G.R. No.
L-27782 July 31, 1970 appellant sent appellee a check for said amount, which appellee
OCTAVIO A. KALALO, plaintiff-appellee,
vs.
ALFREDO J. LUZ, defendant-appellant.
Amelia K. del Rosario for plaintiff-appellee.
Pelaez, Jalandoni & Jamir for defendant-appellant.
ZALDIVAR, J.:
Appeal from the decision, dated, February 10, 1967, of the Court of
First Instance of Rizal (Branch V, Quezon City) in its Civil Case No. Q-
6561.
On November 17, 1959, plaintiff-appellee Octavio A. Kalalo hereinafter
referred to as appellee), a licensed civil engineer doing business under
the firm name of O. A. Kalalo and Associates, entered into an
agreement (Exhibit A )1 with defendant-appellant Alfredo J . Luz
(hereinafter referred to as appellant), a licensed architect, doing
business under firm name of A. J. Luz and Associates, whereby the
former was to render engineering design services to the latter for fees,
as stipulated in the agreement. The services included design
computation and sketches, contract drawing and technical
specifications of all engineering phases of the project designed by O.
A. Kalalo and Associates bill of quantities and cost estimate, and
consultation and advice during construction relative to the work. The
fees agreed upon were percentages of the architect's fee, to wit:
structural engineering, 12-½%; electrical engineering, 2-½%. The
agreement was subsequently supplemented by a "clarification to letter-
proposal" which provided, among other things, that "the schedule of
engineering fees in this agreement does not cover the following: ... D.
Foundation soil exploration, testing and evaluation; E. Projects that are
principally engineering works such as industrial plants, ..." and "O. A.
Kalalo and Associates reserve the right to increase fees on projects
,which cost less than P100,000 ...."2 Pursuant to said agreement,
appellee rendered engineering services to appellant in the following
projects:
(a) Fil-American Life Insurance Building at Legaspi
City;
(b) Fil-American Life Insurance Building at Iloilo
City;
(c) General Milling Corporation Flour Mill at Opon
Cebu;
(d) Menzi Building at Ayala Blvd., Makati, Rizal;
(e) International Rice Research Institute, Research
center Los Baños, Laguna;
(f) Aurelia's Building at Mabini, Ermita, Manila;
(g) Far East Bank's Office at Fil-American Life
Insurance Building at Isaac Peral Ermita, Manila;
(h) Arthur Young's residence at Forbes Park,
Makati, Rizal;
(i) L & S Building at Dewey Blvd., Manila; and
(j) Stanvac Refinery Service Building at Limay,
Bataan.
On December 1 1, '1961, appellee sent to appellant a statement of
account (Exhibit "1"),3 to which was attached an itemized statement of
defendant-appellant's account (Exh. "1-A"), according to which the total
engineering fee asked by appellee for services rendered amounted to
P116,565.00 from which sum was to be deducted the previous
payments made in the amount of P57,000.00, thus leaving a balance
due in the amount of P59,565.00.
On May 18, 1962 appellant sent appellee a resume of fees due to the
latter. Said fees, according to appellant. amounted to P10,861.08
instead of the amount claimed by the appellee. On June 14, 1962
1
refused to accept as full payment of the balance of the fees due him.
On August 10, 1962, appellee filed a complaint against appellant,
containing four causes of action. In the first cause of action, appellee
alleged that for services rendered in connection with the different
projects therein mentioned there was due him fees in sum s consisting
of $28,000 (U.S.) and P100,204.46, excluding interests, of which sums
only P69,323.21 had been paid, thus leaving unpaid the $28,000.00
and the balance of P30,881.25. In the second cause of action, appellee
claimed P17,000.00 as consequential and moral damages; in the third
cause of action claimed P55,000.00 as moral damages, attorney's fees
and expenses of litigation; and in the fourth cause of action he claimed
P25,000.00 as actual damages, and also for attorney's fees and
expenses of litigation.
In his answer, appellant admitted that appellee rendered engineering
services, as alleged in the first cause of action, but averred that some
of appellee's services were not in accordance with the agreement and
appellee's claims were not justified by the services actually rendered,
and that the aggregate amount actually due to appellee was only
P80,336.29, of which P69,475.21 had already been paid, thus leaving
a balance of only P10,861.08. Appellant denied liability for any damage
claimed by appellee to have suffered, as alleged in the second, third
and fourth causes of action. Appellant also set up affirmative and
special defenses, alleging that appellee had no cause of action, that
appellee was in estoppel because of certain acts, representations,
admissions and/or silence, which led appellant to believe certain facts
to exist and to act upon said facts, that appellee's claim regarding the
Menzi project was premature because appellant had not yet been paid
for said project, and that appellee's services were not complete or were
performed in violation of the agreement and/or otherwise
unsatisfactory. Appellant also set up a counterclaim for actual and
moral damages for such amount as the court may deem fair to assess,
and for attorney's fees of P10,000.00.
Inasmuch as the pleadings showed that the appellee's right to certain
fees for services rendered was not denied, the only question being the
assessment of the proper fees and the balance due to appellee after
deducting the admitted payments made by appellant, the trial court,
upon agreement of the parties, authorized the case to be heard before
a Commissioner. The Commissioner rendered a report which, in
resume, states that the amount due to appellee was $28,000.00 (U.S.)
as his fee in the International Research Institute Project which was
twenty percent (20%) of the $140,000.00 that was paid to appellant,
and P51,539.91 for the other projects, less the sum of P69,475.46
which was already paid by the appellant. The Commissioner also
recommended the payment to appellee of the sum of P5,000.00 as
attorney's fees.
At the hearing on the Report of the Commissioner, the respective
counsel of the parties manifested to the court that they had no
objection to the findings of fact of the Commissioner contained in the
Report, and they agreed that the said Report posed only two legal
issues, namely: (1) whether under the facts stated in the Report, the
doctrine of estoppel would apply; and (2) whether the recommendation
in the Report that the payment of the amount. due to the plaintiff in
dollars was legally permissible, and if not, at what rate of exchange it
should be paid in pesos. After the parties had submitted their
respective memorandum on said issues, the trial court rendered its
decision dated February 10, 1967, the dispositive portion of which
reads as follows:
WHEREFORE, judgment is rendered in favor of
plaintiff and against the defendant, by ordering the
defendant to pay plaintiff the sum of P51,539.91
and $28,000.00, the latter to be converted into the
Philippine currency on the basis of the current rate
of exchange at the time of the payment of this
judgment, as certified to by the Central Bank of the
Philippines, from which shall be deducted the sum
of P69,475.46, which the defendant had paid the
plaintiff, and the legal rate of interest thereon from
the filing of the complaint in the case until fully paid
for; by ordering the defendant to pay to plaintiff the
further sum of P8,000.00 by way of attorney's fees
which the Court finds to be reasonable in the
premises, with costs against the defendant. The
counterclaim of the defendant is ordered
dismissed.
From the decision, this appeal was brought, directly to this Court,
raising only questions of law.
During the pendency of this appeal, appellee filed a petition for the
issuance of a writ of attachment under Section 1 (f) of Rule 57 of the
Rules of Court upon the ground that appellant is presently residing in
Canada as a permanent resident thereof. On June 3, 1969, this Court
resolved, upon appellee's posting a bond of P10,000.00, to issue the
writ of attachment, and ordered the Provincial Sheriff of Rizal to attach
the estate, real and personal, of appellant Alfredo J. Luz within the
province, to the value of not less than P140,000.00.
The appellant made the following assignments of errors:
I. The lower court erred in not declaring and
holding that plaintiff-appellee's letter dated
December 11, 1961 (Exhibit "1") and the
statement of account (Exhibit "1-A") therein
enclosed, had the effect, cumulatively or
alternatively, of placing plaintiff-appellee in
estoppel from thereafter modifying the
representations made in said exhibits, or of
making plaintiff-appellee otherwise bound by said
representations, or of being of decisive weight in
determining the true intent of the parties as to the
nature and extent of the engineering services
rendered and/or the amount of fees due.
II. The lower court erred in declaring and holding
that the balance owing from defendant-appellant to
plaintiff-appellee on the IRRI Project should be
paid on the basis of the rate of exchange of the
U.S. dollar to the Philippine peso at the time of
payment of judgment. .
III. The lower court erred in not declaring and
holding that the aggregate amount of the balance
due from defendant-appellant to plaintiff-appellee
is only P15,792.05.
IV. The lower court erred in awarding attorney's
fees in the sum of P8,000.00, despite the
commissioner's finding, which plaintiff-appellee
has accepted and has not questioned, that said
fee be only P5,000.00; and
V. The lower court erred in not granting defendant-
appellant relief on his counter-claim.
1. In support of his first assignment of error appellant argues that in
Exhibit 1-A, which is a statement of accounts dated December 11,
1961, sent by appellee to appellant, appellee specified the various
projects for which he claimed engineering fees, the precise amount
due on each particular engineering service rendered on each of the
various projects, and the total of his claims; that such a statement
barred appellee from asserting any claim contrary to what was stated
therein, or from taking any position different from what he asserted
therein with respect to the nature of the engineering services rendered;
and consequently the trial court could not award fees in excess of what
was stated in said statement of accounts. Appellant argues that for
estoppel to apply it is not necessary, contrary to the ruling of the trial
court, that the appellant should have actually relied on the
representation, but that it is sufficient that the representations were
intended to make the defendant act there on; that
assuming arguendo that Exhibit 1-A did not put appellee in estoppel,
the said Exhibit 1-A nevertheless constituted a formal admission that
would be binding on appellee under the law on evidence, and would
not only belie any inconsistent claim but also would discredit any
evidence adduced by appellee in support of any claim inconsistent with
what appears therein; that, moreover, Exhibit 1-A, being a statement of
account, establishes prima facie the accuracy and correctness of the
items stated therein and its correctness can no longer be impeached
except for fraud or mistake; that Exhibit 1-A furthermore, constitutes
appellee's own interpretation of the contract between him and
appellant, and hence, is conclusive against him.
On the other hand, appellee admits that Exhibit 1-A itemized the
services rendered by him in the various construction projects of
appellant and that the total engineering fees charged therein was
P116,565.00, but maintains that he was not in estoppel: first, because
when he prepared Exhibit 1-A he was laboring under an innocent
mistake, as found by the trial court; second, because appellant was not
ignorant of the services actually rendered by appellee and the fees due
to the latter under the original agreement, Exhibit "A."
We find merit in the stand of appellee.
The statement of accounts (Exh. 1-A) could not estop appellee,
because appellant did not rely thereon as found by the Commissioner,
from whose Report we read:
2
While it is true that plaintiff vacillated in his claim,
yet, defendant did not in anyway rely or believe in
the different claims asserted by the plaintiff and
instead insisted on a claim that plaintiff was only
entitled to P10,861.08 as per a separate resume of
fees he sent to the plaintiff on May 18, 1962 (See
Exhibit 6).4
The foregoing finding of the Commissioner, not disputed by appellant,
was adopted by the trial court in its decision. Under article 1431 of the
Civil Code, in order that estoppel may apply the person, to whom
representations have been made and who claims the estoppel in his
favor must have relied or acted on such representations. Said article
provides:
Art. 1431. Through estoppel an admission or
representation is rendered conclusive upon the
person making it, and cannot be denied or
disproved as against the person relying thereon.
An essential element of estoppel is that the person invoking it has been
influenced and has relied on the representations or conduct of the
person sought to be estopped, and this element is wanting in the
instant case. In Cristobal vs. Gomez,5 this Court held that no estoppel
based on a document can be invoked by one who has not been
mislead by the false statements contained therein. And in Republic of
the Philippines vs. Garcia, et al.,6 this Court ruled that there is no
estoppel when the statement or action invoked as its basis did not
mislead the adverse party-Estoppel has been characterized as harsh
or odious and not favored in law.7 When misapplied, estoppel becomes
a most effective weapon to accomplish an injustice, inasmuch as it
shuts a man's mouth from speaking the truth and debars the truth in a
particular case.8 Estoppel cannot be sustained by mere argument or
doubtful inference: it must be clearly proved in all its essential elements
by clear, convincing and satisfactory evidence.9 No party should be
precluded from making out his case according to its truth unless by
force of some positive principle of law, and, consequently, estoppel in
pains must be applied strictly and should not be enforced unless
substantiated in every particular. 1 0
The essential elements of estoppel in pais may be considered in
relation to the party sought to be estopped, and in relation to the party
invoking the estoppel in his favor. As related to the party to be
estopped, the essential elements are: (1) conduct amounting to false
representation or concealment of material facts or at least calculated to
convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to
assert; (2) intent, or at least expectation that his conduct shall be acted
upon by, or at least influence, the other party; and (3) knowledge,
actual or constructive, of the real facts. As related to the party claiming
the estoppel, the essential elements are (1) lack of knowledge and of
the means of knowledge of the truth as the facts in questions; (2)
(reliance, in good faith, upon the conduct or statements of the party to
be estopped; (3) action or inaction based thereon of such character as
To change the position or status of the party claiming the estoppel, to
his injury, detriment or prejudice. 1 1
The first essential element in relation to the party sought to be
estopped does not obtain in the instant case, for, as appears in the
Report of the Commissioner, appellee testified "that when he wrote
Exhibit 1 and prepared Exhibit 1-A, he had not yet consulted the
services of his counsel and it was only upon advice of counsel that the
terms of the contract were interpreted to him resulting in his
subsequent letters to the defendant demanding payments of his fees
pursuant to the contract Exhibit A." 1 2 This finding of the
Commissioner was adopted by the trial court. 1 3 It is established ,
therefore, that Exhibit 1-A was written by appellee through ignorance or
mistake. Anent this matter, it has been held that if an act, conduct or
misrepresentation of the party sought to be estopped is due to
ignorance founded on innocent mistake, estoppel will not
arise. 1 4 Regarding the essential elements of estoppel in relation to
the party claiming the estoppel, the first element does not obtain in the
instant case, for it cannot be said that appellant did not know, or at
least did not have the means of knowing, the services rendered to him
by appellee and the fees due thereon as provided in Exhibit A. The
second element is also wanting, for, as adverted to, appellant did not
rely on Exhibit 1-A but consistently denied the accounts stated therein.
Neither does the third element obtain, for appellant did not act on the
basis of the representations in Exhibit 1-A, and there was no change in
his position, to his own injury or prejudice.
Appellant, however, insists that if Exhibit 1-A did not put appellee in
estoppel, it at least constituted an admission binding upon the latter. In
this connection, it cannot be gainsaid that Exhibit 1-A is not a judicial
admission. Statements which are not estoppels nor judicial admissions
have no quality of conclusiveness, and an opponent. whose
admissions have been offered against him may offer any evidence
which serves as an explanation for his former assertion of what he now
denies as a fact. This may involve the showing of a mistake.
Accordingly, in Oas vs. Roa, 1 6 it was held that when a party to a suit
has made an admission of any fact pertinent to the issue involved, the
admission can be received against him; but such an admission is not
conclusive against him, and he is entitled to present evidence to
overcome the effect of the admission. Appellee did explain, and the
trial court concluded, that Exhibit 1-A was based on either his
ignorance or innocent mistake and he, therefore, is not bound by it.
Appellant further contends that Exhibit 1-A being a statement of
account, establishes prima facie the accuracy and correctness of the
items stated therein. If prima facie, as contended by appellant, then it is
not absolutely conclusive upon the parties. An account stated may be
impeached for fraud, mistake or error. In American Decisions, Vol. 62,
p. 95, cited as authority by appellant himself. we read thus:
An account stated or settled is a mere admission
that the account is correct. It is not an estoppel.
The account is still open to impeachment for
mistakes or errors. Its effect is to establish, prima
facie, the accuracy of the items without other
proof; and the party seeking to impeach it is bound
to show affirmatively the mistake or error alleged.
The force of the admission and the strength of the
evidence necessary to overcome it will depend
upon the circumstances of the case.
In the instant case, it is Our view that the ignorance mistake that
attended the writing of Exhibit 1-A by appellee was sufficient to
overcome the prima facie evidence of correctness and accuracy of
said Exhibit 1-A.
Appellant also urges that Exhibit 1-A constitutes appellee's own
interpretation of the contract, and is, therefore, conclusive against him.
Although the practical construction of the contract by one party,
evidenced by his words or acts, can be used against him in behalf of
the other party, 1 7 yet, if one of the parties carelessly makes a wrong
interpretation of the words of his contract, or performs more than the
contract requires (as reasonably interpreted independently of his
performance), as happened in the instant case, he should be entitled to
a restitutionary remedy, instead of being bound to continue to his
erroneous interpretation or his erroneous performance and "the other
party should not be permitted to profit by such mistake unless he can
establish an estoppel by proving a material change of position made in
good faith. The rule as to practical construction does not nullify the
equitable rules with respect to performance by mistake." 1 8 In the
instant case, it has been shown that Exhibit 1-A was written through
mistake by appellee and that the latter is not estopped by it. Hence,
even if said Exhibit 1-A be considered as practical construction of the
contract by appellee, he cannot be bound by such erroneous
interpretation. It has been held that if by mistake the parties followed a
practice in violation of the terms of the agreement, the court should not
perpetuate the error. 1 9
2. In support of the second assignment of error, that the lower court
erred in holding that the balance from appellant on the IRRI project
should be paid on the basis of the rate of exchange of the U.S. dollar to
the Philippine peso at the time of payment of the judgment, appellant
contends: first, that the official rate at the time appellant received his
architect's fees for the IRRI project, and correspondingly his obligation
to appellee's fee on August 25, 1961, was P2.00 to $1.00, and cites in
support thereof Section 1612 of the Revised Administrative Code,
Section 48 of Republic Act 265 and Section 6 of Commonwealth Act
No. 699; second, that the lower court's conclusion that the rate of
exchange to be applied in the conversion of the $28,000.00 is the
current rate of exchange at the time the judgment shall be satisfied
was based solely on a mere presumption of the trial court that the
defendant did not convert, there being no showing to that effect, the
dollars into Philippine currency at the official rate, when the legal
presumption should be that the dollars were converted at the official
rate of $1.00 to P2.00 because on August 25, 1961, when the IRRI
project became due and payable, foreign exchange controls were in
full force and effect, and partial decontrol was effected only afterwards,
during the Macapagal administration; third, that the other ground
advanced by the lower court for its ruling, to wit, that appellant
committed a breach of his obligation to turn over to the appellee the
engineering fees received in U.S. dollars for the IRRI project, cannot
be upheld, because there was no such breach, as proven by the fact
that appellee never claimed in Exhibit 1-A that he should be paid in
dollars; and there was no provision in the basic contract (Exh. "A") that
he should be paid in dollars; and, finally, even if there were such
provision, it would have no binding effect under the provision of
Republic Act 529; that, moreover, it cannot really be said that no
payment was made on that account for appellant had already paid
P57,000.00 to appellee, and under Article 125 of the Civil Code, said
payment could be said to have been applied to the fees due from the
3
IRRI project, this project being the biggest and this debt being the most
onerous.
In refutation of appellant's argument in support of the second
assignment of error, appellee argues that notwithstanding Republic Act
529, appellant can be compelled to pay the appellee in dollars in view
of the fact that appellant received his fees in dollars, and appellee's fee
is 20% of appellant's fees; and that if said amount is be converted into
Philippine Currency, the rate of exchange should be that at the time of
the execution of the judgment. 2 0
We have taken note of the fact that on August 25, 1961, the date when
appellant said his obligation to pay appellee's fees became due, there
was two rates of exchange, to wit: the preferred rate of P2.00 to $1.00,
and the free market rate. It was so provided in Circular No. 121 of the
Central Bank of the Philippines, dated March 2, 1961. amending an
earlier Circular No. 117, and in force until January 21, 1962 when it
was amended by Circular No. 133, thus:
1. All foreign exchange receipts shall be
surrendered to the Central Bank of those
authorized to deal in foreign exchange as follows:
Percentage of Total to be surrendered at
Preferred: Free Market Rate: Rate:
(a) Export Proceeds, U.S. Government
Expenditures invisibles other than those
specifically mentioned
below. ................................................ 25 75
(b) Foreign Investments, Gold Proceeds, Tourists
and Inward Remittances of Veterans and Filipino
Citizens; and Personal Expenses of Diplomatic
Per personnel ................................. 100"2 1
The amount of $140,000.00 received by appellant foil the International
Rice Research Institute project is not within the scope of sub-
paragraph (a) of paragraph No. 1 of Circular No. 121. Appellant has
not shown that 25% of said amount had to be surrendered to the
Central Bank at the preferred rate because it was either export
proceeds, or U.S. Government expenditures, or invisibles not included
in sub-paragraph (b). Hence, it cannot be said that the trial court erred
in presuming that appellant converted said amount at the free market
rate. It is hard to believe that a person possessing dollars would
exchange his dollars at the preferred rate of P2.00 to $1.00, when he is
not obligated to do so, rather than at the free market rate which is
much higher. A person is presumed to take ordinary care of his
concerns, and that the ordinary course of business has been
followed. 2 2
Under the agreement, Exhibit A, appellee was entitled to 20% of
$140,000.00, or the amount of $28,000.00. Appellee, however, cannot
oblige the appellant to pay him in dollars, even if appellant himself had
received his fee for the IRRI project in dollars. This payment in dollars
is prohibited by Republic Act 529 which was enacted on June 16,
1950. Said act provides as follows:
SECTION 1. Every provision contained in, or
made with respect to, any obligation which
provision purports to give the obligee the right to
require payment in gold or in a particular kind of
coin or currency other than Philippine currency or
in an amount of money of the Philippines
measured thereby, be as it is hereby declared
against public policy, and null, void and of no
effect, and no such provision shall be contained in,
or made with respect to, any obligation hereafter
incurred. Every obligation heretofore or here after
incurred, whether or not any such provision as to
payment is contained therein or made with respect
thereto, shall be discharged upon payment in any
coin or currency which at the time of payment is
legal tender for public and private debts: Provided,
That, ( a) if the obligation was incurred prior to the
enactment of this Act and required payment in a
particular kind of coin or currency other than
Philippine currency, it shall be discharged in
Philippine currency measured at the prevailing rate
of exchange at the time the obligation was
incurred, (b) except in case of a loan made in a
foreign currency stipulated to be payable in the
same currency in which case the rate of exchange
prevailing at the time of the stipulated date of
 payment shall prevail. All coin and currency,
including Central Bank notes, heretofore or
hereafter issued and declared by the Government
of the Philippines shall be legal tender for all
debts, public and private.
Under the above-quoted provision of Republic Act 529, if the obligation
was incurred prior to the enactment of the Act and require payment in
a particular kind of coin or currency other than the Philippine currency
the same shall be discharged in Philippine currency measured at the
prevailing rate of exchange at the time the obligation was incurred. As
We have adverted to, Republic Act 529 was enacted on June 16, 1950.
In the case now before Us the obligation of appellant to pay appellee
the 20% of $140,000.00, or the sum of $28,000.00, accrued on August
25, 1961, or after the enactment of Republic Act 529. It follows that the
provision of Republic Act 529 which requires payment at the prevailing
rate of exchange when the obligation was incurred cannot be applied.
Republic Act 529 does not provide for the rate of exchange for the
payment of obligation incurred after the enactment of said Act. The
logical Conclusion, therefore, is that the rate of exchange should be
that prevailing at the time of payment. This view finds support in the
ruling of this Court in the case of Engel vs. Velasco & Co. 2 3 where
this Court held that even if the obligation assumed by the defendant
was to pay the plaintiff a sum of money expressed in American
currency, the indemnity to be allowed should be expressed in
Philippine currency at the rate of exchange at the time of judgment
rather than at the rate of exchange prevailing on the date of
defendant's breach. This is also the ruling of American court as follows:
The value in domestic money of a payment made
in foreign money is fixed with respect to the rate of
exchange at the time of payment. (70 CJS p. 228)
According to the weight of authority the amount of
recovery depends upon the current rate of
exchange, and not the par value of the particular
money involved. (48 C.J. 605-606)
The value in domestic money of a payment made
in foreign money is fixed in reference to the rate of
exchange at the time of such payment. (48 C.J.
605)
It is Our considered view, therefore, that appellant should pay the
appellee the equivalent in pesos of the $28,000.00 at the free market
rate of exchange at the time of payment. And so the trial court did not
err when it held that herein appellant should pay appellee $28,000.00
"to be converted into the Philippine currency on the basis of the current
rate of exchange at the time of payment of this judgment, as certified to
by the Central Bank of the Philippines, ...." 2 4
Appellant also contends that the P57,000.00 that he had paid to
appellee should have been applied to the due to the latter on the IRRI
project because such debt was the most onerous to appellant. This
contention is untenable. The Commissioner who was authorized by the
trial court to receive evidence in this case, however, reports that the
appellee had not been paid for the account of the $28,000.00 which
represents the fees of appellee equivalent to 20% of the $140,000.00
that the appellant received as fee for the IRRI project. This is a finding
of fact by the Commissioner which was adopted by the trial court. The
parties in this case have agreed that they do not question the finding of
fact of the Commissioner. Thus, in the decision appealed from the
lower court says:
At the hearing on the Report of the Commissioner
on February 15, 1966, the counsels for both
parties manifested to the court that they have no
objection to the findings of facts of the
Commissioner in his report; and agreed that the
said report only poses two (2)legal issues, namely:
(1) whether under the facts stated in the Report,
the doctrine of estoppel will apply; and (2) whether
the recommendation in the Report that the
payment of amount due to the plaintiff in dollars is
permissible under the law, and, if not, at what rate
of exchange should it be paid in pesos (Philippine
currency) .... 2 5
In the Commissioner's report, it is spetifically recommended that the
appellant be ordered to pay the plaintiff the sum of "$28,000. 00 or its
equivalent as the fee of the plaintiff under Exhibit A on the IRRI
project." It is clear from this report of the Commissioner that no
payment for the account of this $28,000.00 had been made. Indeed, it
is not shown in the record that the peso equivalent of the $28,000.00
had been fixed or agreed upon by the parties at the different times
when the appellant had made partial payments to the appellee.
4
3. In his third assignment of error, appellant contends that the lower
court erred in not declaring that the aggregate amount due from him to
appellee is only P15,792.05. Appellant questions the propriety or
correctness of most of the items of fees that were found by the
Commissioner to be due to appellee for services rendered. We believe
that it is too late for the appellant to question the propriety or
correctness of those items in the present appeal. The record shows
that after the Commissioner had submitted his report the lower court,
on February 15, 1966, issued the following order:
When this case was called for hearing today on
the report of the Commissioner, the counsels of
the parties manifested that they have no objection
to the findings of facts in the report. However, the
report poses only legal issues, namely: (1)
whether under the facts stated in the report, the
doctrine of estoppel will apply; and (2) whether the
recommendation in the report that the alleged
payment of the defendant be made in dollars is
permissible by law and, if not, in what rate it
should be paid in pesos (Philippine Currency). For
the purpose of resolving these issues the parties
prayed that they be allowed to file their respective
memoranda which will aid the court in the
determination of said issues. 2 6
In consonance with the afore-quoted order of the trial court, the
appellant submitted his memorandum which opens with the following
statements:
As previously manifested, this Memorandum shall
be confined to:
(a) the finding in the Commissioner's Report that
defendant's defense of estoppel will not lie (pp. 17-
18, Report); and
(b) the recommendation in the Commissioner's
Report that defendant be ordered to pay plaintiff
the sum of '$28,000.00 (U.S.) or its equivalent as
the fee of the plaintiff under Exhibit 'A' in the IRRI
project.'
More specifically this Memorandum proposes to
demonstrate the affirmative of three legal
issues posed, namely:
First: Whether or not plaintiff's letter dated
December 11, 1961 (Exhibit 'I') and/or Statement
of Account (Exhibit '1-A') therein enclosed has the
effect of placing plaintiff in estoppel from thereafter
modifying the representations made in said letter
and Statement of Account or of making plaintiff
otherwise bound thereby; or of being decisive or
great weight in determining the true intent of the
parties as to the amount of the engineering fees
owing from defendant to plaintiff;
Second: Whether or not defendant can be
compelled to pay whatever balance is owing to
plaintiff on the IRRI (International Rice and
Research Institute) project in United States dollars;
and
Third: Whether or not in case the ruling of this
Honorable Court be that defendant cannot be
compelled to pay plaintiff in United States dollars,
the dollar-to-peso convertion rate for determining
the peso equivalent of whatever balance is owing
to plaintiff in connection with the IRRI project
should be the 2 to 1 official rate and not any other
rate. 2 7
It is clear, therefore, that what was submitted by appellant to the lower
court for resolution did not include the question of correctness or
propriety of the amounts due to appellee in connection with the
different projects for which the appellee had rendered engineering
services. Only legal questions, as above enumerated, were submitted
to the trial court for resolution. So much so, that the lower court in
another portion of its decision said, as follows:
The objections to the Commissioner's Report
embodied in defendant's memorandum of
objections, dated March 18, 1966, cannot likewise
be entertained by the Court because at the
 hearing of the Commissioner's Report the parties
had expressly manifested that they had no
objection to the findings of facts embodied therein.
We, therefore hold that the third assignment of error of the appellant
has no merit.
4. In his fourth assignment of error, appellant questions the award by
the lower court of P8,000.00 for attorney's fees. Appellant argues that
the Commissioner, in his report, fixed the sum of P5,000.00 as "just
and reasonable" attorney's fees, to which amount appellee did not
interpose any objection, and by not so objecting he is bound by said
finding; and that, moreover, the lower court gave no reason in its
decision for increasing the amount to P8,000.00.
Appellee contends that while the parties had not objected to the
findings of the Commissioner, the assessment of attorney's fees is
always subject to the court's appraisal, and in increasing the
recommended fees from P5,000.00 to P8,000.00 the trial court must
have taken into consideration certain circumstances which warrant the
award of P8,000.00 for attorney's fees.
We believe that the trial court committed no error in this connection.
Section 12 of Rule 33 of the Rules of Court, on which the fourth
assignment of error is presumably based, provides that when the
parties stipulate that a commissioner's findings of fact shall be final,
only questions of law arising from the facts mentioned in the report
shall thereafter be considered. Consequently, an agreement by the
parties to abide by the findings of fact of the commissioner is
equivalent to an agreement of facts binding upon them which the court
cannot disregard. The question, therefore, is whether or not the
estimate of the reasonable fees stated in the report of the
Commissioner is a finding of fact.
The report of the Commissioner on this matter reads as follows:
As regards attorney's fees, under the provisions of Art 2208, par (11),
the same may be awarded, and considering the number of hearings
held in this case, the nature of the case (taking into account the
technical nature of the case and the voluminous exhibits offered in
evidence), as well as the way the case was handled by counsel, it is
believed, subject to the Court's appraisal of the matter, that the sum of
P5,000.00 is just and reasonable as attorney's fees." 2 8
It is thus seen that the estimate made by the Commissioner was an
expression of belief, or an opinion. An opinion is different from a fact.
The generally recognized distinction between a statement of "fact" and
an expression of "opinion" is that whatever is susceptible of exact
knowledge is a matter of fact, while that not susceptible of exact
knowledge is generally regarded as an expression of opinion. 2 9 It has
also been said that the word "fact," as employed in the legal sense
includes "those conclusions reached by the trior from shifting
testimony, weighing evidence, and passing on the credit of the
witnesses, and it does not denote those inferences drawn by the trial
court from the facts ascertained and settled by it. 3 0 In the case at bar,
the estimate made by the Commissioner of the attorney's fees was an
inference from the facts ascertained by him, and is, therefore, not a
finding of facts. The trial court was, consequently, not bound by that
estimate, in spite of the manifestation of the parties that they had no
objection to the findings of facts of the Commissioner in his report.
Moreover, under Section 11 of Rule 33 of the Rules of Court, the court
may adopt, modify, or reject the report of the commissioner, in whole or
in part, and hence, it was within the trial court's authority to increase
the recommended attorney's fees of P5,000.00 to P8,000.00. It is a
settled rule that the amount of attorney's fees is addressed to the
sound discretion of the court. 3 1
It is true, as appellant contends, that the trial court did not state in the
decision the reasons for increasing the attorney's fees. The trial court,
however, had adopted the report of the Commissioner, and in adopting
the report the trial court is deemed to have adopted the reasons given
by the Commissioner in awarding attorney's fees, as stated in the
above-quoted portion of the report. Based on the reasons stated in the
report, the trial court must have considered that the reasonable
attorney's fees should be P8,000.00. Considering that the judgment
against the appellant would amount to more than P100,000.00, We
believe that the award of P8,000.00 for attorney's fees is reasonable.
5. In his fifth assignment of error appellant urges that he is entitled to
relief on his counterclaim. In view of what We have stated in
connection with the preceding four assignments of error, We do not
consider it necessary to dwell any further on this assignment of error.
WHEREFORE, the decision appealed from is affirmed, with costs
against the defendant-appellant. It is so ordered.
5
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Castro, Fernando,
Teehankee, Barredo and Villamor, JJ., concur.
G.R. No. 140528               December 7, 2011
MARIA TORBELA, represented by her heirs, namely: EULOGIO
TOSINO, husband and children: CLARO, MAXIMINO, CORNELIO,
OLIVIA and CALIXTA, all surnamed TOSINO, APOLONIA TOSINO
VDA. DE RAMIREZ and JULITA TOSINO DEAN; PEDRO TORBELA,
represented by his heirs, namely: JOSE and DIONISIO, both
surnamed TORBELA; EUFROSINA TORBELA ROSARIO,
represented by her heirs, namely: ESTEBAN T. ROSARIO,
MANUEL T. ROSARIO, ROMULO T. ROSARIO and ANDREA
ROSARIO-HADUCA; LEONILA TORBELA TAMIN; FERNANDO
TORBELA, represented by his heirs, namely: SERGIO T.
TORBELA, EUTROPIA T. VELASCO, PILAR T. ZULUETA,
CANDIDO T. TORBELA, FLORENTINA T. TORBELA and
PANTALEON T. TORBELA; DOLORES TORBELA TABLADA;
LEONORA TORBELA AGUSTIN, represented by her heirs, namely:
PATRICIO, SEGUNDO, CONSUELO and FELIX, all surnamed
AGUSTIN; and SEVERINA TORBELA ILDEFONSO, Petitioners,
vs.
SPOUSES ANDRES T. ROSARIO and LENA DUQUE-ROSARIO and
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 140553
LENA DUQUE-ROSARIO, Petitioner,
vs.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
Presently before the Court are two consolidated Petitions for Review
on Certiorari under Rule 45 of the Rules of Court, both assailing the
Decision1 dated June 29, 1999 and Resolution2 dated October 22,
1999 of the Court of Appeals in CA-G.R. CV No. 39770.
The petitioners in G.R. No. 140528 are siblings Maria Torbela, 3 Pedro
Torbela,4 Eufrosina Torbela Rosario,5 Leonila Torbela Tamin,
Fernando Torbela,6 Dolores Torbela Tablada, Leonora Torbela
Agustin,7 and Severina Torbela Ildefonso (Torbela siblings).
The petitioner in G.R. No. 140553 is Lena Duque-Rosario (Duque-
Rosario), who was married to, but now legally separated from, Dr.
Andres T. Rosario (Dr. Rosario). Dr. Rosario is the son of Eufrosina
Torbela Rosario and the nephew of the other Torbela siblings.
The controversy began with a parcel of land, with an area of 374
square meters, located in Urdaneta City, Pangasinan (Lot No. 356-A).
It was originally part of a larger parcel of land, known as Lot No. 356 of
the Cadastral Survey of Urdaneta, measuring 749 square meters, and
covered by Original Certificate of Title (OCT) No. 16676, 8 in the name
of Valeriano Semilla (Valeriano), married to Potenciana Acosta. Under
unexplained circumstances, Valeriano gave Lot No. 356-A to his sister
Marta Semilla, married to Eugenio Torbela (spouses Torbela). Upon
the deaths of the spouses Torbela, Lot No. 356-A was adjudicated in
equal shares among their children, the Torbela siblings, by virtue of a
Deed of Extrajudicial Partition9 dated December 3, 1962.
On December 12, 1964, the Torbela siblings executed a Deed of
Absolute Quitclaim10 over Lot No. 356-A in favor of Dr. Rosario.
According to the said Deed, the Torbela siblings "for and in
consideration of the sum of NINE PESOS (₱9.00) x x x transfer[red]
and convey[ed] x x x unto the said Andres T. Rosario, that undivided
portion of THREE HUNDRED SEVENTY-FOUR square meters of that
parcel of land embraced in Original Certificate of Title No. 16676 of the
land records of Pangasinan x x x."11 Four days later, on December 16,
1964, OCT No. 16676 in Valeriano’s name was partially cancelled as
to Lot No. 356-A and TCT No. 5275112 was issued in Dr. Rosario’s
name covering the said property.
Another Deed of Absolute Quitclaim13 was subsequently executed on
December 28, 1964, this time by Dr. Rosario, acknowledging that he
only borrowed Lot No. 356-A from the Torbela siblings and was already
returning the same to the latter for ₱1.00. The Deed stated:
That for and in consideration of the sum of one peso (₱1.00),
Philippine Currency and the fact that I only borrowed the above
described parcel of land from MARIA TORBELA, married to Eulogio
Tosino, EUFROSINA TORBELA, married to Pedro Rosario, PEDRO
TORBELA, married to Petra Pagador, LEONILA TORBELA, married to
Fortunato Tamen, FERNANDO TORBELA, married to Victoriana
Tablada, DOLORES TORBELA, widow, LEONORA TORBELA,
married to Matias Agustin and SEVERINA TORBELA, married to Jorge
Ildefonso, x x x by these presents do hereby cede, transfer and convey
by way of this ABSOLUTE QUITCLAIM unto the said Maria, Eufrosina,
Pedro, Leonila, Fernando, Dolores, Leonora and Severina, all
surnamed Torbela the parcel of land described above.14 (Emphasis
ours.)
The aforequoted Deed was notarized, but was not immediately
annotated on TCT No. 52751.
Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan
from the Development Bank of the Philippines (DBP) on February 21,
1965 in the sum of ₱70,200.00, secured by a mortgage constituted on
Lot No. 356-A. The mortgage was annotated on TCT No. 52751 on
September 21, 1965 as Entry No. 243537.15 Dr. Rosario used the
proceeds of the loan for the construction of improvements on Lot No.
356-A.
by TCT No. 24832; and (3) Lot No. 5-F-8-C-2-B-2-A, with an area of
1,001 square meters, located in Nancayasan, Urdaneta, Pangasinan,
covered by TCT No. 104189.21 The amended loan agreement and
mortgage on Lot No. 356-A was annotated on TCT No. 52751 on
March 6, 1981 as Entry No. 520099. 22
Five days later, on March 11, 1981, another annotation, Entry No.
520469,23 was made on TCT No. 52751, canceling the adverse claim
on Lot No. 356-A under Entry Nos. 274471-274472, on the basis of the
Cancellation and Discharge of Mortgage executed by Dr. Rosario on
March 5, 1981. Entry No. 520469 consisted of both stamped and
handwritten portions, and exactly reads:
Entry No. 520469. Cancellation of Adverse Claim executed by Andres
Rosario in favor of same. The incumbrance/mortgage appearing under
Entry No. 274471-72 is now cancelled as per Cancellation and
Discharge of Mortgage Ratified before Notary Public Mauro G.
Meris on March 5, 1981: Doc. No. 215; Page No. 44; Book No. 1;
Series Of 1981.
Lingayen, Pangasinan, 3-11, 19981

