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Republic SUPREME Manila THIRD DIVISION G.R. No.

173002

of

the

Philippines COURT

July 4, 2008

BENJAMIN BAUTISTA, petitioner, vs. SHIRLEY G. UNANGST and OTHER UNKNOWN PERSONS, respondentS. DECISION REYES, R.T., J.: THE presumption of equitable mortgage imposes a burden on the buyer to present clear evidence to rebut it. He must overthrow it, lest it persist.1 To overturn that prima facie presumption, the buyer needs to adduce substantial and credible evidence to prove that the contract was a bona fide deed of sale with right to repurchase. This petition for review on certiorari impugns the Decision 2 of the Court of Appeals (CA) in CA-G.R. CV No. 85942 3 which reversed and set aside that 4 of the Regional Trial Court (RTC) in an action for specific performance or recovery of possession, for sum of money, for consolidation of ownerships and damages. The Facts On November 15, 1996, Hamilton Salak rented a car from GAB Rent-A-Car, a car rental shop owned by petitioner Benjamin Bautista. The lease was for three (3) consecutive days at a rental fee of P1,000.00 per day.5 However, Salak failed to return the car after three (3) days prompting petitioner to file a complaint against him for estafa, violation of Batas Pambansa Blg. 22 and carnapping. 6 On February 2, 1997, Salak and his common-law wife, respondent Shirley G. Unangst, were arrested by officers of the Criminal Investigation Service Group (CISG) of the Philippine National Police while riding the rented car along Quezon City. The next day, petitioner demanded from Salak at the CISG Office the sum of P232,372.00 as payment for car rental fees, fees incurred in locating the car, attorney's fees, capital gains tax, transfer tax, and other incidental expenses. 7 Salak and respondent expressed willingness to pay but since they were then short on cash, Salak proposed to sell to petitioner a house and lot titled in the name of respondent. Petitioner welcomed the proposal after consulting his wife, Cynthia. Cynthia, on the other hand, further agreed to pay the mortgage loan of respondent over the subject property to a certain Jojo Lee in the amount of P295,000.00 as the property was then set to be publicly auctioned on February 17, 1997. 8 To formalize their amicable settlement, Cynthia, Salak and respondent executed a written agreement. 9 They stipulated that respondent would sell, subject to repurchase, her residential property in favor of Cynthia for the total amount of P527,372.00 broken down, as follows: (1) P295,000.00 for the amount paid by Cynthia to Lee to release the mortgage on the property; and (2) P232,372.00, which is the amount due to GAB Rent-A-Car. Cynthia also agreed to desist from pursuing the complaint against Salak and respondent.10 Respondent and petitioner also executed a separate deed of sale with right to repurchase, 11 specifying, among others, that: (1) respondent, as vendor, shall pay capital gains tax, current real estate taxes and utility bills pertaining to the property; (2) if respondent fails to repurchase the property within 30 days from the date of the deed, she and her assigns shall immediately vacate the premises and deliver

its possession to petitioner without need of a judicial order; and (3) respondent's refusal to do so will entitle petitioner to take immediate possession of the property. 12 Respondent failed to repurchase the property within the stipulated period. As a result, petitioner filed, on June 5, 1998, a complaint for specific performance or recovery of possession, for sum of money, for consolidation of ownership and damages against respondent and other unnamed persons before the RTC of Olongapo City. In his complaint,13 petitioner alleged, among others, that after respondent failed to repurchase the subject realty, he caused the registration of the deed of sale with the Register of Deeds and the transfer of the tax declarations in his name; that respondent failed to pay the capital gains taxes and update the real estate taxes forcing him to pay said amounts in the sum of P71,129.05 and P11,993.72, respectively; and that respondent violated the terms of the deed when she, as well as the other unnamed persons, refused to vacate the subject property despite repeated demands. 14 Petitioner prayed before the RTC that an order be issued in his favor directing respondents to: (1) surrender the possession of the property; (2) pay P150,000.00 for the reasonable compensation for its use from March 7, 1997 to June 7, 1998, plus P10,000.00 per month afterward; (3) pay the amount advanced by petitioner, to wit: P71,129.05 and P11,993.72 for the payment of capital gains tax and real estate taxes, respectively; and P70,000.00 for attorney's fees.15 On June 16, 1998, petitioner filed an amended complaint, 16 reiterating his previous allegations but with the added prayer for consolidation of ownership pursuant to Article 1607 of the Civil Code.17 On the other hand, respondents controverted the allegations in the complaint and averred in their Answer,18 among others, that plaintiff had no cause of action inasmuch as respondent Unangst signed the subject deed of sale under duress and intimidation employed by petitioner and his cohorts; that, assuming that her consent was freely given, the contract of sale was simulated and fictitious since the vendor never received the stipulated consideration; that the sale should be construed as an equitable mortgage pursuant to Articles 1602 and 1604 of the Civil Code because of its onerous conditions and shockingly low consideration; that their indebtedness in the form of arrears in car rentals merely amounts to P90,000.00; and that the instant action was premature as plaintiff had not yet consolidated ownership over the property. Defendants counterclaimed for moral damages in the amount of P500,000.00 and attorney's fees in the amount of P50,000.00, plus P500.00 per appearance. 19 On July 29, 2004, after due proceedings, the RTC rendered a decision in favor of petitioner, disposing as follows: WHEREFORE, judgment is rendered finding the Deed of Sale with Right to Repurchase (Exh. "C") as, indeed, a document of sale executed by the defendant in favor of the plaintiff covering the parcel of land house (sic) situated at Lot 3-B, Blk. 10, Waterdam Road, Gordon Heights, Olongapo City, declared under Tax Declaration Nos. 004-7756R and 7757R (Exhs. "I" and "I1"). The defendant and any person taking rights from her is (sic) ordered to immediately vacate from the place and turn over its possession to the plaintiff. They are likewise directed not to remove any part of the building on the lot. The ownership of the said property is properly consolidated in the name of the plaintiff. The defendant is further ordered to pay to the plaintiff the amount of P10,000.00 a month from March 7, 1997 up to the time possession of the lot and house is restored to the plaintiff representing the reasonable value for the use of the property; the amount of P71,129.05 representing the payment made by the plaintiff on the capital gain taxes and the further amount of P70,000.00 for attorney's fees and the costs of suit. SO ORDERED. 20 Respondents failed to interpose a timely appeal. However, on September 10, 2004, respondent Unangst filed a petition for relief pursuant to Section 38 of the 1997 Rules on Civil Procedure. She

argued that she learned of the decision of the RTC only on September 6, 2004 when she received a copy of the motion for execution filed by petitioner.21 Petitioner, on the other hand, moved for the dismissal of respondent's petition on the ground that the latter paid an insufficient sum of P200.00 as docket fees.22 It appears that respondent Unangst initially paid P200.00 as docket fees as this was the amount assessed by the Clerk of Court of the RTC. 23 Said amount was insufficient as the proper filing fees amount to P1,715.00. Nevertheless, the correct amount was subsequently paid by said respondent on February 22, 2005. 24 In their comment, 25 respondents countered that they should not be faulted for paying deficient docket fees as it was due to an erroneous assessment of the Clerk of Court. 26 The RTC granted the petition for relief. Subsequently, it directed respondents to file a notice of appeal within twenty-four (24) hours from receipt of the order. 27 Accordingly, on February 23, 2005, respondents filed their notice of appeal. 28 Respondents contended before the CA that the RTC erred in: (1) not annulling the deed of sale with right to repurchase; (2) declaring that the deed of sale with right to repurchase is a real contract of sale; (3) ordering the consolidation of ownership of the subject property in the name of petitioner. 29 They argued that respondent Unangst's consent to the deed of sale with right to repurchase was procured under duress and that even assuming that her consent was freely given, the contract partakes of the nature of an equitable mortgage. 30 On the other hand, petitioner insisted, among others, that although the petition for relief of respondents was filed on time, the proper filing fees for said petition were paid beyond the 60-day reglementary period. He posited that jurisdiction is acquired by the court over the action only upon full payment of prescribed docket fees.31 CA Disposition In a Decision32 dated April 7, 2006, the CA reversed and set aside the RTC judgment. 33 The dispositive part of the appellate court's decision reads, thus: IN VIEW OF ALL THE FOREGOING, the instant appeal is hereby GRANTED, the challenged Decision dated July 29, 2004 hereby (sic) REVERSED and SET ASIDE, and a new one entered declaring the Deed of Sale With Right Of Repurchase dated February 4, 1997 as an equitable mortgage. No cost. SO ORDERED. 34 The CA declared that the Deed of Sale with Right of Repurchase executed by the parties was an equitable mortgage. On the procedural aspect pertaining to the petition for relief filed by respondent Unangst, the CA ruled that "the trial court, in opting to apply the rules liberally, cannot be faulted for giving due course to the questioned petition for relief which enabled appellants to interpose the instant appeal."35 It ratiocinated: Appellee recognizes the timely filing of appellants' petition for relief to be able to appeal judgment but nonetheless points out that the proper filing fees were paid beyond the 60-day reglementary period. Arguing that the court acquires jurisdiction over the action only upon full payment of the prescribed docket fees, he submits that the trial court erred in granting appellants' petition for relief despite the late payment of the filing fees. While this Court is fully aware of the mandatory nature of the requirement of payment of appellate docket fee, the High Court has recognized that its strict application is qualified by the following: first, failure to pay those fees within the reglementary period allows only

discretionary, not automatic, dismissal; second, such power should be used by the court in conjunction with its exercise of sound discretion in accordance with the tenets of justice and fair play, as well as with a great deal of circumspection in consideration of all attendant circumstances (Meatmasters International Corporation v. Lelis Integrated Development Corporation, 452 SCRA 626 [2005], citing La Salette College v. Pilotin, 418 SCRA 380 [2003]). Applied in the instant case, the docket fees were admittedly paid only on February 22, 2005, or a little less than two (2) months after the period for filing the petition lapsed. Yet, this matter was sufficiently explained by appellants. The records bear out that appellants initially paid P200.00 as docket fees because this was the amount assessed by the Clerk of Court of the RTC of Olongapo City (p. 273, Records). As it turned out, the fees paid was insufficient, the proper filing fees being P1,715.00, which was eventually paid by appellants on February 1, 2005 (p. 296, Records). As such, appellants cannot be faulted for their failure to pay the proper docket fees for, given the prevailing circumstances, such failure was clearly not a dilatory tactic nor intended to circumvent the Rules of Court. On the contrary, appellants demonstrated their willingness to pay the docket fees when they subsequently paid on the same day they were assessed the correct fees (p. 299, Records). Notably, in Yambao v. Court of Appeals (346 SCRA 141 [2000]), the High Court declared therein that "the appellate court may extend the time for the payment of the docket fees if appellants is able to show that there is a justifiable reason for his failure to pay the correct amount of docket fees within the prescribed period, like fraud, accident, mistake, excusable negligence, or a similar supervening casualty, without fault on the part of appellant." Verily, the trial court, in opting to apply the rules liberally, cannot be faulted for giving due course to the questioned petition for relief which enabled appellants to interpose the instant appeal. 36 On the substantial issues, the CA concluded that "While the records is bereft of any proof or evidence that appellee employed unlawful or improper pressure against appellant Unangst to give her consent to the contract of sale, there is, nevertheless, sufficient basis to hold the subject contract as one of equitable mortgage." 37 It explained: Jurisprudence has consistently held that the nomenclature used by the contracting parties to describe a contract does not determine its nature. The decisive factor in determining the true nature of the transaction between the parties is the intent of the parties, as shown not necessarily by the terminology used in the contract but by all the surrounding circumstances, such as the relative situations of the parties at that time; the attitudes, acts, conduct, and declarations of the parties; the negotiations between them leading to the deed; and generally, all pertinent facts having a tendency to fix and determine the real nature of their design and understanding (Legaspi v. Ong, 459 SCRA 122 [2005]). It must be stressed, however, that there is no conclusive test to determine whether a deed absolute on its face is really a simple loan accommodation secured by a mortgage. In fact, it is often a question difficult to resolve and is frequently made to depend on the surrounding circumstances of each case. When in doubt, courts are generally inclined to construe a transaction purporting to be a sale as an equitable mortgage, which involves a lesser transmission of rights and interests over the property in controversy (Legaspi, ibid.). Article 1602 of the Civil Code enumerates the instances where a contract shall be presumed to be an equitable mortgage when - (a) the price of a sale with right to repurchase is unusually inadequate; (b) the vendor remains in possession as lessee or otherwise; (c) upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed; (d) the purchaser retains for himself a part of the purchase price; (e) the vendor binds himself to pay taxes on the thing sold; and, (f) in any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation (Legaspi, supra; Martinez v. Court of Appeals, 358 SCRA 38 [2001]). For the presumption of an equitable mortgage to arise under Article 1602, two (2) requisites must concur: (a) that the parties entered into a contract denominated as a contract of sale; and, (b) that their intention was to secure an existing debt by way of a mortgage. Any of the

circumstance laid out in Article 1602, not the concurrence nor an overwhelming number of the circumstances therein enumerated, suffices to construe a contract of sale to be one of equitable mortgage (Lorbes v. Court of Appeals, 351 SCRA 716 [2001]). Applying the foregoing considerations in the instant case, there is hardly any doubt that the true intention of the parties is that the transaction shall secure the payment of a debt. It is not contested that before executing the subject deed, Unangst and Salak were under police custody and were sorely pressed for money. Such urgent prospect of prolonged detention helps explain why appellants would subscribe to an agreement like the deed in the instant case. This might very well explain appellants' insistence that Unangst was not truly free when she signed the questioned deed. Besides, there is no gainsaying that when appellee allowed appellants to retain possession of the realty sold for 30 days, as part of the agreement, that period of time surely signaled a time allotted to Salak and Unangst, as debtors, within which to pay their mortgage indebtedness. The High Court, in several cases involving similar situations, has declared that "while it was true that plaintiffs were aware of the contents of the contracts, the preponderance of the evidence showed, however, that they signed knowing that said contracts did not express their real intention, and if they did so notwithstanding this, it was due to the urgent necessity of obtaining funds. Necessitous men are not, truly speaking, free men; but to answer a present emergency, will submit to any terms that the crafty may impose upon them" (Lorbes, ibid.; Reyes v. Court of Appeals, 339 SCRA 97 [2000]; Lao v. Court of Appeals, 275 SCRA 237 [1997]; Zamora v. Court of Appeals, 260 SCRA 10 [1996]; Labasan v. Lacuesta, 86 SCRA 16 [1978]). After all, Article 1602(6) provides that a contract of sale with right to repurchase is presumed to be an equitable mortgage in any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any obligation. In fine, a careful review of the records convincingly shows that the obtaining facts in this case qualify the controversial agreement between the parties as an equitable mortgage under Article 1602 of the New Civil Code.38 Issues Petitioner has resorted to the present recourse under Rule 45, assigning to the CA the following errors: (a) The Honorable Court of Appeals committed grave error in finding that the respondent perfected an appeal via Petition for Relief To Be Able To Appeal Judgment even when the proper docket fees were paid beyond the period prescribed to bring such action under Section 3 of Rule 38 of the 1997 Rules of Civil Procedure in relation to the pronouncements by the Honorable Court in the cases of Philippine Rabbit Bus Lines, Inc. v. Arciaga [148 SCRA 433], Philippine Pryce Assurance Corp. v. Court of Appeals [148 SCRA 433] and Sun Insurance Office, Ltd. v. Asuncion [170 SCRA 274]. (b) The Honorable Court of Appeals erred on a question of law in reversing the Decision of the Court a quo finding the Deed of Sale with Right to Repurchase a document of sale executed by the respondent in favor of the petitioner and in further holding such contract as one of equitable mortgage.39 Our Ruling On the first issue, petitioner contends that respondents' "Petition for Relief to Be Able to Appeal Judgment," which paved the way for the allowance of respondents' appeal of the RTC decision, was filed within the prescriptive period but the proper docket fees for it were belatedly paid. 40 He thus posits that the RTC did not acquire jurisdiction over said petition. Having no jurisdiction, the RTC could not have allowed respondents to appeal. On this issue, respondent counters that the belated payment of proper docket fees was not due to their fault but to the improper assessment by the Clerk of Court. Respondent asserts the ruling of the

the Court relaxed the rigid application of the rules of procedure to afford the parties the opportunity to fully ventilate their cases on the merits. She merely secured the payment of the unpaid car rentals and the amount advanced by petitioner to Jojo Lee. He added that the "language and terms of the Deed of Sale with Right to Repurchase executed by respondent in favor of the petition are clear and unequivocal. Article 1602 of the New Civil Code provides that the contract is presumed to be an equitable mortgage in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate. if it be the case."52 We cannot agree. respondent argues that petitioner failed to contest the RTC Order dated February 21. The right to appeal is a purely statutory right. the ends of justice would be better served. whenever the purposes of justice require it. 46 The emerging trend in the rulings of this Court is to afford every party-litigant the amplest opportunity for the proper and just determination of his cause. rather than on a technicality. 45 For.CA that the court may extend the time for the payment of the docket fees if there is a justifiable reason for the failure to pay the correct amount. Said contract must be construed with its literal sense.41 For this reason. Petitioner failed to file a motion for reconsideration or a petition for certiorari to the higher court to question said order. free from the constraints of technicalities. According to petitioner. The transaction between the parties is one of equitable mortgage and not a sale with right to purchase as maintained by petitioners. To penalize such citizen for relying upon said officer in all good faith is repugnant to justice. Their failure to pay the correct amount of docket fees was due to a justifiable reason. as this Court ruled in Aranas v. the right to appeal may be exercised only in the manner and in accordance with the rules provided therefor." 49 Technicality and procedural imperfections should thus not serve as bases of decisions.48 the Court ruled that where an appellant in good faith paid less than the correct amount for the docket fee because that was the amount he was required to pay by the clerk of court. it is error to dismiss his appeal because "(e)very citizen has the right to assume and trust that a public officer charged by law with certain duties knows his duties and performs them in accordance with law. 47 As early as 1946. indeed. 42 Nevertheless. in Segovia v. It is always within the power of this Court to suspend its own rules. 50 In that way. This is in line with the time-honored principle that cases should be decided only after giving all parties the chance to argue their causes and defenses. . 2004 that allowed the payment of supplementary docket fees. the general objective of procedure is to facilitate the application of justice to the rival claims of contending parties. and he promptly paid the balance. Not being a natural right or a part of due process. it is far better to dispose of a case on the merit which is a primordial end. Respondent is correct in alleging that the deed of sale with right to repurchase qualifies as an equitable mortgage under Article 1602. Endona. the deed should not be construed as an equitable mortgage as it does not fall under any of the instances mentioned in Article 1602 of the Civil Code where the agreement can be construed as an equitable mortgage. Barrios. 51 We go now to the crux of the petition. or to except a particular case from their operation. For. Should the deed of sale with right to repurchase executed by the parties be construed as an equitable mortgage? This is the pivotal question here. payment of the full amount of the appellate court docket and other lawful fees within the reglementary period is mandatory and jurisdictional. We agree with respondents.44 In not a few instances. Moreover. bearing always in mind that procedure is not to hinder but to promote the administration of justice. that may result in injustice.43 the strict application of the jurisdictional nature of the above rule on payment of appellate docket fees may be mitigated under exceptional circumstances to better serve the interest of justice.

