00, or the option to allow private respondents to purchase the LAND at P25,000.00, in our opinion, was a correct decision.têñ.£îhqwâ£

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 453 (now Article 546). The owner, of the land. upon, the other hand, has the option, under article 361 (now 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. (Emphasis ours)

We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners to remove their buildings from the land belonging to plaintiffs-respondents only because the latter chose neither to pay for such buildings nor to sell the land, is null and void, for it amends substantially the judgment sought to be executed and is, furthermore, offensive to articles 361 (now Article 448) and 453 (now Article 546) of the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946]).

WHEREFORE, the Petition for Certiorari is hereby ordered dismissed, without pronouncement as to costs

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.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 P20.00 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 P725,780.00.

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 (P26,183,225.14), 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. . .

x x x

. . . . 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.

x x x

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.

x x x

. . . 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

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 P18,000 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 P26,183,225.14 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 choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.

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

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

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. L-43346 March 20, 1991

MARIO C. RONQUILLO, petitioner vs.THE COURT OF APPEALS, DIRECTOR OF LANDS, DEVELOPMENT BANK OF THE PHILIPPINES, ROSENDO DEL ROSARIO, AMPARO DEL ROSARIO and FLORENCIA DEL ROSARIO, respondents.*REGALADO, J.:p

This petition seeks the review of the decision 1 rendered by respondent Court of Appeals on September 25, 1975 in CA-G.R. No. 32479-R, entitled "Rosendo del Rosario, et al., Plaintiffs-Appellees, versus Mario Ronquillo, Defendant-Appellant," affirming in toto the judgment of the trial court, and its amendatory resolution 2 dated January 28, 1976 the dispositive portion of which reads:

IN VIEW OF THE FOREGOING, the decision of this Court dated September 25, 1975 is hereby amended in the sense that the first part of the appealed decision is set aside, except the last portion "declaring the plaintiffs to be the rightful owners of the dried-up portion of Estero Calubcub which is abutting plaintiffs' property," which we affirm, without pronouncement as to costs.

SO ORDERED.

The following facts are culled from the decision of the Court of Appeals:

It appears that plaintiff Rosendo del Rosario was a registered owner of a parcel of land known as Lot 34, Block 9, Sulucan Subdivision, situated at Sampaloc, Manila and covered by Transfer Certificate of Title No. 34797 of the Registry of Deeds of Manila (Exhibit "A"). The other plaintiffs Florencia and Amparo del Rosario were daughters of said Rosendo del Rosario. Adjoining said lot is a dried-up portion of the old Estero Calubcub occupied by the defendant since 1945 which is the subject matter of the present action.

Plaintiffs claim that long before the year 1930, when T.C.T. No. 34797 over Lot No. 34 was issued in the name of Rosendo del Rosario, the latter had been in possession of said lot including the adjoining dried-up portion of the old Estero Calubcub having bought the same from Arsenio Arzaga. Sometime in 1935, said titled lot was occupied by Isabel Roldan with the tolerance and consent of the plaintiff on condition that the former will make improvements on the adjoining dried-up portion of the Estero Calubcub. In the early part of 1945 defendant occupied the eastern portion of said titled lot as well as the dried-up portion of the old Estero Calubcub which abuts plaintiffs' titled lot. After a

relocation survey of the land in question sometime in 1960, plaintiffs learned that defendant was occupying a portion of their land and thus demanded defendant to vacate said land when the latter refused to pay the reasonable rent for its occupancy. However, despite said demand defendant refused to vacate.

Defendant on the other hand claims that sometime before 1945 he was living with his sister who was then residing or renting plaintiffs' titled lot. In 1945 he built his house on the disputed dried-up portion of the Estero Calubcub with a small portion thereof on the titled lot of plaintiffs. Later in 1961, said house was destroyed by a fire which prompted him to rebuild the same. However, this time it was built only on the called up portion of the old Estero Calubcub without touching any part of plaintiffs titled land. He further claims that said dried-up portion is a land of public domain. 3

Private respondents Rosendo, Amparo and Florencia, all surnamed del Rosario (Del Rosarios), lodged a complaint with the Court of First Instance of Manila praying, among others, that they be declared the rightful owners of the dried-up portion of Estero Calubcub. Petitioner Mario Ronquillo (Ronquillo) filed a motion to dismiss the complaint on the ground that the trial court had no jurisdiction over the case since the dried-up portion of Estero Calubcub is public land and, thus, subject to the disposition of the Director of Lands. The Del Rosarios opposed the motion arguing that since they are claiming title to the dried-up portion of Estero Calubcub as riparian owners, the trial court has jurisdiction. The resolution of the motion to dismiss was deferred until after trial on the merits.

Before trial, the parties submitted the following stipulation of facts:

1. That the plaintiffs are the registered owners of Lot 34, Block 9, Sulucan Subdivision covered by Transfer Certificate of Title No. 34797;

2. That said property of the plaintiffs abuts and is adjacent to the dried-up river bed of Estero Calubcub Sampaloc, Manila;

3. That defendant Mario Ronquillo has no property around the premises in question and is only claiming the dried-up portion of the old Estero Calubcub, whereon before October 23, 1961, the larger portion of his house was constructed;

4. That before October 23, 1961, a portion of defendant's house stands (sic) on the above-mentioned lot belonging to the plaintiffs;

5. That the plaintiffs and defendant have both filed with the Bureau of Lands miscellaneous sales application for the purchase of the abandoned river bed known as Estero Calubcub and their sales applications, dated August 5, 1958 and October 13, 1959, respectively, are still pending action before the Bureau of Lands;

6. That the parties hereby reserve their right to prove such facts as are necessary to support their case but not covered by this stipulation of facts. 4

On December 26, 1962, the trial court rendered judgment the decretal portion of which provides:

WHEREFORE, judgment is hereby rendered ordering the defendant to deliver to the plaintiffs the portion of the land covered by Transfer Certificate of title No. 34797 which is occupied by him and to pay for the use and occupation of said portion of land at the rate of P 5.00 a month from the date of the filing of the complaint until such time as he surrenders the same to the plaintiffs and declaring plaintiffs to be the owners of the dried-up portion of estero Calubcub which is abutting plaintiffs' property.

With costs to the defendant.

SO ORDERED. 5

On appeal, respondent court, in affirming the aforequoted decision of the trial court, declared that since Estero Calubcub had already dried-up way back in 1930 due to the natural change in the course of the waters, under Article 370 of the old Civil Code which it considers applicable to the present case, the abandoned river bed belongs to the Del Rosarios as riparian owners. Consequently, respondent court opines, the dried-up river bed is private land and does not form part of the land of the public domain. It stated further that "(e)ven assuming for the sake of argument that said estero did not change its course but merely dried up or disappeared, said dried-up estero would still belong to the riparian owner," citing its ruling in the case of Pinzon vs. Rama. 6

Upon motion of Ronquillo, respondent court modified its decision by setting aside the first portion of the trial court's decision ordering Ronquillo to surrender to the Del Rosarios that portion of land covered by Transfer Certificate of Title No. 34797 occupied by the former, based on the former's representation that he had already vacated the same prior to the commencement of this case. However, respondent court upheld its declaration that the Del Rosarios are the rightful owners of the dried-up river bed. Hence, this petition.

On May 17, 1976, this Court issued a resolution 7 requiring the Solicitor General to comment on the petition in behalf of the Director of Lands as an indispensable party in representation of the Republic of the Philippines, and who, not having been impleaded, was subsequently considered impleaded as such in our resolution of September 10, 1976. 8 In his Motion to Admit Comment, 9 the Solicitor General manifested that pursuant to a request made by this office with the Bureau of Lands to conduct an investigation, the Chief of the Legal Division of the Bureau sent a communication informing him that the records of his office "do not show that Mario Ronquillo, Rosendo del Rosario, Amparo del Rosario or Florencia del Rosario has filed any public land application covering parcels of land situated at Estero Calubcub Manila as verified by our Records Division.

The position taken by the Director of Lands in his Comment 10 filed on September 3, 1978, which was reiterated in the Reply dated May 4, 1989 and again in the Comment dated August 17, 1989, explicates:

5. We do not see our way clear to subscribe to the ruling of the Honorable Court of Appeals on this point for Article 370 of the Old Civil Code, insofar as ownership of abandoned river beds by the owners of riparian lands are concerned, speaks only of a situation where such river beds were abandoned because of a natural change in the course of the waters. Conversely, we submit that if the abandonment was for some cause other than the natural change in the course of the waters, Article 370 is not applicable and the abandoned bed does not lose its character as a property of public dominion not susceptible to private ownership in accordance with Article 502 (No. 1) of the New Civil Code. In the present case, the drying up of the bed, as contended by the petitioner, is clearly caused by human activity and undeniably not because of the natural change of the course of the waters (Emphasis in the original text).

In his Comment 11 dated August 17, 1989, the Director of Lands further adds:

8. Petitioner herein and the private respondents, the del Rosarios, claim to have pending sales application(s) over the portion of the dried up Estero Calubcub, as stated in pages 4-5, of the Amended Petition.

9. However, as stated in the Reply dated May 4, 1989 of the Director of Lands, all sales application(s) have been rejected by that office because of the objection interposed by the Manila City Engineer's Office that they need the dried portion of the estero for drainage purposes.

10. Furthermore, petitioner and private respondents, the del Rosarios having filed said sales application(s) are now

estopped from claiming title to the Estero Calubcub (by possession for petitioner and by accretion for respondents del Rosarios) because for (sic) they have acknowledged that they do not own the land and that the same is a public land under the administration of the Bureau of Lands (Director of Lands vs. Santiago, 160 SCRA 186, 194).

In a letter dated June 29, 1979 12 Florencia del Rosario manifested to this Court that Rosendo, Amparo and Casiano del Rosario have all died, and that she is the only one still alive among the private respondents in this case.

In a resolution dated January 20, 1988, 13 the Court required petitioner Ronquillo to implead one Benjamin Diaz pursuant to the former'smanifestation 14 that the land adjacent to the dried up river bed has already been sold to the latter, and the Solicitor General was also required to inquire into the status of the investigation being conducted by the Bureau of Lands. In compliance therewith, the Solicitor General presented a letter from the Director of Lands to the effect that neither of the parties involved in the present case has filed any public land application. 15

On April 3, 1989, petitioner filed an Amended Petition for Certiorari, 16 this time impleading the Development Bank of the Philippines (DBP) which subsequently bought the property adjacent to the dried-up river bed from Benjamin Diaz. In its resolution dated January 10, 1990, 17 the Court ordered that DBP be impleaded as a party respondent.

In a Comment 18 filed on May 9, 1990, DBP averred that "[c]onsidering the fact that the petitioner in this case claims/asserts no right over the property sold to Diaz/DBP by the del Rosarios; and considering, on the contrary, that Diaz and DBP claims/asserts (sic) no right (direct or indirect) over the property being claimed by Ronquillo (the dried-up portion of Estero Calubcub), it follows, therefore, that the petitioner Ronquillo has no cause of action against Diaz or DBP. A fortiori from the viewpoint of the classical definition of a cause of action, there is no legal justification to implead DBP as one of the respondents in this petition." DBP thereafter prayed that it be dropped in the case as party respondent.

On September 13, 1990, respondent DBP filed a Manifestation/Compliance 19 stating that DBP's interest over Transfer Certificate of Title No. 139215 issued in its name (formerly Transfer Certificate of Title No. 34797 of the Del Rosarios and Transfer Certificate of Title No. 135170 of Benjamin Diaz) has been transferred to Spouses Victoriano and Pacita A. Tolentino pursuant to a Deed of Sale dated September 11, 1990.

Petitioner Ronquillo avers that respondent Court of Appeals committed an error of law and gross abuse of discretion, acted arbitrarily and denied petitioner due process of law (a) when it declared private respondents Del Rosarios the rightful

owners of the dried-up portion of Estero Calubcub by unduly relying upon decisional law in the case of Pinzon vs. Rama, ante, which case was decided entirely on a set of facts different from that obtaining in this case; and (b) when it ignored the undisputed facts in the present case and declared the dried-up portion of Estero Calubcub as a private property.

The main issue posed for resolution in this petition is whether the dried-up portion of Estero Calubcub being claimed by herein petitioner was caused by a natural change in the course of the waters; and, corollary thereto, is the issue of the applicability of Article 370 of the old Civil Code.

Respondent court, in affirming the findings of the trial court that there was a natural change in the course of Estero Calubcub declared that:

The defendant claims that Article 370 of the old Civil Code is not applicable to the instant case because said Estero Calubcub did not actually change its course but simply dried up, hence, the land in dispute is a land of public domain and subject to the disposition of the Director of Land(s). The contention of defendant is without merit. As mentioned earlier, said estero as shown by the relocation plan (Exhibit "D") did not disappear but merely changed its course by a more southeasternly (sic) direction. As such, "the abandoned river bed belongs to the plaintiffs-appellees and said land is private and not public in nature. Hence, further, it is not subject to a Homestead Application by the appellant." (Fabian vs. Paculan CA-G.R. Nos. 21062-63-64-R, Jan. 25 1962). Even assuming for the sake of argument that said estero did not change its course but merely dried up or disappeared, said dried-up estero would still belong to the riparian owner as held by this Court in the case of Pinzon vs. Rama (CA-G.R. No. 8389, Jan. 8, 1943; 2 O.G. 307). 20

Elementary is the rule that the jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals in a petition for certiorari under Rule 45 of the Rules of Court is limited to the review of errors of law, and that said appellate court's finding of fact is conclusive upon this Court. However, there are certain exceptions, such as (1) when the conclusion is a finding grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly absurd, mistaken or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the judgment is premised on a misapprehension of facts; (5) when the findings of fact are conflicting; and (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 andappellee. 21

A careful perusal of the evidence presented by both parties in the case at bar will reveal that the change in the course of Estero Calubcub was caused, not by

natural forces, but due to the dumping of garbage therein by the people of the surrounding neighborhood. Under the circumstances, a review of the findings of fact of respondent court thus becomes imperative.

Private respondent Florencia del Rosario, in her testimony, made a categorical statement which in effect admitted that Estero Calubcub changed its course because of the garbage dumped therein, by the inhabitants of the locality, thus:

Q When more or less what (sic) the estero fully dried up?

A By 1960 it is (sic) already dried up except for a little rain that accumulates on the lot when it rains.

Q How or why did the Estero Calubcub dried (sic) up?

A It has been the dumping place of the whole neighborhood. There is no street, they dumped all the garbage there. It is the dumping place of the whole community, sir. 22

In addition, the relocation plan (Exhibit "D") which also formed the basis of respondent court's ruling, merely reflects the change in the course of Estero Calubcub but it is not clear therefrom as to what actually brought about such change. There is nothing in the testimony of lone witness Florencia del Rosario nor in said relocation plan which would indicate that the change in the course of the estero was due to the ebb and flow of the waters. On the contrary, the aforequoted testimony of the witness belies such fact, while the relocation plan is absolutely silent on the matter. The inescapable conclusion is that the dried-up portion of Estero Calubcub was occasioned, not by a natural change in the course of the waters, but through the active intervention of man.

The foregoing facts and circumstances remove the instant case from the applicability of Article 370 of the old Civil Code which provides:

Art. 370. The beds of rivers, which are abandoned because of a natural change in the course of the waters, belong to the owners of the riparian lands throughout the respective length of each. If the abandoned bed divided tenements belonging to different owners the new dividing line shall be equidistant from one and the other.

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 23 nor to accretions to lands that adjoin canals or esteros or artificial drainage systems. 24 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. That such is the case is made more evident in the letter, dated April 28, 1989, of the Chief, Legal Division of the Bureau of Lands 25 as reported in the Reply of respondent Director of Lands stating that "the alleged application filed by Ronquillo no longer exists in its records as it must have already been disposed of as a rejected application for the reason that other applications "covering Estero Calubcub Sampaloc, Manila for areas other than that contested in the instant case, were all rejected by our office because of the objection interposed by the City Engineer's office that they need the same land for drainage purposes". Consequently, since the land is to be used for drainage purposes the same cannot be the subject of a miscellaneous sales application.

Lastly, the fact that petitioner and herein private respondents filed their sales applications with the Bureau of Lands covering the subject dried-up portion of Estero Calubcub cannot but be deemed as outright admissions by them that the same is public land. They are now estopped from claiming otherwise.

WHEREFORE, the decision appealed from, the remaining effective portion of which declares private respondents Del Rosarios as riparian owners of the dried-up portion of Estero Calubcub is hereby REVERSED and SET ASIDE.

SO ORDERED.

G.R. No. 108065 July 6, 1993

SPOUSES FELIX BAES AND RAFAELA BAES, petitioners, vs.THE COURT OF APPEALS AND REPUBLIC OF THE PHILIPPINES, respondents.CRUZ, J.:

This is an appeal by way of certiorari from the decision of the respondent Court of Appeals which affirmed in toto the ruling of the trial court in Civil Case No. 0460-P, the dispositive portion of which read thus:

WHEREFORE, judgment is hereby rendered declaring null and void TCT Nos. 14405, 29592, 29593, 29594, 29595, and TCT No. 29593's derivative titles TCT Nos. 124725, 124726, 124727 and 124729, and ordering the Register of Deeds for Pasay City to cancel them and issue new ones in their stead in the name of the plaintiff after segregating from TCT No. 29593 452 sq. m., the actual area of Lot 2958-C (covered by cancelled TCT No. 11043) belonging to defendant Felix Baes. The counterclaim is hereby dismissed.

Let a copy of this Decision be furnished the Register of Deeds for Pasay City.

SO ORDERED.

The controversy began in 1962, when the government dug a canal on a private parcel of land, identified as Lot 2958 and covering an area of P33,902 sq.m., to streamline the Tripa de Gallina creek.

This lot was later acquired by Felix Baes, who registered it in his name under TCT No. 10990 and then had it subdivided into three lots, namely: (a) Lot 2958-A, with an area of 28,889 sq.m.; (b) Lot 2958-B, with an area of 3,588 sq.m.; and (c) Lot 2958-C, with an area of 452 sq.m., covered by TCT Nos. 11041, 11042 and 11043, respectively.

In exchange for Lot 2958-B, which was totally occupied by the canal, the government gave Baes a lot with exactly the same area as Lot 2958-B through a Deed of Exchange of Real Property dated June 20, 1970. 1 The property, which was near but not contiguous to Lot 2956-C, was denominated as Lot 3271-A and later registered in the name of Felix Baes under TCT No. 24300. The soil displaced by the canal was used to fill up the old bed of the creek.

Meanwhile, Baes had Lot 2958-C and a portion of Lot 2958-A designated as Lot 1, Blk., 4, resurveyed and subdivided. On January 12, 1968, he submitted a petition for the approval of his resurvey and subdivision plans, claiming that after the said lots were plotted by a competent surveyor, it was found that there were errors in respect of their bearings and distances.

The resurvey-subdivision plan was approved by the Court of First Instance of Pasay City in an order dated January 15, 1968. 2

As a result, the old TCTs covering the said lots were canceled and new ones were issued, to wit: (a) Lot 1-A, Blk. 4, with 672 sq.m., under TCT No. T-14404; (b) Lot 1-B, with 826 sq.m., representing the increase in area after the resurvey, under TCT No. T-14405; (c) Lot 2958-C-1, with 452 sq.m., under TCT No. T-14406; and (d) Lot 2958-C-2, with 2,770 sq.m. representing the increase after resurvey, under TCT No. T-14407.

Lots 2958-C-1 and 2958-C-2 were later consolidated and this time further subdivided into four (4) lots, namely, Lot 1, with an area of 147 sq.m.; Lot 2, with an area of 950 sq.m.; Lot 3, with an area of 257 sq.m.; and Lot 4, with an area of 1,868 sq.m., which were respectively issued TCT Nos. 29592, 29593, 29594, and 29595.

In 1978, the Republic of the Philippines discovered that Lot 1-B (with TCT No. 14405 and an area of 826 sq.m.), on which the petitioners had erected an

apartment building, covered Lot 3611 of the Pasay Cadastre, which is a filled-up portion of the Tripa de Gallina creek. Moreover, Lot 2958-C (covered by TCT Nos. 29592 to 29595, with an increased area of 2,770 after resurvey and subdivision) had been unlawfully enlarged.

On November 17, 1982, it filed a petition for cancellation of TCT Nos. 14405 and 29592 to 29595. 3

Baes did not object in his answer to the cancellation of TCT Nos. 29592, 29594 and 29595 and was notable to prove during the trial that the government utilized a portion of Lot 2 under, TCT No. 29593. The trial court therefore decreed (correctly) that the original Lot 2958-C (with an area of 452 sq.m.) be reverted to its status before the resurvey-subdivision of Lot 2958-C.

The only remaining dispute relates to Lot 1-B (TCT No. 14405), which the petitioners, relying on Article 461 of the Civil Code, are claiming as their own. The government rejects this claim and avers that the petitioners had already been fully compensated for it on June 20, 1970 when they agreed to exchange their Lot 2958-B with Lot 3271-A belonging to the government.

Article 461 of the Civil Code states:

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 land 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)

A portion of the Tripa de Gallina creek was diverted to a man-made canal which totally occupied Lot 2958-B (with an area of 3,588 sq.m.) belonging to Felix Baes. Thus, the petitioners claim that they became the owners of the old bed (which was eventually filled up by soil excavated from Lot 2958-B) by virtue of Article 461.

The petitioners rely heavily on Dr. Arturo M. Tolentino's interpretation of this Article, to wit:

This article (461) refers to a natural change in the course of a stream. If the change of the course is due to works constructed by concessioners authorized by the government, the concession may grant the abandoned river bed to the concessioners. If there is no such grant, then, by analogy, the abandoned river bed will belong to the owners of the land covered by the waters, as provided in this article, without prejudice to a superior right of third persons with sufficient title.

(Citing 3 Manresa 251-252; 2 Navarro Amandi, 100-101; 3 Sanchez Roman 148)

We agree.

If the riparian owner is entitled to compensation for the damage to or loss of his property due to natural causes, there is all the more reason to compensate him when the change in the course of the river is effected through artificial means. The loss to the petitioners of the land covered by the canal was the result of a deliberate act on the part of the government when it sought to improve the flow of the Tripa de Gallina creek. It was therefore obligated to compensate the Baeses for their loss.

We find, however, that the petitioners have already been so compensated. Felix Baes was given Lot 3271-A in exchange for the affected Lot 2958-B through the Deed of Exchange of Real Property dated June 20, 1970. This was a fair exchange because the two lots were of the same area and value and the agreement was freely entered into by the parties. The petitioners cannot now claim additional compensation because, as correctly observed by the Solicitor General,

. . . to allow petitioners to acquire ownership of the dried-up portion of the creek would be a clear case of double compensation and unjust enrichment at the expense of the state.

The exchange of lots between the petitioners and the Republic was the result of voluntary negotiations. If these had failed, the government could still have taken Lot 2958-B under the power of eminent domain, upon payment of just compensation, as the land was needed for a public purpose.

WHEREFORE, the petition is DENIED, with costs against the petitioners. It is so ordered.

G.R. No. L-12958             May 30, 1960

FAUSTINO IGNACIO, applicant-appellant, vs. THE DIRECTOR OF LANDS and LAUREANO VALERIANO, oppositors-appellees.MONTEMAYOR, J.:

Faustino Ignacio is appealing the decision of the Court of First Instance of Rizal, dismissing his application for the registration of a parcel of land.

On January 25, 1950, Ignacio filed an application for the registration of a parcel of land (mangrove), situated in barrio Gasac, Navotas, Rizal, with an area of 37,877 square meters. Later, he amended his application by alleging among others that

he owned the parcel applied for by right of accretion. To the application, the Director of Lands, Laureano Valeriano and Domingo Gutierrez filed oppositions. Gutierrez later withdrew his opposition. The Director of Lands claimed the parcel applied for as a portion of the public domain, for the reason that neither the applicant nor his predecessor-in-interest possessed sufficient title thereto, not having acquired it either by composition title from the Spanish government or by possessory information title under the Royal Decree of February 13, 1894, and that he had not possessed the same openly, continuously and adversely under a bona fide claim of ownership since July 26, 1894. In his turn, Valeriano alleged he was holding the land by virtue of a permit granted him by the Bureau of Fisheries, issued on January 13, 1947, and approved by the President.

It is not disputed that the land applied for adjoins a parcel owned by the applicant which he had acquired from the Government by virtue of a free patent title in 1936. It has also been established that the parcel in question was formed by accretion and alluvial deposits caused by the action of the Manila Bay which boarders it on the southwest. Applicant Ignacio claims that he had occupied the land since 1935, planting it with api-api trees, and that his possession thereof had been continuous, adverse and public for a period of twenty years until said possession was distributed by oppositor Valeriano.

On the other hand, the Director of Lands sought to prove that the parcel is foreshore land, covered by the ebb and flow of the tide and, therefore, formed part of the public domain.

After hearing, the trial court dismissed the application, holding that the parcel formed part of the public domain. In his appeal, Ignacio assigns the following errors:

I. The lower court erred in holding that the land in question, altho an accretion to the land of the applicant-appellant, does not belong to him but forms part of the public domain.

II. Granting that the land in question forms part of the public domain, the lower court nevertheless erred in not declaring the same to be the necessary for any public use or purpose and in not ordering in the present registration proceedings.

III. The lower court erred in not holding that the land in question now belongs to the applicant-appellant by virtue of acquisitive prescription, the said land having ceased to be of the public domain and became the private or patrimonial property of the State.

IV. The lower court erred in not holding that the oppositor Director of Lands is now in estoppel from claiming the land in question as a land of the public domain.

Appellant contends that the parcel belongs to him by the law of accretion, having been formed by gradual deposit by action of the Manila Bay, and he cites Article 457 of the New Civil Code (Article 366, Old Civil Code), which provides that:

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.

The article cited is clearly inapplicable because it refers to accretion or deposits on the banks of rivers, while the accretion in the present case was caused by action of the Manila Bay.

Appellant next contends that Articles 1, 4 and 5 of the Law of Waters are not applicable because they refer to accretions formed by the sea, and that Manila Bay cannot be considered as a sea. We find said contention untenable. A bay is a part of the sea, being a mere indentation of the same:

Bay. — An opening into the land where the water is shut in on all sides except at the entrance; an inlet of the sea; an arm of the sea, distinct from a river, a bending or curbing of the shore of the sea or of a lake. 7 C.J. 1013-1014 (Cited in Francisco, Philippine Law of Waters and Water Rights p. 6)

Moreover, this Tribunal has some cases applied the Law of Waters on Lands bordering Manila Bay. (See the cases of Ker & Co. vs. Cauden, 6 Phil., 732, involving a parcel of land bounded on the sides by Manila Bay, where it was held that such land formed by the action of the sea is property of the State; Francisco vs. Government of the P.I., 28 Phil., 505, involving a land claimed by a private person and subject to the ebb and flow of the tides of the Manila Bay).

Then the applicant argues that granting that the land in question formed part of the public domain, having been gained from the sea, the trial court should have declared the same no longer necessary for any public use or purpose, and therefore, became disposable and available for private ownership. Article 4 of the Law of Waters of 1866 reads thus:

ART. 4. Lands added to the shores by accretions and alluvial deposits caused by the action of the sea, form part of the public domain. When they are no longer washed by the waters of the sea and are not necessary for purposes of public utility, or for the establishment of special industries, or for the coastguard service, the Government shall declare them to be the property of the owners of the estates adjacent thereto and as increment thereof.

Interpreting Article 4 of the Law of Waters of 1866, in the case of Natividad vs. Director of Lands, (CA) 37 Off. Gaz., 2905, it was there held that:

Article 4 of the Law of Waters of 1866 provides that when a portion of the shore is no longer washed by the waters of the sea and is not necessary for purposes of public utility, or for the establishment of special industries, or for coastguard service, the government shall declare it to be the property of the owners of the estates adjacent thereto and as an increment thereof. We believe that only the executive and possibly the legislative departments have the authority and the power to make the declaration that any land so gained by the sea, is not necessary for purposes of public utility, or for the establishment of special industries, on for coast-guard service. If no such declaration has been made by said departments, the lot in question forms part of the public domain. (Natividad vs. Director of Lands, supra.)

The reason for this pronouncement, according to this Tribunal in the case of Vicente Joven y Monteverde vs. Director of Lands, 93 Phil., 134, (cited in Velayo's Digest, VI. I, p. 52).

. . . is undoubtedly that the courts are neither primarily called upon, nor indeed in a position to determine whether any public land are to be used for the purposes specified in Article 4 of the Law of Waters.

Consequently, until a formal declaration on the part of the Government, through the executive department or the Legislature, to the effect that the land in question is no longer needed for coast guard service, for public use or for special industries, they continue to be part of the public domain, not available for private appropriation or ownership.

Appellant next contends that he had acquired the parcel in question through acquisitive prescription, having possessed the same for over ten years. In answer, suffice it to say that land of the public domain is not subject to ordinary prescription. In the case of Insular Government vs. Aldecoa & Co., 19 Phil., 505 this Court said:

The occupation or material possession of any land formed upon the shore by accretion, without previous permission from the proper authorities, although the occupant may have held the same as owner for seventeen years and constructed a wharf on the land, is illegal and is a mere detainer, inasmuch as such land is outside of the sphere of commerce; it pertains to the national domain; it is intended for public uses and for the benefit of those who live nearby.

We deem it unnecessary to discuss the other points raised in the appeal.

In view of the foregoing, the appealed decision is hereby affirmed, with costs.

G.R. No. 126000 October 7, 1998

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM (MWSS), petitioner, vs. COURT OF APPEALS, HON. PERCIVAL LOPEZ, AYALA CORPORATION and AYALA LAND, INC., respondents.

G.R. No. 128520 october 7, 1998

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner, vs.HON. PERCIVAL MANDAP LOPEZ, CAPITOL HILLS GOLF AND COUNTRY CLUB INC., SILHOUETTE TRADING CORPORATION, and PABLO ROMAN JR., respondents.MARTINEZ, J.:

These are consolidated petitions for review emanating from Civil Case No. Q-93-15266 of the Regional Trial Court of Quezon City, Branch 78, entitled "Metropolitan Waterworks and Sewerage System (hereafter MWSS) vs. Capitol Hills Golf & Country Club Inc. (hereafter, CHGCCI), STC (hereafter, SILHOUETTE), Ayala Corporation, Ayala Land, Inc. (hereafter AYALA) Pablo Roman, Jr., Josefina A. Roxas, Jesus Hipolito, Alfredo Juinito, National Treasurer of the Philippines and the Register of Deeds of Quezon City."

From the voluminous pleadings and other documents submitted by the parties and their divergent styles in the presentation of the facts, the basic antecedents attendant herein are as follows:

Sometime in 1965, petitioner MWSS (then known as NAWASA) leased around one hundred twenty eight (128) hectares of its land (hereafter, subject property) to respondent CHGCCI (formerly the International Sports Development Corporation) for twenty five (25) years and renewable for another fifteen (15) years or until the year 2005, with the stipulation allowing the latter to exercise a right of first refusal should the subject property be made open for sale. The terms and conditions of respondent CHGCCI's purchase thereof shall nonetheless be subject to presidential approval.

Pursuant to Letter of instruction (LOI) No. 440 issued on July 29,1976 by then President Ferdinand E. Marcos directing petitioner MWSS to negotiate the cancellation of the MWSS-CHGCCI lease agreement for the disposition of the subject property, Oscar Ilustre, then General Manager of petitioner MWSS, sometime in November of 1980 informed respondent CHGCCI, through its president herein respondent Pablo Roman, Jr., of its preferential right to buy the subject property which was up for sale. Valuation thereof was to be made by an appraisal company of petitioner MWSS' choice, the Asian Appraisal Co., Inc. which, on January 30, 1981, pegged a fair market value of P40.00 per square meter or a total of P53,800,000.00 for the subject property.

Upon being informed that petitioner MWSS and respondent CHGCCI had already agreed in principle on the purchase of the subject property, President Marcos expressed his approval of the sale as shown in his marginal note on the letter sent by respondents Jose Roxas and Pablo Roman, Jr. dated December 20, 1982.

The Board of Trustees of petitioner MWSS thereafter passed Resolution 36-83, approving the sale of the subject property in favor of respondent SILHOUETTE, as assignee of respondent CHGCCI, at the appraised value given by Asian Appraisal Co., Inc. Said Board Resolution reads:

NOW, THEREFORE, BE IT RESOLVED, as it is hereby resolved, that in accordance with Section 3, Par. (g) of the MWSS Charter and subject to the approval of the President of the Philippines, the sale of a parcel of land located in Balara, Quezon City, covered by TCT No. 36069 of the Registry of Deeds of Quezon City, containing an area of ONE HUNDRED TWENTY SEVEN (127.313) hectares more or less, which is the remaining portion of the area under lease after segregating a BUFFER ZONE already surveyed along the undeveloped area near the treatment plant and the developed portion of the CHGCCI golf course, to SILHOUETTE TRADING CORPORATION as Assignee of Capitol Hills Golf & Country Club, Inc., at FORTY (P40.00) PESOS per square meter, be and is hereby approved.

BE IT RESOLVED FURTHER, that the General Manager be authorized, as he is hereby authorized to sign for and in behalf of the MWSS the contract papers and other pertinent documents relative thereto.

The MWSS-SILHOUETTE sales agreement eventually pushed through. Per the Agreement dated May 11, 1983 covering said purchase, the total price for the subject property is P50,925,200, P25 Million of which was to be paid upon President Marcos' approval of the contract and the balance to be paid within one (1) year from the transfer of the title to respondent SILHOUETTE as vendee with interest at 12% per annum. The balance was also secured by an irrevocable letter of credit. A Supplemental Agreement was forged between petitioner MWSS and respondent SILHOUETTE on August 11, 1983 to accurately identify the subject property.

Subsequently, respondent SILHOUETTE, under a deed of sale dated July 26, 1984, sold to respondent AYALA about sixty-seven (67) hectares of the subject property at P110.00 per square meter. Of the total price of around P74 Million, P25 Million was to be paid by respondent AYALA directly to petitioner MWSS for respondent SILHOUETTE's account and P2 Million directly to respondent SILHOUETTE. P11,600,000 was to be paid upon the issuance of title in favor of

respondent AYALA, and the remaining balance to be payable within one (1) year with 12% per annum interest.

Respondent AYALA developed the land it purchased into a prime residential area now known as the Ayala Heights Subdivision.

Almost a decade later, petitioner MWSS on March 26, 1993 filed an action against all herein named respondents before the Regional Trial Court of Quezon City seeking for the declaration of nullity of the MWSS-SILHOUETTE sales agreement and all subsequent conveyances involving the subject property, and for the recovery thereof with damages.

Respondent AYALA filed its answer pleading the affirmative defenses of (1) prescription, (2) laches, (3) waiver/estoppel/ratification, (4) no cause of action, (5) non-joinder of indispensable parties, and (6) non-jurisdiction of the court for non-specification of amount of damages sought.

On June 10, 1993; the trial court issued an Order dismissing the complaint of petitioner MWSS on grounds of prescription, laches, estoppel and non-joinder of indispensable parties.

Petitioner MWSS's motion for reconsideration of such Order was denied, forcing it to seek relief from the respondent Court where its appeal was docketed as CA-G.R. CV No. 50654. It assigned as errors the following:

I. The court a quo committed manifest serious error and gravely abused its discretion when it ruled that plaintiffs cause of action is for annulment of contract which has already prescribed in the face of the clear and unequivocal recitation of six causes of action in the complaint, none of which is for annulment.

II. The lower court erred and exceeded its jurisdiction when, contrary to the rules of court and jurisprudence, it treated and considered the affirmative defenses of Ayalas — defenses not categorized by the rules as grounds for a motion to dismiss — as grounds of a motion to dismiss which justify the dismissal of the complaint.

III. The lower court abused its discretion and exceeded its jurisdiction when it favorably acted on Ayala's motion for preliminary hearing of affirmative defenses (motion to dismiss) by dismissing the complaint without conducting a hearing or otherwise requiring the Ayalas to present evidence on the factual moorings of their motion.

IV. The lower court acted without jurisdiction and committed manifest error when it resolved factual issues and made findings and conclusions

of facts all in favor of the Ayalas in the absence of any evidence presented by the parties.

V. The court a quo erred when, contrary to the rules and jurisprudence, it prematurely ruled that laches and estoppel bar the complaint as against Ayalas or that otherwise the alleged failure to implead indispensable parties dictates the dismissal of the complaint.

In the meantime, respondents CHGCCI and Roman filed their own motions to hear their affirmative defenses which were identical to those adduced by respondent AYALA. For its part, respondent SILHOUETTE filed a similarly grounded motion to dismiss.

Ruling upon these motions, the trial court issued an order dated December 13, 1993 denying all of them. The motions for reconsideration of the respondents concerned met a similar fate in the May 9, 1994 Order of the trial court. They thus filed special civil actions for certiorari before the respondent Court which were docketed as CA-G.R. SP Nos. 34605, 34718 and 35065 and thereafter consolidated with CA-G.R. CV No. 50694 for disposition.

Respondent court, on August 19, 1996, rendered the assailed decision, the dispositive portion of which reads:

WHEREFORE, judgment is rendered:

1.) DENYING the petitions for writ of certiorari for lack of merit; and

2.) AFFIRMING the order of the lower court dismissing the complaint against the appellees Ayalas.

SO ORDERED.

Petitioner MWSS appealed to this Court that portion of the respondent Court's decision affirming the trial court's dismissal of its complaint against respondent AYALA, docketed as G.R. No. 126000. The portion dismissing the petition for certiorari (CA-GR Nos. 34605, 347718 and 35065) of respondents Roman, CHGCCI and SILHOUETTE, however, became final and executory for their failure to appeal therefrom. Nonetheless, these respondents were able to thereafter file before the trial court another motion to dismiss grounded, again, on prescription which the trial court in an Order of October 1996 granted.

This prompted petitioner MWSS to file another petition for review of said trial court Order before this Court and docketed as G.R. No. 128520. On motion of petitioner MWSS, this Court in a Resolution dated December 3, 1997 directed the consolidation of G.R. Nos. 126000 and 128520.

The errors assigned by petitioner MWSS in CA-GR No. 126000 are:

I.

In holding, per the questioned Decision dated 19 August 1996, that plaintiffs cause of action is for annulment of contract which has already prescribed in the face of the clear and unequivocal recitation of six causes of action in the complaint, none of which is for annulment, and in effect affirming the dismissal by the respondent judge of the complaint against respondent Ayalas. This conclusion of respondent CH is, with due respect, manifestly mistaken and legally absurd.

II.

In failing to consider that the complaint recited six alternative causes of action, such that the insufficiency of one cause — assuming there is such insufficiency — does not render insufficient the other causes and the complaint itself. The contrary ruling in this regard by respondent CA is founded entirely on speculation and conjecture and is constitutive of grave abuse of discretion.

In G.R. No. 128520, petitioner MWSS avers that:

I.

The court of origin erred in belatedly granting respondent's motions to dismiss which are but a rehash, a disqualification, of their earlier motion for preliminary hearing of affirmative defense / motion to dismiss. These previous motions were denied by the lower court, which denial the respondents raised to the Court of Appeals by way of perfection for certiorari, which petitions in turn were dismissed for lack of merit by the latter court. The correctness and validity of the lower court's previous orders denying movant's motion for preliminary hearing of affirmative defense / motion to dismiss has accordingly been settled already with finality and cannot be disturbed or challenged anew at this instance of defendant's new but similarly anchored motions to dismiss, without committing procedural heresy causative of miscarriage of justice.

II.

The lower court erred in not implementing correctly the decision of the Court of Appeal. After all, respondents' own petitions for certiorari questioning the earlier denial of their motion for preliminary hearing of affirmative defense / motion to dismiss were dismissed by the Court of Appeal, in the process of affirming the validity and legality of such denial by the court a quo. The dismissal of the respondents' petitions are embodied in the dispositive portion of the said decision of the Court of Appeals dated 19 August 1996. The lower

court cannot choose to disregard such decretal aspect of the decision and instead implement an obiter dictum.

III.

That part of the decision of the decision of the Court of Appeals resolving the issue of prescription attendant to the appeal of plaintiff against the Ayalas, has been appealed by plaintiff to the Supreme Court by way of a petition for review on certiorari. Not yet being final and executory, the lower court erred in making capital out of the same to dismiss the case against the other defendants, who are the respondents herein.

IV.

The lower court erred in holding, per the questioned orders, that plaintiff's cause of action is for annulment of contract which has already prescribed in the face of the clear and unequivocal recitation of six causes of action in the complaint, none of which is for annulment. This conclusion of public respondent is manifestly mistaken and legally absurd.

V.

The court a quo erred in failing to consider the complaint recites six alternative causes of action, such that the insufficiency of one cause — assuming there is such insufficiency — does not render insufficient the other cause and the complaint itself. The contrary ruling in this regard by public respondent is founded entirely on speculation and conjecture and is constitutive of grave abuse of discretion.

In disposing of the instant petition, this Court shall dwell on the more crucial grounds upon which the trial court and respondent based their respective rulings unfavorable to petitioner MWSS; i.e., prescription, laches, estoppel/ratification and non-joinder of indispensable parties.

RE: Prescription

Petitioner MWSS claims as erroneous both the lower courts' uniform finding that the action has prescribed, arguing that its complaint is one to declare the MWSS-SILHOUETTE sale, and all subsequent conveyances of the subject property, void which is imprescriptible.

We disagree.

The very allegations in petitioner MWSS' complaint show that the subject property was sold through contracts which, at most, can be considered only as voidable, and not void. Paragraph 12 of the complaint reads in part:

12. . . . .

The plaintiff has been in continuous, peaceful and public possession and ownership of the afore-described properties, the title (TCT No. [36069] 199170) thereto, including its derivative titles TCT Nos. 213872 and 307655, having been duly issued in its name. However, as a result of fraudulent and illegal acts of herein defendants, as described in the paragraphs hereinafter following, the original of said title/s were cancelled and in lieu thereof new titles were issued to corporate defendant/s covering subject 127.9271 hectares. . . . .

Paragraph 34 alleges:

34. Sometime thereafter, clearly influenced by the premature if not questionable approval by Mr. Marcos of a non-existent agreement, and despite full knowledge that both the assessed and market value of subject property were much higher, the MWSS Board of Trusties illegally passed an undated resolution ("Resolution No. 36-83"), approving the "sale" of the property to CHGCCI at P40/sq.m. and illegally authorizing General Manager Ilustre to sign the covering contract.

This "resolution" was signed by Messrs. Jesus Hipolito as Chairman; Oscar Ilustre, as Vice Chairman; Aflredo Junio, as Member; and Silvestre Payoyo, as Member; . . . .

Paragraph 53 states:

53. Defendants Pablo Roman, Jr., Josefino Cenizal, and Jose Roxas as well as defendant corporations (CHGCCI, STC and Ayala) who acted through the former and their other principal officers, knowingly induced and caused then President Marcos and the former officers of plaintiff MWSS to enter into the aforesaid undated "Agreement" which are manifestly and grossly disadvantageous to the government and which gave the same defendants unwarranted benefits, i.e., the ownership and dominion of the afore-described property of plaintiff.

Paragraph 54 avers:

54. Defendants Jesus Hipolito and Alfredo Junio, then public officers, together with the other public officers who are now deceased (Ferdinand Marcos, Oscar Ilustre, and Sivestre Payoyo) knowingly allowed themselves to be persuaded, induced and influenced to approve and/or enter into the aforementioned "Agreements" which are grossly and manifestly disadvantageous to the MWSS/government and which bestowed upon the other defendants the unwarranted benefit/ownership of subject property.

The three elements of a contract — consent, the object, and the cause of obligation 1 are all present. It cannot be otherwise argued that the contract had for its object the sale of the property and the cause or consideration thereof was the price to be paid (on the part of respondents CHGCCI/SILHOUETTE) and the land to be sold (on the part of petitioner MWSS). Likewise, petitioner MWSS' consent to the May 11, 1983 and August 11, 1983 Agreements is patent on the face of these documents and on its own resolution No. 36-83.

As noted by both lower courts, petitioner MWSS admits that it consented to the sale of the property, with the qualification that such consent was allegedly unduly influenced by the President Marcos. Taking such allegation to be hypothetically true, such would have resulted in only voidable contracts because all three elements of a contract, still obtained nonetheless. The alleged vitiation of MWSS' consent did not make the sale null and void ab initio. Thus, "a contract where consent is given through mistake, violence, intimidation, undue influence or fraud, is voidable" 2. Contracts "where consent is vitiated by mistake, violence, intimidation, undue influence or fraud" are voidable or annullable 3. These are not void as —

Concepts of Voidable Contracts. — Voidable or anullable contracts are existent, valid, and binding, although they can be annulled because of want of capacity or vitiated consent of the one of the parties, but before annulment, they are effective and obligatory between parties. Hence, it is valid until it is set aside and its validity may be assailed only in an action for that purpose. They can be confirmed or ratified. 4

As the contracts were voidable at the most, the four year prescriptive period under Art. 1391 of the New Civil Code will apply. This article provides that the prescriptive period shall begin in the cases of intimidation, violence or undue influence, from the time the defect of the consent ceases", and "in case of mistake or fraud, from the time of the discovery of the same time".

Hypothetically admitting that President Marcos unduly influenced the sale, the prescriptive period to annul the same would have begun on February 26, 1986 which this Court takes judicial notice of as the date President Marcos was

deposed. Prescription would have set in by February 26, 1990 or more than three years before petitioner MWSS' complaint was failed.

However, if petitioner MWSS' consent was vitiated by fraud, then the prescriptive period commenced upon discovery. Discovery commenced from the date of the execution of the sale documents as petitioner was party thereto. At the least, discovery is deemed to have taken place on the date of registration of the deeds with the register of Deeds as registration is constructive notice to the world. 5 Given these two principles on discovery, the prescriptive period commenced in 1983 as petitioner MWSS actually knew of the sale, or, in 1984 when the agreements were registered and titles thereafter were issued to respondent SILHOUTTE. At the latest, the action would have prescribed by 1988, or about five years before the complaint was instituted. Thus, in Aznar vs. Bernard 6, this Court held that:

Lastly, even assuming that the petitioners had indeed failed to raise the affirmative defense of prescription in a motion to dismiss or in an appropriate pleading (answer, or amended or supplemental answer) and an amendment would no longer be feasible, still prescription, if apparent on the face of the complaint, may be favorably considered. In the case at bar, the private respondents admit in their complaint that the contract or real estate mortgage which they alleged to be fraudulent and which had been foreclosed, giving rise to this controversy with the petitioners, was executed on July 17, 1978, or more than eight long years before the commencement of the suit in the court a quo, on September 15, 1986. And an action declare a contract null and void on the ground of fraud must be instituted within four years. Extinctive prescription is thus apparent on the face of the complaint itself as resolved by the Court.

Petitioner MWSS further contends that prescription does not apply as its complaint prayed not for the nullification of voidable contracts but for the declaration of nullity of void ab initio contracts which are imprescriptible. This is incorrect, as the prayers in a complaint are not determinative of what legal principles will operate based on the factual allegations of the complaint. And these factual allegations, assuming their truth, show that MWSS consented to the sale, only that such consent was purportedly vitiated by undue influence or fraud. Therefore, the rules on prescription will operate. Even if petitioner MWSS asked for the declaration of nullity of these contracts, the prayers will not be controlling as only the factual allegations in the complaint determine relief. "(I)t is the material allegations of fact in the complaint, not the legal conclusion made therein or the prayer that determines the relief to which the plaintiff is entitled" 7. Respondent court is thus correct in holding that:

xxx xxx xxx

The totality then of those allegations in the complaint makes up a case of a voidable contract of sale — not a void one. The determinative allegations are those that point out that the consent of MWSS in the Agreement of Sale was vitiated either by fraud or undue for the declaration of nullity of the said contract because the Complaint says no. Basic is the rule however that it is the body and not the caption nor the prayer of the Complaint that determines the nature of the action. True, the caption and prayer of the Complaint state that the action is for a judicial declaration of nullity of a contract, but alas, as already pointed out, its body unmistakably alleges only a voidable contract. One cannot change the real nature of an action adopting a different nomenclature any more than one can change gin into whisky by just replacing the label on the bottle with that of the latter's and calling it whisky. No matter what, the liquid inside remains gin.

xxx xxx xxx

Petitioner MWSS also theorizes that the May 11, 1983 MWSS-SILHOUTTE Agreement and the August 11, 1983 Supplemental Agreement were void ab initio because the "initial agreement" from which these agreements emanated was executed "without the knowledge, much less the approval" of petitioner MWSS through its Board of Trustees. The "initial agreement" referred to in petitioner MWSS' argument is the December 20, 1982 letter of respondents Roxas and Roman, Jr. to President Marcos where the authors mentioned that they had reached an agreement with petitioner's then general manager, Mr. Oscar Ilustre. Petitioner MWSS maintains that Mr. Ilustre was not authorized to enter into such "initial agreement", contrary to Art. 1874 of the New Civil Code which provides that "when a sale of a parcel of land or any interest therein is through an agent, the authority of the latter shall be in writing otherwise the sale shall be void." It then concludes that since its Res. No. 36-83 and the May 11, 1983 and August 11, 1983 Agreements are "fruits" of the "initial agreement" (for which Mr. Ilustre was allegedly not authorized in writing), all of these would have been also void under Art. 1422 of NCC, which provides that a contract which is the direct result of a pronounced illegal contract, is also void and inexistent."

The argument does not impress. The "initial agreement" reflected in the December 20, 1982 letter of respondent Roman to Pres. Marcos, is not a sale under Art. 1874. Since the nature of the "initial agreement" is crucial, wequotes 8 the letter in full:

We respectfully approach Your Excellency in all humility and in the spirit of the Yuletide Season. We have explained to Your Excellency when you allowed us the honor to see you, that the negotiations with MWSS which the late Pablo R. Roman

initiated way back in 1975, with your kind approval, will finally be concluded.

We have agreed in principle with Mr. Oscar Ilustre on the terms of the sale as evidenced by the following:

1. Our written agreement to hire Asian Appraisal Company to appraise the entire leased area which then be the basis for the negotiations of the purchase price of the property; and

2. Our exchange of communications wherein made a counter-offer and our acceptance counter-offer.

However, we were informed by Mr. Ilustre that only written instruction from Your Excellency will allow us to finally sign the Agreement.

In sum, our Agreement is for the purchase price of FIFTY-SEVEN MILLION TWO-HUNDRED-FORTY THOUSAND PESOS (P57,240,000) for the entire leased area of 135 hectares; TWENTY-SEVEN MILLION PESOS (P27,000,000) payable upon approval of the contract by Your Excellency and the balance of THIRTY MILLION TWO HUNDRED FORTY THOUSAND PESOS (P30,240,000) after one (1) year inclusive of a 12% interest.

We believe that this arrangement is fair and equitable to both parties considering that the value of the land was appraised by a reputable company and independent appraisal company jointly commissioned by both parties and considering further that Capitol Hills has still a 23-year lien on the property by virtue of its existing lease contract with MWSS.

We humbly seek your instruction, Your Excellency and please accept our families' sincere wish for a Merry Christmas and a Happy New Year to you and the First Family.

The foregoing does not document a sale, but at most, only the conditions proposed by respondent Roman to enter into one. By the terms thereof, it refers only to an "agreement in principle". Reflecting a future consummation, the letter mentions "negotiations with MWSS (which) with your (Marcos) kind approval, will finally be concluded". It must likewise be noted that presidential approval had yet to be obtained. Thus, the "initial agreement" was not a sale as it did not in any way transfer ownership over the property. The proposed terms had yet to be approval by the President and the agreement in principle still had to be formalized in a deed of sale. Written authority as is required under Art. 1834 of the New Civil Code, was not needed at the point of the "initial agreement".

Verily, the principle on prescription of actions is designed to cover situations such as the case at bar, where there have been a series of transfers to innocent purchasers for value. To set aside these transactions only to accommodate a party who has slept on his rights is anathema to good order. 9

RE: Laches

Even assuming, for argument's sake, that the allegations in the complaint establish the absolute nullity of the assailed contracts and hence imprescriptible, the complaint can still be dismissed on the ground of laches which is different from prescription. This Court, as early as 1966, has distinguished these two concepts in this wise:

. . . (T)he defense of laches applies independently of prescription. Laches is different from the statute of limitations. Prescription is concerned with the fact of delay, whereas laches, is concerned with the effect of delay. Prescription is a matter of time; laches is principally a question of inequity of permitting a claim to be enforced, this inequity being founded on some change in the condition of the property or the relation of the parties. Prescription is statutory; laches is not. Laches applies in inequity, whereas prescription applies at law. Prescription is based on fixed-time; laches is not. 10

Thus, the prevailing doctrine is that the right to have a contract declared void ab initio may be barred by laches although not barred by prescription. 11

It has, for all its elements are present, viz:

(1) conduct on the part of the defendant, or one under whom he claims, giving rise to the situation that led to the complaint and for which the complaint seeks a remedy;

(2) delay in asserting the complainant's rights, having had knowledge or notice of the defendant's conduct and having been afforded an opportunity to institute a suit;

(3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and

(4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held barred. 12

There is no question on the presence of the first element. the main thrust of petitioner MWSS's complaint is to bring to the fore what it claims as fraudulent and/or illegal acts of the respondents in the acquisition of the subject property.

The second element of delay is evident from the fact that petitioner tarried for almost ten (10) years from the conclusion of the sale sometime in 1983 before formally laying claim to the subject property in 1993.

The third element is present as can be deduced from the allegations in the complaint that petitioner MWSS (a) demanded for a downpayment for no less than three times; (b) accepted downpayment for P25 Million; and (c) accepted a letter of credit for the balance. The pertinent paragraphs in the complaint thus read:

38. In a letter dated September 19, 1983, for failure of CHGCCI to pay on time, Mr. Ilustre demanded payment of the downpayment of P25 Million which was due as of 18 April 1983. A copy of this letter is hereto attached as Annex "X";

39. Again, in a letter dated February 7, 1984, then MWSS Acting General Manager Aber Canlas demanded payment from CHGCCI of the purchase price long overdue. A copy of this letter is hereto attached as Annex "Y";

40. Likewise, in a letter dated March 14, 1984, Mr. Canlas again demanded from CHGCCI payment of the price. A copy of this demand letter is hereto attached as Annex "Z";

41. Thereafter, in a letter dated July 27, 1984, another entity, defendant Ayala Corporation, through SVP Renato de la Fuente, paid with a check the long overdue downpayment of P25,000,000.00 of STC/CHGCCI. Likewise a domestic stand-by letter of credit for the balance was issued in favor of MWSS; Copies of the said letter, check and letter of credit are hereto attached as Annexes "AA", "BB", and "CC", respectively.

Under these facts supplied by petitioner MWSS itself, respondents have every good reason to believe that petitioner was honoring the validity of the conveyances of the subject property, and that the sudden institution of the complaint in 1993 alleging the nullity of such conveyances was surely an unexpected turn of events for respondents. Hence, petitioner MWSS cannot escape the effect of laches.

RE: Ratification

Pertinent to this issue is the claim of petitioner MWSS that Mr. Ilustre was never given the authority by its Board of Trustees to enter into the "initial agreement" of December 20, 1982 and therefore, the sale of the subject property is invalid.

Petitioner MWSS misses the paint. The perceived infirmity in the "initial agreement" can be cured by ratification. So settled is the precept that ratification can be made by the corporate board either expressly or impliedly. Implied ratification may take various forms — like silence or acquiescence; by acts showing approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom. 13 Both modes of ratification have been made in this case.

There was express ratification made by the Board of petitioner MWSS when it passed Resolution No. 36-83 approving the sale of the subject property to respondent SILHOUETTE and authorizing Mr. Ilustre, as General Manager, "to sign for and in behalf of the MWSS the contract papers and other pertinent documents relative thereto." Implied ratification by "silence or acquiescence" is revealed from the acts of petitioner MWSS in (a) sending three (3) demand letters for the payment of the purchase price, (b) accepting P25 Million as downpayment, and (c) accepting a letter of credit for the balance, as hereinbefore mentioned. It may well be pointed out also that nowhere in petitioner MWSS' complaint is it alleged that it returned the amounts, or any part thereof, covering the purchase price to any of the respondents-vendees at any point in time. This is only indicative of petitioner MWSS' acceptance and retention of benefits flowing from the sales transactions which is another form of implied ratification.

RE: Non-joinder of indispensable parties

There is no denying that petitioner MWSS' action against herein respondents for the recovery of the subject property now converted into a prime residential subdivision would ultimately affect the proprietary rights of the many lot owners to whom the land has already been parceled out. They should have been included in the suit as parties-defendants, for "it is well established that owners of property over which reconveyance is asserted are indispensable parties without whom no relief is available and without whom the court can render no valid judgment." 14 Being indispensable parties, the absence of these lot-owners in the suit renders all subsequent actions of the trial court null and void for want of authority to act, not only as to the absent parties but even as to those present. 15 Thus, when indispensable parties are not before the court, the action should be dismissed. 16

WHEREFORE, in view of the foregoing, the consolidated petitions are hereby DENIED.

SO ORDERED.

G.R. No. 117642 April 24, 1998

EDITHA ALVIOLA and PORFERIO ALVIOLA, petitioners, vs. HONORABLE COURT OF APPEALS, FORENCIA BULING Vda de TINAGAN, DEMOSTHENES TINAGAN, JESUS TINAGAN, ZENAIDA T., JOSEP and JOSEPHINE TINAGAN, respondents.MARTINEZ, J.:

In this petition for review on certiorari, petitioners assail the decision 1 of the Court of Appeals dated April 8, 1994 which affirmed the decision of the lower court ordering petitioners to peacefully vacate and surrender the possession of the disputed properties to the private respondents.

Culled from the record are the following antecedent facts of this case to wit:

On April 1, 1950, Victoria Sonjaconda Tinagan purchased from Mauro Tinagan two (2) parcels of land situated at Barangay Bongbong, Valencia, Negros Oriental. 2 One parcel of land contains an area of 5,704 square meters, more or less; 3 while the other contains 10,860 square meters. 4 Thereafter, Victoria and her son Agustin Tinagan, took possession of said parcels of land.

Sometime in 1960, petitioners occupied portions thereof whereat they built a copra dryer and put up a store wherein they engaged in the business of buying and selling copra.

On June 23, 1975, Victoria died. On October 26, 1975, Agustin died, survived by herein private respondents, namely his wife, Florencia Buling Vda. de Tinagan and their children Demosthenes, Jesus, Zenaida and Josephine, all surnamed Tinagan.

On December 24, 1976, petitioner Editha assisted by her husband filed a complaint for partition and damages before the then Court of First Instance of Negros Oriental, Branch 1, Dumaguete City, docketed as Civil Case No. 6634, claiming to be an acknowledged natural child of deceased Agustin Tinagan and demanding the delivery of her shares in the properties left by the deceased. 5

On October 4, 1979, the aforesaid case was dismissed by the trial court on the ground that recognition of natural children may be brought only during the lifetime of the presumed parent and petitioner Editha did not fall in any of the exceptions enumerated in Article 285 of the Civil Code. 6

Petitioners assailed the order of dismissal by filing a petition for certiorari and mandamus before this Court. 7 On August 9, 1982, this Court dismissed the petition for lack of merit. 8 Petitioners filed a motion for reconsideration but the same was denied on October 19, 1982. 9

On March 29, 1988, private respondents filed a complaint for recovery of possession against Editha and her husband Porferio Alviola before the Regional Trial Court of Negros Oriental, Branch 35, Dumaguete City, docketed as Civil Case No. 9148, praying, among others, that they be declared absolute owners of the said parcels of land, and that petitioners be ordered to vacate the same, to remove their copra dryer and store, to pay actual damages (in the form of rentals), moral and punitive damages, litigation expenses and attorney's fees. 10

In their answer, petitioners contend that they own the improvements in the disputed properties which are still public land; that they are qualified to be beneficiaries of the comprehensive agrarian reform program and that they are rightful possessors by occupation of the said properties for more than twenty years. 11

After trial, the lower court rendered judgment in favor of the private respondents, the dispositive portion of which reads:

WHEREFORE, premises considered, in Civil Case No. 9148, for Recovery of Property, the court hereby renders judgment:

a) Declaring plaintiffs as the absolute owners of the land in question including the portion claimed and occupied by defendants;

b) Ordering defendants Editha Alviola and her husband Porfirio Alviola to peacefully vacate and to surrender the possession of the premises in question to plaintiffs; Defendants may remove their store and dryer on the premises without injury and prejudice to the plaintiffs;

c) Ordering defendants to pay the following amounts to the plaintiffs:

1. P150.00 monthly rentals from April 1988 up to the time the improvements in the questioned portions are removed;

2. P5,000.00 for attorney's fees;

3. P3,000.00 for litigation expenses and to pay the costs.

SO ORDERED. 12

Petitioners appealed to the Court of Appeals. On April 8, 1994, the respondent court rendered its decision, 13 affirming the judgment of the lower court. Petitioners

filed a motion for reconsideration 14 but the same was denied by the respondent court in an order dated October 6, 1994. 15

Hence, this petition.

Petitioners aver that respondent court erred in declaring private respondents the owners of the disputed properties. They contend that ownership of a public land cannot be declared by the courts but by the Executive Department of the Government, citing the case of Busante vs. Hon. Court of Appeals, Oct. 20, 1992, 214 SCRA 774; and that the respondent court erred in not considering that private respondents' predecessor-in-interest, Victoria Sonjaco Tinagan, during her lifetime, ceded her right to the disputed properties in favor of petitioners.

Moreover, petitioners maintain that the respondent court erred in holding that they were in bad faith in possessing the disputed properties and in ruling that the improvements thereon are transferable. They claim that the copra dryer and the store are permanent structures, the walls thereof being made of hollow-blocks and the floors made of cement.

Private respondents counter that the question of whether or not the disputed properties are public land has been resolved by overwhelming evidence showing ownership and possession by the Tinagans and their predecessors-in-interest prior to 1949. They further aver that they merely tolerated petitioners' possession of the disputed properties for a period which was less than that required for extraordinary prescription.

The petition must fail.

Petitioners claim that the disputed properties are public lands. This is a factual issue. The private respondents adduced overwhelming evidence to prove their ownership and possession of the two (2) parcels of land on portions of which petitioners built the copra dryer and a store. Private respondents' tax declarations and receipts of payment of real estate taxes, as well as other related documents, prove their ownership of the disputed properties. As stated previously in the narration of facts, these two (2) parcels of land were originally owned by Mauro Tinagan, who sold the same to Victoria S. Tinagan on April 1, 1950, as evidenced by a Deed of Sale, 16 wherein the two (2) lots, Parcels 1 and 2, are described. 17 Anent Parcel 1, tax declarations indicate that the property has always been declared in the name of the Tinagans. The first, Tax Declaration No. 3335 18 is in the name of Mauro Tinagan. It was thereafter cancelled by Tax Declaration No. 19534 effective 1968, 19 still in the name of Mauro. This declaration was cancelled by Tax Declaration No. 016740 now in the name of Agustin Tinagan, 20 effective 1974, followed by Tax Declaration No. 08-421 in the name of Jesus Tinagan, effective 1980; 21 and finally by Tax Declaration No. 08-816 in the name of Jesus Tinagan, effective 1985. 22

With regard to Parcel 2, private respondents presented Tax Declaration No. 20973 in the name of Mauro Tinagan, effective 1959, 23 Tax Declaration No. 016757, effective 1974; 24 Tax Declaration No. 08-405-C in the name of Agustin Tinagan, effective 1980 25 and Tax Declaration No. 08-794 in the name of Agustin Tinagan, effective 1985. 26 Moreover, the realty taxes on the two lots have always been paid by the private respondents. 27 There can be no doubt, therefore, that the two parcels of land are owned by the private respondents.

The record further discloses that Victoria S. Tinagan and her son, Agustin Tinagan, took possession of the said properties in 1950, introduced improvements thereon, and for more than 40 years, have been in open, continuous, exclusive and notorious occupation thereof in the concept of owners.

Petitioners' own evidence recognized the ownership of the land in favor of Victoria Tinagan. In their tax declarations, 28 petitioners stated that the house and copra dryer are located on the land of Victoria S. Tinagan/Agustin Tinagan. By acknowledging that the disputed portions belong to Victoria/Agustin Tinagan in their tax declarations, petitioners' claim as owners thereof must fail.

The assailed decision of the respondent court states that "Appellants do not dispute that the two parcels of land subject matter of the present complaint for recovery of possession belonged to Victoria S. Tinagan, the grandmother of herein plaintiffs-appellees; that Agustin Tinagan inherited the parcels of land from his mother Victoria; and that plaintiffs-appellees, in turn, inherited the same from Agustin." 29

Taking exception to the aforequoted finding, petitioners contend that while the 2 parcels of land are owned by private respondents, the portions wherein the copra dryers and store stand were ceded to them by Victoria S. Tinagan in exchange for an alleged indebtedness of Agustin Tinagan in the sum of P7,602.04. 30

This claim of the petitioners was brushed aside by the respondent court as merely an afterthought, thus —

Appellants' claim that they have acquired ownership over the floor areas of the store and dryer "in consideration of the account of Agustin Tinagan in the sum of P7,602.04" is not plausible. It is more of an "after-thought" defense which was not alleged in their answer. Although the evidence presented by them in support of this particular claim was not duly objected to by counsel for appellees at the proper time and therefore deemed admissible in evidence, an examination of the oral and documentary evidence submitted in support thereof, reveals the weakness of their claim.

Appellant testified that the areas on which their store and dryer were located were exchanged for the amount of P7,602.04 owed to them by Agustin in 1967 (TSN, Hearing of April 14, 1989, p. 9); that he did not

bother to execute a document reflecting such agreement "because they were our parents and we had used the land for quite sometime already they had also sold their copra to us for a long time." (id.) Yet, as earlier discussed, the tax declarations in appellants' answer show that even after 1967, they expressly declared that the parcels of land on which their store and dryer were constructed, belonged to Victoria and Agustin (Exhs. 2-A, 2-B, 2-C, 3-A, 3-B). If appellants really believed that they were in possession of the said particular areas in the concept of owners, they could have easily declared it in said tax declarations. 31

Concededly, petitioners have been on the disputed portions since 1961. However, their stay thereon was merely by tolerance on the part of the private respondents and their predecessor-in-interest. The evidence shows that the petitioners were permitted by Victoria Sanjoco Tinagan to build a copra dryer on the land when they got married. Subsequently, petitioner Editha Alviola, claiming to be the illegitimate daughter of Agustin Tinagan, filed a petition for partition demanding her share in the estate of the deceased Agustin Tinagan on December 6, 1976. However, the petition was dismissed since it was brought only after the death of Agustin Tinagan. This Court dismissed the petition for certiorari and mandamus filed by petitioner Editha Alviola on August 9, 1982. It was on March 29, 1988, when private respondents filed this complaint for recovery of possession against petitioners. Considering that the petitioners' occupation of the properties in dispute was merely tolerated by private respondents, their posture that they have acquired the property by "occupation" for 20 years does not have any factual or legal foundation.

As correctly ruled by the respondent court, there was bad faith on the part of the petitioners when they constructed the copra dryer and store on the disputed portions since they were fully aware that the parcels of land belonged to Victoria Tinagan. And, there was likewise bad faith on the part of the private respondents, having knowledge of the arrangement between petitioners and Victoria Tinagan relative to the construction of the copra dryer and store. Thus, for purposes of indemnity, Article 448 of the New Civil Code should be applied. 32 However, the copra dryer and the store, as determined by the trial court and respondent court, are transferable in nature. Thus, it would not fall within the coverage of Article 448. As the noted civil law authority, Senator Arturo Tolentino, aptly explains: "To fall within the provision of this Article, the construction must be of permanent character, attached to the soil with an idea of perpetuity; but if it is of a transitory character or is transferable, there is no accession, and the builder must remove the construction. The proper remedy of the landowner is an action to eject the builder from the land." 33

The private respondents' action for recovery of possession was the suitable solution to eject petitioners from the premises.

WHEREFORE, this petition should be, as it is hereby, DISMISSED.

The assailed decision is hereby AFFIRMED.

G.R. No. 178906               February 18, 2009

ELVIRA T. ARANGOTE, petitioner, vs.SPS. MARTIN MAGLUNOB and LOURDES S. MAGLUNOB, and ROMEO SALIDO, Respondents.CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to reverse and set aside the Decision1 dated 27 October 2006 and Resolution2 dated 29 June 2007 of the Court of Appeals in CA-G.R. SP No. 64970. In its assailed Decision, the appellate court affirmed the Decision3 dated 12 September 2000 of the Regional Trial Court (RTC), 6th Judicial Region, Branch 1, Kalibo, Aklan, in Civil Case No. 5511, which reversed the Decision4 dated 6 April 1998 of the 7th Municipal Circuit Trial Court (MCTC) of Ibajay-Nabas, Ibajay, Aklan, in Civil Case No. 156; and declared5 the herein respondent-Spouses Martin and Lourdes Maglunob (Spouses Maglunob) and respondent Romeo Salido (Romeo) as the lawful owners and possessors of Lot 12897 with an area of 982 square meters, more or less, located in Maloco, Ibajay, Aklan (subject property). In its assailed Resolution, the appellate court denied herein petitioner Elvira T. Arangote’s Motion for Reconsideration.

Elvira T. Arangote, herein petitioner married to Ray Mars E. Arangote, is the registered owner of the subject property, as evidenced by Original Certificate of Title (OCT) No. CLOA-1748.6 Respondents Martin (Martin II) and Romeo are first cousins and the grandnephews of Esperanza Maglunob-Dailisan (Esperanza), from whom petitioner acquired the subject property.

The Petition stems from a Complaint7 filed by petitioner and her husband against the respondents for Quieting of Title, Declaration of Ownership and Possession, Damages with Preliminary Injunction, and Issuance of Temporary Restraining Order before the MCTC, docketed as Civil Case No. 156.

The Complaint alleged that Esperanza inherited the subject property from her uncle Victorino Sorrosa by virtue of a notarized Partition Agreement8 dated 29 April 1985, executed by the latter’s heirs. Thereafter, Esperanza declared the subject property in her name for real property tax purposes, as evidenced by Tax Declaration No. 16218 (1985).9

The Complaint further stated that on 24 June 1985, Esperanza executed a Last Will and Testament10 bequeathing the subject property to petitioner and her husband, but it was never probated. On 9 June 1986, Esperanza executed another document, an Affidavit,11 in which she renounced, relinquished, waived and quitclaimed all her rights, share, interest and participation whatsoever in the subject property in favor of petitioner and her husband. On the basis thereof, Tax Declaration No. 16218 in the name of Esperanza was cancelled and Tax

Declaration No. 1666612 (1987) was issued in the name of the petitioner and her husband.

In 1989, petitioner and her husband constructed a house on the subject property. On 26 March 1993, OCT No. CLOA-1748 was issued by the Secretary of the Department of Agrarian Reform (DAR) in the name of petitioner, married to Ray Mars E. Arangote. However, respondents, together with some hired persons, entered the subject property on 3 June 1994 and built a hollow block wall behind and in front of petitioner’s house, which effectively blocked the entrance to its main door.

As a consequence thereof, petitioner and her husband were compelled to institute Civil Case No. 156.

In their Answer with Counterclaim in Civil Case No. 156, respondents averred that they co-owned the subject property with Esperanza. Esperanza and her siblings, Tomas and Inocencia, inherited the subject property, in equal shares, from their father Martin Maglunob (Martin I). When Tomas and Inocencia passed away, their shares passed on by inheritance to respondents Martin II and Romeo, respectively. Hence, the subject property was co-owned by Esperanza, respondent Martin II (together with his wife Lourdes), and respondent Romeo, each holding a one-third pro-indiviso share therein. Thus, Esperanza could not validly waive her rights and interest over the entire subject property in favor of the petitioner.

Respondents also asserted in their Counterclaim that petitioner and her husband, by means of fraud, undue influence and deceit were able to make Esperanza, who was already old and illiterate, affix her thumbmark to the Affidavit dated 9 June 1986, wherein she renounced all her rights and interest over the subject property in favor of petitioner and her husband. Respondents thus prayed that the OCT issued in petitioner’s name be declared null and void insofar as their two-thirds shares are concerned.

After trial, the MCTC rendered its Decision dated 6 April 1998 in Civil Case No. 156, declaring petitioner and her husband as the true and lawful owners of the subject property. The decretal portion of the MCTC Decision reads:

WHEREFORE, judgment is hereby rendered:

A. Declaring the [herein petitioner and her husband] the true, lawful and exclusive owners and entitled to the possession of the [subject property] described and referred to under paragraph 2 of the [C]omplaint and covered by Tax Declaration No. 16666 in the names of the [petitioner and her husband];

B. Ordering the [herein respondents] and anyone hired by, acting or working for them, to cease and desist from asserting or claiming any right or interest in, or exercising any act of ownership or possession over the [subject property];

C. Ordering the [respondents] to pay the [petitioner and her husband] the amount of P10,000.00 as attorney’s fee. With cost against the [respondents].13

The respondents appealed the aforesaid MCTC Decision to the RTC. Their appeal was docketed as Civil Case No. 5511.

Respondents argued in their appeal that the MCTC erred in not dismissing the Complaint filed by the petitioner and her husband for failure to identify the subject property therein. Respondents further faulted the MCTC for not declaring Esperanza’s Affidavit dated 9 June 1986 -- relinquishing all her rights and interest over the subject property in favor of petitioner and her husband -- as null and void insofar as respondents’ two-thirds share in the subject property is concerned.

On 12 September 2000, the RTC rendered its Decision reversing the MCTC Decision dated 6 April 1998. The RTC adjudged respondents, as well as the other heirs of Martin Maglunob, as the lawful owners and possessors of the entire subject property. The RTC decreed:

WHEREFORE, judgment is hereby rendered as follows:

1) The appealed [D]ecision is REVERSED;

2) [Herein respondents] and the other heirs of Martin Maglunob are declared the lawful owners and possessors of the whole [subject property] as described in Paragraph 2 of the [C]omplaint, as against the [herein petitioner and her husband].

3) [Petitioner and her husband] are ordered to immediately turn over possession of the [subject property] to the [respondents] and the other heirs of Martin Maglunob; and

4) [Petitioner and her husband] are ordered to pay [respondents] attorney’s fees of P5,000.00, other litigation expenses of P5,000.00, moral damages of P10,000.00 and exemplary damages of P5,000.00.14

Petitioner and her husband filed before the RTC, on 26 September 2000, a Motion for New Trial or Reconsideration15 on the ground of newly discovered evidence consisting of a Deed of Acceptance16 dated 23 September 2000, and notice17 of the same, which were both made by the petitioner, for herself and in behalf of her

husband,18 during the lifetime of Esperanza. In the RTC Order19 dated 2 May 2001, however, the RTC denied the aforesaid Motion for New Trial or Reconsideration.

The petitioner and her husband then filed a Petition for Review, under Rule 42 of the 1997 Revised Rules of Civil Procedure, before the Court of Appeals, where the Petition was docketed as CA-G.R. SP No. 64970.

In their Petition before the appellate court, petitioner and her husband raised the following errors committed by the RTC in its 12 September 2000 Decision:

I. It erred in reversing the [D]ecision of the [MCTC];

II. It erred in declaring the [herein respondents] and the other heirs of Martin Maglunob as the lawful owners and possessors of the whole [subject property];

III. It erred in declaring [OCT] No. CLOA-1748 in the name of [herein petitioner] Elvie T. Arangote as null and void;

IV. It erred in denying [petitioner and her husband’s] [M]otion for [N]ew [T]rial or [R]econsideration dated [26 September 2000; and

V. It erred in not declaring the [petitioner and her husband] as possessors in good faith.20

On 27 October 2006, the Court of Appeals rendered a Decision denying the Petition for Review of petitioner and her husband and affirming the RTC Decision dated 12 September 2000. Petitioner and her husband’s subsequent Motion for Reconsideration was similarly denied by the Court of Appeals in its Resolution dated 29 June 2007.

Hence, petitioner21 now comes before this Court raising in her Petition the following issues:

I. Whether the [RTC] acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it declared the [petitioner and her husband’s title to the subject property] null and void;

II. Whether the [RTC] acted with grave abuse of discretion amounting to lack of jurisdiction when it declared the Affidavit of Quitclaim null and void; and

III. Whether the [RTC] and the Honorable Court of Appeals acted with grave abuse of discretion amounting to lack or excess of jurisdiction

when it rejected petitioner’s claim as possessors (sic) in good faith, hence, entitled to the rights provided in [Article] 448 and [Article] 546 of the Civil Code.22

Petitioner contends that the aforesaid OCT No. CLOA-1748 was issued in her name on 26 March 1993 and was registered in the Registry of Deeds of Aklan on 20 April 1993. From 20 April 1993 until the institution of Civil Case No. 156 on 10 June 1994 before the MCTC, more than one year had already elapsed. Considering that a Torrens title can only be attacked within one year after the date of the issuance of the decree of registration on the ground of fraud and that such attack must be through a direct proceeding, it was an error on the part of the RTC and the Court of Appeals to declare OCT No. CLOA-1748 null and void.

Petitioner additionally posits that both the RTC and the Court of Appeals committed a mistake in declaring null and void the Affidavit dated 9 June 1986 executed by Esperanza, waiving all her rights and interest over the subject property in favor of petitioner and her husband. Esperanza’s Affidavit is a valid and binding proof of the transfer of ownership of the subject property in petitioner’s name, as it was also coupled with actual delivery of possession of the subject property to petitioner and her husband. The Affidavit is also proof of good faith on the part of petitioner and her husband.

Finally, petitioner argues that, assuming for the sake of argument, that Esperanza’s Affidavit is null and void, petitioner and her husband had no knowledge of any flaw in Esperanza’s title when the latter relinquished her rights to and interest in the subject property in their favor. Hence, petitioner and her husband can be considered as possessors in good faith and entitled to the rights provided under Articles 448 and 546 of the Civil Code.

This present Petition is devoid of merit.

It is a hornbook doctrine that the findings of fact of the trial court are entitled to great weight on appeal and should not be disturbed except for strong and valid reasons, because the trial court is in a better position to examine the demeanor of the witnesses while testifying. It is not a function of this Court to analyze and weigh evidence by the parties all over again. This Court’s jurisdiction is, in principle, limited to reviewing errors of law that might have been committed by the Court of Appeals.23 This rule, however, is subject to several exceptions,24 one of which is present in this case, i.e., when the factual findings of the Court of Appeals and the trial court are contradictory.

In this case, the findings of fact of the MCTC as regards the origin of the subject property are in conflict with the findings of fact of both the RTC and the Court of Appeals. Hence, this Court will have to examine the records to determine first the true origin of the subject property and to settle whether the respondents have the right over the same for being co-heirs and co-owners, together with their grand

aunt, Esperanza, before this Court can resolve the issues raised by the petitioner in her Petition.

