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G.R. No. 152809
Under consideration is this petition for review on certiorari under Rule
45 of the Rules of Court to nullify and set aside the following issuances of
the Court of Appeals (CA) in CA-G.R. SP No. 61610, to wit:
Decision dated September 27, 2001, affirming an earlier decision of the
Regional Trial Court (RTC) of Davao City which reversed that of the Municipal
Trial Court in Cities (MTCC), Davao City, Branch 1, in an action for unlawful
detainer thereat commenced by the petitioner against the herein
respondents; and
Resolution dated February 28, 2002, denying petitioner’s motion for
At the heart of this controversy is a parcel of land located in Davao
City and registered in the name of petitioner Mercedes Moralidad under
Transfer Certificate of Title (TCT) No. T-123125 of the Registry of Deeds of
Davao City.
In her younger days, petitioner taught in Davao City, Quezon City and
Manila. While teaching in Manila, she had the good fortune of furthering her
studies at the University of Pennsylvania, U.S.A. While schooling, she was
offered to teach at the Philadelphia Catholic Archdiocese, which she did for
seven (7) years. Thereafter, she worked at the Mental Health Department of
said University for the next seventeen (17) years.
During those years, she would come home to the Philippines to spend
her two-month summer vacation in her hometown in Davao City. Being
single, she would usually stay in Mandug, Davao City, in the house of her
niece, respondent Arlene Pernes, a daughter of her younger sister, Rosario.

Back in the U.S.A. sometime in 1986, she received news from Arlene
that Mandug at the outskirts of Davao City was infested by NPA rebels and
many women and children were victims of crossfire between government
troops and the insurgents. Shocked and saddened about this development,
she immediately sent money to Araceli, Arlene’s older sister, with
instructions to look for a lot in Davao City where Arlene and her family could
transfer and settle down. This was why she bought the parcel of land
covered by TCT No. T-123125.
Petitioner acquired the lot property initially for the purpose of letting Arlene
move from Mandug to Davao City proper but later she wanted the property
to be also available to any of her kins wishing to live and settle in Davao
City. Petitioner made known this intention in a document she executed on
July 21, 1986.[3] The document reads:
I, MERCEDES VIÑA MORALIDAD, of legal age, single, having been born
on the 29th day of January, 1923, now actually residing at 8021 Lindbergh
Boulevard, Philadelphia, Pennsylvania, U.S.A., wishes to convey my honest
intention regarding my properties situated at Palm Village Subdivision,
Bajada, Davao City, 9501, … and hereby declare:
That it is my desire that Mr. and Mrs. Diosdado M. Pernes may build their
house therein and stay as long as they like;
That anybody of my kins who wishes to stay on the aforementioned real
property should maintain an atmosphere of cooperation, live in harmony
and must avoid bickering with one another;
That anyone of my kins may enjoy the privilege to stay therein and may
avail the use thereof. Provided, however, that the same is not inimical to the
purpose thereof;
That anyone of my kins who cannot conform with the wishes of the
undersigned may exercise the freedom to look for his own;
That any proceeds or income derived from the aforementioned properties
shall be allotted to my nearest kins who have less in life in greater
percentage and lesser percentage to those who are better of in standing.

charging the respondent spouses. petitioner came back to the Philippines to stay with the respondents’ on the house they build on the subject property. with conduct unbecoming of public servants. on July 29. she sustained cuts and wounds when Arlene pulled her hair. supra. as plaintiff therein. . The MTCC. that through her counsel. did not prosper. Ordering defendants to pay P2. which the respondents refused to heed. Myco Pernes. respondents’ continued possession of the premises turned unlawful upon their receipt of the demand to vacate. on August 3. the respondent spouses appealed to the RTC of Davao City. with the petitioner narrating that. petitioner filed with the MTCC of Davao City an unlawful detainer suit against the respondent spouses. 1999. in its decision dated November 17. the respondents alleged having entered the property in question.[4] the MTCC rendered judgment for the petitioner. the lupon apparently ordered the Pernes family to vacate petitioner’s property but not after they are reimbursed for the value of the house they built thereon. For instance. Petitioner alleged that she is the registered owner of the land on which the respondents built their house. although builders in good faith vis-à-vis the house they built on her property. such possession being merely at petitioner’s tolerance. Petitioner brought the matter to the local barangay lupon where she lodged a complaint for slander. 1998. declared that the respondent spouses. hit her on the face. This administrative case.00 a month from the filing of this complaint until they vacate premises. while her husband Diosdado held her. judgment is hereby rendered in favor of herein plaintiff and against the defendants. she sent the respondent spouses a letter demanding them to vacate the premises and to pay rentals therefor. petitioner. To the MTCC. In the course of time. Unfortunately.000. Other ugly incidents interspersed with violent confrontations meanwhile transpired. thus prolonging the impasse between them. Sentencing defendants to pay the sum of P120. the parties could not agree on the amount. harassment. Accordingly. neck and back. To prove their point. 1998. twisting her arms in the process. 1986. then a fourth year veterinary medicine student. to wit: Directing the defendants. wherein she expressly signified her desire for the spouses to build their house on her property and stay thereat for as long as they like. Deciding for petitioner. at one occasion in July 1998. would answer petitioner back with clenched fist and at one time hurled profanities when she corrected him. threat and defamation against the Pernes Family. (sic) Dissatisfied. they invited attention to her written declaration of July 21. however. lodged a formal complaint before the Regional Office of the Ombudsman for Mindanao. Arlene herself followed suit. their agents and other persons acting on their behalf to vacate the premises and to yield peaceful possession thereof to plaintiff. WHEREFORE. Arlene’s eldest son. In their defense. Defendants counterclaim are hereby dismissed except with respect to the claim for reimbursement of necessary and useful expenses which should be litigated in an ordinary civil actions. building their house thereon and maintaining the same as their residence with petitioner’s full knowledge and express consent. their relations turned sour because members of the Pernes family were impervious to her suggestions and attempts to change certain practices concerning matters of health and sanitation within their compound.00[5] as attorney’s fees and to pay the cost of suit. resolving the ejectment suit in petitioner’s xxx xxx Following her retirement in 1993. and sans any rental. Then. as follows: Relations having deteriorated from worse to worst.000. Later. who were both government employees. cannot invoke their bona fides as a valid excuse for not complying with the demand to vacate.

