#6

PEDRO ANGELES ,
Represented by ADELINA T.
ANGELES, Attorney-in Fact,
Petitioner,
- versus -

G.R. No. 157150

Present:
CORONA,
C.J., Chairperson,
LEONARDO-DE
CASTRO,
BERSAMIN,
DEL CASTILLO, and
*PEREZ, JJ.

ESTELITA B. PASCUAL,
MARIA THERESA
PASCUAL, NERISSA
PASCUAL, IMELDA
Promulgated:
PASCUAL, MA. LAARNI
PASCUAL and EDWIN
PASCUAL,
September 21, 2011
Respondents.
x------------------------------------------------------------x
RE SOLUTION
BERSAMIN, J.:

Under appeal is the decision promulgated on January 31, 2002 in

CA- G.R. CV No. 61600,[1] which involved a dispute about the
true location of the respective lots of the parties, with the
respondents claiming that the petitioner had encroached on their
lot but the latter denying the encroachment.
Antecedents
Neighbors Regidor Pascual (Pascual) and Pedro Angeles
(Angeles) were registered owners of adjacent parcels of land
located in Cabanatuan City. Pascual owned Lot 4, Block 2 (Lot 4)
of the consolidation-subdivision plan (LRC) Psd-951, a portion
of the consolidation of Lots 1419-B-2B-3, 1419-B-2-B-4 and
1419-B-2-B-5, Psd- 9016, LGC (GLRO) Cadastral Record No.
94 covered by Transfer Certificate Title No. T-43707 of the
Registry of Deeds of Nueva Ecija;[2] Angeles owned Lot 5,
Block 2 (Lot 5) of the same consolidation-subdivision plan
covered by TCT No. T-9459 of the Registry of Deeds of Nueva
Ecija.[3] Each of them built a house on his respective lot,
believing all the while that his respective lot was properly
delineated. It was not until Metropolitan Bank and Trust
Company (Metrobank), as the highest bidder in the foreclosure
sale of the adjacent Lot 3, Block 2 (Lot 3), caused the relocation
survey of Lot 3 that the geodetic engineer discovered that
Pascuals house had encroached on Lot 3. As a consequence,
Metrobank successfully ejected Pascual.
In turn, Pascual caused the relocation survey of his own Lot 4
and discovered that Angeles house also encroached on his lot. Of
the 318 square meters comprising Lot 4, Angeles occupied 252
square meters, leaving Pascual with only about 66 square meters.
Pascual demanded rentals for the use of the encroached area of
Lot 4 from Angeles, or the removal of Angeles house. Angeles
refused the demand. Accordingly, Pascual sued Angeles for
recovery of possession and damages in the Regional Trial Court
(RTC) in Cabanatuan City.
In the course of the trial, Pascual presented Clarito Fajardo, the
geodetic engineer who had conducted the relocation survey and
had made the relocation plan of Lot 4.[4] Fajardo testified that
Angeles house was erected on Lot 4. On the other hand, Angeles
presented Juan Fernandez, the geodetic engineer who had
prepared the sketch plan relied upon by Angeles to support his
claim that there had been no encroachment.[5] However,
Fernandez explained that he had performed only a table work,
that is, he did not actually go to the site but based the sketch plan
on the descriptions and bearings appearing on the TCTs of Lot 4,
Lot 5 and Lot 6; and recommended the conduct of a relocation
survey.[6]

In its decision of November 3, 1998,[7] the RTC held that there

was no dispute that Pascual and Angeles were the respective
registered owners of Lot 4 and Lot 5; that what was disputed
between them was the location of their respective lots; that
Pascual proved Angeles encroachment on Lot 4 by preponderant
evidence; and that Pascual was entitled to relief. The RTC thus
disposed:
WHEREFORE, premises considered, judgment
is rendered in favor of the plaintiff and against
the defendant as follows:
1)
ordering the defendant or
persons claiming right through him
to cause the removal of his house
insofar as the same occupies the
portion of Lot 4, Block 2 (TCT No.
T-43707), of an area of 252 square
meters, as particularly indicated in
the Sketch Plan (Exhibit C-1); and
2)
and without pronouncement to
damages in both the complainant
and counterclaim.
With Costs.
SO ORDERED.[8]

Angeles appealed to the CA.

On January 31, 2002, the CA affirmed the RTC,[9] and held that
as between the findings of the geodetic engineer (Fajardo) who
had actually gone to the site and those of the other (Fernandez)
who had based his findings on the TCTs of the owners of the
three lots, those of the former should prevail. However, the CA,
modifying the RTCs ruling, applied Article 448 of the Civil
Code (which defined the rights of a builder, sower and planter in
good faith). The decision decreed thus:[10]
WHEREFORE, the decision appealed from is
MODIFIED. Plaintiffs-appellees are ordered to
exercise within thirty (30) days from the
finality of this decision their option to either
buy the portion of defendant-appellants house
on their Lot. No. 4, or to sell to defendantappellant the portion of their land on which his
house stands. If plaintiffs-appellees elect to sell
the land or buy the improvement, the purchase
price must be at the prevailing market price at
the time of payment. If buying the
improvement will render the defendantappellants house useless, then plaintiffsappellees should sell the encroached portion of
their land to defendant-appellant. If plaintiffsappellees choose to sell the land but defendantappellant is unwilling or unable to buy, then the
latter must vacate the subject portion and pay
reasonable rent from the time plaintiffsappellees made their choice up to the time they
actually vacate the premises. But if the value of
the land is considerably more than the value of
the improvement, then defendant-appellant
may elect to lease the land, in which case the
parties shall agree upon the terms of the
lease. Should they fail to agree on said terms,
the court of origin is directed to fix the terms of
the lease. From the moment plaintiffs-appellees
shall have exercised their option, defendantappellant shall pay reasonable monthly rent up
to the time the parties agree on the terms of the
lease or until the court fixes such terms. This is
without prejudice to any future compromise
which may be agreed upon by the parties.

SO ORDERED.
Angeles expectedly sought reconsideration, but the CA denied
his motion on February 13, 2003.
Issues
Hence, Angeles appeals, assailing: (a) the credence the CA
accorded to the testimony and relocation plan of Fajardo as
opposed to the survey plan prepared by Fernandez; and (b) the
options laid down by the CA, i.e., for Pascual either to buy the
portion of Angeles house or to sell to Angeles the portion of his
land occupied by Angeles were contrary to its finding of good
faith.
Ruling
The petition lacks merit.
The Court, not being a trier of facts,
cannot review factual issues
Section 1, Rule 45 of the Rules of Court explicitly states that the
petition for review on certiorari shall raise only questions of law,
which must be distinctly set forth. In appeal by certiorari,
therefore, only questions of law may be raised, because the
Supreme Court is not a trier of facts and does not normally
undertake the re-examination of the evidence presented by the
contending parties during the trial. The resolution of factual
issues is the function of lower courts, whose findings thereon are
received with respect and are binding on the Supreme Court
subject to certain exceptions.[11] A question, to be one of law,
must not involve an examination of the probative value of the
evidence presented by the litigants or any of them. There is a
question of law in a given case when the doubt or difference
arises as to what the law is on certain state of facts; there is a
question of fact when the doubt or difference arises as to the truth
or falsehood of alleged facts.[12]
Whether certain items of evidence should be accorded probative
value or weight, or should be rejected as feeble or spurious; or
whether or not the proofs on one side or the other are clear and
convincing and adequate to establish a proposition in issue;
whether or not the body of proofs presented by a party, weighed
and analyzed in relation to contrary evidence submitted by
adverse party, may be said to be strong, clear and
convincing; whether or not certain documents presented by one
side should be accorded full faith and credit in the face of
protests as to their spurious character by the other side; whether
or not inconsistencies in the body of proofs of a party are of such
gravity as to justify refusing to give said proofs weight all these
are issues of fact. Questions like these are not reviewable by the
Supreme Court whose review of cases decided by the CA is
confined only to questions of law raised in the petition and
therein distinctly set forth.[13]
Nonetheless, the Court has recognized several
exceptions to the rule, including: (a) when the findings are
grounded entirely on speculation, surmises or conjectures; (b)
when the inference made is manifestly mistaken, absurd or
impossible; (c) when there is grave abuse of discretion; (d) when
the judgment is based on a misapprehension of facts; (e) when
the findings of facts are conflicting; (f) when in making its
findings the Court of Appeals went beyond the issues of the case,
or its findings are contrary to the admissions of both the appellant
and the appellee; (g) when the findings are contrary to those of
the trial court; (h) when the findings are conclusions without
citation of specific evidence on which they are based; (i) when
the facts set forth in the petition as well as in the petitioners main
and reply briefs are not disputed by the respondent; (j) when the
findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record; and (k)
when the Court of Appeals manifestly overlooked certain
relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion.[14] The

circumstances of this case indicate that none of such exceptions

is attendant herein.
The credence given by the RTC to the testimony and relocation
plan of Fajardo was conclusive upon this Court especially by
virtue of the affirmance by the CA of the RTC.Resultantly, the
fact of Angeles encroachment on Pascuals Lot 4 was proved by
preponderant evidence.
It is noteworthy to point out, too, that the argument of Angeles
based on the indefeasibility and incontrovertibility of Torrens
titles pursuant to Presidential Decree No. 1529 (The Property
Registration Decree) is inapplicable considering that the
ownership of Lot 4 and Lot 5 was not the issue. Nor were the
metes and bounds of the lots as indicated in the respective TCTs
being assailed, for the only issue concerned the exact and actual
location of Lot 4 and Lot 5.
II
Angeles was a builder in good faith
To be next determined is whether the CAs application of Article
448 of the Civil Code was correct and proper.
Article 448 of the Civil Code provides thusly:
Article 448. The owner of the land on which
anything has been built, sown or planted in
good faith, shall have the right to appropriate as
his own the works, sowing or planting, after
payment of the indemnity provided for in
articles 546 and 548, or to oblige the one who
built or planted to pay the price of the land, and
the one who sowed, the proper rent. However,
the builder or planter cannot be obliged to buy
the land if its value is considerably more than
that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the
land does not choose to appropriate the
building or trees after proper indemnity. The
parties shall agree upon the terms of the lease
and in case of disagreement, the court shall fix
the terms thereof.
The provision contemplates a person building, or sowing, or
planting in good faith on land owned by another. The law
presupposes that the land and the building or plants are owned by
different persons, like here. The RTC and CA found and declared
Angeles to be a builder in good faith. We cannot veer away from
their unanimous conclusion, which can easily be drawn from the
fact that Angeles insists until now that he built his house entirely
on his own lot. Good faith consists in the belief of the builder that
the land he is building on is his and in his ignorance of a defect
or flaw in his title.[15]
With the unassailable finding that Angeles house straddled the lot
of Pascual, and that Angeles had built his house in good faith,
Article 448 of the Civil Code, which spells out the rights and
obligations of the owner of the land as well as of the builder, is
unquestionably applicable. Consequently, the land being the
principal and the building the accessory, preference is given to
Pascual as the owner of the land to make the choice as between
appropriating the building or obliging Angeles as the builder to
pay the value of the land. Contrary to the insistence of Angeles,
therefore, no inconsistency exists between the finding of good
faith in his favor and the grant of the reliefs set forth in Article
448 of the Civil Code.
WHEREFORE, the Court DENIES the petition for review
on certiorari; and AFFIRMS the decision promulgated on
January 31, 2002 by the Court of Appeals in C.A.-G.R. CV No.
61600. No pronouncement on costs of suit.
SO ORDERED.

#7
G.R. No. 140528

December 7, 2011

MARIA TORBELA, represented by her heirs, namely:

EULOGIO TOSINO, husband and children: CLARO,
MAXIMINO, CORNELIO, OLIVIA and CALIXTA, all
surnamed TOSINO, APOLONIA TOSINO VDA. DE
RAMIREZ and JULITA TOSINO DEAN; PEDRO
TORBELA, represented by his heirs, namely: JOSE and
DIONISIO, both surnamed TORBELA; EUFROSINA
TORBELA ROSARIO, represented by her heirs, namely:
ESTEBAN T. ROSARIO, MANUEL T. ROSARIO,
ROMULO T. ROSARIO and ANDREA ROSARIOHADUCA; LEONILA TORBELA TAMIN; FERNANDO
TORBELA, represented by his heirs, namely: SERGIO T.
TORBELA, EUTROPIA T. VELASCO, PILAR T.
ZULUETA, CANDIDO T. TORBELA, FLORENTINA T.
TORBELA and PANTALEON T. TORBELA; DOLORES
TORBELA TABLADA; LEONORA TORBELA AGUSTIN,
represented by her heirs, namely: PATRICIO, SEGUNDO,
CONSUELO and FELIX, all surnamed AGUSTIN; and
SEVERINA
TORBELA
ILDEFONSO, Petitioners,
vs.
SPOUSES ANDRES T. ROSARIO and LENA DUQUEROSARIO and BANCO FILIPINO SAVINGS AND
MORTGAGE BANK, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 140553
LENA DUQUE-ROSARIO, Petitioner,
vs.
BANCO FILIPINO SAVINGS AND MORTGAGE
BANK, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
Presently before the Court are two consolidated Petitions for
Review on Certiorari under Rule 45 of the Rules of Court, both
assailing the Decision1 dated June 29, 1999 and
Resolution2 dated October 22, 1999 of the Court of Appeals in
CA-G.R. CV No. 39770.
The petitioners in G.R. No. 140528 are siblings Maria
Torbela,3 Pedro Torbela,4 Eufrosina Torbela Rosario,5Leonila
Torbela Tamin, Fernando Torbela,6 Dolores Torbela Tablada,
Leonora Torbela Agustin,7 and Severina Torbela Ildefonso
(Torbela siblings).
The petitioner in G.R. No. 140553 is Lena Duque-Rosario
(Duque-Rosario), who was married to, but now legally separated
from, Dr. Andres T. Rosario (Dr. Rosario). Dr. Rosario is the son
of Eufrosina Torbela Rosario and the nephew of the other Torbela
siblings.
The controversy began with a parcel of land, with an area of 374
square meters, located in Urdaneta City, Pangasinan (Lot No.
356-A). It was originally part of a larger parcel of land, known as
Lot No. 356 of the Cadastral Survey of Urdaneta, measuring 749
square meters, and covered by Original Certificate of Title (OCT)
No. 16676,8 in the name of Valeriano Semilla (Valeriano),
married to Potenciana Acosta. Under unexplained circumstances,
Valeriano gave Lot No. 356-A to his sister Marta Semilla,
married to Eugenio Torbela (spouses Torbela). Upon the deaths
of the spouses Torbela, Lot No. 356-A was adjudicated in equal
shares among their children, the Torbela siblings, by virtue of a
Deed of Extrajudicial Partition9 dated December 3, 1962.
On December 12, 1964, the Torbela siblings executed a Deed of
Absolute Quitclaim10 over Lot No. 356-A in favor of Dr.
Rosario. According to the said Deed, the Torbela siblings "for
and in consideration of the sum of NINE PESOS (P9.00) x x x
transfer[red] and convey[ed] x x x unto the said Andres T.

Rosario, that undivided portion of THREE HUNDRED

SEVENTY-FOUR square meters of that parcel of land embraced
in Original Certificate of Title No. 16676 of the land records of
Pangasinan x x x."11 Four days later, on December 16, 1964,
OCT No. 16676 in Valerianos name was partially cancelled as to
Lot No. 356-A and TCT No. 5275112 was issued in Dr. Rosarios
name covering the said property.
Another Deed of Absolute Quitclaim13 was subsequently
executed on December 28, 1964, this time by Dr. Rosario,
acknowledging that he only borrowed Lot No. 356-A from the
Torbela siblings and was already returning the same to the latter
for P1.00. The Deed stated:
That for and in consideration of the sum of one peso (P1.00),
Philippine Currency and the fact that I only borrowed the above
described parcel of land from MARIA TORBELA, married to
Eulogio Tosino, EUFROSINA TORBELA, married to Pedro
Rosario, PEDRO TORBELA, married to Petra Pagador,
LEONILA TORBELA, married to Fortunato Tamen,
FERNANDO TORBELA, married to Victoriana Tablada,
DOLORES TORBELA, widow, LEONORA TORBELA, married
to Matias Agustin and SEVERINA TORBELA, married to Jorge
Ildefonso, x x x by these presents do hereby cede, transfer and
convey by way of this ABSOLUTE QUITCLAIM unto the said
Maria, Eufrosina, Pedro, Leonila, Fernando, Dolores, Leonora
and Severina, all surnamed Torbela the parcel of land described
above.14 (Emphasis ours.)
The aforequoted Deed was notarized, but was not immediately
annotated on TCT No. 52751.
Following the issuance of TCT No. 52751, Dr. Rosario obtained
a loan from the Development Bank of the Philippines (DBP) on
February 21, 1965 in the sum of P70,200.00, secured by a
mortgage constituted on Lot No. 356-A. The mortgage was
annotated on TCT No. 52751 on September 21, 1965 as Entry
No. 243537.15 Dr. Rosario used the proceeds of the loan for the
construction of improvements on Lot No. 356-A.
On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an
Affidavit of Adverse Claim,16 on behalf of the Torbela siblings.
Cornelio deposed in said Affidavit:
3. That ANDRES T. ROSARIO later quitclaimed his
rights in favor of the former owners by virtue of a Deed
of Absolute Quitclaim which he executed before Notary
Public Banaga, and entered in his Notarial Registry as
Dec. No. 43; Page No. 9; Book No. I; Series of 1964;
4. That it is the desire of the parties, my aforestated kins,
to register ownership over the above-described property
or to perfect their title over the same but their Deed
could not be registered because the registered owner
now, ANDRES T. ROSARIO mortgaged the property
with the DEVELOPMENT BANK OF THE
PHILIPPINES, on September 21, 1965, and for which
reason, the Title is still impounded and held by the said
bank;
5. That pending payment of the obligation with the
DEVELOPMENT BANK OF THE PHILIPPINES or
redemption of the Title from said bank, I, CORNELIO
T. TOSINO, in behalf of my mother MARIA
TORBELA-TOSINO, and my Aunts EUFROSINA
TORBELA,
LEONILA
TORBELA-TAMEN,
DOLORES TORBELA, LEONORA TORBELAAGUSTIN, SEVERINA TORBELA-ILDEFONSO, and
my Uncles PEDRO TORBELA and FERNANDO, also
surnamed TORBELA, I request the Register of Deeds of
Pangasinan to annotate their adverse claim at the back of
Transfer Certificate of Title No. 52751, based on the
annexed document, Deed of Absolute Quitclaim by
ANDRES T. ROSARIO, dated December 28, 1964,
marked as Annex "A" and made a part of this Affidavit,
and it is also requested that the DEVELOPMENT
BANK OF THE PHILIPPINES be informed
accordingly.17

