G.R. No.

L-36359 January 31, 1974

FELIX BUCTON AND NICANORA GABAR BUCTON, petitioners,

vs.
ZOSIMO GABAR, JOSEFINA LLAMOSO GABAR AND THE HONORABLE COURT OF
APPEALS, respondents.

Rizalindo V. Diaz for petitioners.

Alfredo Ber. Pallarca for respondents.

ANTONIO, J.: 1wph1.t

Appeal from the decision of the Court of Appeals in CA-G.R. No. 49091-R, dated
January 10, 1973, reversing the judgment of the trial court and dismissing the
complaint filed by herein petitioners, and from said appellate court's resolution, dated
February 5, 1973, denying petitioners' motion for reconsideration.

The facts of the case, as found by the trial court, which have not been disturbed by
respondent Court of Appeals, are as follows:

Plaintiff Nicanora Gabar Bucton (wife of her co-plaintiff Felix Bucton) is

the sister of defendant Zosimo Gabar, husband of his co-defendant
Josefina Llamoso Gabar.

This action for specific performance prays, inter-alia, that defendants-

spouses be ordered to execute in favor of plaintiffs a deed of sale of the
western half of a parcel of land having an area of 728 sq. m. covered by
TCT No. II (from OCT No. 6337) of the office of the Register of Deeds of
Misamis Oriental.

Plaintiffs' evidence tends to show that sometime in 1946 defendant

Josefina Llamoso Gabar bought the above-mentioned land from the
spouses Villarin on installment basis, to wit, P500 down, the balance
payable in installments. Josefina entered into a verbal agreement with
her sister-in-law, plaintiff Nicanora Gabar Bucton, that the latter would
pay one-half of the price (P3,000) and would then own one-half of the
land. Pursuant to this understanding Nicanora on January 19, 1946
gave her sister-in-law Josefina the initial amount of P1,000, for which
the latter signed a receipt marked as Exhibit A.

Subsequently, on May 2, 1948 Nicanora gave Josefina P400. She later

signed a receipt marked as Exhibit B.

On July 30, 1951 plaintiffs gave defendants P1,000 in concept of loan,

for which defendant Zosimo Gabar signed a receipt marked as Exhibit
E.
Meanwhile, after Josefina had received in January, 1946 the initial
amount of P1,000 as above stated, plaintiffs took possession of the
portion of the land indicated to them by defendants and built a modest
nipa house therein. About two years later plaintiffs built behind the nipa
house another house for rent. And, subsequently, plaintiffs demolished
the nipa house and in its place constructed a house of strong materials,
with three apartments in the lower portion for rental purposes. Plaintiffs
occupied the upper portion of this house as their residence, until July,
1969 when they moved to another house, converting and leasing the
upper portion as a dormitory.

In January, 1947 the spouses Villarin executed the deed of sale of the
land abovementioned in favor of defendant Josefina Llamoso Gabar,
Exhibit I, to whom was issued on June 20, 1947 TCT No. II, cancelling
OCT No. 6337. Exhibit D.

Plaintiffs then sought to obtain a separate title for their portion of the
land in question. Defendants repeatedly declined to accommodate
plaintiffs. Their excuse: the entire land was still mortgaged with the
Philippine National Bank as guarantee for defendants' loan of P3,500
contracted on June 16, 1947: Exhibit D-1.

Plaintiffs continued enjoying their portion of the land, planting fruit

trees and receiving the rentals of their buildings. In 1953, with the
consent of defendants (who were living on their portion), plaintiffs had
the entire land surveyed and subdivided preparatory to obtaining their
separate title to their portion. After the survey and the planting of the
concrete monuments defendants erected a fence from point 2 to point 4
of the plan, Exhibit I, which is the dividing line between the portion
pertaining to defendants, Exhibit I-1, and that pertaining to plaintiffs,
Exhibit I-2.

In the meantime, plaintiffs continued to insist on obtaining their

separate title. Defendants remained unmoved, giving the same excuse.
Frustrated, plaintiffs were compelled to employ Atty. Bonifacio
Regalado to intercede; counsel tried but failed. Plaintiffs persevered,
this time employing Atty. Aquilino Pimentel, Jr. to persuade defendants
to comply with their obligation to plaintiffs; this, too, failed. Hence, this
case, which has cost plaintiffs P1,500 in attorney's fees.

Defendants' evidence based only on the testimony of defendant

Josefina Llamoso Gabar denies agreement to sell to plaintiffs one-
half of the land in litigation. She declared that the amounts she had
received from plaintiff Nicanora Gabar Bucton first, P1,000, then
P400 were loans, not payment of one-half of the price of the land
(which was P3,000). This defense is devoid of merit.

When Josefina received the first amount of P1,000 the receipt she
signed, Exhibit A, reads:
 Received from Mrs. Nicanora Gabar the sum of one thousand (P1,000)
pesos, victory currency, as part payment of the one thousand five
hundred (P1,500.00) pesos, which sum is one-half of the purchase value
of Lot No. 337, under Torrens Certificate of Title No. 6337, sold to me by
Mrs. Carmen Roa Villarin.

"(Sgd.) Josefina Ll. Gabar".

On the basis of the facts quoted above the trial court on February 14, 1970, rendered
judgment the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered for plaintiffs:

1) Ordering defendants within thirty days from receipt hereof to execute

a deed of conveyance in favor of plaintiffs of the portion of the land
covered by OCT No. II, indicated as Lot 337-B in the Subdivision Plan,
Exhibit I, and described in the Technical Description, Exhibit 1-2;
should defendants for any reason fail to do so, the deed shall be
 executed in their behalf by the Provincial Sheriff of Misamis Oriental or
his Deputy;

2) Ordering the Register of Deeds of Cagayan de Oro, upon

presentation to him of the above-mentioned deed of conveyance, to
cancel TCT No. II and in its stead to issue Transfer Certificates of Title,
to wit, one to plaintiffs and another to defendants, based on the
subdivision Plan and Technical Description above-mentioned; and
ordering defendants to present and surrender to the Register of Deeds
their TCT No. II so that the same may be cancelled; and

3) Ordering defendants to pay unto plaintiffs attorney's fees in the

amount of P1,500 and to pay the costs.

SO ORDERED.

Appeal was interposed by private respondents with the Court of Appeals, which
reversed the judgment of the trial court and ordered petitioners' complaint dismissed,
on the following legal disquisition:

Appellees' alleged right of action was based on the receipt (Exh. A)

which was executed way back on January 19, 1946. An action arising
from a written contract does not prescribe until after the lapse of ten
(10) years from the date of action accrued. This period of ten (10) years
is expressly provided for in Article 1144 of the Civil Code.

From January 19, 1946 to February 15, 1968, when the complaint was
filed in this case, twenty-two (22) years and twenty-six (26) days had
elapsed. Therefore, the plaintiffs' action to enforce the alleged written
contract (Exh. A) was not brought within the prescriptive period of ten
(10) years from the time the cause of action accrued.

The land in question is admittedly covered by a torrens title in the name

of Josefina Llamoso Gabar so that the alleged possession of the land
by the plaintiffs since 1947 is immaterial because ownership over
registered realty may not be acquired by prescription or adverse
possession (Section 40 of Act 496).

It is not without reluctance that in this case we are constrained to

sustain the defense of prescription, for we think that plaintiffs really
paid for a portion of the lot in question pursuant to their agreement with
the defendants that they would then own one-half of the land. But we
cannot apply ethical principles in lieu of express statutory provisions. It
is by law provided that:

"ART. 1144. The following actions must be brought within

ten years from the time the right of action accrues:

1. Upon a written contract;

2. Upon an obligation created by law;

 3. Upon a judgment."

If eternal vigilance is the price of safety, one cannot sleep on one's right
and expect it to be preserved in its pristine purity.

Petitioners' appeal is predicated on the proposition that owners of the property by

purchase from private respondents, and being in actual, continuous and physical
possession thereof since the date of its purchase, their action to compel the vendors
to execute a formal deed of conveyance so that the fact of their ownership may be
inscribed in the corresponding certificate of title, had not yet prescribed when they
filed the present action.

We hold that the present appeal is meritorious.

1. There is no question that petitioner Nicanora Gabar Bucton paid P1,500.00 to

respondent Josefina Gabar as purchase price of one-half of the lot now covered by
TCT No. II, for respondent Court of Appeals found as a fact "that plaintiffs really paid
for a portion of the lot in question pursuant to their agreement with the defendants
that they would own one-half (1/2) of the land." That sale, although not consigned in a
public instrument or formal writing, is nevertheless valid and binding between
petitioners and private respondents, for the time-honored rule is that even a verbal
contract of sale or real estate produces legal effects between the parties. 1 Although at
the time said petitioner paid P1,000.00 as part payment of the purchase price on January
19, 1946, private respondents were not yet the owners of the lot, they became such owners
on January 24, 1947, when a deed of sale was executed in their favor by the Villarin
spouses. In the premises, Article 1434 of the Civil Code, which provides that "[w]hen a
person who is not the owner of a thing sells or alienates and delivers it, and later the seller
or grantor acquires title thereto, such title passes by operation of law to the buyer or
grantee," is applicable. 2 Thus, the payment by petitioner by Nicanora Gabar Bucton of
P1,000.00 on January 19, 1946, her second payment of P400.00 on May 2, 1948, and the
compensation, up to the amount of P100.00 (out of the P1,000.00-loan obtained by private
respondents from petitioners on July 30, 1951), resulted in the full payment of the
purchase price and the consequential acquisition by petitioners of ownership over one-
half of the lot. Petitioners therefore became owners of the one-half portion of the lot in
question by virtue of a sale which, though not evidenced by a formal deed, was
nevertheless proved by both documentary and parole evidence.

2. The error of respondent Court of Appeals in holding that petitioners' right of action
had already prescribed stems from its belief that the action of petitioners is based on
the receipt Exh. "A" which was executed way back on January 19, 1946, and,
therefore, in the view of said appellate court, since petitioners' action was filed on
February 15, 1968, or after the lapse of twenty-two (22) years and twenty-six (26) days
from, the date of said document, the same is already barred according to the
provisions of Article 1144 of the New Civil Code. The aforecited document (Exh. "A"),
as well as the other documents of similar import (Exh. "B" and Exh. "E"), are the
receipts issued by private respondents to petitioners, evidencing payments by the
latter of the purchase price of one-half of the lot.

The real and ultimate basis of petitioners' action is their ownership of one-half of the
lot coupled with their possession thereof, which entitles them to a conveyance of the
property. In Sapto, et al. v. Fabiana, 3 this Court, speaking thru Mr. Justice J.B.L. Reyes,
explained that, under the circumstances no enforcement of the contract is needed, since
the delivery of possession of the land sold had consummated the sale and transferred title
to the purchaser, and that, actually, the action for conveyance is one to quiet title, i.e., to
remove the cloud upon the appellee's ownership by the refusal of the appellants to
recognize the sale made by their predecessors. We held therein that "... it is an established
rule of American jurisprudence (made applicable in this jurisdiction by Art. 480 of the New
Civil Code) that actions to quiet title to property in the possession of the plaintiff are
imprescriptible (44 Am. Jur. p. 47; Cooper vs. Rhea, 20 L.R.A. 930; Inland Empire Land
Co. vs. Grant County, 138 Wash. 439, 245 Pac. 14).

The prevailing rule is that the right of a plaintiff to have his title to land
quieted, as against one who is asserting some adverse claim or lien
thereon, is not barred while the plaintiff or his grantors remain in actual
possession of the land, claiming to be owners thereof, the reason for
this rule being that while the owner in fee continues liable to an action,
proceeding, or suit upon the adverse claim, he has a continuing right to
the aid of a court of equity to ascertain and determine the nature of
such claim and its effect on his title, or to assert any superior equity in
his favor. He may wait until his possession is disturbed or his title in
attacked before taking steps to vindicate his right. But the rule that the
statute of limitations is not available as a defense to an action to
remove a cloud from title can only be invoked by a complainant when
he is in possession. One who claims property which is in the
possession of another must, it seems, invoke remedy within the
statutory period. (44 Am. Jur., p. 47)

The doctrine was reiterated recently in Gallar v. Husain, et al., 4 where We ruled that by
the delivery of the possession of the land, the sale was consummated and title was
transferred to the appellee, that the action is actually not for specific performance, since
all it seeks is to quiet title, to remove the cloud cast upon appellee's ownership as a result
of appellant's refusal to recognize the sale made by his predecessor, and that as plaintiff-
appellee is in possession of the land, the action is imprescriptible. Considering that the
foregoing circumstances obtain in the present case, We hold that petitioners' action has
not prescribed.

WHEREFORE, the decision and resolution of respondent Court of Appeals appealed

from are hereby reversed, and the judgment of the Court of First Instance of Misamis
Oriental, Branch IV, in its Civil Case No. 3004, is revived. Costs against private
respondents.

Zaldivar (Chairman), Fernando, Barredo, Fernandez, Aquino, JJ., concur. 1wph1

G.R. Nos. L-48971 & 49011 January 22, 1980

PACIFICO GARCIA, petitioner-appellant,

vs.
BENJAMIN M. GOZON, TECLA GUTIERREZ, ROSARIO FELIX, PAULINO D.
BUENAVENTURA, RAYMUNDO DIONISIO, VIRGILIO AUSTRIA and MARCEON
VICENCIO, respondents-appellees;

PHILIPPINE NATIONAL BANK, petitioner-appellant,

vs.
COURT OF APPEALS (Third Division), CAROLINA LAPUZ- GOZON, assisted by her
husband BENJAMIN M. GOZON, TECLA GUTIERREZ, ROSARIO FELIX, PAULINO D.
BUENAVENTURA, RAYMUNDO DIONISIO, VIRGILIO AUSTRIA and MARCEON
VICENCIO, respondents-appellees.

Agapito Mendoza & Antonio G. Ibarra for appellant Pacifico Garcia

Laurel Law Office and Flores Ocampo, Dizon & Domingo for private appellees.

AQUINO, J.:

This case is about the issuance of two or more transfer certificates of title to different persons
for the same lots, or subdivisions thereof, due to the fact that the original title was allegedly
not cancelled when the first transfer certificates of title were issued to replace the original
title. The factual background is as follows:

1. On August 9, 1918, a deed of sale for two parcels of land, E and G (with a total area of
more than seven hectares) of the Hacienda Maysilo, located in Malabon, Rizal and covered
by Original Certificate of Title No. 983, was executed in favor of Ismael Lapus a bona
fide occupant thereof. The deed was executed pursuant to an order of the Court of First
Instance of Rizal in Civil Case No. 391, Negao vs. Vidal, a partition proceeding involving the
said hacienda (See Bustamante vs. Tuason, 47 Phil. 433, 434).

2. The deed of sale was presented for registration at two-twenty five in the afternoon of
January 15, 1920 and was recorded as Primary Entry No. 7710. That deed of sale itself
contains the following entries showing that it was annotated on the back of OCT NO. 983:

Presentado en este Registro a las 2:25 de la tarde del dia de hoy segun el
Asiento No. 7710 de tomo 10 del Libro Diario, Pasig, Rizal, Enero 15, 1920.

Register of Deeds (Exh. B-12)

Inscrito el documento que precede al dorso del certificado de Titulo Original

No. 983 del Tomo A-9, de inscritor en las paginas 113 y 114 ambos del libro
T-25 de registro como certificados de titulo Nos. 4910 y 4911, archivado en
el legajo T-#4910. Pasig, Rizal, Enero 15, 1920.:

Register of Deeds (Exh. B-1).

However, it seemed that, contrary to the foregoing entry and the official routine or standard
operating procedure, the deed of sale was not annotated on OCT No. 983 and that,
consequently, that title was apparently not cancelled. Why that annotation did not appear in
OCT No. 983 and why there was no notation of the cancellation of that title, as it appeared
in 1962, is a mystifying circumstance in this case.

3. As a result of the registration of that deed of sale, Transfer Certificate of 'Title No. 4910
was issued to Lapus for the two parcels of land, E and G, and I Transfer Certificate of Title
No. 4911 was issued for the remaining five lots covered by OCT No. 983 (which embrace an
area of more than two hundred fifty-eight hectares registered in the names of more than
twenty-six-co-owners). TCT Nos. 4910 and 4911 contain the following entries: "Transfer from
No. 983. Originally registered on the 29th day of January, in the year 1917 in Book No. A-9,
page 215, of the said Province of Rizal, pursuant to a decree entered in Case No. 3850."

4. Lapus on different occasions mortgaged the two parcels of land to secure his obligations
to the Philippine National Bank, the Government and the Philippine Trust Company. He died
in 1951. The two parcels of land were inherited by his daughter, Carolina Lapuz-Gozon. She
became the registered owner of the two lots. She subdivided them into fifty-five lots. She
sold some of the subdivision lots to her co-respondents-appellees herein. Lapus and his
successors-in-interest have been in possession of the two parcels even before 1910 or for
more than seventy years.

5. Meanwhile, in 1962, certain. alleged heirs (collectively known as the Riveras) of the late
Maria de la Concepcion Vidal filed a motion in Land Registration Cases Nos. 4429 and 4496
of the Court of First Instance of Rizal, alleging that they were deprived of their participation in
the Hacienda Maysilo covered by OCT No. 983 and for other titles and that, since only OCT
No. 983 was supposedly unencumbered, all the land covered by that title should be
adjudicated to them. The court granted the motion. It should be stressed that OCT No. 983
appears to have remained uncancelled notwithstanding the sale to Lapus of two parcels
covered by it and the fact that it had been replaced by TCT Nos. 4910 and 4911.

6. On June 7, 1963, OCT No. 983 was definitely cancelled and in lieu thereof Transfer
Certificate of Title No. 112236 was issued to the Riveras. Later, Lots 5 and 7 of the said title
(corresponding to parcels E and G which were sold to Ismael Lapus in 1918 as stated
earlier) were assigned by Bartolome Rivera to Sergio Cruz and Pacifico Garcia and TCT
Nos. 112743 and 112742 were issued to Cruz and Garcia, respectively. Thus, two sets of
transfer certificates of title for Lots E and G or 5 and 7, originally covered by OCT No. 983,
were issued, one to the heir of Ismael Lapus and another set to the successors-in-interest of
the Riveras.

7. On October 22, 1964, Garcia subdivided Lot 7 (G) into Lots A and B. Garcia retained Lot A
and obtained TCT No. 134958 for it. He assigned Lot B to Antonio Muoz on November 5,
1964. As a consequence of the assignment, TCT No. 112742 was cancelled and TCT No.
134957 was issued to Muoz. In 1965, he mortgaged Lot B to the Associated Banking
Corporation to secure a loan of P200,000.

8. On the other hand, on July 17, 1964 Cruz sold to Santiago Go Lot 5 (E) covered by TCT
No. 112743. TCT No. 131329 was issued to Go on August 25,1964. On December 23, 1964,
Go mortgaged Lot 6 to the Philippine National Bank (PNB) to secure a loan of P50,000 which
was later increased to P60,000.
9. Muoz and Go did not pay their mortgage debts. The two banks foreclosed the
mortgages. The PNB bought the mortgaged lot at the auction sale held on May 4. 1967. The
sheriff issued to it a certificate of sale dated May 19, 1967 but at that time there was already
a notice of lis pendens annotated on the title of the mortgaged lot. TCT Nos. 212163 and
236881 for the mortgaged lots were issued to the Associated Banking Corporation and the
Philippine National Bank, respectively.