the CA. SO ORDERED. SP No. and therefore invalid. considering that the house the respondents constructed on the subject property might even be more valuable than the land site. the Decision appealed from is REVERSED and declared invalid. Counter-claims of moral and exemplary damages claimed by defendants are likewise dismissed. and against plaintiffs. the unlawful detainer suit presupposes the cessation of respondents’ right to possess. 2000[6] on the ground that immediate execution of the appealed decision was not the prudent course of action to take. The CA further ruled that what governs the rights of the parties is the law on usufruct but petitioner failed to establish that respondents’ right to possess had already ceased. 2000. It further ruled that Article 1678 of the Civil Code on reimbursement of improvements introduced is inapplicable since said provision contemplates of a lessorlessee arrangement. explaining thus: Since the defendants-appellees [respondents] are admittedly possessors of the property by permission from plaintiff [petitioner]. Accordingly. they have the right to retain possession of the property subject of this case until they have been reimbursed the cost of the improvements they have introduced on the property. but the Order was later withdrawn and vacated by its subsequent Order dated May 9. the CA concluded that the ejectment suit instituted by the petitioner was premature. this is a substantive right given to the defendants by law. petitioner went to the CA in CA-G. as ruled by the latter court. in view of the foregoing. as follows: WHEREFORE. 2002. On this premise.In the meantime. premises considered. (Words in brackets supplied). holding that respondents’ possession of the property in question was not. The motion was initially granted by the RTC in its Order of February 29. SO ORDERED. Eventually. petitioner is now before this Court raising the following issues: . However. the petitioner’s complaint for Unlawful Detainer is DISMISSED. by mere tolerance of the petitioner but rather by her express consent. 2001. ruled that it is still premature to apply the same considering that the issue of whether respondents’ right to possess a portion of petitioner’s land had already expired or was already terminated was not yet resolved.R. the motion for execution pending appeal is likewise denied.[8] Therefrom. 2000. the RTC reversed that of the MTCC. With the CA’s denial of her motion for reconsideration in its Resolution of February 28. and this right is superior to the procedural right to [sic] plaintiff to immediately ask for their removal by a writ of execution by virtue of a decision which as we have shown is erroneous. the RTC ruled that what governed the parties’ relationship are Articles 448 and 546 of the Civil Code. The appellate court thus affirmed the appealed RTC decision. and accordingly dismissed petitioner’s appeal. Consequently. attorney’s fees in the amount of fifteen thousand pesos is hereby awarded in favor of defendantsappellants. in a decision[7] dated September 30. On September 27. petitioner filed a Motion for Execution Pending Appeal. the instant petition for review is hereby denied for lack of merit. To the CA. while conceding the applicability of Articles 448 and 546 of the Civil Code to the case. 61610. Instead. which was not the factual milieu obtaining in the case. disposing: WHEREFORE. and builders in good faith. Indeed.

with the CA’s ruling that usufruct was constituted between petitioner and respondents.” The established facts undoubtedly gave respondents not only the right to use the property but also granted them. Pernes may build their house therein and stay as long as they like. Diosdado M. Thus – “it is my desire that Mr. unless the title constituting it or the law otherwise provides. Usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance. as amended. Usufruct. If the question is resolved in the affirmative. whether the existing usufruct may be deemed to have been extinguished or terminated.” From this statement.[9] It is also defined as the right to enjoy the property of another temporarily. the right to enjoy the fruits thereof.WHETHER OR NOT THE COURT OF APPEALS ERRED IN DISMISSING THE UNLAWFUL DETAINER CASE FOR BEING PREMATURE WHICH DECISION IS NOT IN ACCORDANCE WITH LAW AND JURISPRUDENCE. among the petitioner’s other kins. has respondents’ right to possess the subject portion of petitioner’s property expired or terminated? Let us therefore examine respondents’ basis for occupying the same.[10] with the owner retaining the jus disponendi or the power to alienate the same. It is thus pointless to discuss why there was no lease contract between the parties. provides xxx From the foregoing provision. However. is nothing else but simply allowing one to enjoy another’s property. We have no quarrel. with the petitioner being the owner of the property upon whom the naked title thereto remained and the respondents being two (2) among other unnamed usufructuaries who were simply referred to as petitioner’s kin. In that case. the duration of which being dependent on how long respondents would like to occupy the property. proceeding as it did from their right of usufruct. in a document dated July 21. made known her intention to give respondents and her other kins the right to use and to enjoy the fruits of her property. however. The Court rules for the petitioner.” Paragraph #5 of the same document earmarks “proceeds or income derived from the It is undisputed that petitioner expressly authorized respondents o occupy portion of her property on which their house may be built. and Mrs. then the respondents’ right to possession. it becomes apparent that for an action for unlawful detainer to prosper. WHETHER OR NOT THE COURT OF APPEALS ERRED IN APPLYING ARTICLES 448 AND 546 AND THE PROVISIONS OF THE CODE ON USUFRUCT INSTEAD OF ARTICLE 1678 OF THE CIVIL CODE.. cannot go along with the CA’s holding that the action for unlawful detainer must be dismissed on ground of prematurity. Now. There can also be no quibbling about the respondents being given the right “to build their own house” on the property and to stay thereat “as long as they like. the plaintiff [petitioner] needs to prove that defendants’ [respondents’] right to possess already expired and terminated. aforementioned properties” for the petitioner’s “nearest kins who have less in life in greater percentage and lesser percentage to those who are better of (sic) in standing. i. 562. 1986. determinative of the outcome of the ejectment case is the resolution of the next issue. While petitioner had already demanded from the respondents the . Rule 70 of the 1997 Rules of Civil Procedure. xxx Section 1. in essence. The Court is inclined to agree with the CA that what was constituted between the parties herein is one of usufruct over a piece of land.[11] It is undisputed that petitioner. therefore. Usufruct is defined under Article 562 of the Civil Code in the following wise: The CA disposed of this issue in this wise: ART. including both the jus utendi and the jus fruendi. The Court. it seems that petitioner had given the respondents the usufructuary rights over the portion that may be occupied by the house that the latter would build. supra. petitioner’s action for ejectment in the unlawful detainer case could proceed and should prosper.e. likewise ceased.

