EN BANC

[ G.R. Nos. L-33466-67, April 20, 1983 ]

PEOPLE OF THE PHILIPPINES, PLAINTIFF-APPELLEE, VS. MAMERTO
NARVAEZ, DEFENDANT-APPELLANT.

DECISION

MAKASIAR, J.:

This is an appeal from the decision of the Court of First Instance of South Cotabato,
Branch I, in Criminal Cases Nos. 1815 and 1816 for murder which, after a joint trial,
resulted in the conviction of the accused in a decision rendered on September 8, 1970,
with the following pronouncement:

"Thus, we have a crime of MURDER qualified by treachery with the aggravating

circumstance of evident premeditation offset by the mitigating circumstance of voluntary
surrender. The proper penalty imposable, therefore, is RECLUSION PERPETUA (Arts.
248 and 64, Revised Penal Code).

"Accordingly, finding Mamerto Narvaez guilty beyond reasonable doubt of the crime of
murder,

"(a) In Criminal Case No. 1815, he is hereby sentenced to RECLUSION PERPETUA, to

indemnify the heirs of the deceased Davis Q. Fleischer in the sum of P12,000.00 as
compensatory damages, P10,000.00 as moral damages, P2,000.00 as attorney's fees, the
offended party having been represented by a private prosecutor, and to pay the costs;

"(b) In Criminal Case No. 1816, he is hereby sentenced to RECLUSION PERPETUA, to

indemnify the heirs of the deceased Flaviano Rubia in the sum of P12,000.00 as
compensatory damages, P10,000.00 as moral damages, P2,000.00 as attorney's fees, the
offended party having been represented by a private prosecutor, and to pay the costs" (p.
48, rec.).

The facts are summarized in the People's brief, as follows:

"At about 2:30 in the afternoon of August 22, 1968, Graciano Juan, Jesus Verano and
Cesar Ibañez, together with the two deceased Davis Fleischer and Flaviano Rubia, were
fencing the land of George Fleischer, father of deceased Davis Fleischer. The place was
in the boundary of the highway and the hacienda owned by George Fleischer. This is
located in the municipality of Maitum, South Cotabato. At the place of the fencing is the
house and rice drier of appellant Mamerto Narvaez (pp. 179-182, t.s.n., Pieza II). At that
time, appellant was taking his rest, but when he heard that the walls of his house were
being chiselled, he arose and there he saw the fencing going on. If the fencing would go
on, appellant would be prevented from getting into his house and the bodega of his
ricemill. So he addressed the group, saying- 'Pare, if possible you stop destroying my
house and if possible we will talk it over - what is good,' addressing the deceased Rubia,
who is appellant's compadre. The deceased Fleischer, however, answered: 'No, gademit,
proceed, go ahead.' Appellant apparently lost his equilibrium and he got his gun and shot
Fleischer, hitting him. As Fleischer fell down, Rubia ran towards the jeep, and knowing
there is a gun on the jeep, appellant fired at Rubia, likewise hitting him (pp. 127-133,
t.s.n., Defense transcript). Both Fleischer and Rubia died as a result of the shooting' (pp.
9-14, t.s.n., Pieza I; pp. 8-9, Appellant's Brief, p. 161, rec.).

It appears, however, that this incident is intertwined with the long drawn out legal battle
between the Fleischer and Co., Inc. of which deceased Fleischer was the secretary-
treasurer and deceased Rubia the assistant manager, on the one hand, and the land settlers
of Cotabato, among whom was appellant.

From the available records of the related cases which had been brought to the Court of
Appeals (CA-G.R. Nos. 28858-R and 50583-R) and to this Court on certiorari (G.R.
No. L-26757 and L-45504), WE take judicial notice of the following antecedent facts:

Appellant was among those persons from northern and central Luzon who went to
Mindanao in 1937 and settled in Maitum, a former sitio of Kiamba, and now a separate
municipality of South Cotabato. He established his residence therein, built his house,
cultivated the area, and was among those who petitioned then President Manuel L.
Quezon to order the subdivision of the defunct Celebes Plantation and nearby Kalaong
Plantation totalling about 2,000 hectares, for distribution among the settlers.

Shortly thereafter, Fleischer and Company, headed by George W. Fleischer, an American

landowner in Negros Oriental, filed sales application No. 21983 on June 3, 1937 over the
same area formerly leased and later abandoned by Celebes Plantation Company, covering
1,017.2234 hectares.

Meanwhile, the subdivision was ordered and a public land surveyor did the actual survey
in 1941 but the survey report was not submitted until 1946 because of the outbreak of the
second world war. According to the survey, only 300 hectares identified as Lots Nos. 22,
26 and 38, Ps. 176 Kiamba, were set aside for Sales Application No. 21983, while the
rest were subdivided into sublots of 5 to 6 hectares each to be distributed among the
settlers (pp. 32-33, G.R. No. L-45504).

The 300 hectares set aside for the sales application of Fleischer and Company was
declared open for disposition, appraised and advertised for public auction. At the public
auction held in Manila on August 14, 1948, Fleischer and Company was the only bidder
for P6,000.00. But because of protests from the settlers the corresponding award in its
favor was held in abeyance, while an investigator was sent by the Director of Lands to
Kiamba in the person of Atty. Jose T. Gozon. Atty. Gozon came back after ten days with
an amicable settlement signed by the representative of the settlers. This amicable
settlement was later repudiated by the settlers, but the Director of Lands, acting upon the
report of Atty. Gozon, approved the same and ordered the formal award of the land in
question to Fleischer and Company. The settlers appealed to the Secretary of Agriculture
and Natural Resources, who, however, affirmed the decision in favor of the company.

On May 29, 1950, the settlers filed Civil Case No. 240 in the Court of First Instance of
Cotabato which then consisted only of one sala, for the purpose of annulling the order of
the Secretary of Agriculture and Natural Resources which affirmed the order of the
Director of Lands awarding the contested land to the company. The settlers, as plaintiffs,
lost that case in view of the amicable settlement which they had repudiated as resulting
from threats and intimidation, deceit, misrepresentation and fraudulent machination on
the part of the company. They appealed to the Court of Appeals (CA-G.R. No. 28858-R)
which likewise affirmed on August 16, 1965 the decision of the Court of First Instance in
favor of the company.

This resulted in the ouster of the settlers by an order of the Court of First Instance dated
September 24, 1966, from the land which they had been occupying for about 30 years.
Among those ejected was the appellant who, to avoid trouble, voluntarily dismantled his
house, built in 1947 at a cost of around P20,000.00, and transferred to his other house
which he built in 1962 or 1963 near the highway. The second house is not far from the
site of the dismantled house. Its ground floor has a store operated by Mrs. June Talens
who was renting a portion thereof. He also transferred his store from his former residence
to the house near the highway. Aside from the store, he also had a rice mill located about
15 meters east of the house, and a concrete pavement between the rice mill and the house,
which is used for drying grains and copra.

On November 14, 1966, appellant was among the settlers on whose behalf Jose V.
Gamboa and other leaders filed Civil Case No. 755 in the Court of First Instance of
Cotabato, Branch I, to obtain an injunction or annulment of the order of award with
prayer for preliminary injunction. During the pendency of this case, appellant on
February 21, 1967 entered into a contract of lease with the company whereby he agreed
to lease an area of approximately 100 to 140 square meters of Lot No. 38 from the
company (Exh. 9, p. 1, Folder of Exhibits for Defense) for a consideration of P16.00
monthly. According to him, he signed the contract although the ownership of the land
was still uncertain, in order to avoid trouble, until the question of ownership could be
decided. He never paid the agreed rental, although he alleges that the milling job they did
for Rubia was considered payment. On June 25, 1968, deceased Fleischer wrote him a
letter with the following tenor:
"You have not paid six months rental to Fleischers & Co., Inc. for that portion of land in
which your house and ricemill are located as per agreement executed on February 21,
1967. You have not paid even after repeated attempts of collection made by Mr. Flaviano
Rubia and myself.

"In view of the obvious fact that you do not comply with the agreement, I have no
alternative but to terminate our agreement on this date.

"I am giving you six months to remove your house, ricemill, bodega, and water pitcher
pumps from the land of Fleischers & Co., Inc. This six-month period shall expire on
December 31, 1966.

"In the event the above constructions have not been removed within the six-month period,
the company shall cause their immediate demolition" (Exhibit 10, p. 2, supra).

On August 21, 1968, both deceased, together with their laborers, commenced fencing Lot
38 by putting bamboo posts along the property line parallel to the highway. Some posts
were planted right on the concrete drier of appellant, thereby cutting diagonally across its
center (pp. 227-228, t.s.n., Vol. 2), with the last post just adjacent to appellant's house (p.
231, t.s.n., supra). The fence, when finished, would have the effect of shutting off the
accessibility to appellant's house and rice mill from the highway, since the door of the
same opens to the Fleischers' side. The fencing continued on that fateful day of August
22, 1968, with the installation of four strands of barbed wire to the posts.

At about 2:30 p.m. on the said day, appellant who was taking a nap after working on his
farm all morning, was awakened by some noise as if the wall of his house was being
chiselled. Getting up and looking out of the window, he found that one of the laborers of
Fleischer was indeed chiselling the wall of his house with a crowbar (p. 129, t.s.n., Vol.
6), while deceased Rubia was nailing the barbed wire and deceased Fleischer was
commanding his laborers. The jeep used by the deceased was parked on the highway. The
rest of the incident is narrated in the People's Brief as above-quoted. Appellant
surrendered to the police thereafter, bringing with him shotgun No. 1119576 and
claiming he shot two persons (Exh. P, p. 31, Defense Exhibits).

Appellant now questions the propriety of his conviction, assigning the following errors:

"First Assignment of Error: That the lower court erred in convicting defendant-appellant
despite the fact that he acted in defense of his person; and

"Second Assignment of Error: That the court a quo also erred in convcting defendant-
appellant although he acted in defense of his rights" (p. 20 of Appellant's Brief, p. 145,
rec.).
The act of killing of the two deceased by appellant is not disputed. Appellant admitted
having shot them from the window of his house with the shotgun which he surrendered to
the police authorities. He claims, however, that he did so in defense of his person and of
his rights, and therefore he should be exempt from criminal liability.

Defense of one's person or rights is treated as a justifying circumstance under Art. 11,
par. 1 of the Revised Penal Code, but in order for it to be appreciated, the following
requisites must occur:

"First. Unlawful aggression;

"Second. Reasonable necessity of the means employed to prevent or repel it;

"Third. Lack of sufficient provocation on the part of the person defending himself" (Art.
11, par. 1, Revised Penal Code, as amended).

The aggression referred to by appellant is the angry utterance by deceased Fleischer of

the following words: "Hindi, sigue, gademit, avante", in answer to his request addressed
to his compadre, the deceased Rubia, when he said, "Pare, hinto mona ninyo at pag-
usapan natin kung ano ang mabuti" (pp. 227-229, t.s.n., Vol. 6). This was in reaction to
his having been awakened to see the wall of his house being chiselled. The verbal
exchange took place while the two deceased were on the grounds doing the fencing and
the appellant was up in his house looking out of his window (pp. 225-227, supra).
According to appellant, Fleischer's remarks caused this reaction in him: "As if, I lost my
senses and unknowingly I took the gun on the bed and unknowingly also I shot Mr.
Fleischer, without realizing it, I shot Mr. Fleischer" (p. 132, supra). As for the shooting
of Rubia, appellant further testified:

"When I shot Davis Fleischer, Flaviano Rubia was nailing and upon hearing the shot, Mr.
Rubia looked at Mr. Fleischer and when Mr. Fleischer fell down, Mr. Rubia ran towards
the jeep and knowing that there was a firearm in the jeep and thinking that if he will take
that firearm he will kill me, I shot at him" (p. 132, supra, italics supplied).

The foregoing statements of appellant were never controverted by the prosecution. They
claim, however, that the deceased were in lawful exercise of their rights of ownership
over the land in question, when they did the fencing that sealed off appellant's access to
the highway.

A review of the circumstances prior to the shooting as borne by the evidence reveals that
five persons, consisting of the deceased and their three laborers, were doing the fencing
and chiselling of the walls of appellant's house. The fence they were putting up was made
of bamboo posts to which were being nailed strands of barbed wire in several layers.
Obviously, they were using tools which could be lethal weapons, such as nail and
hammer, bolo or bamboo cutter, pliers, crowbar, and other necessary gadgets. Besides, it
was not disputed that the jeep which they used in going to the place was parked just a few
steps away, and in it there was a gun leaning near the steering wheel. When the appellant
woke up to the sound of the chiselling on his walls, his first reaction was to look out of
the window. Then he saw the damage being done to his house, compounded by the fact
that his house and rice mill will be shut off from the highway by the fence once it is
finished. He therefore appealed to his compadre, the deceased Rubia, to stop what they
were doing and to talk things over with him. But deceased Fleischer answered angrily
with "gademit" and directed his men to proceed with what they were doing.

The actuation of deceased Fleischer in angrily ordering the continuance of the fencing
would have resulted in the further chiselling of the walls of appellant's house as well as
the closure of the access to and from his house and rice mill -- which were not only
imminent but were actually in progress. There is no question, therefore, that there was
aggression on the part of the victims: Fleischer was ordering, and Rubia was actually
participating in the fencing. This was indeed aggression, not on the person of appellant,
but on his property rights.

The question is, was the aggression unlawful or lawful? Did the victims have a right to
fence off the contested property, to destroy appellant's house and to shut off his ingress
and egress to his residence and the highway?

Article 30 of the Civil Code recognizes the right of every owner to enclose or fence his
land or tenements.

However, at the time of the incident on August 22, 1968, Civil Case No. 755 for
annulment of the order of award to Fleischer and Company was still pending in the Court
of First Instance of Cotabato. The parties could not have known that the case would be
dismissed over a year after the incident on August 22, 1968, as it was dismissed on
January 23, 1970 on ground of res judicata, in view of the dismissal in 1965 (by the
Court of Appeals) of Civil Case No. 240 filed in 1950 for the annulment of the award to
the company, between the same parties, which the company won by virtue of the
compromise agreement in spite of the subsequent repudiation by the settlers of said
compromise agreement; and that such 1970 dismissal also carried the dismissal of the
supplemental petition filed by the Republic of the Philippines on November 28, 1968 to
annul the sales patent and to cancel the corresponding certificate of title issued to the
company, on the ground that the Director of Lands had no authority to conduct the sale
due to his failure to comply with the mandatory requirements for publication. The
dismissal of the government's supplemental petition was premised on the ground that
after its filing on November 28, 1968, nothing more was done by the petitioner Republic
of the Philippines except to adopt all the evidence and arguments of plaintiffs with whom
it joined as parties-plaintiffs.
Hence, it is reasonable to believe that appellant was indeed hoping for a favorable
judgment in Civil Case No. 755 filed on November 14, 1966 and his execution of the
contract of lease on February 21, 1967 was just to avoid trouble. This was explained by
him during cross-examination on January 21, 1970, thus:

"It happened this way: we talked it over with my Mrs. that we better rent the place
because even though we do not know who really owns this portion to avoid trouble. To
avoid trouble we better pay while waiting for the case because at that time, it was not
known who is the right owner of the place. So we decided until things will clear up and
determine who is really the owner, we decided to pay rentals" (p. 169, t.s.n., Vol. 6).

In any case, Fleischer had given him up to December 31, 1968 (Exh. 10, p. 2, Defense
Exhibits) within which to vacate the land. He should have allowed appellant the peaceful
enjoyment of his properties up to that time, instead of chiselling the walls of his house
and closing appellant's entrance and exit to the highway.

The following provisions of the Civil Code of the Philippines are in point:

"Art. 536. In no case may possession be acquired through force or intimidation as long as
there is a possessor who objects thereto. He who believes that he has an action or a right
to deprive another of the holding of a thing must invoke the aid of the competent court, if
the holder should refuse to deliver the thing."

"Art. 539. Every possessor has a right to be respected in his possession; and should he be
disturbed therein he shall be protected in or restored to said possession by the means
established by the laws and the Rules of Court" (Articles 536 and 539, Civil Code of the
Philippines).

Conformably to the foregoing provisions, the deceased had no right to destroy or cause
damage to appellant's house, nor to close his accessibility to the highway while he was
pleading with them to stop and talk things over with him. The assault on appellant's
property, therefore, amounts to unlawful aggression as contemplated by law.

"Illegal aggression is equivalent to assault or at least threatened assault of immediate and

imminent kind" (People vs. Encomiendas, 46 SCRA 522).

In the case at bar, there was an actual physical invasion of appellant's property which he
had the right to resist, pursuant to Art. 429 of the Civil Code of the Philippines which
provides:

"Art. 429. The owner or lawful possessor of a thing has the right to exclude any
person from the enjoyment and disposal thereof. For this purpose, he may use such force
as may be reasonably necessary to repel or prevent an actual or threatened unlawful
physical invasion or usurpation of his property" (italics supplied).

The reasonableness of the resistance is also a requirement of the justifying circumstance

of self defense or defense of one's rights under paragraph 1 of Article 11, Revised Penal
Code. When the appellant fired his shotgun from his window, killing his two victims, his
resistance was disproportionate to the attack.

WE find, however, that the third element of defense of property is present, i.e., lack of
sufficient provocation on the part of appellant who was defending his property. As a
matter of fact, there was no provocation at all on his part, since he was asleep at first and
was only awakened by the noise produced by the victims and their laborers. His plea for
the deceased and their men to stop and talk things over with him was no provocation at
all.

Be that as it may, appellant's act in killing the deceased was not justifiable, since not all
the elements for justification are present. He should therefore be held responsible for the
death of his victims, but he could be credited with the special mitigating circumstance of
incomplete defense, pursuant to paragraph 6, Article 13 of the Revised Penal Code.

The crime committed is homicide on two counts. The qualifying circumstance of

treachery cannot be appreciated in this case because of the presence of provocation on the
part of the deceased. As WE held earlier in People vs. Manlapaz (55 SCRA 598), the
element of a sudden unprovoked attack is therefore lacking.

Moreover, in order to appreciate alevosia, "it must clearly appear that the method of
assault adopted by the aggressor was deliberately chosen with a special view to the
accomplishment of the act without risk to the assailant from any defense that the party
assailed might have made. This cannot be said of a situation where the slayer acted
instantaneously . . ." (People vs. Cañete, 44 Phil. 481).

WE likewise find the aggravating (qualifying) circumstance of evident premeditation not

sufficiently established. The only evidence presented to prove this circumstance was the
testimony of Crisanto Ibañez, 37 years old, married, resident of Maitum, South Cotabato,
and a laborer of Fleischer and Company, which may be summarized as follows:

"On August 20, 1968 (two days before the incident) at about 7:00 A.M., he was drying
corn near the house of Mr. and Mrs. Mamerto Narvaez at the crossing, Maitum, South
Cotabato, when the accused and his wife talked to him. Mrs. Narvaez asked him to help
them, as he was working in the hacienda. She further told him that if they fenced their
house, there is a head that will be broken. Mamerto Narvaez added 'Noy, it is better that
you will tell Mr. Fleischer because there will be nobody who will break his head but I
will be the one.' He relayed this to Mr. Flaviano Rubia, but the latter told him not to
believe as they were only idle threats designed to get him out of the hacienda" (pp. 297-
303, t.s.n., Vol. 2).

This single evidence is not sufficient to warrant appreciation of the aggravating

circumstance of evident premeditation. As WE have consistently held, there must be
"direct evidence of the planning or preparation to kill the victim, . . . it is not enough that
premeditation be suspected or surmised, but the criminal intent must be evidenced by
notorious outward acts evincing the determination to commit the crime" (People vs.
Ordioles, 42 SCRA 238). Besides, there must be a "showing" that the accused
premeditated the killing; that the culprit clung to their (his) premeditated act; and that
there was sufficient interval between the premeditation and the execution of the crime to
allow them (him) to reflect upon the consequences of the act" (People vs. Gida, 102
SCRA 70).

Moreover, the obvious bias of witness Crisanto Ibañez, as a laborer of the deceased Davis
Fleischer, neutralizes his credibility.

Since in the case at bar, there was no direct evidence of the planning or preparation to kill
the victims nor that the accused premeditated the killing, and clung to his premeditated
act, the trial court's conclusion as to the presence of such circumstance may not be
endorsed.

Evident premeditation is further negated by appellant pleading with the victims to stop
the fencing and destroying his house and to talk things over just before the shooting.

But the trial court has properly appreciated the presence of the mitigating circumstance of
voluntary surrender, it appearing that appellant surrendered to the authorities soon after
the shooting.

Likewise, WE find that passion and obfuscation attended the commission of the crime.
The appellant awoke to find his house being damaged and its accessibility to the highway
as well as of his rice mill bodega being closed. Not only was his house being unlawfully
violated; his business was also in danger of closing down for lack of access to the
highway. These circumstances, coming so near to the time when his first house was
dismantled, thus forcing him to transfer to his only remaining house, must have so
aggravated his obfuscation that he lost momentarily all reason causing him to reach for
his shotgun and fire at the victims in defense of his rights. Considering the antecedent
facts of this case, where appellant had thirty years earlier migrated to this so-called "land
of promise" with dreams and hopes of relative prosperity and tranquility, only to find his
castle crumbling at the hands of the deceased, his dispassionate plea going unheeded --
all these could be too much for any man -- he should be credited with this mitigating
circumstance.
Consequently, appellant is guilty of two crimes of homicide only, the killing not being
attended by any qualifying nor aggravating circumstance, but extenuated by the
privileged mitigating circumstance of incomplete defense -- in view of the presence of
unlawful aggression on the part of the victims and lack of sufficient provocation on the
part of the appellant -- and by two generic mitigating circumstance of voluntary surrender
and passion and obfuscation.

Article 249 of the Revised Penal Code prescribes the penalty for homicide as reclusion
temporal. Pursuant to Article 69, supra, the penalty lower by one or two degrees shall be
imposed if the deed is not wholly excusable by reason of the lack of some of the
conditions required to justify the same. Considering that the majority of the requirements
for defense of property are present, the penalty may be lowered by two degrees, i.e.,
to prision correccional. And under paragraph 5 of Article 64, the same may further be
reduced by one degree, i.e., arresto mayor, because of the presence of two mitigating
circumstances and no aggravating circumstance.