the vendor remains in possession. The rule is firmly settled that whenever it is clearly shown that a deed of sale with pacto de retro. petitioner allowed respondent and Salak to retain the possession of the property despite the execution of the deed. the legal title to the property is immediately transferred to the vendee. It was at this point that respondent was constrained to execute a deed of sale with right to repurchase. said contract is indubitably an equitable mortgage. Fact is. regular on its face. However. car rental payments. petitioner. truly speaking. Jojo Lee. (6) In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. 58 It discloses. in the alleged vendee. 54 "Necessitous men are not.59 Third. When the vendor is in urgent need of money when he executes the sale. it is likewise undisputed that the deed was executed by reason of: (1) the alleged indebtedness of Salak to petitioner. since it was executed in consideration of the aforesaid loans and/or indebtedness. 53 (Emphasis ours) The conclusion that the deed of sale with right to repurchase is an equitable mortgage is buttressed by the following: First. as a lessee or otherwise. fruits. 57 The reason for the presumption lies in the fact that in a contract of sale with pacto de retro. is given as security for a loan. but to answer a present emergency will submit to any terms that the crafty may impose upon them. and (2) respondent's own obligation to petitioner." 55 Second. therefore. There can be no consent when under force or duress. 60 Apparently. Retention. that is. the deed purports to be a sale with right to purchase.61 . as they would not be released from custody unless they paid petitioner. the purchase price stated in the deed was the amount of the indebtedness of both respondent and Salak to petitioner. or other benefit to be received by the vendee as rent or otherwise shall be considered as interest which shall be subject to the usury laws. (4) When the purchaser retains for himself a part of the purchase price. reimbursement of what petitioner paid to the mortgagee. It is established that respondent signed the deed only because of the urgent necessity of obtaining funds. In any of the foregoing cases. Respondent was in no position whatsoever to bargain with their creditor. 56 Where in a contract of sale with pacto de retro. any money. respondent and Salak were not bound to deliver the possession of the property to petitioner if they would pay him the amount he demanded. it must be regarded as an equitable mortgage. subject to the vendor's right to redeem. (3) When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed. free men. They were sorely pressed for money. by the vendor of the possession of the property is inconsistent with the vendee's acquisition of the right of ownership under a true sale. (5) When the vendor binds himself to pay the taxes on the thing sold. respondent and Salak were under police custody due to the complaint lodged against them by petitioner. the alleged sale with pacto de retro will be construed as an equitable mortgage. Nel consensui tam contrarium est quam vis atqui metus. the contract shall be presumed to be an equitable mortgage. In fact.(2) When the vendor remains in possession as lessee or otherwise. before executing the deed. that is. Bale wala ang pagsang-ayon kung ito'y nakuha sa pamimilit o paraang di malaya. a lack of interest in the property that belies the truthfulness of the sale a retro.

such as the circumvention of the laws against usury and pactum commissorium. SO ORDERED. 4 5 6 . 593.63 the Court held that: The decisive factor in evaluating such agreement is the intention of the parties. Chairperson. Nachura. with the stringent and onerous effects which follow. conduct. 62 Moreover. Id. Penned by Judge Eliodoro G. 2005. Jr. Id. We have no doubt that the transaction between the parties is that of a loan secured by said property by way of mortgage." In this case. an equitable mortgage under paragraphs 2 and 6 of Article 1602 exists here. 1997. all pertinent facts having a tendency to fix and determine the real nature of their design and understanding. In Lorbes v. Vasquez. Ynares-Santiago. documentary and parol evidence may be submitted and admitted to prove the intention of the parties. any other construction can fairly and reasonably be made. Sarao. 2 Rollo. 48-56. the negotiations between them leading to the deed. at 35-36. acts.65 WHEREFORE. concurring.. 149756. 35-47.R. a contract purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. 3 Entitled "Benjamin Bautista v. such construction will be adopted and the contract will be construed as a mere loan unless the court can see that. under the terms of the writing. the petition is DENIED for lack of merit. at 36. as defined by the Civil Code. Penned by Associate Justice Conrado M. De Leon. unless the terms of the document and the surrounding circumstances require it. Court of Appeals. concur. pp. under Article 1603 of the Civil Code it is provided that: "(i)n case of doubt. They are more than sufficient to show that the true intention of the parties is to secure the payment of said debts. Footnotes 1 Ramos v. 121027. Unangst and Other Unknown Persons. Shirley G. 116. such as the relative situation of the parties at that time. Ubadias. are not favored.. JJ. We will not construe instruments to be sales with a right to repurchase. and generally. Tison v. February 11. Court of Appeals. G. 276 SCRA 582. Whenever. it is not an unconscionable one.64 Article 1602 of the Civil Code is designed primarily to curtail the evils brought about by contracts of sale with right of repurchase. No. Sales with rights to repurchase. Del Castillo and Magdangal M. pp. the attitude." Rollo. Verily. G. As such. Austria-Martinez. the existence of one circumstance is enough. July 31. Settled is the rule that to create the presumption enunciated by Article 1602.The above-mentioned circumstances preclude the Court from declaring that the parties intended the transfer of the property from one to the other by way of sale. with Associate Justices Mariano C. declarations of the parties. No. as shown not necessarily by the terminology used in the contract but by all the surrounding circumstances. if enforced according to its terms. 451 SCRA 103.R. Chico-Nazario.

40. at 48-56. at 37-38. 41. Records. Id. 28. Rollo. 42. 82. 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 . at 37. Id. Id. 37. Rollo. 39-40. Id. at 41. 284. Rollo. 84. 38. Id. 41. Rollo. CA rollo. at 57-58. Id. at 312. pp.7 Id. p. p. Id. 290. p. p. pp. p. at 36-37. at 43. p. Records. p. p. p. records. Id. Id. p. Id. 308. Id. Id. Records. Records. 1. p. Rollo. Records. 38. records. at 62-63. p. Rollo. at 35-47. Records. p. Rollo. Records. 264-265. p. p. 32.

G. Luriz. Court of Appeals. January 26. No. 566. 142950.R. July 20. citing Ginete v. L-32719. G. 528. at 43. 213. G. Inc. Equitable PCI Bank v. 49 50 G. 767 (1946). Id. 330 SCRA 208. Ku. Food Corporation Employees Union-Associated Labor Unions v. 142248. No. 108870.R. 473 SCRA 559. 1998. v. April 43 140162. Corporate Inn Hotel v.34 Id. 411 SCRA 621. Inc. Chronicle Securities Corporation v. G. 357 Phil. September 23. 152998. No. 764. 137761. 408 SCRA 523. Court of Appeals. Corporate Inn Hotel v. 758. at 18-19. see Bank of America.R.R. July 9. 577. No. 429 SCRA 573. 165648. Court of Appeals. 117 SCRA 753. Galant Maritime Services. 2000. August 7. 36 (1998). Lazaro v. 213. G. 1982. Serrano v. May 27. 626.R. 151833. v. 2001. 2006. 230 SCRA 9. 485 SCRA 203. 158992. Carpo. G. 316-317. 51 Asian Spirit Airlines v. G.R. No.R. G. No. at 42-43. 2004. 1995. Lizo. 451 SCRA 294. 2003. 246 SCRA 304. 166594. G. supra note 42. 570.R. November 22.R. 2005. 495 SCRA 807. Gerochi. Bautista. G. February 10. Lizo. supra..R. 513 SCRA 140. No. p. Crystal Shipping. 30. v. 148279. 444 SCRA 342. 2003. G. v. Court of Appeals. G. 397 SCRA 563. 106564. 2006. 301. 345 SCRA 579.R. 148. Ong. of Appeals. 42 Ayala Land. at 21-23. Id. No. 1994. Añonuevo. 2003. at 41-43. 316. 35 36 37 38 39 40 41 Republic v. G. . Natividad. 154798.R. 46 Gutierrez v.R. 1996. No. Inc. Secretary of the Department of Labor and Employment. 164668. Inc. February 14. Id. Id. 292 SCRA 243. 142440. NT & SA v.R. 157907. G. 355 SCRA 309. March 23. El Reyno Homes. 47 Id. 2004. February 17. Philippine National Bank v. El Reyno Homes. No. 44 Chronicle Securities Corporation v. Ayala Land. 52 Rollo. July 14. 348-349. 15.R.R. No. December 16. at 46. Ciudad Fernandina G. Jr. 584. 45 Eastland Construction & Development Corporation v. Court 6. No. 130118. November 28. National Labor Relations Commission. November 25.R. 2004. v. March 26.R. Inc. Court of Appeals. 2007. at 767. No. 823. G. Id. G. v.. Inc. No. No.Videogram Regulatory Board v. Ong. 48 75 Phil. Mortel. 73210. 251-252. Id. October 20. Id. No. 120. 265 SCRA 50. Carpo. Republic v. 2005. Court of Appeals. No. October 23. National Labor Relations Commission. 2000.R. No. at 43-46. No. 447 SCRA 107. 143. G. supra note 44.

100. at 158-159. 63 Phil. Deala.R. MEGA PRIME REALTY AND HOLDINGS CORPORATION. L-46307. 1965. Vol.R. Republic SUPREME Manila THIRD DIVISION G. G. No. Civil Law. 457 SCRA 263. Rollo. G. 1987. A.R. 1992 ed. No. Court of Appeals. No. Padilla. February 15. 1989. 2005. Cuyugan v. Court of Appeals. 189. June 29. Commentaries and Jurisprudence on the Civil Code of the Philippines. 180 SCRA 635. 439 SCRA 35. 19 Phil..R. . No. Sarabia. at 646. No. V.R. L-20901. 2004. December 29. 42108. x-------------------------x G. October 30. 86 SCRA 16. 154 SCRA 530. L-25931. 64 Ramos v.M. Court of Appeals. Vol. G.. 54 Tolentino. 65 (1911) and Aquino v. Bundalian v. citing Labasan v. citing Balatero v. supra note 61. G. petitioner.R. 35-37. 14 SCRA 1041. p. 55 Agas v. Id. No. 351 SCRA 716. 65 Id. 57 58 59 60 61 G. 1985. Linsangan.R. No. 45. citing Santos v. PHILIPPINE NATIONAL BANK. 1987 ed. 156447. G. 173456 October 6. April 26. 1984.. No. 139 SCRA 179. 582 (1936). pp. No. Ramos v. Court of Appeals. Court of Appeals. L-55739. 1978. 173454 of the Philippines COURT October 6.. Serrano v. L-73889. 279. No. Santos. 140357. Civil Code Annotated. A. 160.R. September 30. 57. June 22. Sabico. 63 G. petitioner. Duata. MEGA PRIME REALTY AND HOLDINGS vs.. 129 SCRA 645. respondent. at 159. G. 62 Id. No. V. Lacuesta. 111 (1916). G. October 9. 34 Phil. respondent. 2001. 44-45. 130 SCRA 245. Intermediate Appellate Court. 726. No. and Capulong v. at 649. 2008 PHILIPPINE NATIONAL BANK. 645. pp.R. p. G. vs. 2008 CORPORATION.R. 56 Rollo. 454. 139884. August 31. 1984.R. September 24.53 See Lopez v. See note 54.R. citing Padilla v. L-61337.

R. as vendor.562.000. the Vendee has offered to buy all of the stockholdings of the Vendor in PNBMADECOR with an authorized capital stock of P250. The pertinent portions of the deed of sale are hereunder quoted as follows: WHEREAS. transferred and conveyed to Mega Prime. . is a wholly-owned subsidiary of the vendor. WHEREAS.x-------------------------x DECISION REYES. a corporation organized and existing under the laws of the Republic of the Philippines. which reversed and set aside that of the Regional Trial Court (RTC) in Malabon City.000. (ii) P50. with principal office at PNB Financial Center. and the Philippine National Bank (PNB). as summarized by the appellate court. 1997.00). are as follows: Mega Prime filed a complaint for annulment of contract before the RTC of Malabon on November 28. J. it opted to sell or dispose of all its stockholdings over PNB-Madecor to Mega Prime. the RTC invalidated the sale of shares of stock in PNB Management and Development Corporation (PNB-Madecor) by and between Mega Prime Realty Corporation (Mega Prime). Roxas Boulevard. The principle is illustrated in these consolidated petitions for review on certiorari of the Decision1 and Resolution 2 of the Court of Appeals (CA) in CA-G. An amended complaint was subsequently filed on February 17.. that PNB operates a subsidiary by the name of PNB Management and Development Corporation. 1996 was executed between PNB (as vendor) and Mega Prime (as vendee) whereby PNB sold.000. In line with PNB's privatization plan. Metro Manila. 66759. the parties have previously agreed for the Vendee to pay the Vendor the purchase price of all the said stockholdings of the Vendor.00 on or before July 18. a breach in the warranties of the seller entitles the buyer to a proportionate reduction of the purchase price. as follows: (i) P50. and (iii) Balance of the purchase price through loan with the Vendor.562. among others. all of its stockholdings in PNB-Madecor for the sum of Five Hundred Five Million Six Hundred Twenty Thousand Pesos (P505. subject to the condition that if the Vendee fails to pay the second installment. Pasay City. for and in consideration of the foregoing premises and the sum of PHILIPPINE PESOS: FIVE HUNDRED FIVE MILLION SIX HUNDRED TWENTY (P505. 1996 which has been paid.000. Earlier. Mega Prime alleged. a deed of sale dated September 27.00 on or before September 27. WHEREAS. as vendee. THEREFORE. In its amended complaint. 1996.: IN sales of realty.000.00 and the Vendor has accepted the said offer. 1998. the agreement to sell the said stockholdings will be cancelled and the initial 10% down payment will be forfeited in favor of the Vendor.620. The Facts The facts. PNB Management and Development Corporation (PNB-MADECOR). NOW. on "As is where is" basis.000.T.620.00). Thereafter.R. CV No.

unto and in favor of the Vendee." "D. 160470 covers real property located right in the middle of the Pantranco property rendering nugatory the plans set up by Mega Prime for the said property. including receivables shall be transferred to the Vendee." "C. . subject to the following terms and conditions: 1. of Shares 313. namely: TCT Nos." and "F" hereof. to the terms of the above-quoted deed of sale.496. fixtures and equipment. m. and no deposits. furniture. 1996) for P404.080 square-meter property located at the corner of Quezon Avenue and Roosevelt Avenue referred to as the Pantranco property. the parties also entered into a loan agreement on the same date (September 27. i.000.. per Annexes "B. 87881. 87882. transfers and conveys. therefore. x x x Pursuant. the Vendor hereby sells.496. However. Leasehold rights of the Vendor on the Numancia property are excluded from this sale.000. on "As is where is" basis. free from any liens and encumbrances. Mega Prime then entered into a joint venture to develop the Pantranco property. Mega Prime's joint venture partner pulled out of the agreement when it learned that the property covered by Transfer Certificate of Title (TCT) No.e. as evidenced by the following Certificates of Stock (the "Certificates of Stock"): Number 0010 0002 0003 0004 0005 0006 0008 0009 0012 0013 No. the lot plan of the Pantranco property shows that TCT No. specifically the 19. 160470 was likewise the subject matter of another title registered in the name of the City Government of Quezon City (TCT No." and any subscription rights thereto. all of the Vendor's stockholdings in PNB-MADECOR.871 1 1 1 1 1 1 1 1 1 hereto attached as Annex "A. however. and 160470. The sale of the above stockholdings of the Vendor is on a clean balance sheet.00 and Mega Prime executed in favor of PNB a promissory note for the P404.receipt of which in full is hereby acknowledged. 87884.080 sq. RT-9987 [266573]). Mega Prime further alleged that one of the principal inducements for it to purchase the stockholdings of defendant PNB in PNB-Madecor was to acquire assets of PNB-Madecor. except real properties and improvements thereon of PNB-MADECOR in Quezon City containing an area of 19. lease of the Mandy Enterprises and sub-leases thereon shall be honored by the Vendor which shall become the sub-lessor of the said property. situated at the corner of Quezon Boulevard (presently Quezon Avenue) and Roosevelt Avenue covered by five (5) titles. 87883. its assigns and successorsin-interest. all assets and liabilities are squared. Moreover." "E.00.

as actual damages. PNB maintains that the subject matter of the deed of sale was PNB's shares of stock in PNB-Madecor which is a separate juridical entity.00) loan intended by plaintiff in developing the Pantranco properties. Only a proper proceeding may determine which of the two (2) titles should prevail over the other. as follows: (1) Declaring the Deed of Sale of 27 September 1996 as void and rescinded. that the Quezon City Government was able to secure another title over the lot covered by TCT No. 160470. Mega Prime also sought reimbursement of the P150. but remained owned by PNB-Madecor.00 allegedly incurred by Mega Prime for the development of the Pantranco property since Mega Prime itself alleged in its amended complaint that no such development could be undertaken. (4) Ordering defendant PNB to pay plaintiff the sum of ONE HUNDRED THOUSAND PESOS (P100. In its answer to the amended complaint. premises considered.124.000.000. should have instead filed action to quiet PNB-Madecor's title over the said lot. The fallo of the RTC decision states: WHEREFORE. bought the shares of stock at its own risk under the caveat emptor rule. However.000. The sale of PNB's shares of stock in PNB-Madecor to Mega Prime did not dissolve PNB-Madecor.000.3 RTC and CA Dispositions On December 21.000. As stockholder of PNB-Madecor. (2) Ordering the defendant PNB to reimburse plaintiff the legal interest on the amount of ONE HUNDRED FIFTY MILLION PESOS (P150. According to PNB. Moreover.000. PNB denied that it is liable for P150. more so considering that the sale was made on an "as is where is" basis.000.00) . the same being a road owned by the Quezon City Government. Moreover. Mega Prime. 160470.000. the subject property was outside the commerce of man.00 plus legal interest incurred by Mega Prime as expenses for the development of the Pantranco property as actual damages and further sought moral and exemplary damages and attorney's fees. as buyer.000. 1999. now as the controlling stockholder of PNB-Madecor. judgment is hereby rendered in favor of plaintiff and against the defendant. and not the properties owned by the latter as evidenced by the deed itself. (5) Ordering defendant to restore to plaintiff the sum of ONE HUNDRED ONE MILLION ONE HUNDRED TWENTY-FOUR THOUSAND PESOS (P101.00) as attorney's fees.Mega Prime sought the annulment of the deed of sale on ground that PNB misrepresented that among the assets to be acquired by Mega Prime from the sale of shares of stock was the property covered by TCT No. the fact that the Quezon City Government was able to secure a title over the same lot does not necessarily mean that PNB-Madecor's title to it is void or outside the commerce of man. the RTC gave judgment in favor of Mega Prime and against PNB.000. PNB did not know nor was it in a position to know. (3) Ordering defendant PNB to pay plaintiff the sum of FIVE MILLION PESOS (P5. Mega Prime.00) as exemplary damages. Mega Prime's accusation that there was fraudulent misrepresentation on the former's part is without basis. The real properties of PNB-Madecor did not change ownership. PNB only transferred its control over PNB-Madecor to Mega Prime. The best evidence of their transaction is the subject deed of sale which clearly shows that what PNB sold to Mega Prime was PNB's stockholdings in PNBMadecor.