Provided. By prescription. 1986 constitutes the title creating. There are other modes or instances whereby the usufruct shall be considered terminated or extinguished. (Emphasis supplied. or by the fulfillment of any resolutory condition provided in the title creating the usufruct. extinguishes the usufruct. By renunciation of the usufructuary. are enough factual bases to consider the usufruct as having been terminated.) The document executed by the petitioner dated July 21. 1986. Usufruct is extinguished: By the death of the usufructuary. the usufruct. by express wish of the petitioner. What may be inimical to the purpose constituting the usufruct may be gleaned from the preceding paragraph wherein petitioner made it abundantly clear “that anybody of my kins who wishes to stay on the aforementioned property should maintain an atmosphere of cooperation. despite her advanced age and frail condition. and sets forth the conditions of. For sure.” In fine. that the same is not inimical to the purpose thereof” (Emphasis supplied). Considering that respondents still want to occupy the premises. the Civil Code enumerates such other modes of extinguishment: ART. . We disagree with the CA’s conclusion of law on the matter. unless a contrary intention clearly appears. it is indubitable that there were indeed facts and circumstances whereby the subject usufruct may be deemed terminated or extinguished by the occurrence of the resolutory conditions provided for in the title creating the usufruct. the Office of the Ombudsman for Mindanao. the bickering or the cessation of harmonious relationship between/among kin constitutes a resolutory condition which. By the termination of the right of the person constituting the usufruct.” That the maintenance of a peaceful and harmonious relations between and among kin constitutes an indispensable condition for the continuance of the usufruct is clearly deduced from the succeeding Paragraph #4 where petitioner stated “[T]hat anyone of my kins who cannot conform with the wishes of the undersigned may exercise the freedom to look for his own. live in harmony and must avoid bickering with one another. this Court is of the opinion that the usufructuary rights of respondents had not been terminated by the said demand considering the clear statement of petitioner that she is allowing respondents to occupy portion of her land as long as the latter want to. the document adverted to which the petitioner executed on July 21. By the total loss of the thing in usufruct. Thus. the occurrence of any of the following: the loss of the atmosphere of cooperation. By merger of the usufruct and ownership in the same person. By expiration of the period for which it was constituted. respondents’ own evidence before the MTCC indicated that the relations between the parties “have deteriorated to almost an irretrievable level. the Court rules that the continuing animosity between the petitioner and the Pernes family and the violence and humiliation she was made to endure. and this instant complaint for unlawful detainer before the MTCC is that she could not live peacefully and harmoniously with the Pernes family and vice versa. Paragraph #3 thereof states “[T]hat anyone of my kins may enjoy the privilege to stay therein and may avail the use thereof. namely. however. The term or period of the usufruct originally specified provides only one of the bases for the right of a usufructuary to hold and retain possession of the thing given in usufruct. 603.”[13] There is no doubt then that what impelled petitioner to file complaints before the local barangay lupon. petitioner clearly cannot eject respondents.surrender of the premises. From the pleadings submitted by the parties. As aptly pointed out by the petitioner in her Memorandum.

No. DOMINIUM REALTY AND CONSTRUCTION CORPORATION.) [G. as usufructuary. then the usufructuary might. 579. therefore. Accordingly. Out of the generosity of her heart. No. the terms of the contract and the pertinent provisions of law should govern (3 Manresa 215-216. It is also right. B-1766 dated February 22.[2] and the resolution dated December 29. 1992 affirming in toto the decision of Branch 24 of the Regional Trial Court of Laguna in Civil Case No. respondents. 1999] Art. improve the owner out of his property. the petitioner has allowed the respondent spouses to use and enjoy the fruits of her property for quite a R & B INSURANCE CORPORATION. respondents will have to be ordered to vacate the premises without any right of reimbursement. If the rule on reimbursement or indemnity were otherwise. 71 Phil. By express provision of law. 107132. HEMEDES. provided he does not alter its form or substance. HEMEDES and MAXIMA HEMEDES. The usufructuary may set off the improvements he may have made on the property against any damage to the same. 1999] MAXIMA HEMEDES. vs. respondents.To reiterate. They opted. the petition is GRANTED. Bantug. CV No. they really cannot begrudge their aunt for putting an end to their right of usufruct. the relationship between the petitioner and respondents respecting the property in question is one of owner and usufructuary. 22010 promulgated on September 11. the decision of the MTCC is REINSTATED with MODIFICATION that all of respondents’ counterclaims are dismissed. but he shall have no right to be indemnified therefor.[15] The respondents may. The disposition herein arrived is not only legal and called for by the law and facts of the case. Given the foregoing perspective.R. should it be possible to do so without damage to the property.: Assailed in these petitions for review on certiorari is the decision of the eleventh division of the Court of Appeals in CA-G. however.R. respondents. do not have the right to reimbursement for the improvements they may have introduced on the property. The usufructuary may make on the property held in usufruct such useful improvements or expenses for mere pleasure as he may deem proper. (Emphasis supplied. 579 and 580. and R & B INSURANCE CORPORATION. We quote Articles 579 and 580 of the Civil Code: SO ORDERED. In this regard. THE HONORABLE COURT OF APPEALS. [G. WHEREFORE. vs.R. October 8. ENRIQUE D. 1992 . however. THE HONORABLE COURT OF APPEALS DOMINIUM REALTY AND CONSTRUCTION CORPORATION. J. ENRIQUE D. we cite with approval what Justice Edgardo Paras wrote on the matter: If the builder is a usufructuary. petitioner. The assailed Decision and Resolution of the CA are REVERSED and SET ASIDE. No pronouncement as to costs. remove or destroy the improvements they may have introduced thereon without damaging the petitioner’s property. THIRD DIVISION Art. October 8. At the end of the day. DECISION GONZAGA_REYES. his rights will be governed by Arts. Accordingly. however. including their claims for reimbursement of useful and necessary expenses. 108472. 1989. In case like this. to repay a noble gesture with unkindness. He may. remove such improvements.) long period of time. petitioner. se also Montinola vs. 580. respondents’ claim for reimbursement of the improvements they introduced on the property during the effectivity of the usufruct should be governed by applicable statutory provisions and principles on usufruct.[14] (Emphasis ours. as an author pointed out. 449).