The civil liability of the appellant should be modified. In the case of Zulueta vs. Pan
American World Airways (43 SCRA 397), the award for moral damages was reduced
because the plaintiff contributed to the gravity of defendant's reaction. In the case at bar,
the victims not only contributed but they actually provoked the attack by damaging
appellant's properties and business. Considering appellant's standing in the community,
being married to a municipal councilor, the victims' actuations were apparently designed
to humiliate him and destroy his reputation. The records disclose that his wife, councilor
Feliza Narvaez, was also charged in these two cases and detained without bail despite the
absence of evidence linking her to the killings. She was dropped as a defendant only upon
motion of the prosecution dated October 31, 1968 (p. 14, CFI rec. of Crim. Case No.
1816), but acted upon on November 4, 1968 (p. 58, CFI rec. of Criminal Case No. 1815).

Moreover, these cases arose out of an inordinate desire on the part of Fleischer and
Company, despite its extensive landholdings in a Central Visayan province, to extend its
accumulation of public lands to the resettlement areas of Cotabato. Since it had the
capability -- financial and otherwise -- to carry out its land accumulation scheme, the
lowly settlers, who uprooted their families from their native soil in Luzon to take
advantage of the government's resettlement program, but had no sufficient means to fight
the big landowners, were the ones prejudiced. Thus, the moral and material suffering of
appellant and his family deserves leniency as to his civil liability.

Furthermore, Article 39 of the Revised Penal Code requires a person convicted of prision
correccional or arresto mayor and fine who has no property with which to meet his civil
liabilities to serve a subsidiary imprisonment at the rate of one (1) day for each P2.50.
However, the amendment introduced by Republic Act No. 5465 on April 21, 1969 made
the provisions of Art. 39 applicable to fines only and not to reparation of the damage
caused, indemnification of consequential damages and costs of proceedings. Considering
that Republic Act 5465 is favorable to the accused who is not a habitual delinquent, it
may be given retroactive effect pursuant to Article 22 of the Revised Penal Code.

WHEREFORE, FINDING APPELLANT GUILTY BEYOND REASONABLE

DOUBT OF ONLY TWO (2) HOMICIDES, MITIGATED BY THE PRIVILEGED
EXTENUATING CIRCUMSTANCE OF INCOMPLETE SELF-DEFENSE AS WELL
AS BY TWO (2) GENERIC MITIGATING CIRCUMSTANCES OF VOLUNTARY
SURRENDER AND OBFUSCATION, WITHOUT ANY AGGRAVATING
CIRCUMSTANCE, APPELLANT IS HEREBY SENTENCED TO SUFFER AN
IMPRISONMENT OF FOUR (4) MONTHS OF ARRESTO MAYOR, TO INDEMNIFY
EACH GROUP OF HEIRS OF DAVIS FLEISCHER AND OF FLAVIANO RUBIA IN
THE SUM OF FOUR THOUSAND (P4,000.00) PESOS, WITHOUT SUBSIDIARY
IMPRISONMENT AND WITHOUT ANY AWARD FOR MORAL DAMAGES AND
ATTORNEY'S FEES.

CONSIDERING THAT APPELLANT HAS BEEN UNDER DETENTION FOR

ALMOST FOURTEEN (14) YEARS NOW SINCE HIS VOLUNTARY SURRENDER
ON AUGUST 22, 1968, HIS IMMEDIATE RELEASE IS HEREBY ORDERED. NO
COSTS.

SO ORDERED.

EN BANC
[ G.R. No. 80796, October 11, 2001 ]
PROVINCE OF CAMARINES NORTE, REPRESENTED BY HON. ROY A.
PADILLA, JR., AS PROVINCIAL GOVERNOR, PETITIONER, VS.
PROVINCE OF QUEZON, REPRESENTED BY HON. EDUARDO T.
RODRIGUEZ, AS PROVINCIAL  GOVERNOR, RESPONDENT. RE:
URGENT PETITION TO CITE GOVERNOR EDUARDO T. RODRIGUEZ OF
QUEZON PROVINCE, AND MAYOR JULIO U. LIM OF CALAUAG,
QUEZON, IN CONTEMPT OF COURT.

[G.R. NO. 132885.  OCTOBER 11, 2001]

THE PROVINCIAL GOVERNMENT OF QUEZON, REPRESENTED BY

GOVERNOR EDUARDO T. RODRIGUEZ; MUNICIPALITY OF CALAUAG
IN THE PROVINCE OF QUEZON, WIGBERTO E. TAÑADA, PEDRO C.
INOFRE AND OSCAR F. FOLLOSO, PETITIONERS, VS. THE
COMMISSION ON ELECTIONS, RESPONDENT.
 DECISION

SANDOVAL-GUTIERREZ, J.:

On November 8, 1989, this Court, in an En Banc Decision in G.R. No. 80796,

[1]
 "PROVINCE OF CAMARINES NORTE, Represented by HONORABLE ROY
PADILLA, as Acting Provincial Governor, petitioner, vs. PROVINCE OF QUEZON,
Represented by HONORABLE HJALMAR QUINTANA, as Acting Provincial Governor,
respondent," resolved with finality the decade-long land boundary discord between the
Provinces of Camarines Norte and Quezon,

The contending parties are back in this Court instituting two separate petitions. The
present petition filed by the Province of Camarines Norte (docketed as G.R. No. 80796)
prays that respondents Quezon Governor Eduardo T. Rodriguez and Mayor Julio U. Lim
of Calauag, Quezon be cited in contempt of court for causing the removal of the
monument marker erected on the disputed boundary line by the Department of
Environment and Natural Resources in implementation of the November 8, 1989
Decision.

On the other hand, G.R. No. 132885 is a petition for certiorari with prayer for a
temporary restraining order wherein petitioners Quezon Province, et al. assail the validity
of the Commission On Elections Resolution No. 97-2406 (dated July 10, 1997) and
Resolution No. 97-3721 (dated November 27, 1997). Both Resolutions recognize nine
(9) barangays as belonging to the territorial jurisdiction of Camarines Norte, no longer
part of Calauag, Quezon, in view of the November 8, 1989 Decision of this Court in G.R.
No. 80796.

The facts are not disputed:

As earlier mentioned, on November 8, 1989, this Court rendered a Decision in G.R.

No. 80796 ("1989 SC Decision," for brevity) which resolved the long-drawn boundary
dispute between the Provinces of Camarines Norte and Quezon.  The Decision upheld as
binding upon the parties the decision of the then Chief of the Executive
Bureau dated June 16, 1922 ("1922 EB decision," for brevity) delineating and
describing that portion of the boundary comprising a land area of approximately 8,762
hectares[2] as belonging to Camarines Norte, not to Quezon Province.  The pertinent
portion of the 1989 SC Decision declares:

"In sum, we hold that the decision of the Chief of the Executive Bureau dated 16 June
1922 was lawfully issued and is binding upon the parties.  We hold further that
prohibition and mandamus will lie for the enforcement of that decision, an enforcement
unjustifiably resisted and delayed for sixty-seven (67) years.

"WHEREFORE, the Petition for Mandamus and Prohibition is hereby GRANTED. 

Respondent Quezon Province is hereby ORDERED immediately to cease and desist, and
perpetually to refrain, from exercising or performing any and all acts of jurisdiction or
political authority over all or any part of the area here held to be part of the territory of
the Province of Camarines Norte and forthwith to relinquish the same to petitioner
Province of Camarines Norte.

"Let a copy of this decision be furnished to the Secretary of the Local Governments and
the Office of the President with the request that surveyors from the Bureau of Lands
or other appropriate government agency be forthwith designated to survey and
locate, by latitude and longitude and by metes and bounds, and to monument the
Basiad Bay -Mt. Cadig line described in the 16 June 1922 decision of the Chief of the
Executive Bureau.  Costs against respondent.

"SO ORDERED."[3] (Emphasis ours)

The 1989 SC Decision became final and executory on March 19, 1990.[4]

Pursuant to the directive in the dispositive portion of the 1989 SC Decision, the Province
of Camarines Norte, through its Governor, Roy A. Padilla, Jr., asked the Secretary of the
Department of Environment and Natural Resources (DENR) to undertake the survey of
the boundary line between the two provinces based on the description[5] in the 1922 EB
decision.  Acting favorably on the request, then Secretary Fulgencio Factoran, Jr. issued
Special Order No. 1179[6] creating a technical working group specifically tasked to make
the delineation of the boundary separating the two provinces.

On January 31 1991, the DENR technical team informed Quezon Gov. Rodriguez about
the survey it would undertake.[7] However, Provincial Secretary Jorge Vargas (acting in
behalf of Gov. Rodriguez) objected, claiming that the 1922 EB decision should not be
made the basis of the survey.  He asserted that the survey should be done in conformity
with the conditions set forth in Section 42, Article II of Act 2711 (The Revised
Administrative Code of 1917).[8] But the DENR technical team proceeded with the survey
using as guide the 1922 EB decision.

On May 28, 1991, the DENR technical team went to barangay Tabugon, Calauag,
Quezon and installed a monument marker along the boundary line determined in the
survey.  The marker indicates that the area consisting of 8,032 hectares then held as part
of Calauag, Quezon actually falls within the territorial jurisdiction of Camarines Norte. 
This area comprises the nine (9) barangays of Kagtalaba, Plaridel, Kabuluan, Don
Tomas, Guitol, Tabugon, Maualawin, Patag Ibaba and Patag Iraya.[9]
On October 14, 1991, Quezon Gov. Eduardo Rodriguez and Calauag Mayor Julio U. Lim
caused the bulldozing and removal of the boundary marker.  The next day, the Manila
Bulletin published an article entitled "2 provinces in border row,"[10] with a photograph
containing the following caption:

"Boundary dispute

"Quezon Gov. Eduardo T. Rodriguez (2nd from right) orders the removal of a boundary
marker at barangay Tabugon in Calauag town placed by the Camarines Norte provincial
government last May 29. Witnessing the bulldozing of the marker are Calauag Mayor
Julio U. Lim (right) and other town officials. (JLJ)"

Aggrieved, Camarines Norte Gov. Roy Padilla, Jr. filed the present petition for contempt
(docketed as G.R. No. 80796) against Gov. Rodriguez and Mayor Lim, alleging therein
that by removing the monument marker, respondents-officials disobeyed the lawful
judgment of this Court, which act is punishable as indirect contempt of court under
Section 3, Rule 71, of the Revised Rules of Court (now 1997 Rules of Civil Procedure, as
amended).

In their comment[11] on the petition, respondents Gov. Rodriguez and Mayor Lim did not
deny having ordered the removal of the monument marker installed by the DENR.  They
claimed, however, that the placing of the marker is illegal because (a) it was installed
within the territory of Calauag, Quezon and (b) the survey conducted by the DENR
technical team was without prior authority from the Office of the President, as required
by the 1989 SC Decision.  Thus, respondents Governor Rodriguez and Mayor Lim
asserted that their action was a "reasonable use of force" justified under Article 429 [12] of
the Civil Code to protect the territorial integrity of Quezon from a threatened physical
invasion.

In a Resolution dated February 4, 1992, this Court directed Justice Alicia V. Sempio-Diy
of the Court of Appeals to conduct hearing, receive evidence and submit a report and
recommendation on the contempt proceedings.  During the proceedings, Gov. Roy
Padilla, Jr. and Engr. Mamerto Infante, head of the DENR technical team, testified for
petitioner Camarines Norte.  After petitioner has rested its case, respondent Gov.
Rodriguez filed a Demurrer to Evidence[13] contending that the 1989 SC Decision cannot
be implemented and that, therefore, no valid survey can be made, in the light of Section
42 (of Act 2711) and Republic Act No. 5480 (An Act Creating the Municipality of Sta.
Elena in the Province of Camarines Norte) which define the boundary between
Camarines Norte and Quezon provinces.[14] However, the Investigating Justice found no
sufficient basis to sustain the demurrer to evidence and ordered further hearing to
ascertain respondents' justification for removing the monument marker.  Eventually, the
parties submitted their respective memoranda. Upon the retirement of Justice Alice V.
Sempio Diy, the contempt case was assigned to Court of Appeals Justice Teodoro P.
Regino.

Thereafter, Justice Regino submitted to this Court his 29-page Report and

Recommendation dated May 3, 2000.  His recommendation reads:

"Under the facts and for the reasons stated above, the undersigned RECOMMENDS that
the respondents (Eduardo T. Rodriguez and Julio U. Lim) be both held guilty of contempt
(of court) to be sentenced the maximum penalty of six (6) months imprisonment and to
pay jointly and severally a fine of one thousand pesos (PhP1,000.00), and to shoulder the
costs of installing a new monument marker on the sight where the previous marker was
removed."[15]

Meanwhile, during the pendency of the contempt proceedings in the Court of Appeals,
the Department of Budget and Management (DBM), obviously recognizing Camarines
Norte's territorial jurisdiction over the subject nine (9) barangays as determined by the
DENR survey, transferred the Internal Revenue Allotment (IRA) share of the
9 barangays from the Municipality of Calauag, Quezon to the Municipality of Sta. Elena,
Camarines Norte starting the Fiscal Year 1994.[16]

Likewise, other agencies of the government recognized the Province of Camarines

Norte's jurisdiction over the 9 barangays.  Thus, during the May 6, 1996 Sangguniang
Kabataan Elections, the COMELEC sent the election paraphernalia of the 9 barangays to
Sta. Elena, Camarines Norte.  In its Resolution No. 96-1175 dated April 18, 1996, the
COMELEC directed inter alia the Office of the Election Officer of Calauag, Quezon to
refrain from exercising supervision relative to any political exercise in the 9 barangays.

Moreover, the Deputy Administrator of the Office of the Civil Registrar General,
National Statistics Office, issued a Memorandum dated July 27, 1996 informing the Civil
Registrar of Calauag, Quezon that the registration of vital events occurring in the subject
9 barangays should now be exercised by the Local Civil Registry of Sta. Elena,
Camarines Norte.  Also, on March 18 1997, the Department of Finance directed the
Provincial Assessor and Provincial Treasurer of Quezon Province to transfer to Sta.
Elena, Camarines Norte all the documents and records pertaining to the assessment and
collection of realty taxes on the real property located in the 9 barangays.

On July 10, 1997, the COMELEC issued Resolution No. 97-2406,[17] this time
authorizing the Election Officer of Sta. Elena, Camarines Norte to: 1) change the address
in the Voter Registration Records (VRR) of the subject 9 barangays from Calauag,
Quezon to Sta. Elena, Camarines Norte and 2) notify the registered voters concerned of
such change of address.

This action by the COMELEC was opposed by the Sangguniang Bayan of Calauag,
Quezon through Resolution No. 121[18] dated September 12, 1997.  On November 27,
1997, the COMELEC issued Resolution No. 97-3721[19] noting and denying the Calauag
Sangguniang Bayan Resolution with finality.

Hence, the present second petition for certiorari, docketed as G.R. No.

132885, challenging the COMELEC twin Resolutions.  This case was consolidated
with G.R. No. 80796.[20]

Now to our resolution of the two petitions.

As regards the contempt proceedings (G.R. No. 80796), respondents Gov. Eduardo T.

Rodriguez and Mayor Julio U. Lim aver that their act of removing the monument marker
is in accordance with Article 429 of the Civil Code authorizing the owner or lawful
possessor of a property to exclude any person from the enjoyment and disposal thereof. 
They claim that the survey conducted by the DENR technical team, as well as the
subsequent setting up of the monument marker separating the two provinces, constitute
usurpation of their territory because (1) the survey was made by the DENR without prior
directive from the Office of the President and (2) the 1922 Executive Bureau decision,
which was the basis of the survey, is technically inconsistent with and violative of: [a]
Section 42, Article II of Act 2711 [Revised Administrative Code of 1917],  [b]  Republic
Act No. 5480, [c] Section 10, Article X of the 1987 Constitution,[21] and [d] Section 10 of
Republic Act No. 7160.[22]

In his Report and Recommendation, Justice Teodoro Regino found that respondents'

act of removing the monument marker amounts to contumacious conduct defined under
Section 3 (b), Rule 71 of the Revised Rules of Court (now 1997 Rules of Civil Procedure,
as amended) which declares contemptuous any "disobedience of or resistance to a
lawful writ, process, order, or judgment or command of a court." He found valid and
regular the DENR survey, stressing that the installation of the monument marker was in
compliance with this Court's 1989 Decision.  Further, he viewed respondents' persistent
invocation of Section 42 of Act No. 2711 (Revised Administrative Code of 1917);
Republic Act 5480; Section 10, Article X of the 1987 Constitution; and Section 10 of
Republic Act 7160 as a continuing effort on their part to reopen settled issues in order to
thwart the implementation of the 1989 SC Decision.

Justice Regino's findings are reproduced hereunder:

"The import of the (Nov. 8, 1989 SC Decision) need not be essayed.  The terms
employed therein are clear.  In removing the monument marker, the objective of the
respondents (Eduardo T. Rodriguez and Julio U. Lim) was to remove the proof that they
no longer have any territorial jurisdiction over the area determined by the DENR survey
group as belonging to the petitioner (Province of Camarines Norte). x x x.  They
perceived the installation of the monument marker as an attack on the territorial integrity
of Quezon Province despite the DENR technical working group's findings that the
disputed area belongs to petitioner.  Respondents were thus doing what the
Supreme Court decision expressly prohibited or enjoined, that is, the exercise of
jurisdiction or political authority over an area held to be part of the territory of the
petitioner based on the 1922 Decision of the Chief of the Executive Bureau.

x x x                                                x x x                                        x x x

"Based on the records of the case, the respondents have a long record of resisting
the claim of petitioner to the disputed area.  x x x."

"The undersigned is, therefore, convinced that respondents completely understood the

Supreme Court decision but chose instead to deliberately disobey it x x
x.  Respondents' contumacious refusal to adhere to the decision was made with full
understanding that their acts would fall under contempt of court as evidenced by
the following declaration of the respondent Governor in his "Demurrer to Evidence
With Leave of Court", dated October 12, 1992, as follows:

`The whole case would have been different if factually the territory defined in the (1922)
Decision of the Executive Bureau conformed with the prescription of Section 42 (of
Article II, Revised Administrative Code  of 1917), x x x.'

x x x                                                x x x                                        x x x"[23] (Emphasis

ours)

We agree with Justice Regino's findings.

Indeed, it is highly improper for respondent Gov. Rodriguez to state in his Demurrer to
Evidence that "the whole case would have been different" (meaning, this contempt
incident would not have happened) had "the territory defined in the (1922) Decision of
the Executive Bureau conformed with the prescription of Section 42 (of Article II,
Revised Administrative Code of 1917)". Respondent Rodriguez knew very well that this
issue on the subject territorial boundary had long been settled in our 1989 Decision where
we ruled:

"1.  Turning to the first issue, we note that Section 42 (Article II, Revised
Administrative Code of 1917) does set out a definition or description of the boundary
line between Ambos Camarines and Quezon Province. We note, however, that Section
42 does not describe or define the entirety of that line in such a manner as to permit
the whole boundary line to be located on the ground by a surveyor.  Close examination
of Section 42 will show that it is not the whole boundary line that is disputed but only a
segment thereof.  The boundary line from the peak of Mt. Cadig eastward to the peak of
Mt. Labo and from there to a stone monument at the head-waters of the Pasay River and
thence along the course of that river to the Gulf of Ragay, is described in terms which are
sufficiently precise to permit a surveyor to locate that boundary line on the surface of the
earth.  It is the western portion of the boundary line - from the peak of Mt.
Cadig westward to a point on the eastern shore of Basiad Bay - which is the subject of
the boundary dispute.

"It is pointed out by petitioner Camarines Norte, firstly, that the particular point on
Basiad Bay that is the terminus of the boundary line is not specifically identified
in Section 42, considering that the eastern shore of Basiad Bay is 25 kilometers in
length, more or less, such that that terminal point could in theory be located anywhere
along the 25-kilometer shore line.  Secondly, the specific direction or directions and the
varying lengths (the 'metes and bounds') of the various segments of the boundary line to
be projected from the terminus point on Basiad Bay onto Mt. Cadig's peak, are similarly
not specified in Section 42.  Thus, again, a surveyor on the ground would be unable to
locate and monument the boundary line from Basiad Bay to Mt. Cadig if all he had was
the language found in Section 42 of the Revised Administrative Code.

"We agree with petitioner Camarines Norte's argument.  We consider that to that
limited extent, the Ambos Camarines - Quezon boundary line was `undefined' and
that there was thus necessity for the 16 June 22 decision of the Chief of the Executive
Bureau to provide more specific guidance that would permit the actual
identification or location of the Basiad Bay - Mt. Cadig portion of the boundary line
between Ambos Camarines and Quezon Province:

'[from the peak of Mt. Cadig] thence a straight line is drawn to the point of intersection
of the interprovincial road between Camarines Norte and Tayabas (now Quezon) with the
Tabugon River, thence following the course of the river to each mouth at the Basiad
Bay.'"[24] (Emphasis ours)

Very clearly, our 1989 Decision categorically declared valid and binding the 1922 EB
decision upon the contending parties.  Despite this, respondents stubbornly insisted on
their own interpretation of what should be the correct description of the boundary line.
Such willful disregard of our Decision was eloquently demonstrated when respondents
caused the removal of the monument marker delineating the actual territorial boundary
between the Provinces of Quezon and Camarines Norte.

Parenthetically, exactly the same point was emphasized by this Court in

the disbarment case[25] filed by Camarines Norte Governor Roy Padilla, Jr. against the
counsel for the Province of Quezon, Attys. Jorge B Vargas and Jovito E. Talabong,
docketed as A.C. No. 3774.[26] This Court reprimanded both lawyers for having told the
DENR technical team that the "province of Quezon shall (only) agree to the definition of
the boundary line if it would comply with Section 42, Article II of Act No. 2711 (the
Revised Administrative Code of 1917)." There we said:
"Thus, it is clear to us that respondents' insistence that the DENR Technical
Working Group comply with Section 42, Article II of Act 2711, despite the Court's
ruling that said provision of law had failed to identify this portion of the boundary
between the two (2) provinces with sufficient specificity, which specificity was precisely
supplied by the 16 June 1922 Decision of the Chief of the Executive Bureau, was but a
disingenuous device to delay and perhaps frustrate the implementation of the
Court's Decision in G.R. No. 80796, which Decision respondents vehemently
disagree.

"This Court does not, as it cannot, always expect counsel of losing litigants graciously to
accept the correctness of the decisions of this Court.  But when such decisions reach
finality, it is the duty of such counsel as officers of the Court and members of the
Bar to obey those decisions, whatever their personal opinion may be in respect of
the merits of the decisions. It is, of course, open to the respondents herein to seek to
change those decisions they disagree with by going to the Congress of the Philippines to
try to secure the enactment of a statute changing the boundary line already declared
legally binding by this Court. Until such a statute is enacted, however, respondents
owe a special duty faithfully and honestly to comply with final decisions of this
Court.  The Court cannot countenance any further disregard of this duty.  It is of
essence of an ordered and civilized community that the function of final resolution
of disputes be located in a particular institution.  In our system, that institution is
this Court.