The very next day, on May 17, 1967, the Torbela siblings had
Cornelios Affidavit of Adverse Claim dated May 16, 1967 and
Dr. Rosarios Deed of Absolute Quitclaim dated December 28,
1964 annotated on TCT No. 52751 as Entry Nos. 27447118 and
274472,19 respectively.
The construction of a four-storey building on Lot No. 356-A was
eventually completed. The building was initially used as a
hospital, but was later converted to a commercial building. Part
of the building was leased to PT&T; and the rest to Mrs. Andrea
Rosario-Haduca, Dr. Rosarios sister, who operated the Rose Inn
Hotel and Restaurant.
Dr. Rosario was able to fully pay his loan from DBP. Under Entry
No. 520197 on TCT No. 5275120 dated March 6, 1981, the
mortgage appearing under Entry No. 243537 was cancelled per
the Cancellation and Discharge of Mortgage executed by DBP in
favor of Dr. Rosario and ratified before a notary public on July
11, 1980.
In the meantime, Dr. Rosario acquired another loan from the
Philippine National Bank (PNB) sometime in 1979-1981.
Records do not reveal though the original amount of the loan
from PNB, but the loan agreement was amended on March 5,
1981 and the loan amount was increased to P450,000.00. The
loan was secured by mortgages constituted on the following
properties: (1) Lot No. 356-A, covered by TCT No. 52751 in Dr.
Rosarios name; (2) Lot No. 4489, with an area of 1,862 square
meters, located in Dagupan City, Pangasinan, covered by TCT
No. 24832; and (3) Lot No. 5-F-8-C-2-B-2-A, with an area of
1,001 square meters, located in Nancayasan, Urdaneta,
Pangasinan, covered by TCT No. 104189.21 The amended loan
agreement and mortgage on Lot No. 356-A was annotated on
TCT No. 52751 on March 6, 1981 as Entry No. 520099.22
Five days later, on March 11, 1981, another annotation, Entry No.
520469,23 was made on TCT No. 52751, canceling the adverse
claim on Lot No. 356-A under Entry Nos. 274471-274472, on the
basis of the Cancellation and Discharge of Mortgage executed by
Dr. Rosario on March 5, 1981. Entry No. 520469 consisted of
both stamped and handwritten portions, and exactly reads:
Entry No. 520469. Cancellation of Adverse Claim executed
by Andres Rosario in favor of same. The incumbrance/mortgage
appearing under Entry No. 274471-72 is now cancelled as per
Cancellation and Discharge of Mortgage Ratified before Notary
Public Mauro G. Meris on March 5, 1981: Doc. No. 215; Page
No.44; Book No. 1; Series Of 1981.
Lingayen, Pangasinan, 3-11, 19981
[Signed: Pedro dela Cruz]
Register of Deeds 24
On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario
(spouses Rosario), acquired a third loan in the amount
of P1,200,000.00 from Banco Filipino Savings and Mortgage
Bank (Banco Filipino). To secure said loan, the spouses Rosario
again constituted mortgages on Lot No. 356-A, Lot No. 4489,
and Lot No. 5-F-8-C-2-B-2-A. The mortgage on Lot No. 356-A
was annotated on TCT No. 52751 as Entry No. 53328325 on
December 18, 1981. Since the construction of a two-storey
commercial building on Lot No. 5-F-8-C-2-B-2-A was still
incomplete, the loan value thereof as collateral was deducted
from the approved loan amount. Thus, the spouses Rosario could
only avail of the maximum loan amount of P830,064.00 from
Banco Filipino.
Because Banco Filipino paid the balance of Dr. Rosarios loan
from PNB, the mortgage on Lot No. 356-A in favor of PNB was
cancelled per Entry No. 53347826 on TCT No. 52751 dated
December 23, 1981.
On February 13, 1986, the Torbela siblings filed before the
Regional Trial Court (RTC) of Urdaneta, Pangasinan, a
Complaint for recovery of ownership and possession of Lot No.
356-A, plus damages, against the spouses Rosario, which was

docketed as Civil Case No. U-4359. On the same day, Entry Nos.
593493 and 593494 were made on TCT No. 52751 that read as
follows:
Entry No. 593494 Complaint Civil Case No. U-4359 (For:
Recovery of Ownership and Possession and Damages. (Sup.
Paper).
Entry No. 593493 Notice of Lis Pendens The
parcel of land described in this title is subject to Lis
Pendens executed by Liliosa B. Rosario, CLAO,
Trial Attorney dated February 13, 1986. Filed to
TCT No. 52751
February 13, 1986-1986 February 13 3:30 p.m.
(SGD.) PACIFICO M. BRAGANZA
Register of Deeds27
The spouses Rosario afterwards failed to pay their loan from
Banco Filipino. As of April 2, 1987, the spouses Rosarios
outstanding principal obligation and penalty charges amounted
to P743,296.82 and P151,524.00, respectively.28
Banco Filipino extrajudicially foreclosed the mortgages on Lot
No. 356-A, Lot No. 4489, and Lot No. 5-F-8-C-2-B-2-A. During
the public auction on April 2, 1987, Banco Filipino was the lone
bidder for the three foreclosed properties for the price
of P1,372,387.04. The Certificate of Sale29 dated April 2, 1987,
in favor of Banco Filipino, was annotated on TCT No. 52751 on
April 14, 1987 as Entry No. 610623.30
On December 9, 1987, the Torbela siblings filed before the RTC
their Amended Complaint,31 impleading Banco Filipino as
additional defendant in Civil Case No. U-4359 and praying that
the spouses Rosario be ordered to redeem Lot No. 356-A from
Banco Filipino.
The spouses Rosario instituted before the RTC on March 4, 1988
a case for annulment of extrajudicial foreclosure and damages,
with prayer for a writ of preliminary injunction and temporary
restraining order, against Banco Filipino, the Provincial Ex
Officio Sheriff and his Deputy, and the Register of Deeds of
Pangasinan. The case was docketed as Civil Case No. U-4667.
Another notice of lis pendens was annotated on TCT No. 52751
on March 10, 1988 as Entry No. 627059, viz:
Entry No. 627059 Lis Pendens Dr. Andres T. Rosario and
Lena Duque Rosario, Plaintiff versus Banco Filipino, et. al. Civil
Case No. U-4667 or Annulment of ExtraJudicial Foreclosure of
Real Estate Mortgage The parcel of land described in this title
is subject to Notice of Lis Pendens subscribed and sworn to
before Notary Public Mauro G. Meris, as Doc. No. 21; Page No.
5; Book 111; S-1988. March 7, 1988-1988 March 10, 1:00 p.m.
(SGD.) RUFINO M. MORENO, SR.
Register of Deeds32
The Torbela siblings intervened in Civil Case No. U-4667.
Eventually, on October 17, 1990, the RTC issued an
Order33 dismissing without prejudice Civil Case No. U-4667 due
to the spouses Rosarios failure to prosecute.
Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A
from Banco Filipino, but their efforts were unsuccessful. Upon
the expiration of the one-year redemption period in April 1988,
the
Certificate
of
Final
Sale34and
Affidavit
of
Consolidation35 covering all three foreclosed properties were
executed on May 24, 1988 and May 25, 1988, respectively.
On June 7, 1988, new certificates of title were issued in the name
of Banco Filipino, particularly, TCT No. 165812 for Lot No. 5-F8-C-2-B-2-A and TCT No. 165813 for Lot No. 356-A .36
The Torbela siblings thereafter filed before the RTC on August
29, 1988 a Complaint37 for annulment of the Certificate of Final
Sale dated May 24, 1988, judicial cancelation of TCT No.

165813, and damages, against Banco Filipino, the Ex Officio

Provincial Sheriff, and the Register of Deeds of Pangasinan,
which was docketed as Civil Case No. U-4733.
On June 19, 1991, Banco Filipino filed before the RTC of
Urdaneta City a Petition for the issuance of a writ of possession.
In said Petition, docketed as Pet. Case No. U-822, Banco Filipino
prayed that a writ of possession be issued in its favor over Lot
No. 5-F-8-C-2-B-2-A and Lot No. 356-A, plus the improvements
thereon, and the spouses Rosario and other persons presently in
possession of said properties be directed to abide by said writ.
The RTC jointly heard Civil Case Nos. U-4359 and U-4733 and
Pet. Case No. U-822. The Decision38 on these three cases was
promulgated on January 15, 1992, the dispositive portion of
which reads:
WHEREFORE, judgment is rendered:
1. Declaring the real estate mortgage over Lot 356-A
covered by TCT 52751 executed by Spouses Andres
Rosario in favor of Banco Filipino, legal and valid;
2. Declaring the sheriffs sale dated April 2, 1987 over
Lot 356-A covered by TCT 52751 and subsequent final
Deed of Sale dated May 14, 1988 over Lot 356-A
covered by TCT No. 52751 legal and valid;
3. Declaring Banco Filipino the owner of Lot 356-A
covered by TCT No. 52751 (now TCT 165813);
4. Banco Filipino is entitled to a Writ of Possession over
Lot 356-A together with the improvements thereon
(Rose Inn Building). The Branch Clerk of Court is
hereby ordered to issue a writ of possession in favor of
Banco Filipino;
5. [The Torbela siblings] are hereby ordered to render
accounting to Banco Filipino the rental they received
from tenants of Rose Inn Building from May 14, 1988;
6. [The Torbela siblings] are hereby ordered to pay
Banco Filipino the sum of P20,000.00 as attorneys fees;
7. Banco Filipino is hereby ordered to give [the Torbela
siblings] the right of first refusal over Lot 356-A. The
Register of Deeds is hereby ordered to annotate the right
of [the Torbela siblings] at the back of TCT No. 165813
after payment of the required fees;
8. Dr. Rosario and Lena Rosario are hereby ordered to
reimburse [the Torbela siblings] the market value of Lot
356-A as of December, 1964 minus payments made by
the former;
9. Dismissing the complaint of [the Torbela siblings]
against Banco Filipino, Pedro Habon and Rufino
Moreno in Civil Case No. U-4733; and against Banco
Filipino in Civil Case No. U-4359.39
The RTC released an Amended Decision40 dated January 29,
1992, adding the following paragraph to the dispositive:
Banco Filipino is entitled to a Writ of Possession over Lot-5-F-8C-2-[B]-2-A of the subdivision plan (LRC) Psd-122471, covered
by Transfer Certificate of Title 104189 of the Registry of Deeds
of Pangasinan[.]41
The Torbela siblings and Dr. Rosario appealed the foregoing RTC
judgment before the Court of Appeals. Their appeal was docketed
as CA-G.R. CV No. 39770.
In its Decision42 dated June 29, 1999, the Court of Appeals
decreed:
WHEREFORE, foregoing considered, the appealed decision is
hereby AFFIRMED with modification. Items No. 6 and 7 of the
appealed decision are DELETED. Item No. 8 is modified
requiring [Dr. Rosario] to pay [the Torbela siblings] actual
damages, in the amount of P1,200,000.00 with 6% per annum
interest from finality of this decision until fully paid. [Dr.
Rosario] is further ORDERED to pay [the Torbela siblings] the

amount of P300,000.00 as moral damages; P200,000.00 as

exemplary damages and P100,000.00 as attorneys fees.
Costs against [Dr. Rosario].43
The Court of Appeals, in a Resolution44 dated October 22, 1999,
denied the separate Motions for Reconsideration of the Torbela
siblings and Dr. Rosario.
The Torbela siblings come before this Court via the Petition for
Review in G.R. No. 140528, with the following assignment of
errors:
First Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED
IN
NOT
FINDING
THAT THE
REGISTRATION OF THE DEED OF ABSOLUTE
QUITCLAIM EXECUTED BY [DR. ANDRES T.
ROSARIO] IN FAVOR OF THE [TORBELA
SIBLINGS] DATED DECEMBER 28, 1964 AND THE
REGISTRATION OF THE NOTICE OF ADVERSE
CLAIM
EXECUTED
BY THE
[TORBELA
SIBLINGS], SERVE AS THE OPERATIVE ACT TO
CONVEY OR AFFECT THE LAND AND
IMPROVEMENTS THEREOF IN SO FAR AS THIRD
PERSONS ARE CONCERNED.
Second Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE SUBJECT
PROPERTY COVERED BY T.C.T. NO. 52751 IS
CLEAN AND FREE, DESPITE OF THE
ANNOTATION OF ENCUMBRANCES OF THE
NOTICE OF ADVERSE CLAIM AND THE DEED OF
ABSOLUTE QUITCLAIM APPEARING AT THE
BACK THEREOF AS ENTRY NOS. 274471 AND
274472, RESPECTIVELY.
Third Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE NOTICE OF
ADVERSE CLAIM OF THE [TORBELA SIBLINGS]
UNDER ENTRY NO. 274471 WAS VALIDLY
CANCELLED BY THE REGISTER OF DEEDS, IN
THE ABSENCE OF A PETITION DULY FILED IN
COURT FOR ITS CANCELLATION.
Fourth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT RESPONDENT BANCO
FILIPINO SAVINGS AND MORTGAGE BANK IS A
MORTGAGEE IN GOOD FAITH.
Fifth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN NOT FINDING THAT THE FILING OF A
CIVIL CASE NO. U-4359 ON DECEMBER 9, 1987,
IMPLEADING RESPONDENT BANCO FILIPINO AS
ADDITIONAL PARTY DEFENDANT, TOLL OR
SUSPEND THE RUNNING OF THE ONE YEAR
PERIOD OF REDEMPTION.
Sixth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN NOT FINDING THAT THE OWNERSHIP
OVER
THE
SUBJECT
PROPERTY
WAS
PREMATURELY CONSOLIDATED IN FAVOR OF
RESPONDENT BANCO FILIPINO SAVINGS AND
MORTGAGE BANK.
Seventh Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE SUBJECT
PROPERTY IS AT LEAST WORTH P1,200,000.00.45
The Torbela siblings ask of this Court:

WHEREFORE, in the light of the foregoing considerations, the

[Torbela siblings] most respectfully pray that the questioned
DECISION promulgated on June 29, 1999 (Annex "A", Petition)
and the RESOLUTION dated October 22, 1999 (Annex "B",
Petition) be REVERSED and SET ASIDE, and/or further
MODIFIED in favor of the [Torbela siblings], and another
DECISION issue ordering, among other reliefs, the respondent
Banco Filipino to reconvey back Lot No. 356-A, covered by
T.C.T. No. 52751, in favor of the [Torbela siblings] who are the
actual owners of the same.
The [Torbela siblings] likewise pray for such other reliefs and
further remedies as may be deemed just and equitable under the
premises.46
Duque-Rosario, now legally separated from Dr. Rosario, avers in
her Petition for Review in G.R. No. 140553 that Lot No. 4489
and Lot No. 5-F-8-C-2-B-2-A were registered in her name, and
she was unlawfully deprived of ownership of said properties
because of the following errors of the Court of Appeals:
A

As the succeeding discussion will bear out, the first, fourth, and
ninth exceptions are extant in these case.
Barangay conciliation was not a pre-requisite to the institution of
Civil Case No. U-4359.
Dr. Rosario contends that Civil Case No. U-4359, the Complaint
of the Torbela siblings for recovery of ownership and possession
of Lot No. 356-A, plus damages, should have been dismissed by
the RTC because of the failure of the Torbela siblings to comply
with the prior requirement of submitting the dispute to barangay
conciliation.
The Torbela siblings instituted Civil Case No. U-4359 on
February 13, 1986, when Presidential Decree No. 1508,
Establishing a System of Amicably Settling Disputes at the
Barangay Level, was still in effect.50 Pertinent provisions of said
issuance read:
Section 2. Subject matters for amicable settlement. The Lupon of
each barangay shall have authority to bring together the parties
actually residing in the same city or municipality for amicable
settlement of all disputes except:

THE HON. COURT OF APPEALS PATENTLY

ERRED IN NOT FINDING THAT THE PERIOD TO
REDEEM
THE
PROPERTY
HAS
NOT
COMMENCED, HENCE, THE CERTIFICATE OF
SALE, THE CONSOLIDATION OF OWNERSHIP BY
[BANCO FILIPINO], ARE NULL AND VOID.