[Signed: Pedro dela Cruz]

On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit
Register of Deeds 24
of Adverse Claim,16 on behalf of the Torbela siblings. Cornelio deposed
in said Affidavit:
On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario
(spouses Rosario), acquired a third loan in the amount of
3. That ANDRES T. ROSARIO later quitclaimed his rights in
₱1,200,000.00 from Banco Filipino Savings and Mortgage Bank
favor of the former owners by virtue of a Deed of Absolute
(Banco Filipino). To secure said loan, the spouses Rosario again
Quitclaim which he executed before Notary Public Banaga,
constituted mortgages on Lot No. 356-A, Lot No. 4489, and Lot No. 5-
and entered in his Notarial Registry as Dec. No. 43; Page
F-8-C-2-B-2-A. The mortgage on Lot No. 356-A was annotated on TCT
No. 9; Book No. I; Series of 1964;
No. 52751 as Entry No. 53328325 on December 18, 1981. Since the
construction of a two-storey commercial building on Lot No. 5-F-8-C-2-
4. That it is the desire of the parties, my aforestated kins, to B-2-A was still incomplete, the loan value thereof as collateral was
register ownership over the above-described property or to deducted from the approved loan amount. Thus, the spouses Rosario
perfect their title over the same but their Deed could not be could only avail of the maximum loan amount of ₱830,064.00 from
registered because the registered owner now, ANDRES T. Banco Filipino.
ROSARIO mortgaged the property with the DEVELOPMENT
BANK OF THE PHILIPPINES, on September 21, 1965, and
Because Banco Filipino paid the balance of Dr. Rosario’s loan from
for which reason, the Title is still impounded and held by the
PNB, the mortgage on Lot No. 356-A in favor of PNB was cancelled
said bank;
per Entry No. 53347826 on TCT No. 52751 dated December 23, 1981.