"ACCORDINGLY, the Court Resolved to REPRIMAND respondents Attys. Jorge B.

Vargas, Jr. and Jovito E. Talabong for obstructing implementation of the Decision
of this Court dated 8 November 1989 in G.R. No. 80796.  Respondents are hereby
solemnly WARNED that any further attempts to delay or frustrate the
implementation of the Decision in G.R. No. 80796 of the commission of similar act(s)
tending towards the same end, will be dealt with more severely.

"Let copies of this Resolution be spread on respondents' respective personal records in

the Office of the Bar Confidant."[27] (Emphasis ours)

Next, respondents vainly sought to justify their contemptuous conduct by invoking

Republic Act No. 5480 ("An Act Creating The Municipality Of Santa Elena In The
Province Of Camarines Norte"), which was approved on June 21, 1969. They claim that
Section 1 of the law, which reads:

"SECTION 1. Barrios Salvacion, Bulala, Rizal, San Lorenzo, Pulong Guit-guit, Santa
Elena, San Vicente, Basiad and San Pedro up to the boundary of the Province of
Quezon and the Province of Camarines Norte as defined in Chapter three, Article
II, Section forty-two of the Administrative Code, in the Municipality of Capalonga,
Province of Camarines Norte, are hereby separated from said municipality, and
constituted into a distinct and independent political entity, to be known as the
Municipality of Santa Elena. x x x." (Emphasis ours)

provides the "latest definition" of the boundary between Quezon and Camarines Norte. 
They argue that nowhere in Section 1 can be found the subject nine (9) barangays to be
within the territorial jurisdiction of Santa Elena, Camarines Norte.  Hence, to include
these 9 barangays to Santa Elena would violate not only R.A. No. 5480 but also Section
10, Article X of the 1987 Constitution and Section 10 of Republic Act 7160 (The Local
Government Code of 1991), which laws require a plebiscite in cases of substantial
alteration of territorial boundaries.

Again, these arguments do not present any novel issue.

Firstly, we have settled this matter when we disposed of the Province of Quezon's motion
for clarification of the 1989 SC Decision.  We said:

"Considering that the motion for clarification of judgment dated March 26, 1990 filed by
the counsel for respondent province of Quezon merely repeats an argument previously
made in their motion for reconsideration, and considering that said motion for
clarification is in effect a second motion for reconsideration, the first motion for
reconsideration having been denied with finality, the Court resolved to note without
action the said motion for clarification.  The Court would simply add that Republic
Act No. 5480 does not purport to have amended Section 42 of the Revised
Administrative Code nor Section 2 of Act No. 2809, both as implemented in the
decision dated 16 June 1922 of the Executive Bureau of the Department of Interior.
xxx."[28] (Emphasis ours)

Moreover, while Section 1 quoted above enumerates the component barangays of Santa

Elena, the same section categorically extends Santa Elena's territorial jurisdiction "up to
the boundary of the Province of Quezon and the Province of Camarines Norte as defined
in Chapter three, Article II, Section forty-two of the Administrative Code".  That
"boundary" has been defined in the 1922 EB Decision, which, in turn, was ordered
enforced in our November 8, 1989 Decision.  Verily, the enumeration of the barangays in
Section 1 of R.A. No. 5480 is not intended to delimit the territorial jurisdiction of
Santa Elena, Camarines Norte.

And, secondly, the 1989 SC Decision emphatically stresses that "the (1922 decision of
the) Chief of the Executive Bureau did not x x x `alter' or `re-define' or `amend an
existing provincial boundary,' the boundary line between Ambos Camarines and
Tayabas (now Quezon Province).  All that the Chief of the Executive Bureau did
was to implement, upon the authority of the Secretary of Interior, Section 42 of Act
No. 2711."[29] Necessarily, respondents' argument on the non-compliance with the
plebiscite requirement under Section 10, Article X of the 1987 Constitution, as well as
Section 10 of Republic Act No. 7160, is misplaced.

We also find baseless respondents' claim that the DENR technical team conducted the
survey without prior authority from the Office of the President.  It cannot be gainsaid that
the authority of the DENR technical team emanated from the Special Order No.
1179 duly issued by the DENR Secretary, the alter ego of the President.  Being an alter
ego, the acts of the DENR Secretary are presumed to be the acts of the President, unless
expressly repudiated by the latter.  The DENR technical team was precisely created in
compliance with the 1989 SC Decision to conduct the survey.  Thus, the DENR technical
team's authority is beyond question.

From the above disquisition, we hold that respondents Gov. Eduardo T. Rodriguez and
Mayor Julio U. Lim openly disobeyed our November 8, 1989 Decision when they caused
the removal of the  monument marker installed by the DENR.  The significance of the
monument marker cannot simply be disregarded.  As aptly explained by Engr. Mamerto
Infante, it has a technical purpose of preserving the survey conducted by his team. [30] In
fact, our 1989 Decision itself mandates "...to monument the Basiad Bay-Mt. Cadig line
described in the 16 June 1922 decision of the Chief of the Executive Bureau." That
respondents understood our 1989 Decision is fully borne by the records in these cases and
well attested by their valiant effort in re-litigating issues already settled by this Court. 
That same effort, however, highlighted by their contumacious destruction of the
monument, worked adversely to their cause.  It renders them liable for indirect contempt.

We are well aware of the legal precept that the power of the court to punish
contemptuous acts should be exercised on the preservative and not on the vindictive
principle.[31] However, where, as here, there is clear and contumacious defiance of, or
refusal to obey this Court's Decision, we will not hesitate to exercise our inherent power
if only to maintain respect to this Court, for without which the administration of justice
may falter or fail.  We note that respondents Gov. Rodriguez and Mayor Lim committed
the contemptuous act on October 14, 1991 and were charged for contempt under Section
3, Rule 71 of the Revised Rules of Court.  Section 6 thereof imposes a penalty of fine not
exceeding P1,000.00 or imprisonment of not more than six (6) months, or both.  We
believe the penalty of FINE in the amount of P1,000.00, with warning, is reasonable for
this purpose.

We now come to the petition for certiorari (G.R. No. 132885) instituted by the Province
of Quezon, et al. against the COMELEC.

Petitioners assail the COMELEC Resolutions No. 97-2406 (dated July 10, 1997) and No.
97-3721 (dated November 27, 1997) which, for election purposes, recognize the Province
of Camarines Norte's territorial jurisdiction over the subject nine (9) barangays formerly
considered part of Calauag, Quezon. They maintain that respondent COMELEC, in
issuing the Resolutions, has "committed grave abuse of discretion and/or acted without or
in excess of jurisdiction," contending that such recognition violated Republic Act No.
5480; Section 10, Article X of the Constitution; and Section 10 of the Local Government
Code.

In its comment, the COMELEC asserts that it issued the assailed Resolutions "in
deference to the final (November 8, 1989) Decision of this Honorable Court in the case
of `Province of Camarines Norte vs. Province of Quezon' (in G.R. No. 80796), and
only after the issue of the land boundary dispute between the two provinces had been
settled therein."[32] It further claims that the issuance of the challenged Resolutions was to
enforce the 1989 SC Decision as directed by this Court in a subsequent En
Banc Resolution dated August 4, 1994 in the same G.R. No. 80796, thus:

"The Court takes this occasion to stress that the Province of Quezon and Governor
Eduardo Rodriguez are bound by the said final decision of this Court and that the
boundary dispute there resolved is no longer a dispute and that all the attendant
legal issues have been resolved with finality.  That decision of this Court constitutes res
adjudicata in respect of all offices and agencies of the Executive
Department. Accordingly, the province of Camarines Norte is entitled, not to a `status
quo prior to the controversy,' but rather to the prompt enforcement of the decision of
this Court."[33] (Emphasis ours)

We fully agree with respondent COMELEC.

For showing high regard to this Court's Decision and Orders, we commend not only the
COMELEC but also the Department of Budget and Management, the Department of
Finance, the Department of Environment and Natural Resources, the Department of
Interior and Local Government and the National Statistics Office. These government
offices and agencies have collectively recognized the subject 9 barangays as part of
Camarines Norte's jurisdiction.

Sadly, it is only Quezon Province and its officials who ignore the finality of the Decision
and Resolutions of this Court.  Their present petition attempts to re-litigate the same
issues judiciously passed upon by this Court with finality.  It is but imperative for this
Court to write finis to these cases.  Indeed, every litigation must come to an end;
otherwise, it would become even more intolerable than the wrong and injustice it is
designed to correct.

WHEREFORE, the petition for contempt in G.R. No. 80796 is GRANTED. 

Respondents Eduardo T. Rodriguez and Julio U. Lim are adjudged GUILTY of
INDIRECT CONTEMPT of this Court and, pursuant to Section 6, Rule 71 of the Revised
Rules of Court, are FINED in the amount of P1,000.00 each, and WARNED that a
repetition of similar misconduct will be dealt with more severely.  The Province of
Quezon, its representatives and any person acting on its behalf are ORDERED to
REFRAIN from committing the same or similar act tending to obstruct the full
implementation of this Court's Decision dated November 9, 1989 in G.R. No. 80796.

Within Ten (10) days from notice of this Decision, respondents Eduardo T. Rodriguez
and Julio U. Lim are ORDERED to RE-INSTALL, at their expense, the monument
marker on the site where it was originally placed, under the direct supervision of the
Department of Environment and Natural Resources.

The petition for certiorari in G.R. No. 132885 is DISMISSED for lack of merit.

Let a copy of this Decision be furnished the Office of the President and the Secretary of
the Department of Interior and Local Government, with the request that the results of the
survey conducted by the DENR Technical Working Group be FULLY and
IMMEDIATELY implemented.  Costs against respondents Eduardo T. Rodriguez and
Julio U. Lim.

This Decision is FINAL.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 147076, June 17, 2004 ]
METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM,
PETITIONER, VS. ACT THEATER, INC., RESPONDENT.

DECISION

CALLEJO, SR., J.:

Before the Court is a petition for review on certiorari filed by the Metropolitan
Waterworks and Sewerage System (MWSS), seeking to reverse and set aside the
Decision[1] dated January 31, 2001 of the Court of Appeals in CA-G.R. CV No. 58581,
which affirmed the civil aspect of the Decision [2] dated May 5, 1997 of the Regional Trial
Court of Quezon City, Branch 77, directing the petitioner MWSS to pay the respondent
Act Theater, Inc. damages and attorney’s fees.

The present case stemmed from the consolidated cases of Criminal Case No. Q-89-2412
entitled People of the Philippines v. Rodolfo Tabian, et al., for violation of Presidential
Decree (P.D.) No. 401, as amended by Batas Pambansa Blg. 876, and Civil Case No. Q-88-
768 entitled Act Theater, Inc. v. Metropolitan Waterworks and Sewerage System. The
two cases were jointly tried in the court a quo as they arose from the same factual
circumstances, to wit:

On September 22, 1988, four employees of the respondent Act Theater, Inc., namely,
Rodolfo Tabian, Armando Aguilar, Arnel Concha and Modesto Ruales, were
apprehended by members of the Quezon City police force for allegedly tampering a
water meter in violation of P.D. No. 401, as amended by B.P. Blg. 876. The respondent’s
employees were subsequently criminally charged (Criminal Case No. Q-89-2412) before
the court a quo. On account of the incident, the respondent’s water service connection
was cut off. Consequently, the respondent filed a complaint for injunction with damages
(Civil Case No. Q-88-768) against the petitioner MWSS.

In the civil case, the respondent alleged in its complaint filed with the court a quo that
the petitioner acted arbitrarily, whimsically and capriciously, in cutting off the
respondent’s water service connection without prior notice. Due to lack of water, the
health and sanitation, not only of the respondent’s patrons but in the surrounding
premises as well, were adversely affected. The respondent prayed that the petitioner be
directed to pay damages.

After due trial, the court a quo rendered its decision, the dispositive portion of which
reads:

In Criminal Case No. Q-89-2412

WHEREFORE, for failure of the prosecution to prove the guilt of the accused
beyond reasonable doubt, the four (4) above-named Accused are hereby ACQUITTED of
the crime charged.[3]

In Civil Case No. Q-88-768

...

1. Ordering defendant MWSS to pay plaintiff actual or compensatory damages in

the amount of P25,000.00; and to return the sum of P200,000.00 deposited by
 the plaintiff for the restoration of its water services after its disconnection on
September 23, 1988;

2. Defendant’s counterclaim for undercollection of P530,759.96 is dismissed for lack

of merit;

3. Ordering defendant MWSS to pay costs of suit;

4. Ordering defendant MWSS to pay plaintiff the amount of P5,000.00 as attorney’s

fees;

5. Making the mandatory injunction earlier issued to plaintiff Act Theater, Inc.
permanent.

SO ORDERED.[4]
Aggrieved, the petitioner appealed the civil aspect of the aforesaid decision to
the CA. The appellate court, however, dismissed the appeal. According to the CA, the
court a quo correctly found that the petitioner’s act of cutting off the respondent’s
water service connection without prior notice was arbitrary, injurious and prejudicial to
the latter justifying the award of damages under Article 19 of the Civil Code.

Undaunted, the petitioner now comes to this Court alleging as follows:

I
WHETHER OR NOT THE HONORABLE COURT OF APPEAL[S] VALIDLY AFFIRMED
THE DECISION OF THE REGIONAL TRIAL COURT IN RESOLVING THE PETITIONER’S
APPEAL;

II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS VALIDLY UPHELD THE AWARD
OF ATTORNEY’S FEES;

III

WHETHER OR NOT THE HONORABLE COURT OF APPEAL[S] CORRECTLY APPLIED THE

PROVISION OF ARTICLE 19 OF THE NEW CIVIL CODE WITHOUT CONSIDERING THE
APPLICABLE PROVISION OF ARTICLE 429 OF THE SAME CODE.[5]
 Preliminarily, the petitioner harps on the fact that, in quoting the decretal portion
of the court a quo’s decision, the CA erroneously typed P500,000 as the attorney’s fees
awarded in favor of the respondent when the same should only be P5,000. In any case,
according to the petitioner, whether the amount is P500,000 or P5,000, the award of
attorney’s fees is improper considering that there was no discussion or statement in the
body of the assailed decision justifying such award. The petitioner insists that in cutting
off the respondent’s water service connection, the petitioner merely exercised its
proprietary right under Article 429 of the Civil Code.

The petition is devoid of merit.

Article 429 of the Civil Code, relied upon by the petitioner in justifying its act of
disconnecting the water supply of the respondent without prior notice, reads:
Art. 429. The owner or lawful possessor of a thing has the right to exclude any
person from the enjoyment and disposal thereof. For this purpose, he may use such
force as may be reasonable to repel or prevent an actual or threatened unlawful
physical invasion or usurpation of his property.
A right is a power, privilege, or immunity guaranteed under a constitution,
statute or decisional law, or recognized as a result of long usage, [6] constitutive of a
legally enforceable claim of one person against the other. [7]

Concededly, the petitioner, as the owner of the utility providing water supply to certain
consumers including the respondent, had the right to exclude any person from the
enjoyment and disposal thereof. However, the exercise of rights is not without
limitations. Having the right should not be confused with the manner by which such
right is to be exercised.[8]

Article 19 of the Civil Code precisely sets the norms for the exercise of one’s rights:
Art. 19. Every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good faith.
When a right is exercised in a manner which discards these norms resulting in
damage to another, a legal wrong is committed for which actor can be held accountable.
[9]
 In this case, the petitioner failed to act with justice and give the respondent what is
due to it when the petitioner unceremoniously cut off the respondent’s water service
connection. As correctly found by the appellate court:
 While it is true that MWSS had sent a notice of investigation to plaintiff-appellee
prior to the disconnection of the latter’s water services, this was done only a few hours
before the actual disconnection. Upon receipt of the notice and in order to ascertain the
matter, Act sent its assistant manager Teodulo Gumalid, Jr. to the MWSS office but he
was treated badly on the flimsy excuse that he had no authority to represent Act. Act’s
water services were cut at midnight of the day following the apprehension of the
employees. Clearly, the plaintiff-appellee was denied due process when it was deprived
of the water services. As a consequence thereof, Act had to contract another source to
provide water for a number of days. Plaintiff-appellee was also compelled to deposit
with MWSS the sum of P200,000.00 for the restoration of their water services. [10]
There is, thus, no reason to deviate from the uniform findings and conclusion of
the court a quo and the appellate court that the petitioner’s act was arbitrary, injurious
and prejudicial to the respondent, justifying the award of damages under Article 19 of
the Civil Code.

Finally, the amount of P500,000 as attorney’s fees in that portion of the assailed
decision which quoted the fallo of the court a quo’s decision was obviously a
typographical error. As attorney’s fees, the court a quo awarded the amount of P5,000
only. It was this amount, as well as actual and compensatory damages of P25,000 and
the reimbursement of P200,000 deposited by the respondent for the restoration of its
water supply, that the CA affirmed, as it expressly stated in its dispositive portion that
“finding no cogent reason to reverse the appealed Decision which is in conformity with
the law and evidence, the same is hereby AFFIRMED.” [11]

The award of P5,000 as attorney’s fees is reasonable and warranted. Attorney’s fees
may be awarded when a party is compelled to litigate or incur expenses to protect his
interest by reason of an unjustified act of the other party. [12]

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated

January 31, 2001 in CA-G.R. CV No. 58581 is AFFIRMED in toto.

SO ORDERED.

SECOND DIVISION
 [ G.R. No. 142668, August 31, 2004 ]
UNITED COCONUT PLANTERS BANK AND LUIS MA. ONGSIAPCO,
PETITIONERS, VS. RUBEN E. BASCO, RESPONDENT.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari assailing the Decision[1] of the Court of Appeals
dated March 30, 2000, affirming, with modifications, the Decision[2] of the Regional Trial
Court (RTC), Makati City, Branch 146, which found the petitioner bank liable for
payment of damages and attorney’s fees.

The Case for the Respondent

Respondent Ruben E. Basco had been employed with the petitioner United Coconut
Planters Bank (UCPB) for seventeen (17) years.[3] He was also a stockholder thereof and
owned 804 common shares of stock at the par value of P1.00.[4] He likewise maintained a
checking account with the bank at its Las Piñas Branch under Account No. 117-001520-
6.[5] Aside from his employment with the bank, the respondent also worked as an
underwriter at the United Coconut Planters Life Association (Coco Life), a subsidiary of
UCPB since December, 1992.[6] The respondent also solicited insurance policies from
UCPB employees.

On June 19, 1995, the respondent received a letter from the UCPB informing him of the
termination of his employment with the bank for grave abuse of discretion and authority,
and breach of trust in the conduct of his job as Bank Operations Manager of its Olongapo
Branch. The respondent thereafter filed a complaint for illegal dismissal, non-payment of
salaries, and damages against the bank in the National Labor Relations Commission
(NLRC), docketed as NLRC Cases Nos. 00-09-05354-92 and 00-09-05354-93. However,
the respondent still frequented the UCPB main office in Makati City to solicit insurance
policies from the employees thereat. He also discussed the complaint he filed against the
bank with the said employees.[7]

The respondent was also employed by All-Asia Life Insurance Company as an

underwriter. At one time, the lawyers of the UCPB had an informal conference with him
at the head office of the bank, during which the respondent was offered money so that the
case could be amicably settled. The respondent revealed the incident to some of the bank
employees.[8]

On November 15, 1995, Luis Ma. Ongsiapco, UCPB First Vice-President, Human
Resource Division, issued a Memorandum to Jesus Belanio, the Vice-President of the
Security Department, informing him that the respondent’s employment had been
terminated as of June 19, 1995, that the latter filed charges against the bank and that the
case was still on-going. Ongsiapco instructed Belanio not to allow the respondent access
to all bank premises.[9] Attached to the Memorandum was a passport-size picture of the
respondent. The next day, the security guards on duty were directed to strictly impose the
security procedure in conformity with Ongsiapco’s Memorandum.[10]

On December 7, 1995, the respondent, through counsel, wrote Ongsiapco, requesting that
such Memorandum be reconsidered, and that he be allowed entry into the bank premises.
[11]
 His counsel emphasized that –
In the meantime, we are more concerned with your denying Mr. Basco “access to all
bank premises.” As you may know, he is currently connected with Cocolife as insurance
agent. Given his 17-year tenure with your bank, he has established good relationships
with many UCPB employees, who comprise the main source of his solicitations. In the
course of his work as insurance agent, he needs free access to your bank premises, within
reason, to add the unnecessary. Your memorandum has effectively curtailed his
livelihood and he is once again becoming a victim of another “illegal termination,” so to
speak. And Shakespeare said: “You take his life when you do take the means whereby he
lives.”

Mr. Basco’s work as an insurance agent directly benefits UCPB, Cocolife’s mother
company. He performs his work in your premises peacefully without causing any
disruption of bank operations. To deny him access to your premises for no reason except
the pendency of the labor case, the outcome of which is still in doubt – his liability, if
any, certainly has not been proven – is a clear abuse of right in violation of our client’s
rights. Denying him access to the bank, which is of a quasi-public nature, is an undue
restriction on his freedom of movement and right to make a livelihood, comprising gross
violations of his basic human rights. (This is Human Rights Week, ironically).

We understand that Mr. Basco has been a stockholder of record of 804 common shares of
the capital stock of UCPB since July 1983. As such, he certainly deserves better
treatment than the one he has been receiving from your office regarding property he
partly owns. He is a particle of corporate sovereignty. We doubt that you can impose the
functional equivalent of the penalty of destierro on our client who really wishes only to
keep his small place in the sun, to survive and breathe. No activity can be more legitimate
than to toil for a living. Let us live and let live.[12]
In his reply dated December 12, 1995, Ongsiapco informed the respondent that his
request could not be granted:
As you understand, we are a banking institution; and as such, we deal with matters
involving confidences of clients. This is among the many reasons why we, as a matter of
policy, do not allow non-employees to have free access to areas where our employees
work. Of course, there are places where visitors may meet our officers and employees to
discuss business matters; unfortunately, we have limited areas where our officers and
employees can entertain non-official matters.

Furthermore, in keeping with good business practices, the Bank prohibits solicitation,
peddling and selling of goods, service and other commodities within its premises as it
disrupts the efficient performance and function of the employees.