10. The Riveras and their successors-in-interest have never set foot on the disputed lots.

11. Mrs. Gozon later learned that the Riveras and their successors-in-interest had acquired
the land (more than two hundred fifty-eight hectares) covered by OCT No. 983. Her lawyer
and a surveyor informed her that parcels E and G, which she inherited from her father, were
identical to Lots 5 and 7 which were conveyed to Cruz and Garcia. She registered adverse
claims on the titles covering Lots 5 and 7. On December 27, 1965 she and the persons to
whom she had transferred portions of parcels E and G filed with the Court of First Instance of
Rizal at Caloocan City against the Riveras, Cruz, Muoz, Garcia, Associated Banking
Corporation, PNB and others an action to quiet title and for damages.

12. A notice of lis pendens was annotated on January 25, 1966 on the titles of Garcia,
Muoz and Go. The notice of lis pendens was annotated on the title of the PNB when the
sale in its favor was registered on December 13, 1969.

13. The trial court in its decision of July 30, 1975 declared valid TCT Nos. 141802 to 141855
and 143512 issued to Mrs. Gozon and her co-plaintiffs. It voided TCT No. 112235 issued to
the Riveras and all titles and transactions emanating therefrom insofar as those titles
covered the lots embraced in plaintiffs' titles. The Riveras were ordered to pay the plaintiffs
twenty thousand pesos as attorney's fees.

14. The trial court also ordered Muoz to pay the Associated Banking Corporation, in the
event that the bank would be evicted from the lot covered by TCT No. 212153, two hundred
sixty-five thousand seventy-two pesos and fifteen centavos with twelve percent interest per
annum from the date of the eviction plus ten thousand pesos as attorney's fees.

15. Santiago Go was ordered to pay the PNB, should it be evicted from the lot covered by
TCT No. 236881, the sum of sixty thousand pesos plus nine percent interest per annum from
the date of the eviction and six thousand pesos as attorney's fees.

16. That judgment of the trial court was affirmed by the Court of Appeals in its decision of
May 25, 1978. Garcia and the PNB appealed from that decision. The Associated Banking
Corporation, now the Associated Citizens Bank, tried to appeal but it was not able to file its
petition for review (L-49010).

Garcia contends that the Court of Appeals erred in not holding that his title is valid and that
the titles of Ismael Lapus and his successors-in-interest lost their right to the disputed lots
due to their negligence or inaction.

The issue is whether the 1920 title issued to Lapus and the titles derived therefrom should
prevail over the 1963 title issued to the Riveras and the subsequent titles derived from it.
Should Lapus' title prevail even if it was not annotated by the register of deeds on the
anterior or parent title which was not cancelled before 1963? It was that noncancellation
which led to the issuance of the duplicative title to the Riveras and eventually to the
execution of the controversial mortgages and foreclosure sales to the two banks.
We hold that the two appeals have no merit. The title of Lapus and the titles derived
therefrom should be given effect. The title of the Riveras and the titles springing from it are
void.

There can be no doubt that Lapus was an innocent purchaser for value. He validly
transmitted to his successors-in-interest his indefeasible title or ownership over the disputed
lots or parcels of land. That title could not be nullified or defeated by the issuance forty-three
Years later to other persons of another title over the same lots due to the failure of the
register of deeds to cancel the title preceding the title issued to Lapuz. This must be so
considering that Lapus and his interest remained in possession of the disputed successors in
lots and the rival claimants never possessed the same.

"The general rule is that in the case of two certificates of title, purporting to include the same
land, the earlier in date prevail, whether the land comprised in the latter certificate be wholly,
or only in part, comprised in the earlier certificate" (Hogg, Australian Torrens System 823,
citing cases and cited in Legarda and Prieto vs. Saleeby, 31 Phil. 590, 595).

"Where two certificates (of title) purport to include the same land, the earlier in date prevails.
... In successive registrations, where more than once certificate is issued in respect of a party
estate or interest in land, the Person claiming under the prior certificate is entitled to the
estate or interest; and that person is deemed to hold under the prior certificate who is the
holder of, or whose claim is derived directly or indirectly from the person who was the holder
of the earliest certificate issued in respect thereof " (Niblack, Analysis of the Torrens System
page 237, cited in Legarda and Prieto vs. Saleeby, supra, pages 595-6).

And the rule that in case of double registration the owner of the earlier certificate is the owner
of the land applies to the successive vendees of the owners of such certificates. "The
vendee of the earlier certificate would be the owner as against the vendee of the owner of
the later certificate" (Legarda and Prieto vs. Saleeby, supra, pages 597-9).

It is settled that is this jurisdiction the maxim prior est in tempore, potior est in jure (he who is
first in time is preferred in right) is followed in land registration matters (La Urbana vs.
Bernardo, 62 Phil. 790, 806).

Appellant Garcia invokes the ruling that the mere entry of a document in the day or entry
book without noting it on the certificate of title is not a sufficient registration (Bass vs. De la
Rama, 73 Phil. 682, 685).

That ruling was superseded by the holding in the later six cases of Levin vs. Bass, 91 Phil.
420, where a distinction was made between voluntary and involuntary registration, such as
the registration of an attachment, levy upon execution, notice of his pendens, and the like. In
cases of involuntary registration, an entry thereof in the day book is a sufficient notice to all
persons even if the owner's duplicate certificate of title is not presented to the register of
deeds.

On the other hand, according to the said cases of Levin vs. Bass, in case
of voluntary registration of documents an innocent purchaser for value of registered land
becomes the registered owner, and, in contemplation of law the holder of a certificate of title,
the moment he presents and files a duly notarized and valid deed of sale and the same is
entered in the day book and at the same time he surrenders or presents the owner's
duplicate certificate of title covering the land sold and pays the registration fees, because
what remains to be done lies not within his power to perform. The register of deeds is duty
bound to perform it. (See Potenciano vs. Dineros, 97 Phil. 196.)

The instant case is not Identical to the Bass cases. Here the deed of sale in favor of Lapus,
which was judicially authorized, was entered in the entry book and a new title was issued to
him. As already stated, and this point should be underscored, the deed of sale in favor of
Lapus contains the notation that it was annotated on the back of OCT No. 983 (presumably,
the original and owner's duplicate thereof).

But why in 1962 it appeared that no such annotation was found on the back of OCT No. 983,
contrary to what was stated in the 1918 deed of sale, is a mystery that the trill court and the
plaintiffs failed to unravel during the trial. Moreover, the title issued to Lapus contains the
usual notation that it was a transfer from a previous title which in this case was OCT No. 983.

It should be further observed that the deed of sale in favor of Lapus and the titles issued to
him and his successors interest together with his mortgage in 1929 of the disputed lots to the
PNB itself, are all a matter of public record in the registry of deeds.

As stressed in Legarda and Prieto vs. Saleeby, 31 Phil. 590, 600, "the record is notice to all
the world. All persons are charged with the knowledge of what it contains. All persons
dealing with the land so recorded, or any portion of it, must be charged with notice of
whatever it contains. The purchaser is charged with notice of every fact shown by the record
and is presumed to know every fact which the record discloses.

"When a conveyance has been properly recorded, such record is constructive notice of its
contents and all interests, legal and equitable, included therein." "Under the rule of notice, it
is presumed that the purchaser has examined every instrument of record affecting the title.
Such presumption is irrefutable. He is charged with notice of every fact shown by the record
and is presumed to know every fact which an examination of the record would have
disclosed" (Legarda and Prieto vs. Saleeby, supra, page 600).

As Justice Johnson says, "this presumption cannot be overcome by proof of innocence or

good faith. Otherwise, the very purpose and object of the law requiring a record would be
destroyed. Such presumption cannot be defeated by proof of want of knowledge of what the
record contains any more than one may be permitted to show that he was ignorant of the
provisions of the law. The rule that all persons must take notice of the facts which the public
record contains is a rule of law. The rule must be absolute. Any variation would lead to
endless confusion and useless litigation" (Legarda and Prieto vs. Saleeby, supra, pp. 600-
601).

As to the PNB's claim that it was a mortgagee and purchaser in good faith and for value, the
Appellate Court held that the bank should have made an on-the-spot investigation of the lot
mortgaged by Go to ascertain whether he was in possession of it or it was claimed by other
persons. Its failure to do so precludes the bank from being considered as a mortgagee in
good faith and for value (Gatioan vs. Gaffud, L-21953, March 28, 1969, 27 SCRA 706).

On the other hand, the trial court held that the PNB was not a buyer in good faith when it
bought Go's lot at the auction sale because there was already a notice of his pendens
annotated on his title.

In the Gatioan case, it appears that in 1935 Rufina Permison secured a Torrens title for a
parcel of land on the basis of a free patent. The land was sold to Encarnacion Gatioan and
Transfer Certificate of Title No. T-1212 was issued to her. She mortgaged the land three
times to the PNB

In 1956, the spouses Sixto Gaffud and Villamora Logan were able to secure a Torrens title
for the same lot also on the basis of a free patent. They mortgaged the land also to the PNB.
The Secretary of Agriculture and Natural Resources, on discovering that two Torrens titles
were issued for the same land, recommended the cancellation of the later title issued to the
Gaffud spouses. As the PNB refused to cancel the mortgaged executed by Gatioan, in spite
of the fact that she had made full payment of the mortgage debt, she filed against the Gaffud
spouses and the PNB an action to quiet title.

It was held that Gatioan's title should prevail over that of the Gaffud spouses and that the
mortgage executed by them in favor of the PNB was void. The Gaffud spouse were ordered
to pay damages to Gatioan.

Since the applicable rule in the instant case is that the earlier certificate of title should be
recognized as superior and controlling there is no justification for relying on the doctrine laid
down by Justice Holmes in Eliason vs. Wilborn 281 U.S. 457, that "as between two innocent
persons, one of whom must suffer the consequence of a breach of trust, the one who made it
possible by his act of confidence must bear the loss."

There was no breach of trust in this case. What is note. worthy in this case is that after it was
recited in the registered deed of sale that sale was annotated at the back of the title covering
the lots sold, it turned out that the title did not contain such an annotation and that the title
was not cancelled. For that anomaly, the purchaser, Ismael Lapus, the how" of the earlier
title, was not culpable or blameworthy.

WHEREFORE, the judgment of the Court of Appeals, affirming the decision of the trial court,
should stand. Costs against the appellants.

SO ORDERED.
G.R. No. L-47579 October 9, 1981

EDUARDO JALANDONI (Deceased), Substituted by ROGELIA R. JALANDONI,

BRENDA R. TAYAG, ARTHUR JALANDONI, DEANNA J. FELICIANO and SUSAN R.
JALANDONI, petitioners,
vs.
PHILIPPINE NATIONAL BANK and COURT OF FIRST INSTANCE OF NEGROS
OCCIDENTAL, Silay City Branch I, respondents.

AQUINO, J.:

May the judgment debtor's land, which was levied upon within five years from the entry of
judgment, be sold at an execution sale after the expiration of the ten-year period for
enforcing the judgment? That legal issue arises under the following facts:

On March 31, 1959 the Court of First Instance of Manila rendered a judgment ordering
Eduardo Jalandoni to pay the Philippine National Bank the sum of P63,297.53, together with
daily interest of P12.57 from March 6, 1959 until fully paid, and ten percent of the total
amount due as attorney's fees, plus the costs (Civil Case No. 38393).

That judgment became final and executory. Within five years from the entry of judgment in
that case, or on March 9, 1964, the sheriff of Silay City, pursuant to an alias writ of execution,
levied upon Lot No. 657-C of the Silay cadastre, with an area of seventeen hectares,
covered by Transfer Certificate of Title No. T-1827, which was later cancelled and replaced
in 1969 by Transfer Certificate of Title No. T-3202 in the name of Eduardo Jalandoni.

The levy was annotated on TCT No. T-1827 and TCT No. 3202 in this manner:

Entry No. 2041 Notice of Embargo. ... issued by the City Sheriff of Silay
City subjecting the rights, interests and participations of Eduardo Jalandoni
over the lot described in this title, to "levy on execution in relation to Civil
Case No. 38393 otherwise entitled Philippine National Bank, Plaintiff vs.
Eduardo Jalandoni, Defendant". Date of Instrument March 9, 1964 Date
of Inscription March 9, 1964 at 11:00 A. M.

No effort was made by the bank up to this time to have that land sold at public auction to
satisfy the judgment against Jalandoni.

On April 22, 1974, or more than ten years after the levy was made, Jalandoni filed with the
Court of First Instance of Negros Occidental at Silay City in the land registration proceeding,
LRC Cadastral Record No. 86 for Lot No. 657-C, a petition for the cancellation of the levy on
the ground of prescription. The petition was opposed by the bank.

The lower court in its order of October 31, 1974 directed Jalandoni to ask the Manila court to
quash the writ of execution on the ground of prescription and thereafter to refile his petition in
the lower court.
The said court also adverted to the rule that relief under section 112 of Act No. 496 can be
granted only when there is unanimity among the parties or there is no adverse claim or
serious objection on the part of an interested party.

On May 20, 1975, Jalandoni filed in the same court an action to quiet title or for the
cancellation of the notice of embargo on the ground that, although more than ten years had
elapsed from the time the levy was made, no execution sale had been held and, therefore,
the levy had become inefficacious and was a cloud on his title (Civil Case No. 685).

The bank answered the complaint. After a pre-trial and the submission of memoranda, the
trial court rendered a decision dated June 15, 1977 dismissing the complaint. The heirs of
Jalandoni (he died on January 20, 1977) appealed to this Court under Republic Act No.
5440.

It should be borne in mind that an action upon a judgment must be brought within ten years
from the time the right of action accrues (Art. 1144, Civil Code). As clarified in the Rules of
Court, that prescriptive period means that "a judgment may be executed on motion within
five (5) years from the date of its entry or from the date it becomes final and executory" and
"after the lapse of such time, and before it is barred by the statute of limitations, a judgment
may be enforced by action" (Sec. 6, Rule 39).

The Jalandoni heirs, in support of their contention that the levy cannot be enforced after the
expiration in 1969 of the ten-year period for enforcing the judgment, rely on the rule laid
down in Ansaldo vs. Fidelity and Surety Co. of the P.I., 88 Phil. 547, a 1951 case, that
"properties levied upon by execution must be sold in public auction within the period of ten
years during which the judgment can be enforced by action" The reason for that rule is that
an execution is enforced (and therefore accomplished) by levy and sale, not by levy alone.

In the Ansaldo case, a writ of execution was issued by the Court of First Instance of Manila
on April 11, 1933 and a notice of levy was annotated on April 17, 1933 on the Torrens titles
covering the lots of the judgment debtor, Angel A. Ansaldo. No other step was taken by the
judgment creditor on the writ of execution and levy.

More than fourteen years later, or on July 30, 1947, Jose Ma. Ansaldo, the heir of the
judgment debtor, filed a petition with the Court of First Instance of Manila for the cancellation
of the levy in view of the inaction of the judgment creditor. The latter opposed the petition.

The lower court granted it on the ground that the judgment creditor's right to enforce the
judgment by execution had prescribed This Court affirmed the lower court's order cancelling
the levy annotated on Ansaldo's titles.

In passing, this Court noted that, although it was ruled in Government of the Philippines vs.
Echaus, 71 Phil. 318 that if 'there is a valid levy within the period prescribed by law, the
execution sale may be enforced thereafter, the execution sale in that case took place within
the ten-year period from the entry of judgment.

In the Echaus case, the judgment was rendered in 1932, the writ of execution was issued
and the levy was made in 1934, and the execution sale was held in 1939 or within the ten-
year period.
On the other hand, in this case the trial court and the bank hold the view that the execution
sale can be made beyond the ten-year period for enforcing the judgment as long as the levy
was effected within five years from the entry of judgment as in the instant case.

They rely on the dictum that while section 6 of Rule 39 "limits the time within which a writ of
execution may be issued to enforce a judgment, it does not prescribe a period when the sale
at public auction by the sheriff shall take place after the issuance of the writ of execution and
a valid levy made pursuant thereto" (Del Rosario vs. Yatco, L-18735, December 29, 1966, 18
SCRA 1263). That dictum was based on the following ruling, also cited in the Echaus case:

The levy is the essential act by which the property is set apart for the
satisfaction of the judgment and taken into the custody of the law, and ...
after it has been taken from the defendant, his interest is limited to its
application to the judgment, irrespective of the time when it may be sold
(Southern Cal. Lumber Co. vs. Hotel Co., 94 C. 217, 28 American State
Reports 115).

In the decision in the Southern California Lumber case, the phrase "irrespective of the time
when it may be sold" means that after a levy has been made, the property levied upon may
be sold even after the sixty-day period, which is the term of the writ of execution, but that
phrase does not mean that the execution sale could be held beyond the ten-year period for
enforcing the judgment.

In the Del Rosario case, the judgment was rendered in 1955, the writ of execution was
issued in 1956 and a levy was made on the land of the judgment debtor, Narciso del
Rosario, which levy was annotated on his title and was recorded in the registry of deeds. No
execution sale was held.

In 1961, Del Rosario and the persons to whom he had mortgaged the land levied upon filed
in court a petition to cancel the levy on the ground that more than five years had already
elapsed since the levy was made and no auction sale had been held. Del Rosario contended
that the judgment creditor's remedy was to file an action to revive the judgment.

The trial court did not grant the petition. It ordered the judgment creditor to take steps that
the land levied upon be sold at an execution sale within sixty days. This Court affirmed that
order of the trial court. It should be noted that the said execution sale would take place within
the ten-year prescriptive period for enforcing the judgment.

In the Del Rosario case, this Court cited the case of Quiambao vs. Manila Motor Co., Inc.,
113 Phil. 431, which reaffirmed the rule in the Ansaldo case that "a valid execution issued
and levy made within the five-year period after entry of the judgment may be enforced by
sale of the property levied upon thereafter, provided the sale is made within ten years after
the entry of the judgment".

We hold that the trial court erred in not applying the ruling in the Ansaldo case which is on all
fours with this case.

The employees of the bank were negligent. They did not require the sheriff to sell Jalandoni's
land at public auction. The bank is bound by its employees' negligence. This case should
teach the responsible officers of the bank to be more vigilant in exercising its rights and in
supervising its employees. The law helps the diligent and vigilant, not those who sleep on
their rights.
 For laches and neglect on the part of those, who, under the law are entitled
to require of others the fulfillment of their obligations, the statute of limitations
has been enacted, which provides that such rights prescribe after a certain
period of time, in order that it may serve alike as a punishment for those who
do not know how to look after their own interests, and as a source of
reassurance to those who may have rested in the belief that their creditors
had waived their rights, and also to insure economic stability and the
certainty of rights. (Villareal, J., in Lutero vs. Siuliong & Co., 54 Phil. 272,
280.)

We find that the "notice of embargo" annotated in 1964 on Jalandoni's title is no longer
enforceable and has become a cloud upon his title. Following the rule in the Ansaldo case,
he and his heirs have a good cause of action under article 476 of the Civil Code for the
removal of that state encumbrance.

Moreover, article 478 of the Civil Code provides that "there may also be an action to quiet
title or remove a cloud therefrom when the contract, instrument or other obligation has been
extinguished or has terminated, or has been barred by extinctive prescription". (See sec. 112
of Act No. 496.)

A court of equity will remove a cloud cast upon title to property by a lien,
interest, or title which has become barred by reason of laches or the running
of the statute of limitations. ...