5. That pending payment of the obligation with the

On February 13, 1986, the Torbela siblings filed before the Regional
DEVELOPMENT BANK OF THE PHILIPPINES or
Trial Court (RTC) of Urdaneta, Pangasinan, a Complaint for recovery
redemption of the Title from said bank, I, CORNELIO T.
of ownership and possession of Lot No. 356-A, plus damages, against
TOSINO, in behalf of my mother MARIA TORBELA-
the spouses Rosario, which was docketed as Civil Case No. U-4359.
TOSINO, and my Aunts EUFROSINA TORBELA, LEONILA
On the same day, Entry Nos. 593493 and 593494 were made on TCT
TORBELA-TAMEN, DOLORES TORBELA, LEONORA
No. 52751 that read as follows:
TORBELA-AGUSTIN, SEVERINA TORBELA-ILDEFONSO,
and my Uncles PEDRO TORBELA and FERNANDO, also
surnamed TORBELA, I request the Register of Deeds of Entry No. 593494 – Complaint – Civil Case No. U-4359 (For: Recovery
Pangasinan to annotate their adverse claim at the back of of Ownership and Possession and Damages. (Sup. Paper).
Transfer Certificate of Title No. 52751, based on the
annexed document, Deed of Absolute Quitclaim by ANDRES
Entry No. 593493 – Notice of Lis Pendens – The parcel of land
T. ROSARIO, dated December 28, 1964, marked as Annex
described in this title is subject to Lis Pendens executed by Liliosa B.
"A" and made a part of this Affidavit, and it is also requested
Rosario, CLAO, Trial Attorney dated February 13, 1986. Filed to TCT
that the DEVELOPMENT BANK OF THE PHILIPPINES be
No. 52751
informed accordingly.17

February 13, 1986-1986 February 13 – 3:30 p.m.

The very next day, on May 17, 1967, the Torbela siblings had
Cornelio’s Affidavit of Adverse Claim dated May 16, 1967 and Dr.
Rosario’s Deed of Absolute Quitclaim dated December 28, 1964
annotated on TCT No. 52751 as Entry Nos. 27447118 and
274472,19 respectively.
The construction of a four-storey building on Lot No. 356-A was
eventually completed. The building was initially used as a hospital, but
was later converted to a commercial building. Part of the building was
leased to PT&T; and the rest to Mrs. Andrea Rosario-Haduca, Dr.
Rosario’s sister, who operated the Rose Inn Hotel and Restaurant.
Dr. Rosario was able to fully pay his loan from DBP. Under Entry No.
520197 on TCT No. 5275120 dated March 6, 1981, the mortgage
appearing under Entry No. 243537 was cancelled per the Cancellation
and Discharge of Mortgage executed by DBP in favor of Dr. Rosario
and ratified before a notary public on July 11, 1980.
In the meantime, Dr. Rosario acquired another loan from the Philippine
National Bank (PNB) sometime in 1979-1981. Records do not reveal
though the original amount of the loan from PNB, but the loan
agreement was amended on March 5, 1981 and the loan amount was
increased to ₱450,000.00. The loan was secured by mortgages
constituted on the following properties: (1) Lot No. 356-A, covered by
TCT No. 52751 in Dr. Rosario’s name; (2) Lot No. 4489, with an area
of 1,862 square meters, located in Dagupan City, Pangasinan, covered
6
(SGD.) PACIFICO M. BRAGANZA
Register of Deeds27
The spouses Rosario afterwards failed to pay their loan from Banco
Filipino. As of April 2, 1987, the spouses Rosario’s outstanding
principal obligation and penalty charges amounted to ₱743,296.82 and
₱151,524.00, respectively.28
Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-
A, Lot No. 4489, and Lot No. 5-F-8-C-2-B-2-A. During the public
auction on April 2, 1987, Banco Filipino was the lone bidder for the
three foreclosed properties for the price of ₱1,372,387.04. The
Certificate of Sale29 dated April 2, 1987, in favor of Banco Filipino, was
annotated on TCT No. 52751 on April 14, 1987 as Entry No. 610623. 30
On December 9, 1987, the Torbela siblings filed before the RTC their
Amended Complaint,31 impleading Banco Filipino as additional
defendant in Civil Case No. U-4359 and praying that the spouses
Rosario be ordered to redeem Lot No. 356-A from Banco Filipino.
The spouses Rosario instituted before the RTC on March 4, 1988 a
case for annulment of extrajudicial foreclosure and damages, with
prayer for a writ of preliminary injunction and temporary restraining
order, against Banco Filipino, the Provincial Ex Officio Sheriff and his
Deputy, and the Register of Deeds of Pangasinan. The case was Torbela siblings] at the back of TCT No. 165813 after
docketed as Civil Case No. U-4667. Another notice of lis pendens was payment of the required fees;
annotated on TCT No. 52751 on March 10, 1988 as Entry No. 627059,
viz:
8. Dr. Rosario and Lena Rosario are hereby ordered to
reimburse [the Torbela siblings] the market value of Lot 356-
Entry No. 627059 – Lis Pendens – Dr. Andres T. Rosario and Lena A as of December, 1964 minus payments made by the
Duque Rosario, Plaintiff versus Banco Filipino, et. al. Civil Case No. U- former;
4667 or Annulment of ExtraJudicial Foreclosure of Real Estate
Mortgage – The parcel of land described in this title is subject to Notice
9. Dismissing the complaint of [the Torbela siblings] against
of Lis Pendens subscribed and sworn to before Notary Public Mauro G.
Banco Filipino, Pedro Habon and Rufino Moreno in Civil
Meris, as Doc. No. 21; Page No. 5; Book 111; S-1988. March 7, 1988-
Case No. U-4733; and against Banco Filipino in Civil Case
1988 March 10, 1:00 p.m.
No. U-4359.39

(SGD.) RUFINO M. MORENO, SR.

The RTC released an Amended Decision40 dated January 29, 1992,
Register of Deeds32
adding the following paragraph to the dispositive:

The Torbela siblings intervened in Civil Case No. U-4667. Eventually,

Banco Filipino is entitled to a Writ of Possession over Lot-5-F-8-C-2-
on October 17, 1990, the RTC issued an Order33 dismissing without
[B]-2-A of the subdivision plan (LRC) Psd-122471, covered by Transfer
prejudice Civil Case No. U-4667 due to the spouses Rosario’s failure to
Certificate of Title 104189 of the Registry of Deeds of Pangasinan[.]41
prosecute.

Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from
Banco Filipino, but their efforts were unsuccessful. Upon the expiration
of the one-year redemption period in April 1988, the Certificate of Final
Sale34 and Affidavit of Consolidation35 covering all three foreclosed
properties were executed on May 24, 1988 and May 25, 1988,
respectively.
On June 7, 1988, new certificates of title were issued in the name of
Banco Filipino, particularly, TCT No. 165812 for Lot No. 5-F-8-C-2-B-2-
A and TCT No. 165813 for Lot No. 356-A .36
The Torbela siblings thereafter filed before the RTC on August 29,
1988 a Complaint37 for annulment of the Certificate of Final Sale dated
May 24, 1988, judicial cancelation of TCT No. 165813, and damages,
against Banco Filipino, the Ex Officio Provincial Sheriff, and the
Register of Deeds of Pangasinan, which was docketed as Civil Case
No. U-4733.
On June 19, 1991, Banco Filipino filed before the RTC of Urdaneta City
a Petition for the issuance of a writ of possession. In said Petition,
docketed as Pet. Case No. U-822, Banco Filipino prayed that a writ of
possession be issued in its favor over Lot No. 5-F-8-C-2-B-2-A and Lot
No. 356-A, plus the improvements thereon, and the spouses Rosario
and other persons presently in possession of said properties be
directed to abide by said writ.
The RTC jointly heard Civil Case Nos. U-4359 and U-4733 and Pet.
Case No. U-822. The Decision38 on these three cases was
promulgated on January 15, 1992, the dispositive portion of which
reads:
WHEREFORE, judgment is rendered:
1. Declaring the real estate mortgage over Lot 356-A
covered by TCT 52751 executed by Spouses Andres
Rosario in favor of Banco Filipino, legal and valid;
The Torbela siblings and Dr. Rosario appealed the foregoing RTC
judgment before the Court of Appeals. Their appeal was docketed as
CA-G.R. CV No. 39770.
In its Decision42 dated June 29, 1999, the Court of Appeals decreed:
WHEREFORE, foregoing considered, the appealed decision is hereby
AFFIRMED with modification. Items No. 6 and 7 of the appealed
decision are DELETED. Item No. 8 is modified requiring [Dr. Rosario]
to pay [the Torbela siblings] actual damages, in the amount of
₱1,200,000.00 with 6% per annum interest from finality of this decision
until fully paid. [Dr. Rosario] is further ORDERED to pay [the Torbela
siblings] the amount of ₱300,000.00 as moral damages; ₱200,000.00
as exemplary damages and ₱100,000.00 as attorney’s fees.
Costs against [Dr. Rosario]. 43
The Court of Appeals, in a Resolution44 dated October 22, 1999,
denied the separate Motions for Reconsideration of the Torbela
siblings and Dr. Rosario.
The Torbela siblings come before this Court via the Petition for Review
in G.R. No. 140528, with the following assignment of errors:
First Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN NOT FINDING THAT THE REGISTRATION OF
THE DEED OF ABSOLUTE QUITCLAIM EXECUTED BY
[DR. ANDRES T. ROSARIO] IN FAVOR OF THE [TORBELA
SIBLINGS] DATED DECEMBER 28, 1964 AND THE
REGISTRATION OF THE NOTICE OF ADVERSE CLAIM
EXECUTED BY THE [TORBELA SIBLINGS], SERVE AS
THE OPERATIVE ACT TO CONVEY OR AFFECT THE
LAND AND IMPROVEMENTS THEREOF IN SO FAR AS
THIRD PERSONS ARE CONCERNED.

2. Declaring the sheriff’s sale dated April 2, 1987 over Lot Second Issue and Assignment of Error:
356-A covered by TCT 52751 and subsequent final Deed of
Sale dated May 14, 1988 over Lot 356-A covered by TCT
THE HONORABLE COURT OF APPEALS GRAVELY
No. 52751 legal and valid;
ERRED IN FINDING THAT THE SUBJECT PROPERTY
COVERED BY T.C.T. NO. 52751 IS CLEAN AND FREE,
3. Declaring Banco Filipino the owner of Lot 356-A covered DESPITE OF THE ANNOTATION OF ENCUMBRANCES
by TCT No. 52751 (now TCT 165813); OF THE NOTICE OF ADVERSE CLAIM AND THE DEED
OF ABSOLUTE QUITCLAIM APPEARING AT THE BACK
THEREOF AS ENTRY NOS. 274471 AND 274472,
4. Banco Filipino is entitled to a Writ of Possession over Lot
RESPECTIVELY.
356-A together with the improvements thereon (Rose Inn
Building). The Branch Clerk of Court is hereby ordered to
issue a writ of possession in favor of Banco Filipino; Third Issue and Assignment of Error:

5. [The Torbela siblings] are hereby ordered to render
accounting to Banco Filipino the rental they received from
tenants of Rose Inn Building from May 14, 1988;
6. [The Torbela siblings] are hereby ordered to pay Banco
Filipino the sum of ₱20,000.00 as attorney’s fees;
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE NOTICE OF ADVERSE
CLAIM OF THE [TORBELA SIBLINGS] UNDER ENTRY NO.
274471 WAS VALIDLY CANCELLED BY THE REGISTER
OF DEEDS, IN THE ABSENCE OF A PETITION DULY
FILED IN COURT FOR ITS CANCELLATION.

Fourth Issue and Assignment of Error:

7. Banco Filipino is hereby ordered to give [the Torbela
siblings] the right of first refusal over Lot 356-A. The Register
of Deeds is hereby ordered to annotate the right of [the