Please be assured that it is farthest from our intention to discriminate against your client.
In the same vein, it is highly improper for us to carve exceptions to our policies simply to
accommodate your client’s business ventures.[13]
The respondent was undaunted. At 5:30 p.m. of December 21, 1995, he went to the office
of Junne Cacay, the Assistant Manager of the Makati Branch. Cacay was then having a
conference with Bong Braganza, an officer of the UCPB Sucat Branch. Cacay entertained
the respondent although the latter did have an appointment. Cacay even informed him
that he had a friend who wanted to procure an insurance policy.[14] Momentarily, a
security guard of the bank approached the respondent and told him that it was already
past office hours. He was also reminded not to stay longer than he should in the bank
premises.[15] Cacay told the guard that the respondent would be leaving shortly.[16] The
respondent was embarrassed and told Cacay that he was already leaving. [17]

At 1:30 p.m. of January 31, 1996, the respondent went to the UCPB Makati Branch to
receive a check from Rene Jolo, a bank employee, and to deposit money with the bank
for a friend.[18] He seated himself on a sofa fronting the teller’s booth[19] where other
people were also seated.[20] Meanwhile, two security guards approached the respondent.
The guards showed him the Ongsiapco’s Memorandum and told him to leave the bank
premises. The respondent pleaded that he be allowed to finish his transaction before
leaving. One of the security guards contacted the management and was told to allow the
respondent to finish his transaction with the bank.

Momentarily, Jose Regino Casil, an employee of the bank who was in the 7th floor of the
building, was asked by Rene Jolo to bring a check to the respondent, who was waiting in
the lobby in front of the teller’s booth.[21] Casil agreed and went down to the ground floor
of the building, through the elevator. He was standing in the working area near the
Automated Teller Machine (ATM) Section[22] in the ground floor when he saw the
respondent standing near the sofa[23] near the two security guards.[24] He motioned the
respondent to come and get the check, but the security guard tapped the respondent on the
shoulder and prevented the latter from approaching Casil. The latter then walked towards
the respondent and handed him the check from Jolo.

Before leaving, the respondent requested the security guard to log his presence in the
logbook. The guard did as requested and the respondent’s presence was recorded in the
logbook.[25]
On March 11, 1996, the respondent filed a complaint for damages against the petitioners
UCPB and Ongsiapco in the RTC of Manila, alleging inter alia, that –

12. It is readily apparent from this exchange of correspondence that defendant bank'’
acknowledged reason for barring plaintiff from its premises - the pending labor
case – is a mere pretense for its real vindictive and invidious intent: to prevent
plaintiff, and plaintiff alone, from carrying out his trade as an insurance agent
among defendant bank’s employees, a practice openly and commonly allowed and
tolerated (encouraged even, for some favored proverbial sacred cows) in the bank
premises, now being unjustly denied to plaintiff on spurious grounds.

13. Defendants, to this day, have refused to act on plaintiff’s claim to be allowed even
in only the “limited areas where [the bank’s] officers and employees can entertain
non-official matters” and have maintained the policy banning plaintiff
from all bank premises. As he had dared exercised his legal right to question his
dismissal, he is being penalized with a variation of destierro, available in criminal
cases where the standard however, after proper hearing, is much more stringent
and based on more noble grounds than mere pique or vindictiveness.

14. This appallingly discriminatory policy resulted in an incident on January 31, 1996
at 1:30 p.m. at defendant bank’s branch located at its head office, which caused
plaintiff tremendous undeserved humiliation, embarrassment, and loss of face.[26]

15. Defendants’ memorandum and the consequent acts of defendants’ security guards,
together with defendant Ongsiapco’s disingenuous letter of December 12, 1995,
are suggestive of malice and bad faith in derogation of plaintiff’s right and dignity
as a human being and citizen of this country, which acts have caused him
considerable undeserved embarrassment. Even if defendants, for the sake of
argument, may be acting within their rights, they cannot exercise same abusively,
as they must, always, act with justice and in good faith, and give plaintiff his due.
[27]

The respondent prayed that, after trial, judgment be rendered in his favor, as follows:
WHEREFORE, it is respectfully prayed that judgment issue ordering defendants:

1. To rescind the directive to its agents barring plaintiff from all bank premises as
embodied in the memorandum of November 15, 1995, and allow plaintiff access
to the premises of defendant bank, including all its branches, which are open to
 members of the general public, during reasonable hours, to be able to conduct
lawful business without being subject to invidious discrimination; and

2. To pay plaintiff P100,000.00 as moral damages, P100,000.00 as exemplary

damages, and P50,000.00 by way of attorney’s fees.

Plaintiff likewise prays for costs, interest, the disbursements of this action, and such other
further relief as may be deemed just and equitable in the premises. [28]
In their Answer to the complaint, the petitioners interposed the following affirmative
defenses:

9. Plaintiff had been employed as Branch Operations Officer, Olongapo Branch, of

defendant United Coconut Planters Bank.

In or about the period May to June 1992, he was, together with other fellow
officers and employees, investigated by the bank in connection with various
anomalies. As a result of the investigation, plaintiff was recommended terminated
on findings of fraud and abuse of discretion in the performance of his work. He
was found by the bank’s Committee on Employee Discipline to have been guilty
of committing or taking part in the commission of the following:

a. Abuse of discretion in connection with actions taken beyond or outside the

limits of his authority.
b. Borrowing money from a bank client.
c. Gross negligence or dereliction of duty in the implementation of bank
policies or valid orders from management.
d. Direct refusal or willful failure to perform, or delay in performing, an
assigned task.
e. Fraud or willful breach of trust in the conduct of his work.
f. Falsification or forgery of bank records/documents.

10. Plaintiff thereafter decided to contest his termination by filing an action for illegal
dismissal against the bank.

Despite the pendency of this litigation, plaintiff was reported visiting employees of
the bank in their place of work during work hours, and circulating false
information concerning the status of his case against the bank, including alleged
offers by management of a monetary settlement for his “illegal dismissal.”
 11. Defendants acted to protect the bank’s interest by preventing plaintiff’s access to
the bank’s offices, and at the same time informing him of that decision.

Plaintiff purported to insist on seeing and talking to the bank’s employees despite
this decision, claiming he needed to do this in connection with his insurance
solicitation activities, but the bank has not reconsidered.

12. The complaint states, and plaintiff has, no cause of action against defendants. [29]

The petitioners likewise interposed compulsory counterclaims for damages.

The Case for the Petitioners

The petitioners adduced evidence that a day or so before November 15, 1995, petitioner
Ongsiapco was at the 10th floor of the main office of the bank where the training room of
the Management Development Training Office was located. Some of the bank’s
management employees were then undergoing training. The bank also kept important
records in the said floor. When Ongsiapco passed by, he saw the respondent talking to
some of the trainees. Ongsiapco was surprised because non-participants in the training
were not supposed to be in the premises.[30] Besides, the respondent had been dismissed
and had filed complaints against the bank with the NLRC. Ongsiapco was worried that
bank records could be purloined and employees could be hurt.

The next day, Ongsiapco contacted the training supervisor and inquired why the
respondent was in the training room the day before. The supervisor replied that he did not
know why.[31] Thus, on November 15, 1995, Ongsiapco issued a Memorandum to
Belanio, the Vice-President for Security Services, directing the latter not to allow the
respondent access to the bank premises near the working area. [32] The said Memorandum
was circulated by the Chief of Security to the security guards and bank employees.

At about 12:30 p.m. on January 31, 1996, Security Guard Raul Caspe, a substitute for the
regular guard who was on leave, noticed the respondent seated on the sofa in front of the
teller’s booth.[33] Caspe notified his superior of the respondent’s presence, and was
instructed not to confront the respondent if the latter was going to make a deposit or
withdrawal.[34] Caspe was also instructed not to allow the respondent to go to the upper
floors of the building.[35] The respondent went to the teller’s booth and, after a while,
seated himself anew on the sofa. Momentarily, Caspe noticed Casil, another employee of
the bank who was at the working section of the Deposit Service Department (DSD),
motioning to the respondent to get the check. The latter stood up and proceeded in the
direction of Casil’s workstation. After the respondent had taken about six to seven paces
from the sofa, Caspe and the company guard approached him. The guards politely
showed Ongsiapco’s Memorandum to the respondent and told the latter that he was not
allowed to enter the DSD working area; it was lunch break and no outsider was allowed
in that area.[36] The respondent looked at the Memorandum and complied.

On May 29, 1998, the trial court rendered judgment in favor of the respondent.
The fallo of the decision reads:
WHEREFORE, premises considered, defendants are hereby adjudged liable to plaintiff
and orders them to rescind and set-aside the Memorandum of November 15, 1995 and
orders them to pay plaintiff the following:
1) the amount of P100,000.00 as moral damages;
2) the amount of P50,000.00 as exemplary damages;
3) P50,000.00 for and as attorney’s fees;
4) Cost of suit.
Defendants’ counterclaim is dismissed for lack of merit.

SO ORDERED.[37]
The trial court held that the petitioners abused their right; hence, were liable to the
respondent for damages under Article 19 of the New Civil Code.

The petitioners appealed the decision to the Court of Appeals and raised the following
issues:
4.1 Did the appellants abuse their right when they issued the Memorandum?

4.2 Did the appellants abuse their right when Basco was asked to leave the bank
premises, in implementation of the Memorandum, on 21 December 1995?

4.3. Did the appellants abuse their right when Basco was asked to leave the bank
premises, in implementation of the Memorandum, on 31 January 1995?

4.4. Is Basco entitled to moral and exemplary damages and attorney’s fees?

4.5. Are the appellants entitled to their counterclaim?[38]

The CA rendered a Decision on March 30, 2000, affirming the decision of the RTC with
modifications. The CA deleted the awards for moral and exemplary damages, but ordered
the petitioner bank to pay nominal damages on its finding that latter abused its right when
its security guards stopped the respondent from proceeding to the working area near the
ATM section to get the check from Casil. The decretal portion of the decision reads:
WHEREFORE, the Decision of the Regional Trial Court dated May 29, 1998 is
hereby MODIFIED as follows:

1. The awards for moral and exemplary damages are deleted;

2. The award for attorney’s fees is deleted;

3. The order rescinding Memorandum dated November 15, 1995 is set aside; and
 4. UCPB is ordered to pay nominal damages in the amount of P25,000.00 to
plaintiff-appellee.

Costs de oficio.[39]
The Present Petition

The petitioners now raise the following issues before this Court:

I. Whether or not the appellate court erred when it found that UCPB excessively
exercised its right to self-help to the detriment of Basco as a depositor, when on
January 31, 1996, its security personnel stopped respondent from proceeding to
the area restricted to UCPB’s employees.

II. Whether or not the appellate court erred when it ruled that respondent is entitled to
nominal damages.

III. Whether or not the appellate court erred when it did not award the petitioners’
valid and lawful counterclaim.[40]

The core issues are the following: (a) whether or not the petitioner bank abused its right
when it issued, through petitioner Ongsiapco, the Memorandum barring the respondent
access to all bank premises; (b) whether or not petitioner bank is liable for nominal
damages in view of the incident involving its security guard Caspe, who stopped the
respondent from proceeding to the working area of the ATM section to get the check
from Casil; and (c) whether or not the petitioner bank is entitled to damages on its
counterclaim.

The Ruling of the Court

On the first issue, the petitioners aver that the petitioner bank has the right to prohibit the
respondent from access to all bank premises under Article 429 of the New Civil Code,
which provides that:
Art. 429. The owner or lawful possessor of a thing has the right to exclude any person
from the enjoyment and disposal thereof. For this purpose, he may use such force as may
be reasonably necessary to repel or prevent an actual or threatened unlawful physical
invasion or usurpation of his property.
The petitioners contend that the provision which enunciates the principle of self-help
applies when there is a legitimate necessity to personally or through another, prevent not
only an unlawful, actual, but also a threatened unlawful aggression or usurpation of its
properties and records, and its personnel and customers/clients who are in its premises.
The petitioners assert that petitioner Ongsiapco issued his Memorandum dated November
15, 1995 because the respondent had been dismissed from his employment for varied
grave offenses; hence, his presence in the premises of the bank posed a threat to the
integrity of its records and to the persons of its personnel. Besides, the petitioners
contend, the respondent, while in the bank premises, conversed with bank employees
about his complaint for illegal dismissal against the petitioner bank then pending before
the Labor Arbiter, including negotiations with the petitioner bank’s counsels for an
amicable settlement of the said case.

The respondent, for his part, avers that Article 429 of the New Civil Code does not give
to the petitioner bank the absolute right to exclude him, a stockholder and a depositor,
from having access to the bank premises, absent any clear and convincing evidence that
his presence therein posed an imminent threat or peril to its property and records, and the
persons of its customers/clients.

We agree with the respondent bank that it has the right to exclude certain individuals
from its premises or to limit their access thereto as to time, to protect, not only its
premises and records, but also the persons of its personnel and its customers/clients while
in the premises. After all, by its very nature, the business of the petitioner bank is so
impressed with public trust; banks are mandated to exercise a higher degree of diligence
in the handling of its affairs than that expected of an ordinary business enterprise.
[41]
 Banks handle transactions involving millions of pesos and properties worth
considerable sums of money. The banking business will thrive only as long as it
maintains the trust and confidence of its customers/clients. Indeed, the very nature of
their work, the degree of responsibility, care and trustworthiness expected of officials and
employees of the bank is far greater than those of ordinary officers and employees in the
other business firms.[42] Hence, no effort must be spared by banks and their officers and
employees to ensure and preserve the trust and confidence of the general public and its
customers/clients, as well as the integrity of its records and the safety and well being of
its customers/clients while in its premises. For the said purpose, banks may impose
reasonable conditions or limitations to access by non-employees to its premises and
records, such as the exclusion of non-employees from the working areas for employees,
even absent any imminent or actual unlawful aggression on or an invasion of its
properties or usurpation thereof, provided that such limitations are not contrary to the
law.[43]

It bears stressing that property rights must be considered, for many purposes, not as
absolute, unrestricted dominions but as an aggregation of qualified privileges, the limits
of which are prescribed by the equality of rights, and the correlation of rights and
obligations necessary for the highest enjoyment of property by the entire community of
proprietors.[44] Indeed, in Rellosa vs. Pellosis,[45] we held that:
Petitioner might verily be the owner of the land, with the right to enjoy and to exclude
any person from the enjoyment and disposal thereof, but the exercise of these rights is not
without limitations. The abuse of rights rule established in Article 19 of the Civil Code
requires every person to act with justice, to give everyone his due; and to observe honesty
and good faith. When right is exercised in a manner which discards these norms resulting
in damage to another, a legal wrong is committed for which the actor can be held
accountable.
Rights of property, like all other social and conventional rights, are subject to such
reasonable limitations in their enjoyment and to such reasonable restraints established by
law.[46]

In this case, the Memorandum of the petitioner Ongsiapco dated November 15, 1995,
reads as follows:

MEMO TO : MR. JESUS M. BELANIO

Vice President
Security Department
DATE : 15 November 1995
RE : MR. RUBEN E. BASCO
Please be advised that Mr. Ruben E. Basco was terminated for a cause
by the Bank on 19 June 1992. He filed charges against the bank and the
case is still on-going.
In view of this, he should not be allowed access to all bank premises.
(Sgd.) LUIS MA. ONGSIAPCO
First Vice President
Human Resource Division

16 November 1995
TO: ALL GUARDS
ON DUTY
Strictly adhere/impose Security Procedure RE: Admission to Bank
premises.
For your compliance.
(Signature) 11/16/95
JOSE G. TORIAGA[47]

On its face, the Memorandum barred the respondent, a stockholder of the petitioner bank
and one of its depositors, from gaining access to all bank premises under all
circumstances. The said Memorandum is all-embracing and admits of no exceptions
whatsoever. Moreover, the security guards were enjoined to strictly implement the same.

We agree that the petitioner may prohibit non-employees from entering the working area
of the ATM section. However, under the said Memorandum, even if the respondent
wished to go to the bank to encash a check drawn and issued to him by a depositor of the
petitioner bank in payment of an obligation, or to withdraw from his account therein, or
to transact business with the said bank and exercise his right as a depositor, he could not
do so as he was barred from entry into the bank. Even if the respondent wanted to go to
the petitioner bank to confer with the corporate secretary in connection with his shares of
stock therein, he could not do so, since as stated in the Memorandum of petitioner
Ongsiapco, he would not be allowed access to all the bank premises. The said
Memorandum, as worded, violates the right of the respondent as a stockholder or a
depositor of the petitioner bank, for being capricious and arbitrary.

The Memorandum even contravenes Article XII, paragraph 4 (4.1 and 4.2) of the Code of
Ethics issued by the petitioner bank itself, which provides that one whose employment
had been terminated by the petitioner bank may, nevertheless, be allowed access to bank
premises, thus:
4.1 As a client of the Bank in the transaction of a regular bank-client activity.

4.2 When the offending party is on official business concerning his employment with the
Bank with the prior approval and supervision of the Head of HRD or of the Division
Head, or of the Branch Head in case of branches.[48]
For another, the Memorandum, as worded, is contrary to the intention of the petitioners.
Evidently, the petitioners did not intend to bar the respondent from access to all bank
premises under all circumstances. When he testified, petitioner Ongsiapco admitted that a
bank employee whose services had been terminated may be allowed to see an employee
of the bank and may be allowed access to the bank premises under certain conditions, viz:

ATTY. R. ALIKPALA
Q SO THE PERMISSION YOU ARE REFERRING TO IS
MERELY A PERMISSION TO BE GRANTED BY THE
SECURITY GUARD?
A NO, SIR, NOT THE SECURITY GUARD. THE
SECURITY WILL CALL THE OFFICE WHERE THEY
ARE GOING. BECAUSE THIS IS THE SAME
PROCEDURE THEY DO FOR VISITORS. ANYBODY
WHO WANTS TO SEE ANYBODY IN THE BANK
BEFORE THEY ARE ALLOWED ACCESS OR
ENTRY, THEY CALL UP THE DEPARTMENT OR
THE DIVISION.
Q SO I WANT TO CLARIFY, MR. WITNESS. FORMER
BANK EMPLOYEES ARE NOT ALLOWED WITHIN
THE BANK PREMISES UNTIL AFTER THE
SECURITY GUARD CALL, WHICH EVER
DEPARTMENT THEY ARE HEADED FOR, AND
THAT THEY GIVE THE PERMISSION AND THEY
TELL THE SECURITY GUARD TO ALLOW THE
PERSON?
A YES, SIR, THAT IS THE USUAL PROCEDURE.
Q IF AN EMPLOYEE RESIGNED FROM THE BANK,
SAME TREATMENT?
A YES, SIR.
Q IF AN EMPLOYEE WAS TERMINATED BY THE
BANK FOR CAUSE, SAME TREATMENT?
A YES, SIR.
Q OUTSIDERS WHO ARE NOT EMPLOYEES OR WHO
WERE NEVER EMPLOYEES OF THE BANK ALSO
MUST ASK PERMISSION?
A YES, SIR. BECAUSE THERE IS A SECURITY
CONTROL AT THE LOBBY.
Q YOU MENTIONED THAT THIS IS A GENERAL
RULE?
A YES, SIR.
Q IS THIS RULE WRITTEN DOWN IN BLACK AND
WHITE ANYWHERE?
A I THINK THIS IS MORE OF A SECURITY
PROCEDURE.
Q BUT BEING A HUGE FINANCIAL INSTITUTION,
WE EXPECT COCOBANK HAS ITS PROCEDURE
WRITTEN DOWN IN BLACK AND WHITE?
ATTY. A. BATUHAN
YOUR HONOR, OBJECTION. ARGUMENTATIVE,
YOUR HONOR. THERE IS NO QUESTION POSED
AT ALL, YOUR HONOR.
COURT
ANSWER. IS THERE ANY GUIDELINE?
A THERE MUST BE A GUIDELINE OF THE
SECURITY.
Q BUT YOU ARE NOT VERY FAMILIAR ABOUT THE
SECURITY PROCEDURES?
A YES, SIR.
ATTY. R. ALIKPALA
Q MR. ONGSIAPCO, THE AGENCY THAT YOU HIRED
FOLLOWS CERTAIN PROCEDURES?
A YES, SIR.
Q WHICH OF COURSE ARE UNDER THE DIRECT
CONTROL AND SUPERVISION OF THE BANK?
A YES, SIR.
Q AND DID THE SECURITY AGENCY HAVE ANY OF
THIS PROCEDURE WRITTEN DOWN?
A IT WILL BE GIVEN TO THEM BY THE SECURITY
DEPARTMENT, BECAUSE THEY ARE UNDER THE
SECURITY DEPARTMENT.
Q BUT IF AN EMPLOYEE IS ONLY ENTERING THE
GROUND FLOOR BANK AREA, WHERE
CUSTOMERS OF THE BANK ARE NORMALLY
ALLOWED, WHETHER DEPOSITORS OR NOT,
THEY DON’T NEED TO ASK FOR EXPRESS
PERMISSION, IS THAT CORRECT?
A YES, IF THEY ARE CLIENT.
 Q EVEN IF THEY ARE NOT CLIENT, BUT LET US
SAY THEY HAVE TO ENCASH A CHECK PAID TO
THEM BY SOMEONE?
A HE IS A CLIENT THEN.
Q BUT HE IS NOT YET A CLIENT WHEN HE ENTERS
THE BANK PREMISES. HE ONLY BECOMES …
YOU KNOW BECAUSE YOU DO NOT ALL THESE
PEOPLE, YOU DO NOT KNOW EVERY CLIENT OF
THE BANK SO YOU JUST ALLOW THEM INSIDE
THE BANK?
A YES, THE PREMISES.[49]
PETITIONER ONGSIAPCO ALSO TESTIFIED THAT A FORMER EMPLOYEE
WHO IS A CUSTOMER/CLIENT OF THE PETITIONER BANK ALSO HAS
ACCESS TO THE BANK PREMISES, EXCEPT THOSE AREAS RESERVED FOR
ITS OFFICERS AND EMPLOYEES, SUCH AS THE WORKING AREAS:

ATTY. R. ALIKPALA
Q SO MR. WITNESS, JUST FOR THE SAKE OF
CLARITY. THE GROUND FLOOR AREA IS WHERE
THE REGULAR CONSUMER BANKING SERVICES
ARE HELD? WHAT DO YOU CALL THIS PORTION?
A THAT IS THE DEPOSIT SERVICING DEPARTMENT.
Q WHERE THE ….
A WHERE THE PEOPLE TRANSACT BUSINESS.
ATTY. R. ALIKPALA
Q THEY ARE FREELY ALLOWED IN THIS AREA?
A YES, SIR.
Q THIS IS THE AREA WHERE THERE ARE
COUNTERS, TELLER, WHERE A PERSON WOULD
NORMALLY GO TO LET US SAY OPEN A BANK
ACCOUNT OR TO REQUEST FOR MANAGER’S
CHECK, IS THAT CORRECT?
A YES, SIR.
Q SO, IN THIS PORTION, NO, I MEAN BEYOND THIS
PORTION, MEANING THE WORKING AREAS AND
SECOND FLOOR UP, OUTSIDERS WILL HAVE TO
ASK EXPRESS PERMISSION FROM THE SECURITY
GUARD?
A YES, SIR.
Q AND YOU SAY THAT THE SECURITY GUARDS
ARE INSTRUCTED TO VERIFY THE PURPOSE OF
EVERY PERSON WHO GOES INTO THIS AREA?
A AS FAR AS I KNOW, SIR.[50]

It behooved the petitioners to revise such Memorandum to conform to its Code of Ethics
and their intentions when it was issued, absent facts and circumstances that
occurred pendente lite which warrant the retention of the Memorandum as presently
worded.