1964. 6.denying petitioner R & B Insurance Corporation’s (R & B Insurance) motion for reconsideration. (0-941) 0-198[5] was issued in the name of Maxima Hemedes married to Raul Rodriguez by the Registry of Deeds of Laguna on June 8. in a deed of “DONATION INTER VIVOS WITH RESOLUTORY CONDITIONS” executed by the donor in my favor. Maxima Hemedes and her husband Raul Rodriguez constituted a real estate mortgage over the subject property in its favor to serve as security for a loan which they obtained in the amount of P6. of the DONOR expressly designated by the DONEE in a public document conveying the property to the latter. and duly accepted by me on March 22. and all rights and interests therein by reversion under the first resolutory condition in the above deed of donation. or their heirs. 15 Acacia Road. we shall decide the petitions jointly. of the DONOR expressly designated by the DONEE in a public document conveying the property to the latter. Except the possession and enjoyment of the said property which shall remain vested in me during my lifetime. Justa Kausapin executed on September 27. of legal age. or their heirs. who is one of the children and heirs of my donor. or widowhood and which upon my death or remarriage shall also automatically revert to. On February 22. 1962. or (b) In absence of such an express designation made by the DONEE before her death or remarriage contained in a public instrument as above provided. Pursuant to the first condition abovementioned. 1947 Jose Hemedes executed a document entitled “Donation Inter Vivos With Resolutory Conditions” whereby he conveyed ownership over the subject land. MAXIMA HEMEDES. filed an application for registration and confirmation of title over the subject unregistered land. Laguna.773 square meters. 1960 a “Deed of Conveyance of Unregistered Real Property by Reversion” conveying to Maxima Hemedes the subject property under the following terms That the said parcel of land was donated unto me by the said Jose Hemedes. my deceased husband. transfer. and for and in consideration of my love and affection. Cabuyao.” It is claimed by R & B Insurance that on June 2. wherefore. in favor of his third wife. R & B Insurance extrajudicially foreclosed the mortgage since Maxima Hemedes . and title to the property hereinabove described. before Notary Public Luis Bella in Cabuyao. On March 22. That the donation is subject to the resolutory conditions appearing in the said deed of “DONATION INTER VIVOS WITH RESOLUTORY CONDITIONS. As the factual antecedents and issues are the same. married to RAUL RODRIGUEZ. through her counsel. and be transferred to my designee. Filipino and resident of No.” as follows: “(a) Upon the death or remarriage of the DONEE. the ownership of. in virtue of the deed of donation above mentioned and in the exercise of my right and privilege under the terms of the first resolutory condition therein contained and hereinabove reproduced. subject to the following resolutory conditions: (a) Upon the death or remarriage of the DONEE. and deed unto my designee. Original Certificate of Title (OCT) No. I do hereby by these presents convey. the title to the property shall automatically revert to the legal heirs of the DONOR in common. JOSE HEMEDES. situated in Sala.000. Quezon City. the title to the property shall automatically revert to the legal heirs of the DONOR in common.00. together with all its improvements. Maxima Hemedes. It was originally owned by the late Jose Hemedes. Hemedes. The instant controversy involves a question of ownership over an unregistered parcel of land.” That. or (b) In absence of such an express designation made by the DONEE before her death or remarriage contained in a public instrument as above provided. with an area of 21. 1968. Justa Kauapin. the title to the property donated shall revert to any of the children. 1947. identified as Lot No. the title to the property donated shall revert to any of the children. with the annotation that “Justa Kausapin shall have the usufructuary rights over the parcel of land herein described during her lifetime or widowhood. father of Maxima Hemedes and Enrique D. Maxima Hemedes. Subsequently. Laguna. plan Psu-111331.

In the cadastral survey of Cabuyao. Justa Kausapin executed an affidavit affirming the conveyance of the subject property in favor of Enrique D. (b) Declaring Dominium Realty and Construction Corporation the absolute owner and possessor of the parcel of land described in paragraph 3 of the complaint. Justa Kausapin executed a “Kasunduan” on May 27. 1981 informing the former of its ownership of the property as evidenced by TCT No. Dominium and Enrique D. Since Maxima Hemedes failed to redeem the property within the redemption period. Laguna for the annulment of TCT No. or to compel Asia Brewery to purchase the land. 1989 in favor of plaintiffs Dominium and Enrique D. On March 27. Cad.failed to pay the loan even after it became due on August 2. 1979. . Enriques D. 455-D. the complaint alleged that Dominium was the absolute owner of the subject property by virtue of the February 28. who in turn obtained ownership of the land from Justa Kausapin. 1979 deed of sale executed by Enrique D. the trial court rendered judgment on February 22.000. Also. and at the same time denying the conveyance made to Maxima 1972. Maxima Hemedes denied the execution of any real estate mortgage in favor of the latter. Hemedes sold the property to Dominium Realty and Construction Corporation (Dominium). in 1974. Maxima Hemedes also wrote a letter addressed to Asia Brewery wherein she asserted that she is the rightful owner of the subject property by virtue of OCT No. constructed two warehouses made of steel and asbestos costing about P10. Hemedes as embodied in the “Kasunduan” dated May 27. R & B Insurance executed an Affidavit of Consolidation dated March 29. 1981. Hemedes filed a complaint[7] with the Court of First Instance of Binan. 41985 in the name of R & B Insurance. as evidenced by the “Kasunduan” dated May 27. Hemedes. pursuant to the resolutory condition in the deed of donation executed in her favor by her late husband Jose Hemedes. Dominium leased the property to its sister corporation Asia Brewery. 41985 issued in its favor and of its right to appropriate the constructions since Asia Brewery is a builder in bad faith. (0-941) 0-198 and issued Transfer Certificate of Title (TCT) No. Hemedes. After considering the merits of the case.000. 1971 whereby she transferred the same land to her stepson Enrique D. Inc. 1981. The land was sold at a public auction on May 3. Hemedes had no knowledge of the registration proceedings initiated by Maxima Hemedes. 1968 with R & B Insurance as the highest bidder and a certificate of sale was issued by the sheriff in its favor. (Asia Brewery) who. 1974 to October 10. she has the right to appropriate Asia Brewery’s constructions. Cabuyao Cadastre. the dispositive portion of which states – WHEREFORE. 2990. 1971.[6] Despite the earlier conveyance of the subject land in favor of Maxima Hemedes. 41985 issued in favor of R & B Insurance and/or the reconveyance to Dominium of the subject property. and again. Hemedes obtained two declarations of real property .00 each. 1971. he has been paying the realty taxes on the property from the time Justa Kausapin conveyed the property to him in 1971 until 1979. In another letter of the same date addressed to R & B Insurance. Upon learning of Asia Brewery’s constructions upon the subject property. Enrique Hemedes is also the named owner of the property in the records of the Ministry of Agrarian Reform office at Calamba. 1981. Laguna. R & B Insurance sent it a letter on March 16. On May 8. Enrique D. 1981. The plaintiffs asserted that Justa Kausapin never transferred the land to Maxima Hemedes and that Enrique D. On February 28. The annotation of usufruct in favor of Justa Kausapin was maintained in the new title. even before the signing of the contract of lease. Hemedes. when the assessed value of the property was raised. 1964. On August 27. On April 10. 41985 of the Register of Deeds of Laguna null and void and ineffective. 1975 the Register of Deeds of Laguna cancelled OCT No. as such. in the name of Enrique Hemedes. 1974. Laguna conducted from September 8. the property was assigned Cadastral No. to demand its demolition. On May 14. (0-941) 0-198 and that. judgment is hereby rendered: (a) Declaring Transfer Certificate of Title No. Specifically. 1974 and on May 21. 1981. a conference was held between R & B Insurance and Asia Brewery but they failed to arrive at an amicable settlement.