7
 THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT RESPONDENT BANCO
FILIPINO SAVINGS AND MORTGAGE BANK IS A
MORTGAGEE IN GOOD FAITH.
Fifth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN NOT FINDING THAT THE FILING OF A CIVIL
CASE NO. U-4359 ON DECEMBER 9, 1987, IMPLEADING
RESPONDENT BANCO FILIPINO AS ADDITIONAL PARTY
DEFENDANT, TOLL OR SUSPEND THE RUNNING OF
THE ONE YEAR PERIOD OF REDEMPTION.
Sixth Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN NOT FINDING THAT THE OWNERSHIP OVER
THE SUBJECT PROPERTY WAS PREMATURELY
CONSOLIDATED IN FAVOR OF RESPONDENT BANCO
FILIPINO SAVINGS AND MORTGAGE BANK.
Seventh Issue and Assignment of Error:
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN FINDING THAT THE SUBJECT PROPERTY IS
AT LEAST WORTH ₱1,200,000.00.45
The Torbela siblings ask of this Court:
WHEREFORE, in the light of the foregoing considerations, the [Torbela
siblings] most respectfully pray that the questioned DECISION
promulgated on June 29, 1999 (Annex "A", Petition) and the
RESOLUTION dated October 22, 1999 (Annex "B", Petition) be
REVERSED and SET ASIDE, and/or further MODIFIED in favor of the
[Torbela siblings], and another DECISION issue ordering, among other
reliefs, the respondent Banco Filipino to reconvey back Lot No. 356-A,
covered by T.C.T. No. 52751, in favor of the [Torbela siblings] who are
the actual owners of the same.
The [Torbela siblings] likewise pray for such other reliefs and further
remedies as may be deemed just and equitable under the premises.46
Duque-Rosario, now legally separated from Dr. Rosario, avers in her
Petition for Review in G.R. No. 140553 that Lot No. 4489 and Lot No.
5-F-8-C-2-B-2-A were registered in her name, and she was unlawfully
deprived of ownership of said properties because of the following
errors of the Court of Appeals:
A
THE HON. COURT OF APPEALS PATENTLY ERRED IN
NOT FINDING THAT THE PERIOD TO REDEEM THE
PROPERTY HAS NOT COMMENCED, HENCE, THE
CERTIFICATE OF SALE, THE CONSOLIDATION OF
OWNERSHIP BY [BANCO FILIPINO], ARE NULL AND
VOID.
B
THE COURT OF APPEALS PATENTLY ERRED IN
REFUSING TO RULE THAT THE FILING OF THE
COMPLAINT BEFORE THE COURT A QUO BY THE
[TORBELA SIBLINGS] HAD ALREADY BEEN
PRESCRIBED.47
Duque-Rosario prays that the appealed decision of the Court of
Appeals be reversed and set aside, and that Lot No. 4489 and Lot No.
5-F-8-C-2-B-2-A be freed from all obligations and encumbrances and
returned to her.
Review of findings of fact by the RTC and the Court of Appeals
warranted.
A disquisition of the issues raised and/or errors assigned in the
Petitions at bar unavoidably requires a re-evaluation of the facts and
evidence presented by the parties in the court a quo.
In Republic v. Heirs of Julia Ramos,48 the Court summed up the rules
governing the power of review of the Court:
8
Ordinarily, this Court will not review, much less reverse, the factual
findings of the Court of Appeals, especially where such findings
coincide with those of the trial
court.http://sc.judiciary.gov.ph/jurisprudence/2010/february2010/16948
1.htm - _ftn The findings of facts of the Court of Appeals are, as a
general rule, conclusive and binding upon this Court, since this Court is
not a trier of facts and does not routinely undertake the re-examination
of the evidence presented by the contending parties during the trial of
the case.
The above rule, however, is subject to a number of exceptions, such as
(1) when the inference made is manifestly mistaken, absurd or
impossible; (2) when there is grave abuse of discretion; (3) when the
finding is grounded entirely on speculations, surmises, or conjectures;
(4) when the judgment of the Court of Appeals is based on
misapprehension of facts; (5) when the findings of fact are conflicting;
(6) when the Court of Appeals, in making its findings, went beyond the
issues of the case and the same is contrary to the admissions of both
parties; (7) when the findings of the Court of Appeals are contrary to
those of the trial court; (8) when the findings of fact are conclusions
without citation of specific evidence on which they are based; (9) when
the Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties and which, if properly considered, would justify
a different conclusion; and (10) when the findings of fact of the Court of
Appeals are premised on the absence of evidence and are
contradicted by the evidence on record. 49
As the succeeding discussion will bear out, the first, fourth, and ninth
exceptions are extant in these case.
Barangay conciliation was not a pre-requisite to the institution of Civil
Case No. U-4359.
Dr. Rosario contends that Civil Case No. U-4359, the Complaint of the
Torbela siblings for recovery of ownership and possession of Lot No.
356-A, plus damages, should have been dismissed by the RTC
because of the failure of the Torbela siblings to comply with the prior
requirement of submitting the dispute to barangay conciliation.
The Torbela siblings instituted Civil Case No. U-4359 on February 13,
1986, when Presidential Decree No. 1508, Establishing a System of
Amicably Settling Disputes at the Barangay Level, was still in
effect.50 Pertinent provisions of said issuance read:
Section 2. Subject matters for amicable settlement. The Lupon of each
barangay shall have authority to bring together the parties actually
residing in the same city or municipality for amicable settlement of all
disputes except:
1. Where one party is the government, or any subdivision or
instrumentality thereof;
2. Where one party is a public officer or employee, and the
dispute relates to the performance of his official functions;
3. Offenses punishable by imprisonment exceeding 30 days,
or a fine exceeding ₱200.00;
4. Offenses where there is no private offended party;
5. Such other classes of disputes which the Prime Minister
may in the interest of justice determine upon
recommendation of the Minister of Justice and the Minister of
Local Government.
Section 3. Venue. Disputes between or among persons actually
residing in the same barangay shall be brought for amicable settlement
before the Lupon of said barangay. Those involving actual residents of
different barangays within the same city or municipality shall be
brought in the barangay where the respondent or any of the
respondents actually resides, at the election of the complainant.
However, all disputes which involved real property or any interest
therein shall be brought in the barangay where the real property or any
part thereof is situated.
The Lupon shall have no authority over disputes:
1. involving parties who actually reside in barangays of
different cities or municipalities, except where such
barangays adjoin each other; and
2. involving real property located in different municipalities.
xxxx
Section 6. Conciliation, pre-condition to filing of complaint. – No
complaint, petition, action or proceeding involving any matter within the
authority of the Lupon as provided in Section 2 hereof shall be filed or
instituted in court or any other government office for adjudication
unless there has been a confrontation of the parties before the Lupon
Chairman or the Pangkat and no conciliation or settlement has been
reached as certified by the Lupon Secretary or the Pangkat Secretary,
attested by the Lupon or Pangkat Chairman, or unless the settlement
has been repudiated. x x x. (Emphases supplied.)
The Court gave the following elucidation on the jurisdiction of the
Lupong Tagapayapa in Tavora v. Hon. Veloso51 :
The foregoing provisions are quite clear. Section 2 specifies the
conditions under which the Lupon of a barangay "shall have authority"
to bring together the disputants for amicable settlement of their dispute:
The parties must be "actually residing in the same city or municipality."
At the same time, Section 3 — while reiterating that the disputants
must be "actually residing in the same barangay" or in "different
barangays" within the same city or municipality — unequivocably
declares that the Lupon shall have "no authority" over disputes
"involving parties who actually reside in barangays of different cities or
municipalities," except where such barangays adjoin each other.
Thus, by express statutory inclusion and exclusion, the Lupon shall
have no jurisdiction over disputes where the parties are not actual
residents of the same city or municipality, except where the barangays
in which they actually reside adjoin each other.
It is true that immediately after specifying the barangay whose Lupon
shall take cognizance of a given dispute, Sec. 3 of PD 1508 adds:
"However, all disputes which involve real property or any interest
therein shall be brought in the barangay where the real property or any
part thereof is situated."
Actually, however, this added sentence is just an ordinary proviso and
should operate as such.
The operation of a proviso, as a rule, should be limited to its normal
function, which is to restrict or vary the operation of the principal
clause, rather than expand its scope, in the absence of a clear
indication to the contrary.
"The natural and appropriate office of a proviso is . . . to except
something from the enacting clause; to limit, restrict, or qualify the
statute in whole or in part; or to exclude from the scope of the statute
that which otherwise would be within its terms." (73 Am Jur 2d 467.)
Therefore, the quoted proviso should simply be deemed to restrict or
vary the rule on venue prescribed in the principal clauses of the first
paragraph of Section 3, thus: Although venue is generally determined
by the residence of the parties, disputes involving real property shall be
brought in the barangay where the real property or any part thereof is
situated, notwithstanding that the parties reside elsewhere within the
same city/municipality.52 (Emphases supplied.)
The original parties in Civil Case No. U-4359 (the Torbela siblings and
the spouses Rosario) do not reside in the same barangay, or in
different barangays within the same city or municipality, or in different
barangays of different cities or municipalities but are adjoining each
other. Some of them reside outside Pangasinan and even outside of
the country altogether. The Torbela siblings reside separately in
Barangay Macalong, Urdaneta, Pangasinan; Barangay Consolacion,
Urdaneta, Pangasinan; Pangil, Laguna; Chicago, United States of
America; and Canada. The spouses Rosario are residents of Calle
Garcia, Poblacion, Urdaneta, Pangasinan. Resultantly, the Lupon had
no jurisdiction over the dispute and barangay conciliation was not a
pre-condition for the filing of Civil Case No. U-4359.
The Court now looks into the merits of Civil Case No. U-4359.
There was an express trust between the Torbela siblings and Dr.
Rosario.
There is no dispute that the Torbela sibling inherited the title to Lot No.
356-A from their parents, the Torbela spouses, who, in turn, acquired
the same from the first registered owner of Lot No. 356-A, Valeriano.
Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim on
December 12, 1964 in which they transferred and conveyed Lot No.
9
356-A to Dr. Rosario for the consideration of ₱9.00. However, the
Torbela siblings explained that they only executed the Deed as an
accommodation so that Dr. Rosario could have Lot No. 356-A
registered in his name and use said property to secure a loan from
DBP, the proceeds of which would be used for building a hospital on
Lot No. 356-A – a claim supported by testimonial and documentary
evidence, and borne out by the sequence of events immediately
following the execution by the Torbela siblings of said Deed. On
December 16, 1964, TCT No. 52751, covering Lot No. 356-A, was
already issued in Dr. Rosario’s name. On December 28, 1964, Dr.
Rosario executed his own Deed of Absolute Quitclaim, in which he
expressly acknowledged that he "only borrowed" Lot No. 356-A and
was transferring and conveying the same back to the Torbela siblings
for the consideration of ₱1.00. On February 21, 1965, Dr. Rosario’s
loan in the amount of ₱70,200.00, secured by a mortgage on Lot No.
356-A, was approved by DBP. Soon thereafter, construction of a
hospital building started on Lot No. 356-A.
Among the notable evidence presented by the Torbela siblings is the
testimony of Atty. Lorenza Alcantara (Atty. Alcantara), who had no
apparent personal interest in the present case. Atty. Alcantara, when
she was still a boarder at the house of Eufrosina Torbela Rosario (Dr.
Rosario’s mother), was consulted by the Torbela siblings as regards
the extrajudicial partition of Lot No. 356-A. She also witnessed the
execution of the two Deeds of Absolute Quitclaim by the Torbela
siblings and Dr. Rosario.
In contrast, Dr. Rosario presented TCT No. 52751, issued in his name,
to prove his purported title to Lot No. 356-A. In Lee Tek Sheng v. Court
of Appeals,53 the Court made a clear distinction between title and the
certificate of title:
The certificate referred to is that document issued by the Register of
Deeds known as the Transfer Certificate of Title (TCT). By title, the law
refers to ownership which is represented by that document. Petitioner
apparently confuses certificate with title. Placing a parcel of land under
the mantle of the Torrens system does not mean that ownership
thereof can no longer be disputed. Ownership is different from a
certificate of title. The TCT is only the best proof of ownership of a
piece of land. Besides, the certificate cannot always be considered as
conclusive evidence of ownership. Mere issuance of the certificate of
title in the name of any person does not foreclose the possibility that
the real property may be under co-ownership with persons not named
in the certificate or that the registrant may only be a trustee or that
other parties may have acquired interest subsequent to the issuance of
the certificate of title. To repeat, registration is not the equivalent of
title, but is only the best evidence thereof. Title as a concept of
ownership should not be confused with the certificate of title as
evidence of such ownership although both are interchangeably used. x
x x.54 (Emphases supplied.)
Registration does not vest title; it is merely the evidence of such title.
Land registration laws do not give the holder any better title than what
he actually has.55 Consequently, Dr. Rosario must still prove herein his
acquisition of title to Lot No. 356-A, apart from his submission of TCT
No. 52751 in his name.
Dr. Rosario testified that he obtained Lot No. 356-A after paying the
Torbela siblings ₱25,000.00, pursuant to a verbal agreement with the
latter. The Court though observes that Dr. Rosario’s testimony on the
execution and existence of the verbal agreement with the Torbela
siblings lacks significant details (such as the names of the parties
present, dates, places, etc.) and is not corroborated by independent
evidence.
In addition, Dr. Rosario acknowledged the execution of the two Deeds
of Absolute Quitclaim dated December 12, 1964 and December 28,
1964, even affirming his own signature on the latter Deed. The Parol
Evidence Rule provides that when the terms of the agreement have
been reduced into writing, it is considered as containing all the terms
agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the
contents of the written agreement.56 Dr. Rosario may not modify,
explain, or add to the terms in the two written Deeds of Absolute
Quitclaim since he did not put in issue in his pleadings (1) an intrinsic
ambiguity, mistake, or imperfection in the Deeds; (2) failure of the
Deeds to express the true intent and the agreement of the parties
thereto; (3) the validity of the Deeds; or (4) the existence of other terms
agreed to by the Torbela siblings and Dr. Rosario after the execution of
the Deeds.57
Even if the Court considers Dr. Rosario’s testimony on his alleged
verbal agreement with the Torbela siblings, the Court finds the same
unsatisfactory. Dr. Rosario averred that the two Deeds were executed
only because he was "planning to secure loan from the Development
Bank of the Philippines and Philippine National Bank and the bank
needed absolute quitclaim[.]"58 While Dr. Rosario’s explanation makes
sense for the first Deed of Absolute Quitclaim dated December 12,
1964 executed by the Torbela siblings (which transferred Lot No. 356-
A to Dr. Rosario for ₱9.00.00), the same could not be said for the
second Deed of Absolute Quitclaim dated December 28, 1964
executed by Dr. Rosario. In fact, Dr. Rosario’s Deed of Absolute
Quitclaim (in which he admitted that he only borrowed Lot No. 356-A
and was transferring the same to the Torbela siblings for ₱1.00.00)
would actually work against the approval of Dr. Rosario’s loan by the
banks. Since Dr. Rosario’s Deed of Absolute Quitclaim dated
December 28, 1964 is a declaration against his self-interest, it must be
taken as favoring the truthfulness of the contents of said Deed.59
It can also be said that Dr. Rosario is estopped from claiming or
asserting ownership over Lot No. 356-A based on his Deed of Absolute
Quitclaim dated December 28, 1964. Dr. Rosario's admission in the
said Deed that he merely borrowed Lot No. 356-A is deemed
conclusive upon him. Under Article 1431 of the Civil Code, "[t]hrough
estoppel an admission or representation is rendered conclusive upon
the person making it, and cannot be denied or disproved as against the
person relying thereon."60 That admission cannot now be denied by Dr.
Rosario as against the Torbela siblings, the latter having relied upon
his representation.
Considering the foregoing, the Court agrees with the RTC and the
Court of Appeals that Dr. Rosario only holds Lot No. 356-A in trust for
the Torbela siblings.
Trust is the right to the beneficial enjoyment of property, the legal title
to which is vested in another. It is a fiduciary relationship that obliges
the trustee to deal with the property for the benefit of the beneficiary.
Trust relations between parties may either be express or implied. An
express trust is created by the intention of the trustor or of the parties,
while an implied trust comes into being by operation of law.61
Express trusts are created by direct and positive acts of the parties, by
some writing or deed, or will, or by words either expressly or impliedly
evincing an intention to create a trust. Under Article 1444 of the Civil
Code, "[n]o particular words are required for the creation of an express
trust, it being sufficient that a trust is clearly intended."62 It is possible to
create a trust without using the word "trust" or "trustee." Conversely,
the mere fact that these words are used does not necessarily indicate
an intention to create a trust. The question in each case is whether the
trustor manifested an intention to create the kind of relationship which
to lawyers is known as trust. It is immaterial whether or not he knows
that the relationship which he intends to create is called a trust, and
whether or not he knows the precise characteristics of the relationship
which is called a trust.63
In Tamayo v. Callejo,64 the Court recognized that a trust may have a
constructive or implied nature in the beginning, but the registered
owner’s subsequent express acknowledgement in a public document
of a previous sale of the property to another party, had the effect of
imparting to the aforementioned trust the nature of an express trust.
The same situation exists in this case. When Dr. Rosario was able to
register Lot No. 356-A in his name under TCT No. 52751 on December
16, 1964, an implied trust was initially established between him and the
Torbela siblings under Article 1451 of the Civil Code, which provides:
ART. 1451. When land passes by succession to any person and he
causes the legal title to be put in the name of another, a trust is
established by implication of law for the benefit of the true owner.
Dr. Rosario’s execution of the Deed of Absolute Quitclaim on
December 28, 1964, containing his express admission that he only
borrowed Lot No. 356-A from the Torbela siblings, eventually
transformed the nature of the trust to an express one. The express
trust continued despite Dr. Rosario stating in his Deed of Absolute
Quitclaim that he was already returning Lot No. 356-A to the Torbela
siblings as Lot No. 356-A remained registered in Dr. Rosario’s name
under TCT No. 52751 and Dr. Rosario kept possession of said
property, together with the improvements thereon.
The right of the Torbela siblings to recover Lot No. 356-A has not yet
prescribed.
The Court extensively discussed the prescriptive period for express
trusts in the Heirs of Maximo Labanon v. Heirs of Constancio
Labanon,65 to wit:
On the issue of prescription, we had the opportunity to rule in Bueno v.
Reyes that unrepudiated written express trusts are imprescriptible:
"While there are some decisions which hold that an action upon a trust
is imprescriptible, without distinguishing between express and implied
trusts, the better rule, as laid down by this Court in other decisions, is
10
that prescription does supervene where the trust is merely an implied
one. The reason has been expressed by Justice J.B.L. Reyes in J.M.
Tuason and Co., Inc. vs. Magdangal, 4 SCRA 84, 88, as follows:
Under Section 40 of the old Code of Civil Procedure, all actions for
recovery of real property prescribed in 10 years, excepting only actions
based on continuing or subsisting trusts that were considered by
section 38 as imprescriptible. As held in the case of Diaz v. Gorricho,
L-11229, March 29, 1958, however, the continuing or subsisting trusts
contemplated in section 38 of the Code of Civil Procedure referred only
to express unrepudiated trusts, and did not include constructive trusts
(that are imposed by law) where no fiduciary relation exists and the
trustee does not recognize the trust at all."
This principle was amplified in Escay v. Court of Appeals this way:
"Express trusts prescribe 10 years from the repudiation of the trust
(Manuel Diaz, et al. vs. Carmen Gorricho et al., 54 O.G. p. 8429, Sec.
40, Code of Civil Procedure)."
In the more recent case of Secuya v. De Selma, we again ruled that
the prescriptive period for the enforcement of an express trust of ten
(10) years starts upon the repudiation of the trust by the trustee.66
To apply the 10-year prescriptive period, which would bar a
beneficiary’s action to recover in an express trust, the repudiation of
the trust must be proven by clear and convincing evidence and made
known to the beneficiary.67 The express trust disables the trustee from
acquiring for his own benefit the property committed to his
management or custody, at least while he does not openly repudiate
the trust, and makes such repudiation known to the beneficiary
or cestui que trust. For this reason, the old Code of Civil Procedure
(Act 190) declared that the rules on adverse possession do not apply
to "continuing and subsisting" (i.e., unrepudiated) trusts. In an express
trust, the delay of the beneficiary is directly attributable to the trustee
who undertakes to hold the property for the former, or who is linked to
the beneficiary by confidential or fiduciary relations. The trustee's
possession is, therefore, not adverse to the beneficiary, until and
unless the latter is made aware that the trust has been repudiated.68
Dr. Rosario argues that he is deemed to have repudiated the trust on
December 16, 1964, when he registered Lot No. 356-A in his name
under TCT No. 52751, so when on February 13, 1986, the Torbela
siblings instituted before the RTC Civil Case No. U-4359, for the
recovery of ownership and possession of Lot No. 356-A from the
spouses Rosario, over 21 years had passed. Civil Case No. U-4359
was already barred by prescription, as well as laches.
The Court already rejected a similar argument in Ringor v. Ringor 69 for
the following reasons:
A trustee who obtains a Torrens title over a property held in trust for
him by another cannot repudiate the trust by relying on the registration.
A Torrens Certificate of Title in Jose’s name did not vest ownership of
the land upon him. The Torrens system does not create or vest title. It
only confirms and records title already existing and vested. It does not
protect a usurper from the true owner. The Torrens system was not
intended to foment betrayal in the performance of a trust. It does not
permit one to enrich himself at the expense of another. Where one
does not have a rightful claim to the property, the Torrens system of
registration can confirm or record nothing. Petitioners cannot rely on
the registration of the lands in Jose’s name nor in the name of the
Heirs of Jose M. Ringor, Inc., for the wrong result they seek. For Jose
could not repudiate a trust by relying on a Torrens title he held in trust
for his co-heirs. The beneficiaries are entitled to enforce the trust,
notwithstanding the irrevocability of the Torrens title. The intended trust
must be sustained.70 (Emphasis supplied.)
In the more recent case of Heirs of Tranquilino Labiste v. Heirs of Jose
Labiste,71 the Court refused to apply prescription and laches and
reiterated that:
[P]rescription and laches will run only from the time the express trust is
repudiated. The Court has held that for acquisitive prescription to bar
the action of the beneficiary against the trustee in an express trust for
the recovery of the property held in trust it must be shown that: (a) the
trustee has performed unequivocal acts of repudiation amounting to an
ouster of the cestui que trust; (b) such positive acts of repudiation have
been made known to the cestui que trust, and (c) the evidence thereon
is clear and conclusive. Respondents cannot rely on the fact that the
Torrens title was issued in the name of Epifanio and the other heirs of
Jose. It has been held that a trustee who obtains a Torrens title over
property held in trust by him for another cannot repudiate the trust by
relying on the registration. The rule requires a clear repudiation of the
trust duly communicated to the beneficiary. The only act that can be
construed as repudiation was when respondents filed the petition for
reconstitution in October 1993. And since petitioners filed their
complaint in January 1995, their cause of action has not yet
prescribed, laches cannot be attributed to them.72 (Emphasis supplied.)
It is clear that under the foregoing jurisprudence, the registration of Lot
No. 356-A by Dr. Rosario in his name under TCT No. 52751 on
December 16, 1964 is not the repudiation that would have caused the
10-year prescriptive period for the enforcement of an express trust to
run.
The Court of Appeals held that Dr. Rosario repudiated the express
trust when he acquired another loan from PNB and constituted a
second mortgage on Lot No. 356-A sometime in 1979, which, unlike
the first mortgage to DBP in 1965, was without the knowledge and/or
consent of the Torbela siblings.
The Court only concurs in part with the Court of Appeals on this matter.
For repudiation of an express trust to be effective, the unequivocal act
of repudiation had to be made known to the Torbela siblings as the
cestuis que trust and must be proven by clear and conclusive
evidence. A scrutiny of TCT No. 52751 reveals the following
inscription:
Entry No. 520099
Amendment of the mortgage in favor of PNB inscribed under Entry
No. 490658 in the sense that the consideration thereof has been
increased to PHILIPPINE PESOS Four Hundred Fifty Thousand Pesos
only (₱450,000.00) and to secure any and all negotiations with PNB,
whether contracted before, during or after the date of this instrument,
acknowledged before Notary Public of Pangasinan Alejo M. Dato as
Doc. No. 198, Page No. 41, Book No. 11, Series of 1985.
Date of Instrument March 5, 1981
Date of Inscription March 6, 198173
Although according to Entry No. 520099, the original loan and
mortgage agreement of Lot No. 356-A between Dr. Rosario and PNB
was previously inscribed as Entry No. 490658, Entry No. 490658 does
not actually appear on TCT No. 52751 and, thus, it cannot be used as
the reckoning date for the start of the prescriptive period.
The Torbela siblings can only be charged with knowledge of the
mortgage of Lot No. 356-A to PNB on March 6, 1981 when the
amended loan and mortgage agreement was registered on TCT No.
52751 as Entry No. 520099. Entry No. 520099 is constructive notice to
the whole world74 that Lot No. 356-A was mortgaged by Dr. Rosario to
PNB as security for a loan, the amount of which was increased to
₱450,000.00. Hence, Dr. Rosario is deemed to have effectively
repudiated the express trust between him and the Torbela siblings on
March 6, 1981, on which day, the prescriptive period for the
enforcement of the express trust by the Torbela siblings began to run.
From March 6, 1981, when the amended loan and mortgage
agreement was registered on TCT No. 52751, to February 13, 1986,
when the Torbela siblings instituted before the RTC Civil Case No. U-
4359 against the spouses Rosario, only about five years had passed.
The Torbela siblings were able to institute Civil Case No. U-4359 well
before the lapse of the 10-year prescriptive period for the enforcement
of their express trust with Dr. Rosario.
Civil Case No. U-4359 is likewise not barred by laches. Laches means
the failure or neglect, for an unreasonable and unexplained length of
time, to do that which by exercising due diligence could or should have
been done earlier. It is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned it or declined to assert it. As the Court
explained in the preceding paragraphs, the Torbela siblings instituted
Civil Case No. U-4359 five years after Dr. Rosario’s repudiation of the
express trust, still within the 10-year prescriptive period for
enforcement of such trusts. This does not constitute an unreasonable
delay in asserting one's right. A delay within the prescriptive period is
sanctioned by law and is not considered to be a delay that would bar
relief. Laches apply only in the absence of a statutory prescriptive
period.75
Banco Filipino is not a mortgagee and buyer in good faith.
Having determined that the Torbela siblings are the true owners and
Dr. Rosario merely the trustee of Lot No. 356-A, the Court is next faced
with the issue of whether or not the Torbela siblings may still recover
Lot No. 356-A considering that Dr. Rosario had already mortgaged Lot
11
No. 356-A to Banco Filipino, and upon Dr. Rosario’s default on his loan
obligations, Banco Filipino foreclosed the mortgage, acquired Lot No.
356-A as the highest bidder at the foreclosure sale, and consolidated
title in its name under TCT No. 165813. The resolution of this issue
depends on the answer to the question of whether or not Banco
Filipino was a mortgagee in good faith.
Under Article 2085 of the Civil Code, one of the essential requisites of
the contract of mortgage is that the mortgagor should be the absolute
owner of the property to be mortgaged; otherwise, the mortgage is
considered null and void. However, an exception to this rule is the
doctrine of "mortgagee in good faith." Under this doctrine, even if the
mortgagor is not the owner of the mortgaged property, the mortgage
contract and any foreclosure sale arising therefrom are given effect by
reason of public policy. This principle is based on the rule that all
persons dealing with property covered by a Torrens Certificate of Title,
as buyers or mortgagees, are not required to go beyond what appears
on the face of the title. This is the same rule that underlies the principle
of "innocent purchasers for value." The prevailing jurisprudence is that
a mortgagee has a right to rely in good faith on the certificate of title of
the mortgagor to the property given as security and in the absence of
any sign that might arouse suspicion, has no obligation to undertake
further investigation. Hence, even if the mortgagor is not the rightful
owner of, or does not have a valid title to, the mortgaged property, the
mortgagee in good faith is, nonetheless, entitled to protection. 76
On one hand, the Torbela siblings aver that Banco Filipino is not a
mortgagee in good faith because as early as May 17, 1967, they had
already annotated Cornelio’s Adverse Claim dated May 16, 1967 and
Dr. Rosario’s Deed of Absolute Quitclaim dated December 28, 1964 on
TCT No. 52751 as Entry Nos. 274471-274472, respectively.
On the other hand, Banco Filipino asseverates that it is a mortgagee in
good faith because per Section 70 of Presidential Decree No. 1529,
otherwise known as the Property Registration Decree, the notice of
adverse claim, registered on May 17, 1967 by the Torbela siblings
under Entry Nos. 274471-274472 on TCT No. 52751, already lapsed
after 30 days or on June 16, 1967. Additionally, there was an express
cancellation of Entry Nos. 274471-274472 by Entry No. 520469 dated
March 11, 1981. So when Banco Filipino approved Dr. Rosario’s loan
for ₱1,200,000.00 and constituted a mortgage on Lot No. 356-A
(together with two other properties) on December 8, 1981, the only
other encumbrance on TCT No. 52751 was Entry No. 520099 dated
March 6, 1981, i.e., the amended loan and mortgage agreement
between Dr. Rosario and PNB (which was eventually cancelled after it
was paid off with part of the proceeds from Dr. Rosario’s loan from
Banco Filipino). Hence, Banco Filipino was not aware that the Torbela
siblings’ adverse claim on Lot No. 356-A still subsisted.
The Court finds that Banco Filipino is not a mortgagee in good faith.
Entry Nos. 274471-274472 were not validly cancelled, and the
improper cancellation should have been apparent to Banco Filipino and
aroused suspicion in said bank of some defect in Dr. Rosario’s title.
The purpose of annotating the adverse claim on the title of the disputed
land is to apprise third persons that there is a controversy over the
ownership of the land and to preserve and protect the right of the
adverse claimant during the pendency of the controversy. It is a notice
to third persons that any transaction regarding the disputed land is
subject to the outcome of the dispute.77
Adverse claims were previously governed by Section 110 of Act No.
496, otherwise known as the Land Registration Act, quoted in full
below:
ADVERSE CLAIM
SEC. 110. Whoever claims any part or interest in registered land
adverse to the registered owner, arising subsequent to the date of the
original registration, may, if no other provision is made in this Act for
registering the same, make a statement in writing setting forth fully his
alleged right or interest, and how or under whom acquired, and a
reference to the volume and page of the certificate of title of the
registered owner, and a description of the land in which the right or
interest is claimed.
The statement shall be signed and sworn to, and shall state the
adverse claimant’s residence, and designate a place at which all
notices may be served upon him. This statement shall be entitled to
registration as an adverse claim, and the court, upon a petition of any
party in interest, shall grant a speedy hearing upon the question of the
validity of such adverse claim and shall enter such decree therein as
justice and equity may require. If the claim is adjudged to be invalid,
the registration shall be cancelled. If in any case the court after notice
and hearing shall find that a claim thus registered was frivolous or
vexatious, it may tax the adverse claimant double or treble costs in its
discretion.
Construing the aforequoted provision, the Court stressed in Ty Sin Tei
v. Lee Dy Piao78 that "[t]he validity or efficaciousness of the [adverse]
claim x x x may only be determined by the Court upon petition by an
interested party, in which event, the Court shall order the immediate
hearing thereof and make the proper adjudication as justice and equity
may warrant. And it is ONLY when such claim is found unmeritorious
that the registration thereof may be cancelled." The Court likewise
pointed out in the same case that while a notice of lis pendens may be
cancelled in a number of ways, "the same is not true in a registered
adverse claim, for it may be cancelled only in one instance, i.e., after
the claim is adjudged invalid or unmeritorious by the Court x x x;" and
"if any of the registrations should be considered unnecessary or
superfluous, it would be the notice of lis pendens and not the
annotation of the adverse claim which is more permanent and cannot
be cancelled without adequate hearing and proper disposition of the
claim."
With the enactment of the Property Registration Decree on June 11,
1978, Section 70 thereof now applies to adverse claims:
SEC. 70. Adverse claim. – Whoever claims any part or interest in
registered land adverse to the registered owner, arising subsequent to
the date of the original registrations, may, if no other provision is made
in this Decree for registering the same, make a statement in writing
setting forth fully his alleged right, or interest, and how or under whom
acquired, a reference to the number of the certificate of title of the
registered owner, the name of the registered owner, and a description
of the land in which the right or interest is claimed.
The statement shall be signed and sworn to, and shall state the
adverse claimant’s residence, and a place at which all notices may be
served upon him. This statement shall be entitled to registration as an
adverse claim on the certificate of title. The adverse claim shall be
effective for a period of thirty days from the date of registration. After
the lapse of said period, the annotation of adverse claim may be
cancelled upon filing of a verified petition therefor by the party in
interest: Provided, however, that after cancellation, no second adverse
claim based on the same ground shall be registered by the same
claimant.
Before the lapse of thirty days aforesaid, any party in interest may file a
petition in the Court of First Instance where the land is situated for the
cancellation of the adverse claim, and the court shall grant a speedy
hearing upon the question of the validity of such adverse claim, and
shall render judgment as may be just and equitable. If the adverse
claim is adjudged to be invalid, the registration thereof shall be ordered
cancelled. If, in any case, the court, after notice and hearing, shall find
that the adverse claim thus registered was frivolous, it may fine the
claimant in an amount not less than one thousand pesos nor more than
five thousand pesos, in its discretion. Before the lapse of thirty days,
the claimant may withdraw his adverse claim by filing with the Register
of Deeds a sworn petition to that effect. (Emphases supplied.)
In Sajonas v. Court of Appeals,79 the Court squarely interpreted
Section 70 of the Property Registration Decree, particularly, the new
30-day period not previously found in Section 110 of the Land
Registration Act, thus:
In construing the law aforesaid, care should be taken that every part
thereof be given effect and a construction that could render a provision
inoperative should be avoided, and inconsistent provisions should be
reconciled whenever possible as parts of a harmonious whole. For
taken in solitude, a word or phrase might easily convey a meaning
quite different from the one actually intended and evident when a word
or phrase is considered with those with which it is associated. In
ascertaining the period of effectivity of an inscription of adverse claim,
we must read the law in its entirety. Sentence three, paragraph two of
Section 70 of P.D. 1529 provides:
"The adverse claim shall be effective for a period of thirty days from the
date of registration."
At first blush, the provision in question would seem to restrict the
effectivity of the adverse claim to thirty days. But the above provision
cannot and should not be treated separately, but should be read in
relation to the sentence following, which reads:
"After the lapse of said period, the annotation of adverse claim may be
cancelled upon filing of a verified petition therefor by the party in
interest."
12
If the rationale of the law was for the adverse claim to ipso facto lose
force and effect after the lapse of thirty days, then it would not have
been necessary to include the foregoing caveat to clarify and complete
the rule. For then, no adverse claim need be cancelled. If it has been
automatically terminated by mere lapse of time, the law would not have
required the party in interest to do a useless act.
A statute's clauses and phrases must not be taken separately, but in its
relation to the statute's totality. Each statute must, in fact, be construed
as to harmonize it with the pre-existing body of laws. Unless clearly
repugnant, provisions of statutes must be reconciled. The printed
pages of the published Act, its history, origin, and its purposes may be
examined by the courts in their construction. x x x.
xxxx
Construing the provision as a whole would reconcile the apparent
inconsistency between the portions of the law such that the provision
on cancellation of adverse claim by verified petition would serve to
qualify the provision on the effectivity period. The law, taken together,
simply means that the cancellation of the adverse claim is still
necessary to render it ineffective, otherwise, the inscription will remain
annotated and shall continue as a lien upon the property. For if the
adverse claim has already ceased to be effective upon the lapse of
said period, its cancellation is no longer necessary and the process of
cancellation would be a useless ceremony.
It should be noted that the law employs the phrase "may be cancelled,"
which obviously indicates, as inherent in its decision making power,
that the court may or may not order the cancellation of an adverse
claim, notwithstanding such provision limiting the effectivity of an
adverse claim for thirty days from the date of registration. The court
cannot be bound by such period as it would be inconsistent with the
very authority vested in it. A fortiori, the limitation on the period of
effectivity is immaterial in determining the validity or invalidity of an
adverse claim which is the principal issue to be decided in the court
hearing. It will therefore depend upon the evidence at a proper hearing
for the court to determine whether it will order the cancellation of the
adverse claim or not.
To interpret the effectivity period of the adverse claim as absolute and
without qualification limited to thirty days defeats the very purpose for
which the statute provides for the remedy of an inscription of adverse
claim, as the annotation of an adverse claim is a measure designed to
protect the interest of a person over a piece of real property where the
registration of such interest or right is not otherwise provided for by the
Land Registration Act or Act 496 (now P.D. 1529 or the Property
Registration Decree), and serves as a warning to third parties dealing
with said property that someone is claiming an interest or the same or
a better right than the registered owner thereof.
The reason why the law provides for a hearing where the validity of the
adverse claim is to be threshed out is to afford the adverse claimant an
opportunity to be heard, providing a venue where the propriety of his
claimed interest can be established or revoked, all for the purpose of
determining at last the existence of any encumbrance on the title
arising from such adverse claim. This is in line with the provision
immediately following:
"Provided, however, that after cancellation, no second adverse claim
shall be registered by the same claimant."
Should the adverse claimant fail to sustain his interest in the property,
the adverse claimant will be precluded from registering a second
adverse claim based on the same ground.
It was held that "validity or efficaciousness of the claim may only be
determined by the Court upon petition by an interested party, in which
event, the Court shall order the immediate hearing thereof and make
the proper adjudication as justice and equity may warrant. And it is only
when such claim is found unmeritorious that the registration of the
adverse claim may be cancelled, thereby protecting the interest of the
adverse claimant and giving notice and warning to third
parties."80 (Emphases supplied.)
Whether under Section 110 of the Land Registration Act or Section 70
of the Property Registration Decree, notice of adverse claim can only
be cancelled after a party in interest files a petition for cancellation
before the RTC wherein the property is located, and the RTC conducts
a hearing and determines the said claim to be invalid or unmeritorious.
No petition for cancellation has been filed and no hearing has been
conducted herein to determine the validity or merit of the adverse claim
of the Torbela siblings. Entry No. 520469 cancelled the adverse claim
of the Torbela siblings, annotated as Entry Nos. 274471-774472, upon
the presentation by Dr. Rosario of a mere Cancellation and Discharge When it comes to the improvements on Lot No. 356-A, both the
of Mortgage. Torbela siblings (as landowners) and Dr. Rosario (as builder) are
deemed in bad faith. The Torbela siblings were aware of the
construction of a building by Dr. Rosario on Lot No. 356-A, while Dr.
Regardless of whether or not the Register of Deeds should have
Rosario proceeded with the said construction despite his knowledge
inscribed Entry No. 520469 on TCT No. 52751, Banco Filipino could
that Lot No. 356-A belonged to the Torbela siblings. This is the case
not invoke said inscription in support of its claim of good faith. There
contemplated under Article 453 of the Civil Code, which reads:
were several things amiss in Entry No. 520469 which should have
already aroused suspicions in Banco Filipino, and compelled the bank
to look beyond TCT No. 52751 and inquire into Dr. Rosario’s title. First, ART. 453. If there was bad faith, not only on the part of the person who
Entry No. 520469 does not mention any court order as basis for the built, planted or sowed on the land of another, but also on the part of
cancellation of the adverse claim. Second, the adverse claim was not a the owner of such land, the rights of one and the other shall be the
mortgage which could be cancelled with Dr. Rosario’s Cancellation and same as though both had acted in good faith.
Discharge of Mortgage. And third, the adverse claim was against Dr.
Rosario, yet it was cancelled based on a document also executed by
It is understood that there is bad faith on the part of the landowner
Dr. Rosario.
whenever the act was done with his knowledge and without opposition
on his part. (Emphasis supplied.)
It is a well-settled rule that a purchaser or mortgagee cannot close his
eyes to facts which should put a reasonable man upon his guard, and
When both the landowner and the builder are in good faith, the
then claim that he acted in good faith under the belief that there was no
following rules govern:
defect in the title of the vendor or mortgagor. His mere refusal to
believe that such defect exists, or his willful closing of his eyes to the
possibility of the existence of a defect in the vendor's or mortgagor's ART. 448. The owner of the land on which anything has been built,
title, will not make him an innocent purchaser or mortgagee for value, if sown or planted in good faith, shall have the right to appropriate as his
it afterwards develops that the title was in fact defective, and it appears own the works, sowing or planting, after payment of the indemnity
that he had such notice of the defects as would have led to its provided for in articles 546 and 548, or to oblige the one who built or
discovery had he acted with the measure of precaution which may be planted to pay the price of the land, and the one who sowed, the
required of a prudent man in a like situation.81 proper rent. However, the builder or planter cannot be obliged to buy
the land if its value is considerably more than that of the building or
trees. In such case, he shall pay reasonable rent, if the owner of the
While the defective cancellation of Entry Nos. 274471-274472 by Entry
land does not choose to appropriate the building or trees after proper
No. 520469 might not be evident to a private individual, the same
indemnity. The parties shall agree upon the terms of the lease and in
should have been apparent to Banco Filipino. Banco Filipino is not an
case of disagreement, the court shall fix the terms thereof.
ordinary mortgagee, but is a mortgagee-bank, whose business is
impressed with public interest. In fact, in one case, 82 the Court
explicitly declared that the rule that persons dealing with registered ART. 546. Necessary expenses shall be refunded to every possessor;
lands can rely solely on the certificate of title does not apply to banks. but only the possessor in good faith may retain the thing until he has
In another case,83 the Court adjudged that unlike private individuals, a been reimbursed therefor.
bank is expected to exercise greater care and prudence in its dealings,
including those involving registered lands. A banking institution is
Useful expenses shall be refunded only to the possessor in good faith
expected to exercise due diligence before entering into a mortgage
with the same right of retention, the person who has defeated him in
contract. The ascertainment of the status or condition of a property
the possession having the option of refunding the amount of the
offered to it as security for a loan must be a standard and
expenses or of paying the increase in value which the thing may have
indispensable part of its operations.
acquired by reason thereof.