1. Where one party is the government, or any

subdivision or instrumentality thereof;
2. Where one party is a public officer or employee, and
the dispute relates to the performance of his official
functions;

3. Offenses punishable by imprisonment exceeding 30

days, or a fine exceeding P200.00;

THE COURT OF APPEALS PATENTLY ERRED IN

REFUSING TO RULE THAT THE FILING OF THE
COMPLAINT BEFORE THE COURT A QUO BY THE
[TORBELA SIBLINGS] HAD ALREADY BEEN
PRESCRIBED.47
Duque-Rosario prays that the appealed decision of the Court of
Appeals be reversed and set aside, and that Lot No. 4489 and Lot
No. 5-F-8-C-2-B-2-A be freed from all obligations and
encumbrances and returned to her.
Review of findings of fact by the RTC and the Court of Appeals
warranted.
A disquisition of the issues raised and/or errors assigned in the
Petitions at bar unavoidably requires a re-evaluation of the facts
and evidence presented by the parties in the court a quo.
In Republic v. Heirs of Julia Ramos,48 the Court summed up the
rules governing the power of review of the Court:
Ordinarily, this Court will not review, much less reverse, the
factual findings of the Court of Appeals, especially where such
findings
coincide
with
those
of
the
trial
court.http://sc.judiciary.gov.ph/jurisprudence/2010/february2010/
169481.htm - _ftn The findings of facts of the Court of Appeals
are, as a general rule, conclusive and binding upon this Court,
since this Court is not a trier of facts and does not routinely
undertake the re-examination of the evidence presented by the
contending parties during the trial of the case.
The above rule, however, is subject to a number of exceptions,
such as (1) when the inference made is manifestly mistaken,
absurd or impossible; (2) when there is grave abuse of discretion;
(3) when the finding is grounded entirely on speculations,
surmises, or conjectures; (4) when the judgment of the Court of
Appeals is based on misapprehension of facts; (5) when the
findings of fact are conflicting; (6) when the Court of Appeals, in
making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both parties; (7) when the
findings of the Court of Appeals are contrary to those of the trial
court; (8) when the findings of fact are conclusions without
citation of specific evidence on which they are based; (9) when
the Court of Appeals manifestly overlooked certain relevant facts
not disputed by the parties and which, if properly considered,
would justify a different conclusion; and (10) when the findings
of fact of the Court of Appeals are premised on the absence of
evidence and are contradicted by the evidence on record.49

4. Offenses where there is no private offended party;

5. Such other classes of disputes which the Prime
Minister may in the interest of justice determine upon
recommendation of the Minister of Justice and the
Minister of Local Government.
Section 3. Venue. Disputes between or among persons actually
residing in the same barangay shall be brought for amicable
settlement before the Lupon of said barangay. Those involving
actual residents of different barangays within the same city or
municipality shall be brought in the barangay where the
respondent or any of the respondents actually resides, at the
election of the complainant. However, all disputes which
involved real property or any interest therein shall be brought in
the barangay where the real property or any part thereof is
situated.
The Lupon shall have no authority over disputes:
1. involving parties who actually reside in barangays of
different cities or municipalities, except where such
barangays adjoin each other; and
2. involving real
municipalities.

property

located

in

different

xxxx
Section 6. Conciliation, pre-condition to filing of complaint.
No complaint, petition, action or proceeding involving any matter
within the authority of the Lupon as provided in Section 2 hereof
shall be filed or instituted in court or any other government office
for adjudication unless there has been a confrontation of the
parties before the Lupon Chairman or the Pangkat and no
conciliation or settlement has been reached as certified by the
Lupon Secretary or the Pangkat Secretary, attested by the Lupon
or Pangkat Chairman, or unless the settlement has been
repudiated. x x x. (Emphases supplied.)
The Court gave the following elucidation on the jurisdiction of
the Lupong Tagapayapa in Tavora v. Hon. Veloso51:
The foregoing provisions are quite clear. Section 2 specifies the
conditions under which the Lupon of a barangay "shall have
authority" to bring together the disputants for amicable settlement
of their dispute: The parties must be "actually residing in the
same city or municipality." At the same time, Section 3 while

reiterating that the disputants must be "actually residing in the

same barangay" or in "different barangays" within the same city
or municipality unequivocably declares that the Lupon shall
have "no authority" over disputes "involving parties who actually
reside in barangays of different cities or municipalities," except
where such barangays adjoin each other.
Thus, by express statutory inclusion and exclusion, the Lupon
shall have no jurisdiction over disputes where the parties are not
actual residents of the same city or municipality, except where
the barangays in which they actually reside adjoin each other.
It is true that immediately after specifying the barangay whose
Lupon shall take cognizance of a given dispute, Sec. 3 of PD
1508 adds:
"However, all disputes which involve real property or any
interest therein shall be brought in the barangay where the real
property or any part thereof is situated."
Actually, however, this added sentence is just an ordinary proviso
and should operate as such.
The operation of a proviso, as a rule, should be limited to its
normal function, which is to restrict or vary the operation of the
principal clause, rather than expand its scope, in the absence of a
clear indication to the contrary.
"The natural and appropriate office of a proviso is . . . to except
something from the enacting clause; to limit, restrict, or qualify
the statute in whole or in part; or to exclude from the scope of the
statute that which otherwise would be within its terms." (73 Am
Jur 2d 467.)
Therefore, the quoted proviso should simply be deemed to
restrict or vary the rule on venue prescribed in the principal
clauses of the first paragraph of Section 3, thus: Although venue
is generally determined by the residence of the parties, disputes
involving real property shall be brought in the barangay where
the real property or any part thereof is situated, notwithstanding
that the parties reside elsewhere within the same
city/municipality.52 (Emphases supplied.)
The original parties in Civil Case No. U-4359 (the Torbela
siblings and the spouses Rosario) do not reside in the same
barangay, or in different barangays within the same city or
municipality, or in different barangays of different cities or
municipalities but are adjoining each other. Some of them reside
outside Pangasinan and even outside of the country altogether.
The Torbela siblings reside separately in Barangay Macalong,
Urdaneta, Pangasinan; Barangay Consolacion, Urdaneta,
Pangasinan; Pangil, Laguna; Chicago, United States of America;
and Canada. The spouses Rosario are residents of Calle Garcia,
Poblacion, Urdaneta, Pangasinan. Resultantly, the Lupon had no
jurisdiction over the dispute and barangay conciliation was not a
pre-condition for the filing of Civil Case No. U-4359.
The Court now looks into the merits of Civil Case No. U-4359.
There was an express trust between the Torbela siblings and Dr.
Rosario.
There is no dispute that the Torbela sibling inherited the title to
Lot No. 356-A from their parents, the Torbela spouses, who, in
turn, acquired the same from the first registered owner of Lot No.
356-A, Valeriano.
Indeed, the Torbela siblings executed a Deed of Absolute
Quitclaim on December 12, 1964 in which they transferred and
conveyed Lot No. 356-A to Dr. Rosario for the consideration
of P9.00. However, the Torbela siblings explained that they only
executed the Deed as an accommodation so that Dr. Rosario
could have Lot No. 356-A registered in his name and use said
property to secure a loan from DBP, the proceeds of which would
be used for building a hospital on Lot No. 356-A a claim
supported by testimonial and documentary evidence, and borne
out by the sequence of events immediately following the
execution by the Torbela siblings of said Deed. On December 16,
1964, TCT No. 52751, covering Lot No. 356-A, was already
issued in Dr. Rosarios name. On December 28, 1964, Dr.

Rosario executed his own Deed of Absolute Quitclaim, in which

he expressly acknowledged that he "only borrowed" Lot No. 356A and was transferring and conveying the same back to the
Torbela siblings for the consideration of P1.00. On February 21,
1965, Dr. Rosarios loan in the amount ofP70,200.00, secured by
a mortgage on Lot No. 356-A, was approved by DBP. Soon
thereafter, construction of a hospital building started on Lot No.
356-A.
Among the notable evidence presented by the Torbela siblings is
the testimony of Atty. Lorenza Alcantara (Atty. Alcantara), who
had no apparent personal interest in the present case. Atty.
Alcantara, when she was still a boarder at the house of Eufrosina
Torbela Rosario (Dr. Rosarios mother), was consulted by the
Torbela siblings as regards the extrajudicial partition of Lot No.
356-A. She also witnessed the execution of the two Deeds of
Absolute Quitclaim by the Torbela siblings and Dr. Rosario.
In contrast, Dr. Rosario presented TCT No. 52751, issued in his
name, to prove his purported title to Lot No. 356-A. In Lee Tek
Sheng v. Court of Appeals,53 the Court made a clear distinction
between title and the certificate of title:
The certificate referred to is that document issued by the Register
of Deeds known as the Transfer Certificate of Title (TCT). By
title, the law refers to ownership which is represented by that
document. Petitioner apparently confuses certificate with title.
Placing a parcel of land under the mantle of the Torrens system
does not mean that ownership thereof can no longer be disputed.
Ownership is different from a certificate of title. The TCT is only
the best proof of ownership of a piece of land. Besides, the
certificate cannot always be considered as conclusive evidence of
ownership. Mere issuance of the certificate of title in the name of
any person does not foreclose the possibility that the real
property may be under co-ownership with persons not named in
the certificate or that the registrant may only be a trustee or that
other parties may have acquired interest subsequent to the
issuance of the certificate of title. To repeat, registration is not the
equivalent of title, but is only the best evidence thereof. Title as a
concept of ownership should not be confused with the certificate
of title as evidence of such ownership although both are
interchangeably used. x x x.54 (Emphases supplied.)
Registration does not vest title; it is merely the evidence of such
title. Land registration laws do not give the holder any better title
than what he actually has.55 Consequently, Dr. Rosario must still
prove herein his acquisition of title to Lot No. 356-A, apart from
his submission of TCT No. 52751 in his name.
Dr. Rosario testified that he obtained Lot No. 356-A after paying
the Torbela siblings P25,000.00, pursuant to a verbal agreement
with the latter. The Court though observes that Dr. Rosarios
testimony on the execution and existence of the verbal agreement
with the Torbela siblings lacks significant details (such as the
names of the parties present, dates, places, etc.) and is not
corroborated by independent evidence.
In addition, Dr. Rosario acknowledged the execution of the two
Deeds of Absolute Quitclaim dated December 12, 1964 and
December 28, 1964, even affirming his own signature on the
latter Deed. The Parol Evidence Rule provides that when the
terms of the agreement have been reduced into writing, it is
considered as containing all the terms agreed upon and there can
be, between the parties and their successors in interest, no
evidence of such terms other than the contents of the written
agreement.56 Dr. Rosario may not modify, explain, or add to the
terms in the two written Deeds of Absolute Quitclaim since he
did not put in issue in his pleadings (1) an intrinsic ambiguity,
mistake, or imperfection in the Deeds; (2) failure of the Deeds to
express the true intent and the agreement of the parties thereto;
(3) the validity of the Deeds; or (4) the existence of other terms
agreed to by the Torbela siblings and Dr. Rosario after the
execution of the Deeds.57
Even if the Court considers Dr. Rosarios testimony on his
alleged verbal agreement with the Torbela siblings, the Court
finds the same unsatisfactory. Dr. Rosario averred that the two

Deeds were executed only because he was "planning to secure

loan from the Development Bank of the Philippines and
Philippine National Bank and the bank needed absolute
quitclaim[.]"58 While Dr. Rosarios explanation makes sense for
the first Deed of Absolute Quitclaim dated December 12, 1964
executed by the Torbela siblings (which transferred Lot No. 356A to Dr. Rosario for P9.00.00), the same could not be said for the
second Deed of Absolute Quitclaim dated December 28, 1964
executed by Dr. Rosario. In fact, Dr. Rosarios Deed of Absolute
Quitclaim (in which he admitted that he only borrowed Lot No.
356-A and was transferring the same to the Torbela siblings
for P1.00.00) would actually work against the approval of Dr.
Rosarios loan by the banks. Since Dr. Rosarios Deed of
Absolute Quitclaim dated December 28, 1964 is a declaration
against his self-interest, it must be taken as favoring the
truthfulness of the contents of said Deed.59
It can also be said that Dr. Rosario is estopped from claiming or
asserting ownership over Lot No. 356-A based on his Deed of
Absolute Quitclaim dated December 28, 1964. Dr. Rosario's
admission in the said Deed that he merely borrowed Lot No. 356A is deemed conclusive upon him. Under Article 1431 of the
Civil Code, "[t]hrough estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying
thereon."60 That admission cannot now be denied by Dr. Rosario
as against the Torbela siblings, the latter having relied upon his
representation.
Considering the foregoing, the Court agrees with the RTC and
the Court of Appeals that Dr. Rosario only holds Lot No. 356-A
in trust for the Torbela siblings.
Trust is the right to the beneficial enjoyment of property, the legal
title to which is vested in another. It is a fiduciary relationship
that obliges the trustee to deal with the property for the benefit of
the beneficiary. Trust relations between parties may either be
express or implied. An express trust is created by the intention of
the trustor or of the parties, while an implied trust comes into
being by operation of law.61
Express trusts are created by direct and positive acts of the
parties, by some writing or deed, or will, or by words either
expressly or impliedly evincing an intention to create a trust.
Under Article 1444 of the Civil Code, "[n]o particular words are
required for the creation of an express trust, it being sufficient
that a trust is clearly intended."62 It is possible to create a trust
without using the word "trust" or "trustee." Conversely, the mere
fact that these words are used does not necessarily indicate an
intention to create a trust. The question in each case is whether
the trustor manifested an intention to create the kind of
relationship which to lawyers is known as trust. It is immaterial
whether or not he knows that the relationship which he intends to
create is called a trust, and whether or not he knows the precise
characteristics of the relationship which is called a trust.63
In Tamayo v. Callejo,64 the Court recognized that a trust may
have a constructive or implied nature in the beginning, but the
registered owners subsequent express acknowledgement in a
public document of a previous sale of the property to another
party, had the effect of imparting to the aforementioned trust the
nature of an express trust. The same situation exists in this case.
When Dr. Rosario was able to register Lot No. 356-A in his name
under TCT No. 52751 on December 16, 1964, an implied trust
was initially established between him and the Torbela siblings
under Article 1451 of the Civil Code, which provides:
ART. 1451. When land passes by succession to any person and he
causes the legal title to be put in the name of another, a trust is
established by implication of law for the benefit of the true
owner.
Dr. Rosarios execution of the Deed of Absolute Quitclaim on
December 28, 1964, containing his express admission that he
only borrowed Lot No. 356-A from the Torbela siblings,
eventually transformed the nature of the trust to an express one.
The express trust continued despite Dr. Rosario stating in his

Deed of Absolute Quitclaim that he was already returning Lot

No. 356-A to the Torbela siblings as Lot No. 356-A remained
registered in Dr. Rosarios name under TCT No. 52751 and Dr.
Rosario kept possession of said property, together with the
improvements thereon.
The right of the Torbela siblings to recover Lot No. 356-A has
not yet prescribed.
The Court extensively discussed the prescriptive period for
express trusts in the Heirs of Maximo Labanon v. Heirs of
Constancio Labanon,65 to wit:
On the issue of prescription, we had the opportunity to rule in
Bueno v. Reyes that unrepudiated written express trusts are
imprescriptible:
"While there are some decisions which hold that an action upon a
trust is imprescriptible, without distinguishing between express
and implied trusts, the better rule, as laid down by this Court in
other decisions, is that prescription does supervene where the
trust is merely an implied one. The reason has been expressed by
Justice J.B.L. Reyes in J.M. Tuason and Co., Inc. vs. Magdangal,
4 SCRA 84, 88, as follows:
Under Section 40 of the old Code of Civil Procedure, all actions
for recovery of real property prescribed in 10 years, excepting
only actions based on continuing or subsisting trusts that were
considered by section 38 as imprescriptible. As held in the case
of Diaz v. Gorricho, L-11229, March 29, 1958, however, the
continuing or subsisting trusts contemplated in section 38 of the
Code of Civil Procedure referred only to express unrepudiated
trusts, and did not include constructive trusts (that are imposed
by law) where no fiduciary relation exists and the trustee does
not recognize the trust at all."
This principle was amplified in Escay v. Court of Appeals this
way: "Express trusts prescribe 10 years from the repudiation of
the trust (Manuel Diaz, et al. vs. Carmen Gorricho et al., 54 O.G.
p. 8429, Sec. 40, Code of Civil Procedure)."
In the more recent case of Secuya v. De Selma, we again ruled
that the prescriptive period for the enforcement of an express
trust of ten (10) years starts upon the repudiation of the trust by
the trustee.66
To apply the 10-year prescriptive period, which would bar a
beneficiarys action to recover in an express trust, the repudiation
of the trust must be proven by clear and convincing evidence and
made known to the beneficiary.67The express trust disables the
trustee from acquiring for his own benefit the property
committed to his management or custody, at least while he does
not openly repudiate the trust, and makes such repudiation known
to the beneficiary or cestui que trust. For this reason, the old
Code of Civil Procedure (Act 190) declared that the rules on
adverse possession do not apply to "continuing and subsisting"
(i.e., unrepudiated) trusts. In an express trust, the delay of the
beneficiary is directly attributable to the trustee who undertakes
to hold the property for the former, or who is linked to the
beneficiary by confidential or fiduciary relations. The trustee's
possession is, therefore, not adverse to the beneficiary, until and
unless the latter is made aware that the trust has been
repudiated.68
Dr. Rosario argues that he is deemed to have repudiated the trust
on December 16, 1964, when he registered Lot No. 356-A in his
name under TCT No. 52751, so when on February 13, 1986, the
Torbela siblings instituted before the RTC Civil Case No. U4359, for the recovery of ownership and possession of Lot No.
356-A from the spouses Rosario, over 21 years had passed. Civil
Case No. U-4359 was already barred by prescription, as well as
laches.
The Court already rejected a similar argument in Ringor v.
Ringor69 for the following reasons:
A trustee who obtains a Torrens title over a property held in trust
for him by another cannot repudiate the trust by relying on the
registration. A Torrens Certificate of Title in Joses name did not

vest ownership of the land upon him. The Torrens system does
not create or vest title. It only confirms and records title already
existing and vested. It does not protect a usurper from the true
owner. The Torrens system was not intended to foment betrayal
in the performance of a trust. It does not permit one to enrich
himself at the expense of another. Where one does not have a
rightful claim to the property, the Torrens system of registration
can confirm or record nothing. Petitioners cannot rely on the
registration of the lands in Joses name nor in the name of the
Heirs of Jose M. Ringor, Inc., for the wrong result they seek. For
Jose could not repudiate a trust by relying on a Torrens title he
held in trust for his co-heirs. The beneficiaries are entitled to
enforce the trust, notwithstanding the irrevocability of the
Torrens title. The intended trust must be sustained.70 (Emphasis
supplied.)
In the more recent case of Heirs of Tranquilino Labiste v. Heirs
of Jose Labiste,71 the Court refused to apply prescription and
laches and reiterated that:
[P]rescription and laches will run only from the time the express
trust is repudiated. The Court has held that for acquisitive
prescription to bar the action of the beneficiary against the trustee
in an express trust for the recovery of the property held in trust it
must be shown that: (a) the trustee has performed unequivocal
acts of repudiation amounting to an ouster of the cestui que trust;
(b) such positive acts of repudiation have been made known to
the cestui que trust, and (c) the evidence thereon is clear and
conclusive. Respondents cannot rely on the fact that the Torrens
title was issued in the name of Epifanio and the other heirs of
Jose. It has been held that a trustee who obtains a Torrens title
over property held in trust by him for another cannot repudiate
the trust by relying on the registration. The rule requires a clear
repudiation of the trust duly communicated to the beneficiary.
The only act that can be construed as repudiation was when
respondents filed the petition for reconstitution in October 1993.
And since petitioners filed their complaint in January 1995, their
cause of action has not yet prescribed, laches cannot be attributed
to them.72 (Emphasis supplied.)
It is clear that under the foregoing jurisprudence, the registration
of Lot No. 356-A by Dr. Rosario in his name under TCT No.
52751 on December 16, 1964 is not the repudiation that would
have caused the 10-year prescriptive period for the enforcement
of an express trust to run.
The Court of Appeals held that Dr. Rosario repudiated the
express trust when he acquired another loan from PNB and
constituted a second mortgage on Lot No. 356-A sometime in
1979, which, unlike the first mortgage to DBP in 1965, was
without the knowledge and/or consent of the Torbela siblings.
The Court only concurs in part with the Court of Appeals on this
matter.
For repudiation of an express trust to be effective, the
unequivocal act of repudiation had to be made known to the
Torbela siblings as the cestuis que trust and must be proven by
clear and conclusive evidence. A scrutiny of TCT No. 52751
reveals the following inscription:
Entry No. 520099
Amendment of the mortgage in favor of PNB inscribed under
Entry No. 490658 in the sense that the consideration thereof has
been increased to PHILIPPINE PESOS Four Hundred Fifty
Thousand Pesos only (P450,000.00) and to secure any and all
negotiations with PNB, whether contracted before, during or after
the date of this instrument, acknowledged before Notary Public
of Pangasinan Alejo M. Dato as Doc. No. 198, Page No. 41,
Book No. 11, Series of 1985.
Date of Instrument March 5, 1981
Date of Inscription March 6, 198173
Although according to Entry No. 520099, the original loan and
mortgage agreement of Lot No. 356-A between Dr. Rosario and
PNB was previously inscribed as Entry No. 490658, Entry No.