except with regards to the real estate mortgage allegedly executed by Maxima Hemedes in its favor. 1992 and February 22. . R & B Insurance alleges that: I RESPONDENT COURT ERRONEOUSLY ERRED IN APPLYING ARTICLE 1332 OF THE CIVIL CODE. No. No pronouncement as to costs and attorney’s fees. 41985 IN THE NAME OF R & B INSURANCE CORPORATION. petitioner R & B Insurance assigns almost the same errors. No. 41985 in the name of R & B Insurance Corporation. respectively. (0-941) 0-198 IN THE NAME OF PETITIONER MAXIMA HEMEDES AND NOT THE TRANSFER CERTIFICATE OF TITLE (TCT) NO. (0-941) 0-198 ISSUED IN THE NAME OF PETITIONER MAXIMA HEMEDES NULL AND VOID. (d) Directing the Register of Deeds of Laguna to cancel said Transfer Certificate of Title No. in G. On September 11.[8] RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT ORIGINAL CERTIFICATE OF TITLE NO. RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT THE VALID TITLE COVERING THE SUBJECT PROPERTY IS THE ORIGINAL CERTIFICATE OF TITLE NO. 1992 the Court of Appeals affirmed the assailed decision in toto and on December 29. III Meanwhile. Specifically.R. Both R & B Insurance and Maxima Hemedes appealed from the trial court’s decision. VI In G. 108472[11]. 1993. issue a new transfer certificate of title in the name of Dominium Realty and Construction Corporation. and RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING RESPONDENTS ENRIQUE AND DOMINIUM IN BAD FAITH. 107132[9]. Thus. IV V RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT NO LOAN WAS OBTAINED BY PETITIONER MAXIMA HEMEDES FROM RESPONDENT R & B INSURANCE CORPORATION. and in lieu thereof. it denied R & B Insurance’s motion for reconsideration.(c) Ordering the defendants and all persons acting for and/or under them to respect such ownership and possession of Dominium Realty and Construction Corporation and to forever desist from asserting adverse claims thereon nor disturbing such ownership and possession. I VII RESPONDENT COURT OF APPEALS GRAVELY ERRED IN APPLYING ARTICLE 1332 OF THE NEW CIVIL CODE IN DECLARING AS SPURIOUS THE DEED OF CONVEYANCE OF UNREGISTERED REAL PROPERTY BY REVERSION EXECUTED BY JUSTA KAUSAPIN IN FAVOR OF PETITIONER MAXIMA HEMEDES. petitioner Maxima Hemedes makes the following assignment of errors as regards public respondent’s ruling – RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT NO REAL ESTATE MORTGAGE OVER THE SUBJECT PROPERTY WAS EXECUTED BY PETITIONER MAXIMA HEMEDES IN FAVOR OF RESPONDENT R & B INSURANCE CORPORATION.[10] II RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AS VOID AND OF NO LEGAL EFFECT THE “KASUNDUAN” DATED 27 MAY 1971 EXECUTED BY JUSTA KAUSAPIN IN FAVOR OF RESPONDENT ENRIQUE HEMEDES AND THE SALE OF THE SUBJECT PROPERTY BY RESPONDENT ENRIQUE HEMEDES IN FAVOR OF RESPONDENT DOMINIUM REALTY AND CONSTRUCTION CORPORATION. 1992. Maxima Hemedes and R & B Insurance filed their respective petitions for review with this Court on November 3.R.

III RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON (sic) THE AFFIDAVIT OF REPUDIATION OF JUSTA KAUSAPIN NOTWITHSTANDING THE FACT THAT SHE IS A BIAS (sic) WITNESS AND EXECUTED THE SAME SOME TWENTY-ONE (21) YEARS AFTER THE EXECUTION OF THE DEED OF CONVEYANCE IN FAVOR OF MAXIMA. both Enrique D. (0-941) 0-198 in favor of Maxima Hemedes on the strength of the “Deed of Conveyance of Unregistered Real Property by Reversion” executed by Justa Kausapin. there exist various circumstances which show that Justa Kausapin did in fact execute and understand the deed of conveyance in favor of Maxima Hemedes. [13] Maxima Hemedes argues that Justa Kausapin’s affidavit should not be given any credence since she is obviously a biased witness as it has been shown that she is dependent upon Enrique D. It is her contention that for such a provision to be applicable. effectively transferred ownership over the subject land. Public respondent upheld the trial court’s finding that such deed is sham and spurious and has “no evidentiary value under the law upon which claimant Maxima Hemedes may anchor a valid claim of ownership over the property. IV RESPONDENT COURT SERIOUSLY ERRED IN NOT FINDING THAT THE COMPLAINT OF ENRIQUE AND DOMINIUM HAS PRESCRIBED AND/OR THAT ENRIQUE AND DOMINIUM WERE GUILTY OF LACHES. there must be a party seeking to enforce a contract.” In ruling thus. she is not enforcing the “Deed of Conveyance of Unregistered Real Property by Reversion” as her basis in claiming ownership. although she could not read nor understand English. and she was most probably influenced by Enrique D. VI RESPONDENT COURT SERIOUSLY ERRED IN NOT GRANTING THE DAMAGES PRAYED FOR BY R & B IN ITS COUNTERCLAIM AND CROSSCLAIM. Public respondent concluded by holding that the registration of the property on the strength of the spurious deed of conveyance is null and void and does not confer any right of ownership upon Maxima Hemedes. the first in favor of Maxima Hemedes and the second in favor of Enrique D. to show that the terms thereof were fully explained to Justa Kausapin. First. thus. Hemedes for her daily subsistence. Hemedes to execute the “Kasunduan” in his favor. Hemedes. She also refutes the applicability of article 1332. it gave credence to the April 10. 1981 affidavit executed by Justa Kausapin repudiating such deed of conveyance in favor of Maxima Hemedes and affirming the authenticity of the “Kasunduan” in favor of Enrique D. (0-941) 0-198 issued in her name. The Register of Deeds of Laguna issued OCT No. Hemedes and Dominium objected to the request of Maxima Hemedes’ counsel to obtain a specimen thumbmark of Justa Kausapin.[14] . Hemedes. V RESPONDENT COURT SERIOUSLY ERRED IN FINDING R & B AS A MORTGAGEE NOT IN GOOD FAITH. the “Donation Intervivos With Resolutory Conditions” executed by Jose Hemedes in favor of Justa Kausapin was also in English. but rather her claim is anchored upon OCT No. however. pursuant to Article 1332 of the Civil Code. it considered as pivotal the fact that the deed of conveyance in favor of Maxima Hemedes was in English and that it was not explained to Justa Kausapin. Maxima Hemedes failed to discharge her burden. Also. Also. but she never alleged that she did not understand such document. Secondly.[12] The primary issue to be resolved in these consolidated petitions is which of the two conveyances by Justa Kausapin. which document can stand independently from the deed of conveyance. Justa Kausapin failed to prove that it was not her thumbmark on the deed of conveyance in favor of Maxima Hemedes and in fact.II RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON (sic) THE KASUNDUAN BY AND BETWEEN JUSTA KAUSAPIN AND ENRIQUE NOTWITHSTANDING THE FACT THAT JUSTA KAUSAPIN BY WAY OF A DEED OF CONVEYANCE OF UNREGISTERED REAL PROPERTY BY REVERSION CEDED THE SUBJECT PROPERTY TO MAXIMA SOME ELEVEN (11) YEARS EARLIER.

public respondent’s reliance upon Justa Kausapin’s repudiation of the deed of conveyance is misplaced for there are strong indications that she is a biased witness. can you tell the Honorable Court why you donated this particular property to Enrique Hemedes? (TSN. or to suppress or to pervert the truth. Hemedes: A: Yes. xxx xx xxx Q: And because of these accommodations that you have given to Justa Kausapin. Justa Kausapin has in turn treated you very well because she’s very grateful for that. Moreover.. Q: Aling Justa. 19 and 23. it occurs to one of them to allege some defect therein as a reason for annulling it. A witness is said to be biased when his relation to the cause or to the parties is such that he has an incentive to exaggerate or give false color to his statements. 1984)[20] A: Because I was in serious condition and he was the one supporting me financially.Public respondent’s finding that the “Deed of Conveyance of Unregistered Real Property By Reversion” executed by Justa Kausapin in favor of Maxima Hemedes is spurious is not supported by the factual findings in this case. The trial court found that Justa Kausapin was dependent upon Enrique D. Aling Justa are you continuing to receive any assistance from Enrique Hemedes? A: Yes Sir. or to state what is . Conchu: Q: As of today.[17] The failure of private respondents to refute the due execution of the deed of conveyance by making a comparison with Justa Kausapin’s thumbmark necessarily leads one to conclude that she did in fact affix her thumbmark upon the deed of donation in favor of her stepdaughter. the alleged defect must be conclusively proven. the records do not show that such evidence was introduced by private respondents and the lower court decisions do not make mention of any comparison having been made. 34. The transcripts state as follows: Atty. 1981)[19] Even Enrique Hemedes admitted that Justa Kausapin was dependent upon him for financial support. p. is it not? A: I think that’s human nature. no. Q: Was this already the practice at the time this “Kasunduan” was executed? A: No that was increased. If. A party to a contract cannot just evade compliance with his contractual obligations by the simple expedient of denying the execution of such contract.[18] Justa Kausapin’s own testimony attests to this fact Atty. Mr. medicine & other personal or family needs? E. November 17. after this document. after a perfect and binding contract has been executed between the parties. Hemedes she’s very grateful? A: Yes she might be grateful but not very grateful. Hemedes for financial assistance. Q: Answer me categorically. June 15.[15] Although a comparison of Justa Kausapin’s thumbmark with the thumbmark affixed upon the deed of conveyance would have easily cleared any doubts as to whether or not the deed was forged. Mora: Now you said that Justa Kausapin has been receiving from you advances for food. since the validity and fulfillment of contracts cannot be left to the will of one of the contracting parties. It is grounded upon the mere denial of the same by Justa Kausapin. no.[16] It is a legal presumption that evidence willfully suppressed would be adverse if produced. (TSN pp.

