Cases for Recitation Property SY 2016-2017

Pros. Katrina Aznar

 Co-ownership

1. Avila et al. vs. Sps. Barabat GR No. 141993, May 17, 2006

The subject of this controversy is a portion of a 433-square meter parcel of land located in
Poblacion, Toledo City, Cebu. The entire property is designated as cadastral lot no. 348
registered in the name of Anunciacion Bahena vda. de Nemeño. Upon her death, ownership
of the lot was transferred by operation of law to her five children, petitioners Narcisa Avila,
Natividad Macapaz, Francisca Adlawan, Leon Nemeño and Jose Bahena. These heirs built
their respective houses on the lot.

In 1964, respondent Benjamin Barabat leased a portion of the house owned by Avila. His co-
respondent, Jovita Barabat, moved in with him in 1969 when they got married.

Avila subsequently relocated to Cagayan de Oro City. She came back to Toledo City in July
1979 to sell her house and share in the lot to her siblings but no one showed interest in it.
She then offered it to respondents who agreed to buy it.

Respondents stopped paying rentals to Avila and took possession of the property as owners.
They also assumed the payment of realty taxes on it.

Sometime in early 1982, respondents were confronted by petitioner Januario Adlawan who
informed them that they had until March 1982 only to stay in Avila’s place because he was
buying the property. Respondents replied that the property had already been sold to them by
Avila. They showed Adlawan the July 17, 1979 document executed by Avila.

On January 6, 1983, respondents received a letter from Atty. Joselito Alo informing them that
Avila had sold her house and share in lot no. 348 to his clients, the spouses Januario and
Nanette Adlawan. Considering the sale to the spouses Adlawan as prejudicial to their title
and peaceful possession of the property, they demanded that Avila execute a public
document evidencing the sale of the property to them but Avila refused.

Respondents filed a complaint for quieting of title with the Regional Trial Court (RTC) of
Toledo City, Branch 29.3Docketed as Civil Case No. T-53, the complaint was subsequently
amended to include annulment of the deed of sale to the spouses Adlawan, specific
performance, partition and damages as additional causes of action. Respondents anchored
their claim over the property to the July 17, 1979 private document which they presented as
Exhibit "A."

Avila denied having offered to sell her property to respondents. She claimed that
respondents gave her an P8,000 loan conditioned on her signing a document constituting
her house and share in lot no. 348 as security for its payment. She alleged that she
innocently affixed her signature on Exhibit "A" which was prepared by respondents and
which they now claim as a private deed of sale transferring ownership to them.

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The trial court rendered its May 9, 1995 decision in favor of respondents. It declared Exhibit
"A" as a valid and lawful deed of sale. It nullified the subsequent deed of sale between Avila
and the spouses Adlawan. Avila was ordered to execute a formal and notarized deed of sale
in favor of respondents. It also held petitioners liable for moral damages and attorney’s fees.

Petitioners claim that the appellate court erred in ruling that the transaction between
respondents and Avila was an absolute sale, not an equitable mortgage. They assert that the
facts of the case fell within the ambit of Article 1602 in relation to Article 1604 of the Civil
Code on equitable mortgage because they religiously paid the realty tax on the property and
there was gross inadequacy of consideration. In this connection, Articles 1602 and 1604
provide:

Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the
following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;

(2) When the vendor remains in possession as lessee or otherwise;

(3) When upon or after the expiration of the right to repurchase another instrument
extending the period of redemption or granting a new period is executed;

(4) When the purchaser retains for himself a part of the purchase price;

(5) When the vendor binds himself to pay the taxes of the thing sold;

(6) In any other case where it may be fairly inferred that the real intention of the
parties is that the transaction shall secure the payment of a debt or the performance
of any other obligation.

In any of the foregoing cases, any money, fruits, or other benefit to be received by the
vendee as rent or otherwise shall be considered as interest which shall be subject to the
usury laws.

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Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an
absolute sale.

They also claim that the court erred in denying them the right to redeem the property and in
ruling that there was implied partition by the acts of the parties.

We rule in favor of respondents.

For Articles 1602 and 1604 to apply, two requisites must concur: (1) the parties entered into
a contract denominated as a contract of sale and (2) their intention was to secure an existing
debt by way of mortgage.4 Here, both the trial and appellate courts found that Exhibit "A"
evidenced a contract of sale. They also agreed that the circumstances of the case show that
Avila intended her agreement with respondents to be a sale. Both courts were unanimous in

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finding that the subsequent acts of Avila revealed her intention to absolutely convey the
disputed property. It was only after the perfection of the contract, when her siblings began
protesting the sale, that she wanted to change the agreement.

Furthermore, contrary to petitioners’ claim, the trial court found that it was respondents who
took over the payment of real property taxes after the execution of Exhibit "A." There is no
reason to depart from these factual findings because, as a rule, factual findings of the trial
court, when adopted and confirmed by the Court of Appeals, are binding and conclusive on
the Court and generally will not be reviewed on appeal to us.5 There is no reason for us to
deviate from this rule.

Petitioners’ claim of gross inadequacy of selling price has no basis. They failed to introduce
evidence of the correct price at the time the land was sold to respondents in 1979. How can
we therefore conclude that the price was grossly inadequate? In the absence of evidence as
to the fair market value of a parcel of land at the time of its sale, we cannot reasonably
conclude that the price at which it was sold was inadequate.

Petitioners’ rely on Article 1623 in relation to Article 1620 of the Civil Code to justify their right
of redemption. This is incorrect.

These provisions state:

Art. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of
all the other co-owners or any of them, are sold to a third person. If the price of the alienation
is grossly excessive, the redemptioner shall pay only a reasonable one.

Should two or more co-owners desire to exercise the right of redemption, they may only do
so in proportion to the share they may respectively have in the thing owned in common.

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Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within
thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case
may be. The deed of sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written notice thereof to all
possible redemptioners.

The right of redemption of co-owners excludes that of adjoining owners.

Petitioners’ right to redeem would have existed only had there been co-ownership among
petitioners-siblings. But there was none. For this right to be exercised, co-ownership must
exist at the time the conveyance is made by a co-owner and the redemption is demanded by
the other co-owner or co-owner(s).7 However, by their own admission, petitioners were no
longer co-owners when the property was sold to respondents in 1979. The co-ownership had
already been extinguished by partition.

The regime of co-ownership exists when the ownership of an undivided thing or right belongs
to different persons.8By the nature of co-ownership, a co-owner cannot point to any specific
portion of the property owned in common as his own because his share in it remains
intangible and ideal.9

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Every act intended to put an end to indivision among co-heirs is deemed to be a
partition.10 Here, the particular portions pertaining to petitioners had been ascertained and
they in fact already took possession of their respective parts. The following statement of
petitioners in their amended answer11 as one of their special and affirmative defenses was
revealing:

F-8. That all defendants [i.e., petitioners] in this case who are co-owners of lot 348 have their
own respective buildings constructed on the said lot in which case it can be safely assumed
that that their respective shares in the lot have been physically segregated although
there is no formal partition of the land among themselves.12(emphasis supplied)

Being an express judicial admission, it was conclusive on petitioners unless it was made
through palpable mistake or that no such admission was in fact made.13 Petitioners proved
neither and were therefore bound by it.

The purpose of partition is to separate, divide and assign a thing held in common among
those to whom it belongs.14 By their own admission, petitioners already segregated and took
possession of their respective shares in the lot. Their respective shares were therefore
physically determined, clearly identifiable and no longer ideal. Thus, the co-ownership had
been legally dissolved. With that, petitioners’ right to redeem any part of the property from
any of their former co-owners was already extinguished. As legal redemption is intended to
minimize co-ownership,15once a property is subdivided and distributed among the co-owners,
the community ceases to exist and there is no more reason to sustain any right of legal
redemption.16

Under the law, subject to certain conditions, owners of adjoining urban land have the pre-
emptive right to a lot before it is sold to third parties, or the redemptive right if it has already
been sold. In particular, Article 1622 of the Civil Code provides:

Art. 1622. Whenever a piece of urban land is so small and so situated in that a major portion
thereof cannot be used for any practical purpose within a reasonable time, having been
bought merely for speculation, is about to be re-sold, the owner of any adjoining land has a
right of pre-emption at a reasonable price.

If the re-sale has been perfected, the owner of the adjoining land shall have a right of
redemption, also at a reasonable price.

When two or more owners of adjoining lands wish to exercise the rights of pre-emption or
redemption, the owner whose intended use of the land in question appears best justified
shall be preferred.

However, this provision does not apply here. Aside from the fact that petitioners never raised
it as an issue, the conditions provided for its application were not met. While the property
may be considered as urban land, it was not shown or even alleged that its area and location
would render a major portion of no practical use within a reasonable time. Neither was there
any allegation to the effect that the disputed property was bought merely for speculation.

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 2. Balo v. CA, G.R. No. 129704

A complaint for Judicial Partition of Real Properties and Accounting with Damages,
docketed as Civil Case No. 279, was filed by private respondent Josefina Garrido
against petitioners Ulpiano Balo, Lydia Balo-Lumpas, Eugenio Balo, Ulpiano Balo, Jr.,
Nida Balo-Moraleta, Nora Balo-Catano, Zaida Balo, Judith Balo-Mandreza, Danilo Balo
and Ronilo Balo, before the Regional Trial Court (RTC) of Abuyog, Leyte, Branch 10,
alleging that she (private respondent) and petitioners are the co-owners of undivided
parcels of land located at Mayorga, Leyte. According to her, these lands were
originally owned by the spouses Eugenio Balo, Sr. and Ma. Pasagui-Balo, who, at the
time of the filing of the complaint, were already deceased. The Balo spouses were
survived by their two (2) children, Ulpiano, Sr. and Maximino, the latter likewise
deceased. Private respondent is the daughter of Maximino Balo and Salvacion
Sabulao. Petitioner Ulpiano Balo is the son of Eugenio Balo, Sr., while the other
petitioners, the children of Ulpiano, are Eugenio’s grandchildren.

Private respondent further alleged in her complaint that immediately upon the death of
her grandfather, Eugenio Sr., the petitioners took possession of the said real
properties without her knowledge and consent. The petitioners being her uncle and
cousins, private respondent earnestly requested them that they come up with a fair
and equal partition of the properties left by her grandparents. The petitioners having
outrightly refused her proposal, private respondent filed the complaint.

n lieu of an Answer, petitioners filed a Motion to Dismiss2 on the following grounds:

1. Failure to state a cause of action - plaintiff, though she claims to be a daughter of

Maximino who died sometime in 1946, failed to allege whether or not she is a
legitimate child. Plaintiff’s failure to allege legitimacy is fatal considering the provision
of Article 992 of the Civil Code.3 To allow Plaintiff to inherit from the estate of the
spouses Eugenio and Maria Balo in representation of her father Maximino Balo would
be to permit intestate succession by an illegitimate child from the legitimate parent of
his father, assuming that she is the child of Maximino Balo.

2. The complaint does not show that the estate of the spouses Eugenio and Maria
Balo have been settled and its obligations have been paid.

3. The properties enumerated in the Complaint were proceeded against by way of

execution to satisfy a judgment against Eugenio and Maria Balo. Subsequently,
defendant Ulpiano repurchased the said properties and has been, together with his
children, openly, exclusively and adversely in possession of the real estate properties
in question.

Private respondent filed her comment/opposition to the motion to dismiss.4

In an Order dated 12 September 1996, the RTC denied the motion to dismiss for lack
of merit.5 The trial court held:

The complaint clearly states that the late Eugenio Balo, Sr., and Maria Pasagui Balo
had two (2) children, namely: Ulpiano, Sr. and Maximino. The plaintiff is the daughter
of the late Maximino Balo and Salvacion Sabulao; while the defendants are children of
the late Ulpiano Balo, Sr. and Felicidad Superio.

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The complaint enumerates/annexes 13 tax declarations in the name of Eugenio Balo,
Sr. marked as Annexes "A" to "M." The plaintiff as an heir prays that these parcels of
land be partitioned in accordance with Article 982 of the Civil Code which states:

"The grandchildren and other descendants shall inherit by right of representation, and
if any one of them should have died, leaving several heirs, the portion pertaining to
him shall be divided among the latter in equal portions."

No evidence may be alleged or considered to test the sufficiency of the complaint

except the very facts pleaded therein. It would be improper to inject into the
allegation, facts not alleged and use them as basis for the decision on the motion.

The Court is not permitted to go beyond and outside of the allegations in the
complaint for data or facts.

Therefore, the allegation of illegitimacy and claim of absolute ownership are

modifications and unreasonable inferences. If there is doubt to the truth of the facts
averred in the complaint, the Court does not dismiss the complaint but requires an
answer and proceeds to hear the case on the merit.6

Petitioners filed a Motion for Reconsideration7 which the RTC denied in its
Order8 dated 07 November 1996.

Petitioners filed a Petition for Certiorari9 before the Court of Appeals. After the filing of
Comment and other pleadings, the case was deemed submitted for decision. In a
resolution dated 16 April 1997, the Court of Appeals denied due course to the petition
and accordingly dismissed the same. The Court of Appeals justified the dismissal in
the following manner:

It is an established rule that an order denying a motion to dismiss is basically

interlocutory in character and cannot be the proper subject of a petition for certiorari.
When a motion to dismiss is denied, the proper procedure is to proceed with the trial
and if the decision be adverse to the movant, the remedy is to take an appeal from
said decision, assigning as one of the errors therefore the denial of the motion to
dismiss.10

Petitioners filed a Motion for Reconsideration11 which the Court of Appeals denied in a
resolution dated 30 June 1997.12 Hence this petition for review13 under Rule 45 of the
Rules of Court.

Petitioners cite the following grounds for the allowance of their petition, to wit:

WHETHER OR NOT THE FAILURE TO ALLEGE THE NATURE AND EXTENT OF

PLAINTIFF’S TITLE IN A PETITION FOR PARTITION IS FATAL TO ITS CAUSE OF
ACTION.

II

WHETHER OR NOT THE ACTION FOR JUDICIAL PARTITION AND ACCOUNTING HAS
PRESCRIBED, WAS WAIVED, OR WAS OTHERWISE ABANDONED.14

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At the threshold of the instant petition for review is the correctness of the appellate
court’s dismissal of the petition for certiorari filed by the petitioners.

In resolving to deny the petition, the Court of Appeals relied on the long established
jurisprudence that an order denying a motion to dismiss is interlocutory and cannot
be the proper subject of a petition forcertiorari.

The general rule regarding denial of a motion to dismiss as a basis of a resort to the
extraordinary writ ofcertiorari is that:

. . . [A]n order denying a motion to dismiss is an interlocutory order which neither

terminates nor finally disposes of a case as it leaves something to be done by the
court before the case is finally decided on the merits. As such, the general rule is that
the denial of a motion to dismiss cannot be questioned in a special civil action
for certiorari which is a remedy designed to correct errors of jurisdiction and not
errors of judgment.

To justify the grant of the extraordinary remedy of certiorari, therefore, the denial of
the motion to dismiss must have been tainted with grave abuse of discretion. By
"grave abuse of discretion" is meant, such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction. The abuse of discretion must be
grave as where the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility and must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act
all in contemplation of law.15

Specific instances whereby the rule admits certain exceptions are provided as
follows:

. . . Under certain situations, recourse to certiorari or mandamus is considered

appropriate, i.e., (a) when the trial court issued the order without or in excess of
jurisdiction; (b) where there is patent grave abuse of discretion by the trial court; or
(c) appeal would not prove to be a speedy and adequate remedy as when an appeal
would not promptly relieve a defendant from the injurious effects of the patently
mistaken order maintaining the plaintiff’s baseless action and compelling the
defendant needlessly to go through a protracted trial and clogging the court dockets
by another futile case.16

Applying the foregoing, the Court of Appeals should not have dismissed the petition
outright as the same alleges grave abuse of discretion. Instead, it should have
proceeded to determine whether or not the trial court did commit grave abuse of
discretion as alleged by the petitioners. The Court of Appeals having failed in this
regard, it behooves upon this Court to discuss the merits of the petition to put to rest
the issues raised by the petitioners.

Contrary to petitioners’ contention, allegations sufficient to support a cause of action

for partition may be found in private respondent’s complaint.17

Nothing is more settled than the rule that in a motion to dismiss for failure to state a
cause of action, the inquiry is into the sufficiency, not the veracity, of the material
allegations.18 Moreover, the inquiry is confined to the four corners of the complaint,
and no other.19

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In a motion to dismiss a complaint based on lack of cause of action, the question
submitted to the court for determination is the sufficiency of the allegations made in
the complaint to constitute a cause of action and not whether those allegations of fact
are true, for said motion must hypothetically admit the truth of the facts alleged in the
complaint.

The test of the sufficiency of the facts alleged in the complaint is whether or not,
admitting the facts alleged, the court could render a valid judgment upon the same in
accordance with the prayer of the complaint. (Garcon vs. Redemptorist Fathers, 17
SCRA 341)

If the allegations of the complaint are sufficient in form and substance but their
veracity and correctness are assailed, it is incumbent upon the court to deny the
motion to dismiss and require the defendant to answer and go to trial to prove his
defense. The veracity of the assertions of the parties can be ascertained at the trial of
the case on the merits. (Galeon vs. Galeon, 49 SCRA 516-521)20

Section 1, Rule 8 of the 1997 Rules of Civil Procedure provides that the complaint
needs only to allege the ultimate facts upon which private respondent bases her
claim.

The rules of procedure require that the complaint must make a concise statement of
the ultimate facts or the essential facts constituting the plaintiff’s cause of action. A
fact is essential if it cannot be stricken out without leaving the statement of the cause
of action inadequate. A complaint states a cause of action only when it has its three
indispensable elements, namely: (1) a right in favor of the plaintiff by whatever means
and under whatever law it arises or is created; (2) an obligation on the part of the
named defendant to respect or not to violate such right; and (3) an act or omission on
the part of such defendant violate of the right of plaintiff or constituting a breach of
the obligation of defendant to the plaintiff for which the latter may maintain an action
for recovery of damages.21

In her Complaint, the private respondent made the following assertions:

. . . That the afore-described parcels of lands were originally owned by Eugenio Balo,
Sr. and Ma. Pasagui-Balo, who are now both deceased and after their death, were
inherited into two (2) equal shares by their two (2) children, namely: Ulpiano, Sr. and
Maximino, both surnamed Balo, the later (sic) being already dead.

That plaintiff is the daughter of the late Maximino Balo and Salvacion Sabulao, who
after her father’s death, had inherited her father’s share of the inheritance.

That defendant Ulpiano Balo, Sr. aside from being the son of Eugenio Balo, Sr., is
married to Felicidad Superio, and is the father of all the other defendants in this case.

The defendants took possession of the above-described real properties immediately

after the death of plaintiff’s grandfather Eugenio Balo, Sr. without her knowledge and
consent.

That plaintiff is desirous that the above-described real properties be partitioned

between her and defendants.

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That plaintiff has proposed to the defendants that the above-described real properties
be amicably partitioned between them by mutual agreement in a very fair and practical
division of the same, but said defendants refused and continue to do so without any
justifiable cause or reason to accede to the partition of the said properties.22

The foregoing allegations show substantial compliance with the formal and
substantial requirements of a Complaint for Partition as required under Section 1,
Rule 69 of the 1997 Rules of Civil Procedure.23

On the insistence of petitioners that private respondent first prove her legitimacy
before an action for partition may be maintained, this Court, in the case of Briz v.
Briz,24 pronounced that proof of legal acknowledgment is not a prerequisite before an
action for partition may be filed. We said:25

. . . In other words, there is no absolute necessity requiring that the action to compel
acknowledgment should have been instituted and prosecuted to a successful
conclusion prior to the action in which that same plaintiff seeks additional relief in the
character of heir. Certainly, there is nothing so peculiar to the action to compel
acknowledgment as to require that a rule should be here applied different from that
generally applicable in other cases. For instance, if the plaintiff had in this action
impleaded all of the persons who would be necessary parties defendant to an action
to compel acknowledgement, and had asked for relief of that character, it would have
been permissible for the court to make the judicial pronouncement declaring that the
plaintiff is entitled to be recognized as the natural child of Maximo Briz, and at the
same time to grant the additional relief sought in this case against the present
defendants; that is, a decree compelling them to surrender to the plaintiff the parcel of
land sued for and to pay her the damages awarded in the appealed decision.

The conclusion above stated, though not heretofore explicitly formulated by this
court, is undoubtedly to some extent supported by our prior decisions. Thus, we have
held in numerous cases, and the doctrine must be considered well settled, that a
natural child having a right to compel acknowledgment, but who has not been in fact
legally acknowledged, may maintain partition (proceedings for the division of the
inheritance against his coheirs (Siguiong vs. Siguiong, 8 Phil. 5; Tiamson vs.
Tiamson, 32 Phil 62); and the same person may intervene in proceedings for the
distribution of the estate of his deceased natural father, or mother (Capistrano vs.
Fabella, 8 Phil. 135; Conde vs. Abaya, 13 Phil. 249; Ramirez vs. Gmur, 42 Phil 855). In
neither of these situations has it been thought necessary for the plaintiff to show a
prior decree compelling acknowledgment. The obvious reason is that in partition suits
and distribution proceedings the other persons who might take by inheritance are
before the court; and the declaration of heirship is appropriate to such proceedings.

To further reiterate that in partition proceedings, dismissal prior to answer is

premature, this Court has held:

In a complaint for partition, the plaintiff seeks, first, a declaration that he is a co-owner
of the subject properties; and second, the conveyance of his lawful shares. As the
Court of Appeals correctly held, an action for partition is at once an action for
declaration of co-ownership and for segregation and conveyance of a determine
portion of the properties involved. If the defendant asserts exclusive title over the
property, the action for partition should not be dismissed. Rather, the court should
resolve the case and if the plaintiff is unable to sustain his claimed status as a co-
owner, the court should dismiss the action, not because the wrong remedy was

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availed of, but because no basis exists for requiring the defendant to submit to
partition. If, on the other hand, the court after trial should find the existence of co-
ownership among the parties, the court may and should order the partition of the
properties in the same action.26

The case of Vda. De Daffon v. Court of Appeals27 is almost most appropriate. In said
case, the action for partition filed by the plaintiffs was met by a motion to dismiss filed
by the defendants based on the grounds of failure of the complaint to state a cause of
action, waiver, abandonment and extinguishment of the obligation. The trial court
denied the motion to dismiss and the denial was affirmed by the appellate court and
by this Court. We held there that the trial court and the Court of Appeals were correct
in dismissing the petition for certiorari absent a clear showing of grave abuse of
discretion amounting to lack or excess of jurisdiction. We further expressed our
dismay over the delay in the resolution of the said case due to the fact that the issue
of the denial of the Motion to Dismiss was elevated to this Court by petitioner and
counsel instead of just filing an Answer and meeting the issues head-on.

On the matter of prescription cited by the petitioners as a ground for the dismissal of
the complaint, it is noteworthy that the motion to dismiss filed by the petitioners did
not ipso facto establish prescription. An allegation of prescription can effectively be
used in a motion to dismiss only when the complaint on its face shows that indeed the
action has already prescribed;28 otherwise, the issue of prescription is one involving
evidentiary matters requiring a full-blown trial on the merits and cannot be determined
in a mere motion to dismiss.29

3. Oesmer vs. Paraiso Dev’t Corp., G.R. No. 157493, February 5, 2007

Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, and Enriqueta, all surnamed
Oesmer, together with Adolfo Oesmer (Adolfo) and Jesus Oesmer (Jesus), are brothers and
sisters, and the co-owners of undivided shares of two parcels of agricultural and tenanted
land situated in Barangay Ulong Tubig, Carmona, Cavite, identified as Lot 720 with an area
of 40,507 square meters (sq. m.) and Lot 834 containing an area of 14,769 sq. m., or a total
land area of 55,276 sq. m. Both lots are unregistered and originally owned by their parents,
Bibiano Oesmer and Encarnacion Durumpili, who declared the lots for taxation purposes
under Tax Declaration No. 34383(cancelled by I.D. No. 6064-A) for Lot 720 and Tax
Declaration No. 34374 (cancelled by I.D. No. 5629) for Lot 834. When the spouses Oesmer
died, petitioners, together with Adolfo and Jesus, acquired the lots as heirs of the former by
right of succession.

Respondent Paraiso Development Corporation is known to be engaged in the real estate

business.

Sometime in March 1989, Rogelio Paular, a resident and former Municipal Secretary of
Carmona, Cavite, brought along petitioner Ernesto to meet with a certain Sotero Lee,
President of respondent Paraiso Development Corporation, at Otani Hotel in Manila. The
said meeting was for the purpose of brokering the sale of petitioners’ properties to
respondent corporation.

Pursuant to the said meeting, a Contract to Sell5 was drafted by the Executive Assistant of
Sotero Lee, Inocencia Almo. On 1 April 1989, petitioners Ernesto and Enriqueta signed the
aforesaid Contract to Sell. A check in the amount of P100,000.00, payable to Ernesto, was
given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado

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also signed the said Contract to Sell. However, two of the brothers, Adolfo and Jesus, did not
sign the document.

On 5 April 1989, a duplicate copy of the instrument was returned to respondent corporation.
On 21 April 1989, respondent brought the same to a notary public for notarization.

In a letter6 dated 1 November 1989, addressed to respondent corporation, petitioners

informed the former of their intention to rescind the Contract to Sell and to return the amount
of P100,000.00 given by respondent as option money.

Respondent did not respond to the aforesaid letter. On 30 May 1991, herein petitioners,
together with Adolfo and Jesus, filed a Complaint7 for Declaration of Nullity or for Annulment
of Option Agreement or Contract to Sell with Damages before the Regional Trial Court (RTC)
of Bacoor, Cavite. The said case was docketed as Civil Case No. BCV-91-49.

During trial, petitioner Rizalino died. Upon motion of petitioners, the trial court issued an
Order,8 dated 16 September 1992, to the effect that the deceased petitioner be substituted
by his surviving spouse, Josefina O. Oesmer, and his children, Rolando O. Oesmer and
Fernando O. Oesmer. However, the name of Rizalino was retained in the title of the case
both in the RTC and the Court of Appeals.

After trial on the merits, the lower court rendered a Decision9 dated 27 March 1996 in favor of
the respondent, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of herein

[respondent] Paraiso Development Corporation. The assailed Contract to Sell is valid and
binding only to the undivided proportionate share of the signatory of this document and
recipient of the check, [herein petitioner] co-owner Ernesto Durumpili Oesmer. The latter is
hereby ordered to execute the Contract of Absolute Sale concerning his 1/8 share over the
subject two parcels of land in favor of herein [respondent] corporation, and to pay the latter
the attorney’s fees in the sum of Ten Thousand (P10,000.00) Pesos plus costs of suit.

The counterclaim of [respondent] corporation is hereby Dismissed for lack of merit.10

Unsatisfied, respondent appealed the said Decision before the Court of Appeals. On 26 April
2002, the appellate court rendered a Decision modifying the Decision of the court a quo by
declaring that the Contract to Sell is valid and binding with respect to the undivided
proportionate shares of the six signatories of the said document, herein petitioners, namely:
Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer). The
decretal portion of the said Decision states that:

WHEREFORE, premises considered, the Decision of the court a quo is hereby MODIFIED.
Judgment is hereby rendered in favor of herein [respondent] Paraiso Development
Corporation. The assailed Contract to Sell is valid and binding with respect to the undivided
proportionate share of the six (6) signatories of this document, [herein petitioners], namely,
Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer). The
said [petitioners] are hereby ordered to execute the Deed of Absolute Sale concerning their
6/8 share over the subject two parcels of land and in favor of herein [respondent]
corporation, and to pay the latter the attorney’s fees in the sum of Ten Thousand Pesos
(P10,000.00) plus costs of suit.11

11
Aggrieved by the above-mentioned Decision, petitioners filed a Motion for Reconsideration of
the same on 2 July 2002. Acting on petitioners’ Motion for Reconsideration, the Court of
Appeals issued a Resolution dated 4 March 2003, maintaining its Decision dated 26 April
2002, with the modification that respondent tender payment to petitioners in the amount
of P3,216,560.00, representing the balance of the purchase price of the subject parcels of
land. The dispositive portion of the said Resolution reads:

WHEREFORE, premises considered, the assailed Decision is hereby modified. Judgment is

1aw phi1.net

hereby rendered in favor of herein [respondent] Paraiso Development Corporation. The

assailed Contract to Sell is valid and binding with respect to the undivided proportionate
shares of the six (6) signatories of this document, [herein petitioners], namely, Ernesto,
Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer). The said
[petitioners] are hereby ordered to execute the Deed of Absolute Sale concerning their 6/8
share over the subject two parcels of land in favor of herein [respondent] corporation, and to
pay the latter attorney’s fees in the sum of Ten Thousand Pesos (P10,000.00) plus costs of
suit. Respondent is likewise ordered to tender payment to the above-named [petitioners] in
the amount of Three Million Two Hundred Sixteen Thousand Five Hundred Sixty Pesos
(P3,216,560.00) representing the balance of the purchase price of the subject two parcels of
land. 12

Hence, this Petition for Review on Certiorari.

Petitioners come before this Court arguing that the Court of Appeals erred:

I. On a question of law in not holding that, the supposed Contract to Sell (Exhibit D)
is not binding upon petitioner Ernesto Oesmer’s co-owners (herein petitioners
Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora).

II. On a question of law in not holding that, the supposed Contract to Sell (Exhibit D)
is void altogether considering that respondent itself did not sign it as to indicate its
consent to be bound by its terms. Moreover, Exhibit D is really a unilateral promise to
sell without consideration distinct from the price, and hence, void.

Petitioners assert that the signatures of five of them namely: Enriqueta, Librado, Rizalino,
Bibiano, Jr., and Leonora, on the margins of the supposed Contract to Sell did not confer
authority on petitioner Ernesto as agent to sell their respective shares in the questioned
properties, and hence, for lack of written authority from the above-named petitioners to sell
their respective shares in the subject parcels of land, the supposed Contract to Sell is void as
to them. Neither do their signatures signify their consent to directly sell their shares in the
questioned properties. Assuming that the signatures indicate consent, such consent was
merely conditional. The effectivity of the alleged Contract to Sell was subject to a suspensive
condition, which is the approval of the sale by all the co-owners.

Petitioners also assert that the supposed Contract to Sell (Exhibit D), contrary to the findings
of the Court of Appeals, is not couched in simple language.

They further claim that the supposed Contract to Sell does not bind the respondent because
the latter did not sign the said contract as to indicate its consent to be bound by its terms.
Furthermore, they maintain that the supposed Contract to Sell is really a unilateral promise to
sell and the option money does not bind petitioners for lack of cause or consideration distinct
from the purchase price.

12
The Petition is bereft of merit.

It is true that the signatures of the five petitioners, namely: Enriqueta, Librado, Rizalino,
Bibiano, Jr., and Leonora, on the Contract to Sell did not confer authority on petitioner
Ernesto as agent authorized to sell their respective shares in the questioned properties
because of Article 1874 of the Civil Code, which expressly provides that:

Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void.

The law itself explicitly requires a written authority before an agent can sell an immovable.
The conferment of such an authority should be in writing, in as clear and precise terms as
possible. It is worth noting that petitioners’ signatures are found in the Contract to Sell. The
Contract is absolutely silent on the establishment of any principal-agent relationship between
the five petitioners and their brother and co-petitioner Ernesto as to the sale of the subject
parcels of land. Thus, the Contract to Sell, although signed on the margin by the five
petitioners, is not sufficient to confer authority on petitioner Ernesto to act as their agent in
selling their shares in the properties in question.

However, despite petitioner Ernesto’s lack of written authority from the five petitioners to sell
their shares in the subject parcels of land, the supposed Contract to Sell remains valid and
binding upon the latter.

As can be clearly gleaned from the contract itself, it is not only petitioner Ernesto who signed
the said Contract to Sell; the other five petitioners also personally affixed their signatures
thereon. Therefore, a written authority is no longer necessary in order to sell their shares in
the subject parcels of land because, by affixing their signatures on the Contract to Sell, they
were not selling their shares through an agent but, rather, they were selling the same directly
and in their own right.

The Court also finds untenable the following arguments raised by petitioners to the effect that
the Contract to Sell is not binding upon them, except to Ernesto, because: (1) the signatures
of five of the petitioners do not signify their consent to sell their shares in the questioned
properties since petitioner Enriqueta merely signed as a witness to the said Contract to Sell,
and that the other petitioners, namely: Librado, Rizalino, Leonora, and Bibiano, Jr., did not
understand the importance and consequences of their action because of their low degree of
education and the contents of the aforesaid contract were not read nor explained to them;
and (2) assuming that the signatures indicate consent, such consent was merely conditional,
thus, the effectivity of the alleged Contract to Sell was subject to a suspensive condition,
which is the approval by all the co-owners of the sale.

It is well-settled that contracts are perfected by mere consent, upon the acceptance by the
offeree of the offer made by the offeror. From that moment, the parties are bound not only to
the fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law. To produce a
contract, the acceptance must not qualify the terms of the offer. However, the acceptance
may be express or implied. For a contract to arise, the acceptance must be made known to
the offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made
known to the offeror.13

In the case at bar, the Contract to Sell was perfected when the petitioners consented to the
sale to the respondent of their shares in the subject parcels of land by affixing their
signatures on the said contract. Such signatures show their acceptance of what has been

13
stipulated in the Contract to Sell and such acceptance was made known to respondent
corporation when the duplicate copy of the Contract to Sell was returned to the latter bearing
petitioners’ signatures.

As to petitioner Enriqueta’s claim that she merely signed as a witness to the said contract,
the contract itself does not say so. There was no single indication in the said contract that
she signed the same merely as a witness. The fact that her signature appears on the right-
hand margin of the Contract to Sell is insignificant. The contract indisputably referred to the
"Heirs of Bibiano and Encarnacion Oesmer," and since there is no showing that Enriqueta
signed the document in some other capacity, it can be safely assumed that she did so as
one of the parties to the sale.

Emphasis should also be given to the fact that petitioners Ernesto and Enriqueta
concurrently signed the Contract to Sell. As the Court of Appeals mentioned in its
Decision,14 the records of the case speak of the fact that petitioner Ernesto, together with
petitioner Enriqueta, met with the representatives of the respondent in order to finalize the
terms and conditions of the Contract to Sell. Enriqueta affixed her signature on the said
contract when the same was drafted. She even admitted that she understood the
undertaking that she and petitioner Ernesto made in connection with the contract. She
likewise disclosed that pursuant to the terms embodied in the Contract to Sell, she updated
the payment of the real property taxes and transferred the Tax Declarations of the
questioned properties in her name.15 Hence, it cannot be gainsaid that she merely signed the
Contract to Sell as a witness because she did not only actively participate in the negotiation
and execution of the same, but her subsequent actions also reveal an attempt to comply with
the conditions in the said contract.

With respect to the other petitioners’ assertion that they did not understand the importance
and consequences of their action because of their low degree of education and because the
contents of the aforesaid contract were not read nor explained to them, the same cannot be
sustained.

We only have to quote the pertinent portions of the Court of Appeals Decision, clear and
concise, to dispose of this issue. Thus,

First, the Contract to Sell is couched in such a simple language which is undoubtedly easy to
read and understand. The terms of the Contract, specifically the amount of P100,000.00
representing the option money paid by [respondent] corporation, the purchase price
of P60.00 per square meter or the total amount of P3,316,560.00 and a brief description of
the subject properties are well-indicated thereon that any prudent and mature man would
have known the nature and extent of the transaction encapsulated in the document that he
was signing.

Second, the following circumstances, as testified by the witnesses and as can be gleaned
from the records of the case clearly indicate the [petitioners’] intention to be bound by the
stipulations chronicled in the said Contract to Sell.

As to [petitioner] Ernesto, there is no dispute as to his intention to effect the alienation of the
subject property as he in fact was the one who initiated the negotiation process and
culminated the same by affixing his signature on the Contract to Sell and by taking receipt of
the amount of P100,000.00 which formed part of the purchase price.

xxxx

14
As to [petitioner] Librado, the [appellate court] finds it preposterous that he willingly affixed
his signature on a document written in a language (English) that he purportedly does not
understand. He testified that the document was just brought to him by an 18 year old niece
named Baby and he was told that the document was for a check to be paid to him. He readily
signed the Contract to Sell without consulting his other siblings. Thereafter, he exerted no
effort in communicating with his brothers and sisters regarding the document which he had
signed, did not inquire what the check was for and did not thereafter ask for the check which
is purportedly due to him as a result of his signing the said Contract to Sell. (TSN, 28
September 1993, pp. 22-23)

The [appellate court] notes that Librado is a 43 year old family man (TSN, 28 September
1993, p. 19). As such, he is expected to act with that ordinary degree of care and prudence
expected of a good father of a family. His unwitting testimony is just divinely disbelieving.

The other [petitioners] (Rizalino, Leonora and Bibiano Jr.) are likewise bound by the said
Contract to Sell. The theory adopted by the [petitioners] that because of their low degree of
education, they did not understand the contents of the said Contract to Sell is devoid of
merit. The [appellate court] also notes that Adolfo (one of the co-heirs who did not sign) also
possess the same degree of education as that of the signing co-heirs (TSN, 15 October
1991, p. 19). He, however, is employed at the Provincial Treasury Office at Trece Martirez,
Cavite and has even accompanied Rogelio Paular to the Assessor’s Office to locate certain
missing documents which were needed to transfer the titles of the subject properties. (TSN,
28 January 1994, pp. 26 & 35) Similarly, the other co-heirs [petitioners], like Adolfo, are far
from ignorant, more so, illiterate that they can be extricated from their obligations under the
Contract to Sell which they voluntarily and knowingly entered into with the [respondent]
corporation.

The Supreme Court in the case of Cecilia Mata v. Court of Appeals (207 SCRA 753 [1992]),
citing the case of Tan Sua Sia v. Yu Baio Sontua (56 Phil. 711), instructively ruled as follows:

"The Court does not accept the petitioner’s claim that she did not understand the terms and
conditions of the transactions because she only reached Grade Three and was already 63
years of age when she signed the documents. She was literate, to begin with, and her age
did not make her senile or incompetent. x x x.

At any rate, Metrobank had no obligation to explain the documents to the petitioner as
nowhere has it been proven that she is unable to read or that the contracts were written in a
language not known to her. It was her responsibility to inform herself of the meaning and
consequence of the contracts she was signing and, if she found them difficult to
comprehend, to consult other persons, preferably lawyers, to explain them to her. After all,
the transactions involved not only a few hundred or thousand pesos but, indeed, hundreds of
thousands of pesos.

As the Court has held:

x x x The rule that one who signs a contract is presumed to know its contents has been
applied even to contracts of illiterate persons on the ground that if such persons are unable
to read, they are negligent if they fail to have the contract read to them. If a person cannot
read the instrument, it is as much his duty to procure some reliable persons to read and
explain it to him, before he signs it, as it would be to read it before he signed it if he were
able to do and his failure to obtain a reading and explanation of it is such gross negligence
as will estop from avoiding it on the ground that he was ignorant of its contents."16

15
That the petitioners really had the intention to dispose of their shares in the subject parcels of
land, irrespective of whether or not all of the heirs consented to the said Contract to Sell, was
unveiled by Adolfo’s testimony as follows:

ATTY. GAMO: This alleged agreement between you and your other brothers and sisters that
unless everybody will agree, the properties would not be sold, was that agreement in writing?

WITNESS: No sir.