After a careful scrutiny of the records, this Court affirms the findings of both the RTC and the Court of Appeals as regards the origin of the subject property and the fact that respondents, with their grand aunt Esperanza, were co-heirs and co-owners of the subject property.

The records disclosed that the subject property was part of a parcel of land25 situated in Maloco, Ibajay, Aklan, consisting of 7,176 square meters and commonly owned in equal shares by the siblings Pantaleon Maglunob (Pantaleon) and Placida Maglunob-Sorrosa (Placida). Upon the death of Pantaleon and Placida, their surviving and legal heirs executed a Deed of Extrajudicial Settlement and Partition of Estate in July 1981,26 however, the Deed was not notarized. Considering that Pantaleon died without issue, his one-half share in the parcel of land he co-owned with Placida passed on to his four siblings (or their respective heirs, if already deceased), namely: Placida, Luis, Martin I, and Victoria, in equal shares.

According to the aforementioned Deed of Extrajudicial Settlement and Partition of Estate, the surviving and legal heirs of Pantaleon and Placida agreed to have the parcel of land commonly owned by the siblings declared for real property tax purposes in the name of Victorino Sorrosa (Victorino), Placida’s husband. Thus, Tax Declarations No. 5988 (1942),27 No. 6200 (1945)28 and No. 7233 (1953)29 were all issued in the name of Victorino.

Since Martin I already passed away when the Deed of Extrajudicial Settlement and Partition of Estate was executed, his heirs30 were represented therein by Esperanza. By virtue of the said Deed, Martin I received as inheritance a portion of the parcel of land measuring 897 square meters.

After the death of Victorino, his heirs31 executed another Partition Agreement on 29 April 1985, which was notarized on the same date. The Partition Agreement mentioned four parcels of land. The subject property, consisting of a portion of the consolidated parcels 1, 2, and 3, and measuring around 982 square meters, was allocated to Esperanza. In comparison, the property given to Esperanza under the Partition Agreement is bigger than the one originally allocated to her earlier under the Deed of Extrajudicial Settlement and Partition of Estate dated July 1981, which had an area of only 897 square meters. It may be reasonably assumed, however, that the subject property, measuring 982 square meters, allocated to Esperanza under the Partition Agreement dated 29 April 1985, is already inclusive of the smaller parcel of 897 square meters assigned to her under the Deed of Extrajudicial Settlement and Partition of Estate dated July 1981. As explained by the RTC in its 12 September 2000 Decision:

The [subject property] which is claimed by the [herein petitioner and her husband] and that which is claimed by the [herein respondents] are one and the same, the

difference in area and technical description being due to the repartition and re-allocation of the parcel of land originally co-owned by Pantaleon Maglunob and his sister Placida Maglunob and subsequently declared in the name of [Victorino] under Tax Declaration No. 5988 of 1949.32

It is clear from the records that the subject property was not Esperanza’s exclusive share, but also that of the other heirs of her father, Martin I. Esperanza expressly affixed her thumbmark to the Deed of Extrajudicial Settlement of July 1981 not only for herself, but also on behalf of the other heirs of Martin I. Though in the Partition Agreement dated 29 April 1985 Esperanza affixed her thumbmark without stating that she was doing so not only for herself, but also on behalf of the other heirs of Martin I, this does not mean that Esperanza was already the exclusive owner thereof. The evidence shows that the subject property is the share of the heirs of Martin I. This is clear from the sketch33 attached to the Partition Agreement dated 29 April 1985, which reveals the proportionate areas given to the heirs of the two siblings, Pantaleon and Placida, who were the original owners of the whole parcel of land34 from which the subject property was taken.

Further, it bears emphasis that the Partition Agreement was executed by and among the son, grandsons, granddaughters and cousins of Victorino. Esperanza was neither the granddaughter nor the cousin of Victorino, as she was only Victorino’s grandniece. The cousin of Victorino is Martin I, Esperanza’s father. In effect, therefore, the subject property allotted to Esperanza in the Partition Agreement was not her exclusive share, as she holds the same for and on behalf of the other heirs of Martin I, who was already deceased at the time the Partition Agreement was made.

To further bolster the truth that the subject property was not exclusively owned by Esperanza, the Affidavit she executed in favor of petitioner and her husband on 6 June 1985 was worded as follows:

That I hereby renounce, relinquish, waive and quitclaim all my rights, share, interest and participation whatsoever in the [subject property] unto the said Sps. Ray Mars Arangote and Elvira T. Arangote, their heirs, successors, and assigns including the improvement found thereon;35

Logically, if Esperanza fully owned the subject property, she would have simply waived her rights to and interest in the subject property, without mentioning her "share" and "participation" in the same. By including such words in her Affidavit, Esperanza was aware of and was limiting her waiver, renunciation, and quitclaim to her one-third share and participation in the subject property.

Going to the issues raised by the petitioner in this Petition, this Court will resolve the same concurrently as they are interrelated.

In this case, the petitioner derived her title to the subject property from the notarized Affidavit executed by Esperanza, wherein the latter relinquished her rights, share, interest and participation over the same in favor of the petitioner and her husband.

A careful perusal of the said Affidavit reveals that it is not what it purports to be. Esperanza’s Affidavit is, in fact, a Donation. Esperanza’s real intent in executing the said Affidavit was to donate her share in the subject property to petitioner and her husband.

As no onerous undertaking is required of petitioner and her husband under the said Affidavit, the donation is regarded as a pure donation of an interest in a real property covered by Article 749 of the Civil Code.36 Article 749 of the Civil Code provides:

Art. 749. In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy.

The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor.

If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments.

From the aforesaid provision, there are three requisites for the validity of a simple donation of a real property, to wit: (1) it must be made in a public instrument; (2) it must be accepted, which acceptance may be made either in the same Deed of Donation or in a separate public instrument; and (3) if the acceptance is made in a separate instrument, the donor must be notified in an authentic form, and the same must be noted in both instruments.

This Court agrees with the RTC and the Court of Appeals that the Affidavit executed by Esperanza relinquishing her rights, share, interest and participation over the subject property in favor of the petitioner and her husband suffered from legal infirmities, as it failed to comply with the aforesaid requisites of the law.

In Sumipat v. Banga,37 this Court declared that title to immovable property does not pass from the donor to the donee by virtue of a Deed of Donation until and unless it has been accepted in a public instrument and the donor duly notified thereof. The acceptance may be made in the very same instrument of donation. If the acceptance does not appear in the same document, it must be made in another. Where the Deed of Donation fails to show the acceptance, or where the formal notice of the acceptance, made in a separate instrument, is either not given

to the donor or else not noted in the Deed of Donation and in the separate acceptance, the donation is null and void.38

In the present case, the said Affidavit, which is tantamount to a Deed of Donation, met the first requisite, as it was notarized; thus, it became a public instrument. Nevertheless, it failed to meet the aforesaid second and third requisites. The acceptance of the said donation was not made by the petitioner and her husband either in the same Affidavit or in a separate public instrument. As there was no acceptance made of the said donation, there was also no notice of the said acceptance given to the donor, Esperanza. Therefore, the Affidavit executed by Esperanza in favor of petitioner and her husband is null and void.

The subsequent notarized Deed of Acceptance39 dated 23 September 2000, as well as the notice40 of such acceptance, executed by the petitioner did not cure the defect. Moreover, it was only made by the petitioner several years after the Complaint was filed in court, or when the RTC had already rendered its Decision dated 12 September 2000, although it was still during Esperanza’s lifetime. Evidently, its execution was a mere afterthought, a belated attempt to cure what was a defective donation.

It is true that the acceptance of a donation may be made at any time during the lifetime of the donor. And granting arguendo that such acceptance may still be admitted in evidence on appeal, there is still need for proof that a formal notice of such acceptance was received by the donor and noted in both the Deed of Donation and the separate instrument embodying the acceptance.41 At the very least, this last legal requisite of annotation in both instruments of donation and acceptance was not fulfilled by the petitioner. Neither the Affidavit nor the Deed of Acceptance bears the fact that Esperanza received notice of the acceptance of the donation by petitioner. For this reason, even Esperanza’s one-third share in the subject property cannot be adjudicated to the petitioner.

With the foregoing, this Court holds that the RTC and the Court of Appeals did not err in declaring null and void Esperanza’s Affidavit.

The next issue to be resolved then is whether the RTC, as well as the Court of Appeals, erred in declaring OCT No. CLOA-1748 in the name of petitioner and her husband null and void.

Again, this Court answers the said issue in the negative.

Section 48 of Presidential decree No. 1529 states:

SEC. 48. Certificate not subject to collateral attack. - A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.

Such proscription has long been enshrined in Philippine jurisprudence. The judicial action required to challenge the validity of title is a direct attack, not a collateral attack.42

The attack is considered direct when the object of an action is to annul or set aside such proceeding, or enjoin its enforcement. Conversely, an attack is indirect or collateral when, in an action to obtain a different relief, an attack on the proceeding is nevertheless made as an incident thereof. Such action to attack a certificate of title may be an original action or a counterclaim, in which a certificate of title is assailed as void.43

A counterclaim is considered a new suit in which the defendant is the plaintiff and the plaintiff in the complaint becomes the defendant. It stands on the same footing as, and is to be tested by the same rules as if it were, an independent action.44

In their Answer to the Complaint for Quieting of Title filed by the petitioner and her husband before the MCTC, respondents included therein a Counterclaim wherein they repleaded all the material allegations in their affirmative defenses, the most essential of which was their claim that petitioner and her husband -- by means of fraud, undue influence and deceit -- were able to make their grand aunt, Esperanza, who was already old and illiterate, affix her thumbmark to the Affidavit, wherein she renounced, waived, and quitclaimed all her rights and interest over the subject property in favor of petitioner and her husband. In addition, respondents maintained in their Answer that as petitioner and her husband were not tenants either of Esperanza or of the respondents, the DAR could not have validly issued in favor of petitioner and her husband OCT No. CLOA-1748. Thus, the respondents prayed, in their counterclaim in Civil Case No. 156 before the MCTC, that OCT No. CLOA-1748 issued in the name of petitioner, married to Ray Mars E. Arangote, be declared null and void, insofar as their two-thirds shares in the subject property are concerned.

It is clear, thus, that respondents’ Answer with Counterclaim was a direct attack on petitioner’s certificate of title. Furthermore, since all the essential facts of the case for the determination of the validity of the title are now before this Court, to require respondents to institute a separate cancellation proceeding would be pointlessly circuitous and against the best interest of justice.

Esperanza’s Affidavit, which was the sole basis of petitioner’s claim to the subject property, has been declared null and void. Moreover, petitioner and her husband were not tenants of the subject property. In fact, petitioner herself admitted in her Complaint filed before the MCTC that her husband is out of the country, rendering it impossible for him to work on the subject property as a tenant. Instead of cultivating the subject property, petitioner and her husband possessed the same by constructing a house thereon. Thus, it is highly suspicious how the petitioner was able to secure from the DAR a Certificate of Land Ownership Award (CLOA) over the subject property. The DAR awards such certificates to the grantees only if they fulfill the requirements of Republic Act No. 6657, otherwise known as the

Comprehensive Agrarian Reform Program (CARP).45 Hence, the RTC and the Court of Appeals did not err in declaring null and void OCT No. CLOA-1748 in the name of the petitioner, married to Ray Mars E. Arangote.

Considering that Esperanza died without any compulsory heirs and that the supposed donation of her one-third share in the subject property per her Affidavit dated 9 June 1985 was already declared null and void, Esperanza’s one-third share in the subject property passed on to her legal heirs, the respondents.

As petitioner’s last-ditch effort, she claims that she is a possessor in good faith and, thus, entitled to the rights provided for under Articles 448 and 546 of the Civil Code.

This claim is untenable.

The Civil Code describes a possessor in good faith as follows:

Art. 526. He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.

He is deemed a possessor in bad faith who possesses in any case contrary to the foregoing.

Mistake upon a doubtful or difficult question of law may be the basis of good faith.

Art. 1127. The good faith of the possessor consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership.

Possession in good faith ceases from the moment defects in the title are made known to the possessor by extraneous evidence or by a suit for recovery of the property by the true owner. Every possessor in good faith becomes a possessor in bad faith from the moment he becomes aware that what he believed to be true is not so.46

In the present case, when respondents came to know that an OCT over the subject property was issued and registered in petitioner’s name on 26 March 1993, respondents brought a Complaint on 7 August 1993 before the Lupon of Barangay Maloco, Ibajay, Aklan, challenging the title of petitioner to the subject property on the basis that said property constitutes the inheritance of respondent, together with their grandaunt Esperanza, so Esperanza had no authority to relinquish the entire subject property to petitioner. From that moment, the good faith of the petitioner had ceased.

Petitioner cannot be entitled to the rights under Articles 448 and 546 of the Civil Code, because the rights mentioned therein are applicable only to builders in good faith and not to possessors in good faith.

Moreover, the petitioner cannot be considered a builder in good faith of the house on the subject property. In the context that such term is used in particular reference to Article 448 of the Civil Code, a builder in good faith is one who, not being the owner of the land, builds on that land, believing himself to be its owner and unaware of any defect in his title or mode of acquisition.47

The various provisions of the Civil Code, pertinent to the subject, read:

Article 448. The owner of the land on which anything has been built, sown, or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such a case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof.1avvphi1

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.

Under the foregoing provisions, the builder in good faith can compel the landowner to make a choice between appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land. The choice belongs to the owner of the land, a rule that accords with the principle of accession, i.e., that the accessory follows the principal and not the other way around. Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. He must choose one. He cannot, for instance, compel the owner of the building to instead remove it from the land. In order, however, that the builder can invoke that accruing benefit and enjoy his corresponding right to demand that a choice be made by the landowner, he should be able to prove good faith on his part.48

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. Applied to possession, one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.49

In this case, the subject property waived and quitclaimed by Esperanza to the petitioner and her husband in the Affidavit was only covered by a tax declaration in the name of Esperanza. Petitioner did not even bother to look into the origin of the subject property and to probe into the right of Esperanza to relinquish the same. Thus, when petitioner and her husband built a house thereon in 1989 they cannot be considered to have acted in good faith as they were fully aware that when Esperanza executed an Affidavit relinquishing in their favor the subject property the only proof of Esperanza’s ownership over the same was a mere tax declaration. This fact or circumstance alone was enough to put the petitioner and her husband under inquiry. Settled is the rule that a tax declaration does not prove ownership. It is merely an indicium of a claim of ownership. Payment of taxes is not proof of ownership; it is, at best, an indicium of possession in the concept of ownership. Neither tax receipts nor a declaration of ownership for taxation purposes is evidence of ownership or of a right to possess realty when not supported by other effective proofs.50

With the foregoing, the petitioner is not entitled to the rights under Article 448 and 546 as the petitioner is not a builder and possessor in good faith.

WHEREFORE, premises considered, the instant Petition is hereby DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 64970, dated 27 October 2006 and 29 June 2007, respectively, affirming the RTC Decision dated 12 September 2000 in Civil Case No. 5511 and declaring the respondents the lawful owners and possessors of the subject property are hereby AFFIRMED. No costs.

G.R. No. L-44606             November 28, 1938

VICENTE STO. DOMINGO BERNARDO, plaintiff-appellant, vs.CATALINO BATACLAN, defendant-appellant. TORIBIO TEODORO, purchaser-appellee.Pedro de Leon for plaintiff-appellant. LAUREL, J.:

          This is an appeal taken by both the plaintiff and the defendant from the order of September 26, 1935, hereinabove referred to, of the Court of First Instance of Cavite in Civil Case No. 2428.

          There is no controversy as to the facts. By a contract of sale executed from Pastor Samonte and others ownership of a parcel of land of about 90 hectares situated in sitio Balayunan, Silang, Cavite. To secure possession of the land from the vendors the said plaintiff, on July 20, 1929, instituted Civil Case No. 1935 in the Court of First Instance of Cavite. The trial court found for the plaintiff in a decision which was affirmed by this Supreme Court on appeal (G.R. No. 33017). 1 When plaintiff entered upon the premises, however, he found the defendant herein, Catalino Bataclan, who appears to have been authorized by former owners, as far back as 1922, to clear the land and make improvements thereon. As Bataclan was not a party in Case No. 1935, plaintiff, on June 11, 1931, instituted against him, in the Court of First Instance of Cavite, Civil Case No. 2428. In this case, plaintiff was declared owner but the defendant was held to be a possessor in good faith, entitled to reimbursement in the total sum of P1,642, for work done and improvements made. The dispositive part of the decision reads:

          Por las consideraciones expuestas, se declara al demandante Vicente Santo Domingo Bernardo dueño con derecho a la posesion del terreno que se describe en la demanda, y al demandado Catalino Bataclan con derecho a que del demandante le pague la suma de P1,642 por gastos utiles hechos de buena fe en el terreno, y por el cerco y ponos de coco y abaca existentes en el mismo, y con derecho, ademas a retener la posesion del terreno hasta que se le pague dicha cantidad. Al demandante puede optar, en el plazo de treinta dias, a partir de la fecha en que fuere notificado de la presente, por pagar esa suma al demandado, haciendo asi suyos el cerco y todas las plantaciones existentes en el terreno, u obligar al demandado a pagarle el precio terreno, a razon de trescientos pesos la hectarea. En el caso de que el demandante optara por que el demandado le pagara el precio del terreno, el demandado efectuara el pago en el plazo convenientes por las partes o que sera fijado por el Juzgado. Sin costas.

          Both parties appealed to this court (G. R. No. 37319). 2 The decision appealed from was modified by allowing the defendant to recover compensation amounting to P2,212 and by reducing the price at which the plaintiff could require the defendant to purchase the land in question from P300 to P200 per hectare. Plaintiff was given by this court 30 days from the date when the decision became final within which to exercise his option, either to sell the land to the defendant or to buy the improvements from him. On January 9, 1934, the plaintiff manifested to the lower court his desire "to require the defendant to pay him the value of the land at the rate of P200 per hectare or a total price of P18,000 for the whole tract of land." The defendant informed the lower court that he was unable to pay the land and, on January 24, 1934, an order was issued giving the plaintiff 30 days within which to pay the defendant the sum of P2,212 stating that, in the event of failure to make such payment, the land would be ordered sold at public auction "Para hacer pago al demandante de la suma de P2,212 y el remanente despues de deducidos los gastos legales de la venta en publica subasta sera entregado al demandante." On February 21, 1934, plaintiff moved to reconsider the foregoing order so that he would have preference over the defendant in the order of

payment. The motion was denied on March 1, 1934 but on March 16 following the court below, motu proprio modified its order of January 24, "en el sentido de que el demandante tiene derecho preferente al importe del terreno no se vendiere en publica subasta, a razon de P200 por hectares y el remanente, si acaso lo hubiere se entregara al demandado en pago de la cantidad de P2,212 por la limpieza del terreno y las mejoras introducidas en el mismo por el citado demandado." On April 24, 1934, the court below, at the instance of the plaintiff and without objection on the part of the defendant, ordered the sale of the land in question at public auction. The land was sold on April 5, 1935 to Toribio Teodoro, the highest bidder, for P8,000. In the certificate of sale issued to said purchaser on the very day of sale, it was stated that the period of redemption of the land sold was to expire on April 5, 1936. Upon petition of Toribio Teodoro the court below ordered the provincial sheriff to issue another certificate not qualified by any equity of redemption. This was complied with by the sheriff on July 30, 1935. On September 18, 1935, Teodoro moved that he be placed in possession of the land purchased by him. The motion was granted by order of September 26, 1935, the dispositive part of which is as follows:

          Por tanto, se ordena al Sheriff Provincial de Cavite ponga a Toribio Teodoro en posesion del terreno comprado por el en subasta publica y por el cual se le expidio certificado de venta definitiva, reservando al demandado su derecho de ejercitar una accion ordinaria para reclamar del demandante la cantidad de P2,212 a que tiene derecho por la limpieza y mejoras del terreno y cuya suma, en justicia y equidad, debe ser descontada y deducida de la suma de P8,000 que ya ha recibido el demandante.

          The Civil Code confirms certain time-honored principles of the law of property. One of these is the principle of accession whereby the owner of property acquires not only that which it produces but that which is united to it either naturally or artificially. (Art. 353.) Whatever is built, planted or sown on the land of another, and the improvements or repairs made thereon, belong to the owner of the land (art. 358). Where, however, the planter, builder, or sower has acted in good faith, a conflict of rights arises between the owners and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating what Manresa calls a state of "forced coownership" (vol. 3, 4th ed., p. 213), the law has provided a just and equitable solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity or to oblige the builder or planter to pay for the land and the sower to pay the proper rent (art. 361). It is the owner of the land who is allowed to exercise the option because his right is older and because, by the principle of accession, he is entitled to the ownership of the accessory thing (3 Manresa, 4th ed., p. 213). In the case before us, the plaintiff, as owner of the land, chose to require the defendant, as owner of the improvements, to pay for the land.

          The defendant states that he is a possessor in good faith and that the amount of P2,212 to which he is entitled has not yet been paid to him. Therefore,

he says, he has a right to retain the land in accordance with the provisions of article 453 of the Civil Code. We do not doubt the validity of the premises stated. "Considera la ley tan saarada y legitima la deuda, que, hasta que sea pagada, no consiente que la cosa se restituya all vencedor." (4 Manresa, 4th ed, p., 304.) We find, however, that the defendant has lost his right of retention. In obedience to the decision of this court in G.R. No. 37319, the plaintiff expressed his desire to require the defendant to pay for the value of the land. The said defendant could have become owner of both land and improvements and continued in possession thereof. But he said he could not pay and the land was sold at public auction to Toribio Teodoro. The law, as we have already said, requires no more than that the owner of the land should choose between indemnifying the owner of the improvements or requiring the latter to pay for the land. When he failed to pay for the land, the defendant herein lost his right of retention.

          The sale at public auction having been asked by the plaintiff himself (p. 22, bill of exceptions) and the purchase price of P8,000 received by him from Toribio Teodoro, we find no reason to justify a rapture of the situation thus created between them, the defendant-appellant not being entitled, after all, to recover from the plaintiff the sum of P2,212. lawphi1.net

          The judgment of the lower court is accordingly modified by eliminating therefrom the reservation made in favor of the defendant-appellant to recover from the plaintiff the sum of P2,212. In all the respects, the same is affirmed, without pronouncement regarding costs. So ordered.

.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 1and 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.

G.R. No. 98045 June 26, 1996

DESAMPARADO VDA. DE NAZARENO and LETICIA NAZARENO TAPIA, petitioners, vs.THE COURT OF APPEALS, MR. & MRS. JOSE SALASALAN, MR. & MRS. LEO RABAYA, AVELINO LABIS, HON. ROBERTO G. HILARIO, ROLLEO I. IGNACIO, ALBERTO M. GILLERA and HON. ABELARDO G. PALAD, JR., in their official and/or private capacities, respondents.ROMERO, J.:p

Petitioners Desamparado Vda. de Nazareno and Leticia Nazareno Tapia challenge the decision of the Court of Appeals which affirmed the dismissal of petitioners' complaint by the Regional Trial Court of Misamis Oriental, Branch 22. The complaint was for annulment of the verification, report and recommendation, decision and order of the Bureau of Lands regarding a parcel of public land.

The only issue involved in this petition is whether or not petitioners exhausted administrative remedies before having recourse to the courts.

The subject of this controversy is a parcel of land situated in Telegrapo, Puntod, Cagayan de Oro City. Said land was formed as a result of sawdust dumped into the dried-up Balacanas Creek and along the banks of the Cagayan river.

Sometime in 1979, private respondents Jose Salasalan and Leo Rabaya leased the subject lots on which their houses stood from one Antonio Nazareno, petitioners' predecessor-in-interest. In the latter part of 1982, private respondents allegedly stopped paying rentals. As a result, Antonio Nazareno and petitioners filed a case for ejectment with the Municipal Trial Court of Cagayan de Oro City, Branch 4. A decision was rendered against private respondents, which decision was affirmed by the Regional Trial Court of Misamis Oriental, Branch 20.

The case was remanded to the municipal trial court for execution of judgment after the same became final and executory. Private respondents filed a case for annulment of judgment before the Regional Trial Court of Misamis Oriental, Branch 24 which dismissed the same. Antonio Nazareno and petitioners again moved for execution of judgment but private respondents filed another case for certiorari with prayer for restraining order and/or writ of preliminary injunction with the Regional Trial Court of Misamis Oriental, Branch 25 which was likewise dismissed. The decision of the lower court was finally enforced with the private respondents being ejected from portions of the subject lots they occupied..

Before he died, Antonio Nazareno caused the approval by the Bureau of Lands of the survey plan designated as Plan Csd-106-00571 with a view to perfecting his title over the accretion area being claimed by him. Before the approved survey plan could be released to the applicant, however, it was protested by private respondents before the Bureau of Lands.

In compliance with the order of respondent District Land Officer Alberto M. Gillera, respondent Land Investigator Avelino G. Labis conducted an investigation and rendered a report to the Regional Director recommending that Survey Plan No. MSI-10-06-000571-D (equivalent to Lot No. 36302, Cad. 237) in the name of Antonio Nazareno, be cancelled and that private respondents be directed to file appropriate public land applications.

Based on said report, respondent Regional Director of the Bureau of Lands Roberto Hilario rendered a decision ordering the amendment of the survey plan in the name of Antonio Nazareno by segregating therefrom the areas occupied by the private respondents who, if qualified, may file public land applications covering their respective portions.

Antonio Nazareno filed a motion for reconsideration with respondent Rolleo Ignacio, Undersecretary of the Department of Natural Resources and Officer-in-Charge of the Bureau of Lands who denied the motion. Respondent Director of Lands Abelardo Palad then ordered him to vacate the portions adjudicated to private respondents and remove whatever improvements they have introduced thereon. He also ordered that private respondents be placed in possession thereof.

Upon the denial of the late Antonio Nazareno's motion for reconsideration, petitioners Desamparado Vda. de Nazareno and Leticia Tapia Nazareno, filed a

case before the RTC, Branch 22 for annulment of the following: order of investigation by respondent Gillera, report and recommendation by respondent Labis, decision by respondent Hilario, order by respondent Ignacio affirming the decision of respondent Hilario and order of execution by respondent Palad. The RTC dismissed the complaint for failure to exhaust administrative remedies which resulted in the finality of the administrative decision of the Bureau of Lands.

On appeal, the Court of Appeals affirmed the decision of the RTC dismissing the complaint. Applying Section 4 of C.A. No. 141, as amended, it contended that the approval of the survey plan belongs exclusively to the Director of Lands. Hence, factual findings made by the Metropolitan Trial Court respecting the subject land cannot be held to be controlling as the preparation and approval of said survey plans belong to the Director of Lands and the same shall be conclusive when approved by the Secretary of Agriculture and Natural resources. 1

Furthermore, the appellate court contended that the motion for reconsideration filed by Antonio Nazareno cannot be considered as an appeal to the Office of the Secretary of Agriculture and Natural Resources, as mandated by C.A. No. 141 inasmuch as the same had been acted upon by respondent Undersecretary Ignacio in his capacity as Officer-in-charge of the Bureau of Lands and not as Undersecretary acting for the Secretary of Agriculture and Natural Resources. For the failure of Antonio Nazareno to appeal to the Secretary of Agriculture and Natural Resources, the present case does not fall within the exception to the doctrine of exhaustion of administrative remedies. It also held that there was no showing of oppressiveness in the manner in which the orders were issued and executed..

Hence, this petition.

Petitioners assign the following errors:

I. PUBLIC RESPONDENT COURT OF APPEALS IN A WHIMSICAL, ARBITRARY AND CAPRICIOUS MANNER AFFIRMED THE DECISION OF THE LOWER COURT WHICH IS CONTRARY TO THE PREVAILING FACTS AND THE LAW ON THE MATTER;

II. PUBLIC RESPONDENT COURT OF APPEALS IN A WHIMSICAL, ARBITRARY AND CAPRICIOUS MANNER AFFIRMED THE DECISION OF THE LOWER COURT DISMISSING THE ORIGINAL CASE WHICH FAILED TO CONSIDER THAT THE EXECUTION ORDER OF PUBLIC RESPONDENT ABELARDO G. PALAD, JR., DIRECTOR OF LANDS, MANILA, PRACTICALLY CHANGED THE DECISION OF PUBLIC RESPONDENT ROBERTO HILARIO, REGIONAL DIRECTOR, BUREAU OF LANDS, REGION 10, THUS MAKING THE CASE PROPER SUBJECT FOR ANNULMENT WELL WITHIN THE JURISDICTION OF THE LOWER COURT.

The resolution of the above issues, however, hinges on the question of whether or not the subject land is public land. Petitioners claim that the subject land is private land being an accretion to his titled property, applying Article 457 of the Civil Code which provides:

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

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

For petitioners to insist on the application of these rules on alluvion to their case, the above-mentioned requisites must be present. However, they admit that the accretion was formed by the dumping of boulders, soil and other filling materials on portions of the Balacanas Creek and the Cagayan River bounding their land. 3 It cannot be claimed, therefore, that the accumulation of such boulders, soil and other filling materials was gradual and imperceptible, resulting from the action of the waters or the current of the Balacanas Creek and the Cagayan River. In Hilario v. City of Manila, 4 this Court held that the word "current" indicates the participation of the body of water in the ebb and flow of waters due to high and low tide. Petitioners' submission not having met the first and second requirements of the rules on alluvion, they cannot claim the rights of a riparian owner.

In any case, this court agrees with private respondents that petitioners are estopped from denying the public character of the subject land, as well as the jurisdiction of the Bureau of Lands when the late Antonio Nazareno filed his Miscellaneous Sales Application MSA (G-6) 571. 5 The mere filing of said Application constituted an admission that the land being applied for was public land, having been the subject of Survey Plan No. MSi-10-06-000571-D (Equivalent to Lot No. 36302, Cad-237) which was conducted as a consequence of Antonio Nazareno's Miscellaneous Sales Application wherein said land was described as an orchard. Said description by Antonio Nazareno was, however, controverted by respondent Labis in his investigation report to respondent Hilario based on the findings of his ocular inspection that said land actually covers a dry portion of Balacanas Creek and a swampy portion of Cagayan River. The investigation report also states that, except for the swampy portion which is fully planted to nipa palms, the whole area is fully occupied by a part of a big concrete bodega of petitioners and several residential houses made of light materials, including those of private respondents which were erected by themselves sometime in the early part of 1978. 6

Furthermore, the Bureau of Lands classified the subject land as an accretion area which was formed by deposits of sawdust in the Balacanas Creek and the Cagayan river, in accordance with the ocular inspection conducted by the Bureau of Lands. 7 This Court has often enough held that findings of administrative agencies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality. 8 Again, when said factual findings are affirmed by the Court of Appeals, the same are conclusive on the parties and not reviewable by this Court. 9

It is this Court's irresistible conclusion, therefore, that the accretion was man-made or artificial. In Republic v. CA, 10 this Court ruled that the requirement that the deposit should be due to the effect of the current of the river is indispensable. This excludes from Art. 457 of the Civil Code all deposits caused by human intervention. Putting it differently, alluvion must be the exclusive work of nature. Thus, in Tiongco v. Director of Lands, et al., 11 where the land was not formed solely by the natural effect of the water current of the river bordering said land but is also the consequence of the direct and deliberate intervention of man, it was deemed a man-made accretion and, as such, part of the public domain.

In the case at bar, the subject land was the direct result of the dumping of sawdust by the Sun Valley Lumber Co. consequent to its sawmill operations. 12 Even if this Court were to take into consideration petitioners' submission that the accretion site was the result of the late Antonio Nazareno's labor consisting in the dumping of boulders, soil and other filling materials into the Balacanas Creek and Cagayan River bounding his land, 13 the same would still be part of the public domain.

Having determined that the subject land is public land, a fortiori, the Bureau of Lands, as well as the Office of the Secretary of Agriculture and Natural Resources have jurisdiction over the same in accordance with the Public Land Law. Accordingly, the court a quo dismissed petitioners' complaint for non-exhaustion of administrative remedies which ruling the Court of Appeals affirmed.

However, this Court agrees with petitioners that administrative remedies have been exhausted. Petitioners could not have intended to appeal to respondent Ignacio as an Officer-In-Charge of the Bureau of Lands. The decision being appealed from was the decision of respondent Hilario who was the Regional Director of the Bureau of Lands. Said decision was made "for and by authority of the Director of Lands". 14 It would be incongruous to appeal the decision of the Regional Director of the Bureau of Lands acting for the Director of the Bureau of Lands to an Officer-In-Charge of the Bureau of Lands.

In any case, respondent Rolleo Ignacio's official designation was "Undersecretary of the Department of Agriculture and Natural Resources." He was only an "Officer-In-Charge" of the Bureau of Lands. When he acted on the late Antonio Nazareno's motion for reconsideration by affirming or adopting respondent Hilario's decision, he was acting on said motion as an Undersecretary on behalf of

the Secretary of the Department. In the case of Hamoy v. Secretary of Agriculture and Natural Resources, 15 this Court held that the Undersecretary of Agriculture and Natural Resources may modify, adopt, or set aside the orders or decisions of the Director of Lands with respect to questions involving public lands under the administration and control of the Bureau of Lands and the Department of Agriculture and Natural Resources. He cannot, therefore, be said to have acted beyond the bounds of his jurisdiction under Sections 3, 4 and 5 of Commonwealth Act No. 141 16

As borne out by the administrative findings, the controverted land is public land, being an artificial accretion of sawdust. As such, the Director of Lands has jurisdiction, authority and control over the same, as mandated under Sections 3 and 4 of the Public Land Law (C.A. No. 141) which states, thus:

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

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

In connection with the second issue, petitioners ascribe whim, arbitrariness or capriciousness in the execution order of public respondent Abelardo G. Palad, the Director of Lands. This Court finds otherwise since said decision was based on the conclusive finding that the subject land was public land. Thus, this Court agrees with the Court of Appeals that the Director of Lands acted within his rights when he issued the assailed execution order, as mandated by the aforecited provisions.

Petitioners' allegation that respondent Palad's execution order directing them to vacate the subject land practically changed respondent Hilario's decision is baseless. It is incorrect for petitioners to assume that respondent Palad awarded portions of the subject land to private respondents Salasalans and Rabayas as they had not yet been issued patents or titles over the subject land. The execution order merely directed the segregation of petitioners' titled lot from the subject land which was actually being occupied by private respondents before they were ejected from it. Based on the finding that private respondents were actually in possession or were actually occupying the subject land instead of petitioners, respondent Palad, being the Director of Lands and in the exercise of his administrative discretion, directed petitioners to vacate the subject land on the ground that private respondents have a preferential right, being the occupants thereof.

While private respondents may not have filed their application over the land occupied by them, they nevertheless filed their protest or opposition to petitioners' Miscellaneous Sales Application, the same being preparatory to the filing of an application as they were in fact directed to do so. In any case, respondent Palad's execution order merely implements respondent Hilario's order. It should be noted that petitioners' own application still has to be given due course. 17

As Director of Lands, respondent Palad is authorized to exercise executive control over any form of concession, disposition and management of the lands of the public domain. 18 He may issue decisions and orders as he may see fit under the circumstances as long as they are based on the findings of fact.

In the case of Calibo v. Ballesteros, 19 this Court held that where, in the disposition of public lands, the Director of Lands bases his decision on the evidence thus presented, he clearly acts within his jurisdiction, and if he errs in appraising the evidence, the error is one of judgment, but not an act of grave abuse of discretion annullable by certiorari. Thus, except for the issue of non-exhaustion of administrative remedies, this Court finds no reversible error nor grave abuse of discretion in the decision of the Court of Appeals.

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

G.R. No. 116290               December 8, 2000

DIONISIA P. BAGAIPO, petitioner, vs.THE HON. COURT OF APPEALS and LEONOR LOZANO, respondents.QUISUMBING, J.:

This petition assails the decision dated June 30, 1994 of the Court of Appeals affirming the dismissal by the Regional Trial Court of Davao City, Branch 8, in Civil Case No. 555-89, of petitioner’s complaint for recovery of possession with prayer for preliminary mandatory injunction and damages.

The undisputed facts of the case are as follows:

Petitioner Dionisia P. Bagaipo is the registered owner of Lot No. 415, a 146,900 square meter agricultural land situated in Ma-a, Davao City under Transfer Certificate of Title No. T-15757 particularly described as follows:

…Bounded on the NE., by Lots Nos. 419 and 416; on the SE by the Davao River; on the SE., (sic) by Lots Nos. 1092 and 1091; and on the NW., by Lots Nos. 413 and 418…1

Respondent Leonor Lozano is the owner of a registered parcel of land located across and opposite the southeast portion of petitioner’s lot facing the Davao River. Lozano acquired and occupied her property in 1962 when his wife inherited the land from her father who died that year.

On May 26, 1989, Bagaipo filed a complaint2 for Recovery of Possession with Mandatory Writ of Preliminary Injunction and Damages against Lozano for: (1) the surrender of possession by Lozano of a certain portion of land measuring 29,162 square meters which is supposedly included in the area belonging to Bagaipo under TCT No. T-15757; and (2) the recovery of a land area measuring 37,901 square meters which Bagaipo allegedly lost when the Davao River traversed her property. Bagaipo contended that as a result of a change in course of the said river, her property became divided into three lots, namely: Lots 415-A, 415-B and 415-C.

In January 1988, Bagaipo commissioned a resurvey of Lot 415 and presented before the trial court a survey plan3 prepared by Geodetic Engineer Gersacio A. Magno. The survey plan allegedly showed that: a) the area presently occupied by Bagaipo, identified as Lot 415-A, now had an area of only 79,843 square meters; b) Lot 415-B, with an area measuring 37,901 square meters, which cut across Bagaipo’s land was taken up by the new course of the Davao River; and c) an area of 29,162 square meters designated as Lot 415-C was illegally occupied by respondent Lozano. The combined area of the lots described by Engineer Magno in the survey plan tallied with the technical description of Bagaipo’s land under TCT No. T-15757. Magno concluded that the land presently located across the river and parallel to Bagaipo’s property still belonged to the latter and not to Lozano, who planted some 350 fruit-bearing trees on Lot 415-C and the old abandoned river bed.

Bagaipo also presented Godofredo Corias, a former barangay captain and long-time resident of Ma-a to prove her claim that the Davao River had indeed changed its course. Corias testified that the occurrence was caused by a big flood in 1968 and a bamboo grove which used to indicate the position of the river was washed away. The river which flowed previously in front of a chapel located 15 meters away from the riverbank within Bagaipo’s property now flowed behind it. Corias was also present when Magno conducted the relocation survey in 1988.

For his part, Lozano insisted that the land claimed by Bagaipo is actually an accretion to their titled property. He asserted that the Davao River did not change its course and that the reduction in Bagaipo’s domain was caused by gradual erosion due to the current of the Davao River. Lozano added that it is also because of the river’s natural action that silt slowly deposited and added to his land over a long period of time. He further averred that this accretion continues up to the present and that registration proceedings instituted by him over the alluvial formation could not be concluded precisely because it continued to increase in size.

Lozano presented three witnesses: Atty. Pedro Castillo, his brother-in-law; Cabitunga Pasanday, a tenant of Atty. Castillo; and Alamin Catucag, a tenant of the Lozanos.

Atty. Castillo testified that the land occupied by the Lozanos was transferred to his sister, Ramona when they extra-judicially partitioned their parents’ property upon his father’s death. On September 9, 1973, Atty. Castillo filed a land registration case involving the accretion which formed on the property and submitted for this purpose, a survey plan4 approved by the Bureau of Lands as well as tax declarations5 covering the said accretion. An Order of General Default6 was already issued in the land registration case on November 5, 1975, but the case itself remained pending since the petition had to be amended to include the continuing addition to the land area.

Mr. Cabitunga Pasanday testified that he has continuously worked on the land as tenant of the Castillos since 1925, tilling an area of about 3 hectares. However, the land he tilled located opposite the land of the Lozanos and adjacent to the Davao River has decreased over the years to its present size of about 1 hectare. He said the soil on the bank of the river, as well as coconut trees he planted would be carried away each time there was a flood. This similar erosion occurs on the properties of Bagaipo and a certain Dr. Rodriguez, since the elevation of the riverbank on their properties is higher than the elevation on Lozano’s side.

Alamin Catucag testified that he has been a tenant of the Castillos since 1939 and that the portion he occupies was given to Ramona, Lozano’s wife. It was only 1 hectare in 1939 but has increased to 3 hectares due to soil deposits from the mountains and river. Catucag said that Bagaipo’s property was reduced to half since it is in the curve of the river and its soil erodes and gets carried away by river water.

On April 5, 1991, the trial court conducted an ocular inspection. It concluded that the applicable law is Article 4577 . 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.7 of the New Civil Code and not Art. 4618 The reduction in the land area of plaintiff was caused by erosion and not by a change in course of the Davao River. Conformably then, the trial court dismissed the complaint.

On appeal, the Court of Appeals affirmed the decision of the trial court and decreed as follows:

WHEREFORE, the decision appealed from is hereby affirmed, with costs against the plaintiff-appellant.9

Hence, this appeal.

Petitioner asserts that the Court of Appeals erred in:

....NOT GIVING PROBATIVE VALUE TO THE RELOCATION SURVEY (EXHIBIT "B") PREPARED BY LICENSED GEODETIC ENGINEER GERSACIO MAGNO. THE CASE OF "DIRECTOR OF LANDS VS. HEIRS OF JUANA CAROLINA" 140 SCRA 396 CITED BY THE RESPONDENT COURT IN DISREGARDING EXHIBIT "B" IS NOT APPLICABLE TO THE CASE AT BAR.

....NOT FINDING THAT ASSUMING WITHOUT ADMITTING THAT THE QUESTIONED LOT 415-C (EXHIBIT "B-1") OCCUPIED BY RESPONDENT LEONOR LOZANO WAS THE RESULT OF AN ACCRETION, THE PRINCIPLE OF ACCRETION CANNOT AND DOES NOT APPLY IN THE INSTANT CASE TO FAVOR SAID RESPONDENT BECAUSE SAID LOT 415-C IS WITHIN AND FORM PART OF PETITIONER’S LAND DESCRIBED IN TCT NO. 15757 (EXHIBIT "A")

....FINDING PETITIONER GUILTY OF LACHES WHEN SHE INSTITUTED THE SUIT.

....NOT ORDERING RESPONDENT LEONOR LOZANO TO VACATE AND SURRENDER LOT 415-C IN FAVOR OF PETITIONER AND FOR HIM TO PAY PETITIONER DAMAGES FOR ITS UNLAWFUL OCCUPATION THEREOF.

....NOT HOLDING PETITIONER ENTITLED TO THE ABANDONED RIVER BED.10

For this Court’s resolution are the following issues: Did the trial court err in holding that there was no change in course of the Davao River such that petitioner owns the abandoned river bed pursuant to Article 461 of the Civil Code? Did private respondent own Lot 415-C in accordance with the principle of accretion under Article 457? Should the relocation survey prepared by a licensed geodetic engineer be disregarded since it was not approved by the Director of Lands? Is petitioner’s claim barred by laches?

On the first issue. The trial court and the appellate court both found that the decrease in land area was brought about by erosion and not a change in the river’s course. This conclusion was reached after the trial judge observed during ocular inspection that the banks located on petitioner’s land are sharp, craggy and very much higher than the land on the other side of the river. Additionally, the riverbank on respondent’s side is lower and gently sloping. The lower land therefore naturally received the alluvial soil carried by the river current.11 These findings are factual, thus conclusive on this Court, unless there are strong and exceptional reasons, or they are unsupported by the evidence on record, or the judgment itself is based on a misapprehension of facts.12 These factual findings are based on an ocular inspection of the judge and convincing testimonies, and we find no convincing reason to disregard or disbelieve them.

The decrease in petitioner’s land area and the corresponding expansion of respondent’s property were the combined effect of erosion and accretion respectively. Art. 461 of the Civil Code is inapplicable. Petitioner cannot claim ownership over the old abandoned riverbed because the same is inexistent. The riverbed’s former location cannot even be pinpointed with particularity since the movement of the Davao River took place gradually over an unspecified period of time, up to the present.

The rule is well-settled that 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 the river.13 These requisites were sufficiently proven in favor of respondents. In the absence of evidence that the change in the course of the river was sudden or that it occurred through avulsion, the presumption is that the change was gradual and was caused by alluvium and erosion.14

As to Lot 415-C, which petitioner insists forms part of her property under TCT No. T-15757, it is well to recall our holding in C.N. Hodges vs. Garcia, 109 Phil. 133, 135:

… The fact that the accretion to his land used to pertain to plaintiff’s estate, which is covered by a Torrens certificate of title, cannot preclude him (defendant) from being the owner thereof. Registration does not protect the riparian owner against the diminution of the area of his land through gradual changes in the course of the adjoining stream. Accretions which the banks of rivers may gradually receive from the effect of the current become the property of the owners of the banks (Art. 366 of the old Civil Code; Art. 457 of the new). Such accretions are natural incidents to land bordering on running streams and the provisions of the Civil Code in that respect are not affected by the Land Registration Act.15

Petitioner did not demonstrate that Lot 415-C allegedly comprising 29,162 square meters was within the boundaries of her titled property. The survey plan commissioned by petitioner which was not approved by the Director of Lands was properly discounted by the appellate court. In Titong vs. Court of Appeals16 we affirmed the trial court’s refusal to give probative value to a private survey plan and held thus:

…the plan was not verified and approved by the Bureau of Lands in accordance with Sec. 28, paragraph 5 of Act No. 2259, the Cadastral Act, as amended by Sec. 1862 of Act No. 2711. Said law ordains that private surveyors send their original field notes, computations, reports, surveys, maps and plots regarding a piece of property to the Bureau of Lands for verification and approval.1âwphi1 A survey plan not verified and approved by said Bureau is nothing more than a private writing, the due execution and authenticity of which must be proven in accordance with Sec. 20 of Rule 132 of the Rules of Court. The circumstance that the plan was admitted in evidence without any objection as to its due execution

and authenticity does not signify that the courts shall give probative value therefor. To admit evidence and not to believe it subsequently are not contradictory to each other…

In view of the foregoing, it is no longer necessary now to discuss the defense of laches. It is mooted by the disquisition on the foregoing issues.

WHEREFORE, the assailed decision dated June 30, 1994, of the Court of Appeals in C.A.-G. R. CV No. 37615, sustaining the judgment of the court a quo, is AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. L-4656            November 18, 1912

RICARDO PARDELL Y CRUZ and VICENTA ORTIZ Y FELIN DE PARDELL, plaintiffs-appellees, vs.GASPAR DE BARTOLOME Y ESCRIBANO and MATILDE ORTIZ Y FELIN DE BARTOLOME, defendants-appellants. TORRES, J.:

This is an appeal by bill of exceptions, from the judgment of October 5, 1907, whereby the Honorable Dionisio Chanco, judge, absolved the defendants from the complaint, and the plaintiff from a counterclaim, without special finding as to costs.

Counsel for the spouses Ricardo y Cruz and Vicente Ortiz y Felin de Pardell, the first of whom, absent in Spain by reason of his employment, conferred upon the second sufficient and ample powers to appear before the courts of justice, on June 8, 1905, in his written complaint, alleged that the plaintiff, Vicente Ortiz, and the defendant, Matilde Ortiz, are the duly recognized natural daughters of the spouses Miguel Ortiz and Calixta Felin y Paula who died in Vigan, Ilocos Sur, in 1875 and 1882, respectively; that Calixta Felin, prior to her death, executed on August 17, 1876, a nuncupative will in Vigan whereby she made her four children, named Manuel, Francisca, Vicenta, and Matilde, surnamed Ortiz y Felin, her sole and universal heirs of all her property; that, of the persons enumerated, Manuel died before his mother and Francisca a few years after her death, leaving no heirs by force of law, and therefore the only existing heirs of the said testatrix are the plaintiff Vicenta Ortiz and the defendant Matilde Ortiz; that, aside from some personal property and jewelry already divided among the heirs, the testatrix possessed, at the time of the execution of her will, and left at her death the real properties which, with their respective cash values, are as follows:

1. A house of strong material, with the lot on which it is built, situated on Escolta Street, Vigan, and valued at

P6,000.00

2. A house of mixed material, with the lot on which it stands, at No. 88 Washington Street, Vigan; valued at

1,500.00

3. A lot on Magallanes Street, Vigan; valued at 100.00

4. A parcel of rice land, situated in the barrio of San Julian, Vigan; valued at

60.00

5. A parcel of rice land in the pueblo of Santa Lucia; valued at 86.00

6. Three parcels of land in the pueblo of Candon; valued at 150.00

Total 7,896.00

That, on or about the first months of the year 1888, the defendants, without judicial authorization, nor friendly or extrajudicial agreement, took upon themselves the administration and enjoyment of the said properties and collected the rents, fruits, and products thereof, to the serious detriment of the plaintiffs' interest; that, notwithstanding the different and repeated demands extrajudicially made upon Matilde Ortiz to divide the aforementioned properties with the plaintiff Vicente and to deliver to the latter the one-half thereof, together with one-half of the fruits and rents collected therefrom, the said defendant and her husband, the self-styled administrator of the properties mentioned, had been delaying the partition and delivery of the said properties by means of unkept promises and other excuses; and that the plaintiffs, on account of the extraordinary delay in the delivery of one-half of said properties, or their value in cash, as the case might be, had suffered losses and damages in the sum of P8,000. Said counsel for the plaintiffs therefore asked that judgment be rendered by sentencing the defendants, Gaspar de Bartolome, and Matilde Ortiz Felin de Bartolome, to restore and deliver to the plaintiffs one-half of the total value in cash, according to appraisal, of the undivided property specified, which one-half amounted approximately to P3,948, or if deemed proper, to recognize the plaintiff Vicenta Ortiz to be vested with the full and absolute right of ownership to the said undivided one-half of the properties in question, as universal testamentary heir thereof together with the defendant Matilde Ortiz, to indemnify the plaintiffs in the sum of P8,000, for losses and damages, and to pay the costs.

Counsel for the defendants, in his answer denied the facts alleged in paragraphs 1, 4, 6, 7, and 8 thereof, inasmuch as, upon the death of the litigating sister's brother Manuel, their mother, who was still living, was his heir by force of law, and the defendants had never refused to give to the plaintiff Vicente Ortiz her share of the said properties; and stated that he admitted the facts alleged in paragraph 2, provided it be understood, however, that the surname of the defendant's mother was Felin, and not Feliu, and that Miguel Ortiz died in Spain, and not in Vigan; that he also admitted paragraph 3 of the complaint, with the difference that the said surname should be Felin, and likewise paragraph 5, except the part thereof relating to the personal property and the jewelry, since the latter had not yet been divided; that the said jewelry was in the possession of the plaintiffs and consisted of: one Lozada gold chronometer watch with a chain in the form of a bridle curb and a watch charm consisting of the engraving of a postage stamp on a stone mounted in gold and bearing the initials M. O., a pair of cuff buttons made of gold

coins, four small gold buttons, two finger rings, another with the initials M. O., and a gold bracelet; and that the defendants were willing to deliver to the plaintiffs, in conformity with their petitions, one-half of the total value in cash, according to appraisement, of the undivided real properties specified in paragraph 5, which half amounted to P3,948.

In a special defense said counsel alleged that the defendants had never refused to divide the said property and had in fact several years before solicited the partition of the same; that, from 1886 to 1901, inclusive, there was collected from the property on Calle Escolta the sum of 288 pesos, besides a few other small amounts derived from other sources, which were delivered to the plaintiffs with other larger amounts, in 1891, and from the property on Calle Washington, called La Quinta, 990.95 pesos, which proceeds, added together, made a total of 1,278.95 pesos, saving error or omission; that, between the years abovementioned, Escolta, and that on Calle Washington, La Quinta, 376.33, which made a total of 1,141.71, saving error or omission; that, in 1897, the work of reconstruction was begun of the house on Calle Escolta, which been destroyed by an earthquake, which work was not finished until 1903 and required an expenditure on the part of the defendant Matilde Ortiz, of 5,091.52 pesos; that all the collections made up to August 1, 1905, including the rent from the stores, amounted to only P3,654.15, and the expenses, to P6,252.32, there being, consequently, a balance of P2,598.17, which divided between the sisters, the plaintiff and the defendant, would make the latter's share P1,299.08; that, as shown by the papers kept by the plaintiffs, in the year 1891 the defendant Bartolome presented to the plaintiffs a statement in settlements of accounts, and delivered to the person duly authorized by the latter for the purpose, the sum of P2,606.29, which the said settlement showed was owing his principals, from various sources; that, the defendant Bartolome having been the administrator of the undivided property claimed by the plaintiffs, the latter were owing the former legal remuneration of the percentage allowed by law for administration; and that the defendants were willing to pay the sum of P3,948, one-half of the total value of the said properties, deducting therefrom the amount found to be owing them by the plaintiffs, and asked that judgment be rendered in their favor to enable them to recover from the latter that amount, together with the costs and expenses of the suit.

The defendants, in their counter claim, repeated each and all of the allegations contained in each of the paragraphs of section 10 of their answer; that the plaintiffs were obliged to pay to the administrator of the said property the remuneration allowed him by law; that, as the revenues collected by the defendants amounted to no more than P3,654.15 and the expenditures incurred by them, to P6,252.32, it followed that the plaintiffs owed the defendants P1,299.08, that is one-half of the difference between the amount collected from and that extended on the properties, and asked that judgment be therefore rendered in their behalf to enable them to collect this sum from the plaintiffs, Ricardo Pardell and Vicenta Ortiz, with legal interest thereon from December 7, 1904, the date when the accounts were rendered, together with the sums to which

the defendant Bartolome was entitled for the administration of the undivided properties in question.

By a written motion of August 21, 1905, counsel for the plaintiffs requested permission to amend the complaint by inserting immediately after the words "or respective appraisal," fifth line of paragraph 5, the phrase "in cash in accordance with the assessed value," and likewise further to amend the same, in paragraph 6 thereof, by substituting the following word in lieu of the petition for the remedy sought: "By reason of all the foregoing, I beg the court to be pleased to render the judgment by sentencing the defendants, Gaspar de Bartolome and Matilde Ortiz Felin de Bartolome, to restore and deliver to the plaintiffs an exact one-half of the total vale of the undivided properties described in the complaint, such value to be ascertained by the expert appraisal of two competent persons, one of whom shall be appointed by the plaintiffs and the other by the defendants, and, in case of disagreement between these two appointees such value shall be determined by a third expert appraiser appointed by the court, or, in a proper case, by the price offered at public auction; or, in lieu thereof, it is requested that the court recognize the plaintiff, Vicenta Ortiz, to be vested with a full and absolute right to an undivided one-half of the said properties; furthermore, it is prayed that the plaintiffs be awarded an indemnity of P8,000 for losses and damages, and the costs." Notwithstanding the opposition of the defendants, the said amendment was admitted by the court and counsel for the defendants were allowed to a period of three days within which to present a new answer. An exception was taken to this ruling.

The proper proceedings were had with reference to the valuation of the properties concerned in the division sought and incidental issues were raised relative to the partition of some of them and their award to one or the other of the parties. Due consideration was taken of the averments and statements of both parties who agreed between themselves, before the court, that any of them might at any time acquire, at the valuation fixed by the expert judicial appraiser, any of the properties in question, there being none in existence excluded by the litigants. The court, therefore, by order of December 28, 1905, ruled that the plaintiffs were entitled to acquire, at the valuation determined by the said expert appraiser, the building known as La Quinta, the lot on which it stands and the warehouses and other improvements comprised within the inclosed land, and the seeds lands situated in the pueblos of Vigan and Santa Lucia; and that the defendants were likewise entitled to acquire the house on Calle Escolta, the lot on Calle Magallanes, and the three parcels of land situated in the pueblo of Candon.

After this partition had been made counsel for the defendants, by a writing of March 8, 1906, set forth: That, having petitioned for the appraisement of the properties in question for the purpose of their partition, it was not to be understood that he desired from the exception duly entered to the ruling made in the matter of the amendment to the complaint; that the properties retained by the defendants were valued at P9,310, and those retained by the plaintiffs, at P2,885, one-half of which amounts each party had to deliver to the other, as they were pro indiviso properties; that, therefore, the defendants had to pay the plaintiffs the sum of

P3,212.50, after deducting the amount which the plaintiffs were obliged to deliver to the defendants, as one-half of the price of the properties retained by the former; that, notwithstanding that the amount of the counterclaim for the expenses incurred in the reconstruction of the pro indiviso property should be deducted from the sum which the defendants had to pay the plaintiffs, the former, for the purpose of bringing the matter of the partition to a close, would deliver to the latter, immediately upon the signing of the instrument of purchase and sale, the sum of P3,212.50, which was one-half of the value of the properties alloted to the defendants; such delivery, however, was not to be understood as a renouncement of the said counterclaim, but only as a means for the final termination of the pro indiviso status of the property.

The case having been heard, the court on October 5, 1907, rendered judgment holding that the revenues and the expenses were compensated by the residence enjoyed by the defendant party, that no losses or damages were either caused or suffered, nor likewise any other expense besides those aforementioned, and absolved the defendants from the complaint and the plaintiffs from the counterclaim, with no special finding as to costs. An exception was taken to this judgment by counsel for the defendants who moved for a new trial on the grounds that the evidence presented did not warrant the judgment rendered and that the latter was contrary to law. This motion was denied, exception whereto was taken by said counsel, who filed the proper bill of exceptions, and the same was approved and forwarded to the clerk of this court, with a transcript of the evidence.

Both of the litigating sisters assented to a partition by halves of the property left in her will by their mother at her death; in fact, during the course of this suit, proceedings were had, in accordance with the agreement made, for the division between them of the said hereditary property of common ownership, which division was recognized and approved in the findings of the trial court, as shown by the judgment appealed from.

The issues raised by the parties, aside from said division made during the trial, and which have been submitted to this court for decision, concern: (1) The indemnity claimed for losses and damages, which the plaintiffs allege amount to P8,000, in addition to the rents which should have been derived from the house on Calle Escolta, Vigan; (2) the payment by the plaintiffs to the defendants of the sum of P1,299.08, demanded by way of counterclaim, together with legal interest thereon from December 7, 1904; (3) the payment to the husband of the defendant Matilde Ortiz, of a percentage claimed to be due him as the administrator of the property of common ownership; (4) the division of certain jewelry in the possession of the plaintiff Vicenta Ortiz; and (5) the petition that the amendment be held to have been improperly admitted, which was made by the plaintiffs in their written motion of August 21, 1905, against the opposition of the defendants, through which admission the latter were obliged to pay the former P910.50.lawphil.net

Before entering upon an explanation of the propriety or impropriety of the claims made by both parties, it is indispensable to state that the trial judge, in absolving the defendants from the complaint, held that they had not caused losses and damages to the plaintiffs, and that the revenues and the expenses were compensated, in view of the fact that the defendants had been living for several years in the Calle Escolta house, which was pro indiviso property of joint ownership.

By this finding absolving the defendants from the complaint, and which was acquiesced in by the plaintiffs who made no appeal therefrom, the first issue has been decided which was raised by the plaintiffs, concerning the indemnity for losses and damages, wherein are comprised the rents which should have been obtained from the upper story of the said house during the time it was occupied by the defendants, Matilde Ortiz and her husband, Gaspar de Bartolome.

Notwithstanding the acquiescence on the part of the plaintiffs, assenting to the said finding whereby the defendants were absolved from the complaint, yet, as such absolution is based on the compensation established in the judgment of the trial court, between the amounts which each party is entitled to claim from the other, it is imperative to determine whether the defendant Matilde Ortiz, as coowner of the house on Calle Escolta, was entitled, with her husband, to reside therein, without paying to her coowner, Vicenta Ortiz, who, during the greater part of the time, lived with her husband abroad, one-half of the rents which the upper story would have produced, had it been rented to a stranger.

Article 394 of the Civil Code prescribes:

Each coowner may use the things owned in common, provided he uses them in accordance with their object and in such manner as not to injure the interests of the community nor prevent the coowners from utilizing them according to their rights.

Matilde Ortiz and her husband occupied the upper story, designed for use as a dwelling, in the house of joint ownership; but the record shows no proof that, by so doing, the said Matilde occasioned any detriment to the interest of the community property, nor that she prevented her sister Vicenta from utilizing the said upper story according to her rights. It is to be noted that the stores of the lower floor were rented and accounting of the rents was duly made to the plaintiffs.

Each coowner of realty held pro indiviso exercises his rights over the whole property and may use and enjoy the same with no other limitation than that he shall not injure the interests of his coowners, for the reason that, until a division be made, the respective part of each holder can not be determined and every one of the coowners exercises, together with his other coparticipants, joint ownership over the pro indiviso property, in addition to his use and enjoyment of the same.

As the hereditary properties of the joint ownership of the two sisters, Vicenta Ortiz, plaintiff, and Matilde Ortiz, defendant, were situated in the Province of Ilocos Sur, and were in the care of the last named, assisted by her husband, while the plaintiff Vicenta with her husband was residing outside of the said province the greater part of the time between 1885 and 1905, when she left these Islands for Spain, it is not at all strange that delays and difficulties should have attended the efforts made to collect the rents and proceeds from the property held in common and to obtain a partition of the latter, especially during several years when, owing to the insurrection, the country was in a turmoil; and for this reason, aside from that founded on the right of coownership of the defendants, who took upon themselves the administration and care of the properties of joint tenancy for purposes of their preservation and improvement, these latter are not obliged to pay to the plaintiff Vicenta one-half of the rents which might have been derived from the upper of the story of the said house on Calle Escolta, and, much less, because one of the living rooms and the storeroom thereof were used for the storage of some belongings and effects of common ownership between the litigants. The defendant Matilde, therefore, in occupying with her husband the upper floor of the said house, did not injure the interests of her coowner, her sister Vicenta, nor did she prevent the latter from living therein, but merely exercised a legitimate right pertaining to her as coowner of the property.

Notwithstanding the above statements relative to the joint-ownership rights which entitled the defendants to live in the upper story of the said house, yet in view of the fact that the record shows it to have been proved that the defendant Matilde's husband, Gaspar de Bartolome, occupied for four years a room or a part of the lower floor of the same house on Calle Escolta, using it as an office for the justice of the peace, a position which he held in the capital of that province, strict justice, requires that he pay his sister-in-law, the plaintiff, one half of the monthly rent which the said quarters could have produced, had they been leased to another person. The amount of such monthly rental is fixed at P16 in accordance with the evidence shown in the record. This conclusion as to Bartolome's liability results from the fact that, even as the husband of the defendant coowner of the property, he had no right to occupy and use gratuitously the said part of the lower floor of the house in question, where he lived with his wife, to the detriment of the plaintiff Vicenta who did not receive one-half of the rent which those quarters could and should have produced, had they been occupied by a stranger, in the same manner that rent was obtained from the rooms on the lower floor that were used as stores. Therefore, the defendant Bartolome must pay to the plaintiff Vicenta P384, that is, one-half of P768, the total amount of the rents which should have been obtained during four years from the quarters occupied as an office by the justice of the peace of Vigan.

With respect to the second question submitted for decision to this court, relative to the payment of the sum demanded as a counterclaim, it was admitted and proved in the present case that, as a result of a serious earthquake on August 15, 1897, the said house on Calle Escolta was left in ruins and uninhabitable, and that, for its reconstruction or repair, the defendants had to expend the sum of P6,252.32. This expenditure, notwithstanding that it was impugned, during the trial, by the

plaintiffs, was duly proved by the evidence presented by the defendants. Evidence, unsuccessfully rebutted, was also introduced which proved that the rents produced by all the rural and urban properties of common ownership amounted, up to August 1, 1905, to the sum of P3,654.15 which, being applied toward the cost of the repair work on the said house, leaves a balance of P2,598.17, the amount actually advanced by the defendants, for the rents collected by them were not sufficient for the termination of all the work undertaken on the said building, necessary for its complete repair and to replace it in a habitable condition. It is therefore lawful and just that the plaintiff Vicenta Ortiz, who was willing to sell to her sister Matilde for P1,500, her share in the house in question, when it was in a ruinous state, should pay the defendants one-half of the amount expanded in the said repair work, since the building after reconstruction was worth P9,000, according to expert appraisal. Consequently, the counterclaim made by the defendants for the payment to them of the sum of P1,299.08, is a proper demand, though from this sum a reduction must be made of P384, the amount of one-half of the rents which should have been collected for the use of the quarters occupied by the justice of the peace, the payment of which is incumbent upon the husband of the defendant Matilde, as aforesaid, and the balance remaining, P915.08, is the amount which the plaintiff Vicenta must pay to the defendants.

The defendants claim to be entitled to the collection of legal interest on the amount of the counterclaim, from December 7, 1904. This contention can not be sustained, inasmuch as, until this suit is finally decided, it could not be known whether the plaintiffs would or would not be obliged to pay the sum whatever in reimbursement of expenses incurred by the plaintiffs in the repair work on the said house on Calle Escolta, whether or not the defendants, in turn, were entitled to collect any such amount, and, finally, what the net sum would be which the plaintiff's might have to pay as reimbursement for one-half of the expenditure made by the defendants. Until final disposal of the case, no such net sum can be determined, nor until then can the debtor be deemed to be in arrears. In order that there be an obligation to pay legal interest in connection with a matter at issue between the parties, it must be declared in a judicial decision from what date the interest will be due on the principal concerned in the suit. This rule has been established by the decisions of the supreme court of Spain, in reference to articles 1108, 1109, and 1110 of the Civil Code, reference on April 24, 1867, November 19, 1869, and February 22, 1901.

With regard to the percentage, as remuneration claimed by the husband of the defendant Matilde for his administration of the property of common ownership, inasmuch as no stipulation whatever was made in the matter by and between him and his sister-in-law, the said defendant, the claimant is not entitled to the payment of any remuneration whatsoever. Of his own accord and as an officious manager, he administered the said pro indiviso property, one-half of which belonged to his wife who held it in joint tenancy, with his sister-in-law, and the law does not allow him any compensation as such voluntary administrator. He is merely entitled to a reimbursement for such actual and necessary expenditures as he may have made on the undivided properties and an indemnity for the damages

he may have suffered while acting in that capacity, since at all events it was his duty to care for and preserve the said property, half of which belonged to his wife; and in exchange for the trouble occasioned him by the administration of his sister-in-law's half of the said property, he with his wife resided in the upper story of the house aforementioned, without payment of one-half of the rents said quarters might have produced had they been leased to another person.

With respect to the division of certain jewelry, petitioned for by the defendants and appellants only in their brief in this appeal, the record of the proceedings in the lower court does not show that the allegation made by the plaintiff Vicenta is not true, to the effect that the deceased mother of the litigant sisters disposed of this jewelry during her lifetime, because, had she not done so, the will made by the said deceased would have been exhibited in which the said jewelry would have been mentioned, at least it would have been proved that the articles in question came into the possession of the plaintiff Vicenta without the expressed desire and the consent of the deceased mother of the said sisters, for the gift of this jewelry was previously assailed in the courts, without success; therefore, and in view of its inconsiderable value, there is no reason for holding that the said gift was not made.

As regards the collection of the sum of P910.50, which is the difference between the assessed value of the undivided real properties and the price of the same as determined by the judicial expert appraiser, it is shown by the record that the ruling of the trial judge admitting the amendment to the original complaint, is in accord with the law and principles of justice, for the reason that any of the coowners of a pro indiviso property, subject to division or sale, is entitled to petition for its valuation by competent expert appraisers. Such valuation is not prejudicial to any of the joint owners, but is beneficial to their interests, considering that, as a general rule, the assessed value of a building or a parcel of realty is less than the actual real value of the property, and this being appraiser to determine, in conjunction with the one selected by the plaintiffs, the value of the properties of joint ownership. These two experts took part in the latter proceedings of the suit until finally, and during the course of the latter, the litigating parties agreed to an amicable division of the pro indiviso hereditary property, in accordance with the price fixed by the judicial expert appraiser appointed as a third party, in view of the disagreement between and nonconformity of the appraisers chosen by the litigants. Therefore it is improper now to claim a right to the collection of the said sum, the difference between the assessed value and that fixed by the judicial expert appraiser, for the reason that the increase in price, as determined by this latter appraisal, redounded to the benefit of both parties.

In consideration of the foregoing, whereby the errors assigned to the lower court have been duly refuted, it is our opinion that, with a partial reversal of the judgment appealed from, in so far as it absolves the plaintiffs from the counterclaim presented by the defendants, we should and hereby do sentence the plaintiffs to the payment of the sum of P915.08, the balance of the sum claimed by the defendants as a balance of the one-half of the amount which the defendants advanced for the reconstruction or repair of the Calle Escolta house, after

deducting from the total of such sum claimed by the latter the amount of P384 which Gaspar de Bartolome, the husband of the defendant Matilde, should have paid as one-half of the rents due for his occupation of the quarters on the lower floor of the said house as an office for the justice of the peace court of Vigan; and we further find: (1) That the defendants are not obliged to pay one-half of the rents which could have been obtained from the upper story of the said house; (2) that the plaintiffs can not be compelled to pay the legal interest from December 7, 1904, on the sum expanded in the reconstruction of the aforementioned house, but only the interest fixed by law, at the rate of 6 per cent per annum, from the date of the judgment to be rendered in accordance with this decision; (3) that the husband of the defendant Matilde Ortiz is not entitled to any remuneration for the administration of the pro indiviso property belonging to both parties; (4) that, neither is he entitled to collect from the plaintiffs the sum of P910.50, the difference between the assessed valuation and the price set by the expert appraisal solicited by the plaintiffs in their amendment to the complaint; and, (5) that no participation shall be made of jewelry aforementioned now in the possession of the plaintiff Vicenta Ortiz. The said judgment, as relates to the points appealed, is affirmed, in so far as its findings agree with those of this decision, and is reversed, in so far as they do not. No special finding is made regarding the costs of both instances. So ordered.

G.R. No. L-45425             April 29, 1939

JOSE GATCHALIAN, ET AL., plaintiffs-appellants, vs.THE COLLECTOR OF INTERNAL REVENUE, defendant-appellee.IMPERIAL, J.:

The plaintiff brought this action to recover from the defendant Collector of Internal Revenue the sum of P1,863.44, with legal interest thereon, which they paid under protest by way of income tax. They appealed from the decision rendered in the case on October 23, 1936 by the Court of First Instance of the City of Manila, which dismissed the action with the costs against them.

The case was submitted for decision upon the following stipulation of facts:

Come now the parties to the above-mentioned case, through their respective undersigned attorneys, and hereby agree to respectfully submit to this Honorable Court the case upon the following statement of facts:

1. That plaintiff are all residents of the municipality of Pulilan, Bulacan, and that defendant is the Collector of Internal Revenue of the Philippines;

2. That prior to December 15, 1934 plaintiffs, in order to enable them to purchase one sweepstakes ticket valued at two pesos (P2), subscribed and paid therefor the amounts as follows:

1. Jose Gatchalian ....................................................................................................

P0.18

2. Gregoria Cristobal ...............................................................................................

.18

3. Saturnina Silva ....................................................................................................

.08

4. Guillermo Tapia ...................................................................................................

.13

5. Jesus Legaspi ......................................................................................................

.15

6. Jose Silva .............................................................................................................

.07

7. Tomasa Mercado ................................................................................................

.08

8. Julio Gatchalian ...................................................................................................

.13

9. Emiliana Santiago ................................................................................................

.13

10. Maria C. Legaspi ...............................................................................................

.16

11. Francisco Cabral ...............................................................................................

.13

12. Gonzalo Javier ....................................................................................................

.14

13. Maria Santiago ...................................................................................................

.17

14. Buenaventura Guzman ......................................................................................

.13

15. Mariano Santos .................................................................................................

.14

Total ........................................................................................................ 2.00

3. That immediately thereafter but prior to December 15, 1934, plaintiffs purchased, in the ordinary course of business, from one of the duly authorized agents of the National Charity Sweepstakes Office one ticket bearing No. 178637 for the sum of two pesos (P2) and that the said ticket was registered in the name of Jose Gatchalian and Company;

4. That as a result of the drawing of the sweepstakes on December 15, 1934, the above-mentioned ticket bearing No. 178637 won one of the third prizes in the amount of P50,000 and that the corresponding check covering the above-mentioned prize of P50,000 was drawn by the National Charity Sweepstakes Office in favor of Jose Gatchalian & Company against the Philippine National Bank, which check was cashed during the latter part of December, 1934 by Jose Gatchalian & Company;

5. That on December 29, 1934, Jose Gatchalian was required by income tax examiner Alfredo David to file the corresponding income tax return covering the prize won by Jose Gatchalian & Company and that on December 29, 1934, the said return was signed by Jose Gatchalian, a copy of which return is enclosed as Exhibit A and made a part hereof;

6. That on January 8, 1935, the defendant made an assessment against Jose Gatchalian & Company requesting the payment of the sum of P1,499.94 to the deputy provincial treasurer of Pulilan, Bulacan, giving to said Jose Gatchalian & Company until January 20, 1935 within which to pay the said amount of P1,499.94, a copy of which letter marked Exhibit B is enclosed and made a part hereof;

7. That on January 20, 1935, the plaintiffs, through their attorney, sent to defendant a reply, a copy of which marked Exhibit C is attached and made a part hereof, requesting exemption from payment of the income tax to which reply there were enclosed fifteen (15) separate individual income tax returns filed separately by each one of the plaintiffs, copies of which returns are attached and marked Exhibit D-1 to D-15, respectively, in order of their names listed in the caption of this case and made parts hereof; a statement of sale signed by Jose Gatchalian showing the amount put up by each of the plaintiffs to cover up the attached and marked as Exhibit E and made a part hereof; and a copy of the affidavit signed by Jose Gatchalian dated December 29, 1934 is attached and marked Exhibit F and made part thereof;

8. That the defendant in his letter dated January 28, 1935, a copy of which marked Exhibit G is enclosed, denied plaintiffs' request of January 20, 1935, for exemption from the payment of tax and reiterated his demand for the payment of the sum of P1,499.94 as income tax and gave plaintiffs until February 10, 1935 within which to pay the said tax;

9. That in view of the failure of the plaintiffs to pay the amount of tax demanded by the defendant, notwithstanding subsequent demand made by defendant upon the plaintiffs through their attorney on March 23, 1935, a copy of which marked Exhibit H is enclosed, defendant on May 13, 1935 issued a warrant of distraint and levy against the property of the plaintiffs, a copy of which warrant marked Exhibit I is enclosed and made a part hereof;

10. That to avoid embarrassment arising from the embargo of the property of the plaintiffs, the said plaintiffs on June 15, 1935, through Gregoria Cristobal, Maria C. Legaspi and Jesus Legaspi, paid under protest the sum of P601.51 as part of the tax and penalties to the municipal treasurer of Pulilan, Bulacan, as evidenced by official receipt No. 7454879 which is attached and marked Exhibit J and made a part hereof, and requested defendant that plaintiffs be allowed to pay under protest the balance of the tax and penalties by monthly installments;

11. That plaintiff's request to pay the balance of the tax and penalties was granted by defendant subject to the condition that plaintiffs file the usual bond secured by two solvent persons to guarantee prompt payment of each installments as it becomes due;

12. That on July 16, 1935, plaintiff filed a bond, a copy of which marked Exhibit K is enclosed and made a part hereof, to guarantee the payment of the balance of the alleged tax liability by monthly installments at the rate of P118.70 a month, the first payment under protest to be effected on or before July 31, 1935;

13. That on July 16, 1935 the said plaintiffs formally protested against the payment of the sum of P602.51, a copy of which protest is attached and marked Exhibit L, but that defendant in his letter dated August 1, 1935 overruled the protest and denied the request for refund of the plaintiffs;

14. That, in view of the failure of the plaintiffs to pay the monthly installments in accordance with the terms and conditions of bond filed by them, the defendant in his letter dated July 23, 1935, copy of which is attached and marked Exhibit M, ordered the municipal treasurer of Pulilan, Bulacan to execute within five days the warrant of distraint and levy issued against the plaintiffs on May 13, 1935;

15. That in order to avoid annoyance and embarrassment arising from the levy of their property, the plaintiffs on August 28, 1936, through Jose Gatchalian, Guillermo Tapia, Maria Santiago and Emiliano Santiago, paid under protest to the municipal treasurer of Pulilan, Bulacan the sum of P1,260.93 representing the unpaid balance of the income tax and penalties demanded by defendant as evidenced by income tax receipt No. 35811 which is attached and marked Exhibit N and made a part hereof; and that on September 3, 1936, the plaintiffs formally protested to the defendant against the payment of said amount and requested the refund thereof, copy of which is attached and marked Exhibit O and made part hereof; but that on September 4, 1936, the defendant overruled the protest and denied the refund thereof; copy of which is attached and marked Exhibit P and made a part hereof; and

16. That plaintiffs demanded upon defendant the refund of the total sum of one thousand eight hundred and sixty three pesos and forty-four centavos (P1,863.44) paid under protest by them but that defendant refused and still refuses to refund the said amount notwithstanding the plaintiffs' demands.

17. The parties hereto reserve the right to present other and additional evidence if necessary.

Exhibit E referred to in the stipulation is of the following tenor:

To whom it may concern:

I, Jose Gatchalian, a resident of Pulilan, Bulacan, married, of age, hereby certify, that on the 11th day of August, 1934, I sold parts of my shares on ticket No. 178637 to the persons and for the amount indicated below and the part of may share remaining is also shown to wit:

Purchaser Amount Address

1. Mariano Santos ........................................... P0.14 Pulilan, Bulacan.

2. Buenaventura Guzman ............................... .13 - Do -

3. Maria Santiago ............................................ .17 - Do -

4. Gonzalo Javier .............................................. .14 - Do -

5. Francisco Cabral .......................................... .13 - Do -

6. Maria C. Legaspi .......................................... .16 - Do -

7. Emiliana Santiago ......................................... .13 - Do -

8. Julio Gatchalian ............................................ .13 - Do -

9. Jose Silva ...................................................... .07 - Do -

10. Tomasa Mercado ....................................... .08 - Do -

11. Jesus Legaspi ............................................. .15 - Do -

12. Guillermo Tapia ........................................... .13 - Do -

13. Saturnina Silva ............................................ .08 - Do -

14. Gregoria Cristobal ....................................... .18 - Do -

15. Jose Gatchalian ............................................ .18 - Do -

Total cost of said

2.00

ticket; and that, therefore, the persons named above are entitled to the parts of whatever prize that might be won by said ticket.

Pulilan, Bulacan, P.I.

(Sgd.) JOSE GATCHALIAN

And a summary of Exhibits D-1 to D-15 is inserted in the bill of exceptions as follows:

RECAPITULATIONS OF 15 INDIVIDUAL INCOME TAX RETURNS FOR 1934 ALL DATED JANUARY 19, 1935 SUBMITTED TO THE

COLLECTOR OF INTERNAL REVENUE.

NameExhibi

t No.