Banco Filipino cannot be deemed a mortgagee in good faith, much less

ART. 548. Expenses for pure luxury or mere pleasure shall not be
a purchaser in good faith at the foreclosure sale of Lot No. 356-A.
refunded to the possessor in good faith; but he may remove the
Hence, the right of the Torbela siblings over Lot No. 356-A is superior
ornaments with which he has embellished the principal thing if it suffers
over that of Banco Filipino; and as the true owners of Lot No. 356-A,
no injury thereby, and if his successor in the possession does not
the Torbela siblings are entitled to a reconveyance of said property
prefer to refund the amount expended.
even from Banco Filipino.

Whatever is built, planted, or sown on the land of another, and the

Nonetheless, the failure of Banco Filipino to comply with the due
diligence requirement was not the result of a dishonest purpose, some
moral obliquity, or breach of a known duty for some interest or ill will
that partakes of fraud that would justify damages.84
Given the reconveyance of Lot No. 356-A to the Torbela siblings, there
is no more need to address issues concerning redemption, annulment
of the foreclosure sale and certificate of sale (subject matter of Civil
Case No. U-4733), or issuance of a writ of possession in favor of
Banco Filipino (subject matter of Pet. Case No. U-822) insofar as Lot
No. 356-A is concerned. Such would only be superfluous. Banco
Filipino, however, is not left without any recourse should the
foreclosure and sale of the two other mortgaged properties be
insufficient to cover Dr. Rosario’s loan, for the bank may still bring a
proper suit against Dr. Rosario to collect the unpaid balance.
The rules on accession shall govern the improvements on Lot No. 356-
A and the rents thereof.
The accessory follows the principal. The right of accession is
recognized under Article 440 of the Civil Code which states that "[t]he
ownership of property gives the right by accession to everything which
is produced thereby, or which is incorporated or attached thereto,
either naturally or artificially."
improvements or repairs made thereon, belong to the owner of the
land. Where, however, the planter, builder, or sower has acted in good
faith, a conflict of rights arises between the owners and it becomes
necessary to protect the owner of the improvements without causing
injustice to the owner of the land. In view of the impracticability of
creating what Manresa calls a state of "forced co-ownership," the law
has provided a just and equitable solution by giving the owner of the
land the option to acquire the improvements after payment of the
proper indemnity or to oblige the builder or planter to pay for the land
and the sower to pay the proper rent. It is the owner of the land who is
allowed to exercise the option because his right is older and because,
by the principle of accession, he is entitled to the ownership of the
accessory thing.85
The landowner has to make a choice between appropriating the
building by paying the proper indemnity or obliging the builder to pay
the price of the land. But even as the option lies with the landowner,
the grant to him, nevertheless, is preclusive. He must choose one. He
cannot, for instance, compel the owner of the building to remove the
building from the land without first exercising either option. It is only if
the owner chooses to sell his land, and the builder or planter fails to
purchase it where its value is not more than the value of the
improvements, that the owner may remove the improvements from the
land. The owner is entitled to such remotion only when, after having
chosen to sell his land, the other party fails to pay for the same.86