4 PNB elevated the matter to the CA via Rule 41 of the 1997 Rules of Civil Procedure. is hereby REVERSED and SET ASIDE and a new one entered DISMISSING the complaint in Civil Case No. a corporation separate and distinct from PNB. disposing as follows: WHEREFORE. the CA reversed and nullified the RTC ruling. SO ORDERED. Branch 72. (6) Ordering plaintiff to return the five properties covered by T. 87882. 87881. ignoring the documentary evidence proving that Mega Prime's complaint was intended to preempt the foreclosure of the pledge and evade payment of its P404. based on the above premises. inter alia.T.R. 2006. (7) Ordering plaintiff to return the stockholdings subject matter of the 27 September 1996 contract of sale in favor of defendant. The counterclaim of PNB is likewise DISMISSED. 6 Hence. PNB claimed that Mega Prime bought its shares of stock at its own risk under the caveat emptor rule. Metro Manila.C. it being a reputable real estate company. as the new controlling owner of PNB-Madecor. In its appeal. Mega Prime challenged the reversal by the CA of the RTC decision. docketed as G. 5 Both parties moved for reconsideration of the CA decision. (8) Ordering defendant to pay the costs of suit. 2006. however. No. Nos. 173454. On January 27. that Mega Prime is presumed to have undertaken due diligence in ascertaining the ownership of the disputed property. that what was sold to Mega Prime were the bank's shares of stock in PNB-Madecor. the assailed Decision dated 21 December 1999 of the Regional Trial Court of Malabon. SO ORDERED.representing the sum actually paid by plaintiff under the subject contract of sale with legal interest thereon reckoned from the date of extra judicial demand made by plaintiff. Mega Prime's remedy. Further. as the sale was on an "as is where is" basis. Both motions were. 87883. That the Quezon City Government was able to secure title over the same lot does not necessarily mean that PNBMadecor's title to it was void or outside the commerce of man. In its separate petition for review. assailing only the CA's dismissal of its counterclaim. in concluding that Mega Prime's complaint was not a mere ploy to prevent the foreclosure of the pledge and in dismissing PNB's counterclaim. PNB contended.00 overdue debt. . No.000. that the Pantranco property was never a consideration in the contract of sale. giving rise to a question of law. the present recourse by both PNB and Mega Prime. 173456. 87884 and 160470 in favor of the defendant under the principle of mutual restitution. 2793-MN.496. PNB first filed its petition for review. docketed as G. denied with finality on July 5. Issues PNB assigns solely that the CA committed a grave error.R. According to PNB. is to file an action for quieting of its title to the questioned lot.

these presumptions can be overcome only by clear and preponderant evidence. In fact. This is so because TCT No. In other words. Thus. the Court is tasked to resolve the following questions: A. 160740 in the name of the Quezon City government before and during the execution of the deed of sale. the law requires that it be established by clear and convincing evidence. We quote with approval the CA observations along this line: Well-settled is the rule that the party alleging fraud or mistake in a transaction bears the burden of proof. Are PNB and Mega Prime entitled to the damages they respectively claim against each other? Our Ruling A. PNB correctly argued that with Mega Prime as a corporation principally engaged in real estate business it is presumed to be experienced in its business and it is assumed that it made the proper appraisal and examination of the properties it would acquire from the sale of shares of stock. 1996 annulled. there was full disclosure on the part of PNB of the status of the properties of PNB-Madecor to be transferred to Mega Prime by reason of its purchase of all of PNB's shareholdings in PNB-Madecor. it may be committed in as many different ways. it is presumed that "a person is innocent of crime or wrong" and that "private transactions have been fair and regular. Although it is expressly stated in the deed of sale that the transfer of the entire stockholdings of PNB in PNB-Madecor will effectively result in the transfer of the said properties. There is no sufficient ground to annul the deed of sale. it is good faith that is. it cannot be said that Mega Prime was able to adduce a preponderance of evidence before the trial court to show that PNB fraudulently misrepresented that it had title or authority to sell the property covered by TCT No." While disputable. 160470. Any defect in any of the said titles should not. 87884 and 160740. the discovery of the title under the name of the Quezon City government does not substantially affect the integrity of the object of the sale. Mega Prime submits that the CA erred in ruling that Mega Prime did not have sufficient grounds to have the deed of sale dated September 27. 87882. The circumstances evidencing fraud are as varied as the people who perpetrate it in each case. Stripped to its bare essentials. Mega Prime was given copies of the titles to the properties which were attached to the subject deed of sale. not the properties covered by TCT Nos. the presumption is in favor of validity and regularity. It may assume different shapes and forms. A perusal of the deed of sale reveals that the sale principally involves the entire shareholdings of PNB in PNBMadecor. Further.70 square meters of the entire Pantranco property which has a total area of 19. . therefore. Nor was Mega Prime able to satisfactorily show that PNB should be held liable for damages allegedly sustained by it. 87881. 160740 covers only 733. 87883. there is no evidence that PNB was aware of the existence of another title on one of the properties covered by TCT No. First. Are there grounds for the annulment of the deed of sale between PNB and Mega Prime? and B. In this case. There is no basis for a finding of fraud against PNB to invalidate the sale.For its part. affect the entire sale. Fraud is never lightly inferred. Applied to contracts. Under the Rules of Court.080 square meters.

A perusal of TCT No. in the exercise of judicial discretion step in to prevent the abuses of separate entity privilege and pierce the veil of corporate fiction. 160470 itself which describes the property it covers as a road lot. The mere fact that a corporation owns all of the stocks of another corporation.The general rule is that a person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the need of making further inquiries. and is not affected by the personal rights. 160470 explicitly shows on its face that it covers a road lot. 160470 is outside the commerce of man. admittedly. If used to perform legitimate functions. Mega Prime cannot therefore claim that it can rely on the face of the title when the same is neither registered under the name of PNB. Mega Prime should have insisted on putting in writing. Second. Moreover. indeed. taken alone is not sufficient to justify their being treated as one entity. any condition or understanding of the parties regarding the transfer of titles from PNB-Madecor to Mega Prime. This rule. obligations and transactions of the latter. since this fact is evident on the face of TCT No. This should have forewarned Mega Prime to inquire further into the ownership of PNB-Madecor with respect to TCT No. Clearly. the vendor of the shares of stock in PNB-Madecor. admits of exceptions: when the party has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. And it should not be heard to complain that the property covered by TCT No. It must be stressed that PNB only sold its shares of stock in PNB-Madecor which remains to be the owner of the lot in question. If. nor of PNB-Madecor. TCT No. the alleged owner of the said property. this does not necessarily mean that PNB and PNB-Madecor are one and the same corporation. the alleged owner of the property. investing millions of pesos on the said purchase. it being a road. however. Mega Prime purchased the shares of stock of PNB in PNBMadecor on an "as is where is" basis. . under the deed of sale. This fact notwithstanding. Courts may. (b) The parent and subsidiary corporations have common directors or officers. a subsidiary's separate existence shall be respected. Although. Mega Prime's remedy is not with PNB. however. and the liability of the parent corporation as well as the subsidiary will be confined to those arising in their respective business. The following circumstances are useful in the determination of whether a subsidiary is but a mere instrumentality of the parent-corporation and whether piercing of the corporate veil is proper: (a) The parent corporation owns all or most of the capital stock of the subsidiary. the principal inducement for Mega Prime to buy PNB's shares of stock in PNBMadecor was the acquisition of the said properties. The general rule is that as a legal entity. which should give Mega Prime more reason to investigate and look deeper into the titles of PNB-Madecor. 160470 would show that the property is registered under the name Marcris Realty Corporation and not under PNB or PNB-Madecor. Mega Prime assumed the risks that may attach to the said purchase or said investment. a corporation has a personality distinct and separate from its individual stockholders or members. (c) The parent corporation finances the subsidiary. whether in the same deed of sale or in a separate agreement. PNB-Madecor is a subsidiary of PNB. Mega Prime still opted to buy PNB's shares of stock. 160470. In buying the shares of stock with notice of the flaw in the certificate of title of PNB-Madecor.

in anticipation of owning properties owned by PNBit was found out later that a title in the name of the Quezon City cloud over PNB-Madecor's title to the so-called Pantranco Properties. (i) The parent corporation uses the property of the subsidiary as its own. or its business or financial responsibility is referred to as the parent corporation's own. Lastly. PNB presented to Mega Prime the titles to the properties. The evidentiary value of a notarial document guaranteed by public attestation in accordance with law must be sustained in full force and effect unless impugned by strong. convincing and more than merely preponderant. Mega Prime.(d) The parent corporation subscribes to all the capital stock of the subsidiary or otherwise causes its incorporation. but take their orders from the parent corporation. 160470. there is no reason to annul the said deed considering that both parties freely and fairly entered into the said contract presumptively knowing the consequences of their acts. This . It is admissible in evidence without further proof of its authenticity and is entitled to full faith and credit upon its face. However. the subsidiary is described as a department or division of the parent corporation. (e) The subsidiary has grossly inadequate capital. and it carries the evidentiary weight conferred upon it with respect to its due execution. With the exception of one (1) title. respecting shares of Madecor. 160470. Thus. (j) The directors or executives of the subsidiary do not act independently in the interest of the subsidiary. TCT No. the four (4) titles are registered under PNB-Madecor's name and not PNB. Government casts a using its business judgment. there must be evidence that is clear. Third. Based on the above arguments. As such. (g) The subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to or by the parent corporation. It has in its favor the presumption of regularity. PNB correctly observed that Mega Prime's remedy is not to go after PNB who merely sold its shares of stock in PNBMadecor but to file the appropriate action to remove any cloud in PNB-Madecor's title over TCT No. (h) In the papers of the parent corporation or in the statements of its officers. complete and conclusive proof. Aside from the fact that PNB-Madecor is a wholly-owned subsidiary of PNB. (f) The parent corporation pays the salaries and other expenses or losses of the subsidiary. (k) The formal legal requirements of the subsidiary are not observed. there are no other factors shown to indicate that PNB-Madecor is a mere instrumentality of PNB. Therefore. It must be noted that at the outset. unequivocal manner therein expressed. PNB's separate personality cannot be merged with PNB-Madecor in the absence of sufficient ground to pierce the veil of corporate fiction. To contradict all these. It has long been settled that a public document executed and attested through the intervention of the notary public is evidence of the facts in clear. it has in its favor the presumption of regularity. it is significant to note that the deed of sale is a public document duly notarized and acknowledged before a notary public. entered into a sale transaction with PNB stock in PNB-Madecor.

Mega Prime cannot be relieved from its obligation. pledgee. One of the express conditions in the deed of sale is the transfer of the properties under TCT Nos. situated at the corner of Quezon Boulevard (presently Quezon Avenue) and Roosevelt Avenue covered by five (5) titles namely: TCT Nos. Just as nobody can be forced to enter into a contract. the failure of the seller PNB to effect a change in ownership of the subject properties amounts to a hidden defect within the contemplation of Articles 1547 and 1561 of the New Civil Code. 87882. Contrary to the trial court's finding.fact alone cannot justify annulment of a valid and consummated contract of sale. The contract has the force of law between the parties and they are expected to abide in good faith by their respective contractual commitments.e. a reduction in the sale price should be decreed. Mega Prime accepted the risk of an "as is where is" arrangement with respect to the sale of shares of stock therein. Mega Prime failed to sufficiently prove that PNB was guilty of misrepresentation or fraud with respect to the said transaction. 87884. in the same manner.. 1547. In a contract of sale. It should have been more prudent or careful in making such a huge investment worth millions of pesos. for the sale of a thing in which a third person has a legal or equitable interest. i. 7 Nevertheless.8 Verily. 87881. voluntarily assumed. Clearly. or other person professing to sell by virtue of authority in fact or law. including receivables shall be transferred to the vendee. (2) An implied warranty that the thing shall be free from any hidden faults or defects. The said provisions of law read: Art. auctioneer. and 160470 x x x.. all assets and liabilities are squared. or to proceed contrary thereto. and that the buyer shall from that time have and enjoy the legal and peaceful possession of the thing. 87882. to the prejudice of the other party. 87883.080 sq. and no deposits. 9 xxxx Art. fixtures and equipment. however. By signing the deed of sale. 1561. the Court holds that there was a breach in the warranties of the seller PNB. This article shall not. or any charge or encumbrance not declared or known to the buyer. m. should they render it unfit for the use for which it is intended. except real properties and improvements thereon of PNB-Madecor in Quezon City containing an area of 19. unless a contrary intention appears. We find that there is no sufficient basis to annul the Deed of Sale dated 27 September 1996. there is: (1) An implied warranty on the part of the seller that he has a right to sell the thing at the time when the ownership is to pass. under the said contract simply because the contract turned out to be a poor business judgment or unwise investment. It is a general principle of law that no one may be permitted to change his mind or disavow and go back upon his own acts. had the vendee been aware . be held to render liable a sheriff. mortgagee. an important sense of the deed of sale is the transfer of ownership over the subject properties to Mega Prime. The vendor shall be responsible for warranty against the hidden defects which the thing sold may have. It should have conducted its own due diligence. so to speak. not weasel out of them. 87883. once a contract is entered into. or should they diminish its fitness for such use to such an extent that. The Sale of the above stockholdings of the vendor is on a clean balance sheet. 87881. 87884 and 160740 in the name of Mega Prime: 1. furniture. no party can renounce it unilaterally or without the consent of the other. Resultantly.

00 by 733. When PNB failed to deliver the title to the property covered by TCT No.080 square meters.00 deserves scant consideration. Records bear out that the total consideration for the sale contract is P505.00 per square meter.70 square meters.70 square meters. no other proof was presented by Mega Prime to show that it had incurred expenses for the development of the Pantranco property. Without sufficient proof that Mega Prime incurred said expenses and that it was due to PNB's fault. It is a requisite in the grant of exemplary damages that the act of the offender must be accompanied by bad faith or done in wanton. there being no adequate proof to show that PNB was in bad faith when it entered into the contract of sale with Mega Prime. Said the appellate court: Necessarily. Considering that the area covered by TCT No.500. On the other hand. Simple division or mathematical computation yields that the property has a value of P26. The object is the 19. the Court fully agrees with the CA that both should be dismissed for lack of factual and legal bases.443.00. Hence. The CA refused to award actual and exemplary damages to Mega Prime.000. 160740. PNB cannot be made liable for actual damages allegedly sustained by Mega Prime. a proportionate reduction in the consideration of the sale is justified.500. 160740 is covered by a title pertaining to the City Government of Quezon City coupled with PNB's inability up to the present to submit a title in the name of PNB-Madecor constitutes a breach of warranty.620. the title of the said property is still under the name of the former registered owner Marcris Realty Corporation. speculations.000. then the latter cannot be held liable for such unsupported allegation. As to the parties' claims of damages against each other. fraudulent or malevolent manner. he would not have acquired it or would have given a lower price for it. attorney's fees may be awarded only when a party is compelled to litigate or to incur . the purchase price should be proportionately reduced by P19. B. or guesswork but must depend on competent proof or the best obtainable evidence of the actual amount of loss. Regarding the award of exemplary damages. Mega Prime cannot be considered in default with respect to its obligation to petitioner bank in view of the modification of the stipulated consideration. applying the Civil Code principle that "no person shall be enriched at the expense of another. should have known them.080-square-meter Pantranco property. therefore. The latter's allegation that it incurred expenses for the development of the Pantranco Property in the amount of P150. the total consideration in the Deed of Sale should be proportionately reduced equivalent to the value of the property covered by TCT No.050.00. but said vendor shall not be answerable for patent defects or those which may be visible. Thus.70 or vice versa. 160740. 160740 is 733. Mega Prime itself alleged that its partner pulled out from the project and the development of the Pantranco Property could not be undertaken after knowledge of the alleged defective title of PNB-Madecor. PNB violated an express warranty under the deed of sale.thereof. the Court likewise finds that PNB cannot be made liable for exemplary damages and attorney's fees. Basic is the jurisprudential principle that in determining actual damages. Necessarily. with an area of 733. conjectures. or for those which are not visible if the vendee is an expert who. by reason of his trade or profession.10 Up to now."11 The sale of shares of stock was undertaken to effect the transfer of the subject properties with a total area of 19. the courts cannot rely on mere assertions. Aside from the site development plan adduced by Mega Prime. In fact. Mega Prime's subsequent discovery that the property covered by TCT No.000. an amount arrived at after multiplying P26.