On the second issue, the Court of Appeals ruled that the petitioner bank is liable for
nominal damages to the respondent despite its finding that the petitioners had the right to
issue the Memorandum. The CA ratiocinated that the petitioner bank should have
allowed the respondent to walk towards the restricted area of the ATM section until they
were sure that he had entered such area, and only then could the guards enforce the
Memorandum of petitioner Ongsiapco. The Court of Appeals ruled that for such failure
of the security guards, the petitioner bank thereby abused its right of self-help and
violated the respondent's right as one of its depositors:
With respect, however, to the second incident on January 31, 1996, it appears that
although according to UCPB security personnel they tried to stop plaintiff-appellee from
proceeding to the stairs leading to the upper floors, which were limited to bank personnel
only (TSN, pp. 6-9, June 4, 1997), the said act exposed plaintiff-appellee to humiliation
considering that it was done in full view of other bank customers. UCPB security
personnel should have waited until they were sure that plaintiff-appellee had entered the
restricted areas and then implemented the memorandum order by asking him to leave the
premises. Technically, plaintiff-appellee was still in the depositing area when UCPB
security personnel approached him. In this case, UCPB’s exercise of its right to self-help
was in excess and abusive to the detriment of the right of plaintiff-appellee as depositor
of said Bank, hence, warranting the award of nominal damages in favor of plaintiff-
appellee. Nominal damages are adjudicated in order that a right of a plaintiff, which has
been violated or invaded by the defendant, may be vindicated or recognized and not for
the purpose of indemnifying any loss suffered by him (Japan Airlines vs. Court of
Appeals, 294 SCRA 19).[51]
The petitioners contend that the respondent is not entitled to nominal damages and that
the appellate court erred in so ruling for the following reasons: (a) the respondent failed
to prove that the petitioner bank violated any of his rights; (b) the respondent did not
suffer any humiliation because of the overt acts of the security guards; (c) even if the
respondent did suffer humiliation, there was no breach of duty committed by the
petitioner bank since its security guards politely asked the respondent not to proceed to
the working area of the ATM section because they merely acted pursuant to the
Memorandum of petitioner Ongsiapco, and accordingly, under Article 429 of the New
Civil Code, this is a case of damnum absque injuria;[52] and (d) the respondent staged the
whole incident so that he could create evidence to file suit against the petitioners.

We rule in favor of the petitioners.

The evidence on record shows that Casil was in the working area of the ATM section on
the ground floor when he motioned the respondent to approach him and receive the
check. The respondent then stood up and walked towards the direction of Casil.
Indubitably, the respondent was set to enter the working area, where non-employees were
prohibited entry; from there, the respondent could go up to the upper floors of the bank’s
premises through the elevator or the stairway. Caspe and the company guard had no other
recourse but prevent the respondent from going to and entering such working area. The
security guards need not have waited for the respondent to actually commence entering
the working area before stopping the latter. Indeed, it would have been more
embarrassing for the respondent to have started walking to the working area only to be
halted by two uniformed security guards and disallowed entry, in full view of bank
customers. It bears stressing that the security guards were polite to the respondent and
even apologized for any inconvenience caused him. The respondent could have just
motioned to Casil to give him the check at the lobby near the teller’s booth, instead of
proceeding to and entering the working area himself, which the respondent knew to be an
area off-limits to non-employees. He did not.

The respondent failed to adduce evidence other than his testimony that people in the
ground floor of the petitioner bank saw him being stopped from proceeding to the
working area of the bank. Evidently, the respondent did not suffer embarrassment,
inconvenience or discomfort which, however, partakes of the nature of damnum absque
injuria, i.e. damage without injury or damage inflicted without injustice, or loss or
damage without violation of legal rights, or a wrong due to a pain for which the law
provides no remedy.[53] Hence, the award of nominal damages by the Court of Appeals
should be deleted.

On the third issue, we now hold that the petitioner bank is not entitled to damages and
attorney’s fees as its counterclaim. There is no evidence on record that the respondent
acted in bad faith or with malice in filing his complaint against the petitioners. Well-
settled is the rule that the commencement of an action does not per se make the action
wrongful and subject the action to damages, for the law could not have meant to impose a
penalty on the right to litigate.

We reiterate case law that if damages result from a party’s exercise of a right, it
is damnum absque injuria.[54]

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed

Decision of the Court of Appeals is REVERSED and SET ASIDE. The complaint of the
respondent in the trial court and the counterclaims of the petitioners are DISMISSED.

No costs.

SECOND DIVISION
[ G.R. NO. 134239, May 26, 2005 ]
 REYNALDO VILLAFUERTE AND PERLITA T. VILLAFUERTE,
PETITIONERS, VS. HON. COURT OF APPEALS, EDILBERTO DE MESA
AND GONZALO DALEON, RESPONDENTS.

DECISION

CHICO-NAZARIO, J.:

This is a petition for review on certiorari of the Decision[1] of the Court of Appeals in
CA-G.R. CV No. 41871 which affirmed, with modification, the decision[2] of the
Regional Trial Court, Branch 55, Lucena City, in Civil Case No. 90-11 entitled,
"Reynaldo C. Villafuerte and Perlita Tan Villafuerte v. Edilberto De Mesa and Gonzalo
Daleon."

The facts, as established by the Court of Appeals, follow:

Appelees – the spouses Reynaldo C. Villafuerte and Perlita Tan-Villafuerte – operated a
gasoline station known as Peewee's Petron Powerhouse Service Station and General
Merchandise on the premises of three (3) adjoining lots at the corner of Gomez Street
and Quezon Avenue in Lucena City. One of these lots, Lot No. 2948-A with an area of
575 square meters, is owned by several persons, one of whom is appellant Edilberto de
Mesa, while the other lot, Lot 2948-B with an area of 290 square meters, is owned by
appellant Gonzalo Daleon and his brother Federico A. Daleon. The remaining lot belongs
to Mrs. Anicia Yap-Tan, mother of appellee Perlita Tan-Villafuerte.

Appellants Edilberto de Mesa and Gonzalo Daleon acquired their respective lots subject
to the lease by Petrophil Corporation which had built thereon the gasoline station being
managed by the Villafuerte couple. When the lease of Petrophil Corporation expired on
December 31, 1988, the Villafuertes obtained a new lease on Lot No. 2948-A from
appellant Edilberto de Mesa for a period expiring on December 31, 1989, thus:.

"1 – This lease will be for a period of one (1) year only, from January 1, 1989 and will
terminate on the 31st of December 1989 at a monthly rental of FOUR THOUSAND
PESOS (P4,000.00)." (Exhibit "1-A-1" De Mesa).

As regards Lot 2948-B of the Daleon brothers, the Villafuertes were not as lucky. For,
instead of obtaining a lease renewal, what they received were demand letters from the
brothers' counsel ordering them to vacate the premises. Instead of complying therewith,
the Villafuertes simply ignored the demand and continued operating the gas station
(Exhibits "3-B", "3-C" and "3-F", Daleon).

On May 9, 1989, in the Office of the Barangay Captain of Barangay Tres, Lucena City, a
complaint for ejectment was filed by Gonzalo Daleon against the Villafuertes (Exhibit
"6", Daleon). Evidently, no settlement was reached thereat, as shown by a certification to
file action issued by the lupon.

With their problem with the Daleon brothers far from over, the Villafuertes were apt for
another one; their lease contract with Edilberto de Mesa was not renewed when it expired
on December 31, 1989. Nonetheless, and duplicating what they had done in the case of
the property of the Daleon brothers, the spouses continued to operate their gasoline
station and other businesses on the lot of de Mesa despite the latter's demand to vacate.

What transpired next lays at the core of the instant controversy.

It appears that in the early morning of February 1, 1990, appellants Edilberto de Mesa
and Gonzalo Daleon, with the aid of several persons and without the knowledge of the
Villafuertes, caused the closure of the latter's gasoline station by constructing fences
around it.

The following day – February 2, 1990 – the Villafuertes countered with a complaint for
damages with preliminary mandatory injunction against both Edilberto de Mesa and
Gonzalo Daleon. Docketed in the court below as Civil Case No. 90-11, the complaint
seeks vindication for the alleged malicious and unlawful fencing of the plaintiffs'
business premises (Records, pp. 1-6).

Invoking their status as owners of the withheld premises, the defendants admitted in their
respective answers having caused the fencing of the plaintiffs' gasoline station thereat but
reasoned out that they did so on account of the plaintiffs' refusal to vacate the same
despite demands.

After hearing the parties in connection with the plaintiffs' application for a writ of
preliminary mandatory injunction, the lower court, in its order of May 23, 1990, ruled
that with the expiration of the lease on the defendants' property, the plaintiffs have no
more right to stay thereon and, therefore, cannot pretend to have a clear and unmistakable
right to an injunctive writ and accordingly denied their application therefore (Rec., p.
186). In a subsequent order of July 30, 1990, the same court denied the Villafuertes'
motion for reconsideration (Rec., p. 237).

Later, with leave of court, the Villafuertes amended their complaint to allege, among
others, that the complained acts of the defendants cost them the following items of actual
damages:

a) Daily Sales (4000-5000 lts.) at .35¢lt. mark-up, P1,750 x 270 days P472,500.00
b) Storage Fee of POL (Petroleum, Oil & Lubricants) Recom 4 at 5% for
100,000 lts. = 5000 lts. X 3 quarters x P6.00/lt. 90,000.00
c) Tires, Batteries, Accessories (TBA) Gen. Merchandise Sales, P50,000/mo. 90,000.00
 20% mark-Up = P10,000 x 9 months
d) Hauling of Petroleum products for Peewee's Petron Powerhouse, 2 trips
weekly, P1,500 X 8 trips/mo. X 9 months 108,000.00
e) Hauling of Petroleum products for military 7 trips/qtr., P1,500/trip x 21 (3
qtrs.) 31,500.00
f) Balloon Business (Sunshine Balloons)
P50,000.00 capital, P6,000/mo. Income
TOTAL LOSS 200,000.00
g) Uncollected Debts 619,030.61
h) Uncollected Checks 37,449.05
i) Merchandise Inventory as of July 25, 1990, P141,036.50 value, 50% damaged 70,518.25
j) Damaged Office Equipments 30,000.00
k) Stampitas (Religious Articles) and other Hermana Fausta Memorial
Foundation, Inc. printed matters entrusted in my care,
totally damaged by rain and termites 5,000.00
l) Products lost in 4 underground tanks 249,805.00
m) Interest payments to RCBC (Rizal Commercial Banking Corporation) for
additional loan availed of to pay off products acquired on
credit from Petron Corp. but were held inside gas station 172,490.53
TOTAL --P2,176,293.44
(Rec., pp. 290, 300)
The amended complaint thus prayed for the following reliefs:
"WHEREFORE, it is respectfully prayed of this Hon. Court that judgment be rendered in
favor of the plaintiffs:

A - Immediately ordering the issuance of a writ of preliminary mandatory injunction

against the defendants commanding them and any person acting in their behalf to
forthwith remove the fence they have constructed around the premises in question, and
after trial making the said injunction permanent.

B - Ordering the defendants to pay jointly and severally the plaintiffs the following:

1) Moral damages equivalent to not less than P200,000.00;

2) Exemplary damages in the amount of P50,000.00;

3) Attorney's fee in the amount of P60,000.00 plus twenty-five percent (25%) of the
amount of damages to which plaintiffs are entitled; and

4) Litigation expenses in this instance in the amount of P10,000.00

C - Requiring the defendants to pay jointly and severally actual damages representing
unrealized income and profits as well as losses referred to in paragraphs 10 and 12
hereof in such amount as may be shown in evidence during the hearing.
D - Granting the plaintiffs such other just and equitable remedies to which they may be
entitled under the law and equity." (Orig. Rec., pp. 292-293).
As later events disclosed, the defendants resumed possession of the premises in question
on January 25, 1991 (Rec., p. 333). Four (4) days later, they obtained a judgment by
compromise from the Municipal Trial Court in Cities, Lucena City in connection with the
suit for ejectment they earlier filed thereat against Petrophil Corporation. In that
judgment, Petrophil bound itself to remove the materials and equipment related to the
operation of the gasoline station on the subject premises. (Rec., pp. 355-356).

After the parties herein had presented their respective evidence, the lower court came out
with the decision now under review. Dated November 13, 1990, the decision
dispositively reads:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and ordering the
defendants Edliberto de Mesa and Gonzalo Daleon to pay, jointly and severally,
plaintiffs the following:

1. Actual damages in the total amount of TWO MILLION ONE HUNDRED

SEVENTY SIX THOUSAND AND TWO HUNDRED NINETY THREE PESOS
AND FORTY FOUR CENTAVOS (P2,176,293.44);

2. Moral damages in the amount of P200,000.00;

3. Exemplary damages in the amount of P50,000.00;

4. P50,000.00, as and for attorney's fees; and

5. Costs of suit.

SO ORDERED" (Rec., pp. 408-414).[3]

The trial court ruled that with the continued occupation by petitioners of the two lots
belonging to private respondents, despite the expiration of the lease contracts over the
same, petitioners had become "undesirable lessees."[4] However, it was improper for
private respondents to resort to fencing their properties in order to remove petitioners
from the premises in the light of the clear provision of the Civil Code on the matter, to
wit:
Art. 536. In no case may possession be acquired through force or intimidation as long as
there is a possessor who objects thereto. He who believes that he has an action or a right
to deprive another of the holding of a thing, must invoke the aid of the competent court, if
the holder should refuse to deliver the thing.
Having disregarded the plain requirement of the law, private respondents were held
accountable to petitioners for the various damages prayed for by petitioners in their
amended complaint.

In due time, private respondents filed their respective appeals before the Court of Appeals
which affirmed, with modification, the decision of the trial court. The dispositive portion
of the appellate court's decision reads:
WHEREFORE, the decision appealed from is MODIFIED by holding the appellants
jointly and severally liable to the appellees for P50,000.00 as exemplary damages and for
P27,000.00 as actual damages, itemized as follows:

1. detention of the records: P7,000.00;

2. detention of the merchandise: P10,000.00;

3. value of the damaged merchandise and religious items: P5,000; and

4. detention of offices equipment: P5,000.00,

and by holding the appellees jointly and severally liable for rental to appellants Edilberto
de Mesa and Gonzalo Daleon in the amount of P5,500.00 and P39,000.00, respectively.

The deficiency in the payment of the docket fees, to be computed by the clerk of court of
the lower court, shall constitute a lien on this judgment.[5]
In adjudging private respondents liable for damages, the Court of Appeals substantially
ruled that:

1. Private respondents could not invoke the doctrine of self-help contained in Article
429 of the Civil Code[6] reasoning that the doctrine finds no application when
occupation was effected through lawful means such as in this case where
petitioners' possession of the lots owned by private respondents was effected
through lease agreements;

2. Petitioners' continued unauthorized occupation of private respondents' properties

may have been illegal, however, it was incumbent upon private respondents to
abide by the express provision of Article 536 of the Civil Code requiring recourse
to the proper court prior to ousting petitioners from their (private respondents')
lots;
 3. On the matter of insufficient docket fees paid by petitioners during the institution
of this action, the Court of Appeals declared that "whatever deficiency there may
be in the docket fees can be levied from the amount that may be awarded the
appellees (petitioners herein)"[7] and that private respondents were already
estopped from assailing the jurisdiction of the trial court;

4. Private respondents could not invoke the principle of damnum absque injuria as
this doctrine only applies "when the loss or damage does not constitute a violation
of a legal right or amounts to a legal wrong"[8] and not to this case where private
respondents clearly violated the law by unilaterally displacing petitioners from the
subject premises;

5. On the issue of actual damages, the appellate court substantially reduced the
amount of actual damages awarded by the court a quo upon the ground that
petitioners failed to substantiate their claims thereto except for the detention of
petitioners' records of their receivables, various merchandise, damaged goods,
religious items, and office equipment;

6. As for the propriety of awarding moral damages to petitioners, the Court of

Appeals held that petitioners are not entitled to this form of damage as this case
does not fall within Article 2219 of the Civil Code;

7. Although Article 2219 of the Civil Code encompasses incidents which may fall
within the purview of Article 21 of the Civil Code, the latter, being a rule based on
equity, necessitates the claimant to come to court with clean hands which cannot
be said of petitioners who continued to occupy the lands belonging to private
respondents without the authority of a subsisting lease agreement;

8. Private respondents are nevertheless liable for exemplary damages for having
taken the law into their own hands by fencing the premises of the Petron gasoline
station operated by petitioners instead of seeking redress from the proper court as
mandated by Article 536 of the Civil Code; and

9. Petitioners are liable to pay private respondents for the unpaid rentals from the
time the lease agreements over the subject properties expired until 01 February
1990 when private respondents constructed the fence.

Dissatisfied with the ruling of the Court of Appeals, petitioners are now before us raising,
in the main, the issue of whether the appellate court erred in substantially reducing the
amount of damages earlier awarded to them by the trial court.

Petitioners insist that the appellate court "resorted to assumptions, inferences, surmises
and conjectures in disallowing certain items of actual damages like lost petroleum
products valued at P249,805.00, loss of value of merchandise detained for a quite a long
time (sic) in the fenced premises and uncollected debts as against the positive testimony
of petitioner Perlita Villafuerte which remained unrebutted and uncontested even on
appeal."[9] They also allege that the list of unrealized income, collectibles and damages
prepared by petitioner Perlita was based and ably supported by documents.

Petitioners also maintain that the Court of Appeals erred in finding that they came to
court with "unclean hands," thus, depriving them of entitlement to moral damages.
According to petitioners, their continued occupation of private respondents' properties
was based on their belief that their lease contract with private respondent De Mesa was
modified and extended whereas private respondent Daleon had verbally agreed to allow
them to continue with their possession of his lot for as long as the Petron Corporation's
equipment remain in the premises.

Finally, petitioners argue that the trial court was correct in awarding in their favor
attorney's fees in the amount of P50,000.00 as they were compelled to engage the
services of counsel in order to seek vindication from the arbitrary action of private
respondents.

After a considered review of the records of this case, we resolve to affirm, with
modification, the decision of the Court of Appeals.

Both the trial court and the Court of Appeals concluded that the lease contracts between
petitioners and private respondents over the latter's respective lots had already expired.
There was also a congruence of findings that it was wrong for private respondents to
fence their properties thereby putting to a halt the operation of petitioners' gasoline
station. To this, we agree.

Article 536 of the Civil Code previously quoted explicitly provides for the proper
recourse of one who claims to be entitled to the possession of a thing. When private
respondents personally took it upon themselves to evict petitioners from their properties,
which act was in clear contravention of the law, they became liable "for all the necessary
and natural consequences of [their] illegal act."[10]

As expected, petitioners instituted this action praying that private respondents be held
liable for actual damages, moral damages, exemplary damages, attorney's fees, and costs
of litigation. We shall resolve their right to these damages in seriatim.