ATTY. GAMO: What you are saying is that when your brothers and sisters except Jesus and
you did not sign that agreement which had been marked as [Exhibit] "D", your brothers and
sisters were grossly violating your agreement.

WITNESS: Yes, sir, they violated what we have agreed upon.17

We also cannot sustain the allegation of the petitioners that assuming the signatures indicate
consent, such consent was merely conditional, and that, the effectivity of the alleged
Contract to Sell was subject to the suspensive condition that the sale be approved by all the
co-owners. The Contract to Sell is clear enough. It is a cardinal rule in the interpretation of
contracts that if the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall control.18 The terms of the
Contract to Sell made no mention of the condition that before it can become valid and
binding, a unanimous consent of all the heirs is necessary. Thus, when the language of the
contract is explicit, as in the present case, leaving no doubt as to the intention of the parties
thereto, the literal meaning of its stipulation is controlling.

In addition, the petitioners, being owners of their respective undivided shares in the subject
properties, can dispose of their shares even without the consent of all the co-heirs. Article
493 of the Civil Code expressly provides:

Article 493. Each co-owner shall have the full ownership of his part and of the fruits and
benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even
substitute another person in its enjoyment, except when personal rights are involved. But the
effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the
portion which may be allotted to him in the division upon the termination of the co-ownership.
[Emphases supplied.]

Consequently, even without the consent of the two co-heirs, Adolfo and Jesus, the Contract
to Sell is still valid and binding with respect to the 6/8 proportionate shares of the petitioners,
as properly held by the appellate court.

Therefore, this Court finds no error in the findings of the Court of Appeals that all the
petitioners who were signatories in the Contract to Sell are bound thereby.

The final arguments of petitioners state that the Contract to Sell is void altogether
considering that respondent itself did not sign it as to indicate its consent to be bound by its
terms; and moreover, the Contract to Sell is really a unilateral promise to sell without
consideration distinct from the price, and hence, again, void. Said arguments must
necessarily fail.

The Contract to Sell is not void merely because it does not bear the signature of the
respondent corporation. Respondent corporation’s consent to be bound by the terms of the

16
contract is shown in the uncontroverted facts which established that there was partial
performance by respondent of its obligation in the said Contract to Sell when it tendered the
amount of P100,000.00 to form part of the purchase price, which was accepted and
acknowledged expressly by petitioners. Therefore, by force of law, respondent is required to
complete the payment to enforce the terms of the contract. Accordingly, despite the absence
of respondent’s signature in the Contract to Sell, the former cannot evade its obligation to
pay the balance of the purchase price.

As a final point, the Contract to Sell entered into by the parties is not a unilateral promise to
sell merely because it used the word option money when it referred to the amount
of P100,000.00, which also form part of the purchase price.

Settled is the rule that in the interpretation of contracts, the ascertainment of the intention of
the contracting parties is to be discharged by looking to the words they used to project that
intention in their contract, all the words, not just a particular word or two, and words in
context, not words standing alone.19

In the instant case, the consideration of P100,000.00 paid by respondent to petitioners was
referred to as "option money." However, a careful examination of the words used in the
contract indicates that the money is not option money but earnest money. "Earnest money"
and "option money" are not the same but distinguished thus: (a) earnest money is part of the
purchase price, while option money is the money given as a distinct consideration for an
option contract; (b) earnest money is given only where there is already a sale, while option
money applies to a sale not yet perfected; and, (c) when earnest money is given, the buyer is
bound to pay the balance, while when the would-be buyer gives option money, he is not
required to buy, but may even forfeit it depending on the terms of the option.20

The sum of P100,000.00 was part of the purchase price. Although the same was
denominated as "option money," it is actually in the nature of earnest money or down
payment when considered with the other terms of the contract. Doubtless, the agreement is
not a mere unilateral promise to sell, but, indeed, it is a Contract to Sell as both the trial court
and the appellate court declared in their Decisions.

WHEREFORE, premises considered, the Petition is DENIED, and the Decision and
Resolution of the Court of Appeals dated 26 April 2002 and 4 March 2003, respectively,
are AFFIRMED, thus, (a) the Contract to Sell isDECLARED valid and binding with respect to
the undivided proportionate shares in the subject parcels of land of the six signatories of the
said document, herein petitioners Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and
Leonora (all surnamed Oesmer); (b) respondent is ORDERED to tender payment to
petitioners in the amount ofP3,216,560.00 representing the balance of the purchase price for
the latter’s shares in the subject parcels of land; and (c) petitioners are further ORDERED to
execute in favor of respondent the Deed of Absolute Sale covering their shares in the subject
parcels of land after receipt of the balance of the purchase price, and to pay respondent
attorney’s fees plus costs of the suit. Costs against petitioners.

4. Aguirre, et. al vs. CA, et al., GR No. 122249, January 29, 2004

In his lifetime, Leocadio Medrano was the owner and possessor of a parcel of residential
land, situated in Aplaya, Bauan, Batangas, containing an area of 2,611 square meters.4 The
parcel of land was conjugal property, having been acquired by Leocadio during his first

17
marriage with one Emiliana Narito. Their union begot four children, namely: (a) Gertrudes
Medrano, now deceased, represented in this case by her children, herein petitioners
Telesforo, Reynaldo, Remedios, Alfredo, and Belen, all surnamed Aguirre; (b) Isabel
Medrano, likewise deceased, represented by her children, herein petitioners Vicenta,
Horacio, and Florencio, all surnamed Magtibay; (c) Placido Medrano, also deceased,
represented by his only child, herein petitioner Zosima Quiambao; and (d) Sixto Medrano.

After the death of his first wife, Leocadio contracted a second marriage with Miguela Cariño.
Their union bore four children, herein co-petitioners, namely: Venancio, Leonila, Antonio and
Cecilia, all surnamed Medrano.

Upon the death of Leocadio on March 19, 1945, the surviving heirs agreed that Sixto should
manage and administer the subject property.

Sixto died on May 17, 1974. It was only after his death that petitioners heard rumors that
Sixto had, in fact, sold significant portions of the estate of Leocadio. It appears that on
September 7, 1953, Sixto, without the knowledge and consent of the petitioners, executed an
Affidavit of Transfer of Real Property stating therein that he was the only heir of
Leocadio.5 Sixto declared that Leocadio died on September 16, 1949, instead of the actual
date of his death on March 19, 1945. With the use of said affidavit and a survey plan,6 Tax
Declaration No. 40105 in the name of Leocadio was cancelled and Tax Declaration No.
44984 was issued in the name of Sixto.7 On August 29, 1957, Sixto sold to Maria Bacong a
160- square meter portion of the subject land.8 On September 28, 1959, Sixto sold to
Tiburcio Balitaan a 1,695 square meter portion of the same land.9 Sometime in November
1967, Maria Bacong sold her property to Rosendo Bacong.10

Petitioners demanded the reconveyance of the portions sold by Sixto but Tiburcio Balitaan,
Maria Bacong and Rosendo Bacong refused to do so. Hence, petitioners filed against them
before the Regional Trial Court of Batangas (Branch 2), a complaint for Declaration of Nullity
of Documents, Partition, Malicious Prosecution and Damages, docketed as Civil Case No.
202.11

In their Answer, Maria Bacong and Rosendo Bacong contend that petitioners have no cause
of action because they acquired their property thru a valid deed of sale dated August 29,
1957, executed by Sixto and, alternatively, petitioners' cause of action, if any, was barred by
prescription and laches.12

In his Answer, Tiburcio Balitaan contends that petitioners have no cause of action since
petitioners were well-aware of the sale of the property to him by Sixto; and that he was an
innocent purchaser for value, in possession and enjoyment of the land in the concept of
absolute owner, peacefully and publicly. He further echoed the contention of Maria and
Rosendo Bacong that any cause of action petitioners may have was barred by prescription
and laches.13

Maria Bacong died during the pendency of the suit in the trial court and she was substituted
by her surviving heirs, namely, Lorenza, Elena, Felipa, Manuel, Marilou, Ricardo, Medel,
Monchito and Milag, all surnamed Medrano.14Tiburcio Balitaan also died and was substituted
by his heirs, herein private respondents, namely: his wife, Maria Rosales and their four
children: Elias, Jose, Arsenia and Rogelio, all surnamed Balitaan.15

On July 28, 1989, petitioners and Rosendo Bacong, for himself and as attorney-in-fact of the
heirs of Maria Bacong, entered into a compromise agreement to settle the case between
them.16 The compromise agreement, as approved by the trial court, provided that Rosendo

18
Bacong and the heirs of Maria Bacong agreed to pay P30,000.00 to petitioners in recognition
of petitioners' ownership of a 269-square meter portion17 and in consideration of which,
petitioners recognized the full ownership, rights, interest and participation of the former over
said land.18 The area of the subject land is thus reduced to 2,342 square meters (2,611
square meters minus 269 square meters).

After trial on the merits, the trial court rendered judgment dated April 28, 1992, ruling that
private respondents did not dispute, by any evidence, the falsity of the Affidavit of Transfer,
as well as the fact that Sixto had co-owners to the property. It found that private respondents'
affirmative defense of laches and/or prescription are unavailing against a property held in co-
ownership as long as the state of co-ownership is recognized. Consequently, the trial court
upheld the sale made by Sixto in favor of private respondents only to the extent that Sixto is
entitled to by virtue of his being a co-owner.19

In determining the area that Sixto could have validly sold to private respondents, the trial
court, in its decision, provided for the manner of partition among the parties, based on the
memorandum submitted by petitioners, thus:

For the four (4) children of the first marriage, namely:

(1) Gertrudes, who is already dead represented by her children Tefesforo, Reynaldo,
Remedios, Alfredo and Belen, all surnamed Aguirre - 399.42 square meters;

(2) Isabel Medrano, who is already dead, represented by the plaintiffs, her children
Vicenta, Horacio and Florencio, all surnamed Magtibay - 399.42 square meters;

(3) Placido Medrano (dead), represented by his only child Zosima Medrano - 399.42
square meters; and

(4) Sixto Medrano - 399.42 square meters only which he had the right to
dispose of in favor of Tiburcio Balitaan and Maria Rosales.

The above consist of undivided interest, shares and participations from the inheritance or
succession to the conjugal estate of Leocadio Medrano and Emiliana Narito.

For the children of the second marriage their shares in the inheritance from the property of
Leocadio Medrano are as follows:

(1) To Venancio Medrano - 138.32 square meters

(2) To Leonila Medrano - 138.32 square meters

(3) To Antonio Medrano - 138.32 square meters

(4) To Cecilia Medrano - 138.32 square meters

with all the above consisting of undivided shares, interest and participation in the estate.

For the defendants Maria Rosales, surviving spouse of the deceased Tiburcio Balitaan and
their Children, an area of 399.42 square meters, the only area and extent which Sixto
Medrano could have legally dispensed of in their favor.20

19
Thus, the dispositive portion of the trial court's decision reads as follows:

WHEREFORE, in view of the foregoing, the Court renders judgment in favor of the plaintiffs
and against the defendants, to wit:

(a) Ordering the partition of the property in question among the plaintiffs and the
defendants; and

(b) Ordering the parties, plaintiffs and defendants, to make a partition among
themselves by proper instruments of conveyance and to submit before this Court a
project of partition should the parties be able to agree for the confirmation of the
Court within two (2) months upon receipt of this decision, otherwise this Court will be
constrained to appoint commissioners to make the partition in accordance with law.

All other claims not having been duly proved are ordered dismissed.

SO ORDERED.21

Aggrieved, private respondents appealed to the Court of Appeals.22

On July 26, 1995, the appellate court rendered judgment recognizing the validity of the sale
only with respect to the undivided share of Sixto Medrano as co-owner; but nonetheless,
declaring respondents as absolute owners of 1,695 square meters of the subject property,
reasoning that:

. . . Defendants-appellees have been in possession, in the concept of owner, of the entire

parcel of land sold to Tiburcio Balitaan by Sixto Medrano for more than ten years, seventeen
years to be exact (1958-1975). Relying on the affidavit of transfer (Exhibit "B") the tax
declaration (Exhibit "C") and the survey plan (Exhibit "D") shown to him by Sixto Medrano
which indicate the latter as owner of the property in dispute, Tiburcio Balitaan believed
transfer to him was effected. (TSN, April 17, 1991, pp. 14-17) and thus, entered the property
as owner (Ibid. at p. 13) Tiburcio Balitaan, believing himself as the lawful transferee, in
addition, caused Tax Declaration No. 51038 to be issued in his name (Exhibits "6", "6-A", "6-
B", and "6-C"). Thus, although the sale of the co-owned property is only valid as to the
undivided share of Sixto Medrano, defendants, by virtue of their open, adverse and
uninterrupted possession from 1958 (Exhibit "G") to 1975, obtained title to the entire property
and not just Sixto's undivided share. This is pursuant to Article 1134 (1957a) of the New Civil
Code which provides that:

Ownership and other real rights over immovable property are acquired by ordinary
prescription through possession of ten years.

...

Plaintiffs did not at all inquire as to the status of their property all this time and thus have
been remiss of their duties as owners of the property. Plaintiffs waited until Sixto's death to
learn more about their property. Even though the co-ownership is to be preserved in
accordance with the wishes of the deceased, the plaintiffs should have taken it upon
themselves to look into the status of the property once in a while, to assure themselves that it
is managed well and that they are receiving what is due them as co-owners of the parcel of
land or to at least manifest their continued interest in the property as normal owners would
do. But the plaintiffs did not show any interest in the way Sixto Medrano was managing the

20
property which in effect gave the latter carte blanche powers over the same. Such passivity
is aggravated by the fact that one of the plaintiffs resides a mere 600 meters away from the
disputed property (TSN, April 17, 1991, p. 13). By not showing any interest, the plaintiffs
have, in fact, slept on their rights and thus, cannot now exercise a stale right.23

Petitioners sought reconsideration24 but the appellate court denied it in a Resolution dated
October 5, 1995.25

In their present recourse, petitioners take exception from the appellate court's findings that
respondents have been in possession, in the concept of owner of the entire parcel of land
sold to Tiburcio Balitaan by Sixto Medrano for seventeen years (1958-1975), relying on the
Affidavit of Transfer and Tax Declaration No. 51038 in the name of Sixto; and that Tiburcio
acquired ownership of the whole property from Sixto through ordinary prescription for ten
years.

Petitioners submit that Tiburcio Balitaan was not a purchaser in good faith and for value
since there are enough circumstances which should have put him on guard and prompted
him to be more circumspect and inquire further about the true status of Sixto Medrano's
ownership; that during his lifetime, Tiburcio was a neighbor of petitioners and was well-aware
that Sixto had other siblings but Tiburcio chose to rely on the Affidavit of Transfer executed
by Sixto Medrano declaring that he was the only heir of Leocadio; that the Court of Appeals
should not have faulted them for failing to inquire about the status of the disputed property
until after the death of Sixto Medrano; that they are not guilty of laches.

It is settled that in the exercise of the Supreme Court's power of review, the findings of facts
of the Court of Appeals are conclusive and binding on the Supreme Court.26 The exceptions
to this rule are: (1) when the findings are grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3)
when there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its
findings the Court of Appeals went beyond the issues of the case, or its findings are contrary
to the admissions of both the appellant and the appellee; (7) when the findings are contrary
to the trial court; (8) when the findings are conclusions without citation of specific evidence
on which they are based; (9) when the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings
of fact are premised on the supposed absence of evidence and contradicted by the evidence
on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts
not disputed by the parties, which, if properly considered, would justify a different
conclusion.27 Exceptions (4), (7), (10) and (11) are present in the instant case. 1âwphi1

We find the petition meritorious.28 We agree with the petitioners that the Court of Appeals
committed a reversible error in upholding the claim of petitioners that they acquired
ownership of the subject property through prescription.

Acquisitive prescription of real rights may be ordinary or extraordinary. Ordinary acquisitive

prescription requires possession of things in good faith and with just title for the time fixed by
law;29 without good faith and just title, acquisitive prescription can only be extraordinary in
character. Regarding real or immovable property, ordinary acquisitive prescription requires a
period of possession of ten years,30 while extraordinary acquisitive prescription requires an
uninterrupted adverse possession of thirty years.31

Ordinary acquisitive prescription demands that possession be "in good faith", which consists
in the reasonable belief that the person from whom the thing is received has been the owner

21
thereof and could thereby transmit that ownership.32 There is "just title" when the adverse
claimant comes into possession of the property through any of the modes recognized by law
for the acquisition of ownership or other real rights, but that the grantor is neither the owner
nor in a position to transmit the right.33

Article 1130 of the Civil Code states that the "title for prescription must be true and valid."
In Doliendo vs. Biarnesa,34 we elucidated on this provision, thus:

We think that this contention is based on a misconception of the scope and effect of the
provisions of this article of the Code in its application to "ordinary prescription." It is evident
that by a "titulo verdadero y valido" in this connection we are not to understand a "titulo que
por si solo tiene fuerza de transferir el dominio sin necesidad de la prescricion" (a title which
of itself is sufficient to transfer the ownership without the necessity of the lapse of the
prescription period); and we accept the opinion of a learned Spanish law writer who holds
that the "titulo verdadero y valido" as used in this article of the code prescribes a "titulo
Colorado" and not merely "putativo;" a "titulo Colorado" being one 'which a person has when
he buys a thing, in good faith, from one whom he believes to be the owner,' and a "titulo
putativo" "being one which is supposed to have preceded the acquisition of a thing, although
in fact it did not, as might happen when one is in possession of a thing in the belief that it had
been bequeathed to him." (Viso Derecho Civil, Parte Segunda, p. 541)35

The requirements for ordinary acquisitive prescription as hereinabove described have not
been met in this case.

It must be remembered that the burden of proving the status of a purchaser in good faith lies
upon him who asserts that status. It is not sufficient to invoke the ordinary presumption of
good faith, that is, that everyone is presumed to have acted in good faith, since the good
faith that is here essential is integral with the very status that must be established.36

After a careful examination of the records, we find that private respondents failed to
discharge the burden of proof that Tiburcio Balitaan was a purchaser in good faith. It is
undisputed that Tiburcio practically lived his entire lifetime in the area where the property in
dispute is located and had been a neighbor of petitioners. He knew that Sixto Medrano had
other siblings because his son, Dr. Elias Balitaan, is the godson by baptism of spouses Jose
Aguirre and Gertrudes Medrano, the latter being a deceased sister of Sixto. Thus, Tiburcio
was not a complete stranger to the Medrano clan. Yet, he deliberately chose to close his
eyes to said facts and despite his personal knowledge to the contrary, he purchased the
disputed property from Sixto on the basis of the misrepresentation of the latter in his Affidavit
of Transfer that he is the sole surviving heir of Leocadio. A purchaser cannot close his eyes
to facts which should put a reasonable man upon his guard, and then claim that he acted in
good faith under the belief that there was no defect in the title of the vendor.37

Since the disputed property is an unregistered land, Tiburcio as buyer thereof did so at his
peril. Private respondents' claim that Tiburcio bought the land in good faith, that is, without
notice that some other person has a right to or interest in the property, would not protect
them if it turns out, as it actually did in this case, that the seller, Sixto Medrano, did not own
the entire property at the time of the sale, but only an undivided portion of the land as a co-
owner. Private respondents failed to show that the petitioners were notified of the subject
sale or that respondents gave their consent to the sale. Not being in "good faith", the ten-
year period required for ordinary acquisitive prescription does not apply.

Even the thirty-year period under extraordinary acquisitive prescription has not been met in
this case. Private respondents claim to have been in possession, in the concept of owner, of

22
the entire parcel of land sold to Tiburcio Balitaan by Sixto Medrano for only seventeen years
(1958-1975).

In addition, as we have enunciated in Salvador vs. Court of Appeals,38 to wit:

This Court has held that the possession of a co-owner is like that of a trustee and shall not
be regarded as adverse to the other co-owners but in fact as beneficial to all of them. Acts
which may be considered adverse to strangers may not be considered adverse insofar
as co-owners are concerned. A mere silent possession by a co-owner, his receipt of
rents, fruits or profits from the property, the erection of buildings and fences and the
planting of trees thereon, and the payment of land taxes, cannot serve as proof of
exclusive ownership,if it is not borne out by clear and convincing evidence that he
exercised acts of possession which unequivocably constituted an ouster or deprivation of the
rights of the other co-owners.

Thus, in order that a co-owner's possession may be deemed adverse to the cestui que
trust or the other co-owners, the following elements must concur: (1) that he has performed
unequivocal acts of repudiation amounting to an ouster of the cestui que trust or the
other co-owners; (2) that such positive acts of repudiation have been made known to
the cestui que trust or the other co-owners; and (3) that the evidence thereon must be
clear and convincing.39 (Emphasis supplied)

Tested against these guidelines, respondents failed to present competent evidence that the
acts of Sixto adversely and clearly repudiated the existing co-ownership among the heirs of
Leocadio Medrano.

Private respondents' reliance on the tax declaration in the name of Sixto Medrano is
unworthy of credit since we have held on several occasions that tax declarations by
themselves do not conclusively prove title to land.40 Further, private respondents failed to
show that the Affidavit executed by Sixto to the effect that he is the sole owner of the subject
property was known or made known to the other co-heirs of Leocadio Medrano.

Neither can we subscribe to the appellate court's view that petitioners are guilty of laches.
Laches is the negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it has abandoned it or declined to assert it.41 It
does not involve mere lapse or passage of time, but is principally an impediment to the
assertion or enforcement of a right, which has become under the circumstances inequitable
or unfair to permit.42 The rule that each co-owner may demand at any time the partition of the
common property implies that an action to demand partition is imprescriptible or cannot be
barred by laches.43

We have consistently held that 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.44 Article 493 of the Civil Code provides:

Art. 493. Each co-owner shall have the full ownership of his part and the fruits and benefits
pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute
another person in its enjoyment, except when personal rights are involved. But the effect of
the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion
which may be allotted to him in the division upon the termination of the co-ownership.

23
It clearly provides that the sale or other disposition affects only the seller's share pro indiviso,
and the transferee gets only what corresponds to his grantor's share in the partition of the
property owned in common. 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; only the rights of the co-owner/seller are transferred, thereby making the buyer a
co-owner of the property.45 Accordingly, we held in Bailon-Casilao vs. Court of Appeals:

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].46

It is clear therefore that the deed of sale executed by Sixto Medrano in favor of Tiburcio
Balitaan is a valid conveyance only insofar as the share of Sixto Medrano in the co-
ownership is concerned. Thus, the respondent court erred in declaring the ownership of the
entire 1,695-square meter property sold by Sixto, in favor of the private respondents.

The next question is what is the area of the pro indiviso share pertaining to Sixto Medrano
that was sold to private respondents? The trial court endeavored to determine the same by
ascertaining the inheritance of each of the heirs of Leocadio. However, the manner of
partition as set out by the trial court in the text of its decision needs to be amended so as to
conform to the laws on intestate succession under the Old Civil Code absent any allegation
or showing that Leocadio left any last will and testament.

It is not disputed that the 2,342-square meter property was a conjugal property of Leocadio
and Emiliana. Upon the death of Emiliana, which occurred many years before the death of
Leocadio in 1945, both deaths occurring before the enactment of the New Civil Code in
1950, all the four children of the first marriage and the four children of the second marriage
shall share equally. The subject property should have been divided into eight equal parts,
pursuant to Articles 921 and 931 of the old Civil Code,47 or 292.75 square meters each. The
respective heirs of the now deceased children of Leocadio inherit by way of representation
the respective shares of their respective parents, pursuant to Articles 933 and 934 of the Old
Civil Code.48

At the time of death of Leocadio in 1945, Miguela was entitled only to the usufruct of the land
pursuant to Article 834 of the Old Civil Code,49 which provides that "[i]f only one legitimate
child or descendant survives, the widower or widow shall have the usufruct of the third
available for betterment, such child or descendant to have the naked ownership until, on the
death of the surviving spouse, the whole title is merged in him".

24
Thus, to recapitulate, each of the heirs of Leocadio should inherit 292.75 square meters, pro-
indiviso (2,342 square meters ¸ 8 = 292.75 square meters) after deducting from the original
2,611 square meters of the subject property the 269 square meters ceded to the heirs of
Maria Bacong in a compromise agreement among the petitioners and the heirs of Maria
Bacong. The deceased children of Leocadio are represented by their respective heirs by
right of representation under Articles 933 and 934 of the Old Civil Code.

Accordingly, the undivided shares of Leocadio's eight children or their heirs by right of
representation, upon the death of Leocadio in 1945 are as follows:

(1) Venancio Medrano - 292.75 square meters

(2) Leonila Medrano - 292.75 square meters

(3) Antonio Medrano - 292.75 square meters

(4) Cecilia Medrano - 292.75 square meters

(5) Heirs of Gertrudes M. Aguirre, Telesforo, Reynaldo, Remedios, Alfredo and

Belen, all surnamed Aguirre- - 292.75 square meters

(6) Heirs of Isabel M. Magtibay, Vicenta, Horacio and Florencio, all surnamed
Magtibay - 292.75 square meters

(7) Heirs of Placido Medrano, plaintiff Zosima Medrano Quimbao - 292.75 square
meters

(8) Sixto Medrano - 292.75 square meters

During the pendency of the case in the trial court but after the death of Sixto, petitioners sold
460 square meters to one Mateo Castillo. Consequently, the 460 square meters should be
charged against the shares of petitioners only and should not affect the 292.75 square
meters undivided share of Sixto Medrano which he had sold in 1959.50Accordingly, 460
square meters divided by 7 equals 65.71 square meters. Deducting said area from 292.75
square meters, the final undivided share of each of the seven heirs of Leocadio should be
227.04 square meters (292.75 - 65.71 = 227.04) and that pertaining to Sixto in 292.75
square meters.

Thus, the manner of partition set forth by the trial court in its decision should be amended, as
follows:

(1) Gertrudes M. Aguirre, deceased, represented by her children, herein petitioners

Telesforo, Reynaldo, Remedios, Alfredo and Belen, all surnamed Aguirre - 227.04
square meters

(2) Isabel M. Magtibay, deceased, represented by her children, herein petitioners

Vicenta, Horacio and Florencio, all surnamed Magtibay - 227.04 square meters

(3) Placido Medrano, deceased, represented by his only child, Placido Medrano -
227.04 square meters

25
 (4) Private respondents Maria Rosales and heirs of Tiburcio Balitaan, namely:
Elias, Jose, Arsenia and Rogelio all surnamed Balitaan (in lieu of Sixto
Medrano) - 292.75 square meters

(5) Venancio Medrano - 227.04 square meters

(6) Leonila Medrano - 227.04 square meters

(7) Antonio Medrano - 227.04 square meters

(8) Cecilia Medrano - 227.04 square meters

(9) Rosendo Bacong - 269 square meters

(10) Mateo Castillo - 460 square meters

WHEREFORE, we GRANT the petition. The assailed decision of the Court of Appeals in CA-
G.R. CV No. 42350, dated July 26, 1995, is REVERSED and SET ASIDE. The decision of
the Regional Trial Court is REINSTATED with the following MODIFICATIONS:

The sale in favor of private respondents is declared VALID but only insofar as the 292.75
square meters undivided share of Sixto Medrano in the subject property is concerned.

Let the parcel of land, located at Aplaya, Bauan, Batangas, consisting of 2,611 square
meters, be partitioned and distributed as determined by the Court in the text of herein
decision. Accordingly, let the records of the case be remanded to the Regional Trial Court of
Batangas City (Branch 2) in Civil Case No. 202 for further appropriate proceedings under
Rule 69 of the Rules of Court.

5. Robles vs. CA, GR No. 123509, March 14, 2000

To be entitled to the remedy of quieting of title, petitioners must show that they have title to
the real property at issue, and that some deed or proceeding beclouds its validity or efficacy.
Buyers of unregistered real property, especially banks, must exert due diligence in
ascertaining the titles of mortgagors and sellers, lest some innocent parties be prejudiced.
Failure to observe such diligence may amount to bad faith and may result in the nullity of the
mortgage, as well as of the subsequent foreclosure and/or auction sale. Unless the co-
ownership is clearly repudiated, a co-owner cannot, by prescription, acquire title to the share
of the other co-owners.

The Case

Before us is a Petition for Review under Rule 45, assailing the June 15, 1995 Decision and
the January 15, 1996 Resolution of the Court of Appeals 1 (CA) in CA-GR CV No. 34213.2 In
its Decision, the CA ruled: 3

WHEREFORE, the trial court's June 17, 1991 decision is REVERSED and SET
ASIDE, and in lieu thereof a new one is hereby entered ordering the dismissal of the
plaintiffs-appellees['] second amended complaint.

26
Earlier, the trial court had disposed as follows:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring free patent Title No. IV-1-010021 issued by the Bureau of Lands
as null and void;

2. Ordering the defendant spouses Vergel Santos and Ruth Santos to deliver
the property subject of this case to the plaintiff; and

3. Declaring the heirs of Silvino Robles as the absolute owner of the land in
controversy.

The January 15, 1996 CA Resolution denied petitioners' Motion for Reconsideration.

The Facts

The present Petition is rooted in a case for quieting of title before the Regional Trial Court of
Morong, Rizal, filed on March 14, 1988, 4 by Petitioners Lucio Robles, Emeteria Robles,
Aludia. Robles and Emilio Robles. The facts were narrated by the trial court in this wise:

There seems to be no dispute that Leon Robles primitively owned the land situated in
Kay Taga, Lagundi, Morong, Rizal with an area of 9,985 square meters. He occupied
the same openly and adversely. He also declared the same in his name for taxation
purposes as early as 1916 covered by Tax Declaration No. 17865 (Exh. "I") and paid
the corresponding taxes thereon (Exh. "B"). When Leon Robles died, his son Silvino
Robles inherited the land, who took possession of the land, declared it in his name
for taxation purposes and paid the taxes thereon. 1âwphi1.nêt

Upon the death of Silvino Robles in 1942, his widow Maria de la Cruz and his
children inherited the property. They took adverse possession of said property and
paid taxes thereon. The task of cultivat[ing] the land was assigned to plaintiff Lucio
Robles who planted trees and other crops. He also built a nipa hut on the land. The
plaintiffs entrusted the payment of the land taxes to their co-heir and half-brother,
Hilario Robles.

In 1962, for unknown reasons, the tax declaration of the parcel of land in the, name
of Silvino Robles was canceled and transferred to one Exequiel Ballena (Exh. "19"),
father of Andrea Robles who is the wife of defendant Hilario Robles. Thereafter,
Exequiel Ballena secured a loan from the Antipolo Rural Bank, using the tax
declaration as security. Somehow, the tax declaration was transferred [to] the name
of Antipolo Rural Bank (Exh. "17") and later on, was transferred [to] the name of
defendant Hilario Robles and his wife (Exh. "16").

In 1996, Andrea Robles secured a loan from the Cadona Rural Bank, Inc., using the
tax declaration as security. Andrea Robles testified without contradiction that
somebody else, not her husband Hilario Robles, signed the loan papers because
Hilario Robles was working in Marinduque at that time as a carpenter.

For failure to pay the mortgage debt, foreclosure proceedings were had and
defendant Rural Bank emerged as the highest bidder during the auction sale in
October 1968.

27
 The spouses Hilario Robles failed to redeem the property and so the tax declaration
was transferred in the name of defendant Rural Bank. On September 25, 1987,
defendant Rural Bank sold the same to the Spouses Vergel Santos and Ruth Santos.

In September 1987, plaintiff discovered the mortgage and attempted to redeem the
property, but was unsuccessful. On May 10, 1988, defendant spouses Santos took
possession of the property in question and was able to secure Free Patent No. IV-1-
010021 in their names. 5

On the other hand, the Court of Appeals summarized the facts of the case as follows:

The instant action for quieting of title concerns the parcel of land bounded and more
particularly described as follows:

A parcel of land located at Kay Taga, Lagundi, Morong, Rizal. Bounded [i]n
the north by the property of Venancio Ablay y Simeon Ablay; [i]n the east by
the property of Veronica Tulak y Dionisio Ablay; [i]n the south by the property
of Simeon Ablay y Dionisio Ablay; and [i]n the west by the property of
Dionisio Ablay y Simeon Ablay, with an area of 9,985 square meters, more or
less, assessed in the year 1935 at P60.00 under Tax Declaration No. 23219.

As the heirs of Silvino Robles who, likewise inherited the above-described parcel
from Leon Robles, the siblings Lucio, Emeteria, Aludia and Emilio, all surnamed
Robles, commenced the instant suit with the filing of their March 14, 1988 complaint
against Spouses Virgilio and Ruth Santos, as well as the Rural Bank of Cardona, Inc.
Contending that they had been in possession of the land since 1942, the plaintiff
alleged, among other matters, that it was only in September of 1987 that they came
to know of the foreclosure of the real estate mortgage constituted thereon by the half-
brother, Hilario Robles, in favor of defendant Rural Bank; and that they likewise
learned upon further inquiry, that the latter had already sold the self-same parcel in
favor of the Santos spouses (pp. 1-3, orig, rec.). Twice amended to implead Hilario
Robles (pp. 76-80, orig. rec) and, upon subsequent discovery of the issuance of Free
Patent No. IV-I-010021 in favor of the defendant spouses, the Director of Land as
parties-defendants (pp. 117-121, orig. rec). The plaintiffs' complaint sought the
following reliefs on the theory that the encumbrance of their half-brother, constituted
on the land, as well as all proceedings taken subsequent thereto, were null and void,
to wit:

Wherefore, it is respectfully prayed that (a) a preliminary mandatory injunction be

issued forthwith restoring plaintiffs to their possession of said parcel of land; (b) an
order be issued annulling said Free Patent No. IV-I-010021 in the name of
defendants spouses Vergel Santos and Ruth C. Santos, the deed of sale
aforementioned and any tax declaration which have been issued in the name of
defendants; and (c) ordering defendants jointly and severally, to pay plaintiffs the
sum of P10,000.00 as attorney's fees.

Plaintiffs pray for other relief as [may be] just and equitable under the premises. (pp.
120-121, orig. rec.)

xxx xxx xxx

28
With the termination of the pre-trial stage upon the parties-litigants' agreement (p. 203, orig.
rec.) the trial court proceeded to try the case on the merits. It thereafter rendered the
challenged June 17, 1991 decision upon the following findings and conclusions:

The real estate, mortgage allegedly executed by Hilario Robles is not valid because
his signature in the mortgage deed was forged. This fact, which remains unrebutted,
was admitted by Andrea Robles.

Inasmuch as the real estate mortgage executed allegedly by Hilario Robles in favor
of the defendant Cardona Rural Bank, Inc. was not valid, it stands to reason that the
foreclosure proceedings therein were likewise not valid. Therefore, the defendant
bank did not acquire any right arising out of the foreclosure proceedings.
Consequently, defendant bank could not have transferred any right to the spouses
Santos.

The fact that the land was covered by a free patent will not help the defendant
Santos any.

There can be no question that the subject [property was held] in the concept of
owner by Leon Robles since 1916. Likewise, his successor-in-interest, Silvino
Robles, his wife Maria de la Cruz and the plaintiffs occupied the property openly,
continuously and exclusively until they were ousted from their possession in 1988 by
the spouses Vergel and Ruth Santos.

Under the circumstances, therefore, and considering that "open, exclusive and
undisputed possession of alienable public lands for the period prescribed by law (30
years), creates the legal fiction whereby the land, upon completion of the requisite
period, ipso jure and without the need of judicial or other action, ceases to be public
land and becomes private property. Possession of public land . . . which is [of] the
character and duration prescribed by the statute is the equivalent of an express grant
from the State, considering the dictum of the statute itself[:]; "The . . . shall be
conclusively presumed to have performed all the conditions essential to a
government grant and shall be entitled to a certificate of title . . ." No proof is
admissible to overcome a conclusive presumption[,] and confirmation proceedings
would be a little more than a formality, at the most limited to ascertaining whether the
possession claimed is of the required character and length of time. Registration
thereunder would not confer title, but simply recognize a title already vested. (Cruz v.
IAC, G.R. No. 75042, November 29, 1988) The land in question has become private
land.

Consequently, the issuance of [a] free patent title to the Spouses Vergel Santos and
Ruth C. Santos is not valid because at the time the property subject of this case was
already private land, the Bureau of Lands having no jurisdiction to dispose of the
same. (pp. 257-259, orig. rec.)

Dissatisfied with the foregoing decision, the Santos spouses and the defendant Rural Bank
jointly filed their July 6, 1991 Notice of Appeal (p. 260, orig. rec.) . . . . 6

Ruling of the Court of Appeals

29
In reversing the trial court, the Court of Appeals held that petitioners no longer had any title
to the subject property at the time they instituted the Complaint for quieting of title. The CA
ratiocinated as follows:

As correctly urged by the appellants, the plaintiff-appellees no longer had any title to
the property at the time of the institution of the instant complaint. (pp. 25-27, rec.)
The latter's claim of continuous possession notwithstanding (pp. 3-5, TSN, July 5,
1990; p. 12, TSN, July 12, 1990), the aforesaid loss of title is amply evidenced by the
subsequent declaration of the subject realty for taxation purposes not only in the
name of Exequiel Ballena (Exhibits "1" and "2", pp. 23-24, orig, rec.) but also in the
name of the Rural Bank of Antipolo (Exhibit 17, vol. II orig. rec). On the theory that
tax declarations can be evincive of the transfer of a parcel of land or a portion thereof
(Gacos v. Court of Appeals, 212 SCRA 214), the court a quo clearly erred in simply
brushing aside the apparent transfers [which] the land in litigation had undergone.
Whether legal or equitable, it cannot, under the circumstances, be gainsaid that the
plaintiff-appellees no longer had any title to speak of when Exequiel Ballena
executed the November 7, 1966 Deed of Absolute Sale transferring the land in favor
of the spouses Hilario and Andrea Robles (Exhibit "3", p. 25, orig. rec.)

Even on the theory that the plaintiffs-appellees and their half-brother, Hilario Robles,
are co-owners of the land left behind by their common father, Silvino Robles, such
title would still be effectively discounted by what could well serve as the latter's acts
of repudiation of the co-ownership, i.e., his possession (p. 22, TSN, November 15,
1990) and declaration thereof for taxation purposes in his own name (Exhibit "4", p.
26, orig. rec.). In view of the plaintiffs-appellees' inaction for more than twenty (20)
years from the time the subject realty was transferred in favor of Hilario Robles, the
appellants correctly maintain that prescription had already set in. While it may be
readily conceded that an action to quiet title to property in the possession of the
plaintiff is imprescriptible (Almanza vs. Arguelles, 156 SCRA 718; Coronel vs.
Intermediate Appellate Court, 155 SCRA 270; Caragay-Layno vs. Court of Appeals,
133 SCRA 718; Charon Enterprises vs. Court of Appeals, 124 SCRA 784; Faja vs.
Court of Appeals, 75 SCRA 441; Burton vs. Gabar, 55 SCRA 4999), it equally bears
emphasis that a co-owner or, for that matter, the said co-owner[']s successors-in-
interest who occupy the community property other than as co-owner[s] can claim
prescription as against the other co-owners (De Guzman vs. Austria, 148 SCRA 75;
Ramos vs. Ramos, 45 Phil. 362; Africa vs. Africa, 42 Phil. 902; Bargayo vs.
Camumot, 40 Phil. 857; De Castro vs. Echarri, 20 Phil. 23). If only in this latter sense,
the appellants correctly argue that the plaintiffs-appellees have lost their cause of
action by prescription.