PNB's counterclaim is anchored on the alleged bad faith and ill motive of Mega Prime in filing the complaint which allegedly was done by Mega Prime to preempt PNB's foreclosure of the pledge of its shares of stock in PNBMadecor. Associate Acting Chairperson ** ALICIA AUSTRIA-MARTINEZ Justice MINITA Associate Justice B. RUBEN Associate Justice T.876.00 as actual damages and P48. as when the defendant acted in gross and evident bad faith in refusing the plaintiff's plainly valid. According to PNB. 1997. the CA explained: In the same vein. Thus. In said letter. V.13 WHEREFORE. QUISUMBING EDUARDO ATTESTATION . 1996 shall be proportionately reduced by P19. We find no reason to hold Mega Prime liable on the counterclaim of PNB for moral and exemplary damages and attorney's fees. 160470 is actually owned by the Quezon City Government. CHICO-NAZARIO NACHURA LEONARDO Associate Justice ANTONIO Associate Justice A. evidently to prevent PNB from foreclosing the pledge. REYES WE CONCUR: * MA. Mega Prime filed its complaint against PNB after Mega Prime received PNB's letter dated December 11.000. 1997.496. and it was preceded by Mega Prime's demand letter dated November 3.00 as other expenses. We are not persuaded. Such circumstances were not proved in this case. Mega Prime's complaint was filed prior to PNB's letter dated December 11.124. 1997 of its P404.00 loan with PNB. informing PNB of Mega Prime's discovery that the property covered by TCT No. otherwise legal action shall be instituted against PNB. SO ORDERED. premises considered. 1997 reminding it of the maturity date on November 26. Clearly. the value corresponding to the property covered by TCT No. The records show that Mega Prime filed its complaint on November 28. there is no justification to grant the counterclaim of PNB.000. 160740. in dismissing PNB's counterclaims. in the absence of ample proof that Mega Prime acted in gross and evident bad faith in instituting the complaint against PNB. Mega Prime made a demand upon PNB to pay to Mega Prime the amounts of P101. PNB's allegation that Mega Prime filed its complaint as a mere ploy to prevent foreclosure of the pledge and thus evade payment of its overdue obligation is not quite true. 1997 addressed to PNB. the appealed decision is AFFIRMED with MODIFICATION in that the consideration in the Deed of Sale dated September 27. Accordingly.443. 12 Along the same vein. just and demandable claim.00.050.000.expenses to protect his interest by reason of an unjustified act of the other party.

Art. MA. Penned by Associate Justice Rosalinda Asuncion-Vicente. 1547. REYNATO Chief Justice S. Art. at 8. Chairperson. concurring. pp. at 32-35.R. at 52-54. 3 4 5 6 7 8 9 10 11 12 13 . at 52-54. Id. at 30-31. 1 Rollo (G. at 49. Cruz and Sesinando E. Id. 173454). who inhibited herself from these cases as she is related to the former counsel of one of the parties. New Civil Code. 2 Id. Id. Id. No. 2006. 1561.R. Id. ** Designated as additional member. Rollo (G. 30-50. Dated July 5. at 42-47. 2006. 47-48. Id. with Associate Justices Edgardo P. I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. PUNO ALICIA AUSTRIA-MARTINEZ Justice Footnotes * Vice Associate Justice Consuelo Ynares-Santiago. No. Id. at 48-49. Id. pp. 173454). Art.I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. Villon. Dated January 27. Article VIII of the Constitution and the Division Chairperson's Attestation. Associate Acting Chairperson CERTIFICATION Pursuant to Section 13... Id. 22.

Branch 65. The said Notice was published in Metro Profile on 11. the developer of Makati Prime City Condominium Townhomes Project (Project). 164919 of the Philippines COURT July 4. 402. There is hardly any dispute as to the antecedent facts of the instant Petition. a two-bedroom residential unit with an area of 42. covered by CCT No.014.10 to CBC. LOZADA. Yap and Treasurer Gilbert Y. vs. M4184. J.00.92 . Case No. .90 square meters. payable as follows: 30% Downpayment P (including the Residential Fee) 70% Balance 402. agreed to sell to the spouses Lozada Unit No.Republic SUPREME Manila THIRD DIVISION G.R.Payable upon completion or turn-over of the unit P 1.067. On 25 June 1995.: Before this Court is a Petition for Review on Certiorari 1 under Rule 45 of the Revised Rules of Court filed by petitioner China Banking Corporation (CBC) seeking the reversal and setting aside of the Decision2 dated 25 March 2004 and Resolution3 dated 10 August 2004 of the Court of Appeals in CAG.R. 69096. 402 of Cluster 1 of the Project.83 About six months later. beginning 2 October 1995 . directing them to vacate the said property within five days from receipt of the notices.010. 67399. The real estate mortgages covered 51 units of the Project. and (3) the Notices to Vacate 6 dated 17 October 2001 and 22 October 2001 of the Sheriff addressed.000. executed two Deeds of Real Estate Mortgage 9 in favor of CBC to secure the credit facilities granted by CBC to PPGI in the combined maximum amount of P37. PPGI. the spouses Lozada entered into a Contract to Sell 7 with PPGI. Lozada and Erlina P. respondents.444. The Petition was docketed as Foreclosure No. 2008 petitioner.12 The public auction sale took place as scheduled at which CBC was the highest bidder.708.C. Yap.Payable in 15 months. or on 7 December 1995. DECISION CHICO-NAZARIO. LOZADA and ERLINA P. represented by its President Kenneth T. (2) the Writ of Possession 5 dated 3 September 2001 issued by the RTC Branch Clerk of Court commanding the Sheriff to place CBC in possession of the said condominium unit and eject all its present occupants.04. 18 and 25 August 1998. and with Mortgage Clearance 8 from the Housing and Land Use Regulatory Board (HLURB). SPOUSES TOBIAS L.803. respectively. to Primetown Property Group. 34898. in L. When PPGI failed to pay its indebtedness despite repeated demands. The assailed Decision of the appellate court annulled and set aside: (1) the Order 4 dated 31 August 2001 of the Regional Trial Court (RTC).000. A Notice of Sheriff’s Sale11 was issued on 7 August 1998 setting the public auction of the foreclosed properties on 11 September 1998 at 10:00 a. including Unit No. SP No. Makati City.809. (PPGI) and respondent spouses Tobias L.m. PPGI. 98-098. CBC filed with the Clerk of Court and Ex Officio Sheriff of the Makati City RTC a Petition for Extrajudicial Foreclosure 10 of the real estate mortgages on 31 July 1998. PPGI availed itself of the said credit facilities and incurred a total principal obligation of P29. Lozada (spouses Lozada). Inc. No. granting the ex parte petition of CBC for a writ of possession over the condominium unit covered by Condominium Certificate of Title (CCT) No. for the total price of P1.R. CHINA BANKING CORPORATION.

1998. shall be notified before the release of the loan. Inc. Dee executed an Affidavit of Consolidation14 stating that 21 of the 51 foreclosed properties had been either "released by take-out by certain buyers" or partially redeemed.000. through its Senior Manager Salvador G. sent a letter 16 dated 30 March 1998 to respondent Erlina P. the development of which has been partially financed by China Banking Corporation. The buyer may. Attached is your Statement of Account for your guidance. M. the titles to the remaining foreclosed properties had already been consolidated in the name of CBC. The Certificate of Sale13 of the foreclosed properties was subsequently issued in favor of CBC on 15 October 1998. Very truly yours. and for said reason. Such approval shall not be granted unless it is shown that the proceeds of the mortgage loan shall be used for the development of the condominium or subdivision project and effective measures have been provided to ensure such utilization. 34898. This payment arrangement shall in no way cause any amendment of the other terms and conditions. Manager There is nothing on record to show any immediate action taken by the spouses Lozada on the aforequoted letter. Lozada: This refers to your purchase of Unit 402. ("PPGI"). 402. Credit and Collection Department Prieto. Erlina executed a Notice of Adverse Claim17 dated 13 September 1999 as regards . On 25 April 2000. PPGI. The loan value of each lot or unit covered by the mortgage shall be determined and the buyer thereof.00 for the foreclosed properties. But a year following the public auction sale of the foreclosed properties held on 11 September 1998. We refer to Section 18 of Presidential Decree No. nor the cancellation of the Contract to Sell you have executed with PPGI. effective April 1.M. we hereby direct your goodself to remit all payments under your Contract to Sell directly to China Banking Corporation at its Greenhills Branch located at Padilla Arcade. Prieto. Mortgages. the period for redemption of the remaining foreclosed properties (which included Unit No. 69096 15 in the name of CBC on 12 May 2000. (Signed) Salvador G. otherwise known as "The Subdivision and Condominium Buyer’s Protective Decree". Jr. In view of the foregoing. It appears that a few months prior to the foreclosure of the real estate mortgages. 402) had already expired without having been redeemed. No mortgage on any unit or lot shall be made by the owner or developer without prior written approval of the Authority. pay his installment for the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtedness secured by the particular lot or unit being paid for. Greenhills..offering the amount of P30.000. a project of Primetown Property Group. Jr. and issued in its place CCT No. the Registry of Deeds of Makati City was requested to issue the corresponding CCTs in the name of CBC. with a view to enabling said buyer to obtain title over the lot or unit promptly after full payment thereto. the Registry of Deeds of Makati City cancelled CCT No. if any. Pursuant to the Affidavit of Consolidation. Section 18 states: SECTION 18. covering Unit No. Lozada (Erlina) in the following tenor: Dear Ms. and registered in the name of PPGI. CBC Chief Executive Officer Peter S. at his option. 957. Cluster 1 of Makati Prime City. Sr.

Erlina sent another letter20 dated 3 December 1999 to PPGI and CBC stating that she was unable to open an escrow account as no one had advised her on how to go about it. laying down her position pertaining to Unit No. 2. In reply. CBC notified her that it had already consolidated its title and ownership over Unit No. CBC also informed her that all taxes including documentary stamp tax.Unit No. apparently. Not long thereafter. charges or any other imposition is recognized. docketed as Land Registration Commission (L.83 She reiterated that the amount represented the balance of the purchase price for Unit No.809. 402.100. My liability is limited to the amount stated thereunder plus reasonable expenses for the transfer of title. 402 under the Contract to Sell. and requested her to vacate and surrender the said property. to its duly authorized representative within 15 days from receipt of the letter. 402. 402 which she presently occupied.010. including the appurtenant keys. 402 was P1. The VAT is a liability of the seller and I have never consented to accept this burden. and shall be available to the party who shall establish the lawful right to the payment and deliver the muniments of title and other documents necessary for the transfer of the same. I have been ready. 402 per the Contract to Sell with PPGI. 69096 when it was issued in the name of CBC.R. she advised that she was tendering payment by opening an escrow account with CBC in the amount of P1. no other liability such as for interests. and able since August 25. a conference was held and more letters were exchanged between the parties. Erlina next sent a letter dated 1 December 1999 19 to both PPGI and CBC.) Case No. Bank Amount : : : : Erlina P. Lozada 103-630621-4 Chinabank Makati Head Office P1. telling her that the consideration for Unit No. In another letter dated 15 May 2001 to Erlina. On delivery of my full payment. Instead.83. no agreement was reached. 18 Said Notice of Adverse Claim was subsequently annotated on CCT No.809. penalties.22 but. On 27 July 2001. 1998 to pay the balance under my contract and I have tendered payment as early as then.788. Following the 15 May 2001 letter of CBC to Erlina. capital gains tax.C. she opened a special account with the following details: Account Name Account No. I have a right to demand reasonable assurance that title could be transferred to me immediately and so to require that the muniments of title and evidence of all tax payments by seller (necessary for registration) be delivered to me. CBC prayed to the court a quo for the following: . transfer tax. M-4184. which she registered with the Registry of Deeds of Makati City. thus. willing. representing the 70% balance of the purchase price of Unit No. and all other expenses for the transfer of title to her name shall be for her exclusive account. to wit: 1. CBC filed an Ex Parte Petition for Issuance of a Writ of Possession 23 with the Makati City RTC. 3. the amount she was tendering was insufficient.010. CBC sent Erlina a letter 21 dated 8 December 1999.29. In the same letter.

C. in turn. 402 and eject all its present occupants. Case No. The hearing on 31 August 2001 pushed through. respectively. on 7 August 2001. the Makati City RTC issued an Order 26 dated 15 August 2001 canceling the hearing for that day and transferring the same to 31 August 2001 at 10:00 a.WHEREFORE. consolidation of ownership between CBC and [PPGI] insofar as they pertain to [spouses Lozada] and to order the respondent Register of Deeds of Makati City to cancel Condominium Certificate of Title No. On the other hand. finding that the prayer for issuance of a writ of possession of CBC in L. even without the presence of the spouses Lozada. he failed to enforce the Writ of Possession because the main door of the said property was padlocked. REM-0080701-11582 proceeded simultaneously. L. 69096. REM-0080701-11582 directing the parties therein to maintain status quo awaiting the resolution of the Application for a Writ of Preliminary Injunction of the spouses Lozada. 402 on 30 October 2001. and decreeing that: Finding the petition to be duly substantiated by the evidence presented and pursuant to the provisions of section 7 of Act 3135 as amended by Act 4118. The Sheriff. . sale. over the condominium unit covered by CCT No. although it is principally the former which concerns this Court in the present Petition. The same Order expressly directed that Erlina be notified. 34898). [Spouses Lozada] pray for such other relief and remedies that are just and equitable under the premises. foreclosure. but the records do not show that said notice was actually sent and received by her. [herein respondents spouses Lozada] pray of this Honorable Board to order the annulment of mortgage.m. REM-0080701-11582. 402 and place CBC in possession thereof. Case No. The Makati City RTC.R. M-4184 needed to be substantiated by evidence. let a writ of possession issue in favor of the petitioner China Banking Corporation. It is likewise prayed that a Temporary Restraining Order and/or Writ of Preliminary Injunction be issued to prevent [herein petitioner] CBC from taking possession of the unit in question. on motion of CBC.m.25 However. They were able to secure an Order32 dated 25 October 2001 in HLURB Case No. In accordance with the foregoing Order. M-4184.R. with all the improvements existing thereon. directing them to vacate the said property within five days from receipt of the notices. of the Registry of Deeds for the City of Makati. 69096 (formerly CCT No. initially set the hearing on 15 August 2001 at 10:00 a. Case No. the Makati City RTC issued an Order 27 granting the Ex Parte Petition of CBC. during which the CBC presented and marked its documentary evidence. the RTC Branch Clerk of Court issued the Writ of Possession 28 dated 3 September 2001 commanding the Sheriff to place CBC in possession of Unit No.C. When the Sheriff went to Unit No. M-4184 and HLURB Case No. the spouses Lozada were seeking recourse elsewhere. the spouses Lozada instituted a Complaint 24 with the HLURB.R. docketed as HLURB Case No. While the afore-mentioned events were unfolding in L. issued the Notices to Vacate 29 dated 17 October 2001 and 22 October 2001 addressed to PPGI and the spouses Lozada. On 31 August 2001. with the following prayer: WHEREFORE.C. 30 prompting CBC to file with the Makati City RTC an Urgent Ex Parte Motion to Break Open31 the door to Unit No. it is most respectfully prayed of this Honorable Court that the corresponding Writ of Possession be issued ex parte by the Honorable Court in favor of petitioner [CBC] and against Erlinda [sic] Lozada and/or all persons claiming rights under her name.

as well as the Notice of Adverse Claim annotated on CCT No. without jurisdiction and in excess of jurisdiction. notwithstanding the fact that said unit was in possession of the spouses Lozada under a legitimate claim of ownership on the strength of a Contract to Sell executed in their favor by PPGI. with Application for Writ of Preliminary Injunction/Temporary Restraining Order33 against the Makati City RTC. he capriciously. premises considered. on 29 October 2001. 36 to notify the installment buyer of the condominium unit of the mortgage constituted thereon. (3) the spouses Lozada . The Court of Appeals rendered its assailed Decision 35 on 25 March 2004 ruling in favor of the spouses Lozada. the Writ of Possession and the Notice to Vacate are hereby ANNULLED and SET ASIDE. which was anchored on the following grounds: I. Accordingly. II. Housing and Land Use Regulatory Board.00.R. 2001 granting the Writ of Possession sought by [petitioner] CBC that will certainly interfere with the authority of [the] HLURB being exercised in HLURB Case No. the issuance of the Writ of Possession was not mandatory and ministerial on the part of the Makati City RTC. the spouses Lozada filed with the Court of Appeals their Petition for Certiorari and Prohibition. The respondent Presiding Judge committed a grave abuse of discretion. considering that (1) Unit No. The respondent Judge. SP No. REM-008070-11582. the August 31. 69096 presented by CBC as evidence before the trial court.Four days later. arbitrarily and unjustifiably issued the questioned Writ of Possession intended to eject the [spouses Lozada] from the condominium unit that they purchased. Sheriff. still in accordance with the tenor of the Contract to Sell. III. docketed as CA-G. without giving [spouses Lozada] the opportunity to fully ventilate their possession over the condominium unit purchased by them. without jurisdiction and in excess of jurisdiction. amounting to lack or excess of jurisdiction. there being grave abuse of discretion on the part of the court a quo in issuing the herein assailed Order. issued arbitrarily. . and PPGI. the Writ of Possession to the irreparable damage and [prejudice] of [spouses Lozada]. the instant Petition is GRANTED. 402 was no longer in the possession of the original debtor/mortgagor PPGI. According to the appellate court. Respondent Presiding Judge deprived your [herein respondents spouses Lozada] of due process of law and their day in court. contrary to law and existing jurisprudence. The dispositive portion of the Decision reads: WHEREFORE.37 In its Resolution38 dated 10 August 2004. CBC. the Court of Appeals issued a Resolution 34 granting in favor of the spouses Lozada a temporary restraining order enjoining the Sheriff and the other respondents therein from enforcing the Writ of Possession and Notices to Vacate. The appellate court reiterated that there was grave abuse of discretion on the part of the Makati City RTC when it included Unit No. 402 was already in the possession of the spouses Lozada because it was so stated in the ex parte petition of CBC. 402 within the coverage of the writ of possession. The respondent Judge in grave abuse of discretion. however. 67399. under Section 18 of Presidential Decree No. 2001 Order. The spouses Lozada. IV. On 30 October 2001.000. maintaining that the possession of the spouses Lozada of Unit No. the purchaser thereof at the foreclosure sale. when he unjustifiably failed to order the service of notice on [spouses Lozada] of the ex-parte petition of [herein petitioner] CBC. had the right to continue paying for Unit No. 402 constituted an effective obstacle barring the Makati City RTC from issuing a writ to place CBC in possession of the same. the Court of Appeals denied the Motion for Reconsideration of CBC. and (4) the spouses Lozada had a perfect cause of action for the annulment of the mortgage constituted by PPGI in favor of CBC since PPGI failed to comply with the requirement in Union Bank of the Philippines v. when he issued the Order of August 31. were directed to file an injunctive bond in the amount of P200. 957. and the court a quo should have afforded the spouses Lozada a hearing. 402 to CBC. but was already being enjoyed by the spouses Lozada. (2) the Makati City RTC was aware that Unit No.