Liens which were acquired by virtue of judgments or levies of execution, and

which have become barred by limitations or by delay in enforcing them, and
sales based on such hens, have been held to be removable as clouds. (65
Am Jur 2nd 163-164).

WHEREFORE, the trial court's decision is reversed and set aside. The register of deeds of
Silay City is directed to cancel the "Notice of Embargo" annotated on Jalandoni's title, TCT
No. T-3202, covering Lot No. 657-C of the Silay cadastre No costs.
G.R. No. L-52064 December 26, 1984

JULIANA CARAGAY-LAYNO, Assisted by Her Husband, BENITO LAYNO, petitioner,

vs.
HONORABLE COURT OF APPEALS and SALVADOR ESTRADA as Administrator of
the Estate of the Deceased, MARIANO DE VERA, respondents.

Pedro Peralta for petitioner.

Andres T. Gutierrez for private respondent.

MELENCIO-HERRERA, J.:

Respondent Appellate Court, then the Court of Appeal, affirmed in toto the judgment of the
former Court of First Instance of Pangasinan, Branch III, at Dagupan adjudging private
respondent entitled to recover possession of a parcel of land and ordering petitioners, as
defendants below, to vacate the premises. Petitioners, as paupers, now seek a reversal of
that judgment.

It was established by a relocation survey that the Disputed Portion is a 3,732 square-meter-
area of a bigger parcel of sugar and coconut land (Lot No. 1, Psu-24206 [Case No. 44,
GLRO Rec. No. 117]), with a total area of 8,752 square meters, situated at Calasiao,
Pangasinan. The entire parcel is covered by Original Certificate of Title No. 63, and includes
the adjoining Lots 2 and 3, issued on 11 September 1947 in the name of Mariano M. DE
VERA, who died in 1951 without issue. His intestate estate was administered first by his
widow and later by her nephew, respondent Salvador Estrada.

Petitioner, JULIANA Caragay, and the decedent, Mariano DE VERA, were first cousins,
"both orphans, who lived together under one roof in the care of a common aunt."

As Administratrix, DE VERA's widow filed in Special Proceedings No. 4058 of the former
Court of First Instance of Pangasinan, Branch III, an Inventory of all properties of the
deceased, which included "a parcel of land in the poblacion of Calasiao, Pangasinan,
containing an area of 5,417 square meters, more or less, and covered by Tax Declaration
No. 12664."

Because of the discrepancy in area mentioned in the Inventory as 5,147 square meters (as
filed by the widow), and that in the title as 8,752 square meters, ESTRADA repaired to the
Disputed Property and found that the northwestern portion, subsequently surveyed to be
3,732 square meters, was occupied by petitioner-spouses Juliana Caragay Layno and Benito
Layno. ESTRADA demanded that they vacate the Disputed Portion since it was titled in the
name of the deceased DE VERA, but petitioners refused claiming that the land belonged to
them and, before them, to JULIANA's father Juan Caragay.

ESTRADA then instituted suit against JULIANA for the recovery of the Disputed Portion (Civil
Case No. D-2007), which she resisted, mainly on the ground that the Disputed Portion had
been fraudulently or mistakenly included in OCT No. 63, so that an implied or constructive
trust existed in her favor. She then counterclaimed for reconveyance of property in the sense
that title be issued in her favor.

After hearing, the Trial Court rendered judgment ordering JULIANA to vacate the Disputed
Portion.

On appeal respondent Appellate Court affirmed the Decision in toto.

Before us, JULIANA takes issue with the following finding of respondent Court:

Although Section 102 of Act 496 allows a Petition to compel a Trustee to

reconvey a registered land to the cestui que trust (Severino vs. Severino, 44
Phil 343; Escobar vs. Locsin, 74 PhiL 86) this remedy is no longer available
to Juliana Caragay. Mariano de Vera's land, Lot 1, Psu-24206, was
registered on September 11, 1947 (Exhibit"C") and it was only on March 28,
1967 when the defendants filed their original answer that Caragay sought the
reconveyance to her of the 3,732 square meters. Thus, her claim for
reconveyance based on implied or constructive trust has prescribed after 10
years (Banaga vs. Soler, L-15717, June 30,1961; J.M. Tuason & Co. vs.
Magdangal, L-15539, Jan. 30, 1962; Alzona vs. Capunitan, 4 SCRA 450). In
other words, Mariano de Vera's Original Certificate of Title No. 63 (Exhibit
"C") has become indefeasible. 1

We are constrained to reverse.

The evidence discloses that the Disputed Portion was originally possessed openly,
continuously and uninterruptedly in the concept of an owner by Juan Caragay, the deceased
father of JULIANA, and had been declared in his name under Tax Declaration No. 28694
beginning with the year 1921 (Exhibit "2-C"), later revised by Tax Declaration No. 2298 in
1951 (Exhibit "2-B"). Upon the demise of her father in 1914, JULIANA adjudicated the
property to herself as his sole heir in 1958 (Exhibit "4"), and declared it in her name under
Tax Declaration No. 22522 beginning with the year 1959 (Exhibit "2-A"), later cancelled by
TD No. 3539 in 1966 (Exhibit "2"). Realty taxes were also religiously paid from 1938 to 1972
(Exhibits "3-A" to "3-H"). Tacking the previous possession of her father to her own, they had
been in actual open, continuous and uninterrupted possession in the concept of owner for
about forty five (45) years, until said possession was disturbed in 1966 when ESTRADA
informed JULIANA that the Disputed Portion was registered in Mariano DE VERA's name.

To substantiate her claim of fraud in the inclusion of the Disputed Portion in OCT No. 63,
JULIANA, an unlettered woman, declared that during his lifetime, DE VERA, her first cousin,
and whom she regarded as a father as he was much older, borrowed from her the Tax
Declaration of her land purportedly to be used as collateral for his loan and sugar quota
application; that relying on her cousin's assurances, she acceded to his request and was
made to sign some documents the contents of which she did not even know because of her
ignorance; that she discovered the fraudulent inclusion of the Disputed Portion in OCT No.
63 only in 1966 when ESTRADA so informed her and sought to eject them.

Of significance is the fact, as disclosed by the evidence, that for twenty (20) years from the
date of registration of title in 1947 up to 1967 when this suit for recovery of possession was
instituted, neither the deceased DE VERA up to the time of his death in 1951, nor his
successors-in-interest, had taken steps to possess or lay adverse claim to the Disputed
Portion. They may, therefore be said to be guilty of laches as would effectively derail their
cause of action. Administrator ESTRADA took interest in recovering the said portion only
when he noticed the discrepancy in areas in the Inventory of Property and in the title.

Inasmuch as DE VERA had failed to assert any rights over the Disputed Portion during his
lifetime, nor did he nor his successors-in-interest possess it for a single moment: but that,
JULIANA had been in actual, continuous and open possession thereof to the exclusion of all
and sundry, the inescapable inference is, fraud having been unsubstantiated, that it had
been erroneously included in OCT No. 63. The mistake is confirmed by the fact that
deducting 3,732 sq. ms., the area of the Disputed Portion from 8,752 sq. ms., the area of Lot
1 in OCT No. 63, the difference is 5,020 sq. ms., which closely approximates the area of
5,147 sq. ms., indicated in the Inventory of Property of DE VERA. In fact, the widow by
limiting the area in said Inventory to only 5,147 sq. ms., in effect, recognized and admitted
that the Disputed Portion of 3,132 sq. ms., did not form part of the decedent's estate.

The foregoing conclusion does not necessarily wreak havoc on the indefeasibility of a
Torrens title. For, mere possession of a certificate of title under the Torrens System is not
conclusive as to the holder's true ownership of all the property described therein for he does
not by virtue of said certificate alone become the owner of the land illegally included. 2 A Land
Registration Court has no jurisdiction to decree a lot to persons who have never asserted any
right of ownership over it.

... Obviously then, the inclusion of said area in the title of Lot No. 8151 is void
and of no effect for a land registration Court has no jurisdiction to decree a lot
to persons who have put no claim in it and who have never asserted any right
of ownership over it. The Land Registration Act as well as the Cadastral Act
protects only the holders of a title in good faith and does not permit its
provisions to be used as a shield for the commission of fraud, or that one
should enrich himself at the expense of another. 3

JULIANA, whose property had been wrongfully registered in the name of another, but which
had not yet passed into the hands of third parties, can properly seek its reconveyance.

The remedy of the landowner whose property has been wrongfully or

erroneously registered in another's name is, after one year from the date of
the decree, not to set aside the decree, but, respecting the decree as
incontrovertible and no longer open to review, to bring an ordinary action in
the ordinary court of justice for reconveyance or, if the property has passed
into the hands of an innocent purchaser for value, for damages. 4

Prescription cannot be invoked against JULIANA for the reason that as lawful possessor and
owner of the Disputed Portion, her cause of action for reconveyance which, in effect, seeks
to quiet title to the property, falls within settled jurisprudence that an action to quiet title to
property in one's possession is imprescriptible. 5 Her undisturbed possession over a period of
fifty two (52) years gave her a continuing right to seek the aid of a Court of equity to determine
the nature of the adverse claim of a third party and the effect on her own title. 6

Besides, under the circumstances, JULIANA's right to quiet title, to seek reconveyance, and
to annul OCT. No. 63 accrued only in 1966 when she was made aware of a claim adverse to
her own. It was only then that the statutory period of prescription may be said to have
commenced to run against her, following the pronouncement in Faja vs. Court of Appeals,
supra, a case almost Identical to this one.
 ... Inasmuch as it is alleged in paragraph 3 of Frial's complaint, that Felipa
Faja has been in possession of the property since 1945 up to the present for
a period of 30 years, her cause of action for reconveyance, which in effect
seeks to quiet her title to the property, falls within that rule. If at all, the period
of prescription began to run against Felipa Faja only from the time she was
served with copy of the complaint in 1975 giving her notice that the property
she was occupying was titled in the name of Indalecio Frial. There is settled
jurisprudence that one who is in actual possession of a piece of land claiming
to be owner thereof may wait until his possession is disturbed or his title is
attacked before taking steps to vindicate his right, the reason for the rule
being, that his undisturbed possession gives him a continuing right to seek
the aid of a court of equity to ascertain and determine the nature of the
adverse claim of a third party and its effect on his own title, which right can
be claimed only by one who is in possession. No better situation can be
conceived at the moment for Us to apply this rule on equity than that of
herein petitioners whose mother, Felipa Faja, was in possession of the
litigated property for no less than 30 years and was suddenly confronted with
a claim that the land she had been occupying and cultivating all these years,
was titled in the name of a third person. We hold that in such a situation the
right to quiet title to the property, to seek its reconveyance and annul any
certificate of title covering it, accrued only from the time the one in
possession was made aware of a claim adverse to his own, and it is only
then that the statutory period of prescription commences to run against such
possessor.

WHEREFORE, the judgment under review is hereby REVERSED and SET ASIDE, and
another one entered ordering private respondent Salvador Estrada, as Administrator of the
Estate of the Deceased, Mariano de Vera, to cause the segregation of the disputed portion of
3,732 square meters forming part of Lot No. 1, Psu-24206, Case No. 44, GLRO Rec. No.
117, presently occupied by petitioner Juliana Caragay-Layno, and to reconvey the same to
said petitioner. After the segregation shall have been accomplished, the Register of Deeds of
Pangasinan is hereby ordered to issue a new certificate of title covering said 3,732 sq. m.
portion in favor of petitioner, and another crtificate of title in favor of the Estate of the
deceased, Mariano de Vera covering the remaining portion of 5,0520 square meters. No
costs.
G.R. No. 78178 April 15, 1988

DELIA BAILON-CASILAO, LUZ PAULINO-ANG, EMMA PAULINO-YBANEZ, NILDA

PAULINO-TOLENTINO, and SABINA BAILON, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and CELESTINO AFABLE, respondents.

Veronico E. Rubio for petitioners.

Mario G. Fortes for private-respondent.

CORTES, J.:

The fate of petitioners' claim over a parcel of land rests ultimately on a determination of
whether or not said petitioners are chargeable with such laches as may effectively bar their
present action.

The petitioners herein filed a case for recovery of property and damages with notice of lis
pendens on March 13, 1981 against the defendant and herein private respondent, Celestino
Afable. The parcel of land involved in this case, with an area of 48,849 square meters, is
covered by Original Certificate of Title No. 1771 issued on June 12, 1931, in the names of
Rosalia, Gaudencio, Sabina Bernabe, Nenita and Delia, all surnamed Bailon, as co-owners,
each with a 1/6 share. Gaudencio and Nenita are now dead, the latter being represented in
this case by her children. Luz, Emma and Nilda. Bernabe went to China in 1931 and had not
been heard from since then [Decision of the Court of Appeals, Rollo, p. 39].

It appears that on August 23, 1948, Rosalia Bailon and Gaudencio Bailon sold a portion of
the said land consisting of 16,283 square meters to Donato Delgado. On May 13, 1949,
Rosalia Bailon alone sold the remainder of the land consisting of 32,566 square meters to
Ponciana V. Aresgado de Lanuza. On the same date, Lanuza acquired from Delgado the
16,283 square meters of land which the latter had earlier acquired from Rosalia and
Gaudencio. On December 3, 1975, John Lanuza, acting under a special power of attorney
given by his wife, Ponciana V. Aresgado de Lanuza, sold the two parcels of land to Celestino
Afable, Sr.

In all these transfers, it was stated in the deeds of sale that the land was not registered under
the provisions of Act No. 496 when the fact is that it is. It appears that said land had been
successively declared for taxation first, in the name of Ciriaca Dellamas, mother of the
registered co-owners, then in the name of Rosalia Bailon in 1924, then in that of Donato
Delgado in 1936, then in Ponciana de Lanuza's name in 1962 and finally in the name of
Celestino Afable, Sr. in 1983.

In his answer to the complaint filed by the herein petitioners, Afable claimed that he had
acquired the land in question through prescription and contended that the petitioners were
guilty of laches.He later filed a third-party complaint against Rosalia Bailon for damages
allegedly suffered as a result of the sale to him of the land.

After trial, the lower court rendered a decision:

 1. Finding and declaring Celestino Afable, a co-owner of the land described
in paragraph III of the complaint having validly bought the two-sixth (2/6)
respective undivided shares of Rosalia Bailon and Gaudencio Bailon;

2. Finding and declaring the following as pro-indiviso co-owners, having 1/6

share each, of the property described in paragraph III of the complaint, to wit:

a. Sabina Bailon

b. Bernabe Bailon

c. Heirs of Nenita Bailon-Paulino

d. Delia Bailon-Casilao;

3. Ordering the segregation of the undivided interests in the property in order

to terminate co-ownership to be conducted by any Geodetic Engineer
selected by the parties to delineate the specific part of each of the co-owners.

4. Ordering the defendant to restore the possession of the plaintiffs

respective shares as well as all attributes of absolute dominion;

5. Ordering the defendant to pay the following:

a. P5,000.00 as damages;

b. P2,000.00 as attorney's fees and;

c. to pay the costs.

[Decision of the Trial Court, Rollo, p. 37-38].

On appeal, the respondent Court of Appeals affirmed the decision of the lower court insofar
as it held that prescription does not he against plaintiffs-appellees because they are co-
owners of the original vendors. However, the appellate court declared that, although
registered property cannot be lost by prescription, nevertheless, an action to recover it may
be barred by laches, citing the ruling in Mejia de Lucaz v. Gamponia [100 Phil. 277 (1956)].
Accordingly, it held the petitioners guilty of laches and dismissed their complaint. Hence, this
petition for review on certiorari of the decision of the Court of Appeals.

The principal issue to be resolved in this case concerns the applicability of the equitable
doctrine of laches. Initially though, a determination of the effect of a sale by one or more co-
owners of the entire property held in common without the consent of all the co-owners and of
the appropriate remedy of the aggrieved co-owners is required.

The rights of a co-owner of a certain property are clearly specified in Article 493 of the Civil
Code.Thus:

Art. 493. Each co-owner shall have the full ownership of his part and of the
acts 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
mortgage, with respect to the co-owners, shall be limited to the portion which
may be allotted to him in the division upon the termination of the co-
ownership. [Emphasis supplied.]

As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his,
the sale will affect only his own share but not those of the other co-owners who did not
consent to the sale [Punsalan v. Boon Liat 44 Phil. 320 (1923)]. This is because under the
aforementioned codal provision, the sale or other disposition affects only his undivided share
and the transferee gets only what would correspond to his grantor in the partition of the thing
owned in common.[Ramirez v. Bautista, 14 Phil. 528 (1909)]. Consequently, by virtue of the
sales made by Rosalia and Gaudencio Bailon which are valid with respect to their
proportionate shares, and the subsequent transfers which culminated in the sale to private
respondent Celestino Afable, the said Afable thereby became a co-owner of the disputed
parcel of land as correctly held by the lower court since the sales produced the effect of
substituting the buyers in the enjoyment thereof [Mainit v. Bandoy, 14 Phil. 730 (1910)].

From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided
share, a sale of the entire property by one co-owner without the consent of the other co-
owners is not null and void. However, only the rights of the co-owner-seller are transferred,
thereby making the buyer a co-owner of the property.

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 co-owners 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. Neither recovery of possession nor restitution can be granted since
the defendant buyers are legitimate proprietors and possessors in joint ownership of the
common property claimed [Ramirez v. Bautista, supra].

As to the action for petition, neither prescription nor laches can be invoked.

In the light of the attendant circumstances, defendant-appellee's defense of prescription is a

vain proposition. Pursuant to Article 494 of the Civil Code, '(n)o co-owner shall be obliged to
remain in the co-ownership. Such co-owner may demand at anytime the partition of the thing
owned in common, insofar as his share is concerned.' [Emphasis supplied.] In Budiong v.
Bondoc [G.R. No. L-27702, September 9, 1977, 79 SCRA 241, this Court has interpreted
said provision of law to mean that the action for partition is imprescriptible or cannot be
barred by prescription. For Article 494 of the Civil Code explicitly declares: "No prescription
shall lie in favor of a co-owner or co- heir so long as he expressly or impliedly recognizes the
co-ownership."

Furthermore, the disputed parcel of land being registered under the Torrens System, the
express provision of Act No. 496 that '(n)o title to registered land in derogation to that of the
registered owner shall be acquired by prescription or adverse possession' is squarely
applicable. Consequently, prescription will not lie in favor of Afable as against the petitioners
who remain the registered owners of the disputed parcel of land.
It is argued however, that as to the petitioners Emma, Luz and Nelda who are not the
registered co-owners but merely represented their deceased mother, the late Nenita Bailon,
prescription lies.Respondents bolster their argument by citing a decision of this Court
in Pasion v. Pasion [G.R.No. L-15757, May 31, 1961, 2 SCRA 486, 489] holding that "the
imprescriptibility of a Torrens title can only be invoked by the person in whose name the title
is registered" and that 'one who is not the registered owner of a parcel of land cannot invoke
imprescriptibility of action to claim the same.'

Reliance on the aforesaid Pasion case is futile. The ruling therein applies only against
transferees other than direct issues or heirs or to complete strangers. The rational is clear:

If prescription is unavailing against the registered owner, it must be equally

unavailing against the latter's hereditary successors, because they merely
step into the shoes of the decedent by operation of law (New Civil Code,
Article 777; Old Civil Code, Article 657), the title or right undergoing no
change by its transmission mortis causa [Atus, et al., v. Nunez, et al., 97 Phil.
762, 764].