490658 does not actually appear on TCT No. 52751 and, thus, it
cannot be used as the reckoning date for the start of the
prescriptive period.
The Torbela siblings can only be charged with knowledge of the
mortgage of Lot No. 356-A to PNB on March 6, 1981 when the
amended loan and mortgage agreement was registered on TCT
No. 52751 as Entry No. 520099. Entry No. 520099 is
constructive notice to the whole world74 that Lot No. 356-A was
mortgaged by Dr. Rosario to PNB as security for a loan, the
amount of which was increased to P450,000.00. Hence, Dr.
Rosario is deemed to have effectively repudiated the express trust
between him and the Torbela siblings on March 6, 1981, on
which day, the prescriptive period for the enforcement of the
express trust by the Torbela siblings began to run.
From March 6, 1981, when the amended loan and mortgage
agreement was registered on TCT No. 52751, to February 13,
1986, when the Torbela siblings instituted before the RTC Civil
Case No. U-4359 against the spouses Rosario, only about five
years had passed. The Torbela siblings were able to institute Civil
Case No. U-4359 well before the lapse of the 10-year
prescriptive period for the enforcement of their express trust with
Dr. Rosario.
Civil Case No. U-4359 is likewise not barred by laches. Laches
means the failure or neglect, for an unreasonable and unexplained
length of time, to do that which by exercising due diligence could
or should have been done earlier. It is negligence or omission to
assert a right within a reasonable time, warranting a presumption
that the party entitled to assert it either has abandoned it or
declined to assert it. As the Court explained in the preceding
paragraphs, the Torbela siblings instituted Civil Case No. U-4359
five years after Dr. Rosarios repudiation of the express trust, still
within the 10-year prescriptive period for enforcement of such
trusts. This does not constitute an unreasonable delay in asserting
one's right. A delay within the prescriptive period is sanctioned
by law and is not considered to be a delay that would bar relief.
Laches apply only in the absence of a statutory prescriptive
period.75
Banco Filipino is not a mortgagee and buyer in good faith.
Having determined that the Torbela siblings are the true owners
and Dr. Rosario merely the trustee of Lot No. 356-A, the Court is
next faced with the issue of whether or not the Torbela siblings
may still recover Lot No. 356-A considering that Dr. Rosario had
already mortgaged Lot No. 356-A to Banco Filipino, and upon
Dr. Rosarios default on his loan obligations, Banco Filipino
foreclosed the mortgage, acquired Lot No. 356-A as the highest
bidder at the foreclosure sale, and consolidated title in its name
under TCT No. 165813. The resolution of this issue depends on
the answer to the question of whether or not Banco Filipino was a
mortgagee in good faith.
Under Article 2085 of the Civil Code, one of the essential
requisites of the contract of mortgage is that the mortgagor
should be the absolute owner of the property to be mortgaged;
otherwise, the mortgage is considered null and void. However, an
exception to this rule is the doctrine of "mortgagee in good faith."
Under this doctrine, even if the mortgagor is not the owner of the
mortgaged property, the mortgage contract and any foreclosure
sale arising therefrom are given effect by reason of public policy.
This principle is based on the rule that all persons dealing with
property covered by a Torrens Certificate of Title, as buyers or
mortgagees, are not required to go beyond what appears on the
face of the title. This is the same rule that underlies the principle
of "innocent purchasers for value." The prevailing jurisprudence
is that a mortgagee has a right to rely in good faith on the
certificate of title of the mortgagor to the property given as
security and in the absence of any sign that might arouse
suspicion, has no obligation to undertake further investigation.
Hence, even if the mortgagor is not the rightful owner of, or does
not have a valid title to, the mortgaged property, the mortgagee in
good faith is, nonetheless, entitled to protection.76
On one hand, the Torbela siblings aver that Banco Filipino is not

a mortgagee in good faith because as early as May 17, 1967, they

had already annotated Cornelios Adverse Claim dated May 16,
1967 and Dr. Rosarios Deed of Absolute Quitclaim dated
December 28, 1964 on TCT No. 52751 as Entry Nos. 274471274472, respectively.

and "if any of the registrations should be considered unnecessary

or superfluous, it would be the notice of lis pendens and not the
annotation of the adverse claim which is more permanent and
cannot be cancelled without adequate hearing and proper
disposition of the claim."

On the other hand, Banco Filipino asseverates that it is a

mortgagee in good faith because per Section 70 of Presidential
Decree No. 1529, otherwise known as the Property Registration
Decree, the notice of adverse claim, registered on May 17, 1967
by the Torbela siblings under Entry Nos. 274471-274472 on TCT
No. 52751, already lapsed after 30 days or on June 16, 1967.
Additionally, there was an express cancellation of Entry Nos.
274471-274472 by Entry No. 520469 dated March 11, 1981. So
when Banco Filipino approved Dr. Rosarios loan
forP1,200,000.00 and constituted a mortgage on Lot No. 356-A
(together with two other properties) on December 8, 1981, the
only other encumbrance on TCT No. 52751 was Entry No.
520099 dated March 6, 1981, i.e., the amended loan and
mortgage agreement between Dr. Rosario and PNB (which was
eventually cancelled after it was paid off with part of the
proceeds from Dr. Rosarios loan from Banco Filipino). Hence,
Banco Filipino was not aware that the Torbela siblings adverse
claim on Lot No. 356-A still subsisted.

With the enactment of the Property Registration Decree on June

11, 1978, Section 70 thereof now applies to adverse claims:

The Court finds that Banco Filipino is not a mortgagee in good

faith. Entry Nos. 274471-274472 were not validly cancelled, and
the improper cancellation should have been apparent to Banco
Filipino and aroused suspicion in said bank of some defect in Dr.
Rosarios title.
The purpose of annotating the adverse claim on the title of the
disputed land is to apprise third persons that there is a
controversy over the ownership of the land and to preserve and
protect the right of the adverse claimant during the pendency of
the controversy. It is a notice to third persons that any transaction
regarding the disputed land is subject to the outcome of the
dispute.77
Adverse claims were previously governed by Section 110 of Act
No. 496, otherwise known as the Land Registration Act, quoted
in full below:
ADVERSE CLAIM
SEC. 110. Whoever claims any part or interest in registered land
adverse to the registered owner, arising subsequent to the date of
the original registration, may, if no other provision is made in this
Act for registering the same, make a statement in writing setting
forth fully his alleged right or interest, and how or under whom
acquired, and a reference to the volume and page of the
certificate of title of the registered owner, and a description of the
land in which the right or interest is claimed.
The statement shall be signed and sworn to, and shall state the
adverse claimants residence, and designate a place at which all
notices may be served upon him. This statement shall be entitled
to registration as an adverse claim, and the court, upon a petition
of any party in interest, shall grant a speedy hearing upon the
question of the validity of such adverse claim and shall enter
such decree therein as justice and equity may require. If the claim
is adjudged to be invalid, the registration shall be cancelled. If in
any case the court after notice and hearing shall find that a claim
thus registered was frivolous or vexatious, it may tax the adverse
claimant double or treble costs in its discretion.
Construing the aforequoted provision, the Court stressed in Ty
Sin Tei v. Lee Dy Piao78 that "[t]he validity or efficaciousness of
the [adverse] claim x x x may only be determined by the Court
upon petition by an interested party, in which event, the Court
shall order the immediate hearing thereof and make the proper
adjudication as justice and equity may warrant. And it is ONLY
when such claim is found unmeritorious that the registration
thereof may be cancelled." The Court likewise pointed out in the
same case that while a notice of lis pendens may be cancelled in
a number of ways, "the same is not true in a registered adverse
claim, for it may be cancelled only in one instance, i.e., after the
claim is adjudged invalid or unmeritorious by the Court x x x;"

SEC. 70. Adverse claim. Whoever claims any part or interest in

registered land adverse to the registered owner, arising
subsequent to the date of the original registrations, may, if no
other provision is made in this Decree for registering the same,
make a statement in writing setting forth fully his alleged right,
or interest, and how or under whom acquired, a reference to the
number of the certificate of title of the registered owner, the name
of the registered owner, and a description of the land in which the
right or interest is claimed.
The statement shall be signed and sworn to, and shall state the
adverse claimants residence, and a place at which all notices
may be served upon him. This statement shall be entitled to
registration as an adverse claim on the certificate of title. The
adverse claim shall be effective for a period of thirty days from
the date of registration. After the lapse of said period, the
annotation of adverse claim may be cancelled upon filing of a
verified petition therefor by the party in interest: Provided,
however, that after cancellation, no second adverse claim based
on the same ground shall be registered by the same claimant.
Before the lapse of thirty days aforesaid, any party in interest
may file a petition in the Court of First Instance where the land is
situated for the cancellation of the adverse claim, and the court
shall grant a speedy hearing upon the question of the validity of
such adverse claim, and shall render judgment as may be just and
equitable. If the adverse claim is adjudged to be invalid, the
registration thereof shall be ordered cancelled. If, in any case, the
court, after notice and hearing, shall find that the adverse claim
thus registered was frivolous, it may fine the claimant in an
amount not less than one thousand pesos nor more than five
thousand pesos, in its discretion. Before the lapse of thirty days,
the claimant may withdraw his adverse claim by filing with the
Register of Deeds a sworn petition to that effect. (Emphases
supplied.)
In Sajonas v. Court of Appeals,79 the Court squarely interpreted
Section 70 of the Property Registration Decree, particularly, the
new 30-day period not previously found in Section 110 of the
Land Registration Act, thus:
In construing the law aforesaid, care should be taken that every
part thereof be given effect and a construction that could render a
provision inoperative should be avoided, and inconsistent
provisions should be reconciled whenever possible as parts of a
harmonious whole. For taken in solitude, a word or phrase might
easily convey a meaning quite different from the one actually
intended and evident when a word or phrase is considered with
those with which it is associated. In ascertaining the period of
effectivity of an inscription of adverse claim, we must read the
law in its entirety. Sentence three, paragraph two of Section 70 of
P.D. 1529 provides:
"The adverse claim shall be effective for a period of thirty days
from the date of registration."
At first blush, the provision in question would seem to restrict the
effectivity of the adverse claim to thirty days. But the above
provision cannot and should not be treated separately, but should
be read in relation to the sentence following, which reads:
"After the lapse of said period, the annotation of adverse claim
may be cancelled upon filing of a verified petition therefor by the
party in interest."
If the rationale of the law was for the adverse claim to ipso facto
lose force and effect after the lapse of thirty days, then it would
not have been necessary to include the foregoing caveat to clarify
and complete the rule. For then, no adverse claim need be
cancelled. If it has been automatically terminated by mere lapse

of time, the law would not have required the party in interest to
do a useless act.
A statute's clauses and phrases must not be taken separately, but
in its relation to the statute's totality. Each statute must, in fact, be
construed as to harmonize it with the pre-existing body of laws.
Unless clearly repugnant, provisions of statutes must be
reconciled. The printed pages of the published Act, its history,
origin, and its purposes may be examined by the courts in their
construction. x x x.
xxxx
Construing the provision as a whole would reconcile the apparent
inconsistency between the portions of the law such that the
provision on cancellation of adverse claim by verified petition
would serve to qualify the provision on the effectivity period.
The law, taken together, simply means that the cancellation of the
adverse claim is still necessary to render it ineffective, otherwise,
the inscription will remain annotated and shall continue as a lien
upon the property. For if the adverse claim has already ceased to
be effective upon the lapse of said period, its cancellation is no
longer necessary and the process of cancellation would be a
useless ceremony.
It should be noted that the law employs the phrase "may be
cancelled," which obviously indicates, as inherent in its decision
making power, that the court may or may not order the
cancellation of an adverse claim, notwithstanding such provision
limiting the effectivity of an adverse claim for thirty days from
the date of registration. The court cannot be bound by such
period as it would be inconsistent with the very authority vested
in it. A fortiori, the limitation on the period of effectivity is
immaterial in determining the validity or invalidity of an adverse
claim which is the principal issue to be decided in the court
hearing. It will therefore depend upon the evidence at a proper
hearing for the court to determine whether it will order the
cancellation of the adverse claim or not.
To interpret the effectivity period of the adverse claim as absolute
and without qualification limited to thirty days defeats the very
purpose for which the statute provides for the remedy of an
inscription of adverse claim, as the annotation of an adverse
claim is a measure designed to protect the interest of a person
over a piece of real property where the registration of such
interest or right is not otherwise provided for by the Land
Registration Act or Act 496 (now P.D. 1529 or the Property
Registration Decree), and serves as a warning to third parties
dealing with said property that someone is claiming an interest or
the same or a better right than the registered owner thereof.
The reason why the law provides for a hearing where the validity
of the adverse claim is to be threshed out is to afford the adverse
claimant an opportunity to be heard, providing a venue where the
propriety of his claimed interest can be established or revoked,
all for the purpose of determining at last the existence of any
encumbrance on the title arising from such adverse claim. This is
in line with the provision immediately following:
"Provided, however, that after cancellation, no second adverse
claim shall be registered by the same claimant."
Should the adverse claimant fail to sustain his interest in the
property, the adverse claimant will be precluded from registering
a second adverse claim based on the same ground.
It was held that "validity or efficaciousness of the claim may only
be determined by the Court upon petition by an interested party,
in which event, the Court shall order the immediate hearing
thereof and make the proper adjudication as justice and equity
may warrant. And it is only when such claim is found
unmeritorious that the registration of the adverse claim may be
cancelled, thereby protecting the interest of the adverse claimant
and giving notice and warning to third parties."80 (Emphases
supplied.)
Whether under Section 110 of the Land Registration Act or
Section 70 of the Property Registration Decree, notice of adverse
claim can only be cancelled after a party in interest files a

petition for cancellation before the RTC wherein the property is

located, and the RTC conducts a hearing and determines the said
claim to be invalid or unmeritorious.
No petition for cancellation has been filed and no hearing has
been conducted herein to determine the validity or merit of the
adverse claim of the Torbela siblings. Entry No. 520469
cancelled the adverse claim of the Torbela siblings, annotated as
Entry Nos. 274471-774472, upon the presentation by Dr. Rosario
of a mere Cancellation and Discharge of Mortgage.
Regardless of whether or not the Register of Deeds should have
inscribed Entry No. 520469 on TCT No. 52751, Banco Filipino
could not invoke said inscription in support of its claim of good
faith. There were several things amiss in Entry No. 520469 which
should have already aroused suspicions in Banco Filipino, and
compelled the bank to look beyond TCT No. 52751 and inquire
into Dr. Rosarios title. First, Entry No. 520469 does not mention
any court order as basis for the cancellation of the adverse claim.
Second, the adverse claim was not a mortgage which could be
cancelled with Dr. Rosarios Cancellation and Discharge of
Mortgage. And third, the adverse claim was against Dr. Rosario,
yet it was cancelled based on a document also executed by Dr.
Rosario.
It is a well-settled rule that a purchaser or mortgagee cannot close
his eyes to facts which should put a reasonable man upon his
guard, and then claim that he acted in good faith under the belief
that there was no defect in the title of the vendor or mortgagor.
His mere refusal to believe that such defect exists, or his willful
closing of his eyes to the possibility of the existence of a defect
in the vendor's or mortgagor's title, will not make him an
innocent purchaser or mortgagee for value, if it afterwards
develops that the title was in fact defective, and it appears that he
had such notice of the defects as would have led to its discovery
had he acted with the measure of precaution which may be
required of a prudent man in a like situation.81
While the defective cancellation of Entry Nos. 274471-274472
by Entry No. 520469 might not be evident to a private individual,
the same should have been apparent to Banco Filipino. Banco
Filipino is not an ordinary mortgagee, but is a mortgagee-bank,
whose business is impressed with public interest. In fact, in one
case, 82 the Court explicitly declared that the rule that persons
dealing with registered lands can rely solely on the certificate of
title does not apply to banks. In another case,83 the Court
adjudged that unlike private individuals, a bank is expected to
exercise greater care and prudence in its dealings, including those
involving registered lands. A banking institution is expected to
exercise due diligence before entering into a mortgage contract.
The ascertainment of the status or condition of a property offered
to it as security for a loan must be a standard and indispensable
part of its operations.
Banco Filipino cannot be deemed a mortgagee in good faith,
much less a purchaser in good faith at the foreclosure sale of Lot
No. 356-A. Hence, the right of the Torbela siblings over Lot No.
356-A is superior over that of Banco Filipino; and as the true
owners of Lot No. 356-A, the Torbela siblings are entitled to a
reconveyance of said property even from Banco Filipino.
Nonetheless, the failure of Banco Filipino to comply with the due
diligence requirement was not the result of a dishonest purpose,
some moral obliquity, or breach of a known duty for some
interest or ill will that partakes of fraud that would justify
damages.84
Given the reconveyance of Lot No. 356-A to the Torbela siblings,
there is no more need to address issues concerning redemption,
annulment of the foreclosure sale and certificate of sale (subject
matter of Civil Case No. U-4733), or issuance of a writ of
possession in favor of Banco Filipino (subject matter of Pet. Case
No. U-822) insofar as Lot No. 356-A is concerned. Such would
only be superfluous. Banco Filipino, however, is not left without
any recourse should the foreclosure and sale of the two other
mortgaged properties be insufficient to cover Dr. Rosarios loan,
for the bank may still bring a proper suit against Dr. Rosario to

collect the unpaid balance.