and upon notice.42 At the crux of the opposition of the spouses Lozada to the ex parte issuance by the Makati City RTC of the writ of possession in favor of CBC was that it supposedly deprived them of the opportunity to defend their title and right to possess. The purchaser at the public auction sale of an extrajudicially foreclosed real property may seek possession thereof in accordance with Section 7 of Act No.40 The Court answers in the affirmative." 41 It consists of the two basic rights of notice and hearing. the Court ascertains that the pivotal issue for its consideration is. or simply. WHICH IS IN DIRECT COLLISSION (SIC) WITH APPLICABLE JURISPRUDENCE. they may claim the right to appear therein. 3135. Individuals are entitled to be notified of any pending case affecting their interests.D.39 Sorting through the allegations and arguments presented by the parties. as well as the guarantee of being heard by an impartial and competent tribunal. BUT WHICH RESPONDENTS IGNORED. the basic rights of notice and hearing pervade not only in criminal and civil proceedings. In any sale made under the provisions of this Act. The procedure for extrajudicial foreclosure of real estate mortgage is governed by Act No. whether the writ of possession may be granted and issued by the Makati City RTC ex parte or without notice to other parties. 7. II THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE RESPONDENTS WERE HOLDING THE SUBJECT PROPERTY ADVERSELY TO THE JUDGMENT DEBTOR THUS THE ISSUANCE OF THE WRIT OF POSSESSION WAS IMPROPER AND UNWARRANTED. but in administrative proceedings as well. to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. present their side and refute the position of the opposing parties. given the circumstances in the present case. Non-observance of these rights will invalidate the proceedings.Comes now CBC before this Court via the present Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court with the following assignment of errors: I THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT TOOK COGNIZANCE OF THE PETITION. which provides: SEC. this Court establishes that the issue herein is one involving procedural due process. STOPPED THE IMPLEMENTATION OF THE WRIT OF POSSESSION AND EVENTUALLY HAD IT ANNULLED AND SET ASIDE. HENCE THEY MADE [sic] THEMSELVES BEYOND THE MANTLE OF PROTECTION UNDER P. 43 as amended. as amended. True to the mandate of the due process clause. to give him possession thereof during the redemption period. 957. III THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO APPRECIATE THE FACTUALITY THAT RESPONDENTS WERE SUBSEQUENTLY INFORMED OF THE MORTGAGE WITH AN ADVISE OF PAYMENT OF INSTALLMENTS TO HEREIN PETITIONERS [sic]. Such petition shall be made under oath and filed in form or an ex parte motion in the registration or cadastral proceedings if the property is . Procedural due process At the outset. 3135. that it denied them due process. furnishing bond in an amount equivalent to the use of the property for a period of twelve months. Procedural due process "refers to the method or manner by which the law is enforced. the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated.

No discretion is left to the court. Upon proper application and proof of title.) Strictly. 554). the RTC 45 shall. refers to a situation wherein the purchaser seeks possession of the foreclosed property during the 12-month period for redemption. the issuance of the writ of possession becomes a ministerial duty of the court. Philippine National Bank. or of any other real property encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any existing law. upon the filing of such petition. 54. And any question regarding the regularity and validity of the sale (and the consequent cancellation of the writ) is left to be determined in a subsequent proceeding as outlined in section 8. Upon the purchaser’s filing of the ex parte petition and posting of the appropriate bond. especially where a new title has already been issued in the name of the purchaser. 3135. as amended. Under the legal provisions above copied.) x x x. Section 7 of Act No. as a matter of course. the order for a writ of possession issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond. its ownership becomes consolidated in the purchaser. may be availed of by a purchaser seeking possession of the foreclosed property he bought at the public auction sale after the redemption period has expired without redemption having been made. the proceeding for this is ex parte. he is entitled to the possession of the said property and can demand it at any time following the consolidation of ownership in his name and the issuance to him of a new transfer certificate of title.registered. No such bond is required after the redemption period if the property is not redeemed. As such. and upon the filing of such motion and the approval of the corresponding bond. Hence. 3135. there is no reason why it should not also have the same power after the expiration of the redemption period.. or in special proceedings in the case of property registered under the Mortgage Law or under section one hundred and ninety-four of the Administrative Code. Nera. to wit: It is settled that upon receipt of the definitive deed in an execution sale.44 thus: As may be seen. and in each case the clerk of court shall. and the latter. "as absolute owner . Such question is not to be raised as a justification for opposing the issuance of the writ of possession. And this court has also [said] and that the land bought by him and described in the deed deemed (sic) within the period allowed for that purpose." (Powell v. . order the issuance of the writ of possession in the purchaser’s favor. S. legal title over the property sold is perfected (33 C. who shall execute said order immediately. and the court shall. the procedure under Section 7 of Act No. under the Act. the RTC has the power during the period of redemption to issue a writ of possession on the ex parte application of the purchaser.46 the Court reasoned that if under Section 7 of Act No. San Jose. is entitled to its possession and to receive the rents and fruits thereof. The buyer can in fact demand possession of the land even during the redemption period except that he has to post a bond in accordance with Section 7 of Act No. 54 Phil. upon approval of the bond. 3135. the law expressly authorizes the purchaser to petition for a writ of possession during the redemption period by filing an ex parte motion under oath for that purpose in the corresponding registration or cadastral proceeding in the case of property with Torrens title. 3135. (Emphasis supplied. collect the fees specified in paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and ninety six as amended by Act Numbered Twenty-eight hundred and sixty-six. The Court recognizes the rights acquired by the purchaser of the foreclosed property at the public auction sale upon the consolidation of his title when no timely redemption of the property was made. as amended. as amended. (Emphasis supplied. as amended. J. the law also in express terms directs the court to issue the order for a writ of possession. 48 . Possession of the land then becomes an absolute right of the purchaser as confirmed owner. since. In IFC Service Leasing and Acceptance Corporation v.47 It is thus settled that the buyer in a foreclosure sale becomes the absolute owner of the property purchased if it is not redeemed during the period of one year after the registration of the sale.) The Court expounded on the application of the foregoing provision in De Gracia v. 63. . order that a writ of possession issue addressed to the sheriff of the province in which the property is situated.

interest and claim of the judgment obligor to the property as of the time of the levy. 51574-77. 6 Act No. and upon an ex parte petition of the purchaser. G. "redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty-six. (Emphasis supplied. the issuance by the RTC of a writ of possession in favor of the purchaser of the said real property ceases to be ministerial and may no longer be done ex parte. 6 of Act 3135. 1967. is entitled to a conveyance and possession of the property x x x. therefore. Under Sec. September 30. 52823.] After further revision of the Rules of Court. the property ." The possession of the property shall be given to the purchaser or last redemptioner by the officer unless a party is actually holding the property adversely to the judgment debtor. as amended (An Act to Regulate the Sale of Property Under Special Powers Inserted In or Annexed to Real Estate Mortgages). there is an exception. however. Nera. however.The purchaser. supra: x x x The applicable provision of Act No. of the Code of Civil Procedure in so far as these are not inconsistent with the provisions of this Act. it is ministerial upon the RTC to issue such writ of possession in favor of the purchaser. or his assignee. L-21720. – If no redemption be made within one (1) year from the date of the registration of the certificate of sale. Section 35 of the Revised Rules of Court expressly states that "If no redemption be made within twelve (12) months after the sale. the purchaser or redemptioner shall be substituted to and acquire all the rights. However. Buan. 50 Similarly.R. [Id. Nera. 33.) Where a parcel levied upon on execution is occupied by a party other than a judgment debtor. possession of the property may be awarded to the purchaser at the foreclosure sale during the pendency of the period of redemption under the terms provided in Sec. title. 35. 1982. which reads: SEC. not without exception. 3135 is Section 6 which provides that. without need of a separate and independent action [IFC Service Leasing and Acceptance Corp. The exception and its basis were summarized by the Court in Roxas v. For the exception to apply. 118 SCRA 110. x x x. No. This is founded on his right of ownership over the property which he purchased at the auction sale and his consequent right to be placed in possession thereof. Upon the expiration of the right of redemption. November 2. in cases in which an extrajudicial sale is made. Philippine National Bank v. 19 SCRA 181). the procedure is for the court to order a hearing to determine the nature of said adverse possession. in an extrajudicial foreclosure of real property. 132 SCRA 429. v.R. while this is the general rule." Sections 464-466 of the Code of Civil Procedure were superseded by Sections 25-27 and Section 31 of Rule 39 of the Rules of Court which in turn were replaced by Sections 29-31 and Section 35 of Rule 39 of the Revised Rules of Court. which was made applicable to the extrajudicial foreclosure of real estate mortgages by Sec. Adil." (Clapano v. Emphasis in the original. Nos.R. The possession of the property shall be given to the purchaser or last redemptioner by the same officer unless a third party is actually holding the property adversely to the judgment obligor.) As explained by the Court in IFC Service Leasing and Acceptance Corp. the purchaser. January 30. Rule 39 of the Revised Rules of Court. v. as in all general rules. IFC Service Leasing and Acceptance Corp. G. when the foreclosed property is in the possession of a third party holding the same adversely to the defaulting debtor/mortgagor. or after the lapse of the redemption period. inclusive.49 thus: In the extrajudicial foreclosure of real estate mortgages. by whom executed or given. Deed and possession to be given at expiration of redemption period. Gapultos. This rule is. the purchaser is entitled to a conveyance and possession of the property. 1984. 3135. Section 35 of Rule 39 referred to above is now Section 33 of Rule 39. Nera. in the public auction sale of a foreclosed property is entitled to a writ of possession. the possession of the mortgaged property may be awarded to a purchaser in extrajudicial foreclosures "unless a third party is actually holding the property adversely to the judgment debtor. at 184185. No. v. 434. G. supra.

which. 402 to the spouses Lozada upon the completion thereof. Arcadio Valentin. however. The Court ratiocinated as follows: Contending that petitioner Roxas is a party actually holding the property adversely to the debtor. Roxas allegedly bought the foreclosed property from Valentin and leased the same to the spouses De Guia. the spouses Lozada assert the exception. and not a third party holding the property adversely to the latter. and the spouses Lozada. In the said case. 402. it is undisputed that they were already in possession thereof at the time CBC filed its Ex Parte Petition for the Issuance of a Writ of Possession with the Makati City RTC on July 2001. Hence. The Court determined that Roxas was the successor-in-interest of the mortgagor Valentin.need not only be possessed by a third party. Valentin executed a Deed of Real Estate Mortgage over a house and lot in favor of Buan to secure a loan granted by the latter to the former. Again relevant herein is the Court’s ruling in Roxas v. being third parties. counters that the spouses Lozada are mere successors-in-interest of PPGI who only stepped into the latter’s shoes and may not claim the defense of possession by third persons. 402 adversely to the debtor/mortgagor PPGI.51 which involved factual circumstances akin to the instant Petition. They also insisted that Buan should file an independent action to recover the property. Buan caused the extrajudicial foreclosure of the real estate mortgage and was the winning bidder at the auction sale of the foreclosed property. Buan. petitioner Roxas indeed is a party actually holding the property adversely to Valentin. Buan then filed a petition for the issuance of a writ of possession. the character of Roxas’ possession was directly put in issue. However. According to the Contract to Sell. CBC. the Sheriff was unable to execute the writ of possession because the foreclosed property was occupied by Roxas and the spouses De Guia. . The spouses Lozada can be more appropriately considered the transferee of or successor to the right of possession of PPGI over Unit No. The spouses Lozada acquired possession of Unit No. shall already be bound at that point to pay the 70% balance of the purchase price for the said property. otherwise. 402 pursuant to the Contract to Sell executed in their favor by PPGI. being uncontested. 402. General rule v. but also held by the third party adversely to the debtor/mortgagor. Upon the expiration of the period for redemption without Valentin redeeming the foreclosed property. their right to due process of law would be violated since they were not given their day in court to prove their adverse claim. 402 cannot be considered adverse to that of PPGI. under the circumstances. 3135 they cannot be ordered to vacate the property. Their right to possess the said property was derived from PPGI under the terms of the Contract to Sell executed by the latter in their favor. They cannot assert that said right of possession is adverse or contrary to that of PPGI when they have no independent right of possession other than what they acquired from PPGI. in turn. the question of whether. However. it is apparent that the spouses Lozada’s possession of Unit No. 402. Given the foregoing. PPGI shall deliver Unit No. The spouses Lozada aver that they are holding Unit No. When Valentin failed to pay his loan when it matured. 402 to them even prior to the transfer of ownership and title over the same that they came into its possession. The records do not establish the date when the spouses Lozada actually entered into possession of Unit No. petitioners argue that under the provisions of Act No. Roxas and the spouses De Guia argued that the writ of possession was ineffective as against them. and that their possession is sufficient obstacle to the ex parte issuance of a writ of possession in favor of CBC. It is thus incumbent upon this Court to scrutinize the nature of the spouses Lozada’s possession of Unit No. exception While CBC invokes the general rule in the Petition at bar. It was because PPGI contractually agreed to deliver Unit No. a Final Bill of Sale was issued by the Sheriff in Buan’s favor. was granted by the trial court.

Spouses Ordinario. Nonetheless. and praying for the exclusion of said property from the writ of possession. Sec. being the latter's successor-in-interest. Rosete v. p. in the instant case. Viola. 402.00.59 which. considering that the property had already been sold at public auction pursuant to an extrajudicial foreclosure. it is readily apparent that Roxas holds title to and possesses the property as Valentin's transferee. When PPGI constituted the real estate mortgage on Unit No. Prov.55 agricultural tenant. finds no application to the present Petition. 402 is analogous to any of these. Roxas is therefore the successor-in-interest of Valentin. Roxas' occupancy of the property cannot be considered adverse to Valentin. Sheriff of Zambales. 54 The co-owner.000. the Court affirmed the trial court’s denial of their motion for reconsideration. 402 in favor of CBC six months later. xxxx It does not matter that petitioner Roxas was not specifically named in the writ of possession. 58 a mere promise to sell. much less. assuming arguendo that they were adverse third parties. 95 Phil. China Banking Corporation v. As transferee. At the public auction sale. During the period of redemption. filed a motion for reconsideration before the Quezon City RTC. CBC foreclosed the real estate mortgages. possession of and title to the property still resided in PPGI. 560 (1954). In its Decision. Magno v. 56 and usufructuary 57 possess the property in their own right. 24]. CBC was the highest bidder for the foreclosed properties. respondent court's decision granting private respondent Buan's petition for the issuance of a writ of possession ordered the Provincial Sheriff of Zambales or any of his deputies to remove Valentin "or any person claiming interest under him" from the property [Rollo. did not yet transfer possession. it must be emphasized that what PPGI executed in favor of the spouses Lozada was a Contract to Sell. PPGI executed in favor of the spouses Lozada the Contract to Sell covering Unit No. Since the spouses Ordinario did not avail themselves of either remedy and. instead. since they did not receive notice of CBC’s petition. Thus. 16]. petitioner de Guia was occupying the house as Roxas' alleged tenant [Rollo. p. The spouses Lozada cannot claim that their right of possession over Unit No. the only interest that may be transferred by Valentin to Roxas is the right to redeem it within the period prescribed by law. as he merely stepped into the shoes of Valentin. he steps into the latter's shoes. When TransAmerican failed to pay its loans. title to Unit No. and (2) an independent "separate action" to vindicate their claim of ownership and/or possession over the foreclosed property. CBC filed with the Quezon City RTC an ex parte petition for the issuance of a writ of possession. and they are not merely the successor or transferee of the right of possession of another co-owner or the owner of the property. Moreover. CBC granted loans to the company TransAmerican which executed real estate mortgages to secure the same. petitioners fell under this category. to whom the latter had conveyed his interest in the property for the purpose of redemption [Rule 39.] Consequently. The Court merely presented therein the remedies available to the spouses Ordinario. the Court did not directly resolve the nature of the possession of the foreclosed property by the spouses Ordinario. 61 Phil.53 cited by the spouses Lozada. It is true that in the case presently before this Court. 52 In contrast. at the moment of its execution. And when PPGI . tenant or usufructuary. 402 before it constituted in favor of CBC the real estate mortgages on 51 Project units including Unit No. The spouses Ordinario filed a motion for reconsideration with the Quezon City RTC claiming to have bought one of the foreclosed properties on which they built their townhouse. such as that of a co-owner. which granted CBC’s ex parte petition for issuance of a writ of possession. The exception provided under Section 33 of Rule 39 of the Revised Rules of Court contemplates a situation in which a third party holds the property by adverse title or right. Assuming this to be true. In said case. namely: (1) a terceria to determine whether the Sheriff had rightly or wrongly taken hold of the property not belonging to the judgment debtor or obligor. Any right he has to the property is necessarily derived from that of Valentin. Undeniably. On the other hand. 29 (a) of the Revised Rules of Court.It will be recalled that Roxas' possession of the property was premised on its alleged sale to him by Valentin for the amount of P100. 80 (1934). 402 from PPGI to the spouses Lozada. which was granted by the trial court upon the posting of a surety bond by CBC.