Purchase

Price

Price Won

ExpensesNet prize

1. Jose Gatchalian ..........................................

D-1 P0.18P4,42

5P 480 3,945

2. Gregoria Cristobal ......................................

D-2 .18 4,575 2,000 2,575

3. Saturnina Silva .............................................

D-3 .08 1,875 360 1,515

4. Guillermo Tapia ..........................................

D-4 .13 3,325 360 2,965

5. Jesus Legaspi by Maria Cristobal .........

D-5 .15 3,825 720 3,105

6. Jose Silva ....................................................

D-6 .08 1,875 360 1,515

7. Tomasa Mercado .......................................

D-7 .07 1,875 360 1,515

8. Julio Gatchalian by Beatriz Guzman .......

D-8 .13 3,150 240 2,910

9. Emiliana D-9 .13 3,325 360 2,965

Santiago ......................................

10. Maria C. Legaspi ......................................

D-10 .16 4,100 960 3,140

11. Francisco Cabral ......................................

D-11 .13 3,325 360 2,965

12. Gonzalo Javier ..........................................

D-12 .14 3,325 360 2,965

13. Maria Santiago ..........................................

D-13 .17 4,350 360 3,990

14. Buenaventura Guzman ...........................

D-14 .13 3,325 360 2,965

15. Mariano Santos ........................................

D-15 .14 3,325 360 2,965

2.00 50,000

< COSPAN="2">

The legal questions raised in plaintiffs-appellants' five assigned errors may properly be reduced to the two following: (1) Whether the plaintiffs formed a partnership, or merely a community of property without a personality of its own; in the first case it is admitted that the partnership thus formed is liable for the payment of income tax, whereas if there was merely a community of property, they are exempt from such payment; and (2) whether they should pay the tax collectively or whether the latter should be prorated among them and paid individually.

The Collector of Internal Revenue collected the tax under section 10 of Act No. 2833, as last amended by section 2 of Act No. 3761, reading as follows:

SEC. 10. (a) There shall be levied, assessed, collected, and paid annually upon the total net income received in the preceding calendar year from all sources by every corporation, joint-stock company, partnership, joint account (cuenta en participacion), association or insurance company, organized in the Philippine Islands, no matter how created or organized, but not including duly registered general copartnership (compañias colectivas), a tax of three per centum upon such income; and a like tax shall be levied, assessed, collected, and paid annually upon the total net income received in the preceding calendar

year from all sources within the Philippine Islands by every corporation, joint-stock company, partnership, joint account (cuenta en participacion), association, or insurance company organized, authorized, or existing under the laws of any foreign country, including interest on bonds, notes, or other interest-bearing obligations of residents, corporate or otherwise: Provided, however, That nothing in this section shall be construed as permitting the taxation of the income derived from dividends or net profits on which the normal tax has been paid.

The gain derived or loss sustained from the sale or other disposition by a corporation, joint-stock company, partnership, joint account (cuenta en participacion), association, or insurance company, or property, real, personal, or mixed, shall be ascertained in accordance with subsections (c) and (d) of section two of Act Numbered Two thousand eight hundred and thirty-three, as amended by Act Numbered Twenty-nine hundred and twenty-six.

The foregoing tax rate shall apply to the net income received by every taxable corporation, joint-stock company, partnership, joint account (cuenta en participacion), association, or insurance company in the calendar year nineteen hundred and twenty and in each year thereafter.

There is no doubt that if the plaintiffs merely formed a community of property the latter is exempt from the payment of income tax under the law. But according to the stipulation facts the plaintiffs organized a partnership of a civil nature because each of them put up money to buy a sweepstakes ticket for the sole purpose of dividing equally the prize which they may win, as they did in fact in the amount of P50,000 (article 1665, Civil Code). The partnership was not only formed, but upon the organization thereof and the winning of the prize, Jose Gatchalian personally appeared in the office of the Philippines Charity Sweepstakes, in his capacity as co-partner, as such collection the prize, the office issued the check for P50,000 in favor of Jose Gatchalian and company, and the said partner, in the same capacity, collected the said check. All these circumstances repel the idea that the plaintiffs organized and formed a community of property only.

Having organized and constituted a partnership of a civil nature, the said entity is the one bound to pay the income tax which the defendant collected under the aforesaid section 10 (a) of Act No. 2833, as amended by section 2 of Act No. 3761. There is no merit in plaintiff's contention that the tax should be prorated among them and paid individually, resulting in their exemption from the tax.

In view of the foregoing, the appealed decision is affirmed, with the costs of this instance to the plaintiffs appellants. So ordered.

G.R. No. L-13281             August 31, 1960

SIARI VALLEY ESTATES, INC., petitioner, vs.FILEMON LUCASAN, ET AL., respondents.BAUTISTA ANGELO, J.:

On January 30, 1952, the Court of First Instance of Zamboanga del Norte rendered decision ordering Filemon Lucasan to deliver to the Siari Valley Estates, Inc. the cattle inside the former's pasture or pay its value amounting to P40,000.00 and damages in another sum of P40,000.00, This decision was affirmed in toto by the Supreme Court, and when the same became final and executory, a writ of execution was issued. In carrying out this writ, the sheriff proceeded to levy on certain parcels of lands belonging to defendant. These lands were sold by the sheriff at public auction to the corporation as the highest bidder on January 14, 1956. The judgment debtor having failed to redeem the land within the period of one year, on January 26, 1957, the sheriff issued in favor of the purchaser the final certificate of sale, copy of which was registered in the Office of the Register of Deeds of Zamboanga. On February 16, 1957, upon petition of the corporation, a writ of possession was issued directing the sheriff to place said corporation in possession thereof. Notwithstanding said writ, however, the corporation failed to take possession of the lands, hence it filed a motion reiterating its petition that it be placed in their possession.

This time judgment debtor Filemon Lucasan filed an opposition alleging that he was in possession of one of the parcels of land sold at public auction on which he has erected a house and which he has extra judicially constituted as a family home, the rest being in possession of third parties. On April 30, 1957, the court, overruling the opposition, issued an order directing the sheriff to place the corporation in possession of the lands sold to it. On August 7, 1957, debtor Lucasan filed a motion for reconsideration which was denied, the court reiterating its previous order with little amendment, but on August 23, 1957 issued another order allowing the corporation to take possession of all lands sold, with the exception of parcel 1 on which the family home was constituted, holding that the levy and sale made by the sheriff with regard to said parcel were not made in accordance with law and so are null and void. Having failed to have this last order reconsidered, the corporation interposed the present petition for certiorari.

It appears that parcel 1 is a registered land covered by Certificate of Title No. OCT-2492, Patent No. 50967, duly registered in the Office of the Register of Deeds of Zamboanga del Norte in the name of Filemon Lucasan. On this land stands a big house of mixed materials which is asserted in the amount of P23,270.00 as evidenced by Tax Declaration No. 7653. It also 37 3 appears that Filemon Lucasan and his wife constituted this house and the lot on which stands into a family home, the pertinent document having been registered in the office of the register of deeds on June 21, 1955. In opposing the petition of the corporation for a writ of possession insofar as this property is concerned, Lucasan contended that said lot and house having been constituted as a family home are beyond the reach of judicial execution. He contended that the levy made by the sheriff on said property is legally ineffective because it was not effected in accordance with what is prescribed in Section 14, Rule 39, in relation to Section 7, Rule 59, of the Rules of Court.

There is merit in this contention. The evidence shows that when this property was levied on execution by the sheriff to satisfy the judgment rendered against Filemon Lucasan in favor of petitioner corporation the notice of levy merely described the property as unregistered land and the same was registered under Act 3344 in the office of the register of deeds. It also appears that in the notice of sale the property was merely described according to the boundaries and area appearing in the tax declaration and not according to what appears in the certificate of title. On the other hand, the rule provides that real property shall "be levied on in like manner and with like effect as under an order of attachment" (Section 14, Rule 39), and the provision regarding attachment of real property postulates that the attachment shall be made "by filing with the register of deeds a copy of the order, together with the description of the property attached, and a notice that it is attached, and by leaving a copy of said order, description, and notice with the occupant of the property, if any there be," and that "Where the property has been brought under the operation of the Land Registration Act, the notice shall contain a reference to the number of the certificate of title and the volume and page in the registration book where the certificate is registered" (Section 7 [a], Rule 59).

These provisions should be strictly construed if their purpose has to be accomplished. The requirement that the notice of levy should contain a reference to the number of the certificate of title and the volume and page in the registration book where the certificate is registered is made in order that the debtor as well as a third person may be properly informed of the particular land or property that is under the custody of the court. This can only be accomplished by making a reference to the certificate of title covering the property. The situation differs if the land is unregistered in which case it is enough that the notice be registered under Act 3344. This conclusion finds support in the following authorities:

An attachment levied on real estate not duly recorded in the registry of property is not an encumbrance on the attached property, nor can such attachment, unrecorded in the registry, serve as a ground for decreeing the annulment of the sale of the property, at the request of another creditor. (Gonzales Diez vs. Delgado and Imperial, 37 Phil., 389)

... In conformity with the provisions of section 71 of the Land Registration Act, the sheriff of the City of Manila filed a notice of the levy with the register of deeds, which notice was entered in the primary entry book of the register's office, but was afterwards, on May 20, 1920, returned to the sheriff with the information that the property was registered in the name of Buenaventura Dizon, having been conveyed to the latter by the defendant in execution, Celerino Arellano, and that, therefore, no memorandum of the notice had been entered upon the outstanding certificate of title. It may be noted that the notice contained no "reference to the number of the certificate of title of the land to be effected and the volume and page in the registry book where the certificate is registered, and that t that extent, the notice did not meet the requirements of said

section 71. (De Ocampo vs. Treasurer of the Philippine Islands, 50 Phil., 140, 141; Emphasis supplied).

Since the notice of levy made by the sheriff as regards parcel number 1 which is a registered land contains no reference to the number of its certificate of title and the volume and page in the registry book where the title is registered, it follows that said notice is legally ineffective and as such did not have the effect of binding the property for purposes of execution. Consequently, the sale carried out by virtue of said levy is also invalid and of no legal effect.

The second issue raised is: Is the family home extra judicially established by respondent on the lot and house in question exempt from execution?

Respondent sustains the affirmative considering that the money judgment rendered against him was appealed to the Supreme Court in which event, he contends, the same could not be considered as a debt at the time the family home was constituted for it was still inchoate and as such cannot come under the provisions of Article 243 (2) of the new Civil Code.

The article above referred to provides that "The family home extra judicially formed shall be exempt from execution" except "for debts incurred before the declaration was recorded in the Registry of Property." What if the meaning of the word debt used in this article? Does it refer to a debt that is undisputed, or may it also refer to any pecuniary obligation even if the same has not yet been finally determined? In other words, can a judgment for a sum of money be considered a debt within the meaning of this provision even if said judgment is still pending appeal?

We are inclined to uphold the affirmative considering the real purpose of the law. The reason why a family home constituted after a debt had been incurred is not exempt from execution is to protect the creditor against a debtor who may act in bad faith by resorting to such declaration just to defeat the claim against him. If the purpose is to protect the creditor from fraud it would be immaterial if the debt incurred be undisputed or inchoate, for a debtor acting in good faith would prefer to wait until his case is definitely decided before constituting the family home. Indeed, it may result, as in this case, that the Supreme Court may affirm the judgment of the lower court. If the contention of respondent be sustained a debtor may be allowed to circumvent this provision of the law to the prejudice of the creditor. This the Court cannot countenance. Hence, we are persuaded to conclude that the money judgment in question comes within the purview of the word debt used in Article 243 (2) of the new Civil Code.

WHEREFORE, the order appealed from is hereby affirmed, without prejudice of the part of petitioner to file a new petition for execution following strictly the requirements of the rule on the matter. No pronouncement as to costs.

.R. No. L-27933      December 24, 1968

DIVERSIFIED CREDIT CORPORATION, plaintiff-appellee, vs.FELIPE ROSADO and LUZ JAYME ROSADO, defendants-appellants. REYES, J.B.L.:

This appeal from a decision of the Court of First Instance of Bacolod City, Negros Occidental (Civ. Case No. 7516 of that Court) was certified to us by the Court of Appeals (Second Division) because the same involves no questions of fact.

The case had its origin in the Municipal Court of Bacolod City, when the Diversified Credit Corporation filed an action to compel the spouses Felipe Rosado and Luz Jayme Rosado to vacate and restore possession of a parcel of land in the City of Bacolod (Lot 62-B of Subdivision plan LRC-Psd-33823) that forms part of Lot No. 62 of the Bacolod Cadastre, and is covered by Transfer Certificate of Title No. 27083 in the name of plaintiff. After answer, claiming that the lot was defendants' conjugal property, the Municipal Court ordered defendants to surrender and vacate the land in litigation; to pay P100.00 a month from the filing of the complaint up to the actual vacating of the premises; to pay P500.00 attorneys' fees and costs. Upon appeal to the Court of First Instance, the case was submitted on the following stipulation of facts (Rec. on App., pp. 59-60):

1. That Lot No. 62-B of Bacolod Cadastre belong to the thirteen co-owners, including the wife of the defendant herein, who owns 1/13th part pro-indiviso;

2. That on May 11, 1964, Luz Jayme Rosado, wife of the defendant Felipe Rosado, signed a Deed of Sale together with the co-owners of the property to the plaintiff as shown by Exh. "A" for the plaintiff;

3. That on the lot in question the defendant Felipe Rosado had built a house sometime in 1957 without the whole property having been previously partitioned among the thirteen (13) co-owners;

4. That the title of the property has already been transferred to the plaintiff upon registration of the Deed of Sale in June, 1964, with the Office of the Register of Deeds;

5. That demand was made by the plaintiff upon the defendant Felipe Rosado and his wife Luz Jayme Rosado on October 19, 1964, but until now the defendant Felipe Rosado has refused to vacate the premises or to remove his house thereon as shown by Exh. "B" for the plaintiff, on the grounds as he alleged in his answer that he had built on the lot in question a conjugal house worth P8,000.00 which necessarily makes the lot on which it stands subject to Article 158 of the Civil Code and on the point of view of equity that the wife of the defendant Felipe Rosado received an aliquot share of P2,400.00 only from the share and if the house were demolished the defendant would suffer damage in the amount of P8,000.00;

6. That the portion of the lot on which the house stands, would earn a monthly rental of P50.00;

7. That Felipe Rosado, husband of Luz Jayme, did not give his conformity to the Deed of Sale, Exh. "A".

8. That on October 31, 1964, the defendant Felipe Rosado requested the plaintiff in the letter, Exh. "C" for the plaintiff, for a period of six (6) months within which to vacate the premises.

9. That the letter was not answered by the plaintiff and they did not accept the offer, and on November 25, 1964, they filed a complaint before the Municipal Court which proves that plaintiff neglected the offer;

The Court of First Instance in its decision rejected the claim of ownership advanced by Rosado, based upon the construction of a house on the disputed lot by the conjugal partnership of the Rosado spouses, which allegedly converted the land into conjugal property under Article 158, paragraph 2 of the present Civil Code of the Philippines; further held that defendants were in estoppel to claim title in view of the letter Exhibit C requesting for six (6) months within which to vacate the premises, and affirmed the decision of the Inferior Court. Defendant Felipe Rosado resorted to the Court of Appeals, and his appeal (CA-G.R. No. 37398-R) is the one now before us. He assigns four alleged errors:

(a) The lower court erred in not holding that Exhibit "A" is null and void, since upon the construction of the conjugal dwelling thereon, the conjugal partnership of the defendant-appellant Felipe Rosado and Luz Jayme became the owner of the share of Luz Jayme in Lot No. 62-B, Bacolod Cadastre;

(b) The trial court erred in ordering the defendant-appellant to vacate Lot No. 62-B and in not holding that Exhibit "A" is null and void because as the legal usufructuary of the share of Luz Jayme Rosado in Lot 62-B, Bacolod Cadastre, the conjugal partnership, managed and administered by the defendant-appellant Felipe Rosado can not be deprived of its usufructuary rights by any contract between Luz Jayme and the plaintiff-appellee;

(c) The trial court erred in not holding that the defendant-appellant should be reimbursed the value of the conjugal house constructed on Lot 62-B; and

(d) The lower court erred in ordering the defendant-appellant to pay attorneys' fees in the amount of five hundred (P500.00) pesos.

It can be seen that the key question is whether by the construction of a house on the lot owned in common by the Jaymes, and sold by them to the appellant corporation, the land in question or a 1/13th part of it became conjugal property.

Appellant, husband of vendor Luz Jayme, claims the affirmative invoking the second paragraph of Article 158 of the Civil Code of the Philippines, prescribing that:

ART. 158. Improvements, whether for utility or adornment, made on the separate property of the spouses through advancements from the partnership or through the industry of either the husband or the wife, belong to the conjugal partnership.

Buildings constructed, at the expense of the partnership, during the marriage on land belonging to one of the spouses, also pertain to the partnership, but the value of the land shall be reimbursed to the spouse who owns the same.

Rosado further contends that as the building of the house at the expense of the conjugal partnership converted the 1/13 undivided share on his wife in Lot 62-B into property of the community, the deed of sale of May 11, 1964 in favor of the appellee corporation was void in so far as said 1/13 share is concerned, because his wife, Luz Jayme, had ceased to own such share from and after the building of the house; and Rosado, as manager of the conjugal partnership, had not participated in the sale, nor subsequently ratified the same.

We find appellant's thesis legally untenable. For it is a basic principle in the law of co-ownership, both under the present Civil Code as in the Code of 1889, that no individual co-owner can claim title to any definite portion of the land or thing owned in common until the partition thereof. Prior to that time, all that the co-owner has is an ideal, or abstract, quota or proportionate share in the entire thing owned in common by all the co-owners. The principle is emphasized by the rulings of this Court. In Lopez vs. Ilustre, 5 Phil. 567, it was held that while a co-owner has the right to freely sell and dispose of his undivided interest, he has no right to sell a divided part of the real estate owned in common. "If he is the owner of an undivided half of a tract of land, he has the right to sell and convey an undivided half, but he has no right to divide the lot into two parts, and convey the whole of one part by metes and bounds." The doctrine was reiterated in Mercado vs. Liwanag, L-14429, June 20, 1962, holding that a co-owner may not convey a physical portion of the land owned in common. And in Santos vs. Buenconsejo, L-20136, June 23, 1965, it was ruled that a co-owner may not even adjudicate to himself any determinate portion of land owned in common.

Since the share of the wife, Luz Jayme, was at no time physically determined, it cannot be validly claimed that the house constructed by her husband was built on land belonging to her, and Article 158 of the Civil Code can not apply. Certainly, on her 1/13 ideal or abstract undivided share, no house could be erected.

Necessarily, the claim of conversion of the wife's share from paraphernal to conjugal in character as a result of the construction must be rejected for lack of factual or legal basis.

It is the logical consequence of the foregoing ruling that the lower court did not err in holding that the appellant was bound to vacate the land without reimbursement, since he knew that the land occupied by the house did not belong exclusively to his wife, but to the other owners as well, and there is no proof on record that the house occupied only 1/13 of the total area. The construction was not done in good faith.

WHEREFORE, the judgment of the Court of First Instance is affirmed. Costs against appellant Felipe Rosado.

G.R. No. 123509             March 14, 2000

LUCIO ROBLES, EMETERIA ROBLES, ALUDIA ROBLES and EMILIO ROBLES, petitioners, vs.COURT OF APPEALS, Spouses VIRGILIO SANTOS and BABY RUTH CRUZ, RURAL BANK OF CARDONA, Inc., HILARIO ROBLES, ALBERTO PALAD JR. in his capacity as Director of Lands, and JOSE MAULEON in his capacity as District Land Officer of the Bureau Of Lands, respondents.

PANGANIBAN, J.:

To be entitled to the remedy of quieting of title, petitioners must show that they have title to the real property at issue, and that some deed or proceeding beclouds its validity or efficacy. Buyers of unregistered real property, especially banks, must exert due diligence in ascertaining the titles of mortgagors and sellers, lest some innocent parties be prejudiced. Failure to observe such diligence may amount to bad faith and may result in the nullity of the mortgage, as well as of the subsequent foreclosure and/or auction sale. Unless the co-ownership is clearly repudiated, a co-owner cannot, by prescription, acquire title to the share of the other co-owners.

The Case

Before us is a Petition for Review under Rule 45, assailing the June 15, 1995 Decision and the January 15, 1996 Resolution of the Court of Appeals 1 (CA) in CA-GR CV No. 34213.2 In its Decision, the CA ruled: 3

WHEREFORE, the trial court's June 17, 1991 decision is REVERSED and SET ASIDE, and in lieu thereof a new one is hereby entered ordering the dismissal of the plaintiffs-appellees['] second amended complaint.

Earlier, the trial court had disposed as follows:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring free patent Title No. IV-1-010021 issued by the Bureau of Lands as null and void;

2. Ordering the defendant spouses Vergel Santos and Ruth Santos to deliver the property subject of this case to the plaintiff; and

3. Declaring the heirs of Silvino Robles as the absolute owner of the land in controversy.

The January 15, 1996 CA Resolution denied petitioners' Motion for Reconsideration.

The Facts

The present Petition is rooted in a case for quieting of title before the Regional Trial Court of Morong, Rizal, filed on March 14, 1988, 4 by Petitioners Lucio Robles, Emeteria Robles, Aludia. Robles and Emilio Robles. The facts were narrated by the trial court in this wise:

There seems to be no dispute that Leon Robles primitively owned the land situated in Kay Taga, Lagundi, Morong, Rizal with an area of 9,985 square meters. He occupied the same openly and adversely. He also declared the same in his name for taxation purposes as early as 1916 covered by Tax Declaration No. 17865 (Exh. "I") and paid the corresponding taxes thereon (Exh. "B"). When Leon Robles died, his son Silvino Robles inherited the land, who took possession of the land, declared it in his name for taxation purposes and paid the taxes thereon.1âwphi1.nêt

Upon the death of Silvino Robles in 1942, his widow Maria de la Cruz and his children inherited the property. They took adverse possession of said property and paid taxes thereon. The task of cultivat[ing] the land was assigned to plaintiff Lucio Robles who planted trees and other crops. He also built a nipa hut on the land. The plaintiffs entrusted the payment of the land taxes to their co-heir and half-brother, Hilario Robles.

In 1962, for unknown reasons, the tax declaration of the parcel of land in the, name of Silvino Robles was canceled and transferred to one Exequiel Ballena (Exh. "19"), father of Andrea Robles who is the wife of

defendant Hilario Robles. Thereafter, Exequiel Ballena secured a loan from the Antipolo Rural Bank, using the tax declaration as security. Somehow, the tax declaration was transferred [to] the name of Antipolo Rural Bank (Exh. "17") and later on, was transferred [to] the name of defendant Hilario Robles and his wife (Exh. "16").

In 1996, Andrea Robles secured a loan from the Cadona Rural Bank, Inc., using the tax declaration as security. Andrea Robles testified without contradiction that somebody else, not her husband Hilario Robles, signed the loan papers because Hilario Robles was working in Marinduque at that time as a carpenter.

For failure to pay the mortgage debt, foreclosure proceedings were had and defendant Rural Bank emerged as the highest bidder during the auction sale in October 1968.

The spouses Hilario Robles failed to redeem the property and so the tax declaration was transferred in the name of defendant Rural Bank. On September 25, 1987, defendant Rural Bank sold the same to the Spouses Vergel Santos and Ruth Santos.

In September 1987, plaintiff discovered the mortgage and attempted to redeem the property, but was unsuccessful. On May 10, 1988, defendant spouses Santos took possession of the property in question and was able to secure Free Patent No. IV-1-010021 in their names. 5

On the other hand, the Court of Appeals summarized the facts of the case as follows:

The instant action for quieting of title concerns the parcel of land bounded and more particularly described as follows:

A parcel of land located at Kay Taga, Lagundi, Morong, Rizal. Bounded [i]n the north by the property of Venancio Ablay y Simeon Ablay; [i]n the east by the property of Veronica Tulak y Dionisio Ablay; [i]n the south by the property of Simeon Ablay y Dionisio Ablay; and [i]n the west by the property of Dionisio Ablay y Simeon Ablay, with an area of 9,985 square meters, more or less, assessed in the year 1935 at P60.00 under Tax Declaration No. 23219.

As the heirs of Silvino Robles who, likewise inherited the above-described parcel from Leon Robles, the siblings Lucio, Emeteria, Aludia and Emilio, all surnamed Robles, commenced the instant suit with the filing of their March 14, 1988 complaint against Spouses Virgilio and Ruth Santos, as well as the Rural Bank of Cardona, Inc. Contending that

they had been in possession of the land since 1942, the plaintiff alleged, among other matters, that it was only in September of 1987 that they came to know of the foreclosure of the real estate mortgage constituted thereon by the half-brother, Hilario Robles, in favor of defendant Rural Bank; and that they likewise learned upon further inquiry, that the latter had already sold the self-same parcel in favor of the Santos spouses (pp. 1-3, orig, rec.). Twice amended to implead Hilario Robles (pp. 76-80, orig. rec) and, upon subsequent discovery of the issuance of Free Patent No. IV-I-010021 in favor of the defendant spouses, the Director of Land as parties-defendants (pp. 117-121, orig. rec). The plaintiffs' complaint sought the following reliefs on the theory that the encumbrance of their half-brother, constituted on the land, as well as all proceedings taken subsequent thereto, were null and void, to wit:

Wherefore, it is respectfully prayed that (a) a preliminary mandatory injunction be issued forthwith restoring plaintiffs to their possession of said parcel of land; (b) an order be issued annulling said Free Patent No. IV-I-010021 in the name of defendants spouses Vergel Santos and Ruth C. Santos, the deed of sale aforementioned and any tax declaration which have been issued in the name of defendants; and (c) ordering defendants jointly and severally, to pay plaintiffs the sum of P10,000.00 as attorney's fees.

Plaintiffs pray for other relief as [may be] just and equitable under the premises. (pp. 120-121, orig. rec.)

x x x           x x x          x x x

With the termination of the pre-trial stage upon the parties-litigants' agreement (p. 203, orig. rec.) the trial court proceeded to try the case on the merits. It thereafter rendered the challenged June 17, 1991 decision upon the following findings and conclusions:

The real estate, mortgage allegedly executed by Hilario Robles is not valid because his signature in the mortgage deed was forged. This fact, which remains unrebutted, was admitted by Andrea Robles.

Inasmuch as the real estate mortgage executed allegedly by Hilario Robles in favor of the defendant Cardona Rural Bank, Inc. was not valid, it stands to reason that the foreclosure proceedings therein were likewise not valid. Therefore, the defendant bank did not acquire any right arising out of the foreclosure proceedings. Consequently, defendant bank could not have transferred any right to the spouses Santos.

The fact that the land was covered by a free patent will not help the defendant Santos any.

There can be no question that the subject [property was held] in the concept of owner by Leon Robles since 1916. Likewise, his successor-in-interest, Silvino Robles, his wife Maria de la Cruz and the plaintiffs occupied the property openly, continuously and exclusively until they were ousted from their possession in 1988 by the spouses Vergel and Ruth Santos.

Under the circumstances, therefore, and considering that "open, exclusive and undisputed possession of alienable public lands for the period prescribed by law (30 years), creates the legal fiction whereby the land, upon completion of the requisite period, ipso jure and without the need of judicial or other action, ceases to be public land and becomes private property. Possession of public land . . . which is [of] the character and duration prescribed by the statute is the equivalent of an express grant from the State, considering the dictum of the statute itself[:]; "The . . . shall be conclusively presumed to have performed all the conditions essential to a government grant and shall be entitled to a certificate of title . . ." No proof is admissible to overcome a conclusive presumption[,] and confirmation proceedings would be a little more than a formality, at the most limited to ascertaining whether the possession claimed is of the required character and length of time. Registration thereunder would not confer title, but simply recognize a title already vested. (Cruz v. IAC, G.R. No. 75042, November 29, 1988) The land in question has become private land.

Consequently, the issuance of [a] free patent title to the Spouses Vergel Santos and Ruth C. Santos is not valid because at the time the property subject of this case was already private land, the Bureau of Lands having no jurisdiction to dispose of the same. (pp. 257-259, orig. rec.)

Dissatisfied with the foregoing decision, the Santos spouses and the defendant Rural Bank jointly filed their July 6, 1991 Notice of Appeal (p. 260, orig. rec.) . . . . 6

Ruling of the Court of Appeals

In reversing the trial court, the Court of Appeals held that petitioners no longer had any title to the subject property at the time they instituted the Complaint for quieting of title. The CA ratiocinated as follows:

As correctly urged by the appellants, the plaintiff-appellees no longer had any title to the property at the time of the institution of the instant complaint. (pp. 25-27, rec.) The latter's claim of continuous possession notwithstanding (pp. 3-5, TSN, July 5, 1990; p. 12, TSN, July 12, 1990), the aforesaid loss of title is amply evidenced by the subsequent declaration of the subject realty for taxation purposes not only in the name of Exequiel Ballena (Exhibits "1" and "2", pp. 23-24, orig, rec.) but

also in the name of the Rural Bank of Antipolo (Exhibit 17, vol. II orig. rec). On the theory that tax declarations can be evincive of the transfer of a parcel of land or a portion thereof (Gacos v. Court of Appeals, 212 SCRA 214), the court a quo clearly erred in simply brushing aside the apparent transfers [which] the land in litigation had undergone. Whether legal or equitable, it cannot, under the circumstances, be gainsaid that the plaintiff-appellees no longer had any title to speak of when Exequiel Ballena executed the November 7, 1966 Deed of Absolute Sale transferring the land in favor of the spouses Hilario and Andrea Robles (Exhibit "3", p. 25, orig. rec.)

Even on the theory that the plaintiffs-appellees and their half-brother, Hilario Robles, are co-owners of the land left behind by their common father, Silvino Robles, such title would still be effectively discounted by what could well serve as the latter's acts of repudiation of the co-ownership, i.e., his possession (p. 22, TSN, November 15, 1990) and declaration thereof for taxation purposes in his own name (Exhibit "4", p. 26, orig. rec.). In view of the plaintiffs-appellees' inaction for more than twenty (20) years from the time the subject realty was transferred in favor of Hilario Robles, the appellants correctly maintain that prescription had already set in. While it may be readily conceded that an action to quiet title to property in the possession of the plaintiff is imprescriptible (Almanza vs. Arguelles, 156 SCRA 718; Coronel vs. Intermediate Appellate Court, 155 SCRA 270; Caragay-Layno vs. Court of Appeals, 133 SCRA 718; Charon Enterprises vs. Court of Appeals, 124 SCRA 784; Faja vs. Court of Appeals, 75 SCRA 441; Burton vs. Gabar, 55 SCRA 4999), it equally bears emphasis that a co-owner or, for that matter, the said co-owner[']s successors-in-interest who occupy the community property other than as co-owner[s] can claim prescription as against the other co-owners (De Guzman vs. Austria, 148 SCRA 75; Ramos vs. Ramos, 45 Phil. 362; Africa vs. Africa, 42 Phil. 902; Bargayo vs. Camumot, 40 Phil. 857; De Castro vs. Echarri, 20 Phil. 23). If only in this latter sense, the appellants correctly argue that the plaintiffs-appellees have lost their cause of action by prescription.

Over and above the foregoing considerations, the court a quo gravely erred in invalidating the real estate mortgage constituted on the land solely on the basis of Andrea Robles' testimony that her husband's signature thereon was forged (p. 257, orig. rec.),

x x x           x x x          x x x

In according to the foregoing testimony . . . credibility which, while admittedly unrebutted, was altogether uncorroborated, the trial court lost sight of the fact that the assailed deed of real estate mortgage (Exhibit "5", Vol. II, orig. rec.) is a public document, the acknowledgment of which is a prima facie evidence of its due execution (Chua vs. Court of

Appeals, 206 SCRA 339). As such, it retains the presumption of validity in the absence of a full, clear and convincing evidence to overcome such presumption (Agdeppa vs. Ibe, 220 SCRA 584).

The foregoing principles take even more greater [sic] when it is, moreover, borne in mind that Hilario Robles made the following admissions in his March 8, 1989 answer, viz:

3. The complaint filed against herein answering defendant has no legal basis considering that as the lawful owner of the subject real property, defendant Hilario Robles has the right to mortgage the said real property and could dispose the same in whatever manner he wishe[s] to do. (p. 96, orig. rec.)

Appropriately underscored by the appellants, the foregoing admission is binding against Hilario [Robles]. Judicial admissions, verbal or written, made by the parties in the pleadings or in the course of the trial or other proceedings in the same case are conclusive, no evidence being required to prove the same. They cannot be contradicted unless shown to have been made through [a] palpable mistake or [unless] no such admission was actually made (Philippine American General Insurance, Inc. vs. Sweet Lines, Inc., 212 SCRA 194).

It does not help the plaintiffs-appellees cause any that, aside from complying with the requirements for the foreclosure of the subject real estate mortgage (Exhibits "6", "7", "8" and "10", Volume II [)], the appellant Rural Bank had not only relented to the mortgagor's request to postpone the (Exhibit "g", Vol. II, orig. rec.) but had likewise granted the latter's request for an extension of the redemption period therefor (Exhibits "11" and "12", pp. 35-36, orig. rec.). Without going into minute detail in discussing the Santos spouses' rights as purchasers for value and in good faith (Exhibit "21", Vol. II, orig. rec.), the mortgagor and the plaintiffs'-appellees cannot now be heard to challenge the validity of the sale of the land after admittedly failing to redeem the same within the extension the appellant, Rural Bank granted (pp. 10-11, TSN, November 15, 1990).

Being dependent on the supposed invalidity of the constitution and foreclosure of the subject real estate mortgage, the plaintiffs-appellees' attack upon . . . Free Patent No. IV-I must necessarily fail. The trial court, therefore, misread, and ignored the evidence o[n] record, to come up with erroneous conclusion.

Contending that such ruling was contrary to law and jurisprudence, Petitioners Lucio, Emeteria, Aludia and Emilio — all surnamed Robles — filed this Petition for Review. 7

The Assigned Error

Petitioners ascribe the following error to the respondent court:

Respondent Court of Appeals grievously erred in ruling that with the transfers of the tax declaration over the parcel of land in question from Silvino Robles to Exequiel Ballena, then to the Rural Bank of Antipolo, then to Respondent Hilario Robles, then to Respondent Rural Bank of Cardona Inc., and then finally to Respondent Spouses Santos, petitioners, who by themselves and their predecessors in interest have been in open, actual and adverse possession of said parcel of land since 1916 up to their forced removal therefrom in 1988, have lost their title to said property by prescription to their half-brother, Respondent Hilario Robles, and then finally, to Respondent Spouses Santos. 8

For a better understanding of the case, the above issue will be broken down into three points: first, the nature of the remedy of quieting of title; second, the validity of the real estate mortgage; and third, the efficacy of the free patent granted to the Santos spouses.

First Issue:

Quieting of Title

Art. 476 of the Civil Code provides:

Whenever there is 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 title.

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

Based on the above definition, an action to quiet title is a common-law remedy for the removal of any cloud or doubt or uncertainty on the title to real property. 9 It is essential for the plaintiff or complainant to have a legal or an equitable title to or interest in the real property which is the subject matter of the action. 10 Also, the deed, claim, encumbrance or proceeding that is being alleged as a cloud on plaintiff's title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy. 11

That there is an instrument or a document which, on its face, is a valid and efficacious is clear in the present case. Petitioners allege that their title as owners

and possessors of the disputed property is clouded by the tax declaration and, subsequently, the free patent thereto granted to Spouses Vergel and Ruth Santos. The more important question to be resolved, however, is whether the petitioners have the appropriate title that will entitle them to avail themselves of the remedy of quieting of title.

Petitioners anchor their claim to the disputed property on their continued and open occupation and possession as owners thereof. They allege that they inherited it from their father, Silvino, who in turn had inherited it from his father, Leon. They maintain that after their father's death, they agreed among themselves that Petitioner Lucio Robles would be tending and cultivating it for everyone, and that their half-brother Hilario would be paying the land taxes.

Petitioners insist that they were not aware that from 1962 until 1987, the subject property had been declared in the names of Exequiel Ballena, the Rural Bank of Antipolo, Hilario Robles, the Rural Bank of Cardona, Inc., and finally, Spouses Vergel and Ruth Santos. Maintaining that as co-owners of the subject property, they did agree to the real estate mortgage constituted on it, petitioners insist that their shares therein should not have been prejudiced by Hilario's actions.

On the other hand, Private Respondents Vergel and Ruth Santos trace their claim to the subject property to Exequiel Ballena, who had purportedly sold it to Hilario and Andrea Robles. According to private respondents, the Robles spouses then mortgaged it to the Rural Bank of Cardona, Inc. — not as co-owners but as absolute owners — in order to secure an agricultural loan worth P2,000. Upon their failure to pay their indebtedness, the mortgage was foreclosed and the property sold to the bank as the highest bidder. Thereafter, private respondents purchased the property from the bank.

Undisputed is the fact that the land had previously been occupied by Leon and later by Silvino Robles, petitioners' predecessor-in-interest, as evidenced by the different tax declarations issued in their names. Also undisputed is the fact that the petitioners continued occupying and possessing the land from the death of Silvino in 1942 until they were allegedly ousted therefrom in 1988. In 1962, the subject property was declared in the name of Exequiel for taxation purposes. On September 30, 1965, it was again declared in the same name; on October 28, 1965, in the name of the Rural Bank of Antipolo; on November 7, 1966, in the name of Hilario and Andrea; and thereafter, in the name of the Rural Bank of Cardona and, finally, in the name of the Santos spouses.

Ostensibly, the Court of Appeals failed to consider irregularities in the transactions involving the disputed property. First, while it was declared in the name of Exequiel in 1962, there was no instrument or deed of conveyance evidencing its transfer from the heirs of Silvino to him. This fact is important, considering that the petitioners are alleging continued possession of the property. Second, Exequiel was the father-in-law of Hilario, to whom petitioners had entrusted the payment of the land taxes. Third, considering that the subject property had been mortgaged

by Exequiel to the Rural Bank of Antipolo, and that it was foreclosed and in fact declared in the bank's name in 1965, why was he able to sell it to Spouses Hilario and Andrea in 1966? Lastly, inasmuch as it was an unregistered parcel of land, the Rural Bank of Cardona, Inc., did not observe due diligence in determining Hilario's title thereto.

The failure to show the indubitable title of Exequiel to the property in question is vital to the resolution of the present Petition. It was from him that Hilario had allegedly derived his title thereto as owner, an allegation which thereby enabled him to mortgage it to the Rural Bank of Cardona. The occupation and the possession thereof by the petitioners and their predecessors-in-interest until 1962 was not disputed, and Exequiel's acquisition of the said property by prescription was not alleged. Thus, the deed of conveyance purportedly evidencing the transfer of ownership and possession from the heirs of Silvino to Exequiel should have been presented as the best proof of that transfer. No such document was presented, however.

Therefore, there is merit to the contention of the petitioners that Hilario mortgaged the disputed property to the Rural Bank of Cardona in his capacity as a mere co-owner thereof. Clearly, the said transaction did not divest them of title to the property at the time of the institution of the Complaint for quieting of title.

Contrary to the disquisition of the Court of Appeals, Hilario effected no clear and evident repudiation of the co-ownership. It is a fundamental principle that a co-owner cannot acquire by prescription the share of the other co-owners, absent any clear repudiation of the co-ownership. In order that the title may prescribe in favor of a co-owner, the following requisites must concur: (1) the co-owner has performed unequivocal acts of repudiation amounting to an ouster of the other co-owners; (2) such positive acts of repudiation have been made known to the other co-owner; and (3) the evidence thereof is clear and convincing. 12

In the present case, Hilario did not have possession of the subject property; neither did he exclude the petitioners from the use and the enjoyment thereof, as they had indisputably shared in its fruits. 13 Likewise, his act of entering into a mortgage contract with the bank cannot be construed to be a repudiation of the co-ownership. As absolute owner of his undivided interest in the land, he had the right to alienate his share, as he in fact did. 14 Neither should his payment of land taxes in his name, as agreed upon by the co-owners, be construed as a repudiation of the co-ownership. The assertion that the declaration of ownership was tantamount to repudiation was belied by the continued occupation and possession of the disputed property by the petitioners as owners.

Second Issue:

Validity of the Real Estate Mortgage

In a real estate mortgage contract, it is essential that the mortgagor be the absolute owner of the property to be mortgaged; otherwise, the mortgage is void. 15 In the present case, it is apparent that Hilario Robles was not the absolute owner of the entire subject property; and that the Rural Bank of Cardona, Inc., in not fully ascertaining his title thereto, failed to observe due diligence and, as such, was a mortgagee in bad faith.

First, the bank was utterly remiss in its duty to establish who the true owners and possessors of the subject property were.1âwphi1 It acted with precipitate haste in approving the Robles spouses' loan application, as well as the real estate mortgage covering the disputed parcel of land. 16 Had it been more circumspect and assiduous, it would have discovered that the said property was in fact being occupied by the petitioners, who were tending and cultivating it.

Second, the bank should not have relied solely on the Deed of Sale purportedly showing that the ownership of the disputed property had been transferred from Exequiel Ballena to the Robles spouses, or that it had subsequently been declared in the name of Hilario. Because it was dealing with unregistered land, and the circumstances surrounding the transaction between Hilario and his father-in-law Exequiel were suspicious, the bank should have exerted more effort to fully determine the title of the Robleses. Rural Bank of Compostela vs. Court Appeals 17 invalidated a real estate mortgage after a finding that the bank had not been in good faith. The Court explained: "The rule that persons dealing with registered lands can rely solely on the certificate of title does not apply to banks." In Tomas v. Tomas, the Court held:

. . . Banks, indeed, should exercise more care and prudence in dealing even with registered lands, than private individuals, for their business is one affected with public interest, keeping in trust money belonging to their depositors, which they should guard against loss by not committing any act of negligence which amounts to lack of good faith by which they would be denied the protective mantle of land registration statute, Act 496, extended only to purchasers for value and in good faith, as well as to mortgagees of the same character and description. . . . 18

Lastly, the Court likewise finds it unusual that, notwithstanding the bank's insistence that it had become the owner of the subject property and had paid the land taxes thereon, the petitioners continued occupying it and harvesting the fruits therefrom. 19

Considering that Hilario can be deemed to have mortgaged the disputed property not as absolute owner but only as a co-owner, he can be adjudged to have disposed to the Rural Bank of Cardona, Inc., only his undivided share therein. The said bank, being the immediate predecessor of the Santos spouses, was a mortgagee in bad faith. Thus, justice and equity mandate the entitlement of the Santos spouses, who merely stepped into the shoes of the bank, only to what legally pertains to the latter — Hilario's share in the disputed property.

Third Issue:

Efficacy of Free Patent Grant

Petitioners repeatedly insist that the disputed property belongs to them by private ownership and, as such, it could not have been awarded to the Santos spouses by free patent. They allege that they possessed it in the concept of owners — openly, peacefully, publicly and continuously as early as 1916 until they were forcibly ousted therefrom in 1988. They likewise contend that they cultivated it and harvested its fruits. Lucio Robles testified:

x x x           x x x          x x x

Q By the way, why do you know this parcel of land?

A Because before my father died, he showed me all the documents.

Q Before the death of your father, who was the owner of this parcel of land?

A My father, sir.

Q How did your father acquire this parcel of land?

A My father knew that it [was] by inheritance, sir.

Q From whom?

A From his father, Leon Robles, sir.

Q And do you know also [from] whom Leon Robles acquired this land?

A It was inherited from his father, sir.

Q What is the nature of this parcel of land?

A It's an agricultural land, sir.

Q Now, at the time of the death of your father, this land was planted with what crops?

A Mango trees, santol trees, and I was the one who planted those trees, sir.

Q When did you plant those trees?

A Before the death of my father, sir.

Q Now, after the death of your father, who cultivated this parcel of land?

A I took charge of the land after the death of my father, sir.

Q Up to when?

A Up to the present, sir, after this case was already filed. 20

The preceding claim is an assertion that the subject property is private land. The petitioners do not concede, and the records do not show, that it was ever an alienable land of the public domain. They allege private ownership thereof, as evidenced by their testimonies and the tax declarations issued in the names of their predecessors-in-interest. It must be noted that while their claim was not corroborated by other witnesses, it was not controverted by the other parties, either.

Carlos Dolores insisted that the Rural Bank of Cardona, Inc., of which he was the manager, had acquired and possessed the subject property. He did not, however, give any reason why the petitioners had continued occupying it, even as he admitted on the stand that he had visited it twice. 21

In the light of their open, continuous, exclusive and notorious possession and occupation of the land, petitioners are "deemed to have acquired, by operation of law, a right to a grant, a government grant, without the necessity of a certificate of title being issued." 22 The land was "segregated from the public domain." Accordingly, the director of lands had no authority to issue a free patent thereto in favor of another person. Verily, jurisprudence holds that a free patent covering private land is null and void. 23

Worth quoting is the disquisition of the Court in Agne v. Director of Lands, 24 in which it held that a riparian owner presently in possession had a better right over an abandoned river bed than had a registered owner by virtue of a free patent.

Under the provisions of Act 2874 pursuant to which the title of private respondents' predecessor-in-interest was issued, the President of the Philippines, or his alter ego, the Director of Lands, has no authority to grant a free patent for land that has ceased to be a public land and has passed to private ownership and a title so issued is null and void. The nullity arises, not from fraud or deceit, but from the fact that the land is not under the jurisdiction of the Bureau of Lands. The jurisdiction of the Director of Lands is limited only to public lands and does not cover lands

publicly owned. The purpose of the Legislature in adopting the former Public Land Act, Act No. 2874, was and is to limit its application to lands of the public domain, and lands held in private ownership are not included therein and are not affected in any manner whatsoever thereby. Land held in freehold or fee title, or of private ownership, constitutes no part of the public domain, and cannot possibly come within the purview of said act 2874, inasmuch as the "subject" of such freehold or private land is not embraced in any manner in the title of the Act and the same is excluded from the provisions of the text thereof.

We reiterate that private ownership of land is not affected by the issuance of the free patent over the same land because the Public Land Act applies only to lands of the public domain. Only public land may be disposed of by the Director of Lands. Since as early as 1920, the land in dispute was already under the private ownership of herein petitioners and no longer a part of the lands of the public domain, the same could not have been the subject matter of a free patent. The patentee and his successors-in-interest acquired no right or title to said land. Necessarily, Free Patent No. 23263 issued to Herminigildo Agpoon is null and void and the subsequent titles issued pursuant thereto cannot become final and indefeasible. Hence we ruled in Director of Lands v. Sicsican, et al. that if at the time the free patents were issued in 1953 the land covered therein were already private property of another and, therefore, not part of the disposable land of the public domain, then applicants patentees acquired no right or title to the land.

Now, a certificate of title fraudulently secured is null and void ab initio if the fraud consisted in misrepresenting that the land is part of the public domain, although it is not. As earlier stated, the nullity arises, not from the fraud or deceit, but from the fact that the land is not under the jurisdiction of the Bureau of Lands. Being null and void, the free patent granted and the subsequent titles produce no legal effect whatsoever. Quod nullum est, nullum producit effectum.

A free patent which purports to convey land to which the government did not have any title at the time of its issuance does not vest any title in the patentee as against the true owner. The Court has previously held that the Land Registration Act and the Cadastral Act do not give anybody who resorts to the provisions thereof a better title than what he really and lawfully has.

x x x           x x x          x x x

We have, therefore, to arrive at the unavoidable conclusion that the title of herein petitioners over the land in dispute is superior to the title of the registered owner which is a total nullity. The long and continued possession of petitioners under a valid claim of title cannot be defeated

by the claim of a registered owner whose title is defective from the beginning.

The Santos spouses argue that petitioners do not have the requisite personality to question the free patent granted them, inasmuch as "it is a well-settled rule that actions to nullify free patents should be filed by the Office of the Solicitor General at the behest of the Director of Lands." 25

Private respondents' reliance on this doctrine is misplaced. Indeed, the Court held in Peltan Development, Inc. v. Court of Appeals 26 that only the solicitor general could file an action for the cancellation of a free patent. Ruling that the private respondents, who were applicants for a free patent, were not the proper parties in an action to cancel the transfer certificates covering the parcel of land that was the subject of their application, the Court ratiocinated thus:

The Court also holds that private respondents are not the proper parties to initiate the present suit. The complaint, praying as it did for the cancellation of the transfer certificates of title of petitioners on the ground that they were derived from a "spurious" OCT No. 4216, assailed in effect the validity of said title. While private respondents did not pray for the reversion of the land to the government, we agree with the petitioners that the prayer in the complaint will have the same result of reverting the land to the government under the Regalian Doctrine. Gabila v. Barinaga 27 ruled that only the government is entitled to this relief. . . . .

Because the cancellation of the free patent as prayed for by the private respondents in Peltan would revert the property in question to the public domain, the ultimate beneficiary would be the government, which can be represented by the solicitor general only. Therefore, the real party-in-interest is the government, not the private respondents.

This ruling does not, however, apply to the present case. While the private respondents in Peltan recognized that the disputed property was part of the public domain when they applied for free patent, 28 herein petitioners asserted and proved private ownership over the disputed parcel of land by virtue of their open, continued and exclusive possession thereof since 1916.

Neither does the present case call for the reversion of the disputed property to the State. By asking for the nullification of the free patent granted to the Santos spouses, the petitioners are claiming the property which, they contend, rightfully belongs to them.

Indeed, the same issue was resolved by this Court in Heirs of Marciano Nagano v. Court of Appeals. 29 In that case, the trial court dismissed a Complaint seeking the declaration of nullity of an Original Certificate of Title issued pursuant to a free

patent, reasoning that the action should have been instituted by the solicitor general. In reversing the trial court, the Supreme Court held:

It is settled that a Free Patent issued over private land is null and void, and produces no legal effect whatsoever. Quod nullum est, nullum producit affectum. Moreover, private respondents' claim of open, peaceful, continuous and adverse possession of the 2,250 square meter portion since 1920, and its illegal inclusion in the Free Patent of petitioners and in their original certificate of title, gave private respondents a cause of action for quieting of title which is imprescriptible.

In any event, the Office of the Solicitor General was afforded an opportunity to express its position in these proceedings. But it manifested that it would not file a memorandum, because "this case involves purely private interests." 30

The foregoing considered, we sustain the contention of petitioners that the free patent granted to the Santos spouses is void. It is apparent that they are claiming ownership of the disputed property on the basis of their possession thereof in the concept of owners — openly, peacefully, publicly, continuously and adversely since 1916. Because they and their predecessors-in-interest have occupied, possessed and cultivated it as owners for more than thirty years, 31 only one conclusion can be drawn — it has become private land and is therefore beyond the authority of the director of lands.

Epilogue

We recognize that both the petitioners and the Santos spouses fell victim to the dubious transaction between Spouses Hilario and Andrea Robles and the Rural Bank of Cardona, Inc. However, justice and equity mandate that we declare Petitioners Lucio, Emerita, Aludia and Emilio Robles to have the requisite title essential to their suit for quieting of title. Considering the circumstances peculiar to this complicated problem, the Court finds this conclusion the logical and just solution.

The claim that petitioners were guilty of laches in not asserting their rights as owners of the property should be viewed in the light of the fact that they thought their brother was paying the requisite taxes for them, and more important, the fact that they continued cultivating it and harvesting and gaining from its fruits.

From another viewpoint, it can even be said that it was the Rural Bank of Cardona, Inc., which was guilty of laches because, granting that it had acquired the subject property legally, it failed to enforce its rights as owner. It was oblivious to the petitioners' continued occupation, cultivation and possession thereof. Considering that they had possessed the property in good faith for more than ten years, it can even be argued that they thus regained it by acquisitive prescription.

In any case, laches is a remedy in equity, and considering the circumstances in this case, the petitioners cannot be held guilty of it.

In sum, the real estate mortgage contract covering the disputed property — a contract executed between Spouses Hilario and Andrea on the one hand and the Rural Bank of Cardona, Inc., on the other — is hereby declared null and void insofar as it prejudiced the shares of Petitioners Lucio, Emerita, Aludia and Emilio Robles; it is valid as to Hilario Robles' share therein. Consequently, the sale of the subject property to the Santos spouses is valid insofar as it pertained to his share only. Likewise declared null and void is Free Patent No. IV-1-010021 issued by the Bureau of Lands covering the subject property.

WHEREFORE, the Petition is hereby GRANTED. The assailed Decision is REVERSED and SET ASIDE. Except as modified by the last paragraph of this Decision, the trial court's Decision is REINSTATED. No costs.1âwphi1.nêt

SO ORDERED.

G.R. No. 102380 January 18, 1993

HERODOTUS P. ACEBEDO and DEMOSTHENES P. ACEBEDO, petitioners, vs.HON. BERNARDO P. ABESAMIS, MIGUEL ACEBEDO, ALEXANDER ACEBEDO, NAPOLEON ACEBEDO, RIZALINO ACEBEDO, REPUBLICA ACEBEDO, FILIPINAS ACEBEDO and YU HWA PING, respondents.

Heminio L. Ruiz for petitioners.

Vicente D. Millora for private respondents.

Romero A. Yu for respondent Yu Hua Ping.

 

CAMPOS, JR., J.:

The lower court's jurisdiction in approving a Deed of Conditional Sale executed by respondents-heirs and ordering herein administrator-petitioner Herodotus Acebedo to sell the remaining portions of said properties, despite the absence of its prior approval as a probate court, is being challenged in the case at bar.

The late Felix Acebedo left an estate consisting of several real estate properties located in Quezon City and Caloocan City, with a conservative estimated value of about P30 million. Said estate allegedly has only the following unsettled claims:

a. P87,937.00 representing unpaid real estate taxes due Quezon City;

b. P20,244.00 as unpaid real estate taxes due Caloocan City;

c. The unpaid salaries/allowances of former Administrator Miguel Acebedo, and the incumbent Administrator Herodotus Acebedo; and

d. Inheritance taxes that may be due on the net estate.

The decedent was succeeded by eight heirs, two of whom are the petitioners herein, and the others are the private respondents.

Due to the prolonged pendency of the case before the respondent Court for sixteen years, respondents-heirs filed a "Motion for Approval of Sale", on October 4, 1989. The said sale involved the properties covered by Transfer Certificate of Title Nos. 155569, 120145, 9145, and 18709, all of which are registered in Quezon City, and form part of the estate. The consideration for said lots was twelve (12) million pesos and by that time, they already had a buyer. It was further stated in said Motion that respondents-heirs have already received their proportionate share of the six (6) million pesos paid by the buyer, Yu Hwa Ping, as earnest money; that the balance of P6,000,000.00 is more than enough to pay the unsettled claims against the estate. Thus, they prayed for the Court to direct the administrator, Herodotus Acebedo (referred to as petitioner-administrator hereafter):

1. to sell the properties mentioned in the motion;

2. with the balance of P6 million, to pay all the claims against the Estate; and

3. to distribute the residue among the Heirs in final settlement of the Estate.

To the aforesaid Motion, herein petitioner-administrator interposed an "Opposition to Approval of Sale", to wit:

1. That he has learned that some of the heirs herein have sold some real estate property of the Estate located at Balintawak, Quezon City, without the knowledge of the herein administrator, without the approval of this Honorable Court and of some heirs, and at a shockingly low price;

2. That he is accordingly hereby registering his vehement objection to the approval of the sale, perpetrated in a manner which can even render the proponents of the sale liable for punishment for contempt of this Honorable Court;

3. The herein Administrator instead herein prays this Honorable Court to authorize the sale of the above mentioned property of the Estate to generate funds to pay certain liabilities of the Estate and with the approval of this Honorable Court if warranted, to give the heirs some advances chargeable against theirs (sic) respective shares, and, for the purpose to authorize the herein Administrator, and the other heirs to help the Administrator personally or through a broker, to look for a buyer for the highest obtainable price, subject always to the approval of this Honorable Court. 1

On October 30, 1989, herein petitioners moved to be given a period of forty-five (45) days within which to look for a buyer who will be willing to buy the properties at a price higher than P12,000,000.00.

The case was set for hearing on December 15, 1989. However, by said date, petitioners have not found any buyer offering better terms. Thus, they asked the Court, on February 8, 1990, for an in extendible period of thirty days to look for a buyer.

Petitioner-administrator then filed a criminal complaint for falsification of a public document against Yu Hwa Ping and notary public Eugenio Obon on February 26, 1990. He initiated this complaint upon learning that it was Yu Hwa Ping who caused the notarization of the Deed of Conditional Sale wherein allegedly petitioner-administrator's signature was made to appear. He also learned that after he confronted the notary public of the questioned document, the latter revoked his notarial act on the same.

On April 2, 1990, petitioner-administrator filed the civil action to secure the declaration by the Court of the nullity of the Deed of Conditional Sale and the Deed of Absolute Sale.

The period granted herein petitioners having lapsed without having found a buyer, petitioner Demosthenes Acebedo sought to nullify the Orders granting them several periods within which to look for a better buyer. Respondents filed a comment thereon.

Having miserably failed to find a better buyer, after seven long months, petitioner-administrator filed another "Opposition to Approval of Sale", dated May 10, 1990, maintaining that the sale should wait for the country to recover from the effects of

the coup d'etat attempts, otherwise, the properties should be divided among the heirs.

On June 21, 1990, petitioners filed a "Motion for Leave of Court to Mortgage and Lease some of the Properties of the Estate". To this Motion, respondents filed an Opposition on the following grounds : that the motion is not proper because of the pending motion to approve the sale of the same properties; that said conditional sale was initiated by petitioner-administrator who had earlier signed a receipt for P500,000.00 as earnest money; that the approval of the sale would mean Yu Hwa Ping's assumption of payment of the realty taxes; that the estate has no further debts and thus, the intestate administrator may be terminated.

On August 17, 1990, respondent Court issued an Order, the dispositive portion of which, stated, among others, to wit: 2

b. the motion filed by the heirs-movants, dated October 4, 1989, praying that the new administrator be directed to sell the properties covered by TCT Nos. 155569, 120145, 9145 and 18709, in favor of Yu Hwa Ping is hereby denied; and

c. the new administrator is hereby granted leave to mortgage some properties of the estate at a just and reasonable amount, subject to the approval of the Court.

On December 4, 1990, the respondent Judge issued an order resolving to call the parties to a conference on December 17, 1990. The conference was held, but still the parties were unable to arrive at an agreement. So, on January 4, 1991, it was continued, wherein the parties actually agreed that the heirs be allowed to sell their shares of the properties to Yu Hwa Ping for the price already agreed upon, while herein petitioners negotiate for a higher price with Yu Hwa Ping.

Petitioners, then, instead filed a "Supplemental Opposition" to the approval of the Deed of Conditional Sale.

On March 29, 1991, the respondent Court issued the challenged Order, the dispositive portion of which states, to wit:

WHEREFORE, the Order dated August 7, 1990, is hereby lifted, reconsidered and set aside, and another one is hereby issued as follows:

1. Approving the conditional sale, dated September 10, 1989, executed by the heirs-movants, in favor of Yu Hwa Ping, pertaining to their respective shares in the properties covered by TCT Nos. 155569, 120145, 1945 and 18709 of the Register of Deeds of Quezon City;

2. Ordering the administrator Herodotus Acebedo to sell the remaining portions of the said properties also in favor of Yu Hwa Ping at the same price as the sale executed by the herein heirs-movants;

3. Ordering Yu Hwa Ping to deposit with the Court the total remaining balance of the purchase price for the said lots within TWENTY (20) DAYS from notice hereof;

4. The motion to cite former administrator Miguel Acebedo in contempt of court, resulting from his failure to submit the owner's copy of TCT Nos. 155569, and 120145 is hereby denied. 3

Yu Hwa Ping, on April 4, 1991, deposited the remaining balance of the purchase price for the properties subject of the Deed of Conditional Sale in the amount of P6,500,000.00.

Petitioners herein received the questioned Order on April 11, 1991. Twenty one (21) days thereafter, they filed a Motion for Reconsideration, praying that the Court reinstate its Order of August 17, 1990. To this, private respondents filed their Opposition. 4

Instead of making a reply, petitioners herein filed a Supplemental Motion for Reconsideration. The motions for reconsideration of herein petitioners were denied by the respondent Court on August 23, 1991.

On September 23, 1991, herein petitioners filed a Motion for Partial Reconsideration, hoping for the last time that they would be able to convince the Court that its Order dated March 29, 1991 in effect approving the conditional sale is erroneous and beyond its jurisdiction.

On October 17, 1991, the respondent Court denied the Motion for Partial Reconsideration for "lack of merit".

On November 7, 1991, private respondents filed a Motion for Execution of the Order dated March 29, 1991. This was pending resolution when the petitioners filed this Petition for Certiorari.

The controversy in the case at bar revolves around one question: Is it within the jurisdiction of the lower court, acting as a probate court, to issue an Order approving the Deed of Conditional Sale executed by respondents-heirs without prior court approval and to order herein Administrator to sell the remaining portion of said properties?

We answer in the positive?

In the case of Dillena vs. Court of Appeals, 5 this Court made a pronouncement that it is within the jurisdiction of the probate court to approve the sale of properties of a deceased person by his prospective heirs before final adjudication. Hence, it is error to say that this matter should be threshed out in a separate action.

The Court further elaborated that although the Rules of Court do not specifically state that the sale of an immovable property belonging to an estate of a decedent, in a special proceeding, should be made with the approval of the court, this authority is necessarily included in its capacity as a probate court. Therefore, it is clear that the probate court in the case at bar, acted within its jurisdiction in issuing the Order approving the Deed of Conditional Sale.

We cannot countenance the position maintained by herein petitioners that said conditional sale is null and void for lack of prior court approval. The sale precisely was made conditional, the condition being that the same should first be approved by the probate court.

Petitioners herein anchor their claim on Section 7, Rule 89 of the Rules of Court. 6 It is settled that court approval is necessary for the validity of any disposition of the decedent's estate. However, reference to judicial approval cannot adversely affect the substantive rights of the heirs to dispose of their ideal share in the co-heirship and/or co-ownership among the heirs. 7

This Court had the occasion to rule that there is no doubt that an heir can sell whatever right, interest, or participation he may have in the property under administration. This is a matter which comes under the jurisdiction of the probate court. 8

The right of an heir to dispose of the decedent's property, even if the same is under administration, is based on the Civil Code provision 9 stating that the possession of hereditary property is deemed transmitted to the heir without interruption and from the moment of the death of the decedent, in case the inheritance is accepted. Where there are however, two or more heirs, the whole estate of the decedent is, before its partition, owned in common by such heirs. 10

The Civil Code, under the provisions on co-ownership, further qualifies this right. 11

Although it is mandated that each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and thus may alienate, assign or mortgage it, and even substitute another person in its enjoyment, the effect of the alienation or the mortgage, with respect to theco-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership. 12 In other words, the law does

not prohibit a co-owner from selling, alienating or mortgaging his ideal share in the property held in common. 13

As early as 1942, this Court has recognized said right of an heir to dispose of property under administration. In the case of Teves de Jakosalem vs. Rafols, et al., 14 it was said that the sale made by an heir of his share in an inheritance, subject to the result of the pending administration, in no wise, stands in the way of such administration. The Court then relied on the provision of the Old Civil Code, Article 440 and Article 339 which are still in force as Article 533 and Article 493, respectively, in the new Civil Code. The Court also cited the words of a noted civilist, Manresa: "Upon the death of a person, each of his heirs 'becomes the undivided owner of the whole estate left with respect to the part or portion which might be adjudicated to him, a community of ownership being thus formed among the co-owners of the estate which remains undivided'."

Private respondents having secured the approval of the probate court, a matter which is unquestionably within its jurisdiction, and having established private respondents' right to alienate the decedent's property subject of administration, this Petition should be dismissed for lack of merit.

PREMISES considered, Petition is hereby DISMISSED. With Costs.

G.R. No. 61584 November 25, 1992

DONATO S. PAULMITAN, JULIANA P. FANESA and RODOLFO FANESA, petitioners, vs.COURT OF APPEALS, ALICIO PAULMITAN, ELENA PAULMITAN, ABELINO PAULMITAN, ANITA PAULMITAN, BAKING PAULMITAN, ADELINA PAULMITAN and ANITO PAULMITAN, respondents.

 

ROMERO, J.:

This is a petition for review on certiorari seeking the reversal of the decision 1 of the Court of Appeals, dated July 14, 1982 in CA-G.R. No. 62255-R entitled "Alicio Paulmitan, et al. v. Donato Sagario Paulmitan, et al." which affirmed the decision 2

of the then Court of First Instance (now RTC) of Negros Occidental, 12th Judicial District, Branch IV, Bacolod City, in Civil Case No. 11770.

The antecedent facts are as follows:

Agatona Sagario Paulmitan, who died sometime in 1953, 3 left the two following parcels of land located in the Province of Negros Occidental: (1) Lot No. 757 with

an area of 1,946 square meters covered by Original Certificate of Title (OCT) No. RO-8376; and (2) Lot No. 1091 with an area of 69,080 square meters and covered by OCT No. RO-11653. From her marriage with Ciriaco Paulmitan, who is also now deceased, Agatona begot two legitimate children, namely: Pascual Paulmitan, who also died in 1953, 4 apparently shortly after his mother passed away, and Donato Paulmitan, who is one of the petitioners. Petitioner Juliana P. Fanesa is Donato's daughter while the third petitioner, Rodolfo Fanes, is Juliana's husband. Pascual Paulmitan, the other son of Agatona Sagario, is survived by the respondents, who are his children, name: Alicio, Elena, Abelino, Adelina, Anita, Baking and Anito, all surnamed Paulmitan.

Until 1963, the estate of Agatona Sagario Paulmitan remained unsettled and the titles to the two lots mentioned above remained in the name of Agatona. However, on August 11, 1963, petitioner Donato Paulmitan executed an Affidavit of Declaration of Heirship, extrajudicially adjudicating unto himself Lot No. 757 based on the claim that he is the only surviving heir of Agatona Sagario. The affidavit was filed with the Register of Deeds of Negros Occidental on August 20, 1963, cancelled OCT No. RO-8376 in the name of Agatona Sagario and issued Transfer Certificate of Title (TCT) No. 35979 in Donato's name.

As regards Lot No. 1091, Donato executed on May 28, 1974 a Deed of Sale over the same in favor of petitioner Juliana P. Fanesa, his daughter. 5

In the meantime, sometime in 1952, for non-payment of taxes, Lot No. 1091 was forfeited and sold at a public auction, with the Provincial Government of Negros Occidental being the buyer. A Certificate of Sale over the land was executed by the Provincial Treasurer in favor of the Provincial Board of Negros Occidental. 6

On May 29, 1974, Juliana P. Fanesa redeemed the property from the Provincial Government of Negros Occidental for the amount of P2,959.09. 7

On learning of these transactions, respondents children of the late Pascual Paulmitan filed on January 18, 1975 with the Court of First Instance of Negros Occidental a Complaint against petitioners to partition the properties plus damages.

Petitioners set up the defense of prescription with respect to Lot No. 757 as an affirmative defense, contending that the Complaint was filed more than eleven years after the issuance of a transfer certificate of title to Donato Paulmitan over the land as consequence of the registration with the Register of Deeds, of Donato's affidavit extrajudicially adjudicating unto himself Lot No. 757. As regards Lot No. 1091, petitioner Juliana P. Fanesa claimed in her Answer to the Complaint that she acquired exclusive ownership thereof not only by means of a deed of sale executed in her favor by her father, petitioner Donato Paulmitan, but also by way of redemption from the Provincial Government of Negros Occidental.

Acting on the petitioners' affirmative defense of prescription with respect to Lot No. 757, the trial court issued an order dated April 22, 1976 dismissing the complaint as to the said property upon finding merit in petitioners' affirmative defense. This order, which is not the object of the present petition, has become final after respondents' failure to appeal therefrom.

Trial proceeded with respect to Lot No. 1091. In a decision dated May 20, 1977, the trial court decided in favor of respondents as to Lot No. 1091. According to the trial court, the respondents, as descendants of Agatona Sagario Paulmitan were entitled to one-half (1/2) of Lot No. 1091, pro indiviso. The sale by petitioner Donato Paulmitan to his daughter, petitioner Juliana P. Fanesa, did not prejudice their rights. And the repurchase by Juliana P. Fanesa of the land from the Provincial Government of Negros Occidental did not vest in Juliana exclusive ownership over the entire land but only gave her the right to be reimbursed for the amount paid to redeem the property. The trial court ordered the partition of the land and directed petitioners Donato Paulmitan and Juliana P. Fanesa to pay private respondents certain amounts representing the latter's share in the fruits of the land. On the other hand, respondents were directed to pay P1,479.55 to Juliana P. Fanesa as their share in the redemption price paid by Fanesa to the Provincial Government of Negros Occidental. The dispositive portion of the trial court's decision reads:

WHEREFORE, judgment is hereby rendered on the second cause of action pleaded in the complain as follows:

1. The deed of sale (Exh. "F") dated May 28, 1974 is valid insofar as the one-half undivided portion of Lot 1091 is concerned as to vest ownership over said half portion in favor of defendant Juliana Fanesa and her husband Rodolfo Fanesa, while the remaining half shall belong to plaintiffs, pro-indiviso;

2. Lot 1091, Cadastral Survey of Pontevedra, Province of Negros Occidental, now covered by TCT No. RO-11653 (N.A.), is ordered partitioned. The parties must proceed to an actual partition by property instrument of partition, submitting the corresponding subdivision within sixty (60) days from finality of this decision, and should they fail to agree, commissioners of partition may be appointed by the Court;

3. Pending the physical partition, the Register of Deeds of Negros Occidental is ordered to cancel Original Certificate of Title No. RO-11653 (N.A.) covering Lot 1091, Pontevedra Cadastre, and to issue in lieu thereof a new certificate of title in the name of plaintiffs and defendants, one-half portion each, pro-indiviso, as indicated in paragraph 1 above;

4. Plaintiffs are ordered to pay, jointly and severally, defendant Juliana Fanesa the amount of P1,479.55 with interest at the legal rate from May 28, 1974 until paid;

5 Defendants Donato Sagario Paulmitan and Juliana Paulmitan Fanesa are ordered to account to plaintiffs and to pay them, jointly and severally, the value of the produce from Lot 1091 representing plaintiffs' share in the amount of P5,000.00 per year from 1966 up to the time of actual partition of the property, and to pay them the sum of P2,000.00 as attorney's fees as well as the costs of the suit.

xxx xxx xxx

On appeal, the Court of Appeals affirmed the trial court's decision. Hence this petition.

To determine the rights and obligations of the parties to the land in question, it is well to review, initially, the relatives who survived the decedent Agatona Sagario Paulmitan. When Agatona died in 1953, she was survived by two (2) sons, Donato and Pascual. A few months later in the same year, Pascual died, leaving seven children, the private respondents. On the other had, Donato's sole offspring was petitioner Juliana P. Fanesa.

At the time of the relevant transactions over the properties of decedent Agatona Sagario Paulmitan, her son Pascual had died, survived by respondents, his children. It is, thus, tempting to apply the principles pertaining to the right of representation as regards respondents. It must, however, be borne in mind that Pascual did no predecease his mother, 8 thus precluding the operation of the provisions in the Civil Code on the right of representation 9 with respect to his children, the respondents. When Agatona Sagario Paulmitan died intestate in 1952, her two (2) sons Donato and Pascual were still alive. Since it is well-settled by virtue of Article 777 of the Civil Code that "[t]he rights to the succession are transmitted from the moment of the death of the decedent," 10 the right of ownership, not only of Donato but also of Pascual, over their respective shares in the inheritance was automatically and by operation of law vested in them in 1953 when their mother died intestate. At that stage, the children of Donato and Pascual did not yet have any right over the inheritance since "[i]n every inheritance, the relative nearest in degree excludes the more distantones." 11 Donato and Pascual excluded their children as to the right to inherit from Agatona Sagario Paulmitan, their mother.

From the time of the death of Agatona Sagario Paulmitan to the subsequent passing away of her son Pascual in 1953, the estate remained unpartitioned. Article 1078 of the Civil Code provides: "Where there are two or more heirs, the whole estate of the decedent is, before its partition, owned in common by such heirs, subject to the payment of debts of the deceased." 12 Donato and Pascual

Paulmitan were, therefore, co-owners of the estate left by their mother as no partition was ever made.

When Pascual Paulmitan died intestate in 1953, his children, the respondents, succeeded him in the co-ownership of the disputed property. Pascual Paulmitan's right of ownership over an undivided portion of the property passed on to his children, who, from the time of Pascual's death, became co-owners with their uncle Donato over the disputed decedent estate.

Petitioner Juliana P. Fanesa claims ownership over Lot No. 1091 by virtue of two transactions, namely: (a) the sale made in her favor by her father Donato Paulmitan; and (b) her redemption of the land from the Provincial of Negros Occidental after it was forfeited for non-payment of taxes.

When Donato Paulmitan sold on May 28, 1974 Lot No. 1091 to his daughter Juliana P. Fanesa, he was only a co-owner with respondents and as such, he could only sell that portion which may be allotted to him upon termination of the co-ownership. 13 The sale did not prejudice the rights of respondents to one half (1/2) undivided share of the land which they inherited from their father. It did not vest ownership in the entire land with the buyer but transferred only the seller's pro-indiviso share in the property 14 and consequently made the buyer a co-owner of the land until it is partitioned. In Bailon-Casilao v. Court of Appeals, 15 the Court, through Justice Irene R. Cortes, outlined the effects of a sale by one co-owner without the consent of all the co-owners, thus:

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

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

As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the sale will affect only his own share but not those of the other co-owners who did not consent to the sale [Punsalan v. Boon Liat, 44 Phil. 320 (1923)]. This is because under the aforementioned codal provision, the sale or other disposition affects only his undivided share and the transferee gets only what would correspond to his grantor in the partition of the thing owned in common [Ramirez v. Bautista, 14 Phil. 528 (1909)]. Consequently, by virtue of the sales made by Rosalia and Gaudencio Bailon which are valid with respect to

their proportionate shares, and the subsequent transfers which culminated in the sale to private respondent Celestino Afable, the said Afable thereby became a co-owner of the disputed parcel of land as correctly held by the lower court since the sales produced the effect of substituting the buyers in the enjoyment thereof [Mainit v. Bandoy, 14 Phil. 730 (1910)].

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

Applying this principle to the case at bar, the sale by petitioner Donato Paulmitan of the land to his daughter, petitioner Juliana P. Fanesa, did not give to the latter ownership over the entire land but merely transferred to her the one half (1/2) undivided share of her father, thus making her the co-owner of the land in question with the respondents, her first cousins.

Petitioner Juliana P. Fanesa also claims ownership of the entire property by virtue of the fact that when the Provincial Government of Negros Occidental bought the land after it was forfeited for non-payment of taxes, she redeemed it.

The contention is without merit.

The redemption of the land made by Fanesa did not terminate the co-ownership nor give her title to the entire land subject of the co-ownership. Speaking on the same issue raised by petitioners, the Court, in Adille v. Court of Appeals, 16 resolved the same with the following pronouncements:

The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the property held in common?

Essentially, it is the petitioners' contention that the property subject of dispute devolved upon him upon the failure of his co-heirs to join him in its redemption within the period required by law. He relies on the provisions of Article 1515 of the old Civil Code, Article 1613 of the present Code, giving the vendee a retro the right to demand redemption of the entire property.

There is no merit in this petition.

The right of repurchase may be exercised by co-owner with respect to his share alone (CIVIL CODE, art. 1612, CIVIL CODE (1889), art. (1514.). While the records show that

petitioner redeemed the property in its entirety, shouldering the expenses therefor, that did not make him the owner of all of it. In other words, it did not put to end the existing state of co-ownership (Supra, Art. 489). There is no doubt that redemption of property entails a necessary expense. Under the Civil Code:

Art. 488. Each co-owner shall have a right to compel the other co-owners to contribute to the expenses of preservation of the thing or right owned in common and to the taxes. Any one of the latter may exempt himself from this obligation by renouncing so much of his undivided interest as may be equivalent to his share of the expenses and taxes. No such waiver shall be made if it is prejudicial to the co-ownership.

The result is that the property remains to be in a condition of co-ownership. While a vendee a retro, under Article 1613 of the Code, "may not be compelled to consent to a partial redemption," the redemption by one co-heir or co-owner of the property in its totality does not vest in him ownership over it. Failure on the part of all the co-owners to redeem it entitles the vendee a retro to retain the property and consolidate title thereto in his name (Supra, art. 1607). But the provision does not give to the redeeming co-owner the right to the entire property. It does not provide for a mode of terminating a co-ownership.

Although petitioner Fanesa did not acquire ownership over the entire lot by virtue of the redemption she made, nevertheless, she did acquire the right to reimbursed for half of the redemption price she paid to the Provincial Government of Negros Occidental on behalf of her co-owners. Until reimbursed, Fanesa hold a lien upon the subject property for the amount due her. 17

Finally, petitioners dispute the order of the trial court, which the Court of Appeals affirmed, for them to pay private respondents P5,000.00 per year from 1966 until the partition of the estate which represents the share of private respondents in the fruits of the land. According to petitioners, the land is being leased for P2,000.00 per year only. This assigned error, however raises a factual question. The settled rule is that only questions of law may be raised in a petition for review. As a general rule, findings of fact made by the trial court and the Court of Appeals are final and conclusive and cannot be reviewed on appeal. 18

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals AFFIRMED.

SO ORDERED.

G.R. No. 108228       February 1, 2001

SPOUSES MANUEL and SALVACION DEL CAMPO, petitioners, vs.HON. COURT OF APPEALS and HEIRS OF JOSE REGALADO, SR., respondents.

QUISUMBING, J.:

This is a petition for review on certiorari of a decision of the Court of Appeals which affirmed the judgment of the Regional Trial Court of Roxas City, Branch 15 in Civil Case No. V-5369, ordering the dismissal of the action for repartition, resurvey and reconveyance filed by petitioners.

Pure questions of law are raised in this appeal as the following factual antecedents are undisputed:

Salome, Consorcia, Alfredo, Maria, Rosalia, Jose, Quirico and Julita, all surnamed Bornales, were the original co-owners of Lot 162 of the Cadastral Survey of Pontevedra, Capiz under Original Certificate of Title No. 18047. As appearing therein, the lot, which consisted of a total area of 27,179 square meters was divided in aliquot shares among the eight (8) co-owners as follows:

Salome Bornales 4/16

Consorcia Bornales 4/16

Alfredo Bornales 2/16

Maria Bornales 2/16

Jose Bornales 1/16

Quirico Bornales 1/16

Rosalia Bornales 1/16

Julita Bornales 1/16

On July 14, 1940, Salome sold part of her 4/16 share in Lot 162 for P200.00 to Soledad Daynolo. In the Deed of Absolute Sale signed by Salome and two other co-owners, Consorcia and Alfredo, the portion of Lot 162 sold to Soledad was described as having more or less the following measurements:

63-1/2 meters from point "9" to "10", 35 meters from point "10" to point "11", 30 meters from point "11" to a certain point parallel to a line drawn from points "9" to "10"; and then from this "Certain Point" to point "9" and as shown in the accompanying sketch, and made an integral part of this deed, to SOLEDAD DAYNOLO, her heirs and assigns.1

Thereafter, Soledad Daynolo immediately took possession of the land described above and built a house thereon. A few years later, Soledad and her husband, Simplicio Distajo, mortgaged the subject portion of Lot 162 as security for a P400.00 debt to Jose Regalado, Sr. This transaction was evidenced by a Deed of Mortgage2 dated May 1, 1947.