Actual or compensatory damages are those awarded in order to compensate a party for an
injury or loss he suffered. They arise out of a sense of natural justice and are aimed at
repairing the wrong done.[11] Except as provided by law or by stipulation, a party is
entitled to an adequate compensation only for such pecuniary loss as he has duly proven.
[12]
 It is hornbook doctrine that to be able to recover actual damages, the claimant bears
the onus of presenting before the court actual proof of the damages alleged to have been
suffered, thus:
A party is entitled to an adequate compensation for such pecuniary loss actually suffered
by him as he has duly proved. Such damages, to be recoverable, must not only be capable
of proof, but must actually be proved with a reasonable degree of certainty. We have
emphasized that these damages cannot be presumed and courts, in making an award must
point out specific facts which could afford a basis for measuring whatever compensatory
or actual damages are borne.[13]
We have exhaustively perused the records of this case and thus conclude that petitioners
have miserably failed to proffer evidence capable of sustaining their plea for actual
damages. We note that when petitioner Perlita was directly examined with respect to her
unrealized income[14] for the following matters, namely: daily sales of various petroleum
products;[15] storage fee of RECOM IV's petroleum, oil, and lubricants;[16] sales of tires,
batteries, accessories, and general merchandise;[17] hauling of petroleum products for
Peewee's Petron Powerhouse by the gasoline tankers owned by petitioners;[18] hauling of
petroleum products for the military;[19] and petitioner Perlita's balloon business which she
conducted within the premises of the fenced gasoline station,[20] she repeatedly testified
that she arrived at these claimed amounts based on the average of her sales for the month
of January 1990, the number of trips undertaken by their tankers, and average volume of
the gasoline deposit for RECOM IV. Her testimony on these matters went as follows:
Atty. CAMALIGAN:
May I ask that this List of Unrealized Income, Collectibles and Damages from
Febrauary 1, 1990 to October 30, 1990 be marked as Exhibit AA.
...
Q: Will you explain to the court why this list you made is up to October 30, 1990?
A: I prepared this list until October 10, 1990 in preparation for our first hearing sometime
in November, sir.
Q: I am calling your attention to No. 1 which is I quote, "Daily Sales (4,000 to 5,000
liters) at P0.035 per liter mark up " P1,750.00 by 270 days amounting to P472,500.00?
will you explain to the court how you incurred this damage?
(A): After the closure of our gasoline station that was February 1, 1990 and then until
September, 1990 is nine (9) months and that is 270 days. I went thru my sales for
January and the average sales (is) 4,000 to 5,000 liters and so for our daily sales of
4,000 to 5,000 liters sale at P0.35 centavos mark-up, I got P1,750.00 daily so that is
times 270 days until September 1990, the total is P472,500.00, sir.
COURT: That is gross?
A: Yes, your Honor.
COURT: What about the net income to be realized?
A: Your Honor, we will deduct from here the salaries and wages of the gasoline boys and
electric bill, maybe P0.25 centavos per liter.
COURT: Proceed.
Q: Is the mark-up of P0.35 centavos per liter thru (sic), irrespective of amount of gasoline
or value of gasoline per liter?
A: We have different kinds of petroleum products, extra, regular and diesel and the
average mark-up is thirty-five (35) centavos.
 ...
Q: Calling your attention to No. 2 in the list which refers to storage fee of petroleum, oil
and lubricant from RECOM IV amounting to a total of ninety thousand pesos
(P90,000.00) will you kindly explain how you arrived at this amount?
A: The military, PC/INP RECOM IV which is stationed at Camp Nakar has entered into
an agreement with us to deposit their petroleum, oil and lubricant for every quarter, sir.
Q: Under what condition was that deposit made for?
A: That they will be able to withdraw the said products for a certain storage fee, sir, and
the storage fee is 5% which would cover disposing the products and also certain
percent of evaporation.
COURT: Five percent of what?
A: Five percent of the number of liters deposited with us so that if they deposited one
hundred thousand (100,000) liters we are paid in terms of gasoline also, five thousand
(5,000) liters.
Q: What was the average volume of deposit made by the RECOM IV?
A: It is on a quarterly basis, that is one hundred thousand (100,000) liters quarterly, sir.
Q: On item 3 referring to tires, batteries, accessories, general merchandise is listed an
amount of ninety thousand (P90,000.00) pesos as your losses, will you please explain
how you incurred such losses?
A: Aside from petroleum products we also sell accessories for the motoring public and
they are in kinds like tires, batteries and some additives, how do you realize income out
of this? (sic)
A: We have 20% mark-up on the merchandise and last January 1990 I average fifty
thousand (P50,000.00) pesos gross income on the general merchandise so for 20%
mark-up that is more or less ten thousand (P10,000.00) pesos and for nine (9) months
that is ninety thousand (P90,000.00) pesos, sir.
Q: In item No. 4 appearing in your list you listed a total amount of one hundred eight
thousand (P108,000.00) pesos, for hauling of petroleum products for Peewee?s Petron
Powerhouse, will you explain to the court this hauling?
A: My husband and I run a fleet of gasoline tankers and they are hauling petroleum
products for our gasoline stations and for the military accounts. We average two (2)
deliveries every week so this is already a net of one thousand five hundred (P1,500.00)
pesos per delivery. It is two thousand eight hundred (P2,800.00) pesos per delivery and
deducting the salaries of the drivers, the fuel consumption and the depreciation of the
tankers, we incur a net of one thousand five hundred (P1,500.00) pesos per trip. Every
month we incur at least eight (8) trips and that is one thousand five hundred
(P1,500.00) pesos times eight (8) trips times nine (9) months and I got one hundred
eight thousand (P108,000.00) pesos total.
Q: Do you own them?
A: Yes, sir.
Q: In item No. 6 you listed Balloon Business under Sunshine Balloon, you have given a
total amount of two hundred thousand (P200,000.00) pesos as your losses here, will
you please explain to the Court how you incurred these losses?
...
A: Inside the gasoline station we also operate a balloon business and we have invested
fifty thousand capital on this balloon business. This business has been thriving for
 several years and we usually incur six (6) thousand monthly income from said
business, sir. Now that the gasoline station was closed with all the equipments of the
balloon business inside also, we have totally lost the market for the balloon business
and I feel that two hundred thousand (P200,000.00) pesos would have to be paid for the
total loss of the business. [21]
Noticeably, petitioner Perlita's testimony was replete with claims that her unrealized
income, as far as these items were concerned, were based on the "average." Except,
however, for the record of daily petroleum sales for the month of January 1990,
[22]
 petitioners failed to present any evidence that would sufficiently establish their mean
income from these business undertakings. In the absence of any corroborative proof, this
Court is not bound to award in petitioners' favor the actual damages for items a, b, c, d, e,
and f of her alleged unrealized income. Nor can we give premium on the summary of
daily petroleum sales for January 1990 prepared by petitioner Perlita as the same is not
supported by any competent evidence; at best, said exhibit is self-serving.

Anent the actual damages claimed for the deterioration of the items which remained
inside petitioners' office, petitioner Perlita testified that when they were able to retrieve
the merchandise from the gasoline station, they noticed that most of them were already
defective and so they "valued"[23] the damages thereto at seventy (70%) of their total
value. As for the items entrusted to her by the Hermana Fausta Memorial Foundation of
which she was the executive vice president at that time, petitioner Perlita alleged that the
amount of five thousand pesos represents the production cost of these materials which the
foundation purportedly paid to Imprenta Lucentina. As regards the amount of P30,000.00
sought as actual damages for the damaged office equipment, petitioner Perlita stated
before the trial court that she arrived at this figure after computing the acquisition costs of
these equipment which she "approximated"[24] to be P35,000.00.

Evidently, in establishing the amount of actual damages for the merchandise inventory,
office equipment, and materials owned by the Hermana Fausta Memorial Foundation,
petitioners relied solely on their own assessment of the prices of these items as well as the
damage thereto purportedly occasioned by the fencing of the gasoline station. This is
clearly demonstrated by the inconsistent stance of petitioner Pertlita with regard to the
percentage of damaged merchandise stored in the gasoline station, thus:
ATTY. CAMALIGAN:
Q: I noticed that the total appearing on page 3 of your merchandize inventory is one
hundred forty one thousand thirty six pesos and fifty centavos (P141,036.50) only
while in your list, it is ninety eight thousand seven hundred twenty five pesos and fifty
five centavos (P98,725.55), will you please explain the same?
WITNESS:
A: This list with the total amount of one hundred forty one thousand thirty six pesos and
fifty centavos (P141,036.50) represent the total value of all the merchandize but then
the reason why we have the ninety eight thousand seven hundred twenty five pesos and
fifty five centavos (P98,725.55) figure is, this represents seventy percent (70%) of the
total amount because when we retrieved the merchandize, we noticed that most of them
 are already defective, so we valued the damages only seventy percent (70%) of the
total value because some of them could still be sold, sir.
ATTY. CAMALIGAN:
Q: I noticed there is a correction in Item No. 9 from ninety percent (90%) to seventy
percent (70%). When did you make that correction?
A: Only last December 30, 1990 after we have retrieved all the merchandize. I prepared
this list on October 31, 1990 not realizing the extent of the real damages to the
merchandize but when we retrieved them last December 29 and upon inspection, most
of the motor oil have already leaked because of the plastics that were exposed to sun
and rain, so we changed the estimate to seventy percent (70%), sir. [25]
Such arbitrary estimations run afoul with our consistent pronouncement that actual or
compensatory damages cannot be presumed but must be proved with reasonable degree
of certainty.[26] A court cannot simply rely on speculation, conjecture or guesswork as to
the fact and amount of damages, but is required to depend upon competent proof that the
claimant had suffered and on evidence of the actual amount thereof.[27] Failing in this
regard, we resolve to delete the award of actual damages rendered by the Court of
Appeals with respect to these items.

Similarly, we rule that petitioners are not entitled to the total amount of the 17 checks
issued in their favor by their customers and to the amount of uncollected debts owed to
them by their patrons. Petitioners maintain that their customers were used to coming to
their gasoline station in order to settle their obligations but were prevented from doing
after the 01 February 1990 incident. They therefore would like to hold private
respondents accountable for these receivables. This, we can not grant.

The records indicate that petitioners filed before the trial court a motion to allow them to
enter the gasoline station subject of this dispute in order to make an inventory of their
property that were locked inside and to remove those they needed for their personal use.
[28]
 Among the items removed from the gasoline station were the receipts evidencing
petitioners' receivables from their customers[29] as well as the 17 uncollected checks.
[30]
 Obviously, after the court-approved ocular inspection conducted on 24 July 1990 and
25 July 1990, petitioners were already in possession of the evidences of credit of their
customers. There was nothing, not even the closure of their gasoline station, which stood
in the way of petitioners' exerting earnest efforts in going after their debtors.

Petitioners likewise seek to be compensated for the value of the petroleum products
allegedly lost from the four underground tanks between the period 01 February 1990 until
25 July 1990 when an ocular inspection was conducted within the disputed property.
According to petitioners, after they compared the volume of the tanks' contents as of the
evening of 31 January 1990 with the dipstick reading on 25 July 1990, they discovered
that they had lost thousands of liters of petroleum products. On this point, we quote with
approval the conclusion of the Court of Appeals, to wit:
The appellees[31] failed to adduce convincing evidence that appellants are the ones
responsible for the loss of the petroleum products in the four (4) underground tanks (item
"1," paragraph 10 of Amended Complaint). Although the premises which were fenced by
the appellants[32] adjoin the lot of Perlita's mother and are even secured by appellees'
guard, the appellees did not present anyone to testify on the fact of loss of said gasoline
products. Instead, they chose to rely on Perlita's bare assertion that she lost P249,805.00
in terms of petroleum products that allegedly disappeared. The sheer volume of the
missing fuel makes it difficult for the pilferer to commit the deed without attracting
attention. An unsubstantiated claim of loss, more so of such a dimension, cannot merit an
award therefor.[33]
Finally, with respect to the interest payments to the Rizal Commercial Banking
Corporation (RCBC), petitioners maintain that because of the fencing of their gasoline
station on 01 February 1990, they were forced to obtain a loan from RCBC in order to
pay off their obligations to different suppliers. This contention was effectively refuted by
petitioner Perlita herself when, during her re-direct examination, she admitted that the
loan granted by the RCBC was intended for all the businesses that she and her husband,
petitioner Reynaldo, were maintaining.[34] It would, therefore, be iniquitous to charge
private respondents for the interest payments for this loan the proceeds of which were
utilized to finance petitioners' various businesses and not solely the settlement of
petitioners' obligations to the suppliers of Peewee's Petron Powerhouse. In the absence of
actual proof as to how much of the RCBC loan was really used to pay the creditors of the
closed gasoline station, this Court can not affirm petitioners' right to be compensated for
the amount of interest payments they have made to the RCBC.

We find, however, that an award of temperate damages to petitioners is in order. In lieu

of actual damages, temperate damages, which are more than nominal but less than
compensatory damages, may be awarded where the court finds that some pecuniary loss
had been suffered by the claimant but its amount cannot be proved with certainty.
Undoubtedly, pecuniary loss had been inflicted upon petitioners in this case, however,
due to the insufficiency of evidence before us, we cannot place its amount with certainty.
In this regard, we find the amount of P50,000.00 to be sufficient.

Petitioners also assail the removal by the Court of Appeals of the moral damages
previously ordered by the trial court. They argue that contrary to the findings of the
appellate court, they came to court with "clean hands" as they believed that the lease
contract with private respondent De Mesa was modified and extended. At the same time,
they contend that they had a verbal understanding with private respondent Daleon
wherein the latter permitted them to remain in his lot for as long as Petron Corporation
was not removing its equipment. Further, petitioners contend that under Article 2219 of
the Civil Code, this Court had awarded moral damages in instances where the claimants
were victims of capricious, wanton, oppressive, malicious, and arbitrary acts such as
petitioners in this case. On this issue, we agree in the findings of the Court of Appeals
that:
The Court must have to disallow the lower court's award of moral damages. The concept
of moral damages, as announced in Article 2217 of the Civil Code, is designed to
compensate the complainant for his physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and
similar injury occasioned by the defendant's wrongful act or omission. Article 2219 of the
same Code specifies the cases where moral damages may be awarded, to wit:
Art. 2219. Moral damages may be recovered in the following and analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34, and 35.

The parents of the female seduced, abducted, raped or abused, referred to in No. 3 of this
article, may also recover moral damages.

The spouse, descendants, ascendants, and brothers and sisters may bring the action
mentioned in No. 9 of this article, in the order named.
Noticeably, none of the foregoing instances has any relevant bearing to the case at bench.
While Article 2219 comprehends the situation in Article 21 of the Code, whereunder
"[A]ny person who willfully causes loss or injury to another in a manner that is contrary
to morals, good customs or public policy shall compensate the latter for the damages,"
the appellees cannot benefit from it. The right to recover moral damages under Article 21
is based on equity, and those who come to court to demand equity must come with clean
hands (Garciano v. Court of Appeals, 212 SCRA 436 citing Padilla, CIVIL CODE
ANNOTATED, Vol. 1, 1975 Ed., p. 87). The appellees knew that their lease had expired.
Yet, despite such awareness, they persisted in their unauthorized occupancy of appellants'
property. Being partly responsible for their present predicament which is very much
within their power to avoid, appellees cannot receive compensation for whatever mental
anguish or suffering they went thru.[35]
Similarly, we uphold the award of P50,000.00 as exemplary damages in order to deter
similarly minded individuals from pursuing the course of action taken by private
respondents. The law on this matter is clear: "(h)e who believes himself entitled to
deprive another of the possession of a thing, so long as the possessor refuses delivery,
must request the assistance of the proper authority."[36] Petitioners' arbitrary conduct of
fencing their properties under the claim that they own the same brazenly violates the law
and circumvents the proper procedure which should be obtained before the court.

This Court likewise adopts the conclusion reached by the Court of Appeals that
petitioners do not deserve the award of attorney's fees for it was precisely their unfounded
insistence to stay on private respondents' properties that precipitated this suit.

WHEREFORE, the Decision of the Court of Appeals dated 31 March 1998, which
modified the Decision dated 13 November 1992 of the Regional Trial Court, Branch 55,
Lucena City, and its Resolution of 17 June 1993 denying reconsideration are hereby
MODIFIED as follows:

1. The award of Twenty-Seven Thousand Pesos (P27,000.00) as actual damages in

favor of petitioners Reynaldo and Perlita Villafuerte is deleted; and

2. Private respondents Edilberto De Mesa and Gonzalo Daleon are held jointly and
severally liable to pay petitioners the amount of Fifty Thousand Pesos
(P50,000.00) as temperate damages.

The remainder of the same Decision and Resolution of the Court of Appeals are hereby
AFFIRMED. No costs.

SO ORDERED.

FIRST DIVISION
[ G.R. NO. 165500, August 30, 2006 ]
PHILIPPINE BANK OF COMMUNICATIONS AND ROMEO G. DELA
ROSA, PETITIONERS, VS. ELENITA B. TRAZO, RESPONDENT.

DECISION

CHICO-NAZARIO, J.:

Petitioners are asking Us to reverse, in this Petition for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure, the Decision[1] of the Court of Appeals dated 25
March 2004 and its Resolution[2] dated 23 September 2004 denying petitioners' Motion
for Reconsideration.

The facts of the case are as follows:

In order to facilitate the payment of her salaries and other monetary benefits from her
employer, petitioner Philippine Bank of Communications (PBCOM[3]), respondent
Elenita B. Trazo opened a payroll account with China Banking Corporation (CBC) under
Current Account No. 101-003921-9.
On or about 29 December 1997, petitioner Romeo G. dela Rosa, PBCOM assistant vice-
president, instructed CBC to credit all accounts under its payroll with the medical and
clothing subsidy for the year 1998. Accordingly, respondent Trazo's current account was
credited on that date with the amount of P7,000.00 for such annual subsidy.

On 31 December 1997, respondent Trazo, then project manager of the information

technology and management group, resigned from PBCOM.

Since respondent Trazo severed her employment with PBCOM effective 1 January 1998
and was, therefore, no longer entitled to the medical and clothing subsidy for the year
1998, petitioner dela Rosa wrote William Lim, CBC senior assistant vice-president, on 5
January 1997 authorizing/directing CBC/Lim to debit the sum of P7,000.00 from
respondent Trazo's current account. Acting upon such authority/directive, CBC/Lim
debited said amount from respondent Trazo's account on the same date.

Meanwhile, respondent Trazo drew checks against her current account in favor of Bliss
Development Corporation (BDC) and the House of Sara Lee Phils., Inc. However, the
checks were dishonored by CBC due to insufficiency of funds, which was occasioned by
the P7,000.00 debit from her current account.

Averring that PBCOM, through dela Rosa, had no authority to unilaterally order the
debiting of her current account and that CBC, through Lim, made such debit without her
knowledge and consent resulting in the dishonor of her checks, respondent Trazo
instituted an action for damages against PBCOM, dela Rosa, CBC, and Lim before the
Regional Trial Court (RTC) of Quezon City (Branch 79).

Summons was served on CBC and Lim on 19 May 1998 and on petitioners herein,
PBCOM and dela Rosa, on 27 May 1998. On 27 May 1998 and 11 June 1998, or before
the expiration of the reglementary period for filing their answers, CBC and Lim, and
PBCOM and dela Rosa, respectively, filed motions for 15-day extension of time.

On 8 June 1998, respondent Trazo filed a Motion to Declare Defendants China Banking
Corporation and William Lim in Default and Opposition to Motion for Extension of Time
to File Answer and/or Responsive Pleading. On 15 June 1998, respondent Trazo filed a
Motion to Declare Defendants Philippine Bank of Communication and Romeo G. dela
Rosa in Default.

On 16 June 1998, CBC and Lim filed a Motion to Dismiss the case on the ground of
improper venue. On 24 June 1998, PBCOM and dela Rosa filed their own Motion to
Dismiss on the ground that the complaint failed to state a cause of action.

On 7 October 1998, the lower court issued an Omnibus Order granting the motions to
dismiss and declaring the motions to declare defendants in default moot and academic.
The dispositive portion of the Omnibus Order is as follows:
PREMISES CONSIDERED, the case against defendants China Bank and William Lim is
DISMISSED on the ground of improper venue. The case against defendants Philippine
Bank of Communications and Romeo G. dela Rosa is DISMISSED for lack of cause of
action.[4]
Respondent Trazo filed with the trial court a Notice of Appeal. In the assailed Decision,
the Court of Appeals ruled in favor of respondent Trazo, disposing of the case in the
following manner:
WHEREFORE, the omnibus order dated October 7, 1998 of the Regional Trial Court of
Quezon City (Branch 79) is REVERSED and SET ASIDE and the complaint
REINSTATED. Appellant is given ten (10) days from notice of finality of this decision
within which to amend the complaint.[5]
Petitioners filed their Motion for Reconsideration on 14 April 2004, while CBC and Lim
filed their Motion for Reconsideration on 19 April 2004. On 23 September 2004, the
Court of Appeals issued the assailed Resolution wherein both motions for reconsideration
were denied for lack of merit.

Hence, the instant Petition, where petitioners PBCOM and Trazo bring before us the
following issues:
A.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT

THE COMPLAINT STATED A CAUSE OF ACTION FOR DAMAGES AGAINST
PETITIONERS ARISING OUT OF THE ALLEGED UNLAWFUL DEBITING OF
RESPONDENT'S CHINABANK ACCOUNT, NOTWITHSTANDING THAT IT
WAS CHINABANK WHICH DEBITED THE ACCOUNT, NOT PETITIONERS.

B.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT

THE COMPLAINT PLEADED A CAUSE OF ACTION FOR ABUSE OF RIGHTS
AGAINST PETITIONERS.

C.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN ORDERING THE

AMENDMENT OF THE COMPLAINT DESPITE THE COMPLAINT'S
ABSOLUTE FAILURE TO STATE A CAUSE OF ACTION AGAINST
PETTIONERS.

D.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT
THE VENUE CLAUSE IN THE APPLICATION FOR NEW CURRENT
ACCOUNTS IS NOT EXCLUSIVE.[6]
Only CBC, and not
petitionersPBCOM and
dela Rosa, can movefor
dismissal on the ground of
improper venue.

The Application for New Current Accounts, which embodies the terms and conditions of
respondent Trazo's relationship with CBC, contains a stipulation on venue, to wit:
In case of litigation hereunder, venue shall be in the City Court or Court of First Instance
of Manila as the case may be for determination of any and all questions arising
thereunder.[7]
The RTC of Quezon City dismissed the complaint against CBC and Lim based on this
stipulation, but the Court of Appeals reversed said dismissal. According to the Court of
Appeals, absent any qualifying or restrictive words, a stipulation on venue should be
considered merely as an agreement on an additional forum, and not to be considered as
limiting venue to the specified place.[8]

Before proceeding any further, it bears to point out that among the multiple defendants in
the case filed by respondent Trazo, only CBC and its officer Lim can assert the alleged
impropriety of venue since they are privy to and covered by the contract containing the
venue stipulation. Indeed, the dispositive portion of the RTC decision shows that the
dismissal on the ground of improper venue was effective only as against CBC and Lim.
As CBC and Lim did not appeal the decision of the Court of Appeals reversing the RTC
ruling, such decision has become final and executory as regards its disposition on the
issue regarding venue.

Nevertheless, We agree with the Court of Appeals that it was incorrect for the RTC to
dismiss the complaint on the ground of improper venue. The parties must be able to show
that the stipulation is exclusive. Thus, sans words expressing the parties' intention to
restrict the filing of a suit in a particular place, courts will allow the filing of a case in any
of the venues prescribed by law or stipulated by the parties, as long as the jurisdictional
requirements are followed.[9] The subject clause contains no qualifying nor restrictive
words, such as "must," or "exclusively," as would indicate the parties' intention
"mandatorily to restrict the venue of actions to the courts of (Manila) only."[10] In the 8
December 2000 case of Langkaan Realty Development, Inc. v. United Coconut Planters
Bank,[11] where the venue stipulation contained the word "shall,"[12] we held that the
stipulations of the parties "lack qualifying or restrictive words to indicate the exclusivity
of the agreed forum,"[13] and therefore "the stipulated place is considered only as an
additional, not a limiting venue."[14] Consequently, the dismissal by the RTC of the
complaint against CBC and Lim on ground of improper venue is erroneous, and was
correctly reversed by the Court of Appeals.

Respondent Trazo's
complaint contains a cause
of action against
petitioners PBCOM and
dela Rosa.

As discussed above, the RTC dismissed the complaint, insofar as it operates against CBC
and Lim, on the ground of improper venue. In the same Omnibus Order, the RTC also
dismissed the same complaint on the ground of failure to state a cause of action, this time,
insofar as the complaint operates against petitioners PBCOM and dela Rosa. The Court of
Appeals, in reversing the Order of the RTC dismissing the complaint on the ground of
failure to state a cause of action, held:
Par. 13 of the complaint recites appellant's alleged cause of action against [PBCOM and
dela Rosa]. It reads:
"13. Upon further personal inquiry with [PBCOM], [respondent Trazo] found out that on
January 5, 1998 [petitioner] ROMEO G. DE LA ROSA, without [respondent Trazo's]
knowledge, consent and approval, wrote a letter and authorized/directed x x x
CHINABANK and WILLIAM LIM `to debit the account of Elenita Trazo under C/A
#101-003921-9 in the amount of PESOS: SEVEN THOUSAND PESOS ONLY
– P7,000.00 representing her medical and clothing subsidy for the year 1998." He even
acknowledged and admitted that [respondent Trazo] resigned from PBCom effective
December 31, 1997. He further stated that CHINABANK make the `Manager's check
payable to Philippine Bank of Communications.' x x x."
Crucial to appellant's action against [PBCOM and dela Rosa] is the issue of whether the
latter had the right to authorize/direct [CBC and Lim] to debit the amount of P7,000.00
from appellant's current account and, if so, whether appellant was entitled to notice of
such authority/directive.