The rules on accession shall govern the improvements on Lot No.
356-A and the rents thereof.
The accessory follows the principal. The right of accession is
recognized under Article 440 of the Civil Code which states that
"[t]he ownership of property gives the right by accession to
everything which is produced thereby, or which is incorporated
or attached thereto, either naturally or artificially."
There is no question that Dr. Rosario is the builder of the
improvements on Lot No. 356-A. The Torbela siblings
themselves alleged that they allowed Dr. Rosario to register Lot
No. 356-A in his name so he could obtain a loan from DBP, using
said parcel of land as security; and with the proceeds of the loan,
Dr. Rosario had a building constructed on Lot No. 356-A,
initially used as a hospital, and then later for other commercial
purposes. Dr. Rosario supervised the construction of the building,
which began in 1965; fully liquidated the loan from DBP; and
maintained and administered the building, as well as collected the
rental income therefrom, until the Torbela siblings instituted Civil
Case No. U-4359 before the RTC on February 13, 1986.
When it comes to the improvements on Lot No. 356-A, both the
Torbela siblings (as landowners) and Dr. Rosario (as builder) are
deemed in bad faith. The Torbela siblings were aware of the
construction of a building by Dr. Rosario on Lot No. 356-A,
while Dr. Rosario proceeded with the said construction despite
his knowledge that Lot No. 356-A belonged to the Torbela
siblings. This is the case contemplated under Article 453 of the
Civil Code, which reads:
ART. 453. If there was bad faith, not only on the part of the
person who built, planted or sowed on the land of another, but
also on the part of the owner of such land, the rights of one and
the other shall be the same as though both had acted in good
faith.
It is understood that there is bad faith on the part of the
landowner whenever the act was done with his knowledge and
without opposition on his part. (Emphasis supplied.)
When both the landowner and the builder are in good faith, the
following rules govern:
ART. 448. The owner of the land on which anything has been
built, sown or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting, after
payment of the indemnity provided for in articles 546 and 548, or
to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent. However, the builder or
planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case,
he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper indemnity.
The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
ART. 546. Necessary expenses shall be refunded to every
possessor; but only the possessor in good faith may retain the
thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good
faith with the same right of retention, the person who has
defeated him in the possession having the option of refunding the
amount of the expenses or of paying the increase in value which
the thing may have acquired by reason thereof.
ART. 548. Expenses for pure luxury or mere pleasure shall not be
refunded to the possessor in good faith; but he may remove the
ornaments with which he has embellished the principal thing if it
suffers no injury thereby, and if his successor in the possession
does not prefer to refund the amount expended.
Whatever is built, planted, or sown on the land of another, and
the improvements or repairs made thereon, belong to the owner
of the land. Where, however, the planter, builder, or sower has
acted in good faith, a conflict of rights arises between the owners
and it becomes necessary to protect the owner of the

improvements without causing injustice to the owner of the land.

In view of the impracticability of creating what Manresa calls a
state of "forced co-ownership," the law has provided a just and
equitable solution by giving the owner of the land the option to
acquire the improvements after payment of the proper indemnity
or to oblige the builder or planter to pay for the land and the
sower to pay the proper rent. It is the owner of the land who is
allowed to exercise the option because his right is older and
because, by the principle of accession, he is entitled to the
ownership of the accessory thing.85
The landowner has to make a choice between appropriating the
building by paying the proper indemnity or obliging the builder
to pay the price of the land. But even as the option lies with the
landowner, the grant to him, nevertheless, is preclusive. He must
choose one. He cannot, for instance, compel the owner of the
building to remove the building from the land without first
exercising either option. It is only if the owner chooses to sell his
land, and the builder or planter fails to purchase it where its value
is not more than the value of the improvements, that the owner
may remove the improvements from the land. The owner is
entitled to such remotion only when, after having chosen to sell
his land, the other party fails to pay for the same.86
This case then must be remanded to the RTC for the
determination of matters necessary for the proper application of
Article 448, in relation to Article 546, of the Civil Code. Such
matters include the option that the Torbela siblings will choose;
the amount of indemnity that they will pay if they decide to
appropriate the improvements on Lot No. 356-A; the value of Lot
No. 356-A if they prefer to sell it to Dr. Rosario; or the
reasonable rent if they opt to sell Lot No. 356-A to Dr. Rosario
but the value of the land is considerably more than the
improvements. The determination made by the Court of Appeals
in its Decision dated June 29, 1999 that the current value of Lot
No. 356-A is P1,200,000.00 is not supported by any evidence on
record.
Should the Torbela siblings choose to appropriate the
improvements on Lot No. 356-A, the following ruling of the
Court in Pecson v. Court of Appeals87 is relevant in the
determination of the amount of indemnity under Article 546 of
the Civil Code:
Article 546 does not specifically state how the value of the useful
improvements should be determined. The respondent court and
the private respondents espouse the belief that the cost of
construction of the apartment building in 1965, and not its
current market value, is sufficient reimbursement for necessary
and useful improvements made by the petitioner. This position is,
however, not in consonance with previous rulings of this Court in
similar cases. In Javier vs. Concepcion, Jr., this Court pegged the
value of the useful improvements consisting of various fruits,
bamboos, a house and camarin made of strong material based on
the market value of the said improvements. In Sarmiento vs.
Agana, despite the finding that the useful improvement, a
residential house, was built in 1967 at a cost of between eight
thousand pesos (P8,000.00) to ten thousand pesos (P10,000.00),
the landowner was ordered to reimburse the builder in the
amount of forty thousand pesos (P40,000.00), the value of the
house at the time of the trial. In the same way, the landowner was
required to pay the "present value" of the house, a useful
improvement, in the case of De Guzman vs. De la Fuente, cited
by the petitioner.
The objective of Article 546 of the Civil Code is to administer
justice between the parties involved. In this regard, this Court had
long ago stated in Rivera vs. Roman Catholic Archbishop of
Manila that the said provision was formulated in trying to adjust
the rights of the owner and possessor in good faith of a piece of
land, to administer complete justice to both of them in such a
way as neither one nor the other may enrich himself of that which
does not belong to him. Guided by this precept, it is therefore the
current market value of the improvements which should be made
the basis of reimbursement. A contrary ruling would unjustly
enrich the private respondents who would otherwise be allowed
to acquire a highly valued income-yielding four-unit apartment

building for a measly amount. Consequently, the parties should

therefore be allowed to adduce evidence on the present market
value of the apartment building upon which the trial court should
base its finding as to the amount of reimbursement to be paid by
the landowner.88 (Emphases supplied.)
Still following the rules of accession, civil fruits, such as rents,
belong to the owner of the building.89 Thus, Dr. Rosario has a
right to the rents of the improvements on Lot No. 356-A and is
under no obligation to render an accounting of the same to
anyone. In fact, it is the Torbela siblings who are required to
account for the rents they had collected from the lessees of the
commercial building and turn over any balance to Dr. Rosario.
Dr. Rosarios right to the rents of the improvements on Lot No.
356-A shall continue until the Torbela siblings have chosen their
option under Article 448 of the Civil Code. And in case the
Torbela siblings decide to appropriate the improvements, Dr.
Rosario shall have the right to retain said improvements, as well
as the rents thereof, until the indemnity for the same has been
paid.90
Dr. Rosario is liable for damages to the Torbela siblings.
The Court of Appeals ordered Dr. Rosario to pay the Torbela
siblings P300,000.00 as moral damages;P200,000.00 as
exemplary damages; and P100,000.00 as attorneys fees.
Indeed, Dr. Rosarios deceit and bad faith is evident when, being
fully aware that he only held Lot No. 356-A in trust for the
Torbela siblings, he mortgaged said property to PNB and Banco
Filipino absent the consent of the Torbela siblings, and caused the
irregular cancellation of the Torbela siblings adverse claim on
TCT No. 52751. Irrefragably, Dr. Rosarios betrayal had caused
the Torbela siblings (which included Dr. Rosarios own mother,
Eufrosina Torbela Rosario) mental anguish, serious anxiety, and
wounded feelings. Resultantly, the award of moral damages is
justified, but the amount thereof is reduced to P200,000.00.
In addition to the moral damages, exemplary damages may also
be imposed given that Dr. Rosarios wrongful acts were
accompanied by bad faith. However, judicial discretion granted
to the courts in the assessment of damages must always be
exercised with balanced restraint and measured objectivity. The
circumstances of the case call for a reduction of the award of
exemplary damages to P100,000.00.
As regards attorney's fees, they may be awarded when the
defendant's act or omission has compelled the plaintiff to litigate
with third persons or to incur expenses to protect his interest.
Because of Dr. Rosarios acts, the Torbela siblings were
constrained to institute several cases against Dr. Rosario and his
spouse, Duque-Rosario, as well as Banco Filipino, which had
lasted for more than 25 years. Consequently, the Torbela siblings
are entitled to an award of attorney's fees and the amount
of P100,000.00 may be considered rational, fair, and reasonable.
Banco Filipino is entitled to a writ of possession for Lot No. 5-F8-C-2-B-2-A.
The Court emphasizes that Pet. Case No. U-822, instituted by
Banco Filipino for the issuance of a writ of possession before the
RTC of Urdaneta, included only Lot No. 5-F-8-C-2-B-2-A and
Lot No. 356-A (Lot No. 4489, the third property mortgaged to
secure Dr. Rosarios loan from Banco Filipino, is located in
Dagupan City, Pangasinan, and the petition for issuance of a writ
of possession for the same should be separately filed with the
RTC of Dagupan City). Since the Court has already granted
herein the reconveyance of Lot No. 356-A from Banco Filipino
to the Torbela siblings, the writ of possession now pertains only
to Lot No. 5-F-8-C-2-B-2-A.

2-A had been registered in her name under TCT No. 104189. Yet,
without a copy of TCT No. 104189 on record, the Court cannot
give much credence to Duque-Rosarios claim of sole ownership
of Lot No. 5-F-8-C-2-B-2-A. Also, the question of whether Lot
No. 5-F-8-C-2-B-2-A was the paraphernal property of DuqueRosario or the conjugal property of the spouses Rosario would
not alter the outcome of Duque-Rosarios Petition.
The following facts are undisputed: Banco Filipino
extrajudicially foreclosed the mortgage constituted on Lot No. 5F-8-C-2-B-2-A and the two other properties after Dr. Rosario
defaulted on the payment of his loan; Banco Filipino was the
highest bidder for all three properties at the foreclosure sale on
April 2, 1987; the Certificate of Sale dated April 2, 1987 was
registered in April 1987; and based on the Certificate of Final
Sale dated May 24, 1988 and Affidavit of Consolidation dated
May 25, 1988, the Register of Deeds cancelled TCT No. 104189
and issued TCT No. 165812 in the name of Banco Filipino for
Lot No. 5-F-8-C-2-B-2-A on June 7, 1988.
The Court has consistently ruled that the one-year redemption
period should be counted not from the date of foreclosure sale,
but from the time the certificate of sale is registered with the
Registry of Deeds.91 No copy of TCT No. 104189 can be found
in the records of this case, but the fact of annotation of the
Certificate of Sale thereon was admitted by the parties, only
differing on the date it was made: April 14, 1987 according to
Banco Filipino and April 15, 1987 as maintained by DuqueRosario. Even if the Court concedes that the Certificate of Sale
was annotated on TCT No. 104189 on the later date, April 15,
1987, the one-year redemption period already expired on April
14, 1988.92 The Certificate of Final Sale and Affidavit of
Consolidation were executed more than a month thereafter, on
May 24, 1988 and May 25, 1988, respectively, and were clearly
not premature.
It is true that the rule on redemption is liberally construed in
favor of the original owner of the property. The policy of the law
is to aid rather than to defeat him in the exercise of his right of
redemption.93 However, the liberal interpretation of the rule on
redemption is inapplicable herein as neither Duque-Rosario nor
Dr. Rosario had made any attempt to redeem Lot No. 5-F-8-C-2B-2-A. Duque-Rosario could only rely on the efforts of the
Torbela siblings at redemption, which were unsuccessful. While
the Torbela siblings made several offers to redeem Lot No. 356A, as well as the two other properties mortgaged by Dr. Rosario,
they did not make any valid tender of the redemption price to
effect a valid redemption. The general rule in redemption is that it
is not sufficient that a person offering to redeem manifests his
desire to do so. The statement of intention must be accompanied
by an actual and simultaneous tender of payment. The
redemption price should either be fully offered in legal tender or
else validly consigned in court. Only by such means can the
auction winner be assured that the offer to redeem is being made
in good faith.94 In case of disagreement over the redemption
price, the redemptioner may preserve his right of redemption
through judicial action, which in every case, must be filed within
the one-year period of redemption. The filing of the court action
to enforce redemption, being equivalent to a formal offer to
redeem, would have the effect of preserving his redemptive rights
and "freezing" the expiration of the one-year period.95 But no
such action was instituted by the Torbela siblings or either of the
spouses Rosario.

To recall, the Court of Appeals affirmed the issuance by the RTC

of a writ of possession in favor of Banco Filipino. Dr. Rosario no
longer appealed from said judgment of the appellate court.
Already legally separated from Dr. Rosario, Duque-Rosario alone
challenges the writ of possession before this Court through her
Petition in G.R. No. 140553.

Duque-Rosario also cannot bar the issuance of the writ of

possession over Lot No. 5-F-8-C-2-B-2-A in favor of Banco
Filipino by invoking the pendency of Civil Case No. U-4359, the
Torbela siblings action for recovery of ownership and possession
and damages, which supposedly tolled the period for redemption
of the foreclosed properties. Without belaboring the issue of Civil
Case No. U-4359 suspending the redemption period, the Court
simply points out to Duque-Rosario that Civil Case No. U-4359
involved Lot No. 356-A only, and the legal consequences of the
institution, pendency, and resolution of Civil Case No. U-4359
apply to Lot No. 356-A alone.

Duque-Rosario alleges in her Petition that Lot No. 5-F-8-C-2-B-

Equally unpersuasive is Duque-Rosarios argument that the writ

of possession over Lot No. 5-F-8-C-2-B-2-A should not be issued

given the defects in the conduct of the foreclosure sale (i.e., lack
of personal notice to Duque-Rosario) and consolidation of title
(i.e., failure to provide Duque-Rosario with copies of the
Certificate of Final Sale).
The right of the purchaser to the possession of the foreclosed
property becomes absolute upon the expiration of the redemption
period. The basis of this right to possession is the purchaser's
ownership of the property. After the consolidation of title in the
buyer's name for failure of the mortgagor to redeem, the writ of
possession becomes a matter of right and its issuance to a
purchaser in an extrajudicial foreclosure is merely a ministerial
function.961avvphi1
The judge with whom an application for a writ of possession is
filed need not look into the validity of the mortgage or the
manner of its foreclosure. Any question regarding the validity of
the mortgage or its foreclosure cannot be a legal ground for the
refusal to issue a writ of possession. Regardless of whether or not
there is a pending suit for the annulment of the mortgage or the
foreclosure itself, the purchaser is entitled to a writ of possession,
without prejudice, of course, to the eventual outcome of the
pending annulment case. The issuance of a writ of possession in
favor of the purchaser in a foreclosure sale is a ministerial act and
does not entail the exercise of discretion.97
WHEREFORE, in view of the foregoing, the Petition of the
Torbela siblings in G.R. No. 140528 is GRANTED, while the
Petition of Lena Duque-Rosario in G.R. No. 140553 is DENIED
for lack of merit. The Decision dated June 29, 1999 of the Court
of Appeals in CA-G.R. CV No. 39770, which affirmed with
modification the Amended Decision dated January 29, 1992 of
the RTC in Civil Case Nos. U-4359 and U-4733 and Pet. Case
No. U-822, is AFFIRMED WITH MODIFICATIONS, to now
read as follows:
(1) Banco Filipino is ORDERED to reconvey Lot No.
356-A to the Torbela siblings;

DECISION

PANGANIBAN, J.:
The parties in this case are owners of adjoining lots in
Paraaque, Metro Manila. It was discovered in a survey that a
portion of a building of petitioner, which was presumably
constructed by its predecessor-in-interest, encroached on a
portion of the lot owned by private respondent. What are the
rights and obligations of the parties? Is petitioner considered a
builder in bad faith because, as held by respondent Court, he is
presumed to know the metes and bounds of his property as
described in his certificate of title? Does petitioner succeed into
the good faith or bad faith of his predecessor-in-interest which
presumably constructed the building?
These are the questions raised in the petition for review of
the Decision[1] dated August 28, 1992, in CA-G.R. CV No.
28293 of respondent Court[2] where the disposition reads:[3]
WHEREFORE, premises considered, the Decision of the
Regional Trial Court is hereby reversed and set aside and another
one entered 1. Dismissing the complaint for lack of cause of action;
2. Ordering Tecnogas to pay the sum of P2,000.00 per month as
reasonable rental from October 4, 1979 until appellee vacates the
land;

(2) The Register of Deeds of Pangasinan is ORDERED

to cancel TCT No. 165813 in the name of Banco
Filipino and to issue a new certificate of title in the name
of the Torbela siblings for Lot No. 356-A;

3. To remove the structures and surrounding walls on the

encroached area;

(3) The case is REMANDED to the RTC for further

proceedings to determine the facts essential to the proper
application of Articles 448 and 546 of the Civil Code,
particularly: (a) the present fair market value of Lot No.
356-A; (b) the present fair market value of the
improvements thereon; (c) the option of the Torbela
siblings to appropriate the improvements on Lot No.
356-A or require Dr. Rosario to purchase Lot No. 356-A;
and (d) in the event that the Torbela siblings choose to
require Dr. Rosario to purchase Lot No. 356-A but the
value thereof is considerably more than the
improvements, then the reasonable rent of Lot No. 356A to be paid by Dr. Rosario to the Torbela siblings;

5. Ordering appellee to pay the sum of P20,000.00 for and as

attorneys fees;

(4) The Torbela siblings are DIRECTED to submit an

accounting of the rents of the improvements on Lot No.
356-A which they had received and to turn over any
balance thereof to Dr. Rosario;

4. Ordering appellee to pay the value of the land occupied by the

two-storey building.