On April 14, 1948, three of the eight co-owners of Lot 162, specifically, Salome, Consorcia and Alfredo, sold 24,993 square meters of said lot to Jose Regalado, Sr.

On May 4, 1951, Simplicio Distajo, heir of Soledad Daynolo who had since died, paid the mortgage debt and redeemed the mortgaged portion of Lot 162 from Jose Regalado, Sr. The latter, in turn, executed a Deed of Discharge of Mortgage3

in favor of Soledad’s heirs, namely: Simplicio Distajo, Rafael Distajo and Teresita Distajo-Regalado. On same date, the said heirs sold the redeemed portion of Lot 162 for P1,500.00 to herein petitioners, the spouses Manuel Del Campo and Salvacion Quiachon.1âwphi1.nêt

Meanwhile, Jose Regalado, Sr. caused the reconstitution of Original Certificate of Title No. 18047. The reconstituted OCT No. RO-4541 initially reflected the shares of the original co-owners in Lot 162. However, title was transferred later to Jose Regalado, Sr. who subdivided the entire property into smaller lots, each covered by a respective title in his name. One of these small lots is Lot No. 162-C-6 with an area of 11,732 square meters which was registered on February 24, 1977 under TCT No. 14566.

In 1987, petitioners Manuel and Salvacion del Campo brought this complaint for "repartition, resurvey and reconveyance" against the heirs of the now deceased Jose Regalado, Sr. Petitioners claimed that they owned an area of 1,544 square meters located within Lot 162-C-6 which was erroneously included in TCT No. 14566 in the name of Regalado. Petitioners alleged that they occupied the disputed area as residential dwelling ever since they purchased the property from the Distajos way back in 1951. They also declared the land for taxation purposes and paid the corresponding taxes.

On April 1, 1987, summons were served on Regalado’s widow, Josefina Buenvenida, and two of her children, Rosemarie and Antonio. Josefina and Rosemarie were declared in default on May 10, 1989 because only Antonio filed an answer to the complaint.

During trial, petitioners presented the Deed of Absolute Sale4 executed between Soledad Daynolo and Salome Bornales as well as the Deed of Mortgage5 and Deed of Discharge6 signed by Jose Regalado, Sr. The Deed of Absolute Sale7 showing the purchase by the Del Campos of the property from the Distajos was likewise given in evidence.

Despite the filing of an answer, Antonio failed to present any evidence to refute the claim of petitioners. Thus, after considering Antonio to have waived his opportunity to present evidence, the trial court deemed the case submitted for decision.

On November 20, 1990, the trial court rendered judgment dismissing the complaint. It held that while Salome could alienate her pro-indiviso share in Lot 162, she could not validly sell an undivided part thereof by meters and bounds to Soledad, from whom petitioners derived their title. The trial court also reasoned that petitioners could not have a better right to the property even if they were in physical possession of the same and declared the property for taxation purposes, because mere possession cannot defeat the right of the Regalados who had a Torrens title over the land.

On appeal, the Court of Appeals affirmed the trial court’s judgment, with no pronouncement as to costs.8

Petitioners now seek relief from this Court and maintain that:

I.

THE FACT THAT THE SALE OF THE SUBJECT PORTION CONSTITUTES A SALE OF A CONCRETE OR DEFINITE PORTION OF LAND OWNED IN COMMON DOES NOT ABSOLUTELY DEPRIVE HEREIN PETITIONERS OF ANY RIGHT OR TITLE THERETO;

II.

IN ANY EVENT, HEREIN PRIVATE RESPONDENTS ARE ALL ESTOPPED FROM DENYING THE RIGHT AND TITLE OF HEREIN PETITIONERS.9

In resolving petitioners’ appeal, we must answer the following questions: Would the sale by a co-owner of a physical portion of an undivided property held in common be valid? Is respondent estopped from denying petitioners’ right and title over the disputed area? Under the facts and circumstances duly established by the evidence, are petitioners entitled to ‘repartition, resurvey and reconveyance’ of the property in question?

On the first issue, it seems plain to us that the trial court concluded that petitioners could not have acquired ownership of the subject land which originally formed part of Lot 162, on the ground that their alleged right springs from a void sale transaction between Salome and Soledad. The mere fact that Salome purportedly transferred a definite portion of the co-owned lot by metes and bounds to Soledad, however, does not per se render the sale a nullity. This much is evident under Article 49310 of the Civil Code and pertinent jurisprudence on the matter. More particularly in Lopez vs. Vda. De Cuaycong, et. al.11 which we find relevant, the Court, speaking through Mr. Justice Bocobo, held that:

…The fact that the agreement in question purported to sell a concrete portion of the hacienda does not render the sale void, for it is a well-established principle that the binding force of a contract must be recognized as far as it is legally possible to do so. "Quando res non valet ut ago, valeat quantum valere potest." (When a thing is of no force as I do it, it shall have as much force as it can have.)12

Applying this principle to the instant case, there can be no doubt that the transaction entered into by Salome and Soledad could be legally recognized in its entirety since the object of the sale did not even exceed the ideal shares held by the former in the co-ownership. As a matter of fact, the deed of sale executed between the parties expressly stipulated that the portion of Lot 162 sold to Soledad would be taken from Salome’s 4/16 undivided interest in said lot, which the latter could validly transfer in whole or in part even without the consent of the other co-owners. Salome’s right to sell part of her undivided interest in the co-owned property is absolute in accordance with the well-settled doctrine that a co-owner has full ownership of his pro-indiviso share and has the right to alienate, assign or mortgage it, and substitute another person in its enjoyment13 Since Salome’s clear intention was to sell merely part of her aliquot share in Lot 162, in our view no valid objection can be made against it and the sale can be given effect to the full extent.

We are not unaware of the principle that a co-owner cannot rightfully dispose of a particular portion of a co-owned property prior to partition among all the co-owners. However, this should not signify that the vendee does not acquire anything at all in case a physically segregated area of the co-owned lot is in fact sold to him. Since the co-owner/vendor’s undivided interest could properly be the object of the contract of sale between the parties, what the vendee obtains by virtue of such a sale are the same rights as the vendor had as co-owner, in an ideal share equivalent to the consideration given under their transaction. In other words, the vendee steps into the shoes of the vendor as co-owner and acquires a proportionate abstract share in the property held in common.

Resultantly, Soledad became a co-owner of Lot 162 as of the year 1940 when the sale was made in her favor. It follows that Salome, Consorcia and Alfredo could not have sold the entire Lot 162 to Jose Regalado, Sr. on April 14, 1948 because

at that time, the ideal shares held by the three co-owners/vendors were equivalent to only 10/16 of the undivided property less the aliquot share previously sold by Salome to Soledad. Based on the principle that "no one can give what he does not have,"14 Salome, Consorcia and Alfredo could not legally sell the shares pertaining to Soledad since a co-owner cannot alienate more than his share in the co-ownership. We have ruled many times that even if a co-owner sells the whole property as his, the sale will affect only his own share but not those of the other co-owners who did not consent to the sale. Since a co-owner is entitled to sell his undivided share, a sale of the entire property by one co-owner will only transfer the rights of said co-owner to the buyer, thereby making the buyer a co-owner of the property.15

In this case, Regalado merely became a new co-owner of Lot 162 to the extent of the shares which Salome, Consorcia and Alfredo could validly convey. Soledad retained her rights as co-owner and could validly transfer her share to petitioners in 1951. The logical effect on the second disposition is to substitute petitioners in the rights of Soledad as co-owner of the land. Needless to say, these rights are preserved notwithstanding the issuance of TCT No. 14566 in Regalado’s name in 1977.

Be that as it may, we find that the area subject matter of this petition had already been effectively segregated from the ‘mother lot’ even before title was issued in favor of Regalado. It must be noted that 26 years had lapsed from the time petitioners bought and took possession of the property in 1951 until Regalado procured the issuance of TCT No. 14566. Additionally, the intervening years between the date of petitioners’ purchase of the property and 1987 when petitioners filed the instant complaint, comprise all of 36 years. However, at no instance during this time did respondents or Regalado, for that matter, question petitioners’ right over the land in dispute. In the case of Vda. De Cabrera vs. Court of Appeals,16 we had occasion to hold that where the transferees of an undivided portion of the land allowed a co-owner of the property to occupy a definite portion thereof and had not disturbed the same for a period too long to be ignored, the possessor is in a better condition or right than said transferees. (Potior est condition possidentis). Such undisturbed possession had the effect of a partial partition of the co-owner property which entitles the possessor to the definite portion which he occupies. Conformably, petitioners are entitled to the disputed land, having enjoyed uninterrupted possession thereof for a total of 49 years up to the present.

The lower court’s reliance on the doctrine that mere possession cannot defeat the right of a holder of a registered Torrens title over property is misplaced, considering that petitioners were deprived of their dominical rights over the said lot through fraud and with evident bad faith on the part of Regalado. Failure and intentional omission to disclose the fact of actual physical possession by another person during registration proceedings constitutes actual fraud. Likewise, it is fraud to knowingly omit or conceal a fact, upon which benefit is obtained to the prejudice of a third person.17 In this case, we are convinced that Regalado knew of the fact that he did not have a title to the entire lot and could not, therefore, have

validly registered the same in his name alone because he was aware of petitioners’ possession of the subject portion as well as the sale between Salome and Soledad.

That Regalado had notice of the fact that the disputed portion of Lot 162 was under claim of ownership by petitioners and the latter’s predecessor is beyond question. Records show that the particular area subject of this case was mortgaged by Soledad and her husband to Jose Regalado, Sr. as early as May 1, 1947 or one year prior to the alienation of the whole lot in favor of the latter. Regalado never questioned the ownership of the lot given by Soledad as security for the P400.00 debt and he must have at least known that Soledad bought the subject portion from Salome since he could not have reasonably accepted the lot as security for the mortgage debt if such were not the case. By accepting the said portion of Lot 162 as security for the mortgage obligation, Regalado had in fact recognized Soledad’s ownership of this definite portion of Lot 162. Regalado could not have been ignorant of the fact that the disputed portion is being claimed by Soledad and subsequently, by petitioners, since Regalado even executed a Release of Mortgage on May 4, 1951, three years after the entire property was supposedly sold to him. It would certainly be illogical for any mortgagee to accept property as security, purchase the mortgaged property and, thereafter, claim the very same property as his own while the mortgage was still subsisting.

Consequently, respondents are estopped from asserting that they own the subject land in view of the Deed of Mortgage and Discharge of Mortgage executed between Regalado and petitioners’ predecessor-in-interest. As petitioners correctly contend, respondents are barred from making this assertion under the equitable principle of estoppel by deed, whereby a party to a deed and his privies are precluded from asserting as against the other and his privies any right or title in derogation of the deed, or from denying the truth of any material fact asserted in it.18 A perusal of the documents evidencing the mortgage would readily reveal that Soledad, as mortgagor, had declared herself absolute owner of the piece of land now being litigated. This declaration of fact was accepted by Regalado as mortgagee and accordingly, his heirs cannot now be permitted to deny it.

Although Regalado’s certificate of title became indefeasible after the lapse of one year from the date of the decree of registration, the attendance of fraud in its issuance created an implied trust in favor of petitioners and gave them the right to seek reconveyance of the parcel wrongfully obtained by the former. An action for reconveyance based on an implied trust ordinarily prescribes in ten years. But when the right of the true and real owner is recognized, expressly or implicitly such as when he remains undisturbed in his possession, the said action is imprescriptible, it being in the nature of a suit for quieting of title.19 Having established by clear and convincing evidence that they are the legal owners of the litigated portion included in TCT NO. 14566, it is only proper that reconveyance of the property be ordered in favor of petitioners. The alleged incontrovertibility of Regalado’s title cannot be successfully invoked by respondents because certificates of title merely confirm or record title already existing and cannot be

used to protect a usurper from the true owner or be used as a shield for the commission of fraud.20

WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Appeals in CA-G.R. CV No. 30438 is REVERSED and SET ASIDE. The parties are directed to cause a SURVEY for exact determination of their respective portions in Lot 162-C-6. Transfer Certificate of Title No. 14566 is declared CANCELLED and the Register of Deeds of Capiz is ordered to ISSUE a new title in accordance with said survey, upon finality of this decision.

Costs against respondents.1âwphi1.nêt

G.R. No. L-44546 January 29, 1988

RUSTICO ADILLE, petitioner, vs.THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO, TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA ASEJO and SANTIAGO ASEJO, respondents.

 

SARMIENTO, J.:

In issue herein are property and property rights, a familiar subject of controversy and a wellspring of enormous conflict that has led not only to protracted legal entanglements but to even more bitter consequences, like strained relationships and even the forfeiture of lives. It is a question that likewise reflects a tragic commentary on prevailing social and cultural values and institutions, where, as one observer notes, wealth and its accumulation are the basis of self-fulfillment and where property is held as sacred as life itself. "It is in the defense of his property," says this modern thinker, that one "will mobilize his deepest protective devices, and anybody that threatens his possessions will arouse his most passionate enmity." 1

The task of this Court, however, is not to judge the wisdom of values; the burden of reconstructing the social order is shouldered by the political leadership-and the people themselves.

The parties have come to this Court for relief and accordingly, our responsibility is to give them that relief pursuant to the decree of law.

The antecedent facts are quoted from the decision 2 appealed from:

xxx xxx xxx

... [T]he land in question Lot 14694 of Cadastral Survey of Albay located in Legaspi City with an area of some 11,325 sq. m. originally belonged to one Felisa Alzul as her own private property; she married twice in her lifetime; the first, with one Bernabe Adille, with whom she had as an only child, herein defendant Rustico Adille; in her second marriage with one Procopio Asejo, her children were herein plaintiffs, — now, sometime in 1939, said Felisa sold the property in pacto de retro to certain 3rd persons, period of repurchase being 3 years, but she died in 1942 without being able to redeem and after her death, but during the period of redemption, herein defendant repurchased, by himself alone, and after that, he executed a deed of extra-judicial partition representing himself to be the only heir and child of his mother Felisa with the consequence that he was able to secure title in his name alone also, so that OCT. No. 21137 in the name of his mother was transferred to his name, that was in 1955; that was why after some efforts of compromise had failed, his half-brothers and sisters, herein plaintiffs, filed present case for partition with accounting on the position that he was only a trustee on an implied trust when he redeemed,-and this is the evidence, but as it also turned out that one of plaintiffs, Emeteria Asejo was occupying a portion, defendant counterclaimed for her to vacate that, —

Well then, after hearing the evidence, trial Judge sustained defendant in his position that he was and became absolute owner, he was not a trustee, and therefore, dismissed case and also condemned plaintiff occupant, Emeteria to vacate; it is because of this that plaintiffs have come here and contend that trial court erred in:

I. ... declaring the defendant absolute owner of the property;

II. ... not ordering the partition of the property; and

III. ... ordering one of the plaintiffs who is in possession of the portion of the property to vacate the land, p. 1 Appellant's brief.

which can be reduced to simple question of whether or not on the basis of evidence and law, judgment appealed from should be maintained. 3

xxx xxx xxx

The respondent Court of appeals reversed the trial Court, 4 and ruled for the plaintiffs-appellants, the private respondents herein. The petitioner now appeals, by way of certiorari, from the Court's decision.

We required the private respondents to file a comment and thereafter, having given due course to the petition, directed the parties to file their briefs. Only the petitioner, however, filed a brief, and the private respondents having failed to file one, we declared the case submitted for decision.

The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the property held in common?

Essentially, it is the petitioner's contention that the property subject of dispute devolved upon him upon the failure of his co-heirs to join him in its redemption within the period required by law. He relies on the provisions of Article 1515 of the old Civil Article 1613 of the present Code, giving the vendee a retro the right to demand redemption of the entire property.

There is no merit in this petition.

The right of repurchase may be exercised by a co-owner with aspect to his share alone. 5 While the records show that the petitioner redeemed the property in its entirety, shouldering the expenses therefor, that did not make him the owner of all of it. In other words, it did not put to end the existing state of co-ownership.

Necessary expenses may be incurred by one co-owner, subject to his right to collect reimbursement from the remaining co-owners. 6 There is no doubt that redemption of property entails a necessary expense. Under the Civil Code:

ART. 488. Each co-owner shall have a right to compel the other co-owners to contribute to the expenses of preservation of the thing or right owned in common and to the taxes. Any one of the latter may exempt himself from this obligation by renouncing so much of his undivided interest as may be equivalent to his share of the expenses and taxes. No such waiver shall be made if it is prejudicial to the co-ownership.

The result is that the property remains to be in a condition of co-ownership. While a vendee a retro, under Article 1613 of the Code, "may not be compelled to consent to a partial redemption," the redemption by one co-heir or co-owner of the property in its totality does not vest in him ownership over it. Failure on the part of all the co-owners to redeem it entitles the vendee a retro to retain the property and consolidate title thereto in his name. 7 But the provision does not give to the redeeming co-owner the right to the entire property. It does not provide for a mode of terminating a co-ownership.

Neither does the fact that the petitioner had succeeded in securing title over the parcel in his name terminate the existing co-ownership. While his half-brothers and sisters are, as we said, liable to him for reimbursement as and for their shares in redemption expenses, he cannot claim exclusive right to the property owned in

common. Registration of property is not a means of acquiring ownership. It operates as a mere notice of existing title, that is, if there is one.

The petitioner must then be said to be a trustee of the property on behalf of the private respondents. The Civil Code states:

ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes.

We agree with the respondent Court of Appeals that fraud attended the registration of the property. The petitioner's pretension that he was the sole heir to the land in the affidavit of extrajudicial settlement he executed preliminary to the registration thereof betrays a clear effort on his part to defraud his brothers and sisters and to exercise sole dominion over the property. The aforequoted provision therefore applies.

It is the view of the respondent Court that the petitioner, in taking over the property, did so either on behalf of his co-heirs, in which event, he had constituted himself a negotiorum gestor under Article 2144 of the Civil Code, or for his exclusive benefit, in which case, he is guilty of fraud, and must act as trustee, the private respondents being the beneficiaries, under the Article 1456. The evidence, of course, points to the second alternative the petitioner having asserted claims of exclusive ownership over the property and having acted in fraud of his co-heirs. He cannot therefore be said to have assume the mere management of the property abandoned by his co-heirs, the situation Article 2144 of the Code contemplates. In any case, as the respondent Court itself affirms, the result would be the same whether it is one or the other. The petitioner would remain liable to the Private respondents, his co-heirs.

This Court is not unaware of the well-established principle that prescription bars any demand on property (owned in common) held by another (co-owner) following the required number of years. In that event, the party in possession acquires title to the property and the state of co-ownership is ended . 8 In the case at bar, the property was registered in 1955 by the petitioner, solely in his name, while the claim of the private respondents was presented in 1974. Has prescription then, set in?

We hold in the negative. Prescription, as a mode of terminating a relation of co-ownership, must have been preceded by repudiation (of the co-ownership). The act of repudiation, in turn is subject to certain conditions: (1) a co-owner repudiates the co-ownership; (2) such an act of repudiation is clearly made known to the other co-owners; (3) the evidence thereon is clear and conclusive, and (4) he has been in possession through open, continuous, exclusive, and notorious possession of the property for the period required by law. 9

The instant case shows that the petitioner had not complied with these requisites. We are not convinced that he had repudiated the co-ownership; on the contrary, he had deliberately kept the private respondents in the dark by feigning sole heirship over the estate under dispute. He cannot therefore be said to have "made known" his efforts to deny the co-ownership. Moreover, one of the private respondents, Emeteria Asejo, is occupying a portion of the land up to the present, yet, the petitioner has not taken pains to eject her therefrom. As a matter of fact, he sought to recover possession of that portion Emeteria is occupying only as a counterclaim, and only after the private respondents had first sought judicial relief.

It is true that registration under the Torrens system is constructive notice of title, 10 but it has likewise been our holding that the Torrens title does not furnish a shield for fraud. 11 It is therefore no argument to say that the act of registration is equivalent to notice of repudiation, assuming there was one, notwithstanding the long-standing rule that registration operates as a universal notice of title.

For the same reason, we cannot dismiss the private respondents' claims commenced in 1974 over the estate registered in 1955. While actions to enforce a constructive trust prescribes in ten years, 12 reckoned from the date of the registration of the property, 13 we, as we said, are not prepared to count the period from such a date in this case. We note the petitioner's sub rosa efforts to get hold of the property exclusively for himself beginning with his fraudulent misrepresentation in his unilateral affidavit of extrajudicial settlement that he is "the only heir and child of his mother Feliza with the consequence that he was able to secure title in his name also." 14 Accordingly, we hold that the right of the private respondents commenced from the time they actually discovered the petitioner's act of defraudation. 15 According to the respondent Court of Appeals, they "came to know [of it] apparently only during the progress of the litigation." 16 Hence, prescription is not a bar.

Moreover, and as a rule, prescription is an affirmative defense that must be pleaded either in a motion to dismiss or in the answer otherwise it is deemed waived, 17 and here, the petitioner never raised that defense. 18 There are recognized exceptions to this rule, but the petitioner has not shown why they apply.

WHEREFORE, there being no reversible error committed by the respondent Court of Appeals, the petition is DENIED. The Decision sought to be reviewed is hereby AFFIRMED in toto. No pronouncement as to costs.

SO ORDERED,

G.R. No. 162421               August 31, 2007

NELSON CABALES and RITO CABALES, Petitioners, vs.

COURT OF APPEALS, JESUS FELIANO and ANUNCIACION FELIANO, Respondents.

D E C I S I O N

PUNO, C.J.:

This is a petition for review on certiorari seeking the reversal of the decision1 of the Court of Appeals dated October 27, 2003, in CA-G.R. CV No. 68319 entitled "Nelson Cabales and Rito Cabales v. Jesus Feliano and Anunciacion Feliano," which affirmed with modification the decision2 of the Regional Trial Court of Maasin, Southern Leyte, Branch 25, dated August 11, 2000, in Civil Case No. R-2878. The resolution of the Court of Appeals dated February 23, 2004, which denied petitioners’ motion for reconsideration, is likewise herein assailed.

The facts as found by the trial court and the appellate court are well established.

Rufino Cabales died on July 4, 1966 and left a 5,714-square meter parcel of land located in Brgy. Rizal, Sogod, Southern Leyte, covered by Tax Declaration No. 17270 to his surviving wife Saturnina and children Bonifacio, Albino, Francisco, Leonora, Alberto and petitioner Rito.

On July 26, 1971, brothers and co-owners Bonifacio, Albino and Alberto sold the subject property to Dr. Cayetano Corrompido for P2,000.00, with right to repurchase within eight (8) years. The three (3) siblings divided the proceeds of the sale among themselves, each getting a share of P666.66.

The following month or on August 18, 1971, Alberto secured a note ("vale") from Dr. Corrompido in the amount of P300.00.

In 1972, Alberto died leaving his wife and son, petitioner Nelson.

On December 18, 1975, within the eight-year redemption period, Bonifacio and Albino tendered their payment of P666.66 each to Dr. Corrompido. But Dr. Corrompido only released the document of sale with pacto de retro after Saturnina paid for the share of her deceased son, Alberto, including his "vale" of P300.00.

On even date, Saturnina and her four (4) children Bonifacio, Albino, Francisco and Leonora sold the subject parcel of land to respondents-spouses Jesus and Anunciacion Feliano for P8,000.00. The Deed of Sale provided in its last paragraph, thus:

It is hereby declared and understood that the amount of TWO THOUSAND TWO HUNDRED EIGHTY SIX PESOS (P2,286.00) corresponding and belonging to the

Heirs of Alberto Cabales and to Rito Cabales who are still minors upon the execution of this instrument are held

in trust by the VENDEE and to be paid and delivered only to them upon reaching the age of 21.

On December 17, 1985, the Register of Deeds of Southern Leyte issued Original Certificate of Title No. 17035 over the purchased land in the names of respondents-spouses.

On December 30, 1985, Saturnina and her four (4) children executed an affidavit to the effect that petitioner Nelson would only receive the amount of P176.34 from respondents-spouses when he reaches the age of 21 considering that Saturnina paid Dr. Corrompido P966.66 for the obligation of petitioner Nelson’s late father Alberto, i.e., P666.66 for his share in the redemption of the sale with pacto de retro as well as his "vale" of P300.00.

On July 24, 1986, 24-year old petitioner Rito Cabales acknowledged receipt of the sum of P1,143.00 from respondent Jesus Feliano, representing the former’s share in the proceeds of the sale of subject property.

In 1988, Saturnina died. Petitioner Nelson, then residing in Manila, went back to his father’s hometown in Southern Leyte. That same year, he learned from his uncle, petitioner Rito, of the sale of subject property. In 1993, he signified his intention to redeem the subject land during a barangay conciliation process that he initiated.

On January 12, 1995, contending that they could not have sold their respective shares in subject property when they were minors, petitioners filed before the Regional Trial Court of Maasin, Southern Leyte, a complaint for redemption of the subject land plus damages.

In their answer, respondents-spouses maintained that petitioners were estopped from claiming any right over subject property considering that (1) petitioner Rito had already received the amount corresponding to his share of the proceeds of the sale of subject property, and (2) that petitioner Nelson failed to consign to the court the total amount of the redemption price necessary for legal redemption. They prayed for the dismissal of the case on the grounds of laches and prescription.

No amicable settlement was reached at pre-trial. Trial ensued and on August 11, 2000, the trial court ruled against petitioners. It held that (1) Alberto or, by his death, any of his heirs including petitioner Nelson lost their right to subject land when not one of them repurchased it from Dr. Corrompido; (2) Saturnina was effectively subrogated to the rights and interests of Alberto when she paid for Alberto’s share as well as his obligation to Dr. Corrompido; and (3) petitioner Rito

had no more right to redeem his share to subject property as the sale by Saturnina, his legal guardian pursuant to Section 7, Rule 93 of the Rules of Court, was perfectly valid; and it was shown that he received his share of the proceeds of the sale on July 24, 1986, when he was 24 years old.

On appeal, the Court of Appeals modified the decision of the trial court. It held that the sale by Saturnina of petitioner Rito’s undivided share to the property was unenforceable for lack of authority or legal representation but that the contract was effectively ratified by petitioner Rito’s receipt of the proceeds on July 24, 1986. The appellate court also ruled that petitioner Nelson is co-owner to the extent of one-seventh (1/7) of subject property as Saturnina was not subrogated to Alberto’s rights when she repurchased his share to the property. It further directed petitioner Nelson to pay the estate of the late Saturnina Cabales the amount of P966.66, representing the amount which the latter paid for the obligation of petitioner Nelson’s late father Alberto. Finally, however, it denied petitioner Nelson’s claim for redemption for his failure to tender or consign in court the redemption money within the period prescribed by law.

In this petition for review on certiorari, petitioners contend that the Court of Appeals erred in (1) recognizing petitioner Nelson Cabales as co-owner of subject land but denied him the right of legal redemption, and (2) not recognizing petitioner Rito Cabales as co-owner of subject land with similar right of legal redemption.

First, we shall delineate the rights of petitioners to subject land.

When Rufino Cabales died intestate, his wife Saturnina and his six (6) children, Bonifacio, Albino, Francisco, Leonora, Alberto and petitioner Rito, survived and succeeded him. Article 996 of the New Civil Code provides that "[i]f a widow or widower and legitimate children or descendants are left, the surviving spouse has in the succession the same share as that of each of the children." Verily, the seven (7) heirs inherited equally on subject property. Petitioner Rito and Alberto, petitioner Nelson’s father, inherited in their own rights and with equal shares as the others.

But before partition of subject land was effected, Alberto died. By operation of law, his rights and obligations to one-seventh of subject land were transferred to his legal heirs – his wife and his son petitioner Nelson.

We shall now discuss the effects of the two (2) sales of subject land to the rights of the parties.

The first sale with pacto de retro to Dr. Corrompido by the brothers and co-owners Bonifacio, Albino and Alberto was valid but only as to their pro-indiviso shares to the land. When Alberto died prior to repurchasing his share, his rights and obligations were transferred to and assumed by his heirs, namely his wife and his

son, petitioner Nelson. But the records show that it was Saturnina, Alberto’s mother, and not his heirs, who repurchased for him. As correctly ruled by the Court of Appeals, Saturnina was not subrogated to Alberto’s or his heirs’ rights to the property when she repurchased the share.

In Paulmitan v. Court of Appeals,3 we held that a co-owner who redeemed the property in its entirety did not make her the owner of all of it. The property remained in a condition of co-ownership as the redemption did not provide for a mode of terminating a co-ownership.4 But the one who redeemed had the right to be reimbursed for the redemption price and until reimbursed, holds a lien upon the subject property for the amount due.5 Necessarily, when Saturnina redeemed for Alberto’s heirs who had then acquired his pro-indiviso share in subject property, it did not vest in her ownership over the pro-indiviso share she redeemed. But she had the right to be reimbursed for the redemption price and held a lien upon the property for the amount due until reimbursement. The result is that the heirs of Alberto, i.e., his wife and his son petitioner Nelson, retained ownership over their pro-indiviso share.

Upon redemption from Dr. Corrompido, the subject property was resold to respondents-spouses by the co-owners. Petitioners Rito and Nelson were then minors and as indicated in the Deed of Sale, their shares in the proceeds were held in trust by respondents-spouses to be paid and delivered to them upon reaching the age of majority.

As to petitioner Rito, the contract of sale was unenforceable as correctly held by the Court of Appeals. Articles 320 and 326 of the New Civil Code6 state that:

Art. 320. The father, or in his absence the mother, is the legal administrator of the property pertaining to the child under parental authority. If the property is worth more than two thousand pesos, the father or mother shall give a bond subject to the approval of the Court of First Instance.

Art. 326. When the property of the child is worth more than two thousand pesos, the father or mother shall be considered a guardian of the child’s property, subject to the duties and obligations of guardians under the Rules of Court.

In other words, the father, or, in his absence, the mother, is considered legal administrator of the property pertaining to the child under his or her parental authority without need of giving a bond in case the amount of the property of the child does not exceed two thousand pesos.7 Corollary to this, Rule 93, Section 7 of the Revised Rules of Court of 1964, applicable to this case, automatically designates the parent as legal guardian of the child without need of any judicial appointment in case the latter’s property does not exceed two thousand pesos,8 thus:

Sec. 7. Parents as guardians. – When the property of the child under parental authority is worth two thousand pesos or less, the father or the mother, without the necessity of court appointment, shall be his legal guardian x x x x9

Saturnina was clearly petitioner Rito’s legal guardian without necessity of court appointment considering that the amount of his property or one-seventh of subject property was P1,143.00, which is less than two thousand pesos. However, Rule 96, Sec. 110 provides that:

Section 1. To what guardianship shall extend. – A guardian appointed shall have the care and custody of the person of his ward, and the management of his estate, or the management of the estate only, as the case may be. The guardian of the estate of a nonresident shall have the management of all the estate of the ward within the Philippines, and no court other than that in which such guardian was appointed shall have jurisdiction over the guardianship.

Indeed, the legal guardian only has the plenary power of administration of the minor’s property. It does not include the power of alienation which needs judicial authority.11 Thus, when Saturnina, as legal guardian of petitioner Rito, sold the latter’s pro-indiviso share in subject land, she did not have the legal authority to do so.

Article 1403 of the New Civil Code provides, thus:

Art. 1403. The following contracts are unenforceable, unless they are ratified:

(1) Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted beyond his powers;

x x x x

Accordingly, the contract of sale as to the pro-indiviso share of petitioner Rito was unenforceable. However, when he acknowledged receipt of the proceeds of the sale on July 24, 1986, petitioner Rito effectively ratified it. This act of ratification rendered the sale valid and binding as to him.

With respect to petitioner Nelson, on the other hand, the contract of sale was void. He was a minor at the time of the sale. Saturnina or any and all the other co-owners were not his legal guardians with judicial authority to alienate or encumber his property. It was his mother who was his legal guardian and, if duly authorized by the courts, could validly sell his undivided share to the property. She did not. Necessarily, when Saturnina and the others sold the subject property in its entirety to respondents-spouses, they only sold and transferred title to their pro-indiviso shares and not that part which pertained to petitioner Nelson and his mother. Consequently, petitioner Nelson and his mother retained ownership over their undivided share of subject property.12

But may petitioners redeem the subject land from respondents-spouses? Articles 1088 and 1623 of the New Civil Code are pertinent:

Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one month from the time they were notified in writing of the sale by the vendor.

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

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

Clearly, legal redemption may only be exercised by the co-owner or co-owners who did not part with his or their pro-indiviso share in the property held in common. As demonstrated, the sale as to the undivided share of petitioner Rito became valid and binding upon his ratification on July 24, 1986. As a result, he lost his right to redeem subject property.

However, as likewise established, the sale as to the undivided share of petitioner Nelson and his mother was not valid such that they were not divested of their ownership thereto. Necessarily, they may redeem the subject property from respondents-spouses. But they must do so within thirty days from notice in writing of the sale by their co-owners vendors. In reckoning this period, we held in Alonzo v. Intermediate Appellate Court,13 thus:

x x x we test a law by its results; and likewise, we may add, by its purposes. It is a cardinal rule that, in seeking the meaning of the law, the first concern of the judge should be to discover in its provisions the intent of the lawmaker. Unquestionably, the law should never be interpreted in such a way as to cause injustice as this is never within the legislative intent. An indispensable part of that intent, in fact, for we presume the good motives of the legislature, is to render justice.

Thus, we interpret and apply the law not independently of but in consonance with justice. Law and justice are inseparable, and we must keep them so. x x x x

x x x x While we may not read into the law a purpose that is not there, we nevertheless have the right to read out of it the reason for its enactment. In doing so, we defer not to "the letter that killeth" but to "the spirit that vivifieth," to give effect to the lawmaker’s will.

In requiring written notice, Article 1088 (and Article 1623 for that matter)14 seeks to ensure that the redemptioner is properly notified of the sale and to indicate the date of such notice as the starting time of the 30-day period of redemption. Considering the shortness of the period, it is really necessary, as a general rule, to pinpoint the precise date it is supposed to begin, to obviate the problem of alleged delays, sometimes consisting of only a day or two.1awph!1

In the instant case, the right of redemption was invoked not days but years after the sale was made in 1978. We are not unmindful of the fact that petitioner Nelson was a minor when the sale was perfected. Nevertheless, the records show that in 1988, petitioner Nelson, then of majority age, was informed of the sale of subject property. Moreover, it was noted by the appellate court that petitioner Nelson was likewise informed thereof in 1993 and he signified his intention to redeem subject property during a barangay conciliation process. But he only filed the complaint for legal redemption and damages on January 12, 1995, certainly more than thirty days from learning about the sale.

In the face of the established facts, petitioner Nelson cannot feign ignorance of the sale of subject property in 1978. To require strict proof of written notice of the sale would be to countenance an obvious false claim of lack of knowledge thereof, thus commending the letter of the law over its purpose, i.e., the notification of redemptioners.

The Court is satisfied that there was sufficient notice of the sale to petitioner Nelson. The thirty-day redemption period commenced in 1993, after petitioner Nelson sought the barangay conciliation process to redeem his property. By January 12, 1995, when petitioner Nelson filed a complaint for legal redemption and damages, it is clear that the thirty-day period had already expired.

As in Alonzo, the Court, after due consideration of the facts of the instant case, hereby interprets the law in a way that will render justice.15

Petitioner Nelson, as correctly held by the Court of Appeals, can no longer redeem subject property. But he and his mother remain co-owners thereof with respondents-spouses. Accordingly, title to subject property must include them.

IN VIEW WHEREOF, the petition is DENIED. The assailed decision and resolution of the Court of Appeals of October 27, 2003 and February 23, 2004 are AFFIRMED WITH MODIFICATION. The Register of Deeds of Southern Leyte is ORDERED to cancel Original Certificate of Title No. 17035 and to issue in lieu thereof a new certificate of title in the name of respondents-spouses Jesus and Anunciacion Feliano for the 6/7 portion, and petitioner Nelson Cabales and his mother for the remaining 1/7 portion, pro indiviso.

SO ORDERED.

G.R. No. L-46296 September 24, 1991

EPITACIO DELIMA, PACLANO DELIMA, FIDEL DELIMA, VIRGILIO DELIMA, GALILEO DELIMA, JR., BIBIANO BACUS, OLIMPIO BACUS and PURIFICACION BACUS, petitioners, vs.HON. COURT OF APPEALS, GALILEO DELIMA (deceased), substituted by his legal heirs, namely: FLAVIANA VDA. DE DELIMA, LILY D. ARIAS, HELEN NIADAS, ANTONIO DELIMA, DIONISIO DELIMA, IRENEA DELIMA, ESTER DELIMA AND FELY DELIMA, respondents.

Gabriel J. Canete for petitioners.

Emilio Lumontad, Jr. for private respondents.

 

MEDIALDEA, J.:p

This is a petition for review on certiorari of the decision of the Court of Appeals reversing the trial court's judgment which declared as null and void the certificate of title in the name of respondents' predecessor and which ordered the partition of the disputed lot among the parties as co-owners.

The antecedent facts of the case as found both by the respondent appellate court and by the trial court are as follows:

During his lifetime, Lino Delima acquired Lot No. 7758 of the Talisay-Minglanilla Friar Lands Estate in Cebu by sale on installments from the government. Lino Delima later died in 1921 leaving as his only heirs three brothers and a sister namely: Eulalio Delima, Juanita Delima, Galileo Delima and Vicente Delima. After his death, TCT No. 2744 of the property in question was issued on August 3, 1953 in the name of the Legal Heirs of Lino Delima, deceased, represented by Galileo Delima.

On September 22, 1953, Galileo Delima, now substituted by respondents, executed an affidavit of "Extra-judicial Declaration of Heirs." Based on this affidavit, TCT No. 2744 was cancelled and TCT No. 3009 was issued on February 4,1954 in the name of Galileo Delima alone to the exclusion of the other heirs.

Galileo Delima declared the lot in his name for taxation purposes and paid the taxes thereon from 1954 to 1965.

On February 29, 1968, petitioners, who are the surviving heirs of Eulalio and Juanita Delima, filed with the Court of First Instance of Cebu (now Regional Trial

Court) an action for reconveyance and/or partition of property and for the annulment of TCT No. 3009 with damages against their uncles Galileo Delima and Vicente Delima,. Vicente Delima was joined as party defendant by the petitioners for his refusal to join the latter in their action.

On January 16, 1970, the trial court rendered a decision in favor of petitioners, the dispositive portion of which states:

IN VIEW OF THE FOREGOING CONSIDERATIONS, the following are the declared owners of Lot No. 7758 of the Talisay-Minglanilla Friar Lands Estate presently covered by transfer Certificate of Title No. 3009, each sharing a pro-indiviso share of one-fourth;

1) Vicente Delima (one-fourth)

2) Heirs of Juanita Delima, namely: Bibiano Bacus, Olimpio Bacus and Purificacion Bacus (on-fourth);

3) Heirs of Eulalio Delima, namely Epitacio, Pagano, Fidel, Virgilio and Galileo Jr., all surnamed Delima (one-fourth); and

4) The Heirs of Galileo Delima, namely Flaviana Vda. de Delima, Lily D. Arias, Helen Niadas and Dionisio, Antonio, Eotu Irenea, and Fely, all surnamed Delima (one-fourth).

Transfer Certificate of Title No. 3009 is declared null and void and the Register of Deeds of Cebu is ordered to cancel the same and issue in lieu thereof another title with the above heirs as pro-indiviso owners.

After the payment of taxes paid by Galileo Delima since 1958, the heirs of Galileo Delima are ordered to turn a over to the other heirs their respective shares of the fruits of the lot in question computed at P170.00 per year up to the present time with legal (interest).

Within sixty (60) days from receipt of this decision the parties are ordered to petition the lot in question and the defendants are directed to immediately turn over possession of the shares here awarded to the respective heirs.

Defendants are condemned to pay the costs of the suit.

The counterclaim is dismissed.

SO ORDERED. (pp. 54-55, Rollo)

Not satisfied with the decision, respondents appealed to the Court of Appeals. On May 19, 1977, respondent appellate court reversed the trial court's decision and upheld the claim of Galileo Delima that all the other brothers and sister of Lino Delima, namely Eulalio, Juanita and Vicente, had already relinquished and waived their rights to the property in his favor, considering that he (Galileo Delima) alone paid the remaining balance of the purchase price of the lot and the realty taxes thereon (p. 26, Rollo).

Hence, this petition was filed with the petitioners alleging that the Court of Appeals erred:

1) In not holding that the right of a co-heir to demand partition of inheritance is imprescriptible. If it does, the defenses of prescription and laches have already been waived.

2) In disregarding the evidence of the petitioners.(p.13, Rollo)

The issue to be resolved in the instant case is whether or not petitioners' action for partition is already barred by the statutory period provided by law which shall enable Galileo Delima to perfect his claim of ownership by acquisitive prescription to the exclusion of petitioners from their shares in the disputed property. Article 494 of the Civil Code expressly provides:

Art. 494. No co-owner shall be obliged to remain in the co-ownership. Each co-owner may demand at any time the partition of the thing owned in common, insofar as his share is concerned.

Nevertheless, an agreement to keep the thing undivided for a certain period of time, not exceeding ten years, shall be valid. This term may be extended by a new agreement.

A donor or testator may prohibit partition for a period which shall not exceed twenty years.

Neither shall there be any partition when it is prohibited by law.

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

As a rule, possession by a co-owner will not be presumed to be adverse to the others, but will be held to benefit all. It is understood that the co-owner or co-heir

who is in possession of an inheritance pro-indiviso for himself and in representation of his co-owners or co-heirs, if, as such owner, he administers or takes care of the rest thereof with the obligation of delivering it to his co-owners or co-heirs, is under the same situation as a depository, a lessee or a trustee (Bargayo v. Camumot, 40 Phil, 857; Segura v. Segura, No. L-29320, September 19, 1988, 165 SCRA 368). Thus, an action to compel partition may be filed at any time by any of the co-owners against the actual possessor. In other words, no prescription shall run in favor of a co-owner against his co-owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership (Del Blanco v. Intermediate Appellate Court, No. 72694, December 1, 1987, 156 SCRA 55).

However, from the moment one of the co-owners claims that he is the absolute and exclusive owner of the properties and denies the others any share therein, the question involved is no longer one of partition but of ownership (De Castro v. Echarri, 20 Phil. 23; Bargayo v. Camumot, supra; De los Santos v. Santa Teresa, 44 Phil. 811). In such case, the imprescriptibility of the action for partition can no longer be invoked or applied when one of the co-owners has adversely possessed the property as exclusive owner for a period sufficient to vest ownership by prescription.

It is settled that possession by a co-owner or co-heir is that of a trustee. In order that such possession is considered adverse to the cestui que trust amounting to a repudiation of the co-ownership, the following elements must concur: 1) that the trustee has performed unequivocal acts amounting to an ouster of the cestui que trust; 2) that such positive acts of repudiation had been made known to the cestui que trust; and 3) that the evidence thereon should be clear and conclusive (Valdez v. Olorga, No. L-22571, May 25, 1973, 51 SCRA 71; Pangan v. Court of Appeals, No. L-39299, October 18, 1988, 166 SCRA 375).

We have held that when a co-owner of the property in question executed a deed of partition and on the strength thereof obtained the cancellation of the title in the name of their predecessor and the issuance of a new one wherein he appears as the new owner of the property, thereby in effect denying or repudiating the ownership of the other co-owners over their shares, the statute of limitations started to run for the purposes of the action instituted by the latter seeking a declaration of the existence of the co-ownership and of their rights thereunder (Castillo v. Court of Appeals, No. L-18046, March 31, 1964, 10 SCRA 549). Since an action for reconveyance of land based on implied or constructive trust prescribes after ten (10) years, it is from the date of the issuance of such title that the effective assertion of adverse title for purposes of the statute of limitations is counted (Jaramil v. Court of Appeals, No. L-31858, August 31, 1977, 78 SCRA 420).

Evidence shows that TCT No. 2744 in the name of the legal heirs of Lino Delima, represented by Galileo Delima, was cancelled by virtue of an affidavit executed by Galileo Delima and that on February 4, 1954, Galileo Delima obtained the issuance of a new title in Ms name numbered TCT No. 3009 to the exclusion of

his co-heirs. The issuance of this new title constituted an open and clear repudiation of the trust or co-ownership, and the lapse of ten (10) years of adverse possession by Galileo Delima from February 4, 1954 was sufficient to vest title in him by prescription. As the certificate of title was notice to the whole world of his exclusive title to the land, such rejection was binding on the other heirs and started as against them the period of prescription. Hence, when petitioners filed their action for reconveyance and/or to compel partition on February 29, 1968, such action was already barred by prescription. Whatever claims the other co-heirs could have validly asserted before can no longer be invoked by them at this time.

ACCORDINGLY, the petition is hereby DENIED and the assailed decision of the Court of Appeals dated May 19, 1977 is AFFIRMED.

SO ORDERED.

G.R. No. L-57062 January 24, 1992

MARIA DEL ROSARIO MARIATEGUI, ET AL., petitioners, vs.HON. COURT OF APPEALS, JACINTO MARIATEGUI, JULIAN MARIATEGUI and PAULINA MARIATEGUI, respondents.

Montesa, Albon & Associates for petitioners.

Parmenio B. Patacsil, Patacsil Twins Law Office for the heirs of the late Maria del Rosario Mariategui.

Tinga, Fuentes & Tagle Firm for private respondents.

 

BIDIN, J.:

This is a petition for review on certiorari of the decision * of the Court of Appeals dated December 24, 1980 in CA-G.R. No. 61841, entitled "Jacinto Mariategui, et al. v. Maria del Rosario Mariategui, et al.," reversing the judgment of the then Court of First Instance of Rizal, Branch VIII ** at Pasig, Metro Manila.

The undisputed facts are as follows:

Lupo Mariategui died without a will on June 26, 1953 (Brief for respondents, Rollo, pp. 116; 8). During his lifetime, Lupo Mariategui contracted three (3) marriages. With his first wife, Eusebia Montellano, who died on November 8, 1904, he begot four (4) children, namely: Baldomera, Maria del Rosario, Urbana and Ireneo.

Baldomera died and was survived by her children named Antero, Rufina, Catalino, Maria, Gerardo, Virginia and Federico, all surnamed Espina. Ireneo also died and left a son named Ruperto. With his second wife, Flaviana Montellano, he begot a daughter named Cresenciana who was born on May 8, 1910 (Rollo, Annex "A", p. 36).

Lupo Mariategui and Felipa Velasco (Lupo's third wife) got married sometime in 1930. They had three children, namely: Jacinto, born on July 3, 1929, Julian, born on February 16, 1931 and Paulina, born on April 19, 1938. Felipa Velasco Mariategui died in 1941 (Rollo, Ibid).

At the time of his death, Lupo Mariategui left certain properties which he acquired when he was still unmarried (Brief for respondents, Rollo, pp. 116; 4). These properties are described in the complaint as Lots Nos. 163, 66, 1346 and 156 of the Muntinglupa Estate (Rollo, Annex "A", p. 39).

On December 2, 1967, Lupo's descendants by his first and second marriages, namely, Maria del Rosario, Urbana, Ruperto, Cresencia, all surnamed Mariategui and Antero, Rufina, Catalino, Maria, Gerardo, Virginia and Federico, all surnamed Espina, executed a deed of extrajudicial partition whereby they adjudicated unto themselves Lot No. 163 of the Muntinglupa Estate. Thereafter, Lot No. 163 was the subject of a voluntary registration proceedings filed by the adjudicatees under Act No. 496, and the land registration court issued a decree ordering the registration of the lot. Thus, on April 1, 1971, OCT No. 8828 was issued in the name of the above-mentioned heirs. Subsequently, the registered owners caused the subdivision of the said lot into Lots Nos. 163-A to 163-H, for which separate transfer certificates of title were issued to the respective parties (Rollo, ibid).

On April 23, 1973, Lupo's children by his third marriage with Felipa Velasco (Jacinto, Julian and Paulina) filed with the lower court an amended complaint claiming that Lot No. 163 together with Lots Nos. 669, 1346 and 154 were owned by their common father, Lupo Mariategui, and that, with the adjudication of Lot No. 163 to their co-heirs, they (children of the third marriage) were deprived of their respective shares in the lots. Plaintiffs pray for partition of the estate of their deceased father and annulment of the deed of extrajudicial partition dated December 2, 1967 (Petition, Rollo, p. 10). Cresencia Mariategui Abas, Flaviana Mariategui Cabrera and Isabel Santos were impleaded in the complaint as unwilling defendants as they would not like to join the suit as plaintiffs although they acknowledged the status and rights of the plaintiffs and agreed to the partition of the parcels of land as well as the accounting of their fruits (Ibid., Rollo, p. 8; Record on Appeal, p. 4).

The defendants (now petitioners) filed an answer with counterclaim (Amended Record on Appeal, p. 13). Thereafter, they filed a motion to dismiss on the grounds of lack of cause of action and prescription. They specifically contended that the complaint was one for recognition of natural children. On August 14,

1974, the motion to dismiss was denied by the trial court, in an order the dispositive portion of which reads:

It is therefore the opinion of the Court that Articles 278 and 285 of the Civil Code cited by counsel for the defendants are of erroneous application to this case. The motion to dismiss is therefore denied for lack of merit.

SO ORDERED. (Ibid, p. 37).

However, on February 16, 1977, the complaint as well as petitioners' counterclaim were dismissed by the trial court, in its decision stating thus:

The plaintiffs' right to inherit depends upon the acknowledgment or recognition of their continuous enjoyment and possession of status of children of their supposed father. The evidence fails to sustain either premise, and it is clear that this action cannot be sustained. (Ibid, Rollo, pp. 67-68)

The plaintiffs elevated the case to the Court of Appeals on the ground that the trial court committed an error ". . . in not finding that the parents of the appellants, Lupo Mariategui and Felipa Velasco (were) lawfully married, and in holding (that) they (appellants) are not legitimate children of their said parents, thereby divesting them of their inheritance . . . " (Rollo, pp. 14-15).

On December 24, 1980, the Court of Appeals rendered a decision declaring all the children and descendants of Lupo Mariategui, including appellants Jacinto, Julian and Paulina (children of the third marriage) as entitled to equal shares in the estate of Lupo Mariategui; directing the adjudicatees in the extrajudicial partition of real properties who eventually acquired transfer certificates of title thereto, to execute deeds of reconveyance in favor, and for the shares, of Jacinto, Julian and Paulina provided rights of innocent third persons are not prejudiced otherwise the said adjudicatees shall reimburse the said heirs the fair market value of their shares; and directing all the parties to submit to the lower court a project of partition in the net estate of Lupo Mariategui after payment of taxes, other government charges and outstanding legal obligations.

The defendants-appellees filed a motion for reconsideration of said decision but it was denied for lack of merit. Hence, this petition which was given due course by the court on December 7, 1981.

The petitioners submit to the Court the following issues: (a) whether or not prescription barred private respondents' right to demand the partition of the estate of Lupo Mariategui, and (b) whether or not the private respondents, who belatedly filed the action for recognition, were able to prove their successional rights over said estate. The resolution of these issues hinges, however, on the resolution of

the preliminary matter, i.e., the nature of the complaint filed by the private respondents.

The complaint alleged, among other things, that "plaintiffs are the children of the deceased spouses Lupo Mariategui . . . and Felipa Velasco"; that "during his lifetime, Lupo Mariategui had repeatedly acknowledged and confirmed plaintiffs as his children and the latter, in turn, have continuously enjoyed such status since their birth"; and "on the basis of their relationship to the deceased Lupo Mariategui and in accordance with the law on intestate succession, plaintiffs are entitled to inherit shares in the foregoing estate (Record on Appeal, pp. 5 & 6). It prayed, among others, that plaintiffs be declared as children and heirs of Lupo Mariategui and adjudication in favor of plaintiffs their lawful shares in the estate of the decedent (Ibid, p. 10).

A perusal of the entire allegations of the complaint, however, shows that the action is principally one of partition. The allegation with respect to the status of the private respondents was raised only collaterally to assert their rights in the estate of the deceased. Hence, the Court of Appeals correctly adopted the settled rule that the nature of an action filed in court is determined by the facts alleged in the complaint constituting the cause of action (Republic vs. Estenzo, 158 SCRA 282 [1988]).

It has been held that, if the relief demanded is not the proper one which may be granted under the law, it does not characterize or determine the nature of plaintiffs' action, and the relief to which plaintiff is entitled based on the facts alleged by him in his complaint, although it is not the relief demanded, is what determines the nature of the action (1 Moran, p. 127, 1979 ed., citing Baguioro vs. Barrios, et al., 77 Phil. 120).

With respect to the legal basis of private respondents' demand for partition of the estate of Lupo Mariategui, the Court of Appeals aptly held that the private respondents are legitimate children of the deceased.

Lupo Mariategui and Felipa Velasco were alleged to have been lawfully married in or about 1930. This fact is based on the declaration communicated by Lupo Mariategui to Jacinto who testified that "when (his) father was still living, he was able to mention to (him) that he and (his) mother were able to get married before a Justice of the Peace of Taguig, Rizal." The spouses deported themselves as husband and wife, and were known in the community to be such. Although no marriage certificate was introduced to this effect, no evidence was likewise offered to controvert these facts. Moreover, the mere fact that no record of the marriage exists does not invalidate the marriage, provided all requisites for its validity are present (People vs. Borromeo, 133 SCRA 106 [1984]).

Under these circumstances, a marriage may be presumed to have taken place between Lupo and Felipa. The laws presume that a man and a woman, deporting themselves as husband and wife, have entered into a lawful contract of marriage;

that a child born in lawful wedlock, there being no divorce, absolute or from bed and board is legitimate; and that things have happened according to the ordinary course of nature and the ordinary habits of life (Section 5 (z), (bb), (cc), Rule 131, Rules of Court; Corpus v. Corpus, 85 SCRA 567 [1978]; Saurnaba v. Workmen's Compensation, 85 SCRA 502 [1978]; Alavado v. City Gov't. of Tacloban, 139 SCRA 230 [1985]; Reyes v. Court of Appeals, 135 SCRA 439 [1985]).

Courts look upon the presumption of marriage with great favor as it is founded on the following rationale:

The basis of human society throughout the civilized world is that of marriage. Marriage in this jurisdiction is not only a civil contract, but it is a new relation, an institution in the maintenance of which the public is deeply interested. Consequently, every intendment of the law leans toward legalizing matrimony. Persons dwelling together in apparent matrimony are presumed, in the absence of any counterpresumption or evidence special to that case, to be in fact married. The reason is that such is the common order of society and if the parties were not what they thus hold themselves out as being, they would be living in the constant violation of decency and of law . . . (Adong vs. Cheong Seng Gee, 43 Phil. 43, 56 [1922] quoted in Alavado vs. City Government of Tacloban, 139 SCRA 230 [1985]).

So much so that once a man and a woman have lived as husband and wife and such relationship is not denied nor contradicted, the presumption of their being married must be admitted as a fact (Alavado v. City Gov't. of Tacloban, supra).

The Civil Code provides for the manner under which legitimate filiation may be proven. However, considering the effectivity of the Family Code of the Philippines, the case at bar must be decided under a new if not entirely dissimilar set of rules because the parties have been overtaken by events, to use the popular phrase (Uyguangco vs. Court of Appeals, G.R. No. 76873, October 26, 1989). Thus, under Title VI of the Family Code, there are only two classes of children — legitimate and illegitimate. The fine distinctions among various types of illegitimate children have been eliminated (Castro vs. Court of Appeals, 173 SCRA 656 [1989]).

Article 172 of the said Code provides that the filiation of legitimate children may be established by the record of birth appearing in the civil register or a final judgment or by the open and continuous possession of the status of a legitimate child.

Evidence on record proves the legitimate filiation of the private respondents. Jacinto's birth certificate is a record of birth referred to in the said article. Again, no evidence which tends to disprove facts contained therein was adduced before the

lower court. In the case of the two other private respondents, Julian and Paulina, they may not have presented in evidence any of the documents required by Article 172 but they continuously enjoyed the status of children of Lupo Mariategui in the same manner as their brother Jacinto.

While the trial court found Jacinto's testimonies to be inconsequential and lacking in substance as to certain dates and names of relatives with whom their family resided, these are but minor details. The nagging fact is that for a considerable length of time and despite the death of Felipa in 1941, the private respondents and Lupo lived together until Lupo's death in 1953. It should be noted that even the trial court mentioned in its decision the admission made in the affidavit of Cresenciana Mariategui Abas, one of the petitioners herein, that " . . . Jacinto, Julian and Paulina Mariategui ay pawang mga kapatid ko sa ama . . ." (Exh. M, Record on Appeal, pp. 65-66).

In view of the foregoing, there can be no other conclusion than that private respondents are legitimate children and heirs of Lupo Mariategui and therefore, the time limitation prescribed in Article 285 for filing an action for recognition is inapplicable to this case. Corollarily, prescription does not run against private respondents with respect to the filing of the action for partition so long as the heirs for whose benefit prescription is invoked, have not expressly or impliedly repudiated the co-ownership. In other words, prescription of an action for partition does not lie except when the co-ownership is properly repudiated by the co-owner (Del Banco vs. Intermediate Appellate Court, 156 SCRA 55 [1987] citing Jardin vs. Hollasco, 117 SCRA 532 [1982]).

Otherwise stated, a co-owner cannot acquire by prescription the share of the other co-owners absent a clear repudiation of co-ownership duly communicated to the other co-owners (Mariano vs. De Vega, 148 SCRA 342 [1987]). Furthermore, an action to demand partition is imprescriptible and cannot be barred by laches (Del Banco vs. IAC, 156 SCRA 55 [1987]). On the other hand, an action for partition may be seen to be at once an action for declaration of co-ownership and for segregation and conveyance of a determinate portion of the property involved (Roque vs. IAC, 165 SCRA 118 [1988]).

Petitioners contend that they have repudiated the co-ownership when they executed the extrajudicial partition excluding the private respondents and registered the properties in their own names (Petition, p. 16; Rollo, p. 20). However, no valid repudiation was made by petitioners to the prejudice of private respondents. Assuming petitioners' registration of the subject lot in 1971 was an act of repudiation of the co-ownership, prescription had not yet set in when private respondents filed in 1973 the present action for partition (Ceniza vs. C.A., 181 SCRA 552 [1990]).

In their complaint, private respondents averred that in spite of their demands, petitioners, except the unwilling defendants in the lower court, failed and refused to acknowledge and convey their lawful shares in the estate of their father

(Record on Appeal, p. 6). This allegation, though denied by the petitioners in their answer (Ibid, p. 14), was never successfully refuted by them. Put differently, in spite of petitioners' undisputed knowledge of their relationship to private respondents who are therefore their co-heirs, petitioners fraudulently withheld private respondent's share in the estate of Lupo Mariategui. According to respondent Jacinto, since 1962, he had been inquiring from petitioner Maria del Rosario about their (respondents) share in the property left by their deceased father and had been assured by the latter (Maria del Rosario) not to worry because they will get some shares. As a matter of fact, sometime in 1969, Jacinto constructed a house where he now resides on Lot No. 163 without any complaint from petitioners.

Petitioners' registration of the properties in their names in 1971 did not operate as a valid repudiation of the co-ownership. In Adille vs. Court of Appeals (157 SCRA 455, 461-462 [1988]), the Court held:

Prescription, as a mode of terminating a relation of co-ownership, must have been preceded by repudiation (of the co-ownership). The act of repudiation, in turn, is subject to certain conditions: (1) a co-owner repudiates the co-ownership; (2) such an act of repudiation is clearly made known to the other co-owners; (3) the evidence thereon is clear and conclusive; and (4) he has been in possession through open, continuous, exclusive, and notorious possession of the property for the period required by law.

xxx xxx xxx

It is true that registration under the Torrens system is constructive notice of title, but it has likewise been our holding that the Torrens title does not furnish shield for fraud. It is therefore no argument to say that the act of registration is equivalent to notice of repudiation, assuming there was one, notwithstanding the long-standing rule that registration operates as a universal notice of title.

Inasmuch as petitioners registered the properties in their names in fraud of their co-heirs prescription can only be deemed to have commenced from the time private respondents discovered the petitioners' act of defraudation (Adille vs. Court of Appeals, supra). Hence, prescription definitely may not be invoked by petitioners because private respondents commenced the instant action barely two months after learning that petitioners had registered in their names the lots involved.

WHEREFORE, the petition is DENIED and the assailed decision of the Court of Appeals dated December 24, 1980 is Affirmed.

SO ORDERED.

G.R. No. 170264               March 13, 2009

JAMES ESTRELLER, EDUARDO CULIANAN, GREG CARROS, RAQUEL YEE, JOSELITO PENILLA, LORNA DOTE, CRESENCIANA CLEOPAS, TRINIDAD TEVES, SONIA PENILLA, ANITA GOMINTONG, CHING DIONESIO, MARIBEL MANALO, DESIRES HUERTO, and RAYMUNDO CORTES, Petitioners, vs.LUIS MIGUEL YSMAEL and CRISTETA L. SANTOS-ALVAREZ, Respondents.*

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

In the present petition, the Court finds occasion to reassert the legal precepts that a co-owner may file an action for recovery of possession without the necessity of joining all the other co-owners as co-plaintiffs since the suit is deemed to be instituted for the benefit of all; and that Section 2 of Presidential Decree (P.D.) No. 2016, reinforced by P.D. No. 1517, which prohibits the eviction of qualified tenants/occupants, extends only to landless urban families who are rightful occupants of the land and its structures, and does not include those whose presence on the land is merely tolerated and without the benefit of contract, those who enter the land by force or deceit, or those whose possession is under litigation.

Respondents filed with the Regional Trial Court (RTC), Branch 216, Quezon City, a case for Recovery of Possession against petitioners, claiming ownership of the property subject of dispute located in E. Rodriguez Avenue and La Filonila Streets in Quezon City, by virtue of Transfer Certificate of Title (TCT) No. 41698 issued by the Register of Deeds of Quezon City on June 10, 1958. Respondents alleged that on various dates in 1973, petitioners entered the property through stealth and strategy and had since occupied the same; and despite demands made in March 1993, petitioners refused to vacate the premises, prompting respondents to file the action.1

Petitioners denied respondents' allegations. According to them, respondent Luis Miguel Ysmael (Ysmael) had no personality to file the suit since he only owned a small portion of the property, while respondent Cristeta Santos-Alvarez (Alvarez) did not appear to be a registered owner thereof. Petitioners also contended that their occupation of the property was lawful, having leased the same from the Magdalena Estate, and later on from Alvarez. Lastly, petitioners asserted that the property has already been proclaimed by the Quezon City Government as an Area for Priority Development under P. D. Nos. 1517 and 2016, which prohibits the eviction of lawful tenants and demolition of their homes.2

After trial, the RTC rendered its Decision dated September 15, 2000 in favor of respondents. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs Luis Miguel Ysmael and Cristeta L. Santos-Alvarez and against defendants ordering the latter and all persons claiming rights under them to immediately vacate the subject property and peacefully surrender the same to the plaintiffs.

Defendants are likewise ordered to pay plaintiffs the following:

1. The amount of P400.00 each per month from the date of extra-judicial demand until the subject property is surrendered to plaintiffs as reasonable compensation for the use and possession thereof;

2. The amount of P20,000.00 by way of exemplary damages;

3. The amount of P20,000.00 by way of attorney's fees and litigation expenses;

4. Cost of suit.

Corollarily, the counter-claims of defendants are hereby DISMISSED for lack of merit.

SO ORDERED.3

Petitioners appealed to the Court of Appeals (CA), which, in a Decision4 dated March 14, 2005, dismissed their appeal and affirmed in toto the RTC Decision.

Hence, the present petition for review under Rule 45 of the Rules of Court, on the following grounds:

I

THE HONORABLE COURT OF APPEALS ERRED IN CONCLUDING THAT RESPONDENTS YSMAEL AND ALVAREZ ARE BOTH "REAL PARTIES IN INTEREST" WHO WOULD BE BENEFITED OR INJURED BY THE JUDGMENT OR THE PARTY ENTITLED TO THE AVAILS OF THE SUIT.

II

THE HONORABLE COURT OF APPEALS FAILED TO CONSIDER AND DECIDE THE RELEVANT QUESTIONS AND ISSUES PRESENTED BY THE

PETITIONERS IN ROMAN NUMERALS II, III AND IV OF THEIR DISCUSSIONS AND ARGUMENTS IN THE APPELLANTS BRIEF WHICH ARE HEREUNTO COPIED OR REPRODUCED.5

The present petition merely reiterates the issues raised and settled by the RTC and the CA. On this score, it is well to emphasize the rule that the Court’s role in a petition under Rule 45 is limited to reviewing or reversing errors of law allegedly committed by the appellate court. Factual findings of the trial court, especially when affirmed by the CA, are conclusive on the parties. Since such findings are generally not reviewable, this Court is not duty-bound to analyze and weigh all over again the evidence already considered in the proceedings below, unless the factual findings complained of are devoid of support from the evidence on record or the assailed judgment is based on a misapprehension of facts.6

The Court then finds that the petition is without merit.

Respondents are real parties-in-interest in the suit below and may, therefore, commence the complaint for accion publiciana. On the part of Ysmael, he is a named co-owner of the subject property under TCT No. 41698, together with Julian Felipe Ysmael, Teresa Ysmael, and Ramon Ysmael.7 For her part, Alvarez was a buyer of a portion of the property, as confirmed in several documents, namely: (1) Decision dated August 30, 1974 rendered by the Regional Trial Court of Quezon City, Branch 9 (IX), in Civil Case No. Q-8426, which was based on a Compromise Agreement between Alvarez and the Magdalena Estate;8 (2) an unnotarized Deed of Absolute Sale dated May 1985 executed between the Ysmael Heirs and Alvarez;9 and (3) a notarized Memorandum of Agreement between the Ysmael Heirs and Alvarez executed on May 2, 1991.10

Recently, in Wee v. De Castro,11 the Court, citing Article 487 of the Civil Code, reasserted the rule that any one of the co-owners may bring any kind of action for the recovery of co-owned properties since the suit is presumed to have been filed for the benefit of all co-owners. The Court also stressed that Article 487 covers all kinds of action for the recovery of possession, i.e., forcible entry and unlawful detainer (accion interdictal), recovery of possession (accion publiciana), and recovery of ownership (accion de reivindicacion), thus:

In the more recent case of Carandang v. Heirs of De Guzman,this Court declared that a co-owner is not even a necessary party to an action for ejectment, for complete relief can be afforded even in his absence, thus:

In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the Civil Code and the relevant jurisprudence, any one of them may bring an action, any kind of action for the recovery of co-owned properties. Therefore, only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a complete relief can be

afforded in the suit even without their participation, since the suit is presumed to have been filed for the benefit of all co-owners. (Emphasis supplied)

Petitioners persistently question the validity of the transfer of ownership to Alvarez. They insist that Alvarez failed to establish any right over the property since the Deed of Absolute Sale was not inscribed on TCT No. 41698. Interestingly, petitioners debunked their own argument when they themselves claimed in their Answer with Counter-claim that they derived their right to occupy the property from a lease agreement with, first, the Magdalena Estate, and thereafter, Alvarez herself.12 More importantly, the fact that the sale was not annotated or inscribed on TCT No. 41698 does not make it any less valid. A contract of sale has the force of law between the contracting parties and they are expected to abide, in good faith, by their respective contractual commitments. Article 1358 of the Civil Code which requires the embodiment of certain contracts in a public instrument, is only for convenience; and registration of the instrument only adversely affects third parties, and non-compliance therewith does not adversely affect the validity of the contract or the contractual rights and obligations of the parties thereunder.13

Petitioners further contend that the property subject of the Deed of Absolute Sale – Lot 6, Block 4 of Subd. Plan Psd No. 33309 – is different from that being claimed in this case, which are Lots 2 and 3. They claim that there exists another title covering the subject property, i.e., TCT No. 41698 in the names of Victoria M. Panganiban and Teodoro M. Panganiban.

Notably, TCT No. 41698 in the name of the Ysmael Heirs covers several parcels of land under Subd. Plan Psd No. 33309. These include: Lot 2, Block 4; Lot 3, Block 4; and Lot 6, Block 4, each of which contains 1,000 square meters. In the Decision dated August 30, 1974 rendered by the RTC of Quezon City, Branch 9, in Civil Case No. Q-8426, the ownership of 200 square meters of Lot 2, Block 4; 250 square meters of Lot 3, Block 4; and the full 1,000 square meters of Lot 6, Block 4, was conferred on Alvarez. A Deed of Absolute Sale dated May 1985 was later executed by the Ysmael Heirs in favor of Alvarez, but it covered only Lot 6, Block 4. Nevertheless, a Memorandum of Agreement dated May 2, 1991 was subsequently entered into by the Ysmael Heirs and Alvarez, whereby all three apportioned parcels of land allocated to Alvarez under the RTC Decision dated August 30, 1974, were finally sold, transferred and conveyed to her. Evidently, while the title was yet to be registered in the name of Alvarez, for all intents and purposes, however, the subject property was already owned by her. The Ysmael Heirs are merely naked owners of the property, while Alvarez is already the beneficial or equitable owner thereof; and the right to the gains, rewards and advantages generated by the property pertains to her.

The existence of a title in the same TCT No. 41698, this time in the names of Victoria M. Panganiban and Teodoro M. Panganiban, was adequately explained by the Certification of the Register of Deeds dated March 1, 1994, and which reads:

At the instance of RUY ALBERTO S. RONDAIN, I, SAMUEL C. CLEOFE, Register of Deeds of Quezon City, do hereby certify that TCT No. 41698, covering Lot 19, Blk. 8 of the cons.-subd. plan Pos-817, with an area of Three Hundred Seventy Five (375) Square Meters, registered in the name of VICTORIA M. PANGANIBAN; and TEODORO M. PANGANIBAN, married to Elizabeth G. Panganiban, issued on February 8, 1991, is existing and on file in this Registry.

This is to certify further that TCT No. 41698 presented by Ruy Alberto S. Rondain covering Lot 3, Blk. 2 of the subd. Plan PSD-3309, with an area of Nine Hundred Ninety Six (996) Square Meters, issued on June 10, 1958 and registered in the name of JUAN FELIPE YSMAEL, TERESA YSMAEL, RAMON YSMAEL, LUIS MIGUEL YSMAEL, which is also an existing title is different and distinct from each other inasmuch as they cover different Lots and Plans.

That it is further certified that the similarity in the title numbers is due to the fact that after the fire of June 11, 1988, the Quezon City Registry issued new title numbers beginning with TCT No. 1.14 (Emphasis supplied)

Finally, petitioners' claim that they are entitled to the protection against eviction and demolition afforded by P.D. Nos. 2016,15 1517,16 and Republic Act (R.A.) No. 7279,17 is not plausible.

Section 6 of P.D. No. 1517 grants preferential rights to landless tenants/occupants to acquire land within urban land reform areas, while Section 2 of P.D. No. 2016 prohibits the eviction of qualified tenants/ occupants.

In Dimaculangan v. Casalla,18 the Court was emphatic in ruling that the protective mantle of P.D. No. 1517 and P.D. No. 2016 extends only to landless urban families who meet these qualifications: a) they are tenants as defined under Section 3(f) of P.D. No. 1517; b) they built a home on the land they are leasing or occupying; c) the land they are leasing or occupying is within an Area for Priority Development and Urban Land Reform Zone; and d) they have resided on the land continuously for the last 10 years or more.

Section 3(f) of P.D. No. No. 1517 defines the term "tenant" covered by the said decree as the "rightful occupant of land and its structures, but does not include those whose presence on the land is merely tolerated and without the benefit of contract, those who enter the land by force or deceit, or those whose possession is under litigation." It has already been ruled that occupants of the land whose presence therein is devoid of any legal authority, or those whose contracts of lease were already terminated or had already expired, or whose possession is under litigation, are not considered "tenants" under the Section 3(f).19

Petitioners claim that they are lawful lessees of the property. However, they failed to prove any lease relationship or, at the very least, show with whom they entered the lease contract. Respondents, on the other hand, were able to prove their right

to enjoy possession of the property. Thus, petitioners, whose occupation of the subject property by mere tolerance has been terminated by respondents, clearly do not qualify as "tenants" covered by these social legislations.

Finally, petitioners failed to demonstrate that they qualify for coverage under R. A. No. 7279 or the Urban Development and Housing Act of 1992.

R. A. No. 7279 provides for the procedure to be undertaken by the concerned local governments in the urban land development process, to wit: conduct an inventory of all lands and improvements within their respective localities, and in coordination with the National Housing Authority, the Housing and Land Use Regulatory Board, the National Mapping Resource Information Authority, and the Land Management Bureau; identify lands for socialized housing and resettlement areas for the immediate and future needs of the underprivileged and homeless in the urban areas; acquire the lands; and dispose of said lands to the beneficiaries of the program.20 While there is a Certification that the area bounded by E. Rodriguez, Victoria Avenue, San Juan River and 10th Street of Barangay. Damayang Lagi, Quezon City is included in the list of Areas for Priority Development under Presidential Proclamation No. 1967,21 there is no showing that the property has already been acquired by the local government for this purpose; or that petitioners have duly qualified as beneficiaries.

All told, the Court finds no reason to grant the present petition.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated March 14, 2005 of the Court of Appeals is AFFIRMED.

G.R. No. 134329           January 19, 2000

VERONA PADA-KILARIO and RICARDO KILARIO, petitioners, vs.COURT OF APPEALS and SILVERIO PADA, respondents.

DE LEON, JR., J.:

The victory1 of petitioner spouses Ricardo and Verona Kilario in the Municipal Circuit Trial Court2 in an ejectment suit3 filed against them by private respondent Silverio Pada, was foiled by its reversal4 by the Regional Trial Court5 on appeal. They elevated their cause6 to respondent Court of Appeals7 which, however, promulgated a Decision8 on May 20, 1998, affirming the Decision of the Regional Trial Court.

The following facts are undisputed:

One Jacinto Pada had six (6) children, namely, Marciano, Ananias, Amador, Higino, Valentina and Ruperta. He died intestate. His estate included a parcel of land of residential and coconut land located at Poblacion, Matalom, Leyte, denominated as Cadastral Lot No. 5581 with an area of 1,301.92 square meters. It is the northern portion of Cadastral Lot No. 5581 which is the subject of the instant controversy.

During the lifetime of Jacinto Pada, his half-brother, Feliciano Pada, obtained permission from him to build a house on the northern portion of Cadastral Lot No. 5581. When Feliciano died, his son, Pastor, continued living in the house together with his eight children. Petitioner Verona Pada-Kilario, one of Pastor's children, has been living in that house since 1960.

Sometime in May, 1951, the heirs of Jacinto Pada entered into an extra-judicial partition of his estate. For this purpose, they executed a private document which they, however, never registered in the Office of the Registrar of Deeds of Leyte.

At the execution of the extra-judicial partition, Ananias was himself present while his other brothers were represented by their children. Their sisters, Valentina and Ruperta, both died without any issue. Marciano was represented by his daughter, Maria; Amador was represented by his daughter, Concordia; and Higina was represented by his son, Silverio who is the private respondent in this case. It was to both Ananias and Marciano, represented by his daughter, Maria, that Cadastral Lot No. 5581 was allocated during the said partition. When Ananias died, his daughter, Juanita, succeeded to his right as co-owner of said property.

On June 14, 1978, Juanita Pada sold to Engr. Ernesto Paderes, the right of his father, Ananias, as co-owner of Cadastral Lot No. 5881.

On November 17, 1993, it was the turn of Maria Pada to sell the co-ownership right of his father, Marciano. Private respondent, who is the first cousin of Maria, was the buyer.

Thereafter, private respondent demanded that petitioner spouses vacate the northern portion of Cadastral Lot No. 5581 so his family can utilize the said area. They went through a series of meetings with the barangay officials concerned for the purpose of amicable settlement, but all earnest efforts toward that end, failed.

On June 26, 1995, private respondent filed in the Municipal Circuit Trial Court of Matalom, Leyte, a complaint for ejectment with prayer for damages against petitioner spouses.

On July 24, 1995, the heirs of Amador Pada, namely, Esperanza Pada-Pavo, Concordia Pada-Bartolome, and Angelito Pada, executed a Deed of Donation9 transferring to petitioner Verona Pada-Kilario, their respective shares as co-owners of Cadastral Lot No. 5581.

On February 12, 1996, petitioner spouses filed their Answer averring that the northern portion of Cadastral Lot No. 5581 had already been donated to them by the heirs of Amador Pada. They contended that the extra-judicial partition of the estate of Jacinto Pada executed in 1951 was invalid and ineffectual since no special power of attorney was executed by either Marciano, Amador or Higino in favor of their respective children who represented them in the extra-judicial partition. Moreover, it was effectuated only through a private document that was never registered in the office of the Registrar of Deeds of Leyte.

The Municipal Circuit Trial Court rendered judgment in favor of petitioner spouses. It made the following findings:

After a careful study of the evidence submitted by both parties, the court finds that the evidence adduced by plaintiff failed to establish his ownership over . . . Cadastral Lot No. 5581 . . . while defendants has [sic] successfully proved by preponderance of evidence that said property is still under a community of ownership among the heirs of the late Jacinto Pada who died intestate. If there was some truth that Marciano Pada and Ananias Pada has [sic] been adjudicated jointly of [sic] the above-described residential property . . . as their share of the inheritance on the basis of the alleged extra judicial settlement, how come that since 1951, the date of partition, the share of the late Marciano Pada was not transferred in the name of his heirs, one of them Maria Pada-Pavo and still remain [sic] in the name of Jacinto Pada up to the present while the part pertaining to the share of Ananias Pada was easily transferred in the name of his heirs . . ..

The alleged extra judicial settlement was made in private writing and the genuineness and due execution of said document was assailed as doubtful and it appears that most of the heirs were not participants and signatories of said settlement, and there was lack of special power of attorney to [sic] those who claimed to have represented their co-heirs in the participation [sic] and signing of the said extra judicial statement.