Over and above the foregoing considerations, the court a quo gravely erred in
invalidating the real estate mortgage constituted on the land solely on the basis of
Andrea Robles' testimony that her husband's signature thereon was forged (p. 257,
orig. rec.),

xxx xxx xxx

In according to the foregoing testimony . . . credibility which, while admittedly

unrebutted, was altogether uncorroborated, the trial court lost sight of the fact that
the assailed deed of real estate mortgage (Exhibit "5", Vol. II, orig. rec.) is a public
document, the acknowledgment of which is a prima facie evidence of its due
execution (Chua vs. Court of Appeals, 206 SCRA 339). As such, it retains the

30
 presumption of validity in the absence of a full, clear and convincing evidence to
overcome such presumption (Agdeppa vs. Ibe, 220 SCRA 584).

The foregoing principles take even more greater [sic] when it is, moreover, borne in
mind that Hilario Robles made the following admissions in his March 8, 1989
answer, viz:

3. The complaint filed against herein answering defendant has no legal basis
considering that as the lawful owner of the subject real property, defendant
Hilario Robles has the right to mortgage the said real property and could
dispose the same in whatever manner he wishe[s] to do. (p. 96, orig. rec.)

Appropriately underscored by the appellants, the foregoing admission is binding

against Hilario [Robles]. Judicial admissions, verbal or written, made by the parties in
the pleadings or in the course of the trial or other proceedings in the same case are
conclusive, no evidence being required to prove the same. They cannot be
contradicted unless shown to have been made through [a] palpable mistake or
[unless] no such admission was actually made (Philippine American General
Insurance, Inc. vs. Sweet Lines, Inc., 212 SCRA 194).

It does not help the plaintiffs-appellees cause any that, aside from complying with the
requirements for the foreclosure of the subject real estate mortgage (Exhibits "6", "7",
"8" and "10", Volume II [)], the appellant Rural Bank had not only relented to the
mortgagor's request to postpone the (Exhibit "g", Vol. II, orig. rec.) but had likewise
granted the latter's request for an extension of the redemption period therefor
(Exhibits "11" and "12", pp. 35-36, orig. rec.). Without going into minute detail in
discussing the Santos spouses' rights as purchasers for value and in good faith
(Exhibit "21", Vol. II, orig. rec.), the mortgagor and the plaintiffs'-appellees cannot
now be heard to challenge the validity of the sale of the land after admittedly failing to
redeem the same within the extension the appellant, Rural Bank granted (pp. 10-11,
TSN, November 15, 1990).

Being dependent on the supposed invalidity of the constitution and foreclosure of the
subject real estate mortgage, the plaintiffs-appellees' attack upon . . . Free Patent
No. IV-I must necessarily fail. The trial court, therefore, misread, and ignored the
evidence o[n] record, to come up with erroneous conclusion.

Contending that such ruling was contrary to law and jurisprudence, Petitioners Lucio,
Emeteria, Aludia and Emilio — all surnamed Robles — filed this Petition for Review. 7

The Assigned Error

Petitioners ascribe the following error to the respondent court:

Respondent Court of Appeals grievously erred in ruling that with the transfers of the
tax declaration over the parcel of land in question from Silvino Robles to Exequiel
Ballena, then to the Rural Bank of Antipolo, then to Respondent Hilario Robles, then
to Respondent Rural Bank of Cardona Inc., and then finally to Respondent Spouses
Santos, petitioners, who by themselves and their predecessors in interest have been
in open, actual and adverse possession of said parcel of land since 1916 up to their
forced removal therefrom in 1988, have lost their title to said property by prescription

31
 to their half-brother, Respondent Hilario Robles, and then finally, to Respondent
Spouses Santos. 8

For a better understanding of the case, the above issue will be broken down into three
points: first, the nature of the remedy of quieting of title; second, the validity of the real estate
mortgage; and third, the efficacy of the free patent granted to the Santos spouses.

First Issue:

Quieting of Title

Art. 476 of the Civil Code provides:

Whenever there is cloud on title to real property or any interest therein, by reason of
any instrument, record, claim, encumbrance or proceeding which is apparently valid
or effective but is in truth and in fact invalid, ineffective, voidable or unenforceable,
and may be prejudicial to said title, an action may be brought to remove such cloud
or to quiet title.

An action may also be brought to prevent a cloud from being cast upon title to real
property or any interest therein.

Based on the above definition, an action to quiet title is a common-law remedy for the
removal of any cloud or doubt or uncertainty on the title to real property. 9 It is essential for
the plaintiff or complainant to have a legal or an equitable title to or interest in the real
property which is the subject matter of the action. 10 Also, the deed, claim, encumbrance or
proceeding that is being alleged as a cloud on plaintiff's title must be shown to be in fact
invalid or inoperative despite its prima facie appearance of validity or legal efficacy. 11

That there is an instrument or a document which, on its face, is a valid and efficacious is
clear in the present case. Petitioners allege that their title as owners and possessors of the
disputed property is clouded by the tax declaration and, subsequently, the free patent thereto
granted to Spouses Vergel and Ruth Santos. The more important question to be resolved,
however, is whether the petitioners have the appropriate title that will entitle them to avail
themselves of the remedy of quieting of title.

Petitioners anchor their claim to the disputed property on their continued and open
occupation and possession as owners thereof. They allege that they inherited it from their
father, Silvino, who in turn had inherited it from his father, Leon. They maintain that after their
father's death, they agreed among themselves that Petitioner Lucio Robles would be tending
and cultivating it for everyone, and that their half-brother Hilario would be paying the land
taxes.

Petitioners insist that they were not aware that from 1962 until 1987, the subject property had
been declared in the names of Exequiel Ballena, the Rural Bank of Antipolo, Hilario Robles,
the Rural Bank of Cardona, Inc., and finally, Spouses Vergel and Ruth Santos. Maintaining
that as co-owners of the subject property, they did agree to the real estate mortgage
constituted on it, petitioners insist that their shares therein should not have been prejudiced
by Hilario's actions.

On the other hand, Private Respondents Vergel and Ruth Santos trace their claim to the
subject property to Exequiel Ballena, who had purportedly sold it to Hilario and Andrea

32
Robles. According to private respondents, the Robles spouses then mortgaged it to the Rural
Bank of Cardona, Inc. — not as co-owners but as absolute owners — in order to secure an
agricultural loan worth P2,000. Upon their failure to pay their indebtedness, the mortgage
was foreclosed and the property sold to the bank as the highest bidder. Thereafter, private
respondents purchased the property from the bank.

Undisputed is the fact that the land had previously been occupied by Leon and later by
Silvino Robles, petitioners' predecessor-in-interest, as evidenced by the different tax
declarations issued in their names. Also undisputed is the fact that the petitioners continued
occupying and possessing the land from the death of Silvino in 1942 until they were allegedly
ousted therefrom in 1988. In 1962, the subject property was declared in the name of
Exequiel for taxation purposes. On September 30, 1965, it was again declared in the same
name; on October 28, 1965, in the name of the Rural Bank of Antipolo; on November 7,
1966, in the name of Hilario and Andrea; and thereafter, in the name of the Rural Bank of
Cardona and, finally, in the name of the Santos spouses.

Ostensibly, the Court of Appeals failed to consider irregularities in the transactions involving
the disputed property. First, while it was declared in the name of Exequiel in 1962, there was
no instrument or deed of conveyance evidencing its transfer from the heirs of Silvino to him.
This fact is important, considering that the petitioners are alleging continued possession of
the property. Second, Exequiel was the father-in-law of Hilario, to whom petitioners had
entrusted the payment of the land taxes. Third, considering that the subject property had
been mortgaged by Exequiel to the Rural Bank of Antipolo, and that it was foreclosed and in
fact declared in the bank's name in 1965, why was he able to sell it to Spouses Hilario and
Andrea in 1966? Lastly, inasmuch as it was an unregistered parcel of land, the Rural Bank of
Cardona, Inc., did not observe due diligence in determining Hilario's title thereto.

The failure to show the indubitable title of Exequiel to the property in question is vital to the
resolution of the present Petition. It was from him that Hilario had allegedly derived his title
thereto as owner, an allegation which thereby enabled him to mortgage it to the Rural Bank
of Cardona. The occupation and the possession thereof by the petitioners and their
predecessors-in-interest until 1962 was not disputed, and Exequiel's acquisition of the said
property by prescription was not alleged. Thus, the deed of conveyance purportedly
evidencing the transfer of ownership and possession from the heirs of Silvino to Exequiel
should have been presented as the best proof of that transfer. No such document was
presented, however.

Therefore, there is merit to the contention of the petitioners that Hilario mortgaged the
disputed property to the Rural Bank of Cardona in his capacity as a mere co-owner thereof.
Clearly, the said transaction did not divest them of title to the property at the time of the
institution of the Complaint for quieting of title.

Contrary to the disquisition of the Court of Appeals, Hilario effected no clear and evident
repudiation of the co-ownership. It is a fundamental principle that a co-owner cannot acquire
by prescription the share of the other co-owners, absent any clear repudiation of the co-
ownership. In order that the title may prescribe in favor of a co-owner, the following requisites
must concur: (1) the co-owner has performed unequivocal acts of repudiation amounting to
an ouster of the other co-owners; (2) such positive acts of repudiation have been made
known to the other co-owner; and (3) the evidence thereof is clear and convincing. 12

In the present case, Hilario did not have possession of the subject property; neither did he
exclude the petitioners from the use and the enjoyment thereof, as they had indisputably
shared in its fruits. 13 Likewise, his act of entering into a mortgage contract with the bank

33
cannot be construed to be a repudiation of the co-ownership. As absolute owner of his
undivided interest in the land, he had the right to alienate his share, as he in fact
did. 14 Neither should his payment of land taxes in his name, as agreed upon by the co-
owners, be construed as a repudiation of the co-ownership. The assertion that the
declaration of ownership was tantamount to repudiation was belied by the continued
occupation and possession of the disputed property by the petitioners as owners.

Second Issue:

Validity of the Real Estate Mortgage

In a real estate mortgage contract, it is essential that the mortgagor be the absolute owner of
the property to be mortgaged; otherwise, the mortgage is void. 15 In the present case, it is
apparent that Hilario Robles was not the absolute owner of the entire subject property; and
that the Rural Bank of Cardona, Inc., in not fully ascertaining his title thereto, failed to
observe due diligence and, as such, was a mortgagee in bad faith.

First, the bank was utterly remiss in its duty to establish who the true owners and possessors
of the subject property were. It acted with precipitate haste in approving the Robles
1âw phi1

spouses' loan application, as well as the real estate mortgage covering the disputed parcel of
land. 16 Had it been more circumspect and assiduous, it would have discovered that the said
property was in fact being occupied by the petitioners, who were tending and cultivating it.

Second, the bank should not have relied solely on the Deed of Sale purportedly showing that
the ownership of the disputed property had been transferred from Exequiel Ballena to the
Robles spouses, or that it had subsequently been declared in the name of Hilario. Because it
was dealing with unregistered land, and the circumstances surrounding the transaction
between Hilario and his father-in-law Exequiel were suspicious, the bank should have
exerted more effort to fully determine the title of the Robleses. Rural Bank of Compostela vs.
Court Appeals 17invalidated a real estate mortgage after a finding that the bank had not been
in good faith. The Court explained: "The rule that persons dealing with registered lands can
rely solely on the certificate of title does not apply to banks." In Tomas v. Tomas, the Court
held:

. . . Banks, indeed, should exercise more care and prudence in dealing even with registered
lands, than private individuals, for their business is one affected with public interest, keeping
in trust money belonging to their depositors, which they should guard against loss by not
committing any act of negligence which amounts to lack of good faith by which they would be
denied the protective mantle of land registration statute, Act 496, extended only to
purchasers for value and in good faith, as well as to mortgagees of the same character and
description. . . . 18

Lastly, the Court likewise finds it unusual that, notwithstanding the bank's insistence that it
had become the owner of the subject property and had paid the land taxes thereon, the
petitioners continued occupying it and harvesting the fruits therefrom. 19

Considering that Hilario can be deemed to have mortgaged the disputed property not as
absolute owner but only as a co-owner, he can be adjudged to have disposed to the Rural
Bank of Cardona, Inc., only his undivided share therein. The said bank, being the immediate
predecessor of the Santos spouses, was a mortgagee in bad faith. Thus, justice and equity
mandate the entitlement of the Santos spouses, who merely stepped into the shoes of the
bank, only to what legally pertains to the latter — Hilario's share in the disputed property.

34
 Third Issue:

Efficacy of Free Patent Grant

Petitioners repeatedly insist that the disputed property belongs to them by private ownership
and, as such, it could not have been awarded to the Santos spouses by free patent. They
allege that they possessed it in the concept of owners — openly, peacefully, publicly and
continuously as early as 1916 until they were forcibly ousted therefrom in 1988. They
likewise contend that they cultivated it and harvested its fruits. Lucio Robles testified:

xxx xxx xxx

Q By the way, why do you know this parcel of land?

A Because before my father died, he showed me all the documents.

Q Before the death of your father, who was the owner of this parcel of land?

A My father, sir.

Q How did your father acquire this parcel of land?

A My father knew that it [was] by inheritance, sir.

Q From whom?

A From his father, Leon Robles, sir.

Q And do you know also [from] whom Leon Robles acquired this land?

A It was inherited from his father, sir.

Q What is the nature of this parcel of land?

A It's an agricultural land, sir.

Q Now, at the time of the death of your father, this land was planted with what crops?

A Mango trees, santol trees, and I was the one who planted those trees, sir.

Q When did you plant those trees?

A Before the death of my father, sir.

Q Now, after the death of your father, who cultivated this parcel of land?

A I took charge of the land after the death of my father, sir.

Q Up to when?

35
 A Up to the present, sir, after this case was already filed. 20

The preceding claim is an assertion that the subject property is private land. The petitioners
do not concede, and the records do not show, that it was ever an alienable land of the public
domain. They allege private ownership thereof, as evidenced by their testimonies and the tax
declarations issued in the names of their predecessors-in-interest. It must be noted that while
their claim was not corroborated by other witnesses, it was not controverted by the other
parties, either.

Carlos Dolores insisted that the Rural Bank of Cardona, Inc., of which he was the manager,
had acquired and possessed the subject property. He did not, however, give any reason why
the petitioners had continued occupying it, even as he admitted on the stand that he had
visited it twice. 21

In the light of their open, continuous, exclusive and notorious possession and occupation of
the land, petitioners are "deemed to have acquired, by operation of law, a right to a grant, a
government grant, without the necessity of a certificate of title being issued." 22 The land was
"segregated from the public domain." Accordingly, the director of lands had no authority to
issue a free patent thereto in favor of another person. Verily, jurisprudence holds that a free
patent covering private land is null and void. 23

Worth quoting is the disquisition of the Court in Agne v. Director of Lands, 24 in which it held
that a riparian owner presently in possession had a better right over an abandoned river bed
than had a registered owner by virtue of a free patent.

Under the provisions of Act 2874 pursuant to which the title of private respondents'
predecessor-in-interest was issued, the President of the Philippines, or his alter ego,
the Director of Lands, has no authority to grant a free patent for land that has ceased
to be a public land and has passed to private ownership and a title so issued is null
and void. The nullity arises, not from fraud or deceit, but from the fact that the land is
not under the jurisdiction of the Bureau of Lands. The jurisdiction of the Director of
Lands is limited only to public lands and does not cover lands publicly owned. The
purpose of the Legislature in adopting the former Public Land Act, Act No. 2874, was
and is to limit its application to lands of the public domain, and lands held in private
ownership are not included therein and are not affected in any manner whatsoever
thereby. Land held in freehold or fee title, or of private ownership, constitutes no part
of the public domain, and cannot possibly come within the purview of said act 2874,
inasmuch as the "subject" of such freehold or private land is not embraced in any
manner in the title of the Act and the same is excluded from the provisions of the text
thereof.

We reiterate that private ownership of land is not affected by the issuance of the free
patent over the same land because the Public Land Act applies only to lands of the
public domain. Only public land may be disposed of by the Director of Lands. Since
as early as 1920, the land in dispute was already under the private ownership of
herein petitioners and no longer a part of the lands of the public domain, the same
could not have been the subject matter of a free patent. The patentee and his
successors-in-interest acquired no right or title to said land. Necessarily, Free Patent
No. 23263 issued to Herminigildo Agpoon is null and void and the subsequent titles
issued pursuant thereto cannot become final and indefeasible. Hence we ruled
inDirector of Lands v. Sicsican, et al. that if at the time the free patents were issued
in 1953 the land covered therein were already private property of another and,

36
 therefore, not part of the disposable land of the public domain, then applicants
patentees acquired no right or title to the land.

Now, a certificate of title fraudulently secured is null and void ab initio if the fraud
consisted in misrepresenting that the land is part of the public domain, although it is
not. As earlier stated, the nullity arises, not from the fraud or deceit, but from the fact
that the land is not under the jurisdiction of the Bureau of Lands. Being null and void,
the free patent granted and the subsequent titles produce no legal effect
whatsoever. Quod nullum est, nullum producit effectum.

A free patent which purports to convey land to which the government did not have
any title at the time of its issuance does not vest any title in the patentee as against
the true owner. The Court has previously held that the Land Registration Act and the
Cadastral Act do not give anybody who resorts to the provisions thereof a better title
than what he really and lawfully has.

xxx xxx xxx

We have, therefore, to arrive at the unavoidable conclusion that the title of herein
petitioners over the land in dispute is superior to the title of the registered owner
which is a total nullity. The long and continued possession of petitioners under a valid
claim of title cannot be defeated by the claim of a registered owner whose title is
defective from the beginning.

The Santos spouses argue that petitioners do not have the requisite personality to question
the free patent granted them, inasmuch as "it is a well-settled rule that actions to nullify free
patents should be filed by the Office of the Solicitor General at the behest of the Director of
Lands." 25

Private respondents' reliance on this doctrine is misplaced. Indeed, the Court held in Peltan
Development, Inc. v. Court of Appeals 26 that only the solicitor general could file an action for
the cancellation of a free patent. Ruling that the private respondents, who were applicants for
a free patent, were not the proper parties in an action to cancel the transfer certificates
covering the parcel of land that was the subject of their application, the Court ratiocinated
thus:

The Court also holds that private respondents are not the proper parties to initiate the
present suit. The complaint, praying as it did for the cancellation of the transfer
certificates of title of petitioners on the ground that they were derived from a
"spurious" OCT No. 4216, assailed in effect the validity of said title. While private
respondents did not pray for the reversion of the land to the government, we agree
with the petitioners that the prayer in the complaint will have the same result of
reverting the land to the government under the Regalian Doctrine. Gabila v.
Barinaga 27 ruled that only the government is entitled to this relief. . . . .

Because the cancellation of the free patent as prayed for by the private respondents in
Peltan would revert the property in question to the public domain, the ultimate beneficiary
would be the government, which can be represented by the solicitor general only. Therefore,
the real party-in-interest is the government, not the private respondents.

This ruling does not, however, apply to the present case. While the private respondents in
Peltan recognized that the disputed property was part of the public domain when they

37
applied for free patent, 28 herein petitioners asserted and proved private ownership over the
disputed parcel of land by virtue of their open, continued and exclusive possession thereof
since 1916.

Neither does the present case call for the reversion of the disputed property to the State. By
asking for the nullification of the free patent granted to the Santos spouses, the petitioners
are claiming the property which, they contend, rightfully belongs to them.

Indeed, the same issue was resolved by this Court in Heirs of Marciano Nagano v. Court of
Appeals. 29 In that case, the trial court dismissed a Complaint seeking the declaration of
nullity of an Original Certificate of Title issued pursuant to a free patent, reasoning that the
action should have been instituted by the solicitor general. In reversing the trial court, the
Supreme Court held:

It is settled that a Free Patent issued over private land is null and void, and produces
no legal effect whatsoever. Quod nullum est, nullum producit affectum. Moreover,
private respondents' claim of open, peaceful, continuous and adverse possession of
the 2,250 square meter portion since 1920, and its illegal inclusion in the Free Patent
of petitioners and in their original certificate of title, gave private respondents a cause
of action for quieting of title which is imprescriptible.

In any event, the Office of the Solicitor General was afforded an opportunity to express its
position in these proceedings. But it manifested that it would not file a memorandum,
because "this case involves purely private interests." 30

The foregoing considered, we sustain the contention of petitioners that the free patent
granted to the Santos spouses is void. It is apparent that they are claiming ownership of the
disputed property on the basis of their possession thereof in the concept of owners —
openly, peacefully, publicly, continuously and adversely since 1916. Because they and their
predecessors-in-interest have occupied, possessed and cultivated it as owners for more than
thirty years, 31 only one conclusion can be drawn — it has become private land and is
therefore beyond the authority of the director of lands.

Epilogue

We recognize that both the petitioners and the Santos spouses fell victim to the dubious
transaction between Spouses Hilario and Andrea Robles and the Rural Bank of Cardona,
Inc. However, justice and equity mandate that we declare Petitioners Lucio, Emerita, Aludia
and Emilio Robles to have the requisite title essential to their suit for quieting of title.
Considering the circumstances peculiar to this complicated problem, the Court finds this
conclusion the logical and just solution.

The claim that petitioners were guilty of laches in not asserting their rights as owners of the
property should be viewed in the light of the fact that they thought their brother was paying
the requisite taxes for them, and more important, the fact that they continued cultivating it
and harvesting and gaining from its fruits.

From another viewpoint, it can even be said that it was the Rural Bank of Cardona, Inc.,
which was guilty of laches because, granting that it had acquired the subject property legally,
it failed to enforce its rights as owner. It was oblivious to the petitioners' continued
occupation, cultivation and possession thereof. Considering that they had possessed the
property in good faith for more than ten years, it can even be argued that they thus regained

38
it by acquisitive prescription. In any case, laches is a remedy in equity, and considering the
circumstances in this case, the petitioners cannot be held guilty of it.

In sum, the real estate mortgage contract covering the disputed property — a contract
executed between Spouses Hilario and Andrea on the one hand and the Rural Bank of
Cardona, Inc., on the other — is hereby declared null and void insofar as it prejudiced the
shares of Petitioners Lucio, Emerita, Aludia and Emilio Robles; it is valid as to Hilario Robles'
share therein. Consequently, the sale of the subject property to the Santos spouses is valid
insofar as it pertained to his share only. Likewise declared null and void is Free Patent No.
IV-1-010021 issued by the Bureau of Lands covering the subject property.

6. Laguna v. Levantino GR No. L-47386, April 18, 1941

On May 6, 1925, one Justo Laguna, absolute owner in his lifetime of two parcels of land
described in appellant's petition for certiorari, died intestate and was survived by two
children, Bonifacio and Vivencia, his third son Pantaleon having died before him leaving a
daughter named Andrea who also died before him leaving a son named Esteban Laguna
Fabie. Bonifacio, in turn, died intestate on May 28, 1929, without descendant and was
survived only by his wife, Ambrosia Levantino. A month after the death of Bonifacio, his
surviving spouse, Ambrosia Levantino, and the heirs of the deceased Justo — Vivencia and
Esteban Laguna Fable — agreed to divide extrajudicially the respective properties of the two
deceased, and to this effect executed two deeds of partition, the first, Exhibit A, by Vivencia
and Esteban Laguna Fabie, purporting to divide the properties left by the deceased Justo;
and, the second, Exhibit B, by Ambrosia Levantino and Vivencia Laguna, purporting to divide
the properties left by the deceased Bonifacio. The two parcels of land aforecited and which
constitute the sole subject of the present litigation, were erroneously included in the second
deed of partition, Vivencia Laguna then of the belief that said parcels were conjugal property
of the deceased Bonifacio and his spouse. Six years thereafter, Vivencia Laguna,
discovering the error, instituted an action in the Court of First Instance of Pangasinan for the
recovery of the portion erroneously assigned to Ambrosia Levantino. Judgement was
rendered declaring, inter alia, the partition null and void and adjudging the two parcels of
land to be the exclusive properties of the petitioner Vivencia Laguna. Respondent Ambrosia
Levantino appealed to the Court of Appeals which reversed the judgment of the trial court,
holding that the deceased Bonifacio Laguna, who had declared the two parcels of land in
question for tax purposes since 1914, had acquired a perfect title thereto by prescription; that
petitioner's action for the rescission of the partition has prescribed; and that petitioner is in
estoppel she having signed the deed of partition.

From the undisputed facts of the case, Bonifacio Laguna's possession of the two parcels in
question during the lifetime of his father Justo, appears no more than in the character of
trustee. And it is a well-settled rule that possession of a trustee is, in law, possession of
the cestui que trust and, therefore, it cannot be a good ground for title by prescription. The
only instance in which the possession of a trustee may be deemed adverse to the cestui que
trust is when the former makes an open repudiation of the trust by unequivocal acts made
known to the latter. It has been held that the trustee may claim title by prescription founded
on adverse possession, where it appears (a) that he has performed unequivocal acts of
repudiation amounting to an ouster of the cestui que trust; (b) that such positive acts of
repudiation have been made known to the cestui que trust; and (c) that the evidence thereon
should be clear and conclusive. Acts which may be adverse to strangers may not be
sufficiently adverse to the cestui que trust. A mere silent possession of the trustee
unaccompanied with acts amounting to an ouster of the cestui que trust cannot be construed

39
as an adverse possession. Mere perception of rents and profits by the trustee, and erecting
fences and building adapted for the cultivation of the land held in trust, are not equivalent to
unequivocal acts of ouster of the cestui que trust. (Cortes et al. v. Oliva, 33 Phil., 480;
Bargayo v. Camumot, 40 Phil., 857; Espeidel v. Henrice, 120 U.S. 377). In the instant case,
the sole fact of Bonifacio's having declared the lands in his name for tax purposes,
constitutes no such unequivocal act of repudiation amounting to an ouster of his father, Justo
Laguna, and cannot thus constitute adverse possession as basis for title by prescription.

From what has been said, it follows that the two parcels of land in question were of the
exclusive ownership of Justo Laguna in his lifetime, and upon his death, should pass to his
heirs, Vivencia Laguna, Esteban Laguna Fable and the heirs, of Bonifacio Laguna. The
partition subsequently made upon the erroneous assumption that the two parcels of land
were of the conjugal partnership of the deceased Bonifacio Laguna and his wife Ambrosia
Levantino, and assigning to her a property to which she had absolutely no right, is a contract
without consideration and is void. (Art. 1081 Civil Code; De Torres v. De Torres, 28 Phil.,
49). The Court of Appeals held, however, that, as six years had already elapsed from the
date of the execution of the deed of partition, the action instituted by the petitioner for the
rescission of the partition on the ground or lesion had prescribed, under article 1076 of the
Civil Code. But, as correctly ruled by the trial court, the action is not really one of rescission,
which presupposes a valid partition, but, one of reivindicacion, ignoring a void partition, and
as such, prescribes in ten years. Such partition as respect Ambrosia Levantino who has no
right to inherit from Justo Laguna is legally non-existing (7 Manresa, 726) and may be
completely ignored.

The Court of Appeals also ruled that the petitioner, in having signed the deed of partition, is
now estopped in impugning its validity. Suffice it say that, as general rule, acquiescence
through innocent mistake cannot constitute a basis for estoppel. (21 C.J., 1125).

The judgment of the Court of Appeals is reversed and that of the Court of First Instance of
Pangasinan, affirmed, with costs against respondents.

7. Galvez vs. CA, GR No. 157954, March 24, 2006

The factual antecedents of this case reveal that Timotea F. Galvez died intestate on 28 April
1965.1 She left behind her children Ulpiano and Paz Galvez. Ulpiano, who died on 24 July
1959,2 predeceased Timotea and was survived by his son, Porfirio Galvez. Timotea left a
parcel of land situated at Pagdaraoan, San Fernando, La Union, covered by Tax Declaration
No. 396453 and more particularly described as follows:

A parcel of unirrigated riceland situated at Brgy. Pagdaraoan, San Fernando, La Union under
Tax Declaration No. 39645, series of 1957, with an area of 4,304.5 square meters, more or
less bounded on the North by Valentin and Isidoro Sobrepeña; on the East by Nicolas
Ducusin; on the South by Victor Ducusin; and on the West by the National Highway.4

Considering that all the other compulsory heirs of Timotea already received their respective
shares,5 the property passed by succession, both to Timotea’s daughter, Paz Galvez, and to
the former’s grandson, Porfirio, the latter succeeding by right of representation as the son of
Ulpiano.

40
Porfirio Galvez was surprised to discover that on 4 May 1970,6 Paz Galvez executed an
affidavit of adjudication stating that she is the true and lawful owner of the said property. Tax
Declarations No. 157497 and No. 123428 were then issued in the name of Paz Galvez. On 22
June 1992, without the knowledge and consent of Porfirio Galvez, Paz Galvez sold the
property to Carlos Tam for a consideration of Ten Thousand Pesos (P10,000.00) by way of a
Deed of Absolute Sale.9 Carlos Tam thereafter filed an application for registration of said
parcel of land under Land Registration Case No. 2278 before the Regional Trial Court (RTC)
of San Fernando, La Union. On 21 January 1994, Original Certificate of Title No. 0-2602 of
the Registry of Deeds of San Fernando, La Union, was issued in the name of Carlos
Tam.10 Subsequently, on 27 September 1994, Carlos Tam sold the property to Tycoon
Properties, Inc. through a Deed of Absolute Sale executed by the former in favor of the
latter.11 As a result, the title of Carlos Tam over the property was cancelled and a new one,
Transfer Certificate of Title (TCT) No. T-4039012 was issued in favor of Tycoon Properties,
Inc.

On 12 May 1994, Porfirio Galvez filed Civil Case No. 4895 before the RTC, Branch 26, of
San Fernando, La Union, for Legal Redemption with Damages and Cancellation of
Documents13 against Paz Galvez and Carlos Tam. The Complaint was later amended to
implead as additional defendant, Tycoon Properties, Inc.14 When Tycoon Properties, Inc.
filed its Answer, it also filed a cross-claim against Carlos Tam. In a decision15 dated 15
December 1999, the trial court held:

WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:

1. declaring null and void the Affidavit of Adjudication executed by defendant PAZ
GALVEZ dated May 4, 1970;

2. declaring null and void the Deed of Absolute Sale over the property originally
covered by Tax Declaration No. 39645 executed by PAZ GALVEZ in favor of
CARLOS TAM;

3. the Original Certificate of Title No. 0-2602, in the name of CARLOS TAM be
considered cancelled;

4. The Deed of Sale between CARLOS TAM and TYCOON PROPERTIES, Inc. is
hereby ordered cancelled with Transfer Certificate of Title No. T-40390, being null
and void;

5. That CARLOS TAM shall receive from the Clerk of Court, San Fernando City, La
Union the amount of Ten Thousand (P10,000.00) pesos, as redemption of the
property pursuant to law;

6. That the property covered by Transfer Certificate of Title No. T-40390, be

reconveyed (whole property) to PORFIRIO GALVEZ, he having redeemed one-half
(½) of the property from CARLOS TAM and other half of the property belongs to him
as co-heir of TIMOTEA FLORES GALVEZ.

7. Defendant PAZ GALVEZ and CARLOS TAM shall be liable solidarily for the actual
damages of the plaintiff in the amount of Ten Thousand (P10,000.00) pesos as well
as moral damages in the amount of Fifty Thousand (P50,000.00) Pesos, together
with attorney's fees in the amount of Ten Thousand (P10,000.00) Pesos acceptance
fee and Five Hundred (P500.00) per appearance fee.16

41
Petitioners Paz Galvez, Carlos Tam and Tycoon Properties, Inc. appealed the decision to the
Court of Appeals.17 In a decision of the Court of Appeals dated 28 August 2002,18 the
appellate court resolved to affirm the decision of the trial court. Petitioners filed a Motion for
Reconsideration which was denied in a resolution dated 14 April 2003.19

Not contented with the decision of the Court of Appeals, petitioners are now before this Court
via Petition for Review on Certiorari under Rule 45 of the Rules of Court.

Petitioners Carlos Tam and Tycoon Properties, Inc. separately filed their Memorandum20 but
raised the same issues to wit:

THE HONORABLE COURT OF APPEALS ERRED WHEN IT REFUSED TO HOLD THAT

RESPONDENT'S CLAIM OVER THE SUBJECT PROPERTY, WHICH IS BASED ON AN
IMPLIED TRUST, HAS ALREADY PRESCRIBED BECAUSE THE ACTION WAS FILED 24
YEARS AFER PETITIONER REPUDIATED THE SAID TRUST.

II

THE HONORABLE COURT OF APPEALS ERRED WHEN IT FAILED TO RECOGNIZE

THAT RESPONDENT'S CLAIM IS ALREADY BARRED BY LACHES BECAUSE HE FAILED
TO ASSERT HIS ALLEGED RIGHT FOR ALMOST TWENTY FOUR (24) YEARS.

III

THE HONORABLE COURT ERRED IN FAILING TO RECOGNIZE THAT PETITIONERS

[CARLOS TAM AND] TYCOON PROPERTIES ARE BUYERS IN GOOD FAITH AND FOR
VALUE AND HAS THE RIGHT TO RELY ON THE FACE OF THE TITLE.21

In assailing the decisions of the trial and appellate courts, petitioners cite Article 145122 of the
Civil Code and claim that an implied or constructive trust which prescribes in ten years, was
established between Paz Galvez and Porfirio Galvez. It is petitioners’ unflinching stand that
the implied trust was repudiated when Paz Galvez executed an Affidavit of Self-Adjudication
on 4 May 1970, registered the same before the Register of Deeds of La Union on 4 June
1970 and secured a new tax declaration in her name. From 4 May 1970 to the time the
complaint was filed on 12 May 1994, 24 years have passed, hence, the action is clearly
barred both by prescription and laches.

We find the petition bereft of merit.

Ostensibly, this case is governed by the rules on co-ownership23 since both Paz Galvez and
Porfirio Galvez are obviously co-owners of the disputed property having inherited the same
from a common ancestor. Article 494 of the Civil Code provides that "[a] prescription shall
not run in favor of a co-owner or co-heir against his co-owners or co-heirs as long as he
expressly or impliedly recognizes the co-ownership."

It is a fundamental principle that a co-owner cannot acquire by prescription the share of the
other co-owners, absent any clear repudiation of the co-ownership.24 In Santos v.
Santos,25 citing the earlier case of Adille v. Court of Appeals,26 this Court found occasion to
rule that:

42
Prescription, as a mode of terminating a relation of co-ownership, must have been preceded
by repudiation (of the co-ownership). The act of repudiation, in turn, is subject to certain
conditions: (1) a co-owner repudiates the co-ownership; (2) such an act of repudiation is
clearly made known to the other co-owners; (3) the evidence thereon is clear and conclusive;
and (4) he has been in possession through open, continuous, exclusive, and notorious
possession of the property for the period required by law.

For title to prescribe in favor of a co-owner there must be a clear showing that he has
repudiated the claims of the other co-owners and the latter has been categorically advised of
the exclusive claim he is making to the property in question. The rule requires a clear
repudiation of the co-ownership duly communicated to the other co-owners.27 It is only when
such unequivocal notice has been given that the period of prescription will begin to run
against the other co-owners and ultimately divest them of their own title if they do not
seasonably defend it.28

To sustain a plea of prescription, it must always clearly appear that one who was originally a
joint owner has repudiated the claims of his co-owners, and that his co-owners were
apprised or should have been apprised of his claim of adverse and exclusive ownership
before the alleged prescriptive period began to run.29

In Salvador v. Court of Appeals,30 it was held that the possession of a co-owner is like that of
a trustee and shall not be regarded as adverse to the other co-owner but in fact beneficial to
all of them.

The case of Huang v. Court of Appeals31 is instructive on the creation of trust relationships.

Trust is a fiduciary relationship with respect to property which involves the existence of
equitable duties imposed upon the holder of the title to the property to deal with it for the
benefit of another. A person who establishes a trust is called the trustor; one in whom
confidence is reposed as regards property for the benefit of another person is known as the
trustee; and the person for whose benefit the trust has been created is referred to as the
beneficiary or cestui que trust. Trust is either express or implied. Express trust is created by
the intention of the trustor or of the parties. Implied trust comes into being by operation of
law. The latter kind is either constructive or resulting trust. A constructive trust is imposed
where a person holding title to property is subject to an equitable duty to convey it to another
on the ground that he would be unjustly enriched if he were permitted to retain it. The duty to
convey the property arises because it was acquired through fraud, duress, undue influence
or mistake, or through breach of a fiduciary duty, or through the wrongful disposition of
another’s property. On the other hand, a resulting trust arises where a person makes or
causes to be made a disposition of property under circumstances which raise an inference
that he does not intend that the person taking or holding the property should have the
beneficial interest in the property. It is founded on the presumed intention of the parties, and
as a general rule, it arises where, and only where such may be reasonably presumed to be
the intention of the parties, as determined from the facts and circumstances existing at the
time of the transaction out of which it is sought to be established.

Acts which may be considered adverse to strangers may not be considered adverse insofar
as co-owners are concerned. Thus, Salvador v. Court of Appeals reiterated what acts
constitute proof of exclusive ownership amounting to repudiation, emphasizing that the act
must be borne out of clear and convincing evidence of acts of possession which
unequivocably amounts to an ouster or deprivation of the right of the other co-owner. The
case of Pangan v. Court of Appeals32 enumerated the following as constituting acts of
repudiation:

43
Filing by a trustee of an action in court against the trustor to quiet title to property, or for
recovery of ownership thereof, held in possession by the former, may constitute an act of
repudiation of the trust reposed on him by the latter.

The issuance of the certificate of title would constitute an open and clear repudiation of any
trust, and the lapse of more than 20 years, open and adverse possession as owner would
certainly suffice to vest title by prescription.

An action for the reconveyance of land based on implied or constructive trust prescribes
within 10 years. And it is from the date of the issuance of such title that the effective
assertion of adverse title for purposes of the statute of limitation is counted.

The prescriptive period may only be counted from the time petitioners repudiated the trust
relation in 1955 upon the filing of the complaint for recovery of possession against private
respondents so that the counterclaim of the private respondents contained in their amended
answer wherein they asserted absolute ownership of the disputed realty by reason of the
continuous and adverse possession of the same is well within the 10-year prescriptive
period.

There is clear repudiation of a trust when one who is an apparent administrator of property
causes the cancellation of the title thereto in the name of the apparent beneficiaries and gets
a new certificate of title in his own name.

It is only when the defendants, alleged co-owners of the property in question, executed a
deed of partition and on the strength thereof obtained the cancellation of the title in the name
of their predecessor and the issuance of a new one wherein they appear as the new owners
of a definite area each, thereby in effect denying or repudiating the ownership of one of the
plaintiffs over his alleged share in the entire lot, that the statute of limitations started to run
for the purposes of the action instituted by the latter seeking a declaration of the existence of
the co-ownership and of their rights thereunder.

In this case, we find that Paz Galvez effected no clear and evident repudiation of the co-
ownership. The execution of the affidavit of self-adjudication does not constitute such
sufficient act of repudiation as contemplated under the law as to effectively exclude Porfirio
Galvez from the property. This Court has repeatedly expressed its disapproval over the
obvious bad faith of a co-heir feigning sole ownership of the property to the exclusion of the
other heirs essentially stating that one who acts in bad faith should not be permitted to profit
from it to the detriment of others. In the cases of Adille33 and Pangan34 where, as in this case,
a co-heir was excluded from his legal share by the other co-heir who represented himself as
the only heir, this Court held that the act of exclusion does not constitute repudiation.