There is no question that Dr. Rosario is the builder of the

This case then must be remanded to the RTC for the determination of
improvements on Lot No. 356-A. The Torbela siblings themselves
matters necessary for the proper application of Article 448, in relation
alleged that they allowed Dr. Rosario to register Lot No. 356-A in his
to Article 546, of the Civil Code. Such matters include the option that
name so he could obtain a loan from DBP, using said parcel of land as
the Torbela siblings will choose; the amount of indemnity that they will
security; and with the proceeds of the loan, Dr. Rosario had a building
pay if they decide to appropriate the improvements on Lot No. 356-A;
constructed on Lot No. 356-A, initially used as a hospital, and then
the value of Lot No. 356-A if they prefer to sell it to Dr. Rosario; or the
later for other commercial purposes. Dr. Rosario supervised the
reasonable rent if they opt to sell Lot No. 356-A to Dr. Rosario but the
construction of the building, which began in 1965; fully liquidated the
value of the land is considerably more than the improvements. The
loan from DBP; and maintained and administered the building, as well
determination made by the Court of Appeals in its Decision dated June
as collected the rental income therefrom, until the Torbela siblings
instituted Civil Case No. U-4359 before the RTC on February 13, 1986.
13
29, 1999 that the current value of Lot No. 356-A is ₱1,200,000.00 is
not supported by any evidence on record.
Should the Torbela siblings choose to appropriate the improvements
on Lot No. 356-A, the following ruling of the Court in Pecson v. Court of
Appeals87 is relevant in the determination of the amount of indemnity
under Article 546 of the Civil Code:
Article 546 does not specifically state how the value of the useful
improvements should be determined. The respondent court and the
private respondents espouse the belief that the cost of construction of
the apartment building in 1965, and not its current market value, is
sufficient reimbursement for necessary and useful improvements made
by the petitioner. This position is, however, not in consonance with
previous rulings of this Court in similar cases. In Javier vs. Concepcion,
Jr., this Court pegged the value of the useful improvements consisting
of various fruits, bamboos, a house and camarin made of strong
material based on the market value of the said improvements. In
Sarmiento vs. Agana, despite the finding that the useful improvement,
a residential house, was built in 1967 at a cost of between eight
thousand pesos (₱8,000.00) to ten thousand pesos (₱10,000.00), the
landowner was ordered to reimburse the builder in the amount of forty
thousand pesos (₱40,000.00), the value of the house at the time of the
trial. In the same way, the landowner was required to pay the "present
value" of the house, a useful improvement, in the case of De Guzman
vs. De la Fuente, cited by the petitioner.
The objective of Article 546 of the Civil Code is to administer justice
between the parties involved. In this regard, this Court had long ago
stated in Rivera vs. Roman Catholic Archbishop of Manila that the said
provision was formulated in trying to adjust the rights of the owner and
possessor in good faith of a piece of land, to administer complete
justice to both of them in such a way as neither one nor the other may
enrich himself of that which does not belong to him. Guided by this
precept, it is therefore the current market value of the improvements
which should be made the basis of reimbursement. A contrary ruling
would unjustly enrich the private respondents who would otherwise be
allowed to acquire a highly valued income-yielding four-unit apartment
building for a measly amount. Consequently, the parties should
therefore be allowed to adduce evidence on the present market value
of the apartment building upon which the trial court should base its
finding as to the amount of reimbursement to be paid by the
landowner.88 (Emphases supplied.)
Still following the rules of accession, civil fruits, such as rents, belong
to the owner of the building.89 Thus, Dr. Rosario has a right to the rents
of the improvements on Lot No. 356-A and is under no obligation to
render an accounting of the same to anyone. In fact, it is the Torbela
siblings who are required to account for the rents they had collected
from the lessees of the commercial building and turn over any balance
to Dr. Rosario. Dr. Rosario’s right to the rents of the improvements on
Lot No. 356-A shall continue until the Torbela siblings have chosen
their option under Article 448 of the Civil Code. And in case the Torbela
siblings decide to appropriate the improvements, Dr. Rosario shall
have the right to retain said improvements, as well as the rents thereof,
until the indemnity for the same has been paid. 90
Dr. Rosario is liable for damages to the Torbela siblings.
The Court of Appeals ordered Dr. Rosario to pay the Torbela siblings
₱300,000.00 as moral damages; ₱200,000.00 as exemplary damages;
and ₱100,000.00 as attorney’s fees.
Indeed, Dr. Rosario’s deceit and bad faith is evident when, being fully
aware that he only held Lot No. 356-A in trust for the Torbela siblings,
he mortgaged said property to PNB and Banco Filipino absent the
consent of the Torbela siblings, and caused the irregular cancellation
of the Torbela siblings’ adverse claim on TCT No. 52751. Irrefragably,
Dr. Rosario’s betrayal had caused the Torbela siblings (which included
Dr. Rosario’s own mother, Eufrosina Torbela Rosario) mental anguish,
serious anxiety, and wounded feelings. Resultantly, the award of moral
damages is justified, but the amount thereof is reduced to
₱200,000.00.
In addition to the moral damages, exemplary damages may also be
imposed given that Dr. Rosario’s wrongful acts were accompanied by
bad faith. However, judicial discretion granted to the courts in the
assessment of damages must always be exercised with balanced
restraint and measured objectivity. The circumstances of the case call
for a reduction of the award of exemplary damages to ₱100,000.00.
As regards attorney's fees, they may be awarded when the defendant's
act or omission has compelled the plaintiff to litigate with third persons
or to incur expenses to protect his interest. Because of Dr. Rosario’s
acts, the Torbela siblings were constrained to institute several cases
against Dr. Rosario and his spouse, Duque-Rosario, as well as Banco
14
Filipino, which had lasted for more than 25 years. Consequently, the
Torbela siblings are entitled to an award of attorney's fees and the
amount of ₱100,000.00 may be considered rational, fair, and
reasonable.
Banco Filipino is entitled to a writ of possession for Lot No. 5-F-8-C-2-
B-2-A.
The Court emphasizes that Pet. Case No. U-822, instituted by Banco
Filipino for the issuance of a writ of possession before the RTC of
Urdaneta, included only Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A
(Lot No. 4489, the third property mortgaged to secure Dr. Rosario’s
loan from Banco Filipino, is located in Dagupan City, Pangasinan, and
the petition for issuance of a writ of possession for the same should be
separately filed with the RTC of Dagupan City). Since the Court has
already granted herein the reconveyance of Lot No. 356-A from Banco
Filipino to the Torbela siblings, the writ of possession now pertains only
to Lot No. 5-F-8-C-2-B-2-A.
To recall, the Court of Appeals affirmed the issuance by the RTC of a
writ of possession in favor of Banco Filipino. Dr. Rosario no longer
appealed from said judgment of the appellate court. Already legally
separated from Dr. Rosario, Duque-Rosario alone challenges the writ
of possession before this Court through her Petition in G.R. No.
140553.
Duque-Rosario alleges in her Petition that Lot No. 5-F-8-C-2-B-2-A had
been registered in her name under TCT No. 104189. Yet, without a
copy of TCT No. 104189 on record, the Court cannot give much
credence to Duque-Rosario’s claim of sole ownership of Lot No. 5-F-8-
C-2-B-2-A. Also, the question of whether Lot No. 5-F-8-C-2-B-2-A was
the paraphernal property of Duque-Rosario or the conjugal property of
the spouses Rosario would not alter the outcome of Duque-Rosario’s
Petition.
The following facts are undisputed: Banco Filipino extrajudicially
foreclosed the mortgage constituted on Lot No. 5-F-8-C-2-B-2-A and
the two other properties after Dr. Rosario defaulted on the payment of
his loan; Banco Filipino was the highest bidder for all three properties
at the foreclosure sale on April 2, 1987; the Certificate of Sale dated
April 2, 1987 was registered in April 1987; and based on the Certificate
of Final Sale dated May 24, 1988 and Affidavit of Consolidation dated
May 25, 1988, the Register of Deeds cancelled TCT No. 104189 and
issued TCT No. 165812 in the name of Banco Filipino for Lot No. 5-F-
8-C-2-B-2-A on June 7, 1988.
The Court has consistently ruled that the one-year redemption period
should be counted not from the date of foreclosure sale, but from the
time the certificate of sale is registered with the Registry of Deeds. 91 No
copy of TCT No. 104189 can be found in the records of this case, but
the fact of annotation of the Certificate of Sale thereon was admitted by
the parties, only differing on the date it was made: April 14, 1987
according to Banco Filipino and April 15, 1987 as maintained by
Duque-Rosario. Even if the Court concedes that the Certificate of Sale
was annotated on TCT No. 104189 on the later date, April 15, 1987,
the one-year redemption period already expired on April 14,
1988.92 The Certificate of Final Sale and Affidavit of Consolidation were
executed more than a month thereafter, on May 24, 1988 and May 25,
1988, respectively, and were clearly not premature.
It is true that the rule on redemption is liberally construed in favor of the
original owner of the property. The policy of the law is to aid rather than
to defeat him in the exercise of his right of redemption.93 However, the
liberal interpretation of the rule on redemption is inapplicable herein as
neither Duque-Rosario nor Dr. Rosario had made any attempt to
redeem Lot No. 5-F-8-C-2-B-2-A. Duque-Rosario could only rely on the
efforts of the Torbela siblings at redemption, which were unsuccessful.
While the Torbela siblings made several offers to redeem Lot No. 356-
A, as well as the two other properties mortgaged by Dr. Rosario, they
did not make any valid tender of the redemption price to effect a valid
redemption. The general rule in redemption is that it is not sufficient
that a person offering to redeem manifests his desire to do so. The
statement of intention must be accompanied by an actual and
simultaneous tender of payment. The redemption price should either
be fully offered in legal tender or else validly consigned in court. Only
by such means can the auction winner be assured that the offer to
redeem is being made in good faith. 94 In case of disagreement over the
redemption price, the redemptioner may preserve his right of
redemption through judicial action, which in every case, must be filed
within the one-year period of redemption. The filing of the court action
to enforce redemption, being equivalent to a formal offer to redeem,
would have the effect of preserving his redemptive rights and "freezing"
the expiration of the one-year period.95 But no such action was
instituted by the Torbela siblings or either of the spouses Rosario.
Duque-Rosario also cannot bar the issuance of the writ of possession G.R. No. 193453               June 5, 2013
over Lot No. 5-F-8-C-2-B-2-A in favor of Banco Filipino by invoking the
pendency of Civil Case No. U-4359, the Torbela siblings’ action for
SPOUSES RUBIN AND PORTIA HOJAS, Petitioners,
recovery of ownership and possession and damages, which
vs.
supposedly tolled the period for redemption of the foreclosed
PHILIPPINE AMANAH BANK AND RAMON KUE, Respondents.
properties. Without belaboring the issue of Civil Case No. U-4359
suspending the redemption period, the Court simply points out to
Duque-Rosario that Civil Case No. U-4359 involved Lot No. 356-A DECISION
only, and the legal consequences of the institution, pendency, and
resolution of Civil Case No. U-4359 apply to Lot No. 356-A alone.
MENDOZA, J.:

Equally unpersuasive is Duque-Rosario’s argument that the writ of

This is a petition for review on certiorari assailing the July 28, 2010
possession over Lot No. 5-F-8-C-2-B-2-A should not be issued given
Decision1 of the Court of Appeals (CA), in CA-G.R. CV No. 55722,
the defects in the conduct of the foreclosure sale (i.e., lack of personal
which affirmed the May 27, 1996 Decision of the Regional Trial Court,
notice to Duque-Rosario) and consolidation of title (i.e., failure to
Branch 13, Zamboanga City (RTC), dismissing Civil Case No. 1028
provide Duque-Rosario with copies of the Certificate of Final Sale).
(3952), an action for "Determination of True Balance of Mortgage,
Debt, Annulment/Setting
The right of the purchaser to the possession of the foreclosed property
becomes absolute upon the expiration of the redemption period. The
Aside of Extrajudicial Foreclosure of Mortgage and Damages, with
basis of this right to possession is the purchaser's ownership of the
Prayer for Preliminary Injunction."
property. After the consolidation of title in the buyer's name for failure
of the mortgagor to redeem, the writ of possession becomes a matter
of right and its issuance to a purchaser in an extrajudicial foreclosure is The petitioners, Spouses Rubin and Portia Hojas (petitioners), alleged
merely a ministerial function.961avvphi1 that on April 11, 1980, they secured a loan from respondent Philippine
Amanah Bank (PAB) in the amount of ₱450,000.00; that this loan was
secured by a mortgage, covering both personal and real properties;
The judge with whom an application for a writ of possession is filed
that from May 14, 1981 to June 27, 1986, they made various payments
need not look into the validity of the mortgage or the manner of its
amounting to ₱486,162.13; that PAB, however, did not properly credit
foreclosure. Any question regarding the validity of the mortgage or its
their payments; that based on the summary of payments furnished by
foreclosure cannot be a legal ground for the refusal to issue a writ of
PAB to them on February 24, 1989, only 13 payments were credited,
possession. Regardless of whether or not there is a pending suit for
erroneously amounting to ₱317,048.83; that PAB did not credit the
the annulment of the mortgage or the foreclosure itself, the purchaser
payment they made totaling ₱165,623.24; and that, in the statement of
is entitled to a writ of possession, without prejudice, of course, to the
their account as of October 17, 1984, PAB listed their total payment as
eventual outcome of the pending annulment case. The issuance of a
₱412,211.54 on the principal, and ₱138,472.09 as 30% interest, all
writ of possession in favor of the purchaser in a foreclosure sale is a
amounting to ₱550,683.63, despite the fact that at that time, petitioners
ministerial act and does not entail the exercise of discretion.97
had already paid the total sum of ₱486,162.13. 2

WHEREFORE, in view of the foregoing, the Petition of the Torbela

Petitioners further averred that for failure to pay the loan, PAB applied
siblings in G.R. No. 140528 is GRANTED, while the Petition of Lena
for the extrajudicial foreclosure of the mortgaged real properties of
Duque-Rosario in G.R. No. 140553 is DENIED for lack of merit. The
petitioners with the Ex-Officio Sheriff; that consequently, a Notice of
Decision dated June 29, 1999 of the Court of Appeals in CA-G.R. CV
Extrajudicial Foreclosure was issued on January 12, 1987 setting the
No. 39770, which affirmed with modification the Amended Decision
foreclosure sale on April 21, 1987 and, stating therein the mortgage
dated January 29, 1992 of the RTC in Civil Case Nos. U-4359 and U-
debt in the sum of ₱450,000.00; and that, in the public auction
4733 and Pet. Case No. U-822, is AFFIRMED WITH
conducted, PAB acquired said real property. 3
MODIFICATIONS, to now read as follows:

It was further alleged that on March 9, 1988, through the intervention of

(1) Banco Filipino is ORDERED to reconvey Lot No. 356-A
to the Torbela siblings;
(2) The Register of Deeds of Pangasinan is ORDERED to
cancel TCT No. 165813 in the name of Banco Filipino and to
issue a new certificate of title in the name of the Torbela
siblings for Lot No. 356-A;
(3) The case is REMANDED to the RTC for further
proceedings to determine the facts essential to the proper
application of Articles 448 and 546 of the Civil Code,
particularly: (a) the present fair market value of Lot No. 356-
A; (b) the present fair market value of the improvements
thereon; (c) the option of the Torbela siblings to appropriate
the improvements on Lot No. 356-A or require Dr. Rosario to
purchase Lot No. 356-A; and (d) in the event that the Torbela
siblings choose to require Dr. Rosario to purchase Lot No.
356-A but the value thereof is considerably more than the
improvements, then the reasonable rent of Lot No. 356-A to
be paid by Dr. Rosario to the Torbela siblings;
then Senator Aquilino Pimentel, Farouk A. Carpizo (Carpizo), the
OICPresident of PAB, wrote Roberto Hojas (Roberto), petitioners’ son,
informing him that although the one-year redemption period would
expire on April 21, 1988, by virtue of the bank’s incentive scheme, the
redemption period was extended until December 31, 1988; that despite
said letter from the OIC-President, the OIC of the Project Development
Department of PAB wrote Rubin Hojas that the real properties acquired
by PAB would be sold in a public bidding before the end of August,
1988; that on November 4, 1988, a public bidding was conducted; that
in the said bidding, the mortgaged properties were awarded to
respondent Ramon Kue (Kue); that subsequently, they received a letter
from the OIC of the Project Development Department, dated January
3, 1989, informing them that they had fifteen (15) days from receipt
within which to vacate the premises; that Kue then sent another letter,
dated January 31, 1989, informing them that he had already acquired
the said property and that they were requested to vacate the premises
within fifteen (15) days from receipt thereof;4 and that because of this
development, on May 7, 1991, petitioners filed an action for
"Determination of True Balance of Mortgage Debt, Annulment/Setting
Aside of Extrajudicial Foreclosure of Mortgage and Damages, with
Prayer for Preliminary Injunction" against PAB.5

(4) The Torbela siblings are DIRECTED to submit an

accounting of the rents of the improvements on Lot No. 356-
A which they had received and to turn over any balance
thereof to Dr. Rosario;
(5) Dr. Rosario is ORDERED to pay the Torbela siblings
₱200,000.00 as moral damages, ₱100,000.00 as exemplary
damages, and ₱100,000.00 as attorney’s fees; and
(6) Banco Filipino is entitled to a writ of possession over Lot-
5-F-8-C-2-B-2-A, covered by TCT No. 165812. The RTC
Branch Clerk of Court is ORDERED to issue a writ of
possession for the said property in favor of Banco Filipino.
SO ORDERED.
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
On May 27, 1996, the RTC dismissed petitioners’ complaint. It ruled,
among others, that: 1) PAB was not guilty of bad faith in conducting the
extrajudicial foreclosure as it, at one time, even suspended the conduct
of the foreclosure upon the request of petitioners, who, nevertheless,
failed to exert effort to settle their accounts; 2) because petitioners
failed to redeem their properties within the period allowed, PAB
became its absolute owner and, as such, it had the right to sell the
same to Kue, who acquired the property for value and in good faith;
and 3) the subsequent foreclosure and auction sale having been
conducted above board and in accordance with the requisite legal
procedure, collusion between PAB and Kue was certainly alien to the
issue.6
Aggrieved, petitioners filed an appeal assailing the May 27, 1996 RTC
Decision. They asserted that the March 9, 1988 Letter of Carpizo to
Roberto Hojas extended the redemption period from April 21 to
December 31, 1988. Considering that they had relied on Carpizo’s
representation, PAB violated the principle of estoppel when it