Defendants were already occupying the northern portion of the above-described property long before the sale of said property on November 17, 1993 was executed between Maria Pada-Pavo, as vendor and the plaintiff, as vendee. They are in possession of said portion of the above-described property since the year 1960 with the consent of some of the heirs of Jacinto Pada and up to the [sic] present some of the heirs of Jacinto Pada has [sic] donated . . . their share of [sic] the above-described property to them, virtually converting defendants' standing as co-owners of the land under controversy. Thus, defendants as co-owners became the undivided owners of the whole estate . . . . As co-owners of . . . Cadastral Lot No. 5581 . . . their possession in the northern portion is being [sic] lawful.10

From the foregoing decision, private respondent appealed to the Regional Trial Court. On November 6, 1997, it rendered a judgment of reversal. It held:

. . . [T]he said conveyances executed by Juanita Pada and Maria Pada Pavo were never questioned or assailed by their co-heirs for more than 40 years, thereby lending credence on [sic] the fact that the two vendors were indeed legal and lawful owners of properties ceded or sold. . . . At any rate, granting that the co-heirs of Juanita Pada and Maria Pada Pavo have some interests on the very lot assigned to Marciano and Ananias, nevertheless, said interests had long been sadly lost by prescription, if not laches or estoppel.

It is true that an action for partition does not prescribe, as a general rule, but this doctrine of imprescriptibility cannot be invoked when one of the heirs possessed the property as an owner and for a period sufficient to acquire it by prescription because from the moment one of the co-heirs claim [sic] that he is the absolute owner and denies the rest their share of the community property, the question then involved is no longer one for partition but of ownership. . . . Since [sic] 1951 up to 1993 covers a period of 42 long years. Clearly, whatever right some of the co-heirs may have, was long extinguished by laches, estoppel or prescription.

x x x           x x x           x x x

. . . [T]he deed of donation executed by the Heirs of Amador Pada, a brother of Marciano Pada, took place only during the inception of the case or after the lapse of more than 40 years reckoned from the time the extrajudicial partition was made in 1951. Therefore, said donation is illegal and invalid [sic] the donors, among others, were absolutely bereft of any right in donating the very property in question.11

The dispositive portion of the decision of the Regional Trial Court reads as follows:

WHEREFORE, a judgment is hereby rendered, reversing the judgment earlier promulgated by the Municipal Circuit Trial Court of Matalom, Leyte, [sic] consequently, defendants-appellees are hereby ordered:

1. To vacate the premises in issue and return peaceful possession to the appellant, being the lawful possessor in concept of owner;

2. To remove their house at their expense unless appellant exercises the option of acquiring the same, in which case the pertinent provisions of the New Civil Code has to be applied;

3. Ordering the defendants-appellees to pay monthly rental for their occupancy and use of the portion of the land in question in the sum of P100.00 commencing on June 26, 1995 when the case was filed and until the termination of the present case;

4. Ordering the defendants to pay to the appellant the sum of P5,000.00 as moral damages and the further sum of P5,000.00 as attorney's fees;

5. Taxing defendants to pay the costs of suit.12

Petitioners filed in the Court of Appeals a petition for review of the foregoing decision of the Regional Trial Court.

On May 20, 1998, respondent Court of Appeals rendered judgment dismissing said petition. It explained:

Well-settled is the rule that in an ejectment suit, the only issue is possession de facto or physical or material possession and not de jure. Hence, even if the question of ownership is raised in the pleadings, the court may pass upon such issue but only to determine the question of possession, specially if the former is inseparably linked with the latter. It cannot dispose with finality the issue of ownership, such issue being inutile in an ejectment suit except to throw light on the question of possession . . . .

Private respondent Silverio Pada anchors his claim to the portion of the land possessed by petitioners on the Deed of Sale executed in his favor by vendor Maria Pada-Pavo, a daughter of Marciano, son of Jacinto Pada who was the registered owner of the subject lot. The right of vendee Maria Pada to sell the property was derived from the extra-judicial partition executed in May 1951 among the heirs of Jacinto Pada, which was written in a Bisayan dialect signed by the heirs, wherein the subject land was adjudicated to Marciano, Maria Pavo's father, and Ananias Pada. Although the authenticity and genuineness of the extra-judicial partition is now being questioned by the heirs of Amador Pada, no action was ever previously filed in court to question the validity of such partition.1âwphi1.nêt

Notably, petitioners in their petition admitted among the antecedent facts that Maria Pavo is one of the co-owners of the property originally owned by Jacinto Pada . . . and that the disputed lot was adjudicated to Marciano (father of Maria Pavo) and Ananias, and upon the death of Marciano and Ananias, their heirs took possession of said lot, i.e. Maria Pavo the vendor for Marciano's share and Juanita for Ananias' share . . . . Moreover, petitioners do not dispute the findings of the respondent court that during the cadastral survey of Matalom, Leyte, the

share of Maria Pada Pavo was denominated as Lot No. 5581, while the share of Juanita Pada was denominated as Lot No. 6047, and that both Maria Pada Pavo and Juanita were in possession of their respective hereditary shares. Further, petitioners in their Answer admitted that they have been occupying a portion of Lot No. 5581, now in dispute without paying any rental owing to the liberality of the plaintiff . . . . Petitioners cannot now impugn the aforestated extrajudicial partition executed by the heirs in 1951. As owner and possessor of the disputed property, Maria Pada, and her vendee, private respondent, is entitled to possession. A voluntary division of the estate of the deceased by the heirs among themselves is conclusive and confers upon said heirs exclusive ownership of the respective portions assigned to them . . ..

The equally belated donation of a portion of the property in dispute made by the heirs of Amador Pada, namely, Concordia, Esperanza and Angelito, in favor of petitioner Verona Pada is a futile attempt to confer upon the latter the status of co-owner, since the donors had no interest nor right to transfer. . . . This gesture appears to be a mere afterthought to help petitioners to prolong their stay in the premises. Furthermore, the respondent court correctly pointed out that the equitable principle of laches and estoppel come into play due to the donors' failure to assert their claims and alleged ownership for more than forty (40) years . . . . Accordingly, private respondent was subrogated to the rights of the vendor over Lot No. 5581 which include [sic] the portion occupied by petitioners.13

Petitioner spouses filed a Motion for Reconsideration of the foregoing decision.

On June 16, 1998, respondent Court of Appeals issued a Resolution denying said motion.

Hence this petition raising the following issues:

I.

WHETHER THE COURT OF APPEALS ERRED IN NOT RULING THAT PETITIONERS, AS CO-OWNERS, CANNOT BE EJECTED FROM THE PREMISES CONSIDERING THAT THE HEIRS OF JACINTO PADA DONATED TO THEM THEIR UNDIVIDED INTEREST IN THE PROPERTY IN DISPUTE.

II.

WHETHER THE COURT OF APPEALS ERRED IN NOT RULING THAT WHAT MARIA PADA SOLD WAS HER UNDIVIDED SHARE IN THE PROPERTY IN DISPUTE.

III.

WHETHER OR NOT THE PETITIONERS ARE BUILDERS IN GOOD FAITH.14

There is no merit to the instant petition.

First. We hold that the extrajudicial partition of the estate of Jacinto Pada among his heirs made in 1951 is valid, albeit executed in an unregistered private document. No law requires partition among heirs to be in writing and be registered in order to be valid.15 The requirement in Sec. 1, Rule 74 of the Revised Rules of Court that a partition be put in a public document and registered, has for its purpose the protection of creditors and the heirs themselves against tardy claims.16 The object of registration is to serve as constructive notice to others. It follows then that the intrinsic validity of partition not executed with the prescribed formalities is not undermined when no creditors are involved.17 Without creditors to take into consideration, it is competent for the heirs of an estate to enter into an agreement for distribution thereof in a manner and upon a plan different from those provided by the rules from which, in the first place, nothing can be inferred that a writing or other formality is essential for the partition to be valid.18 The partition of inherited property need not be embodied in a public document so as to be effective as regards the heirs that participated therein.19 The requirement of Article 1358 of the Civil Code that acts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property, must appear in a public instrument, is only for convenience, non-compliance with which does not affect the validity or enforceability of the acts of the parties as among themselves.20 And neither does the Statute of Frauds under Article 1403 of the New Civil Code apply because partition among heirs is not legally deemed a conveyance of real property, considering that it involves not a transfer of property from one to the other but rather, a confirmation or ratification of title or right of property that an heir is renouncing in favor of another heir who accepts and receives the inheritance.21 The 1951 extrajudicial partition of Jacinto Pada's estate being legal and effective as among his heirs, Juanita and Maria Pada validly transferred their ownership rights over Cadastral Lot No. 5581 to Engr. Paderes and private respondent, respectively.22

Second. The extrajudicial partition which the heirs of Jacinto Pada executed voluntarily and spontaneously in 1951 has produced a legal status.23 When they discussed and agreed on the division of the estate Jacinto Pada, it is presumed that they did so in furtherance of their mutual interests. As such, their division is conclusive, unless and until it is shown that there were debts existing against the estate which had not been paid.24 No showing, however, has been made of any unpaid charges against the estate of Jacinto Pada. Thus, there is no reason why the heirs should not be bound by their voluntary acts.

The belated act of Concordia, Esperanza and Angelito, who are the heirs of Amador Pada, of donating the subject property to petitioners after forty four (44)

years of never having disputed the validity of the 1951 extrajudicial partition that allocated the subject property to Marciano and Ananias, produced no legal effect. In the said partition, what was allocated to Amador Pada was not the subject property which was a parcel of residential land in Sto. Nino, Matalom, Leyte, but rather, one-half of a parcel of coconut land in the interior of Sto. Nino St., Sabang, Matalom, Leyte and one-half of a parcel of rice land in Itum, Sta. Fe, Matalom, Leyte. The donation made by his heirs to petitioners of the subject property, thus, is void for they were not the owners thereof. At any rate it is too late in the day for the heirs of Amador Pada to repudiate the legal effects of the 1951 extrajudicial partition as prescription and laches have equally set in.

Third. Petitioners are estopped from impugning the extrajudicial partition executed by the heirs of Jacinto Pada after explicitly admitting in their Answer that they had been occupying the subject property since 1960 without ever paying any rental as they only relied on the liberality and tolerance of the Pada family.25 Their admissions are evidence of a high order and bind them insofar as the character of their possession of the subject property is concerned.

Considering that petitioners were in possession of the subject property by sheer tolerance of its owners, they knew that their occupation of the premises may be terminated any time. Persons who occupy the land of another at the latter's tolerance or permission, without any contract between them, is necessarily bound by an implied promise that they will vacate the same upon demand, failing in which a summary action for ejectment is the proper remedy against them.26 Thus, they cannot be considered possessors nor builders in good faith. It is well-settled that both Article 44827 and Article 54628 of the New Civil Code which allow full reimbursement of useful improvements and retention of the premises until reimbursement is made, apply only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof.29 Verily, persons whose occupation of a realty is by sheer tolerance of its owners are not possessors in good faith. Neither did the promise of Concordia, Esperanza and Angelito Pada that they were going to donate the premises to petitioners convert them into builders in good faith for at the time the improvements were built on the premises, such promise was not yet fulfilled, i.e., it was a mere expectancy of ownership that may or may not be realized.30 More importantly, even as that promise was fulfilled, the donation is void for Concordia, Esperanza and Angelito Pada were not the owners of Cadastral Lot No. 5581. As such, petitioners cannot be said to be entitled to the value of the improvements that they built on the said lot.

WHEREFORE, the petition for review is HEREBY DENIED.

Costs against petitioners.

SO ORDERED.

G.R. No. 133345             March 9, 2000

JOSEFA CH. MAESTRADO, as substituted by her daughter LOURDES MAESTRADO-LAVIÑA and CARMEN CH. ABAYA, petitioners, vs.THE HONORABLE COURT OF APPEALS, Ninth Division and JESUS C. ROA, JR., RAMON P. CHAVES and NATIVIDAD S. SANTOS, respondents.

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

G.R. No. 133324             March 9, 2000

JOSEFA CHAVES MAESTRADO and CARMEN CHAVES ABAYA, petitioners, vs.JESUS C. ROA, JR., RAMON P. CHAVES and NATIVIDAD S. SANTOS, respondents.

DE LEON, JR. J.:

Before us are two (2) consolidated petitions for review on certiorari of the Decision 1 of the Court of Appeals 2 dated November 28, 1997 declaring Lot No. 5872, located in Kauswagan, Cagayan de Oro City, as common property of the heirs of the deceased spouses, Ramon and Rosario Chaves, and ordering its equal division among all the co-owners. The Court of Appeals affirmed the Decision of the Regional Trial Court, Branch 23 of Cagayan de Oro City, which dismissed petitioners' action against the private respondents for Quieting of Title over the said lot.

The pertinent facts are the following:

These consolidated cases involve the status of Lot No. 5872 and the rights of the contending parties thereto. The said lot which has an area of 57.601 square meters, however, is still registered in the name of the deceased spouses Ramon and Rosario Chaves. The spouses Ramon and Rosario died intestate in 1943 and 1944, respectively. They were survived by the following heirs, namely: Carmen Chaves-Abaya, Josefa Chaves-Maestrado, Angel Chaves, Amparo Chaves-Roa, Concepcion Chaves-Sanvictores and Salvador Chaves.

To settle the estate of the said deceased spouses, Angel Chaves initiated intestate proceedings 3 in the Court of First Instance of Manila and was appointed administrator of said estates in the process. An inventory of the estates was made and thereafter, the heirs agreed on a project of partition. Thus, they filed an action for partition 4 before the Court of First Instance of Misamis Oriental. The court appointed Hernando Roa, husband of Amparo Chaves-Roa, as receiver. On June 6, 1956, the court rendered a decision approving the project of partition. However, the records of said case are missing and although respondents claimed otherwise, they failed to present a copy of said decision.

This notwithstanding, the estate was actually divided in this wise: (1) Lot No. 3046 situated in Bulalong, Cagayan de Oro City, consisting of 44 hectares of coconut land was distributed equally among four (4) heirs, namely: (a) Concepcion Chaves-Sanvictores; (b) Angel Chaves; (c) Amparo Chaves-Roa; and (d) Ramon Chaves, while (2) Lot Nos. 5925, 5934, 1327 and 5872, all located in Kauswagan, Cagayan de Oro City and consisting of an aggregate area of 14 hectares was distributed equally between petitioners (a) Josefa Chaves-Maestrado; and (b) Carmen Chaves-Abaya.

At the time of the actual partition, Salvador Chaves had already died. His share was given to his only son, Ramon, who is the namesake of Salvador's father. In 1956, the year the partition case was decided and effected, receiver Hernando Roa delivered the respective shares of said heirs in accordance with the above scheme. Subsequently, Concepcion sold her share to Angel, while Ramon sold his share to Amparo. Hence, one-half (1/2) of Lot No. 3046 went to Angel and the other half to Amparo.1âwphi1.nêt

Significantly, Lot No. 5872 was not included in any of the following documents: (1) the inventory of properties of the estate submitted to the court in the proceedings for the settlement of said estate; (2) the project of partition submitted to the court for approval; (3) the properties receiver Hernando Roa had taken possession of, which he listed in the "Constancia" submitted to the court; and (4) the court order approving the partition. Decedent Ramon Chaves acquired Lot No. 5872 from Felomino Bautista, Sr. but he subsequently delivered it to the spouses Hernando Roa and Amparo Chaves-Roa. 5 It was thereafter delivered to petitioners during the actual partition in 1956, and petitioners have been in possession of the same since then.

As to the omission of Lot No. 5872 in the inventory and project of partition, the parties offer different explanations. Respondents claim that due to the series of involving the said lot, the heirs were unsure if it belonged to the decedents' estate at all. As a result they deferred its inclusion in the inventory of the properties of the estate as well as its distribution pending the investigation of its status. In fact, administrator Angel Chaves filed a motion in the proceedings for the settlement of the estate to include the said lot in the inventory but the court did not act on it. Petitioners, on the other hand, insist that the omission was inadvertent and the inaction of the court on the motion was due to the compromise agreement entered into by the heirs. 6

Petitioners' thesis consists of the existence of an oral partition agreement entered into by all heirs soon after the death of their parents. The proposed project of partition was allegedly based on it but the court's order of partition failed to embody such oral agreement due to the omission of Lot No. 5872. For some reason, however, the actual partition of the estate conformed to the alleged oral agreement.

Petitioners claim that they failed to notice the non-inclusion of Lot No. 5872 in the court's order. They only realized such fact after the death in 1976 of Silvino Maestrado, the husband of petitioner Josefa. They discovered among Silvino's belongings, the partition order and found out that Lot No 5872 was not included therein. 7

In an effort to set things right, petitioners prepared a quitclaim to confirm the alleged or a agreement. On August 16, 1977, Angel, Concepcion and Ramon signed a notarized quitclaim in favor of petitioners. Amparo was unable to sign because she had an accident and had passed away on the following day. It was her heirs who signed a similarly worded and notarized quitclaim on September 8, 1977. 8

Respondents dispute the voluntariness of their consent or the consent of their predecessors-in-interest to the quitclaims. Ramon claims to have been betrayed by his lawyer, Francisco Velez, who is the son-in-law of petitioner Josefa Maestrado. He allegedly signed the quitclaim without reading it because his lawyer had already read it. He believed that since his lawyer was protecting his interest, it was all right to sign it after hearing no objections from said lawyer. On the other hand, Angel signed the quitclaim "out of respect" for petitioners. On the other hand, Concepcion signed because she was misled by alleged misrepresentations in the "Whereas Clauses" of the quitclaim to the effect that the lot was inadvertently omitted and not deliberately omitted due to doubts on its status. 9

Six (6) years after the execution of the quitclaims, respondents discovered that Lot No. 5872 is still in the name of the deceased spouses Ramon and Rosario Chaves. Thus, on October 14, 1983, respondent Ramon Chaves, sole heir of Salvador Chaves, and respondent Jesus Roa, son of Amparo Chaves-Roa, wrote a letter to their uncle Angel Chaves to inform him of that said property which they claim to belong to the estate of their deceased grandparents, has not yet been distributed to the concerned heirs. Hence, they requested Angel Chaves to distribute and deliver it to the heirs. 10 On October 24, 1983, respondent Natividad Santos, daughter and attorney-in-fact of Concepcion Chaves-Sanvictores, also wrote a similar letter to Angel Chaves. On December 1, 1983, Angel Chaves transmitted the said letters to petitioner Carmen Abaya and requested her to respond.

In response, petitioners filed, on December 22, 1983, an action for Quieting of Title 11 against respondents in the Regional Trial Court of Cagayan de Oro. On April 10, 1995, the trial court rendered its Decision in favor of respondents, the dispositive portion of which reads as follows:

In view of these facts, the court therefore considers the property, Lot 5872 still common property. Consequently, the property must be divided in six (6) parts, there being six heirs. But since the group of Jesus Roa already quitclaimed in favor of plaintiffs and the same is true with Angel

Chaves, the defendants Natividad Santos and Ramon Chaves shall receive one-sixth (1/6) each out of Lot 5872 and the balance will be divided equally by the plaintiffs Josefa-Chaves-Maestrado represented by her daughters and the other half to Carmen Chaves-Abaya.

With no other pronouncements.

SO ORDERED.

The petitioners appealed to the Court of Appeals which in a Decision, promulgated on November 28, 1997, sustained the said Decision of the trial court, in this wise:

WHEREFORE, in view of the foregoing premises, the Decision dated April 10, 1995 subject of the appeal, is hereby AFFIRMED in toto.

Costs against the plaintiffs-appellants.

SO ORDERED.

On May 29, 1998, petitioner Lourdes Maestrado-Lavina, in substitution of her deceased mother Josefa Chaves-Maestrado, fled a petition for review on certiorari with this Court. 12 Petitioner Carmen Chaves-abaya also filed her own petition for review on certiorari on June 1, 1998. 13 Since the two petitions involve the same facts and issues, we decided in a Resolution 14 to consolidate the said cases.

Petitioner Maestrado-Lavina assigns the following errors:

I. THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT'S DECISION DECLARING LOT 5872 AS STILL COMMON PROPERTY, THEREBY EFFECTIVELY NULLIFYING THE VERBAL PARTITION AGREEMENT REACHED AND IMPLEMENTED BY THE CHILDREN/HEIRS OF DECEDENTS RAMON AND ROSARIO CHAVES WAY BACK IN 1956;

II. THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT'S DECISION DECLARING LOT 5872 AS STILL COMMON PROPERTY UPON ITS CONCLUSION THAT THE SIGNATURES OF RESPONDENTS ON THE DULY NOTARIZED QUITCLAIMS WERE OBTAINED THROUGH FRAUD;

III. THE COURT OF APPEALS ERRED IN ITS LEGAL CONCLUSION THAT, ON THE BASIS ALONE OF THE CLAIMS THAT (A) RAMON CHAVES SIGNED THE QUITCLAIM WITHOUT READING IT; AND THAT (B) ANGEL CHAVES SIGNED THE QUITCLAIM OUT OF

RESPECT, THERE WAS FRAUD AS WOULD VITIATE RESPONDENTS CONSENT TO THE QUITCLAIMS;

IV. THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT'S CONCLUSION THAT PETITIONERS HAVE NO CAPACITY TO SUE FOR QUIETING OF TITLE OR REMOVAL OF CLOUD THEREON ON THE BASIS ALONE THAT PETITIONERS ARE NOT THE REGISTERED OWNERS OF LOT 5872;

V. IT BEING UNDISPUTED THAT THE FACTS GIVING RISE TO CLOUD ON JOSEFA'S AND CARMEN'S OWNERSHIP OVER LOT 5872 SURFACED ONLY IN 1983 AND PETITIONERS FILED THE CORRESPONDING ACTION TO QUIET TITLE OR REMOVE CLOUD THEREON ALSO IN 1983, THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT'S CONCLUSION THAT PETITIONERS ARE GUILTY OF LACHES. 15

Petitioner Carmen Chaves-Abaya, on the other hand, assigns the following errors:

I. THE HONORABLE COURT OF APPEALS COMMITTED A CLEAR ERROR IN THE INTERPRETATION OF LAW IN HOLDING THAT THERE WAS FRAUD IN OBTAINING THE CONSENT OF PRIVATE RESPONDENT RAMON P. CHAVES AND CONCEPCION CHAVES SANVICTORES, THE MOTHER OF PRIVATE RESPONDENT NATIVIDAD SANTOS, TO THE DEEDS OF QUITCLAIM;

II. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE ACTION FOR QUIETING OF TITLE WAS NOT BROUGHT BY THE PERSON IN WHOSE NAME THE TITLE IS ISSUED;

III. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT PETITIONERS WERE GUILTY OF LACHES FOR HAVING SLEPT ON THEIR RIGHTS FOR MORE THAN 25 YEARS. 16

We grant the consolidated petitions, the same being impressed with merit.

First. Petitioners are proper parties to bring an action for quieting of title. Persons having legal as well as equitable title to or interest in a real property may bring such action and "title" here does not necessarily denote a certificate of title issued in favor of the person filing the suit. 17 Moreover, if the plaintiff in an action for quieting of title is in possession of the property being litigated, such action is imprescriptible. 18 One who is in actual possession of a land, claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right because his undisturbed possession gives him a continuing right to seek the aid of the courts to ascertain the nature of the adverse claim and its effects on his title. 19

Although prescription and laches are distinct concepts, we have held, nonetheless, that in some instances, the doctrine of laches is inapplicable where the action was filed within the prescriptive period provided by law. 20 Thus, laches does not apply in this case because petitioners' possession of the subject lot has rendered their right to bring an action for quieting of title imprescriptible and, hence, not barred by laches. Moreover, since laches is a creation of equity, acts or conduct alleged to constitute the same must be intentional and unequivocal so as to avoid injustice. 21 Laches operates not really to penalize neglect or sleeping on one's rights, but rather to avoid recognizing a right when to do so would result in a clearly inequitable situation. 22

In the case at bench, the cloud on petitioners' title to the subject property came about only on December 1, 1983 when Angel Chaves transmitted respondents' letters to petitioners, while petitioners' action was filed on December 22, 1983. Clearly, no laches could set in under the circumstances since petitioners were prompt and vigilant in protecting their rights.

Second. Lot No. 5872 is no longer common property of the heirs of the deceased spouses Ramon and Rosario Chaves. Petitioners' ownership over said lot was acquired by reason of the oral partition agreed upon by the deceased spouses' heirs sometime before 1956. That oral agreement was confirmed by the notarized quitclaims executed by the said heirs on August 16, 1977 and September 8, 1977, supra.

It appeared that the decision in Civil Case No. 867, which ordered the partition of the decedents' estate, was not presented by either party thereto. The existence of the oral partition together with the said quitclaims is the bone of contention in this case. It appeared, however, that the actual partition of the estate conformed to the alleged oral partition despite a contrary court order. Despite claims of private respondents that Lot No. 5872 was mistakenly delivered to the petitioners, nothing was done to rectify it for a period of twenty-seven (27) years from 1983.

We are convinced, however, that there was indeed an oral agreement of partition entered into by the heirs/parties. This is the only way we can make sense out of the actual partition of the properties of the estate despite claims that a court order provided otherwise. Prior to the actual partition, petitioners were not in possession of Lot. No. 5872 but for some reason or another, it was delivered to them. From 1956, the year of the actual partition of the estate of the deceased Chaves spouses, until 1983, no one among the heirs questioned petitioners' possession of or ownership over said Lot No. 5872. Hence, we are convinced that there was indeed an oral agreement of partition among the said heirs and the distribution of the properties was consistent with such oral agreement. In any event, the parties had plenty of time to rectify the situation but no such move was done until 1983.

A possessor or real estate property is presumed to have title thereto unless the adverse claimant establishes a better right. 23 In the instant case it is the petitioners, being the possessors of Lot No. 5872, who have established a

superior right thereto by virtue of the oral partition which was also confirmed by the notarized quitclaims of the heirs.

Partition is the separation, division and assignment of a thing held in common among those to whom it may belong. 24 If may be effected extra-judicially by the heirs themselves through a public instrument filed before the register of deeds. 25

However, as between the parties, a public instrument is neither constitutive nor an inherent element of a contract of partition. 26 Since registration serves as constructive notice to third persons, an oral partition by the heirs is valid if no creditors are affected. 27 Moreover, even the requirement of a written memorandum under the statute of frauds does not apply to partitions effected by the heirs where no creditors are involved considering that such transaction is not a conveyance of property resulting in change of ownership but merely a designation and segregation of that part which belongs to each heir. 28

Nevertheless, respondent court was convinced that Lot No. 5872 is still common property of the heirs of the deceased spouses Ramon and Rosario Chaves because the TCT covering the said property is still registered in the name of the said deceased spouses. unfortunately, respondent court was oblivious to the doctrine that the act of registration of a voluntary instrument is the operative act which conveys or affects registered land insofar as third persons are concerned. Hence, even without registration, the contract is still valid as between the parties. 29 In fact, it has been recently held and reiterated by this Court that neither a Transfer Certificate of Title nor a subdivision plan is essential to the validity of an oral partition. 30

In sum, the most persuasive circumstance pointing to the existence of the oral partition is the fact that the terms of the actual partition and distribution of the estate are identical to the sharing scheme in the oral partition.. No one among the heirs disturbed this status quo for a period of twenty-seven (27) years.

Final. The said notarized quitclaims signed by the heirs in favor of petitioners are not vitiated by fraud.1âwphi1 Hence, they are valid.

Since the oral partition has been duly established, the notarized quitclaims confirmed such prior oral agreement as well as the petitioners' title of ownership over the subject Lot No. 5872. More importantly, independent of such oral partition, the quitclaims in the instant case are valid contracts of waiver of property rights.

The freedom to enter into contracts, such as the quitclaims in the instant case, is protected by law 31 and the courts are not quick to interfere with such freedom unless the contract is contrary to law, morals, good customs, public policy or public order. 32 Quitclaims, being contracts of waiver, involve the relinquishment of rights, with knowledge of their existence and intent to relinquish them. 33 The

intent to waive rights must be clearly and convincingly shown. Moreover, when the only proof of intent is the act of a party, such act should be manifestly consistent and indicative of an intent to voluntarily relinquish a particular right such that no other reasonable explanation of his conduct is possible. 34

In the instant case, the terms of the subject quitclaims dated August 16, 1977 and September 8, 1977 are clear; and the heirs signatures thereon have no other significance but their conformity thereto resulting in a valid waiver of property rights. 35 Herein respondents quite belatedly and vainly attempted to invoke alleged fraud in the execution of the said quitclaims but we are not convinced. In other words, the said quitclaims being duly notarized and acknowledged before a notary public, deserve full credence and are valid and enforceable in the absence of overwhelming evidence to the contrary. 36 In the case at bench, it is our view and we hold that the execution of the said quitclaims was not fraudulent.

Fraud refers to all kinds of deception, whether through insidious machination, manipulation, concealment or misrepresentation to lead another party into error. 37

The deceit employed must be serious. It must be sufficient to impress or lead an ordinarily prudent person into error, taking into account the circumstances of each case. 38 Silence or concealment, by itself, does not constitute fraud, unless there is a special duty to disclose certain facts. 39 Moreover, the bare existence of confidential relation between the parties, standing alone, does not raise the presumption of fraud. 40

Dolo causante or fraud which attends the execution of a contract is an essential cause that vitiates consent and hence, it is a ground for the annulment of a contract. 41 Fraud is never presumed, otherwise, courts would be indulging in speculations and surmises. 42 It must be established by clear and convincing evidence but it was not so in the case at bench. A mere preponderance of evidence is not even adequate to prove fraud. 43

The instances of fraud allegedly committed in the case at bench are not the kind of fraud contemplated by law. On the contrary, they constitute mere carelessness in the conduct of the affairs of the heirs concerned. We have consistently denied relief to a party who seeks to avoid the performance of an obligation voluntarily assumed because they turned out to be disastrous or unwise contracts, even if there was a mistake of law or fact. 44 Moreover, we do not set aside contracts merely because solicitation, importunity, argument, persuasion or appeal to affection were used to obtain the consent of the other party. 45

In a nutshell, the quitclaims dated August 16, 1977 and September 8, 1977 in the case at bench are valid, duly confirmed and undeniably established the title of ownership of the petitioners over the subject Lot No. 5872.

WHEREFORE, the instant consolidated petitions are GRANTED. The Decision of the Court of Appeals, dated November 28, 1997, is hereby REVERSED and SET ASIDE. The petitioners' action praying for the quieting of their title of ownership

over Lot No. 5872, located in Kauswagan, Cagayan de Oro, is granted. Costs against respondents.1âwphi1.nêt

SO ORDERED.

G.R. No. 150175             February 5, 2007

ERLINDA PILAPIL and HEIRS OF DONATA ORTIZ BRIONES, namely: ESTELA, ERIBERTO AND VIRGILIO SANTOS, ANA SANTOS CULTURA, ELVIRA SANTOS INOCENTES, ERNESTO MENDOZA, RIZALINA SANTOS, ADOLFO MENDOZA and PACITA MENDOZA, Petitioners, vs.HEIRS OF MAXIMINO R. BRIONES, namely: SILVERIO S. BRIONES, PETRA BRIONES, BONIFACIO CABAHUG, JR., ANITA TRASMONTE, CIRILITA FORTUNA, CRESENCIA BRIONES, FUGURACION MEDALLE and MERCEDES LAGBAS, Respondents.

R E S O L U T I O N

CHICO-NAZARIO, J.:

On 10 March 2006, this Court promulgated its Decision1 in the above-entitled case, ruling in favor of the petitioners. The dispositive portion2 reads as follows:

IN VIEW OF THE FOREGOING, the assailed Decision of the Court of Appeals in CA-GR CV No. 55194, dated 31 August 2001, affirming the Decision of the Cebu City RTC in Civil Case No. CEB-5794, dated 28 September 1986, is hereby REVERSED and SET ASIDE; and the Complaint for partition, annulment, and recovery of possession filed by the heirs of Maximino in Civil Case No. CEB-5794 is hereby DISMISSED.

On 10 May 2006, a Motion for Reconsideration3 of the foregoing Decision was filed by Atty. Celso C. Reales of the Reales Law Office on behalf of the respondents, heirs of Maximino R. Briones. On 19 May 2006, petitioners Erlinda Pilapil and the other co-heirs of Donata Ortiz Vda. de Briones, through counsel, filed an Opposition to Respondents’ Motion for Reconsideration,4 to which the respondents filed a Rejoinder5 on 23 May 2006. Thereafter, Atty. Amador F. Brioso, Jr. of the Canto Brioso Arnedo Law Office entered his appearance as collaborating counsel for the respondents.6 Atty. Brioso then filed on 11 June 2006 and 16 June 2006, respectively, a Reply7 and Supplemental Reply8 to the petitioners’ Opposition to respondents’ Motion for Reconsideration. Finally, petitioners filed a Rejoinder9 to the respondents’ Reply and Supplemental Reply on 5 July 2006.

The facts of the case, as recounted in the Decision,10 are as follows –

Petitioners are the heirs of the late Donata Ortiz-Briones (Donata), consisting of her surviving sister, Rizalina Ortiz-Aguila (Rizalina); Rizalina’s daughter, Erlinda Pilapil (Erlinda); and the other nephews and nieces of Donata, in representation of her two other sisters who had also passed away. Respondents, on the other hand, are the heirs of the late Maximino Briones (Maximino), composed of his nephews and nieces, and grandnephews and grandnieces, in representation of the deceased siblings of Maximino.

x x x x

Maximino was married to Donata but their union did not produce any children. When Maximino died on 1 May 1952, Donata instituted intestate proceedings to settle her husband’s estate with the Cebu City Court of First Instance (CFI), 14th Judicial District, designated as Special Proceedings No. 928-R. On 8 July 1952, the CFI issued Letters of Administration appointing Donata as the administratrix of Maximino’s estate. She submitted an Inventory of Maximino’s properties, which included, among other things, the following parcels of land x x x.

x x x x

The CFI would subsequently issue an Order, dated 2 October 1952, awarding ownership of the aforementioned real properties to Donata. On 27 June 1960, Donata had the said CFI Order recorded in the Primary Entry Book of the Register of Deeds, and by virtue thereof, received new TCTs, covering the said properties, now in her name.

Donata died on 1 November 1977. Erlinda, one of Donata’s nieces, instituted with the RTC a petition for the administration of the intestate estate of Donata. Erlinda and her husband, Gregorio, were appointed by the RTC as administrators of Donata’s intestate estate. Controversy arose among Donata’s heirs when Erlinda claimed exclusive ownership of three parcels of land, covered by TCTs No. 21542, 21545, and 58684, based on two Deeds of Donation, both dated 15 September 1977, allegedly executed in her favor by her aunt Donata. The other heirs of Donata opposed Erlinda’s claim. This Court, however, was no longer informed of the subsequent development in the intestate proceedings of the estate of Donata; and as far as this Petition is concerned, all the heirs of Donata, including Erlinda, appear to be on the same side.

On 21 January 1985, Silverio Briones (Silverio), a nephew of Maximino, filed a Petition with the RTC for Letters of Administration for the intestate estate of Maximino, which was initially granted by the RTC. The RTC also issued an Order, dated 5 December 1985, allowing Silverio to collect rentals from Maximino’s properties. But then, Gregorio filed with the RTC a Motion to Set Aside the Order, dated 5 December 1985, claiming that the said properties were already under his and his wife’s administration as part of the intestate estate of Donata. Silverio’s Letters of Administration for the intestate estate of Maximino was subsequently set aside by the RTC.

On 3 March 1987, the heirs of Maximino filed a Complaint with the RTC against the heirs of Donata for the partition, annulment, and recovery of possession of real property, docketed as Civil Case No. CEB-5794. They later filed an Amended Complaint, on 11 December 1992. They alleged that Donata, as administratrix of the estate of Maximino, through fraud and misrepresentation, in breach of trust, and without the knowledge of the other heirs, succeeded in registering in her name the real properties belonging to the intestate estate of Maximino.

x x x x

After trial in due course, the RTC rendered its Decision, dated 8 April 1986, in favor of the heirs of Maximino x x x.

x x x x

x x x[T]he RTC declared that the heirs of Maximino were entitled to ½ of the real properties covered by TCTs No. 21542, 21543, 21544, 21545, 21546, and 58684. It also ordered Erlinda to reconvey to the heirs of Maximino the said properties and to render an accounting of the fruits thereof.

The heirs of Donata appealed the RTC Decision, dated 8 April 1986, to the Court of Appeals. The Court of Appeals, in its Decision, promulgated on 31 August 2001, affirmed the RTC Decision, x x x.

x x x x

Unsatisfied with the afore-quoted Decision of the Court of Appeals, the heirs of Donata filed the present Petition, x x x.

In its Decision, dated 10 March 2006, this Court found the Petition meritorious and, reversing the Decisions of the Court of Appeals and the Regional Trial Court (RTC), dismissed the Complaint for partition, annulment, and recovery of possession of real property filed by the heirs of Maximino in Civil Case No. CEB-5794. This Court summed up its findings,11 thus –

In summary, the heirs of Maximino failed to prove by clear and convincing evidence that Donata managed, through fraud, to have the real properties, belonging to the intestate estate of Maximino, registered in her name. In the absence of fraud, no implied trust was established between Donata and the heirs of Maximino under Article 1456 of the New Civil Code. Donata was able to register the real properties in her name, not through fraud or mistake, but pursuant to an Order, dated 2 October 1952, issued by the CFI in Special Proceedings No. 928-R. The CFI Order, presumed to be fairly and regularly issued, declared Donata as the sole, absolute, and exclusive heir of Maximino; hence, making Donata the singular owner of the entire estate of Maximino, including the real properties, and not merely a co-owner with the other heirs of her

deceased husband. There being no basis for the Complaint of the heirs of Maximino in Civil Case No. CEB-5794, the same should have been dismissed.

Respondents move for the reconsideration of the Decision of this Court raising still the arguments that Donata committed fraud in securing the Court of First Instance Order, dated 2 October 1952, which declared her as the sole heir of her deceased husband Maximino and authorized her to have Maximino’s properties registered exclusively in her name; that respondents’ right to succession to the disputed properties was transmitted or vested from the moment of Maximino’s death and which they could no longer be deprived of; that Donata merely possessed and held the properties in trust for her co-heirs/owners; and that, by virtue of this Court’s ruling in Quion v. Claridad12 and Sevilla, et al. v. De Los Angeles,13 respondents’ action to recover title to and possession of their shares in Maximino’s estate, held in trust for their benefit by Donata, and eventually, by petitioners as the latter’s successors-in-interest, is imprescriptible. Respondents also advance a fresh contention that the CFI Order, dated 2 October 1952, being based on the fraudulent misrepresentation of Donata that she was Maximino’s sole heir, was a void order, which produced no legal effect. Lastly, respondents asseverate that, by relying on certain procedural presumptions in its Decision, dated 10 March 2006, this Court has sacrificed their substantive right to succession, thus, making justice "subservient to the dictates of mere procedural fiats."14

While this Court is persuaded to reexamine and clarify some points in its previous Decision in this case, it does not find any new evidence or argument that would adequately justify a change in its previous position.

On the finding of fraud

As this Court declared in its Decision, the existence of any trust relations between petitioners and respondents shall be examined in the light of Article 1456 of the New Civil Code, which provides that, "[i]f property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes." Hence, the foremost question to be answered is still whether an implied trust under Article 1456 of the New Civil Code had been sufficiently established in the present case.

In the Decision, this Court ruled in the negative, since there was insufficient evidence to establish that Donata committed fraud. It should be remembered that Donata was able to secure certificates of title to the disputed properties by virtue of the CFI Order in Special Proceedings No. 928-R (the proceedings she instituted to settle Maximino’s intestate estate), which declared her as Maximino’s sole heir. In the absence of proof to the contrary, the Court accorded to Special Proceedings No. 928-R the presumptions of regularity and validity. Reproduced below are the relevant portions15 of the Decision –

At the onset, it should be emphasized that Donata was able to secure the TCTs covering the real properties belonging to the estate of Maximino by virtue of a CFI Order, dated 2 October 1952. It is undisputed that the said CFI Order was issued by the CFI in Special Proceedings No. 928-R, instituted by Donata herself, to settle the intestate estate of Maximino. The petitioners, heirs of Donata, were unable to present a copy of the CFI Order, but this is not surprising considering that it was issued 35 years prior to the filing by the heirs of Maximino of their Complaint in Civil Case No. CEB-5794 on 3 March 1987. The existence of such CFI Order, nonetheless, cannot be denied. It was recorded in the Primary Entry Book of the Register of Deeds on 27 June 1960, at 1:10 p.m., as Entry No. 1714. It was annotated on the TCTs covering the real properties as having declared Donata the sole, absolute, and exclusive heir of Maximino. The non-presentation of the actual CFI Order was not fatal to the cause of the heirs of Donata considering that its authenticity and contents were never questioned. The allegation of fraud by the heirs of Maximino did not pertain to the CFI Order, but to the manner or procedure by which it was issued in favor of Donata. Moreover, the non-presentation of the CFI Order, contrary to the declaration by the RTC, does not amount to a willful suppression of evidence that would give rise to the presumption that it would be adverse to the heirs of Donata if produced. x x x.

x x x x

The CFI Order, dated 2 October 1952, issued in Special Proceedings No. 928-R, effectively settled the intestate estate of Maximino by declaring Donata as the sole, absolute, and exclusive heir of her deceased husband. The issuance by the CFI of the said Order, as well as its conduct of the entire Special Proceedings No. 928-R, enjoy the presumption of validity pursuant to the Section 3(m) and (n) of Rule 131 of the Revised Rules of Court, reproduced below –

SEC. 3. Disputable presumptions. – The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence:

x x x x

(m) That official duty has been regularly performed;

(n) That a court, or judge acting as such, whether in the Philippines or elsewhere, was acting in the lawful exercise of jurisdiction.

By reason of the foregoing provisions, this Court must presume, in the absence of any clear and convincing proof to the contrary, that the CFI in Special Proceedings No. 928-R had jurisdiction of the subject matter and the parties, and to have rendered a judgment valid in every respect; and it could not give credence to the following statements made by the Court of Appeals in its Decision.

x x x x

There was totally no evidentiary basis for the foregoing pronouncements. First of all, the Petition filed by Donata for Letters of Administration in Special Proceedings No. 928-R before the CFI was not even referred to nor presented during the course of the trial of Civil Case No. CEB-5794 before the RTC. How then could the Court of Appeals make a finding that Donata willfully excluded from the said Petition the names, ages, and residences of the other heirs of Maximino? Second, there was also no evidence showing that the CFI actually failed to send notices of Special Proceedings No. 928-R to the heirs of Maximino or that it did not require presentation of proof of service of such notices. It should be remembered that there stands a presumption that the CFI Judge had regularly performed his duties in Special Proceedings No. 928-R, which included sending out of notices and requiring the presentation of proof of service of such notices; and, the heirs of Maximino did not propound sufficient evidence to debunk such presumption. They only made a general denial of knowledge of Special Proceedings No. 928-R, at least until 1985. There was no testimony or document presented in which the heirs of Maximino categorically denied receipt of notice from the CFI of the pendency of Special Proceedings No. 928-R. The only evidence on record in reference to the absence of notice of such proceedings was the testimony of Aurelia Briones (Aurelia), one of the heirs of Maximino, x x x.

x x x x

Aurelia’s testimony deserves scant credit considering that she was not testifying on matters within her personal knowledge. The phrase "I don’t think" is a clear indication that she is merely voicing out her opinion on how she believed her uncles and aunts would have acted had they received notice of Special Proceedings No. 928-R.

It is worth noting that, in its foregoing ratiocination, the Court was proceeding from an evaluation of the evidence on record, which did not include an actual copy of the CFI Order in Special Proceedings No. 928-R. Respondents only submitted a certified true copy thereof on 15 June 2006, annexed to their Supplemental Reply to petitioners’ opposition to their motion for reconsideration of this Court’s Decision. Respondents did not offer any explanation as to why they belatedly produced a copy of the said Order, but merely claimed to have been "fortunate enough to obtain a copy" thereof from the Register of Deeds of Cebu.16

Respondents should be taken to task for springing new evidence so late into the proceedings of this case. Parties should present all their available evidence at the courts below so as to give the opposing party the opportunity to scrutinize and challenge such evidence during the course of the trial. However, given that the existence of the CFI Order in Special Proceedings No. 928-R was never in issue and was, in fact, admitted by the petitioners; that the copy submitted is a certified true copy of the said Order; and that the said Order may provide new information vital to a just resolution of the present case, this Court is compelled to consider the same as part of the evidence on record.

The CFI Order17 in question reads in full as –

O R D E R

This is with reference to the Motion of the Administratrix, dated January 5, 1960, that she be declared the sole heir of her deceased husband, Maximino Suico Briones, the latter having died without any legitimate ascendant nor descendant, nor any legitimate brother or sister, nephews or nieces.

At the hearing of this incident today, nobody appeared to resist the motion, and based on the uncontradicted testimony of Donata G. Ortiz that she was the nearest surviving relative of the deceased Maximino Suico Briones at the time of the latter’s death, and pursuant to the pertinent provisions of the new Civil Code of the Philippines, the Court hereby declares the aforesaid Donata G. Ortiz the sole, absolute and exclusive heir of the estate of the deceased Maximino Suico Briones, and she is hereby entitled to inherit all the residue of this estate after paying all the obligations thereof, which properties are those contained in the Inventory, dated October 2, 1952.1awphi1.net

Cebu City, January 15, 1960.

From the contents of the afore-quoted Order, this Court is able to deduce that the CFI Order was in fact issued on 15 January 1960 and not 2 October 1952, as earlier stated in the Decision. It was the inventory of properties, submitted by Donata as administratrix of Maximino’s intestate estate, which was dated 2 October 1952.18 Other than such observation, this Court finds nothing in the CFI Order which could change its original position in the Decision under consideration.

While it is true that since the CFI was not informed that Maximino still had surviving siblings and so the court was not able to order that these siblings be given personal notices of the intestate proceedings, it should be borne in mind that the settlement of estate, whether testate or intestate, is a proceeding in rem,19

and that the publication in the newspapers of the filing of the application and of the date set for the hearing of the same, in the manner prescribed by law, is a notice to the whole world of the existence of the proceedings and of the hearing on the date and time indicated in the publication. The publication requirement of the notice in newspapers is precisely for the purpose of informing all interested parties in the estate of the deceased of the existence of the settlement proceedings, most especially those who were not named as heirs or creditors in the petition, regardless of whether such omission was voluntarily or involuntarily made.

This Court cannot stress enough that the CFI Order was the result of the intestate proceedings instituted by Donata before the trial court. As this Court pointed out in its earlier Decision, the manner by which the CFI judge conducted the proceedings enjoys the presumption of regularity, and encompassed in such

presumption is the order of publication of the notice of the intestate proceedings. A review of the records fails to show any allegation or concrete proof that the CFI also failed to order the publication in newspapers of the notice of the intestate proceedings and to require proof from Donata of compliance therewith. Neither can this Court find any reason or explanation as to why Maximino’s siblings could have missed the published notice of the intestate proceedings of their brother.

In relying on the presumptions of the regular performance of official duty and lawful exercise of jurisdiction by the CFI in rendering the questioned Order, dated 15 January 1960, this Court is not, as counsel for respondents allege, sacrificing the substantive right of respondents to their share in the inheritance in favor of mere procedural fiats. There is a rationale for the establishment of rules of procedure, as amply explained by this Court in De Dios v. Court of Appeals20 –

Procedural rules are designed to insure the orderly and expeditious administration of justice by providing for a practical system by which the parties to a litigation may be accorded a full and fair opportunity to present their respective positions and refute each other's submissions under the prescribed requirements, conditions and limitations. Adjective law is not the counterfoil of substantive law. In fact, there is a symbiotic relationship between them. By complying faithfully with the Rules of Court, the bench and the bar are better able to discuss, analyze and understand substantive rights and duties and consequently to more effectively protect and enforce them. The other alternative is judicial anarchy.

Thus, compliance with the procedural rules is the general rule, and abandonment thereof should only be done in the most exceptional circumstances. The presumptions relied upon by this Court in the instant case are disputable presumptions, which are satisfactory, unless contradicted or overcome by evidence. This Court finds that the evidence presented by respondents failed to overcome the given presumptions.

Although Donata may have alleged before the CFI that she was her husband’s sole heir, it was not established that she did so knowingly, maliciously and in bad faith, so as for this Court to conclude that she indeed committed fraud. This Court again brings to the fore the delay by which respondents filed the present case, when the principal actors involved, particularly, Donata and Maximino’s siblings, have already passed away and their lips forever sealed as to what truly transpired between them. On the other hand, Special Proceedings No. 928-R took place when all these principal actors were still alive and each would have been capable to act to protect his or her own right to Maximino’s estate. Letters of Administration of Maximino’s estate were issued in favor of Donata as early as 8 July 1952, and the CFI Order in question was issued only on 15 January 1960. The intestate proceedings for the settlement of Maximino’s estate were thus pending for almost eight years, and it is the burden of the respondents to establish that their parents or grandparents, Maximino’s surviving siblings, had absolutely no knowledge of the said proceedings all these years. As established in Ramos v. Ramos,21 the degree of proof to establish fraud in a case where the principal

actors to the transaction have already passed away is proof beyond reasonable doubt, to wit –

"x x x But length of time necessarily obscures all human evidence; and as it thus removes from the parties all the immediate means to verify the nature of the original transactions, it operates by way of presumption, in favor of innocence, and against imputation of fraud. It would be unreasonable, after a great length of time, to require exact proof of all the minute circumstances of any transaction, or to expect a satisfactory explanation of every difficulty, real or apparent, with which it may be encumbered. The most that can fairly be expected, in such cases, if the parties are living, from the frailty of memory, and human infirmity, is, that the material facts can be given with certainty to a common intent; and, if the parties are dead, and the cases rest in confidence, and in parol agreements, the most that we can hope is to arrive at probable conjectures, and to substitute general presumptions of law, for exact knowledge. Fraud, or breach of trust, ought not lightly to be imputed to the living; for, the legal presumption is the other way; as to the dead, who are not here to answer for themselves, it would be the height of injustice and cruelty, to disturb their ashes, and violate the sanctity of the grave, unless the evidence of fraud be clear, beyond a reasonable doubt (Prevost vs. Gratz, 6 Wheat. [U.S.], 481, 498).

Moreover, even if Donata’s allegation that she was Maximino’s sole heir does constitute fraud, it is insufficient to justify abandonment of the CFI Order, dated 15 January 1960,22 considering the nature of intestate proceedings as being in rem and the disputable presumptions of the regular performance of official duty and lawful exercise of jurisdiction by the CFI in rendering the questioned Order, dated 15 January 1960, in Special Proceedings No. 928-R.

On prescription of the right to recover based on implied trust

Assuming, for the sake of argument, that Donata’s misrepresentation constitutes fraud that would impose upon her the implied trust provided in Article 1456 of the Civil Code, this Court still cannot sustain respondents’ contention that their right to recover their shares in Maximino’s estate is imprescriptible. It is already settled in jurisprudence that an implied trust, as opposed to an express trust, is subject to prescription and laches.

The case of Ramos v. Ramos23 already provides an elucidating discourse on the matter, to wit –

"Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the parties. Implied trusts come into being by operation of law" (Art. 1441, Civil Code). "No express trusts concerning an immovable or any interest therein may be proven by oral evidence. An implied trust may be proven by oral evidence" (Ibid; Arts. 1443 and 1457).

"No particular words are required for the creation of an express trust, it being sufficient that a trust is clearly intended" (Ibid; Art. 1444; Tuason de Perez vs. Caluag, 96 Phil. 981; Julio vs. Dalandan, L-19012, October 30, 1967, 21 SCRA 543, 546). "Express trusts are those which are created by the direct and positive acts of the parties, by some writing or deed, or will, or by words either expressly or impliedly evincing an intention to create a trust" (89 C.J. S. 122).

"Implied trusts are those which, without being expressed, are deducible from the nature of the transaction as matters of intent, or which are superinduced on the transaction by operation of law as matters of equity, independently of the particular intention of the parties" (89 C.J.S. 724). They are ordinarily subdivided into resulting and constructive trusts (89 C.J.S. 722).

"A resulting trust is broadly defined as a trust which is raised or created by the act or construction of law, but in its more restricted sense it is a trust raised by implication of law and presumed always to have been contemplated by the parties, the intention as to which is to be found in the nature of their transaction, but not expressed in the deed or instrument of conveyance" (89 C.J.S. 725). Examples of resulting trusts are found in Article 1448 to 1455 of the Civil Code. See Padilla vs. Court of Appeals, L-31569, September 28, 1973, 53 SCRA 168, 179).

On the other hand, a constructive trust is a trust "raised by construction of law, or arising by operation of law." In a more restricted sense and as contradistinguished from a resulting trust, a constructive trust is "a trust not created by any words, either expressly or impliedly evincing a direct intention to create a trust, but by the construction of equity in order to satisfy the demands of justice. It does not arise by agreement or intention but by operation of law." (89 C.J.S. 726-727). "If a person obtains legal title to property by fraud or concealment, courts of equity will impress upon the title a so-called constructive trust in favor of the defrauded party." A constructive trust is not a trust in the technical sense (Gayondato vs. Treasurer of the P.I., 49 Phil. 244; See Art. 1456, Civil Code).

There is a rule that a trustee cannot acquire by prescription the ownership of property entrusted to him (Palma vs. Cristobal, 77 Phil. 712), or that an action to compel a trustee to convey property registered in his name in trust for the benefit of the cestui qui trust does not prescribe (Manalang vs. Canlas, 94 Phil. 776; Cristobal vs. Gomez, 50 Phil. 810), or that the defense of prescription cannot be set up in an action to recover property held by a person in trust for the benefit of another (Sevilla vs. De los Angeles, 97 Phil. 875), or that property held in trust can be recovered by the beneficiary regardless of the lapse of time (Marabilles vs. Quito, 100 Phil. 64; Bancairen vs. Diones, 98 Phil. 122, 126; Juan vs. Zuñiga, 62 O.G. 1351; 4 SCRA 1221; Jacinto vs. Jacinto, L-17957, May 31, 1962. See Tamayo vs. Callejo, 147 Phil. 31, 37).

That rule applies squarely to express trusts. The basis of the rule is that the possession of a trustee is not adverse. Not being adverse, he does not acquire by

prescription the property held in trust. Thus, Section 38 of Act 190 provides that the law of prescription does not apply "in the case of a continuing and subsisting trust" (Diaz vs. Gorricho and Aguado, 103 Phil. 261, 266; Laguna vs. Levantino, 71 Phil. 566; Sumira vs. Vistan, 74 Phil. 138; Golfeo vs. Court of Appeals, 63 O.G. 4895, 12 SCRA 199; Caladiao vs. Santos, 63 O.G. 1956, 10 SCRA 691).

The rule of imprescriptibility of the action to recover property held in trust may possibly apply to resulting trusts as long as the trustee has not repudiated the trust (Heirs of Candelaria vs. Romero, 109 Phil. 500, 502-3; Martinez vs. Graño, 42 Phil. 35; Buencamino vs. Matias, 63 O. G. 11033, 16 SCRA 849).

The rule of imprescriptibility was misapplied to constructive trusts (Geronimo and Isidoro vs. Nava and Aquino, 105 Phil. 145, 153. Compare with Cuison vs. Fernandez and Bengzon, 105 Phil. 135, 139; De Pasion vs. De Pasion, 112 Phil. 403, 407).

Acquisitive prescription may bar the action of the beneficiary against the trustee in an express trust for the recovery of the property held in trust where (a) the trustee has performed unequivocal acts of repudiation amounting to an ouster of the cestui qui trust; (b) such positive acts of repudiation have been made known to the cestui qui trust and (c) the evidence thereon is clear and conclusive (Laguna vs. Levantino, supra; Salinas vs. Tuason, 55 Phil. 729. Compare with the rule regarding co-owners found in the last paragraph of Article 494, Civil Code; Casañas vs. Rosello, 50 Phil. 97; Gerona vs. De Guzman, L-19060, May 29, 1964, 11 SCRA 153, 157).

With respect to constructive trusts, the rule is different. The prescriptibility of an action for reconveyance based on constructive trust is now settled (Alzona vs. Capunitan, L-10228, February 28, 1962, 4 SCRA 450; Gerona vs. De Guzman, supra; Claridad vs. Henares, 97 Phil. 973; Gonzales vs. Jimenez, L-19073, January 30, 1965, 13 SCRA 80; Boñaga vs. Soler, 112 Phil. 651; J. M. Tuason & Co., vs. Magdangal, L-15539, January 30, 1962, 4 SCRA 84). Prescription may supervene in an implied trust (Bueno vs. Reyes, L-22587, April 28, 1969, 27 SCRA 1179; Fabian vs. Fabian, L-20449, January 29, 1968; Jacinto vs. Jacinto, L-17957, May 31, 1962, 5 SCRA 371).

And whether the trust is resulting or constructive, its enforcement may be barred by laches (90 C.J.S. 887-889; 54 Am Jur. 449-450; Diaz vs. Gorricho and Aguado, supra; Compare with Mejia vs. Gampona, 100 Phil. 277). [Emphases supplied.]

A present reading of the Quion24 and Sevilla25 cases, invoked by respondents, must be made in conjunction with and guided accordingly by the principles established in the afore-quoted case. Thus, while respondents’ right to inheritance was transferred or vested upon them at the time of Maximino’s death, their enforcement of said right by appropriate legal action may be barred by the prescription of the action.

Prescription of the action for reconveyance of the disputed properties based on implied trust is governed by Article 1144 of the New Civil Code, which reads –

ART. 1144. The following actions must be brought within ten years from the time the right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

Since an implied trust is an obligation created by law (specifically, in this case, by Article 1456 of the New Civil Code), then respondents had 10 years within which to bring an action for reconveyance of their shares in Maximino’s properties. The next question now is when should the ten-year prescriptive period be reckoned from. The general rule is that an action for reconveyance of real property based on implied trust prescribes ten years from registration and/or issuance of the title to the property,26 not only because registration under the Torrens system is a constructive notice of title,27 but also because by registering the disputed properties exclusively in her name, Donata had already unequivocally repudiated any other claim to the same.

By virtue of the CFI Order, dated 15 January 1960, in Special Proceedings No. 928-R, Donata was able to register and secure certificates of title over the disputed properties in her name on 27 June 1960. The respondents filed with the RTC their Complaint for partition, annulment, and recovery of possession of the disputed real properties, docketed as Civil Case No. CEB-5794, only on 3 March 1987, almost 27 years after the registration of the said properties in the name of Donata. Therefore, respondents’ action for recovery of possession of the disputed properties had clearly prescribed.

Moreover, even though respondents’ Complaint before the RTC in Civil Case No. CEB-5794 also prays for partition of the disputed properties, it does not make their action to enforce their right to the said properties imprescriptible. While as a general rule, the action for partition among co-owners does not prescribe so long as the co-ownership is expressly or impliedly recognized, as provided for in Article 494, of the New Civil Code, it bears to emphasize that Donata had never recognized respondents as co-owners or co-heirs, either expressly or impliedly.28 Her assertion before the CFI in Special Proceedings No. 928-R that she was Maximino’s sole heir necessarily excludes recognition of some other co-owner or co-heir to the inherited properties; Consequently, the rule on non-prescription of action for partition of property owned in common does not apply to the case at bar.

On laches as bar to recovery

Other than prescription of action, respondents’ right to recover possession of the disputed properties, based on implied trust, is also barred by laches. The defense of laches, which is a question of inequity in permitting a claim to be enforced, applies independently of prescription, which is a question of time. Prescription is statutory; laches is equitable.29

Laches is defined as the failure to assert a right for an unreasonable and unexplained length of time, warranting a presumption that the party entitled to assert it has either abandoned or declined to assert it. This equitable defense is based upon grounds of public policy, which requires the discouragement of stale claims for the peace of society.30

This Court has already thoroughly discussed in its Decision the basis for barring respondents’ action for recovery of the disputed properties because of laches. This Court pointed out therein31 that –

In further support of their contention of fraud by Donata, the heirs of Maximino even emphasized that Donata lived along the same street as some of the siblings of Maximino and, yet, she failed to inform them of the CFI Order, dated [15 January 1960], in Special Proceedings No. 928-R, and the issuance in her name of new TCTs covering the real properties which belonged to the estate of Maximino. This Court, however, appreciates such information differently. It actually works against the heirs of Maximino. Since they only lived nearby, Maximino’s siblings had ample opportunity to inquire or discuss with Donata the status of the estate of their deceased brother. Some of the real properties, which belonged to the estate of Maximino, were also located within the same area as their residences in Cebu City, and Maximino’s siblings could have regularly observed the actions and behavior of Donata with regard to the said real properties. It is uncontested that from the time of Maximino’s death on 1 May 1952, Donata had possession of the real properties. She managed the real properties and even collected rental fees on some of them until her own death on 1 November 1977. After Donata’s death, Erlinda took possession of the real properties, and continued to manage the same and collect the rental fees thereon. Donata and, subsequently, Erlinda, were so obviously exercising rights of ownership over the real properties, in exclusion of all others, which must have already put the heirs of Maximino on guard if they truly believed that they still had rights thereto.

The heirs of Maximino knew he died on 1 May 1952. They even attended his wake. They did not offer any explanation as to why they had waited 33 years from Maximino’s death before one of them, Silverio, filed a Petition for Letters of Administration for the intestate estate of Maximino on 21 January 1985. After learning that the intestate estate of Maximino was already settled in Special Proceedings No. 928-R, they waited another two years, before instituting, on 3 March 1987, Civil Case No. CEB-5794, the Complaint for partition, annulment and recovery of the real property belonging to the estate of Maximino. x x x

Considering the circumstances in the afore-quoted paragraphs, as well as respondents’ conduct before this Court, particularly the belated submission of evidence and argument of new issues, respondents are consistently displaying a penchant for delayed action, without any proffered reason or justification for such delay.

It is well established that the law serves those who are vigilant and diligent and not those who sleep when the law requires them to act. The law does not encourage laches, indifference, negligence or ignorance. On the contrary, for a party to deserve the considerations of the courts, he must show that he is not guilty of any of the aforesaid failings.32

On void judgment or order

Respondents presented only in their Reply and Supplemental Reply to the petitioners’ Opposition to their Motion for Reconsideration the argument that the CFI Order, dated 15 January 1960, in Special Proceedings No. 928-R is void and, thus, it cannot have any legal effect. Consequently, the registration of the disputed properties in the name of Donata pursuant to such Order was likewise void.

This Court is unconvinced.

In the jurisprudence referred to by the respondents,33 an order or judgment is considered void when rendered by the court without or in excess of its jurisdiction or in violation of a mandatory duty, circumstances which are not present in the case at bar.

Distinction must be made between a void judgment and a voidable one, thus –

"* * * A voidable judgment is one which, though not a mere nullity, is liable to be made void when a person who has a right to proceed in the matter takes the proper steps to have its invalidity declared. It always contains some defect which may become fatal. It carries within it the means of its own overthrow. But unless and until it is duly annulled, it is attended with all the ordinary consequences of a legal judgment. The party against whom it is given may escape its effect as a bar or an obligation, but only by a proper application to have it vacated or reversed. Until that is done, it will be efficacious as a claim, an estoppel, or a source of title. If no proceedings are ever taken against it, it will continue throughout its life to all intents a valid sentence. If emanating from a court of general jurisdiction, it will be sustained by the ordinary presumptions of regularity, and it is not open to impeachment in any collateral action. * * *"

But it is otherwise when the judgment is void. "A void judgment is in legal effect no judgment. By it no rights are divested. From it no rights can be obtained. Being worthless in itself, all proceedings founded upon it are equally worthless. It neither binds nor bars any one. All acts performed under it and all claims flowing out of it

are void. The parties attempting to enforce it may be responsible as trespassers. The purchaser at a sale by virtue of its authority finds himself without title and without redress." (Freeman on Judgments, sec. 117, citing Campbell vs. McCahan, 41 Ill., 45; Roberts vs. Stowers, 7 Bush, 295, Huls vs. Buntin, 47 Ill., 396; Sherrell vs. Goodrum, 3 Humph., 418; Andrews vs. State, 2 Sneed, 549; Hollingsworth vs. Bagley, 35 Tex., 345; Morton vs. Root, 2 Dill., 312; Commercial Bank of Manchester vs. Martin, 9 Smedes & M., 613; Hargis vs. Morse, 7 Kan., 259. See also Cornell vs. Barnes, 7 Hill, 35; Dawson and Another vs. Wells, 3 Ind., 399; Meyer vs. Mintonye, 106 Ill., 414; Olson vs. Nunnally, 47 Kan., 391; White vs. Foote L. & M. Co., 29 W. Va., 385.)

It is not always easy to draw the line of demarcation between a void judgment and a voidable one, but all authorities agree that jurisdiction over the subject-matter is essential to the validity of a judgment and that want of such jurisdiction renders it void and a mere nullity. In the eye of the law it is non-existent. (Fisher vs. Harnden, 1 Paine, 55; Towns vs. Springer, 9 Ga., 130; Mobley vs. Mobley, 9 Ga., 247; Beverly and McBride vs. Burke, 9 Ga., 440; Central Bank of Georgia vs. Gibson, 11 Ga., 453; Johnson vs. Johnson, 30 Ill., 215; St. Louis and Sandoval Coal and Mining Co. vs. Sandoval Coal and Mining Co., 111 Ill., 32; Swiggart vs. Harber, 4 Scam., 364; Miller vs. Snyder, 6 Ind., 1; Seely vs. Reid, 3 Greene [Iowa], 374.)34

The fraud and misrepresentation fostered by Donata on the CFI in Special Proceedings No. 928-R did not deprive the trial court of jurisdiction over the subject-matter of the case, namely, the intestate estate of Maximino. Donata’s fraud and misrepresentation may have rendered the CFI Order, dated 15 January 1960, voidable, but not void on its face. Hence, the said Order, which already became final and executory, can only be set aside by direct action to annul and enjoin its enforcement.35 It cannot be the subject of a collateral attack as is being done in this case. Note that respondents’ Complaint before the RTC in Civil Case No. CEB-5794 was one for partition, annulment, and recovery of possession of the disputed properties. The annulment sought in the Complaint was not that of the CFI Order, dated 15 January 1960, but of the certificates of title over the properties issued in Donata’s name. So until and unless respondents bring a direct action to nullify the CFI Order, dated 15 January 1960, in Special Proceedings No. 928-R, and attain a favorable judgment therein, the assailed Order remains valid and binding.

Nonetheless, this Court also points out that an action to annul an order or judgment based on fraud must be brought within four years from the discovery of the fraud.36 If it is conceded that the respondents came to know of Donata’s fraudulent acts only in 1985, during the course of the RTC proceedings which they instituted for the settlement of Maximino’s estate, then their right to file an action to annul the CFI Order, dated 15 January 1960, in Special Proceedings No. 928-R (earlier instituted by Donata for the settlement of Maximino’s estate), has likewise prescribed by present time.

In view of the foregoing, the Motion for Reconsideration is DENIED.

SO ORDERED.

G.R. No. L-29727 December 14, 1988

PEDRO OLIVERAS, TEODORA GASPAR, MELECIO OLIVERAS and ANICETA MINOR, plaintiffs-appellees, vs.CANDIDO LOPEZ, SEVERO LOPEZ, HIPOLITO LOPEZ, EUGENIA LOPEZ, PRIMITIVO GASPAR, CORAZON LOPEZ, ALEJANDRO CACAYURIN, FAUSTINA BOTUYAN, MODESTO SALAZAR, ADORACION BOTUYAN, CLAUDIO GANOTICE and ENONG BOTUYAN, defendants-appellants.

Venancio B. Fernando for defendants-appellants.

 

FERNAN, C.J.:

This case exemplifies the Filipino custom of keeping inherited property in a prolonged juridical condition of co-owner ship.

Lorenzo Lopez owned Lot 4685 of the Cadastral survey of Villasis, Pangasinan with an area of 69,687 square meters as evidenced by Original Certificate of Title No. 15262. 1 In December, 1931, Lorenzo Lopez died, 2 leaving said property to his wife, Tomasa Ramos and six (6) children. From that time on, the heirs of Lorenzo Lopez did not initiate any moves to legally partition the property.

More than twenty-one years later, or on February 11, 1953, Tomasa Ramos and her eldest son, Candido Lopez, executed a deed of absolute sale of the "eastern undivided four thousand two hundred and fifty seven-square meters (4,257) more or less, of the undivided portion of (their) interests, rights and participation" over Lot 4685, in favor of the spouses Melecio Oliveras and Aniceta Minor, in consideration of the amount of one thousand pesos (P1,000). 3

On the same day, Tomasa and Candido executed another deed of absolute sale of the "undivided" four thousand two hundred and fifty-seven (4,257) square meters of the "eastern part" of Lot 4685 in favor of the spouses Pedro Oliveras and Teodora Gaspar, also in consideration of P1,000. 4 Each of the said documents bear the thumbmark of Tomasa and the signature of Candido.

In his affidavit also executed on February 11, 1953, Candido stated that a month prior to the execution of the deed of sale in favor of Melecio Oliveras, he offered

his: "undivided portion" of Lot 4685 to his "adjacent owners" but none of them was "in a position to purchase" said property. 5

Since the execution of the two deeds of absolute sale, the vendees, brothers Melecio and Pedro, had been paying the real property taxes for their respectively purchased properties. 6 They also had been in possession of their purchased properties which, being planted to palay and peanuts, were segregated from the rest of Lot 4685 by dikes. 7

More than thirteen years later or on November 21, 1966, the counsel of the Oliveras brothers wrote the heirs of Lorenzo Lopez reminding them of the Oliverases' demands to partition the property so that they could acquire their respective titles thereto without resorting to court action, and that, should they fail to respond, he would be forced to file a case in court. 8 Apparently, the Lopezes did not answer said letter since on December 15, 1966, the Oliveras brothers and their wives filed a complaint for partition and damages 9 in the Court of First Instance of Pangasinan. 10

The Oliverases stated in their complaint that possession of the disputed properties was delivered to them with the knowledge and consent of the defendants; that they had been paying the real estate taxes thereon; that prior to the sale, said properties were offered to the other co-owners for sale but they refused to buy them; that on February 18, 1953, the transactions were duly annotated and entered in the Memorandum of encumbrances of OCT No. 15262 as adverse claims; and that their desire to segregate the portions of Lot 4685 sold to them was frustrated by defendants' adamant refusal to lend them the owner's duplicate of OCT No. 15262 and to execute a deed of partition of the whole lot.

In claiming moral damages in the amount of P2,000.00 plaintiffs alleged that defendants also refused to allow them to survey and segregate the portions bought by them. Plaintiffs prayed that the court order the defendants to partition Lot 4685 and to allow them to survey and segregate the portions they had purchased. They also demanded payment of P800.00 as attorney's fees and cost of the suit.

In their answer, the defendants alleged that no sale ever transpired as the alleged vendors could not have sold specific portions of the property; that plaintiffs' possession and occupation of specific portions of the properties being illegal, they could not ripen into ownership; and that they were not under any obligation to lend their copy of the certificate of title or to accede to plaintiffs' request for the partition or settlement of the property. As special and affirmative defenses, the defendants contended that the deeds of sale were null and void and hence, unenforceable against them; that the complaint did not state a cause of action and that the cause or causes of action if any, had prescribed.

Defendants averred in their counterclaim that despite repeated demands, plaintiffs refused and failed to vacate the premises; that the properties occupied by the

plaintiffs yielded an average net produce in palay and peanuts in the amount of P1,600.00 annually, and that the complaint was filed to harass them. They prayed for the dismissal of the complaint and the payment of P1,600.00 per year from 1953 until plaintiffs shall have vacated the premises and P1,000.00 for attorney's fees.

Plaintiffs filed an answer to defendants' counterclaim, denying all the allegations therein and stating that defendants never demanded that plaintiffs vacate the portions of Lot 4685 they had bought.

The lower court explored the possibility of an amicable settlement between the parties without success. Hence, it set the case for trial and thereafter, it rendered adecision 11 declaring valid the deeds of absolute sale 12 and ordering the defendants to allow the segregation of the sold portions of Lot 4685 by a licensed surveyor in order that the plaintiffs could obtain their respective certificates of title over their portions of said lot.

In resolving the case, the lower court passed upon the issue of whether the two deeds of absolute sale were what they purported to be or merely mortgage documents. It considered as indicia of plaintiffs' absolute dominion over the portions sold to them their actual possession thereof without any opposition from the defendants until the filing of the complaint, their payment of taxes thereon and their having benefited from the produce of the land. The court ruled that the defendants' testimonial evidence that the deeds in question were merely mortgage documents cannot overcome the evidentiary value of the public instruments presented by the plaintiffs.

On the issue of whether the two deeds of absolute sale were null and void considering that the land subject thereof had not yet been partitioned, the court observed that the total area of 8,514 square meters sold to plaintiffs by Candido was less than his share should Lot 4685 with an area of 69,687 square meters be divided among the six children of Lorenzo Lopez and their mother. In this connection, the lower court also found that during his lifetime, and before Candido got married, Lorenzo Lopez had divided Lot 4685 among his children who then took possession of their respective shares. *

The defendants appealed said decision to this Court contending that the lower court erred in declaring the two deeds of absolute sale as valid, in ordering the segregation of the sold portions of Lot 4685 to enable the plaintiffs to obtain their respective certificates of title, and in not considering their defense of prescription.

The extrinsic validity of the two deeds of absolute sale is not in issue in this case in view of the finding of the trial court that the defendants admittedly do not question their due execution. 13 What should pre-occupy the Court is the intrinsic validity of said deeds insofar as they pertain to sales of designated portions of an undivided, co-owned property.

In a long line of decisions, this Court has held that before the partition of a land or thing held in common, no individual co-owner can claim title to any definite portion thereof. All that the co-owner has is an Ideal or abstract quota or proportionate share in the entire land or thing. 14

However, the duration of the juridical condition of co-ownership is not limitless. Under Article 494 and 1083 of the Civil Code, co-ownership of an estate should not exceed the period of twenty (20) years. And, under the former article, any agreement to keep a thing or property undivided should be for a ten-year period only. Where the parties stipulate a definite period of in division which exceeds the maximum allowed by law, said stipulation shall be void only as to the period beyond such maximum. 15

Although the Civil Code is silent as to the effect of the in division of a property for more than twenty years, it would be contrary to public policy to sanction co-ownership beyond the period set by the law. Otherwise, the 20-year limitation expressly mandated by the Civil Code would be rendered meaningless.

In the instant case, the heirs of Lorenzo Lopez maintained the co-ownership for more than twenty years. We hold that when Candido and his mother (who died before the filing of the complaint for partition) sold definite portions of Lot 4685, they validly exercised dominion over them because, by operation of law, the co-ownership had ceased. The filing of the complaint for partition by the Oliverases who, as vendees, are legally considered as subrogated to the rights of Candido over portions of Lot 4685 in their possession, 16 merely served to put a stamp of formality on Candido's otherwise accomplished act of terminating the co-ownership.

The action for partition has not prescribed. Although the complaint was filed thirteen years from the execution of the deeds of sale and hence, as contended by the defendants-appellants, prescription might have barred its filing under the general provision of Article 1144 (a) of the Civil Code, Article 494 specifically mandates that eachco-owner may demand at any time the partition of the thing owned in common insofar as his share is concerned. Hence, considering the validity of the conveyances of portions of Lot 4685 in their favor and as subrogees of Candido Lopez, the Oliverases' action for partition was timely and properly filed. 17

We cannot write finis to this decision without commenting on the compliance with the resolution of September 1, 1986 of counsel for defendants-appellants. In said resolution, the court required the parties to move in the premises "considering the length of time that this case has remained pending in this Court and to determine whether or not there might be supervening events which may render the case moot and academic. 18 In his manifestation and motion dated August 12, 1987, said counsel informed the Court that he had contacted the defendants-appellants whom he advised "to move in the premises which is the land in question and to maintain the status quo with respect to their actual possession thereon" and that

he had left a copy of said resolution with the defendants-appellants" for their guidance in the compliance of their obligations (sic) as specified in saidresolution." 19

Obviously, said counsel interpreted literally the Court's directive "to move in the premises." For the enlightenment of said counsel and all others of similar perception, a "move in the premises" resolution is not a license to occupy or enter the premises subject of litigation especially in cases involving real property. A "move in the premises" resolution simply means what is stated therein: the parties are obliged to inform the Court of developments pertinent to the case which may be of help to the Court in its immediate disposition.

WHEREFORE, the decision of the lower court insofar as it declares the validity of the two deeds of sale and directs the partition of Lot 4685, is AFFIRMED. The lower court is hereby ordered to facilitate with dispatch the preparation of a project of partition which it should thereafter approve. This decision is immediately executory. No costs.

SO ORDERED.

G.R. No. 156364             September 3, 2007

JACOBUS BERNHARD HULST, petitioner, vs.PR BUILDERS, INC., respondent.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the Decision1 dated October 30, 2002 of the Court of Appeals (CA) in CA-G.R. SP No. 60981.

The facts:

Jacobus Bernhard Hulst (petitioner) and his spouse Ida Johanna Hulst-Van Ijzeren (Ida), Dutch nationals, entered into a Contract to Sell with PR Builders, Inc. (respondent), for the purchase of a 210-sq m residential unit in respondent's townhouse project in Barangay Niyugan, Laurel, Batangas.

When respondent failed to comply with its verbal promise to complete the project by June 1995, the spouses Hulst filed before the Housing and Land Use Regulatory Board (HLURB) a complaint for rescission of contract with interest, damages and attorney's fees, docketed as HLRB Case No. IV6-071196-0618.

On April 22, 1997, HLURB Arbiter Ma. Perpetua Y. Aquino (HLURB Arbiter) rendered a Decision2 in favor of spouses Hulst, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant, rescinding the Contract to Sell and ordering respondent to:

1) Reimburse complainant the sum of P3,187,500.00, representing the purchase price paid by the complainants to P.R. Builders, plus interest thereon at the rate of twelve percent (12%) per annum from the time complaint was filed;

2) Pay complainant the sum of P297,000.00 as actual damages;

3) Pay complainant the sum of P100,000.00 by way of moral damages;

4) Pay complainant the sum of P150,000.00 as exemplary damages;

5) P50,000.00 as attorney's fees and for other litigation expenses; and

6) Cost of suit.

SO ORDERED.3

Meanwhile, spouses Hulst divorced. Ida assigned her rights over the purchased property to petitioner.4 From then on, petitioner alone pursued the case.