On the issue of prescription, while admittedly prescription operates as a bar to recovery of

property, the ten-year period commenced to run from date of registration. In this case, Carlos
Tam obtained his title to the property on 21 January 1994. Since the complaint of Porfirio
Galvez was filed on 12 May 1994, the same was well within the ten-year period to file the
action.

On the matter of laches, it is hornbook doctrine that laches is a creation of equity and its
application is controlled by equitable considerations. Laches cannot be used to defeat justice
or perpetrate fraud and injustice.35 Neither should its application be used to prevent the
rightful owners of a property from recovering what has been fraudulently registered in the
name of another.36 The equitable remedy of laches is, therefore, unavailing in this case.

44
Finally, petitioners claim that if the sale would be nullified, the nullification should extend only
to the one-half share of Porfirio Galvez37 but not to the share of Paz Galvez, who, by her
overt act of selling the property, manifested her intention to dispose of her part.

Notably, Porfirio Galvez’s complaint was captioned "legal redemption with damages,
cancellation of documents and reconveyance of share."38 In his prayer, he sought for the
reconveyance of his one-half share in the property and at the same time be subrogated to
the other half pertaining to Paz Galvez and sold to Carlos Tam after reimbursement of the
amount which the latter paid for the property.

The pertinent provisions of the Civil Code on legal redemption are as follows:

ART. 1619. Legal redemption is the right to be subrogated, upon the same terms and
conditions stipulated in the contract, in the place of one who acquires a thing by purchase or
dation in payment, or by any other transaction whereby ownership is transmitted by onerous
title.

ART. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of
all the other co-owners or of any of them, are sold to a third person. If the price of the
alienation is grossly excessive, the redemptioner shall pay only a reasonable one.

Should two or more co-owners desire to exercise the right of redemption, they may only do
so in proportion to the share they may respectively have in the thing owned in common.

In the case of Hermoso v. Court of Appeals,39 this Court, in interpreting the provision of the
law on legal redemption, held:

The purpose of Article 1067 (of the old Civil Code, now Article 1088 of the present Civil
Code) is to keep strangers to the family out of a joint ownership, if, as is often the case, the
presence of outsiders be undesirable and the other heir or heirs be willing and in a position
to repurchase the share sold (De Jesus vs. Manlapus, 81 Phil. 144). While there should be
no question that an heir may dispose his right before partition (Rivero vs. Serrano [CA] 46
O.G. 642; Wenceslao vs. Calimon, 46 Phil. 906; Hernaez vs. Hernaez, 32 Phil. 214), a co-
heir would have had to pay only the price for which the vendee acquired it (Hernaez vs.
Hernaez, Ibid.).

It is a one-way street. It is always in favor of the redemptioner since he can compel the
vendee to sell to him but he cannot be compelled by the vendee to buy the alienated
property.

In another case, 40 this Court reiterated that:

Legal redemption is in the nature of a privilege created by law partly for reasons of public
policy and partly for the benefit and convenience of the redemptioner, to afford him a way out
of what might be a disagreeable or [an] inconvenient association into which he has been
thrust. (10 Manresa, 4th Ed., 317.) It is intended to minimize co-ownership. The law grants a
co-owner the exercise of the said right of redemption when the shares of the other owners
are sold to a "third person."

The rule on redemption is liberally construed in favor of the original owner of the property
and the policy of the law is to aid rather than defeat him in the exercise of his right of
redemption.41

45
Thus, petitioners cannot be accommodated in this respect and we agree with the trial court
when it held:

The provision of Art. 1088 of the Civil Code of the Philippines is very clear on the matter.

Art. 1088, provides: "Should any of the heirs sell his hereditary rights to a stranger before the
partition, any or all the co-heirs may be subrogated to the rights of the purchaser by
reimbursing him for the price of the sale, provided they do so within the period of one (1)
month from the time they were notified in writing of the sale by the vendor."

There was no written notice sent to Porfirio Galvez by Paz Galvez when she sold her share
over the land to Carlos Tam. Porfirio Galvez only discovered on May 12, 1994 that the land
was sold to Carlos Tam. Art. 1620, Civil Code of the Philippines, provides:

Art. 1620. "A co-owner of a thing may exercise the right of redemption in case the share of
all the other co-owners or any of them are sold to a third person. If the price of the alienation
is grossly excessive, the redemptioner shall pay only a reasonable one."

No written notice of the sale was given by Paz Galvez (vendor) to Porfirio Galvez, the co-
owner as required under Art. 1623 of the Civil Code. The written notice is mandatory. Hence,
the right to redeem commenced when plaintiff sought to exercise it by instituting the
complaint in the instant case on June 12, 1994. The complaint of legal redemption may be
filed even several years after the consummation of sale (Zosima Verdad vs. Court of
Appeals, et al.; G.R. No. 10972, April 29, 1996).42

As to petitioners Carlos Tam and Tycoon Properties, Inc.’s claim that they are buyers in good
faith, same fails to persuade.

A purchaser in good faith and for value is one who buys the property without notice that
some other person has a right to or interest in such property and pays its fair price before he
has notice of the adverse claims and interest of another person in the same property. So it is
that the "honesty of intention" which constitutes good faith implies a freedom from knowledge
of circumstances which ought to put a person on inquiry.43

Suffice it to state that both the trial and appellate courts found otherwise as "Tam did not
exert efforts to determine the previous ownership of the property in question"44 and relied
only on the tax declarations in the name of Paz Galvez.45 It must be noted that Carlos Tam
received a copy of the summons and the complaint on 22 September 1994. This
notwithstanding, he sold the property to Tycoon Properties, Inc. on 27 September 1994.
Significantly, Carlos Tam is also an owner of Tycoon Properties, Inc. to the extent of
45%.46 A notice of lis pendens dated 8 July 1997 filed with the Registry of Deeds of the
Province of La Union was inscribed on TCT No. T- 40390.47 Despite the inscription, Tycoon
Properties, Inc. mortgaged the land to Far East Bank and Trust Company for the sum
ofP11,172,600.48 All these attendant circumstances negate petitioners’ claim of good faith.

8. Adille vs. CA, GR No. L-46484 January 29, 1988

46
On November 28,1965, three hundred ten [310] bags of American rice valued at P5,908.60
belonging to the Rice and Corn Administration [RCA] were unloaded from a vessel at Pier 5,
South Harbor, Manila to a truck bearing plate No. TH-2296 owned by the Yellow Ball Freight
Lines. The driver of the truck was Ponciano Reponte with Wilfredo Escopin as helper
["pahinante"].

The cargo was intended for delivery to RCA warehouse No. 3 at Pureza Street, Manila under
the accountability of Emilio Rosella. However, instead of delivering it to its proper destination,
Reponte and Escopin together with one named Frank, diverted the cargo to the grocery store
of Leonardo Mendoza at 160 A. Bonifacio, Balintawak, Quezon City.

Several bags of rice had already been unloaded thereat when police operatives arrived and
arrested Reponte, Escopin and Mendoza. Frank eluded arrest and has not been
apprehended.

After due investigation, the Assistant City Fiscal of Quezon City filed in the then Court of First
Instance of Rizal at Quezon City, an information for qualified theft naming Reponte, Escopin
and John Doe alias Frank as principals, and Leonardo Mendoza as accessory after the fact
for 'purchasing and receiving from the principal the said bags of rice thereby aiding the
accused to profit from the effects of the crime. 1

On arraignment, Reponte and Escopin pleaded not guilty to the crime charged. 2 However,
before the trial, Reponte withdrew his plea of not guilty. The Assistant City Fiscal not having
objected thereto, Reponte was rearraigned. He voluntarily pleaded guilty of simple theft for which
reason the lower court sentenced him to imprisonment of one [1] year of prision correccional and
to pay the costs. The lower court did not order the payment of a indemnity as the stolen goods
had been recovered. 3

During the trial of the case Escopin moved to dismiss the charge against him. Said motion
was denied by the lower court but on September 14, 1966, it rendered a decision acquitting
Escopin of qualified theft. The lower court held that there was no evidence of conspiracy
between Reponte and Escopin. 4

Trial of the case with respect to Leonardo Mendoza thereafter proceeded. On July 7,1968,
the lower court promulgated a decision finding Mendoza guilty beyond reasonable doubt as
accesssory after the fact of the crime of qualified theft. The lower court imposed on him the
indeterminate penalty of four [4] months and twenty [20] days ofarresto mayor, as minimum,
to one [1] year, eight [8] months and twenty-one [21] days of prision correccional, as
maximum, "without indemnity in view of the recovery of the goods stolen and to pay the
costs." 5

On appeal, the Court of Appeals found the judgment of the lower court to be fully supported
by the evidence and the applicable law and affirmed it in toto with costs against the accused-
appellant. * Hence, the instant petition for review on certiorari

In his petition, Mendoza contends that the Court of Appeals erred in concluding that the
prosecution adequately established the commission of the crime of qualified theft and in
affirming his conviction as accessory after the fact. He asserts that his guilt as such
accessory could not be sustained in the absence of evidence that he had knowledge of the
alleged commission of the crime, the finding being based solely on presumption and
suspicion, in total disregard and violation of [his] constitutional right to be presumed innocent
until the contrary is proved. 6However, he concedes to the Solicitor General's recommendation

47
that should the quantum of evidence presented by the prosecution warrant his conviction, he
should be held liable only as accessory to the crime of simple theft. 7

Under Article 19 of the Revised Penal Code, accessories are "those who, having knowledge
of the commission of the crime, and without having participated therein, either as principals
or accomplices, take part subsequent to its commission" in any of the three ways
enumerated therein. One manner of participation which is pertinent to this case is "by
profiting themselves or assisting the offender to profit by the effects of the crime."

Based on said article, We find Mendoza an accessory to the crime committed by the
transportation of RCA rice. One reason for such finding is the testimony of Reponte that
there was a previous understanding among the accused to sell the stolen RCA rice to
Mendoza. 8 The latter's admission that the RCA rice was brought to his store merely for
deposit9 does not negate Reponte's testimony. Neither does it exonerate him. Rather, it proves
his complicity to the crime. In this connection, the observations of the lower court, which, contrary
to Mendoza's contention, are not mere presumptions based as they are on facts proven at the
trial, are worth quoting. It said:

It is impossible for a person to accept the responsibility of having in custody

for one night 310 bags of rice valued approximately at P5,908.60 without
ascertaining the real ownership of the same. And being an outlet or retailer of
the RCA he knows that the RCA rice are supposed to be placed in the
bodega of the RCA and that they are distributed to the retailers not in big
quantities such as in the instant case. It is surprising why he will accept from
a person whom he does not even know the full name, such a big quantity of
rice if he is not interested in buying the said rice. If he were not an RCA
retailer he would not know the conditions of how RCA rice are distributed, but
being a retailer of the RCA he is of full knowledge how RCA rice are
distributed and sold to the public. The court cannot believe in his defense that
he received that rice only for storing purposes. 10

In its decision, the Court of Appeals added:

We are convinced from the facts and circumstances before Us that the
appellant agreed to buy this stolen rice from Frank that is why the same was
being unloaded at the time the policemen apprehended them, It should not
have been unloaded merely for deposit as he hardly knew Frank whose
complete Identify he could not attest to. He was not a duly licensed
warehouseman nor does it appear that he has a bodega for storage of rice.
And he knew the RCA had enough bodegas for storage. The inescapable
conclusion is that he agreed to buy the goods which he knew was stolen for
certainly its price must be much lower. And even if he did not agree to buy
but merely to have it deposited in his premises, the obvious fact is that he
knew that it was pilfered and he agreed to assist in keeping the same and in
profiting thereby... 11

Hence, while there is no direct proof that Mendoza knew that the rice had been stolen, the
totality of circumstantial evidence point to the fact that he knew that the rice he was receiving
from Frank was stolen. Circumstantial evidence may be the basis for conviction if there is
more than one circumstance, the facts from which the inferences may be derived are proven,
and the combination of all the circumstances is such as to produce a conviction beyond a
reasonable doubt. 12 All these requirements are satisfied in this case.

48
In the same manner, the aforecited web of circumstantial evidence plus the fact that the
police caught him red-handed, prove beyond reasonable doubt that Mendoza assisted the
offenders in profiting from the crime. Said pieces of evidence are strengthened by Mendoza's
own admission that he agreed with Frank that the rice be deposited "ipakilagak" in his
house. 13

However, We are unprepared to convict Mendoza as an accessory to qualified theft. There is

proof beyond reasonable doubt that the crime committed is theft under Article 308 of the
Revised Penal Code but there is insufficient proof that the illegal taking is qualified under
Article 310 of said Code. The situation may have been different had Frank, who, allegedly, is
actually Rogelio Suba y Gamboa and a security guard of the RCA 14 been arrested and put on
trial.

The crime proven being simple theft, Mendoza should be held liable as accessory to said
crime. In the absence of both aggravating and mitigating circumstances, the penalty of one
[1] month and one [1] day of arresto mayorshould be imposed on him.

9. Baloloy vs. Hular GR No. 159723. September 9, 2004

This is a petition for review on certiorari of the decision1 and the resolution2 of the Court of
Appeals in CA-G.R. CV No. 61948 promulgated on May 7, 2003 and August 13, 2003,
respectively, which affirmed the July 27, 2003 decision3 of the Regional Trial Court of Davao
City, Branch 12 dismissing the complaint filed by petitioner.

Petitioner Antonio S. Lim, Jr., represented by his mother, Paz S. Lim, as attorney-in-fact,
filed a complaint4 before the Regional Trial Court of Davao City seeking the annulment of a
Deed of Absolute Sale5 involving a parcel of land purportedly executed by Paz S. Lim in
favor of her brother, respondent Victor K. San.

In the second amended complaint dated May 27, 1993, petitioner alleged the following:

xxx xxx xxx

4. That plaintiff is an owner of a parcel of land situated at Bajada, Davao City,

containing an area of 1,763 square meters, more or less, covered by Transfer
Certificate of Title No. T-11072 of the Registry of Deeds of Davao City, x x x;

4.A. That constructed on the afore-cited parcel of land is a fourteen (14) doors
commercial building, and that defendant is paying an annual lease of ONE
HUNDRED THOUSAND (P100,000.00) PESOS to the herein plaintiff.

5. On May 29, 1991, the herein defendant taking undue advantage of the depressed
mental state of plaintiff’s Attorney-in-Fact, brought about by the demise of her late
husband, Dr. Antonio A. Lim Sr., caused some papers for her to sign, which later turn
(sic) out to be an Absolute Deed of Sale, x x x;

49
 6. That the signature of the Attorney-in-Fact in the aforecited Deed of Absolute Sale
was obtained through fraud and trickery employed by the herein defendant and that
she never appeared before the Notary Public, who notarized the said deed;

7. That no consideration was ever paid, much less received by the plaintiff or by his
Attorney-in-Fact. Simply put, the Deed of Absolute Sale was void ab initio for "lack of
consideration" and for "lack of a valid consent";

8. After the signing of the aforecited Deed of Sale with its attendant legal flaws and
infirmities, plaintiff’s Title was transferred in the name of the defendant, Victor K. San,
x x x;

9. Knowing that he is holding an infirmed Title, defendant, Victor K. San is now in the
process of selling the aforecited property including the commercial building erected
thereon to any third person; and that the defendant had already caused the
cancellation of the Mother Title No. T-165010 by subdividing the same into eight (8)
lots with eight (8) different titles, as follows:

TCT NO. T-191255, T-191256, T-191257, T-191258, T-191259, T-191260, T-

191261, T-191262,

xxx xxx x x x.6

Respondent Victor K. San denied all the allegations of the petitioner. He alleged that the
parcel of land covered by TCT No. T-165010 of the Registry of Deeds of Davao City and
registered in his name was validly and regularly issued. He further claimed that he does not
have any lease contract with the petitioner with respect to the contested property and does
not pay any monthly rental over the same. Moreover, respondent claimed that there was full
payment of the consideration of P264,450.00 for the subject property.

Respondent Elindo Lo was impleaded as a co-defendant on account of his purchase of one

lot covered by TCT No. T-191262,7 notwithstanding the Notice of Adverse Claim and Lis
Pendens annotated on the title of the said parcel of land.

On July 27, 1998, after trial on the merits, the Regional Trial Court of Davao City rendered a
decision dismissing the complaint.8

Petitioner appealed to the Court of Appeals which affirmed the judgment of the trial court in
toto. Petitioner’s motion for reconsideration9 was denied in a Resolution10 dated August 13,
2003.

Hence the present petition based on the following grounds:

a) that the Court of Appeals erred in affirming the trial court’s judgment declaring that
the petitioner failed to prove by clear and convincing evidence that the signature of
his attorney-in-fact was obtained through fraud and trickery and that no consideration
was ever paid.

b) that the Court of Appeals erred in declaring that the medical certificates issued by
foreign medical institutions to prove Paz S. Lim (sic) severe mental state of
depression cannot be given evidentiary weight considering that its due execution and
authenticity were not properly established.11

50
Petitioner contends that the deed of sale should be declared void because his consent to the
same was vitiated by intimidation and that no consideration was paid for the subject property.
Respondents, on the other hand, maintain that the parties to the deed of sale validly entered
into the same; that Paz S. Lim freely and voluntarily gave her consent to the sale; and that
she received the consideration agreed upon by the parties.

After a careful review of the records of this case, we find no cogent reason to deviate from
the rulings of the court a quo and the Court of Appeals.

A contract is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.12 It has three essential
elements, or those without which there can be no contract – consent, subject matter and
cause.13 A knowledge of these essential elements is material because the perfection stage or
the birth of the contract only occurs when the parties to a contract agree upon the essential
elements of the same.14

A contract of sale is consensual,15 as such it is perfected by mere consent.16 Consent is

essential for the existence of a contract, and where it is wanting, the contract is non-
existent.17 Consent in contracts presupposes the following requisites: (1) it should be
intelligent or with an exact notion of the matter to which it refers; (2) it should be free; and (3)
it should be spontaneous. Intelligence in consent is vitiated by error; freedom by violence,
intimidation or undue influence; and spontaneity by fraud.18 Thus, a contract where consent
is given through mistake, violence, intimidation, undue influence or fraud is voidable.19

Contrary to the allegations of the petitioner that the consent of his attorney-in-fact to the deed
of sale was vitiated, a perusal of the records of this case showed that the petitioner failed to
establish that violence, intimidation and undue influence vitiated the consent of Paz S. Lim to
the deed of sale pertaining to the subject property. In determining whether consent is vitiated
by the circumstances provided for in Article 1330 of the Civil Code of the Philippines, courts
are given a wide latitude in weighing the facts or circumstances in a given case and in
deciding in favor of what they believe to have actually occurred, considering the age,
physical infirmity, intelligence, relationship and the conduct of the parties at the time of
making the contract and subsequent thereto, irrespective of whether the contract is in a
public or private writing.20

While it is true that upon the death of her husband, Dr. Antonio T. Lim, Sr., on May 18,
1990,21 Paz S. Lim returned to the Philippines and subsequently stayed at the house of the
respondent, such fact per se is not sufficient to establish that the latter employed
intimidation, violence or undue influence upon the former. Defect or lack of valid consent, in
order to make the contract voidable, must be established by full, clear and convincing
evidence, and not merely by a preponderance thereof.22 Petitioner’s mere allegations that
respondent threatened his mother with harm if she will not sign the contract failed to
measure up to the yardstick of evidence required, not only to prove vitiation of consent, but
also to overturn the presumption that private transactions have been fair and regular.23

Paz S. Lim’s behavior belies the allegation that respondent threatened to harm her. The
following testimony is enlightening:

Q You claim that your brother, the defendant Victor K. San threatened to kill you if
you will not cooperate you recall having mentioned that on direct?

A When?

51
 Q Is it not that you mentioned on the direct that you were threatened by your brother
Victor San?

A Yes, many times he will not let me leave.

Q That was at the time you were then staying with your brother, the defendant in this
case?

A Yes, sir.

Q When did you leave your brother in his residence?

A One day when he was out I think in 1991, I sneaked out of the gate and I saw my
cousin Lucila, she said that we live near each other and that I did not know that from
then on my relatives just lived across the fence.

Q Let me be clarified, you left your brother’s house in late 1991?

A Yes, sir.

Q After leaving your brother’s house late in 1991, where did you live?

A With my nephew William.

Q What is the complete name of this William?

A William Tom.

Q Up to the present you are staying with him?

A Yes, Marlene Babao was living downstairs.

Q After leaving your brother’s house, did you ever report this incident wherein you
were threatened by your brother to the police?

A No, I just told my cousin and my nephew, I am afraid to stay there longer.

Q Did you ever file a criminal case against your brother for grave threats, he having
allegedly threatened to kill you?

A I am the big sister, how can I do that to my own brother, I am a Christian.

Q In other words, you did not report this treatment by your brother to the police nor
filed any criminal case against him in Court even up to the present?

A Yes, sir.24

Well-settled is the rule that the findings of facts and assessment of credibility of witnesses is
a matter best left to the trial court because of its unique position of having observed that
elusive and incommunicable evidence of the witnesses deportment on the stand while
testifying, which opportunity is denied to the appellate courts. Only the trial judge can

52
observe the furtive glance, blush of conscious shame, hesitation, flippant or sneering tone,
calmness, sigh or the scant or full realization of an oath – all of which are useful for an
accurate determination of a witness’ honesty and sincerity.

10. Mariano vs CA, G.R. No. 101522, May 28, 1993

t appears on record that the decedent Francisco Gosiengfiao is the

registered owner of a residential lot located at Ugac Sur, Tuguegarao,
Cagayan, particularly described as follows, to wit:

"The eastern portion of Lot 1351, Tuguegarao Cadastre, and

after its segregation now designated as Lot 1351-A, Plan
PSD-67391, with an area of 1,1346 square meters."

and covered by Transfer Certificate of Title No. T-2416 recorded in the

Register of Deeds of Cagayan.

The lot in question was mortgaged by the decedent to the Rural Bank of
Tuguegarao (designated as Mortgagee bank, for brevity) on several
occasions before the last, being on March 9, 1956 and 29, 1958.

On August 15, 1958, Francisco Gosiengfiao died intestate survived by his

heirs, namely: Third-Party Defendants: wife Antonia and Children Amparo,
Carlos, Severino and herein plaintiffs-appellants Grace, Emma, Ester,
Francisco, Jr., Norma, Lina (represented by daughter Pinky Rose), and
Jacinto.

The loan being unpaid, the lot in dispute was foreclosed by the mortgagee
bank and in the foreclosure sale held on December 27, 1963, the same was
awarded to the mortgagee bank as the highest bidder.

On February 7, 1964, third-party defendant Amparo Gosiengfiao-Ibarra

redeemed the property by paying the amount of P1,347.89 and the balance
of P423.35 was paid on December 28, 1964 to the mortgagee bank.

On September 10, 1965, Antonia Gosiengfiao on her behalf and that of her
minor children Emma, Lina, Norma together with Carlos and Severino
executed a "Deed of Assignment of the Right of Redemption" in favor of
Amparo G. Ibarra appearing in the notarial register of Pedro (Laggui) as Doc.
No. 257, Page No. 6, Book No. 8, Series of 1965.

On August 15, 1966, Amparo Gosiengfiao sold the entire property to

defendant Leonardo Mariano who subsequently established residence on the
lot subject of this controversy. It appears in the Deed of Sale dated August
15, 1966 that Amparo, Antonia, Carlos and Severino were signatories
thereto.

Sometime in 1982, plaintiff-appellant Grace Gosiengfiao learned of the sale

of said property by the third-party defendants. She went to the Barangay

53
 Captain and asked for a confrontation with defendants Leonardo and Avelina
Mariano to present her claim to said property.

On November 27, 1982, no settlement having been reached by the parties,

the Barangay captain issued a certificate to file action.

On December 8, 1982, defendant Leonardo Mariano sold the same property

to his children Lazaro F. Mariano and Dionicia M. Aquino as evidenced by a
Deed of Sale notarized by Hilarion L. Aquino as Doc. No. 143, Page No. 19,
Book No. V, Series of 1982.

On December 21, 1982, plaintiffs Grace Gosiengfiao, et al. filed a complaint

for "recovery of possession and legal redemption with damages" against
defendants Leonardo and Avelina Mariano. Plaintiffs alleged in their
complaint that as co-heirs and co-owners of the lot in question, they have the
right to recover their respective shares in the same, and property as they did
not sell the same, and the right of redemption with regard to the shares of
other co-owners sold to the defendants.

Defendants in their answer alleged that the plaintiffs has (sic) no cause of
action against them as the money used to redeem lot in question was solely
from the personal funds of third-party defendant Amparo Gosiengfiao-Ibarra,
who consequently became the sole owner of the said property and thus
validly sold the entire property to the defendants, and the fact that defendants
had already sold the said property to the children, Lazaro Mariano and
Dionicia M. Aquino. Defendants further contend that even granting that the
plaintiffs are co-owners with the third-party defendants, their right of
redemption had already been barred by the Statute of Limitations under
Article 1144 of the Civil Code, if not by laches.4

After trial on the merits, the Regional Trial Court of Cagayan, Branch I, rendered a decision dated
September 16, 1986, dismissing the complaint and stating that respondents have no right of
ownership or possession over the lot in question. The trial court further said that when the subject
property foreclosed and sold at public auction, the rights of the heirs were reduced to a mere right
of redemption. And when Amparo G. Ibarra redeemed the lot from the Rural Bank on her own
behalf and with her own money she became the sole owner of the property. Respondents' having
failed to redeem the property from the bank or from Amparo G. Ibarra, lost whatever rights the
might have on the property. 5

The Court of Appeals in its questioned decision reversed and set aside the ruling of the trial court
and declared herein respondents as co-owners of the property in the question. The Court of
Appeals said:

The whole controversy in the case at bar revolves on the question of

"whether or not a co-owner who redeems the whole property with her own
personal funds becomes the sole owner of said property and terminates the
existing state of co-ownership."

Admittedly, as the property in question was mortgaged by the decedent, a

co-ownership existed among the heirs during the period given by law to
redeem the foreclosed property. Redemption of the whole property by a co-
owner does not vest in him sole ownership over said property but will inure to

54
 the benefit of all co-owners. In other words, it will not end to the existing state
of co-ownership. Redemption is not a mode of terminating a co-ownership.

xxx xxx xxx

In the case at bar, it is undisputed and supported by records, that third-party

defendant Amparo G. Ibarra redeemed the propety in dispute within the one
year redemption period. Her redemption of the property, even granting that
the money used was from her own personal funds did not make her the
exclusive owner of the mortgaged property owned in common but inured to
the benefit of all co-owners. It would have been otherwise if third-party
defendant Amparo G. Ibarra purchased the said property from the mortgagee
bank (highest, bidder in the foreclosure sale) after the redemption period had
already expired and after the mortgagee bank had consolidated it title in
which case there would no longer be any co-ownership to speak of . 6

The decision of the Court of Appeals is supported by a long line of case law which states that a
redemption by a co-owner within the period prescribed by law inures to the benefit of all the other
co-owners. 7

The main argument of petitioners in the case at bar is that the Court of Appeals incorrectly
applied Article 1620 of the Civil Code, instead of Article 1088 of the same code which governs
legal redemption by co-heirs since the lot in question, which forms part of the intestate estate of
the late Francisco Gosiengfiao, was never the subject of partition or distribution among the heirs,
thus, private respondents and third-party defendants had not ceased to be co-heirs.

On that premise, petitioners further contend that the right of legal redemption was not timely
exercised by the private respondents, since Article 1088 prescribes that the same must be
done within the period of one month from the time they were notified in writing of the sale by
the vendor.

According to Tolentino, the fine distinction between Article 1088 and Article 1620 is that
when the sale consists of an interest in some particular property or properties of the
inheritance, the right redemption that arises in favor of the other co-heirs is that recognized in
Article 1620. On the other hand, if the sale is the hereditary right itself, fully or in part, in the
abstract sense, without specifying any particular object, the right recognized in Article 1088
exists. 8

Petitioners allege that upon the facts and circumstances of the present case, respondents failed
to exercise their right of legal redemption during the period provided by law, citing as authority the
case of Conejero, et al., v. Court of Appeals, et al. 9wherein the Court adopted the principle that
the giving of a copy of a deed is equivalent to the notice as required by law in legal redemption.

We do not dispute the principle laid down in the Conejero case. However, the facts in the
said case are not four square with the facts of the present case. In Conejero, redemptioner
Enrique Conejero was shown and given a copyof the deed of sale of the subject property.
The Court in that case stated that the furnishing of a copy of the deed was equivalent to the
giving of a written notice required by law. 11

The records of the present petition, however, show no written notice of the sale being given
whatsoever to private respondents. Although, petitioners allege that sometime on October 31,
1982 private respondent, Grace Gosiengfiao was given a copy of the questioned deed of sale
and shown a copy of the document at the Office of the Barangay Captain sometime November

55
18, 1982, this was not supported by the evidence presented. On the contrary, respondent, Grace
Gosiengfiao, in her testimony, declared as follows:

Q. When you went back to the residence of Atty. Pedro

Laggui were you able to see him?

A. Yes, I did.

Q. When you saw him, what did you tell?

A. I asked him about the Deed of Sale which Mrs. Aquino had
told me and he also showed me a Deed of Sale. I went over
the Deed of Sale and I asked Atty. Laggui about this and he
mentioned here about the names of the legal heirs. I asked
why my name is not included and I was never informed in
writing because I would like to claim and he told me to better
consult my own attorney.

Q. And did you go?

A. Yes, I did.

Q. What kind of copy or document is that?

A. It is a deed of sale signed by my mother, sister Amparo

and my brothers.

Q. If shown to you the copy of the Deed of Sale will you be

able to identify it?

A. Yes, sir. 11

Thereafter, Grace Gosiengfiao explicitly stated that she was never given a copy of the said Deed
of Sale.

Q. Where did Don Mariano, Dr. Mariano and you see each
other?

A. In the house of Brgy. Captain Antonio Bassig.

Q. What transpired in the house of the Brgy. Captain when

you saw each other there?

A. Brgy. Captain Bassig informed my intention of claiming the

lot and I also informed him about the Deed of Sale that was
not signed by me since it is mine it is already sold and I was
informed in writing about it. I am a legal heir and I have also
the right to claim.

56
 Q. And what was the reply of Don Mariano and Dr. Mariano to
the information given to them by Brgy. Captain Bassig
regarding your claim?

A. He insisted that the lot is already his because of the Deed

of Sale. I asked for the exact copy so that I could show to him
that I did not sign and he said he does not have a copy.12

The above testimony was never refuted by Dr. Mariano who was present before Brgy. Captain
Bassig.

The requirement of a written notice has long been settled as early as in the case of Castillo
v. Samonte, 13 where this Court quoted the ruling in Hernaez v. Hernaez, 32 Phil., 214, thus:

Both the letter and spirit of the New Civil Code argue against any attempt to
widen the scope of the notice specified in Article 1088 by including therein
any other kind of notice, such as verbal or by registration. If the intention of
the law had been to include verbal notice or any other means of information
as sufficient to give the effect of this notice, then there would have been no
necessity or reasons to specify in Article 1088 of the New Civil Code that the
said notice be made in writing for, under the old law, a verbal notice or
information was sufficient. 14

Moreover, petitioners themselves adopted in their argument respondents' allegation In their

complaint that sometime on October, 1982 they sought the redemption of the property from
spouses Leonardo Mariano and Avelina Tigue, by tendering the repurchase money of
P12,000.00, which the spouses rejected. 15 Consequently, private respondents exercised their
right of redemption at the first opportunity they have by tendering the repurchase price to
petitioners. The complaint they filed, before the Barangay Captain and then to the Regional Trial
Court was necessary to assert their rights. As we learned in the case of Castillo, supra:

It would seem clear from the above that the reimbursement to the purchaser
within the period of one month from the notice in writing is a requisite or
condition precedent to the exercise of the right of legal redemption; the
bringing of an action in court is the remedy to enforce that right in case the
purchaser refuses the redemption. The first must be done within the month-
period; the second within the prescriptive period provided in the Statute of
Limitation. 16

The ruling in Castillo v. Samonte; supra, was reiterated in the case of Garcia v. Calaliman, where
We also discussed the reason for the requirement of the written notice. We said:

Consistent with aforesaid ruling, in the interpretation of a related provision

(Article 1623 of the New Civil Code) this Court had stressed that written
notice is indispensable, actual knowledge of the sale acquired in some other
manners by the redemptioner, notwithstanding. He or she is still entitled to
written notice, as exacted by the code to remove all uncertainty as to the
sale, its terms and its validity, and to quiet and doubt that the alienation is not
definitive. The law not having provided for any alternative, the method of
notifications remains exclusive, though the Code does not prescribe any
particular form of written notice nor any distinctive method written notification
of redemption (Conejero et al. v. Court of Appeals et al., 16 SCRA 775

57
 [1966]; Etcuban v. Court of Appeals, 148 SCRA 507 [1987]; Cabrera v.
Villanueva, G.R. No. 75069, April 15, 1988). 17 (Emphasis ours)

We likewise do not find merit in petitioners' position that private respondents could not have
validly effected redemption due to their failure to consign in court the full redemption price
after tender thereof was rejected by the petitioners. Consignation is not necessary, because
the tender of payment was not made to discharge an obligation, but to enforce or exercise a
right. It has been previously held that consignation is not required to preserve the right of
repurchase as a mere tender of payment is enough on time as a basis for an action to
compel the vendee a retroto resell the property; no subsequent consignation was necessary
to entitle private respondents to such
reconveyance. 18

Premises considered, respondents have not lost their right to redeem, for in the absence of a
written notification of the sale by the vendors, the 30-day period has not even begun to run.

 Possession

1. Ramos vs. Director of Lands GR No. 13298, November 19, 1918

This is an appeal by the applicant and appellant from a judgment of the Court of First
Instance of Nueva Ecija, denying the registration of the larger portion of parcel No. 1 (Exhibit
A of the petitioner), marked by the letters A, B, and C on the plan, Exhibit 1, of the
Government.

One Restituto Romero y Ponce apparently gained possession of a considerable tract of land
located in the municipality of San Jose, Province of Nueva Ecija, in the year 1882. He took
advantage of the Royal Decree of February 13, 1894, to obtain a possessory information title
to the land, registered as such on February 8, 1896. Parcel No. 1, included within the limits
of the possessory information title of Restituto Romero, was sold in February, 1907, to
Cornelio Ramos, the instant petitioner, and his wife Ambrosia Salamanca.

Ramos instituted appropriate proceedings to have his title registered. Opposition was
entered by the Director of Lands on the ground that Ramos had not acquired a good title
from the Spanish government and by the Director of Forestry on the ground that the first
parcel was forest land. The trial court agreed with the objectors and excluded parcel No. 1
from registration. So much for the facts.

As to the law, the principal argument of the Solicitor-General is based on the provisions of
the Spanish Mortgage Law and of the Royal Decree of February 13, 1894, commonly known
as the Maura Law. The Solicitor-General would emphasize that for land to come under the
protective ægis of the Maura Law, it must have been shown that the land was cultivated for
six years previously, and that it was not land which pertained to the "zonas forestales." As
proof that the land was, even as long ago as the years 1894 to 1896, forestal and not
agricultural in nature is the fact that there are yet found thereon trees from 50 to 80 years of
age.

We do not stop to decide this contention, although it might be possible, following the doctrine
laid down by the United States Supreme Court with reference to Mexican and Spanish
grantes within the United States, where some recital is claimed to be false, to say that the

58
possessory information, apparently having taken cognizance of the requisites for title, should
not now be disturbed. (Hancock vs. McKinney [1851], 7 Tex., 192; Hornsby and
Roland vs.United States [1869], 10 Wall., 224.) It is sufficient, as will later appear, merely to
notice that the predecessor in interest to the petitioner at least held this tract of land under
color of title.

Subsection 6 of section 54, of Act No. 926, entitled The Public Land Law, as amended by Act
No. 1908, reads as follows:

6. All persons who by themselves or their predecessors and interest have been in the
open, continuous, exclusive, and notorious possession and occupation of agricultural
public lands, as defined by said Act of Congress of July first, nineteen hundred and
two, under a bona fide claim of ownership except as against the Government, for a
period of ten years next preceding the twenty-sixth day of July, nineteen hundred and
four, except when prevented by war or force majeure, shall be conclusively
presumed to have performed all the conditions essential to a government grant and
to have received the same, and shall be entitled to a certificate of title to such land
under the provisions of this chapter.

There are two parts to the above quoted subsection which must be discussed. The first
relates to the open, continuous, exclusive, and notorious possession and occupation of what,
for present purposes, can be conceded to be agricultural public land, under a bona fide claim
of ownership.

Actual possession of land consists in the manifestation of acts of dominion over it of such a
nature as a party would naturally exercise over his own property. Relative to actuality of
possession, it is admitted that the petitioner has cultivated only about one fourth of the entire
tract. This is graphically portrayed by Exhibit 1 of the Government, following:

59
The question at once arises: Is that actual occupancy of a part of the land described in the
instrument giving color of title sufficient to give title to the entire tract of land?
lawphil.net

The doctrine of constructive possession indicates the answer. The general rule is that the
possession and cultivation of a portion of a tract under claim of ownership of all is a
constructive possession of all, if the remainder is not in the adverse possession of another.
(Barr vs. Gratz's Heirs [1819], 4 Wheat., 213; Ellicott vs. Pearl [1836], 10 Pet., 412;
Smith vs. Gale [1892], 144 U. S., 509.) Of course, there are a number of qualifications to the
rule, one particularly relating to the size of the tract in controversy with reference to the
portion actually in possession of the claimant. It is here only necessary to apply the general
rule.

The claimant has color of title; he acted in good faith; and he has had open, peaceable, and
notorious possession of a portion of the property, sufficient to apprise the community and the
world that the land was for his enjoyment. (See arts. 446, 448, Civil Code.) Possession in the
eyes of the law does not mean that a man has to have his feet on every square meter of
ground before it can be said that he is in possession. Ramos and his predecessor in interest
fulfilled the requirements of the law on the supposition that he premises consisted of
agricultural public land.

60
The second division of the law requires consideration of the term "agricultural public land."
The law affirms that the phrase is denied by the Act of Congress of July 1st, 1902, known as
the Philippine bill. Turning to the Philippine Bill, we find in sections 13 to 18 thereof that three
classes of land are mentioned. The first is variously denominated "public land" or "public
domain," the second "mineral land," and the third "timber land." Section 18 of the Act of
Congress comes nearest to a precise definition, when it makes the determination of whether
the land is more valuable for agricultural or for forest uses the test of its character.

Although these sections of the Philippine Bill have come before the courts on numerous
occasions, what was said in the case of Jones vs. Insular Government ([1906], 6 Phil., 122),
is still true, namely: "The meaning of these sections is not clear and it is difficult to give to
them a construction that will be entirely free from objection." In the case which gave most
serious consideration to the subject (Mapa vs. Insular Government [1908], 10 Phil., 175), it
was found that there does exist in the Act of Congress a definition of the phrase "agricultural
public lands." It was said that the phrase "agricultural public lands" as used in Act No. 926
means "those public lands acquired from Spain which are not timber or mineral lands."

The idea would appear to be to determine, by exclusion, if the land is forestal or mineral in
nature and, if not so found, to consider it to be agricultural land. Here, again, Philippine law is
not very helpful. For instance, section 1820 of the Administrative Code of 1917 provides:
"For the purposes of this chapter, 'public forest' includes, except as otherwise specially
indicated, all unreserved public land, including nipa and mangrove swamps, and all forest
reserves of whatever character." This definition of "public forest," it will be noted, is merely
"for the purposes of this chapter." A little further on, section 1827 provides: "Lands in public
forests, not including forest reserves, upon the certification of the Director of Forestry that
said lands are better adapted and more valuable for agricultural than for forest purposes and
not required by the public interests to be kept under forest, shall be declared by the
Department Head to be agricultural lands." With reference to the last section, there is no
certification of the Director of Forestry in the record, as to whether this land is better adapted
and more valuable for agricultural than for forest purposes.