15
conducted the public sale on November 4, 1988.7 Their basis was the
portion of said letter which stated:
xxxx
As the Bank has adopted an incentive scheme whereby payments are
liberalized to give chances to former owners to repossess their
properties, we suggest that you advise your parents to drop by at our
Zamboanga Office so they can avail of this rare privilege which shall be
good only up to December 31, 1988. (Emphasis supplied) 8
The CA was not sympathetic with petitioners’ position. It held that the
period of redemption was never extended. The date "December 31,
1988" was not an extension of the redemption period. It was merely the
last day for the availment of the liberalized payment for the
repossession of foreclosed assets under PAB’s incentive scheme.
PAB, through said letter, did not make an unqualified representation to
petitioners that it had extended the redemption period. As such, PAB
could not be said to have violated the principle of estoppel when it
conducted a public sale on November 4, 1988. 9 Thus, the dispositive
portion of the CA decision reads:
ACCORDINGLY, the instant appeal is DENIED. The Decision dated
May 27, 1996, of the Regional Trial Court, 9th Judicial Region, Branch
No. 13 of Zamboanga City, in Civil Case No. 1028 (3952), is
AFFIRMED.
SO ORDERED.10
Undaunted, petitioners filed the present petition for review. It
postulated the sole issue:
WHETHER OR NOT THE CA ERRED IN NOT HOLDING PAB TO
HAVE VIOLATED THE PRINCIPLE OF ESTOPPEL WHEN THE
LATTER CONDUCTED THE NOVEMBER 4, 1988 PUBLIC SALE.
Petitioners reiterated their argument that the November 4, 1988 public
sale by PAB was violative of the principle of estoppel because said
bank made it appear that the one-year redemption period was
extended. As such, when PAB sold the property before said date, they
suffered damages and were greatly prejudiced.11 They also argued that
since they manifested their interest in availing of the said "incentive
scheme," PAB should have, at the very least, waited until December
31, 1988, before it sold the subject foreclosed property in a public
auction.12
On the other hand, PAB explains that the purpose of the "incentive
scheme" was to give previous owners the chance to redeem their
properties on easy payment term basis, through condonation of some
charges and penalties and allowing payment by installment based on
their proposals which may be acceptable to PAB. Therefore, the March
9, 1988 Letter of Carpizo was an invitation for petitioners to submit a
proposal to PAB.13 It was not meant to extend the one-year redemption
period.
As early as August 11, 1988, PAB wrote petitioners informing them of
the scheduled public bidding. After receipt of the letter, petitioners went
to PAB to signify their willingness to avail of the said incentive scheme.
They, however, failed to submit a proposal. In fact, PAB did not hear
from petitioners again. As such, the respondent sold the subject
property in a public sale on November 4, 198814 PAB cited the RTC’s
finding that although the petitioners manifested their intention to avail
of the incentive scheme desire alone was not sufficient. Redemption is
not a matter of intent but involved making the proper payment or tender
of the price of the land within the specified period.15
The petition is bereft of merit.
Through estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or
disproved as against the person relying on it.16 This doctrine is based
on the grounds of public policy, fair dealing, good faith, and justice and
its purpose is to forbid one to speak against his own act,
representations or commitments to the injury of one to whom they were
directed and who reasonably relied on it.17 Thus, in order for this
doctrine to operate, a representation must have been made to the
detriment of another who relied on it. In other words, estoppel would
not lie against one who, in the first place, did not make any
representation.
In this case, a perusal of the letter, on which petitioners based their
position that the redemption period had been extended, shows
otherwise. Pertinent portions of the said letter read:
16
xxxx
Our records show that the above account has already been foreclosed
by the bank. However, the borrowers concerned can still exercise the
one (1) year right of redemption over the foreclosed properties until
April 21, 1988.
As the Bank has adopted an incentive scheme whereby payments are
liberalized to give chances to former owners to repossess their
properties, we suggest that you advise your parents to drop by at our
Zamboanga Office so they can avail of this rare privilege which shall be
good only up to December 31, 1988. [Emphases and Underscoring
Supplied]18
As correctly held by the RTC and upheld by the CA, the date
"December 31, 1988" refers to the last day when owners of foreclosed
properties, like petitioners, could submit their payment proposals to the
bank. The letter was very clear. It was about the availment of the
liberalized payment scheme of the bank. On the last day for
redemption, the letter was also clear. It was April 21, 1988. It was
never extended.
The opportunity given to the petitioners was to avail of the liberalized
payment scheme which program would expire on December 31, 1988.
As explained by Abraham Iribani (Iribani), the OIC of the Project
Development Department of PAB, it was to give a chance to previous
owners to repossess their properties on easy term basis, possibly by
condonation of charges and penalties and payment on instalment. The
letter of Carpizo was an invitation to the petitioners to come to the bank
with their proposal. It appears that the petitioners could not come up
with a proposal acceptable to the bank.
For said reason, the mortgaged property was included in the list of
mortgaged properties that would be sold through a scheduled public
bidding. Thus, on August 11, 1988, Iribani wrote the petitioners about
the scheduled bidding. In response, the petitioners told Iribani that they
would go Manila to explain their case. They did not, however, return
even after the public bidding. In this regard, the CA was correct when it
wrote:
Here, there is no estoppel to speak of. The letter does not show that
the Bank had unqualifiedly represented to the Hojases that it had
extended the redemption period to December 31, 1988. Thus, the
Hojases have no basis in positing that the public sale conducted on
November 4, 1988 was null and void for having been prematurely
conducted.19
Moreover, petitioners’ allegation that they had signified their intention
to avail of the incentive scheme (which they have equated to their
intention to redeem the property), did not amount to an exercise of
redemption precluding the bank from making the public sale.20 In the
case of China Banking Corporation v. Martir,21 this Court expounded on
what constitutes a proper exercise of the right of redemption, to wit:
The general rule in redemption is that it is not sufficient that a person
offering to redeem manifests his desire to do so. The statement of
intention must be accompanied by an actual and simultaneous tender
of payment. This constitutes the exercise of the right to repurchase.
In several cases decided by the Court where the right to repurchase
was held to have been properly exercised, there was an unequivocal
tender of payment for the full amount of the repurchase price.
Otherwise, the offer to redeem is ineffectual. Bona fide redemption
necessarily implies a reasonable and valid tender of the entire
repurchase price, otherwise the rule on the redemption period fixed by
law can easily be circumvented.
Moreover, jurisprudence also characterizes a valid tender of payment
as one where the full redemption price is tendered. Consequently, in
this case, the offer by respondents on July 24, 1986 to redeem the
foreclosed properties for ₱1,872,935 and the subsequent consignation
in court of ₱1,500,000 on August 27, 1986, while made within the
period of redemption, was ineffective since the amount offered and
actually consigned not only did not include the interest but was in fact
also way below the ₱2,782,554.66 paid by the highest
bidder/purchaser of the properties during the auction sale.
In Bodiongan vs. Court of Appeals, we held:
In order to effect a redemption, the judgment debtor must pay the
purchaser the redemption price composed of the following: (1) the
price which the purchaser paid for the property; (2) interest of 1% per
month on the purchase price; (3) the amount of any assessments or
taxes which the purchaser may have paid on the property after the
purchase; and (4) interest of 1% per month on such assessments and
taxes x x x.
Furthermore, Article 1616 of the Civil Code of the Philippines provides:
The vendor cannot avail himself of the right to repurchase without
returning to the vendee the price of the sale x x x.
It is not difficult to understand why the redemption price should either
be fully offered in legal tender or else validly consigned in court. Only
by such means can the auction winner be assured that the offer to
redeem is being made in good faith.1âwphi1
Respondents' repeated requests for information as regards the amount
of loan availed from the credit line and the amount of redemption, and
petitioner's failure to accede to said requests do not invalidate the
foreclosure. Respondents can find other ways to know the redemption
price. For one, they can examine the Certificate of Sale registered with
the Register of Deeds to verify the purchase price, or upon the filing of
their complaint, they could have moved for a computation of the
redemption price and consigned the same to the court. At any rate,
whether or not respondents '"were diligent in asserting their willingness
to pay is irrelevant. Redemption within the period allowed by law is not
a matter of intent but a question of payment or valid tender of the full
redemption price within said period.
Even the complaint instituted by respondents cannot aid their plight
because the institution of an action to annul a foreclosure sale does not
suspend the running of the redemption period. (Underscoring
supplied)22
In the case at bench, the record is bereft of concrete evidence that
would show that, aside from the fact that petitioners manifested their
intention to avail of the scheme, they were also ready to pay the
redemption price. Hence, as they failed to exercise their right of
redemption and failed to take advantage of the liberalized incentive
scheme, PAB was well within its right to sell its property in a public
sale.
WHEREFORE, the petition is DENIED.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice
G. R. No. L-41001 September 30, 1976
MANILA LODGE NO. 761, BENEVOLENT AND PROTECTIVE
ORDER OF THE ELKS, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, CITY OF MANILA, and
TARLAC DEVELOPMENT CORPORATION, respondents.
No. L-41012 September 30, 1976
TARLAC DEVELOPMENT CORPORATION, petitioner,
vs.
HONORABLE COURT OF APPEALS, CITY OF MANILA, LODGE
NO. 761, BENEVOLENT AND PROTECTIVE ORDER OF ELKS,
INC., respondents.
CASTRO, C.J.:têñ.£îhqwâ£
STATEMENT OF THE CASE AND STATEMENTOF THE FACTS
These two cases are petitions on certiorari to review the decision dated
June 30, 1975 of the Court of Appeals in CA-G.R. No. 51590-R entitled
"Tarlac Development Corporation vs. City of Manila, and Manila Lodge
No. 761, Benevolent and Protective Order of Elks, Inc.," affirming the
trial court's finding in Civil Case No. 83009 that the property subject of
the decision a quo is a "public park or plaza."
On June 26, 1905 the Philippine Commission enacted Act No. l360
which authorized the City of Manila to reclaim a portion of Manila Bay.
The reclaimed area was to form part of the Luneta extension. The Act
provided that the reclaimed area "Shall be the property of the City of
Manila" and that "the City of Manila is hereby authorized to set aside a
tract of the reclaimed land formed by the Luneta extension x x x at the
17
north end not to exceed five hundred feet by six hundred feet in size,
for a hotel site, and to lease the same, with the approval of the
Governor General, to a responsible person or corporation for a term
not exceed ninety-nine years."
Subsequently, the Philippine Commission passed on May 18, 1907 Act
No. 1657, amending Act No. 1360, so as to authorize the City of'
Manila either to lease or to sell the portion set aside as a hotel site.
The total area reclaimed was a little over 25 hectares. The City of
Manila applied for the registration of the reclaimed area, and on
January 20, 1911, O.C.T. No. 1909 was issued in the name of the City
of Manila. The title described the registered land as "un terreno
conocido con el nombre de Luneta Extension, situato en el distrito de
la Ermita x x x." The registration was "subject, however to such of the
incumbrances mentioned in Article 39 of said law (Land Registration
Act) as may be subsisting" and "sujeto a las disposiciones y
condiciones impuestas en la Ley No. 1360; y sujeto tambein a los
contratos de venta, celebrados y otorgados por la Ciudad de Manila a
favor del Army and Navy Club y la Manila Lodge No. 761, Benevolent
and Protective Order of Elks, fechados respectivamente, en 29 de
Diciembre de 1908 y 16 de Enero de 1909." 1
On July 13, 1911 the City of Manila, affirming a prior sale dated
January 16, 1909 cancelled 5,543.07 square meters of the reclaimed
area to the Manila Lodge No. 761, Benevolent and Protective Order of
Elks of the U.S.A. (BPOE, for short) on the basis of which TCT No.
2195 2 was issued to the latter over the Marcela de terreno que es
parte de la Luneta Extension, Situada en el Distrito le la Ermita ... ." At
the back of this title vas annotated document 4608/T-1635, which in
part reads as follows: "que la citada Ciusdad de Manila tendra derecho
a su opcion, de recomparar la expresada propiedad para fines publicos
solamete in cualquier tiempo despues de cincuenta anos desde el 13
le Julio le 1911, precio de la misma propiedad, mas el valor que
entonces tengan las mejoras."
For the remainder of the Luneta Extension, that is, after segregating
therefrom the portion sold to the Manila Lodge No. 761, PBOE, a new
Certificate of Title No. 2196 3 was issued on July 17, 1911 to the City of
Manila.
Manila Lodge No. 761, BPOE, subsequently sold the said 5,543.07
square meters to the Elks Club, Inc., to which was issued TCT No.
67488. 4 The registered owner, "The Elks Club, Inc.," was later
changed by court oder to "Manila Lodge No. 761, Benevolent and
Protective Order of Elks, Inc."
In January 1963 the BPOE. petitioned the Court of First Instance of
Manila, Branch IV, for the cancellation of the right of the City of Manila
to repurchase the property This petition was granted on February 15,
1963.
On November 19, 1963 the BPOE sold for the sum of P4,700,000 the
land together with all the improvements thereon to the Tarlac
Development Corporation (TDC, for short) which paid P1,700.000 as
down payment and mortgaged to the vendor the same realty to secure
the payment of the balance to be paid in quarterly installments.5 At the
time of the sale,, there was no annotation of any subsisting lien on the
title to the property. On December 12, 1963 TCT No. 73444 was
issued to TDC over the subject land still described as "UNA PARCELA
DE TERRENO, que es parte de la Luneta Extension, situada en el
Distrito de Ermita ... ."
In June 1964 the City of Manila filed with the Court of First Instance of
Manila a petition for the reannotation of its right to repurchase; the
court, after haering, issued an order, dated November 19, 1964,
directing the Register of Deeds of the City of Manila to reannotate in
toto the entry regarind the right of the City of Manila to repurchase the
property after fifty years. From this order TDC and BPOE appealed to
this Court which on July 31, 1968 affirmed in G.R. Nos. L-24557 and L-
24469 the trial court's order of reannotation, but reserved to TDC the
right to bring another action for the clarification of its rights.
As a consequence of such reservation, TDC filed on April 28, 1971
against the City of Manila and the Manila Lodge No. 761, BPOE, a
complaint, docketed as Civil Case No. 83009 of the Court of First
Instance of Manila, containing three causes of action and praying -
a) On the first cause of action, that the plaintiff TDC be declared to
have purchased the parcel of land now in question with the buildings
and improvements thereon from the defendant BPOE for value and in
good faith, and accordingly ordering the cancellation of Entry No.
4608/T-1635 on Transfer Certificate of Title No. 73444 in the name of
the Plaintiff;
b) On the second cause of action, ordering the defendant City of
Manila to pay the plaintiff TDC damages in the sum of note less than
one hundred thousand pesos (P100,000.00);
c) On the third cause of action, reserving to the plaintiff TDC the right
to recover from the defendant BPOE the amounts mentioned in par.
XVI of the complaint in accordance with Art. 1555 of the Civil Code, in
the remote event that the final judgment in this case should be that the
parcel of land now in question is a public park; and
d) For costs, and for such other and further relief as the Court may
deem just and equitable. 6
Therein defendant City of Manila, in its answer dated May 19, 1971,
admitted all the facts alleged in the first cause of action except the
allegation that TDC purchased said property "for value and in good
faith," but denied for lack of knowledge or information the allegations in
the second and third causes of action. As, special and affirmative
defense, the City of Manila claimed that TDC was not a purchaser in
good faith for it had actual notice of the City's right to repurchase which
was annotated at the back of the title prior to its cancellation, and that,
assuming arguendo that TDC had no notice of the right to repurchase,
it was, nevertheless, under obligation to investigate inasmuch as its
title recites that the property is a part of the Luneta extension. 7
The Manila Lodge No. 761, BPOE, in its answer dated June 7, 1971,
admitted having sold the land together with the improvements thereon
for value to therein plaintiff which was in good faith, but denied for lack
of knowledge as to their veracity the allegations under the second
cause of action. It furthermore admitted that TDC had paid the
quarterly installments until October l5, 1964 but claimed that the latter
failed without justifiable cause to pay the subsequent installments. It
also asserted that it was a seller for value in good faith without having
misrepresented or concealed tacts relative to the title on the property.
As counterclaim, Manila Lodge No. 761 (BPOE) sought to recover the
balance of the purchase price plus interest and costs. 8
On June 15, 1971 TDC answered the aforesaid counterclaim, alleging
that its refusal to make further payments was fully justified. 9
After due trial the court a quo rendered on July 14, 1972 its decision
finding the subject land to be part of the "public park or plaza" and,
therefore, part of the public domain. The court consequently declared
that the sale of the subject land by the City of Manila to Manila Lodge
No. 761, BPOE, was null and void; that plaintiff TDC was a purchaser
thereof in g faith and for value from BPOE and can enforce its rights
against the latter; and that BPOE is entitled to recover from the City of
Manila whatever consideration it had 'paid the latter. 'The dispositive
part of the decision reads: ñé+.£ªwph!1
WHEREFORE, the Court hereby declares that the
parcel of land formerly covered by Transfer
Certificate of Title Nos 2195 and 67488 in the
name of BPOE and now by Transfer Certificate of
Title No. 73444 in the name of Tarlac
Development Corporation is a public' park or
plaza, and, consequently, instant complaint is
dimissed, without pronouncement as to costs.
In view of the reservation made by plaintiff Tarlac
Development Corporation to recover from
defendant BPOE the amounts mentioned in
paragraph XVI of the complaint in accordance with
Article 1555 of the Civil Code, the Court makes no
pronouncement on this point. 10
From said decision the therein plaintiff TDC as well as the defendant
Manila Lodge No. 761, BPOE, appealed to the Court of Appeals.
In its appeal docketed as CA-G.R. No. 51590-R, the Manila Lodge No.
761, BPOE, avers that the trial court committed the following errors,
namely:
1. In holding that the property subject of the action is not patrimonial
property of the City of Manila; and
2. In holding that the Tarlac Development Corporation may recover and
enforce its right against the defendant BPOE. 11
The Tarlac Development Corporation, on the other hand, asserts that
the trial court erred:
18
(1) In finding that the property in question is or was a public park and in
consequently nullifying the sale thereof by the City of Manila to BPOE;
(2) In applying the cases of Municipality of Cavite vs. Rojas, 30 Phil.
602, and Government vs. Cabangis, 53 Phil. 112, to the case at bar;
and
(3) In not holding that the plaintiff-appellant is entitled to ,recover
damages from the defendant City of Manila. 12
Furthermore, TDC as appellee regarding the second assignment of
error raised by BPOE, maintained that it can recover and enforce its
rigth against BPOE in the event that the land in question is declared a
public park or part thereof.13
In its decision promulgated on June 30, 1975, the Court of Appeals
concur ed in the findings and conclusions of the lower court upon the
ground that they are supported by he evidence and are in accordance
with law, and accordingly affirmed the lower court's judgment.
Hence, the present petitions for review on certiorari.
G.R. No. L-41001
The Manila Lodge No. 761, BPOE, contends, in its petition for review
on certiorari docketed as G.R. No. L-41001, that the Court of Appeals
erred in (1) disregarding the very enabling acts and/or statutes
according to which the subject property was, and still is, patrimonial
property of the City of Manila and could therefore be sold and/or
disposed of like any other private property; and (2) in departing from
the accepted and usual course of judicial proceedings when it simply
made a general affirmance of the court a quo's findings and
conclusions without bothering to discuss or resolve several vital points
stressed by the BPOE in its assigned errrors. 14
G.R. No. L-41012
The Tarlac Development Corporation, in its petition for review on
certiorari docketed as G.R. No. L-41012, relies on the following
grounds for the allowance of its petition:
1. that the Court of Appeals did not correctly interpret Act No. 1360, as
amended by Act No. 1657, of the Philippine Commission; and
2. that the Court of Appeals has departed from the accepted and usual
course of judicial proceedings in that it did not make its own findings
but simply recited those of the lower court. 15
ISSUES AND ARGUMENTS
FIRST ISSUE
Upon the first issue, both petitioners claim that the property subject of
the action, pursuant to the provisions of Act No. 1360, as amended by
Act No. 1657, was patrimonial property of the City of Manila and not a
park or plaza.
Arguments of Petitioners
In G.R. No. L-41001, the Manila Lodge No. 761, BPOE, admits that
"there appears to be some logic in the conclusion" of the Court of
Appeals that "neither Act No. 1360 nor Act No. 1657 could have meant
to supply the City of Manila the authority to sell the subject property
which is located at the south end not the north — of the reclaimed
area." 16 It argues, however, that when Act No. 1360, as amended,
authorized the City of Manila to undertake the construction of the
Luneta extension by reclaimed land from the Manila Bay, and declared
that the reclaimed land shall be the "property of the City of Manila," the
State expressly granted the ownership thereof to the City of Manila
which. consequently. could enter into transactions involving it; that
upon the issuance of O.C.T. No. 1909, there could he no doubt that the
reclaimed area owned by the City was its patrimonial property;" that
the south end of the reclaimed area could not be for public use for. as
argued by TDC a street, park or promenade can be property for public
use pursuant to Article 344 of the Spanish Civil Code only when it has
already been so constructed or laid out, and the subject land, at the
time it was sold to the Elk's Club, was neither actually constructed as a
street, park or promenade nor laid out as a street, park or promenade;"
that even assuming that the subject property was at the beginning
property of public dominion, it was subsequently converted into
patrimonial property pursuant to Art. 422 of the Civil Code, inasmuch
as it had never been used, red or utilized since it was reclaimed in
1905 for purpose other than this of an ordinary real estate for sale or by fences; (3) the property in question was cadastrally surveyed and
lease; that the subject property had never been intended for public use, registered as property of the Elks Club, according to Manuel
is further shown by the fact that it was neither included as a part of the Anonuevo; (4) the property was never used as a public park, for, since
Luneta Park under Plan No. 30 of the National Planning Commission the issuance of T.C.T. No. 2165 on July 17, 1911 in the name of the
nor considered a part of the Luneta National Park (now Rizal Park) by Manila Lodge NO. 761, the latter used it as private property, and as
Proclamation No. 234 dated December 19, 1955 of President Ramon early as January 16, 1909 the City of Manila had already executed a
Magsaysay or by Proclamation Order No. 274 dated October 4, 1967 deed of sale over the property in favor of the Manila Lodge No. 761;
of President Ferdinand E. Marcos;" 19 that, such being the case, there and (5) the City of Manila has not presented any evidence to show that
is no reason why the subject property should -not be considered as the subject property has ever been proclaimed or used as a public
having been converted into patrimonial property, pursuant to the ruling park. 28
in Municipality vs. Roa 7 Phil. 20, inasmuch as the City of Manila has
considered it as its patrimonial property not only bringing it under the
TDC, moreover, contends that Sec. 60 of Com. Act No. 141 cannot
operation of the Land Registration Act but also by disposing of it; 20 and
apply to the subject land, for Com. Act No. 141 took effect on
that to consider now the subject property as a public plaza or park
December 1, 1936 and at that time the subject land was no longer part
would not only impair the obligations of the parties to the contract of
of the part of the public domain. 29
sale (rated July 13, 1911, but also authorize deprivation of property
without due process of law.21
TDC also stresses that its rights as a purchaser in good faith cannot be
disregarded, for the mere mention in the certificate of title that the lot it
G.R. No. L-410112
purchased was "part of the Luneta extension" was not a sufficient
warning that tile title to the City of Manila was invalid; and that although
In L-41012, the petitioner TDC stresses that the principal issue is the the trial court, in its decision affirmed by the Court of Appeals, found
interpretation of Act No. 1360, as amended by. Act No. 1657 of the the TDC -to has been an innocent purchaser for value, the court
Philippine Commission, 22 and avers that inasmuch as Section 6 of Act disregarded the petitioner's rights as such purchaser that relied on
No. 1360, as amended by Act 1657, provided that the reclamation of Torrens certificate of title. 30
the Luneta extension was to be paid for out of the funds of the City of
Manila which was authorized to borrow P350,000 "to be expended in
The Court, continues the petitioner TDC erred in not holding that the
the construction of Luneta Extension," the reclaimed area became
latter is entitled to recover from the City of Manila damages in the
"public land" belonging to the City of Manila that spent for the
amount of P100,000 caused by the City's petition for- reannotation of
reclamation, conformably to the holding in Cabangis,23 and
its right to repurchase.
consequently, said land was subject to sale and other disposition; that
the Insular Government itself considered the reclaimed Luneta
extension as patrimonial property subject to disposition as evidenced DISCUSSION AND RESOLUTION OF FIRST ISSUE
by the fact that See. 3 of Act 1360 declared that "the land hereby
reclaimed shall be the property of the City of Manila;" that this property
It is a cardinal rule of statutory construction that courts must give effect
cannot be property for public use for according to Article 344 of the
to the general legislative intent that can be discovered from or is
Civil Code, the character of property for public use can only attach to
unraveled by the four corners of the statute, 31 and in order to discover
roads and squares that have already been constructed or at least laid
said intent, the whole statute, and not only a particular provision
out as such, which conditions did not obtain regarding the subject land,
thereof, should be considered.32 It is, therefore, necessary to analyze
that Sec. 5 of Act 1360 authorized the City of Manila to lease the
all the provisions of Act No. 1360, as amended, in order to unravel the
northern part of the reclaimed area for hotel purposes; that Act No.
legislative intent.
1657 furthermore authorized the City of Manila to sell the same; 24 that
the express statutory authority to lease or sell the northern part of the
reclaimed area cannot be interpreted to mean that the remaining area Act No. 1360 which was enacted by the Philippine Commission on
could not be sold inasmuch as the purpose of the statute was not June 26, 1905, as amended by Act No. 1657 enacted on May 18,
merely to confer authority to sell the northern portion but rather to limit 1907, authorized the "construction of such rock and timber bulkheads
the city's power of disposition thereof, to wit: to prevent disposition of or sea walls as may be necessary for the making of an extension to the
the northern portion for any purpose other than for a hotel site that the Luneta" (Sec. 1 [a]), and the placing of the material dredged from the
northern and southern ends of the reclaimed area cannot be harbor of Manila "inside the bulkheads constructed to inclose the
considered as extension of the Luneta for they lie beyond the sides of Luneta extension above referred to" (Sec. 1 [a]). It likewise provided
the original Luneta when extended in the direction of the sea, and that that the plan of Architect D. H. Burnham as "a general outline for the
is the reason why the law authorized the sale of the northern portion for extension and improvement of the Luneta in the City of Manila" be
hotel purposes, and, for the same reason, it is implied that the southern adopted; that "the reclamation from the Bay of Manila of the land
portion could likewise be disposed of.26 included in said projected Luneta extension... is hereby authorized
and the land thereby reclaimed shall be the property of the City of
Manila" (Sec. 3); that "the City of Manila is hereby authorized to set
TDC argues likewise that there are several items of uncontradicted
aside a tract of the reclaimed land formed by the Luneta extension
circumstantial evidence which may serve as aids in construing the
authorized by this Act at the worth end of said tract, not to exceed five
legislative intent and which demonstrate that the subject property is
hundred feet by six hundred feet in size, for a hotel site, and to lease
patrimonial in nature, to wit: (1) Exhibits "J" and "J-1", or Plan No. 30 of
the same with the approval of the Governor General, ... for a term not
the National Planning Commission showing the Luneta and its vicinity,
exceeding ninety-nine years; that "should the Municipal Board ... deem
do not include the subject property as part of the Luneta Park; (2)
it advisable it is hereby authorized to advertise for sale to sell said tract
Exhibit "K", which is the plan of the subject property covered by TCT
of land ... ;" "that said tract shall be used for hotel purposes as herein
No. 67488 of BPOE, prepared on November 11, 1963, indicates that
prescribed, and shall not be devoted to any other purpose or object
said property is not a public park; (3) Exhibit "T", which is a certified
whatever;" "that should the grantee x x x fail to maintain on said tract a
copy of Proclamation No. 234 issued on December 15, 1955 is
first-class hotel x x x then the title to said tract of land sold, conveyed,
President Magsaysay, and Exhibit "U" which is Proclamation Order No.
and transferred, and shall not be devoted to any other purpose or
273 issued on October 4, 1967 by President Marcos, do not include the
object whatever;" "that should the grantee x x x fail to maintain on said
subject property in the Luneta Park-, (4) Exhibit "W", which is the
tract a first-class hotel x x x then the title to said tract of land sold,
location plan of the Luneta National Park under Proclamations Nos.
conveyed, and transferred to the grantee shall revert to the City of
234 and 273, further confirms that the subject property is not a public
Manila, and said City of Manila shall thereupon become entitled to
park; and (5) Exhibit "Y", which is a copy of O.C.T. No. 7333 in the
immediate possession of said tract of land" (Sec. 5); that the
name of the United States of America covering the land now occupied
construction of the rock and timber bulkheads or sea wall "shall be paid
by the America covering the land now occupied by the American
for out of the funds of the City of Manila, but the area to be reclaimed
Embassy, the boundaries of which were delineated by the Philippine
by said proposed Luneta extension shall be filled, without cost to the
Legislature, states that the said land is bounded on the northwest by
City of Manila, with material dredged from Manila Bay at the expense
properties of the Army and Navy Club (Block No. 321) and the Elks
of the Insular Government" (Sec. 6); and that "the City of Manila is
Club (Block No. 321), and this circumstance shows that even the
hereby authorized to borrow from the Insular Government ... the sum of
Philippine Legislature recognized the subject property as private
three hundred thousand pesos, to be expended in the construction of
property of the Elks Club. 27
Luneta extension provided for by paragraph (a) of section one hereof"
(Sec.7).
TDC furthermore contends that the City of Manila is estopped from
questioning the validity of the sale of the subject property that it
The grant made by Act No. 1360 of the reclaimed land to the City of
executed on July 13, 1911 to the Manila Lodge No. 761, BPOE, for
Manila is a grant of "public" nature, the same having been made to a
several reasons, namely: (1) the City's petition for the reannotation of
local political subdivision. Such grants have always
Entry No. 4608/T-1635 was predicated on the validity of said sale; (2)
been strictly construed against the grantee.33 One compelling reason
when the property was bought by the petitioner TDC it was not a public
given for the strict interpretation of a public grant is that there is in such
plaza or park as testified to by both Pedro Cojuanco, treasurer of TDC,
grant a gratuitous donation of, public money or resources which results
and the surveyor, Manuel Añoneuvo, according to whom the subject
in an unfair advantage to the grantee and for that reason, the grant
property was from all appearances private property as it was enclosed
should be narrowly restricted in favor of the public.34 This reason for