The latest pronouncement of this Court in Umbay v. Alecha [G. R. No. 67284, March 18,
1985, 135 SCRA 427, 429], which was promulgated subsequent to the Pasion case
reiterated the Atus doctrine. Thus:

Prescription is unavailing not only against the registered owner but also
against his hereditary successors, because they merely step into the shoes
of the decedent by operation of law and are merely the continuation of the
personality of their predecessor-in-interest. [Barcelona v. Barcelona, 100
Phil. 251, 257].

Laches is likewise unavailing as a shield against the action of herein petitioners.

Well-stated in this jurisdiction are the four basic elements of laches, namely: (1) conduct on
the part of the defendant or of one under whom he claims, giving rise to the situation of
which complaint is made and for which the complainant seeks a remedy; (2) delay in
asserting the corporations complainant's rights, the complainant having had knowledge or
notice of the defendant's conduct and having been afforded an opportunity to institute suit;
(3) lack of knowledge or notice on the part of the defendant that the complainant would
assert the right on which he bases his suit; and, (4) injury or prejudice to the defendant in the
event relief is accorded to the complainant, or the suit is not held to be barred [Go China
Gun, et al. v. Co Cho et al., 96 Phil. 622 (1955)].

While the first and last elements are present in this case, the second and third elements are
missing.

The second element speaks of delay in asserting the complainant's rights. However, the
mere fact of delay is insufficient to constitute, laches. It is required that (1) complainant must
have had knowledge of the conduct of defendant or of one under whom he claims and (2) he
must have been afforded an opportunity to institute suit. This court has pointed out that
laches is not concerned with the mere lapse of time. Thus:

Laches has been defined as the failure or neglect, for an unreasonable

length of time to do that which by exercising due diligence could or should
have been done earlier; 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. Tijam, et al., v. Sibonghanoy,
G.R. No. L-21450, April 25, 1968, 23 SCRA 29,35; Tendo v. Zamacoma,
G.R. No. L-63048, August 7, 1985, 138 SCRA 78, 90].

The doctrine of "laches" or of "stale demands" is based upon grounds of

public policy which requires for the peace of society, the discouragement of
stale claims and unlike the statute of limitations, is not a mere question of
time but is principally a question of inequity or unfairness of permitting a right
or claim to be enforced or asserted," [Tijam v. Sibonghanoy, supra, p. 35].
[Emphasis supplied.]

It must be noted that while there was delay in asserting petitioners' rights, such delay was
not attended with any knowledge of the sale nor with any opportunity to bring suit. In the first
place, petitioners had no notice of the sale made by their eldest sister. It is undisputed that
the petitioner co-owners had entrusted the care and management of the parcel of land to
Rosalia Bailon who was the oldest among them [TSN, July 27, 1983, p. 14]. In fact, Nicanor
Lee, a son of Rosalia, who was presented as a witness by the plaintiffs-petitioners, testified
on cross-examination that his mother was only the administrator of the land as she is the
eldest and her brothers and sisters were away [TSN, October 5, 1983, p. 15]. Indeed, when
Delia Bailon-Casilao left Sorsogon in 1942 after she got married, it was only in 1983 that she
returned. Sabina on the other hand, is said to be living in Zamboanga while Bernabe who left
for China in 1931 has not been heard from since then. Consequently, when Rosalia, from
whom the private respondent derived his title, made the disputed sales covering the entire
property, the herein petitioners were unaware thereof.

In the second place, they were not afforded an opportunity to bring suit inasmuch as until
1981, they were kept in the dark about the transactions entered into by their sister. It was
only when Delia Bailon-Casilao returned to Sorsogon in 1981 that she found out about the
sales and immediately, she and her co-petitioners filed the present action for recovery of
property. The appellate court thus erred in holding that 'the petitioners did nothing to show
interest in the land." For the administration of the parcel of land was entrusted to the oldest
co-owner who was then in possession thereof precisely because the other co-owners cannot
attend to such a task as they reside outside of Sorsogon where the land is situated. Her co-
owners also allowed her to appropriate the entire produce for herself because it was not
even enough for her daily consumption [TSN, October 5, 1983, pp. 17-18]. And since
petitioner was the one receiving the produce, it is but natural that she was the one to take
charge of paying the real estate taxes. Now, if knowledge of the sale by Rosalia was
conveyed to the petitioners only later, they cannot be faulted for the acts of their co-owner
who failed to live up to the trust and confidence expected of her. In view of the lack of
knowledge by the petitioners of the conduct of Rosalia in selling the land without their
consent in 1975 and the absence of any opportunity to institute the proper action until 1981,
laches may not be asserted against the petitioners.

The third element of laches is likewise absent. There was no lack of knowledge or notice on
the part of the defendant that the complainants would assert the right on which they base the
suit. On the contrary, private respondent is guilty of bad faith in purchasing the property as
he knew that the property was co-owned by six persons and yet, there were only two
signatories to the deeds of sale and no special authorization to self was granted to the two
sellers by the other co-owners.
Even as the land here was misrepresented in the deeds of sale as "unregistered," the truth
was that Afable already had notice that the land was titled in the name of six persons by
virtue of the Certificate of Title which was already in his possession even before the sale.
Such fact is apparent from his testimony before the court a quo:

COURT:

Q: From whom did you get the certificate of Title?

A: When it was mortgaged by Ponciana Aresgado.

Q: It was mortgaged to you before you bought it?

A: Yes, Your Honor. (TSN, March 5, 1984, p. 12) When

cross-examined, he stated:

Q: Mr. Witness, the original Certificate of Title was given to

you in the year 1974, was it not?

A: 1975.

Q: In 1975, you already discovered that the title was in the

name of several persons, is it not?

A: Yes, sir.

Q: When you discovered that it is in the name of several

persons, you filed a case in court for authority to cancel the
title to be transferred in your name, is it not?

A: Yes, sir.

Q: And that was denied by the Court of First Instance of

Sorsogon because there was ordinary one signatory to the
deed of sale instead of six, was it not?

A: Not one but two signatories.

[Decision of the Regional Trial Court of Sorsogon, Rollo, p. 35]

Such actual knowledge of the existence of other co-owners in whose names the lot subject
of the sale was registered should have prompted a searching inquiry by Afable considering
the well- known rule in this jurisdiction that:

... a person dealing with a registered land has a right to rely upon the face of
the Torrens certificate of title and to dispense with the need of inquiring
further, except when the party concerned has actual knowledge of facts and
circumstances that would impel a reasonably cautions man to make such
inquiry. [Gonzales v. IAC and Rural Bank of Pavia, Inc., G.R. No. 69622,
January 29, 1988).
Moreover, the undisputed fact is that petitioners are relatives of his wife. As a genuine
gesture of good faith, he should have contacted the petitioners who were still listed as co-
owners in the certificate of title which was already in his possession even before the sale. In
failing to exercise even a minimum degree of ordinary prudence required by the situation, he
is deemed to have bought the lot at his own risk. Hence any prejudice or injury that may be
occasioned to him by such sale must be borne by him.

Indeed, aware of the flaws impairing his title, Afable went to the herein petitioner Delia
Bailon-Casilao, asking the latter to sign a document obviously to cure the flaw [TSN, July 27,
1983, p.6]. Later, he even filed a petition in the Court of First Instance to register the title in
his name which was denied as aforesaid.

It may be gleaned from the foregoing examination of the facts that Celestino Afable is not a
buyer in good faith. Laches being an equitable defense, he who invokes it must come to the
court with clean hands.

WHEREFORE, the petition for certiorari is hereby GRANTED, the challenged decision of the
Court of Appeals is SET ASIDE, and the decision of the trial court is REINSTATED.

SO ORDERED.
G.R. No. L-29972 January 26, 1976

ROSARIO CARBONELL, petitioner,

vs.
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA INFANTE and RAMON
INFANTE, respondents.

MAKASIAR, J.

Petitioner seeks a review of the resolution of the Court of Appeals (Special Division of Five)
dated October 30, 1968, reversing its decision of November 2, 1967 (Fifth Division), and its
resolution of December 6, 1968 denying petitioner's motion for reconsideration.

The dispositive part of the challenged resolution reads:

Wherefore, the motion for reconsideration filed on behalf of appellee Emma

Infante, is hereby granted and the decision of November 2, 1967, is hereby
annulled and set aside. Another judgement shall be entered affirming in
toto that of the court a quo, dated January 20, 1965, which dismisses the
plaintiff's complaint and defendant's counterclaim.

Without costs.

The facts of the case as follows:

Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, was the
owner of the parcel of land herein involve with improvements situated at 179 V. Agan St.,
San Juan, Rizal, having an area of some one hundred ninety-five (195) square meters, more
or less, covered by TCT No. 5040 and subject to mortgage in favor of the Republic Savings
Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, a cousin and adjacent neighbor
of respondent Poncio, and also from the Batanes Islands, lived in the adjoining lot at 177 V.
Agan Street.

Both petitioners Rosario Carbonell and respondent Emma Infante offered to buy the said lot
from Poncio (Poncio's Answer, p. 38, rec. on appeal).

Respondent Poncio, unable to keep up with the installments due on the mortgage,
approached petitioner one day and offered to sell to the latter the said lot, excluding the
house wherein respondent lived. Petitioner accepted the offer and proposed the price of
P9.50 per square meter. Respondent Poncio, after having secured the consent of his wife
and parents, accepted the price proposed by petitioner, on the condition that from the
purchase price would come the money to be paid to the bank.

Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and secured
the consent of the President thereof for her to pay the arrears on the mortgage and to
continue the payment of the installments as they fall due. The amount in arrears reached a
total sum of P247.26. But because respondent Poncio had previously told her that the
money, needed was only P200.00, only the latter amount was brought by petitioner
constraining respondent Jose Poncio to withdraw the sum of P47.00 from his bank deposit
with Republic Savings Bank. But the next day, petitioner refunded to Poncio the sum of
P47.00.

On January 27, 1955, petitioner and respondent Poncio, in the presence of a witness, made
and executed a document in the Batanes dialect, which, translated into English, reads:

CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM

JOSE PONCIO

Beginning today January 27, 1955, Jose Poncio can start living on the lot
sold by him to me, Rosario Carbonell, until after one year during which time
he will not pa anything. Then if after said one can he could not find an place
where to move his house, he could still continue occupying the site but he
should pay a rent that man, be agreed.

(
S
g
d
)

J
O
S
E

P
O
N
C
I
O

(
S
g
d
.
)

R
O
S
A
R
I
O

C
 A
R
B
O
N
E
L
L

(
S
g
d
)

C
O
N
S
T
A
N
C
I
O

M
E
O
N
A
D
A

W
i
t
n
e
s
s

(Pp. 6-7 rec. on appeal).

Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes Islands, to prepare
the formal deed of sale, which she brought to respondent Poncio together with the amount of
some P400.00, the balance she still had to pay in addition to her assuming the mortgaged
obligation to Republic Savings Bank.

Upon arriving at respondent Jose Poncio's house, however, the latter told petitioner that he
could not proceed any more with the sale, because he had already given the lot to
respondent Emma Infants; and that he could not withdraw from his deal with respondent Mrs.
Infante, even if he were to go to jail. Petitioner then sought to contact respondent Mrs.
Infante but the latter refused to see her.

On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a gate.

Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse claim
over the land in question with the Office of the Register of Deeds of Rizal. Atty. Garcia
actually sent a letter of inquiry to the Register of Deeds and demand letters to private
respondents Jose Poncio and Emma Infante.

In his answer to the complaint Poncio admitted "that on January 30, 1955, Mrs. Infante
improved her offer and he agreed to sell the land and its improvements to her for P3,535.00"
(pp. 38-40, ROA).

In a private memorandum agreement dated January 31, 1955, respondent Poncio indeed
bound himself to sell to his corespondent Emma Infante, the property for the sum of
P2,357.52, with respondent Emma Infante still assuming the existing mortgage debt in favor
of Republic Savings Bank in the amount of P1,177.48. Emma Infante lives just behind the
houses of Poncio and Rosario Carbonell.

On February 2, 1955, respondent Jose Poncio executed the formal deed of sale in favor of
respondent Mrs. Infante in the total sum of P3,554.00 and on the same date, the latter paid
Republic Savings Bank the mortgage indebtedness of P1,500.00. The mortgage on the lot
was eventually discharged.

Informed that the sale in favor of respondent Emma Infante had not yet been registered, Atty.
Garcia prepared an adverse claim for petitioner, who signed and swore to an registered the
same on February 8, 1955.

The deed of sale in favor of respondent Mrs. Infante was registered only on February 12,
1955. As a consequence thereof, a Transfer Certificate of Title was issued to her but with the
annotation of the adverse claim of petitioner Rosario Carbonell.

Respondent Emma Infante took immediate possession of the lot involved, covered the same
with 500 cubic meters of garden soil and built therein a wall and gate, spending the sum of
P1,500.00. She further contracted the services of an architect to build a house; but the
construction of the same started only in 1959 years after the litigation actually began and
during its pendency. Respondent Mrs. Infante spent for the house the total amount of
P11,929.00.

On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second amended
complaint against private respondents, praying that she be declared the lawful owner of the
questioned parcel of land; that the subsequent sale to respondents Ramon R. Infante and
Emma L. Infante be declared null and void, and that respondent Jose Poncio be ordered to
execute the corresponding deed of conveyance of said land in her favor and for damages
and attorney's fees (pp. 1-7, rec. on appeal in the C.A.).

Respondents first moved to dismiss the complaint on the ground, among others, that
petitioner's claim is unenforceable under the Statute of Frauds, the alleged sale in her favor
not being evidenced by a written document (pp. 7-13, rec. on appeal in the C.A.); and when
said motion was denied without prejudice to passing on the question raised therein when the
case would be tried on the merits (p. 17, ROA in the C.A.), respondents filed separate
answers, reiterating the grounds of their motion to dismiss (pp. 18-23, ROA in the C.A.).

During the trial, when petitioner started presenting evidence of the sale of the land in
question to her by respondent Poncio, part of which evidence was the agreement written in
the Batanes dialect aforementioned, respondent Infantes objected to the presentation by
petitioner of parole evidence to prove the alleged sale between her and respondent Poncio.
In its order of April 26, 1966, the trial court sustained the objection and dismissed the
complaint on the ground that the memorandum presented by petitioner to prove said sale
does not satisfy the requirements of the law (pp. 31-35, ROA in the C.A.).

From the above order of dismissal, petitioner appealed to the Supreme Court (G.R. No. L-
11231) which ruled in a decision dated May 12, 1958, that the Statute of Frauds, being
applicable only to executory contracts, does not apply to the alleged sale between petitioner
and respondent Poncio, which petitioner claimed to have been partially performed, so that
petitioner is entitled to establish by parole evidence "the truth of this allegation, as well as the
contract itself." The order appealed from was thus reversed, and the case remanded to the
court a quo for further proceedings (pp. 26-49, ROA in the C.A.).

After trial in the court a quo; a decision was, rendered on December 5, 1962, declaring the
second sale by respondent Jose Poncio to his co-respondents Ramon Infante and Emma
Infante of the land in question null and void and ordering respondent Poncio to execute the
proper deed of conveyance of said land in favor of petitioner after compliance by the latter of
her covenants under her agreement with respondent Poncio (pp. 5056, ROA in the C.A.).

On January 23, 1963, respondent Infantes, through another counsel, filed a motion for re-trial
to adduce evidence for the proper implementation of the court's decision in case it would be
affirmed on appeal (pp. 56-60, ROA in the C.A.), which motion was opposed by petitioner for
being premature (pp. 61-64, ROA in the C.A.). Before their motion for re-trial could be
resolved, respondent Infantes, this time through their former counsel, filed another motion for
new trial, claiming that the decision of the trial court is contrary to the evidence and the law
(pp. 64-78, ROA in the C.A.), which motion was also opposed by petitioner (pp. 78-89, ROA
in the C.A.).

The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which re-hearing only the
respondents introduced additional evidence consisting principally of the cost of
improvements they introduced on the land in question (p. 9, ROA in the C.A.).

After the re-hearing, the trial court rendered a decision, reversing its decision of December 5,
1962 on the ground that the claim of the respondents was superior to the claim of petitioner,
and dismissing the complaint (pp. 91-95, ROA in the C.A.), From this decision, petitioner
Rosario Carbonell appealed to the respondent Court of Appeals (p. 96, ROA in the C.A.).

On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices Magno
Gatmaitan, Salvador V. Esguerra and Angle H. Mojica, speaking through Justice Magno
Gatmaitan), rendered judgment reversing the decision of the trial court, declaring petitioner
therein, to have a superior right to the land in question, and condemning the defendant
Infantes to reconvey to petitioner after her reimbursement to them of the sum of P3,000.00
plus legal interest, the land in question and all its improvements (Appendix "A" of Petition).

Respondent Infantes sought reconsideration of said decision and acting on the motion for
reconsideration, the Appellate Court, three Justices (Villamor, Esguerra and Nolasco) of
Special Division of Five, granted said motion, annulled and set aside its decision of
November 2, 1967, and entered another judgment affirming in toto the decision of the court a
quo, with Justices Gatmaitan and Rodriguez dissenting (Appendix "B" of Petition).

Petitioner Rosario Carbonell moved to reconsider the Resolution of the Special Division of
Five, which motion was denied by Minute Resolution of December 6, 1968 (but with Justices
Rodriguez and Gatmaitan voting for reconsideration) [Appendix "C" of Petition].

Hence, this appeal by certiorari.

Article 1544, New Civil Code, which is decisive of this case, recites:

If the same thing should have been sold to different vendees, the ownership
shall be transferred to the person who may have first taken possession
thereof in good faith, if it should movable property.

Should it be immovable property, the ownership shall belong to the person

acquiring it who in good faith first recorded it in the Registry of Property.

Should there be no inscription, the ownership shall pertain to the person who
in good faith was first in the possession; and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith (emphasis
supplied).

It is essential that the buyer of realty must act in good faith in registering his deed of sale to
merit the protection of the second paragraph of said Article 1544.

Unlike the first and third paragraphs of said Article 1544, which accord preference to the one
who first takes possession in good faith of personal or real property, the second paragraph
directs that ownership of immovable property should be recognized in favor of one "who in
good faith first recorded" his right. Under the first and third paragraph, good faith must
characterize the act of anterior registration (DBP vs. Mangawang, et al., 11 SCRA 405;
Soriano, et al. vs. Magale, et al., 8 SCRA 489).

If there is no inscription, what is decisive is prior possession in good faith. If there is

inscription, as in the case at bar, prior registration in good faith is a pre-condition to superior
title.

When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer
thereof and the title of Poncio was still in his name solely encumbered by bank mortgage
duly annotated thereon. Carbonell was not aware and she could not have been aware
of any sale of Infante as there was no such sale to Infante then. Hence, Carbonell's prior
purchase of the land was made in good faith. Her good faith subsisted and continued to exist
when she recorded her adverse claim four (4) days prior to the registration of Infantes's deed
of sale. Carbonell's good faith did not cease after Poncio told her on January 31, 1955 of his
second sale of the same lot to Infante. Because of that information, Carbonell wanted an
audience with Infante, which desire underscores Carbonell's good faith. With an aristocratic
disdain unworthy of the good breeding of a good Christian and good neighbor, Infante
snubbed Carbonell like a leper and refused to see her. So Carbonell did the next best thing
to protect her right she registered her adversed claim on February 8, 1955. Under the
circumstances, this recording of her adverse claim should be deemed to have been done in
good faith and should emphasize Infante's bad faith when she registered her deed of sale
four (4) days later on February 12, 1955.

Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is shown
by the following facts, the vital significance and evidenciary effect of which the respondent
Court of Appeals either overlooked of failed to appreciate:

(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was informed
by Poncio that he sold the lot to Infante but several days before Infante registered her deed
of sale. This indicates that Infante knew from Poncio and from the bank of the prior
sale of the lot by Poncio to Carbonell. Ordinarily, one will not refuse to see a neighbor.
Infante lives just behind the house of Carbonell. Her refusal to talk to Carbonell could only
mean that she did not want to listen to Carbonell's story that she (Carbonell) had previously
bought the lot from Poncio.

(2) Carbonell was already in possession of the mortgage passbook [not Poncio's saving
deposit passbook Exhibit "1" Infantes] and Poncio's copy of the mortgage contract,
when Poncio sold the lot Carbonell who, after paying the arrearages of Poncio, assumed the
balance of his mortgaged indebtedness to the bank, which in the normal course of business
must have necessarily informed Infante about the said assumption by Carbonell of the
mortgage indebtedness of Poncio. Before or upon paying in full the mortgage indebtedness
of Poncio to the Bank. Infante naturally must have demanded from Poncio the delivery to her
of his mortgage passbook as well as Poncio's mortgage contract so that the fact of full
payment of his bank mortgage will be entered therein; and Poncio, as well as the bank, must
have inevitably informed her that said mortgage passbook could not be given to her because
it was already delivered to Carbonell.

If Poncio was still in possession of the mortgage passbook and his copy of the mortgage
contract at the time he executed a deed of sale in favor of the Infantes and when the Infantes
redeemed his mortgage indebtedness from the bank, Poncio would have surrendered his
mortgage passbook and his copy of the mortgage contract to the Infantes, who could have
presented the same as exhibits during the trial, in much the same way that the Infantes were
able to present as evidence Exhibit "1" Infantes, Poncio's savings deposit passbook, of
which Poncio necessarily remained in possession as the said deposit passbook was never
involved in the contract of sale with assumption of mortgage. Said savings deposit passbook
merely proves that Poncio had to withdraw P47.26, which amount was tided to the sum of
P200.00 paid by Carbonell for Poncio's amortization arrearages in favor of the bank on
January 27, 1955; because Carbonell on that day brought with her only P200.00, as Poncio
told her that was the amount of his arrearages to the bank. But the next day Carbonell
refunded to Poncio the sum of P47.26.

(3) The fact that Poncio was no longer in possession of his mortgage passbook and that the
said mortgage passbook was already in possession of Carbonell, should have compelled
Infante to inquire from Poncio why he was no longer in possession of the mortgage
passbook and from Carbonell why she was in possession of the same (Paglago, et. al vs.
Jara et al 22 SCRA 1247, 1252-1253). The only plausible and logical reason why Infante did
not bother anymore to make such injury , w because in the ordinary course of business the
bank must have told her that Poncio already sold the lot to Carbonell who thereby assumed
the mortgage indebtedness of Poncio and to whom Poncio delivered his mortgage passbook.
Hoping to give a semblance of truth to her pretended good faith, Infante snubbed Carbonell's
request to talk to her about the prior sale to her b Poncio of the lot. As aforestated, this is not
the attitude expected of a good neighbor imbued with Christian charity and good will as well
as a clear conscience.

(4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly
annotated on Poncio's title, four [4] days before Infante registered on February 12, 1955 her
deed of sale executed on February 2, 1955. Here she was again on notice of the prior sale to
Carbonell. Such registration of adverse claim is valid and effective (Jovellanos vs. Dimalanta,
L-11736-37, Jan. 30, 1959, 105 Phil. 1250-51).

(5) In his answer to the complaint filed by Poncio, as defendant in the Court of First Instance,
he alleged that both Mrs. Infante and Mrs. Carbonell offered to buy the lot at P15.00 per
square meter, which offers he rejected as he believed that his lot is worth at least P20.00 per
square meter. It is therefore logical to presume that Infante was told by Poncio and
consequently knew of the offer of Carbonell which fact likewise should have put her on her
guard and should have compelled her to inquire from Poncio whether or not he had already
sold the property to Carbonell.

As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the preceding
case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante (1-11231, May
12, 1958), Poncio alleged in his answer:

... that he had consistently turned down several offers, made by plaintiff, to
buy the land in question, at P15 a square meter, for he believes that it is
worth not less than P20 a square meter; that Mrs. Infante, likewise, tried to
buy the land at P15 a square meter; that, on or about January 27, 1955,
Poncio was advised by plaintiff that should she decide to buy the property at
P20 a square meter, she would allow him to remain in the property for one
year; that plaintiff then induced Poncio to sign a document, copy of which if
probably the one appended to the second amended complaint; that Poncio
signed it 'relying upon the statement of the plaintiff that the document was a
permit for him to remain in the premises in the event defendant decided to
sell the property to the plaintiff at P20.00 a square meter'; that on January 30,
1955, Mrs. Infante improved her offer and agreed to sell the land and its
improvement to her for P3,535.00; that Poncio has not lost 'his mind,' to sell
his property, worth at least P4,000, for the paltry sum P1,177.48, the amount
of his obligation to the Republic Saving s Bank; and that plaintiff's action is
barred by the Statute of Frauds. ... (pp. 38-40, ROA, emphasis supplied).

II

EXISTENCE OF THE PRIOR SALE TO CARBONELL

DULY ESTABLISHED

(1) In his order dated April 26, 1956 dismissing the complaint on the ground that the private
document Exhibit "A" executed by Poncio and Carbonell and witnessed by Constancio
Meonada captioned "Contract for One-half Lot which I Bought from Jose Poncio," was not
such a memorandum in writing within the purview of the Statute of Frauds, the trial judge
himself recognized the fact of the prior sale to Carbonell when he stated that "the
memorandum in question merely states that Poncio is allowed to stay in the property which
he had sold to the plaintiff. There is no mention of the reconsideration, a description of the
property and such other essential elements of the contract of sale. There is nothing in the
memorandum which would tend to show even in the slightest manner that it was intended to
be an evidence of contract sale. On the contrary, from the terms of the memorandum, it
tends to show that the sale of the property in favor of the plaintiff is already an accomplished
act. By the very contents of the memorandum itself, it cannot therefore, be considered to be
the memorandum which would show that a sale has been made by Poncio in favor of the
plaintiff" (p. 33, ROA, emphasis supplied). As found by the trial court, to repeat the said
memorandum states "that Poncio is allowed to stay in the property which he had sold to the
plaintiff ..., it tends to show that the sale of the property in favor of the plaintiff is already an
accomplished act..."

(2) When the said order was appealed to the Supreme Court by Carbonell in the previous
case of Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante
(L-11231, supra), Chief Justice Roberto Concepcion, then Associate Justice, speaking for a
unanimous Court, reversed the aforesaid order of the trial court dismissing the complaint,
holding that because the complaint alleges and the plaintiff claims that the contract of sale
was partly performed, the same is removed from the application of the Statute of Frauds and
Carbonell should be allowed to establish by parol evidence the truth of her allegation of
partial performance of the contract of sale, and further stated:

Apart from the foregoing, there are in the case at bar several circumstances
indicating that plaintiff's claim might not be entirely devoid of factual basis.
Thus, for instance, Poncio admitted in his answer that plaintiff had offered
several times to purchase his land.

Again, there is Exhibit A, a document signed by the defendant. It is in the

Batanes dialect, which, according to plaintiff's uncontradicted evidence, is the
one spoken by Poncio, he being a native of said region. Exhibit A states that
Poncio would stay in the land sold by him to plaintiff for one year, from
January 27, 1955, free of charge, and that, if he cannot find a place where to
transfer his house thereon, he may remain upon. Incidentally, the allegation
in Poncio's answer to the effect that he signed Exhibit A under the belief that
it "was a permit for him to remain in the premises in the" that "he decided to
sell the property" to the plaintiff at P20 a sq. m." is, on its face, somewhat
difficult to believe. Indeed, if he had not decided as yet to sell the land to
plaintiff, who had never increased her offer of P15 a square meter, there was
no reason for Poncio to get said permit from her. Upon the other hand, if
plaintiff intended to mislead Poncio, she would have caused Exhibit A to be
drafted, probably, in English , instead of taking the trouble of seeing to it that
it was written precisely in his native dialect, the Batanes. Moreover, Poncio's
signature on Exhibit A suggests that he is neither illiterate nor so ignorant as
to sign document without reading its contents, apart from the fact that
Meonada had read Exhibit A to him and given him a copy thereof, before he
signed thereon, according to Meonada's uncontradicted testimony.

Then, also, defendants say in their brief:

The only allegation in plaintiff's complaint that bears any

relation to her claim that there has been partial performance
of the supposed contract of sale, is the notation of the sum of
P247.26 in the bank book of defendant Jose Poncio. The
noting or jotting down of the sum of P247.26 in the bank book
of Jose Poncio does not prove the fact that the said amount
was the purchase price of the property in question. For all we
 knew, the sum of P247.26 which plaintiff claims to have paid
to the Republic Savings Bank for the account of the
defendant, assuming that the money paid to the Republic
Savings Bank came from the plaintiff, was the result of some
usurious loan or accomodation, rather than earnest money or
part payment of the land. Neither is it competent or
satisfactory evidence to prove the conveyance of the land in
question the fact that the bank book account of Jose Poncio
happens to be in the possession of the plaintiff. (Defendants-
Appellees' brief, pp. 25-26).

How shall We know why Poncio's bank deposit book is in plaintiffs

possession, or whether there is any relation between the P247.26 entry
therein and the partial payment of P247.26 allegedly made by plaintiff to
Poncio on account of the price of his land, if we do not allow the plaintiff to
explain it on the witness stand? Without expressing any opinion on the merits
of plaintiff's claim, it is clear, therefore, that she is entitled , legally as well as
from the viewpoint of equity, to an opportunity to introduce parol evidence in
support of the allegations of her second amended complaint. (pp. 46-49,
ROA, emphasis supplied).

(3) In his first decision of December 5, 1962 declaring null and void the sale in favor of the
Infantes and ordering Poncio to execute a deed of conveyance in favor of Carbonell, the trial
judge found:

... A careful consideration of the contents of Exh. 'A' show to the satisfaction
of the court that the sale of the parcel of land in question by the defendant
Poncio in favor of the plaintiff was covered therein and that the said Exh. "a'
was also executed to allow the defendant to continue staying in the premises
for the stated period. It will be noted that Exh. 'A' refers to a lot 'sold by him to
me' and having been written originally in a dialect well understood by the
defendant Poncio, he signed the said Exh. 'A' with a full knowledge and
consciousness of the terms and consequences thereof. This therefore,
corroborates the testimony of the plaintiff Carbonell that the sale of the land
was made by Poncio. It is further pointed out that there was a partial
performance of the verbal sale executed by Poncio in favor of the plaintiff,
when the latter paid P247.26 to the Republic Savings Bank on account of
Poncio's mortgage indebtedness. Finally, the possession by the plaintiff of
the defendant Poncio's passbook of the Republic Savings Bank also adds
credibility to her testimony. The defendant contends on the other hand that
the testimony of the plaintiff, as well as her witnesses, regarding the sale of
the land made by Poncio in favor of the plaintiff is inadmissible under the
provision of the Statute of Fraud based on the argument that the note Exh.
"A" is not the note or memorandum referred to in the to in the Statute of
Fraud. The defendants argue that Exh. "A" fails to comply with the
requirements of the Statute of Fraud to qualify it as the note or memorandum
referred to therein and open the way for the presentation of parole evidence
to prove the fact contained in the note or memorandum. The defendant
argues that there is even no description of the lot referred to in the note,
especially when the note refers to only one half lot. With respect to the latter
argument of the Exhibit 'A', the court has arrived at the conclusion that there
is a sufficient description of the lot referred to in Exh. 'A' as none other than
the parcel of land occupied by the defendant Poncio and where he has his
 improvements erected. The Identity of the parcel of land involved herein is
sufficiently established by the contents of the note Exh. "A". For a while, this
court had that similar impression but after a more and thorough consideration
of the context in Exh. 'A' and for the reasons stated above, the Court has
arrived at the conclusion stated earlier (pp. 52-54, ROA, emphasis supplied).

(4) After re-trial on motion of the Infantes, the trial Judge rendered on January 20, 1965
another decision dismissing the complaint, although he found

1. That on January 27, 1955, the plaintiff purchased from the defendant
Poncio a parcel of land with an area of 195 square meters, more or less,
covered by TCT No. 5040 of the Province of Rizal, located at San Juan del
Monte, Rizal, for the price of P6.50 per square meter;

2. That the purchase made by the plaintiff was not reduced to writing except
for a short note or memorandum Exh. A, which also recited that the
defendant Poncio would be allowed to continue his stay in the premises,
among other things, ... (pp. 91-92, ROA, emphasis supplied).

From such factual findings, the trial Judge confirms the due execution of Exhibit "A", only that
his legal conclusion is that it is not sufficient to transfer ownership (pp. 93-94, ROA).

(5) In the first decision of November 2, 1967 of the Fifth Division of the Court of Appeals
composed of Justices Esguerra (now Associate Justice of the Supreme Court), Gatmaitan
and Mojica, penned by Justice Gatmaitan, the Court of Appeals found that:

... the testimony of Rosario Carbonell not having at all been attempted to be
disproved by defendants, particularly Jose Poncio, and corroborated as it is
by the private document in Batanes dialect, Exhibit A, the testimony being to
the effect that between herself and Jose there had been celebrated a sale of
the property excluding the house for the price of P9.50 per square meter, so
much so that on faith of that, Rosario had advanced the sum of P247.26 and
binding herself to pay unto Jose the balance of the purchase price after
deducting the indebtedness to the Bank and since the wording of Exhibit
A, the private document goes so far as to describe their transaction as one of
sale, already consummated between them, note the part tense used in the
phrase, "the lot sold by him to me" and going so far even as to state that from
that day onwards, vendor would continue to live therein, for one year, 'during
which time he will not pay anything' this can only mean that between Rosario
and Jose, there had been a true contract of sale, consummated by delivery
constitutum possession, Art. 1500, New Civil Code; vendor's possession
having become converted from then on, as a mere tenant of vendee, with the
special privilege of not paying rental for one year, it is true that the sale by
Jose Poncio to Rosario Carbonell corroborated documentarily only by Exhibit
A could not have been registered at all, but it was a valid contract
nonetheless, since under our law, a contract sale is consensual, perfected by
mere consent, Couto v. Cortes, 8 Phil 459, so much so that under the New
Civil Code, while a sale of an immovable is ordered to be reduced to a public
document, Art. 1358, that mandate does not render an oral sale of realty
invalid, but merely incapable of proof, where still executory and action is
brought and resisted for its performance, 1403, par. 2, 3; but where already
wholly or partly executed or where even if not yet, it is evidenced by a
 memorandum, in any case where evidence to further demonstrate is
presented and admitted as the case was here, then the oral sale becomes
perfectly good, and becomes a good cause of action not only to reduce it to
the form of a public document, but even to enforce the contract in its
entirety, Art. 1357; and thus it is that what we now have is a case wherein on
the one hand Rosario Carbonell has proved that she had an anterior sale,
celebrated in her favor on 27 January, 1955, Exhibit A, annotated as an
adverse claim on 8 February, 1955, and on other, a sale is due form in favor
of Emma L. Infante on 2 February, 1955, Exhibit 3-Infante, and registered in
due form with title unto her issued on 12 February, 1955; the vital question
must now come on which of these two sales should prevail; ... (pp. 74-76,
rec., emphasis supplied).

(6) In the resolution dated October 30, 1968 penned by then Court of Appeals Justice
Esguerra (now a member of this Court), concurred in by Justices Villamor and Nolasco,
constituting the majority of a Special Division of Five, the Court of Appeals, upon motion of
the Infantes, while reversing the decision of November 2, 1967 and affirming the decision of
the trial court of January 20, 1965 dismissing plaintiff's complaint, admitted the existence and
genuineness of Exhibit "A", the private memorandum dated January 27, 1955, although it did
not consider the same as satisfying "the essential elements of a contract of sale," because it
"neither specifically describes the property and its boundaries, nor mention its certificate of
title number, nor states the price certain to be paid, or contrary to the express mandate of
Articles 1458 and 1475 of the Civil Code.

(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his
decision of November 2, 1967 as well as his findings of facts therein, and reiterated that the
private memorandum Exhibit "A", is a perfected sale, as a sale is consensual and
consummated by mere consent, and is binding on and effective between the parties. This
statement of the principle is correct [pp. 89-92, rec.].

III

ADEQUATE CONSIDERATION OR PRICE FOR THE SALE

IN FAVOR OF CARBONELL

It should be emphasized that the mortgage on the lot was about to be foreclosed by the bank
for failure on the part of Poncio to pay the amortizations thereon. To forestall the foreclosure
and at the same time to realize some money from his mortgaged lot, Poncio agreed to sell
the same to Carbonell at P9.50 per square meter, on condition that Carbonell [1] should pay
(a) the amount of P400.00 to Poncio and 9b) the arrears in the amount of P247.26 to the
bank; and [2] should assume his mortgage indebtedness. The bank president agreed to the
said sale with assumption of mortgage in favor of Carbonell an Carbonell accordingly paid
the arrears of P247.26. On January 27, 1955, she paid the amount of P200.00 to the bank
because that was the amount that Poncio told her as his arrearages and Poncio advanced
the sum of P47.26, which amount was refunded to him by Carbonell the following day. This
conveyance was confirmed that same day, January 27, 1955, by the private document,
Exhibit "A", which was prepared in the Batanes dialect by the witness Constancio Meonada,
who is also from Batanes like Poncio and Carbonell.

The sale did not include Poncio's house on the lot. And Poncio was given the right to
continue staying on the land without paying any rental for one year, after which he should
pay rent if he could not still find a place to transfer his house. All these terms are part of the
consideration of the sale to Carbonell.

It is evident therefore that there was ample consideration, and not merely the sum of
P200.00, for the sale of Poncio to Carbonell of the lot in question.

But Poncio, induced by the higher price offered to him by Infante, reneged on his
commitment to Carbonell and told Carbonell, who confronted him about it, that he would not
withdraw from his deal with Infante even if he is sent to jail The victim, therefore, "of injustice
and outrage is the widow Carbonell and not the Infantes, who without moral compunction
exploited the greed and treacherous nature of Poncio, who, for love of money and without
remorse of conscience, dishonored his own plighted word to Carbonell, his own cousin.

Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma Infante
from the time she enticed Poncio to dishonor his contract with Carbonell, and instead to sell
the lot to her (Infante) by offering Poncio a much higher price than the price for which he sold
the same to Carbonell. Being guilty of bad faith, both in taking physical possession of the lot
and in recording their deed of sale, the Infantes cannot recover the value of the
improvements they introduced in the lot. And after the filing by Carbonell of the complaint in
June, 1955, the Infantes had less justification to erect a building thereon since their title to
said lot is seriously disputed by Carbonell on the basis of a prior sale to her.