The lexicographers define "forest" as "a large tract of land covered with a natural growth of
trees and underbrush; a large wood." The authorities say that he word "forest" has a
significant, not an insignificant meaning, and that it does not embrace land only partly
woodland. It is a tract of land covered with trees, usually of considerable extent.
(Higgins vs. Long Island R. Co. [1908], 114 N. Y. Supp., 262; People vs. Long Island R. Co.
[1908], 110 N. Y. Supp., 512.)

The foresters say that no legal definition of "forest" is practicable or useful. B. H. Baden-
Powell, in his work on Forest Law of India, states as follows:

Every definition of a forest that can be framed for legal purposes will be found either
to exclude some cases to which the law ought to apply, or on the other hand, to
include some with which the law ought not to interfere. It may be necessary, for
example, to take under the law a tract of perfectly barren land which at present has
neither trees, brushwood, nor grass on it, but which in the course f time it is hoped
will be "reboise;" but any definition wide enough to take in all such lands, would also
take in much that was not wanted. On the other hand, the definition, if framed with
reference to tree-growth, might (and indeed would be almost sure to) include a
garden, shrubbery, orchard, or vineyard, which it was not designed to deal with.

B. E. Fernow, in his work on the Economics of Forestry, states as follows:

61
 A forest in the sense in which we use the term, as an economic factor, is by no
means a mere collection of trees, but an organic whole in which all parts, although
apparently heterogeneous, jumbled together by accident as it were and apparently
unrelated, bear a close relation to each other and are as interdependent as any other
beings and conditions in nature.

The Director of Forestry of the Philippine Islands has said:

During the time of the passage of the Act of Congress of July 1, 1902, this question
of forest and agricultural lands was beginning to receive some attention and it is
clearly shown in section 18 of the above mentioned Act; it leaves to the Bureau of
Forestry the certification as to what lands are for agricultural or forest uses. Although
the Act states timber lands, the Bureau has in its administration since the passage of
this act construed this term to mean forest lands in the sense of what was necessary
to protect, for the public good; waste lands without a tree have been declared more
suitable for forestry in many instances in the past. The term 'timber' as used in
England and in the United States in the past has been applied to wood suitable for
construction purposes but with the increase in civilization and the application of new
methods every plant producing wood has some useful purpose and the term timber
lands is generally though of as synonymous with forest lands or lands producing
wood, or able to produce wood, if agricultural crops on the same land will not bring
the financial return that timber will or if the same land is needed for protection
purposes.

xxx xxx xxx

The laws in the United States recognize the necessity of technical advice of duly
appointed boards and leave it in the hands of these boards to decide what lands are
more valuable for forestry purposes or for agricultural purposes.

In the Philippine Islands this policy is follows to as great an extent as allowable under
the law. In many cases, in the opinion of the Bureau of Forestry, lands without a
single tree on them are considered as true forest land. For instance, mountain sides
which are too steep for cultivation under ordinary practice and which, if cultivated,
under ordinary practice would destroy the big natural resource of the soil, by
washing, is considered by this bureau as forest land and in time would be reforested.
Of course, examples exist in the Mountain Province where steep hillsides have been
terraced and intensive cultivation practiced but even then the mountain people are
very careful not to destroy forests or other vegetative cover which they from
experience have found protect their water supply. Certain chiefs have lodged
protests with the Government against other tribes on the opposite side of the
mountain cultivated by them, in order to prevent other tribes from cutting timber or
destroy cover guarding their source of water for irrigation.

Dr. M. S. Shaler, formerly Dean of the Lawrence Scientific School, remarked that if
mankind could not devise and enforce ways dealing with the earth, which will
preserve this source of like "we must look forward to the time, remote it may be, yet
equally discernible, when out kin having wasted its great inheritance will fade from
the earth because of the ruin it has accomplished."

The method employed by the bureau of Forestry in making inspection of lands, in

order to determine whether they are more adapted for agricultural or forest purposes
by a technical and duly trained personnel on the different phases of the conservation

62
of natural resources, is based upon a previously prepared set of questions in which
the different characters of the land under inspection are discussed, namely:

Slope of land: Level; moderate; steep; very steep.

Exposure: North; South; East; West.

Soil: Clay; sandy loam; sand; rocky; very rocky.

Character of soil cover: Cultivated, grass land, brush land, brush land and timber
mixed, dense forest.

If cultivated, state crops being grown and approximate number of hectares under
cultivation. (Indicate on sketch.)

For growth of what agricultural products is this land suitable?

State what portion of the tract is wooded, name of important timber species and
estimate of stand in cubic meters per hectare, diameter and percentage of each
species.

If the land is covered with timber, state whether there is public land suitable for
agriculture in vicinity, which is not covered with timber.

Is this land more valuable for agricultural than for forest purposes? (State reasons in
full.)

Is this land included or adjoining any proposed or established forest reserve or

communal forest? Description and ownership of improvements.

If the land is claimed under private ownership, give the name of the claimant, his
place of residence, and state briefly (if necessary on a separate sheet) the grounds
upon which he bases his claim.

When the inspection is made on a parcel of public land which has been applied for,
the corresponding certificate is forwarded to the Director of Lands; if it is made on a
privately claimed parcel for which the issuance of a title is requested from the Court
of Land Registration, and the inspection shows the land to be more adapted for
forest purposes, then the Director of Forestry requests the Attorney-General to file an
opposition, sending him all data collected during the inspection and offering him the
forest officer as a witness.

It should be kept in mind that the lack of personnel of this Bureau, the limited time
intervening between the notice for the trial on an expediente of land and the day of
the trial, and the difficulties in communications as well as the distance of the land in
question greatly hinder the handling of this work.

In the case of lands claimed as private property, the Director of Forestry, by means
of his delegate the examining officer, submits before the court all evidence referring
to the present forest condition of the land, so that the court may compare them with
the alleged right by the claimant. Undoubtedly, when the claimant presents a title
issued by the proper authority or evidence of his right to the land showing that he

63
 complied with the requirements of the law, the forest certificate does not affect him in
the least as such land should not be considered as a part of the public domain; but
when the alleged right is merely that of possession, then the public or private
character of the parcel is open to discussion and this character should be established
not simply on the alleged right of the claimant but on the sylvical condition and soil
characteristics of the land, and by comparison between this area, or different
previously occupied areas, and those areas which still preserve their primitive
character.

Either way we look at this question we encounter difficulty. Indubitably, there should be
conservation of the natural resources of the Philippines. The prodigality of the spendthrift
who squanders his substance for the pleasure of the fleeting moment must be restrained for
the less spectacular but surer policy which protects Nature's wealth for future generations.
Such is the wise stand of our Government as represented by the Director of Forestry who,
with the Forester for the Government of the United States, believes in "the control of nature's
powers by man for his own good." On the other hand, the presumption should be, in lieu of
contrary proof, that land is agricultural in nature. One very apparent reason is that it is for the
good of the Philippine Islands to have the large public domain come under private
ownership. Such is the natural attitude of the sagacious citizen.

If in this instance, we give judicial sanction to a private claim, let it be noted that the
Government, in the long run of cases, has its remedy. Forest reserves of public land can be
established as provided by law. When the claim of the citizen and the claim of the
Government as to a particular piece of property collide, if the Government desires to
demonstrate that the land is in reality a forest, the Director of Forestry should submit to the
court convincing proof that the land is not more valuable for agricultural than for forest
purposes. Great consideration, it may be stated, should, and undoubtedly will be, paid by the
courts to the opinion of the technical expert who speaks with authority on forestry matters.
But a mere formal opposition on the part of the Attorney-General for the Director of Forestry,
unsupported by satisfactory evidence will not stop the courts from giving title to the claimant.

We hold that the petitioner and appellant has proved a title to the entire tract of land for
which he asked registration, under the provisions of subsection 6, of section 54, of Act No.
926, as amended by Act No. 1908, with reference to the Philippine Bill and the Royal Decree
of February 13, 1894, and his possessory information.

2. Caqueña vs. Bolante GR No. 137944, April 6, 2000

The Petition herein refers to a parcel of land situated in Barangay Bangad, Binangonan,
Province of Rizal, having an area of 1,728 square meters and covered by Tax Declaration
No. 26-0027. The undisputed antecedents of this case are narrated by the Court of Appeals
as follows: 4

The facts not disputed revealed that prior to 1954, the land was originally declared for
taxation purposes in the name of Sinforoso Mendoza, father of [respondent] and married to
Eduarda Apiado. Sinforoso died in 1930. [Petitioners] were the daughters of Margarito
Mendoza. On the basis of an affidavit, the tax declaration in the name of Sinforoso Mendoza
of the contested lot was cancelled and subsequently declared in the name of Margarito
Mendoza. Margarito and Sinforoso are brothers. [Respondent] is the present occupant of the

64
land. Earlier, on October 15, 1975, [respondent] and Miguel Mendoza, another brother of
[petitioners], during the cadastral survey had a dispute on [the] ownership of the land. 1âw phi 1.nêt

During the pre-trial conference, parties stipulated the following facts:

1) The land subject of the case was formerly declared for taxation purposes in the
name of Sinforoso Mendoza prior to 1954 but is now declared in the name of
Margarito Mendoza.

2) The parties agree[d] as to the identity of the land subject of instant case.

3) [Petitioners] are the daughters of Margarito Mendoza while the [respondent] is the
only daughter of Sinforoso Mendoza.

4) Margarito Mendoza and Sinforoso Mendoza [were] brothers, now deceased.

5) During the cadastral survey of the property on October 15, 1979 there was already
a dispute between Honorata M. Bolante and Miguel Mendoza, brother of [petitioners].

6) [Respondent was] occupying the property in question.

The only issue involved [was] who [was] the lawful owner and possessor of the land subject
of the case.

After trial, the court a quo rendered its judgment in favor of [petitioners], the dispositive
portion of which reads as follows:

Wherefore, in view of the foregoing considerations, judgment is hereby rendered for the
[petitioners] and against the [respondent]:

1. Declaring that the parcel of land situated in Bangad, Binangonan, Rizal covered by
tax declaration no. 26-0027 in the name of Margarito Mendoza belong to his heirs,
the [petitioners] herein;

2. Ordering [respondent] to vacate the property subject of the case and deliver
possession thereof to the heirs of Margarito Mendoza.

3. Ordering the [respondent] to indemnify the [petitioners] in the sum of P10,000.00,

as actual damages.

4. Ordering the [respondent] to pay the costs.

Ruling of the Court of Appeals

The Court of Appeals reversed the trial court because the genuineness and the due
execution of the affidavit allegedly signed by the respondent and her mother had not been
sufficiently established. The notary public or anyone else who had witnessed the execution
of the affidavit was not presented. No expert testimony or competent witness ever attested to
the genuineness of the questioned signatures.

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The CA further ruled that the affidavit was insufficient to overcome the denial of respondent
and her mother. The former testified that the latter, never having attended school, could
neither read nor write. Respondent also said that she had never been called "Leonor," which
was how she was referred to in the affidavit.

Moreover, the appellate court held that the probative value of petitioners' tax receipts and
declarations paled in comparison with respondent's proof of ownership of the disputed
parcel. Actual, physical, exclusive and continuous possession by respondent since 1985
indeed gave her a better title under Article 538 of the Civil Code.

Hence, this Petition. 5

Issues

Insisting that they are the rightful owners of the disputed land, the petitioners allege that the
CA committed these reversible errors: 6

1. . . . [I]n not considering the affidavit as an exception to the general rule that an
affidavit is classified as hearsay evidence, unless the affiant is placed on the witness
stand;

2. . . . [I]n holding that respondent has been in actual and physical possession,
coupled with . . . exclusive and continuous possession of the land since 1985, which
are evidence of the best kind of circumstance proving the claim of the title of
ownership and enjoys the presumption of preferred possessor.

The Court's Ruling

The Petition has no merit.

First Issue:

Admissibility of the Affidavit

Petitioners dispute the CA's ruling that the affidavit was not the best evidence of their father's
ownership of the disputed land, because the "affiant was not placed on the witness stand."
They contend that it was unnecessary to present a witness to establish the authenticity of the
affidavit because it was a declaration against respondent's interest and was an ancient
document. As a declaration against interest, it was an exception to the hearsay rule. As a
necessary and trustworthy document, it was admissible in evidence. And because it was
executed on March 24, 1953, it was a self-authenticating ancient document.

We quote below the pertinent portion of the appellate court's ruling: 7

While it is true that the affidavit was signed and subscribed before a notary public,
the general rule is that affidavits are classified as hearsay evidence, unless affiants
are placed on the witness stand (People's Bank and Trust Company vs. Leonidas,
207 SCRA 164). Affidavits are not considered the best evidence, if affiants are
available as witnesses (Vallarta vs. Court of Appeals, 163 SCRA 587). The due
execution of the affidavit was not sufficiently established. The notary public or others
who saw that the document was signed or at least [could] confirm its recitals [were]
not presented. There was no expert testimony or competent witness who attested to

66
 the genuineness of the questioned signatures. Worse, [respondent] denied the
genuineness of her signature and that of her mother . . . [Respondent] testified that
her mother was an illiterate and as far as she knew her mother could not write
because she had not attended school (p. 7, ibid). Her testimony was corroborated by
Ma. Sales Bolante Basa, who said the [respondent's] mother was illiterate.

The petitioners’ allegations are untenable. Before a private document offered as authentic
can be received in evidence, its due execution and authenticity must be proved first. 8 And
before a document is admitted as an exception to the hearsay rule under the Dead Man's
Statute, the offeror must show (a) that the declarant is dead, insane or unable to testify; (b)
that the declaration concerns a fact cognizable by the declarant; (c) that at the time the
declaration was made, he was aware that the same was contrary to his interest; and (d) that
circumstances render improbable the existence of any motive to falsify. 9

In this case, one of the affiants happens to be the respondent, who is still alive and who
testified that the signature in the affidavit was not hers. A declaration against interest is not
admissible if the declarant is available to testify as a witness. 10 Such declarant should be
confronted with the statement against interest as a prior inconsistent statement.

The affidavit cannot be considered an ancient document either. An ancient document is one
that is (1) more than 30 years old, (2) found in the proper custody, and (3) unblemished by
any alteration or by any circumstance of suspicion. 11 It must on its face appear to be
genuine. The petitioners herein failed, however, to explain how the purported signature of
Eduarda Apiado could have been affixed to the subject affidavit if, according to the witness,
she was an illiterate woman who never had any formal schooling. This circumstance casts
suspicion on its authenticity.

Not all notarized documents are exempted from the rule on authentication. Thus, an affidavit
does not automatically become a public document just because it contains a notarial jurat.
Furthermore, the affidavit in question does not state how the ownership of the subject land
was transferred from Sinforoso Mendoza to Margarito Mendoza. By itself, an affidavit is not a
mode of acquiring ownership.

Second Issue:

Preference of Possession

The CA ruled that the respondent was the preferred possessor under Article 538 of the Civil
Code because she was in notorious, actual, exclusive and continuous possession of the land
since 1985. Petitioners dispute this ruling. They contend that she came into possession
through force and violence, contrary to Article 536 of the Civil Code.

We concede that despite their dispossession in 1985, the petitioners did not lose legal
possession because possession cannot be acquired through force or violence. 12 To all
intents and purposes, a possessor, even if physically ousted, is still deemed the legal
possessor.13 Indeed, anyone who can prove prior possession, regardless of its character,
may recover such possession. 14

However, possession by the petitioners does not prevail over that of the
respondent. Possession by the former before 1985 was not exclusive, as the latter also
1âwphi1

acquired it before 1985. The records show that the petitioners' father and brother, as well as
the respondent and her mother were simultaneously in adverse possession of the land.

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Before 1985, the subject land was occupied and cultivated by the respondent's father
(Sinforoso), who was the brother of petitioners' father (Margarito), as evidenced by Tax
Declaration No. 26425. 15 When Sinforoso died in 1930, Margarito took possession of the
land and cultivated it with his son Miguel. At the same time, respondent and her mother
continued residing on the lot.

When respondent came of age in 1948, she paid realty taxes for the years 1932-
1948. 16 Margarito declared the lot for taxation in his name in 1953 17 and paid its realty taxes
beginning 1952. 18 When he died, Miguel continued cultivating the land. As found by the CA,
the respondent and her mother were living on the land, which was being tilled by Miguel until
1985 when he was physically ousted by the respondent. 19

Based on Article 538 of the Civil Code, the respondent is the preferred possessor because,
benefiting from her father's tax declaration of the subject lot since 1926, she has been in
possession thereof for a longer period. On the other hand, petitioners' father acquired joint
possession only in 1952.

Third Issue:

Possession of Better Right

Finally, the petitioners challenge the CA ruling that "actual and physical coupled with the
exclusive and continuous possession [by respondent] of the land since 1985" proved her
ownership of the disputed land. The respondent argues that she was legally presumed to
possess the subject land with a just title since she possessed it in the concept of owner.
Under Article 541 of the Code, she could not be obliged to show or prove such title.

The respondent's contention is untenable. The presumption in Article 541 of the Civil Code is
merely disputable; it prevails until the contrary is proven. 20 That is, one who is disturbed in
one's possession shall, under this provision, be restored thereto by the means established
by law. 21 Article 538 settles only the question of possession, and possession is different from
ownership. Ownership in this case should be established in one of the ways provided by law.

To settle the issue of ownership, we need to determine who between the claimants has
proven acquisitive prescription. 22

Ownership of immovable property is acquired by ordinary prescription through possession for

ten years.23 Being the sole heir of her father, respondent showed through his tax receipt that
she had been in possession of the land for more than ten years since 1932. When her father
died in 1930, she continued to reside there with her mother. When she got married, she and
her husband engaged in kaingin inside the disputed lot for their livelihood. 24

Respondent's possession was not disturbed until 1953 when the petitioners' father claimed
the land. But by then, her possession, which was in the concept of owner — public, peaceful,
and uninterrupted 25 — had already ripened into ownership. Furthermore she herself, after
her father's demise, declared and paid realty taxes for the disputed land. Tax receipts and
declarations of ownership for taxation, when coupled with proof of actual possession of the
property, can be the basis of a claim for ownership through prescription. 26

In contrast, the petitioners, despite thirty-two years of farming the subject land, did not
acquire ownership. It is settled that ownership cannot be acquired by mere
occupation. 27 Unless coupled with the element of hostility toward the true

68
owner, 28 occupation and use, however long, will not confer title by prescription or adverse
possession. Moreover, the petitioners cannot claim that their possession was public,
peaceful and uninterrupted. Although their father and brother arguably acquired ownership
through extraordinary prescription because of their adverse possession for thirty-two years
(1953-1985), 29 this supposed ownership cannot extend to the entire disputed lot, but must
be limited to the portion that they actually farmed.

We cannot sustain the petitioners' contention that their ownership of the disputed land was
established before the trial court through the series of tax declarations and receipts issued in
the name of Margarito Mendoza. Such documents prove that the holder has a claim of title
over the property. Aside from manifesting a sincere desire to obtain title thereto, they
announce the holder's adverse claim against the state and other interested parties. 30

However, tax declarations and receipts are not conclusive evidence of ownership. 31 At most,
they constitute mereprima facie proof of ownership or possession of the property for which
taxes have been paid. 32 In the absence of actual public and adverse possession, the
declaration of the land for tax purposes does not prove ownership.33 In sum, the petitioners'
claim of ownership of the whole parcel has no legal basis. 1âw phi 1.nêt

3. Bishop of Cebu vs. Mangaron, G.R. No. 1748, June 1, 1906

The plaintiff in this case relates to a tract of land in the district of Ermita of this city, it is
alleged is at present occupied by the defendant. The object of the original complaint was to
recover the possession of the said land, while in the amended complaint the plaintiff prays
that the said land be declared to be the property of the Catholic Church and that it be
restored to the latter. Counsel for appellant admits in his brief that the object of the action is
the recovery of possession when he refers to the judgment of the court below as being "in
favor of the plaintiff in anaction to recover the possession of certain real estate." (Record, p.
1.)

Neither party has exhibited any title papers to the land in question nor pay other
documentary proof. They have only offered certain parol evidence as to the former
possession of the land and as to certain acts of ownership exercised by the parties over the
same.

The court below found (a) "that the defendant's parents and brothers had been in possession
of the land in question until about the year 1887;" (b) "that it had not been clearly shown in
what capacity they had occupied the lands;" (c) "that about the year 1887 the defendant and
his relatives vacated the land by the virtue of an order from the municipality, which declared
that the land was included within the zone of materiales fuertes (fire zone) and the houses in
which they lived upon the said land without objection;" (d)"that after the land was vacated the
parish priest of the Ermita Church fenced the land and cleaned the same without any
objection whatsoever on the part of anyone; that the plaintiff claimed that this property had
belonged to the Catholic Church from the time immemorial, the defendant, his parents and
brothers having occupied a part thereof by the mere tolerance of the Catholic Church," (e)
"that in the year 1898 the defendant, without the consent of anyone, entered upon the land in
question and built thereon a nipa house and continued to live thereon without the consent of
the parish priest of the Ermita Church or the plaintiff in third case." (Bill of exceptions, p. 11.)
The court then ordered "that the defendants vacate the land described in the complaint and
pay the costs of this action" (p. 12).

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Counsel appellant says in his brief "that the defendant claims to be owner of the land by
inheritance." (Brief, p. 8.) It is not necessary for this court to apply to the present case the
well-settled doctrine that it is not sufficient to allege a universal title of inheritance without
showing the manner and form in which such title was converted into a singular title in favor of
the person invoking the same, particularly where, as in the present, case, the question
involved does not relate to the ownership of the property but rather to who has the better
right to the possession of the same. But the court below suggest that there are several
brothers of the defendant who might also claim the same right to occupy the land but who,
however, had not done so. The court says "from the evidence introduced at the trial and from
the fact that the defendant's brothers do not claim any right to the land in question, it seems
that the claim of the plaintiff is the more credible." (Bill of exceptions, p. 11.)

The complaint is directed against the illegal act of spoliation committed by the defendant in
October, 1898, while as he himself says there was no priest in Ermita who could take care of
the church and of the land in question, the American troops having occupied the parish
house according to the defendant, and the Filipino troops having occupied it according to
other witness. This is one of the points as to which there is no dispute between the parties,
the defendant and the witnesses of both important details relating to this matter.

Counsel for appellant sums up his brief in the following paragraph:

The defendant was the legal owner of the property when he was unlawfully ejected
by the plaintiff in 1879, and we insist that he had a right to reenter upon the land
when he did so, the time for prescription not having expired since he was ejected in
1879 (p. 8).

Upon this point the court below said: "The occupation of the land by the defendant in the
year 1898 was illegal, for, if her brought he had a right to the land, he should have applied to
the courts for the possession of what belonged to him, and not proceed to occupy property
claimed (he should have said possessed) by another against the will of the latter."

The conclusion of law of the trial court is entirely in conformity with the conclusion would
sanction the recovery of possession through violence or other unlawful and arbitrary means,
and would permit a person to take the law into his own hands. "If a person thinks that he is
entitled to the property which another possesses he should claim the same from the person
in possession. If the latter accedes and voluntarily returns possession and acknowledges
that the property does not belong to him, there is no necessity of any one interfering, but if
the person in possession refuses to deliver the property, the one who believes himself to be
entitled to it, however well founded his belief may be, can not take the law into his own hands
but must seek the aid of the competent authorities." (4 Manresa, Commentaries on the Civil
Code, p. 163.) The action of the defendant in 1898 was therefore absolutely unlawful.

This possession held by the defendant in 1898 can not be added to the former possession,
which was interrupted in 1877 by the order of the municipality, so as to consider such
possession continous, the time intervening not being of sufficient duration to cover the
statutory period of "a person who recovers possession according to law, which was
improperly lost, is considered as having enjoyed it redound to his benefit." But in this case it
appears (1) that it can not be affirmed that the possession enjoyed by the defendant was
improperly lost; that possession ceased by virtue of an order from the municipality and no
proof to the contrary has been offered on this point; (2) that it is impossible to say what was
the nature of the possession prior to the year 1877 — that is to say, whether it was held by
right or by the mere tolerance of the plaintiff in this case. The code refers to the recovery of
the possession, according to law, which was improperly lost, and to "recover according to

70
law means through the proper writs and actions, or by requesting the aid of competent
authorities in the special cases where the provisions of article 441 may apply." (4 Manresa,
Commentaries on the Civil Code, p. 329.) "Of course," continues Manresa "the acts of
violence or secrecy or mere tolerance can not affect the right of possession." Consequently
the defendant in this case could never have lawfully and legally done what he did, to wit, to
reenter upon the land which he had been ejected by the city of Manila. If the order of the
municipality was illegal, and the possession was improperly lost, the defendant should have
requested the assistance of the competent authorities to recover it. He should have applied
to the executive or administrative officials, as the case might have been, or to the courts of
justice in a plenary action for possession, for a year having elapsed since he was ejected
from the premises, he could not maintain a summary action for possession.

The legal provisions hereinbefore quoted would be sufficient ground upon which to base the
confirmation of the decision of the trial court, but on account of the facts involved in this case
a question of law has been raised by the members of this court which has not been urged by
the parties themselves. It is absolutely necessary to decide this question, which naturally
arises from the facts alleged in the complaint. The question is whether, after the
promulgation of the Civil Code, the accion publiciana, which had for its object the recovery of
possession in a plenary action before an action for the recovery of title could be instituted,
still existed. It is well known that under the legislation prior to the Civil Code, both substantive
and adjective, there were three remedies which a party unlawfully dispossessed could avail
himself of, to wit: The accion interdictal, which could be brought within a year, in a summary
proceeding; the plenary action for possession in an ordinary proceeding, which could only be
brought after the expiration of a year; and the action for title in an ordinary proceeding, which
was brought in case the plenary action for possession failed. The accion interdictal had for its
object the recovery of the physical possession; the plenary action for possession, the better
right to such possession; and the action for title, the recovery of the ownership.

We lay down as a conclusion that if the plaintiff, when he was deprived in October, 1898, of
the possession which he had enjoyed quietly and peacefully for twenty years, more or less,
had within a year instituted the accion interdictal, or summary action for possession, he
would have been, necessarily and undoubtedly, restored to the possession of the land. It
would have availed the defendant nothing to allege, as he now alleges, that he had merely
recovered the possession which he improperly lost in 1877, when he dispossessed the
plaintiff as he did. Any tribunal, in the same arbitrary manner in which the defendant
dispossessed the party in possession, would have condemned the said defendant to return
the possession to that party.

But a year elapsed and the plaintiff brought this summary action for possession, and we also
lay down as a conclusion that such summary action for possession could not be maintained,
either under the old Code of Civil Procedure or under the new Code of Procedure in Civil
Actions. (Laws 1 and 2, title 34 of the Novisima Recopilacion; art. 1635 of the Spanish Code
of Civil Procedure and sec. 80 of the present Code of Procedure in Civil Actions.)

This quiet and peaceful possession of twenty years, more or less, thus lost in a moment,
could not be recovered in a summary action for possession after the expiration of one year,
but possession could still be recovered through theaccion publiciana, which involved the right
to possess. This latter action would be then based upon the fact that he, having been in
possession for twenty years, could not lose the same until he had been given an opportunity
to be heard and had been defeated in an action in court by another with a better right. (The
same laws.) This fact of itself would have been sufficient to recover the possession, not in
summary, but in a plenary action, in which it would likewise have availed the defendant
nothing to allege that all that he did was to recover a possession improperly lost in 1877. In

71
one way or the other the plaintiff would have recovered such possession, in the first case the
physical possession and in the second case the right to possess, which is not lost by the
mere occupation of a third person, whether such occupation was effected violently, secretly,
or arbitrarily.

But the doubt which now exists is whether, after the promulgation of the Civil Code, the
accion publiciana continued to exist.

The doubt arises from the provisions of article 460 of the Civil Code, which reads as follows:

The possessor may lose his possession —

1. By the abandonment of the thing.

2. By transfer to another for a good or valuable consideration.

3. By the destruction or total loss of the thing or by the thing becoming unmarketable.

4. By the possession of another, over against the will of the former possessor, if the
new possession has lasted more than one year.

The last provision of this article has given rise to the doubt whether possession which is lost
by the occupation of another against the will of the former possessor is merely
possession de facto or possession de jure.

The most powerful reason why it is thought that it refers to possession both de facto and de
jure is that, whereas the two are equally lost in the manner indicated in the first three
provisions of this article, it would be rather strange that the fourth provision should only refer
to possession de facto.

This, however, is not convincing because not only can the right of possession of any kind be
lost in the aforesaid three ways, but the right of ownership as well. It could not be inferred
from this, however, that the right of ownership can be lost in the fourth manner indicated. The
legislation and the jurisprudence of all countries will allow a party after he has lost
possession to bring an action to recover the ownership of the property — that is to say, to
recover what belongs to him — except where he is barred by the statute of limitations. There
is no law fixing one year and one day as the period of prescription of such actions.

Manresa expressly propounds this question and says:

Meditation upon the nature of possession, being convinced as we are of the fact that
possession constitutes a right, a right in rem, whenever it is exercised over real
property or property rights, has merely served to strengthen as far as possible our
conviction of the existence of the accion publiciana. We confess, willing to rely only
upon a sound basis, that a doubt has occurred to us as to whether or not such action
should be exercised by the possessor, as we find nothing definite upon which to
place such reliance, although we have noticed that most of the authors admit that he
should, and we know that where there is a right there is a cause of action.

We have later seen this question raised and the proposition advanced that, although,
as an exception to the general rule, such action is based upon equity, but as equity is
not sufficient to allow the exercise of such action, it would be necessary to have a

72
legal provision, an article in the code, establishing the same, a provision and an
article which do not exist, and their nonexistence shows that there is no such thing as
theaccion publiciana.

That we have no knowledge of the existence of any legal text or recent provisions
which expressly relate to such action, is true. The same thing is true in France.
However, the majority of the authors admit its existence. Among us it existence is
also generally admitted by the authorities on civil and procedural law. But we do not
desire to base our conclusions upon the arguments of the authorities, particularly
when we note that Sanchez Roman is the only one who has attempted to support in
any way his conclusions. It is sufficient, says this author, that the right existing, there
should be an action to protect it. There is no necessity of any special declaration in
the Civil Code.

We are of the same opinion as the author in question, but certainly not because we
believe that if the possessor is deprived of the accion publiciana his right ceases to
be a right in rem. In regard to this matter we refer to what we have already said in our
preliminary consideration of the question of possession.

In regard to this matter the idea is present in the code that possession should be
considered as an actual right and it is so stated in various articles of that code, as for
instance in article 438. It would be impossible to admit that a mere physical act would
confer all the rights which a possessor ordinarily enjoys.

Article 445 presupposes that possession may be considered either as de facto or de

jure, for when it refers to controversies arising from the possession de facto, it clearly
indicates that other controversies may arise which would not relate to the possession
de facto. Further it can not be conceived that had its intent been different it should
have preferred actual possession to any other possession. The article in question
ends with the following significant words: "The thing shall be placed in deposit or
judicial keeping until the possession or ownership thereof is decided in the proper
manner." That is to say, the question of fact can not be determined until the
question of law has been decided either in regard to the ownership or in regard to the
possession (pp. 220-221).

Further, let us take another subject, for instance, the subject for easements. It was
generally believed that theaccion confesoria existed. Vain delusion! We have
carefully examined all the provisions of the code relating to easements and we find
absolutely nothing in regard to such an action. Then the accion confesoria is another
error. It does not really exist. Then, if the owner of the dominant estate is denied the
use of the easement, it would not be because he has not a right to such use of it. The
only thing that he has not is the action.

No; such an absurdity can not be admitted. It is impossible to conceive that a person
has a right which need not be respected by others, and such respect can not be
exacted unless the law provides an adequate remedy for its enforcement. If a person
has aright over any kind of property, such right would not be complete unless it could
be enforced as against the whole world. The action is the recognition of the right; it is
the weapon for its protection; the right certainly does not arise from the action, but on
the contrary the action arises from the right. There is a right recognized by the code
— then this is sufficient! That right necessarily carries with it the action to enforce it,
the life-giving force. The action is, under this aspect, the actual enforcement of the
right, and these two things are so closely allied that if the action is denied the right is

73
 also virtually and actually denied. the accion publiciana, therefore, exists, not for the
sake of equity, but because it must necessarily exist if the right to possession exists
or can exist as provided in article 445, and as is inferred from the other articles of the
code dealing with this subject.

There are not, in reality, any practical difficulties, for the courts consider as owners
many who are simply possessors, and actions for title are maintained upon evidence
which appears to be proof of ownership, but which in reality is not, for the reason that
the title under which such ownership is claimed is not always in question, but merely
its superiority over the claim of title of another. In a word, it is necessary to state the
nature of the action but not the name by which it is known, and the claim being a just
one, it is allowed in an action for title which in a multitude of cases would be nothing
but an accion publiciana (plenary action for possession). Do not give the name of the
action because it is not necessary; merely ask that the right be enforced. Who can
reject the claim ? (Pages 223-224.)

Paragraph 4 of article 460 is not an innovation in the Civil Code, nor does it mean the
modification or reformation of the old law. Law 17, title 30 of the third Partida contains the
same provision: "One who holds property can not lose the possession thereof except in one
of the following manners: (1) If he is ejected from it by force; (2) if another person occupies in
while he is absent and upon his return refuses him admission. . . . But although he may lose
the possession in either of the aforesaid manners, he can, however, recover the same, and
even the title thereto by an action in court." There is no doubt that paragraph 4 of article 460
is nothing but a repetition of the law in force prior to the Civil Code. He who loses possession
in either of these ways may demand the return of the same in an action in court, as well as
the ownership of the property, the glossator in expanding the word juizio which appears in
the law, saying, "by means of an action, unde vi, namely, that of recovery, or by any such
restorative means." So that the possession thus lost may be recovered not only in an action
unde vi but some other restorative means, such as the accion publiciana or a penal action;
this aside from an action for title.

Law 2, title 34, book 11 of the "Novisima Recopilacion" contains in its title the following
prohibitive provision: "No one shall be deprived of his possession until he has had an
opportunity to be heard and his right is defeated in accordance with the law."

As a legal precedent to paragraph 4 of article 460 we have law 3, title 8, of the same book
11, which says: "The laws of some cities provide that he who has been in possession of a
building, vineyard, or other land for one year and one day, peacefully and adversely to the
person claiming to be entitled to such possession who travels in and out of the village, shall
not be held responsible therefor. There being doubt as to whether such possession for the
period of one year and one day requires title in good faith, we, to dispell this doubt, do
hereby order that he who holds such possession for the period of one year and one day shall
not be exempt from liability therefor while in possessionunless such possession of one year
and one day was accompanied by title in good faith."

If the whole provision of article 460, paragraph 4, was contained in the old law and such was
the meaning and efficacy that possession of one year and one day had under the said old
law, the courts must give some satisfactory and convincing explanation why the meaning
and efficacy of such possession of one year and one day referred to in the code should be
different. We are unable to give such explanation, because in the act which was the basis of
the present code nothing new was provided upon this subject, nor was any rule or procedure
specified by which the various sections of the new law should be governed. Therefore the
provisions of the code should be construed, as to the possession of one year and one day,

74
as they were construed in the prior legislation, unless it appears that the intention of the
legislature was otherwise — that is to say, unless it appears that the said legislature intended
exactly the contrary of what had been established preceding the enactment of the code.

The right acquired by the person who has been in possession for one year and one day is
the right that the former possessor lost by allowing the year and one day to expire. The right
is lost by the prescription of the action. And the action which prescribes upon the expiration
of the year is "the action to recover or to retain possession; " that is to say, the interdictory
action. (Art. 1968, par. 1.) then the only right that can be acquired now, as before, by the
person who was in possession for one year and one day is that he can not be made to
answer in an interdictory action, but this is not so in a plenary action unless he had some title
in good faith. The former possessor who had been in possession for twenty years, more or
less, was considered as owner, and unless he was given an opportunity to be heard, and
was defeated in law, he could not be deprived of such possession; and notwithstanding all
this, and in spite of such prohibition, the maintenance of a possession wrongfully taken from
the former possessor by a willful act of the actual possessor had to be sustained.

The lessee, the depositary, the pledgee, the intruder, the usurper, the thief himself, after the
expiration of a year would not be responsible for the possession of which the lawful
possessor was wrongfully deprived, and if the latter could produce no evidence of his right of
ownership — the only thing that he could do according to the contrary theory — it would be
impossible for him to recover such possession thus lost by any other means.

If, in addition to the fact of possession, the action for the enforcement of which prescribes
after the expiration of one year and one day, there exists without any doubt whatsoever the
right to possess (or more properly speaking in the case at bar, to continue to possess, which
said right of possession would be a right in rem, such possession would not be on a less
favorable footing than a mere possession de facto; and, if in the latter case the interdictory
action lies, the action which existed prior to the enactment of the code, to wit, the accion
publiciana, should continue to lie in the former case. The code establishes rights and the
Law of civil Procedure prescribes actions for the protection of such rights, and we can not
look to the code to find any provision defining the action which every civil right carries with it.

This is the reason why as a title of chapter 3 of the code in which article 460 is included, and
a sanction of the whole of title 5, book 2, which deals with possession, article 446 provides
that every possessor has a right to be respected in his possession, and should he be
disturbed therein, he must be protected or possession must be restored to him by the
means established in the laws of procedure.

The code refers to the laws of procedure enacted in Spain in 1881 and extended to the
Philippines in 1888. Article 1635 of the old Code of Civil Procedure makes provision for
summary proceedings to retain or to recover, to protect or to restore, possession, provided
the action is brought within a year, but after the expiration of this period the party may
bring such action as may be proper. This latter action, as has been explained before, may be
either the plenary action for possession referred to or an action for title. This assumed, and
reading article 1635 of the old Code of Civil Procedure immediately before article 446 of the
Civil Code, we are unable to conceive how that could be successfully denied after the 8th of
December, 1889, when the Civil code went into effect, which could not be denied prior to that
date, to wit, the existence of the accion publiciana to recover the right of possession, to
enforce the right to possess, which although it could not be brought within the year as a mere
interdictory action for the protection of the mere physical possession, there can be no valid
reason why it could not be brought after the expiration of the year in order to protect the right
and not the mere physical possession.

75
Article 1635 of the old Code of Civil Procedure not having been repealed by the Civil Code, if
the accion publicianaexisted prior to its enactment, it must necessarily exist after such
enactment. We consequently conclude that the action brought by the plaintiff in this case to
recover the possession of which he was unlawfully deprived by the defendant can be
properly maintained under the provisions of the present Civil Code considered as a
substantive law, without prejudice to any right which he may have to the ownership of the
property, which ownership he must necessarily establish in order to overcome the
presumption of title which exist in favor of the lawful possessor, the plaintiff in this case, who
had been in the quiet and peaceful possession of the land for twenty years, more or less, at
the time he was wrongfully dispossessed by the defendant.