the general rule. the mortgage it constituted on Unit No. However. The Court already made a determination that the spouses Lozada possessed Unit No. Presidential Decree No. 402. 746). 402. By merely stepping into the shoes of PPGI. Dominic Corp. The annulment of the real estate mortgage will have no bearing on this Court’s determination. their possession can never be adverse or contrary to that of PPGI. the deed of conveyance entitled the purchaser to have and to hold the purchased property. After such delivery. having succeeded PPGI in the possession of Unit No. to the spouses Lozada. and to which the respective titles thereto have already been issued. the petitioner's rights over the property has become absolute. 402. 402 was null and void. Mortgages. It is founded on the right of ownership. The buyer may. will not rule on the matter. 402. upon its completion. Writ of certiorari . It bears to stress that the issue herein is purely procedural. thus. though. to protect the installment buyer of the subdivision lot or condominium unit under a Contract to Sell. 402. As we said in Tan Soo Huat v. such right was already burdened by the terms and conditions of the mortgage constituted thereon. pay his installment for the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtedness secured by the particular lot or unit being paid for. 957 imposed the following conditions on the right of the owner or developer to mortgage a subdivision lot or condominium unit: Section 18. This means. This Court. The Intermediate Appellate Court61 : The right of the respondent to the possession of the property is clearly unassailable. cannot be considered a third party holding the said property adversely to PPGI. For the same reasons.subsequently ceded possession of Unit No. 402. It was the mandatory and ministerial duty of the Makati City RTC to grant the ex parte petition of CBC and order the issuance of a writ of possession in the latter’s favor over Unit No. the defaulting debtor/mortgagor. 402 as the successors or transferees of PPGI. Presidential Decree No. Ongwico (63 Phil. with a view to enabling said buyer to obtain title over the lot or unit promptly after full payment thereto. hence. and not the exception. on whether the Makati City RTC can issue the writ of possession in favor of CBC ex parte. As the purchaser of the properties in the foreclosure sale. vesting upon it the right of possession of the property which the court must aid in affecting its delivery. v. Resultantly. Moreover. the resolution of which hinges on the nature of the spouses Lozada’s possession of Unit No.. Adil. the issue of whether the real estate mortgages constituted by PPGI in favor of CBC are valid or void is squarely raised by the spouses Lozada before the HLURB in HLURB Case No. that the purchaser is entitled to go immediately upon the real property. shall be notified before the release of the loan. at his option. It was likewise mandatory and ministerial for the Clerk of Court to comply with the Makati City RTC order by issuing the writ of possession. if any. the spouses Lozada’s right of possession to Unit No. The spouses Lozada persistently allege herein that PPGI did not comply with the foregoing requirements. whether it is adverse to or as successor of PPGI. The loan value of each lot or unit covered by the mortgage shall be determined and the buyer thereof. 402 cannot be less or more than PPGI’s. the spouses Lozada only acquired the right of possession of PPGI over Unit No. for it is not significant to the case at hand. 118 SCRA 110). the purchaser becomes the absolute owner of the property. and for the Sheriff to implement the writ by first issuing a notice to vacate to the occupants of Unit No. (Philippine National Bank v. Still. Such approval shall not be granted unless it is shown that the proceeds of the mortgage loan shall be used for the development of the condominium or subdivision project and effective measures have been provided to ensure such utilization. REM-0080701-11582. 95760 cannot totally prevent the owner or developer from mortgaging the subdivision lot or condominium unit when the title thereto still resides in the owner or developer awaiting the full payment of the purchase price by the installment buyer. and that it is the sheriff's inescapable duty to place him in such possession. The spouses Lozada. No mortgage on any unit or lot shall be made by the owner or developer without prior written approval of the Authority. for it will not change the nature of the spouses Lozada’s possession as to make it adverse to that of PPGI. As this Court ruled in St. applies to the instant Petition.

38 Off. respectively. foreclosure. developer. developer.. vs. 134463: Sec. 62. The grounds for the issuance of a writ of certiorari are described below: Certiorari lies where a court has acted without or in excess of jurisdiction or with grave abuse of discretion. the Writ of Possession dated 3 September 2001 and the Notices to Vacate dated 17 October 2001 and 22 October 2001. and consolidation of title. Gaz. REM-0080701-11582. 957 and Union Bank of the Philippines v. Gaz. (Leung Ben vs. Housing and Land Use Regulatory Board. B. and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. "Without jurisdiction" means that the court acted with absolute want of jurisdiction. REM-0080701-11582 The spouses Lozada already filed a complaint with the HLURB. no resort to the courts may be made before such administrative body shall have acted upon the matter. as provided in Section 18 of Presidential Decree No. 45. Salvador Campos y Cia vs. Province of Tarlac. HLURB Case No. 38 Phil. dealer. no grave abuse of discretion can also be attributed to the RTC Branch Clerk of Court and Sheriff who issued. and the cancellation of CCT. this Court pronounces that the findings of the Court of Appeals in its assailed Decision as regards the non-compliance by PPGI with the requirements for a valid mortgage. and C. chiefly grounded on the argument that the real estate mortgage on Unit No. praying for the annulment of real estate mortgage.. O'Brien. it could not be said that the trial court acted in grave abuse of discretion warranting the issuance of a writ of certiorari to annul its said Order.)62 Since there is sufficient legal basis for the Makati City RTC to issue its Order dated 31 August 2001 granting the ex parte petition of CBC and ordering the issuance in the latter’s favor of a writ of possession over Unit No. 38 Off. There is "excess of jurisdiction" where the court has jurisdiction but has transcended the same or acted without any statutory authority. 64 Also based on the doctrine of primary jurisdiction. 41 Phil. Unsound real estate business practices. Accordingly. dealer. broker or salesman. Under the doctrine of primary administrative jurisdiction. 830).. 65 were rendered prematurely and in excess of . since they were only acting in accordance with and in execution of a valid order of the Makati City RTC. in which jurisdiction is vested in an administrative body. 957. or. enumerated under Presidential Decree No. the National Housing Authority [now the HLURB] shall have exclusive jurisdiction to hear and decide cases of the following nature: A. broker or salesman. docketed as HLURB Case No. Inc. Nable. 402. in other words. REM0080701-11582.) "Grave abuse of discretion" implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction (Abad Santos vs. 182. It is but proper for this Court to refrain from making any pronouncements that may predetermine the issues raised in HLURB Case No. 1. it is evident that the Court of Appeals erred in finding that the Makati City RTC committed grave abuse of discretion amounting to lack or excess of jurisdiction when it ordered ex parte the issuance of a writ of possession in favor of CBC. Del Rosario. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner.. public auction sale. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility.In consideration of the foregoing discussion. The spouses Lozada instituted said case before the HLURB invoking the jurisdiction of the Board over the following cases. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner. (TaveraLuna. 402 constituted by PPGI in favor of CBC did not comply with Section 18 of Presidential Decree No. 957.

pp. Therefore. and (3) the Notices to Vacate 70 dated 17 October 2001 and 22 October 2001. Footnotes 1 Rollo. REM0080701-11582 a Status Quo Order66 dated 25 October 2001. Id. at 30-32. 270-273. Can the said HLURB Order stay the execution of the writ of possession issued by the Makati City RTC in L.. in resolving HLURB Case No. Reyes. The Decision dated 25 March 2004 and Resolution dated 10 August 2004 of the Court of Appeals in CA-G. at 33-40. SO ORDERED. pp. Penned by Judge Salvador S. Branch 65. Rollo. 98.C. 67399 are REVERSED AND SET ASIDE. The following issuances in L. at 132. are hereby REINSTATED. p.C.R. 8-27. M-4184? The Court rules in the negative. pp. 90-91. or in this case. Case No.R. 4 5 6 7 8 9 10 11 . Chairperson. Rollo. the HLURB. 53-61. pp.R. 3 Rollo. with the issuance or enforcement of the writ of possession issued by the Makati City RTC. JJ. Makati City. Labitoria and Mercedes Gozo-Dadole. Case No. Austria-Martinez. REM-008070111582. 99. 2 Penned by Associate Justice Rosmari D. Id. Records. (2) the Writ of Possession 69 dated 3 September 2001.its jurisdiction. the instant Petition for Review is GRANTED. Nachura. pp. an administrative body exercising quasi-judicial powers. it is not even significant for the resolution of the Petition at bar. Abad-Santos. Ynares-Santiago. REM-0080701-11582. Id. and as the Court previously discussed. Rollo. considering that the said issue was the one primarily raised before the HLURB in HLURB Case No. Another point that needs to be addressed is the fact that the HLURB issued in HLURB Case No. would neither have the power to interfere by an injunction. Records. concurring. SP No. 67 If such is the rule among courts of concurrent jurisdiction. concur. allowing it to freely proceed in making its own determination thereof based on the arguments and evidence presented before it by the parties. then the HLURB. WHEREFORE. No costs. Rollo. premises considered. M-4184: (1) the Order68 dated 31 August 2001 of the Regional Trial Court. 25-52. must not be bound by the said findings of the Court of Appeals. a status quo order. pp. 62-64. Jurisprudence is replete with the rule that no court has the power to interfere by injunction with the issuance or enforcement of a writ of possession issued by another court of concurrent jurisdiction having the power to issue such writ. p. Carandang with Associate Justices Eugenio S.

53-61. CA rollo. 90-91. 95364. 59. records. Rollo. 89-92. p. Rollo. pp. 282-283. Records. 291-298. penned by Judge Salvador S. Records. concurring. Id. at 52-56. Balasolla. at 89.R. p. at 41. Cruz and Alicia L. 60. Rowena C. Rollo. 29 June 1992. at 61. at 288-290. Id. pp. Rollo. 36 37 . rollo. Id. CA rollo. at 99. Id. 1-7. Id. p. 1-14. pp. 19 Rollo. No. 340. Id. 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 Penned by Associate Justice Hilarion L. Santos. Abad-Santos. p. Id. Id. 57. at 279-280. at 92-93. 98. 131. Id. Order dated 27 July 2001. Penned by Housing and Land Use Arbiter Atty. p. 69096 when it was issued in the name of CBC on 12 May 2000. p. pp. Id.12 Id. Records. at 42-51. Id. G. 210 SCRA 558. at 57. at 284-285. 35 Rollo. pp. 13 14 15 16 17 18 The Notice of Adverse Claim of the spouses Lozada was subsequently annotated on CCT No. at 286. Aquino with Associate Justices Edgardo P. pp. pp.

at 62-64. Lantion. L-70623. 42 43 An Act to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to Real Estate Mortgages. 44 94 Phil.R. Id. G. 447 Phil. 1038. are ex parte. (Gatchalian v. which provides that no tenant-tiller of private agricultural lands devoted to crops other than rice and/or corn. ejected. 8 November 1988. but at the same time he is the owner of a share which is really abstract because until the division is effected. Id. Zandaga.R. 702. (See Ramirez v. 167 SCRA 43. Hon. The Intermediate Appellate Court. 191 SCRA 516. 55 In co-ownership. banana. v. of the application. 557 (2003).) 41 Hon. 523. 623. 166 Phil. Supra note 49. (See Clapano v. 21 November 1990. Inc. 625-626 (1954). While there is co-ownership. 379 Phil. Judge Arlegui.38 Id. Belleza v. 347 Phil. Hon. 340 (1997). 217 Phil. such share is not concretely determined. 236. 49 G. 703 (1956). including but not limited to abaca. or in this case.) 56 Agricultural tenants are protected by Presidential Decree No. 42 Phil. 30 June 1987. L-53798. United Harbor Pilots Association of the Philippines. No. Corona v. 125 Phil. 432. 414-415 [1984]. Saavedra v. Siari Valley Estates. 45 46 47 48 F. mongo.) 57 Relevant provisions of the Civil Code on usufructuary are reproduced below: . Gmur. then the proceedings. at 32-33. coffee. G. each co-owner owns the whole. 436 (1959). 98 Phil. at 49-51. Gapultos. 590. 78714. a coowner's possession of his share is co-possession which is linked to the possession of the other co-owners. David Enterprises v.R. coconut. 48-49. 595 (1967). for all intents and purposes. 248 [1977]. ousted or excluded from his farmholding unless for causes provided by law and directed by a final decision or order of the court. Secretary of Justice v. 409. 855 [1918]. 39 40 Where there is no provision made for notice. 106 Phil. the petition. 165. No. by publication or otherwise. Insular Bank of Asia and America. No. Dominic Corp. 151 SCRA 577. and over it he exercises rights of dominion. 50 51 52 53 54 St. 203 (2000).. 333. durian and other permanent crops shall be removed. Sale of the land is not included as one of the just causes for removal of tenants. In place of the Court of First Instance.

Nable. 389. 581.R. Court of Appeals. 562. or do anything thereon which may be prejudicial to the usufructuary. 60 Regulating the Sale of Subdivision Lots and Condominiums. Providing Penalties for Violations Thereof. Rollo. may alienate it. Art. (2) By the expiration of the period for which it was constituted. 62 63 Empowering the National Housing Authority to Issue Writ of Execution in the Enforcement of Its Decision under Presidential Decree No. 318. unless a contrary intention clearly appears. the security or mortgage shall be cancelled. Usufruct is extinguished: (1) By the death of the usufructuary. The owner of property the usufruct of which is held by another. but he cannot alter its form or substance. 957. or by the fulfillment of any resolutory condition provided in the title creating the usufruct. the thing in usufruct shall be delivered to the owner. 227 Phil. (6) By the termination of the right of the person constituting the usufruct. 353 Phil. G. 612. v. (4) By renunciation of the usufructuary. 219 SCRA 378. unless the title constituting it or the law otherwise provides. Inc. 72 Phil. Court of Appeals. Art. Court of Appeals. After the delivery has been made. 3 March 1993. 280 (1941). (5) By the total loss of the thing in usufruct. 340. 83851. Alafriz v. p. 625 [1986]. 65 66 . 61 Supra note 54 at 290. Supra note 36 at 564. No. Usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance. without prejudice to the right of retention pertaining to the usufructuary or his heirs for taxes and extraordinary expenses which should be reimbursed. v. (3) By merger of the usufruct and ownership in the same person. 58 A contract to sell is one wherein ownership shall be transferred only after the full payment of the installments of the purchase price or the fulfillment of the condition and the execution of a definite or absolute deed of sale. 330 (1998). 603.Art.) 59 Visayan SawMill Company. (7) By prescription. 64 Cristobal v. 278. Inc. Art. (Joseph & Sons Enterprises. Upon the termination of the usufruct.

6-B before the Department of Agrarian Reform (DAR). the heirs of the late Arturo Reyes. p. No. When Marcelo died. 2008 HEIRS OF ARTURO REYES. dated 5 September 1954. approving the application of respondent Elena Socco-Beltran to purchase the subject property. Id. Abad-Santos. 6-C. San Buenaventura. in O. situated in Zamora Street. respondent. respondent Elena Socco-Beltran filed an application for the purchase of Lot No. Spouses Maranan. Lot No. 3 Pursuant to an unnotarized document entitled "Extrajudicial Settlement of the Estate of the Deceased Constancia R. The subject property in this case is a parcel of land originally identified as Lot No. which affirmed the Decision2 dated 30 June 2003 of the Office of the President. Miguel R. with her heirs – her siblings.R. 6-B. 6-B. pp. ELENA SOCCO-BELTRAN. and Elena Socco-Beltran. as evidenced by the Contract to Sell. J.4 The subject property." executed by Constancia’s heirs sometime in 1965. and that I am to inherit as such a portion of her lot consisting of Four Hundred Square Meters (400) more or less located on the (sic) Zamora St. measuring 1. Province of Bataan. 68 69 70 Republic SUPREME Manila THIRD DIVISION G. 90-91. represented by Evelyn R. Isabel Socco de Hipolito. at 99. SP No.P. bounded as follows: . petitioners. and Lot No.67 Penson v. rollo. Arturo Reyes. Upon Constancia’s subsequent death. alleging that it was adjudicated in her favor in the extra-judicial settlement of Constancia Socco’s estate. 6-A. the property was left to his wife Constancia. Bataan. 87066. assailing the Decision 1 dated 31 January 2006 rendered by the Court of Appeals in CA-G. No. Socco.. but no title had been issued in her name. Socco. Socco. 491 SCRA 396. It was originally part of a larger parcel of land. filed their protest to respondent’s petition before the DAR on the ground that the subject property was sold by respondent’s brother. Penned by Judge Salvador S. DECISION CHICO-NAZARIO. allocated to the Spouses Marcelo Laquian and Constancia Socco (Spouses Laquian). vs. 02-A-007.R.R. 176474 of the Philippines COURT November 27. On 25 June 1998. Municipality of Dinalupihan. along with her other property. 6-B. 148630. Miguel R. was adjudicated to respondent. 20 June 2006. namely: Filomena Eliza Socco. with a total area of 360 square meters. 5 Petitioners herein.022 square meters. stipulating that:6 That I am one of the co-heirs of the Estate of the deceased Constancia Socco. Records. Dinalupihan. 98.: This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court. Lot No. the parcel of land was partitioned into three lots– Lot No. she left the original parcel of land. G. in favor of their father. who paid for the same with Japanese money. Case No.