(5) Dr. Rosario is ORDERED to pay the Torbela

siblings P200,000.00 as moral damages, P100,000.00 as
exemplary damages, and P100,000.00 as attorneys fees;
and
(6) Banco Filipino is entitled to a writ of possession over
Lot-5-F-8-C-2-B-2-A, covered by TCT No. 165812. The
RTC Branch Clerk of Court is ORDERED to issue a
writ of possession for the said property in favor of
Banco Filipino.
SO ORDERED.
#8

[G.R. No. 108894. February 10, 1997]TECNOGAS

PHILIPPINES MANUFACTURING
CORPORATION, petitioner, vs. COURT OF APPEALS
(FORMER SPECIAL SEVENTEENTH DIVISION) and
EDUARDO UY, respondents.

4. Ordering appellee to pay the value of the land occupied by the

two-storey building;

6. Costs against appellee.

Acting on the motions for reconsideration of both petitioner
and private respondent, respondent Court ordered the deletion of
paragraph 4 of the dispositive portion in an Amended Decision
dated February 9, 1993, as follows:[4]
WHEREFORE, premises considered, our decision of August 28,
1992 is hereby modified deleting paragraph 4 of the dispositive
portion of our decision which reads:

The motion for reconsideration of appellee is hereby DENIED

for lack of merit.
The foregoing Amended Decision is also challenged in the
instant petition.
The Facts
The facts are not disputed. Respondent Court merely
reproduced the factual findings of the trial court, as follows:[5]
That plaintiff (herein petitioner) which is a corporation duly
organized and existing under and by virtue of Philippine laws is
the registered owner of a parcel of land situated in Barrio San
Dionisio, Paraaque, Metro Manila known as Lot 4331-A (should
be 4531-A) of Lot 4531 of the Cadastral Survey of Paraaque,

Metro Manila, covered by Transfer Certificate of Title No.

409316 of the Registry of Deeds of the Province of Rizal; that
said land was purchased by plaintiff from Pariz Industries, Inc. in
1970, together with all the buildings and improvements including
the wall existing thereon; that the defendant (herein private
respondent) is the registered owner of a parcel of land known as
Lot No. 4531-B of Lot 4531 of the Cadastral Survey of Paraaque,
LRC (GLRO) Rec. No. 19645 covered by Transfer Certificate of
Title No. 279838, of the Registry of Deeds for the Province of
Rizal; that said land which adjoins plaintiffs land was purchased
by defendant from a certain Enrile Antonio also in 1970; that in
1971, defendant purchased another lot also adjoining plaintiffs
land from a certain Miguel Rodriguez and the same was
registered in defendants name under Transfer Certificate of Title
No. 31390, of the Registry of Deeds for the Province of Rizal;
that portions of the buildings and wall bought by plaintiff
together with the land from Pariz Industries are occupying a
portion of defendants adjoining land; that upon learning of the
encroachment or occupation by its buildings and wall of a portion
of defendants land, plaintiff offered to buy from defendant that
particular portion of defendants land occupied by portions of its
buildings and wall with an area of 770 square meters, more or
less, but defendant, however, refused the offer. In 1973, the
parties entered into a private agreement before a certain Col.
Rosales in Malacaang, wherein plaintiff agreed to demolish the
wall at the back portion of its land thus giving to defendant
possession of a portion of his land previously enclosed by
plaintiffs wall; that defendant later filed a complaint before the
office of Municipal Engineer of Paraaque, Metro Manila as well
as before the Office of the Provincial Fiscal of Rizal against
plaintiff in connection with the encroachment or occupation by
plaintiffs buildings and walls of a portion of its land but said
complaint did not prosper; that defendant dug or caused to be dug
a canal along plaintiffs wall, a portion of which collapsed in June,
1980, and led to the filing by plaintiff of the supplemental
complaint in the above-entitled case and a separate criminal
complaint for malicious mischief against defendant and his wife
which ultimately resulted into the conviction in court of
defendants wife for the crime of malicious mischief; that while
trial of the case was in progress, plaintiff filed in Court a formal
proposal for settlement of the case but said proposal, however,
was ignored by defendant.
After trial on the merits, the Regional Trial Court[6] of
Pasay City, Branch 117, in Civil Case No. PQ-7631-P, rendered a
decision dated December 4, 1989 in favor of petitioner who was
the plaintiff therein. The dispositive portion reads:[7]

the petitioner a builder in bad faith because it is presumed to

know the metes and bounds of his property.
(B)
Whether or not the respondent Court of Appeals erred when it
used the amicable settlement between the petitioner and the
private respondent, where both parties agreed to the demolition
of the rear portion of the fence, as estoppel amounting to
recognition by petitioner of respondents right over his property
including the portions of the land where the other structures and
the building stand, which were not included in the settlement.
(C)
Whether or not the respondent Court of Appeals erred in ordering
the removal of the structures and surrounding walls on the
encroached area and in withdrawing its earlier ruling in its
August 28, 1992 decision for the petitioner to pay for the value of
the land occupied by the building, only because the private
respondent has manifested its choice to demolish it despite the
absence of compulsory sale where the builder fails to pay for the
land, and which choice private respondent deliberately deleted
from its September 1, 1980 answer to the supple-mental
complaint in the Regional Trial Court.
In its Memorandum, petitioner poses the following issues:
A
The time when to determine the good faith of the builder under
Article 448 of the New Civil Code, is reckoned during the period
when it was actually being built; and in a case where no evidence
was presented nor introduced as to the good faith or bad faith of
the builder at that time, as in this case, he must be presumed to be
a builder in good faith, since bad faith cannot be presumed.[9]
B.
In a specific boundary overlap situation which involves a builder
in good faith, as in this case, it is now well settled that the lot
owner, who builds on the adjacent lot is not charged with
constructive notice of the technical metes and bounds contained
in their torrens titles to determine the exact and precise extent of
his boundary perimeter.[10]
C.

WHEREFORE, judgment is hereby rendered in favor of plaintiff

and against defendant and ordering the latter to sell to plaintiff
that portion of land owned by him and occupied by portions of
plaintiffs buildings and wall at the price of P2,000.00 per square
meter and to pay the former:

The respondent courts citation of the twin cases of Tuason & Co.
v. Lumanlan and Tuason & Co. v. Macalindong is not the judicial
authority for a boundary dispute situation between adjacent
torrens titled lot owners, as the facts of the present case
do not fall within nor square with the involved principle of a
dissimilar case.[11]

1. The sum of P44,000.00 to compensate for the losses in

materials and properties incurred by plaintiff through thievery as
a result of the destruction of its wall;

D.

2. The sum of P7,500.00 as and by way of attorneys fees; and

3. The costs of this suit.
Appeal was duly interposed with respondent Court, which
as previously stated, reversed and set aside the decision of the
Regional Trial Court and rendered the assailed Decision and
Amended Decision. Hence, this recourse under Rule 45 of the
Rules of Court.
The Issues
The petition raises the following issues:[8]
(A)
Whether or not the respondent Court of Appeals erred in holding

Quite contrary to respondent Uys reasoning, petitioner Tecnogas

continues to be a builder in good faith, even if it subsequently
built/repaired the walls/other permanent structures thereon while
the case a quowas pending and even while respondent sent the
petitioner many letters/filed cases thereon.[12]
D. (E.)
The amicable settlement between the parties should be
interpreted as a contract and enforced only in accordance with its
explicit terms, and not over and beyond that agreed upon;
because the courts do nothave the power to create a
contract nor expand its scope.[13]
E. (F.)
As a general rule, although the landowner has the option to
choose between: (1) buying the building built in good faith, or
(2) selling the portion of his land on which stands the building

under Article 448 of the Civil Code; the first option is not
absolute, because an exception thereto, once it would be
impractical for the landowner to choose to exercise the first
alternative, i.e. buy that portion of the house standing on his land,
for the whole building might be rendered useless. The workable
solution is for him to select the second alternative, namely, to sell
to the builder that part of his land on which was constructed a
portion of the house.[14]
Private respondent, on the other hand, argues that the
petition is suffering from the following flaws:[15]
1. It did not give the exact citations of cases decided by the
Honorable Supreme Court that allegedly contradicts the ruling of
the Hon. Court of Appeals based on the doctrine laid down in
Tuason vs. Lumanlan case citing also Tuason vs. Macalindong
case (Supra).
2. Assuming that the doctrine in the alleged Co Tao vs. Chico
case is contradictory to the doctrine in Tuason vs. Lumanlan and
Tuason vs. Macalindong, the two cases being more current, the
same should prevail.
Further, private respondent contends that the following
unmistakably point to the bad faith of petitioner: (1) private
respondents purchase of the two lots, was ahead of the purchase
by petitioner of the building and lot from Pariz Industries; (2) the
declaration of the General Manager of Tecnogas that the sale
between petitioner and Pariz Industries was not registered
because of some problems with China Banking Corporation; and
(3) the Deed of Sale in favor of petitioner was registered in its
name only in the month of May 1973.[16]
The Courts RulingThe petition should be granted.Good Faith
or Bad Faith
Respondent Court, citing the cases of J. M. Tuason & Co.,
Inc. vs. Vda. de Lumanlan[17] and J. M. Tuason & Co., Inc. vs.
Macalindong,[18] ruled that petitioner cannot be considered in
good faith because as a land owner, it is presumed to know the
metes and bounds of his own property, specially if the same are
reflected in a properly issued certificate of title. One who
erroneously builds on the adjoining lot should be considered a
builder in (b)ad (f)aith, there being presumptive knowledge of the
Torrens title, the area, and the extent of the boundaries.[19]
We disagree with respondent Court. The two cases it relied
upon do not support its main pronouncement that a registered
owner of land has presumptive knowledge of the metes and
bounds of its own land, and is therefore in bad faith if he
mistakenly builds on an adjoining land. Aside from the fact that
those cases had factual moorings radically different from those
obtaining here, there is nothing in those cases which would
suggest, however remotely, that bad faith is imputable to a
registered owner of land when a part of his building encroaches
upon a neighbors land, simply because he is supposedly
presumed to know the boundaries of his land as described in his
certificate of title. No such doctrinal statement could have been
made in those cases because such issue was not before the
Supreme Court. Quite the contrary, we have rejected such a
theory in Co Tao vs. Chico,[20] where we held that unless one is
versed in the science of surveying, no one can determine the
precise extent or location of his property by merely examining
his paper title.
There is no question that when petitioner purchased the land
from Pariz Industries, the buildings and other structures were
already in existence. The record is not clear as to who actually
built those structures, but it may well be assumed that petitioners
predecessor-in-interest, Pariz Industries, did so. Article 527 of the
Civil Code presumes good faith, and since no proof exists to
show that the encroachment over a narrow, needle-shaped portion
of private respondents land was done in bad faith by the builder
of the encroaching structures, the latter should be presumed to
have built them in good faith.[21] It is presumed that possession

continues to be enjoyed in the same character in which it was

acquired, until the contrary is proved.[22] Good faith consists in
the belief of the builder that the land he is building on is his, and
his ignorance of any defect or flaw in his title.[23] Hence, such
good faith, by law, passed on to Parizs successor, petitioner in
this case. Further, (w)here one derives title to property from
another, the act, declaration, or omission of the latter, while
holding the title, in relation to the property, is evidence against
the former.[24] And possession acquired in good faith does not
lose this character except in case and from the moment facts exist
which show that the possessor is not unaware that he possesses
the thing improperly or wrongfully.[25] The good faith ceases
from the moment defects in the title are made known to the
possessor, by extraneous evidence or by suit for recovery of the
property by the true owner.[26]
Recall that the encroachment in the present case was caused
by a very slight deviation of the erected wall (as fence) which
was supposed to run in a straight line from point 9 to point 1 of
petitioners lot. It was an error which, in the context of the
attendant facts, was consistent with good faith. Consequently, the
builder, if sued by the aggrieved landowner for recovery of
possession, could have invoked the provisions of Art. 448 of the
Civil Code, which reads:
The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his
own the works, sowing or planting, after payment of the
indemnity provided for in articles 546 and 548, or to oblige the
one who built or planted to pay the price of the land, and the one
who sowed, the proper rent. However, the builder or planter
cannot be obliged to buy the land if its value is considerably
more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The
parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
The obvious benefit to the builder under this article is that,
instead of being outrightly ejected from the land, he can compel
the landowner to make a choice between the two options: (1) to
appropriate the building by paying the indemnity required by law,
or (2) sell the land to the builder. The landowner cannot refuse to
exercise either option and compel instead the owner of the
building to remove it from the land.[27]
The question, however, is whether the same benefit can be
invoked by petitioner who, as earlier stated, is not the builder of
the offending structures but possesses them as buyer.
We answer such question in the affirmative.
In the first place, there is no sufficient showing that
petitioner was aware of the encroachment at the time it acquired
the property from Pariz Industries. We agree with the trial court
that various factors in evidence adequately show petitioners lack
of awareness thereof. In any case, contrary proof has not
overthrown the presumption of good faith under Article 527 of
the Civil Code, as already stated, taken together with the
disputable presumptions of the law on evidence. These
presumptions state, under Section 3 (a) of Rule 131 of the Rules
of Court, that the person is innocent of a crime or wrong; and
under Section 3 (ff) of Rule 131, that the law has been obeyed. In
fact, private respondent Eduardo Uy himself was unaware of
such intrusion into his property until after 1971 when he hired a
surveyor, following his purchase of another adjoining lot, to
survey all his newly acquired lots. Upon being apprised of the
encroachment, petitioner immediately offered to buy the area
occupied by its building -- a species of conduct consistent with
good faith.
In the second place, upon delivery of the property by Pariz
Industries, as seller, to the petitioner, as buyer, the latter acquired

ownership of the property. Consequently and as earlier discussed,

petitioner is deemed to have stepped into the shoes of the seller in
regard to all rights of ownership over the immovable sold,
including the right to compel the private respondent to exercise
either of the two options provided under Article 448 of the Civil
Code.
Estoppel
Respondent Court ruled that the amicable settlement entered
into between petitioner and private respondent estops the former
from questioning the private respondents right over the disputed
property. It held that by undertaking to demolish the fence under
said settlement, petitioner recognized private respondents right
over the property, and cannot later on compel private respondent
to sell to it the land since private respondent is under no
obligation to sell.[28]
We do not agree. Petitioner cannot be held in estoppel for
entering into the amicable settlement, the pertinent portions of
which read:[29]
That the parties hereto have agreed that the rear portion of the
fence that separates the property of the complainant and
respondent shall be demolished up to the back of the building
housing the machineries which demolision (sic) shall be
undertaken by the complainant at anytime.
That the fence which serve(s) as a wall housing the electroplating
machineries shall not be demolished in the mean time which
portion shall be subject to negotiation by herein parties.
From the foregoing, it is clear that petitioner agreed only to
the demolition of a portion of the wall separating the adjoining
properties of the parties -- i.e. up to the back of the building
housing the machineries. But that portion of the fence which
served as the wall housing the electroplating machineries was not
to be demolished. Rather, it was to be subject to negotiation by
herein parties. The settlement may have recognized the
ownership of private respondent but such admission cannot be
equated with bad faith. Petitioner was only trying to avoid a
litigation, one reason for entering into an amicable settlement.
As was ruled in Osmea vs. Commission on Audit,[30]
A compromise is a bilateral act or transaction that is expressly
acknowledged as a juridical agreement by the Civil Code and is
therein dealt with in some detail. `A compromise, declares Article
2208 of said Code, `is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one
already commenced.
xxx xxx xxx
The Civil Code not only defines and authorizes compromises, it
in fact encourages them in civil actions. Art. 2029 states that
`The Court shall endeavor to persuade the litigants in a civil case
to agree upon some fair compromise. x x x.
In the context of the established facts, we hold that
petitioner did not lose its rights under Article 448 of the Civil
Code on the basis merely of the fact that some years after
acquiring the property in good faith, it learned about -- and aptly
recognized -- the right of private respondent to a portion of the
land occupied by its building. The supervening awareness of the
encroachment by petitioner does not militate against its right to
claim the status of a builder in good faith. In fact, a judicious
reading of said Article 448 will readily show that the landowners
exercise of his option can only take place after the builder shall
have come to know of the intrusion -- in short, when both parties
shall have become aware of it. Only then will the occasion for
exercising the option arise, for it is only then that both parties
will have been aware that a problem exists in regard to their
property rights.

Options of Private Respondent

What then is the applicable provision in this case which private

respondent may invoke as his
remedy: Article 448 or Article 450[31] of the Civil Code?