In authorizing/directing [CBC and Lim] to debit appellant's current account, [PBCOM

and dela Rosa] had, in effect, sought to recover, without resorting to a court action, an
amount erroneously credited to her. And because appellant was not given the courtesy of
a notice of such authority/directive, she was lulled into the belief that her funds at CBC
were sufficient to cover the checks she was issuing.

Nevertheless, the lower court ruled that the averment in par. 13 of the complaint is
insufficient to make out a cause of action against [PBCOM and dela Rosa] on the theory
that the "debit (of) the amount of P7,000.00 from the account of [respondent Trazo] x x x
cannot be attributed as the fault of (PBCOM) since the fiduciary relationship exists only
between (CBC) and [respondent Trazo] as its depositor and the primary responsibility
whether to deposit or not lies with (CBC) alone."
However, the lower court did not consider whether the act of authorizing/directing
CBC/Lim to debit appellant's current account without giving notice to her constitutes a
cause of action against [PBCOM and dela Rosa], for abuse of rights.

The modern tendency is to depart from the classical and traditional theory and to grant
indemnity for damages in cases where there is an abuse of rights, even when the act is not
illicit (Sea Commercial Company, Inc. vs. Court of Appeals, 319 SCRA 210). But even
supposing that the asserted act of [PBCOM and dela Rosa] is insufficient to make out a
case of abuse of rights, the lower court could have simply ordered appellant to amend the
complaint. Thus, Sec. 1, Rule 10, in relation to Sec. 3, Rule 16, id., allows amendment of
pleadings before a responsive pleading is served.

Amendment of the complaint, by way of supplementing and amplifying facts as would

carve out a clear abuse of rights situation, would prevent multiplicity of suits. This is so
because of Our ruling that the dismissal of the complaint against [CBC and Lim] on
ground of improper venue is erroneous, with the effect that the complaint against them is
reinstated. However, affirmance of the dismissal of the complaint against [PBCOM and
dela Rosa] anchored on failure to state a cause of action would trigger the filing of a new
action against the latter, thereby spawning two suits, i.e., the instant action and the new
one.

Amendment, not dismissal, of the complaint is proper to avoid multiplicity of suits

(Eugenio, Sr. vs. Velez, 185 SCRA 425). The policy in this jurisdiction is that amendment
of pleadings is favored and liberally allowed in the interest of substantial justice.
Amendment of the complaint may be allowed even if an order for its dismissal has been
issued provided that the motion to amend is filed before the order of dismissal acquired
finality (Tirona vs. Alejo, 367 SCRA 17). Rules of Procedure, after all, are but tools
designed to facilitate the attainment of justice (Valenzuela vs. Court of Appeals, 363
SCRA 779).[15]
Petitioners argue that the afore-quoted paragraph 13 shows that PBCOM and dela Rosa
merely requested CBC to debit the account of respondent Trazo, and that nothing in said
paragraph shows that PBCOM and dela Rosa were actually responsible for the alleged
unlawful debiting of respondent's account.[16]

As regards the Court of Appeals' finding that the complaint contains a cause of action
against petitioners for abuse of rights,[17] petitioners claim that the elements of abuse of
rights are not found in the complaint, since no bad faith was imputed to PBCOM and dela
Rosa in requesting the debiting of the amount stated, and since there was no allegation
showing that PBCOM and dela Rosa acted with the sole intent of prejudicing or injuring
respondent in requesting the same.[18]

While we agree with petitioners that the complaint does not contain a cause of action
against them for abuse of rights, their petition would, nonetheless, fail.

A cause of action is an act or omission of one party in violation of the legal right of the
other.[19] A motion to dismiss based on lack of cause of action hypothetically admits the
truth of the allegations in the complaint.[20] The allegations in a complaint are sufficient to
constitute a cause of action against the defendants if, hypothetically admitting the facts
alleged, the court can render a valid judgment upon the same in accordance with the
prayer therein. A cause of action exists if the following elements are present, namely: (1)
a right in favor of the plaintiff by whatever means and under whatever law it arises or is
created; (2) an obligation on the part of the named defendant to respect or not to violate
such right; and (3) an act or omission on the part of such defendant violative of the right
of the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff
for which the latter may maintain an action for recovery of damages.[21]

The Court of Appeals, like the RTC, seems to have acquiesced in the petitioners'
statement[22] that respondent's cause of action against them is found exclusively in
paragraph 13 of the complaint. An examination of the subject complaint,[23] however,
reveals that it contains other provisions establishing the cause of action against petitioners
PBCOM and de la Rosa, not the least of which is paragraph 23, which provides:

23. In debiting the checking/current account of the plaintiff, without her

knowledge, consent and approval, defendants acted in a wanton, reckless and
oppressive manner. Defendants PBCOM and ROMEO G. DE LA ROSA had no
cause nor reason to unilaterally order the debiting of plaintiff's account as it
was her personal property and not of defendant PBCOM. Even if defendant
PBCOM erroneously credited plaintiff with monetary benefits, plaintiff was to
receive, as she did receive separation benefits equivalent to more than FIVE
HUNDRED THOUSAND PESOS (P500,000.00) more or less, from defendant
PBCOM itself. A reasonable set-off or compensation should and could have been
resorted to. However, defendant PBCOM never utilized this option. Defendant
PBCOM neither informed plaintiff of said transaction, much less seek her
approval and authority to debit her CHINABANK account when at the time of the
debitting (sic), January 5, 1998, she was no longer an employee of PBCOM.
(Emphasis supplied.)[24]

As regards respondent Trazo's entitlement to damages, the complaint recites that:

In order not to jeopardize her housing loan obligations with BDC and Sara Lee, Phil.,
Inc., and considering the legal actions foisted against her, x x x [respondent Trazo] made
immediate restitution to BDC and Sara Lee Phil., Inc. for her outstanding obligations,
which included unwarranted charges and penalties which were not [respondent Trazo's]
making.[25]
The Complaint also claims that the actions of defendants therein, including petitioners
PBCOM and dela Rosa, caused "mental anguish, moral shock, besmirched reputation,
social humiliation, serious fright and anxiety, sleepless nights and wounded
feelings."[26] The same was reiterated in Annex K of said complaint, wherein respondent
Trazo, through her legal representative, wrote to petitioner dela Rosa, in his capacity as
Assistant Vice-President of petitioner PBCOM, stating:
On January 5, 1997, you, as AVP of PBCOM's Human Resource Management
Department, authorized CHINA BANKING CORPORATION to debit our client's
account under C/A # 101-003921-9 in the amount of SEVEN THOUSAND PESOS
(P7,000.00), representing her medical and clothing subsidy for the year 1998, without
notifying our client, much less acquiring her consent and approval. However, our client
resigned from PBCOM effective July 1, 1998, during which time the same account
already ceased to be a payroll account.

As a result of your action[,] our client incurred damages and injury in several personal
transactions involving check payments made by her under said checking account with
CHINA BANKING CORPORATION. This unfortunate incident caused her untold
sufferings, not to mention lost opportunities in her profession and other businesses,
besmirched reputation, sleepless nights, mental anguish and wounded feelings. [27]
Paragraph 20[28] of the complaint makes its Annex K an integral part thereof.

We find a sufficient cause of action in the above-quoted allegations. If these allegations

are assumed to be true, respondent Trazo would indeed be entitled to damages, though
the amount of the same would still depend on the evidence presented during trial.

We carefully scrutinize the allegations in the Complaint. It provides that "(d)efendants

PBCOM and ROMEO G. DE LA ROSA had no cause nor reason to unilaterally order
the debitting (sic) of plaintiff's account as it was her personal property and not of
defendant PBCOM."[29] The Complaint also described the action of all defendants,
including petitioners PBCOM and dela Rosa, as unjust and illegal,[30] and done in
a wanton, reckless and oppressive manner.[31] The cause of action stated in the
Complaint, therefore, consists in (1) a right in favor of the plaintiff, which in this case
consists of a right to her personal property;[32] (2) an obligation on the part of the named
defendant to respect her right to her personal property; and (3) an act of such defendant
violative of the right of the plaintiff, which in this case is the order by petitioners to CBC
and Lim to debit respondent Trazo's account, an act which petitioners allege to have
caused them damage.

In the case at bar, the allegations in the complaint verily show a cause of action. To
sustain a motion to dismiss for lack of cause of action, the Complaint must show that the
claim for relief does not exist rather than that a claim has been defectively stated or is
ambiguous, indefinite or uncertain.[33]

We, however, disagree with the Court of Appeals when it decided that the allegations in
the complaint show a cause of action against petitioners for abuse of rights under Article
19[34] of the Civil Code. The elements of abuse of rights are: (1) a legal right or duty; (2)
which is exercised in bad faith; and (3) for the sole intent of prejudicing or injuring
another.[35] Rather, the allegations bare commission of an act contrary to law under
Article 20 of the same Code, which provides:
Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to
another, shall indemnify the latter for the same.
Whereas Article 19 provides for a cause of action for damages in cases when there is no
law violated, the act causing damage being within rights or duties of defendant, Article
20 furnishes a general sanction for violations of provisions of law which do not especially
provide their own sanction.[36] The complaint clearly alleges a violation of respondent
Trazo's property rights with respect to her checking account. Article 429 of the Civil
Code provides that the owner or lawful possessor of the thing has the right to exclude any
person from the enjoyment and disposal thereof.

Petitioners retort that the complaint did not base its claim for damages on Articles 19, 20
and 21 of the Civil Code,[37] and faults the Court of Appeals for making out "a cause of
action for respondent on grounds not even alleged in the Complaint.[38] We, however,
have held in Consolidated Dairy Products, Co. v. Court of Appeals,[39] that the applicable
law to a set of facts stated in the complaint need not be set out directly. Consequently, the
complaint need not state that the property right alleged to have been violated is found in
Article 429 of the Civil Code, or that such violation entitled petitioner Trazo to damages
pursuant to Article 20 of the same Code, which provides a cause of action therefor.

Petitioners' claim that respondent failed to specify in the complaint the standard of proper
conduct and decency required of PBCOM and the basis of invoking such standard on
PBCOM[40] did not improve their position any. The complaint should state only ultimate
facts, not conclusions of law, nor evidentiary facts. In determining whether the
allegations of a complaint are sufficient to support a cause of action, the complaint does
not have to establish or allege the facts proving the existence of a cause of action at the
outset; this will have to be done at the trial on the merits of the case. [41] Ultimate facts
refer to the principal, determinative, constitutive facts upon the existence of which the
cause of action rests. The term does not refer to details of probative matter or particulars
of evidence which establish the material ingredients.[42]

In their last ditch efforts to save their cause, petitioners assert that the duty to notify
respondent regarding the debiting of her account properly belongs to CBC[43] and that,
had CBC denied petitioners' "request," then there would have been no alleged debit of
respondent's account.[44] Petitioners add that the mere act of "requesting" a bank to return
a certain amount of money erroneously credited to one of the bank's depositors cannot be
considered an act which violates the rights of said depositor.[45]

Petitioners' allegations are in the nature of defenses, and, thus, cannot be considered in
determining the sufficiency of the cause of action. For the complaint to be dismissed for
failure to state the cause of action, the insufficiency of the cause of action must appear on
the face of the complaint.[46] If the allegations in a complaint can furnish a sufficient basis
by which the complaint can be maintained, the same should not be dismissed regardless
of the defenses that may be assessed by the defendants. [47]

WHEREFORE, the instant petition is DENIED for lack of merit. The assailed Decision
and Resolution of the Court of Appeals, which reversed and set aside the Regional Trial
Court of Quezon City's 7 October 1998 Omnibus Order dismissing respondent's
complaint, are AFFIRMED. Costs against petitioners.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 116100, February 09, 1996 ]
SPOUSES CRISTINO AND BRIGIDA CUSTODIO AND SPOUSES LITO AND
MARIA CRISTINA SANTOS, PETITIONERS, VS. COURT OF APPEALS,
HEIRS OF PACIFICO C. MABASA AND REGIONAL TRIAL COURT OF
PASIG, METRO MANILA, BRANCH 181, RESPONDENTS.

DECISION

REGALADO, J.:

This petition for review on certiorari assails the decision of respondent Court of
Appeals in CA-G.R. CV No. 29115, promulgated on November 10, 1993, which affirmed
with modification the decision of the trial court, as well as its resolution dated July 8,
1994 denying petitioner’s motion for reconsideration. [1]

On August 26, 1982, Civil Case No. 47466 for the grant of an easement of right of way
was filed by Pacifico Mabasa against Cristino Custodio, Brigida R. Custodio, Rosalina R.
Morato, Lito Santos and Maria Cristina C. Santos before the Regional Trial Court of Pasig
and assigned to Branch 22 thereof.[2]
The generative facts of the case, as synthesized by the trial court and adopted by the
Court of Appeals, are as follows:

Perusing the record, this Court finds that the original plaintiff Pacifico Mabasa
died during the pendency of this case and was substituted by Ofelia Mabasa, his
surviving spouse [and children].

The plaintiff owns a parcel of land with a two-door apartment erected thereon situated
at Interior P. Burgos St., Palingon, Tipas, Taguig, Metro Manila.  The plaintiff was able to
acquire said property through a contract of sale with spouses Mamerto Rayos and
Teodora Quintero as vendors last September 1981.  Said property may be described to
be surrounded by other immovables pertaining to defendants herein. Taking P. Burgos
Street as the point of reference, on the left side, going to plaintiff’s property, the row of
houses will be as follows: That of defendants Cristino and Brigido Custodio, then that of
Lito and Maria Cristina Santos and then that of Ofelia Mabasa. On the right side (is) that
of defendant Rosalina Morato and then a Septic Tank (Exhibit "D"). As an access to P.
Burgos Street from plaintiffs property, there are two possible passageways.  The first
passageway is approximately one meter wide and is about 20 meters distan(t) from
Mabasa’s residence to P. Burgos Street.  Such path is passing in between the previously
mentioned row of houses. The second passageway is about 3 meters in width and
length from plaintiff Mabasa’s residence to P. Burgos Street; it is about 26 meters.  In
passing thru said passageway, a less than a meter wide path through the septic tank and
with 5-6 meters in length has to be traversed.

When said property was purchased by Mabasa, there were tenants occupying the
premises and who were acknowledged by plaintiff Mabasa as tenants.   However,
sometime in February, 1982. one of said tenants vacated the apartment and when
plaintiff Mabasa went to see the premises, he saw that there had been built an adobe
fence in the first passageway making it narrower in width.  Said adobe fence was first
constructed by defendants Santoses along their property which is also along the first
passageway. Defendant Morato constructed her adobe fence and even extended said
fence in such a way that the entire passageway was enclosed (Exhibit "1-Santoses and
Custodios," Exh. "D" for plaintiff, Exhs. "1-C", "1-D" and "I -E") And it was then that the
remaining tenants of said apartment vacated the area. Defendant Ma. Cristina Santos
testified that she constructed said fence because there was an incident when her
daughter was dragged by a bicycle pedalled by a son of one of the tenants in said
apartment along the first passageway. She also mentioned some other inconveniences
of having (at) the front of her house a pathway such as when some of the tenants were
drunk and would bang their doors and windows. Some of their footwear were even lost.
x x x[3] (Italics in original text; corrections in parentheses supplied)

On February 27, 1990, a decision was rendered by the trial court, with this dispositive
part:

Accordingly, judgment is hereby rendered as follows:

1) Ordering defendants Custodios and Santoses to give plaintiff permanent access -

ingress and egress, to the public street;

2) Ordering the plaintiff to pay defendants Custodios and Santoses the sum of Eight
Thousand Pesos (P8,000) as indemnity for the permanent use of the passageway.

The parties to shoulder their respective litigation expenses.[4]

Not satisfied therewith, therein plaintiff represented by his heirs, herein private
respondents, went to the Court of Appeals raising the sole issue of whether or not the
lower court erred in not awarding damages in their favor. On November 10, 1993, as
earlier stated, the Court of Appeals rendered its decision affirming the judgment of the
trial court with modification, the decretal portion of which disposes as follows:

WHEREFORE, the appealed decision of the lower court is hereby AFFIRMED WITH

MODIFICATION only insofar as the herein grant of damages to plaintiffs-appellants. The
Court hereby orders defendants-appellees to pay plaintiffs-appellants the sum of Sixty
Five Thousand (P65,000) Pesos as Actual Damages, Thirty Thousand (P30,000) Pesos as
Moral Damages, and Ten Thousand (P10,000) Pesos as Exemplary Damages. The rest of
the appealed decision is affirmed to all respects. [5]

On July 8, 1994, the Court of Appeals denied petitioner’s motion for reconsideration.
[6]
 Petitioners then took the present recourse to us, raising two issues, namely, whether
or not the grant of right of way to herein private respondents is proper, and whether or
not the award of damages is in order.

With respect to the first issue, herein petitioners are already barred from raising the
same. Petitioners did not appeal from the decision of the court a quo granting private
respondents the right of way, hence they are presumed to be satisfied with the
adjudication therein. With the finality of the judgment of the trial court as to
petitioners, the issue of propriety of the grant of right of way has already been laid to
rest.

For failure to appeal the decision of the trial court to the Court of Appeals, petitioners
cannot obtain any affirmative relief other than those granted in the decision of the trial
court. That decision of the court below has become final as against them and can no
longer be reviewed, much less reversed, by this Court. The rule in this jurisdiction is that
whenever an appeal is taken in a civil case, an appellee who has not himself appealed
may not obtain from the appellate court any affirmative relief other than what was
granted in the decision of the lower court. The appellee can only advance any argument
that he may deem necessary to defeat the appellant’s claim or to uphold the decision
that is being disputed, and he can assign errors in his brief if such is required to
strengthen the views expressed by the court a quo. These assigned errors, in turn, may
be considered by the appellate court solely to maintain the appealed decision on other
grounds, but not for the purpose of reversing or modifying the judgment in the
appellee’s favor and giving him other affirmative reliefs. [7]

However, with respect to the second issue, we agree with petitioners that the Court of
Appeals erred in awarding damages in favor of private respondents.  The award of
damages has no substantial legal basis.  A reading of the decision of the Court of
Appeals will show that the award of damages was based solely on the fact that the
original plaintiff, Pacifico Mabasa, incurred losses in the form of unrealized rentals when
the tenants vacated the leased premises by reason of the closure of the passageway.

However, the mere fact that the plaintiff suffered losses does not give rise to a right to
recover damages.  To warrant the recovery of damages, there must be both a right of
action for a legal wrong inflicted by the defendant, and damage resulting to the plaintiff
therefrom.  Wrong without damage, or damage without wrong, does not constitute a
cause of action, since damages are merely part of the remedy allowed for the injury
caused by a breach or wrong. [8]

There is a material distinction between damages and injury. Injury is the illegal invasion
of a legal right; damage is the loss, hurt, or harm which results from the injury; and
damages are the recompense or compensation awarded for the damage suffered. Thus,
there can be damage without injury in those instances in which the loss or harm was not
the result of a violation of a legal duty.  These situations are often called damnum
absque injuria.[9]

In order that a plaintiff may maintain an action for the injuries of which he complains, he
must establish that such injuries resulted from a breach of duty which the defendant
owed to the plaintiff -- a concurrence of injury to the plaintiff and legal responsibility by
the person causing it.[10] The underlying basis for the award of tort damages is the
premise that an individual was injured in contemplation of law.  Thus, there must first
be the breach of some duty and the imposition of liability for that breach before
damages may be awarded; it is not sufficient to state that there should be tort liability
merely because the plaintiff suffered some pain and suffering) [11]

Many accidents occur and many injuries are inflicted by acts or omissions which cause
damage or loss to another but which violate no legal duty to such other person, and
consequently create no cause of action in his favor. In such cases, the consequences
must be borne by the injured person alone. The law affords no remedy for damages
resulting from an act which does not amount to a legal injury or wrong. [12]

In other words, in order that the law will give redress for an act causing damage, that
act must be not only hurtful, but wrongful.  There must be damnum et injuria. [13] If, as
may happen in many cases, a person sustains actual damage, that is, harm or loss to his
person or property, without sustaining any legal injury, that is, an act or omission which
the law does not deem an injury, the damage is regarded as damnum absque injuria.[14]

In the case at bar, although there was damage, there was no legal injury. Contrary to the
claim of private respondents, petitioners could not be said to have violated the principle
of abuse of right. In order that the principle of abuse of right provided in Article 21 of
the Civil Code can be applied, it is essential that the following requisites concur: (1) The
defendant should have acted in a manner that is contrary to morals, good customs or
public policy; (2) The acts should be willful; and (3) There was damage or injury to the
plaintiff.[15]

The act of petitioners in constructing a fence within their lot is a valid exercise of their
right as owners, hence not contrary to morals, good customs or public policy. The law
recognizes in the owner the right to enjoy and dispose of a thing, without other
limitations than those established by law. [16] It is within the right of petitioners, as
owners, to enclose and fence their property. Article 430 of the Civil Code provides that
"(e)very owner may enclose or fence his land or tenements by means of walls, ditches,
live or dead hedges, or by any other means without detriment to servitudes constituted
thereon."

At the time of the construction of the fence, the lot was not subject to any servitudes.
There was no easement of way existing in favor of private respondents, either by law or
by contract. The fact that private respondents had no existing right over the said
passageway is confirmed by the very decision of the trial court granting a compulsory
right of way in their favor after payment of just compensation. It was only that decision
which gave private respondents the right to use the said passageway after payment of
the compensation and imposed a corresponding duty on petitioners not to interfere in
the exercise of said right.