On August 21, 1997, the HLURB Arbiter issued a Writ of Execution addressed to the Ex-Officio Sheriff of the Regional Trial Court of Tanauan, Batangas directing the latter to execute its judgment.5

On April 13, 1998, the Ex-Officio Sheriff proceeded to implement the Writ of Execution. However, upon complaint of respondent with the CA on a Petition for Certiorari and Prohibition, the levy made by the Sheriff was set aside, requiring the Sheriff to levy first on respondent's personal properties.6 Sheriff Jaime B. Ozaeta (Sheriff) tried to implement the writ as directed but the writ was returned unsatisfied.7

On January 26, 1999, upon petitioner's motion, the HLURB Arbiter issued an Alias Writ of Execution.8

On March 23, 1999, the Sheriff levied on respondent's 15 parcels of land covered by 13 Transfer Certificates of Title (TCT)9 in Barangay Niyugan, Laurel, Batangas.10

In a Notice of Sale dated March 27, 2000, the Sheriff set the public auction of the levied properties on April 28, 2000 at 10:00 a.m..11

Two days before the scheduled public auction or on April 26, 2000, respondent filed an Urgent Motion to Quash Writ of Levy with the HLURB on the ground that the Sheriff made an overlevy since the aggregate appraised value of the levied properties at P6,500.00 per sq m is P83,616,000.00, based on the Appraisal Report12 of Henry Hunter Bayne Co., Inc. dated December 11, 1996, which is over and above the judgment award.13

At 10:15 a.m. of the scheduled auction date of April 28, 2000, respondent's counsel objected to the conduct of the public auction on the ground that respondent's Urgent Motion to Quash Writ of Levy was pending resolution. Absent any restraining order from the HLURB, the Sheriff proceeded to sell the 15 parcels of land. Holly Properties Realty Corporation was the winning bidder for all 15 parcels of land for the total amount of P5,450,653.33. The sum of P5,313,040.00 was turned over to the petitioner in satisfaction of the judgment award after deducting the legal fees.14

At 4:15 p.m. of the same day, while the Sheriff was at the HLURB office to remit the legal fees relative to the auction sale and to submit the Certificates of Sale15 for the signature of HLURB Director Belen G. Ceniza (HLURB Director), he received the Order dated April 28, 2000 issued by the HLURB Arbiter to suspend the proceedings on the matter.16

Four months later, or on August 28, 2000, the HLURB Arbiter and HLURB Director issued an Order setting aside the sheriff's levy on respondent's real properties,17 reasoning as follows:

While we are not making a ruling that the fair market value of the levied properties is PhP6,500.00 per square meter (or an aggregate value of PhP83,616,000.00) as indicated in the Hunter Baynes Appraisal Report, we definitely cannot agree with the position of the Complainants and the Sheriff that the aggregate value of the 12,864.00-square meter levied properties is only around PhP6,000,000.00. The disparity between the two valuations are [sic] so egregious that the Sheriff should have looked into the matter first before proceeding with the execution sale of the said properties, especially when the auction sale proceedings was seasonably objected by Respondent's counsel, Atty. Noel Mingoa. However, instead of resolving first the objection timely posed by Atty. Mingoa, Sheriff Ozaete totally disregarded the objection raised and, posthaste, issued the corresponding Certificate of Sale even prior to the payment of the legal fees (pars. 7 & 8, Sheriff's Return).

While we agree with the Complainants that what is material in an execution sale proceeding is the amount for which the properties were bidded and sold during the public auction and that, mere inadequacy of the price is not a sufficient ground to annul the sale, the court is justified to intervene where the inadequacy of the price shocks the conscience (Barrozo vs. Macaraeg, 83 Phil. 378). The difference between PhP83,616,000.00 and Php6,000,000.00 is PhP77,616,000.00 and it definitely invites our attention to look into the proceedings had especially so when there was only one bidder, the HOLLY PROPERTIES REALTY CORPORATION represented by Ma, Chandra Cacho (par. 7, Sheriff's Return) and the auction sale proceedings was timely objected by Respondent's counsel (par. 6, Sheriff's Return) due to the pendency of the Urgent Motion to Quash the Writ of Levy which was filed prior to the execution sale.

Besides, what is at issue is not the value of the subject properties as determined during the auction sale, but the determination of the value of the properties levied upon by the Sheriff taking into consideration Section 9(b) of the 1997 Rules of Civil Procedure x x x.

x x x x

It is very clear from the foregoing that, even during levy, the Sheriff has to consider the fair market value of the properties levied upon to determine whether they are sufficient to satisfy the judgment, and any levy in excess of the judgment award is void (Buan v. Court of Appeals, 235 SCRA 424).

x x x x18 (Emphasis supplied).

The dispositive portion of the Order reads:

WHEREFORE, the levy on the subject properties made by the Ex-Officio Sheriff of the RTC of Tanauan, Batangas, is hereby SET ASIDE and the said Sheriff is hereby directed to levy instead Respondent's real properties that are reasonably sufficient to enforce its final and executory judgment, this time, taking into consideration not only the value of the properties as indicated in their respective tax declarations, but also all the other determinants at arriving at a fair market value, namely: the cost of acquisition, the current value of like properties, its actual or potential uses, and in the particular case of lands, their size, shape or location, and the tax declarations thereon.

SO ORDERED.19

A motion for reconsideration being a prohibited pleading under Section 1(h), Rule IV of the 1996 HLURB Rules and Procedure, petitioner filed a Petition for Certiorari and Prohibition with the CA on September 27, 2000.

On October 30, 2002, the CA rendered herein assailed Decision20 dismissing the petition. The CA held that petitioner's insistence that Barrozo v. Macaraeg21 does not apply since said case stated that "when there is a right to redeem inadequacy of price should not be material" holds no water as what is obtaining in this case is not "mere inadequacy," but an inadequacy that shocks the senses; that Buan v. Court of Appeals22 properly applies since the questioned levy covered 15 parcels of land posited to have an aggregate value of P83,616,000.00 which shockingly exceeded the judgment debt of only around P6,000,000.00.

Without filing a motion for reconsideration,23 petitioner took the present recourse on the sole ground that:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE ARBITER'S ORDER SETTING ASIDE THE LEVY MADE BY THE SHERIFF ON THE SUBJECT PROPERTIES.24

Before resolving the question whether the CA erred in affirming the Order of the HLURB setting aside the levy made by the sheriff, it behooves this Court to address a matter of public and national importance which completely escaped the attention of the HLURB Arbiter and the CA: petitioner and his wife are foreign nationals who are disqualified under the Constitution from owning real property in their names.

Section 7 of Article XII of the 1987 Constitution provides:

Sec. 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain. (Emphasis supplied).

The capacity to acquire private land is made dependent upon the capacity to acquire or hold lands of the public domain. Private land may be transferred or conveyed only to individuals or entities "qualified to acquire lands of the public domain." The 1987 Constitution reserved the right to participate in the disposition, exploitation, development and utilization of lands of the public domain for Filipino citizens25 or corporations at least 60 percent of the capital of which is owned by Filipinos.26 Aliens, whether individuals or corporations, have been disqualified from acquiring public lands; hence, they have also been disqualified from acquiring private lands.27

Since petitioner and his wife, being Dutch nationals, are proscribed under the Constitution from acquiring and owning real property, it is unequivocal that the

Contract to Sell entered into by petitioner together with his wife and respondent is void. Under Article 1409 (1) and (7) of the Civil Code, all contracts whose cause, object or purpose is contrary to law or public policy and those expressly prohibited or declared void by law are inexistent and void from the beginning. Article 1410 of the same Code provides that the action or defense for the declaration of the inexistence of a contract does not prescribe. A void contract is equivalent to nothing; it produces no civil effect.28 It does not create, modify or extinguish a juridical relation.29

Generally, parties to a void agreement cannot expect the aid of the law; the courts leave them as they are, because they are deemed in pari delicto or "in equal fault."30 In pari delicto is "a universal doctrine which holds that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation; and where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other."31

This rule, however, is subject to exceptions32 that permit the return of that which may have been given under a void contract to: (a) the innocent party (Arts. 1411-1412, Civil Code);33 (b) the debtor who pays usurious interest (Art. 1413, Civil Code);34 (c) the party repudiating the void contract before the illegal purpose is accomplished or before damage is caused to a third person and if public interest is subserved by allowing recovery (Art. 1414, Civil Code);35 (d) the incapacitated party if the interest of justice so demands (Art. 1415, Civil Code);36 (e) the party for whose protection the prohibition by law is intended if the agreement is not illegal per se but merely prohibited and if public policy would be enhanced by permitting recovery (Art. 1416, Civil Code);37 and (f) the party for whose benefit the law has been intended such as in price ceiling laws (Art. 1417, Civil Code)38 and labor laws (Arts. 1418-1419, Civil Code).39

It is significant to note that the agreement executed by the parties in this case is a Contract to Sell and not a contract of sale. A distinction between the two is material in the determination of when ownership is deemed to have been transferred to the buyer or vendee and, ultimately, the resolution of the question on whether the constitutional proscription has been breached.

In a contract of sale, the title passes to the buyer upon the delivery of the thing sold. The vendor has lost and cannot recover the ownership of the property until and unless the contract of sale is itself resolved and set aside.40 On the other hand, a contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed.41 In other words, in a contract to sell, the prospective seller agrees to transfer ownership of the property to the buyer upon the happening of an event, which normally is the full payment of the purchase price. But even upon the

fulfillment of the suspensive condition, ownership does not automatically transfer to the buyer. The prospective seller still has to convey title to the prospective buyer by executing a contract of absolute sale.42

Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the petitioner when he filed the suit for rescission. While the intent to circumvent the constitutional proscription on aliens owning real property was evident by virtue of the execution of the Contract to Sell, such violation of the law did not materialize because petitioner caused the rescission of the contract before the execution of the final deed transferring ownership.

Thus, exception (c) finds application in this case. Under Article 1414, one who repudiates the agreement and demands his money before the illegal act has taken place is entitled to recover. Petitioner is therefore entitled to recover what he has paid, although the basis of his claim for rescission, which was granted by the HLURB, was not the fact that he is not allowed to acquire private land under the Philippine Constitution. But petitioner is entitled to the recovery only of the amount of P3,187,500.00, representing the purchase price paid to respondent. No damages may be recovered on the basis of a void contract; being nonexistent, the agreement produces no juridical tie between the parties involved.43 Further, petitioner is not entitled to actual as well as interests thereon,44 moral and exemplary damages and attorney's fees.

The Court takes into consideration the fact that the HLURB Decision dated April 22, 1997 has long been final and executory. Nothing is more settled in the law than that a decision that has acquired finality becomes immutable and unalterable and may no longer be modified in any respect even if the modification is meant to correct erroneous conclusions of fact or law and whether it was made by the court that rendered it or by the highest court of the land.45 The only recognized exceptions to the general rule are the correction of clerical errors, the so-called nunc pro tunc entries which cause no prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable.46 None of the exceptions is present in this case. The HLURB decision cannot be considered a void judgment, as it was rendered by a tribunal with jurisdiction over the subject matter of the complaint.47

Ineluctably, the HLURB Decision resulted in the unjust enrichment of petitioner at the expense of respondent. Petitioner received more than what he is entitled to recover under the circumstances.

Article 22 of the Civil Code which embodies the maxim, nemo ex alterius incommode debet lecupletari (no man ought to be made rich out of another's injury), states:

Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the

expense of the latter without just or legal ground, shall return the same to him.

The above-quoted article is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as basic principles to be observed for the rightful relationship between human beings and for the stability of the social order; designed to indicate certain norms that spring from the fountain of good conscience; guides for human conduct that should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and dominance of justice.48 There is unjust enrichment when a person unjustly retains a benefit at the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience.49

A sense of justice and fairness demands that petitioner should not be allowed to benefit from his act of entering into a contract to sell that violates the constitutional proscription.

This is not a case of equity overruling or supplanting a positive provision of law or judicial rule. Rather, equity is exercised in this case "as the complement of legal jurisdiction [that] seeks to reach and to complete justice where courts of law, through the inflexibility of their rules and want of power to adapt their judgments to the special circumstances of cases, are incompetent to do so."50

The purpose of the exercise of equity jurisdiction in this case is to prevent unjust enrichment and to ensure restitution. Equity jurisdiction aims to do complete justice in cases where a court of law is unable to adapt its judgments to the special circumstances of a case because of the inflexibility of its statutory or legal jurisdiction.51

The sheriff delivered to petitioner the amount of P5,313,040.00 representing the net proceeds (bidded amount is P5,450,653.33) of the auction sale after deducting the legal fees in the amount of P137,613.33.52 Petitioner is only entitled to P3,187,500.00, the amount of the purchase price of the real property paid by petitioner to respondent under the Contract to Sell. Thus, the Court in the exercise of its equity jurisdiction may validly order petitioner to return the excess amount of P2,125,540.00.

The Court shall now proceed to resolve the single issue raised in the present petition: whether the CA seriously erred in affirming the HLURB Order setting aside the levy made by the Sheriff on the subject properties.

Petitioner avers that the HLURB Arbiter and Director had no factual basis for pegging the fair market value of the levied properties at P6,500.00 per sq m or P83,616,000.00; that reliance on the appraisal report was misplaced since the appraisal was based on the value of land in neighboring developed subdivisions

and on the assumption that the residential unit appraised had already been built; that the Sheriff need not determine the fair market value of the subject properties before levying on the same since what is material is the amount for which the properties were bidded and sold during the public auction; that the pendency of any motion is not a valid ground for the Sheriff to suspend the execution proceedings and, by itself, does not have the effect of restraining the Sheriff from proceeding with the execution.

Respondent, on the other hand, contends that while it is true that the HLURB Arbiter and Director did not categorically state the exact value of the levied properties, said properties cannot just amount to P6,000,000.00; that the HLURB Arbiter and Director correctly held that the value indicated in the tax declaration is not the sole determinant of the value of the property.

The petition is impressed with merit.

If the judgment is for money, the sheriff or other authorized officer must execute the same pursuant to the provisions of Section 9, Rule 39 of the Revised Rules of Court, viz:

Sec. 9. Execution of judgments for money, how enforced. –

(a) Immediate payment on demand. - The officer shall enforce an execution of a judgment for money by demanding from the judgment obligor the immediate payment of the full amount stated in the writ of execution and all lawful fees. x x x

(b) Satisfaction by levy. - If the judgment obligor cannot pay all or part of the obligation in cash, certified bank check or other mode of payment acceptable to the judgment obligee, the officer shall levy upon the properties of the judgment obligor of every kind and nature whatsoever which may be disposed of for value and not otherwise exempt from execution, giving the latter the option to immediately choose which property or part thereof may be levied upon, sufficient to satisfy the judgment. If the judgment obligor does not exercise the option, the officer shall first levy on the personal properties, if any, and then on the real properties if the personal properties are insufficient to answer for the judgment.

The sheriff shall sell only a sufficient portion of the personal or real property of the judgment obligor which has been levied upon.

When there is more property of the judgment obligor than is sufficient to satisfy the judgment and lawful fees, he must sell only so much of the personal or real property as is sufficient to satisfy the judgment and lawful fees.

Real property, stocks, shares, debts, credits, and other personal property, or any interest in either real or personal property, may be levied upon in like manner and with like effect as under a writ of attachment (Emphasis supplied).53

Thus, under Rule 39, in executing a money judgment against the property of the judgment debtor, the sheriff shall levy on all property belonging to the judgment debtor as is amply sufficient to satisfy the judgment and costs, and sell the same paying to the judgment creditor so much of the proceeds as will satisfy the amount of the judgment debt and costs. Any excess in the proceeds shall be delivered to the judgment debtor unless otherwise directed by the judgment or order of the court.54

Clearly, there are two stages in the execution of money judgments. First, the levy and then the execution sale.

Levy has been defined as the act or acts by which an officer sets apart or appropriates a part or the whole of a judgment debtor's property for the purpose of satisfying the command of the writ of execution.55 The object of a levy is to take property into the custody of the law, and thereby render it liable to the lien of the execution, and put it out of the power of the judgment debtor to divert it to any other use or purpose.56

On the other hand, an execution sale is a sale by a sheriff or other ministerial officer under the authority of a writ of execution of the levied property of the debtor.57

In the present case, the HLURB Arbiter and Director gravely abused their discretion in setting aside the levy conducted by the Sheriff for the reason that the auction sale conducted by the sheriff rendered moot and academic the motion to quash the levy. The HLURB Arbiter lost jurisdiction to act on the motion to quash the levy by virtue of the consummation of the auction sale. Absent any order from the HLURB suspending the auction sale, the sheriff rightfully proceeded with the auction sale. The winning bidder had already paid the winning bid. The legal fees had already been remitted to the HLURB. The judgment award had already been turned over to the judgment creditor. What was left to be done was only the issuance of the corresponding certificates of sale to the winning bidder. In fact, only the signature of the HLURB Director for that purpose was needed58 – a purely ministerial act.

A purely ministerial act or duty is one which an officer or tribunal performs in a given state of facts, in a prescribed manner, in obedience to the mandate of a legal authority, without regard for or the exercise of his own judgment upon the propriety or impropriety of the act done. If the law imposes a duty upon a public officer and gives him the right to decide how or when the duty shall be performed, such duty is discretionary and not ministerial. The duty is ministerial only when the discharge of the same requires neither the exercise of official discretion nor

judgment.59 In the present case, all the requirements of auction sale under the Rules have been fully complied with to warrant the issuance of the corresponding certificates of sale.

And even if the Court should go into the merits of the assailed Order, the petition is meritorious on the following grounds:

Firstly, the reliance of the HLURB Arbiter and Director, as well as the CA, on Barrozo v. Macaraeg60 and Buan v. Court of Appeals61 is misplaced.

The HLURB and the CA misconstrued the Court's pronouncements in Barrozo. Barrozo involved a judgment debtor who wanted to repurchase properties sold at execution beyond the one-year redemption period. The statement of the Court in Barrozo, that "only where such inadequacy shocks the conscience the courts will intervene," is at best a mere obiter dictum. This declaration should be taken in the context of the other declarations of the Court in Barrozo, to wit:

Another point raised by appellant is that the price paid at the auction sale was so inadequate as to shock the conscience of the court. Supposing that this issue is open even after the one-year period has expired and after the properties have passed into the hands of third persons who may have paid a price higher than the auction sale money, the first thing to consider is that the stipulation contains no statement of the reasonable value of the properties; and although defendant' answer avers that the assessed value was P3,960 it also avers that their real market value was P2,000 only. Anyway, mere inadequacy of price – which was the complaint' allegation – is not sufficient ground to annul the sale. It is only where such inadequacy shocks the conscience that the courts will intervene. x x x Another consideration is that the assessed value being P3,960 and the purchase price being in effect P1,864 (P464 sale price plus P1,400 mortgage lien which had to be discharged) the conscience is not shocked upon examining the prices paid in the sales in National Bank v. Gonzales, 45 Phil., 693 and Guerrero v. Guerrero, 57 Phil., 445, sales which were left undisturbed by this Court.

Furthermore, where there is the right to redeem – as in this case – inadequacy of price should not be material because the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the price obtained at the execution sale.

x x x x (Emphasis supplied).62

In other words, gross inadequacy of price does not nullify an execution sale. In an ordinary sale, for reason of equity, a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks one's conscience as to

justify the courts to interfere; such does not follow when the law gives the owner the right to redeem as when a sale is made at public auction,63 upon the theory that the lesser the price, the easier it is for the owner to effect redemption.64 When there is a right to redeem, inadequacy of price should not be material because the judgment debtor may re-acquire the property or else sell his right to redeem and thus recover any loss he claims to have suffered by reason of the price obtained at the execution sale.65 Thus, respondent stood to gain rather than be harmed by the low sale value of the auctioned properties because it possesses the right of redemption. More importantly, the subject matter in Barrozo is the auction sale, not the levy made by the Sheriff.

The Court does not sanction the piecemeal interpretation of a decision. To get the true intent and meaning of a decision, no specific portion thereof should be isolated and resorted to, but the decision must be considered in its entirety.66

As regards Buan, it is cast under an entirely different factual milieu. It involved the levy on two parcels of land owned by the judgment debtor; and the sale at public auction of one was sufficient to fully satisfy the judgment, such that the levy and attempted execution of the second parcel of land was declared void for being in excess of and beyond the original judgment award granted in favor of the judgment creditor.

In the present case, the Sheriff complied with the mandate of Section 9, Rule 39 of the Revised Rules of Court, to "sell only a sufficient portion" of the levied properties "as is sufficient to satisfy the judgment and the lawful fees." Each of the 15 levied properties was successively bidded upon and sold, one after the other until the judgment debt and the lawful fees were fully satisfied. Holly Properties Realty Corporation successively bidded upon and bought each of the levied properties for the total amount of P5,450,653.33 in full satisfaction of the judgment award and legal fees.67

Secondly, the Rules of Court do not require that the value of the property levied be exactly the same as the judgment debt; it can be less or more than the amount of debt. This is the contingency addressed by Section 9, Rule 39 of the Rules of Court. In the levy of property, the Sheriff does not determine the exact valuation of the levied property. Under Section 9, Rule 39, in conjunction with Section 7, Rule 57 of the Rules of Court, the sheriff is required to do only two specific things to effect a levy upon a realty: (a) file with the register of deeds a copy of the order of execution, together with the description of the levied property and notice of execution; and (b) leave with the occupant of the property copy of the same order, description and notice.68 Records do not show that respondent alleged non-compliance by the Sheriff of said requisites.

Thirdly, in determining what amount of property is sufficient out of which to secure satisfaction of the execution, the Sheriff is left to his own judgment. He may exercise a reasonable discretion, and must exercise the care which a reasonably prudent person would exercise under like conditions and circumstances,

endeavoring on the one hand to obtain sufficient property to satisfy the purposes of the writ, and on the other hand not to make an unreasonable and unnecessary levy.69 Because it is impossible to know the precise quantity of land or other property necessary to satisfy an execution, the Sheriff should be allowed a reasonable margin between the value of the property levied upon and the amount of the execution; the fact that the Sheriff levies upon a little more than is necessary to satisfy the execution does not render his actions improper.70 Section 9, Rule 39, provides adequate safeguards against excessive levying. The Sheriff is mandated to sell so much only of such real property as is sufficient to satisfy the judgment and lawful fees.

In the absence of a restraining order, no error, much less abuse of discretion, can be imputed to the Sheriff in proceeding with the auction sale despite the pending motion to quash the levy filed by the respondents with the HLURB. It is elementary that sheriffs, as officers charged with the delicate task of the enforcement and/or implementation of judgments, must, in the absence of a restraining order, act with considerable dispatch so as not to unduly delay the administration of justice; otherwise, the decisions, orders, or other processes of the courts of justice and the like would be futile.71 It is not within the jurisdiction of the Sheriff to consider, much less resolve, respondent's objection to the continuation of the conduct of the auction sale. The Sheriff has no authority, on his own, to suspend the auction sale. His duty being ministerial, he has no discretion to postpone the conduct of the auction sale.

Finally, one who attacks a levy on the ground of excessiveness carries the burden of sustaining that contention.72 In the determination of whether a levy of execution is excessive, it is proper to take into consideration encumbrances upon the property, as well as the fact that a forced sale usually results in a sacrifice; that is, the price demanded for the property upon a private sale is not the standard for determining the excessiveness of the levy.73

Here, the HLURB Arbiter and Director had no sufficient factual basis to determine the value of the levied property. Respondent only submitted an Appraisal Report, based merely on surmises. The Report was based on the projected value of the townhouse project after it shall have been fully developed, that is, on the assumption that the residential units appraised had already been built. The Appraiser in fact made this qualification in its Appraisal Report: "[t]he property subject of this appraisal has not been constructed. The basis of the appraiser is on the existing model units."74 Since it is undisputed that the townhouse project did not push through, the projected value did not become a reality. Thus, the appraisal value cannot be equated with the fair market value. The Appraisal Report is not the best proof to accurately show the value of the levied properties as it is clearly self-serving.

Therefore, the Order dated August 28, 2000 of HLURB Arbiter Aquino and Director Ceniza in HLRB Case No. IV6-071196-0618 which set aside the sheriff's

levy on respondent's real properties, was clearly issued with grave abuse of discretion. The CA erred in affirming said Order.

WHEREFORE, the instant petition is GRANTED. The Decision dated October 30, 2002 of the Court of Appeals in CA-G.R. SP No. 60981 is REVERSED and SET ASIDE. The Order dated August 28, 2000 of HLURB Arbiter Ma. Perpetua Y. Aquino and Director Belen G. Ceniza in HLRB Case No. IV6-071196-0618 is declared NULL and VOID. HLURB Arbiter Aquino and Director Ceniza are directed to issue the corresponding certificates of sale in favor of the winning bidder, Holly Properties Realty Corporation. Petitioner is ordered to return to respondent the amount of P2,125,540.00, without interest, in excess of the proceeds of the auction sale delivered to petitioner. After the finality of herein judgment, the amount of P2,125,540.00 shall earn 6% interest until fully paid.

SO ORDERED.

G.R. No. 130316             January 24, 2007

ERNESTO V. YU and ELSIE O. YU, Petitioners, vs.BALTAZAR PACLEB,1 Respondent.

D E C I S I O N

CORONA, J.:

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

The antecedent facts follow.

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

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

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

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

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

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

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

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

On June 17, 1996, the MTC ruled:

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

SO ORDERED.4

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

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

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

SO ORDERED.8

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

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

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

We overrule petitioners’ contentions.

The Civil Code states that possession is the holding of a thing or the enjoyment of a right.12 In the grammatical sense, to possess means to have, to actually and physically occupy a thing, with or without right.13 "Possession always includes the idea of occupation x x x. It is not necessary that the person in possession should himself be the occupant. The occupancy can be held by another in his name."14 Without occupancy, there is no possession.15

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

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

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

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

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

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

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

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

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

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

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

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

Costs against petitioners.

G.R. No. 142255             January 26, 2007

SAMAHAN NG MASANG PILIPINO SA MAKATI, INC. (SMPMI), represented by Chairman Robert L. Mora, Sr., Petitioner, vs.BASES CONVERSION DEVELOPMENT AUTHORITY(BCDA), represented by BCDA Chairman Rogelio Singson, and MUNICIPALITY OF TAGUIG, represented by Mayor Ricardo D. Papa, Respondents.

D E C I S I O N

VELASCO, JR., J.:

Before the Court is a novel Petition for the Issuance of a Temporary Restraining Order (TRO) and Injunction,1 filed by petitioner Samahan ng Masang Pilipino sa Makati, Inc. (SMPMI), to prohibit respondent Bases Conversion Development Authority (BCDA) from evicting its members from their houses in Fort Bonifacio pursuant to Section 212 of Republic Act No. (RA) 7227,3 which grants sole jurisdiction to this Court for the issuance of Injunction or Restraining Order against BCDA.

The facts are undisputed. The members of SMPMI, allegedly comprising over 20,000 families, are residents of Fort Bonifacio occupying a portion of it specifically Lot 4, Lot 3, and Lot 1 with an aggregate area of 97.58 hectares allegedly covered by SWO-00-001265 in the name of BCDA. Petitioner maintains that its members have been occupying peacefully and continuously these lots in Fort Bonifacio. It alleges that Fort Bonifacio is covered by Transfer Certificate of Title (TCT) No. 2288 in the name of the United States of America (USA) which has not been duly cancelled. It further alleges that BCDA, pursuant to RA 7227,

otherwise known as "The Bases Conversion and Development Act of 1992," and the Municipality of Taguig, through its Mayor, sent 30-day notices of eviction to its members. It asserts the illegality of the imminent eviction, for which the present action was filed, as the land which petitioner’s members are occupying is still owned by the USA and not by the Philippine Government.

It further asserts that Section 84 of RA 7227, which stipulates the area of Fort Bonifacio specifically covering 2,276 hectares, did not provide any technical description on what is indeed covered. Besides, it strongly argues that because of the lack of "tie line" locating the exact position claimed by BCDA, the latter cannot illegally stake its claim on the whole of Fort Bonifacio to the prejudice not only of its members but also of all persons or entities occupying said area. Petitioner also contends that what complicates the controversy is the approval of the BCDA plan by the Bureau of Land without due certification from the Land Registration Authority (LRA).

As a background, on March 13, 1992, RA 7227 created the BCDA to "accelerate the sound and balanced conversion into alternative productive uses of the Clark and Subic military reservations and their extensions (John Hay Station, Wallace Air Station, O’Donnell Transmitter Station, San Miguel Naval Communications Station, and Capas Relay Station),"5 and "to raise funds by the sale of portions of Metro Manila military camps."6 Pursuant to this Act, then President Ramos issued Executive Order (EO) No. 40,7 series of 1992, specifying, among others, the portions of Metro Manila military camps to be utilized to generate capital for the BCDA. Among these Metro Manila military camps is Fort Bonifacio, located in the City of Makati and the Municipality of Taguig. Under EO No. 40, series of 1992, 214 hectares in Fort Bonifacio were earmarked for development and disposition to raise funds for BCDA projects and to use such funds to accelerate the sound and balanced conversion into alternative productive uses of the Clark and Subic military reservations and their extensions.

In its Comment,8 BCDA asserts ownership of Fort Bonifacio through RA 7227. It posits that TCT No. 2288 in the name of the USA covering a little over 2,544 hectares of the then Hacienda Maricaban (30 hectares of the property was segregated, used, and occupied by the then Manila Railroad Company) is government property. It cites Acting Registrars of Land Titles and Deeds of Pasay City, Pasig and Makati v. RTC, Branch 57, Makati, where we conclusively held that the subject lot is government property, thus:

The Court takes judicial notice of the fact that the hectarage embraced by TCT No. 192 (OCT No. 291) consists of Government property. Three things persuade the Court: (1) the decrees of Proclamations Nos. 192 and 435; (2) the incontrovertible fact that OCT No. 291 has been duly cancelled; and (3) the decision of the Court of Appeals in AC-G.R. CV No. 00293, affirming the decision of Hon. Gregorio Pineda, Judge of the then Court of First Instance of Rizal, Branch XXI, in LRC (GLRO) Rec. No. 2484, Case No. R-1467 thereof, entitled "In Re: Issuance of Owner’s Duplicate of Certificate of Title No. 291," as well as our

own Resolution, in G.R. No. 69834, entitled "Domingo Palomares, et al. v. Intermediate Appellate Court".9

BCDA maintains that pursuant to Sec. 710 in relation to Sec. 811 of RA 7227, the ownership of the Metro Manila military camp lots in question is transferred to BCDA by the President and specifically earmarked for vital and important government infrastructure projects. In sum, it asserts that its takeover of Fort Bonifacio is in accordance with law since the lots comprising it were originally part of a military reservation, particularly Lot 1, Philippine Light Armour Regiment (PALAR) area; Lot 3, Vetronix area; and Lot 4, Logistics Command (LOGCOM) area. These subject lots are covered by special patents in favor of BCDA. In fact, it asserts that pursuant to RA 7227 and EO No. 40, series of 1992, then President Estrada issued on June 11, 1999 Special Patent No. 3610 covering Lots 3 (Vetronix) and 4 (LOGCOM) in Fort Bonifacio; while Lot No. 1 (PALAR) was issued Special Patent No. 3596 by then President Ramos and the corresponding OCT No. SP-001 issued in favor of Fort Bonifacio Development Corporation (FBDC), a wholly owned subsidiary of BCDA.

BCDA further counters that SMPMI has no cause of action as it is not the real party in interest; on the contrary, it should either be the USA or the individual persons affected by the eviction. Besides, it argues that SMPMI or its members have not shown ownership over the lots they are occupying that are to be accorded protection pursuant to Rule 58 of the 1997 Revised Rules of Civil Procedure on preliminary injunction. Also, BCDA contends that in as much as the ownership of Fort Bonifacio was determined with finality by this Court in Acting Registrars of Land Titles and Deeds of Pasay City, Pasig and Makati12 and corresponding titles were issued to Fort Bonifacio, petitioner clearly has no cause of action against BCDA.

BCDA then traced history which revealed the conveyance of then Fort William McKinley property to the Philippine Government, specifically citing the July 4, 1946 Treaty of General Relations, the Preamble of the Military Bases Agreement, and US Diplomatic Note No. 0634 where the USA acknowledged that said Fort was owned by the Philippine Government.

Finally, BCDA raises the issue that petitioner cannot assail the title of the subject lots in Fort Bonifacio collaterally, that is, in this proceeding for prohibition, and alleges petitioner’s violation of the forum-shopping rule. It contends that there was a pending case filed earlier by SMPMI involving the same parties when on September 20, 1999, SMPMI filed a case against BCDA with the Commission on Settlement of Land Problems (COSLAP), docketed as COSLAP Case No. 99-453, praying for the issuance of an order against BCDA to cease the demolition operation. In said case, SMPMI similarly alleged that the owner of the lands in question was the USA; thus, BCDA or the Philippine Government had no authority to evict or harass complainants. More so, when COSLAP required the parties to file their position papers, which BCDA complied with, SMPMI instead filed the instant petition.

The Issues

In its September 24, 2000 Memorandum, respondent BCDA raises the following issues for our consideration:

A

WHETHER OR NOT PETITIONERS HAVE A CAUSE OF ACTION AGAINST RESPONDENTS

B

WHETHER OR NOT BCDA HAS A LAWFUL RIGHT OVER THE PROPERTY

C

WHETHER OR NOT PETITIONER IS GUILTY OF FORUM-SHOPPING

D

WHETHER OR NOT THE CASE IS A COLLATERAL ATTACK ON THE TITLES OVER THE PROPERTIES IN QUESTION13

On the other hand, petitioner raises in its November 27, 2000 Memorandum the following issues for our consideration:

I

WHETHER OR NOT BCDA (RA 7227) CAN JUST LEGALLY STAKE ITS CLAIM IN ANY PART OF FORT BONIFACIO WITHOUT ANY CLEAR TIE-LINES TO BASE ITS CLAIM? [SIC]

II

WHETHER OR NOT THE BCDA AND MUNICIPALITY OF TAGUIG CAN EXTRAJUDICIALY EJECT THE MEMBERS OF PETITIONERS AND USE VIOLENCE TO ATTAIN ITS OBJECTIVE OF CLEARING THE COMMUNITY OF OCCUPANTS? [SIC]

III

WHETHER OR NOT THE BCDA CAN EJECT THE MEMBERS OF THE PETITIONERS WITHOUT OFFERING THEM A SUITABLE ALTERNATIVE OF HOMESITE AS PROVIDED UNDER PD 1576 (LINA LAW)? [SIC]

IV

WHETHER OR NOT THE HONORABLE JUSTICES OF THE SUPREME COURT MAY ISSUE A RESTRAINING ORDER TO BCDA/MUNICIPALITY OF TAGUIG PENDING THE RESOLUTION OF THE CONTROVERSY TO AVERT FUTURE VIOLENCE?14 [SIC]

The Court’s Ruling

Relative to the issuance of a TRO or injunction, the core issue to be resolved is who between petitioner SMPMI and BCDA has the right of possession over the particular parcels of land which are subject of this petition. In this regard, SMPMI insists that if the ruling is in favor of respondent BCDA, then BCDA and respondent Municipality of Taguig cannot extrajudicially eject its members; at the very least, respondents must comply with RA 7279, commonly known as the "Lina Law," which provides a suitable alternative homesite before eviction is enforced.

We rule in favor of BCDA.

The instant action is essentially for prohibition, which is the issuance of a restraining order or writ of injunction against BCDA and the Municipality of Taguig. It is basic that in order for a restraining order or the writ of injunction to issue, the petitioner is tasked to establish and convincingly show the following: "(1) a right in esse or a clear and unmistakable right to be protected; (2) a violation of that right; (3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage."15

In the absence of a clear legal right, the writ must not issue. Indeed, a restraining order or an injunction is a preservative remedy aimed at protecting substantial rights and interests, and it is not designed to protect contingent or future rights. The possibility of irreparable damage without proof of adequate existing rights is not a ground for injunction.16

A close scrutiny of the records at hand shows that petitioner’s members have not shown a clear right or a right in esse to retain possession of the parcels of land they are occupying inside Fort Bonifacio, thus:

First, it is unequivocal that the Philippine Government, and now the BCDA, has title and ownership over Fort Bonifacio. The case of Acting Registrars of Land Titles and Deeds of Pasay City, Pasig and Makati17 is final and conclusive on the ownership of the then Hacienda de Maricaban estate by the Republic of the Philippines. Clearly, the issue on

the ownership of the subject lands in Fort Bonifacio is laid to rest. Other than their view that the USA is still the owner of the subject lots, petitioner has not put forward any claim of ownership or interest in them.

Second, respondent BCDA has convincingly shown that TCT No. 2288 in the name of the USA covering Fort Bonifacio was cancelled by TCT No. 6152418 issued on September 11, 1958 in the name of the Republic of the Philippines. Thereafter, on January 3, 1995, TCT No. 61524 was cancelled by TCT Nos. 23888,19 23887,20 23886,21 22460,22 23889,23 23890,24 and 23891,25 all in the name of BCDA. Thus, BCDA has valid titles over Fort Bonifacio which have become indefeasible and beyond question. On the other hand, SMPMI has not presented any title or deed to demonstrate ownership or any interest in the subject lots.

Third, it is clear from the records that BCDA has been granted a clear mandate by RA 7227, specifically by its Sections 7 and 8, and re-enforced by EO No. 40, series of 1992, to take over and administer Fort Bonifacio for its development and disposition to raise funds for BCDA projects, among others, the conversion of Clark and Subic military reservations and their extensions to alternative productive uses. The fact that TCT No. 61524, in the name of the Republic of the Philippines, was cancelled and several Torrens Titles were issued in the name of BCDA, coupled with the explicit authority from RA 7227, evidently points to the legal basis for BCDA’s takeover and management of the subject lots.

Fourth, it is basic that ownership or dominion includes the right of possession. In traditional Roman law, jus possidendi or the right to possess is fundamentally not only an attribute of ownership but also a direct consequence of ownership. Thus, from BCDA’s ownership of the subject lots originates the rights of possession, use, and disposition.

Fifth, prescription does not apply if the subject land is covered by a Torrens Title, as in the case at bar. Moreover, the equitable remedy of laches has not been proven to have accrued in favor of the members of petitioner for them to be accorded better right of possession of the subject lots. Laches is evidentiary in nature and cannot be established by mere allegations in the pleadings.26 As it is, in the instant case, laches has not even been alleged, much less proved.

Sixth, of greater import is the basic tenet that neither prescription nor laches runs against the State. Thus, even granting arguendo that the subject lands had been erroneously issued titles in favor of third parties, which is definitely not the case; neither prescription nor estoppel by laches applies against the State. In a catena of cases, we have consistently reiterated this hornbook doctrine. Thus, in East Asia Traders, Inc. v. Republic of the Philippines,27 we reiterated the doctrine citing Reyes v. Court of Appeals:28

In so far as the timeliness of the action of the Government is concerned, it is basic that prescription does not run against the State. x x x The case law has also been:

‘When the government is the real party in interest, and is proceeding mainly to assert its own rights and recover its own property, there can be no defense on the ground of laches or limitation.’ x x x

‘Public land fraudulently included in patents or certificates of title may be recovered or reverted to the State in accordance with Section 101 of the Public Land Act. Prescription does not lie against the State in such cases for the Statute of Limitations does not run against the State. The right of reversion or reconveyance to the State is not barred by prescription.’29 (Emphasis supplied.)

This doctrine applies even more in the instant case where the members of petitioners were not even erroneously granted titles to the subject lots. As it is, petitioner can neither invoke prescription nor estoppel by laches.

Seventh, the issue of lack of technical description and tie-lines is manifestly a dilatory excuse to muddle the issue of possession of the subject lots occupied by petitioner’s members. Verily, petitioner admits that its members do not own the lot where they have erected their houses—they posit the USA as its owner. But as aptly shown and proven by respondent BCDA, Fort Bonifacio is no longer owned by the USA but by the Republic of the Philippines, which has conveyed, ceded, and passed on its ownership, use, and administration to BCDA pursuant to RA 7227. As such, petitioner’s members had taken possession of the government land by illegal means without any legal basis and hence, cannot claim adverse possession of public land. In a plethora of cases, we have reiterated the doctrine that registered property could not be acquired through adverse possession. Thus, in Calimpong v. Heirs of Filomena Gumela, we reiterated that a registered property from the time its registration has become final could not be acquired by adverse possession.30

Eighth, RA 7279,31 otherwise known as the Urban Development and Housing Act of 1992 (UDHA) and commonly known as the Lina Law, does not accord possession to squatters of public land. Section 3 (t) of RA 7279 defines "underprivileged and homeless citizens," who are the beneficiaries of said law, as:

the beneficiaries of this Act and to individuals or families residing in urban and urbanizable areas whose income or combined household income falls within the poverty threshold as defined by the National Economic and Development Authority and who do not own housing facilities. This shall include those who live in makeshift dwelling units and do not enjoy security of tenure.

Interestingly, members of petitioner have not been shown to be "underprivileged and homeless citizens" to be accorded the benefits of RA 7279. In fact, the photos

of the structures that were demolished reveal that these were built with cement and other strong materials costing a lot of money and such structures were not mere shanties of small value. As such, the owners of these structures, the SMPMI members, have the financial capacity and resources to build their own housing facilities which take them out of the ambit of protection under RA 7279. In fact, they would even be considered as professional squatters under Section 3 (m) of RA 7279 which provides, thus:

‘Professional squatters’ refers to individuals or groups who occupy lands without the express consent of the landowner and who have sufficient income for legitimate housing. The term shall also apply to persons who have previously been awarded homelots or housing units by the Government but who sold, leased or transferred the same to settle illegally in the same place or in another urban area, and non-bona fide occupants and intruders of lands reserved for socialized housing. The term shall not apply to individuals or groups who simply rent land and housing from professional squatters or squatting syndicates.

Verily, the pieces of evidence before us would show that the affected members of petitioner SMPMI are professional squatters who have sufficient income for legitimate housing but have illegally occupied the subject lots without the consent of the government or the eventual owner, the BCDA.

Yet, despite the non-application of RA 7279, BCDA still offered cash compensation or relocation to medium-rise buildings, including land-based relocation, and to persons who built their structures on the subject premises before March 28, 1992, who would be affected by BCDA development projects. BCDA claims that 31% of the pre-UHDA occupants already availed themselves of the cash compensation or were relocated to Diego Silang, Centennial Village, and Lupang Katuparan, the sites of the housing projects of BCDA. For the remainder, if they fail to avail of the magnanimous gesture of BCDA for a relocation site or cash payment, they may eventually lose their right to enjoy said benefits once the offer is withdrawn. In sum, we find that RA 7279 does not cover SMPMI’s situation and even if such is conceded, BCDA has already substantially complied with the beneficent provisions of the law.

Moreover, it is also undisputed by petitioner that the structures demolished on April 27, 2000 at the Research and Development Center (RDC) Compound were also undergoing illegal construction, which pursuant to Section 2 (a)32 of the Implementing Rules and Regulations of the UDHA, in relation to Sections 2833 and 3034 of RA 7279, can be immediately dismantled. Besides, it is also undisputed that seven (7) structures were left untouched as their owners were pre-UDHA occupants. Moreover, through a 1997 census conducted by BCDA and Federation of Military and Civilian Residents (FOMCRES) on the occupants of Philippine Light Armor Regiment (PALAR), Wildcat, and Sto. Niño areas contiguous to the RDC Compound, pursuant to an Order issued by the Committee on Justice of the House of Representatives, the BCDA has clearly shown that petitioner’s officers could not be found in said areas, which prove that they are new squatters.35

Ninth, RA 7279 does allow extrajudicial summary demolition and eviction. Section 28 of said Act pertinently provides, thus:

Section 28. Eviction and Demolition.—Eviction or demolition as a practice shall be discouraged. Eviction or demolition, however, may be allowed under the following situations:

(a) When persons or entities occupy danger areas such as esteros, railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and other public places such as sidewalks, roads, parks, and playgrounds;

(b) When government infrastructure projects with available funding are about to be implemented; or

(c) When there is a court order for eviction and demolition.

A perusal of the above proviso clearly shows that the aforementioned law allows not only judicial eviction and demolition through court action (e.g., court order), but also summary or extrajudicial eviction and demolition where structures are built on public places, among others, esteros, railroad tracks, garbage dumps, riverbanks, shorelines, waterways, sidewalks, roads, parks and playground; and when government infrastructure projects with available funding are about to be implemented. Of the two instances of extrajudicial summary eviction and demolition, the first partake of an abatement of public nuisance of illegal structures built on public places, and the second particularly partakes of a government infrastructure project with available funding that is about to be implemented. In the instant case, what is applicable is the second case of an extrajudicial summary eviction and demolition.

Indeed, respondent BCDA has amply shown that the disposition and use of subject lots are required to raise funds needed for the conversion of the Clark and Subic military reservations and their extensions. Section 2 of RA 7227 clearly provides the government policy to "accelerate the sound and balanced conversion into alternative productive uses of the Clark and Subic military reservations and their extensions (John Hay Station, Wallace Air Station, O’Donnell Transmitter Station, San Miguel Naval Communications Station, and Capas Relay Station)," and "to raise funds by the sale of portions of Metro Manila military camps." Pertinently, EO No. 40, series of 1992, was issued by then President Ramos to implement this proviso and identified portions of Metro Manila military camps to be utilized to generate capital for the BCDA. Among these Metro Manila military camps is Fort Bonifacio, which was earmarked for development and disposition to raise funds for BCDA projects and use such funds to convert into alternative productive uses, Clark and Subic military reservations, and their extensions.

Thus, the development and disposition of portions of Fort Bonifacio, which include the subject lots, partake of a government infrastructure project geared towards the

raising of funds needed to implement the conversion of military reservations. PD 1818 and RA 897536 pertinently provide what government infrastructure projects are. Section 2 of RA 8975 defines "National government projects," thus:

"National government projects" shall refer to all current and future national government infrastructure, engineering works and service contracts, including projects undertaken by government-owned and -controlled corporations, all projects covered by Republic Act No. 6957, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer Law, and other related and necessary activities such as site acquisition, supply and/or installation of equipment and materials, implementation, construction, completion, operation, maintenance, improvement, repair and rehabilitation, regardless of the source of funding. (Emphasis supplied.)

Based on the aforequoted provision, it is clear that the project for the conversion, development, and disposition of Metro Manila military camps by the BCDA, a wholly government-owned corporation, partakes of a national government infrastructure project. As such, the present controversy has not only delayed and hampered such development and disposition of subject lots, but also directly affected the more primordial purpose of the project which is to raise funds for the conversion of military reservation that has been pushed by the government for over a decade. Therefore, the BCDA and the Municipality of Taguig had ample authority to extrajudicially and summarily evict and demolish the illegally constructed structures over the disputed lots.

Eviction and Demolition was done properly

Moreover, Section 27 of RA 7279 also provides a summary eviction and demolition against professional squatters, thus:

Section 27. Action Against Professional Squatters and Squatting Syndicates.—The local government units, in cooperation with the Philippine National Police, the Presidential Commission for the Urban Poor (PCUP), and the PCUP-accredited urban poor organization in the area, shall adopt measures to identify and effectively curtail the nefarious and illegal activities of professional squatters and squatting syndicates, as herein defined.

Any person or group identified as such shall be summarily evicted and their dwellings or structures demolished, and shall be disqualified to avail of the benefits of the Program. A public official who tolerates or abets the commission of the abovementioned acts shall be dealt with in accordance with existing laws. (Emphasis supplied.)

While concededly there is no finding that petitioner’s members are professional squatters, yet, as we mentioned above, the evidence presented before us tend to show that the affected members of petitioner SMPMI are professional squatters

who have sufficient income for legitimate housing but have illegally occupied the subject lots without the consent of the government or the eventual owner, the BCDA. Be that as it may, respondent BCDA convincingly showed that the structures demolished were new ones, and that Section 4437 of RA 7279 on moratorium on eviction and demolition does not apply in the instant case. Thus, on the grounds of a much-delayed government infrastructure project about to be implemented, and the structures demolished were new ones, BCDA and the Municipality of Taguig do have the right to carry out, as it did, the summary eviction and demolition of the structures on subject lots.

Tenth, belying petitioner’s allegation of harassment, particularly in the alleged shooting incident of five (5) of its members, is the March 25, 2002 Joint Resolution38 of the Office of the Deputy Ombudsman for the Military, which dismissed two (2) criminal complaints docketed as OMB-MIL-CRIM-01-0028 and OMB-MIL-CRIM-00-0870 filed by two members of petitioner, Pacita L. Pecson and Robert L. Mora, Sr., petitioner’s representative in this petition. The Ombudsman, citing separate investigations conducted by the PNP Southern Police District and the National Bureau of Investigation (NBI), categorically found that during the April 27, 2000 demolition of 27 ongoing and new structures inside the RDC Compound, six (6) individuals were arrested and charged with Illegal Possession of Firearms.

The Ombudsman found evidence on record that the demolition was met with violent resistance by affected squatters, some of whom were armed with unlicensed firearms. Thus, petitioner’s assertion that its members were harassed and no actual gun-battle happened is without factual support as the records show that its members resisted and resorted to violence during the demolition. The Ombudsman concluded that there was no showing that the demolition was conducted in an inhumane manner considering that the measures taken by the respondents were commensurate reaction to the actual resistance posed and violence used by the affected occupants.

Prescinding from this investigation, the Office of the Deputy Ombudsman for the Military found that the eviction and demolition were done in accordance with the rules and were valid exercises of police power by respondent Municipality of Taguig.

In the light of the foregoing considerations, we find that petitioner has not shown its right in esse to be protected by a restraining order or an injunctive writ. Without doubt, the instant petition must fail.

One last word. Through a Very Urgent Manifestation and Motion,39 petitioner manifested that the Office of the President issued EO No. 70, series of 2002, which declared some portions of Fort Bonifacio as socialized housing sites to be implemented by the Housing and Urban Development Coordinating Council (HUDCC). The BCDA was directed to effectuate the smooth turnover of certain lots to HUDCC for socialized housing. Pursuant to said Order, respondent BCDA

has taken the appropriate actions for the survey and implementation of EO No. 70. Given these developments, petitioner and its members have been bestowed a legal mode of acquiring lots for their cherished homes. Hopefully, this dispute will be finally put to rest.

WHEREFORE, the instant petition is DISMISSED for lack of merit. No costs.

SO ORDERED.

G.R. No. 46623 December 7, 1939

MARCIAL KASILAG, petitioner, vs.RAFAELA RODRIGUEZ, URBANO ROQUE, SEVERO MAPILISAN and IGNACIO DEL ROSARIO, respondents.

Luis M. Kasilag for petitioner.Fortunato de Leon for respondents.

 

IMPERIAL, J.:

This is an appeal taken by the defendant-petitioner from the decision of the Court of Appeals which modified that rendered by the court of First Instance of Bataan in civil case No. 1504 of said court and held: that the contract Exhibit "1" is entirely null and void and without effect; that the plaintiffs-respondents, then appellants, are the owners of the disputed land, with its improvements, in common ownership with their brother Gavino Rodriguez, hence, they are entitled to the possession thereof; that the defendant-petitioner should yield possession of the land in their favor, with all the improvements thereon and free from any lien; that the plaintiffs-respondents jointly and severally pay to the defendant-petitioner the sum of P1,000 with interest at 6 percent per annum from the date of the decision; and absolved the plaintiffs-respondents from the cross-complaint relative to the value of the improvements claimed by the defendant-petitioner. The appealed decision also ordered the registrar of deeds of Bataan to cancel certificate of title No. 325, in the name of the deceased Emiliana Ambrosio and to issue in lieu thereof another certificate of title in favor of the plaintiffs-respondents and their brother Gavino Rodriguez, as undivided owners in equal parts, free of all liens and incumbrances except those expressly provided by law, without special pronouncement as to the costs.

The respondents, children and heirs of the deceased Emiliana Ambrosio, commenced the aforesaid civil case to the end that they recover from the petitioner the possession of the land and its improvements granted by way of homestead to Emiliana Ambrosio under patent No. 16074 issued on January 11,

1931, with certificate of title No. 325 issued by the registrar of deeds of Bataan on June 27, 1931 in her favor, under section 122 of Act No. 496, which land was surveyed and identified in the cadastre of the municipality of Limay, Province of Bataan, as lot No. 285; that the petitioner pay to them the sum of P650 being the approximate value of the fruits which he received from the land; that the petitioner sign all the necessary documents to transfer the land and its possession to the respondents; that he petitioner be restrained, during the pendency of the case, from conveying or encumbering the land and its improvements; that the registrar of deeds of Bataan cancel certificate of title No. 325 and issue in lieu thereof another in favor of the respondents, and that the petitioner pay the costs of suit.

The petitioner denied in his answer all the material allegations of the complaint and by way of special defense alleged that he was in possession of the land and that he was receiving the fruits thereof by virtue of a mortgage contract, entered into between him and the deceased Emiliana Ambrosio on May 16, 1932, which was duly ratified by a notary public; and in counterclaim asked that the respondents pay him the sum of P1,000 with 12 per cent interest per annum which the deceased owed him and that, should the respondents be declared to have a better right to the possession of the land, that they be sentenced to pay him the sum of P5,000 as value of all the improvements which he introduced upon the land.lawphil.net

On May 16, 1932 Emiliana Ambrosio, in life, and the petitioner executed the following public deed:

"This agreement, made and entered into this 16th day of May, 1932, by and between Emiliana Ambrosio, Filipino, of legal age, widow and resident of Limay, Bataan, P.L., hereinafter called the party of the first part, and Marcial Kasilag, Filipino, of legal age, married to Asuncion Roces, and resident at 312 Perdigon Street, Manila, P.L., hereinafter called party of the second part.

WITNESSETH: That the parties hereto hereby covenant and agree to and with each other as follows:

ARTICLE I. That the party of the first part is the absolute registered owner of a parcel of land in the barrio of Alngan, municipality of Limay, Province of Bataan, her title thereto being evidenced by homestead certificate of title No. 325 issued by the Bureau of Lands on June 11, 1931, said land being lot No. 285 of the Limay Cadastre, General Land Registration Office Cadastral Record No. 1054, bounded and described as follows:

Beginning at point marked 1 on plan E-57394, N. 84º 32' W. 614.82 m. from B.B.M. No. 3, thence N. 66º 35' E. 307.15 m. to point "2"; S. 5º 07' W. to point "5"; S.6º 10' E. 104.26 m. to point "4"; S. 82º 17' W. to point "5"; S. 28º 53' W. 72.26 m. to point "6"; N. 71º 09' W. to point "7"; N. 1º 42' E. 173.72 m. to point 1, point of beginning, "Containing an area of 6.7540 hectares. "Points 1,2,6 and 7, B.L.;

points 3,4 and 5, stakes; points 4, 5 and 6 on bank of Alangan River. "Bounded on the North, by property claimed by Maria Ambrosio; on the East, by Road; on the South, by Alangan River and property claimed by Maxima de la Cruz; and on the West, by property claimed by Jose del Rosario. "Bearing true. Declination 0º 51' E. "Surveyed under authority of sections 12-22, Act No. 2874 and in accordance with existing regulations of the Bureau of Lands, by Mamerto Jacinto, public land surveyor, on July 8, 1927 and approved on February 25, 1931.

ARTICLE II. That the improvements on the above described land consist of the following:

Four (4) mango trees, fruit bearing: one hundred ten (110) hills of bamboo trees; one (1) tamarind and six (6) boñga trees.

ARTICLE III. That the assessed value of the land is P940 and the assessed value of the improvements is P860, as evidenced by tax declaration No. 3531 of the municipality of Limay, Bataan.

ARTICLE IV. That for and in consideration of the sum of one thousand pesos (P1,000) Philippine currency, paid by the party of second part to the party of the first part, receipt whereof is hereby acknowledged, the party of the first part hereby encumbers and hypothecates, by way of mortgage, only the improvements described in Articles II and III hereof, of which improvements the party of the first part is the absolute owner.

ARTICLE V. That the condition of said mortgage is such that if the party of the first part shall well and truly pay, or cause to paid to the party of the second part, his heirs, assigns, or executors, on or before the 16th day of November, 1936, or four and one-half (4½) years after date of the execution of this instrument, the aforesaid sum of one thousand pesos (P1,000) with interest at 12 per cent per annum, then said mortgage shall be and become null and void; otherwise the same shall be and shall remain in full force and effect, and subject to foreclosure in the manner and form provided by law for the amount due thereunder, with costs and also attorney's fees in the event of such foreclosure.lawphil.net

ARTICLE VI. That the party of the first part shall pay all taxes and assessments which are or may become due on the above described land and improvements during the term of this agreement.

ARTICLE VII. That within thirty (30) days after date of execution of this agreement, the party of the first part shall file a motion before the Court of First Instance at Balanga, Bataan, P. I., requesting cancellation of Homestead Certificate of Title No. 325 referred to in Article I hereof and the issuance, in lieu thereof, of a certificate of title under the provisions of Land Registration Act No. 496, as amended by Act 3901.

ARTICLE III. It if further agreed that if upon the expiration of the period of time (4½) years stipulated in this mortgage, the mortgagor should fail to redeem this mortgage, she would execute a deed of absolute sale of the property herein described for the same amount as this mortgage, including all unpaid interests at the rate of 12 per cent per annum, in favor of the mortgagee.

ARTICLE IX. That in the event the contemplated motion under Article VII hereof is not approved by the Court, the foregoing contract of sale shall automatically become null and void, and the mortgage stipulated under Article IV and V shall remain in full force and effect.

In testimony whereof, the parties hereto have hereunto set their hands the day and year first herein before written.

(Sgd.) MARCIAL KASILAG

(Sgd.) EMILIANA AMBROSIO

Signed in the presence of:

(Sgd.) ILLEGIBLE

(Sgd.) GAVINO RODRIGUEZ.

PHILIPPINE ISLANDS } ss.BALANGA, BATAAN } ss.

Before me this day personally appeared Emiliana Ambrosio without cedula by reason of her sex, to me known and known to me to be the person who signed the foregoing instrument, and acknowledged to me that she executed the same as her free and voluntary act and deed.

I hereby certify that this instrument consists of three (3) pages including this page of the acknowledgment and that each page thereof is signed by the parties to the instrument and the witnesses in their presence and in the presence of each other, and that the land treated in this instrument consists of only one parcel.

In witness whereof I have hereunto set my hand and affixed my notarial seal, this 16th day of May, 1932.

(Sgd.) NICOLAS NAVARRONotary Public

My commission expires December 31, 1933.

Doc. No. 178 Page 36 of my register Book No. IV

One year after the execution of the aforequoted deed, that is, in 1933, it came to pass that Emiliana Ambrosio was unable to pay the stipulated interests as well as the tax on the land and its improvements. For this reason, she and the petitioner entered into another verbal contract whereby she conveyed to the latter the possession of the land on condition that the latter would not collect the interest on the loan, would attend to the payment of the land tax, would benefit by the fruits of the land, and would introduce improvements thereon. By virtue of this verbal contract, the petitioner entered upon the possession of the land, gathered the products thereof, did not collect the interest on the loan, introduced improvements upon the land valued at P5,000, according to him and on May 22, 1934 the tax declaration was transferred in his name and on March 6, 1936 the assessed value of the land was increased from P1,020 to P2,180.

After an analysis of the conditions of Exhibit "1" the Court of Appeals came to the conclusion and so held that the contract entered into by and between the parties, set out in the said public deed, was one of absolute purchase and sale of the land and its improvements. And upon this ruling it held null and void and without legal effect the entire Exhibit 1 as well as the subsequent verbal contract entered into between the parties, ordering, however, the respondents to pay to the petitioner, jointly and severally, the loan of P1,000 with legal interest at 6 per cent per annum from the date of the decision. In this first assignment of error the petitioner contends that the Court of Appeals violated the law in holding that Exhibit 1 is an absolute deed of sale of the land and its improvements and that it is void and without any legal effect.

The cardinal rule in the interpretation of contracts is to the effect that the intention of the contracting parties should always prevail because their will has the force of law between them. Article 1281 of the Civil Code consecrates this rule and provides, that if the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal sense of its stipulations shall be followed; and if the words appear to be contrary to the evident intention of the contracting parties, the intention shall prevail. The contract set out in Exhibit 1 should be interpreted in accordance with these rules. As the terms thereof are clear and leave no room for doubt, it should be interpreted according to the literal meaning of its clauses. The words used by the contracting parties in Exhibit 1 clearly show that they intended to enter into the principal contract of loan in the amount of P1,000, with interest at 12 per cent per annum, and into the accessory contract of mortgage of the improvements on the land acquired as homestead, the parties having moreover, agreed upon the pacts and conditions stated in the deed. In other words, the parties entered into a contract of mortgage of the improvements on the land acquired as homestead, to secure the payment of the indebtedness for P1,000 and the stipulated interest thereon. In clause V the parties stipulated that Emiliana Ambrosio was to pay, within four and a half years, or until November 16, 1936, the debt with interest thereon, in which event the mortgage would not have any effect; in clause VI the parties agreed that the tax on the land and its improvements, during the existence of the mortgage, should be paid by the owner of the land; in clause VII it was covenanted that within thirty days from the date of the contract, the owner of the land would file a motion in the Court of First Instance of Bataan asking that certificate of title No. 325 be cancelled and that in lieu thereof another be issued under the provisions of the Land Registration Act No. 496, as amended by Act No. 3901; in clause VIII the parties agreed that should Emiliana Ambrosio fail to redeem the mortgage within the stipulated period of four years and a half, she would execute an absolute deed of sale of the land in favor of the mortgagee, the petitioner, for the same amount of the loan of P1,000 including unpaid interest; and in clause IX it was stipulated that in case the motion to be presented under clause VII should be disapproved by the Court of First Instance of Bataan, the contract of sale would automatically become void and the mortgage would subsist in all its force.

Another fundamental rule in the interpretation of contracts, not less important than those indicated, is to the effect that the terms, clauses and conditions contrary to law, morals and public order should be separated from the valid and legal contract and when such separation can be made because they are independent of the valid contract which expresses the will of the contracting parties. Manresa, commenting on article 1255 of the Civil Code and stating the rule of separation just mentioned, gives his views as follows:

On the supposition that the various pacts, clauses or conditions are valid, no difficulty is presented; but should they be void, the question is as to what extent they may produce the nullity of the principal obligation. Under the view that such features of the obligation are added to it and do not go to its essence, a criterion based upon the stability of juridical relations should

tend to consider the nullity as confined to the clause or pact suffering therefrom, except in case where the latter, by an established connection or by manifest intention of the parties, is inseparable from the principal obligation, and is a condition, juridically speaking, of that the nullity of which it would also occasion. (Manresa, Commentaries on the Civil Code, Volume 8, p. 575.)

The same view prevails in the Anglo-American law, as condensed in the following words:

Where an agreement founded on a legal consideration contains several promises, or a promise to do several things, and a part only of the things to be done are illegal, the promises which can be separated, or the promise, so far as it can be separated, from the illegality, may be valid. The rule is that a lawful promise made for a lawful consideration is not invalid merely because an unlawful promise was made at the same time and for the same consideration, and this rule applies, although the invalidity is due to violation of a statutory provision, unless the statute expressly or by necessary implication declares the entire contract void. . . . (13 C. J., par. 470, p. 512; New York Cent. etc. R. Co. v. Gray, 239 U.S., 583; 60 Law ed., 451; U.S. v. Mora, 97 U.S., 413, 24 Law. ed., 1017; U.S. v. Hodson, 10 Wall, 395; 19 Law ed. 937; Gelpcke v. Dubuque, 1 Wall. 175, 17 Law ed., 520; U.S. v. Bradly, 10 Pet. 343, 9 Law. ed., 448; Borland v. Prindle, 144 Fed 713; Western Union Tel. Co. v. Kansas Pac. R. Co., 4 Fed., 284; Northern Pac. R. Co. v. U.S., 15 Ct. Cl., 428.)

Addressing ourselves now to the contract entered into by the parties, set out in Exhibit 1, we stated that the principal contract is that of loan and the accessory that of mortgage of the improvements upon the land acquired as a homestead. There is no question that the first of these contract is valid as it is not against the law. The second, or the mortgage of the improvements, is expressly authorized by section 116 of Act No. 2874, as amended by section 23 of Act No. 3517, reading:

SEC. 116. Except in favor of the Government or any of its branches, units or institutions, or legally constituted banking corporations, lands acquired under the free patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of the application and for a term of five years from and after the date of issuance of the patent or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the expiration of said period; but the improvements or crops on the land may be

mortgaged or pledged to qualified persons, associations, or corporations.

It will be recalled that by clause VIII of Exhibit 1 the parties agreed that should Emiliana Ambrosio fail to redeem the mortgage within the stipulated period of four and a half years, by paying the loan together with interest, she would execute in favor of the petitioner an absolute deed of sale of the land for P1,000, including the interest stipulated and owing. The stipulation was verbally modified by the same parties after the expiration of one year, in the sense that the petitioner would take possession of the land and would benefit by the fruits thereof on condition that he would condone the payment of interest upon the loan and he would attend to the payment of the land tax. These pacts made by the parties independently were calculated to alter the mortgage a contract clearly entered into, converting the latter into a contract of antichresis. (Article 1881 of the Civil Code.) The contract of antichresis, being a real encumbrance burdening the land, is illegal and void because it is legal and valid.

The foregoing considerations bring us to the conclusion that the first assignment of error is well-founded and that error was committed in holding that the contract entered into between the parties was one of absolute sale of the land and its improvements and that Exhibit 1 is null and void. In the second assignment of error the petitioner contends that the Court of Appeals erred in holding that he is guilty of violating the Public Land Act because he entered into the contract, Exhibit 1. The assigned error is vague and not specific. If it attempts to show that the said document is valid in its entirety, it is not well-founded because we have already said that certain pacts thereof are illegal because they are prohibited by section 116 of Act No. 2874, as amended.

In the third assignment of error the petitioner insists that his testimony, as to the verbal agreement entered into between him and Emiliana Ambrosio, should have been accepted by the Court of Appeals; and in the fourth and last assignment of error the same petitioner contends that the Court of Appeals erred in holding that he acted in bad faith in taking possession of the land and in taking advantage of the fruits thereof, resulting in the denial of his right to be reimbursed for the value of the improvements introduced by him.

We have seen that subsequent to the execution of the contract, Exhibit 1, the parties entered into another verbal contract whereby the petitioner was authorized to take possession of the land, to receive the fruits thereof and to introduce improvements thereon, provided that he would renounce the payment of stipulated interest and he would assume payment of the land tax. The possession by the petitioner and his receipt of the fruits of the land, considered as integral elements of the contract of antichresis, are illegal and void agreements because, as already stated, the contract of antichresis is a lien and such is expressly prohibited by section 116 of Act No. 2874, as amended. The Court of Appeals held that the petitioner acted in bad faith in taking possession of the land because he knew that the contract he made with Emiliana Ambrosio was an absolute deed

of sale and, further, that the latter could not sell the land because it is prohibited by section 116. The Civil Code does not expressly define what is meant by bad faith, but section 433 provides that "Every person who is unaware of any flaw in his title, or in the manner of its acquisition, by which it is invalidated, shall be deemed a possessor in good faith"; and provides further, that "Possessors aware of such flaw are deemed possessors in bad faith". Article 1950 of the same Code, covered by Chapter II relative to prescription of ownership and other real rights, provides, in turn, that "Good faith on the part of the possessor consists in his belief that the person from whom he received the thing was the owner of the same, and could transmit the title thereto." We do not have before us a case of prescription of ownership, hence, the last article is not squarely in point. In resume, it may be stated that a person is deemed a possessor in bad faith when he knows that there is a flaw in his title or in the manner of its acquisition, by which it is invalidated.

Borrowing the language of Article 433, the question to be answered is whether the petitioner should be deemed a possessor in good faith because he was unaware of any flaw in his title or in the manner of its acquisition by which it is invalidated. It will be noted that ignorance of the flaw is the keynote of the rule. From the facts found established by the Court of Appeals we can neither deduce nor presume that the petitioner was aware of a flaw in his title or in the manner of its acquisition, aside from the prohibition contained in section 116. This being the case, the question is whether good faith may be premised upon ignorance of the laws. Manresa, commenting on article 434 in connection with the preceding article, sustains the affirmative. He says:

"We do not believe that in real life there are not many cases of good faith founded upon an error of law. When the acquisition appears in a public document, the capacity of the parties has already been passed upon by competent authority, and even established by appeals taken from final judgments and administrative remedies against the qualification of registrars, and the possibility of error is remote under such circumstances; but, unfortunately, private documents and even verbal agreements far exceed public documents in number, and while no one should be ignorant of the law, the truth is that even we who are called upon to know and apply it fall into error not infrequently. However, a clear, manifest, and truly unexcusable ignorance is one thing, to which undoubtedly refers article 2, and another and different thing is possible and excusable error arising from complex legal principles and from the interpretation of conflicting doctrines.

But even ignorance of the law may be based upon an error of fact, or better still, ignorance of a fact is possible as to the capacity to transmit and as to the intervention of certain persons, compliance with certain formalities and appreciation of certain acts, and an error of law is possible in the interpretation of doubtful doctrines. (Manresa, Commentaries on the Spanish Civil Code. Volume IV, pp. 100, 101 and 102.)

According to this author, gross and inexcusable ignorance of law may not be the basis of good faith, but possible, excusable ignorance may be such basis. It is a fact that the petitioner is not conversant with the laws because he is not a lawyer. In accepting the mortgage of the improvements he proceeded on the well-grounded belief that he was not violating the prohibition regarding the alienation of the land. In taking possession thereof and in consenting to receive its fruits, he did not know, as clearly as a jurist does, that the possession and enjoyment of the fruits are attributes of the contract of antichresis and that the latter, as a lien, was prohibited by section 116. These considerations again bring us to the conclusion that, as to the petitioner, his ignorance of the provisions of section 116 is excusable and may, therefore, be the basis of his good faith. We do not give much importance to the change of the tax declaration, which consisted in making the petitioner appear as the owner of the land, because such an act may only be considered as a sequel to the change of possession and enjoyment of the fruits by the petitioner, to about which we have stated that the petitioner's ignorance of the law is possible and excusable. We, therefore, hold that the petitioner acted in good faith in taking possession of the land and enjoying its fruits.

The petitioner being a possessor in good faith within the meaning of article 433 of the Civil Code and having introduced the improvements upon the land as such, the provisions of article 361 of the same Code are applicable; wherefore, the respondents are entitled to have the improvements and plants upon indemnifying the petitioner the value thereof which we fix at P3,000, as appraised by the trial court; or the respondents may elect to compel the petitioner to have the land by paying its market value to be fixed by the court of origin.

The respondents also prayed in their complaint that the petitioner be compelled to pay them the sum of P650, being the approximate value of the fruits obtained by the petitioner from the land. The Court of Appeals affirmed the judgment of the trial court denying the claim or indemnity for damages, being of the same opinion as the trial court that the respondents may elect to compel the petitioner to have the land. The Court of Appeals affirmed the judgment of the trial court that the respondents have not established such damages. Under the verbal contract between the petitioner and the deceased Emiliana Ambrosio, during the latter's lifetime, the former would take possession of the land and would receive the fruits of the mortgaged improvements on condition that he would no longer collect the stipulated interest and that he would attend to the payment of the land tax. This agreement, at bottom, is tantamount to the stipulation that the petitioner should apply the value of the fruits of the land to the payment of stipulated interest on the loan of P1,000 which is, in turn, another of the elements characterizing the contract of antichresis under article 1881 of the Civil Code. It was not possible for the parties to stipulate further that the value of the fruits be also applied to the payment of the capital, because the truth was that nothing remained after paying the interest at 12% per annum. This interest, at the rate fixed, amounted to P120 per annum, whereas the market value of the fruits obtainable from the land hardly reached said amount in view of the fact that the assessed value of said improvements was, according to the decision, P860. To this should be added the fact that, under the verbal agreement, from the value of the fruits had to be taken

a certain amount to pay the annual land tax. We mention these data here to show that the petitioner is also not bound to render an accounting of the value of the fruits of the mortgaged improvements for the reason stated that said value hardly covers the interest earned by the secured indebtednes.

For all the foregoing considerations, the appealed decision is reversed, and we hereby adjudge: (1) that the contract of mortgage of the improvements, set out in Exhibit 1, is valid and binding; (2) that the contract of antichresis agreed upon verbally by the parties is a real incumbrance which burdens the land and, as such, is a null and without effect; (3) that the petitioner is a possessor in good faith; (4) that the respondents may elect to have the improvements introduced by the petitioner by paying the latter the value thereof, P3,000, or to compel the petitioner to buy and have the land where the improvements or plants are found, by paying them its market value to be filed by the court of origin, upon hearing the parties; (5) that the respondents have a right to the possession of the land and to enjoy the mortgaged improvements; and (6) that the respondents may redeem the mortgage of the improvements by paying to the petitioner within three months the amount of P1,000, without interest, as that stipulated is set off by the value of the fruits of the mortgaged improvements which petitioner received, and in default thereof the petitioner may ask for the public sale of said improvements for the purpose of applying the proceeds thereof to the payment of his said credit. Without special pronouncement as to the costs in all instances. So ordered.

G.R. No. 3088            February 6, 1907

EL BANCO ESPAÑOL-FILIPINO, plaintiff-appellant, vs.JAMES PETERSON, sheriff of the city of Manila, ET AL., defendants-appellees.

Del-Pan, Ortigas & Fisher for appellant. Hartigan, Marple, Rohde, & Gutierrez for appellees.

TORRES, J.:

On the 24th of October, 1905, the Spanish-Filipino Bank, a corporation, through its attorneys, Del-Pan, Ortigas and Fisher, filed a complaint against the sheriff of the city of Manila and the other defendant, Juan Garcia, praying that judgment be rendered against the said sheriff, declaring that the execution levied upon the property referred to in the complaint, to wit, wines, liquors, canned goods, and other similar merchandise, was illegal, and directing the defendants to return the said goods to the plaintiff corporation, and in case that he had disposed of the same, to pay the value thereof, amounting to P30,000, Philippine currency, and further that it be declared that the said plaintiff corporation, under the contract of pledge referred to in the complaint had the right to apply the proceeds of the sale of the said goods to the payment of the debt of P40,000, Philippine currency, for the security of which the said merchandise was pledged, with preference over the

claim of the other defendant, Juan Garcia and that both defendants be held jointly liable to the plaintiff for the sum of P500, Philippine currency, as damages, and the said defendants to pay the costs of the proceedings, and for such other and further relief as the plaintiff might be entitled to under the law. Plaintiff alleges in its complaint that under the contract entered into on the 4th of March, 1905, by and between the Spanish-Filipino Bank and Francisco Reyes, the former, loaned to the latter the sum of P141,702, Philippine currency; that on the same date Francisco Reyes was already indebted to the bank in the sum of P84,415.38, Philippine currency, which, added to the amount of the loan, made a total of P226,117.38, Philippine currency, received by the said Reyes as a loan from the plaintiff bank, the entire sum at an annual interest of 8 per cent; that to secure the payment of these two sums and the interest thereon, the debtor, Francisco Reyes, by a public instrument executed before a notary on the aforesaid date mortgaged in favor of the plaintiff bank several pieces of property belonging to him, and pledged to the said bank part of his personal property, specifying the proportion on which the said real and personal property thus mortgaged and pledged in favor of the plaintiff corporation would be respectively liable for the payment of the debt; that the property pledged by the debtor to the bank included a stock or merchandise, consisting of wines, liquors, canned goods, and other similar articles valued at P90,591.75, Philippine currency, then stored in the warehouses of the debtor, Reyes, No. 12 Plaza Moraga, in the city of Manila, which said goods and merchandise were liable for the payment of the said sum of P90,591.75, Philippine currency; that in the aforesaid deed of pledge it was agreed by and between the bank and the debtor, Reyes, that the goods should be delivered to Ramon Garcia y Planas for safe-keeping, the debtor having actually turned over to the said Garcia y Planas the goods in question by delivering to him the keys of the warehouse in which they were kept; that in a subsequent contract entered into by and between the debtor, Reyes, and the plaintiff bank on the 29th of September, 1905, the said contract executed on the 4th of March was modified so as to provide that the goods then (September 29) in possession the depositary should only be liable for the sum of P40,000, Philippine currency, the said contract of the 4th of March remaining in all other respects in full force and effect, Luis M.a Sierra having been subsequently appointed by agreement between the bank and the debtor as depositary of the goods thus pledged in substitution for the said Ramon Garcia y Planas.

On the 19th of October, 1905, in an action brought in the Court of First Instance of the city of Manila by Juan Garcia y Planas against Francisco Reyes and Ramon Agtarat, judgment was rendered against the last-mentioned two for the sum of P15,000, Philippine currency, to be paid by them severally or jointly, upon which judgment execution was issued against the property of the defendants, Reyes and Agtarap. On the aforesaid 19th day of October, for the purpose of levying upon the property of the defendants, the sheriff at the request of Garcia, the plaintiff in that case, entered the warehouse where the goods pledged to the plaintiff bank were stored under the custody of the depositary, Sierra, and levied upon them as per list attached to the complaint marked "Exhibit A." The sheriff seized the goods which had been pledged to the bank, depriving the latter of the possession of the same, to which said contract executed on the 4th of March, 1905. Without the authority of the bank, Reyes could not dispose of the said goods. The value of the

goods seized by the sheriff was P30,000, Philippine currency, the said sheriff, having refused, and still refusing, to return to the same to the bank, notwithstanding repeated demands made upon him to this effect, and it being alleged in the complaint that unless prohibited by the court the sheriff would proceed to sell the said goods at public auction and apply the proceeds to the satisfaction of the judgment rendered in favor of the Juan Garcia y Planas, while the other debtor Reyes had not paid to the bank the P40,000, Philippine currency, to secure the payment of which the goods mentioned in Exhibit A had been pledged to the bank, that is, to secure the payment of a sum in excess of the actual value of the goods in the hands of the sheriff.

The defendant sheriff, James J. Peterson, and Juan Garcia, his codefendant, through their attorneys, Hartigan, Marple, Rohde and Gutierrez, answering the complaint, stated that they admitted the allegations contained in paragraphs 1, 2, 3, 4, 5, 12, and 17 of the complaint, but denied the allegations contained in paragraphs 6, 7, 8, 9, 10, 11, 14, 16, and 18. They further denied the allegations contained in paragraph 12, with the exception that the defendant sheriff levied upon the goods mentioned in Exhibit A attached to the complaint for the purpose of satisfying the judgment referred to therein; and also the allegations contained in paragraph 13 of the complaint, with the exception that the sheriff seized the property mentioned in Exhibit A under the execution referred to therein; and finally defendants denied the allegation contained in paragraph 15 of the complaint, with the exception of the allegation that the value of the property seized is P30,000. They accordingly asked that the action be dismissed and that it be adjudged that the plaintiff had no interest whatever in the property described in the complaint, and that the plaintiff be taxed with the costs of these proceedings.

The testimony introduced by the parties having been received, and the exhibits having been attached to the record, the court below entered judgment on the 4th of January, 1906, dismissing plaintiff's action and directing that the defendant recover from the Spanish-Filipino Bank the costs of this action, for which execution was duly issued. To this judgment counsel for plaintiff excepted and announced his intention of prosecuting a bill of exceptions, and further made a motion for a new trial on the ground that the judgment of the court below was contrary to law and that the findings of fact were plainly and manifestly contrary to the weight of the evidence.