With respect to the claim of Poncio that he signed the document Exhibit "A" under the belief
that it was a permit for him to remain in the premises in ease he decides to sell the property
to Carbonell at P20.00 per square meter, the observation of the Supreme Court through Mr.
Chief Justice Concepcion in G.R. No. L-11231, supra, bears repeating:

... Incidentally, the allegation in Poncio's answer to the effect that he signed
Exhibit A under the belief that it 'was a permit for him to remain in the
premises in the event that 'he decided to sell the property' to the plaintiff at
P20.00 a sq. m is, on its face, somewhat difficult to believe. Indeed, if he had
not decided as yet to sell that land to plaintiff, who had never increased her
offer of P15 a square meter, there as no reason for Poncio to get said permit
from her. Upon the they if plaintiff intended to mislead Poncio, she would
have Exhibit A to be drafted, probably, in English, instead of taking the
trouble of seeing to it that it was written precisely in his native dialect, the
Batanes. Moreover, Poncio's signature on Exhibit A suggests that he is
neither illiterate nor so ignorant as to sign a document without reading its
contents, apart from the fact that Meonada had read Exhibit A to him-and
given him a copy thereof, before he signed thereon, according to Meonada's
uncontradicted testimony. (pp. 46-47, ROA).

As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he

reiterated in his dissent from the resolution of the majority of the Special Division. of Five on
October 30, 1968, Exhibit A, the private document in the Batanes dialect, is a valid contract
of sale between the parties, since sale is a consensual contract and is perfected by mere
consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract of realty is all between the
parties and accords to the vendee the right to compel the vendor to execute the proper
public document As a matter of fact, Exhibit A, while merely a private document, can be fully
or partially performed, to it from the operation of the statute of frauds. Being a all consensual
contract, Exhibit A effectively transferred the possession of the lot to the vendee Carbonell
by constitutum possessorium (Article 1500, New Civil Code); because thereunder the vendor
Poncio continued to retain physical possession of the lot as tenant of the vendee and no
longer as knew thereof. More than just the signing of Exhibit A by Poncio and Carbonell with
Constancio Meonada as witness to fact the contract of sale, the transition was further
confirmed when Poncio agreed to the actual payment by at Carbonell of his mortgage
arrearages to the bank on January 27, 1955 and by his consequent delivery of his own
mortgage passbook to Carbonell. If he remained owner and mortgagor, Poncio would not
have surrendered his mortgage passbook to' Carbonell.

IV

IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE MEMORANDUM

EXHIBIT "A"

The claim that the memorandum Exhibit "A" does not sufficiently describe the disputed lot as
the subject matter of the sale, was correctly disposed of in the first decision of the trial court
of December 5, 1962, thus: "The defendant argues that there is even no description of the lot
referred to in the note (or memorandum), especially when the note refers to only one-half lot.
With respect to the latter argument of the defendant, plaintiff points out that one- half lot was
mentioned in Exhibit 'A' because the original description carried in the title states that it was
formerly part of a bigger lot and only segregated later. The explanation is tenable, in (sic)
considering the time value of the contents of Exh. 'A', the court has arrived at the conclusion
that there is sufficient description of the lot referred to in Exh. As none other than the parcel
of lot occupied by the defendant Poncio and where he has his improvements erected. The
Identity of the parcel of land involved herein is sufficiently established by the contents of the
note Exh. 'A'. For a while, this court had that similar impression but after a more and through
consideration of the context in Exh. 'A' and for the reasons stated above, the court has
arrived to (sic) the conclusion stated earlier" (pp. 53-54, ROA).

Moreover, it is not shown that Poncio owns another parcel with the same area, adjacent to
the lot of his cousin Carbonell and likewise mortgaged by him to the Republic Savings Bank.
The transaction therefore between Poncio and Carbonell can only refer and does refer to the
lot involved herein. If Poncio had another lot to remove his house, Exhibit A would not have
stipulated to allow him to stay in the sold lot without paying any rent for one year and
thereafter to pay rental in case he cannot find another place to transfer his house.

While petitioner Carbonell has the superior title to the lot, she must however refund to
respondents Infantes the amount of P1,500.00, which the Infantes paid to the Republic
Savings Bank to redeem the mortgage.

It appearing that the Infantes are possessors in bad faith, their rights to the improvements
they introduced op the disputed lot are governed by Articles 546 and 547 of the New Civil
Code. Their expenses consisting of P1,500.00 for draining the property, filling it with 500
cubic meters of garden soil, building a wall around it and installing a gate and P11,929.00 for
erecting a b ' bungalow thereon, are useful expenditures, for they add to the value of the
property (Aringo vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs.
Ayala de Roxas, 13 Phil. 45).

Under the second paragraph of Article 546, the possessor in good faith can retain the useful
improvements unless the person who defeated him in his possession refunds him the
amount of such useful expenses or pay him the increased value the land may have acquired
by reason thereof. Under Article 547, the possessor in good faith has also the right to
remove the useful improvements if such removal can be done without damage to the land,
unless the person with the superior right elects to pay for the useful improvements or
reimburse the expenses therefor under paragraph 2 of Article 546. These provisions seem to
imply that the possessor in bad faith has neither the right of retention of useful improvements
nor the right to a refund for useful expenses.

But, if the lawful possessor can retain the improvements introduced by the possessor in bad
faith for pure luxury or mere pleasure only by paying the value thereof at the time he enters
into possession (Article 549 NCC), as a matter of equity, the Infantes, although possessors
in bad faith, should be allowed to remove the aforesaid improvements, unless petitioner
Carbonell chooses to pay for their value at the time the Infantes introduced said useful
improvements in 1955 and 1959. The Infantes cannot claim reimbursement for the current
value of the said useful improvements; because they have been enjoying such
improvements for about two decades without paying any rent on the land and during which
period herein petitioner Carbonell was deprived of its possession and use.

WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF THE COURT OF

APPEALS OF OCTOBER 30, 1968 IS HEREBY REVERSED; PETITIONER ROSARIO
CARBONELL IS HEREBY DECLARED TO HAVE THE SUPERIOR RIGHT TO THE LAND
IN QUESTION AND IS HEREBY DIRECTED TO REIMBURSE TO PRIVATE
RESPONDENTS INFANTES THE SUM OF ONE THOUSAND FIVE HUNDRED PESOS
(P1,500.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION; AND
THE REGISTER OF DEEDS OF RIZAL IS HEREBY DIRECTED TO CANCEL TRANSFER
CERTIFICATE OF TITLE NO. 37842 ISSUED IN FAVOR OF PRIVATE RESPONDENTS
INFANTES COVERING THE DISPUTED LOT, WHICH CANCELLED TRANSFER
CERTIFICATE OF TITLE NO. 5040 IN THE NAME OF JOSE PONCIO, AND TO ISSUE A
NEW TRANSFER CERTIFICATE OF TITLE IN FAVOR OF PETITIONER ROSARIO
CARBONELL UPON PRESENTATION OF PROOF OF PAYMENT BY HER TO THE
INFANTES OF THE AFORESAID AMOUNT OF ONE THOUSAND FIVE HUNDRED PESOS
(P1,500.00).

PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED

USEFUL IMPROVEMENTS FROM THE LOT WITHIN THREE (3) MONTHS FROM THE
FINALITY OF THIS DECISION, UNLESS THE PETITIONER ROSARIO CARBONELL
ELECTS TO ACQUIRE THE SAME AND PAYS THE INFANTES THE AMOUNT OF
THIRTEEN THOUSAND FOUR HUNDRED TWENTY-NINE PESOS (P13,429.00) WITHIN
THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION. SHOULD PETITIONER
CARBONELL FAIL TO PAY THE SAID AMOUNT WITHIN THE AFORESTATED PERIOD
OF THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION, THE PERIOD OF
THREE (3) MONTHS WITHIN WHICH THE RESPONDENTS INFANTES MAY REMOVE
THEIR AFOREMENTIONED USEFUL IMPROVEMENTS SHALL COMMENCE FROM THE
EXPIRATION OF THE THREE (3) MONTHS GIVEN PETITIONER CARBONELL TO PAY
FOR THE SAID USEFUL IMPROVEMENTS.

WITH COSTS AGAINST PRIVATE RESPONDENTS.

G.R. No. L-32974 July 30, 1979

BARTOLOME ORTIZ, petitioner,

vs.
HON. UNION C. KAYANAN, in his capacity as Judge of the Court of First Instance of
Quezon, Branch IV; ELEUTERIO ZAMORA, QUIRINO COMINTAN, VICENTE FERRO,
AND GREGORIO PAMISARAN, respondents.

Salonga, Ordo;ez, Yap, Sicat & Associates and Salvador, Ulgado & Carbon for petitioner.

Jose A. Cusi for private respondents.

ANTONIO, J.: 1wph1.t

Petition for certiorari and Prohibition with Preliminary Injunction to nullify the Order of
respondent Judge directing the execution of the final judgment in Civil Case No. C-90,
entitled "Bartolome Ortiz vs. Secretary of Agriculture and Natural Resources, et al.," and the
Writ of Execution issued to implement said Order, allegedly for being inconsistent with the
judgment sought to be enforced.

Civil Case No. C-90 was filed by Bartolome Ortiz who sought the review and/or annulment of
the decision of the Secretary of Agriculture and Natural Resources, giving preference to the
sales applications of private respondents Quirino Comintan and Eleuterio Zamora over Lot
No. 5785, PLS-45, located at Barrio Cabuluan, Calauag, Quezon.

The factual background of the case, as found by respondent Court, is as follows: t.hqw

... The lot in controversy was formerly the subject of Homestead Application
No. 122417 of Martin Dolorico II, plaintiff's ward who died on August 20,
1931; that since then it was plaintiff who continued the cultivation and
possession of the property, without however filing any application to acquire
title thereon; that in the Homestead Application No. 122417, Martin Dolorico
II named his uncle, Martin Dolorico I as his heir and successor in interest, so
that in 1951 Martin Dolorico I executed an affidavit relinquishing his rights
over the property in favor of defendants Quirino Comintan and Eleuterio
Zamora, his grandson and son-in-law, respectively, and requested the
Director of Lands to cancel the homestead application; that on the strength of
the affidavit, Homestead Application No. 122417 was cancelled and
thereafter, defendants Comintan and Zamora filed their respective sales
applications Nos. 8433 and 9258; that plaintiff filed his protest on November
26, 1951 alleging that he should be given preference to purchase the lot
inasmuch as he is the actual occupant and has been in continuous
possession of the same since 1931; and inspite of plaintiff's opposition,
"Portion A" of the property was sold at public auction wherein defendant
Comintan was the only bidder; that on June 8, 1957, investigation was
conducted on plaintiff's protest by Assistant Public Lands Inspector Serapion
 Bauzon who submitted his report to the Regional Land Officer, and who in
turn rendered a decision on April 9, 1958, dismissing plaintiff's claim and
giving due course to defendants' sales applications on the ground that the
relinquishment of the homestead rights of Martin Dolorico I in favor of
Comintan and Zamora is proper, the former having been designated as
successor in interest of the original homestead applicant and that because
plaintiff failed to participate in the public auction, he is forever barred to claim
the property; that plaintiff filed a motion for reconsideration of this decision
which was denied by the Director of Lands in his order dated June 10, 1959;
that, finally, on appeal to the Secretary of Agriculture and Natural Resources,
the decision rendered by the Regional Land Officer was affirmed in toto. 1

On March 22, 1966, respondent Court rendered judgment in the afore-mentioned civil case,
the dispositive portion of which reads as follows: t.hqw

IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby

rendered awarding Lot No. 5785-A of PLS-45, (Calauag Public Land
Subdivision) one-half portion of the property in litigation located at Bo.
Cabuluan, Calauag, Quezon, in favor of defendant QUIRINO COMINTAN,
being the successful bidder in the public auction conducted by the bureau of
Lands on April 18, 1955, and hereby giving due course to the Sales
Application No. 9258 of defendant Eleuterio Zamora over the other half, Lot
No. 5785-B of PLS-45, Calauag, without prejudice to the right of plaintiff
BARTOLOME ORTIZ to participate in the public bidding of the same to be
announced by the Bureau of Lands, Manila. However, should plaintiff
Bartolome Ortiz be not declared the successful bidder thereof, defendants
Quirino Comintan and Eleuterio Zamora are ordered to reimburse jointly said
plaintiff the improvements he has introduced on the whole property in the
amount of THIRTEEN THOUSAND SIX HUNDRED THIRTY-TWO
(P13,632.00) PESOS, the latter having the right to retain the property until
after he has been fully paid therefor, without interest since he enjoys the
fruits of the property in question, with prejudice and with costs again the
plaintiff. 2

Plaintiff appealed the decision to the Court of Appeals.

Two (2) years after the rendition of the judgment by the court a quo, while the case was
pending appeal and upon petition of private respondents Quirino Comintan and Eleuterio
Zamora, respondent Court appointed respondent Vicente Ferro, Clerk of Court, as Receiver
to collect tolls on a portion of the property used as a diversion road. On August 19, 1969, the
Court of Appeals issued a Resolution annulling the Order appointing the Receiver.
Subsequently, on February 19, 1970, the Appellate Court affirmed the decision of the trial
court. A petition for review on certiorari of the decision of the Court of Appeals was denied by
this Court on April 6, 1970. At this point, private respondents filed a petition for appointment
of a new receiver with the court a quo. This petition was granted and the receiver was
reappointed. Petitioner sought the annulment of this Order with the Court of Appeals, but
said Court ruled that its decision had already become final and that the records of the case
were to be remanded to the trial court.

Not satisfied with such denial, petitioner filed a petitioner for certiorari, prohibition and
mandamus with preliminary injunction before this Court, 3 praying for the annulment of the
Order reappointing the Receiver. On July 13, 1970, the petition was dismissed by this Court on
the ground of insufficient showing of grave abuse of discretion.

II

The judgment having become final and executory private respondents filed a motion for the
execution of the same, praying as follows: t.hqw

WHEREFORE, it is respectfully prayed of this Honorable Court to order the

issuance of a writ of execution in accordance with the judgment of this
Honorable Court, confirmed by the Court of Appeals and the Supreme Court,
commanding any lawful officer to deliver to defendants Comintan and
Zamora the land subject of the decision in this case but allowing defendants
to file a bond in such amount as this Honorable Court may fix, in lieu of the
P13,632.00 required to be paid to plaintiff, conditioned that after the
accounting of the tools collected by plaintiff, there is still an amount due and
payable to said plaintiff, then if such amount is not paid on demand, including
the legal interests, said bond shall be held answerable.

Ordering further the plaintiff to render an accounting of the tolls he collected

from March of 1967 to December 31, 1968 and from September 1969 to
March 31, 1970, and deliver said tolls collected to the receiver and if
judgment is already executed, then to Quirino Comintan and Eleuterio
Zamora; and,

Finally, to condemn plaintiff to pay moral damages for withholding the tools
which belong to your movant in an amount this Court may deem just in the
premises. 4

Acting upon the foregoing motion, respondent Judge issued an Order, dated September 23,
1970, stating, among others, the following: t.hqw

The records further disclosed that from March 1967 to December 31, 1968,
piaintiff Bartolome Ortiz collected tolls on a portion of the propertv in question
wherein he has not introduced anv improvement particularlv on Lot No. 5785-
A; PLS-45 awarded to defendant Quirino Comintan, thru which vehicular
traffic was detoured or diverted, and again from September 1969 to March
31, 1970, the plaintiff resumed the collection of tools on the same portion
without rendering any accounting on said tolls to the Receiver, who, was
reappointed after submitting the required bond and specifically authorized
only to collect tolls leaving the harvesting of the improvements to the plaintiff.

xxx xxx xxx

ln virtue of he findings of this Court as contained in the dispositive portion of

its decision, the defendants are jointly obligated to pay the plaintiff in the
amount of P13,632.00 as reasonable value of the improvements he
introduced on the whole property in question, and that he has the right of
retention until fully paid. It can be gleaned from the motion of the defendants
that if plaintiff submits an accounting of the tolls he collected during the
periods above alluded to, their damages of about P25,000.00 can more than
offset their obligation of P13,362.00 in favor of the plaintiff, thereafter the
 possession of the land be delivered to the defendants since the decision of
the Supreme Court has already become final and executory, but in the
interregnum pending such accounting and recovery by the Receiver of the
tolls collected by the plaintiff, the defendants pray that they allowed to put up
a bond in lieu of the said P13,632.00 to answer for damages of the former, if
any.

On the other hand, plaintiff contends in his opposition, admitting that the
decision of the Supreme Court has become final and executory; (1) the offer
of a bond in lieu of payment of P13,632.00 does not, and cannot, satisfy the
condition imposed in the decision of this Court which was affirmed in toto; (2)
the public sale of Portion "B" of the land has still to take place as ordained
before the decision could be executed; and, (3) that whatever sums plaintiff
may derive from the property cannot be set off against what is due him for
the improvements he made, for which he has to be reimbursed as ordered.

xxx xxx xxx

Let it be known that plaintiff does not dispute his having collected tolls during
the periods from March 1967 to December 31, 1968 and from September
1969 to March 31, 1970. The Supreme Court affirmed the decision of this
Court its findings that said tolls belong to the defendant, considering that the
same were collected on a portion of the land question where the plaintiff
did not introduce any improvement. The reimbursement to the plaintiff
pertains only to the value of the improvements, like coconut trees and other
plants which he introduced on the whole property. The tolls collected by the
plaintiff on an unimproved portion naturally belong to the defendants,
following the doctrine on accretion. Further, the reappointment of a Receiver
by this Court was upheld by the Supreme Court when it denied the petition
for certiorari filed by the plaintiff, bolstering the legal claim of defendants over
said tolls. Thus, the decision of the Supreme Court rendered the decision of
this Court retroactive from March 22, 1966 although pending accounting of
the tolls collected by the plaintiff is justified and will not prejudice anybody,
but certainly would substantially satisfy the conditions imposed in the
decision. However, insofar as the one-half portion "B" of the property, the
decision may be executed only after public sale by the Bureau of Lands shall
be accomplished.

WHEREFORE, finding the Motion for Execution filed by the defendants to be

meritorious, the same is granted; provided, however, that they put up a bond
equal the adjudicated amount of P13,632.00 accruing in favor of the plaintiff,
from a reputable or recognized bonding or surety company, conditioned that
after an accounting of the tolls collected by the plaintiff should there be found
out any balance due and payable to him after reckoning said obligation of
P13,632.00 the bond shall be held answerable therefor. 5

Accordingly, a Writ of Execution was issued after private respondent Quirino Comintan had
filed the required bond. The writ directed the Sheriff to enforce the decision of the Court, and
stated, part in, the following:
t.hqw

But should there be found any amount collectible after accounting and
deducting the amount of P3,632.00, you are hereby ordered that of the goods
 and chattels of Bartolome Ortiz of Bo. Kabuluan, Calauag, Quezon, be
caused to be made any excess in the above-metioned amount together with
your lawful fees and that you render same to defendant Quirino Comintan. If
sufficient personal property cannot be found thereof to satisfy this execution
and lawful fees thereon, then you are commanded that of the lands and
buildings of the said BARTOLOME ORTIZ you make the said excess amount
in the manner required by the Rules of Court, and make return of your
proceedings within this Court within sixty (60) days from date of service.