[she] is willing to waive her right on the portion where [the] kitchen and bathroom is (sic) constructed but not the whole of Lot [No. ALLOCATING Lot No. (affidavit of Patricia Hipolito is hereto attached as Annex "F"). ruling that respondent was qualified to own the subject property pursuant to Article 1091 of the New Civil Code. 3. 12 . situated Zamora Street. 11 Respondent filed a Motion for Reconsideration of the foregoing Order. which was denied by DAR Regional Director Acosta in another Order dated 15 September 1999. she had already renounced her right to recover the same. that Elena Socco cannot physically and personally occupy the subject property because of the skeletal building made by the Reyes family who have been requesting that they be paid for the cost of the construction and the same be demolished at the expense of Elena Socco. Reyes. that the Reyes family included the subject property to the sworn statement of value of real properties filed before the municipality of Dinalupihan. Bataan. Acosta. 4. (Emphasis supplied. Other than recounting the afore-mentioned facts. DISMISSING the claims of Elena Socco-Beltran. Legal Officer Pinlac also made the following findings in her Report/Recommendation: 7 Further investigation was conducted by the undersigned and based on the documentary evidence presented by both parties. 9 In an Order dated 15 September 1999. the results of which were contained in her Report/ Recommendation dated 15 April 1999. that construction of the said skeletal building was not continued and left unfinished which according to the affidavit of Patricia Hipolito the Reyes family where (sic) prevented by Elena Socco in their attempt of occupancy of the subject landholding. duly represented by Myrna Socco for lack of merit. that likewise Elena Socco has been continuously and religiously paying the realty tax due on the said property. more or less unto Atty. hence.xxxx That for or in consideration of the sum of FIVE PESOS (P5.10 The dispositive part of the Order reads: 1.00) per square meter. Legal Officer Pinlac recommended the approval of respondent’s petition for issuance of title over the subject property. ORDERING the complainant to refrain from any act tending to disturb the peaceful possession of herein respondents. this was constructed since the year (sic) 70’s at their expense. DAR Regional Director Nestor R. DIRECTING the MARO of Dinalupihan. 6-B under Psd-003-008565 with an area of 360 square meters. more or less.) Petitioners averred that they took physical possession of the subject property in 1954 and had been uninterrupted in their possession of the said property since then. Dinalupihan. Bataan. the following facts were gathered: that the house of [the] Reyes family is adjacent to the landholding in question and portion of the subject property consisting of about 15 meters [were] occupied by the heirs of Arturo Reyes were a kitchen and bathroom [were] constructed therein. administrator and assigns x x x. convey and transfer by way of this conditional sale the said 400 sq. 8 Provincial Agrarian Reform Officer (PARO) Raynor Taroy concurred in the said recommendation in his Indorsement dated 22 April 1999. hereby sell. dismissed respondent’s petition for issuance of title over the subject property on the ground that respondent was not an actual tiller and had abandoned the said property for 40 years.m. Legal Officer Brigida Pinlac of the DAR Bataan Provincial Agrarian Reform Office conducted an investigation. Bataan to process the pertinent documents for the issuance of CLOA in favor of the heirs of Arturo Reyes. his heirs. In the end. 2.] 6-B adjudicated to her. on the remaining portion a skeletal form made of hollow block[s] is erected and according to the heirs of late Arturo Reyes. however. copies of the documents are hereto attached as Annexes "G" and "H". Arturo C. that according to Elena Socco. in favor of the heirs of Arturo Reyes.

16 Petitioners’ Motion for Reconsideration was likewise denied by the Office of the President in a Resolution dated 30 September 2004. the Court of Appeals affirmed respondent’s right over the subject property. Finally. filed beyond fifteen days from receipt of the decision to be reconsidered. Consequently.] 6-B of Elena Socco-Beltran. 87066. Acting on CA-G. since it was respondent who applied to purchase the subject property. which was derived form the original allocatees thereof. judgment appealed from is AFFIRMED and the instant appeal DISMISSED.P.Respondent then appealed to the Office of the DAR Secretary. dated 31 January 2006. 02-A-007.13 In the said Order.17 In the said Resolution. wherein petitioners raise the following issues: I . 87066. since actual occupancy requires the positive act of occupying and tilling the land.R. premises considered. It held that petitioners could not have been actual occupants of the subject property. Pending the resolution of this case. dated 9 November 2001. Petitioners were further disqualified from purchasing the subject property because they were not landless. the Office of the President rendered its Decision denying petitioners’ appeal and affirming the DAR Secretary’s Decision.R.14 Petitioners sought remedy from the Office of the President by appealing the 9 November 2001 Decision of the DAR Secretary. petitioners filed an appeal before the Court of Appeals. nor respondent was an actual occupant of the subject property. premises considered. SP No. had no right to transfer the same. not just the introduction of an unfinished skeletal structure thereon. therefore. who was not the owner of the said property and. 22 Hence. the Court of Appeals subsequently promulgated its Decision. Accordingly. premises considered. This was construed by the DAR Secretary as a waiver by petitioners of their right over the subject property. The Contract to Sell on which petitioners based their claim over the subject property was executed by Miguel Socco. she was better qualified to own said property as opposed to petitioners. Thus. the DAR Secretary reversed the Decision of DAR Regional Director Acosta after finding that neither petitioners’ predecessor-in-interest. Myrna Socco-Beltran. during the investigation of Legal Officer Pinlac. On 30 June 2003. 20 The fallo of the said Decision reads: WHEREFORE. the instant PETITION FOR REVIEW is DISMISSED.15 The fallo of the Decision reads: WHEREFORE. Such date was material considering that the petitioners’ Motion for Reconsideration was filed only on 14 April 2004. it ruled that petitioners’ Motion for Reconsideration. affirming the Decision dated 30 June 2003 of the Office of the President. or almost nine months after the promulgation of the decision sought to be reconsidered. rendered the said decision final and executory. 1999 Order is hereby SET ASIDE and a new Order is hereby issued APPROVING the application to purchase Lot [No. Accordingly. petitioners requested that respondent pay them the cost of the construction of the skeletal house they built on the subject property. Case No. who did not at all apply to purchase the same. Arturo Reyes. the Office of the President noted that petitioners failed to allege in their motion the date when they received the Decision dated 30 June 2003. In an Order. docketed as CA-G. the September 15. the DAR Secretary ordered that: WHEREFORE. the DAR already issued on 8 July 2005 a Certificate of Land Ownership Award (CLOA) over the subject property in favor of the respondent’s niece and representative.18 Respondent passed away on 21 March 2001. However. the present Petition. 19 but the records do not ascertain the identity of her legal heirs and her legatees. Their appeal was docketed as O. SP No. the Decision dated 30 June 2003 and the Resolution dated 30 December 2004 both issued by the Office of the President are hereby AFFIRMED in toto.21 The Court of Appeals denied petitioners’ Motion for Reconsideration of its Decision in a Resolution dated 16 August 2006.

there was no valid sale from which ownership of the subject property could have transferred from Miguel Socco to Arturo Reyes. Petitioners claim that the property was constructively delivered to them in 1954 by virtue of the Contract to Sell. Miguel R. Miguel R. Socco was not yet the owner of the property and was only expecting to inherit it. 23 The main issue in this case is whether or not petitioners have a better right to the subject property over the respondent." The law specifically requires that the vendor must have ownership of the property at the time it is delivered. therefore. II WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT PETITIONERS "CANNOT LEGALLY ACQUIRE THE SUBJECT PROPERTY AS THEY ARE NOT CONSIDERED LANDLESS AS EVIDENCED BY A TAX DECLARATION. Petitioner’s claim over the subject property is anchored on the Contract to Sell executed between Miguel Socco and Arturo Reyes on 5 September 1954. apparent that the sale of the subject property in favor of Arturo Reyes was conditioned upon the event that Miguel Socco would actually inherit and become the owner of the said property. It was unmistakably stated in the Contract and made clear to both parties thereto that the vendor. "The thing must be licit and the vendor must have a right to transfer ownership thereof at the time it is delivered. herein petitioners. it was explicit in the Contract itself that. However. SHE IS ALREADY AN AMERICAN NATIONAL. Arturo Reyes also could not have conveyed the same to his heirs. IV WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DENIED PETITIONERS MOTION FOR NEW TRIAL THEREBY BRUSHING ASIDE THE FACT THAT MYRNA V. Socco never acquired ownership of the subject property which he could validly transfer to Arturo Reyes. was a conditional sale. Miguel R. CONTINUOUS." III WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT "…WHATEVER RESERVATION WE HAVE OVER THE RIGHT OF MYRNA SOCCO TO SUCCEED WAS ALREADY SETTLED WHEN NO LESS THAN MIGUEL SOCCO (PREDECESSOR-IN INTEREST OF HEREIN PETITIONERS) EXECUTED HIS WAIVER OF RIGHT DATED APRIL 19. WHEN IN TRUTH AND IN FACT.WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE FINDINGS OF THE OFFICE OF THE PRESIDENT THAT THE SUBJECT LOT IS VACANT AND THAT PETITIONERS ARE NOT ACTUAL OCCUPANTS THEREOF BY DENYING THE LATTER’S CLAIM THAT THEY HAVE BEEN IN OPEN. It is. EXCLUSIVE. Arturo Reyes. SOCCO-ARIZO GROSSLY MISREPRESENTED IN HER INFORMATION SHEET OF BENEFICIARIES AND APPLICATION TO PURCHASE LOT IN LANDED ESTATES THAT SHE IS A FILIPINO CITIZEN. have been in possession of the subject lot since 1954 for an uninterrupted period of more than 40 years. Absent such occurrence. The Court is unconvinced. Petitioners additionally allege that they and their predecessor-in-interest. Hence. Without acquiring ownership of the subject property. Petitioners cannot derive title to the subject property by virtue of the Contract to Sell. as already pointed out by this Court. was not yet the owner of the subject property and was merely expecting to inherit the same as his share as a co-heir of Constancia’s estate. Arturo Reyes. 2005 OVER THE SUBJECT PROPERTY IN FAVOR OF MYRNA SOCCO. . at the time it was executed. 24 It was also declared in the Contract itself that Miguel R. Socco’s conveyance of the subject to the buyer. Socco. NOTORIOUS AND AVDERSE POSSESSION THEREOF SINCE 1954 OR FOR MORE THAN THIRTY (30) YEARS. Under Article 1459 of the Civil Code on contracts of sale.

since peace time until the present. Arturo Reyes had already died and was already represented by his heirs. continuous. otherwise known as the Land Registration Act. which required -. thus. Thus. petitioners therein sought the enforcement of Section 54. as a private document. and undisputed possession of alienable public land for the period prescribed by law creates the legal fiction whereby land ceases to be public land and is. certifying that Arturo Reyes was the occupant of the subject property "since peace time and at present.Petitioners. petitioners herein. 29 In the present case. 32 In contrast. its authenticity was never put into question. can only bind the parties thereto.31 dated 26 February 1999. and notorious possession and occupation of the same in good faith and under claim of ownership for more than ten years. the Court in the afore-stated case denied the petition on the ground that petitioners failed to prove that they exercised acts of ownership or were in open. paragraph 6 of Act No. are entitled to great respect. and notorious occupation of property for more than 30 years must be no less than conclusive. 926.28 As in the two aforecited cases. exclusive. After evaluating the evidence presented. nevertheless. the certification given by Barangay Captain Gapero that Arturo Reyes occupied the premises for an unspecified period of time. when respondent filed her petition for issuance of title before the DAR. The subject property was allocated to respondent in the extrajudicial settlement by the heirs of Constancia’s estate. Court of Appeals. if supported by evidence. continuous. and had caused it to be enclosed to the exclusion of other persons. exclusive. receipts. the Court reiterated the rule that the open. petitioners herein were unable to prove actual possession of the subject property for the period required by law. and continuous possession of the property since 1954. Moreover. respondent’s claim over the subject property is backed by sufficient evidence. the spouses Laquian. cannot prevail over Legal Officer Pinlac’s more particular findings in her Report/Recommendation. that the structure was left unfinished because respondent prevented petitioners from occupying the subject property. they gained ownership of the property through acquisitive prescription. Her predecessors-in-interest. 27 In San Miguel Corporation. The factual findings of such administrative officer.for the issuance of a certificate of title to agricultural public lands -. However." The statement is rendered doubtful by the fact that as early as 1997. consisting of the testimonies of several witnesses and proof that fences were constructed around the property. Arturo Reyes. It further decreed that whoever claims such possession shall exercise acts of dominion and ownership which cannot be mistaken for the momentary and accidental enjoyment of the property. It was underscored in San Miguel Corporation that the open. had been in open. the Office of the President. have been identified as the original allocatees who have fully paid for the subject property. The adverted findings were the result of Legal Officer Pinlac’s investigation in the course of her official duties. that the occupation of the land for 30 years must be conclusively established. exclusive. Such findings disprove petitioners’ claims that their predecessor-in-interest. petitioner’s predecessor-in-interest who claimed to have occupied the land before selling it to the petitioner – were considered insufficient to satisfy the quantum of proof required to establish the claim of possession required for acquiring alienable public land.. the evidence offered by petitioner therein – tax declarations. continuous. Insular Government 25 and San Miguel Corporation v. nor was its legality impugned.the open. citing Sandoval v. insist that they physically occupied the subject lot for more than 30 years and. the only proof offered to support their claim was a general statement made in the letter 30 dated 4 February 2002 of Barangay Captain Carlos Gapero. such quantum of proof being necessary to avoid the erroneous validation of actual fictitious claims of possession over the property that is being claimed. therefore. Moreover. 26 In Sandoval. private property. She also referred to the averments made by Patricia Hipolito in an Affidavit. exclusive. the evidence presented by the petitioners falls short of being conclusive. and the Court of Appeals. of matters within her expertise which were later affirmed by the DAR Secretary.e. executed in 1965 by the heirs of Constancia Socco. and peaceful possession of the whole land. i. and the sole testimony of the applicant for registration. The document entitled "Extra-judicial Settlement of the Estate of the Deceased Constancia Socco" was not notarized and. It stressed. Legal Officer Pinlac reported that petitioners admitted that it was only in the 1970s that they built the skeletal structure found on the subject property. or more than . however. Apart from their self-serving statement that they took possession of the subject property.

promulgated on 31 January 2006. is AFFIRMED with MODIFICATION. MINITA Associate Justice V. ALICIA Associate Acting Chairperson RUBEN Associate Justice AUSTRIA-MARTINEZ Justice ANTONIO EDUARDO Associate Justice T. Upon the full payment of the purchase price. through a Special Power of Attorney 37 dated 10 March 1999. the Court notes that the records have not clearly established the right of respondent’s representative. now that she is deceased. CHICO-NAZARIO WE CONCUR: CONSUELO Associate Chairperson MA. The only act which remains to be performed is the issuance of a title in the name of her legal heirs. it is an ancient document which appears to be genuine on its face and therefore its authenticity must be upheld. Socco. 35 Since the extrajudicial partition transferring Constancia Socco’s interest in the subject land to the respondent is valid. This Court withholds the confirmation of the validity of title over the subject property in the name of Myrna Socco-Arizo pending determination of respondent’s legal heirs in appropriate proceedings. respondent’s only nephew. though not conclusive. however. The assailed Decision of the Court of Appeals in CA-G. it is only proper that respondent’s claim over the subject property be upheld. it is not clear to this Court why the DAR issued on 8 July 2005 a CLOA 36 over the subject property in favor of Myrna Socco-Arizo. which granted the petitioner’s right to purchase the property. NACHURA REYES . served to strengthen her claim over the property. note that the Order of the DAR Secretary. SO ORDERED.R. which may be assailed in appropriate proceedings. this Decision does not in any way confirm the issuance of the CLOA in favor of Myrna Socco-Arizo. By the nature of a contract or agreement to sell. dated 9 November 2001. Records show that the DAR affirmed that respondent’s predecessors-in-interest. despite the application for the purchase of the property erroneously filed by respondent. have fully paid for the subject property as provided under an agreement to sell. Respondent’s death does not automatically transmit her rights to the property to Myrna Socco-Beltran. executed a waiver of his right to inherit from respondent. there is clearly no need for the respondent to purchase the subject property. Thus. 34 From the foregoing. is flawed and may be assailed in the proper proceedings. This Court must. That Miguel V. and absent any showing that the allocatee violated the conditions of the agreement. ownership of the subject land should be conferred upon the allocatee. having been identified as the original allocatee. the title over the subject property is transferred to the vendee upon the full payment of the stipulated consideration. the son of the late Miguel R. Moreover.30 years ago. to represent her in the present case and to administer the subject property for her benefit. No costs. Myrna Socco-Arizo. There is nothing in the Special Power of Attorney to the effect that Myrna Socco-Arizo can take over the subject property as owner thereof upon respondent’s death. does not automatically mean that the subject property will go to Myrna Socco-Arizo. Marcelo Laquian and Constancia Socco. a fact which. Respondent only authorized Myrna Socco-Arizo. and Myrna Socco-Arizo’s brother. Socco. 33 Respondent has continuously paid for the realty tax due on the subject property. absent any proof that there is no other qualified heir to respondent’s estate. SP No. the instant Petition is DENIED. YNARES-SANTIAGO Justice B. over the subject property. Thus. IN VIEW OF THE FOREGOING. 87066.

1091. concurring. at 114. CONSUELO Associate Chairperson YNARES-SANTIAGO Justice CERTIFICATION Pursuant to Section 13. 2 Penned by Senior Deputy Executive Secretary Waldo Q. Rollo. Records. p. 54. pp. Id. 59-61. at 112. p. Rollo. REYNATO Chief Justice S. p. 26. 10 11 12 . Records. Article VIII of the Constitution and the Division Chairperson’s Attestation. pp. Reyes with Associate Justices Arturo D. Rollo. at 60-61. PUNO Footnotes 1 Penned by Associate Justice Bienvenido L. 32-40. Rollo. Id. Brion (now an Associate Justice of the Supreme Court) and Mariflor Punzalan Castillo. 81-82. 9 Id. 55-58. A partition legally made confers upon each heir the exclusive ownership of the property adjudicated to him. Rollo. 1091 of the Civil Code provides that: 3 4 5 6 7 8 Art. Records. at 65-66. Flores. pp. Id.ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division. 112-113. I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division. Art. pp. 113. pp.