The decision of this case depends mainly upon the question as to whether the contract of pledge entered into by and between the Spanish-Filipino Bank and Francisco Reyes to secure a loan made by the former to the latter was valid, all the requisites prescribed by the Civil Code having been complied with.

If so, the bank's claim had preference over the claim of a third person not secured, as was the bank's, by a pledge, with reference to the property pledged to the extent of its value, and therefore such property could not have been legally levied upon by the sheriff at the request of the defendant, Juan Garcia. (Arts. 1921, 1922, Civil Code.)

The contract in question complies with all the requisites provided in article 1857 of the Civil Code, such as that the property was pledged to secure a debt, the date of the execution, the terms of the pledge, and the property pledged, all of which appears in a public document, and the property pledged was placed in the hands of a third person by common consent of the debtor and creditor, under the supervision of an agent of the bank. (Arts. 1863, 1865, 1866, 1869, 1871, Civil Code.) The defect alleged to exist in the said contract is that the debtor, Reyes, continued in possession of the property pledged; that he never parted with the said property, and that neither the creditor nor the depositary appointed by common consent of the parties were ever in possession of the property pledged, and for this reason, and upon the further ground that the contract was fraudulent, the court below dismissed the complaint with the costs against the plaintiff.

In the motion for a new trial it was alleged by the plaintiff that the judgment of the court below was contrary to law, and that the findings of fact contained therein were plainly and manifestly against the weight of the evidence. If plaintiffs contention is correct, then the judgment of the court below should be reversed.

From the evidence introduced at the trial, both oral and documentary, it appears that a third person, appointed by the common consent of the debtor and creditor, was in possession of the goods pledged in favor of the bank under the direct supervision of an agent of the bank expressly appointed for this purpose, and it has not been shown that the said Reyes continued in the possession of the goods after they had been pledged to the plaintiff bank.

Exhibit C and the testimony of Francisco Reyes, Luis M.a Sierra, and Mariano Rodriguez corroborate the existence and authenticity of the contract of pledge recorded in a public instrument and conclusively and satisfactorily show that the debtor, after the pledge of the property, parted with the possession of the same, and that it was delivered to a third person designated by common consent of the parties. For the purpose of giving this possession greater effect, the pledgee appointed a person to examine daily the property in the warehouse where the same was kept.

The witness Matias Garcia also testified as to the status of these goods, and informed Juan Garcia of such status before the same were levied upon.

The sheriff's testimony supports the allegation that the depositary, Sierra, was present at the place where the goods were kept, as well as the representative of the bank, Rodriguez, when he, the sheriff, went there for the purpose of levying upon the said property. He further testified that Rodriguez, the representative of the bank, then protested and notified him that the property in question was pledged to the Spanish-Filipino Bank.

The contract in question was, therefore, a perfect contract of pledge under articles 1857 and 1863 of the Civil Code, it having been conclusively shown that the pledgee took charge and possession of the goods pledged through a depository

and a special agent appointed by it, each of whom had a duplicate key to the warehouse wherein the said goods were stored, and that the pledgee, itself, received and collected the proceeds of the goods as they were sold.

The fact that the said goods continued in the warehouse which was formerly rented by the pledgor, Reyes, does not affect the validity and legality of the pledge, it having been demonstrated that after the pledge had been agreed upon, and after the depository appointed with the common consent of the parties had taken possession of the said property, the owner, the pledgor, could no longer dispose of the same, the pledgee being the only one authorized to do so through the depositary and special agent who represented it, the symbolical transfer of the goods by means of the delivery of the keys to the warehouse where the goods were stored being sufficient to show that the depositary appointed by the common consent of the parties was legally placed in possession of the goods. (Articles 438, 1463, Civil Code.)

The fact that the debtor, Reyes, procured purchasers and made arrangements for the sale of the goods pledged and that the bills for the goods thus sold were signed by him does not affect the validity of the contract, for the pledgor, Reyes, continued to be the owner of the goods, (art. 1869, Civil Code), he being the one principally interested in the sale of the property on the best possible terms.

As to the reservation stipulated in paragraph 13 of the contract executed on the 4th of March, 1905, it could not affect the contract in question for the reason that reservation referred to the rent from the property mortgaged, to the bank and the dividends from the shares of stock also pledged to the bank, and not the merchandise so pledged, and such reservation could not have rendered the contract of pledge null.

If the case is to be decided in accordance with the facts alleged and established, the defendant not having introduced any evidence to show that the said contract of pledge was fraudulent as to other creditors, there was no legal ground upon which the court below could have held that the contract evidenced by the instrument in question was entered into to defraud other creditors of the pledgor.

For the reason hereinbefore set out, and the judgment of the court below being contrary to the evidence, the said judgment is hereby reversed, and it is hereby adjudged that the plaintiff corporation, under and by virtue of the contract of pledge in question, had a preferential right over that of the defendant, Juan Garcia, to the goods pledged or the value thereof, the value to be applied to the payment of the debt of P40,000, Philippine currency, for the security of which the said property was pledged, and the defendants are accordingly hereby ordered to return to the plaintiff corporation the property improperly levied upon, or to pay its value, amounting to P30,000, Philippine currency, without special provision as to costs. After the expiration of twenty days let judgment be entered in accordance herewith, and ten days thereafter the case be remanded to the court below for execution. So ordered.

G.R. No. 132518             March 28, 2000

GAVINA MAGLUCOT-AW, CATALINA ORCULLO, RICHARD ESTANO, NIDA MAGLUCOT, MELANIA MAGLUCOT-CATUBIG, EMILIANO CATUBIG, LADISLAO SALMA, petitioners, vs.LEOPOLDO MAGLUCOT, SEVERO MAGLUCOT, WILFREDA MAGLUCOT-ALEJO and CONSTANCIO ALEJO, respondents.

 

KAPUNAN, J.:

This petition for review on certiorari assails the Decision, dated 11 November 1997, of the Court of Appeals in CA-G.R. CV No. 48816 which reversed and set aside the Decision, dated 13 December 1994, of the Regional Trial Court, Branch 30 of Dumaguete City, Negros Oriental in an action for recovery of possession and damages.

The core issue in this case is whether a partition of Lot No. 1639 had been effected in 1952. Petitioners contend that there was already a partition of said lot; hence, they are entitled to exclusive possession and ownership of Lot No. 1639-D which originally formed part of Lot No. 1639 until its partition. Private respondents, upon the other hand, claim that there was no partition; hence, they are co-owners of Lot No. 1639-D. Notably, this case presents a unique situation where there is an order for partition but there is no showing that the sketch/subdivision plan was submitted to the then Court of First Instance for its approval or that a decree or order was registered in the Register of Deeds.

The antecedent facts of the case are as follows:

Petitioners filed with the RTC a complaint for recovery of possession and damages alleging, inter alia, that they are the owners of Lot No. 1639-D. Said lot was originally part of Lot No. 1639 which was covered by Original Certificate Title No. 6775 issued in the names of Hermogenes Olis, Bartolome Maglucot. Pascual Olis, Roberto Maglucot, Anselmo Lara and Tomas Maglucot on 16 August 1927. 1 On 19 April 1952, Tomas Maglucot, one of the registered owners and respondents predecessors-in-interest, filed a petition to subdivide lot No. 1639. 2 Consequently, on 13 May 1952, then CFI of Negros Oriental issued an order 3 directing the parties to subdivide said lot into six portions as follows:

a) Hermogenes Olis — lot 1639-A

b) Pascual Olis — lot 1639-B

c) Bartolome Maglucot — lot 1639-C

d) Roberto (Alberto) Maglucot — lot 1639-D

e) Anselmo Lara — lot 1639-E

f) Tomas Maglucot — lot 1639-F. 4

Sometime in 1963, Guillermo Maglucot rented a portion of Lot No. 1639-D (subject lot). Subsequently, Leopoldo and Severo, both surnamed Maglucot, rented portions of subject lot in 1964 and 1969, respectively, and each paying rentals therefor. Said respondents built houses on their corresponding leased lots. They paid the rental amount of P100.00 per annum to Mrs. Ruperta Salma, who represented the heirs of Roberto Maglucot, petitioners predecessors-in-interest. In December 1992, however, said respondents stopped paying rentals claiming ownership over the subject lot. Petitioners thus filed the complaint a quo.

After trail, the lower court rendered judgment in favor of petitioners. The RTC found the existence of tax declarations in the names of Hermogenes Olis and Pascual Oils (purported owners of Lot Nos. 1639-A and 1639-B, respectively) 5 as indubitable proof that there was a subdivision of Lot No. 1639. It likewise found that Tomas Maglucot, respondents' predecessors-in-interest, took active part in the partition as it was he, in fact, who commenced the action for partition. 6 The court a quo cited Article 1431 of the Civil Code which states that "[t]hrough estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon." Applying said provision of law, it held that while there was no court order showing that Lot No. 1639 was partitioned, its absence could not be used by Tomas Maglucot, or respondents as his successors-in-interest, to deny the existence of an approved partitioned against the other co-owners who claim that there was one. 7 Said court, likewise, ruled that the tax declarations 8 over the houses of respondents, expressly stating that the same are constructed on the lots of Roberto Maglucot, constitute a conclusive admission by them of the ownership of the subject lot by the latter. 9

The dispositive portion of the lower court's decision reads as follows:

WHEREFORE, on the basis of the foregoing discussion, judgment is hereby rendered in favor of the plaintiffs against the defendants ordering the latter:

1. To demolish their houses inside lot 1639-D, vacate the premises thereof and deliver the possession of the same to Plaintiffs;

2. To jointly and solidarily pay plaintiffs the sum of P15,000.00 for attorney's fees:

3. To each pay plaintiffs the sum of P100.00 every year from 1993 for actual damages representing the amount of unpaid rentals up to the time they actually vacate the premises in question;

4. To pay the costs. 10

On appeal, the CA reversed the decision of the RTC. The appellate court ruled that the sketch plan and tax declarations relied upon by petitioners are not conclusive evidence of partition. 11 The CA likewise found that the prescribed procedure under Rule 69 of the Rules of Court was not followed. It thus declared that there was no partition of Lot No. 1639.

Petitioners filed this petition for review on certiorari alleging that the CA committed the following reversible errors:

I

IN VIOLATING THE LAW ON ACQUISITIVE PRESCRIPTION PLAINTIFFS HAVING POSSESSED LOT 1639-D SINCE 1946;

II

IN VIOLATING THE LAW ON ESTOPPEL, THE FACT OF PAYMENT OF RENTALS AND OFFER TO BUY THE DEFENDANTS IS ADMISSION THAT THE AREA IN LOT 1639-D. HAD LONG BEEN ADJUDICATED TO PLAINTIFFS;

III

IN DECLARING THAT THERE WAS NO PRIOR PARTITION, CONTRARY TO THE FINDINGS OF THE TRIAL COURT, AND AGAINST THE EVIDENCE ON RECORD, OF WHICH IF PROPERLY CONSIDERED WOULD CHANGE THE OUTCOME OF THE CASE;

IV

IN DECLARING THAT THERE IS NO LAW OR JURISPRUDENCE APPLICABLE UNDER THE PREMISES; THIS WOULD ONLY SHOW THAT THE RECORD OF THE CASE WAS NOT PROPERLY SCRUTINIZED, AND THE LAW WAS NOT PROPERLY STUDIED; ESPECIALLY IN THE CASE AT BENCH THAT THE ORAL AND MUTUAL PARTITION HAPPENED DURING THE REGIME OF THE OLD RULES OF PROCEDURE; 12

Petitioners maintain that Lot No. 1639 was mutually partitioned and physically subdivided among the co-owners and that majority of them participated in the actual execution of the subdivision. Further, the co-owners accepted their designated shares in 1946 as averred by Tomas Maglucot in his petition for partition. 13 Petitioners opine that in 1952, Tomas Maglucot himself initiated a court proceeding for a formal subdivision of Lot No. 1639. In said petition, he averred that only Hermogenes Olis and the heirs of Pascual Olis were not agreeable to the partition. 14 Petitioners further contend that respondents admitted in their tax declarations covering their respective houses that they are "constructed on the land of Roberto Maglucot." 15 Simply put, petitioners vigorously assert that respondents are estopped from claiming to be co-owners of the subject lot in view of the mutual agreement in 1946, judicial confirmation in 1952, and respondents' acquiescence because they themselves exclusively exercised ownership over Lot No. 1639-A beginning 1952 up to the present. 16

For their part, respondents posit three points in support of their position. First, they emphasize that petitioners failed to show that the interested parties were apprised, or notified of the tentative subdivision contained in the sketch and that the CFI subsequently confirmed the same. 17 Second, they point to the fact that petitioners were unable to show any court approval of any partition. 18 Third, they maintain that Lot No. 1639 remain undivided since to date, OCT No. 6275 is still an existing and perfectly valid title, containing no annotation of any encumbrance or partition whatsoever. 19

After a careful consideration of the pleadings filed by the parties and the evidence on record, we find that the petition is meritorious. As stated earlier, the core issue in this case is whether there was a valid partition in 1952.

Preliminary, this Court recognizes that "the jurisdiction of this Court in cases brought before it from the Court of Appeals via Rule 45 of the Rules of Court is limited to reviewing errors of law. Findings of fact of the latter are conclusive, except in the following instances: (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 fact are conflicting; (6) when in making its findings the Court of Appeals 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 those of

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; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record." 20 This case falls under exceptions (7), (8) and (10) in that the findings of facts of the CA are in conflict with that of the RTC, are mere conclusions without citation of specific evidence on which they are based and are premised on absence of evidence but are contradicted by the evidence on record. For these reasons, we shall consider the evidence on record to determine whether indeed there was partition.

In this jurisdiction, an action for partition is comprised of two phases: first, an order for partition which determines whether a co-ownership in fact exists, and whether partition is proper, and, second, a decision confirming the sketch or subdivision submitted by the parties or the commissioners appointed by the court, as the case may be. 21 The first phase of a partition and/or accounting suit is taken up with the determination of whether or not a co-ownership in fact exists, (i.e., not otherwise legally proscribed) and may be made by voluntary agreement of all the parties interested in the property. This phase may end with a declaration that plaintiff is not entitled to have a partition either because a co-ownership does not exist, or partition is legally prohibited. It may end, upon the other hand, with an adjudgment that a co-ownership does in truth exist, partition is proper in the premises and an accounting of rents and profits received by the defendant from the real estate in question is in order. In the latter case, "the parties may, if they are able to agree, make partition among themselves by proper instruments of conveyance, and the court shall confirm the partition so agreed upon. In either case — i.e., either the action is dismissed or partition and/or accounting is decreed — the order is a final one, and may be appealed by any party aggrieved thereby. 22 The second phase commences when it appears that "the parties are unable to agree upon the partition" directed by the court. In that event, partition shall be done for the parties by the court with the assistance of not more than three (3) commissioners. This second stage may well also deal with the rendition of the accounting itself and its approval by the court after the parties have been accorded opportunity to be heard thereon, and an award for the recovery by the party or parties thereto entitled of their just share in the rents and profits of the real estate in question." Such an order is, to be sure, final and appealable. 23

The present rule on the question of finality and appealability of a decision or order decreeing partition is that it is final and appealable. 23 The order of partition is a final determination of the co-ownership over Lot No. 1639 by the parties and the propriety of the partition thereof. Hence, if the present rule were applied, the order not having been appealed or questioned by any of the parties to the case, it has become final and executory and cannot be disturbed.

The true test to ascertain whether or not an order or a judgment is interlocutory or final is: Does it leave something to be done in the trial court with respect to the merits of the case? If it does, it is interlocutory; if it does not, it is final. The key test to what is interlocutory is when there is something more to be done on the

merits of the case. 24 An order for partition is final and not interlocutory and, hence, appealable because it decides the rights of the parties upon the issue submitted. 25

However, this Court notes that the order of partition was issued when the ruling in Fuentebella vs. Carrascoso, 26 which held that the order of partition is interlocutory, was controlling. In addition, the reports of the commissioners not having been confirmed by the trial court are not binding. 27 In this case, both the order of partition and the unconfirmed sketch plan are, thus, interlocutory. Nevertheless, where parties do not object to the interlocutory decree, but show by their conduct that they have assented thereto, they cannot thereafter question the decree, 28 especially, where, by reason of their conduct, considerable expense has been incurred in the execution of the commission. 29 Respondents in this case have occupied their respective lots in accordance with the sketch/subdivision plan. They cannot after acquiescing to the order for more than forty (40) years be allowed to question the binding effect thereof.

This case is to be distinguished from the order in the action for partition in Arcenas vs. Cinco. 30 In that case, the order was clearly interlocutory since it required the parties "to submit the corresponding deed of partition to the Court for its approval." Here, the order appointed two commissioners and directed them merely to approve the sketch plan already existing and tentatively followed by the parties.

Under the present rule, the proceedings of the commissioners without being confirmed by the court are not binding upon the parties. 31 However, this rule does not apply in case where the parties themselves actualized the supposedly unconfirmed sketch/subdivision plan. The purpose of the court approval is to give effect to the sketch/subdivision plan. In this case, the parties themselves or through their predecessors-in-interest implemented the sketch plan made pursuant to a court order for partition by actually occupying specific portions of Lot No. 1639 in 1952 and continue to do so until the present until this case was filed, clearly, the purpose of the court approval has been met. This statement is not to be taken to mean that confirmation of the commissioners may be dispensed with but only that the parties herein are estopped from raising this question by their own acts of ratification of the supposedly non-binding sketch/subdivision plan.

The records of the case show that sometime in 1946 there was a prior oral agreement to tentatively partition Lot No. 1639. 32 By virtue of this agreement, the original co-owners occupied specific portions of Lot No. 1639.33 It was only in 1952 when the petition to subdivide Lot No. 1639 was filed because two of the co-owners, namely Hermogenes Olis and heirs of Pascual Olis, refused to have said lot subdivided and have separate certificates of title. Significantly, after the 1952 proceedings, the parties in this case by themselves and/or through their predecessors-in-interest occupied specific portions of Lot No. 1639 in accordance with the sketch plan. Such possession remained so until this case arose, or about forty (40) years later.

From its order in 1952, it can be gleaned that the CFI took notice of the tentative subdivision plan by oral partition of the parties therein. Further, it appears that the court was aware that the parties therein actually took possession of the portions in accordance with the sketch/subdivision plan. With the factual backdrop, said court ordered the partition and appointed two (2) commissioners to approve the tentative sketch/subdivision plan. It would not be unreasonable to presume that the parties therein, having occupied specific portions of Lot No. 1639 in accordance with the sketch/subdivision plan, were aware that it was that same sketch/subdivision plan which would be considered by the commissioners for approval. There is no showing that respondents by themselves or through their predecessors-in-interest raised any objections. On the contrary, the records show that the parties continued their possession of the specific portions of Lot No. 1639 pursuant to the sketch/subdivision plan.

It has been previously held that a co-owner, who, though not a party to a partition accepts the partition allotted to him, and holds and conveys the same in severalty, will not be subsequently permitted to avoid partition. 34 It follows that a party to a partition is also barred from avoiding partition when he has received and held a portion of the subdivided land especially in this case where respondents have enjoyed ownership rights over their share for a long time.

Parties to a partition proceeding, who elected to take under partition, and who took possession of the portion allotted to them, are estopped to question title to portion allotted to another party. 35 A person cannot claim both under and against the same instrument. 36 In other words, they accepted the lands awarded them by its provisions, and they cannot accept the decree in part, and repudiate it in part. They must accept all or none. 37 Parties who had received the property assigned to them are precluded from subsequently attacking its validity of any part of it. 38 Here, respondents, by themselves and/or through their predecessors-in-interest, already occupied of the lots in accordance with the sketch plan. This occupation continued until this action was filed. They cannot now be heard to question the possession and ownership of the other co-owners who took exclusive possession of Lot 1639-D also in accordance with the sketch plan.

In technical estoppel, the party to be estopped must knowingly have acted so as to mislead his adversary, and the adversary must have placed reliance on the action and acted as he would otherwise not have done. Some authorities, however, hold that what is tantamount to estoppel may arise without this reliance on the part of the adversary, and this is called, ratification or election by acceptance or benefits, which arises when a party, knowing that he is not bound by a defective proceeding, and is free to repudiate it if he will, upon knowledge, and while under no disability, chooses to adopt such defective proceeding as his own. 39 Ratification means that one under no disability voluntarily adopts and gives sanction to some unauthorized act or defective proceeding, which without his sanction would not be binding on him. It is this voluntary choice, knowingly made, which amounts to ratification of what was therefore unauthorized, and becomes the authorized act of the party so making the ratification. 40

The records show that respondents were paying rent for the use of a portion of Lot No. 1639-D. Had they been of the belief that they were co-owners of the entire Lot No. 1639 they would not have paid rent. Respondents attempted to counter this point by presenting an uncorroborated testimony of their sole witness to the effect that the amount so paid to Roberto Maglucot and, subsequently, to Ruperta Salma was for the payment of real property taxes. We are not persuaded. In its quite improbable that the parties would be unaware of the difference in their treatment of their transactions for so long a time. Moreover, no evidence was ever presented to show that a tax declaration for the entire Lot No. 1639 has ever been made. Replete in the records are tax declarations for specific portions of Lot 1639. It is inconceivable that respondents would not be aware of this. With due diligence on their part, they could have easily verified this fact. This they did not do for a period spanning more than four decades.

The payment of rentals by respondents reveal that they are mere lessees. As such, the possession of respondents over Lot No. 1639-D is that of a holder and not in the concept of an owner. One who possesses as a mere holder acknowledges in another a superior right which he believes to be ownership, whether his belief be right or wrong. 41 Since the possession of respondents were found to be that of lessors of petitioners, it goes without saying that the latter were in possession of Lot No. 1639-D in the concept of an owner from 1952 up to the time the present action was commenced.

Partition may be inferred from circumstances sufficiently strong to support presumption. 42 Thus, after a long possession in severalty, a deed of partition may be presumed. 43 It has been held that recitals in deeds, possession and occupation of land, improvements made thereon for a long series of years, and acquiescence for 60 years, furnish sufficient evidence that there was an actual partition of land either by deed or by proceedings in the probate court, which had been lost and were not recorded. 44 And where a tract of land held in common has been subdivided into lots, and one of the lots has long been known and called by the name of one of the tenants in common, and there is no evidence of any subsequent claim of a tenancy in common, it may fairly be inferred that there has been a partition and that such lot was set off to him whose name it bears. 45

Respondents insist that the absence of any annotation in the certificate of title showing any partition of Lot No. 1639 and that OCT No. 6725 has not been canceled clearly indicate that no partition took place. The logic of this argument is that unless partition is shown in the title of the subject property, there can be no valid partition or that the annotation in the title is the sole evidence of partition.

Again, we are not persuaded. The purpose of registration is to notify and protect the interests of strangers to a given transaction, who may be ignorant thereof, but the non-registration of the deed evidencing such transaction does not relieve the parties thereto of their obligations thereunder. 46 As originally conceived, registration is merely a species of notice. The act of registering a document is never necessary in order to give it legal effect as between the parties. 47

Requirements for the recording of the instruments are designed to prevent frauds and to permit and require the public to act with the presumption that recorded instrument exist and are genuine. 48

It must be noted that there was a prior oral partition in 1946. Although the oral agreement was merely tentative, the facts subsequent thereto all point to the confirmation of said oral partition. By virtue of that agreement, the parties took possession of specific portions of the subject lot. The action for partition was instituted because some of the co-owners refused to have separate titles issued in lieu of the original title. In 1952, an order for partition was issued by the cadastral court. There is no evidence that there has been any change in the possession of the parties. The only significant fact subsequent to the issuance of the order of partition in 1952 is that respondents rented portions of Lot No. 1639-D. It would be safe to conclude, therefore, that the oral partition as well as the order of partition in 1952 were the bases for the finding of actual partition among the parties. The legal consequences of the order of partition in 1952 having been discussed separately, we now deal with oral partition in 1946. Given that the oral partition was initially tentative, the actual possession of specific portions of Lot No. 1639 in accordance with the oral partition and the continuation of such possession for a very long period indicate the permanency and ratification of such oral partition. The validity of an oral partition is already well-settled. In Espina vs. Abaya, 49 we declared that an oral partition is valid. In Hernandez vs. Andal, 50 reiterated in Tan vs. Lim, 51 this Court has ruled, thus:

On general principle, independent and in spite of the statute of frauds, courts of equity have enforce oral partition when it has been completely or partly performed.

Regardless of whether a parol partition or agreement to partition is valid and enforceable at law, equity will proper cases where the parol partition has actually been consummated by the taking of possession in severalty and the exercise of ownership by the parties of the respective portions set off to each, recognize and enforce such parol partition and the rights of the parties thereunder. Thus, it has been held or stated in a number of cases involving an oral partition under which the parties went into possession, exercised acts of ownership, or otherwise partly performed the partition agreement, that equity will confirm such partition and in a proper case decree title in accordance with the possession in severalty.

In numerous cases it has been held or stated that parol partition may be sustained on the ground of estoppel of the parties to assert the rights of a tenant in common as to parts of land divided by parol partition as to which possession in severalty was taken and acts of individual ownership were exercised. And a court of equity will recognize the agreement and decree it to

be valid and effectual for the purpose of concluding the right of the parties as between each other to hold their respective parts in severalty.

A parol partition may also be sustained on the ground that the parties thereto have acquiesced in and ratified the partition by taking possession in severalty, exercising acts of ownership with respect thereto, or otherwise recognizing the existence of the partition.

A number of cases have specifically applied the doctrine of part performance, or have stated that a part performance is necessary, to take a parol partition out of the operation of the statute of frauds. It has been held that where there was a partition in fact between tenants in common, and a part performance, a court of equity would have regard to enforce such partition agreed to by the parties.

Two more points have constrained this Court to rule against respondents. First, respondents Wilfreda Maglucot-Alejo and Constancio Alejo offered to buy the share of Roberto Maglucot. Second, the tax declarations contain statements that the houses of respondents were built on the land owned by Roberto Maglucot.

On the first point, petitioners presented Aida Maglucot who testified that after respondents were informed that petitioners were going to use Lot No. 1639-D belonging to Roberto Maglucot, respondents Wilfreda Maglucot-Alejo and Constancio Alejo went to the house of said witness and offered to buy the share of Roberto Maglucot. 52 Aida Maglucot further testified that they refused the offer because they also intend to use the lot for a residential purpose. 53 This testimony of Aida Maglucot is unrebutted by respondents, and the CA did not touch upon this finding of fact. Hence, the offer to buy has been established by the unrebutted evidence of the petitioners. Why would they give such offer if they claim to be at least a co-owner of the said lot? In effect, respondents impliedly admit the title of the petitioners and that they are not co-owners, much less the sole owners, of Lot No. 1639-D.

On the second point, the existence of Tax Declaration No. 04-557 in the names of Constancio Alejo and Godofreda Maglucot, 54 Tax Declaration No. 04-87-13 in the names of Leopoldo Maglucot and Regina Barot, 55 Tax Declaration No. 04-593 in the names of Severo Maglucot and Samni Posida 56 showing that the houses of the above-mentioned persons are constructed on the land of Roberto Maglucot 57 constitute incontrovertible evidence of admission by the same persons of the ownership of the land by Roberto Maglucot. Tax Declarations are public documents. Unless their veracity is directly attacked, the contents therein are presumed to be true and accurate. 58 The lone testimony of Severo Maglucot that Roberto Maglucot was only made to appear as owner of the land in their

respective declarations because he was the administrator of Lot No. 1639 is uncorroborated and not supported by any other evidence.

No injustice is dealt upon respondents because they are entitled to occupy a portion of Lot No. 1639, particularly Lot No. 1639-A, in their capacity as heirs of Tomas Maglucot, one of the original co-owners of Lot No. 1639 in accordance with the sketch plan of said lot showing the partition into six portions. 59

Finally, this Court takes notice of the language utilized by counsel for petitioners in their petition for review on certiorari.1âwphi1 Thrice in the petition, counsel for petitioners made reference to the researcher of the CA. First, he alluded to the lack of scrutiny of the records and lack of study of the law "by the researcher." 60 Second, he cited the researcher of the CA as having "sweepingly stated without reference to the record" 61 that "[w]e have scanned the records on hand and found no evidence of any partition." Finally, counsel for petitioners assailed the CA decision, stating that "this will only show that there was no proper study of the case by the researcher." 62

Any court when it renders a decision does so as an arm of the justice system and as an institution apart from the persons that comprise it. Decisions are rendered by the courts and not the persons or personnel that may participate therein by virtue of their office. It is highly improper and unethical for counsel for petitioners to berate the researcher in his appeal. Counsel for petitioner should be reminded of the elementary rules of the legal profession regarding respect for the courts by the use of proper language in its pleadings and admonished for his improper references to the researcher of the CA in his petition. A lawyer shall abstain from scandalous, offensive, or menacing language or behavior before the courts. 63

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals is SET ASIDE and the decision of the Regional Trial Court is hereby REINSTATED.1âwphi1.nêt

SO ORDERED.

G.R. No. 77976 November 24, 1988

MAXIMO GABRITO, ROGER LIBUT, CARMELITA UY, LIZA DE VERA, thru her Attorney-in-Fact, JESUS DE LOS SANTOS, petitioners, vs.THE HON. NINTH DIVISION, COURT OF APPEALS, THE HON. NICIAS O. MENDOZA, Presiding Judge Branch 74, Regional Trial Court, Olongapo City, ET AL., respondents.

Cornelio C. Cardenas and Valeriano S. Peralta for petitioners.

Estanislao L. Cesa, Jr. for respondents.

 

BIDIN, J.:

This is a petition for review on certiorari with preliminary injunction and restraining order of the decision of the Court of Appeals * dated March 4, 1987 in CA-G.R. No. SP No. 08710, "Maximo Gabrito et al. vs. Hon. Nicias O. Mendoza and Roberto Tan et al.," affirming the April 2, 1986 decision of the Regional Trial Court of Olongapo City ** which also affirmed the decision of MTCC, Branch V, Olongapo City, and the Resolution of respondent court dated March 30, 1987 denying herein petitioners' motion for reconsideration.

The appeal originated as an unlawful detainer complaint filed by herein private respondents with the Municipal Trial Court, Branch V, Olongapo City.

The antecedent facts as summarized by the Court of Appeals are as follows:

The spouses Roberto Tan and Benita Ching-Tan filed a complaint in the Municipal Trial Court against defendants Maximo Gabrito, et al., alleging that they are the possessors and legal owners of the property situated at No. 107 Gordon Ave., New Kalalake, Olongapo City as evidenced by Tax Declaration No. 4-2046. The defendants are leasing portions of this parcel of land, each paying the corresponding monthly rentals due thereon.

On the leased portion, the defendants constructed buildings and have allowed other persons to sublease the same for commercial purposes.

As the spouses Tan have no other property where they could construct their residential house, the spouses Tan notified the defendants (in January 1984) that they intend to personally use the land to build their house thereon and gave defendants three (3) months to vacate the premises and remove the structures and improvements which defendants had constructed thereon.

In April 1984, defendants requested for an extension of time within which to vacate, which was granted by the spouses Tan. However, from that time on, defendants also stopped paying monthly rentals due on the land they leased.

In view of this, in July 1984, defendants were told to leave the premises and to pay rentals in arrears. As defendants refused to comply with both demands, the matter was brought to the Barangay Council for settlement. As no agreement was

reached, a certification to file action was issued to the spouses Tan. Hence, the Tans filed an action for unlawful detainer with damages against Gabrito, et al.

In answer to the complaint, defendants Gabrito, et al. denied the material allegations of the complaint and alleged that: they are builders in good faith over the land as provided in Article 448 of the Civil Code; the land where the houses of defendants were built is a public land, not yet awarded nor titled to anybody; plaintiffs's alleged predecessor-in-interest not being the owner thereof could not have passed nor transferred ownership thereof to them (plaintiffs) considering that Gloria Carillo's Miscellaneous Sales Application No. (X-4-4320) has not yet been acted upon by the Bureau of Lands; plaintiffs and their predessors-in-interest are absentee applicants over the land, hence, are disqualified to own the same; plaintiffs have never been in possession of the land while the defendants are in actual physical possession thereof; the sale of plaintiffs' alleged predecessor-in-interest in favor of plaintiffs is null and void for being in violation of P.D. No. 1517 as defendants being lessees of the land have the right of first refusal thereof.

Defendants brought a counterclaim for damages against the plaintiffs. (Rollo, Annex "C", pp. 39-40).

Respondent Municipal Trial Judge applied the rule on summary procedure in this case, rendered its decision dated November 22, 1985, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered for all the defendants to vacate the parcel of land described in par. 3 of the complaint, removing therefrom the buildings and any other improvements respectively owned by them; and to pay plaintiffs the following as reasonable compensation for the use of the premises:

Maximo Gabrito—atP250.00 per month from April 1984 until he vacates the premises;Roger Libut—atP150.00 per month from May 1984 until he vacates the premises;Liza de Vera—at:P150.00 per month from April 1984, until she vacates the premises; Carmelita Uy—atPl 70.00 per month from April 1984, until she vacates the premises.

for all defendants to pay, in equal shares, damages by way of attorney's fees in the amount of ONE THOUSAND PESOS ( P1,000.00 ) as well as costs.

SO ORDERED. (Rollo, p. 35).

On appeal to the Regional Trial Court (Civil Case No. 450-08-5), the decision of the Municipal Trial Court was affirmed in its decision dated April 2, 1986, the dispositive portion of which reads:

WHEREFORE, premised on all the foregoing consideration and finding no prejudicial and reversible error was ever committed by the lower Court, the Court affirms in toto the decision being appealed, with costs against the defendants-appellants.

SO ORDERED. (Rollo, Annex 'B' p. 38).

On review, herein respondent Court of Appeals sustained the decision rendered by the Regional Trial Court Branch LXXIV, and ruled;

WHEREFORE, the Petition for Review herein is DISMISSED for lack of merit. (Rollo, Annex "C", p. 44).

On March 16, 1987, the petitioner filed their "Motion for Reconsideration and Opposition to the Motion for Immediate Execution Pending Further Proceedings" which was denied by the Ninth Division of respondent Court of Appeals in its Resolution dated March 30, 1987 and granted the Motion for Immediate Issuance of a Writ of Execution filed by private respondents (Annex "F", Rollo, pp. 57-58).

Hence, this petition for review on certiorari filed on April 13, 1987.

On April 21, 1987, Acting Chief Justice Andres Narvasa, authorized the grant of Temporary Restraining Order in this case which was confirmed by the Second Division of this Court in its Resolution dated April 27, 1987 (Rollo, pp. 86, 87, 88).

In a Resolution dated June 8, 1987, petitioners were required to comment on the motion dated April 26, 1987 (Rollo, p. 94) of counsel for respondents, praying to set aside the temporary restraining order issued on April 21, 1987 and to issue a writ of execution pending appeal or to allow the Court of Appeals to proceed with the execution of the decision pending appeal (Rollo, p. 115), which was complied with by petitioners on July 22, 1987 (Rollo, p. 143).

In the resolution of October 5, 1987 (Rollo, p. 187) the petition was given due course and the parties were required to submit their respective memoranda within twenty (20) days from notice. Petitioners' memorandum was submitted on

December 3, 1987 (Rollo, p. 196). Respondents submitted their memorandum on April 12, 1988 (Rollo, p. 235). Petitioners raised the following issues:

1. That a Municipal Trial Court has no jurisdiction to take cognizance of a case for Unlawful Detainer under Sec. 1 of Rule 70 of the Rules of Court, where the plaintiffs are merely the legal possessors and recent transferees of a public land, and the defendants are the absolute owners of the building existing on the same land, for a number of years already.

2. That the respondent Regional Trial Court, Branch LXXIV, Olongapo City, ought to have dismissed the action for Unlawful Detainer and as the same was also heard on appeal by the said Court on this jurisdictional challenge.

3. The market value of the residential houses or buildings of the defendants on the said land is approximately P170,000.00, and it was with plaintiffs' predecessor-in-interest, one Gloria Carillo-Potente that defendants caused said structures to be erected on said land plaintiffs having only acquired from said predecessor, by means of a Deed of Sale of such rights sometime on January 5, 1984.

4. Upon this frame of facts which are admitted in the Decision of both Courts, only a Court of General Jurisdiction, a Regional Trial Court, can have the competence to try and decide the same: the Court of Special Limited Jurisdiction, cannot take cognizance of such facts as an action for Unlawful Detainer.

5. Arguendo, that the Court of Origin has jurisdiction to take cognizance of the cause of action for Unlawful Detainer, it should have not heard the case in accordance with the Rules of Summary Proceedings, and based its Decision on an Affidavit hearing, as the question of ownership was being contested between plaintiffs and defendants, with respect to whom was the preferred grantee to the same land, and which falls under the complete administration and control of the Bureau of Lands.

6. In fact, the Court of Origin, Branch V, Municipal Trial Court in Cities, Olongapo, should have suspended the proceedings, as there was an Administrative Protest being heard by the District Land Office of Olongapo City.

7. On the question of suspension of proceedings denied by the Court of Origin, Municipal Trial Court in Cities, Branch V, Olongapo City, an action for certiorari was filed before Branch

LXXIII of Regional Trial Court, Olongapo City, Civil Case No. 399-0-85, and although a Restraining Order against Municipal Trial Court in Cities, Branch V, City of Olongapo, was issued, the same was already academic as by that time said Municipal Trial Court, Branch V, Olongapo City, has already rendered its Decision in favor of private respondent hereat, plaintiff therein.

8. Branch LXXIV, Regional Trial Court, Olongapo, in its Decision rendered on appeal, did not pass upon such matters, specified supra, so as to reverse the Decision of the Court of Origin: the subject Decisions, have not considered the due process rights of petitioners toward their residences and structures, the same are facing the risk of condemnation and destruction without fair hearing, and such improvements have an aggregate value of Pl70,000.00, more or less.

9. Respondent Honorable Judge Mendoza of Branch LXXIV, Regional Trial Court, Olongapo, may have been misled by the citation of authority, case of Vda. de Bocaling vs. Laguna, et al., 54 SCRA, 243, relied upon by appellees, said case being totally inapplicable to the facts of this case.

10. Respondent Deputy Sheriff Rogelio Lumanlan, without regard to the fif'teen (15) days period finality of the Order and/or Writ of Demolition, harrassed herein petitioners, notwithstanding the pendency of matters involved to their extreme discomfort and anxiety.

11. The Decision of the Honorable Court of Appeals, Annex "C", sustained the Decision of the Regional Trial Court and ignored the vital issues posed for resolution: A Motion For Reconsideration, copy is hereto attached as Annex "D", was presented, precisely to stress the same but, a pointed or precise ruling upon such issues was avoided in the Resolution dated 30th of March, 1987, true copy attached herein as Annex "E".

12. On the other (sic) upon Motion of private respondents, the Tans, despite Opposition thereto, Writ of Execution pending appeal was issued and respondent Deputy Sheriff Lumanlan enforced the same, copy of which is hereto attached as Annex "F": true copy of Notice to Vacate served by said respondent Deputy Sheriff to petitioners is attached as Annex "G" herein.

13. Per Annex "D" Motion For Reconsideration a constitutional point, was reared forth, on first impression, per proviso of Sec. 10, Art. XIII-new, 1986 Constitution, relevant to demolition and

resettlement, and, Resolution, dated 30th March, 1987, Annex "E", of the Honorable Appellate Authority, avoided said constitutional question, without passing upon the same.

14. Of Jurisdictional matters: Decision dated March 4, 1987, of the Honorable Court of Appeals was, received on March 6, 1987, Motion For Reconsideration was filed on March 16, 1987, and Resolution dated 30th of March, 1987, denying Motion for Reconsideration was received on April 1, 1987: thus, this Petition is filed within the 15 day period. (Rollo, pp. 4-8).

All of which boil down to the main issue of whether or not an action for unlawful detainer is the proper action to oust petitioners from their occupation of the land in dispute.

There is no question as to the ownership of the land in litigation as both petitioners and private respondents admit that the same is a public land and owned by the government. The bone of contention is, who has a better right to possess the land which definitely falls under the jurisdiction of the Municipal Trial Court and the rule of summary procedure may properly be applied.

In a preliminary conference held pursuant to Section 6 of the Rule on Summary Procedure, defendants admitted that they entered the premises as lessees and had been paying rentals for the use of the land to Gloria Carillo, private respondents' predecessor-in-interest (Order dated May 15, 1985 in Civil Case No. 2511, MTC, Olongapo City, Branch V; Rollo, pp. 72-73).<äre||anº•1àw> When requested to vacate the premises, petitioners asked for an extension of time which request was granted. However, petitioners failed to vacate the premises and also stopped paying rentals. In view of said admissions, petitioners had unquestionably recognized private respondents' prior right of possession over the questioned property.

Petitioners' allegation in their answer that they are builders in good faith over the land as provided for in Article 448 of the Civil Code is untenable. As ruled by this Court, Article 448 of the Civil Code, applies only where one builds on land in the belief that he is the owner of the land, but does not apply where one's interest in the land is that of a lessee under a rental contract (Balucanag v. Francisco, 122 SCRA 498 [1983]). More than that, it has been settled that the mere fact that, in his answer, defendant claims to be the exclusive owner of the property from which plaintiff seeks to eject him is not sufficient to divest the Municipal Trial Court of jurisdiction (Vivar v. Vivar, 8 SCRA 847, 849 [1963]; De Santa vs. Court of Appeals, 140 SCRA 52 [1985]).

In addition, this Court held in Bocaling v. Laguna, et al (54 SCRA 243, 250 [1973]) that:

The rule is well-settled that lessees, like petitioner, are not possessors in good faith because he knew that their occupancy of the premises continues only during the life of the lease, and they cannot as a matter of right, recover the value of their improvements from the lessor, much less retain the premises until they are reimbursed. Their rights are governed by Article 1678 of the Civil Code which allows reimbursement of lessees up to one-half of the value of their improvements if the lessor so elects.

Petitioners contend that the above cited case is "completely inapplicable to the case at bar, because the genesis case of Ejectment therein was subjected to a compromise Agreement" (Rollo, p. 18). Such contention is, however, untenable. One of the issues raised in the above-cited case was whether or not lessees are builders and/or possessors in good faith entitled to reimbursement for the value of their improvements. The Court categorically resolved the issue in the negative without qualification nor even a reference to the compromise agreement alluded to by the petitioner.

In a later development, petitioners filed a supplemental memorandum submitting the decision of the Bureau of Lands dated June 7, 1987, the dispositive portion of which reads:

IN VIEW OF ALL THE FOREGOING, the Miscellaneous Sales Application No. 4320 of Benita Ching Tan should be, as hereby as it is rejected forfeiting to the government whatever amount had been paid on account thereof. The miscellaneous sales application of Maximo Gabrito, Carmelita Uy, Roger Libut and Liza de Vera shall continue to be given due course after a subdivision survey of the portion occupied by them shall have been made at their pro-rata expense.

SO ORDERED.

In view thereof, petitioners maintain that they are the lawful owners of the buildings and the legal possessors of subject land and that the records of the court proceedings show the pendency of the administrative protest before the Bureau of Lands between the same litigating parties (Rollo, pp. 166-167).

Respondents countered that the decision of the Bureau of Lands granting preferential right to the petitioners to apply for the subject parcel of land is still on appeal before the Department of Natural Resources. 1 Hence, said decision which is not yet final, cannot affect the outcome of this case because the authority given to the land department over the disposition of public land does not exclude the courts from their jurisdiction over possessory actions, the character of the land notwithstanding (Rollo, pp. 246-247).

The contention of private respondents is well taken.

This issue has long been laid to rest by this Court. As early as the case of Pitarque v. Sorilla (92 Phil. 55 [1952]), this Court ruled that:

The vesting of the Lands Department with authority to administer, dispose of, and alienate public lands must not be understood as depriving the other branches of the Government of the exercise of their respective functions of powers thereon, such as the authority to stop disorders and quell breaches of peace by the police and the authority on the part of the courts to take jurisdiction over possessory actions arising therefrom not involving, directly or indirectly, alienation and disposition.

Said ruling was reiterated in Bahayang v. Maceren, 96 Phil 390 (1955); in Molina v. De Bacud, 19 SCRA 56 (1967) and in Rallon v. Ruiz, Jr., 28 SCRA 331 (1969). In the latter case, the Court specifically ruled on the jurisdictional question, as follows:

Courts have jurisdiction over possessory actions involving public lands to determine the issue of physical possession (in forcible entry cases before the inferior court) on the better right of possession (in accion publiciana cases before court of first instance). And this is because the issue of physical possession raised before the courts is independent of the question of disposition and alienation of public lands which should be threshed out in the Bureau of Lands.

The above ruling was further reiterated in Francisco v. Secretary of Agriculture and Natural Resources (121 SCRA 380 [1983]) and in a recent case of National Development Co., et al. v. Hervilla, G.R. No. 65718, June 30, 1987 (151 SCRA 520), where it was held that:

It is now well settled that the administration and disposition of public lands are committed by law to the Director of Lands primarily, and ultimately to the Secretary of Agriculture and Natural Resources. The jurisdiction of the Bureau of Lands is confined to the determination of the respective rights of rival claimants of public lands or to cases which involve disposition and alienation of public lands. The jurisdiction of courts is limited to the determination of who has the actual, physical possession or occupation of the land in question (in forcible entry cases, before municipal courts) or, the better right of possession (in accion publiciana, in cases before the Court of First Instance, now Regional Trial Court).

And even more recently in the case of Guerrero v. Amores, et al., G.R. No. L-34492 promulgated on March 28, 1988, the Court clearly stated that "pending final adjudication of ownership by the Bureau of Lands, the Court has jurisdiction to determine in the meantime the right of possession over the land." Corollary thereto, the power to order the sheriff to remove improvements and turn over the possession of the land to the party adjudged entitled thereto, belongs only to the courts of justice and not to the Bureau of Lands.

In the same case, the application of the principle of exhaustion of administrative remedies with reference to public lands, was further clarified by this Court as follows:

On the other hand, the application of the principle of exhaustion of administrative remedies as a condition precedent to the filing of a juridical action is confined to controversies arising out of the disposition of public lands (Geukoko vs. Araneta, 102 Phil. 706 (1957); Marukot vs. Jacinto, 98 Phil. 128 (1957), alienation of public lands (Rallos vs. Ruiz, Jr., supra) or to the determination of the respective rights of rival claimants to public lands (Pitarque vs. Sorilla, supra) and not to possessory actions involving public lands which are limited to the determination of who has the actual, physical possession or occupation of the land in question (Rallos vs. Ruiz, Jr., supra).<äre||anº•1àw>

In fact, the Bureau of Lands in its decision of June 7, 1987, admitted the jurisdiction of the courts to decide the case on the question of physical possession, although not on the question of ownership (Rollo, p. 179).

Under the circumstances, a careful study of the records failed to show any cogent reason to disturb the findings of the Municipal Trial Court in Cities and of the Regional Trial Court, both of Olongapo City, and finally of the Court of Appeals.

WHEREFORE, the decision of respondent Court of Appeals is AFFIRMED and the temporary restraining order is lifted. Costs against petitioners.

SO ORDERED.

G.R. No. 148830. April 13, 2005

NATIONAL HOUSING AUTHORITY, Petitioners, vs.COURT OF APPEALS, BULACAN GARDEN CORPORATION and MANILA SEEDLING BANK FOUNDATION, INC., Respondents.

D E C I S I O N

CARPIO, J.:

The Case

This is a petition for review1 seeking to set aside the Decision2 dated 30 March 2001 of the Court of Appeals ("appellate court") in CA-G.R. CV No. 48382, as well as its Resolution dated 25 June 2001 denying the motion for reconsideration. The appellate court reversed the Decision3 of Branch 87 of the Regional Trial Court of Quezon City ("trial court") dated 8 March 1994 in Civil Case No. Q-53464. The trial court dismissed the complaint for injunction filed by Bulacan Garden Corporation ("BGC") against the National Housing Authority ("NHA"). BGC wanted to enjoin the NHA from demolishing BGC’s facilities on a lot leased from Manila Seedling Bank Foundation, Inc. ("MSBF"). MSBF allegedly has usufructuary rights over the lot leased to BGC.

Antecedent Facts

On 24 October 1968, Proclamation No. 481 issued by then President Ferdinand Marcos set aside a 120-hectare portion of land in Quezon City owned by the NHA4 as reserved property for the site of the National Government Center ("NGC"). On 19 September 1977, President Marcos issued Proclamation No. 1670, which removed a seven-hectare portion from the coverage of the NGC. Proclamation No. 1670 gave MSBF usufructuary rights over this segregated portion, as follows:

Pursuant to the powers vested in me by the Constitution and the laws of the Philippines, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, do hereby exclude from the operation of Proclamation No. 481, dated October 24, 1968, which established the National Government Center Site, certain parcels of land embraced therein and reserving the same for the Manila Seedling Bank Foundation, Inc., for use in its operation and projects, subject to private rights if any there be, and to future survey, under the administration of the Foundation.

This parcel of land, which shall embrace 7 hectares, shall be determined by the future survey based on the technical descriptions found in Proclamation No. 481, and most particularly on the original survey of the area, dated July 1910 to June 1911, and on the subdivision survey dated April 19-25, 1968. (Emphasis added)

MSBF occupied the area granted by Proclamation No. 1670. Over the years, MSBF’s occupancy exceeded the seven-hectare area subject to its usufructuary rights. By 1987, MSBF occupied approximately 16 hectares. By then the land occupied by MSBF was bounded by Epifanio de los Santos Avenue ("EDSA") to the west, Agham Road to the east, Quezon Avenue to the south and a creek to the north.

On 18 August 1987, MSBF leased a portion of the area it occupied to BGC and other stallholders. BGC leased the portion facing EDSA, which occupies 4,590 square meters of the 16-hectare area.

On 11 November 1987, President Corazon Aquino issued Memorandum Order No. 127 ("MO 127") which revoked the reserved status of "the 50 hectares, more or less, remaining out of the 120 hectares of the NHA property reserved as site of the National Government Center." MO 127 also authorized the NHA to commercialize the area and to sell it to the public.

On 15 August 1988, acting on the power granted under MO 127, the NHA gave BGC ten days to vacate its occupied area. Any structure left behind after the expiration of the ten-day period will be demolished by NHA.

BGC then filed a complaint for injunction on 21 April 1988 before the trial court. On 26 May 1988, BGC amended its complaint to include MSBF as its co-plaintiff.

The Trial Court’s Ruling

The trial court agreed with BGC and MSBF that Proclamation No. 1670 gave MSBF the right to conduct the survey, which would establish the seven-hectare area covered by MSBF’s usufructuary rights. However, the trial court held that MSBF failed to act seasonably on this right to conduct the survey. The trial court ruled that the previous surveys conducted by MSBF covered 16 hectares, and were thus inappropriate to determine the seven-hectare area. The trial court concluded that to allow MSBF to determine the seven-hectare area now would be grossly unfair to the grantor of the usufruct.

On 8 March 1994, the trial court dismissed BGC’s complaint for injunction. Thus:

Premises considered, the complaint praying to enjoin the National Housing Authority from carrying out the demolition of the plaintiff’s structure, improvements and facilities in the premises in question is hereby DISMISSED, but the suggestion for the Court to rule that Memorandum Order 127 has repealed Proclamation No. 1670 is DENIED. No costs.

SO ORDERED.5

The NHA demolished BGC’s facilities soon thereafter.

The Appellate Court’s Ruling

Not content with the trial court’s ruling, BGC appealed the trial court’s Decision to the appellate court. Initially, the appellate court agreed with the trial court that Proclamation No. 1670 granted MSBF the right to determine the location of the

seven-hectare area covered by its usufructuary rights. However, the appellate court ruled that MSBF did in fact assert this right by conducting two surveys and erecting its main structures in the area of its choice.

On 30 March 2001, the appellate court reversed the trial court’s ruling. Thus:

WHEREFORE, premises considered, the Decision dated March 8, 1994 of the Regional Trial Court of Quezon City, Branch 87, is hereby REVERSED and SET ASIDE. The National Housing Authority is enjoined from demolishing the structures, facilities and improvements of the plaintiff-appellant Bulacan Garden Corporation at its leased premises located in Quezon City which premises were covered by Proclamation No. 1670, during the existence of the contract of lease it (Bulacan Garden) had entered with the plaintiff-appellant Manila Seedling Bank Foundation, Inc.

No costs.

SO ORDERED.6

The NHA filed a motion for reconsideration, which was denied by the appellate court on 25 June 2001.

Hence, this petition.

The Issues

The following issues are considered by this Court for resolution:

WHETHER THE PETITION IS NOW MOOT BECAUSE OF THE DEMOLITION OF THE STRUCTURES OF BGC; and

WHETHER THE PREMISES LEASED BY BGC FROM MSBF IS WITHIN THE SEVEN-HECTARE AREA THAT PROCLAMATION NO. 1670 GRANTED TO MSBF BY WAY OF USUFRUCT.

The Ruling of the Court

We remand this petition to the trial court for a joint survey to determine finally the metes and bounds of the seven-hectare area subject to MSBF’s usufructuary rights.

Whether the Petition is Moot because of the

Demolition of BGC’s Facilities

BGC claims that the issue is now moot due to NHA’s demolition of BGC’s facilities after the trial court dismissed BGC’s complaint for injunction. BGC argues that there is nothing more to enjoin and that there are no longer any rights left for adjudication.

We disagree.

BGC may have lost interest in this case due to the demolition of its premises, but its co-plaintiff, MSBF, has not. The issue for resolution has a direct effect on MSBF’s usufructuary rights. There is yet the central question of the exact location of the seven-hectare area granted by Proclamation No. 1670 to MSBF. This issue is squarely raised in this petition. There is a need to settle this issue to forestall future disputes and to put this 20-year litigation to rest.

On the Location of the Seven-Hectare Area Granted by

Proclamation No. 1670 to MSBF as Usufructuary

Rule 45 of the 1997 Rules of Civil Procedure limits the jurisdiction of this Court to the review of errors of law.7 Absent any of the established grounds for exception,8 this Court will not disturb findings of fact of lower courts. Though the matter raised in this petition is factual, it deserves resolution because the findings of the trial court and the appellate court conflict on several points.

The entire area bounded by Agham Road to the east, EDSA to the west, Quezon Avenue to the south and by a creek to the north measures approximately 16 hectares. Proclamation No. 1670 gave MSBF a usufruct over only a seven-hectare area. The BGC’s leased portion is located along EDSA.

A usufruct may be constituted for a specified term and under such conditions as the parties may deem convenient subject to the legal provisions on usufruct.9 A usufructuary may lease the object held in usufruct.10 Thus, the NHA may not evict BGC if the 4,590 square meter portion MSBF leased to BGC is within the seven-hectare area held in usufruct by MSBF. The owner of the property must respect the lease entered into by the usufructuary so long as the usufruct exists.11 However, the NHA has the right to evict BGC if BGC occupied a portion outside of the seven-hectare area covered by MSBF’s usufructuary rights.

MSBF’s survey shows that BGC’s stall is within the seven-hectare area. On the other hand, NHA’s survey shows otherwise. The entire controversy revolves on the question of whose land survey should prevail.

MSBF’s survey plots the location of the seven-hectare portion by starting its measurement from Quezon Avenue going northward along EDSA up until the creek, which serves as the northern boundary of the land in question. Mr. Ben

Malto ("Malto"), surveyor for MSBF, based his survey method on the fact that MSBF’s main facilities are located within this area.

On the other hand, NHA’s survey determines the seven-hectare portion by starting its measurement from Quezon Avenue going towards Agham Road. Mr. Rogelio Inobaya ("Inobaya"), surveyor for NHA, based his survey method on the fact that he saw MSBF’s gate fronting Agham Road.

BGC presented the testimony of Mr. Lucito M. Bertol ("Bertol"), General Manager of MSBF. Bertol presented a map,12 which detailed the area presently occupied by MSBF. The map had a yellow-shaded portion, which was supposed to indicate the seven-hectare area. It was clear from both the map and Bertol’s testimony that MSBF knew that it had occupied an area in excess of the seven-hectare area granted by Proclamation No. 1670.13 Upon cross-examination, Bertol admitted that he personally did not know the exact boundaries of the seven-hectare area.14 Bertol also admitted that MSBF prepared the map without consulting NHA, the owner of the property.15

BGC also presented the testimony of Malto, a registered forester and the Assistant Vice-President of Planning, Research and Marketing of MSBF. Malto testified that he conducted the land survey, which was used to construct the map presented by Bertol.16 Bertol clarified that he authorized two surveys, one in 1984 when he first joined MSBF, and the other in 1986.17 In both instances, Mr. Malto testified that he was asked to survey a total of 16 hectares, not just seven hectares. Malto testified that he conducted the second survey in 1986 on the instruction of MSBF’s general manager. According to Malto, it was only in the second survey that he was told to determine the seven-hectare portion. Malto further clarified that he based the technical descriptions of both surveys on a previously existing survey of the property.18

The NHA presented the testimony of Inobaya, a geodetic engineer employed by the NHA. Inobaya testified that as part of the NHA’s Survey Division, his duties included conducting surveys of properties administered by the NHA.19 Inobaya conducted his survey in May 1988 to determine whether BGC was occupying an area outside the seven-hectare area MSBF held in usufruct.20 Inobaya surveyed the area occupied by MSBF following the same technical descriptions used by Malto. Inobaya also came to the same conclusion that the area occupied by MSBF, as indicated by the boundaries in the technical descriptions, covered a total of 16 hectares. He further testified that the seven-hectare portion in the map presented by BGC,21 which was constructed by Malto, does not tally with the boundaries BGC and MSBF indicated in their complaint.

Article 565 of the Civil Code states:

ART. 565. The rights and obligations of the usufructuary shall be those provided in the title constituting the usufruct; in default of such title, or in case it is deficient, the provisions contained in the two following Chapters shall be observed.

In the present case, Proclamation No. 1670 is the title constituting the usufruct. Proclamation No. 1670 categorically states that the seven-hectare area shall be determined "by future survey under the administration of the Foundation subject to private rights if there be any." The appellate court and the trial court agree that MSBF has the latitude to determine the location of its seven-hectare usufruct portion within the 16-hectare area. The appellate court and the trial court disagree, however, whether MSBF seasonably exercised this right.

It is clear that MSBF conducted at least two surveys. Although both surveys covered a total of 16 hectares, the second survey specifically indicated a seven-hectare area shaded in yellow. MSBF made the first survey in 1984 and the second in 1986, way before the present controversy started. MSBF conducted the two surveys before the lease to BGC. The trial court ruled that MSBF did not act seasonably in exercising its right to conduct the survey. Confronted with evidence that MSBF did in fact conduct two surveys, the trial court dismissed the two surveys as self-serving. This is clearly an error on the part of the trial court. Proclamation No. 1670 authorized MSBF to determine the location of the seven-hectare area. This authority, coupled with the fact that Proclamation No. 1670 did not state the location of the seven-hectare area, leaves no room for doubt that Proclamation No. 1670 left it to MSBF to choose the location of the seven-hectare area under its usufruct.

More evidence supports MSBF’s stand on the location of the seven-hectare area. The main structures of MSBF are found in the area indicated by MSBF’s survey. These structures are the main office, the three green houses, the warehouse and the composting area. On the other hand, the NHA’s delineation of the seven-hectare area would cover only the four hardening bays and the display area. It is easy to distinguish between these two groups of structures. The first group covers buildings and facilities that MSBF needs for its operations. MSBF built these structures before the present controversy started. The second group covers facilities less essential to MSBF’s existence. This distinction is decisive as to which survey should prevail. It is clear that the MSBF intended to use the yellow-shaded area primarily because it erected its main structures there.

Inobaya testified that his main consideration in using Agham Road as the starting point for his survey was the presence of a gate there. The location of the gate is not a sufficient basis to determine the starting point. MSBF’s right as a usufructuary as granted by Proclamation No. 1670 should rest on something more substantial than where MSBF chose to place a gate.

To prefer the NHA’s survey to MSBF’s survey will strip MSBF of most of its main facilities. Only the main building of MSBF will remain with MSBF since the main building is near the corner of EDSA and Quezon Avenue. The rest of MSBF’s main facilities will be outside the seven-hectare area.

On the other hand, this Court cannot countenance MSBF’s act of exceeding the seven-hectare portion granted to it by Proclamation No. 1670. A usufruct is not

simply about rights and privileges. A usufructuary has the duty to protect the owner’s interests. One such duty is found in Article 601 of the Civil Code which states:

ART. 601. The usufructuary shall be obliged to notify the owner of any act of a third person, of which he may have knowledge, that may be prejudicial to the rights of ownership, and he shall be liable should he not do so, for damages, as if they had been caused through his own fault.

A usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides.22 This controversy would not have arisen had MSBF respected the limit of the beneficial use given to it. MSBF’s encroachment of its benefactor’s property gave birth to the confusion that attended this case. To put this matter entirely to rest, it is not enough to remind the NHA to respect MSBF’s choice of the location of its seven-hectare area. MSBF, for its part, must vacate the area that is not part of its usufruct. MSBF’s rights begin and end within the seven-hectare portion of its usufruct. This Court agrees with the trial court that MSBF has abused the privilege given it under Proclamation No. 1670. The direct corollary of enforcing MSBF’s rights within the seven-hectare area is the negation of any of MSBF’s acts beyond it.

The seven-hectare portion of MSBF is no longer easily determinable considering the varied structures erected within and surrounding the area. Both parties advance different reasons why their own surveys should be preferred. At this point, the determination of the seven-hectare portion cannot be made to rely on a choice between the NHA’s and MSBF’s survey. There is a need for a new survey, one conducted jointly by the NHA and MSBF, to remove all doubts on the exact location of the seven-hectare area and thus avoid future controversies. This new survey should consider existing structures of MSBF. It should as much as possible include all of the facilities of MSBF within the seven-hectare portion without sacrificing contiguity.

A final point. Article 605 of the Civil Code states:

ART. 605. Usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years. If it has been constituted, and before the expiration of such period the town is abandoned, or the corporation or association is dissolved, the usufruct shall be extinguished by reason thereof. (Emphasis added)

The law clearly limits any usufruct constituted in favor of a corporation or association to 50 years. A usufruct is meant only as a lifetime grant. Unlike a natural person, a corporation or association’s lifetime may be extended indefinitely. The usufruct would then be perpetual. This is especially invidious in cases where the usufruct given to a corporation or association covers public land.

Proclamation No. 1670 was issued 19 September 1977, or 28 years ago. Hence, under Article 605, the usufruct in favor of MSBF has 22 years left.

MO 127 released approximately 50 hectares of the NHA property as reserved site for the National Government Center. However, MO 127 does not affect MSBF’s seven-hectare area since under Proclamation No. 1670, MSBF’s seven-hectare area was already "exclude[d] from the operation of Proclamation No. 481, dated October 24, 1968, which established the National Government Center Site."

WHEREFORE, the Decision of the Court of Appeals dated 30 March 2001 and its Resolution dated 25 June 2001 in CA-G.R. CV No. 48382 are SET ASIDE. This case is REMANDED to Branch 87 of the Regional Trial Court of Quezon City, which shall order a joint survey by the National Housing Authority and Manila Seedling Bank Foundation, Inc. to determine the metes and bounds of the seven-hectare portion of Manila Seedling Bank Foundation, Inc. under Proclamation No. 1670. The seven-hectare portion shall be contiguous and shall include as much as possible all existing major improvements of Manila Seedling Bank Foundation, Inc. The parties shall submit the joint survey to the Regional Trial Court for its approval within sixty days from the date ordering the joint survey.

SO ORDERED.

G.R. No. 152809 August 3, 2006

MERCEDES MORALIDAD, Petitioner,vs.SPS. DIOSDADO PERNES and ARLENE PERNES, Respondents.

D E C I S I O N

GARCIA, J.:

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

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

2. Resolution dated February 28, 2002, 2 denying petitioner’s motion for reconsideration.

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

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

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

Back in the U.S.A. sometime in 1986, she received news from Arlene that Mandug at the outskirts of Davao City was infested by NPA rebels and many women and children were victims of crossfire between government troops and the insurgents. Shocked and saddened about this development, she immediately sent money to Araceli, Arlene’s older sister, with instructions to look for a lot in Davao City where Arlene and her family could transfer and settle down. This was why she bought the parcel of land covered by TCT No. T-123125.

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

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

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

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

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

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

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

xxx xxx xxx

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

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

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

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

In their defense, the respondents alleged having entered the property in question, building their house thereon and maintaining the same as their residence with petitioner’s full knowledge and express consent. To prove their point, they invited attention to her written declaration of July 21, 1986, supra, wherein she expressly

signified her desire for the spouses to build their house on her property and stay thereat for as long as they like.

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

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

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

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

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

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

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

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

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

Since the defendants-appellees [respondents] are admittedly possessors of the property by permission from plaintiff [petitioner], and builders in good faith, they have the right to retain possession of the property subject of this case until they have been reimbursed the cost of the improvements they have introduced on the property.

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

and accordingly dismissed petitioner’s appeal, as follows:

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

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

SO ORDERED. 8

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

On September 27, 2001, the CA, while conceding the applicability of Articles 448 and 546 of the Civil Code to the case, ruled that it is still premature to apply the same considering that the issue of whether respondents’ right to possess a portion of petitioner’s land had already expired or was already terminated was not yet resolved. To the CA, the unlawful detainer suit presupposes the cessation of respondents’ right to possess. The CA further ruled that what governs the rights of the parties is the law on usufruct but petitioner failed to establish that respondents’ right to possess had already ceased. On this premise, the CA concluded that the ejectment suit instituted by the petitioner was premature. The appellate court thus affirmed the appealed RTC decision, disposing:

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

SO ORDERED.

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

I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN DISMISSING THE UNLAWFUL DETAINER CASE FOR BEING PREMATURE WHICH DECISION IS NOT IN ACCORDANCE WITH LAW AND JURISPRUDENCE.

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

The Court rules for the petitioner.

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

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

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

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

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

However, determinative of the outcome of the ejectment case is the resolution of the next issue, i.e., whether the existing usufruct may be deemed to have been extinguished or terminated. If the question is resolved in the affirmative, then the

respondents’ right to possession, proceeding as it did from their right of usufruct, likewise ceased. In that case, petitioner’s action for ejectment in the unlawful detainer case could proceed and should prosper.

The CA disposed of this issue in this wise:

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

xxx xxx xxx

From the foregoing provision, it becomes apparent that for an action for unlawful detainer to prosper, the plaintiff [petitioner] needs to prove that defendants’ [respondents’] right to possess already expired and terminated. Now, has

respondents’ right to possess the subject portion of petitioner’s property expired or terminated? Let us therefore examine respondents’ basis for occupying the same.

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

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

ART. 603. Usufruct is extinguished:

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

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

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

(4) By renunciation of the usufructuary;

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

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

(7) By prescription. (Emphasis supplied.)

The document executed by the petitioner dated July 21, 1986 constitutes the title creating, and sets forth the conditions of, the usufruct. Paragraph #3 thereof states "[T]hat anyone of my kins may enjoy the privilege to stay therein and may avail the use thereof. Provided, however, that the same is not inimical to the purpose thereof" (Emphasis supplied). What may be inimical to the purpose constituting the usufruct may be gleaned from the preceding paragraph wherein petitioner made it abundantly clear "that anybody of my kins who wishes to stay on the aforementioned property should maintain an atmosphere of cooperation, live in harmony and must avoid bickering with one another." That the maintenance of a peaceful and harmonious relations between and among kin constitutes an indispensable condition for the continuance of the usufruct is clearly deduced from the succeeding Paragraph #4 where petitioner stated "[T]hat anyone of my kins who cannot conform with the wishes of the undersigned may exercise the freedom to look for his own." In fine, the occurrence of any of the following: the loss of the atmosphere of cooperation, the bickering or the cessation of harmonious relationship between/among kin constitutes a resolutory condition which, by express wish of the petitioner, extinguishes the usufruct.

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

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

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

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

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

By express provision of law, respondents, as usufructuary, do not have the right to reimbursement for the improvements they may have introduced on the property. We quote Articles 579 and 580 of the Civil Code:

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

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

Given the foregoing perspective, respondents will have to be ordered to vacate the premises without any right of reimbursement. If the rule on reimbursement or indemnity were otherwise, then the usufructuary might, as an author pointed out, improve the owner out of his property. 15 The respondents may, however, remove or destroy the improvements they may have introduced thereon without damaging the petitioner’s property.

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

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

No pronouncement as to costs.

SO ORDERED.

G.R. No. L-10778            March 29, 1916

THE MUNICIPALITY OF DUMANGAS, ILOILO, applicant-appellee, vs.THE ROMAN CATHOLIC BISHOP OF JARO, objector-appellant.

J. M. Arroyo for appellant.The provincial fiscal of Iloilo, F. Enaje, for appellee.

TORRES, J.:

This appeal by bill of exceptions was raised by counsel for the Roman Catholic Bishop of Jaro from the judgment of December 22, 1914, wherein the judge of the Court of First Instance ordered the inscription in the registry of property in the name of the applicant municipal corporation, of lot 3 of parcel 3, of lot 2 of parcel 5, and of lot 1 of parcel 4, and therefore disallowed the objector's adverse claim with respect to said lot 1 of parcel 4.

By a written application of November 1, 1913, counsel for the municipality of Dumangas, Province of Iloilo, petitioned the Court of First Instance of said province, in conformity with the law, for the registration of six parcels of land of which said municipality claimed to be the absolute owner. These lands are situated in the barrio of Balabag of the pueblo of Dumangas, Iloilo; their description and boundaries are given in detail in the plans and technical descriptions which were made a part of the application, and they contain a total area of 41,815 square meters. The applicant alleged that it had acquired said lands by possession dating from time immemorial; that it was occupying one of said parcels as a public market, the rest of them being unoccupied, etc., etc.

The application for registration was opposed by the Director of Lands, several private parties, and the Roman Catholic Bishop of Jaro who, in a writing of December 8, 1914, set forth that he objected to the registration of lot 2, described in the technical plan Exhibit A, and to that of lot 1 of parcel 4, specified in detail in the plan Exhibit B. He stated that his objections were based on the ground that said lots absolutely and exclusively belonged to the Roman Catholic Apostolic Church, which had been in quiet and peaceable possession of same since time immemorial, and therefore prayed that the petition for registration be denied.

During the hearing of this case, the applicant municipality requested that there should be stricken out of its application for registration certain parcels of land mentioned in its verbal petition, found on page 152 of the record. For this reason all the oppositions that had been filed with respect to those portions were considered withdrawn, save that of the Roman Catholic Bishop of Jaro with regard to lot 1 of parcel 4. After the close of the trial the court rendered the judgment

aforementioned, to which counsel for the objector excepted and from which after taking the proper legal steps, he duly appealed.

In this case the only issue raised and submitted for our decision is whether the applicant municipality of Dumangas, Iloilo, is or is not entitled to have inscribed in its name in the registry of property lot 1 of parcel 4, which lot, according to the application and technical plan, Exhibit B, contains a total area of 2,183 square meters and is adjoined on the northeast by lands of the Roman Catholic Church, on the southeast, by lands of the same Church and by those of Crisostomo Divinagracia, and on the southwest and northwest, by streets without names.

The record shows it to have been duly proven that the disputed lot 1 of parcel 4, is adjacent to the same wall that forms the side of the church of the pueblo of Dumangas; that in said wall or partition there is a side door through which the faithful pass in order to enter the church, and that in order to do so they are compelled to cross the land in question. The applicant municipality claims to be the exclusive owner of the said lot 1, while the objector, the Church, also alleges itself to be the owner, inasmuch as it has been exercising acts of ownership over the said property; that the applicant's contention is unfounded, in that it maintains that said church of Dumangas was constructed on the very edge of the land belonging to the church, without leaving a reasonable space for the use of the faithful, who are accustomed to enter the building by means of said door; and that, inasmuch as its own lands lie on the other side of the church, the most logical thing would have been for it to have built the church in the middle of its own land.

However, reasonable may be the contention of the objecting corporation, the evidence does not justify its claim, inasmuch as the record shows it to have been conclusively proven that the municipal government of the pueblo of Dumangas has been in possession of the lot in question for more than thirty years, and during this period of time have performed thereon acts of indisputable ownership, such as that of erecting a flag-staff for the use of the municipality and that of using said land as a corral for branding cattle; as a public square, it served as a place for posting the lists of persons called up as military conscripts and also as a place for the recognition or identification of malefactors killed by the guardia civil, and it was here where on holidays small mortars were placed for firing salutes. After the revolution, the applicant municipality constructed on said land a building that served first as a theatre, then as a school, and finally as a cockpit. On none of these occasions did the Church object to or oppose such acts of the applicant municipality during the former Spanish or the present American sovereignty. The record also shows that the disputed land is now occupied by a billiard hall and by several houses belonging to private parties who pay a rental to the municipality of Dumangas; that the billiard hall was erected by a concessionary who obtained the necessary permit from said municipality of Dumangas itself, in 1912, without opposition on the part of the objector to these acts of ownership. These facts are proven by the testimony of Quintin Salas, 44 years of age, who says that since he was 7 years old, he has known that the land is litigation belonged to the municipality of Dumangas, and by that of Celestino Dominado, 52 years of age, who stated that from the time of his earliest recollection he has known that the

applicant corporation was the owner of the disputed property. The weight of this testimony was not over-balanced by that of the witnesses presented by the adverse claimant.

The circumstance that the priests in charge of the parish church of Dumangas consented to the performance by the municipal council of said pueblo of acts of possession and ownership over the lot of land in dispute, without their having protested against and objected to the same, clearly shows that the parish church did not then consider that it has a right to the portion of land it now claims, and for this reason we accept the conclusions of fact contained in the judgment appealed from. Besides; it must be remembered that the trial judge had an opportunity to see the witnesses, to observe their manner of testifying and to determine their relative credibility; and the weight of evidence does not always lie on the side of the party who presents the most witnesses.

The record shows that the church of the pueblo of Dumangas was constructed in or about the year 1887; that its wall on the southeast side adjoins the building lot in question; and that since the construction of the church there has been a side door in this wall through which the worshippers attending divine service enter and leave, they having to pass over and cross the land in question. It is therefore to be presumed that the use of said side door also carries with it the use by faithful Catholics of the municipal land over which they have had to pass in order to gain access to said place of worship, and, as this use of the land has been continuous, it is evident that the Church has acquired a right to such use by prescription, in view of the time that has elapsed since the church was built and dedicated to religious worship, during which period the municipality has not prohibited the passage over the land by the persons who attend services customarily held in said church.

The record does not disclose the date when the Government ceded to the Church the land on which the church building was afterwards erected, nor the date of the laying out of the adjacent square that is claimed by the municipality and on which the side door of the church, which is used as an entrance by the people who frequent this building, gives. There are good grounds for presuming that in apportioning lands at the time of the establishment of the pueblo of Dumangas and in designating the land adjacent to the church as a public square, this latter was impliedly encumbered with the easement of a right of way to allow the public to enter and leave the church — a case provided for by article 567 of the Civil Code — for the municipality has never erected any building or executed any work which would have obstructed the passage and access to the side door of the church, and the public has been enjoying the right of way over the land in question for an almost immemorable length of time. Therefore an easement of right of way over said land has been acquired by prescription, not only by the church, but also by the public which, without objection or protest, has continually availed itself of the easement in question.

For the foregoing reasons, by which the errors assigned to the judgment appealed from have been refuted, said judgment should be, as it is hereby, affirmed. The land in litigation shall, however, be understood to be burdened with an easement of right of way to allow passage to and from the side door of the church of Dumangas, to such extent as may be necessary for the transit of persons and four-wheeled vehicles. No special finding is made as to costs. So ordered.

G.R. No. L-48384             October 11, 1943

SEVERO AMOR, petitioner, vs.GABRIEL FLORENTINO, ET AL., respondents.

 

BOCOBO, J.:

          The petitioner asks for the setting aside of the decision of the Court of Appeals which affirmed the judgment of the Court of First Instance of Ilocos Sur. The trial court declared that an easement of light and view had been established in favor of the property of the plaintiffs (respondents herein) and ordered the petitioner to remove within 30 days all obstruction to the windows of respondents' house, to abstain from constructing within three meters from the boundary line, and to pay P200.00 damages.

          It appears that over 50 years ago, Maria Florentino owned a house and a camarin or warehouse in Vigan, Ilocos Sur. The house had and still has, on the north side, three windows on the upper story, and a fourth one on the ground floor. Through these windows the house receives light and air from the lot where the camarin stands. On September 6, 1885, Maria Florentino made a will, devising the house and the land on which it is situated to Gabriel Florentino, one of the respondents herein, and to Jose Florentino, father of the other respondents. In said will, the testatrix also devised the warehouse and the lot where it is situated to Maria Encarnancion Florentino. Upon the death of the testatrix in 1882, nothing was said or done by the devisees in regard to the windows in question. On July 14, 1911, Maria Encarnacion Florentino sold her lot and the warehouse thereon to the petitioner, Severo Amor, the deed of sale stating that the vendor had inherited the property from her aunt, Maria Florentino. In January, 1938, petitioner destroyed the old warehouse and started to build instead a two-story house. On March 1st of that year, respondents filed an action to prohibit petitioner herein from building higher than the original structure and from executing any work which would shut off the light and air that had for many years been received through the four windows referred to. The Court of First Instance found on the 15th of the same month that the construction of the new house had almost been completed, so the court denied the writ of preliminary injunction.

I.

          Inasmuch as Maria Florentino died in 1892, according to the finding of fact of the Court of Appeals, Articles 541 of the Civil Code governs this case. The facts above recited created the very situation provided for in said article, which reads as follows:

          (Spanish - page 406)

          Art. 551. La existencia de un signo aparente de servidumbre entre dos fincas, establecido por el propietario de ambas, se considerara, si se enjenare una, como titulo para que la servidumbre continue activa y pasivamente, a no ser que, al tiempo de separarse la propiedad de las dos fincas, se exprese lo contrario en el titulo de enajenacion de cualquiera de ellas, o se haga desaparecer acquel signo antes del otorgamiento de la escritura.

          Art. 541. The existence of an apparent sign of easement between two estates, established by the proprietor of both, shall be considered, if one of them is alienated, as a title so that the easement will continue actively and passively, unless at the time the ownership of the two estates is divided, the contrary is stated in the deed of alienation of either of them, or the sign is made to disappear before the instrument is executed.

          When the original owner, Maria Florentino, died in 1892, the ownership of the house and its lot passed to respondents while the dominion over the camarin and its lot was vested in Maria Encarnancion Florentino, from whom said property was later bought by petitioner. At the time the devisees took possession of their respective portions of the inheritance, neither the respondents nor Maria Encarnacion Florentino said or did anything with respect to the four windows of the respondents' house. The respondents did not renounce the use of the windows, either by stipulation or by actually closing them permanently. On the contrary, they exercised the right of receiving light and air through those windows. Neither did the petitioner's predecessor in interest, Maria Encarnacion Florentino, object to them or demand that they be close. The easement was therefore created from the time of the death of the original owner of both estates, so when petitioner bought the land and the camarin thereon from Maria Encarnancion Florentino, the burden of this easement continued on the real property so acquired because according to Article 534, "easements are inseparable from the estate to which they actively or passively pertain."