which states: When one of the parties is unable to read. it should refer to the substance of the thing which is the object of the contract. ignorance. The mere denial of its execution by the donor will not suffice for the purpose. the certificate will be upheld. such as when there appears on the record some fact or circumstance of weight and influence. Article 1332 was intended for the protection of a party to a contract who is at a disadvantage due to his illiteracy. Justa Kausapin was already 80 years old. but the consent of one of the parties is vitiated by mistake or fraud committed by the other contracting party.[23] This article contemplates a situation wherein a contract has been entered into.[21] At the time the present case was filed in the trial court in 1981. .false. Although it is a well-established rule that the matter of credibility lies within the province of the trial court. This is immediately followed by provisions explaining what constitutes mistake. To accomplish this result.[28] It is private respondents’ own allegations which render article 1332 inapplicable for it is useless to determine whether or not Justa Kausapin was induced to execute said deed of conveyance by means of fraud employed by Maxima Hemedes. Public respondent should not have given credence to a witness that was obviously biased and partial to the cause of private respondents. mental weakness or other handicap. the evidence must be so clear. intimidation. violence. public respondent was in error when it sustained the trial court’s decision to nullify the “Deed of Conveyance of Unregistered Real Property by Reversion” for failure of Maxima Hemedes to comply with article 1332 of the Civil Code. and mistake or fraud is alleged. article 1332 assumes that the consent of the contracting party imputing the mistake or fraud was given. she asserts that it was only during the hearing conducted on December 7. she could not have possibly affixed her thumbmark thereto. Hemedes could easily have influenced his aging stepmother to donate the subject property to him. Hemedes for support. when Justa Kausapin denies even having seen the document before the present case was initiated in 1981.[24] This is apparent from the ordering of the provisions under Book IV. such rule does not apply when the witness’ credibility has been put in serious doubt. intimidation. although vitiated. and when the evidence is conflicting.[25] In order that mistake may invalidate consent. and does not cover a situation where there is a complete absence of consent. the other is induced to enter into a contract which. the person enforcing the contract must show that the terms thereof have been fully explained to the former. who allegedly took advantage of the fact that the former could not understand English. 1981 before the trial court that she first caught a glimpse of the deed of conveyance and thus. we hold that private respondents have failed to produce clear. and convincing evidence to overcome the positive value of the “Deed of Conveyance of Unregistered Real Property by Reversion” – a notarized document. or if the contract is in a language not understood by him.”[29] In the present case. Chapter 2. is present when. through insidious words or machinations of one of the contracting parties. which has been overlooked or the significance of which has been misinterpreted. Title II. section 1 of the Civil Code. he would not have agreed to. without them. undue influence. In this case. Article 1330 states that A contract where consent is given through mistake. on the other hand. or fraud is voidable. In fact.[26] Fraud. It is apparent that Enrique D.[27]Clearly. strong. from which article 1332 is taken. Justa Kausapin disclaims any knowledge of the “Deed of Conveyance of Unregistered Real Property by Reversion” in favor of Maxima Hemedes. or to those conditions which have principally moved one or both parties to enter into the contract. undue influence. suffering from worsening physical infirmities and completely dependent upon her stepson Enrique D. or fraud sufficient to vitiate consent. It has been held by this Court that “… mere preponderance of evidence is not sufficient to overthrow a certificate of a notary public to the effect that the grantor executed a certain document and acknowledged the fact of its execution before him. strong and convincing as to exclude all reasonable controversy as to the falsity of the certificate.[22] Finally. violence.

it is a rule that the factual findings of the trial court. having already been transferred to his sister. the presence of an encumbrance on the certificate of title is not reason for the purchaser or a prospective mortgagee to look beyond the face of the certificate of title. his payment of realty taxes. Justa Kausapin sought to transfer to her stepson exactly what she had earlier transferred to Maxima Hemedes – the ownership of the subject property pursuant to the first condition stipulated in the deed of donation executed by her husband. are entitled to respect.[30] Similarly.[36] An innocent purchaser for value[37] is one who buys the property of another without notice that some other person has a right to or interest in such property and pays a full and fair price for the same at the time of such purchase or before he has notice of the claim of another person. the donation in favor of Enrique D. did not acquire any rights over the subject property. This finding shall not be disturbed because. usufructuary rights in favor of Justa Kausapin during her lifetime or widowhood. public respondent considered against R & B Insurance the fact that it made it appear in the mortgage contract that the land was free from all liens.. while the “Kasunduan” conveying the land to Enrique D. Laguna and in the records of the Ministry of Agrarian Reform office in Calamba. even assuming that R & B Insurance was legally obliged to go beyond the title and search for any hidden defect or inchoate right which could defeat its right thereto. as we stated earlier. Furthermore. In holding that R & B Insurance is not a mortgagee in good faith. Thus. i..[38] The annotation of usufructuary rights in favor of Justa Kausapin upon Maxima Hemedes’ OCT dose not impose upon R & B Insurance the obligation to investigate the validity of its mortgagor’s title. it would not have discovered anything since the mortgage was entered into in 1964.e. which is an absolute and indefeasible evidence of ownership of the property in favor of the person whose name appears therein. the sale of the subject property by Enrique D. with regard to tax declarations and tax receipts. Hemedes is null and void for the purported object thereof did not exist at the time of the transfer. Hemedes was only entered into in 1971 and the affidavit repudiating the deed of conveyance in favor of Maxima Hemedes was executed by Justa Kausapin in 1981. Thus. public respondent stated that the fact that the certificate of title of the subject property indicates upon its face that the same is subject to an encumbrance. should have prompted R & B Insurance to “. we note that both the trial court and appellate court found that Maxima Hemedes did in fact execute a mortgage over the subject property in favor of R & B Insurance. we must concomitantly rule that Enrique D. R & B Insurance alleges that. It is a well-established principle that every person dealing with registered land may safely rely on the correctness of the certificate of title issued and the law will in no way oblige him to go behind the certificate to determine the condition of the property.investigate further the circumstances behind this encumbrance on the land in dispute. taxes and encumbrances. R & B Insurance accepted the mortgage subject to the usufructuary rights of Justa Kausapin. Usufruct gives a right to enjoy the property of another with the obligation of preserving its . especially when affirmed by the Court of Appeals.” but which it failed to do. Laguna cannot defeat a certificate of title.In upholding the deed of conveyance in favor of Maxima Hemedes. Hemedes did not present any certificate of title upon which it relied. the buyer’s title over the property will simply be restricted by the rights of the usufructuary. [31] Particularly. and should not be disturbed on appeal. At the outset. The owner of a parcel of land may still sell the same even though such land is subject to a usufruct. Hemedes. The declarations of real property by Enrique D. Also. and his being designated as owner of the subject property in the cadastral survey of Cabuyao. Hemedes and his transferee.[32] We come now to the question of whether or not R & B Insurance should be considered an innocent purchaser of the land in question. charges. Hemedes to Dominium is also a nullity for the latter cannot acquire more rights than its predecessor-in-interest and is definitely not an innocent purchaser for value since Enrique D. Dominium. contrary to public respondent’s ruling. We sustain petitioner R & B Insurance’s claim that it is entitled to the protection of a mortgagee in good faith. this Court has held on several occasions that the same do not by themselves conclusively prove title to land.