You are also ordered to cause Bartolome Ortiz to vacate the property within
fifteen (15) days after service thereof the defendant Quirino Comintan having
filed the required bond in the amount of THIRTEEN THOUSAND SIX
HUNDRED THIRTY-TWO (P13,632.00) PESOS. 6

On October 12, 1970, petitioner filed a Motion for Reconsideration of the aforesaid Order and
Writ of Execution, alleging:
t.hqw

(a) That the respondent judge has no authority to place respondents in

possession of the property;

(b) That the Supreme Court has never affirmed any decision of the trial court
that tolls collected from the diversionary road on the property, which is public
land, belong to said respondents;

(c) That to assess petitioner a P25,000.00 liability for damages is purely

punitive imposition without factual or legal justification.

The foregoing Motion for Reconsideration was denied by respondent Judge per Order dated
November 18, 1970. Saod Order states, in part: t.hqw

It goes without saying that defendant Comintan is entitled to be placed in

possession of lot No. 5785-A of PLS-45 (Calauag Public Land Subdivision)
and enjoyment of the tolls from March, 1967 to March, 1968 and from
September, 1969 to March 31, l970 which were received by plaintiff
Bartolome Ortiz, collected from the property by reason of the diversion road
where vehicular traffic was detoured. To defendant Comintan belongs the
tolls thus collected from a portion of the land awarded to him used as a
diversionary road by the doctrine of accretion and his right over the same
is ipso jure, there being no need of any action to possess said addition. It is
so because as consistently maintained by the Supreme Court, an applicant
who has complied with all the terms and conditions which entitle him to a
patent for a particular tract of publlic land, acquires a vested right therein and
is to be regarded as equitable owner thereof so that even without a patent, a
perfected homestead or sales application is a property right in the fullest
sense, unaffectcd by the fact that the paramount title is still in the
Government and no subsequent law can deprive him of that vested right The
question of the actual damages suffered by defendant Comintan by reason of
the unaccounted tolls received by plaintiff had already been fully discussed in
the order of September 23, 1970 and the Court is honestly convinced and
believes it to be proper and regular under the circumstances.
 Incidentally, the Court stands to correct itself when in the same order, it
directed the execution of he decision with respect to the one-half portion "B"
of the property only after the public sale by the Bureau of Lands, the same
being an oversight, it appearing that the Sales Application of defendant
Eleuterio Zamora had already been recognized and full confirmed by the
Supreme Court.

In view thereof, finding the motion filed by plaintiff to be without merit, the
Court hereby denies the same and the order of September 23, 1970 shall
remain in full force subject to the amendment that the execution of the
decision with respect to the one-half portion "B" shall not be conditioned to
the public sale by the Bureau of Lands.

SO ORDERED. 7

III

Petitioner thus filed the instant petition, contending that in having issued the Order and Writ
of Execution, respondent Court "acted without or in excess of jurisdiction, and/or with grave
abuse of discretion, because the said order and writ in effect vary the terms of the judgment
they purportedly seek to enforce." He argued that since said judgment declared the petitioner
a possessor in good faith, he is entitled to the payment of the value of the improvements
introduced by him on the whole property, with right to retain the land until he has been fully
paid such value. He likewise averred that no payment for improvements has been made and,
instead, a bond therefor had been filed by defendants (private respondents), which,
according to petitioner, is not the payment envisaged in the decision which would entitle
private respondents to the possession of the property. Furthermore, with respect to portion
"B", petitioner alleges that, under the decision, he has the right to retain the same until after
he has participated and lost in the public bidding of the land to be conducted by the Bureau
of Lands. It is claimed that it is only in the event that he loses in the bidding that he can be
legally dispossessed thereof.

It is the position of petitioner that all the fruits of the property, including the tolls collected by
him from the passing vehicles, which according to the trial court amounts to P25,000.00,
belongs to petitioner and not to defendant/private respondent Quirino Comintan, in
accordance with the decision itself, which decreed that the fruits of the property shall be in
lieu of interest on the amount to be paid to petitioner as reimbursement for improvements.
Any contrary opinion, in his view, would be tantamount to an amendment of a decision which
has long become final and executory and, therefore, cannot be lawfully done.

Petitioner, therefore, prayed that: (1) a Writ of Preliminary Injunction be issued enjoining the
enforcement of the Orders of September 23, 1970 and November 18, 1970, and the Writ of
Execution issued thereto, or restoring to petitioner the possession of the property if the
private respondents had been placed in possession thereof; (2) annulling said Orders as well
as the Writ of Execution, dissolving the receivership established over the property; and (3)
ordering private respondents to account to petitioner all the fruits they may have gathered or
collected from the property in question from the time of petitioiier's illegal dispossession
thereof.

On January 29, 1971, this Court issued the Writ of Preliminary Injunction. On January 30,
1971, private respondents filed a Motion for Reconsideration and/or Modification of the Order
dated January 29, 1971. This was followed by a Supplemental Motion for Reconsideration
and Manifestation on February 3, 1971. In the latter motion, private respondents manifested
that the amount of P14,040.96, representing the amount decreed in the judgment as
reimbursement to petitioner for the improvements, plus interest for six months, has already
been deposited by them in court, "with the understanding that said amount shall be turned
over to the plaintiff after the court a quo shall have determined the improvement on Lot 5785-
A, and subsequently the remaining balance of the deposit shall be delivered to the petitioner
(plaintiff therein) in the event he loses the bid for Lot 5785-B in favor of private respondent
Eleuterio Zamora." 8 The deposit is evidenced by a certification made by the Clerk of the Court a
quo. 9 Contending that said deposit was a faithful compliance with the judgment of the trial court,
private respondent Quirino Comintan prayed for the dissolution of the Writ of Injunction.

It appears that as a consequence of the deposit made by private respondents, the Deputy,
Sheriff of Calauag, Quezon ousted petitioner's representative from the land in question and
put private respondents in possession thereof. 10

On March 10, 1971, petitioner filed a "Comment on Respondents' 'Motion for

Reconsideration' dated January 29, 1971' and 'Supplemental Motion for Reconsideration and
Manifestation,'" contending that the tender of deposit mentioned in the Suplemental Motion
was not really and officially made, "inasmuch as the same is not supported by any official
receipt from the lower court, or from its clerk or cashier, as required by law;" that said deposit
does not constitute sufficient compliance with the judgment sought to be enforced, neither
was it legally and validly made because the requisites for consignation had not been
complied with; that the tender of legal interest for six months cannot substitute petitioner's
enjoyment of the fruits of the property as long as the judgment in Civil Case No. C-90 has not
been implemented in the manner decreed therein; that contrary to the allegations of private
respondents, the value of the improvements on the whole property had been determined by
the lower court, and the segregation of the improvements for each lot should have been
raised by them at the opportune moment by asking for the modification of the decision before
it became final and executory; and that the tolls on the property constituted "civil fruits" to
which the petitioner is entitled under the terms of the decision.

IV

The issue decisive of the controvery isafter the rendition by the trial court of its judgment in
Civil Case No. C-90 on March 22, 1966 confirming the award of one-half of the property to
Quirino Comintanwhether or not petitioner is still entitled to retain for his own exclusive
benefit all the fruits of the property, such as the tolls collected by him from March 1967 to
December 1968, and September 1969 to March 31, 1970, amounting to about P25,000.00.
In other words, petitioner contends that so long as the aforesaid amount of P13,632,00
decreed in the judgment representing the expenses for clearing the land and the value of the
coconuts and fruit trees planted by him remains unpaid, he can appropriate for his exclusive
benefit all the fruits which he may derive from the property, without any obligation to apply
any portion thereof to the payment of the interest and the principal of the debt.

We find this contention untenable.

There is no question that a possessor in good faith is entitled to the fruits received before the
possession is legally interrupted. 11 Possession in good faith ceases or is legally interrupted
from the moment defects in the title are made known to the possessor, by extraneous evidence or
by the filing of an action in court by the true owner for the recovery of the property. 12 Hence, all
the fruits that the possessor may receive from the time he is summoned in court, or when he
answers the complaint, must be delivered and paid by him to the owner or lawful possessor. 13
However, even after his good faith ceases, the possessor in fact can still retain the property,
pursuant to Article 546 of the New Civil Code, until he has been fully reimbursed for all the
necessary and useful expenses made by him on the property. This right of retention has
been considered as one of the conglomerate of measures devised by the law for the
protection of the possessor in good faith. Its object is to guarantee the reimbursement of the
expenses, such as those for the preservation of the property, 14 or for the enhancement of its
utility or productivity. 15 It permits the actual possessor to remain in possession while he has not
been reimbursed by the person who defeated him in the possession for those necessary
expenses and useful improvements made by him on the thing possessed. The principal
characteristic of the right of retention is its accessory character. It is accessory to a principal
obligation. Considering that the right of the possessor to receive the fruits terminates when his
good faith ceases, it is necessary, in order that this right to retain may be useful, to concede to
the creditor the right to secure reimbursement from the fruits of the property by utilizing its
proceeds for the payment of the interest as well as the principal of the debt while he remains in
possession. This right of retention of the property by the creditor, according to Scaevola, in the
light of the provisions of Article 502 of the Spanish Civil Code, 16 is considered not a coercive
measure to oblige the debtor to pay, depriving him temporarily of the enjoyment of the fruits of his
property, but as a means of obtainitig compensation for the debt. The right of retention in this
case is analogous to a contract of antichresis and it cati be considered as a means of
extinguishing the obligation, inasmuch as the right to retain the thing lasts only for the period
necessary to enable the creditor to be reimbursed from the fruits for the necessary and useful
expenses. 17

According to Manresa, the right of retention is, therefore, analogous to that of a pledge, if the
property retained is a movable, and to that of antichresis, if the property held is
immovable. 18 This construction appears to be in harmony with similar provisions of the civil law
which employs the right of retention as a means or device by which a creditor is able to obtain the
payment of a debt. Thus, under Article 1731 of the New Civil Code, any person who has
performed work upon a movable has a right to retain it by way of pledge until he is paid. Similarly,
under Article 1914 of the same Code, the agent may retain in pledge the things which are the
object of the agency until the principal effects reimbursement of the funds advanced by the former
for the execution of the agency, or he is indemnified for all damages which he may have suffered
as a consequence of the execution of the agency, provided he is free from fault. To the same
effect, the depositary, under Article 1994 of the same Code, may retain the thing in pledge until
the full payment of what may be due him by reason of the deposit. The usufructuary, pursuant to
Article 612 of the same Code, may retain the property until he is reimbursed for the amount paid
for taxes levied on the capital (Article 597) and tor extraordinary repairs (Article 594).

In all of these cases, the right of retention is used as a means of extinguishing the obligation.
As amply observed by Manresa: "El derecho de retencion, lo hemos dicho, es el derecho de
prenda o el de anticresis constituido por la ley con independencia de las partes." 19 In a
pledge, if the thing pledged earns or produces fruits, income, dividends or interests, the creditor
shall compensate what he receives with those which are owing him. 20 In the same manner, in a
contract of antichresis, the creditor acquires the right to receive the fruits of an immovable of his
debtor with the obligation to apply them to payment of the interest, if owing, and thereafter to the
principal of his credit. 21 The debtor can not reacquire enjoyment of the immovable until he has
actually paid what he owes the creditor. 22

Applying the afore-cited principles to the case at bar, petitioner cannot appropriate for his
own exclusive benefit the tolls which he collected from the property retained by him. It was
his duty under the law, after deducting the necessary expenses for his administration, to
apply such amount collected to the payment of the interest, and the balance to the payment
of the obligation.
We hold, therefore, that the disputed tolls, after deducting petitioner's expenses for
administration, belong to Quirino Comintan, owner of the land through which the toll road
passed, further considering that the same was on portions of the property on which petitioner
had not introduced any improvement. The trial court itself clarified this matter when it placed
the toll road under receivership. The omission of any mention of the tolls in the decision itself
may be attributed to the fact that the tolls appear to have been collected after the rendition of
the judgment of the trial court.

The records further reveal that earnest efforts have been made by private respondents to
have the judgment executed in the most practicable manner. They deposited in court the
amount of the judgment in the sum of P13,632.00 in cash, subject only to the accounting of
the tolls collected by the petitioner so that whatever is due from him may be set off with the
amount of reimbursement. This is just and proper under the circumstances and, under the
law, compensation or set off may take place, either totally or partially. Considering that
petitioner is the creditor with respect to the judgment obligation and the debtor with respect
to the tolls collected, Comintan being the owner thereof, the trial court's order for an
accounting and compensation is in accord with law. 23

With respect to the amount of reimbursement to be paid by Comintan, it appears that the
dispositive portion of the decision was lacking in specificity, as it merely provided that
Comintan and Zamora are jointly liable therefor. When two persons are liable under a
contract or under a judgment, and no words appear in the contract or judgment to make each
liable for the entire obligation, the presumption is that their obligation is joint
or mancomunada, and each debtor is liable only for a proportionate part of the
obligation. 24 The judgment debt of P13,632.00 should, therefore, be pro-rated in equal shares to
Comintan and Zamora.

Regarding Lot 5785-B, it appears that no public sale has yet been conducted by the Bureau
of Lands and, therefore, petitioner is entitled to remain in possession thereof. This is not
disputed by respondent Eleuterio Zamora. 25 After public sale is had and in the event that Ortiz
is not declared the successful bidder, then he should be reimbursed by respondent Zamora in the
corresponding amount for the improvements on Lot 5785-B.

WHEREFORE, in view hereof, the Order of respondent Court of November 18, 1970 is
hereby modified to conform to the foregoing judgment. The Writ of Preliminary Injunction,
dated January 29, 1971, is hereby dissolved. Without special pronouncement as to costs.
G.R. No. L-25462 February 21, 1980

MARIANO FLOREZA, petitioner,

vs.
MARIA D. de EVANGELISTA and SERGIO EVANGELISTA, respondents.

R.D. Hipolito & B. P. Fabir for petitioner.

E.G. Tanjuatco & Associates for respondents.

MELENCIO-HERRERA, J:

This is a Petition for Review on certiorari of the Decision of the Court of Appeals (CA-G.R.
No. 23516-R) promulgated on November 4, 1965, entitled "Maria de Evangelista and Sergio
Evangelists, (now the respondents) vs. Mariano Floreza (petitioner herein)," reversing the
judgment of the Court of First Instance of Rizal rendered on July 17, 1957, and instead
ordering petitioner to vacate respondents' residential lot, to remove his house at his own
expenses and to pay rental from May 5, 1956.

Plaintiffs Maria de Evangelista and Sergio Evangelista, who are mother and son, (the
EVANGELISTAS, for short) are the owners of a residential lot located at Sumilang St.,
Tanay, Rizal, with an area of 204.08 sq. ms., assessed at P410.00. In May 1945, the
EVANGELISTAS borrowed from FLOREZA the amount of P100.00. On or about November
1945, with the consent of the EVANGELISTAS, FLOREZA occupied the above residential lot
and built thereon a house of light materials (barong- barong) without any agreement as to
payment for the use of said residential lot owing to the fact that the EVANGELISTAS has
then a standing loan of P100.00 in favor of FLOREZA. 1

On the following dates, the EVANGELISTAS again borrowed the indicated amounts:
September 16, 1946 P100.00; 2 August 17, 1947 P200,00; 3 January 30, 1949
P200.00; 4 April 1, 1949 P140.00, 5 or a total of P740.00 including the first loan. The last three
items are evidenced by private documents stating that the residential lot stands as security
therefor and that the amounts covered thereunder are payable within six years from date, without
mention of interest. The document executed on September 16, 1946 stated specifically that the
loan was without interest "walang anumang patubo."

On January 10, 1949, FLOREZA demolished this house of light materials and in its place
constructed one of strong materials assessed in his name at P1,410.00 under Tax
Declaration No. 4448. FLOREZA paid no rental as before. 6

On August 1, 1949, the EVANGELISTAS, for and in consideration of P1,000.00 representing

the total outstanding loan of P740.00 plus P260.00 in cash, sold their residential lot to
FLOREZA, with a right to repurchase within a period of 6 years from date, or up to August 1,
1955, as evidenced by a notarial document, Exh. B, registered under Act 3344 on December
6, 1949, as Inscription No. 2147. 7

On January 2, 1955, or seven months before the expiry of the repurchase period, the
EVANGELISTAS paid in full the repurchase price of P1,000.00.
On April 25, 1956, the EVANGELISTAS, through their counsel, wrote FLOREZA a
letter 8 asking him to vacate the premises as they wanted to make use of their residential lot
besides the fact that FLOREZA had already been given by them more than one year within which
to move his house to another site. On May 4, 1956, the EVANGELISTAS made a formal written
demand to vacate, within five days from notice, explaining that they had already fully paid the
consideration for the repurchase of the lot. 9 FLOREZA refused to vacate unless he was first
reimbursed the value of his house. Hence, the filing of this Complaint on May 18, 1956 by the
EVANGELISTAS.

The EVANGELISTAS prayed that: 1) they be declared the owners of the house of strong
materials built by FLOREZA on their residential lot, without payment of indemnity; or, in the
alternative to order FLOREZA to remove said house; 2) that FLOREZA pay them the sum of
P10.00 per month as the reasonable value for the use and occupation of the same from
January 2, 1955 (the date the repurchase price was paid) until FLOREZA removes the house
and delivers the lot to them; and 3) to declare the transaction between them and FLOREZA
as one of mortgage and not of pacto de retro.

In his Answer, FLOREZA admitted the repurchase but controverted by stating that he would
execute a deed of repurchase and leave the premises upon payment to him of the
reasonable value of the house worth P7,000.00.

In a Decision dated July 17, 1957, the Court of First Instance of Rizal opined that the
question of whether the transaction between the parties is one of mortgage or pacto de
retro is no longer material as the indebtedness of P1,000.00 of the EVANGELISTAS to
FLOREZA had already been fully paid. And, applying Article 448 of the Civil Code, 10 it
rendered a decision dispositively decreeing:

FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders

judgment granting the plaintiffs the right to elect, as owners of the land, to
purchase the house built, on the said lot in question by the defendant for
P2,500 or to sell their said land to e defendant for P1,500. In the event that
the plaintiffs shall decide not to purchase the house in question the defendant
should be allowed to remain in plaintiffs' premises by, paying a monthly rental
of P10.00 which is the reasonable value for the use of the same per month
as alleged by plaintiffs in their complaint. The Court also orders the
defendant to pay a monthly rental of P10.00 for the use of the land in
question from May 18, 1956, the date of the commencement of this action.
The counterclaim of the defendant is hereby ordered dismissed. Without
pronouncement as to costs.

SO ORDERED. 11

Both parties appealed to the Court of Appeals.

On November 4, 1965, the Court of Appeals concluded that Article 448 of the Civil
Code, supra, was inapplicable; that FLOREZA was not entitled to reimbursement for his
house but that he could remove the same at his expense; and accordingly rendered
judgment thus:

WHEREFORE, judgment is hereby rendered: (1) adjudging the defendant-

appellant Mariano Floreza to vacate plaintiffs' residential lot described in the
complaint and to pay rental of P10.00 a month from May 5, 1956, until he
 (defendant) shall have vacated the premises; (2) ordering defendant to
remove his house from the land in question within 30 days from the time this
decision becomes final and executory; (3) ordering the Register of Deeds of
Rizal to cancel inscription No. 2147, Page 210, Vol. 36, in the Registration
Book under Act 3344 upon payment of his lawful fees; and (4) taxing the
costs in both instances against defendant-appellant Mariano Floreza. 12

Hence, this Petition for Review on certiorari by FLOREZA, seeking a reversal of the
aforestated judgment and ascribing the following errors:

1) That the Court of Appeals erred in holding that petitioner Floreza was a
builder in bad faith without likewise holding that respondents as owners of the
land in dispute, were likewise in bad faith and therefore both parties should in
accordance with Art. 453 of the New Civil Code be considered as having
acted in good faith.