4. Santiago vs. Cruz GR No. L-31919, March 24, 1930

OSTRAND, J.:

It appears from the record that one Juan Dizon died on July 20, 1927, in a house where he
had lived for at least twenty years prior to his death. After his death, a petition for the
appointment of a special administrator was filed with the Court of First Instance of Rizal. The
petition was opposed by Marta Dizon, a close relative of the deceased, but her opposition
was overruled and on July 27, 1927, the plaintiff, Vicente Santiago, was appointed special
administrator. As such, he took possession of the property left by the deceased, including the
house above-mentioned. Two months later, Marta Dizon entered the house and made it her
abode, against the will of the plaintiff. Three days later, Cristina Cruz, the herein defendant,
also made the house her home on the invitation of Marta Dizon and remained there
notwithstanding the objections of the plaintiff.

Trouble immediately ensued, and the plaintiff asserts that the other persons living in the
house were insulted and annoyed to such an extent that they were compelled to leave. To
prevent further alleged depredations on the part of Marta and Cristina, the plaintiff placed
padlocks on most of the doors in the house, and on October 8, 1927, he obtained an order
from the Court of First Instance authorizing him to employ sheriffs or Constabulary men to
aid him in maintaining order in the house. Three days later, the court revoked said order but
authorized the plaintiff to employ deputy sheriffs at his own expense.

Thereafter, Marta Dizon died, but Cristina Cruz still insisted on living in the house, and the
plaintiff brought the present action against her for forcible entry and detainer. The justice of
the peace rendered judgment in favor of the defendant and absolved her from the complaint.
Upon appeal to the Court of First Instance, that court rendered a judgment ordering the
defendant to vacate the premises in question but absolving her from a claim presented by
the plaintiff in the same case for expenses incurred by him in employing a deputy sheriff. The
total amount of the claim was P2,116.71. Both of the parties appealed to this court, the
plaintiff for the denial of his claim of the expenses and the defendant for ordering her to
vacate the house.

In our opinion, neither appeal is well taken. The plaintiff's employment of deputy sheriffs
seems to have been unnecessary, and we cannot hold that the court below erred in declining
to allow him compensation for the resulting expenses.

The defendant-appellant claims that she has inherited an interest in the house and is a
tenant in common with the heirs of Juan Dizon and that she therefore cannot be legally
ejected from said house. This contention cannot be successfully maintained. The plaintiff

76
held possession of the house before Marta Dizon and the defendant took possession. They
acquired such possession by force and against the will of the plaintiff, taking the law in their
own hands. In these circumstances, the defendant must suffer the consequences of her
lawlessness whether she is a part owner of the property or not. The fact that she was invited
by Marta Dizon is immaterial; Marta had no greater right than the defendant.

5. Aznar vs. Yapdiangco, G.R. No. L-18536, March 31, 1965

This is an appeal, on purely legal questions, from a decision of the Court of First Instance of
Quezon City, Branch IV, declaring the intervenor-appellee, Teodoro Santos, entitled to the
possession of the car in dispute.

The records before this Court disclose that sometime in May, 1959, Teodoro Santos
advertised in two metropolitan papers the sale of his FORD FAIRLANE 500. In the afternoon
of May 28, 1959, a certain L. De Dios, claiming to be a nephew of Vicente Marella, went to
the Santos residence to answer the ad. However, Teodoro Santos was out during this call
and only the latter's son, Irineo Santos, received and talked with De Dios. The latter told the
young Santos that he had come in behalf of his uncle, Vicente Marella, who was interested
to buy the advertised car.

On being informed of the above, Teodoro Santos instructed his son to see the said Vicente
Marella the following day at his given address: 1642 Crisostomo Street, Sampaloc, Manila.
And so, in the morning of May 29, 1959, Irineo Santos went to the above address. At this
meeting, Marella agreed to buy the car for P14,700.00 on the understanding that the price
would be paid only after the car had been registered in his name.

Irineo Santos then fetched his father who, together with L. De Dios, went to the office of a
certain Atty. Jose Padolina where the deed of the sale for the car was executed in Marella's
favor. The parties to the contract thereafter proceeded to the Motor Vehicles Office in
Quezon City where the registration of the car in Marella's name was effected. Up to this
stage of the transaction, the purchased price had not been paid.

From the Motor Vehicles Office, Teodoro Santos returned to his house. He gave the
registration papers and a copy of the deed of sale to his son, Irineo, and instructed him not to
part with them until Marella shall have given the full payment for the car. Irineo Santos and L.
De Dios then proceeded to 1642 Crisostomo Street, Sampaloc, Manila where the former
demanded the payment from Vicente Marella. Marella said that the amount he had on hand
then was short by some P2,000.00 and begged off to be allowed to secure the shortage from
a sister supposedly living somewhere on Azcarraga Street, also in Manila. Thereafter, he
ordered L. De Dios to go to the said sister and suggested that Irineo Santos go with him. At
the same time, he requested the registration papers and the deed of sale from Irineo Santos
on the pretext that he would like to show them to his lawyer. Trusting the good faith of
Marella, Irineo handed over the same to the latter and thereupon, in the company of L. De
Dios and another unidentified person, proceeded to the alleged house of Marella's sister.

At a place on Azcarraga, Irineo Santos and L. De Dios alighted from the car and entered a
house while their unidentified companion remained in the car. Once inside, L. De Dios asked
Irineo Santos to wait at the sala while he went inside a room. That was the last that Irineo
saw of him. For, after a considerable length of time waiting in vain for De Dios to return,
Irineo went down to discover that neither the car nor their unidentified companion was there

77
anymore. Going back to the house, he inquired from a woman he saw for L. De Dios and he
was told that no such name lived or was even known therein. Whereupon, Irineo Santos
rushed to 1642 Crisostomo to see Marella. He found the house closed and Marella gone.
Finally, he reported the matter to his father who promptly advised the police authorities.

That very same day, or on the afternoon of May 29, 1959 Vicente Marella was able to sell
the car in question to the plaintiff-appellant herein, Jose B. Aznar, for P15,000.00. Insofar as
the above incidents are concerned, we are bound by the factual finding of the trial court that
Jose B. Aznar acquired the said car from Vicente Marella in good faith, for a valuable
consideration and without notice of the defect appertaining to the vendor's title.

While the car in question was thus in the possession of Jose B. Aznar and while he was
attending to its registration in his name, agents of the Philippine Constabulary seized and
confiscated the same in consequence of the report to them by Teodoro Santos that the said
car was unlawfully taken from him.

In due time, Jose B. Aznar filed a complaint for replevin against Captain Rafael Yapdiangco,
the head of the Philippine Constabulary unit which seized the car in question Claiming
ownership of the vehicle, he prayed for its delivery to him. In the course of the litigation,
however, Teodoro Santos moved and was allowed to intervene by the lower court.

At the end of the trial, the lower court rendered a decision awarding the disputed motor
vehicle to the intervenor-appellee, Teodoro Santos. In brief, it ruled that Teodoro Santos had
been unlawfully deprived of his personal property by Vicente Marella, from whom the
plaintiff-appellant traced his right. Consequently, although the plaintiff-appellant acquired the
car in good faith and for a valuable consideration from Vicente Marella, the said decision
concluded, still the intervenor-appellee was entitled to its recovery on the mandate of Article
559 of the New Civil Code which provides:

ART. 559. The possession of movable property acquired in good faith is equivalent to
title. Nevertheless, one who 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 or 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.

From this decision, Jose B. Aznar appeals.

The issue at bar is one and simple, to wit: Between Teodoro Santos and the plaintiff-
appellant, Jose B. Aznar, who has a better right to the possession of the disputed
automobile?

We find for the intervenor-appellee, Teodoro Santos.

The plaintiff-appellant accepts that the car in question originally belonged to and was owned
by the intervenor-appellee, Teodoro Santos, and that the latter was unlawfully deprived of
the same by Vicente Marella. However, the appellant contends that upon the facts of this
case, the applicable provision of the Civil Code is Article 1506 and not Article 559 as was
held by the decision under review. Article 1506 provides:

78
 ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has
not been voided at the time of the sale, the buyer acquires a good title to the goods,
provided he buys them in good faith, for value, and without notice of the seller's
defect of title.

The contention is clearly unmeritorious. Under the aforequoted provision, it is essential that
the seller should have a voidable title at least. It is very clearly inapplicable where, as in this
case, the seller had no title at all.

Vicente Marella did not have any title to the property under litigation because the same was
never delivered to him. He sought ownership or acquisition of it by virtue of the contract.
Vicente Marella could have acquired ownership or title to the subject matter thereof only by
the delivery or tradition of the car to him.

Under Article 712 of the Civil Code, "ownership and other real rights over property are
acquired and transmitted by law, by donation, by testate and intestate succession, and in
consequence of certain contracts, by tradition." As interpreted by this Court in a host of
cases, by this provision, ownership is not transferred by contract merely but by tradition or
delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership,
while delivery or tradition is the mode of accomplishing the same (Gonzales v. Rojas, 16
Phil. 51; Ocejo, Perez and Co. v. International Bank, 37 Phil. 631, Fidelity and Deposit Co. v.
Wilson, 8 Phil. 51; Kuenzle & Streiff v. Wacke & Chandler, 14 Phil. 610; Easton v. Diaz Co.,
32 Phil. 180).

For the legal acquisition and transfer of ownership and other property rights, the thing
transferred must be delivered, inasmuch as, according to settled jurisprudence, the
tradition of the thing is a necessary and indispensable requisite in the acquisition of
said ownership by virtue of contract. (Walter Laston v. E. Diaz & Co. & the Provincial
Sheriff of Albay, supra.)

So long as property is not delivered, the ownership over it is not transferred by

contract merely but by delivery. Contracts only constitute titles or rights to the
transfer or acquisition of ownership, while delivery or tradition is the method of
accomplishing the same, the title and the method of acquiring it being different in our
law. (Gonzales v. Roxas, 16 Phil. 51)

In the case on hand, the car in question was never delivered to the vendee by the vendor as
to complete or consummate the transfer of ownership by virtue of the contract. It should be
recalled that while there was indeed a contract of sale between Vicente Marella and Teodoro
Santos, the former, as vendee, took possession of the subject matter thereof by stealing the
same while it was in the custody of the latter's son.

There is no adequate evidence on record as to whether Irineo Santos voluntarily delivered

the key to the car to the unidentified person who went with him and L. De Dios to the place
on Azcarraga where a sister of Marella allegedly lived. But even if Irineo Santos did, it was
not the delivery contemplated by Article 712 of the Civil Code. For then, it would be
indisputable that he turned it over to the unidentified companion only so that he may drive
Irineo Santos and De Dios to the said place on Azcarraga and not to vest the title to the said
vehicle to him as agent of Vicente Marella. Article 712 above contemplates that the act be
coupled with the intent of delivering the thing. (10 Manresa 132)

The lower court was correct in applying Article 559 of the Civil Code to the case at bar, for
under it, the rule is to the effect that if the owner has lost a thing, or if he has been unlawfully

79
deprived of it, he has a right to recover it, not only from the finder, thief or robber, but also
from third persons who may have acquired it in good faith from such finder, thief or robber.
The said article establishes two exceptions to the general rule of irrevindicability, to wit, when
the owner (1) has lost the thing, or (2) has been unlawfully deprived thereof. In these cases,
the possessor cannot retain the thing as against the owner, who may recover it without
paying any indemnity, except when the possessor acquired it in a public sale. (Del Rosario v.
Lucena, 8 Phil. 535; Varela v. Finnick, 9 Phil. 482; Varela v. Matute, 9 Phil. 479; Arenas v.
Raymundo, 19 Phil. 46. Tolentino, id., Vol. II, p. 261.)

In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this Court has already ruled
that —

Under Article 559 of the new Civil Code, a person illegally deprived of any movable
may recover it from the person in possession of the same and the only defense the
latter may have is if he has acquired it in good faith at a public sale, in which case,
the owner cannot obtain its return without reimbursing the price paid therefor. In the
present case, plaintiff has been illegally deprived of his car through the ingenious
scheme of defendant B to enable the latter to dispose of it as if he were the owner
thereof. Plaintiff, therefore, can still recover possession of the car even if it is in the
possession of a third party who had acquired it in good faith from defendant B. The
maxim that "no man can transfer to another a better title than he had himself" obtains
in the civil as well as in the common law. (U.S. v. Sotelo, 28 Phil. 147)

Finally, the plaintiff-appellant here contends that inasmuch as it was the intervenor-appellee
who had caused the fraud to be perpetrated by his misplaced confidence on Vicente Marella,
he, the intervenor-appellee, should be made to suffer the consequences arising therefrom,
following the equitable principle to that effect. 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 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 a statutory provision, the latter
must prevail in this jurisdiction. (Cruz v. Pahati, supra)

6. Sotto vs. Enage, 43 O.G. 5075 [1947]

7. EDCA Publishing vs. Santos, G.R. No. 80298, April 26, 1990

The case before us calls for the interpretation of Article 559 of the Civil Code and raises the
particular question of when a person may be deemed to have been "unlawfully deprived" of
movable property in the hands of another. The article runs in full as follows:

Art. 559. 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 or 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.

80
The movable property in this case consists of books, which were bought from the petitioner
by an impostor who sold it to the private respondents. Ownership of the books was
recognized in the private respondents by the Municipal Trial Court, 1 which was sustained by
the Regional Trial Court, 2 which was in turn sustained by the Court of Appeals. 3 The
petitioner asks us to declare that all these courts have erred and should be reversed.

This case arose when on October 5, 1981, a person identifying himself as Professor Jose
Cruz placed an order by telephone with the petitioner company for 406 books, payable on
delivery. 4 EDCA prepared the corresponding invoice and delivered the books as ordered, for
which Cruz issued a personal check covering the purchase price of P8,995.65. 5 On October
7, 1981, Cruz sold 120 of the books to private respondent Leonor Santos who, after verifying
the seller's ownership from the invoice he showed her, paid him P1,700.00. 6

Meanwhile, EDCA having become suspicious over a second order placed by Cruz even
before clearing of his first check, made inquiries with the De la Salle College where he had
claimed to be a dean and was informed that there was no such person in its employ. Further
verification revealed that Cruz had no more account or deposit with the Philippine Amanah
Bank, against which he had drawn the payment check. 7 EDCA then went to the police,
which set a trap and arrested Cruz on October 7, 1981. Investigation disclosed his real name
as Tomas de la Peña and his sale of 120 of the books he had ordered from EDCA to the
private respondents. 8

On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at the
UN Avenue, which forced their way into the store of the private respondents and threatened
Leonor Santos with prosecution for buying stolen property. They seized the 120 books
without warrant, loading them in a van belonging to EDCA, and thereafter turned them over
to the petitioner. 9

Protesting this high-handed action, the private respondents sued for recovery of the books
after demand for their return was rejected by EDCA. A writ of preliminary attachment was
issued and the petitioner, after initial refusal, finally surrendered the books to the private
respondents. 10 As previously stated, the petitioner was successively rebuffed in the three
courts below and now hopes to secure relief from us.

To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in
taking the law into its own hands and forcibly recovering the disputed books from the private
respondents. The circumstance that it did so with the assistance of the police, which should
have been the first to uphold legal and peaceful processes, has compounded the wrong
even more deplorably. Questions like the one at bar are decided not by policemen but by
judges and with the use not of brute force but of lawful writs.

Now to the merits

It is the contention of the petitioner that the private respondents have not established their
ownership of the disputed books because they have not even produced a receipt to prove
they had bought the stock. This is unacceptable. Precisely, the first sentence of Article 559
provides that "the possession of movable property acquired in good faith is equivalent to a
title," thus dispensing with further proof.

The argument that the private respondents did not acquire the books in good faith has been
dismissed by the lower courts, and we agree. Leonor Santos first ascertained the ownership
of the books from the EDCA invoice showing that they had been sold to Cruz, who said he
was selling them for a discount because he was in financial need. Private respondents are in

81
the business of buying and selling books and often deal with hard-up sellers who urgently
have to part with their books at reduced prices. To Leonor Santos, Cruz must have been only
one of the many such sellers she was accustomed to dealing with. It is hardly bad faith for
any one in the business of buying and selling books to buy them at a discount and resell
them for a profit.

But the real issue here is whether the petitioner has been unlawfully deprived of the books
because the check issued by the impostor in payment therefor was dishonored.

In its extended memorandum, EDCA cites numerous cases holding that the owner who has
been unlawfully deprived of personal property is entitled to its recovery except only where
the property was purchased at a public sale, in which event its return is subject to
reimbursement of the purchase price. The petitioner is begging the question. It is putting the
cart before the horse. Unlike in the cases invoked, it has yet to be established in the case at
bar that EDCA has been unlawfully deprived of the books.

The petitioner argues that it was, because the impostor acquired no title to the books that he
could have validly transferred to the private respondents. Its reason is that as the payment
check bounced for lack of funds, there was a failure of consideration that nullified the
contract of sale between it and Cruz.

The contract of sale is consensual and is perfected once agreement is reached between the
parties on the subject matter and the consideration. According to the Civil Code:

Art. 1475. The contract of sale is perfected at the moment there is a meeting of
minds upon the thing which is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.

xxx xxx xxx

Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon
the actual or constructive delivery thereof.

Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the
purchaser until he has fully paid the price.

It is clear from the above provisions, particularly the last one quoted, that ownership in the
thing sold shall not pass to the buyer until full payment of the purchase only if there is a
stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the
vendor to the vendee upon the actual or constructive delivery of the thing soldeven if the
purchase price has not yet been paid.

Non-payment only creates a right to demand payment or to rescind the contract, or to

criminal prosecution in the case of bouncing checks. But absent the stipulation above noted,
delivery of the thing sold will effectively transfer ownership to the buyer who can in turn
transfer it to another.

In Asiatic Commercial Corporation v. Ang,11 the plaintiff sold some cosmetics to Francisco
Ang, who in turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it sued for
the recovery of the articles from Tan, who claimed he had validly bought them from Ang,

82
paying for the same in cash. Finding that there was no conspiracy between Tan and Ang to
deceive Asiatic the Court of Appeals declared:

Yet the defendant invoked Article 464 12 of the Civil Code providing, among other
things that "one who has been unlawfully deprived of personal property may recover
it from any person possessing it." We do not believe that the plaintiff has been
unlawfully deprived of the cartons of Gloco Tonic within the scope of this legal
provision. It has voluntarily parted with them pursuant to a contract of purchase and
sale. The circumstance that the price was not subsequently paid did not render illegal
a transaction which was valid and legal at the beginning.

In Tagatac v. Jimenez,13 the plaintiff sold her car to Feist, who sold it to Sanchez, who sold it
to Jimenez. When the payment check issued to Tagatac by Feist was dishonored, the
plaintiff sued to recover the vehicle from Jimenez on the ground that she had been unlawfully
deprived of it by reason of Feist's deception. In ruling for Jimenez, the Court of Appeals held:

The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been

unlawfully deprived of her car. At first blush, it would seem that she was unlawfully
deprived thereof, considering that she was induced to part with it by reason of the
chicanery practiced on her by Warner L. Feist. Certainly, swindling, like robbery, is
an illegal method of deprivation of property. In a manner of speaking, plaintiff-
appellant was "illegally deprived" of her car, for the way by which Warner L. Feist
induced her to part with it is illegal and is punished by law. But does this "unlawful
deprivation" come within the scope of Article 559 of the New Civil Code?

xxx xxx xxx

. . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a
voidable contract (Article 1390 N.C.C.). Being a voidable contract, it is susceptible of
either ratification or annulment. If the contract is ratified, the action to annul it is
extinguished (Article 1392, N.C.C.) and the contract is cleansed from all its defects
(Article 1396, N.C.C.); if the contract is annulled, the contracting parties are restored
to their respective situations before the contract and mutual restitution follows as a
consequence (Article 1398, N.C.C.).

However, as long as no action is taken by the party entitled, either that of annulment
or of ratification, the contract of sale remains valid and binding. When plaintiff-
appellant Trinidad C. Tagatac delivered the car to Feist by virtue of said voidable
contract of sale, the title to the car passed to Feist. Of course, the title that Feist
acquired was defective and voidable. Nevertheless, at the time he sold the car to
Felix Sanchez, his title thereto had not been avoided and he therefore conferred a
good title on the latter, provided he bought the car in good faith, for value and without
notice of the defect in Feist's title (Article 1506, N.C.C.). There being no proof on
record that Felix Sanchez acted in bad faith, it is safe to assume that he acted in
good faith.

The above rulings are sound doctrine and reflect our own interpretation of Article 559 as
applied to the case before us.

Actual delivery of the books having been made, Cruz acquired ownership over the books
which he could then validly transfer to the private respondents. The fact that he had not yet
paid for them to EDCA was a matter between him and EDCA and did not impair the title
acquired by the private respondents to the books.

83
One may well imagine the adverse consequences if the phrase "unlawfully deprived" were to
be interpreted in the manner suggested by the petitioner. A person relying on the seller's title
who buys a movable property from him would have to surrender it to another person claiming
to be the original owner who had not yet been paid the purchase price therefor. The buyer in
the second sale would be left holding the bag, so to speak, and would be compelled to return
the thing bought by him in good faith without even the right to reimbursement of the amount
he had paid for it.

It bears repeating that in the case before us, Leonor Santos took care to ascertain first that
the books belonged to Cruz before she agreed to purchase them. The EDCA invoice Cruz
showed her assured her that the books had been paid for on delivery. By contrast, EDCA
was less than cautious — in fact, too trusting in dealing with the impostor. Although it had
never transacted with him before, it readily delivered the books he had ordered (by
telephone) and as readily accepted his personal check in payment. It did not verify his
identity although it was easy enough to do this. It did not wait to clear the check of this
unknown drawer. Worse, it indicated in the sales invoice issued to him, by the printed terms
thereon, that the books had been paid for on delivery, thereby vesting ownership in the
buyer.

Surely, the private respondent did not have to go beyond that invoice to satisfy herself that
the books being offered for sale by Cruz belonged to him; yet she did. Although the title of
Cruz was presumed under Article 559 by his mere possession of the books, these being
movable property, Leonor Santos nevertheless demanded more proof before deciding to buy
them.

It would certainly be unfair now to make the private respondents bear the prejudice sustained
by EDCA as a result of its own negligence. We cannot see the justice in transferring EDCA's
1âwphi 1

loss to the Santoses who had acted in good faith, and with proper care, when they bought
the books from Cruz.

While we sympathize with the petitioner for its plight, it is clear that its remedy is not against
the private respondents but against Tomas de la Peña, who has apparently caused all this
trouble. The private respondents have themselves been unduly inconvenienced, and for
merely transacting a customary deal not really unusual in their kind of business. It is they and
not EDCA who have a right to complain.

 Usufruct

1. Gaboya v Cui, GR. No. L-19614, March 27, 1971

Direct appeal (before Republic Act 5440) from a decision of the Court of First Instance of
Cebu (in its Civil Case No. R-1720) denying resolution of a contract of sale of lots 2312,
2313 and 2319 executed on 20 March 1946 by the late Don Mariano Cui in favor of three of
his children Antonio Ma. Cui, Mercedes Cui de Ramas and Rosario Cui de Encarnacion, but
sentencing the first two, Antonio Cui and Mercedes; Cui, to pay, jointly and severally (in
solidum), to the Judicial Administrator of the Estate of Mariano Cui (appellant Jesus M.
Gaboya the amount of P100,088.80, with legal interest from the interposition of the complaint
(5 November 1951), plus P5,000.00 attorney's fees and the costs.

84
The antecedents of the case are stated in the previous decision of this Supreme Court
rendered on 31 July 1952, in the case of Antonio and Mercedes Cui vs. Judge Piccio, et al.,
91 Phil. 712.

Don Mariano Cui, widower, as owner of lots Nos. 2312, 2313 and 2319
situated in the City of Cebu, with an area of 152 square meters, 144 square
meters and 2,362 square meters, respectively, or a total extension of 2,658
square meters, on March 8, 1946, sold said three lots to three of his children
named Rosario C. de Encarnacion, Mercedes C. de Ramas and Antonio Ma.
Cui, pro indiviso for the sum of P64,000. Because Rosario C. de Encarnacion
for lack of funds was unable to pay her corresponding share of the purchase
price, the sale to her was cancelled and the one-third of the property
corresponding to her was returned to the vendor. These three lots are
commercial. The improvements thereon were destroyed during the last
Pacific War so that at the time of the sale in 1946, there were no buildings or
any other improvements on them. Because of the sale of these lots pro
indiviso and because of the cancellation of the sale to one of the three
original vendees, Don Mariano and his children Mercedes and Antonio
became co-owners of the whole mass in equal portions. In the deed of sale
vendor Don Mariano retained for himself the usufruct of the property in the
following words:

"...do hereby sell, transfer, and convey to Messrs. Rosario C.

de Encarnacion, Mercedes C. de Ramas and Antonio Ma.
Cui, the above-mentioned parcel of land in equal parts, ... and
the further consideration, that I, shall enjoy the fruits and rents
of the same, as long as my natural life shall last. Granting and
conveying unto the said buyers the full rights as owners to
enjoy the constructive possession of the same, improve,
construct and erect a building in the lot, or do whatever they
believe to be proper and wise, ..."

Subsequently, a building was erected on a portion of this mass facing

Calderon street and was occupied by a Chinese businessman for which he
paid Don Mariano P600 a month as rental. The date when the building, was
constructed and by whom do not appear in the record.

Sometime after the sale to Mercedes and Antonio the two applied to the
Rehabilitation Finance Corporation (RFC) for a loan of P130,000 with which
to construct a 12-door commercial building presumably on a portion of the
entire parcel corresponding to their share. In order to facilitate the granting of
the loan and inasmuch as only two of the three co-owners applied for the
loan, Don Mariano on January 7, 1947, executed an authority to mortgage
(Annex U) authorizing his two children co-owners to mortgage his share, the
pertinent portion of said authority reading thus:

"That by virtue of these presents, I hereby agree, consent permit and

authorize my said co-owners to mortgage, pledge my share so that they may
be able to construct a house or building in the said property, provided
however, that the rents of the said land shall not be impaired and will always
be received by me."

85
The loan was eventually granted and was secured by a mortgage on the
three lots in question, Don Mariano being included as one of the three
mortgagors and signing the corresponding promissory note with his two co-
owners. He did not however, join in the construction of the 12-door
commercial building as may be gathered from the "Convenio de Asignacion
de Parte' (Annex V) wherein it was agreed among the three co-owners to
assign to Don Mariano that one-third of the whole mass facing Calderon
street and on which was erected the building already referred to as being
occupied by a Chinese businessman and for which he was paying Don
Mariano P600 a month rental. The area of this one-third portion was fixed at
900 square meters approximately one-third of the total area of the three lots.
The pertinent Portion of this Annex V reads as follows:

"Que como quiera que, la propiedad arriba descrita esta actualmente

hipotecada a la Rehabilitation Finance Corporation para garantizar
la construccion que mis condueños cnotruyeron en la parte que les
correponde;

"Y que como quiera que, el Sr. Don Mariano Cui, uno de los condueños, no
ha querido unirse a la construccion de dicho edificio, y desea que la parte
que le corresponda sea la 1/3 que este dando frente a la Calle Calderon."

The 12-door commercial building was eventually constructed and the builder-
owners thereof Mercedes and Antonio received and continued to receive the
rents thereof amounting to P4,800 a month and paying therefrom the
installments due for payment on the loan to the Rehabilitation Finance
Corporation.

On March 25, 1948, two other children of Don Mariano named Jesus and
Jorge brought an action (Civil case No. 599R) in the Court of First Instance of
Cebu for the purpose of annulling the deed of sale of the three lots in
question on the ground that they belonged to the conjugal partnership of Don
Mariano and his deceased wife Antonia Perales. Thereafter, plaintiffs Jesus
and Jorge applied for the appointment of a receiver to take charge of the lots
and of the rentals of the building. This petition was denied on November 8,
1948.

On March 19, 1949, Rosario C. Encarnacion, that daughter of Don Mariano

who was one of the original vendees, filed a petition to declare her father
incompetent and to have a guardian appointed for his property, in Special
Proceeding No. 481-R of the Court of First Instance of Cebu. In May 1949
the petition was granted and Don Mariano was declared incompetent and
Victorino Reynes was appointed guardian of his property. Thereafter, the
lâw phî1.ñèt

complaint in civil case No. 599-R seeking to annul the deed of sale of the
three lots in favor of Mercedes and Antonio was amended so as to include as
plaintiffs not only the guardian Victorino Reynes but also all the other children
of Don Mariano.

On June 15, 1949, guardian Victorino Reynes filed a motion in the

guardianship proceedings seeking authority to collect the rentals from the
three lots in question and asking the Court to order Antonio and Mercedes to
deliver to him as guardian all the rentals they had previously collected from
the 12-door commercial building, together with all the papers belonging to his

86
 ward. This motion was denied by Judge Piccio in his order of July 12, 1949.
The guardian did not appeal from this order.

On May 22, 1951, Judge Saguin rendered a decision in civil case No. 599-R
and found that the three lots in question were not conjugal property but
belonged exclusively to Don Mariano and so upheld the sale of two-thirds of
said lots to Antonio and Mercedes. The plaintiffs appealed to the Court of
Appeals where the case is now pending.

From the Court of Appeals the case was brought to the Supreme Court, and the decision of
Judge Saguin upholding the validity of the sale in favor of Antonio and Mercedes Cui was
finally affirmed on 21 February 1957, in Cui vs. Cui, 100 Phil, 914.

This third case now before Us was started by the erstwhile guardian of Don Mariano Cui
(while the latter was still alive) in order to recover P126,344.91 plus legal interest from
Antonio Cui and Mercedes Cui (Record on Appeal, pages 2-3) apparently as fruits due to his
ward by virtue of his usufruct. The guardian's complaint was supplemented and amplified by
a 1957 complaint in intervention (duly admitted) filed by the other compulsory heirs of
Mariano Cui, who had died on 29 July 1952, some nine months after the present case was
instituted in the court below (Record on Appeal, pages 67-68).

In essence, the complaint alleges that the usufructuary right reserved in favor of Don
Mariano Cui extends to and includes the rentals of the building constructed by Antonio Cui
and Mercedes Cui on the land sold to them by their father; that the defendants retained
those rentals for themselves; that the usufructuary rights of the vendor were of the essence
of the sale, and their violation entitled him to rescind (or resolve) the sale. It prayed either for
rescission with accounting, or for delivery of the rentals of the building with interests,
attorneys' fees and costs (Record on Appeal, pages 12-38).

The amended answer, while admitting the reserved usufruct and the collection of rentals of
the building by the defendants, denied that the usufructuary rights included or extended to
the said rentals, or that such usufruct was of the essence of the sale; that the vendor (Don
Mariano Cui ) had waived and renounced the usufruct and that the defendants vendees gave
the vendor P400.00 a month by way of aid; that the original complaint having sought
fulfillment of the contract, plaintiff can not thereafter seek rescission; that such action is
barred by res judicata (on account of the two previous decisions of the Supreme Court and
by extinctive prescription. Defendants counterclaimed for actual and moral damages and
attorney's fees.

Plaintiffs denied the allegations in the counterclaim. .

From a consideration of the pleadings, the basic and pivotal issue appears to be whether the
usufruct reserved by the vendor in the deed of sale, over the lots in question that were at the
time vacant and unoccupied, gave the usufructuary the right to receive the rentals of the
commercial building constructed by the vendees with funds borrowed from the Rehabilitation
and Finance Corporation, the loan being secured by a mortgage over the lots sold. Similarly,
if the usufruct extended to the building, whether the failure of the vendees to pay over its
rentals to the usufructuary entitled the latter to rescind, or more properly, resolve the contract
of sale. In the third place, should the two preceding issues be resolved affirmatively, whether
the action for rescission due to breach of the contract could still be enforced and was not yet
barred.

87
The court below declared that the reserved right of usufruct in favor of the vendor did not
include, nor was it intended to include, nor was it intended to include, the rentals of the
building subsequently constructed on the vacant lots, but that it did entitle the usufructuary to
receive a reasonable rental for the portion of the land occupied by the building, which the
Court a quo fixed at Pl,858.00 per month; and that the rentals for the land from November,
1947, when the building was rented, to 29 July 1952, when Don Mariano died, amounted to
P100,088.80. It also found no preponderant evidence that the seller, Don Mariano Cui, had
ever waived his right of usufruct, as contended by the defendants; and that the Supreme
Court, in denying reconsideration of its second (1957) decision (100 Phil. 914), had, like the
court of origin, refused to pass upon the extent of the usufructuary rights of the seller,
specially because the present case, was already pending in the Court of First Instance,
hence no res judicataexisted. No attorney's fees were awarded to the defendants, but they
were sentenced to pay counsel fees to plaintiffs.

Both parties appealed in the decision of the court a quo.

We find no the decision appealed from. As therein pointed out, the terms of the 1946 deed of
sale of the vacant lots in question made by the late Don Mariano Cui in favor of his three
children, Rosario, Mercedes and Antonio Cui, in consideration of the sum of P64,000.00 and
the reserved usufruct of the said lot in favor of the vendor, as amplified by the deed of 7
January 1947, authorizing Mercedes, and Antonio Cui to borrow money, with the security of
a mortgage over the entirety of the lots, in order to enable them to construct a house or
building thereon —

provided, however, that the rents of said land shall not be impaired and will
always received by me.

clearly prove that the reserved usufruct in favor of the vendor, Mariano Cui, was limited to
the rentals of the land alone. Had it been designed to include also the rents of the buildings
intended to be raised on the land, an express provision would have been included to the
effect, since in both documents (heretofore quoted) the possibility of such construction was
clearly envisaged and mentioned.

Appellants, however, argue that the terms of the deed constituting the usufruct are not
determinative of the extent of the right conferred; and that by law, the enjoyment of the rents
of the building subsequently erected passed to the usufructuary, by virtue of Article 571 of
the Civil Code of the Philippines (Article 479 of the Spanish Civil Code of 1889) prescribing
that:

Art. 571. The usufructuary shall have the right to enjoy any increase which
the thing in usufruct may acquire through accession, the servitudes
established in its favor, and, in general, all the benefits inherent therein,

inasmuch as (in the appellants' view) the building constructed by appellees was an
accession to the land.

This argument is not convincing. Under the articles of the Civil Code on industrial accession
by modification on the principal land (Articles 445 to 456 of the Civil Code) such accession is
limited either to buildings erected on the land of another, or buildings constructed by the
owner of the land with materials owned by someone else.

Thus, Article 445, establishing the basic rule of industrial accession, prescribes that —

88
 Whatever is built, planted or sown on the land of another, and the
improvements or repairs made thereon, belong to the owner of the land
subject to the provisions of the following articles.

while Article 449 states:

He who builds, plants or sows in bad faith on the land of another, loses what
is built, planted or sown without right to indemnity. (Emphasis supplied)

Articles 447 and 445, in turn, treat of accession produced by the landowner's building,
planting and sowing "with the materials of another" and when "the materials, plants or seeds
belong to a third person other than the landowner or the builder, planter or sower.

Nowhere in these articles on industrial accession is there any mention of the case of
landowner building on his own land with materials owned by himself (which is the case of
appellees Mercedes and Antonio Cui). The reason for the omission is readily apparent:
recourse to the rules of accession are totally unnecessary and inappropriate where the
ownership of land and of the, materials used to build thereon are concentrated on one and
the same person. Even if the law did not provide for accession the land-owner would
necessarily own the building, because he has paid for the materials and labor used in
constructing it. We deem it unnecessary to belabor this obvious point. .

There is nothing in the authorities (Manresa, Venezian, Santamaria, and Borrell cited by
appellants that specifically deals with constructions made by a party on his own land with his
own materials, and at his own expense. The authorities cited merely indicate the application
in general of the rules of accession. But as already stated above, the Civil Code itself limits
the cases of industrial accession to those involving land and materials belonging to different
owners. Anyway, commentators' opinions are not binding where not in harmony with the law
itself.

The author that specifically analyses the situation of the usufructuary vis-a-vis constructions
made by the landowner with his own materials is Scaevola (Codigo Civil, 2d Edition, pages
288 to 297) ; and his conclusion after elaborate discussion is that, at the most —

(b) El nudo propietario no podra, sin el consentimiento del usufructuario,

hacer construcciones, plantaciones y siembras en el predio objecto del
usufructo; y en el caso de que aquel lascosintiese, la utilizacion sera comun
en los frutos y productosde lo sembrado y plantado, y con respecto a las
construcciones,el usufructuario tendra derecho a la renta que de mutuo
acuerdo se fije a las mismas; en su defecto, por la autoridad judicial (Author
cit., Emphasis supplied).

Scaevola's opinion is entirely in harmony with Article 595 of the Civil Code of the Philippines,
prescribing that —

The owner may construct any works and make any improvements of which
the immovable usufruct is susceptible, or make new plantings thereon if it be
rural, provided that such acts do not cause a diminuition in the value of the
usufruct or prejudice the right of the usufructuary.

Note that if the income from constructions made by the owner during the existence of the
usufruct should be held to accrue automatically to the usufructuary under Article 571, such

89
improvements could not diminish the value of the usufruct nor prejudice the right of the
usufructuary; and the qualifications by Article 595 on the owner's right to build would be
redundant. The limitations set by Article 595 to the construction rights of the naked owner of
the land are evidently premised upon the fact that such constructions would necessarily
reduce the area of the land under usufruct, for which the latter should be indemnified. This is
precisely what the court a quo has done in sentencing the appellee owners of the building to
pay to the usufructuary a monthly rent of P1,758.00 for the area occupied by their building,
after mature consideration of the rental values of lands in the neighborhood.

Additional considerations against the thesis sustained by appellants are (1) that the amount
invested in the building represents additional capital of the landowners not foresee" when the
usufruct was created; and (2) that no land-owner would be willing to build upon vacant lots
under usufruct if the gain therefrom were to go to the usufructuary while the depreciation of
the value of the building (as distinguished from the necessary repairs) and the amortization
of its cost would burden exclusively the owner of the land. The unproductive situation of
barren lots would thus be prolonged for an indefinite time, to the detriment of society. In other
words, the rule that appellants advocate would contradict the general interest and be against
public policy.

Appellants urge, in support of their stand, that the loan .for the construction of the building
was obtained upon the security of a mortgage not only upon the share of appellees but also
upon the undivided interest of Don Mariano Cui in the lots in question. That factor is
irrelevant to the ownership of the building, because the money used for the building was
loaned exclusively to the appellees, and they were the ones primarily responsible for its
repayment. Since the proceeds of the loan was exclusively their property, 1 the building
constructed with the funds loaned is likewise their own. A mortgagor does not become directly
liable for the payment of the loan secured by the mortgage, in the absence of stipulation to that
effect; and his subsidiary role as guarantor does not entitle him to the ownership of the money
borrowed, for which the mortgage is mere security.

We agree with the trial court that there was no adequate proof that the vendor, Don Mariano
Cui, ever renounced his usufruct. The alleged waiver was purely verbal, and is supported
solely by the testimony of Antonio Cui, one of the alleged beneficiaries thereof. As a
gratuitous renunciation of a real right over immovable property that as created by public
document, the least to be expected in the regular course of business is that the waiver
should also appear in writing. Moreover, as pointed out in the appealed decision (Record on
Appeal, page 184, et seq.), in previous pleadings sworn to by Antonio Cui himself, in Civil
Case No. 599 and Special Proceeding 481-R of the Cebu Court of First Instance (Exhibits
"I", "J", and "20-A"), he and his sister Mercedes had contended that Don Mariano Cui had
been receiving from them P400.00 per month as the value of his usufruct, and never claimed
that the real right had been renounced or waived. The testimony of Antonio Cui on the
lâwphî1.ñèt

alleged waiver, given after the usufructuary had been declared incompetent and could no
longer contradict him, is obviously of negligible probative value.