          An incidental question that arises at this juncture is whether or not Article 541 applies to a division of property by succession. The affirmative has been authoritatively declared. (Manresa, "Comentarios al Codigo Civil Espanol," vol. 4, p. 619; Sentence of the Supreme Tribunal of Spain, November 17, 1911).

          Petitioner assigns as an error of the Court of Appeals the supposed failure of that tribunal to pass upon his motion to consider certain allegedly new evidence to prove that Maria Florentino, the original owner of the properties, died in 1885. Petitioner alleges that Maria Florentino died in 1885 and, therefore, the Law of the Partidas should be followed in this case and not the Civil Code. However, the petitioner's contention cannot be upheld without rejecting the finding of fact made by the Court of Appeals, as follows:

          Hebiendo pasado la propiedad de la casa de manposteria a los demandantes, a la muerte de Maria Florentino, ocurrida en 1892, (el demandado sostiene que fue con anterioridad a 1889) no hay duda ninguna de que los demandantes adquirieron la servidumbre mediante titulo y por prescripcion (Art. 537).

          We cannot review the above finding of fact by the Court of Appeals that Maria Florentino die in 1892. The evidentiary fact from which the Court of Appeals drew the above finding is that Gregorio Florentino during the trial in 1938 testified to facts of his own personal knowledge, and he was then 58 years old, having been born in 1880. If Maria Florentino, as claimed by petitioner, had died in 1885, Gregorio Florentino would have been only 5 years of age at the time of Maria Florentino's death. The Court of Appeals therefore concluded that Maria Florentino died in 1892, when Gregorio Florentino was ten 12 years of age. We do not believe we can disturb the finding of the Court of Appeals, because its deductions as to the date of Maria Florentino's death may be right or wrong, according to one's own reasoning. In other words, its conclusion of fact from Gregorio Florentino's testimony is not necessarily and unavoidably mistaken. On the contrary, it is reasonable to believe that a person 58 years old cannot remember facts of inheritance as far back as when he was only 5 years of age.

          Furthermore, the burial certificate and the gravestone, whose copy and photograph, respectively, were offered by petitioner in a motion for new trial filed in the Court of Appeals, could have been discovered by petitioner before the trial in the Court of First Instance by the exercise of due diligence. There is no reason why this evidence could be found when the case was already before the Court of Appeals, but could not be found before the trial in the Court of First Instance. It was easy, before such trial, for the petitioner to inquire from the relatives of Maria Florentino as to when she died. And having ascertained the date, it was also easy to secure the burial certificate and a photograph of the gravestone, supposing them to be really of Maria Florentino. The fact is, petitioner never tried to find out such date and never tried to secure the additional evidence till his counsel raised this issue for the first time before the Court of Appeals. That Court was therefore died in 1885. (Sec. 497, Act. 190). The petitioner's statement in his brief (p. 11) that the Court of Appeals neither passed upon his motion nor took the burial certificate and the gravestone into account is not true, because the very words of the Court of Appeals clearly show that the Court had in mind said motion and evidence when the decision was signed. The decision said: "a la muerte de Maria Florentino ocurrida en 1892 (el demandado sostiene que fue con anteriodad a 1889)" (Emphasis supplied).

          Lastly, the issue as to the date of Maria Florentino's death cannot be raised for the first time on appeal. Petitioner did not in the trial court allege or prove this point. He presented this issue for the first time in the Court of Appeals. (Sec. 497, Act. 190).

          Let us now consider Article 541 more closely in its application to the easement of light and view and to the easement not to build higher (altius non tollendi). These two easements necessarily go together because an easement of light and view requires that the owner of the servient estate shall not build to a height that will obstruct the window. They are, as it were, the two sides of the same coin. While an easement of light and view is positive, that of altius non tollendi is negative. Clemente de Diego states that when article 538 speaks of the time for the commencement of prescription for negative easements, "it refers to those negative easements which are the result and consequence of others that are positive, such as the easement not to build higher, or not to construct, which is indispensable to the easement of light." (Se refiere a aquellas servidumbres negativas que son sucuela y consecuencia de otras positivaas, como la de no levantar mas alto, o de no edificar, que es imprescindible para la servidumbre de luces.") ("Curso Elemental de Derecho Civil Españos, Comun y Foral," vol. 3, p. 450). This relation of these two easements should be borned in mind in connection with the following discussion of (1) the modes of establishing and acquiring easements; (2) the meaning of article 541; and (3) the doctrine in the case of Cortes vs. Yu-Tibo.

          First, as to the modes of establishing and acquiring easements. According to Article 536, easements are established by law or by will of th owners. Acquisition of easements is first by title or its equivalent and seconly by prescription. What acts take the place of title? They are mentioned in Articles 540 and 541, namely, (1) a deed of recognition by the owner of the servient estate; (2) a final judgment; and (3) an apparent sign between two estates, established by the owner of both, which is the case of article 541. Sanchez Roman calls cuh apparent sign under article 541 "supletoria del titulo constitutivo de la servidumbre (Derecho Civil, vol. 3, p. 656). The same jurist says in regard to the ways of constituting easements:

          (Spanish word - page 410)

          In the Sentence of the Supreme Tribunal of Spain dated November 7, 1911, it was held that under article 541 of the Civil Code, the visible and permanent sign of an easement "is the title that characterizes its existence" ("es el titulo caracteristico de su existencia.")

          It will thus be seen that under article 541 the existence of the apparent sign in the instance case, to wit, the four windows under consideration, had for all legal purposes the same character and effect as a title of acquisition of the easement of light and view by the respondents upon the death of the original owner, Maria Florentino. Upon the establishment of that easement of light and view, the con-

comitant and concurrent easement of altius non tollendi was also constituted, the heir of the camarin and its lot, Maria Encarnacion Florention, not having objected to the existence of the windows. The theory of article 541, of making the existence of the apparent sign equivalent to a title, when nothing to the contrary is said or done by the two owners, is sound and correct, because as it happens in this case, there is an implied contract between them that the easements in question should be constituted.

          Analyzing article 541 further, it sees that its wording is not quite felicitous when it says that the easement should continue. Sound juridical thinking rejects such an idea because, properly speaking, the easement is not created till the division of the property, inasmuch as a predial or real easement is one of the rights in another's property, or jura in re aliena and nobdy can have an easement over his own property, nimini sua res servit. In the instant case, therefore, when the original owner, Maria Florentino, opened the windows which received light and air from another lot belonging to her, she was merely exercising her right of dominion. Consequently, the moment of the constitution of the easement of light and view, together with that of altius non tollendi, as the time of the death of the original owner of both properties. At that point, the requisite that there must be two proprietors — one of the dominant estate and another of the servient estate — was fulfilled. (Article 530, Civil Code.)

          Upon the question of the time when the easement in article 541 is created, Manresa presents a highly interesting theory, whether one may agree with it or not. He says:

          La servidumbre encubierta, digamoslo asi, por la unidad de dueño, se hace ostensible, se revela con toda su verdadera importancia al separarse la propiedad de las fincas o porciones de finca que respectivamente deben representar el papel de predios sirviente y dominante.

          The concealed easement, as it were by the oneness of the owner, becomes visible, and is revealed in all its importance when the ownership of the estate or portions of the estate which respectively should play the role of servient and dominant estates is divided.

          Such a view cannot be fully accepted because before the division of the estate there is only a service in fact but not an easement in the strictly juridical sense between the two buildings or parcels of land.

          We come now to the case of Cortes vs. Yu-Tibo, 2 Phil., 24 decided in 1903, Mr. Justice, later Chief Justice, Mapa speaking for the Court. Counsel for petitioner contends that the doctrine in that case is controlling in the present one. If the essential facts of the two cases were the same, there is not doubt but that the early opinion would be decisive inasmuch as it is by its cogent reasoning one of the landmarks in Philippine jurisprudence. However, the facts and theories of

both cases are fundamentally dissimilar. What is more, as will presently be explained, that every decision makes a distinction between that case and the situation provided for in article 541. In that case, Cortes sought an injunction to restrain Yu-Tibo from continuing the construction of certain buildings. Cortes' wife owned a house in Manila which had windows that had been in existence since 1843. The defendant, who occupied a house on the adjoining lot, commenced to raise the roof of the house in such a manner that one-half of the windows in the house owned by plaintiff's wife had been covered. This Court, in affirming the judgment of the lower court which dissolved the preliminary injunction, held that the opening of windows through one's own wall does not in itself create an easement, because it is merely tolerated by the owner of the adjoining lot, who may freely build upon his land to the extent of covering the windows, under article 581, and that his kind of easement is negative which can be acquired through prescription by counting the time from the date when the owner of the dominant estate in a formal manner forbids the owner of the servient estate from obstructing the light, which had not been done by the plaintiff in this case.

          It will thus be clear that one of the essential differences between that case and the present is that while the Yu-Tibo case involved acquisition of easement by prescription, in the present action the question is the acquisition of easement by title, or its equivalent, under article 541. Therefore, while a formal prohibition was necessary in the former case in order to start the period of prescription, no such act is necessary here because the existence of the apparent sign when Maria Florentino died was sufficient title in itself to created the easement.

          Another difference is that while in the Yu-Tibo case, there were tow different owners of two separate houses from the beginning, in the present case there was only one original owner of the two structures. Each proprietor in the Yu-Tibo case was merely exercising his rights of dominion, while in the instant case, the existence of the apparent sign upon the death of the original owner ipso facto burdened the land belonging to petitioner's predecessor in interest, with the easements of light and view and altius non tollendi in virtue of article 541.

          The very decision in Cortes vs. Yu-Tibo distinguishes that case from the situation foreseen in article 541. Said this Court in that case:

          It is true that the Supreme Court of Spain, in its decisions of February 7 and May 5, 1986, has classified as positive easements of light which were the object of the suits in which these decisions were rendered in cassation, and from these it might be believed at first glance, that the former holdings of the supreme court upon this subject had been overruled. But this is not so, as a matter of fact, inasmuch as there is no conflict between these decisions and the former decisions above cited.

          In the first of the suits referred to, the question turned upon two houses which had formerly belonged to the same owner, who established a service of light on one of them for the benefit of the other.

These properties were subsequently conveyed to two different persons, but at the time of the separation of the property noting was said as to the discontinuance of the easement, nor were the windows which constituted the visible sign thereof removed. The new owner of the house subject to the easement endeavored to free it from the incumbrance, notwithstanding the fact that the easement had been in existence for thirty-five years, and alleged that the owner of the dominant estate had not performed any act of opposition which might serve as a starting point for the acquisition of a prescriptive title. The supreme court, in deciding this case, on the 7th of February, 1896, held that the easement in this particular case was positive, because it consisted in the active enjoyment of the light. This doctrine is doubtless based upon article 541 of the Code, which is of the following tenor: "The existence of apparent sign of an easement between two tenements, established by the owner of both of them, shall be considered, should one be sold, as a title for the active and passive continuance of the easement, unless, at the time of the division of the ownership of both tenements, the contrary should be expressed in the deed of conveyance of either of them, or such sign is taken away before the execution of such deed.'

          The word "active" used in the decision quoted in classifying the particular enjoyment of light referred to therein, presuposes on the part of the owner of the dominant estate a right to such enjoyment arising, in the particular cases passed upon by that decision, from the voluntary act of the original owner of the two houses, by which he imposed upon one of them an easement for the benefit of the other. It is well known that easements are established, among other cases, by the will of the owners. (Article 536 of the Code.) It was an act which was, in fact, respected and acquiesced in by the new owner of the servient estate, since he purchased it without making any stipulation against the easement existing thereon, but, on the contrary, acquiesced in the continuance of the apparent sign thereof. As is stated in the decision itself, "It is a principle of law that upon a division of a tenement among various persons — in the absence of any mention in the contract of a mode of enjoyment different from that to which the former owner was accustomed — such easements as may be necessary for the continuation of such enjoyment are understood to subsist." It will be seen, then, that the phrase "active enjoyment" involves an idea directly opposed to the enjoyment which is the result of a mere tolerance on the part of the adjacent owner, and which, as it is not based upon an absolute, enforceable right, may be considered as of a merely passive character. (2 Phil., 29-31).

          Finally, the Yu-Tibo case was decided upon the theory if the negative easement of altius non tollendi, while the instant case is predicated on the idea of the positive easement of light and view under article 541. On this point, suffice it to quote from Manresa's work. He says:

          Que en las servidumbres cuyo aspecto positivo aparece enlazado al negativo, asi como al efecto de la precripcion ha de considerarse prefente el aspecto negativo, al efecto del art. 541 basta atender al aspecto positivo, y asi la exitencia de huecos o ventanas entre dos fincas que fueron de un mismo dueño es bastante para considerar establecidas, al separarse la propiedad de esas fincas, las servidumbres de luces o vista, y con ellas las de no edificar on no levantar mas ato, porque sin estas no prodrian existir aquellas.

          That in easements whose positive aspect appears tied up with the negative aspect, just as for the purposes of prescription the negative aspect has to be considered preferential, so for the purposes of Article 541 it is sufficient to view the positive aspect, and therefore the existence of openings or windows between two estates which belonged to the same owner is sufficient to establish, when the ownership of these estates is divided, the easement of light or view, and with them the easements of altius non tollendi because without the latter, the former cannot exists.

          There are several decisions of the Supreme Court of Spain which have applied Article 541. Some of them are those of February 7, 1986; February 6, 1904; May 29, 1911; and November 17, 1911.

          The sentence of February 7, 1896, dealt with windows established in one house by the original of two houses. When he died, the two houses were adjudicated to different heirs. The court held that there was an easement of light.

          Considerando que, segun lo establecido por este Supremo Tribunal en repetidas sentencias, y consignado, muy principalmente, en la dictada en 21 de Octubre de 1892, lo preceptuado en la ley 14, titulo 31 de la Partida 3.a, al tratar del mode de constituirse las servidumbres, no esta en oposicion con el pricipio mediante el que, dividida una finca entre diversas personas, sin que en el contrato se mencione cosa alguna acerca de un modo de aprovenchamiento distinto del que usaba el primitivo dueño de ella, se entieden subsistentes las servidumbres ncesarias para que aquel pueda tener lugar.

          Considerando que ese principio y jurisprudencia han obtenido nueva sancion, puesto que a ellos obedece el concepto claro y concreto del articulo 541 del Codigo Civil, aplicable al caso, . . . (Ruiz, Codigo Civil, Vol. V, pp. 349-350).

          Considering that, according to what has been established by this Supreme Tribunal in repeated sentences, and principally declared in the sentence promulgated on October 21, 1892, the provision of law 14, title 31 of Partida 3 in treating of the mode of constituting easements, is not contrary to the principle that when an estate is divided between different

persons, and in the contract nothing is said out a mode of enjoyment different from that used by the original owner thereof, the necessary easements for said mode of enjoyment are understood to be subsisting;

          Considering that such principle and jurisprudence have obtained a new santion, for due to them is the clear and concrete concept of Article 541 applicable to the case . . . .

          Therefore, considering that Maria Florentino died in 1892, according to a finding of fact by the Court of Appeals, there is an easement of light and view in favor of the respondents' property under article 541 of the Civil Code.

          But granting, arguendo, that Maria Florentino died in 1885, as contended by petitioner, nevertheless the same principle enunciated in article 541 of the Spanish Civil Code was already an integral part of the Spanish law prior to the Civil Code, the easement in question would also have to be upheld. That the law before the Civil Code was the same as at present is shown by the following:

1. Under Law 14, Title 31, Partida 3, this easement was constituted by an implied contract among the heirs of Maria Florentino.

2. Granting for the sake of argument that this easement was not created through an implied contract according to Law 14, Title 31, Partida 3, yet that provision of the Partidas was not inconsistent with the principle in question, so that there was a gap in the Partidas which the Supreme Court of Spain filled up from the Roman Law and modern civil codes, by recognizing the existence of this kind of easement.

3. Law 17, Title 31, Partida 3 regarding the extinguishment of an easement did not prohibit the easement in the instant case, Therefore, we should adhere to the decisions of the Supreme Court of Spain which maintain this easement under the Spanish law prior to Civil Code.

4. Other considerations show that the principle of apparent sign as announced by the Supreme Tribunal of Spain is not incompatible with the Partidas.

          First, as to the implied contract. Law 14, Title 31, Partida 3 provided that easements were acquired by contract, by will and by prescription. Upon the death of the original owner, Maria Florentino, the four windows under consideration already existed and were visible. One of the heirs, Maria Encarnacion Florentino, to whom the camarin and its lot had been devised, having failed to object to the same, knowingly consented to their continuance. Nor did Gabriel and Jose Florentino (devisees of the house that had the four windows) permanently close the windows. There was consequently an implied agreement between her and the devisees of the house with the four windows to the effect that the service of these

windows would continue, thus creating the easement of light and view and the concomitant easement of altius non tollendi. Hence, the easement in question was acquired by Gabriel and Jose Florentino through contract under Law 14, Title 31, Partida 3.

          Secondly, with respect to the doctrine of the Supreme Tribunal of Spain. In a series of decisions of that court, it was held that Law 14, Title 31, Partida 3 was not opposed to the easement under review. One of those decisions is that of November 7, 1883, which held:

          (Spanish word - page 418)

          Other decisions of the Supreme Tribunal of Spain to the same effect are those of September 14, 1867 and June 7, 1883. (See Scaevola, "Codigo Civil Comentado" vol. 10, pp. 272-274.)

          So that, granting for the sake of argument, that the easement was not created through an implied contract according to Law 14, Title 31, Partida 3, yet that provision of the Partidas, according to decisions of the Supreme Tribunal of Spain, was not inconsistent with the principle in question. The problem in this case not having been foreseen in Law 14, Title 31, Partida 3, there was a gap in the old legislation, which the Supreme Tribunal of Spain filled up from the Roman Law and from modern Civil Codes.

          The principle in question was deeply rooted in the Roman Law. It is from the Roman Law that the Supreme Tribunal of Spain obtained this principle, in order to solve a question not provided for by the Partidas, whose main source was also the Roman law. In other words, the Partidas being silent on the point under consideration, the Supreme Tribunal of Spain resorted to the authoritative voice of the Roman law from which the Law of the Partidas had derived its inspiration.

          The following quotations from the Spanish version the Roman Law Digest will prove the assertions just made:

          (Spanish word - page 419)

          Among the modern civil codes which contain the rule in question are those of France, Belgium, Holland, Portugal, Mexico and Chile. It is presumed that the Supreme Tribunal of Spain had also in mind at least one of them when it decided cases involving this principle before the promulgation of the Spanish Civil Code.

          When, therefore, Maria Florentino died (supposing she died in 1885), the status of the Spanish law was in favor of the doctrine in question. We cannot change it because it was in full force at the time of the alleged date of Maria Florentino's death. We cannot reject a doctrine established by the Spanish Supreme Tribunal as an integral part of the Spanish law before the promulgation

of the Civil Code in 1889. And we know that jurisprudence — in the sense of court decisions — is one of the sources of the law.

          Thirdly, concerning Law 17, Title 31, Partida 3. It is true that the eminent jurist, Manresa, is of the opinion that "el precepto del art. 541 no solo no existia en nuestra antigua legislacion, sino que podia deducirse claramente lo contrario de la ley 17, tit. 31, Partida 3.a . . . ." However, a careful reading of this provision of the Partidas reveals that the same did not militate against the creation of an easement by an apparent sign if nothing was said or done when the property is divided. Law 17, Title 31, Partida 3, read as follows:

          (spanish word - page 420-21)

          This law regulates the extinguishment of an easement by merger of the dominant and the servient estates. Speaking of this law of the Partidas and of article 546, par. 1, of the Civil Code, both of which refer to merger of the two estates, Acaevola says: (p. 319, vol. 10)

          But there is a world of difference between extinguishment of an easement by merger of the two estates and the constitution of an easement by an apparent sign when nothing is done or said upon the division of the property. Law 17, title 31, Partida 3, having in mind only the modes of extinguishment, the legislator did not intend to cover the question involved in the present case, which refers to the creation of an easement.

          What, then, are the differences between the extinguishment of an easement by merger under Law 17, title 31, Partida 3, and the constitution of an easement in this case, both before and after the Civil Code went into effect?

          First, in merger under Law 17, Title 31, Partida 3, there were from the very beginning, already two separate estates, the dominant and the servient estates, whereas in this case, there was only one estate.

          Second, in merger under said Law 17, there were already two owners, whereas in this case, there was only one owner, Maria Florentino.

          Third, in merger under Law 17, there was already an easement in the legal sense, whereas in the instant case, there was only a service between the two lots, (while Maria Florentino was living) but there was as yet no easement from the juridical viewpoint.

          4. Other considerations prove that the principle of apparent sign as enunciated by the Supreme Tribunal of Spain is not inconsistent with the Partidas. These considerations are:

1. Article 537, Civil Code, provides that continuous and apparent easements are acquired by title, or by prescription. However, side by side with that article is article 541 which contemplates an easement upon division of an estate, unless a stipulation to the contrary is agreed upon, or the sign is destroyed. Bearing in mind that "title" includes a contract, our view is that if Article 537 and 541 of the Civil Code can stand together, there is no reason why Law 14, title 31, Partida 3, whereby easements are acquired by contract, by will and by prescription should be considered incompatible with the easement under review.

2. Article 546, par. 1 of the Civil Code ordains that by merger of the two estates in the same owner an easement is extinguished. Yet, coexistent with such provision is that of article 541 regarding the apparent sign which is a title for the easement. If these two principles can and do stand together under the Civil Code, the doctrine laid down by the Supreme Tribunal of Spain — before the Civil Code was in force — about the effect of an apparent sign can also stand together with Law 17, title 31, Partida 3 declaring the extinguishment of an easement by merger.

3. Under article 546, par. 1 of the Civil Code, merger extinguishes an easement. So in case the estate is again divided by purchase, etc., the easement is not, under the Civil Code automatically revived. That is the same provision of law 17, title 31, Partida 3, which does not reject the principle in question, just as article 546, par. 1 of the Civil Code does not reject article 541 about an apparent sign.

III.

          Aside from the foregoing reasons that support the easement under consideration, the same has been acquired by respondents through prescriptions.

          The easement involved in this case is of two aspects: light and view and altius non tollendi. These two aspects necessarily go together because an easement of light and view prevents the owner of the sevient estate from building to a height that will obstruct the windows. This court in Cortes vs. Yu-Tibo, supra, held that the easement concerned when there is an apparent sign established by the owner of two estates is positive. Manresa is of the same opinion, supra. This being so, and inasmuch as the original heirs of Maria Florentino succeeded to these two estates either in 1885 or in 1892 and as petitioner bought one of the lots in 1911, the prescriptive period under any legislation that may be applied — the Partidas, Civil Code or Code of Civil Procedure — has elapsed without the necessity of formal prohibition on the owner of the servient estate. The respondent's action was brought in 1938. The persons who were present, and 20 years between absentees. (4 Manresa, 605). According to article 537 of the Civil Code, continous and apparent easements may be acquired by prescription for 20 years. Under sections 40 and 41 of the Code of Civil Procedure, the period is 10 years.

IV.

          The petitioner maintains that he is an innocent purchaser for value of the lot and camarin thereon, and that he was not bound to know the existence of the easement because the mere opening of windows on one's own wall does not ipso facto create an easement of light. Such contention might perhaps be in point if the estates had not originally belonged to the same owner, who opened the windows. But the petitioner was in duty bound to inquire into the significance of the windows, particularly because in the deed of sale, it was stated that the seller had inherited the property from her aunt, Maria Florentino. Referring to the Sentence of the Supreme Court of Spain dated February 7, 1896, which applied Article 541, this Court in the case of Cortes vs. Yu-Tibo already cited, said that the establishment of the easement "was an act which was in fact respected and acquiesced in by the new owner of the servient estate, since he purchased it without making any stipulation against the easement existing thereon, but on the contrary acquiesced in the new owner of the servient estate, since he purchased it without making any stipulation against the easement existing thereon, but on the contrary, acquiesced in the continuance of the apparent sign thereof." (p. 31). Moreover, it has been held that purchasers of lands burdened with apparent easements do not enjoy the rights of third persons who acquire property, though the burden it not recorded. (Sentence of the Supreme Tribunal of Spain, April 5, 1898).

V.

          Let us now discuss the case from the standpoint of justice and public policy.

          First. — When Maria Encarnacion Florentino, as one of the devisees, accepted the camarin and the lot, she could not in fairness receive the benefit without assuming the burden of the legacy. That burden consisted of the service in fact during the lifetime of the original owner, which service became a true easement upon her death.

          Second. — According to Scaevola, the reason for the principle in question is that there is a tacit contract. He says in vol. 10, p. 277:

          (spanish word - page 424)

          Aun hay mas: hay, en nuestro entender, no solo presuncion de voluntad del enajenante, o sea del dueño de las fincas que estuvieren confundidas, sino convencion, siquiera sea tacita, entre el vendedor y al adquirente de la finca vendida. Puesto que pudiendo estipular la no existencia de la servidumbre, nada dicen o nada hacen, fuerza es presumir que el segundo (comprador) acepta el estado jurisdico creado por el primero (vendedor).

          It is not just to allow Maria Encarnacion Florentino or her successor in interest to repudiate her own undertaking, implied, it is true, but binding nevertheless. This easement is therefore a burden which Maria Encarnacion Florentino and her successor in interest willingly accepted. They cannot now murmur against any inconvenience consequent upon their own agreement.

          Third. During the construction of the new house by the petitioner, the respondents filed an action to stop the work. But petitioner continued the construction, so that when the Court of First Instance was ready to pass upon the preliminary injunction, the work had almost been finished. Petitioner, therefore, cannot complain if he is now ordered to tear down part of the new structure so as not to shut off the light from respondents' windows.

          Fourth. When petitioner bought this lot from the original coheir, Maria Encarnacion Florentino, the windows on respondents' house were visible. It was petitioner's duty to inquire into the significance of those windows. Having failed to do so, he cannot now question the easement against the property which he purchased.

          (spanish word - page 425)

          This idea of easements can never become obsolete in the face of modern progress. On the contrary, its need is all the more pressing and evident, considering that this mutual assistance and giving way among estates is demanded by the complexities of modern conditions, such as those which obtain in large cities where buildings, large and small, are so close together.

VI.

          Recapitulating, we believe the easement of light and view has been established in favor of the property of respondents, for these reasons:

1. Maria Florentino having died in 1892, according to a finding of fact of the Court of Appeals, which we cannot review, Article 541 of the Civil Code is applicable to this case.

2. Granting, arguendo, that Maria Florentino died in 1885, nevertheless that same principle embodied in article 541 of the Civil Code was already an integral part of the Spanish law before the promulgation of the Civil Code in 1889, and therefore, even if the instant case should be governed by the Spanish law prior to the Civil Code, the easement in question would also have to be upheld.

3. The easement under review has been acquired by respondents through prescription.

4. The petitioner was not an innocent purchaser, as he was in duty bound to inquire into the significance of the windows.

5. Justice and public policy are on the side of the respondents.

          Wherefore, the judgment appealed from should be and is hereby affirmed, with costs against the petitioner. So ordered.

G.R. No. L-10619             February 28, 1958

LEOGARIO RONQUILLO, ET AL., plaintiffs-appellants, vs.JOSE ROCO, as Administrator of VICENTE, ROCO Y. DOMINGUEZ ET AL., defendants-appellees.

Moises B. Cruz for appellants.Vicente Roco, Jr. for appellees.

MONTEMAYOR, J.:

Involving as it does only a question of law, the present appeal from the order of the Court of First Instance of Camarines Sur, dated March 6, 1955, dismissing the amended and supplemental complaint of plaintiffs on motion of defendants that it did not state a cause of action, was taken directly to this Court.

The facts and the issue involved in the appeal are well and correctly stated in the appealed order, the pertinent portion of which we are reproducing and making our own:

The amended and supplemental complaint alleged that the plaintiffs have been in the continuous and uninterrupted use of a road or passage way which traversed the land of the defendants and their predecessors in interest, in going to Igualdad Street and the market place of Naga City, from their residential land and back, for more than 20 years; that the defendants and the tenants of Vicente Roco, the predecessors in interest of the said defendants have long recognized and respected the private legal easement of road right of way of said plaintiffs; that on May 12, 1953, the defendants Jose Roco thru his co-defendants, Raymundo Martinez and their men with malice aforethought and with a view to obstructing the plaintiffs' private legal easement over the property of the late Vicente Roco, started constructing a chapel in the middle of the said right of way construction actually impeded, obstructed and disturbed the continuous exercise of the rights of the plaintiffs over said right of way; that on July 10, 1954 the new defendants

Natividad Roco and Gregorio Miras, Jr. with the approval of the defendant, Jose Roco and with the help of their men and laborers, by means of force, intimidation, and threats, illegally and violently planted wooden posts, fenced with barbed wire and closed hermitically the road passage way and their right of way in question against their protests and opposition, thereby preventing them from going to or coming from their homes to Igualdad Street and the public market of the City of Naga.

It is very clear from the allegations of the plaintiffs in their amended and supplemental complaint, that they claim to have acquired the easement of right of way over the land of the defendants and the latter's predecessors in interest, Vicente Roco, thru prescription by their continuous and uninterrupted use of a narrow strip of land of the defendants as passage way or road in going to Igualdad Street and the public market of Naga City, from their residential land or houses, and return.

The only question therefore to determine in this case, is whether an easement of right of way can be acquired thru prescription.

The dismissal was based on the ground that an easement of right of way though it may be apparent is, nevertheless, discontinuous or intermittent and, therefore, cannot be acquired through prescription, but only by virtue of a title. Under old as well as the New Civil Code, easements may be continuous discontinuous (intermittent), apparent or non-apparent, discontinuous being those used at more or less long intervals and which depend upon acts of man (Articles 532 and 615 of the Old and New Civil Codes, respectively). Continuous and apparent easements are acquired either, by title or prescription, continuous non-apparent easements and discentinuous ones whether apparent or not, may be acquired only by virtue of a title (Articles 537 and 539, and 620 and 622 of the Old and New Civil Codes, respectively).

Both Manresa and Sanchez Roman are of the opinion the easement of right of way is a discontinuous one:

En cambio, las servidumbres discontinues se ejercitan por un hecho del hombre, y precisamente por eso son y tienen que ser discontinuas, porque es imposible fisicamente que su uso sea incesante. Asi, la servidumbre de paso es discontinua, porque no es posible que el hombre este pasando continuamente por el camino, vereda o senda de que se trate. (4 Manresa, Codigo Civil Español, 5th ed, p. 529).

. . . "5º Por razon de los modos de disfrutar las servidumbres, en continuas y discontinuas (1). Las continuas son aquelles

cuyo uso es o puede ser incesante, sin la intervencion de ningun hecho del hombre, como son las de luces y otras de la misma especie; y las discontinuas, las que se usan intervalos, mas o menos largos, y dependen de actos del hombre, como las de sen senda, carrera y otras de esta clase. (3 Sanchez Roman, Derecho Civil, p. 488).

Under the provisions of the Civil Code, old and new, particularly the articles thereof aforecited, it would therefore appear that the easement of right of way may not be acquired through prescription. Even Article 1959 of the Old Civil Code providing for prescription of ownership and other real rights in real property, excludes therefrom the exception established by Article 539, referring to discontinuous easements, such as, easement of right of way. (Bargayo vs. Camumot, 40 Phil., 857, 867).

In the case of Cuayong vs. Benedicto, 37 Phil., 781 where the point in issue was whether or not vested rights in a right of way can be acquired through user from time immemorial, this Court said:

It is evident, therefore, that no vested right by user from time immemorial had been acquired by plaintiffs at the time the Civil Code took effect. Under that Code (Article 539) ino discontinuous easement could be acquired by prescription in any event.

However, in the case of Municipality of Dumangas is Bishop of Jaro, 34 Phil., 545, this same Tribunal held that the continued use by the public of a path over land adjoining the Catholic church in going to and from said church through its side door, has given the church the right to such use by prescription, and that because of said use by the public, an easement of right of way over said land has been acquired by prescription, not only by the church, but also by the public, which without objection or protest on the part of the owner of said land, had continually availed itself of the easement.

The minority of which the writer of this opinion is a part, believes that the easement of right of way may now be acquired through prescription, at least since the introduction into this jurisdiction of the special law on prescription through the Old Code of Civil Procedure, Act No. 190. Said law, particularly, Section 41 thereof, makes no distinction as to the real rights which are subject to prescription, and there would appear to be no valid reason, at least to the writer of this opinion, why the continued use of a path or a road or right of way by the party, specially by the public, for ten years or more, not by mere tolerance of the owner of the land, but through adverse use of it, cannot give said party a vested right to such right of way through prescription.

The uninterrupted and continuous enjoyment of a right of way necessary to constitute adverse possession does not require

the use thereof every day for the statutory period, but simply the exercise of the right more or less frequently according to the nature of the use. (17 Am. Jur. 972)

Even under the case of Cuaycong vs. Benedicto (supra), this Tribunal insinuated the rule that no discontinuous easement, like an easement of right of way, may, under Article 539 of the Old Civil Code, be acquired, might possibly have been changed by the provisions of the Code of Civil Procedure relative to prescription.

. . . Assuming, without deciding, that this rule has been changed by the provisions of the present Code of Civil Procedure relating to prescription, and that since its enactment discontinuous easement of acquired by prescription, it is clear that this would not by avail plaintiffs. The Code of Civil Procedure went into effect on October 1, 1901. The term of prescription for the acquisition of right in real estate is fixed by the Code (section 41) at ten years. The evidence shows that in February, 1911, before the expiration of the term of ten years since the time the Code of Civil Procedure took effect, the defendants interrupted the use of the road by plaintiffs by constructing and maintaining a toll gate on, it collecting toll from persons making use of it with carts and continued to do so until they were enjoin by the granting of the preliminary injunction by the trial court in December 1912. . . (Cuayong vs. Benedicto, 37 Phil., 781, 796).

Professor Tolentino in his Commentaries and Jurisprudence on the Civil Code, Vol. I, p. 340, would appear to be of the opinion that under, the provision of the Code of Civil Procedure relative to prescription, even discontinuous easements, like the easement right of way, may be acquired through prescription:

. . . "It is submitted that under Act No. 190, even discontinuous servitudes can be acquired by prescription, provided it can be shown that the servitude was actual, open, public, continuous, under a claim of title exclusive of any other right and adverse to all other claimants'."

However, the opinion of the majority must prevail, and it is held that under the present law, particularly, the provisions of the Civil Code, old and new, unless and until the same is changed or clarified, the easement of right of way may not be acquired through prescription.

In view of the foregoing, the order appealed from is hereby affirmed. No costs.

Bengzon, Bautista Angelo, Labrador, Concepcion, Endencia, and Felix, JJ., concur.Padilla, J., concurs in the result.

Separate Opinions

REYES, J.B.L., J., concurring:

I would like to elaborate my reasons for concurring with the majority in declaring the easement of right of way not acquirable by prescription.

The essence of this easement ("servidumbre de paso") lies in the power of the dominant owner to cross or traverse the servient tenement without being prevented or disturbed by its owner. As a servitude, it is a limitation on the servient owner's rights of ownership, because it restricts his right to exclude others from his property. But such limitation exists only when the dominant owner actually crosser, or passes over the servient estate; because when he does not, the servient owner's right of exclusion is perfect and undisturbed. Since the dominant owner can not be continually and uninterruptedly crossing the servient estate, but can do so only at intervals, the easement is necessarily of an intermittent or discontinuous nature.

Because possession of a right consists in the enjoyment of that right (old Civil Code, Art. 430; Art. 423, new Civil Code) and to enjoy a right is to exercise it, it follows that the possession (enjoyment or exercise) of a right of way is intermittent and discontinuous. From this premise, it is inevitable to conclude, with Manresa and Sanchez Roman, that such easement can not be acquired by acquisitive prescription (adverse possession) because the latter requires that the possession be continuous or uninterrupted (old Civil Code, Art. 1941; new Civil Code, Art. 1118).

The Code of Civil Procedure (Act 190) did not change the situation. Observe that its section 41, in conferring prescriptive title upon "ten years adverse possession" qualifies it by the succeeding words "uninterruptedly continued for ten years which is the same condition of continuity that is exacted by the Civil Code.

SEC. 41. Title to Land by Prescription. — Ten years actual adverse possession by any person claiming to be the owner for that time of any land or interest in land, uninterruptedly continued for ten years by occupancy, descent, grants, or otherwise, in whatever way such occupancy may have commenced or continued, shall vest in every actual occupant or possessor of such land a full and complete title, saving to the persons under disabilities the rights secured the next section. In order to constitute such title by prescription or adverse possession, the possession by the claimant or by the person under or through whom he claims must have been actual, open, public, continous, under a claim of title exclusive of any other

right and adverse to all other claimants. But failure to occupy or cultivate land solely by reason of war shall not be deemed to constitute an interruption of possession of the claimant, and his title by prescription shall he complete, if in other regrets perfect, notwithstanding such failure to occupy or cultivate the land during the continuance of war.

The case of Municipality of Dumangas vs. Bishop of Jaro, 34 Phil. 541, does not, if properly analyzed, constitute authority to hold that the easement of right of way is acquirable by prescription or adverse possession. The Court there said:

The record shows that the church of the pueblo of Dumangas was constructed in or about the year 1987; that wall on the southeast side adjoins the building lot in question; and that since the construction of the church there has been a side door in this wall through which the worshippers attending divine service enter and leave, they having to pass over and cross the land in question. It is therefore to be presumed that the use of said side door also carries with it the use by faithful Catholics of the municipal land over which they have had to pass in order to gain access to said place of worship, and, as this use of the land has been continuous, it is evident that the Church has acquired a right to such use by prescription, in view of the time that has elapsed since the church was built and dedicated to religious worship, during which period the municipality has not prohibited the passage over the land by the persons who attend services customarily held in said church.

The record does not disclose the date when the Government ceded to the Church the land on which the church building was afterwards erected, nor the date of the laying out of the adjacent square that is claimed by the municipality and on which the side door of the church, which is used as an entrance by the people who frequent this building, gives. There are good grounds for presuming that in apportioning lands at the time of the establishment of the pueblo of Dumangas and in designating the land adjacent to the church as a public square, this latter was impliedly encumbered with the easement of a right of way to allow the public to enter and leave the church — a case provided for by article 567 of the Civil Code — for the municipality has never erected any building or executed any work which would have obstructed the passage and access to the side door of the church, and the public has been enjoying the right of way over the land in question for an almost immemorable length of time. Therefore an easement of right of way over said land has been acquired by prescription, not only by the church, but also by the public which, without objection or

protest, has continually availed itself of the easement in question. (34 Phil., pp. 545-546).

It will be seen that the ratio decidendi of that case lies in the application of Article 567 of the old Civil Code that provides as follows:

ART. 567. When an estate acquired by purchase, exchange, or partition is enclosed by other estates of the vendor, exchanger, or co-owner, the latter shall be obliged to grant a right of way without indemnity, in the absence of an agreement to the contrary.

Bearing in mind the provisions of the article quoted in relation to the wording of the decision in the Dumangas case, it can be seen that what the court had in mind is that when the Spanish Crown apportioned the land occupied by the Church of Dumangas, it impliedly burdened the neighboring public square (which was also Crown property at the time) with an easement of right of way to allow the public to enter and leave the church, because without such easement the grant in favor of ecclesiastical authorities would be irrisory: what would be the use of constructing a church if no one could enter it? Now, if there was an implied grant of the right of way by the Spanish Crown, it was clearly unnecessary to justify the existence of the easement through prescriptive acquisition. Why then does the decision repeatedly speak of prescription? Plainly, the word "prescription" was used in the decision not in the sense of adverse possession for ten or thirty years, but in the sense of "immemorial usage" that under the law anterior to the Civil Code of 1889, was one of the ways in which the servitude of right of way could be acquired.1 This view is confirmed by the fact that throughout the passages hereinabove quoted, the court's decision stresses that the people of Dumangas have been passing over the public square to go to church since the town was founded and the church was built, an "almost immemorable length of time." It would seem that the term "priscription" used in said case was merely a loose expression that is apt to mislead unless the court's reasoning is carefully analyzed.

Since 1889, however, the Civil Code repealed the prior legislation; and thereafter the right of way could only be acquired by title and not by adverse possession (usucapio), saving those servitudes already acquired before the Code came into effect (Decisions, Supreme Court of Spain 27 Oct. 1900, 1st February 1912; 11 May 1927, and 7 January 1920).

Paras, C.J. and Reyes A., J., concur.

G.R. No. 95252 September 5, 1997

LA VISTA ASSOCIATION, INC., petitioner, vs.COURT OF APPEALS, SOLID HOMES, INC., ATENEO DE MANILA

UNIVERSITY, ROMULO VILLA, LORENZO TIMBOL, EMDEN ENCARNACION, VICENTE CASIÑO, JR., DOMINGO REYES, PEDRO C. MERCADO, MARIO AQUINO, RAFAEL GOSECO, PORFIRIO CABALU, JR., and ANTONIO ADRIANO, in their behalf and in behalf of the residents of LOYOLA GRAND VILLAS, INC., PHASES I AND II, respondents.

 

BELLOSILLO, J.:

MANGYAN ROAD is a 15-meter wide thoroughfare in Quezon City abutting Katipunan Avenue on the west, traversing the edges of La Vista Subdivision on the north and of the Ateneo de Manila University and Maryknoll (now Miriam) College on the south. Mangyan Road serves as the boundary between LA VISTA on one side and ATENEO and MARYKNOLL on the other. It bends towards the east and ends at the gate of Loyola Grand Villas Subdivision. The road has been the subject of an endless dispute, the disagreements always stemming from this unresolved issue: Is there an easement of right-of-way over Mangyan Road?

In resolving this controversy, the Court would wish to write finis to this seemingly interminable debate which has dragged on for more than twenty years.

The area comprising the 15-meter wide roadway was originally part of a vast tract of land owned by the Tuasons in Quezon City and Marikina. On 1 July 1949 the Tuasons sold to Philippine Building Corporation a portion of their landholdings amounting to 1,330,556 square meters by virtue of a Deed of Sale with Mortgage. Paragraph three (3) of the deed provides that ". . . the boundary line between the property herein sold and the adjoining property of the VENDORS shall be a road fifteen (15) meters wide, one-half of which shall be taken from the property herein sold to the VENDEE and the other half from the portion adjoining belonging to the VENDORS."

On 7 December 1951 the Philippine Building Corporation, which was then acting for and in behalf of Ateneo de Manila University (ATENEO) in buying the properties from the Tuasons, sold, assigned and formally transferred in a Deed of Assignment with Assumption of Mortgage, with the consent of the Tuasons, the subject parcel of land to ATENEO which assumed the mortgage. The deed of assignment states —

The ASSIGNEE hereby agrees and assumes to pay the mortgage obligation on the above-described land in favor of the MORTGAGOR and to perform any and all terms and conditions as set forth in the Deed of Sale with Mortgage dated July 1, 1949, hereinabove referred to, which said document is incorporated herein and made an integral part of this contract by reference . . . .

On their part, the Tuasons developed a part of the estate adjoining the portion sold to Philippine Building Corporation into a residential village known as La Vista Subdivision. Thus the boundary between LA VISTA and the portion sold to Philippine Building Corporation was the 15-meter wide roadway known as the Mangyan Road.

On 6 June 1952 ATENEO sold to MARYKNOLL the western portion of the land adjacent to Mangyan Road. MARYKNOLL then constructed a wall in the middle of the 15-meter wide roadway making one-half of Mangyan Road part of its school campus. The Tuasons objected and later filed a complaint before the then Court of First Instance of Rizal for the demolition of the wall. Subsequently, in an amicable settlement, MARYKNOLL agreed to remove the wall and restore Mangyan Road to its original width of 15 meters.

Meanwhile, the Tuasons developed its 7.5-meter share of the 15-meter wide boundary. ATENEO deferred improvement on its share and erected instead an adobe wall on the entire length of the boundary of its property parallel to the 15-meter wide roadway.

On 30 January 1976 ATENEO informed LA VISTA of the former's intention to develop some 16 hectares of its property along Mangyan Road into a subdivision. In response, LA VISTA President Manuel J. Gonzales clarified certain aspects with regard to the use of Mangyan Road. Thus —

. . . The Mangyan Road is a road fifteen meters wide, one-half of which is taken from your property and the other half from the La Vista Subdivision. So that the easement of a right-of-way on your 71/2 m. portion was created in our favor and likewise an easement of right-of-way was created on our 7 1/2 portion of the road in your favor (paragraph 3 of the Deed of Sale between the Tuasons and the Philippine Building Corporation and Ateneo de Manila dated 1 July 1949 . . . .

On 28 April 1976 LA VISTA President Manuel J. Gonzales, in a letter to ATENEO President Fr. Jose A. Cruz, S. J., offered to buy under specified conditions the property ATENEO was intending to develop. One of the conditions stipulated by the LA VISTA President was that "[i]t is the essence of the offer that the mutuaI right of way between the Ateneo de Manila University and La Vista Homeowners' Association will be extinguished." The offer of LA VISTA to buy was not accepted by ATENEO. Instead, on 10 May 1976 ATENEO offered to sell the property to the public subject to the condition that the right to use the 15-meter roadway will be transferred to the vendee who will negotiate with the legally involved parties regarding the use of such right as well as the development costs for improving the access road.

LA VISTA became one of the bidders. However it lost to Solid Homes, Inc., in the bidding. Thus on 29 October 1976 ATENEO executed a Deed of Sale in favor of

Solid Homes, Inc., over parcels of land covering a total area of 124,424 square meters subject, among others, to the condition that —

7. The VENDOR hereby passes unto the VENDEE, its assigns and successors-in-interest the privileges of such right of way which the VENDOR acquired, and still has, by virtue of the Deeds mentioned in the immediately preceeding paragraph hereof; provided, that the VENDOR shall nonetheless continue to enjoy said right of way privileges with the VENDEE, which right of way in favor of the VENDOR shall be annotated on the pertinent road lot titles. However it is hereby agreed that the implementation of such right of way shall be for the VENDEE's sole responsibility and liability, and likewise any development of such right of way shall be for the full account of the VENDEE. In the future, if needed, the VENDOR is therefore free to make use of the aforesaid right of way, and/or Mangyan Road access, but in such a case the VENDOR shall contribute a pro-rata share in the maintenance of the area.

Subsequently, Solid Homes, Inc., developed a subdivision now known as Loyola Grand Villas and together they now claim to have an easement of right-of-way along Mangyan Road through which they could have access to Katipunan Avenue.

LA VISTA President Manuel J. Gonzales however informed Solid Homes, Inc., that LA VISTA could not recognize the right-of-way over Mangyan Road because, first, Philippine Building Corporation and its assignee ATENEO never complied with their obligation of providing the Tuasons with a right-of-way on their 7.5-meter portion of the road and, second, since the property was purchased for commercial purposes, Solid Homes, Inc., was no longer entitled to the right-of-way as Mangyan Road was established exclusively for ATENEO in whose favor the right-of-way was originally constituted. LA VISTA, after instructing its security guards to prohibit agents and assignees of Solid Homes, Inc., from traversing Mangyan Road, then constructed one-meter high cylindrical concrete posts chained together at the middle of and along the entire length of Mangyan Road thus preventing the residents of LOYOLA from passing through.

Solid Homes, Inc., complained to LA VISTA but the concrete posts were not removed. To gain access to LOYOLA through Mangyan Road an opening through the adobe wall of ATENEO was made and some six (6) cylindrical concrete posts of LA VISTA were destroyed. LA VISTA then stationed security guards in the area to prevent entry to LOYOLA through Mangyan Road.

On 17 December 1976, to avert violence, Solid Homes, Inc., instituted the instant case, docketed as Civil Case No. Q-22450, before the then Court of First Instance of Rizal and prayed that LA VISTA been joined from preventing and obstructing the use and passage of LOYOLA residents through Mangyan Road. LA VISTA in

turn filed a third-party complaint against ATENEO. On 14 September 1983 the trial court issued a preliminary injunction in favor of Solid Homes, Inc. (affirming an earlier order of 22 November 1977), directing LA VISTA to desist from blocking and preventing the use of Mangyan Road. The injunction order of 14 September 1983 was however nullified and set aside on 31 May 1985 by the then Intermediate Appellate Court 1 in AC-G.R. SP No. 02534. Thus in a petition for review on certiorari, docketed as G.R. No. 71150, Solid Homes, Inc., assailed the nullification and setting aside of the preliminary injunction issued by the trial court.

Meanwhile, on 20 November 1987 the Regional Trial Court of Quezon City rendered a decision on the merits 2 in Civil Case No. Q-22450 affirming and recognizing the easement of right-of-way along Mangyan Road in favor of Solid Homes, Inc., and ordering LA VISTA to pay damages thus —

ACCORDINGLY, judgment is hereby rendered declaring that an easement of a right-of-way exists in favor of the plaintiff over Mangyan Road, and, consequently, the injunction prayed for by the plaintiff is granted, enjoining thereby the defendant, its successors-in-interest, its/their agents and all persons acting for and on its/their behalf, from closing, obstructing, preventing or otherwise refusing to the plaintiff, its successors-in-interest, its/their agents and all persons acting for and on its/their behalf, and to the public in general, the unobstructed ingress and egress on Mangyan Road, which is the boundary road between the La Vista Subdivision on one hand, and the Ateneo de Manila University, Quezon City, and the Loyola Grand Villas Subdivision, Marikina, Metro Manila, on the other; and, in addition the defendant is ordered to pay the plaintiff reasonable attorney's fees in the amount of P30,000.00. The defendant-third-party plaintiff is also ordered to pay the third-party defendant reasonable attorney's fees for another amount of P15,000.00. The counter-claim of defendant against the plaintiff is dismissed for lack of merit. With costs against the defendant.

Quite expectedly, LA VISTA appealed to the Court of Appeals, docketed as CA-G.R. CV No. 19929. On 20 April 1988 this Court, taking into consideration the 20 November 1987 Decision of the trial court, dismissed the petition docketed as G.R. No. 71150 wherein Solid Homes, Inc., sought reversal of the 31 May 1985 Decision in AC-G.R. SP No. 02534 which nullified andset aside the 14 September 1983 injunction order of the trial court. There we said —

Considering that preliminary injunction is a provisional remedy which may be granted at any time after the commencement of the action and before judgment when it is established that the plaintiff is entitled to the relief demanded and only when his complaint shows facts entitling such reliefs (Section 3(a), Rule

58) and it appearing that the trial court had already granted the issuance of a final injunction in favor of petitioner in its decision rendered after trial on the merits (Sections 7 & 10, Rule 58, Rules of Court), the Court resolved to Dismiss the instant petition having been rendered moot and academic. An injunction issued by the trial court after it has already made a clear pronouncement as to the plaintiff's right thereto, that is, after the same issue has been decided on the merits, the trial court having appreciated the evidence presented, is proper, notwithstanding the fact that the decision rendered is not yet final (II Moran, pp. 81-82, 1980 ed.). Being an ancillary remedy, the proceedings for preliminary injunction cannot stand separately or proceed independently of the decision rendered on the merit of the main case for injunction. The merit of the main case having been already determined in favor of the applicant, the preliminary determination of its non-existence ceases to have any force and effect. 3

On the other hand, in CA-G.R. CV No. 19929, several incidents were presented for resolution: two (2) motions filed by Solid Homes, Inc., to cite certain officers of LA VISTA for contempt for alleged violation of the injunction ordaining free access to and egress from Mangyan Road, to which LA VISTA responded with its own motion to cite Solid Homes, Inc., for contempt; a motion for leave to intervene and to re-open Mangyan Road filed by residents of LOYOLA; and, a petition praying for the issuance of a restraining order to enjoin the closing of Mangyan Road. On 21 September 1989 the incidents were resolved by the Court of Appeals 4 thus —

1. Defendant-appellant La Vista Association, Inc., its Board of Directors and other officials and all persons acting under their orders and in their behalf are ordered to allow all residents of Phase I and II of Loyola Grand Villas unobstructed right-of-way or passage through the Mangyan Road which is the boundary between the La Vista Subdivision and the Loyola Grand Villas Subdivision;

2. The motion to intervene as plaintiffs filed by the residents of Loyola Grand Villas Subdivision is GRANTED; and

3. The motions for contempt filed by both plaintiff-appellee and defendant-appellant are DENIED.

This resolution is immediately executory. 5

On 15 December 1989 both motions for reconsideration of Solid Homes, Inc., and LA VISTA were denied. In separate petitions, both elevated the 21 September 1989 and 15 December 1989 Resolutions of the Court of Appeals to this Court. The petition of Solid Homes, Inc., docketed as G.R. No. 91433, prayed for an

order directing the appellate court to take cognizance of and hear the motions for contempt, while that of LA VISTA in G.R. No. 91502 sought the issuance of a preliminary injunction to order Solid Homes, Inc., ATENEO and LOYOLA residents to desist from intruding into Mangyan Road.

On 22 May 1990, pending resolution of G.R. Nos. 91433 and 91502, the Second Division of the Court of Appeals 6 in CA-G.R. CV No. 19929 affirmed in toto the Decision of the trial court in Civil Case No. Q-22450. On 6 September 1990 the motions for reconsideration and/or re-raffle and to set the case for oral argument were denied. In view of the affirmance of the Decision by the Court of Appeals in CA-G.R. CV No. 19929 this Court dismissed the petition in G.R. No. 91502 for being moot as its main concern was merely the validity of a provisional or preliminary injunction earlier issued. We also denied the petition in G.R. No. 91433 in the absence of a discernible grave abuse of discretion in the ruling of the appellate court that it could not entertain the motions to cite the parties for contempt "because a charge of contempt committed against a superior court may be filed only before the court against whom the contempt has been committed" (Sec. 4, Rule 71, Rules of Court). 7

Consequently we are left with the instant case where petitioner LA VISTA assails the Decision of respondent Court of Appeals affirming in toto the Decision of the trial court which rendered a judgment on the merits and recognized an easement of right-of-way along Mangyan Road, permanently enjoining LA VISTA from closing to Solid Homes, Inc., and its successors-in-interest the ingress and egress on Mangyan Road.

In its first assigned error, petitioner LA VISTA argues that respondent appellate court erred in disregarding the decisions in (a) La Vista Association, Inc., v. Hon. Ortiz, 8 affirmed by this Court in Tecson v. Court of Appeals; 9 (b) La Vista Association, Inc., v. Hon. Leviste, 10 affirmed by this Court in Rivera v. Hon. Intermediate Appellate Court; 11 and, (c) La Vista v. Hon. Mendoza, 12 and in holding that an easement of right-of-way over Mangyan Road exists. 13

We do not agree with petitioner. The reliance of petitioner on the cited cases is out of place as they involve the issuance of a preliminary injunction pending resolution of a case on the merits. In the instant case, however, the subject of inquiry is not merely the issuance of a preliminary injunction but the final injunctive writ which was issued after trial on the merits. A writ of preliminary injunction is generally based solely on initial and incomplete evidence. The opinion and findings of fact of a court when issuing a writ of preliminary injunction are interlocutory in nature and made even before the trial on the merits is terminated. Consequently there may be vital facts subsequently presented during the trial which were not obtaining when the writ of preliminary injunction was issued. Hence, to equate the basis for the issuance of a preliminary injunction with that for the issuance of a final injunctive writ is erroneous. And it does not necessarily mean that when a writ of preliminary injunction issues a final injunction follows.

Accordingly, respondent Court of Appeals in its assailed Decision rightly held that —

We are unswayed by appellant's theory that the cases cited by them in their Brief (pagers 17 and 32) and in their motion for early resolution (page 11, Rollo) to buttress the first assigned error, are final judgments on the merits of, and therefore res judicata to the instant query. It is quite strange that appellant was extremely cautious in not mentioning this doctrine but the vague disquisition nevertheless points to this same tenet, which upon closer examination negates the very proposition. Generally, it is axiomatic that res judicata will attach in favor of La Vista if and when the case under review was disposed of on the merits and with Finality (Manila Electric Co., vs. Artiaga. 50 Phil. 144; 147; S. Diego vs. Carmona, 70 Phil. 281; 283; cited in Comments on the Rules of Court, by Moran. Volume II, 1970 edition, page 365; Roman Catholic Archbishop vs. Director of Lands. 35 Phil. 339; 350-351, cited in Remedial Law Compendium, by Regalado, Volume I, 1986 Fourth revised Edition, page 40). Appellants suffer from the mistaken notion that the "merits" of the certiorari petitions impugning the preliminary injunction in the cases cited by it are tantamount to the merits of the main case, subject of the instant appeal. Quite the contrary, the so-called "final judgments" adverted to dealt only with the propriety of the issuance or non-issuance of the writ of preliminary injunction, unlike the present recourse which is directed against a final injunctive writ under Section 10, Rule 58. Thus the invocation of the disputed matter herein is misplaced. 14

We thus repeat what we said in Solid Homes, Inc., v. La Vista 15 which respondent Court of Appeals quoted in its assailed Decision 16 —

Being an ancillary remedy, the proceedings for preliminary injunction cannot stand separately or proceed independently of the decision rendered on the merits of the main case for injunction. The merits of the main case having been already determined in favor of the applicant, the preliminary determination of its non-existence ceases to have any force and effect.

Petitioner LA VISTA in its lengthy Memorandum also quotes our ruling in Ramos, Sr., v. Gatchalian Realty, Inc., 17 no less than five (5) times 18 —

To allow the petitioner access to Sucat Road through Gatchalian Avenue inspite of a road right-of-way provided by the petitioner's subdivision for its buyers simply because

Gatchalian Avenue allows petitioner a much greater ease in going to and coming from the main thoroughfare is to completely ignore what jurisprudence has consistently maintained through the years regarding an easement of a right-of-way, that "mere convenience for the dominant estate is not enough to serve as its basis. To justify the imposition of this servitude, there must be a real, not a fictitious or artificial, necessity for it" (See Tolentino, Civil Code of the Philippines, Vol. II, 2nd ed., 1972, p. 371)

Again this is misplaced. Ramos, Sr., v. Gatchalian Realty, Inc., 19 concerns a legal or compulsory easement of right-of-way —

Since there is no agreement between the contending parties in this case granting a right-of-way by one in favor of the other, the establishment of a voluntary easement between the petitioner and the respondent company and/or the other private respondents is ruled out. What is left to examine is whether or not petitioner is entitled to a legal or compulsory easement of a right-of-way —

which should be distinguished from a voluntary easement. A legal or compulsory easement is that which is constituted by law for public use or for private interest. By express provisions of Arts. 649 and 650 of the New Civil Code, the owner of an estate may claim a legal or compulsory right-of-way only after he has established the existence of four (4) requisites, namely, (a) the estate is surrounded by other immovables and is without adequate outlet to a public highway; (b) after payment of the proper indemnity; (c) the isolation was not due to the proprietor's own acts; and, (d) the right-of-way claimed is at a point least prejudicial to the servient estate, and insofar as consistent with this rule, where the distance from the dominant estate to a public highway may be the shortest. 20 A voluntary easement on the other hand is constituted simply by will or agreement of the parties.

From the facts of the instant case it is very apparent that the parties and their respective predecessors-in-interest intended to establish an easement of right-of-way over Mangyan Road for their mutual benefit, both as dominant and servient estates. This is quite evident when: (a) the Tuasons and the Philippine Building Corporation in 1949 stipulated in par. 3 of their Deed of Sale with Mortgage that the "boundary line between the property herein sold and the adjoining property of the VENDORS shall be a road fifteen (15) meters wide, one-half of which shall be taken from the property herein sold to the VENDEE and the other half from the portion adjoining belonging to the vendors;" (b) the Tuasons in 1951 expressly agreed and consented to the assignment of the land to, and the assumption of all the rights and obligations by ATENEO, including the obligation to contribute seven and one-half meters of the property sold to form part of the 15-meter wide

roadway; (c) the Tuasons in 1958 filed a complaint against MARYKNOLL and ATENEO for breach of contract and the enforcement of the reciprocal easement on Mangyan Road, and demanded that MARYKNOLL set back its wall to restore Mangyan Road to its original width of 15 meters, after MARYKNOLL constructed a wall in the middle of the 15-meter wide roadway; (d) LA VISTA President Manuel J. Gonzales admitted and clarified in 1976, in a letter to ATENEO President Fr. Jose A. Cruz, S.J., that "Mangyan Road is a road fifteen meters wide, one-half of which is taken from your property and the other half from the La Vista Subdivision. So that the easement of a right-of-way on your 7 1/2 m. portion was created in our favor and likewise an easement of right-of-way was created on our 7 1/2 m. portion of the road in your favor;" (e) LA VISTA, in its offer to buy the hillside portion of the ATENEO property in 1976, acknowledged the existence of the contractual right-of-way as it manifested that the mutual right-of-way between the Ateneo de Manila University and La Vista Homeowners' Association would be extinguished if it bought the adjacent ATENEO property and would thus become the owner of both the dominant and servient estates; and, (f) LA VISTA President Luis G. Quimson, in a letter addressed to the Chief Justice, received by this Court on 26 March 1997, acknowledged that "one-half of the whole length of (Mangyan Road) belongs to La Vista Assn., Inc. The other half is owned by Miriam (Maryknoll) and the Ateneo in equal portions;"

These certainly are indubitable proofs that the parties concerned had indeed constituted a voluntary easement of right-of-way over Mangyan Road and, like any other contract, the same could be extinguished only by mutual agreement or by renunciation of the owner of the dominant estate. Thus respondent Court of Appeals did not commit a reversible error when it ruledthat —

Concerning the pivotal question posed herein on the existence of an easement, we are of the belief, and thus hereby hold that a right-of-way was properly appreciated along the entire route of Mangyan Road. Incidentally, the pretense that the court a quo erred in holding that Mangyan Road is the boundary road between La Vista and Ateneo (page 31, Appellant's Brief) does not raise any critical eyebrow since the same is wholly irrelevant to the existence of a servitude thereon from their express admission to the contrary (paragraph 1, Answer).

One's attention should rather be focused on the contractual stipulations in the deed of sale between the Tuason Family and the Philippine Building Corporation (paragraph 3, thereof) which were incorporated in the deed of assignment with assumption of mortgage by the Philippine Building Corporation in favor of Ateneo (first paragraph, page 4 of the deed) as well as in the deed of sale dated October 24, 1976 when the property was ultimately transferred by Ateneo to plaintiff-appellee. Like any other contractual stipulation, the same cannot be extinguished except by voluntary rescission of the contract establishing the

servitude or renunciation by the owner of the dominant lots (Chuanico vs. Ibañez, 7 CA Reports, 2nd Series, 1965 edition, pages 582; 589, cited in Civil Law Annotated, by Padilla, Volume II, 1972 Edition, pages 602-603), more so when the easement was implicitly recognized by the letters of the La Vista President to Ateneo dated February 11 and April 28, 1976 (page 22, Decision; 19 Ruling Case Law 745).

The free ingress and egress along Mangyan Road created by the voluntary agreement between Ateneo and Solid Homes, Inc., is thus legally demandable (Articles 619 and 625, New Civil Code) with the corresponding duty on the servient estate not to obstruct the same so much so that —

When the owner of the servient tenement performs acts or constructs works impairing the use of the servitude, the owner of the dominant tenement may ask for the destruction of such works and the restoration of the things to their condition before the impairment was committed, with indemnity for damages suffered (3 Sanchez Roman 609). An injunction may also be obtained in order to restrain the owner of the servient tenement from obstructing or impairing in any manner the lawful use of the servitude (Resolme v. Lazo, 27 Phil. 416; 417; 418)." (Commentaries and Jurisprudence on the Civil Code of the Philippines, by Tolentino, Volume 2, 1963 edition, page 320) 21

Resultantly, when the court says that an easement exists, it is not creating one. For, even an injunction cannot be used to create one as there is no such thing as a judicial easement. As in the instant case, the court merely declares the existence of an easement created by the parties. Respondent court could not have said it any better —

It must be emphasized, however, that We are not constituting an easement along Mangyan Road, but merely declaring the existence of one created by the manifest will of the parties herein in recognition of autonomy of contracts (Articles 1306 and 619, New Civil Code; Tolentino, supra, page 308; Civil Code of the Philippines, by Paras, Volume II, 1984 edition, page 549). 22

The argument of petitioner LA VISTA that there are other routes to LOYOLA from Mangyan Road is likewise meritless, to say the least. The opening of an adequate

outlet to a highway can extinguish only legal or compulsory easements, not voluntary easements like in the case at bar. The fact that an easement by grant may have also qualified as an easement of necessity does not detract from its permanency as a property right, which survives the termination of the necessity. 23

That there is no contract between LA VISTA and Solid Homes, Inc., and thus the court could not have declared the existence of an easement created by the manifest will of the parties, is devoid of merit. The predecessors-in-interest of both LA VISTA and Solid Homes, Inc., i.e., the Tuasons and the Philippine Building Corporation, respectively, clearly established a contractual easement of right-of-way over Mangyan Road. When the Philippine Building Corporation transferred its rights and obligations to ATENEO the Tuasons expressly consented and agreed thereto. Meanwhile, the Tuasons themselves developed their property into what is now known as LA VISTA. On the other hand, ATENEO sold the hillside portions of its property to Solid Homes, Inc., including the right over the easement of right-of-way. In sum, when the easement in this case was established by contract, the parties unequivocally made provisions for its observance by all who in the future might succeed them in dominion.

The contractual easement of right-of-way having been confirmed, we find no reason to delve on the issue concerning P.D. No. 957 which supposedly grants free access to any subdivision street to government or public offices within the subdivision. In the instant case, the rights under the law have already been superseded by the voluntary easement of right-of-way.

Finally, petitioner questions the intervention of some LOYOLA residents at a time when the case was already on appeal, and submits that intervention is no longer permissible after trial has been concluded. Suffice it to say that in Director of Lands v. Court of Appeals, 24 we said —

It is quite clear and patent that the motions for intervention filed by the movants at this stage of the proceedings where trial has already been concluded, a judgment thereon had been promulgated in favor of private respondent and on appeal by the losing party . . . the same was affirmed by the Court of Appeals and the instant petition for certiorari to review said judgment is already submitted for decision by the Supreme Court, are obviously and manifestly late, beyond the period prescribed under . . . Section 2, Rule 12 of the Rules of Court (now Sec. 2, Rule 19, 1997 Rules of Civil Procedure).

But Rule 12 of the Rules of Court, like all other Rules therein promulgated, is simply a rule of procedure, the whole purpose and object of which is to make the powers of the Court fully and completely available for justice. The purpose of procedure is not to thwart justice. Its proper aim is to facilitate the application of justice to the rival claims of contending parties. It was created

not to hinder and delay but to facilitate and promote the administration of justice. It does not constitute the thing itself which courts are always striving to secure to litigants. It is designed as the means best adopted to obtain that thing. In other words, it is a means to an end.

The denial of the motions for intervention arising from the strict application of the Rule due to alleged lack of notice to, or the alleged failure of, movants to act seasonably will lead the Court to commit an act of injustice to the movants, to their successors-in-interest and to all purchasers for value and in good faith and thereby open the door to fraud, falsehood and misrepresentation, should intervenors' claims be proven to be true.

After all, the intervention does not appear to have been filed to delay the proceedings. On the contrary, it seems to have expedited the resolution of the case as the incidents brought forth by the intervention, which could have been raised in another case, were resolved together with the issues herein resulting in a more thorough disposal of this case.

WHEREFORE, the Decision of respondent Court of Appeals dated 22 May 1990 and its Resolution dated 6 September 1990, which affirmed the Decision of the RTC-Br. 89, Quezon City, dated 20 November 1987, are AFFIRMED.

SO ORDERED.

G.R. No. 130845               November 27, 2000

BRYAN U. VILLANUEVA, petitioner, vs.HON. TIRSO D.C. VELASCO in his capacity as Presiding Judge of the Regional Trial Court of Quezon City, Branch 88, JULIO N. SEBASTIAN and SHIRLEY LORILLA, respondents.

D E C I S I O N

QUISUMBING, J.:

This petition for certiorari assails (1) the decision1 dated December 27, 1996 of the Court of Appeals in CA-G.R. SP No. 39166, dismissing petitioner’s petition for review under Rule 65 with prayer for the issuance of a cease and desist order and/or temporary restraining order, and (2) the resolution2 dated August 14, 1997 denying the subsequent motion for reconsideration.

Petitioner Bryan Villanueva is the registered owner of the parcel of land covered by Transfer Certificate of Title No. 127862 of the Register of Deeds of Quezon City. He bought it from Pacific Banking Corporation, the mortgagee of said property. The bank had acquired it from the spouses Maximo and Justina Gabriel at a public auction on March 19, 1983. When petitioner bought the parcel of land there was a small house on its southeastern portion. It occupied one meter of the two-meter wide easement of right of way the Gabriel spouses granted to the Espinolas, predecessors-in-interest of private respondents, in a Contract of Easement of Right of Way. The pertinent portion of the contract dated November 28, 1979, states:

. . . in order to have an access to and from their aforementioned land where their houses are constructed and to have an outlet to Tandang Sora Ave. which is the nearest public road and the least burdensome to the servient estate and to third persons, it would be necessary for them to pass through spouses MAXIMO GABRIEL and JUSTINA CAPUNO’s land and for this purpose, a path or passageway of not less than two (2) meters wide of said spouses’ property is necessary for the use of ROMEO, RODOLFO, NENITA and AURORA ESPINOLA and for all their needs in entering their property.

x x x

WHEREFORE, in view of the fact that the property of the ESPINOLA had been bought by them from MAXIMO CAPUNO, father of MAXIMO GABRIEL, spouses MAXIMO GABRIEL and JUSTINA CAPUNO hereby agree and permit RODOLFO, ROMEO, NENITA and AURORA ESPINOLA and their families to have a permanent easement of right of way over the aforementioned property of said spouses limited to not more than two meters wide, throughout the whole length of the southeast side of said property and as specifically indicated in the attached plan which is made an integral part of this Contract as Annex "A";

This Agreement shall be binding between the parties and upon their heirs, successors, assigns, without prejudice in cases of sale of subject property that will warrant the circumstances.3

Unknown to petitioner, even before he bought the land, the Gabriels had constructed the aforementioned small house that encroached upon the two-meter easement. Petitioner was also unaware that private respondents, Julio Sebastian and Shirley Lorilla, had filed on May 8, 1991, Civil Case No. Q-91-8703, for easement, damages and with prayer for a writ of preliminary injunction and/or restraining order against the spouses Gabriel.4 As successors-in-interest, Sebastian and Lorilla wanted to enforce the contract of easement.

On May 15, 1991, the trial court issued a temporary restraining order. On August 13, 1991, it issued a writ of preliminary mandatory injunction ordering the Gabriels to provide the right of way and to demolish the small house encroaching on the easement. On August 15, 1991, the Gabriels filed a motion for reconsideration

which was also denied. Thus, they filed a petition for certiorari before the Court of Appeals.

On March 26, 1992, the Eighth Division of the Court of Appeals dismissed the petition and upheld the RTC’s issuances. The decision became final and executory on July 31, 1992.5

On January 5, 1995, Judge Tirso Velasco of the RTC in Quezon City, Branch 88, issued an Alias Writ of Demolition. On June 20, 1995, the sheriff tried to demolish the small house pursuant to the writ. Petitioner filed a Third Party Claim with Prayer to Quash Alias Writ of Demolition. He maintains that the writ of demolition could not apply to his property since he was not a party to the civil case. His Third Party Claim with prayer to quash the writ of demolition was denied for lack of merit on August 16, 1995.6 The motion for reconsideration as well as the Supplemental Motion for Reconsideration dated September 12, 1995 were denied on October 19, 1995.7

Petitioner, thereafter, filed a petition for certiorari before the Court of Appeals, docketed as CA-G.R. SP No. 39166, asserting that the existence of the easement of right of way was not annotated in his title and that he was not a party to Civil Case No. Q-91-8703, hence the contract of easement executed by the Gabriels in favor of the Espinolas could not be enforced against him. The Court of Appeals dismissed the petition for lack of merit and denied the reconsideration, disposing thus:

WHEREFORE, the instant petition is hereby dismissed by this court for lack of merit.

No costs considering the failure of private respondents to file their comment, despite notice.8

Hence, this instant petition.

Petitioner now avers that the appellate court erred in declaring,

(1) THAT FOLLOWING THE ESSENCE OF INHERENCE AND INTRANSMISSIBILITY OF AN EASEMENT, A RIGHT OF WAY CAN EXIST EVEN IF THEY ARE NOT EXPRESSLY STATED OR ANNOTATED ON THE TORRENS TITLE;

(2) THAT PETITIONER, AS PROSPECTIVE BUYER, SHOULD HAVE EXERCISED ORDINARY PRUDENCE BY TAKING THE INITIATIVE TO DETERMINE THAT AN EASEMENT HAS BEEN CONSTITUTED ON THE PROPERTY HE INTENDS TO BUY; AND,

(3) THAT IN AS MUCH AS THE HEREIN PETITIONER IS NOT A PARTY TO CIVIL CASE NO. Q-91-8703, HE CANNOT BE BOUND BY ANY JUDGMENT OR ORDER RENDERED THEREIN.9

Primarily, the issue is whether the easement on the property binds petitioner.

Petitioner argues it could not be enforced against him. First, he says that a right of way cannot exist when it is not expressly stated or annotated on the Torrens title. According to him, even if an easement is inherent and inseparable from the estate to which it actively belongs as provided in Art. 617 of the Civil Code,10 the same is extinguished when the servient estate is registered and the easement was not annotated in said title conformably with Section 39 of the Land Registration Law. Second, petitioner points out that the trial court erred when it faulted him for relying solely on the clean title of the property he bought, as it is well-settled that a person dealing with registered land is not required to go beyond what is recorded in the title. He adds that it is private respondents who should have made sure their right of way was safeguarded by having the same annotated on the title with the Register of Deeds. He adds that Section 76 of P.D. No. 152911 also requires that when a case is commenced involving any right to registered land under the Land Registration Law (now the Property Registration Decree), any decision on it will only be effectual between or among the parties thereto, unless a notice of lis pendens of such action is filed and registered in the registry office where the land is recorded. There was no such annotation in the title of the disputed land, according to petitioner. Lastly, since he was not a party to Civil Case No. Q-91-8703, petitioner argues that he cannot be bound by the writ of demolition and be forcibly divested of a portion of his land without having his day in court.

Private respondents Sebastian and Lorilla, for their part, adopted the disquisition of the appellate court as their Comment and asked for the dismissal of the petition and P100,000.00 in damages. In its decision the appellate court, citing the decision of the lower court, stressed that unlike other types of encumbrance of real property, a servitude like a right of way can exist even if they are not expressly stated or annotated as an encumbrance in a Torrens title because servitudes are inseparable from the estates to which they actively or passively belong. Moreover, Villanueva was bound by the contract of easement, not only as a voluntary easement but as a legal easement. A legal easement is mandated by law, and continues to exists unless its removal is provided for in a title of conveyance or the sign of the easement is removed before the execution of the conveyance conformably with Article 64912 in accordance with Article 61713 of the Civil Code.

At the outset, we note that the subject easement (right of way) originally was voluntarily constituted by agreement between the Gabriels and the Espinolas. But as correctly observed by the Court of Appeals, the easement in the instant petition is both (1) an easement by grant or a voluntary easement, and (2) an easement by necessity or a legal easement. A legal easement is one mandated by law, constituted for public use or for private interest, and becomes a continuing

property right.14 As a compulsory easement, it is inseparable from the estate to which it belongs, as provided for in said Article 617 of the Civil Code. The essential requisites for an easement to be compulsory are: (1) the dominant estate is surrounded by other immovables and has no adequate outlet to a public highway; (2) proper indemnity has been paid; (3) the isolation was not due to acts of the proprietor of the dominant estate; (4) the right of way claimed is at a point least prejudicial to the servient estate; and (5) to the extent consistent with the foregoing rule, where the distance from the dominant estate to a public highway may be the shortest.15 The trial court and the Court of Appeals have declared the existence of said easement (right of way). This finding of fact of both courts below is conclusive on this Court,16 hence we see no need to further review, but only to re-affirm, this finding. The small house occupying one meter of the two-meter wide easement obstructs the entry of private respondents’ cement mixer and motor vehicle. One meter is insufficient for the needs of private respondents. It is well-settled that the needs of the dominant estate determine the width of the easement.17 Conformably then, petitioner ought to demolish whatever edifice obstructs the easement in view of the needs of private respondents’ estate.

Petitioner’s second proposition, that he is not bound by the contract of easement because the same was not annotated in the title and that a notice of lis pendens of the complaint to enforce the easement was not recorded with the Register of Deeds, is obviously unmeritorious. As already explained, it is in the nature of legal easement that the servient estate (of petitioner) is legally bound to provide the dominant estate (of private respondents in this case) ingress from and egress to the public highway.1âwphi1

Petitioner’s last argument that he was not a party to Civil Case No. Q-91-8703 and that he had not been given his day in court, is also without merit. Rule 39, Sec. 47, of the Revised Rules of Court:

SEC. 47. Effect of judgments or final orders. – The effect of a judgment or final order rendered by a court of the Philippines, having jurisdiction to pronounce the judgment or final order, may be as follows:

(a) In case of a judgment or final order against a specific thing, or in respect to the probate of a will, or the administration of the estate of a deceased person, or in respect to the personal, political, or legal condition or status of a particular person or his relationship to another, the judgment or final order is conclusive upon the title to the thing, the will or administration, or the condition, status or relationship of the person; however, the probate of a will or granting of letters of administration shall only be prima facie evidence of the death of the testator or intestate;

(b) In other cases, the judgment or final order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their

successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity; and

(c) In any other litigation between the same parties or their successors in interest, that only is deemed to have been adjudged in a former judgment or final order which appears upon its face to have been so adjudged, or which was actually and necessarily included therein or necessary thereto. (Emphasis ours).

Simply stated, a decision in a case is conclusive and binding upon the parties to said case and those who are their successor in interest by title after said case has been commenced or filed in court.18 In this case, private respondents, Julio Sebastian and Shirley Lorilla, initiated Civil Case No. Q-91-8703 on May 8, 1991,19 against the original owners, the spouses Maximo and Justina Gabriel. Title in the name of petitioner was entered in the Register of Deeds20 on March 24, 1995, after he bought the property from the bank which had acquired it from the Gabriels. Hence, the decision in Civil Case No. Q-91-8703 binds petitioner. For, although not a party to the suit, he is a successor-in-interest by title subsequent to the commencement of the action in court.

WHEREFORE, the instant petition is DENIED. The assailed decision and resolution of the Court of Appeals are AFFIRMED. Costs against petitioner.

SO ORDERED.