2) That the Court of Appeals erred in completely ignoring the issue raised on
appeal as to whether or not respondents as owners of the questioned lot,
were in bad faith in the sense that they had knowledge of and acquiseced to
the construction of the house of petitioner on their lot.

3) That the Court of Appeals erred in not applying Art. 448 of the New Civil
Code in the adjudication of the rights of petitioner and respondent.

4) That the Court of Appeals erred in declaring that petitioner is not entitled to
reimbursement for the value of his house and that he should instead remove
the same at his expense.

5) That the Court of Appeals erred in adjudging petitioner to vacate

respondents' lot in question and to pay rentals commencing from May 5,
1956, until he shall have vacated the premises, notwithstanding that
petitioner is entitled under Arts. 448 and 546 of the New Civil Code, to
retention without payment of rental while the corresponding indemnity of his
house had not been paid.

6) That the Court of Appeals erred in taxing costs against petitioner.

7) That the Court of Appeals erred in not awarding petitioner's counterclaim.

During the pendency of this appeal, petitioner Maria D. de Evangelista died and was ordered
substituted by her son, petitioner Sergio, as her legal representative, in a Resolution dated
May 14, 1976.

On October 20, 1978. the EVANGELISTAS filed a Motion to Dismiss stating that FLOREZA
had since died and that his heirs had voluntarily vacated the residential lot in question. The
date FLOREZA passed away and the date his heirs had voluntarily vacated the property has
not been stated. Required to comment, "petitioner (represented by his heirs)", through
counsel, confirmed his death and the removal of the house and manifested that thereby the
question of reimbursement had moot and academic. He objected to the dismissal of the
case, however, on the ground that the issue of rentals still pends. On January 21, 1980,
complying with a Resolution of 'his Court, the EVANGELISTAS clarified that the dismissal
they were praying for was not of the entire case but only of this Petition for Review
on Certiorari.

We are not in agreement that the question of reimbursement of the value of the improvement
erected on the subject property has become moot. Petitioner's right of retention of subject
property until he is reimbursed for the value of his house, as he had demanded, is
inextricably linked with the question of rentals. For if petitioner has the right to indemnity, he
has the right of retention and no rentals need be paid. Conversely, if no right of retention
exists, damages in the form of rentals for the continued use and occupation of the property
should be allowed.

We uphold the Court of Appeals in its conclusion that Article 448 of the Civil Code is
inapplicable to the factual milieu herein. Said codal provision applies only when the builder,
planter, or sower believes he had the right so to build, plant or sow because he thinks he
owns the land or believes himself to have a claim of title. 13 In this case, petitioner makes no
pretensions of ownership whatsoever.

Petitioner concedes that he was a builder in bad faith but maintains that' the
EVANGELISTAS should also be held in bad faith, so that both of them being in bad faith,
Article 453 of the Civil Code 14 should apply. By the same token, however, that Article 448 of the
same Code is not applicable, neither is Article 453 under the ambiance of this case.

Would petitioner, as vendee a retro, then be entitled to the rights granted iii Article 1616 of
the Civil Code (Art. 1518 of the old Code)? To quote:

Art. 1616. The vendor cannot avail himself of the right of repurchase without
returning to the vendee the price of the sale, and in addition:

(1) The expenses of the contract, and any other legitimate payments made
by reason of the sale;

(2) The necessary and useful expenses made on the thing sold.

The question again calls for a negative answer. It should be noted that petitioner did not
construct his house as a vendee a retro. The house had already been constructed as far
back as 1949 (1945 for the house of light materials) even before the pacto de retro sale in
1949. Petitioner incurred no useful expense, therefore, after that sale. The house was
already there at the tolerance of the EVANGELISTAS in consideration of the several loans
extended to them. Since petitioner cannot be classified as a builder in good faith within the
purview of Article 448 of the Civil Code, nor as a vendee a retro, who made useful
improvements during the lifetime of the pacto de retro, petitioner has no right to
reimbursement of the value of the house which he had erected on the residential lot of the
EVANGELISTAS, much less to retention of the premises until he is reimbursed.The rights of
petitioner are more akin to those of a usufructuary who, under Article 579 of the Civil (Art.
487 of the old Code), may make on the property useful improvements but with no right to be
indemnified therefor. He may, however, remove such improvements should it be possible to
do so without damage to the property: For if the improvements made by the usufructuary
were subject to indemnity, we would have a dangerous and unjust situation in which the
usufructuary could dispose of the owner's funds by compelling him to pay for improvements
which perhaps he would not have made. 15
We come now to the issue of rentals. It is clear that from the date that the redemption price
had been paid by the EVANGELISTAS on January 2, 1955, petitioner's right to the use of the
residential lot without charge had ceased. Having retained the property although a
redemption had been made, he should be held liable for damages in the form of rentals for
the continued use of the subject residential lot 16 at the rate of P10.00 monthly from January 3,
1955, and not merely from the date of demand on May 4, 1956, as held by the Court of Appeals,
until the house was removed and the property vacated by petitioner or his heirs.

WHEREFORE, the judgment appealed from is hereby affirmed, with the modification that
payment of rentals by the heir, of Mariano Floreza, who are hereby ordered substituted for
him, shall commence on January 3, 1955 until the date that the residential lot in question
was vacated.

Costs against petitioner.

G.R. No. L-20264 January 30, 1971

CONSUELO S. DE GARCIA and ANASTACIO GARCIA, petitioners,

vs.
HON. COURT OF APPEALS, ANGELINA D. GUEVARA and JUAN B.
GUEVARA, respondents.

Deogracias T. Reyes and Jose M. Luison for petitioners.

Tolentino and Garcia and D.R. Cruz for private respondents.

FERNANDO, J.:

This petition for certiorari to review a decision of respondent Court of Appeals was given due
course because it was therein vigorously asserted that legal questions of gravity and of
moment, there being allegations of an unwarranted departure from and a patent misreading
of applicable and controlling decisions, called for determination by this Tribunal. The brief for
petitioners-spouses, however, failed to substantiate such imputed failings of respondent
Court. The performance did not live up to the promise. On the basis of the facts as duly
found by respondent Court, which we are not at liberty to disregard, and the governing legal
provisions, there is no basis for reversal. We affirm.

The nature of the case presented before the lower court by private respondent Angelina D.
Guevara, assisted by her spouse, Juan B. Guevara, as plaintiffs, was noted in the decision of
respondent Court of Appeals thus: "Plaintiff seeks recovery of `one (1) lady's diamond ring
18 cts. white gold mounting, with one (1) 2.05 cts. diamond-solitaire, and four (4) brills 0.10
cts. total weight' which she bought on October 27, 1947 from R. Rebullida, Inc."1 Then came
a summary of now respondent Guevara of her evidence: "Plaintiff's evidence tends to show that
around October 11, 1953 plaintiff while talking to Consuelo S. de Garcia, owner of La Bulakea
restaurant recognized her ring in the finger of Mrs. Garcia and inquired where she bought it,
which the defendant answered from her comadre. Plaintiff explained that that ring was stolen
from her house in February, 1952. Defendant handed the ring to plaintiff and it fitted her finger.
Two or three days later, at the request of plaintiff, plaintiff, her husband Lt. Col. Juan Guevara, Lt.
Cementina of Pasay PD, defendant and her attorney proceeded to the store of Mr. Rebullida to
whom they showed the ring in question. Mr. Rebullida a examined the ring with the aid of high
power lens and after consulting the stock card thereon, concluded that it was the very ring that
plaintiff bought from him in 1947. The ring was returned to defendant who despite a written
request therefor failed to deliver the ring to plaintiff. Hence, this case. Later on when the sheriff
tried to serve the writ of seizure (replevin), defendant refused to deliver the ring which had been
examined by Mr. Rebullida, claiming it was lost."2

How the defendant, Consuelo S. de Garcia, the present petitioner before us, along with her
husband Anastacio Garcia, sought to meet plaintiff's claim was narrated thus: "On the other
hand, defendant denied having made any admission before plaintiff or Mr. Rebullida or the
sheriff. Her evidence tends to show that the ring (Exhibit 1) was purchased by her from Mrs.
Miranda who got it from Miss Angelita Hinahon who in turn got it from the owner, Aling
Petring, who was boarding in her house; that the ring she bought could be similar to, but not
the same ring plaintiff purchased from Mr. Rebullida which was stolen; that according to a
pawn-shop owner the big diamond on Exhibit 1 was before the trial never dismantled. When
dismantled, defendant's diamond was found to weigh 2.57 cts."3

Plaintiff lost in the lower court. She elevated the matter to respondent Court of Appeals with
the judgment of the lower court being reversed. It is this decision now under review.

These are the facts as found by respondent Court of Appeals: "That the ring brought by the
parties for examination by Rafael Rebullida on December 14, 1953 was the same ring
purchased by plaintiff from R. Rebullida, Inc. on October 27, 1947 and stolen in February,
1952 has been abundantly established by plaintiff's evidence. Before plaintiff lost the ring,
she had been wearing it for six years and became familiar with it. Thus, when she saw the
missing ring in the finger of defendant, she readily and definitely identified it. Her
identification was confirmed by Mr. Rafael Rebullida, whose candid testimony is entitled to
great weight, with his 30 years experience behind him in the jewelry business and being a
disinterested witness since both parties are his customers. Indeed, defendant made no
comment when in her presence Rebullida after examining the ring and stock card told
plaintiff that that was her ring, nor did she answer plaintiff's letter of demand, ... asserting
ownership. Further confirmation may be found in the extra-judicial admissions, contained in
defendant's original and first amended answers ..."4

These further facts likewise appeal therein: "The foregoing proof is not counter-balanced by
the denial on the part of defendant or the presentation of the ring, Exhibit I, which has a
diamond-solitaire 2.57 cts., or much heavier than the lost diamond weighing 2.05 cts. only. It
is noteworthy that defendant gave a rather dubious source of her ring. Aling Petring from
whom the ring supposedly came turned out to be a mysterious and ephemeral figure. Miss
Hinahon did not even know her true and full name, nor her forwarding address. She
appeared from nowhere, boarded three months in the house of Miss Hinahon long enough to
sell her diamond ring, disappearing from the scene a week thereafter. Indeed, the case was
terminated without any hearing on the third-party and fourth-party complaints, which would
have shown up the falsity of defendant's theory. Moreover, Mrs. Baldomera Miranda, third-
party defendant, who tried to corroborate defendant on the latter's alleged attempt to
exchange the ring defendant bought through her, is [belied] by her judicial admission in her
Answer that appellee `suggested that she would make alterations to the mounting and
structural design of the ring to hide the true identity and appearance of the original one'
(Cunanan vs. Amparo, 45 O.G. 3796). Finally, defendant is refuted by her own extra-judicial
admissions ... although made by defendant's counsel. For an attorney who acts as counsel
of record and is permitted to act such, has the authority to manage the cause, and this
includes the authority to make admission for the purpose of the litigation... Her proffered
explanation that her counsel misunderstood her is puerile because the liability to error as to
the identity of the vendor and the exchange of the ring with another ring of the same value,
was rather remote."5

It is in the light of the above facts as well as the finding that the discrepancy as to the weight
between the diamond-solitaire in Exhibit I and the lost diamond was due to defendant having
"substituted a diamond-solitaire of plaintiff with a heavier stone" that the decision was
rendered, respondent Court reversing the lower court and ordering defendant, now petitioner
Consuelo S. de Garcia, to return plaintiff's ring or fact value of P1,000.00 and costs, as well
as to pay plaintiff P1,000.00 as attorney's fee and P1,000.00 as exemplary damages. Hence
this appeal.

To repeat, there is no occasion to reverse respondent Court. It correctly applied the law to
the facts as found.
1. The controlling provision is Article 559 of the Civil Code. It reads thus: "The possession of
movable property acquired in good faith is equivalent to a title. Nevertheless, one who has
lost any movable or has been unlawfully deprived thereof may recover it from the person in
possession of the same. If the possessor of a movable lost of which the owner has been
unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its
return without reimbursing the price paid therefor." Respondent Angelina D. Guevara, having
been unlawfully deprived of the diamond ring in question, was entitled to recover it from
petitioner Consuelo S. de Garcia who was found in possession of the same. The only
exception the law allows is when there is acquisition in good faith of the possessor at a
public sale, in which case the owner cannot obtain its return without reimbursing the price.
As authoritative interpreted in Cruz v. Pahati, 6 the right of the owner cannot be defeated even
by proof that there was good faith by the acquisition by the possessor. There is a reiteration of
this principle in Aznar v. Yapdiangco.7 Thus: "Suffice it to say in this regard that the right of the
owner to recover personal property acquired in good faith by another, is based on his being
dispossessed without his consent. The common law principle that where one of two innocent
persons must suffer by a fraud perpetrated by the another, the law imposes the loss upon the
party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be
applied in a case which is covered by an express provision of the new Civil Code, specifically
Article 559. Between a common law principle and statutory provision, the latter must prevail in
this jurisdiction."8

2. It is thus immediately apparent that there is no merit to the contention raised in the first
assigned error that her possession in good faith, equivalent to title, sufficed to defeat
respondent Guevara's claim. As the above cases demonstrate, even on that assumption the
owner can recover the same once she can show illegal deprivation. Respondent Court of
Appeals was so convinced from the evidence submitted that the owner of the ring in litigation
is such respondent. That is a factual determination to which we must pay heed. Instead of
proving any alleged departure from legal norms by respondent Court, petitioner would stress
Article 541 of the Civil Code, which provides: 'A possessor in the concept of owner has in his
favor the legal presumption that he possesses with a just title and he cannot be obliged to
show or prove it." She would accord to it a greater legal significance than that to which under
the controlling doctrines it is entitled. The brief for respondents did clearly point out why
lwph1.t

petitioner's assertion is lacking in support not only from the cases but even from
commentators. Thus: "Actually, even under the first clause, possession in good faith does
not really amount to title, for the reason that Art. 1132 of the Code provides for a period of
acquisitive prescription for movables through `uninterrupted possession for four years in
good faith' (Art. 1955 of the old Spanish Code, which provided a period of three years), so
that many Spanish writers, including Manresa, Sanchez Roman, Scaevola, De Buen, and
Ramos, assert that under Art. 464 of the Spanish Code (Art. 559 of the New Civil Code), the
title of the possessor is not that of ownership, but is merely a presumptive title sufficient to
serve as a basis of acquisitive prescription (II Tolentino, Civil Code of the Phil. p. 258: IV
Manresa, Derecho Civil Espaol, 6th Ed., p. 380). And it is for the very reason that the title
established by the first clause of Art. 559 is only a presumptive title sufficient to serve as a
basis for acquisitive prescription, that the clause immediately following provides that `one
who has lost any movable or has been unlawfully deprived thereof, may recover it from the
person in possession of the same.' As stated by the Honorable Justice Jose B. L. Reyes of
this Court in Sotto vs. Enage (C.A.), 43 Off. Gaz. 5075, Dec. 1947: `Article 559 in fact
assumes that possessor is as yet not the owner; for it is obvious that where the possessor
has come to acquire indefeasible title by, let us say, adverse possession for the necessary
period, no proof of loss or illegal deprivation could avail the former owner of the chattel. He
would no longer be entitled to recover it under any condition.' "9
The second assigned error is centered on the alleged failure to prove the identity of the
diamond ring. Clearly the question raised is one of the fact. What the Court of Appeals found
is conclusive. Again, petitioner could not demonstrate that in reaching such a conclusion the
Court of Appeals acted in an arbitrary manner. As made mention of in the brief for
respondents two disinterested witnesses, Mr. Rafael Rebullida as well as Lt. Col. Reynaldo
Cementina of the Pasay City Police Department, both of whom could not be accused of
being biased in favor of respondent Angelina D. Guevara, did testify as to the identity of the
ring.

The third assigned error of petitioners would find fault with respondent Court relying "on the
weakness of the title or evidence" of petitioner Consuelo S. de Garcia. It is true, in the
decision under review, mention was made of petitioner Consuelo S. de Garcia making no
comment when in her presence Rebullida, after examining the ring the stock card, told
respondent Angelina L. Guevara that that was her ring, nor did petitioner answer a letter of
the latter asserting ownership. It was likewise stated in such decision that there were extra-
judicial admissions in the original and first amended answers of petitioner. In the appraisal of
her testimony, respondent Court likewise spoke of her giving a rather dubious source of her
ring, the person from whom she allegedly bought it turning out "to be a mysterious and
ephemeral figure." As a matter of fact, as set forth a few pages back, respondent Court did
enumerate the flaws in the version given by petitioner. From the weakness of the testimony
offered which, as thus made clear, petitioner, did not even seek to refute, she would raise the
legal question that respondent Court relied on the "weakness of [her] title or evidence" rather
than on the proof justifying respondent Angelina D. Guevara's claim of ownership. Petitioner
here would ignore the finding of fact of respondent Court that such ownership on her part
"has been abundantly established" by her evidence. Again here, in essence, the question
raised is one of fact, and there is no justification for us to reverse respondent Court.

The legal question raised in the fourth assignment of error is that the matter of the
substitution of the diamond on the ring was a question raised for the first time on appeal as it
was never put in issue by the pleadings nor the subject of reception of evidence by both
parties and not touched upon in the decision of the lower court. Why no such question could
be raised in the pleadings of respondent Angelina D. Guevara was clarified by the fact that
the substitution came after it was brought for examination to Mr. Rebullida. After the
knowledge of such substitution was gained, however, the issue was raised at the trial
according to the said respondent resulting in that portion of the decision where the lower
court reached a negative conclusion. As a result, in the motion for reconsideration, one of the
points raised as to such decision being contrary to the evidence is the finding that there was
no substitution. It is not necessary to state that respondent Court, exercising its appellate
power reversed the lower court. What was held by it is controlling. What is clear is that there
is no factual basis for the legal arguments on which the fourth assigned error is predicated.

What is said takes care of the fifth assigned error that respondent Court was mistaken in its
finding that there was such a substitution. Again petitioner would have us pass on a question
of credibility which is left to respondent Court of Appeals. The sixth assigned error would
complain against the reversal of the lower court judgment as well as petitioner Consuelo S.
de Garcia being made to pay respondent Angelina D. Guevara exemplary damages,
attorney's fees and costs. The reversal is called for in the light of the appraisal of the
evidence of record as meticulously weighed by respondent Court. As to the attorney's fees
and exemplary damages, this is what respondent Court said in the decision under review:
"Likewise, plaintiff is entitled to recover reasonable attorney's fees in the sum of P1,000, it
being just and equitable under the circumstances, and another P1,000 as exemplary
damages for the public good to discourage litigants from resorting to fraudulent devices to
frustrate the ends of justice, as defendant herein tried to substitute the ring, Exhibit 1, for
plaintiff's ring." 10 Considering the circumstances, the cursory discussion of the sixth assigned
error on the matter by petitioner fails to demonstrate that respondent Court's actuation is
blemished by legal defects.

WHEREFORE, the decision of respondent Court of Appeals of August 6, 1962 is hereby

affirmed. With costs.