Turning now to the second issue tendered by herein appellants, that the non-compliance with
the provisions concerning the usufruct constituted sufficient ground for the rescission (or
resolution) of the sale under the tacit resolutory condition established by Article 1191 of the
Civil Code. What has been stated previously in discussing the import of Don Mariano's
usufruct shows that the alleged breach of contract by the appellees Antonio and Mercedes
Cui could only consist in their failure to pay to the usufructuary the rental value of the area
occupied by the building constructed by them. But as the rental value in question had not
been ascertained or fixed either by the parties or the court, prior to the decision of 31
October 1961, now under appeal, nor had Don Mariano Cui, or anyone else in his behalf,

90
made any previous demand for its payment, the default, if any, can not be exclusively
blamed upon the defendants-appellees. Hence, the breach is not it "so substantial and
fundamental as to defeat the object of the parties in making the agreement" 2 as to justify the
radical remedy of rescission. This Court, in Banahaw, Inc. vs. Dejarme55 Phil. 338, ruled that —

...Under the third paragraph of article 1124 3 of the Civil Code, the court is
given a discretionary power to allow a period within which a person in default
may be permitted to perform the stipulation upon which the claim for resolution of
the contract is based. The right to resolve or rescind a contract for non-
performance of one of its stipulations is, therefore, not absolute.

We have stated "the default, if any," for the reason that without previous ascertainment of the
exact amount that the, defendants-appellees were obligated to turn over to the usufructuary
by way of reasonable rental value of the land occupied by their building, said parties can not
be considered as having been in default (mora) for failure to turn over such monies to the
usufructuary. "Ab illiquido non fit mora": this principle has been repeatedly declared by the
jurisprudence of Spanish Supreme Court (v. Manresa, Commentaries to the Spanish Civil
Code [5th Ed.], Vol. 8, No. 1, page 134) that is of high persuasive value in the absence of
local adjudications on the point .

No puede estimarse que incurre en mora el obligado al pago de cantidad

mientras esta no sea liquida, y tenga aquel conocimiento por virtud de
requirimiento o reclamacion judicial de lo que debe abonar (Sent. TS of
Spain, 13 July 1904) .

Seguin tiene declarado esta sala con repeticion, no se puede establecer que
hay morosidad, ni condenar por tal razon al abono de intereses cuando no
se conoce la cantidad liquida reclamable" (Sent. TS of Spain, 29 November
1912)

... es visto que no existiendo obligacion de entregar cantidad hasta tanto que
se liquide no puede estimarse segun jurisprudencia, que los recurridos
ineurran en mora, por tanto que hayan de pagar intereses legales de la
cantidad que en su caso resulte (Sent, TS of Spain, 29 April 1914)

In the absence of default on the part of the defendants-vendees, Article 1592 of the Civil
Code of the Philippines that is invoked by appellants in, support of their all right to rescind
the sale, is not applicable: for said article (which is a mere variant of the general principle
embodied in Article 1191, of the same Code) presupposes default of the purchasers in the
fulfilment of their obligations. As already noted, no such default or breach could occur before
liquidation of the usufructuary's credit; and the time for paying such unliquidated claim can
not be said to have accrued until the decisions under appeal was rendered, fixing the rental
value of the land occupied by the building.

The filing of the initial complaint by Victoriano Reynes, then guardian of the late Don Mariano
in 1951, seeking to recover P126,344.91 plus interest, did not place appellees in default, for
that complaint proceeded on the theory that the usufructuary was entitled to all the rentals of
the building constructed by the appellees on the lot under usufruct; and as We have ruled,
that theory was not legally tenable. And the 1957 complaint in intervention, seeking
rescission of the sale as alternative remedy, was only interposed after the death of the
usufructuary in 1952, and the consequent extinction of the usufruct, conformably to Article
603, paragraph (1), of the Civil Code.

91
It is also urged by the appellants that the usufruct was a condition precedent to the
conveyance of ownership over the land in question to herein appellees, and their failure to
comply with their obligations under the usufruct prevented the vesting of title to the property
in said appellees. We need not consider this argument, since We have found that the
usufruct over the land did not entitle the usufructuary to either the gross or the net income of
the building erected by the vendees, but only to the rental value of the portion of the land
occupied by the structure (in so far as the usufructuary was prevented from utilizing said
portion), and that rental value was not liquidated when the complaints were filed in the court
below, hence, there was no default in its payment. Actually, this theory of appellants fails to
take into account that Don Mariano could not retain ownership of the land and, at the same
time, be the usufructuary thereof. His intention of the usufructuary rights in itself imports that
he was no longer its owner. For usufruct is essentially jus in re aliena; and to be a
usufructuary of one's own property is in law a contradiction in terms, and a conceptual
absurdity.

The decision (Exhibit "30") as well as the resolution of this Court upon the motion to
reconsider filed in the previous case (100 Phil 914) refusing to adjudicate the usufructuary
rights of Don Mariano in view of the pendency of the present litigation (Exhibit "22") amply
support the trial court's overruling of the defense of res judicata.

Summing up, We find and hold:

(1) That the usufructuary rights of the late Don Mariano Cui, reserved in the deed of sale
(Exhibit "A" herein), was over the land alone and did not entitle him to the rents of the
building later constructed thereon by defendants Mercedes and Antonio Cui at their own
expense.

(2) That said usufructuary was entitled only to the reasonable rental value of the land
occupied by the building aforementioned.

(3) That such rental value not having been liquidated until the judgment under appeal was
rendered, Antonio and Mercedes Cui were not in default prior thereto, and the deed of sale
was therefore, not subject to rescission.

(4) That as found by the court below, the reasonable rental value of the land occupied by the
defendants' building totalled P100,088.80 up to the time the usufructuary died and the
usufruct terminated.

(5) That pursuant to Articles 2208 (No. 11), 2210 and 2213 of the Civil Code, 5 the trial court
had discretion to equitably award legal interest upon said sum of P100,088.80, as well as
P5,000.00 attorney's fees, considering that defendants Cui have enjoyed the said rental value of
the land during all those years.

2. Hemedes vs. CA, GR No. 107132, October 8, 1999

Assailed in these petitions for review on certiorari is the decision 1 of the eleventh division of
the Court of Appeals in CA-G.R. CV No. 22010 promulgated on September 11, 1992 affirming in
toto the decision of Branch 24 of the Regional Trial Court of Laguna in Civil Case No. B-1766

92
dated February 22, 1989, 2 and the resolution dated December 29, 1992 denying petitioner R & B
Insurance Corporation's (R & B Insurance) motion for reconsideration. As the factual antecedents
and issues are the same, we shall decide the petitions jointly.

The instant controversy involves a question of ownership over an unregistered parcel of land,
identified as Lot No. 6, plan Psu-111331, with an area of 21,773 square meters, situated in
Sala, Cabuyao, Laguna. It was originally owned by the late Jose Hemedes, father of Maxima
Hemedes and Enrique D. Hemedes. On March 22, 1947 Jose Hemedes executed a
document entitled "Donation Inter Vivos With Resolutory Conditions" 3 whereby he conveyed
ownership over the subject land, together with all its improvements, in favor of his third wife, Justa
Kauapin, subject to the following resolutory conditions:

(a) Upon the death or remarriage of the DONEE, the title to the property
donated shall revert to any of the children, or their heirs, of the DONOR
expressly designated by the DONEE in a public document conveying the
property to the latter; or

(b) In absence of such an express designation made by the DONEE before

her death or remarriage contained in a public instrument as above provided,
the title to the property shall automatically revert to the legal heirs of the
DONOR in common.

Pursuant to the first condition above mentioned, Justa Kausapin executed on September 27,
1960 a "Deed of Conveyance of Unregistered Real Property by Reversion" 4 conveying to
Maxima Hemedes the subject property under the following terms —

That the said parcel of land was donated unto me by the said Jose Hemedes,
my deceased husband, in a deed of "DONATION INTER VIVOS WITH
RESOLUTORY CONDITIONS" executed by the donor in my favor, and duly
accepted by me on March 22, 1947, before Notary Public Luis Bella in
Cabuyao, Laguna;

That the donation is subject to the resolutory conditions appearing in the said
deed of "DONATION INTER VIVOS WITH RESOLUTORY CONDITIONS,"
as follows:

(a) Upon the death or remarriage of the DONEE, the title to

the property donated shall revert to any of the children, or
their heirs, of the DONOR expressly designated by the
DONEE in a public document conveying the property to the
latter; or

(b) In absence of such an express designation made by the

DONEE before her death or remarriage contained in a public
instrument as above provided, the title to the property shall
automatically revert to the legal heirs of the DONOR in
common.

That, wherefore, in virtue of the deed of donation above mentioned and in the
exercise of my right and privilege under the terms of the first resolutory
condition therein contained and hereinabove reproduced, and for and in
consideration of my love and affection, I do hereby by these presents convey,
transfer, and deed unto my designee, MAXIMA HEMEDES, of legal age,

93
 married to RAUL RODRIGUEZ, Filipino and resident of No. 15 Acacia Road,
Quezon City, who is one of the children and heirs of my donor, JOSE
HEMEDES, the ownership of, and title to the property hereinabove
described, and all rights and interests therein by reversion under the first
resolutory condition in the above deed of donation; Except the possession
and enjoyment of the said property which shall remain vested in me during
my lifetime, or widowhood and which upon my death or remarriage shall also
automatically revert to, and be transferred to my designee, Maxima
Hemedes.

Maxima Hemedes, through her counsel, filed an application for registration and confirmation
of title over the subject unregistered land. Subsequently, Original Certificate of Title (OCT)
No. (0-941) 0-198 5 was issued in the name of Maxima Hemedes married to Raul Rodriguez by
the Registry of Deeds of Laguna on June 8, 1962, with the annotation that "Justa Kausapin shall
have the usufructuary rights over the parcel of land herein described during her lifetime or
widowhood."

It is claimed by R & B Insurance that on June 2, 1964, Maxima Hemedes and her husband
Raul Rodriguez constituted a real estate mortgage over the subject property in its favor to
serve as security for a loan which they obtained in the amount of P6,000.00. On February
22, 1968, R & B Insurance extrajudicially foreclosed the mortgage since Maxima Hemedes
failed to pay the loan even after it became due on August 2, 1964. The land was sold at a
public auction on May 3, 1968 with R & B Insurance as the highest bidder and a certificate of
sale was issued by the sheriff in its favor. Since Maxima Hemedes failed to redeem the
property within the redemption period, R & B Insurance executed an Affidavit of
Consolidation dated March 29, 1974 and on May 21, 1975 the Register of Deeds of Laguna
cancelled OCT No. (0-941) 0-198 and issued Transfer Certificate of Title (TCT) No. 41985 in
the name of R & B Insurance. The annotation of usufruct in favor of Justa Kausapin was
maintained in the new title. 6

Despite the earlier conveyance of the subject land in favor of Maxima Hemedes, Justa
Kausapin executed a "Kasunduan" on May 27, 1971 whereby she transferred the same land
to her stepson Enrique D. Hemedes, pursuant to the resolutory condition in the deed of
donation executed in her favor by her late husband Jose Hemedes. Enrique D. Hemedes
obtained two declarations of real property — in 1972, and again, in 1974, when the assessed
value of the property was raised. Also, he has been paying the realty taxes on the property
from the time Justa Kausapin conveyed the property to him in 1971 until 1979. In the
cadastral survey of Cabuyao, Laguna conducted from September 8, 1974 to October 10,
1974, the property was assigned Cadastral No. 2990, Cad. 455-D, Cabuyao Cadastre, in the
name of Enrique Hemedes. Enrique Hemedes is also the named owner of the property in the
records of the Ministry of Agrarian Reform office at Calamba, Laguna.

On February 28, 1979, Enriques D. Hemedes sold the property to Dominium Realty and
Construction Corporation (Dominium). On April 10, 1981, Justa Kausapin executed an
affidavit affirming the conveyance of the subject property in favor of Enrique D. Hemedes as
embodied in the "Kasunduan" dated May 27, 1971, and at the same time denying the
conveyance made to Maxima Hemedes.

On May 14, 1981, Dominium leased the property to its sister corporation Asia Brewery, Inc.
(Asia Brewery) who, even before the signing of the contract of lease, constructed two
warehouses made of steel and asbestos costing about P10,000,000.00 each. Upon learning
of Asia Brewery's constructions upon the subject property, R & B Insurance sent it a letter on
March 16, 1981 informing the former of its ownership of the property as evidenced by TCT

94
No. 41985 issued in its favor and of its right to appropriate the constructions since Asia
Brewery is a builder in bad faith. On March 27, 1981, a conference was held between R & B
Insurance and Asia Brewery but they failed to arrive at an amicable settlement. 1âw phi1.nêt

On May 8, 1981, Maxima Hemedes also wrote a letter addressed to Asia Brewery wherein
she asserted that she is the rightful owner of the subject property by virtue of OCT No. (0-
941) 0-198 and that, as such, she has the right to appropriate Asia Brewery's constructions,
to demand its demolition, or to compel Asia Brewery to purchase the land. In another letter of
the same date addressed to R & B Insurance, Maxima Hemedes denied the execution of any
real estate mortgage in favor of the latter.

On August 27, 1981, Dominium and Enrique D. Hemedes filed a

complaint 7 with the Court of First Instance of Binan, Laguna for the annulment of TCT No. 41985
issued in favor of R & B Insurance and/or the reconveyance to Dominium of the subject property.
Specifically, the complaint alleged that Dominium was the absolute owner of the subject property
by virtue of the February 28, 1979 deed of sale executed by Enrique D. Hemedes, who in turn
obtained ownership of the land from Justa Kausapin, as evidenced by the "Kasunduan" dated
May 27, 1971. The plaintiffs asserted that Justa Kausapin never transferred the land to Maxima
Hemedes and that Enrique D. Hemedes had no knowledge of the registration proceedings
initiated by Maxima Hemedes.

After considering the merits of the case, the trial court rendered judgment on February 22,
1989 in favor of plaintiffs Dominium and Enrique D. Hemedes, the dispositive portion of
which states —

WHEREFORE, judgment is hereby rendered:

(a) Declaring Transfer Certificate of Title No. 41985 of the

Register of Deeds of Laguna null and void and ineffective;

(b) Declaring Dominium Realty and Construction Corporation

the absolute owner and possessor of the parcel of land
described in paragraph 3 of the complaint;

(c) Ordering the defendants and all persons acting for and/or
under them to respect such ownership and possession of
Dominium Realty and Construction Corporation and to forever
desist from asserting adverse claims thereon nor disturbing
such ownership and possession; and

(d) Directing the Register of Deeds of Laguna to cancel said

Transfer Certificate of Title No. 41985 in the name of R & B
Insurance Corporation, and in lieu thereof, issue a new
transfer certificate of title in the name of Dominium Realty and
Construction Corporation. No pronouncement as to costs and
attorney's fees. 8

Both R & B Insurance and Maxima Hemedes appealed from the trial court's decision. On
September 11, 1992 the Court of Appeals affirmed the assailed decision in toto and on
December 29, 1992, it denied R & B Insurance's motion for reconsideration. Thus, Maxima
Hemedes and R & B Insurance filed their respective petitions for review with this Court on
November 3, 1992 and February 22, 1993, respectively.

95
In G.R. No. 107132 9, petitioner Maxima Hemedes makes the following assignment of errors as
regards public respondent's ruling —

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN APPLYING

ARTICLE 1332 OF THE NEW CIVIL CODE IN DECLARING AS SPURIOUS
THE DEED OF CONVEYANCE OF UNREGISTERED REAL PROPERTY BY
REVERSION EXECUTED BY JUSTA KAUSAPIN IN FAVOR OF
PETITIONER MAXIMA HEMEDES.

II

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING

AS VOID AND OF NO LEGAL EFFECT THE "KASUNDUAN" DATED 27
MAY 1971 EXECUTED BY JUSTA KAUSAPIN IN FAVOR OF
RESPONDENT ENRIQUE HEMEDES AND THE SALE OF THE SUBJECT
PROPERTY BY RESPONDENT ENRIQUE HEMEDES IN FAVOR OF
RESPONDENT DOMINIUM REALTY AND CONSTRUCTION
CORPORATION.

III

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN NOT FINDING

RESPONDENTS ENRIQUE AND DOMINIUM IN BAD FAITH.

IV

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING

THAT ORIGINAL CERTIFICATE OF TITLE NO. (0-941) 0-198 ISSUED IN
THE NAME OF PETITIONER MAXIMA HEMEDES NULL AND VOID.

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT NO

LOAN WAS OBTAINED BY PETITIONER MAXIMA HEMEDES FROM
RESPONDENT R & B INSURANCE CORPORATION.

VI

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT NO

REAL ESTATE MORTGAGE OVER THE SUBJECT PROPERTY WAS
EXECUTED BY PETITIONER MAXIMA HEMEDES IN FAVOR OF
RESPONDENT R & B INSURANCE CORPORATION.

VII

RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT THE

VALID TITLE COVERING THE SUBJECT PROPERTY IS THE ORIGINAL
CERTIFICATE OF TITLE NO. (0-941) 0-198 IN THE NAME OF PETITIONER
MAXIMA HEMEDES AND NOT THE TRANSFER CERTIFICATE OF TITLE
(TCT) NO. 41985 IN THE NAME OF R & B INSURANCE CORPORATION. 10

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Meanwhile, in G.R. No. 108472 11, petitioner R & B Insurance assigns almost the same errors,
except with regards to the real estate mortgage allegedly executed by Maxima Hemedes in its
favor. Specifically, R & B Insurance alleges that:

RESPONDENT COURT ERRONEOUSLY ERRED IN APPLYING ARTICLE

1332 OF THE CIVIL CODE.

II

RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON

(sic) THE KASUNDUAN BY AND BETWEEN JUSTA KAUSAPIN AND
ENRIQUE NOTWITHSTANDING THE FACT THAT JUSTA KAUSAPIN BY
WAY OF A DEED OF CONVEYANCE OF UNREGISTERED REAL
PROPERTY BY REVERSION CEDED THE SUBJECT PROPERTY TO
MAXIMA SOME ELEVEN (11) YEARS EARLIER.

III

RESPONDENT COURT SERIOUSLY ERRED IN GIVING CREDENCE ON

(sic) THE AFFIDAVIT OF REPUDIATION OF JUSTA KAUSAPIN
NOTWITHSTANDING THE FACT THAT SHE IS A BIAS (sic) WITNESS
AND EXECUTED THE SAME SOME TWENTY-ONE (21) YEARS AFTER
THE EXECUTION OF THE DEED OF CONVEYANCE IN FAVOR OF
MAXIMA.

IV

RESPONDENT COURT SERIOUSLY ERRED IN NOT FINDING THAT THE

COMPLAINT OF ENRIQUE AND DOMINIUM HAS PRESCRIBED AND/OR
THAT ENRIQUE AND DOMINIUM WERE GUILTY OF LACHES.

RESPONDENT COURT SERIOUSLY ERRED IN FINDING

R & B AS A MORTGAGEE NOT IN GOOD FAITH.

VI

RESPONDENT COURT SERIOUSLY ERRED IN NOT GRANTING THE

DAMAGES PRAYED FOR BY R & B IN ITS COUNTERCLAIM AND
CROSSCLAIM. 12

The primary issue to be resolved in these consolidated petitions is which of the two
conveyances by Justa Kausapin, the first in favor of Maxima Hemedes and the second in
favor of Enrique D. Hemedes, effectively transferred ownership over the subject land.

The Register of Deeds of Laguna issued OCT No. (0-941) 0-198 in favor of Maxima
Hemedes on the strength of the "Deed of Conveyance of Unregistered Real Property by
Reversion" executed by Justa Kausapin. Public respondent upheld the trial court's finding
that such deed is sham and spurious and has "no evidentiary value under the law upon

97
which claimant Maxima Hemedes may anchor a valid claim of ownership over the property."
In ruling thus, it gave credence to the April 10, 1981 affidavit executed by Justa Kausapin
repudiating such deed of conveyance in favor of Maxima Hemedes and affirming the
authenticity of the "Kasunduan" in favor of Enrique D. Hemedes. Also, it considered as
pivotal the fact that the deed of conveyance in favor of Maxima Hemedes was in English and
that it was not explained to Justa Kausapin, although she could not read nor understand
English; thus, Maxima Hemedes failed to discharge her burden, pursuant to Article 1332 of
the Civil Code, to show that the terms thereof were fully explained to Justa Kausapin. Public
respondent concluded by holding that the registration of the property on the strength of the
spurious deed of conveyance is null and void and does not confer any right of ownership
upon Maxima Hemedes. 13

Maxima Hemedes argues that Justa Kausapin's affidavit should not be given any credence
since she is obviously a biased witness as it has been shown that she is dependent upon
Enrique D. Hemedes for her daily subsistence, and she was most probably influenced by
Enrique D. Hemedes to execute the "Kasunduan" in his favor. She also refutes the
applicability of article 1332. It is her contention that for such a provision to be applicable,
there must be a party seeking to enforce a contract; however, she is not enforcing the "Deed
of Conveyance of Unregistered Real Property by Reversion" as her basis in claiming
ownership, but rather her claim is anchored upon OCT No. (0-941) 0-198 issued in her
name, which document can stand independently from the deed of conveyance. Also, there
exist various circumstances which show that Justa Kausapin did in fact execute and
understand the deed of conveyance in favor of Maxima Hemedes. First, the "Donation
Intervivos With Resolutory Conditions" executed by Jose Hemedes in favor of Justa
Kausapin was also in English, but she never alleged that she did not understand such
document. Secondly, Justa Kausapin failed to prove that it was not her thumbmark on the
deed of conveyance in favor of Maxima Hemedes and in fact, both Enrique D. Hemedes and
Dominium objected to the request of Maxima Hemedes' counsel to obtain a specimen
thumbmark of Justa Kausapin. 14

Public respondent's finding that the "Deed of Conveyance of Unregistered Real Property By
Reversion" executed by Justa Kausapin in favor of Maxima Hemedes is spurious is not
supported by the factual findings in this case. It is grounded upon the mere denial of the
same by Justa Kausapin. A party to a contract cannot just evade compliance with his
contractual obligations by the simple expedient of denying the execution of such contract. If,
after a perfect and binding contract has been executed between the parties, it occurs to one
of them to allege some defect therein as a reason for annulling it, the alleged defect must be
conclusively proven, since the validity and fulfillment of contracts cannot be left to the will of
one of the contracting parties. 15

Although a comparison of Justa Kausapin's thumbmark with the thumbmark affixed upon the
deed of conveyance would have easily cleared any doubts as to whether or not the deed
was forged, the records do not show that such evidence was introduced by private
respondents and the lower court decisions do not make mention of any comparison having
been made. 16 It is a legal presumption that evidence willfully suppressed would be adverse if
produced. 17 The failure of private respondents to refute the due execution of the deed of
conveyance by making a comparison with Justa Kausapin's thumbmark necessarily leads one to
conclude that she did in fact affix her thumbmark upon the deed of donation in favor of her
stepdaughter.

Moreover, public respondent's reliance upon Justa Kausapin's repudiation of the deed of
conveyance is misplaced for there are strong indications that she is a biased witness. The

98
trial court found that Justa Kausapin was dependent upon Enrique D. Hemedes for financial
assistance. 18 Justa Kausapin's own testimony attests to this fact —

Atty. Conchu:

Q: Aling Justa, can you tell the Honorable Court why you
donated this particular property to Enrique Hemedes?

A: Because I was in serious condition and he was the one

supporting me financially.

Q: As of today, Aling Justa are you continuing to receive any

assistance from Enrique Hemedes?

A: Yes Sir.

(TSN pp. 19 and 23, November 17, 1981) 19

Even Enrique Hemedes admitted that Justa Kausapin was dependent upon him for
financial support. The transcripts state as follows:

Atty. Mora:

Now you said that Justa Kausapin has been receiving from
you advances for food, medicine & other personal or family
needs?

E. Hemedes:

A: Yes.

Q: Was this already the practice at the time this "Kasunduan"

was executed?

A: No that was increased, no, no, after this document.

xxx xxx xxx

Q: And because of these accommodations that you have

given to Justa Kausapin; Justa Kausapin has in turn treated
you very well because she's very grateful for that, is it not?

A: I think that's human nature.

Q: Answer me categorically, Mr. Hemedes she's very

grateful?

A: Yes she might be grateful but not very grateful.

(TSN, p. 34, June 15, 1984) 20

99
A witness is said to be biased when his relation to the cause or to the parties is such that he
has an incentive to exaggerate or give false color to his statements, or to suppress or to
pervert the truth, or to state what is false. 21 At the time the present case was filed in the trial
court in 1981, Justa Kausapin was already 80 years old, suffering from worsening physical
infirmities and completely dependent upon her stepson Enrique D. Hemedes for support. It is
apparent that Enrique D. Hemedes could easily have influenced his aging stepmother to donate
the subject property to him. Public respondent should not have given credence to a witness that
was obviously biased and partial to the cause of private respondents. Although it is a well-
established rule that the matter of credibility lies within the province of the trial court, such rule
does not apply when the witness' credibility has been put in serious doubt, such as when there
appears on the record some fact or circumstance of weight and influence, which has been
overlooked or the significance of which has been
misinterpreted. 22

Finally, public respondent was in error when it sustained the trial court's decision to nullify
the "Deed of Conveyance of Unregistered Real Property by Reversion" for failure of Maxima
Hemedes to comply with article 1332 of the Civil Code, which states:

When one of the parties is unable to read, or if the contract is in a language

not understood by him, and mistake or fraud is alleged, the person enforcing
the contract must show that the terms thereof have been fully explained to
the former.

Art. 1332 was intended for the protection of a party to a contract who is at a disadvantage
due to his illiteracy, ignorance, mental weakness or other handicap. 23 This article
contemplates a situation wherein a contract has been entered into, but the consent of one of the
parties is vitiated by mistake or fraud committed by the other contracting party. 24This is apparent
from the ordering of the provisions under Book IV, Title II, Chapter 2, section 1 of the Civil Code,
from which article 1332 is taken. Article 1330 states that —

A contract where consent is given through mistake, violence, intimidation,

undue influence, or fraud is voidable.

This is immediately followed by provisions explaining what constitutes mistake, violence,

intimidation, undue influence, or fraud sufficient to vitiate consent. 25 In order that mistake may
invalidate consent, it should refer to the substance of the thing which is the object of the contract,
or to those conditions which have principally moved one or both parties to enter into the
contract. 26 Fraud, on the other hand, is present when, through insidious words or machinations of
one of the contracting parties, the other is induced to enter into a contract which, without them, he
would not have agreed to.27 Clearly, article 1332 assumes that the consent of the contracting
party imputing the mistake or fraud was given, although vitiated, and does not cover a situation
where there is a complete absence of consent. 1âw phi1.nêt

In this case, Justa Kausapin disclaims any knowledge of the "Deed of Conveyance of
Unregistered Real Property by Reversion" in favor of Maxima Hemedes. In fact, she asserts
that it was only during the hearing conducted on December 7, 1981 before the trial court that
she first caught a glimpse of the deed of conveyance and thus, she could not have possibly
affixed her thumbmark thereto. 28 It is private respondents' own allegations which render article
1332 inapplicable for it is useless to determine whether or not Justa Kausapin was induced to
execute said deed of conveyance by means of fraud employed by Maxima Hemedes, who
allegedly took advantage of the fact that the former could not understand English, when Justa
Kausapin denies even having seen the document before the present case was initiated in 1981.

100
It has been held by this Court that ". . . mere preponderance of evidence is not sufficient to
overthrow a certificate of a notary public to the effect that the grantor executed a certain
document and acknowledged the fact of its execution before him. To accomplish this result,
the evidence must be so clear, strong and convincing as to exclude all reasonable
controversy as to the falsity of the certificate, and when the evidence is conflicting, the
certificate will be
upheld." 29 In the present case, we hold that private respondents have failed to produce clear,
strong, and convincing evidence to overcome the positive value of the "Deed Conveyance of
Unregistered Real Property by Reversion" — a notarized document. The mere denial of its
execution by the donor will not suffice for the purpose.

In upholding the deed of conveyance in favor of Maxima Hemedes, we must concomitantly

rule that Enrique D. Hemedes and his transferee, Dominium, did not acquire any rights over
the subject property. Justa Kausapin sought to transfer to her stepson exactly what she had
earlier transferred to Maxima Hemedes — the ownership of the subject property pursuant to
the first condition stipulated in the deed of donation executed by her husband. Thus, the
donation in favor of Enrique D. Hemedes is null and void for the purported object thereof did
not exist at the time of the transfer, having already been transferred to his sister. 30 Similarly,
the sale of the subject property by Enrique D. Hemedes to Dominium is also a nullity for the latter
cannot acquire more rights than its predecessor-in-interest and is definitely not an innocent
purchaser for value since Enrique D. Hemedes did not present any certificate of title upon which it
relied.

The declarations of real property by Enrique D. Hemedes, his payment of realty taxes, and
his being designated as owner of the subject property in the cadastral survey of Cabuyao,
Laguna and in the records of the Ministry of Agrarian Reform office in Calamba, Laguna
cannot defeat a certificate of title, which is an absolute and indefeasible evidence of
ownership of the property in favor of the person whose name appears therein. 31 Particularly,
with regard to tax declarations and tax receipts, this Court has held on several occasions that the
same do not by themselves conclusively prove title to land. 32

We come now to the question of whether or not R & B Insurance should be considered an
innocent purchaser of the land in question. At the outset, we note that both the trial court and
appellate court found that Maxima Hemedes did in fact execute a mortgage over the subject
property in favor of R & B Insurance. This finding shall not be disturbed because, as we
stated earlier, it is a rule that the factual findings of the trial court, especially when affirmed
by the Court of Appeals, are entitled to respect, and should not be disturbed on
appeal. 33

In holding that R & B Insurance is not a mortgagee in good faith, public respondent stated
that the fact that the certificate of title of the subject property indicates upon its face that the
same is subject to an encumbrance, i.e. usufructuary rights in favor of Justa Kausapin during
her lifetime or widowhood, should have prompted R & B Insurance to ". . . investigate further
the circumstances behind this encumbrance on the land in dispute," but which it failed to do.
Also, public respondent considered against R & B Insurance the fact that it made it appear in
the mortgage contract that the land was free from all liens, charges, taxes and
encumbrances. 34

R & B Insurance alleges that, contrary to public respondent's ruling, the presence of an
encumbrance on the certificate of title is not reason for the purchaser or a prospective
mortgagee to look beyond the face of the certificate of title. The owner of a parcel of land
may still sell the same even though such land is subject to a usufruct; the buyer's title over
the property will simply be restricted by the rights of the usufructuary. Thus, R & B Insurance

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accepted the mortgage subject to the usufructuary rights of Justa Kausapin. Furthermore,
even assuming that R & B Insurance was legally obliged to go beyond the title and search for
any hidden defect or inchoate right which could defeat its right thereto, it would not have
discovered anything since the mortgage was entered into in 1964, while the "Kasunduan"
conveying the land to Enrique D. Hemedes was only entered into in 1971 and the affidavit
repudiating the deed of conveyance in favor of Maxima Hemedes was executed by Justa
Kausapin in 1981.35

We sustain petitioner R & B Insurance's claim that it is entitled to the protection of a

mortgagee in good faith.

It is a well-established principle that every person dealing with registered land may safely
rely on the correctness of the certificate of title issued and the law will in no way oblige him to
go behind the certificate to determine the condition of the property. 36 An innocent purchaser
for value 37 is one who buys the property of another without notice that some other person has a
right to or interest in such property and pays a full and fair price for the same at the time of such
purchase or before he has notice of the claim of another person. 38

The annotation of usufructuary rights in favor of Justa Kausapin upon Maxima Hemedes'
OCT dose not impose upon R & B Insurance the obligation to investigate the validity of its
mortgagor's title. Usufruct gives a right to enjoy the property of another with the obligation of
preserving its form and
substance. 39 The usufructuary is entitled to all the natural, industrial and civil fruits of the
property 40 and may personally enjoy the thing in usufruct, lease it to another, or alienate his right
of usufruct, even by a gratuitous title, but all the contracts he may enter into as such usufructuary
shall terminate upon the expiration of the usufruct. 41

Clearly, only the jus utendi and jus fruendi over the property is transferred to the
usufructuary. 42 The owner of the property maintains the jus disponendi or the power to alienate,
encumber, transform, and even destroy the same. 43 This right is embodied in the Civil Code,
which provides that the owner of property the usufruct of which is held by another, may alienate it,
although he cannot alter the property's form or substance, or do anything which may be
prejudicial to the usufructuary. 44

There is no doubt that the owner may validly mortgage the property in favor of a third person
and the law provides that, in such a case, the usufructuary shall not be obliged to pay the
debt of the mortgagor, and should the immovable be attached or sold judicially for the
payment of the debt, the owner shall be liable to the usufructuary for whatever the latter may
lose by reason thereof. 45

Based on the foregoing, the annotation of usufructuary rights in favor of Justa Kausapin is
not sufficient cause to require R & B Insurance to investigate Maxima Hemedes' title,
contrary to public respondent's ruling, for the reason that Maxima Hemedes' ownership over
the property remained unimpaired despite such encumbrance. R & B Insurance had a right
to rely on the certificate of title and was not in bad faith in accepting the property as a
security for the loan it extended to Maxima Hemedes.

Even assuming in gratia argumenti that R & B Insurance was obligated to look beyond the
certificate of title and investigate the title of its mortgagor, still, it would not have discovered
any better rights in favor of private respondents. Enrique D. Hemedes and Dominium base
their claims to the property upon the "Kasunduan" allegedly executed by Justa Kausapin in
favor of Enrique Hemedes. As we have already stated earlier, such contract is a nullity as its
subject matter was inexistent. Also, the land was mortgaged to R & B Insurance as early as

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1964, while the "Kasunduan" was executed only in 1971 and the affidavit of Justa Kausapin
affirming the conveyance in favor of Enrique D. Hemedes was executed in 1981. Thus, even
if R & B Insurance investigated the title of Maxima Hemedes, it would not have discovered
any adverse claim to the land in derogation of its mortgagor's title. We reiterate that at no
point in time could private respondents establish any rights or maintain any claim over the
land.

It is a well-settled principle that where innocent third persons rely upon the correctness of a
certificate of title and acquire rights over the property, the court cannot just disregard such
rights. Otherwise, public confidence in the certificate of title, and ultimately, the Torrens
system, would be impaired for everyone dealing with registered property would still have to
inquire at every instance whether the title has been regularly or irregularly issued. 46Being an
innocent mortgagee for value, R & B Insurance validly acquired ownership over the property,
subject only to the usufructuary rights of Justa Kausapin thereto, as this encumbrance was
properly annotated upon its certificate of title.

The factual findings of the trial court, particularly when affirmed by the appellate court, carry
great weight and are entitled to respect on appeal, except under certain
circumstances. 47 One such circumstance that would compel the Court to review the factual
findings of the lower courts is where the lower courts manifestly overlooked certain relevant facts
not disputed by the parties and which, if properly considered, would justify a different
conclusion. 48 Also, it is axiomatic that the drawing of the proper legal conclusions from such
factual findings are within the peculiar province of this Court. 49

As regards R & B Insurance's prayer that Dominium be ordered to demolish the warehouses
or that it be declared the owner thereof since the same were built in bad faith, we note that
such warehouses were constructed by Asia Brewery, not by Dominium. However, despite its
being a necessary party in the present case, the lower courts never acquired jurisdiction over
Asia Brewery, whether as a plaintiff or defendant, and their respective decisions did not pass
upon the constructions made upon the subject property. Courts acquire jurisdiction over a
party plaintiff upon the filing of the complaint, while jurisdiction over the person of a party
defendant is acquired upon the service of summons in the manner required by law or by his
voluntary appearance. As a rule, if a defendant has not been summoned, the court acquires
no jurisdiction over his person, and any personal judgment rendered against such defendant
is null and void. 50 In the present case, since Asia Brewery is a necessary party that was not
51
joined in the action, any judgment rendered in this case shall be without prejudice to its rights.

As to its claim for moral damages, we hold that R & B Insurance is not entitled to the same
for it has not alleged nor proven the factual basis for the same. Neither is it entitled to
exemplary damages, which may only be awarded if the claimant is entitled to moral,
temperate, liquidated or compensatory damages. 52 R & B Insurance's claim for attorney's fees
must also fail. The award of attorney's fees is the exception rather than the rule and counsel's
fees are not to be awarded every time a party wins a suit. Its award pursuant to article 2208 of the
Civil Code demands factual, legal and equitable justification and cannot be left to speculation and
conjecture. 53 Under the circumstances prevailing in the instant case, there is no factual or legal
basis for an award of attorney's fees.

WHEREFORE, the assailed decision of public respondent and its resolution dated February
22, 1989 are REVERSED. We uphold petitioner R & B Insurance's assertion of ownership
over the property in dispute, as evidenced by TCT No. 41985, subject to the usufructuary
rights of Justa Kausapin, which encumbrance has been properly annotated upon the said
certificate of title. No pronouncement as to costs.

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 3. Bachrach vs. Seifert and Elianoff, GR No. L-2659, October 12, 1950

Is a stock dividend fruit or income, which belongs to the usufructuary, or is it capital or part of
the corpus of the estate, which pertains to the remainderman? That is the question raised in
the appeal.

The deceased E. M. Bachrach, who left no forced heir except his widow Mary McDonald
Bachrach, in his last will and testament made various legacies in cash and willed the
remainder of his estate as follows:

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

The will further provided that upon the death of Mary McDonald Bachrach, one-half of the all
his estate "shall be divided share and share alike by and between my legal heirs, to the
exclusion of my brothers."

The estate of E. M. Bachrach, as owner of 108,000 shares of stock of the Atok-Big Wedge
Mining Co., Inc., received from the latter 54,000 shares representing 50 per cent stock
dividend on the said 108,000 shares. On June 10, 1948, Mary McDonald Bachrach, as
usufructuary or life tenant of the estate, petitioned the lower court to authorize the Peoples
Bank and Trust Company as administrator of the estate of E. M. Bachrach, to her the said
54,000 share of stock dividend by endorsing and delivering to her the corresponding
certificate of stock, claiming that said dividend, although paid out in the form of stock, is fruit
or income and therefore belonged to her as usufructuary or life tenant. Sophie Siefert and
Elisa Elianoff, legal heirs of the deceased, opposed said petition on the ground that the stock
dividend in question was not income but formed part of the capital and therefore belonged
not to the usufructuary but to the remainderman. And they have appealed from the order
granting the petition and overruling their objection.

While appellants admits that a cash dividend is an income, they contend that a stock
dividend is not, but merely represents an addition to the invested capital. The so-called
Massachusetts rule, which prevails in certain jurisdictions in the United States, supports
appellants' contention . It regards cash dividends, however large, as income, and stock
dividends, however made, as capital. (Minot vs. Paine, 99 Mass., 101; 96 Am. Dec., 705.) It
holds that a stock dividend is not in any true sense any true sense any dividend at all since it
involves no division or severance from the corporate assets of the dividend; that it does not
distribute property but simply dilutes the shares as they existed before; and that it takes
nothing from the property of the corporation, and nothing to the interests of the shareholders.

On the other hand, so called Pennsylvania rule, which prevails in various other jurisdictions
in the United States, supports appellee's contention. This rule declares that all earnings of
the corporation made prior to the death of the testator stockholder belong to the corpus of
the estate, and that all earnings, when declared as dividends in whatever form, made during
the lifetime of the usufructuary or life tenant. (Earp's Appeal, 28 Pa., 368.)