Court of Appeals. 292.13 CA rollo. No. How genuineness of handwriting proved. Evidence respecting the handwriting may also be given by a comparison. 304 (2001). 36-38. 947 (2001). 57667. Province of Bataan. made by the witness or the court. 160-161. 16 May 2005. at 41-43. 54. 712. "That I am one of the co-heirs of the Estate of the deceased Constancia Socco. 185 SCRA 722. G. 33 Sec. 28 May 1990. 105. Insular Government. and has thus acquired knowledge of the handwriting of such person. Sandoval v.) 25 12 Phil. 81-82. p.R. or has seen writing purporting to be his upon which the witness has acted or been charged. Rollo. Balbastro v. Id. Records. 939. Advincula v.R. 527 SCRA 680. Id. 458 SCRA 696." (Rollo. 42-46. – The handwriting of a person may be proved by any witness who believes it to be the handwriting of such person because he has seen the person write. Id. 22. Id. supra note 25 at 654-656.R. G. G. at 46. 423 Phil. San Miguel Corporation v. 14 15 16 17 18 19 20 21 22 23 24 In the Contract To Sell. pp. Junio. No. p. pp. Id. and that I am to inherit as such a portion of her lot consisting of Four Hundred Square Meters (400) more or less located on the (sic) Zamora St. Rollo. Court of Appeals. 26 27 28 29 30 31 32 Spouses Calvo v. with writings admitted or treated as . 117. 154678. at 64. Spouses Vergara. 22. 693. p. No. Socco states that. Municipality of Dinalupihan. Id. Dicen. pp. Miguel R. Dulos Realty and Development Corporation v. pp. 162403. 648 (1909). Rule 132 of the Revised Rules of Court states that: SEC. at 82. at 86-88. 422 Phil.. Id. at 16. supra note 26 at 724-726. 17 July 2007. Rollo. at 40. 153. CA rollo. Id.

(Manongsong v..genuine by the party against whom the evidence is offered. The RTC modified the Decision 4 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 facts are as follows: Respondent Nayong Pilipino Foundation.) 34 Records. vs. 452 Phil. The RTC declared petitioners as builders in good faith and upheld their right to indemnity. Records. respondent leased a portion of the Nayong Pilipino Complex. pp.289 square meters. 112. 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. known as the Nayong Pilipino Complex. They agreed to the renewal of the contract for another 25 years.00 per square meter. PANLILIO. 415 Phil. of the Philippines COURT 35 36 37 Republic SUPREME Manila FIRST DIVISION G. p. 2 reversing the November 29. 100. INC.780. Estimio. The addendum was signed by petitioner Jose Marcel E. to be known as the Philippine Village Hotel. Petitioner Philippine Village Hotel. Garilao. petitioner PVHI was bound to pay the monthly rental on a per square meter basis at the rate of P20.00. C. which shall be subject to an increase of 20% at the end of every 3-year period. Under the new agreement. Petitioners. Lim of the Nayong Pilipino Foundation. NAYONG PILIPINO FOUNDATION. formerly called Sulo sa Nayon. The lease was for an initial period of 21 years. petitioners sent respondent a letter notifying the latter of their intention to renew the contract for another 25 years. 62. is the owner of a parcel of land in Pasay City. a government-owned and controlled corporation. 2009 SULO SA NAYON. SP No. Spouses Tuazon v. 2002 Decision 3 of the Regional Trial Court (RTC) of Pasay City in Civil Case No.R. or until 2021. INC. On July 4. to petitioner Sulo sa Nayon. DECISION PUNO. 1995. No. 1975. 878 [2003]. (PVHI). Panlilio in his official capacity as Senior Executive Vice President of the PVHI and by Chairman Alberto A.: On appeal are the Court of Appeals’ (CA’s) October 4.R. 69 and 72 (2001). Thus. Hon. and JOSE MARCEL E. p. Petitioner Jose Marcel E.J. At the time of the renewal of the lease contract. the parties executed a Voluntary Addendum to the Lease Agreement. Inc. for the construction and operation of a hotel building. on March 7. CA rollo. or until May 1996. Inc. 862. 1995. Panlilio is its Senior Executive Vice President. 160-161. 02-0133. Inc. 74631 and December 22. 2005 Resolution. consisting of 36. 170923 January 20. is a domestic corporation duly organized and existing under Philippine laws. or proved to be genuine to the satisfaction of the judge. the monthly rental amounted to P725. and/or PHILIPPINE VILLAGE HOTEL. On June 1. . Respondent. 2005 Decision 1 in CA-G.

January 21. 2001. 1999). and] . Vda[. 2001. 2. judgment is hereby rendered in favor of Nayong Pilipino Foundation. . 3. i. On February 26. The complaint was docketed as Civil Case No.] De Pamintuan v. 4.e. Court of Appeals and Ramon Ibarra. in the alternative. which provides for full reimbursement of useful improvements and retention of the premises until reimbursement is made. 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. 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.225. applies only to a possessor in good faith. 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. 2001.780. 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. VACATE the subject premises and surrender possession thereof to plaintiff. Improvements made by a lessee such as the defendants herein on leased premises are not valid reasons for their retention thereof. . Chua and Co Sio Eng vs. PAY plaintiff the sum of FIFTY THOUSAND PESOS (P50.14). . On September 5.225. defendants defaulted in the payment of their rentals. No. Upon the failure of the lessee to pay the stipulated rentals. 53 Phil. premises considered. . There is no provision of law which grants the lessee a right of retention over the leased premises on that ground. 1). It is basic that the lessee is obliged to pay the price of the lease according to the terms stipulated (Art. otherwise. G. For non-payment of rentals. thus: . it would always be in his power to "improve" his landlord out of the latter’s property (Jose L. and all persons claiming rights under it. as of July 31." Although the Contract of Lease stipulates that the building and all the improvements in the leased premises belong to the defendants herein. Respondent repeatedly demanded petitioners to pay the arrears and vacate the premises.183. ordering the latter to: 1. like the petitioners.]. petitioners defaulted in the payment of their monthly rental. Civil Code). in relation to Article 546. Inc[.Beginning January 2001. 1657. and against the defendant Philippine Village Hotel. recover the back rentals and recover possession of the leased premises. . At most. 109840. the lessor may rescind the lease.R. respondent filed a complaint for unlawful detainer before the MeTC of Pasay City. 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.00) by way of attorney’s fees[. . The court is convinced by the evidence that indeed. 2002.. to remove the improvements if the lessor refuses to make reimbursement. . xxx . .14) incurred as of July 31. Tiglao. or.00) per month starting from August 2001 and every month thereafter by way of reasonable compensation for the use and occupation of the premises. This right of retention does not apply to a mere lessee. Article 448 of the Civil Code. 2001. PAY plaintiff the sum of SEVEN HUNDRED TWENTY FIVE THOUSAND SEVEN HUNDRED EIGHTY PESOS (P725. one who builds on a land in the belief that he is the owner thereof. The dispositive portion of the decision reads as follows: WHEREFORE. the MeTC rendered its decision in favor of respondent. 708-01.000.183. The last demand letter was sent on March 26. It ruled. the lessor may eject (sic) and treat the lease as rescinded and sue to eject the lessee (C.

5 Petitioners appealed to the RTC which modified the ruling of the MeTC. 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. . In fact. The said defendant’s counterclaim however is likewise dismissed as the complaint does not appear to be frivolous or maliciously instituted. 605). SO ORDERED. The dispositive portion of the decision of the RTC reads as follows: WHEREFORE. upon payment of proper indemnity consonant to Art. Until such time that plaintiff-appellee has elected an option or choice. It held that: . . 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. 2. . and pursuant to Article 448 in relation to Art. it could not be denied that appellants were builders in good faith." Lease Agreement). these. 546 of the Civil Code may apply with respect to their rights over improvements. judgment is hereby rendered modifying the decision of [the] MTC.5. Moreover. 448 in relation to Art. . "A" to "B. immensely engender the application of Art. xxx . is without prejudice from the parties agreeing to adjust their rights in some other way as they may mutually deem fit and proper. it was precisely the primary purpose for which they entered into an agreement. plaintiff-appellee has the sole option or choice. either to appropriate the building. appellants fail to pay for the land (Ignacio vs. Branch 45 of Pasay City rendered on February 26. PAY the costs of suit. Hilario. it is undeniable that the improvement of the hotel building of appellants (sic) PVHI was constructed with the written consent and knowledge of appellee. the elements of permanency of the construction and substantial value of the improvements as well as the undispute[d] ownership over the land improvements. 76 Phil. xxx Considering therefore.. it is clear and undisputed that appellants-lessees were expressly required to construct a first-class hotel with complete facilities. 546 or compel the appellants to purchase the land whereon the building was erected. The complaint against defendant Jose Marcel E. pars. 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. This. The appellants were also unequivocally declared in the Lease Agreement as the owner of the improvements so constructed. Thus. 2002 as follows: 1. 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. 448 of the Civil Code. i. 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.e. it has no right of removal or demolition against appellants unless after having selected a compulsory sale. Panlilio is hereby dismissed for lack of cause of action. however. 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. Accordingly. . 546 of the Civil Code. and in view of the foregoing.

.780. have the right to indemnity. SO ORDERED. it is glaring error on the part of the RTC to apply the aforesaid legal provisions on the supposition that the improvements. this appeal. The CA held: By and large. 2001 in the amount of P26. which are of substantial value. 5. respondents are admittedly mere lessees of the subject premises and as such. 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. 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. . 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. 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 found in Articles 448 and 546 of the Civil Code when it held that petitioners were builders in good faith and. 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. 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.225. 6 Respondent appealed to the CA which held that the RTC erroneously applied the rules on accession. III . . The parties are directed to adjust their respective rights in the interest of justice as they may deem fit and proper if necessary. allow the lessee to easily "improve" the lessor out of its property. 6. INSTEAD OF ARTICLE 1678 OF THE CIVIL CODE. had been introduced on the leased premises with the permission of the petitioner. thus.3. Ordering defendants-appellants to pay plaintiff-appellee [their] arrears in rent incurred as of July 31.183. 4.14. . THUS COMPELLING THE APPLICATION OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO ARTICLE 546 OF THE SAME CODE. 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. Hence. As it is.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. Petitioners’ Motion for Reconsideration was denied. as stated.00 per month.

Second. shall have the right to appropriate as his own the works. requesting them "to pay the rental arrears or else it will be constrained to file the appropriate legal action and possess the leased premises.225. 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. the language of the demand letter is plain and simple: respondent demanded payment of the rental arrears amounting to P26. we settle the issue of jurisdiction. Article 448 and Article 546 provide: Art. in effect. apply to the instant case. 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. Thus.ASSUMING ARGUENDO THAT THE PETITIONERS ARE NOT BUILDERS IN GOOD FAITH. We have ruled that: . 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. There was. since such demand is a jurisdictional requisite. THUS BOTH PARTIES ACTED AS IF THEY ARE IN GOOD FAITH. The tenants must pay rentals which are fixed and which became payable in the past. it is clear that the demand letter is intended as a notice to petitioners to pay the rental arrears. Contrary to the claim of petitioners. a notice or demand to vacate. as found in Articles 448 and 546 of the Civil Code. petitioners’ argument that the demand letter is "inadequate" because it contained no demand to vacate the leased premises does not persuade. . 9 In the case at bar. sowing or planting. when the petitioners demanded that either he pays P18. BUT ALSO WOULD CONSTITUTE UNJUST ENRICHMENT ON THE PART OF RESPONDENT AT GREAT EXPENSE AND GRAVE PREJUDICE OF PETITIONERS. INC. and the one who sowed. However. .000 in five days or a case of ejectment would be filed against him. 448. WOULD SUFFER ONLY SLIGHT OR INCONSEQUENTIAL INJURY OR LOSS. the builder or planter cannot be obliged to . The word "vacate" is not a talismanic word that must be employed in all notices.183. or to oblige the one who built or planted to pay the price of the land. We reiterate the ruling of the MeTC.14 within ten days from receipt by petitioners. The alternatives in this case are clear cut. or respondent will be constrained to file an appropriate legal action against petitioners to recover the said amount. RTC and CA. and a notice to vacate the premises in case of failure of petitioners to perform their obligation to pay. sown or planted in good faith." Further. 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. 2001 was sent by respondent through registered mail to petitioners. we resolve the main issue of whether the rules on accession. he was placed on notice to move out if he does not pay. failing which they must move out. after payment of the indemnity provided for in Articles 546 and 548. . Hence. 8 First. IN COMPARISON THERETO. documentary evidence proved that a demand letter dated March 26. The owner of the land on which anything has been built. WHILE RESPONDENT NAYONG PILIPINO FOUNDATION. 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. There can be no other interpretation of the notice given to them. the proper rent.

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. explains: This article [Article 448] is manifestly intended to apply only to a case where one builds. and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. planter or sower is that of a holder. the lessee may remove the improvements. The parties shall agree upon the terms of the lease and in case of disagreement. In such case. such as a tenant. he shall pay reasonable rent. 1678. the parties may be considered to have impliedly waived the application of Article 1678. petitioners have no adverse claim or title to the land. We reiterate the doctrine that a lessee is neither a builder in good faith nor in bad faith 12 that would call for the application of Articles 448 and 546 of the Civil Code. Petitioners argue that to apply Article 1678 to their case would result to sheer injustice. they should be considered builders in good faith who have the right to retain possession of the property until reimbursement by respondent. which are suitable for the use for which the lease is intended. His rights are governed by Article 1678 of the Civil Code. such a situation would allow the lessee to easily "improve" the lessor out of its property. the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. that they have introduced on the leased premises with the permission of respondent. Art. useful improvements which are suitable to the use for which the lease is intended. He shall not. as it would amount to giving away the hotel and its other structures at virtually bargain prices. Under Article 1678. plants. Useful expenses shall be refunded only to the possessor in good faith with the same right of retention. but he may remove the ornamental objects. 11 In the case at bar. Thus. the lessee shall not be entitled to any reimbursement.buy the land if its value is considerably more than that of the building or trees. if the owner of the land does not choose to appropriate the building or trees after proper indemnity. and consequently. they contend that it is the lease contract that governs the relationship of the parties. provided no damage is caused to the principal thing. they recognize that the respondent is the owner of the land. without altering the form or substance of the property leased. which are of substantial value. What petitioners insist is that because of the improvements. With regard to ornamental expenses. 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. Should the lessor refuse to reimburse said amount. the lessor has the option of paying one-half of the value of the improvements which the lessee made in good faith. in good faith. 546. They allege that the value of the hotel and its appurtenant facilities amounts to more than two billion pesos. Otherwise. If the lessee makes. 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. 10 and not to lands where the only interest of the builder. while the monetary claim of respondent against them only amounts to a little more than twenty six-million pesos. which reads: Art. The late Senator Arturo M. as lessees. In fact. or sows on land in which he believes himself to have a claim of title. and which have not altered the form and substance of the land. . even though the principal thing may suffer damage thereby. however. cause any more impairment upon the property leased than is necessary. a leading expert in Civil Law. the court shall fix the terms thereof. the lessee may remove the improvements should the lessor refuse to reimburse. On the other hand. Tolentino.

Existing laws always form part of any contract. It can rightfully file for ejectment to evict petitioners. petitioners’ appeal is DENIED. REYNATO Chief Justice S. Associate Justice LEONARDO-DE AZCUNA CASTRO Footnotes 1 Rollo. . 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. The October 4. which provides that: 10.R. as it did before the court a quo. 2005 Decision of the Court of Appeals in CA-G. Costs against petitioners. They cite paragraph 10 of the lease contract. . the LESSEE will pay all reasonable attorney’s fees. 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. charges. . Article VIII of the Constitution. IN VIEW WHEREOF. REYNATO Chief Justice WE CONCUR: ANTONIO Associate Justice RENATO C. Associate Justice TERESITA Associate Justice CERTIFICATION Pursuant to Section 13.We cannot sustain this line of argument by petitioners. or. . pp. Basic is the doctrine that laws are deemed incorporated in each and every contract. In case of cancellation or termination of this contract due to the default or breach of its terms. as well as all unpaid rents. CORONA T. . However. if no time is fixed. 74631 and its December 22. SP No. taxes. Further. fees. PUNO J. CARPIO S. 43-53. Petitioners assert that respondent committed a breach of the lease contract when it filed the ejectment suit against them. assessment and others which the LESSOR may be entitled to. DEFAULT. we find nothing in the above quoted provision that prohibits respondent to proceed the way it did in enforcing its rights as lessor. . after 90 days from the receipt of notice or demand from the LESSOR. 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.. PUNO ADOLFO S. 2005 Resolution are AFFIRMED. I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division. costs and expenses of litigation that may be incurred by the LESSOR in enforcing its rights under this contract or any of its provisions. SO ORDERED.

II. Castillo v. July 31. Francisco. vol. L74289. Id. April 15. 1987. 1976. July 29. Villanueva. Balucanag v.. L-49219. No. 1979. No. May 28. 1980. February 21. 1979. No. 90 SCRA 318. Melencio-Herrera. L-25462. citing Golden Gate Realty Corporation v. 124 SCRA 808. No. citing Floreza v. 1983. 2004. Court of Appeals. at 144-159. citing Alburo v. Id. L-45013. Abesia. Id. Id. Floreza v. Adil. Applied to co-owner: Del Campo v. Concurring Opinion of J. 7 Phil. at 138-143. No. Evangelista. 152 SCRA 684. De Laureano v. 96 SCRA 130. 277 (1907). at 55-56. Southwestern University v. 277. Intermediate Appellate Court. 90 SCRA 318. 96 SCRA 130. September 29. Salvador. L-33422. No. 12 Southwestern University v. 1983. Salvador. 10 Tolentino. 122 SCRA 498. at 158-159. L-45013. Id. Commentaries and Jurisprudence on the Civil Code of the Philippines.2 Id. . at 142-143. 3 4 5 6 7 8 9 MeTC Decision. L-48290. Arturo M. No. No. 7 Phil. May 28. L-43345. Villanueva. 11 Alburo v. 1988. 72 SCRA 148. at 22-23. May 30. Id. Evangelista. 160 SCRA 379. at 10-41.