19
strict interpretation obtains relative to the aforesaid grant, for, although
the City of Manila was to pay for the construction of such work and
timber bulkheads or sea walls as may be necessary for the making of
the Luneta extension, the area to be reclaimed would be filled at the
expense of the Insular Government and without cost to the City of
Manila, with material dredged from Manila Bay. Hence, the letter of the
statute should be narrowed to exclude maters which if included would
defeat the policy of the legislation.
The reclaimed area, an extension to the Luneta, is declared to be
property of the City of Manila. Property, however, is either of public
ownership or of private ownership. 35 What kind of property of the City
is the reclaimed land? Is it of public ownership (dominion) or of private
ownership?
We hold that it is of public dominion, intended for public use.
Firstly, if the reclaimed area was granted to the City of Manila as its
patrimonial property, the City could, by virtue of its ownership, dispose
of the whole reclaimed area without need of authorization to do so
from the lawmaking body. Thus Article 348 of the Civil Code of Spain
provides that "ownership is the right to enjoy and dispose of a thing
without further limitations than those established by law." 36 The right to
dispose (jus disponendi) of one's property is an attribute of ownership.
Act No. 1360, as amended, however, provides by necessary
implication, that the City of Manila could not dispose of the reclaimed
area without being authorized by the lawmaking body. Thus the statute
provides that "the City of Manila is hereby authorized to set aside a
tract ... at the north end, for a hotel site, and to lease the same ...
should the municipal board ... deem it advisable, it is hereby
authorized ...to sell said tract of land ... " (Sec. 5). If the reclaimed area
were patrimonial property of the City, the latter could dispose of it
without need of the authorization provided by the statute, and the
authorization to set aside ... lease ... or sell ... given by the statute
would indeed be superfluous. To so construe the statute s to render
the term "authorize," which is repeatedly used by the statute,
superfluous would violate the elementary rule of legal hermeneutics
that effect must be given to every word, clause, and sentence of the
statute and that a statute should be so interpreted that no part thereof
becomes inoperative or superfluous. 37 To authorize means to
empower, to give a right to act. 38 Act No. 1360 furthermore qualifies
the verb it authorize" with the adverb "hereby," which means "by
means of this statue or section," Hence without the authorization
expressly given by Act No. 1360, the City of Manila could not lease or
sell even the northern portion; much less could it dispose of the whole
reclaimed area. Consequently, the reclaimed area was granted to the
City of Manila, not as its patrimonial property. At most, only the
northern portion reserved as a hotel site could be said to be patrimonial
property for, by express statutory provision it could be disposed of, and
the title thereto would revert to the City should the grantee fail to
comply with the terms provided by the statute.
TDC however, contends that the purpose of the authorization provided
in Act No. 1360 to lease or sell was really to limit the City's power of
disposition. To sustain such contention is to beg the question. If the
purpose of the law was to limit the City's power of disposition then it is
necessarily assumed that the City had already the power to dispose,
for if such power did not exist, how could it be limited? It was precisely
Act 1360 that gave the City the power to dispose for it was hereby
authorized by lease of sale. Hence, the City of Manila had no power to
dispose of the reclaimed land had such power not been granted by Act
No. 1360, and the purpose of the authorization was to empower the
city to sell or lease the northern part and not, as TDC claims, to limit
only the power to dispose. Moreover, it is presumed that when the
lawmaking body enacted the statute, it had full knowledge of prior and
existing laws and legislation on the subject of the statute and acted in
accordance or with respect thereto.39 If by another previous law, the
City of Manila could already dispose of the reclaimed area, which it
could do if such area were given to it as its patrimonial property, would
it then not be a superfluity for Act No. 1360 to authorize the City to
dispose of the reclaimed land? Neither has petitioner TDC pointed to
any other law that authorized the City to do so, nor have we come
across any. What we do know is that if the reclaimed land were
patrimonial property, there would be no need of giving special
authorization to the City to dispose of it. Said authorization was given
because the reclaimed land was not intended to be patrimonial
property of the City of Manila, and without the express authorization to
dispose of the northern portion, the City could not dispose of even that
part.
Secondly, the reclaimed area is an "extension to the Luneta in the City
of Manila." 40 If the reclaimed area is an extension of the Luneta, then it
is of the same nature or character as the old Luneta. Anent this matter,
it has been said that a power to extend (or continue an act or business)
cannot authorize a transaction that is totally distinct. 41 It is not disputed
that the old Luneta is a public park or plaza and it is so considered by
Section 859 of the Revised Ordinances of the City of Manila.42 Hence
20
the "extension to the Luneta" must be also a public park or plaza and
for public use.
TDC, however, contends that the subject property cannot be
considered an extension of the old Luneta because it is outside of the
limits of the old Luneta when extended to the sea. This is a strained
interpretation of the term "extension," for an "extension," it has been
held, "signifies enlargement in any direction — in length, breadth, or
circumstance." 43
Thirdly, the reclaimed area was formerly a part of the manila Bay. A
bay is nothing more than an inlet of the sea. Pursuant to Article 1 of the
Law of Waters of 1866, bays, roadsteads, coast sea, inlets and shores
are parts of the national domain open to public use. These are also
property of public ownership devoted to public use, according to Article
339 of the Civil Code of Spain.
When the shore or part of the bay is reclaimed, it does not lose its
character of being property for public use, according to Government of
the Philippine Islands vs. Cabangis.44 The predecessor of the claimants
in this case was the owner of a big tract of land including the lots in
question. From 1896 said land began to wear away due to the action of
the waters of Manila Bay. In 1901 the lots in question became
completely submerged in water in ordinary tides. It remained in such a
state until 1912 when the Government undertook the dredging of the
Vitas estuary and dumped the Sand and - silt from estuary on the low
lands completely Submerged in water thereby gradually forming the
lots in question. Tomas Cabangis took possession thereof as soon as
they were reclaimed hence, the claimants, his successors in interest,
claimed that the lots belonged to them. The trial court found for the
claimants and the Government appealed. This Court held that when
the lots became a part of the shore. As they remained in that condition
until reclaimed by the filling done by the Government, they belonged to
the public domain. for public use .4' Hence, a part of the shore, and for
that purpose a part of the bay, did not lose its character of being for
public use after it was reclaimed.
Fourthly, Act 1360, as amended, authorized the lease or sale of the
northern portion of the reclaimed area as a hotel sites. The subject
property is not that northern portion authorized to be leased or sold; the
subject property is the southern portion. Hence, applying the rule
of expresio unius est exlusio alterius, the City of Manila was not
authorized to sell the subject property. The application of this principle
of statutory construction becomes the more imperative in the case at
bar inasmuch as not only must the public grant of the reclaimed area to
the City of Manila be, as above stated, strictly construed against the
City of Manila, but also because a grant of power to a municipal
corporation, as happens in this case where the city is author ized to
lease or sell the northern portion of the Luneta extension, is strictly
limited to such as are expressly or impliedly authorized or necessarily
incidental to the objectives of the corporation.
Fifthly, Article 344 of the Civil Code of Spain provides that to property
of public use, in provinces and in towns, comprises the provincial and
town roads, the squares streets fountains, and public waters the
promenades, and public works of general service paid for by such
towns or provinces." A park or plaza, such as the extension to the
Luneta, is undoubtedly comprised in said article.
The petitioners, however, argue that, according to said Article 344, in
order that the character of property for public use may be so attached
to a plaza, the latter must be actually constructed or at least laid out as
such, and since the subject property was not yet constructed as a
plaza or at least laid out as a plaza when it was sold by the City, it
could not be property for public use. It should be noted, however, that
properties of provinces and towns for public use are governed by the
same principles as properties of the same character belonging to the
public domain.46 In order to be property of public domain an intention to
devote it to public use is sufficient. 47 The, petitioners' contention is
refuted by Manresa himself who said, in his comments", on Article 344,
that: ñé+.£ªwph!1
Las plazas, calles y paseos publicos
correspondent sin duda aiguna aldominio publico
municipal ), porque se hallan establecidos sobre
suelo municipal y estan destinadas al uso de
todos Laurent presenta tratando de las plazas,
una question relativa a si deben conceptuarse
como de dominio publico los lugares vacios libres,
que se encuenttan en los Municipios rurales ...
Laurent opina contra Pioudhon que toda vez que
estan al servicio de todos pesos lugares, deben
considerable publicos y de dominion publico.
Realmente, pala decidir el punto, bastara siempre
fijarse en el destino real y efectivo de los citados
lugares, y si este destino entraña un uso comun
 de todos, no hay duda que son de dominio publico Luneta Park. What has been said here applies to Exhibits "V", "V-1" to
municipal si no patrimoniales. "V-3," and "W" which also refer to the area and location of the
reservation for the Luneta Park.
It is not necessary, therefore, that a plaza be already constructed of-
laid out as a plaza in order that it be considered property for public use. Exhibit "Y" is a copy of O.C.T. No. 7333 dated November 13, 1935,
It is sufficient that it be intended to be such In the case at bar, it has covering the lot where now stands the American Embassy [Chancery].
been shown that the intention of the lawmaking body in giving to the It states that the property is "bounded ... on the Northwest by
City of Manila the extension to the Luneta was not a grant to it of properties of Army and Navy Club (Block No.321) and Elks Club (Block
patrimonial property but a grant for public use as a plaza. No. 321)." Inasmuch as the said bounderies delineated by the
Philippine Legislature in Act No. 4269, the petitioners contend that the
Legislature recognized and conceded the existence of the Elks Club
We have demonstrated ad satietatem that the Luneta extension as
property as a primate property (the property in question) and not as a
intended to be property of the City of Manila for public use. But, could
public park or plaza. This argument is non sequitur plain and simple
not said property-later on be converted, as the petitioners contend, to
Said Original Certificate of Title cannot be considered as an
patrimonial property? It could be. But this Court has already said,
incontrovertible declaration that the Elks Club was in truth and in fact
in Ignacio vs. The Director of Lands, 49 the executive and possibly the
the owner of such boundary lot. Such mention as boundary owner is
legislation department that has the authority and the power to make the
not a means of acquiring title nor can it validate a title that is null and
declaration that said property, is no longer required for public use, and
void.
until such declaration i made the property must continue to form paint
of the public domain. In the case at bar, there has been no such
explicit or unequivocal declaration It should be noted, furthermore, TDC finally claims that the City of Manila is estopped from questioning
anent this matter, that courts are undoubted v not. primarily called the validity of the sale it executed on July 13,'1911 conconveying the
upon, and are not in a position, to determine whether any public land is subject property to the Manila Lodge No. 761, BPOE. This contention
still needed for the purposes specified in Article 4 of the Law of cannot be seriously defended in the light of the doctrine repeatedly
Waters .50 enunciated by this Court that the Government is never estopped by
mistakes or errors on the pan of its agents, and estoppel does not
apply to a municipal corporation to validate a contract that is prohibited
Having disposed of the petitioners' principal arguments relative to the
by law or its against Republic policy, and the sale of July 13, 1911
main issue, we now pass to the items of circumstantial evidence which
executed by the City of Manila to Manila Lodge was certainly a contract
TDC claims may serve as aids in construing the legislative intent in the
prohibited by law. Moreover, estoppel cannot be urged even if the City
enactment of Act No. 1360, as amended. It is noteworthy that all these
of Manila accepted the benefits of such contract of sale and the Manila
items of alleged circumstantial evidence are acts far removed in time
Lodge No. 761 had performed its part of the agreement, for to apply
from the date of the enactment of Act No.1360 such that they cannot
the doctrine of estoppel against the City of Manila in this case would be
be considered contemporaneous with its enactment. Moreover, it is not
tantamount to enabling it to do indirectly what it could not do directly. 52
farfetched that this mass of circumstantial evidence might have been
influenced by the antecedent series of invalid acts, to wit: the City's
having obtained over the reclaimed area OCT No. 1909 on January The sale of the subject property executed by the City of Manila to the
20,1911; the sale made by the City of the subject property to Manila Manila Lodge No. 761, BPOE, was void and inexistent for lack of
Lodge No. 761; and the issuance to the latter of T.C.T. No. 2195. It subject matter. 53 It suffered from an incurable defect that could not be
cannot gainsaid that if the subsequent acts constituting the ratified either by lapse of time or by express ratification. The Manila
circumstantial evidence have been base on, or at least influenced, by Lodge No. 761 therefore acquired no right by virtue of the said sale.
those antecedent invalid acts and Torrens titles S they can hardly be Hence to consider now the contract inexistent as it always has seen,
indicative of the intent of the lawmaking body in enacting Act No. 1360 cannot be, as claimed by the Manila Lodge No. 761, an impairment of
and its amendatory act. the obligations of contracts, for there was it, contemplation of law, no
contract at all.
TDC claims that Exhs. "J," "J-l" "K," "T," "U," "W" and "Y" show that the
subject property is not a park. The inexistence of said sale can be set up against anyone who asserts
a right arising from it, not only against the first vendee, the Manila
Lodge No. 761, BPOE, but also against all its suceessors, including the
Exhibits "J" and "J-1," the "Luneta and vicinity showing proposed
TDC which are not protected the doctrine of bona fide ii purchaser
development" dated May 14, 1949, were prepared by the National
without notice, being claimed by the TDC does not apply where there is
Urban Planning Commission of the Office of the President. It cannot be
a total absence of title in the vendor, and the good faith of the
reasonably expected that this plan for development of the Luneta
purchaser TDC cannot create title where none exists. 55
should show that the subject property occupied by the ElksClub is a
public park, for it was made 38 years after the sale to the Elks, and
after T.C.T. No. 2195 had been issued to Elks. It is to be assumed that The so-called sale of the subject property having been executed, the
the Office of the President was cognizant of the Torrens title of BPOE. restoration or restitution of what has been given is order 56
That the subject property was not included as a part of the Luneta only
indicated that the National Urban Planning Commission that made the
SECOND ISSUE
plan knew that the subject property was occupied by Elks and that Elks
had a Torrens title thereto. But this in no way proves that the subject
property was originally intended to be patrimonial property of the City The second ground alleged in support of the instant petitions for review
of Manila or that the sale to Elks or that the Torrens-title of the latter is on certiorari is that the Court of Appeals has departed from the
valid. accepted and usual course of judicial proceedings as to call for an
exercise of the power of supervision. TDC in L-41012, argues that the
respondent Court did not make its own findings but simply recited
Exhibit "K" is the "Plan of land covered by T.C.T . No ----, as prepared
those of the lower court and made a general affirmance, contrary to the
for Tarlac Development Company." It was made on November 11,
requirements of the Constitution; that the respondent Court made
1963 by Felipe F. Cruz, private land surveyor. This surveyor is
glaring and patent mistakes in recounting even the copied findings,
admittedly a surveyor for TDC. 51 This plan cannot be expected to
palpably showing lack of deliberate consideration of the matters
show that the subject property is a part of the Luneta Park, for he plan
involved, as, for example, when said court said that Act No. 1657
was made to show the lot that "was to be sold to petitioner." This plan
authorized the City of Manila to set aside a portion of the reclaimed
must have also assumed the existence of a valid title to the land in
land "formed by the Luneta Extension of- to lease or sell the same for
favor of Elks.
park purposes;" and that respondent Court. further more, did not
resolve or dispose of any of the assigned errors contrary to the
Exhibits "T" and "U" are copies of Presidential Proclamations No. 234 mandate of the Judiciary Act..57
issued on November 15, 1955 and No. 273 issued on October 4, 1967,
respectively. The purpose of the said Proclamations was to reserve
The Manila Lodge No. 761, in L-41001, likewise alleges, as one of the
certain parcels of land situated in the District of Ermita, City of Manila,
reasons warranting review, that the Court of Appeals departed from the
for park site purposes. Assuming that the subject property is not within
accepted and usual course of Judicial proceedings by simply making a
the boundaries of the reservation, this cannot be interpreted to mean
general affirmance of the court a quo findings without bothering to
that the subject property was not originally intended to be for public use
resolve several vital points mentioned by the BPOE in its assigned
or that it has ceased to be such. Conversely, had the subject property
errors. 58
been included in the reservation, it would mean, if it really were private
property, that the rights of the owners thereof would be extinguished,
for the reservations was "subject to private rights, if any there be." That COMMENTS ON SECOND ISSUE
the subject property was not included in the reservation only indicates
that the President knew of the existence of the Torrens titles mentioned
We have shown in our discussion of the first issue that the decision of
above. The failure of the Proclamations to include the subject property
the trial court is fully in accordance with law. To follows that when such
in the reservation for park site could not change the character of the
decision was affirmed by the Court of Appeals, the affirmance was
subject property as originally for public use and to form part of the

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likewise in accordance with law. Hence, no useful purpose will be
served in further discussing the second issue.

CONCLUSION

ACCORDINGLY, the petitions in both G.R. Nos. L-41001 and L-41012

are denied for lack of merit, and the decision of the Court of Appeals of
June 30, 1975, is hereby affirmed, at petitioner's cost.

Makasiar, Munoz Palma and Martin, JJ., concur.1äwphï1.ñët

Teehankee, concurs in the result which is wholly consistent with the

basic rulings and jugdment of this Court in its decision of July 31,
1968.

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