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 . . . It is clear that testator intent the remaindermen should have only the corpus of
the estate he left in trust, and that all dividends should go the life tenants. It is true
that profits realized are not dividends until declared by the proper officials of the
corporation, but distribution of profits, however made, in dividends, and the form of
the distribution is immaterial. (In re Thompson's Estate, 262 Pa., 278; 105 Atl. 273,
274.)

In Hite vs. Hite (93 Ky., 257; 20 S. W., 778, 780), the Court of Appeals of Kentucky, speaking
thru its Chief Justice, said:

. . . Where a dividend, although declared in stock, is based upon the earnings of the
company, it is in reality, whether called by one name or another, the income of the
capital invested in it. It is but a mode of distributing the profit. If it be not income, what
is it? If it is, then it is rightfully and equitably the property of the life tenant. If it be
really profit, then he should have it, whether paid in stock or money. A stock dividend
proper is the issue of new shares paid for by the transfer of a sum equal to their par
value from the profits and loss account to that representing capital stock; and really a
corporation has no right to a dividend, either in cash or stock, except from its
earnings; and a singular state of case — it seems to us, an unreasonable one — is
presented if the company, although it rests with it whether it will declare a dividend,
can bind the courts as to the proper ownership of it, and by the mode of payment
substitute its will for that of that of the testator, and favor the life tenants or the
remainder-men, as it may desire. It cannot, in reason, be considered that the testator
contemplated such a result. The law regards substance, and not form, and such a
rule might result not only in a violation of the testator's intention, but it would give the
power to the corporation to beggar the life tenants, who, in this case, are the wife and
children of the testator, for the benefit of the remainder-men, who may perhaps be
unknown to the testator, being unborn when the will was executed. We are unwilling
to adopt a rule which to us seems so arbitrary, and devoid of reason and justice. If
the dividend be in fact a profit, although declared in stock, it should be held to be
income. It has been so held in Pennsylvania and many other states, and we think it
the correct rule. Earp's Appeal, 28 Pa. St. 368; Cook, Stocks & S. sec. 554. . . .

We think the Pennsylvania rule is more in accord with our statutory laws than the
Massachusetts rule. Under section 16 of our Corporation Law, no corporation may make or
declare any dividend except from the surplus profits arising from its business. Any dividend,
therefore, whether cash or stock, represents surplus profits. Article 471 of the Civil Code
provides that the usufructuary shall be entitled to receive all the natural, industrial, and civil
fruits of the property in usufruct. And articles 474 and 475 provide as follows:

ART. 474. Civil fruits are deemed to accrue day by day, and belong to the
usufructuary in proportion to the time the usufruct may last.

ART. 475. When a usufruct is created on the right to receive an income or periodical
revenue, either in money or fruits, or the interest on bonds or securities payable to
bearer, each matured payment shall be considered as the proceeds or fruits such
right.

When it consists of the enjoyment of the benefits arising from an interest in an

industrial or commercial enterprise, the profits of which are not distributed at fixed
periods, such profits shall have the same consideration. lawphil.net

105
 In either case they shall be distributed as civil fruits, and shall be applied in
accordance with the rules prescribed by the next preceding article.

The 108,000 shares of stock are part of the property in usufruct. The 54,000 shares of stock
dividend are civil fruits of the original investment. They represent profits, and the delivery of
the certificate of stock covering said dividend is equivalent to the payment of said profits.
Said shares may be sold independently of the original shares, just as the offspring of a
domestic animal may be sold independently of its mother.

The order appealed from, being in accordance with the above-quoted provisions of the Civil
Code, his hereby affirmed, with costs against the appellants.

4. Fabie vs. Gutierrez David, GR No. L-123, December 12, 1945

The petitioner Josefa Fabie is the usufructuary of the income of certain houses located at
372-376 Santo Cristo, Binondo, and 950-956 Ongpin, Santa Cruz, Manila, under the ninth
clause of the will of the deceased Rosario Fabie y Grey, which textually reads as follows:

NOVENO. — Lego a mi ahijada menor de edad, Maria Josefa de la Paz Fabie, en

usufructo vitalicio las rentas de las fincas situadas en la Calle Santo Cristo Numeros
372 al 376 del Disrito de Binondo, de esta Ciudad de Manila, descrita en el
Certificado Original de Titulo No. 3824; y en la Calle Ongpin, Numeros 950 al 956 del
Distrito de Santa Cruz, Manila descrita en el Certificado Original de Titulo No. 5030,
expedidos por el Registrador de Titulos de Manila, y prohibo enajene, hipoteque,
permute o transfiera de algun modo mientras que ella sea menor de edad. Nombro a
Serafin Fabie Macario, mi primo por linea paterna tutor de la persona y bienes de mi
ahijada menor, Maria Josefa de la Paz Fabie.

The owner of Santo Cristo property abovementioned is the respondent Juan Grey, while
those of the Ongpin property are other person not concern herein. Previous to September
1944 litigation arose between Josefa Fabie as plaintiff and Juan Grey as defendant and the
owner of the Ongpin property as intervenors, involving the administration of the houses
mentioned in clause 9 of the will above quoted (civil case No. 1659 of the Court of First
Instance of Manila). That suit was decided by the court on September 2, 1944, upon a
stipulation in writing submitted by the parties to and approved by the court. The pertinent
portions of said stipulation read as follows:

(4) Heretofore, the rent of said properties have been collected at times by the
respective owners of the properties, at other times by the usufructuary, and lastly by
the defendant Juan Grey as agent under a written agreement dated March 31, 1942,
between the owners of both properties and the usufructuary.

(5) When the rents were collected by the owners, the net amounts thereof were duly
paid to the usufructuary after the expenses for real estate taxes, repairs and
insurance premiums, including the documentary stamps, on the properties and the
expenses of collecting the rents had been deducted, and certain amount set aside as
a reserve for contingent liabilities. When the rents were collected by the usufructuary,

106
 she herself paid the expenses aforesaid. When the rents are collected by the
defendant Juan Grey under the agreement of March 31, 1942, the net amounts
thereof were duly paid to the usufructuary, after deducting and setting aside the
items aforesaid, monthly, until the month of October 1943, when the usufructuary
refused to continue with the agreement of March 31, 1942.

xxx xxx xxx

II. The parties hereto jointly petition the Court to render judgment adopting the
foregoing as finding of facts and disposing that:

(8) Beginning with the month of September 1944, the usufructuary shall collect all the
rents of the both the Sto. Cristo and the Ongpin properties.

(9) The usufructuary shall, at her own cost and expense, pay all the real estate taxes,
special assessments, and insurance premiums, including the documentary stamps,
and make all the necessary repairs on each of the properties, promptly when due or,
in the case of repairs, when the necessary, giving immediate, written notice to the
owner or owners of the property concerned after making such payment or repairs. In
case of default on the part of the usufructuary, the respective owners of the
properties shall have the right to make the necessary payment, including penalties
and interest, if any, on the taxes and special assessments, and the repairs and in
that event the owner or owners shall entitled to collect all subsequent rents of the
property concerned until the amount paid by him or them and the expenses of
collection are fully covered thereby, after which the usufructuary shall again collect
the rents in accordance herewith.

(10) The foregoing shall be in effect during the term of the usufruct and shall be
binding on the successors and assigns of each of the parties.

(11) Nothing herein shall be understood as affecting any right which the respective
owners of the properties have or may have as such and which is not specifically the
subject of this stipulation.

In June 1945 Josefa Fabie commenced an action of unlawful detainer against the herein
respondent Ngo Boo Soo (who says that his correct name is Ngo Soo), alleging in her
amended complaint that the defendant is occupying the premises located at 372-376 Santo
Cristo on a month-to month rental payable in advance not latter than the 5th of each month;
that she is the administratrix and usufructuary of said premises; "that the defendant offered
to pay P300 monthly rent payable in advance not later than the 5th of every month,
beginning the month of April 1945, for the said of premises including the one door which said
defendant, without plaintiff's consent and contrary to their agreement, had subleased to
another Chinese, but plaintiff refused, based on the fact that the herein plaintiff very badly
needs the said house to live in, as her house was burned by the Japanese on the occasion
of the entry of the American liberators in the City and which was located then at No. 38
Flores, Dominga, Pasay; that defendant was duly notified on March 24 and April 14, 1945, to
leave the said premises, but he refused"; and she prayed for judgment of eviction and for
unpaid rentals.

The defendant answered alleging that he was and since 1908 had been a tenant of the
premises in question, which he was using and had always used principally as a store and
secondarily for living quarters; that he was renting it from its owner and administrator Juan
Grey; "that plaintiff is merely the usufructuary of the income therefrom, and by agreement

107
between her and said owner, which is embodied in a final judgment of the Court of First
Instance of Manila, her only right as usufructuary of the income is to receive the whole of
such income; that she has no right or authority to eject tenants, such right being in the owner
and administrator of the house, the aforesaid Juan Grey, who has heretofore petitioned this
Court for permission to intervene in this action; that plaintiff herein has never had possession
of said property; that defendant's lease contract with the owner of the house is for 5-year
period, with renewal option at the end of each period, and that his present lease due to
expire on December 31, 1945 . . .; that on June 1, 1945, defendant made a written offer to
plaintiff to compromise and settle the question of the amount of rent to be paid by defendant .
. . but said plaintiff rejected the same for no valid reason whatever and instituted the present
action; that the reason plaintiff desires to eject defendant from the property is that she wishes
to lease the same to other persons for a higher rent, ignoring the fact that as usufructuary of
the income of the property she has no right to lease the property; that the defendant has
subleased no part of the house to any person whomsoever.

Juan Grey intervened in the unlawful detainer suit, alleging in his complaint in intervention
that he is the sole and absolute owner of the premises in question; that the plaintiff Josefa
Fabie is the usufructuary of the income of said premises; by virtue of a contract between him
and the intervenor which will expire on December 31, 1945, with the option to renew it for
another period of five years from and after said date; that under the agreement between the
intervenor and plaintiff Josefa Fabie in civil case No. 1659 of the Court of First Instance of
Manila, which was approved by the court and incorporated in its decision of September 2,
1944, the only right recognized in favor of Josefa Fabie as usufructuary of the income of said
premises is to receive the rents therefrom when due; and that as usufructuary she has no
right nor authority to administer the said premises nor to lease them nor to evict tenants,
which right and authority are vested in the intervenor as owner of the premises.

The municipal court (Judge Mariano Nable presiding) found that under paragraph 9 of the
stipulation incorporated in the decision of the Court First Instance of Manila in civil; case No.
1659, the plaintiff usufructuary is the administratrix of the premises in question, and that the
plaintiff had proved her cause. Judgment was accordingly rendered ordering the defendant
Ngo Soo to vacate the premises and to pay the rents at the rate of P137.50 a month
beginning April 1, 1945. The complaint in intervention was dismissed.

Upon appeal to the Court of First Instance of Manila the latter (thru Judge Arsenio P. Dizon)
dismissed the case for the following reason: "The main issue *** is not a mere question of
possession but precisely who is entitled to administer the property subject matter of this case
and who should be the tenant, and the conditions of the lease. These issues were beyond
the jurisdiction of the municipal court. This being case, this Court, as appellate court, is
likewise without jurisdiction to take cognizance of the present case." A motion for
reconsideration filed by the plaintiff was denied by Judge Jose Gutierrez David, who
sustained the opinion of Judge Dizon. lawphi1.net

The present original action was instituted in this Court by Josefa Fabie to annul the order of
the dismissal and to require to the Court of First Instance to try and decide the case on the
merits. The petitioner further prays that the appeal of the intervenor Juan Grey be declared
out of time on the ground that he receive copy of the decision on August 3 but did not file his
notice of appeal until August 25, 1945.

1. The first question to determine is whether the action instituted by the petitioner Josefa
Fabie in the municipal court is a purely possessory action and as such within the jurisdiction
of said court, or an action founded on property right and therefore beyond the jurisdiction of
the municipal court. In other words, is it an action of unlawful detainer within the purview of

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section 1 of Rule 72, or an action involving the title to or the respective interests of the
parties in the property subject of the litigation?

Said section 1 of Rule 72 provides that "a landlord, vendor, vendee, or other person against
whom the possession of any land or building is unlawfully withheld after the expiration or
termination of the right to hold possession, by virtue of any contract, express or implied, or
the legal representatives or assigns of any such landlord, vendor vendee, or other person,
may, at any time within one year after such unlawful deprivation of withholding of
possession, bring an action in the proper inferior court against the person or persons
unlawfully withholding or depriving of possession, or any person or persons claiming under
them, for the restitution of such possession, together with the damages and costs."

It is admitted by the parties that the petitioner Josefa Fabie is the usufructuary of the income
of the property in question and that the respondent Juan Grey is the owner thereof. It is
likewise admitted that by virtue of a final judgment entered in civil case No. 1659 of the Court
of First Instance of Manila between the usufructuary and the owner, the former has the right
to collect all the rents of said property for herself with the obligation on her part to pay all the
real estate taxes, special assessments, and insurance premiums, and make all necessary
repairs thereon, and in case default on her part the owner shall have the right to do all those
things, in which event he shall be entitled to collect all subsequent rents of the property
concerned until the amount paid by him and the expenses of collection are fully satisfied,
after which the usufructuary shall again collect the rents. There is therefore no dispute as to
the title to or the respective interests of the parties in the property in question. The naked title
to the property is to admittedly in the respondent Juan Grey, but the right to all the rents
thereof, with the obligation to pay the taxes and insurance premiums and make the
necessary repairs, is, also admittedly, vested in the usufructuary, the petitioner Josefa Fabie,
during her lifetime. The only question between the plaintiff and the intervenor is: Who has the
right to manage or administer the property — to select the tenant and to fix the amount of the
rent? Whoever has that right has the right to the control and possession of the property in
question, regardless of the title thereto. Therefore, the action is purely possessory and not
one in any way involving the title to the property. Indeed, the averments and the prayer of the
complaint filed in the municipal court so indicate, and as a matter of fact the defendant Ngo
Soo does not pretend to be the owner of the property, but on the contrary admits to be a
mere tenant thereof. We have repeatedly held that in determining whether an action of this
kind is within the original jurisdiction of the municipal court or of the Court of First Instance,
the averments of the complaint and the character of the relief sought are primarily to be
consulted; that the defendant in such an action cannot defeat the jurisdiction of the justice of
the peace or municipal court by setting up title in himself; and that the factor which defeats
the jurisdiction of said court is the necessity to adjudicate the question of title.
(Mediran vs. Villanueva, 37 Phil., 752, 759; Medel vs.Militante, 41 Phil., 526, 529;
Sevilla vs. Tolentino, 51 Phil., 333; Supia and Batioco vs. Quintero and Ayala, 59 Phil., 312;
Lizo vs. Carandang, G.R. No. 47833, 2 Off. Gaz., 302; Aguilar vs. Cabrera and Flameño,
G.R. No. 49129.)

The Court of First Instance was evidently confused and led to misconstrue the real issue by
the complaint in intervention of Juan Grey, who, allying himself with the defendant Ngo Soo,
claimed that he is the administrator of the property with the right to select the tenant and
dictate the conditions of the lease, thereby implying that it was he and not the plaintiff Josefa
Fabie who had the right to bring the action and oust the tenant if necessary. For the
guidance of that court and to obviate such confusion in its disposal of the case on the merits,
we deem it necessary and proper to construe the judgment entered by the Court of First
Instance of Manila in civil case No. 1659, entitled "Josefa Fabie and Jose Carandang,
plaintiffs, vs. Juan Grey, defendant, and Nieves G. Vda. de Grey, et al., intervenors-

109
defendants" which judgment was pleaded by the herein respondents Juan Grey and Ngo
Soo in the municipal court. According the decision, copy of which was submitted to this Court
as Appendix F of the petition and as Annex 1 of the answer, there was an agreement, dated
March 31, 1942, between the usufructuary Josefa Fabie and the owner Juan Grey whereby
the latter as agent collected the rents of the property in question and delivered the same to
the usufructuary after deducting the expenses for taxes, repairs, insurance premiums and
the expenses of collection; that in the month of October 1943 the usufructuary refused to
continue with the said agreement of March 31, 1942, and thereafter the said case arose
between the parties, which by stipulation approved by the court was settled among them in
the following manner: Beginning with the month of September 1944 the usufructuary shall
collect all the rents of the property in question; shall, at her own cost and expense, pay all
the real estate taxes, special assessments, and insurance premiums, including the
documentary stamps, and make all the necessary repairs on the property; and in case of
default on her part the owner shall the right to do any or all of those things, in which event he
shall be entitled to collect all subsequent rents until the amounts paid by him are fully
satisfied, after which the usufructuary shall again collect the rents. It was further stipulated by
the parties and decreed by the court that "the foregoing shall be in effect during the term of
the usufruct and shall be binding on the successors and assigns of each of the parties."

Construing said judgment in the light of the ninth clause of the will of the deceased Rosario
Fabie y Grey, which was quoted in the decision and by which Josefa Fabie was made by the
usufructuary during her lifetime of the income of the property in question, we find that the
said usufructuary has the right to administer the property in question. All the acts of
administration — to collect the rents for herself, and to conserve the property by making all
necessary repairs and paying all the taxes, special assessments, and insurance premiums
thereon — were by said judgment vested in the usufructuary. The pretension of the
respondent Juan Grey that he is the administrator of the property with the right to choose the
tenants and to dictate the conditions of the lease is contrary to both the letter and the spirit of
the said clause of the will, the stipulation of the parties, and the judgment of the court. He
cannot manage or administer the property after all the acts of management and
administration have been vested by the court, with his consent, in the usufructuary. He
admitted that before said judgment he had been collecting the rents as agent of the
usufructuary under an agreement with the latter. What legal justification or valid excuse could
he have to claim the right to choose the tenant and fix the amount of the rent when under the
will, the stipulation of the parties, and the final judgment of the court it is not he but the
usufructuary who is entitled to said rents? As long as the property is properly conserved and
insured he can have no cause for complaint, and his right in that regard is fully protected by
the terms of the stipulation and the judgment of the court above mentioned. To permit him to
arrogate to himself the privilege to choose the tenant, to dictate the conditions of the lease,
and to sue when the lessee fails to comply therewith, would be to place the usufructuary
entirely at his mercy. It would place her in the absurd situation of having a certain
indisputable right without the power to protect, enforce, and fully enjoy it.

One more detail needs clarification. In her complaint for desahucio Josefa Fabie alleges that
she needs the premises in question to live in, as her former residence was burned. Has she
the right under the will and the judgment in question to occupy said premises herself? We
think that, as a corollary to her right to all the rent, to choose the tenant, and to fix the
amount of the rent, she necessarily has the right to choose herself as the tenant thereof, if
she wishes to; and, as she fulfills her obligation to pay the taxes and insure and conserve the
property properly, the owner has no legitimate cause to complain. As Judge Nable of the
municipal court said in his decision, "the pretension that the plaintiff, being a mere
usufructuary of the rents, cannot occupy the property, is illogical if it be taken into account
that that could not have been the intention of the testatrix."

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We find that upon the pleadings, the undisputed facts, and the law the action instituted in the
municipal court by the petitioner Josefa Fabie against the respondent Ngo Soo is one of
unlawful detainer, within the original jurisdiction of said court, and that therefore Judges
Dizon and Gutierrez David of the Court of First Instance erred in holding otherwise and in
quashing the case upon appeal.

2. The next question to determine is the propriety of the remedy availed of by the petitioner in
this Court. Judging from the allegations and the prayer of the petition, it is in the nature
of certiorari and mandamus, to annul the order of dismissal and to require the Court of First
Instance to try and decide the appeal on the merits. Under section 3 of Rule 67, when any
tribunal unlawfully neglects the performance of an act which the law specifically enjoins as a
duty resulting from an office, and there is no other plain, speedy, and adequate remedy in
the ordinary course of law, it may be compelled by mandamus to do the act required to be
done to protect the rights of the petitioner. If, as we find, the case before the respondent
judge is one of unlawful detainer, the law specifically requires him to hear and decide that
case on the merits, and his refusal to do so would constitute an unlawful neglect in the
performance of that duty within section 3 of Rule 67. Taking into consideration that the law
requires that an unlawful detainer case be promptly decided (sections 5 and 8, Rule 72),it is
evident that an appeal from the order of dismissal would not be a speedy and adequate
remedy; and under the authority of Cecilio vs. Belmonte (48 Phil., 243, 255), and Aguilar vs.
Cabrera and Flameño (G.R. No. 49129), we hold that mandamus lies in this case.

3. The contention of the petitioner that the appeal of the intervenor Juan Grey was filed out of
time is not well founded. Although said respondent received copy of the decision of the
municipal court on August 3, 1945, according to the petitioner (on August 6, 1945, according
to the said respondent), it appears from the sworn answer of the respondent Ngo Soo in this
case that on August 8 he filed a motion for reconsideration, which was granted in part on
August 18. Thus, if the judgment was modified on August 18, the time for the intervenor Juan
Grey to appeal therefrom did not run until he was notified of said judgment as modified, and
since he filed his notice of appeal on August 23, it would appear that his appeal was filed on
time. However, we observe in this connection that said appeal of the intervenor Juan Grey,
who chose not to answer the petition herein, would be academic in view of the conclusions
we have reached above that the rights between him as owner and Josefa Fabie as
usufructuary of the property in question have been definitely settled by final judgment in civil
case No. 1659 of the Court of First Instance of Manila in the sense that the usufructuary has
the right to administer and possess the property in question, subject to certain specified
obligations on her part.

The orders of dismissal of the respondent Court of First Instance, dated September 22 and
October 31, 1945, in thedesahucio case (No. 71149) are set aside that court is directed to try
and decide the said case on the merits; with the costs hereof against the respondent Ngo
Soo.

5. Moralidad v. Pernes GR No. 152809, August 3, 2006

Under consideration is this petition for review on certiorari under Rule 45 of the Rules of
Court to nullify and set aside the following issuances of the Court of Appeals (CA) in CA-G.R.
SP No. 61610, to wit:

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by TurboMac

1. Decision dated September 27, 2001, 1 affirming an earlier decision of the Regional Trial
Court (RTC) of Davao City which reversed that of the Municipal Trial Court in Cities (MTCC),
Davao City, Branch 1, in an action for unlawful detainer thereat commenced by the petitioner
against the herein respondents; and

2. Resolution dated February 28, 2002, 2 denying petitioner’s motion for reconsideration.

At the heart of this controversy is a parcel of land located in Davao City and registered in the
name of petitioner Mercedes Moralidad under Transfer Certificate of Title (TCT) No. T-
123125 of the Registry of Deeds of Davao City.

In her younger days, petitioner taught in Davao City, Quezon City and Manila. While teaching
in Manila, she had the good fortune of furthering her studies at the University of
Pennsylvania, U.S.A. While schooling, she was offered to teach at the Philadelphia Catholic
Archdiocese, which she did for seven (7) years. Thereafter, she worked at the Mental Health
Department of said University for the next seventeen (17) years.

During those years, she would come home to the Philippines to spend her two-month
summer vacation in her hometown in Davao City. Being single, she would usually stay in
Mandug, Davao City, in the house of her niece, respondent Arlene Pernes, a daughter of her
younger sister, Rosario.

Back in the U.S.A. sometime in 1986, she received news from Arlene that Mandug at the
outskirts of Davao City was infested by NPA rebels and many women and children were
victims of crossfire between government troops and the insurgents. Shocked and saddened
about this development, she immediately sent money to Araceli, Arlene’s older sister, with
instructions to look for a lot in Davao City where Arlene and her family could transfer and
settle down. This was why she bought the parcel of land covered by TCT No. T-123125.

Petitioner acquired the lot property initially for the purpose of letting Arlene move from
Mandug to Davao City proper but later she wanted the property to be also available to any of
her kins wishing to live and settle in Davao City. Petitioner made known this intention in a
document she executed on July 21, 1986. 3 The document reads:

I, MERCEDES VIÑA MORALIDAD, of legal age, single, having been born on the 29th day of
January, 1923, now actually residing at 8021 Lindbergh Boulevard, Philadelphia,
Pennsylvania, U.S.A., wishes to convey my honest intention regarding my properties situated
at Palm Village Subdivision, Bajada, Davao City, 9501, … and hereby declare:

1. That it is my desire that Mr. and Mrs. Diosdado M. Pernes may build their house therein
and stay as long as they like;

2. That anybody of my kins who wishes to stay on the aforementioned real property should
maintain an atmosphere of cooperation, live in harmony and must avoid bickering with one
another;

3. That anyone of my kins may enjoy the privilege to stay therein and may avail the use
thereof. Provided, however, that the same is not inimical to the purpose thereof;

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4. That anyone of my kins who cannot conform with the wishes of the undersigned may
exercise the freedom to look for his own;

5. That any proceeds or income derived from the aforementioned properties shall be allotted
to my nearest kins who have less in life in greater percentage and lesser percentage to those
who are better of in standing.

xxx xxx xxx

Following her retirement in 1993, petitioner came back to the Philippines to stay with the
respondents’ on the house they build on the subject property. In the course of time, their
relations turned sour because members of the Pernes family were impervious to her
suggestions and attempts to change certain practices concerning matters of health and
sanitation within their compound. For instance, Arlene’s eldest son, Myco Pernes, then a
fourth year veterinary medicine student, would answer petitioner back with clenched fist and
at one time hurled profanities when she corrected him. Later, Arlene herself followed suit.
Petitioner brought the matter to the local barangay lupon where she lodged a complaint for
slander, harassment, threat and defamation against the Pernes Family. Deciding for
petitioner, the lupon apparently ordered the Pernes family to vacate petitioner’s property but
not after they are reimbursed for the value of the house they built thereon. Unfortunately, the
parties could not agree on the amount, thus prolonging the impasse between them.

Other ugly incidents interspersed with violent confrontations meanwhile transpired, with the
petitioner narrating that, at one occasion in July 1998, she sustained cuts and wounds when
Arlene pulled her hair, hit her on the face, neck and back, while her husband Diosdado held
her, twisting her arms in the process.

Relations having deteriorated from worse to worst, petitioner, on July 29, 1998, lodged a
formal complaint before the Regional Office of the Ombudsman for Mindanao, charging the
respondent spouses, who were both government employees, with conduct unbecoming of
public servants. This administrative case, however, did not prosper.

Then, on August 3, 1998, petitioner filed with the MTCC of Davao City an unlawful detainer
suit against the respondent spouses. Petitioner alleged that she is the registered owner of
the land on which the respondents built their house; that through her counsel, she sent the
respondent spouses a letter demanding them to vacate the premises and to pay rentals
therefor, which the respondents refused to heed.

In their defense, the respondents alleged having entered the property in question, building
their house thereon and maintaining the same as their residence with petitioner’s full
knowledge and express consent. To prove their point, they invited attention to her written
declaration of July 21, 1986, supra, wherein she expressly signified her desire for the
spouses to build their house on her property and stay thereat for as long as they like.

The MTCC, resolving the ejectment suit in petitioner’s favor, declared that the respondent
spouses, although builders in good faith vis-à-vis the house they built on her property, cannot
invoke their bona fides as a valid excuse for not complying with the demand to vacate. To
the MTCC, respondents’ continued possession of the premises turned unlawful upon their
receipt of the demand to vacate, such possession being merely at petitioner’s tolerance, and
sans any rental. Accordingly, in its decision dated November 17, 1999, 4 the MTCC rendered
judgment for the petitioner, as plaintiff therein, to wit:

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WHEREFORE, judgment is hereby rendered in favor of herein plaintiff and against the
defendants, as follows:

a) Directing the defendants, their agents and other persons acting on their behalf to vacate
the premises and to yield peaceful possession thereof to plaintiff;

b) Ordering defendants to pay P2,000.00 a month from the filing of this complaint until they
vacate premises;

c) Sentencing defendants to pay the sum of P120,000.00 5 as attorney’s fees and to pay the
cost of suit.

Defendants counterclaim are hereby dismissed except with respect to the claim for
reimbursement of necessary and useful expenses which should be litigated in an ordinary
civil actions. (sic)

Dissatisfied, the respondent spouses appealed to the RTC of Davao City.

In the meantime, petitioner filed a Motion for Execution Pending Appeal. The motion was
initially granted by the RTC in its Order of February 29, 2000, but the Order was later
withdrawn and vacated by its subsequent Order dated May 9, 2000 6 on the ground that
immediate execution of the appealed decision was not the prudent course of action to take,
considering that the house the respondents constructed on the subject property might even
be more valuable than the land site.

Eventually, in a decision 7 dated September 30, 2000, the RTC reversed that of the MTCC,
holding that respondents’ possession of the property in question was not, as ruled by the
latter court, by mere tolerance of the petitioner but rather by her express consent. It further
ruled that Article 1678 of the Civil Code on reimbursement of improvements introduced is
inapplicable since said provision contemplates of a lessor-lessee arrangement, which was
not the factual milieu obtaining in the case. Instead, the RTC ruled that what governed the
parties’ relationship are Articles 448 and 546 of the Civil Code, explaining thus:

Since the defendants-appellees [respondents] are admittedly possessors of the property by

permission from plaintiff [petitioner], and builders in good faith, they have the right to retain
possession of the property subject of this case until they have been reimbursed the cost of
the improvements they have introduced on the property.

Indeed, this is a substantive right given to the defendants by law, and this right is superior to
the procedural right to [sic] plaintiff to immediately ask for their removal by a writ of execution
by virtue of a decision which as we have shown is erroneous, and therefore invalid. (Words
in brackets supplied),

and accordingly dismissed petitioner’s appeal, as follows:

WHEREFORE, in view of the foregoing, the Decision appealed from is REVERSED and
declared invalid. Consequently, the motion for execution pending appeal is likewise denied.

Counter-claims of moral and exemplary damages claimed by defendants are likewise

dismissed. However, attorney’s fees in the amount of fifteen thousand pesos is hereby
awarded in favor of defendants-appellants, and against plaintiffs.

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SO ORDERED. 8

Therefrom, petitioner went to the CA in CA-G.R. SP No. 61610.

On September 27, 2001, the CA, while conceding the applicability of Articles 448 and 546 of
the Civil Code to the case, ruled that it is still premature to apply the same considering that
the issue of whether respondents’ right to possess a portion of petitioner’s land had already
expired or was already terminated was not yet resolved. To the CA, the unlawful detainer suit
presupposes the cessation of respondents’ right to possess. The CA further ruled that what
governs the rights of the parties is the law on usufruct but petitioner failed to establish that
respondents’ right to possess had already ceased. On this premise, the CA concluded that
the ejectment suit instituted by the petitioner was premature. The appellate court thus
affirmed the appealed RTC decision, disposing:

WHEREFORE, premises considered, the instant petition for review is hereby denied for lack
of merit. Accordingly, the petitioner’s complaint for Unlawful Detainer is DISMISSED.

SO ORDERED.

With the CA’s denial of her motion for reconsideration in its Resolution of February 28, 2002,
petitioner is now before this Court raising the following issues:

I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN DISMISSING THE

UNLAWFUL DETAINER CASE FOR BEING PREMATURE WHICH DECISION IS NOT IN
ACCORDANCE WITH LAW AND JURISPRUDENCE.

II. WHETHER OR NOT THE COURT OF APPEALS ERRED IN APPLYING ARTICLES 448
AND 546 AND THE PROVISIONS OF THE CODE ON USUFRUCT INSTEAD OF ARTICLE
1678 OF THE CIVIL CODE.

The Court rules for the petitioner.

The Court is inclined to agree with the CA that what was constituted between the parties
herein is one of usufruct over a piece of land, with the petitioner being the owner of the
property upon whom the naked title thereto remained and the respondents being two (2)
among other unnamed usufructuaries who were simply referred to as petitioner’s kin. The
Court, however, cannot go along with the CA’s holding that the action for unlawful detainer
must be dismissed on ground of prematurity.

Usufruct is defined under Article 562 of the Civil Code in the following wise:

ART. 562. Usufruct gives a right to enjoy the property of another with the obligation of
preserving its form and substance, unless the title constituting it or the law otherwise
provides.

Usufruct, in essence, is nothing else but simply allowing one to enjoy another’s property. 9 It
is also defined as the right to enjoy the property of another temporarily, including both the jus
utendi and the jus fruendi, 10 with the owner retaining the jus disponendi or the power to
alienate the same. 11

It is undisputed that petitioner, in a document dated July 21, 1986, supra, made known her
intention to give respondents and her other kins the right to use and to enjoy the fruits of her

115
property. There can also be no quibbling about the respondents being given the right "to
build their own house" on the property and to stay thereat "as long as they like." Paragraph
#5 of the same document earmarks "proceeds or income derived from the aforementioned
properties" for the petitioner’s "nearest kins who have less in life in greater percentage and
lesser percentage to those who are better of (sic) in standing." The established facts
undoubtedly gave respondents not only the right to use the property but also granted them,
among the petitioner’s other kins, the right to enjoy the fruits thereof. We have no quarrel,
therefore, with the CA’s ruling that usufruct was constituted between petitioner and
respondents. It is thus pointless to discuss why there was no lease contract between the
parties.

However, determinative of the outcome of the ejectment case is the resolution of the next
issue, i.e., whether the existing usufruct may be deemed to have been extinguished or
terminated. If the question is resolved in the affirmative, then the respondents’ right to
possession, proceeding as it did from their right of usufruct, likewise ceased. In that case,
petitioner’s action for ejectment in the unlawful detainer case could proceed and should
prosper.

The CA disposed of this issue in this wise:

xxx Section 1, Rule 70 of the 1997 Rules of Civil Procedure, as amended, provides xxx

xxx xxx xxx

From the foregoing provision, it becomes apparent that for an action for unlawful detainer to
prosper, the plaintiff [petitioner] needs to prove that defendants’ [respondents’] right to
possess already expired and terminated. Now, has respondents’ right to possess the subject
portion of petitioner’s property expired or terminated? Let us therefore examine respondents’
basis for occupying the same.

It is undisputed that petitioner expressly authorized respondents o occupy portion of her

property on which their house may be built. Thus – "it is my desire that Mr. and Mrs.
Diosdado M. Pernes may build their house therein and stay as long as they like." From this
statement, it seems that petitioner had given the respondents the usufructuary rights over the
portion that may be occupied by the house that the latter would build, the duration of which
being dependent on how long respondents would like to occupy the property. While
petitioner had already demanded from the respondents the surrender of the premises, this
Court is of the opinion that the usufructuary rights of respondents had not been terminated
by the said demand considering the clear statement of petitioner that she is allowing
respondents to occupy portion of her land as long as the latter want to. Considering that
respondents still want to occupy the premises, petitioner clearly cannot eject respondents. 12

We disagree with the CA’s conclusion of law on the matter. The term or period of the
usufruct originally specified provides only one of the bases for the right of a usufructuary to
hold and retain possession of the thing given in usufruct. There are other modes or instances
whereby the usufruct shall be considered terminated or extinguished. For sure, the Civil
Code enumerates such other modes of extinguishment:

ART. 603. Usufruct is extinguished:

(1) By the death of the usufructuary, unless a contrary intention clearly appears;

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(2) By expiration of the period for which it was constituted, or by the fulfillment of any
resolutory condition provided in the title creating the usufruct;

(3) By merger of the usufruct and ownership in the same person;

(4) By renunciation of the usufructuary;

(5) By the total loss of the thing in usufruct;

(6) By the termination of the right of the person constituting the usufruct;

(7) By prescription. (Emphasis supplied.)

The document executed by the petitioner dated July 21, 1986 constitutes the title creating,
and sets forth the conditions of, the usufruct. Paragraph #3 thereof states "[T]hat anyone of
my kins may enjoy the privilege to stay therein and may avail the use thereof. Provided,
however, that the same is not inimical to the purpose thereof" (Emphasis supplied). What
may be inimical to the purpose constituting the usufruct may be gleaned from the preceding
paragraph wherein petitioner made it abundantly clear "that anybody of my kins who wishes
to stay on the aforementioned property should maintain an atmosphere of cooperation, live in
harmony and must avoid bickering with one another." That the maintenance of a peaceful
and harmonious relations between and among kin constitutes an indispensable condition for
the continuance of the usufruct is clearly deduced from the succeeding Paragraph #4 where
petitioner stated "[T]hat anyone of my kins who cannot conform with the wishes of the
undersigned may exercise the freedom to look for his own." In fine, the occurrence of any of
the following: the loss of the atmosphere of cooperation, the bickering or the cessation of
harmonious relationship between/among kin constitutes a resolutory condition which, by
express wish of the petitioner, extinguishes the usufruct.

From the pleadings submitted by the parties, it is indubitable that there were indeed facts
and circumstances whereby the subject usufruct may be deemed terminated or extinguished
by the occurrence of the resolutory conditions provided for in the title creating the usufruct,
namely, the document adverted to which the petitioner executed on July 21, 1986.

As aptly pointed out by the petitioner in her Memorandum, respondents’ own evidence
before the MTCC indicated that the relations between the parties "have deteriorated to
almost an irretrievable level." 13 There is no doubt then that what impelled petitioner to file
complaints before the local barangay lupon, the Office of the Ombudsman for Mindanao, and
this instant complaint for unlawful detainer before the MTCC is that she could not live
peacefully and harmoniously with the Pernes family and vice versa.

Thus, the Court rules that the continuing animosity between the petitioner and the Pernes
family and the violence and humiliation she was made to endure, despite her advanced age
and frail condition, are enough factual bases to consider the usufruct as having been
terminated.

To reiterate, the relationship between the petitioner and respondents respecting the property
in question is one of owner and usufructuary. Accordingly, respondents’ claim for
reimbursement of the improvements they introduced on the property during the effectivity of
the usufruct should be governed by applicable statutory provisions and principles on
usufruct. In this regard, we cite with approval what Justice Edgardo Paras wrote on the
matter:

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If the builder is a usufructuary, his rights will be governed by Arts. 579 and 580. In case like
this, the terms of the contract and the pertinent provisions of law should govern (3 Manresa
215-216; se also Montinola vs. Bantug, 71 Phil. 449). 14 (Emphasis ours.)

By express provision of law, respondents, as usufructuary, do not have the right to

reimbursement for the improvements they may have introduced on the property. We quote
Articles 579 and 580 of the Civil Code:

Art. 579. The usufructuary may make on the property held in usufruct such useful
improvements or expenses for mere pleasure as he may deem proper, provided he does not
alter its form or substance; but he shall have no right to be indemnified therefor. He may,
however, remove such improvements, should it be possible to do so without damage to the
property. (Emphasis supplied.)

Art. 580. The usufructuary may set off the improvements he may have made on the property
against any damage to the same.

Given the foregoing perspective, respondents will have to be ordered to vacate the premises
without any right of reimbursement. If the rule on reimbursement or indemnity were
otherwise, then the usufructuary might, as an author pointed out, improve the owner out of
his property. 15 The respondents may, however, remove or destroy the improvements they
may have introduced thereon without damaging the petitioner’s property.

Out of the generosity of her heart, the petitioner has allowed the respondent spouses to use
and enjoy the fruits of her property for quite a long period of time. They opted, however, to
repay a noble gesture with unkindness. At the end of the day, therefore, they really cannot
begrudge their aunt for putting an end to their right of usufruct. The disposition herein arrived
is not only legal and called for by the law and facts of the case. It is also right.

WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the CA
are REVERSED and SET ASIDE. Accordingly, the decision of the MTCC is REINSTATED
with MODIFICATION that all of respondents’ counterclaims are dismissed, including their
claims for reimbursement of useful and necessary expenses.

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