R & B Insurance had a right to rely on the certificate of title and was not in bad faith in accepting the property as a security for the loan it extended to Maxima Hemedes. There is no doubt that the owner may validly mortgage the property in favor of a third person and the law provides that. This right is embodied in the Civil Code. Based on the foregoing. the land was mortgaged to R & B Insurance as early as 1964. lease it to another. The usufructuary is entitled to all the natural. even if R & B Insurance investigated the title of Maxima Hemedes. The owner of the property maintains the jus disponendi or the power to alienate. may alienate it. only the jus utendi and jus fruendi over the property is transferred to the usufructuary. Hemedes was executed in 1981. or alienate his right of usufruct. despite its being a necessary party in the present case. whether as a plaintiff or defendant. particularly when affirmed by the appellate court. it would not have discovered any adverse claim to the land in derogation of its mortgagor’s title. would justify a different conclusion. Even assuming in gratia argumenti that R & B Insurance was obligated to look beyond the certificate of title and investigate the title of its mortgagor. even by a gratuitous title. it would not have discovered any better rights in favor of private respondents. and should the immovable be attached or sold judicially for the payment of the debt. It is a well-settled principle that where innocent third persons rely upon the correctness of a certificate of title and acquire rights over the property. conveyance in favor of Enrique D. Also. the owner shall be liable to the usufructuary for whatever the latter may lose by reason thereof. or do anything which may be prejudicial to the usufructuary. subject only to the usufructuary rights of Justa Kausapin thereto. industrial and civil fruits of the property and may personally enjoy the thing in usufruct. As regards R & B Insurance’s prayer that Dominium be ordered to demolish the warehouses or that it be declared the owner thereof since the same were built in bad faith. As we have already stated earlier. One such circumstance that would compel the Court to review the factual findings of the lower courts is where the lower courts manifestly overlooked certain relevant facts not disputed by the parties and which. carry great weight and are entitled to respect on appeal. not by Dominium. Enrique D. and even destroy the same. Clearly. while the “Kasunduan” was executed only in 1971 and the affidavit of Justa Kausapin affirming the The factual findings of the trial court. if properly considered. contrary to public respondent’s ruling. it is axiomatic that the drawing of the proper legal conclusions from such factual findings are within the peculiar province of this Court. and their respective decisions did not pass upon the constructions made upon the subject property. encumber. [46] Being an innocent mortgagee for value. although he cannot alter the property’s form or substance. which provides that the owner of property the usufruct of which is held by another.[48] Also. Hemedes and Dominium base their claims to the property upon the “Kasunduan” allegedly executed by Justa Kausapin in favor of Enrique Hemedes. the court cannot just disregard such rights. while jurisdiction over the person of a party defendant is acquired upon the service of summons in the manner required by law or by . public confidence in the certificate of title. we note that such warehouses were constructed by Asia Brewery. However. but all the contracts he may enter into as such usufructuary shall terminate upon the expiration of the usufruct. Thus. Courts acquire jurisdiction over a party plaintiff upon the filing of the complaint. except under certain circumstances. as this encumbrance was properly annotated upon its certificate of title. the annotation of usufructuary rights in favor of Justa Kausapin is not sufficient cause to require R & B Insurance to investigate Maxima Hemedes’ title. R & B Insurance validly acquired ownership over the property. We reiterate that at no point in time could private respondents establish any rights or maintain any claim over the land. Otherwise. and ultimately. would be impaired for everyone dealing with registered property would still have to inquire at every instance whether the title has been regularly or irregularly issued. the Torrens system. such contract is a nullity as its subject matter was inexistent. for the reason that Maxima Hemedes’ ownership over the property remained unimpaired despite such encumbrance. transform. the usufructuary shall not be obliged to pay the debt of the mortgagor.form and substance. still. the lower courts never acquired jurisdiction over Asia Brewery. in such a case.

SO ORDERED. since Asia Brewery is a necessary party that was not joined in the action. we hold that R & B Insurance is not entitled to the same for it has not alleged nor proven the factual basis for the same. the court acquires no jurisdiction over his person. temperate.[50] In the present case. and any personal judgment rendered against such defendant is null and void. Neither is it entitled to exemplary damages. if a defendant has not been summoned. legal and equitable justification and cannot be left to speculation and conjecture. any judgment rendered in this case shall be without prejudice to its rights. 41985.[53] Under the circumstances prevailing in the instant case. liquidated or compensatory damages. the assailed decision of public respondent and its resolution dated February 22. subject to the usufructuary rights of Justa Kausapin. . As a rule.[51] As to its claim for moral damages. as evidenced by TCT No. The award of attorney’s fees is the exception rather than the rule and counsel’s fees are not to be awarded every time a party wins a suit. 1989 are REVERSED. We uphold petitioner R & B Insurance’s assertion of ownership over the property in dispute.his voluntary appearance.[52] R & B Insurance’s claim for attorney’s fees must also fail. there is no factual or legal basis for an award of attorney’s fees. which encumbrance has been properly annotated upon the said certificate of title. which may only be awarded if the claimant is entitled to moral. WHEREFORE. No pronouncement as to costs. Its award pursuant to article 2208 of the Civil Code demands factual.