In view of the good faith of both petitioner and private

respondent, their rights and obligations are to be governed by Art.
448. The essential fairness of this codal provision has been
pointed out by Mme. Justice Ameurfina Melencio-Herrera, citing
Manresa and applicable precedents, in the case of Depra vs.
Dumlao,[32] to wit:
Where the builder, planter or sower has acted in good faith, a
conflict of rights arises between the owners, and it becomes
necessary to protect the owner of the improvements without
causing injustice to the owner of the land. In view of the
impracticality of creating a state of forced co-ownership, the law
has provided a just solution by giving the owner of the land the
option to acquire the improvements after payment of the proper
indemnity, or to oblige the builder or planter to pay for the land
and the sower to pay the proper rent. It is the owner of the land
who is authorized to exercise the option, because his right is
older, and because, by the principle of accession, he is entitled to
the ownership of the accessory thing. (3 Manresa 213; Bernardo
vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs. Chan Chico, G. R.
No. 49167, April 30, 1949; Article applied; see Cabral, et al. vs.
Ibanez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco, [C.A.] 52
Off. Gaz. 2050).
The private respondents insistence on the removal of the
encroaching structures as the proper remedy, which respondent
Court sustained in its assailed Decisions, is thus legally
flawed. This is not one of the remedies bestowed upon him by
law. It would be available only if and when he chooses to compel
the petitioner to buy the land at a reasonable price but the latter
fails to pay such price.[33] This has not taken place. Hence, his
options are limited to: (1) appropriating the encroaching portion
of petitioners building after payment of proper indemnity, or (2)
obliging the latter to buy the lot occupied by the structure. He
cannot exercise a remedy of his own liking.
Neither is petitioners prayer that private respondent be
ordered to sell the land[34] the proper remedy. While that was
dubbed as the more workable solution in Grana and Torralba vs.
The Court of Appeals, et al.,[35] it was not the relief granted in
that case as the landowners were directed to exercise within 30
days from this decision their option to either buy the portion of
the petitioners house on their land or sell to said petitioners the
portion of their land on which it stands.[36] Moreover, in Grana
and Torralba, the area involved was only 87 square meters while
this case involves 520 square meters[37]. In line with the case of
Depra vs. Dumlao,[38] this case will have to be remanded to the
trial court for further proceedings to fully implement the mandate
of Art. 448. It is a rule of procedure for the Supreme Court to
strive to settle the entire controversy in a single proceeding
leaving no root or branch to bear the seeds of future litigation.
[39]
Petitioner, however, must also pay the rent for the property
occupied by its building as prescribed by respondent Court from
October 4, 1979, but only up to the date private respondent
serves notice of its option upon petitioner and the trial court; that
is, if such option is for private respondent to appropriate the
encroaching structure. In such event, petitioner would have a
right of retention which negates the obligation to pay rent.
[40] The rent should however continue if the option chosen is
compulsory sale, but only up to the actual transfer of ownership.

The award of attorneys fees by respondent Court against

petitioner is unwarranted since the action appears to have been
filed in good faith. Besides, there should be no penalty on the
right to litigate.[41]

building. Upon expiration of the two-year period,

or upon default by petitioner in the payment of
rentals for two (2) consecutive months, private
respondent shall be entitled to terminate the forced
lease, to recover his land, and to have the portion
of the building removed by petitioner or at latters
expense. The rentals herein provided shall be
tendered by petitioner to the trial court for payment
to private respondent, and such tender shall
constitute evidence of whether or not compliance
was made within the period fixed by the said court.

WHEREFORE, premises considered, the petition is hereby

GRANTED and the assailed Decision and the Amended Decision
are REVERSED and SET ASIDE. In accordance with the case of
Depra vs. Dumlao,[42] this case is REMANDED to the Regional
Trial Court of Pasay City, Branch 117, for further proceedings
consistent with Articles 448 and 546 [43] of the Civil Code, as
follows:
The trial court shall determine:
a) the present fair price of private respondents 520 square-meter
area of land;
b) the increase in value (plus value) which the said area of 520
square meters may have acquired by reason of the existence of
the portion of the building on the area;
c) the fair market value of the encroaching portion of the
building; and
d) whether the value of said area of land is considerably more
than the fair market value of the portion of the building thereon.
2. After said amounts shall have been determined by competent
evidence, the regional trial court shall render judgment as
follows:
a) The private respondent shall be granted a period of
fifteen (15) days within which to exercise his
option under the law (Article 448, Civil
Code), whether to appropriate the portion of the
building as his own by paying to petitioner its fair
market value, or to oblige petitioner to pay the
price of said area. The amounts to be respectively
paid by petitioner and private respondent, in
accordance with the option thus exercised by
written notice of the other party and to the court,
shall be paid by the obligor within fifteen (15) days
from such notice of the option by tendering the
amount to the trial court in favor of the party
entitled to receive it;

c) In any event, petitioner shall pay private respondent

an amount computed at two thousand pesos
(P2,000.00) per month as reasonable compensation
for the occupancy of private respondents land for
the period counted from October 4, 1979, up to the
date private respondent serves notice of its option
to appropriate the encroaching structures,
otherwise up to the actual transfer of ownership to
petitioner or, in case a forced lease has to be
imposed, up to the commencement date of the
forced lease referred to in the preceding paragraph;
d) The periods to be fixed by the trial court in its
decision shall be non-extendible, and upon failure
of the party obliged to tender to the trial court the
amount due to the obligee, the party entitled to
such payment shall be entitled to an order of
execution for the enforcement of payment of the
amount due and for compliance with such other
acts as may be required by the prestation due the
obligee.
No costs.
SO ORDERED.
TECHNOGAS PHIL. v. CA

FACTS
b) If private respondent exercises the option to oblige
petitioner to pay the price of the land but the latter
rejects such purchase because, as found by the trial
court, the value of the land is considerably more
than that of the portion of the building, petitioner
shall give written notice of such rejection to
private respondent and to the trial court within
fifteen (15) days from notice of private
respondents option to sell the land. In that event,
the parties shall be given a period of fifteen (15)
days from such notice of rejection within which to
agree upon the terms of the lease, and give the trial
court formal written notice of the agreement and
its provisos. If no agreement is reached by the
parties, the trial court, within fifteen (15) days
from and after the termination of the said period
fixed for negotiation, shall then fix the terms of the
lease provided that the monthly rental to be fixed
by the Court shall not be less than two thousand
pesos (P2,000.00) per month, payable within the
first five (5) days of each calendar month. The
period for the forced lease shall not be more than
two (2) years, counted from the finality of the
judgment, considering the long period of time
since 1970 that petitioner has occupied the subject
area. The rental thus fixed shall be increased by ten
percent (10%) for the second year of the forced
lease. Petitioner shall not make any further
constructions
or
improvements
on
the

Petitioner bought a lot together with the building and

improvements including the wall which encroached that of the
defendant. Upon learning of such encroachment, petitioner
offered to buy the land but defendant refused.
After 2 years, through an agreement, petitioner agreed to
demolish the wall (but the case did not state what happened to
this agreement, my assumption is that it did not happen due to
conflicts that arose after)
Defendant dug a canal along the wall which caused a portion of it
to collapse. Petitioner filed a supplemental complaint re the
action and a separate criminal action of malicious mischief
(which the wife was convicted of)
RTC decided for the petitioners and the CA reversed. Note that
respondent wants to have the wall demolished.
ISSUES:
A. Whether or not petitioner is a builder in bad faith because it is
'presumed to know the metes and bounds of his property.'
B. Whether or not amicable settlement was a proper remedy
C. Whether or not respondent can opt to demolish the structure
without exercising the option to sell the land to the petitioner and
the latter cannot do buy the same

RULING: Petition was granted.

Good faith or Bad Faith No such doctrinal statement that
supports that the knowledge of metes and bounds of a land due to
the Torrens system would amount to bad faith if there was
encroachment on the land of another.
A. When the petitioner purchased the lot, the wall was already
built. Even the respondent did not knew about the encroachment
until he has hired a surveyor.
B. Where one derives title to the property from another, the act,
declaration, or omission of the latter, while holding the title, in
relation to the property, is evidence against the former. And
possession in good faith does not lose this character except when
the possessor is aware of this impropriety.
C. The encroachment was very narrow which can be considered
as a mere error. Remedy the petitioner, despite being a
purchaser of the original builder, can compel the landowner to
either buy the property or sell the piece of land because:

1.He was really unaware of the encroachment basing on

the fact presented by both sides.
2.When the petitioner bought the land, he has stepped
into the rights of the original owner (hence, the right to
compel the LO to buy or sell is also transferred)
Estoppel Petitioner is not considered in estoppel only because it
has previously agreed to demolish a part of the wall. Rather, it
was to be negotiated by the parties concern. In the meantime,
petitioner has to pay the rent for the property occupied by its
building only up to the date when respondent serves notice of
their option. Case remanded back to the trial court for
determination of the value of the land and the number of days to
allot for the respondent to choose an option.

#9
G.R. No. L-57348 May 16, 1985
FRANCISCO DEPRA, plaintiff-appellee,
vs.
AGUSTIN DUMLAO, defendant-appellant.
Roberto D. Dineros for plaintiff-appellee.
Veil D. Hechanova for defendant-appellant.
MELENCIO-HERRERA, J.:
This is an appeal from the Order of the former Court of First
Instance of Iloilo to the then Court of Appeals, which the latter
certified to this instance as involving pure questions of law
Plaintiff-appellee, Francisco Depra, is the owner of a parcel of
land registered under Transfer Certificate of Title No. T3087,
known as Lot No. 685, situated in the municipality of Dumangas,
Iloilo, with an area of approximately 8,870 square meters.
Agustin Dumlao, defendant-appellant, owns an adjoining lot,
designated as Lot No. 683, with an approximate area of 231 sq.
ms.
Sometime in 1972, when DUMLAO constructed his house on his
lot, the kitchen thereof had encroached on an area of thirty four
(34) square meters of DEPRA's property, After the encroachment
was discovered in a relocation survey of DEPRA's lot made on
November 2,1972, his mother, Beatriz Depra after writing a

demand letter asking DUMLAO to move back from his

encroachment, filed an action for Unlawful Detainer on February
6,1973 against DUMLAO in the Municipal Court of of
Dumangas, docketed as Civil Case No 1, Said complaint was
later amended to include DEPRA as a party plain. plaintiff.
After trial, the Municipal Court found that DUMLAO was a
builder in good faith, and applying Article 448 of the Civil Code,
rendered judgment on September 29, 1973, the dispositive
portion of which reads:
Ordering that a forced lease is created between
the parties with the plaintiffs, as lessors, and the
defendants as lessees, over the disputed portion
with an area of thirty four (34) square meters,
the rent to be paid is five (P5.00) pesos a
month, payable by the lessee to the lessors
within the first five (5) days of the month the
rent is due; and the lease shall commence on
the day that this decision shall have become
final.
From the foregoing judgment, neither party appeal so that, ff it
were a valid judgment, it would have ordinarily lapsed into
finality, but even then, DEPRA did not accept payment of rentals
so that DUMLAO deposited such rentals with the Municipal
Court.
On July 15,1974, DEPRA filed a Complaint for Quieting of Title
against DUMLAO before the then Court of First Instance of
Iloilo, Branch IV (Trial Court), involving the very same 34
square meters, which was the bone of contention in the
Municipal Court. DUMLAO, in his Answer, admitted the
encroachment but alleged, in the main, that the present suit is
barred by res judicata by virtue of the Decision of the Municipal
Court, which had become final and executory.
After the case had been set for pre-trial, the parties submitted a
Joint Motion for Judgment based on the Stipulation of Facts
attached thereto. Premised thereon, the Trial Court on October
31, 1974, issued the assailed Order, decreeing:
WHEREFORE, the Court finds and so holds
that the thirty four (34) square meters subject of
this litigation is part and parcel of Lot 685 of
the Cadastral Survey of Dumangas of which the
plaintiff is owner as evidenced by Transfer
Certificate of Title No. 3087 and such plaintiff
is entitled to possess the same.
Without pronouncement as to costs.
SO ORDERED.
Rebutting the argument of res judicata relied upon by
DUMLAO, DEPRA claims that the Decision of the Municipal
Court was null and void ab initio because its jurisdiction is
limited to the sole issue of possession, whereas decisions
affecting lease, which is an encumbrance on real property, may
only be rendered by Courts of First Instance.
Addressing out selves to the issue of validity of the Decision of
the Municipal Court, we hold the same to be null and void. The
judgment in a detainer case is effective in respect of possession
only (Sec. 7, Rule 70, Rules of Court). 1 The Municipal Court
over-stepped its bounds when it imposed upon the parties a
situation of "forced lease", which like "forced co-ownership" is
not favored in law. Furthermore, a lease is an interest in real
property, jurisdiction over which belongs to Courts of First
Instance (now Regional Trial Courts) (Sec. 44(b), Judiciary Act
of 1948; 2 Sec. 19 (2) Batas Pambansa Blg. 129). 3 Since the
Municipal Court, acted without jurisdiction, its Decision was null
and void and cannot operate as res judicata to the subject
complaint for Queting of Title. Besides, even if the Decision
were valid, the rule on res judicata would not apply due to
difference in cause of action. In the Municipal Court, the cause of
action was the deprivation of possession, while in the action to
quiet title, the cause of action was based on ownership.
Furthermore, Sec. 7, Rule 70 of the Rules of Court explicitly

provides that judgment in a detainer case "shall not bar an action

between the same parties respecting title to the land. " 4
Conceded in the Stipulation of Facts between the parties is that
DUMLAO was a builder in good faith. Thus,
8. That the subject matter in the unlawful
detainer case, Civil Case No. 1, before the
Municipal Court of Dumangas, Iloilo involves
the same subject matter in the present case, the
Thirty-four (34) square meters portion of land
and built thereon in good faith is a portion of
defendant's kitchen and has been in the
possession of the defendant since 1952
continuously up to the present; ... (Emphasis
ours)
Consistent with the principle that our Court system, like any
other, must be a dispute resolving mechanism, we accord legal
effect to the agreement of the parties, within the context of their
mutual concession and stipulation. They have, thereby, chosen
a legal formula to resolve their dispute to appeal ply to
DUMLAO the rights of a "builder in good faith" and to DEPRA
those of a "landowner in good faith" as prescribed in Article 448.
Hence, we shall refrain from further examining whether the
factual situations of DUMLAO and DEPRA conform to the
juridical positions respectively defined by law, for a "builder in
good faith" under Article 448, a "possessor in good faith" under
Article 526 and a "landowner in good faith' under Article 448.
In regards to builders in good faith, Article 448 of the Civil Code
provides:
ART. 448. The owner of the land on which anything has been
built sown or planted in good faith,
shall have the right
to appropriate as his own the works, sowing or
planting, after payment of the indemnity
provided for in articles 546 and 548, or
to oblige the one who built or planted to pay the
price of the land, and the one who sowed, the
proper rent.
However, the builder or planter cannot be
obliged to buy the land if its value is
considerably more than that of the building or
trees. In such case, he shall pay reasonable rent,
if the owner of the land does not choose to
appropriate the building or trees after proper
indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement,
the court shall fix the terms thereof
(Paragraphing supplied)
Pursuant to the foregoing provision, DEPRA has the option either
to pay for the encroaching part of DUMLAO's kitchen, or to sell
the encroached 34 square meters of his lot to DUMLAO. He
cannot refuse to pay for the encroaching part of the building, and
to sell the encroached part of his land, 5 as he had manifested
before the Municipal Court. But that manifestation is not binding
because it was made in a void proceeding.
However, the good faith of DUMLAO is part of the Stipulation
of Facts in the Court of First Instance. It was thus error for the
Trial Court to have ruled that DEPRA is "entitled to possession,"
without more, of the disputed portion implying thereby that he is
entitled to have the kitchen removed. He is entitled to such
removal only when, after having chosen to sell his encroached
land, DUMLAO fails to pay for the same. 6 In this case,
DUMLAO had expressed his willingness to pay for the land, but
DEPRA refused to sell.
The owner of the building erected in good faith
on a land owned by another, is entitled to retain
the possession of the land until he is paid the
value of his building, under article 453 (now
Article 546). The owner of the land, upon the

other hand, has the option, under article 361

(now Article 448), either to pay for the building
or to sell his land to the owner of the
building. But he cannot as respondents here
did refuse both to pay for the building and to
sell the land and compel the owner of the
building to remove it from the land where it
erected. He is entitled to such remotion only
when, after having chosen to sell his land. the
other party fails to pay for the same (italics
ours).
We hold, therefore, that the order of Judge
Natividad compelling defendants-petitioners to
remove their buildings from the land belonging
to plaintiffs-respondents only because the latter
chose neither to pay for such buildings nor to
sell the land, is null and void, for it amends
substantially the judgment sought to be
executed and is. furthermore, offensive to
articles 361 (now Article 448) and 453 (now
Article 546) of the Civil Code. (Ignacio vs.
Hilario, 76 Phil. 605, 608[1946]).
A word anent the philosophy behind Article 448 of the Civil rode.
The original provision was found in Article 361 of the Spanish
Civil Code; which provided:
ART. 361. The owner of land on which
anything has been built, sown or planted in
good faith, shall have the right to appropriate as
his own the work, sowing or planting, after the
payment of the indemnity stated in Articles 453
and 454, or to oblige the one who built or
planted to pay the price of the land, and the one
who sowed, the proper rent.
As will be seen, the Article favors the owner of the land, by
giving him one of the two options mentioned in the Article. Some
commentators have questioned the preference in favor of the
owner of the land, but Manresa's opinion is that the Article is just
and fair.
. . . es justa la facultad que el codigo da al
dueno del suelo en el articulo 361, en el caso de
edificacion
o
plantacion?
Algunos
comentaristas la conceptuan injusta, y como un
extraordinario privilegio en favor de la
propiedad territorial. Entienden que impone el
Codigo una pena al poseedor de buena fe y
como advierte uno de los comentaristas
aludidos 'no se ve claro el por que de tal pena . .
. al obligar al que obro de buena fe a quedarse
con el edificio o plantacion, previo el pago del
terreno que ocupa, porque si bien es verdad que
cuando edifico o planto demostro con este
hecho, que queria para si el edificio o plantio
tambien lo es que el que edifico o planto de
buena fe lo hizo en la erronea inteligencia de
creerse dueno del terreno Posible es que, de
saber lo contrario, y de tener noticia de que
habia que comprar y pagar el terreno, no se
hubiera decidido a plantar ni a edificar. La ley
obligandole a hacerlo fuerza su voluntad, y la
fuerza por un hecho inocente de que no debe
ser responsable'. Asi podra suceder pero la
realidad es que con ese hecho voluntario,
aunque sea inocente, se ha enriquecido
torticeramente con perjuicio de otro a quien es
justo indemnizarle,
En nuestra opinion, el Codigo ha resuelto el
conflicto de la manera mas justa y equitativa y
respetando en lo possible el principio que para
la accesion se establece en el art. 358. 7
Our own Code Commission must have taken account of the

objections to Article 361 of the Spanish Civil Code. Hence, the

Commission provided a modification thereof, and Article 448 of
our Code has been made to provide:
ART. 448. The owner of the land on which
anything has been built, sown or planted in
good faith, shall have the right to appropriate as
his own the works, sowing or planting, after
payment of the indemnity provided for in
articles 546 and 548, or to oblige the one who
built or planted to pay the price of the land, and
the one who sowed, the proper rent. However,
the builder or planter cannot be obliged to buy
the land if its value is considerably more than
that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building
or trees after proper indemnity. The parties shall
agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms
thereof.
Additional benefits were extended to the builder but the
landowner retained his options.
The fairness of the rules in Article 448 has also been explained as
follows:
Where the builder, planter or sower has acted in
good faith, a conflict of rights arises between
the owners, and it becomes necessary to protect
the owner of the improvements without causing
injustice to the owner of the land. In view of the
impracticability of creating a state of forced coownership, the law has provided a just solution
by giving the owner of the land the option to
acquire the improvements after payment of the
proper indemnity, or to oblige the builder or
planter to pay for the land and the sower to pay
for the proper rent. It is the owner of the land
who is authorized to exercise the option,
because his right is older, and because, by the
principle of accession, he is entitled to the
ownership of the accessory thing. (3 Manresa
213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382;
Co Tao vs. Chan Chico, G.R. No. 49167, April
30, 1949; Article applied: see Cabral, et al vs.
Ibanez [S.C.] 52 Off. Gaz. 217; Marfori vs.
Velasco, [C.A.] 52 Off. Gaz. 2050). 8
WHEREFORE, the judgment of the trial Court is hereby set
aside, and this case is hereby ordered remanded to the Regional
Trial Court of Iloilo for further proceedings consistent with
Articles 448 and 546 of the Civil Code, as follows:
1. The trial Court shall determine
a) the present fair price of DEPRA's 34 square
meter area of land;
b) the amount of the expenses spent by
DUMLAO for the building of the kitchen;
c) the increase in value ("plus value") which the
said area of 34 square meters may have
acquired by reason thereof, and
d) whether the value of said area of land is
considerably more than that of the kitchen built
thereon.
2. After said amounts shall have been determined by competent
evidence, the Regional, Trial Court shall render judgment, as
follows:
a) The trial Court shall grant DEPRA a period
of fifteen (15) days within which to exercise his
option under the law (Article 448, Civil Code),
whether to appropriate the kitchen as his own
by paying to DUMLAO either the amount of

tile expenses spent by DUMLAO f or the

building of the kitchen, or the increase in value
("plus value") which the said area of 34 square
meters may have acquired by reason thereof, or
to oblige DUMLAO to pay the price of said
area. The amounts to be respectively paid by
DUMLAO and DEPRA, in accordance with the
option thus exercised by written notice of the
other party and to the Court, shall be paid by
the obligor within fifteen (15) days from such
notice of the option by tendering the amount to
the Court in favor of the party entitled to
receive it;
b) The trial Court shall further order that if
DEPRA exercises the option to oblige
DUMLAO to pay the price of the land but the
latter rejects such purchase because, as found
by the trial Court, the value of the land is
considerably more than that of the kitchen,
DUMLAO shall give written notice of such
rejection to DEPRA and to the Court within
fifteen (15) days from notice of DEPRA's
option to sell the land. In that event, the parties
shall be given a period of fifteen (15) days from
such notice of rejection within which to agree
upon the terms of the lease, and give the Court
formal written notice of such agreement and its
provisos. If no agreement is reached by the
parties, the trial Court, within fifteen (15) days
from and after the termination of the said period
fixed for negotiation, shall then fix the terms of
the lease, provided that the monthly rental to be
fixed by the Court shall not be less than Ten
Pesos (P10.00) per month, payable within the
first five (5) days of each calendar month. The
period for the forced lease shall not be more
than two (2) years, counted from the finality of
the judgment, considering the long period of
time since 1952 that DUMLAO has occupied
the subject area. The rental thus fixed shall be
increased by ten percent (10%) for the second
year of the forced lease. DUMLAO shall not
make
any
further
constructions
or
improvements on the kitchen. Upon expiration
of the two-year period, or upon default by
DUMLAO in the payment of rentals for two (2)
consecutive months, DEPRA shall be entitled to
terminate the forced lease, to recover his land,
and to have the kitchen removed by DUMLAO
or at the latter's expense. The rentals herein
provided shall be tendered by DUMLAO to the
Court for payment to DEPRA, and such tender
shall constitute evidence of whether or not
compliance was made within the period fixed
by the Court.
c) In any event, DUMLAO shall pay DEPRA
an amount computed at Ten Pesos (P10.00) per
month as reasonable compensation for the
occupancy of DEPRA's land for the period
counted from 1952, the year DUMLAO
occupied the subject area, up to the
commencement date of the forced lease referred
to in the preceding paragraph;
d) The periods to be fixed by the trial Court in
its Precision shall be inextendible, and upon
failure of the party obliged to tender to the trial
Court the amount due to the obligee, the party
entitled to such payment shall be entitled to an
order of execution for the enforcement of
payment of the amount due and for compliance
with such other acts as may be required by the
prestation due the obligee.

No costs,

money.[7]

SO ORDERED.

#10
THE HEIRS OF
G.R. No. 157537
PROTACIO GO, SR.
and MARTA BAROLA,
namely: LEONOR,
SIMPLICIO,
Present:
PROTACIO, JR.,
ANTONIO, BEVERLY
CORONA, C.J.,
ANN LORRAINNE,
Chairperson,
TITA, CONSOLACION, LEONARDO-DE
LEONORA and
CASTRO,
ASUNCION, all
BERSAMIN,
surnamed GO,
DEL CASTILLO,
represented by
and
LEONORA B. GO,
VILLARAMA,
Petitioners,
JR., JJ.
-versus Promulgated:
ESTER L. SERVACIO
and RITO B. GO,
September 7, 2011
Respondents.
x----------------------------------------------------------------------------------------x
DECISION
BERSAMIN, J.:
The disposition by sale of a portion of the conjugal property by
the surviving spouse without the prior liquidation mandated by
Article 130 of the Family Code is not necessarily void if said
portion has not yet been allocated by judicial or extrajudicial
partition to another heir of the deceased spouse. At any rate, the
requirement of prior liquidation does not prejudice vested rights.
Antecedents
On February 22, 1976, Jesus B. Gaviola sold two parcels of land
with a total area of 17,140 square meters situated in Southern
Leyte to Protacio B. Go, Jr. (Protacio, Jr.). Twenty three years
later, or on March 29, 1999, Protacio, Jr. executed an Affidavit of
Renunciation and Waiver,[1] whereby he affirmed under oath
that it was his father, Protacio Go, Sr. (Protacio, Sr.), not he, who
had purchased the two parcels of land (the property).
On November 25, 1987, Marta Barola Go died. She was the wife
of Protacio, Sr. and mother of the petitioners.[2] On December
28, 1999, Protacio, Sr. and his son Rito B. Go (joined by Ritos
wife Dina B. Go) sold a portion of the property with an area of
5,560 square meters to Ester L. Servacio (Servacio)
for 5,686,768.00.[3] On March 2, 2001, the petitioners
demanded the return of the property,[4] but Servacio refused to
heed their demand. After barangay proceedings failed to resolve
the dispute,[5] they sued Servacio and Rito in the Regional Trial
Court in Maasin City, Southern Leyte (RTC) for the annulment of
the sale of the property.
The petitioners averred that following Protacio, Jr.s renunciation,
the property became conjugal property; and that the sale of the
property to Servacio without the prior liquidation of the
community property between Protacio, Sr. and Marta was null
and void.[6]
Servacio and Rito countered that Protacio, Sr. had exclusively
owned the property because he had purchased it with his own

On October 3, 2002,[8] the RTC declared that the property was

the conjugal property of Protacio, Sr. and Marta, not the
exclusive property of Protacio, Sr., because there were three
vendors in the sale to Servacio (namely: Protacio, Sr., Rito, and
Dina); that the participation of Rito and Dina as vendors had
been by virtue of their being heirs of the late Marta; that under
Article 160 of the Civil Code, the law in effect when the property
was acquired, all property acquired by either spouse during the
marriage was conjugal unless there was proof that the property
thus acquired pertained exclusively to the husband or to the wife;
and that Protacio, Jr.s renunciation was grossly insufficient to
rebut the legal presumption.[9]
Nonetheless, the RTC affirmed the validity of the sale of the
property, holding that: xxx As long as the portion sold, alienated
or encumbered will not be allotted to the other heirs in the final
partition of the property, or to state it plainly, as long as the
portion sold does not encroach upon the legitimate (sic) of other
heirs, it is valid.[10] Quoting Tolentinos commentary on the
matter as authority,[11] the RTC opined:
In his comment on Article 175 of the New Civil
Code regarding the dissolution of the conjugal
partnership, Senator Arturo Tolentino, says
[sic]
Alienation by the survivor. After the
death of one of the spouses, in case
it is necessary to sell any portion of
the community property in order to
pay outstanding obligation of the
partnership, such sale must be made
in the manner and with the
formalities established by the Rules
of Court for the sale of the property
of the deceased persons. Any sale,
transfer, alienation or disposition of
said property affected without said
formalities shall be null and void,
except as regards the portion that
belongs to the vendor as determined
in the liquidation and partition.
Pending the liquidation, the
disposition must be considered as
limited only to the contingent share
or interest of the vendor in the
particular property involved, but not
to the corpus of the property.
This rule applies not only to sale but
also to mortgages. The alienation,
mortgage or disposal of the
conjugal property without the
required formality, is not however,
null ab initio, for the law recognizes
their validity so long as they do not
exceed the portion which, after
liquidation and partition, should
pertain to the surviving spouse who
made the contract. [underlining
supplied]
It seems clear from these comments of Senator
Arturo Tolentino on the provisions of the New
Civil Code and the Family Code on the
alienation by the surviving spouse of the
community property that jurisprudence remains
the same - that the alienation made by the
surviving spouse of a portion of the community
property is not wholly void ab initio despite
Article 103 of the Family Code, and shall be
valid to the extent of what will be allotted, in

the final partition, to the vendor. And rightly so,

because why invalidate the sale by the
surviving spouse of a portion of the community
property that will eventually be his/her share in
the final partition? Practically there is no
reason for that view and it would be absurd.

Article 105. In case the future spouses agree in

the marriage settlements that the regime of
conjugal partnership of gains shall govern their
property relations during marriage, the
provisions in this Chapter shall be of
supplementary application.

Now here, in the instant case, the 5,560 square

meter portion of the 17,140 square-meter
conjugal lot is certainly mush (sic) less than
what vendors Protacio Go and his son Rito B.
Go will eventually get as their share in the final
partition of the property. So the sale is still
valid.

The provisions of this Chapter shall also

apply to conjugal partnerships of gains
already established between spouses before
the effectivity of this Code, without
prejudice to vested rights already acquired
in accordance with the Civil Code or other
laws, as provided in Article 256. (n)
[emphasis supplied]

WHEREFORE, premises considered,

complaint is hereby DISMISSED without
pronouncement as to cost and damages.
SO ORDERED.[12]
The RTCs denial of their motion for
reconsideration[13] prompted the petitioners to appeal directly to
the Court on a pure question of law.
Issue
The petitioners claim that Article 130 of the Family Code is the
applicable law; and that the sale by Protacio, Sr., et al. to
Servacio was void for being made without prior liquidation.
In contrast, although they have filed separate comments, Servacio
and Rito both argue that Article 130 of the Family Code was
inapplicable; that the want of the liquidation prior to the sale did
not render the sale invalid, because the sale was valid to the
extent of the portion that was finally allotted to the vendors as his
share; and that the sale did not also prejudice any rights of the
petitioners as heirs, considering that what the sale disposed of
was within the aliquot portion of the property that the vendors
were entitled to as heirs.[14]

Ruling
The appeal lacks merit.
Article 130 of the Family Code reads:
Article 130. Upon the termination of the
marriage by death, the conjugal partnership
property shall be liquidated in the same
proceeding for the settlement of the estate of
the deceased.
If no judicial settlement proceeding is
instituted, the surviving spouse shall liquidate
the conjugal partnership property either
judicially or extra-judicially within one year
from the death of the deceased spouse. If upon
the lapse of the six month period no liquidation
is made, any disposition or encumbrance
involving the conjugal partnership property of
the terminated marriage shall be void.
Should the surviving spouse contract a
subsequent marriage without compliance with
the foregoing requirements, a mandatory
regime of complete separation of property shall
govern the property relations of the subsequent
marriage.
Article 130 is to be read in consonance with Article 105 of
the Family Code, viz:

It is clear that conjugal partnership of gains established before

and after the effectivity of the Family Code are governed by the
rules found in Chapter 4 (Conjugal Partnership of Gains) of Title
IV (Property Relations Between Husband And Wife) of
the Family Code. Hence, any disposition of the conjugal property
after the dissolution of the conjugal partnership must be made
only after the liquidation; otherwise, the disposition is void.
Before applying such rules, however, the conjugal partnership of
gains must be subsisting at the time of the effectivity of
the Family Code. There being no dispute that Protacio, Sr. and
Marta were married prior to the effectivity of the Family Code on
August 3, 1988, their property relation was properly
characterized as one of conjugal partnership governed by
the Civil Code. Upon Martas death in 1987, the conjugal
partnership was dissolved, pursuant to Article 175 (1) of the Civil
Code,[15] and an implied ordinary co-ownership ensued among
Protacio, Sr. and the other heirs of Marta with respect to her share
in the assets of the conjugal partnership pending a liquidation
following its liquidation.[16] The ensuing implied ordinary coownership was governed by Article 493 of the Civil Code,[17] to
wit:
Article 493. Each co-owner shall have the full
ownership of his part and of the fruits and
benefits pertaining thereto, and he may
therefore alienate, assign or mortgage it, and
even substitute another person in its enjoyment,
except when personal rights are involved. But
the effect of the alienation or the mortgage,
with respect to the co-owners, shall be limited
to the portion which may be allotted to him in
the division upon the termination of the coownership. (399)
Protacio, Sr., although becoming a co-owner with his children in
respect of Martas share in the conjugal partnership, could not yet
assert or claim title to any specific portion of Martas share
without an actual partition of the property being first done either
by agreement or by judicial decree. Until then, all that he had was
an ideal or abstract quota in Martas share.[18] Nonetheless, a coowner could sell his undivided share; hence, Protacio, Sr. had the
right to freely sell and dispose of his undivided interest, but not
the interest of his co-owners.[19] Consequently, the sale by
Protacio, Sr. and Rito as co-owners without the consent of the
other co-owners was not necessarily void, for the rights of the
selling co-owners were thereby effectively transferred, making
the buyer (Servacio) a co-owner of Martas share.[20] This result
conforms to the well-established principle that the binding force
of a contract must be recognized as far as it is legally possible to
do so (quando res non valet ut ago, valeat quantum valere
potest).[21]
Article 105 of the Family Code, supra, expressly provides that
the applicability of the rules on dissolution of the conjugal
partnership is without prejudice to vested rights already acquired
in accordance with the Civil Code or other laws. This provision

gives another reason not to declare the sale as entirely void.

Indeed, such a declaration prejudices the rights of Servacio who
had already acquired the shares of Protacio, Sr. and Rito in the
property subject of the sale.
In their separate comments,[22] the respondents aver that each of
the heirs had already received a certain allotted portion at the
time of the sale, and that Protacio, Sr. and Rito sold only the
portions adjudicated to and owned by them. However, they did
not present any public document on the allocation among her
heirs, including themselves, of specific shares in Martas estate.
Neither did they aver that the conjugal properties had already
been liquidated and partitioned. Accordingly, pending a partition
among the heirs of Marta, the efficacy of the sale, and whether
the extent of the property sold adversely affected the interests of
the petitioners might not yet be properly decided with finality.
The appropriate recourse to bring that about is to commence an
action for judicial partition, as instructed in Bailon-Casilao v.
Court of Appeals,[23] to wit:
From the foregoing, it may be deduced that since a co-owner is
entitled to sell his undivided share, a sale of the entire property
by one
co-owner without the consent of the other co-owners is not
null and void. However, only the rights of the co-owner-seller
are transferred, thereby making the buyer a co-owner of the
property.
The proper action in cases like this is not for the nullification of
the sale or for the recovery of possession of the thing owned in
common from the third person who substituted the co-owner or
co-owners who alienated their shares, but the DIVISION of the
common property as if it continued to remain in the possession of
the co-owners who possessed and administered it[Mainit v.
Bandoy, supra].
Thus, it is now settled that the appropriate recourse of coowners in cases where their consent were not secured in a sale
of the entire property as well as in a sale merely of the
undivided shares of some of the co-owners is an action for
PARTITION under Rule 69 of the Revised Rules of

Court. xxx[24]
In the meanwhile, Servacio would be a trustee for the benefit of
the co-heirs of her vendors in respect of any portion that might
not be validly sold to her. The following observations of Justice
Paras are explanatory of this result, viz:
xxx [I]f it turns out that the property alienated
or mortgaged really would pertain to the share
of the surviving spouse, then said transaction is
valid. If it turns out that there really would be,
after liquidation, no more conjugal assets then
the whole transaction is null and void. But if it
turns out that half of the property thus alienated
or mortgaged belongs to the husband as his
share in the conjugal partnership, and half
should go to the estate of the wife, then that
corresponding to the husband is valid, and that
corresponding to the other is not. Since all
these can be determined only at the time the
liquidation is over, it follows logically that a
disposal made by the surviving spouse is
not void ab initio. Thus, it has been held that
the sale of conjugal properties cannot be made
by the surviving spouse without the legal
requirements. The sale is void as to the share of
the deceased spouse (except of course as to that
portion of the husbands share inherited by her
as the surviving spouse). The buyers of the
property that could not be validly sold become
trustees of said portion for the benefit of the
husbands other heirs, the cestui que trust ent.
Said heirs shall not be barred by prescription or
by laches (See Cuison, et al. v. Fernandez, et
al.,L-11764, Jan.31, 1959.)[25]
WHEREFORE, we DENY the petition for review
on certiorari; and AFFIRM the decision of the
Regional Trial Court.
The petitioners shall pay the costs of suit.
SO ORDERED.