Hence, prior to said decision, petitioners had an absolute right over their property and
their act of fencing and enclosing the same was an act which they may lawfully perform
in the employment and exercise of said right.  To repeat, whatever injury or damage
may have been sustained by private respondents by reason of the rightful use of the
said land by petitioners is damnum absque injuria.[17]

A person has a right to the natural use and enjoyment of his own property, according to
his pleasure, for all the purposes to which such property is usually applied.  As a general
rule, therefore, there is no cause of action for acts done by one person upon his own
property in a lawful and proper manner, although such acts incidentally cause damage
or an unavoidable loss to another, as such damage or loss is damnum absque injuria.
[18]
 When the owner of property makes use thereof in the general and ordinary manner
in which the property is used, such as fencing or enclosing the same as in this case,
nobody can complain of having been injured, because the inconvenience arising from
said use can be considered as a mere consequence of community life. [19]

The proper exercise of a lawful right cannot constitute a legal wrong for which an action
will lie,[20] although the act may result in damage to another, for no legal right has been
invaded[21] One may use any lawful means to accomplish a lawful purpose and though
the means adopted may cause damage to another, no cause of action arises in the
latter’s favor. Any injury or damage occasioned thereby is damnum absque injuria. The
courts can give no redress for hardship to an individual resulting from action reasonably
calculated to achieve a lawful end by lawful means. [22]

WHEREFORE, under the compulsion of the foregoing premises, the appealed decision of

respondent Court of Appeals is hereby REVERSED and SET ASIDE and the judgment of
the trial court is correspondingly REINSTATED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 165952, July 28, 2008 ]
ANECO REALTY AND DEVELOPMENT CORPORATION, PETITIONER,
VS. LANDEX DEVELOPMENT CORPORATION, RESPONDENT.

DECISION

REYES, R.T., J.:

THIS is a simple case of a neighbor seeking to restrain the landowner from fencing his
own property. The right to fence flows from the right of ownership. Absent a clear legal
and enforceable right, We will not unduly restrain the landowner from exercising an
inherent proprietary right.

Before Us is a petition for review on certiorari of the Decision[1] of the Court of Appeals
(CA) affirming the Order[2] of the Regional Trial Court (RTC) dismissing the complaint
for injunction filed by petitioner Aneco Realty and Development Corporation (Aneco)
against respondent Landex Development Corporation (Landex).
 Facts

Fernandez Hermanos Development, Inc. (FHDI) is the original owner of a tract of land in
San Francisco Del Monte, Quezon City. FHDI subdivided the land into thirty-nine (39)
lots.[3] It later sold twenty-two (22) lots to petitioner Aneco and the remaining seventeen
(17) lots to respondent Landex.[4]

The dispute arose when Landex started the construction of a concrete wall on one of its
lots. To restrain construction of the wall, Aneco filed a complaint for injunction[5] with
the RTC in Quezon City. Aneco later filed two (2) supplemental complaints seeking to
demolish the newly-built wall and to hold Landex liable for two million pesos in
damages.[6]

Landex filed its Answer[7] alleging, among others, that Aneco was not deprived access to
its lots due to the construction of the concrete wall. Landex claimed that Aneco has its
own entrance to its property along Miller Street, Resthaven Street, and San Francisco del
Monte Street. The Resthaven access, however, was rendered inaccessible when Aneco
constructed a building on said street. Landex also claimed that FHDI sold ordinary lots,
not subdivision lots, to Aneco based on the express stipulation in the deed of sale that
FHDI was not interested in pursuing its own subdivision project.

RTC Disposition

On June 19, 1996, the RTC rendered a Decision[8] granting the complaint for injunction,
disposing as follows:
Wherefore, premises considered, and in the light aforecited decision of the Supreme
Court judgment is hereby rendered in favor of the plaintiff and the defendant is hereby
ordered:

1. To stop the completion of the concrete wall and excavation of the road lot in
question and if the same is already completed, to remove the same and to return
the lot to its original situation;

2. To pay actual and compensatory damage to the plaintiff in the total amount of
P50,000.00;

3. To pay attorney's fees in the amount of P20,000.00;

4. To pay the cost.

SO ORDERED.[9]
Landex moved for reconsideration.[10] Records reveal that Landex failed to include a
notice of hearing in its motion for reconsideration as required under Section 5, Rule 15 of
the 1997 Rules of Civil Procedure. Realizing the defect, Landex later filed a
motion[11] setting a hearing for its motion for reconsideration. Aneco countered with a
motion for execution[12] claiming that the RTC decision is already final and executory.

Acting on the motion of Landex, the RTC set a hearing on the motion for reconsideration
on August 28, 1996. Aneco failed to attend the slated hearing. The RTC gave Aneco
additional time to file a comment on the motion for reconsideration.[13]

On March 13, 1997, the RTC issued an order[14] denying the motion for execution of
Aneco.

On March 31, 1997, the RTC issued an order granting the motion for reconsideration of
Landex and dismissing the complaint of Aneco. In granting reconsideration, the RTC
stated:
In previously ruling for the plaintiff, this Court anchored its decision on the ruling of the
Supreme Court in the case of "White Plains Association vs. Legaspi, 193 SCRA 765,"
wherein the issue involved was the ownership of a road lot, in an existing, fully
developed and authorized subdivision, which after a second look, is apparently
inapplicable to the instant case at bar, simply because the property in question never did
exist as a subdivision. Since, the property in question never did exist as a subdivision, the
limitations imposed by Section 1 of Republic Act No. 440, that no portion of a
subdivision road lot shall be closed without the approval of the Court is clearly in
appropriate to the case at bar.

The records show that the plaintiff's property has access to a public road as it has its own
ingress and egress along Miller St.; That plaintiff's property is not isolated as it is
bounded by Miller St. and Resthaven St. in San Francisco del Monte, Quezon City; that
plaintiff could easily make an access to a public road within the bounds and limits of its
own property; and that the defendant has not yet been indemnified whatsoever for the use
of his property, as mandated by the Bill of rights. The foregoing circumstances, negates
the alleged plaintiffs right of way.[15]
Aneco appealed to the CA.[16]

CA Disposition

On March 31, 2003, the CA rendered a Decision[17] affirming the RTC order, disposing as
follows:
WHEREFORE, in consideration of the foregoing, the instant appeal is
perforce dismissed. Accordingly, the order dated 31 March 1996 is hereby affirmed.

SO ORDERED.[18]
In affirming the RTC dismissal of the complaint for injunction, the CA held that Aneco
knew at the time of the sale that the lots sold by FHDI were not subdivision units based
on the express stipulation in the deed of sale that FHDI, the seller, was no longer
interested in pursuing its subdivision project, thus:
The subject property ceased to be a road lot when its former owner (Fernandez
Hermanos, Inc.) sold it to appellant Aneco not as subdivision lots and without the
intention of pursuing the subdivision project. The law in point is Article 624 of the New
Civil Code, which provides:
Art. 624. The existence of an apparent sign of easement between two estates, established
or maintained by the owner of both, shall be considered, should either of them be
alienated, as a title in order that the easement may continue actively and passively,
unless, at the time the ownership of the two estates is divided, the contrary should be
provided in the title of conveyance of either of them, or the sign aforesaid should be
removed before the execution of the deed. This provision shall also apply in case of the
division of a thing owned in common by two or more persons.
Viewed from the aforesaid law, there is no question that the law allows the continued use
of an apparent easement should the owner alienate the property to different persons. It is
noteworthy to emphasize that the lot in question was provided by the previous owner
(Fernandez Hermanos, Inc.) as a road lot because of its intention to convert it into
a subdivision project. The previous owner even applied for a development permit over
the subject property. However, when the twenty-two (22) lots were sold to appellant
Aneco, it was very clear from the seller's deed of sale that the lots sold ceased to be
subdivision lots. The seller even warranted that it shall undertake to extend all the
necessary assistance for the consolidation of the subdivided lots, including the execution
of the requisite manifestation before the appropriate government agencies that the seller
is no longer interested in pursuing the subdivision project. In fine, appellant Aneco knew
from the very start that at the time of the sale, the 22 lots sold to it were not intended as
subdivision units, although the titles to the different lots have yet to be consolidated.
Consequently, the easement that used to exist on the subject lot ceased when appellant
Aneco and the former owner agreed that the lots would be consolidated and would no
longer be intended as a subdivision project.

Appellant Aneco insists that it has the intention of continuing the subdivision project
earlier commenced by the former owner. It also holds on to the previous development
permit granted to Fernandez Hermanos, Inc. The insistence is futile. Appellant Aneco did
not acquire any right from the said previous owner since the latter itself expressly stated
in their agreement that it has no more intention of continuing the subdivision project. If
appellant desires to convert its property into a subdivision project, it has to apply in its
own name, and must have its own provisions for a road lot.[19]
Anent the issue of compulsory easement of right of way, the CA held that Aneco failed to
prove the essential requisites to avail of such right, thus:
An easement involves an abnormal restriction on the property of the servient owner and
is regarded as a charge or encumbrance on the servient owner and is regarded as a charge
or encumbrance on the servient estate (Cristobal v. CA, 291 SCRA 122). The essential
requisites to be entitled to a compulsory easement of way are: 1) that the dominant estate
is surrounded by other immovables and has no adequate outlet to a public highway; 2)
that proper indemnity has been paid; 3) that the isolation was not due to acts of the
proprietor of the dominant estate; 4) that the right of way claimed is at a point least
prejudicial to the servient estate and in so far as consistent with this rule, where the
distance from the dominant estate to a public highway may be the shortest (Cristobal v.
Court of Appeals, 291 SCRA 122).

An in depth examination of the evidence adduced and offered by appellant Aneco,

showed that it had failed to prove the existence of the aforementioned requisites, as the
burden thereof lies upon the appellant Aneco.[20]
Aneco moved for reconsideration but its motion was denied.[21] Hence, the present
petition or appeal by certiorari under Rule 45.

Issues

Petitioner Aneco assigns quadruple errors to the CA in the following tenor:

A.
THE COURT OF APPEALS GRAVELY ERRED IN DISMISSING PETITIONER'S
APPEAL AND SUSTAINING THE TRIAL COURT'S ORDER DATED 31 MARCH
1997 GRANTING RESPONDENT'S MOTION FOR RECONSIDERATION WHICH IS
FATALLY DEFECTIVE FOR LACK OF NOTICE OF HEARING.

B.

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL

COURT'S ORDER WHICH GAVE FULL WEIGHT AND CREDIT TO THE
MISLEADING AND ERRONEOUS CERTIFICATION ISSUED BY GILDA E.
ESTILO WHICH SHE LATER EXPRESSLY AND CATEGORICALLY RECANTED
BY WAY OF HER AFFIDAVIT.

C.

THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE LIBERAL

CONSTRUCTION OF THE RULES IN ORDER TO SUSTAIN THE TRIAL
COURT'S ORDER DATED 31 MARCH 1997.

D.

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL

COURT'S ORDER THAT MADE NO PRONOUNCEMENTS AS TO COSTS, AND IN
DISREGARDING THE MERIT OF THE PETITIONER'S CAUSE OF ACTION. [22]
 Our Ruling

The petition is without merit.

Essentially, two (2) issues are raised in this petition. The first is the procedural issue of
whether or not the RTC and the CA erred in liberally applying the rule on notice of
hearing under Section 5, Rule 15 of the 1997 Rules of Civil Procedure. The second is the
substantive issue of whether or not Aneco may enjoin Landex from constructing a
concrete wall on its own property.

We shall discuss the twin issues sequentially.

Strict vs. Liberal Construction of Procedural Rules; Defective motion was cured when
Aneco was given an opportunity to comment on the motion for reconsideration.

Section 5, Rule 15 of the 1997 Rules of Civil Procedure[23] requires a notice of hearing for
a contested motion filed in court. Records disclose that the motion for reconsideration
filed by Landex of the RTC decision did not contain a notice of hearing. There is no
dispute that the motion for reconsideration is defective. The RTC and the CA ignored the
procedural defect and ruled on the substantive issues raised by Landex in its motion for
reconsideration. The issue before Us is whether or not the RTC and the CA correctly
exercised its discretion in ignoring the procedural defect. Simply put, the issue is whether
or not the requirement of notice of hearing should be strictly or liberally applied under
the circumstances.

Aneco bats for strict construction. It cites a litany of cases which held that notice of
hearing is mandatory. A motion without the required notice of hearing is a mere scrap of
paper. It does not toll the running of the period to file an appeal or a motion for
reconsideration. It is argued that the original RTC decision is already final and executory
because of the defective motion.[24]

Landex counters for liberal construction. It similarly cites a catena of cases which held
that procedural rules may be relaxed in the interest of substantial justice. Landex asserts
that the procedural defect was cured when it filed a motion setting a hearing for its
motion for reconsideration. It is claimed that Aneco was properly informed of the
pending motion for reconsideration and it was not deprived of an opportunity to be heard.
[25]

It is true that appeals are mere statutory privileges which should be exercised only in the
manner required by law. Procedural rules serve a vital function in our judicial system.
They promote the orderly resolution of cases. Without procedure, there will be chaos. It
thus behooves upon a litigant to follow basic procedural rules. Dire consequences may
flow from procedural lapses.
Nonetheless, it is also true that procedural rules are mere tools designed to facilitate the
attainment of justice. Their strict and rigid application should be relaxed when they
hinder rather than promote substantial justice. Public policy dictates that court cases
should, as much as possible, be resolved on the merits not on mere technicalities.
Substantive justice trumps procedural rules. In Barnes v. Padilla,[26] this Court held:
Let it be emphasized that the rules of procedure should be viewed as mere tools designed
to facilitate the attainment of justice. Their strict and rigid application, which would
result in technicalities that tend to frustrate rather than promote substantial justice, must
always be eschewed. Even the Rules of Court reflect this principle. The power to suspend
or even disregard rules can be so pervasive and compelling as to alter even that which
this Court itself has already declared to be final x x x.

The emerging trend in the rulings of this Court is to afford every party litigant the
amplest opportunity for the proper and just determination of his cause, free from the
constraints of technicalities. Time and again, this Court has consistently held that rules
must not be applied rigidly so as not to override substantial justice.[27]
Here, We find that the RTC and the CA soundly exercised their discretion in opting for a
liberal rather than a strict application of the rules on notice of hearing. It must be stressed
that there are no vested right to technicalities. It is within the court's sound discretion to
relax procedural rules in order to fully adjudicate the merits of a case. This Court will not
interfere with the exercise of that discretion absent grave abuse or palpable error. Section
6, Rule 1 of the 1997 Rules of Civil Procedure even mandates a liberal construction of
the rules to promote their objectives of securing a just, speedy, and inexpensive
disposition of every action and proceeding.

To be sure, the requirement of a notice of hearing in every contested motion is part of due
process of law. The notice alerts the opposing party of a pending motion in court and
gives him an opportunity to oppose it. What the rule forbids is not the mere absence of a
notice of hearing in a contested motion but the unfair surprise caused by the lack of
notice. It is the dire consequences which flow from the procedural error which is
proscribed. If the opposing party is given a sufficient opportunity to oppose a defective
motion, the procedural lapse is deemed cured and the intent of the rule is substantially
complied. In E L Mercantile, Inc. v. Intermediate Appellate Court,[28] this Court held:
Procedural due process is not based solely on a mechanistic and literal application of a
rule such that any deviation is inexorably fatal. Rules of procedure, and this includes the
three (3) days notice requirement, are liberally construed in order to promote their object
and to assist the parties in obtaining just, speedy, and inexpensive determination of every
action and proceeding (Section 2, Rule 1, Rules of Court). In Case and Nantz v. Jugo (77
Phil. 517), this Court made it clear that lapses in the literal observance of a rule of
procedure may be overlooked when they have not prejudiced the adverse party and have
not deprived the court of its authority.
A party cannot ignore a more than sufficient opportunity to exercise its right to be heard
and once the court performs its duty and the outcome happens to be against that negligent
party, suddenly interpose a procedural violation already cured, insisting that everybody
should again go back to square one. Dilatory tactics cannot be the guiding principle.

The rule in De Borja v. Tan (93 Phil. 167), that "what the law prohibits is not the absence
of previous notice, but the absolute absence thereof and lack of opportunity to be heard,"
is the applicable doctrine. (See also Aguilar v. Tan, 31 SCRA 205; Omico v. Vallejos, 63
SCRA 285; Sumadchat v. Court of Appeals, 111 SCRA 488.) x x x[29]
We also find that the procedural lapse committed by Landex was sufficiently cured when
it filed another motion setting a hearing for its defective motion for reconsideration.
Records reveal that the RTC set a hearing for the motion for reconsideration but Aneco's
counsel failed to appear. The RTC then gave Aneco additional time to file comment on
the motion for reconsideration.[30]

Aneco was afforded procedural due process when it was given an opportunity to oppose
the motion for reconsideration. It cannot argue unfair surprise because it was afforded
ample time to file a comment, as it did comment, on the motion for reconsideration.
There being no substantial injury or unfair prejudice, the RTC and the CA correctly
ignored the procedural defect.

The RTC and the CA did not err in dismissing the complaint for injunction; factual
findings and conclusions of law of the RTC and the CA are afforded great weight and
respect.

Anent the substantive issue, We agree with the RTC and the CA that the complaint for
injunction against Landex should be dismissed for lack of merit. What is involved here is
an undue interference on the property rights of a landowner to build a concrete wall on
his own property. It is a simple case of a neighbor, petitioner Aneco, seeking to restrain a
landowner, respondent Landex, from fencing his own land.

Article 430 of the Civil Code gives every owner the right to enclose or fence his land or
tenement by means of walls, ditches, hedges or any other means. The right to fence flows
from the right of ownership. As owner of the land, Landex may fence his property subject
only to the limitations and restrictions provided by law. Absent a clear legal and
enforceable right, as here, We will not interfere with the exercise of an essential attribute
of ownership.

Well-settled is the rule that factual findings and conclusions of law of the trial court when
affirmed by the CA are accorded great weight and respect. Here, We find no cogent
reason to deviate from the factual findings and conclusion of law of the trial court and the
appellate court. We have meticulously reviewed the records and agree that Aneco failed
to prove any clear legal right to prevent, much less restrain, Landex from fencing its own
property.

Aneco cannot rely on the road lot under the old subdivision project of FHDI because it
knew at the time of the sale that it was buying ordinary lots, not subdivision lots, from
FHDI. This is clear from the deed of sale between FHDI and Aneco where FHDI
manifested that it was no longer interested in pursuing its own subdivision project. If
Aneco wants to transform its own lots into a subdivision project, it must make its own
provision for road lots. It certainly cannot piggy back on the road lot of the defunct
subdivision project of FHDI to the detriment of the new owner Landex. The RTC and the
CA correctly dismissed the complaint for injunction of Aneco for lack of merit.

WHEREFORE, the petition is DENIED and the appealed Decision AFFIRMED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 152319, October 28, 2009 ]
HEIRS OF THE LATE JOAQUIN LIMENSE, NAMELY: CONCESA
LIMENSE, SURVIVING SPOUSE; AND DANILO AND JOSELITO, BOTH
SURNAMED LIMENSE, CHILDREN, PETITIONERS, VS. RITA VDA. DE
RAMOS, RESTITUTO RAMOS, VIRGILIO DIAZ, IRENEO RAMOS,
BENJAMIN RAMOS, WALDYTRUDES RAMOS-BASILIO, TRINIDAD
RAMOS-BRAVO, PAZ RAMOS-PASCUA, FELICISIMA RAMOS-REYES,
AND JACINTA RAMOS, RESPONDENTS.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
annul and set aside the Decision[1] of the Court of Appeals dated December 20, 2001 in
CA-G.R. CV No. 33589 affirming in toto the Decision[2] of the Regional Trial Court of
Manila, Branch 15, dated September 21, 1990 in Civil Case No. 83-16128.

The antecedent facts are as follows:

Dalmacio Lozada was the registered owner of a parcel of land identified as Lot No. 12,
Block No. 1074 of the cadastral survey of the City of Manila covered by Original
Certificate of Title (OCT) No. 7036 issued at the City of Manila on June 14, 1927,
[3]
 containing an area of 873.80 square meters, more or less, located in Beata Street,
Pandacan, Manila.

Dalmacio Lozada subdivided his property into five (5) lots, namely: Lot Nos. 12-A, 12-
B, 12-C, 12-D and 12-E. Through a Deed of Donation dated March 9, 1932,[4] he donated
the subdivided lots to his daughters, namely: Isabel, Salud, Catalina, and Felicidad, all
surnamed Lozada. The Deed of Donation was registered with the office of the Register of
Deeds of Manila on March 15, 1932.

Under the said Deed of Donation, the lots were adjudicated to Dalmacio's daughters in
the following manner:

a. Lot No. 12-A in favor of Isabel Lozada, married to Isaac Limense;

b. Lot No. 12-B in favor of Catalina Lozada, married to Sotero Natividad;
c. Lot No. 12-C in favor of Catalina Lozada, married to Sotero Natividad; Isabel Lozada,
married to Isaac Limense; and Salud Lozada, married to Francisco Ramos, in equal parts;
d. Lot No. 12-D in favor of Salud Lozada, married to Francisco Ramos; and
e. Lot No. 12-E in favor of Isabel Lozada, married to Isaac Limense, and Felicidad
Lozada, married to Galicano Centeno.

By virtue of the Deed of Donation executed by Dalmacio Lozada, OCT No. 7036, which
was registered in his name, was cancelled and, in lieu thereof, Transfer Certificates of
Title (TCTs) bearing Nos. 40041, 40042, 40043, 40044, and 40045 were issued in favor
of the donees, except TCT No. 40044, which remained in his name. These new TCTs
were annotated at the back of OCT No. 7036.[5]

TCT No. 40043, which covered Lot No. 12-C, was issued in the name of its co-owners
Catalina Lozada, married to Sotero Natividad; Isabel Lozada, married to Isaac Limense;
and Salud Lozada, married to Francisco Ramos. It covered an area of 68.60 square
meters, more or less, was bounded on the northeast by Lot No. 12-A, on the southwest by
Calle Beata, and on the northwest by Lot No. 12-D of the subdivision plan. In 1932,
respondents' predecessor-in-interest constructed their residential building on Lot No. 12-
D, adjacent to Lot No. 12-C.

On May 16, 1969, TCT No. 96886[6] was issued in the name of Joaquin Limense covering
the very same area of Lot No. 12-C.

On October 1, 1981, Joaquin Limense secured a building permit for the construction of a
hollow block fence on the boundary line between his aforesaid property and the adjacent
parcel of land located at 2759 Beata Street, Pandacan, Manila, designated as Lot No. 12-
D, which was being occupied by respondents. The fence, however, could not be
constructed because a substantial portion of respondents' residential building in Lot No.
12-D encroached upon portions of Joaquin Limense's property in Lot No. 12-C.
Joaquin Limense demanded the removal of the encroached area; however, respondent
ignored both oral and written demands. The parties failed to amicably settle the
differences between them despite referral to the barangay. Thus, on March 9, 1983,
Joaquin Limense, duly represented by his Attorney-in-Fact, Teofista L. Reyes, instituted
a Complaint[7] against respondents before the Regional Trial Court (RTC) of Manila,
Branch 15, for removal of obstruction and damages.

Joaquin Limense prayed that the RTC issue an order directing respondents, jointly and
severally, to remove the portion which illegally encroached upon his property on Lot No.
12-C and, likewise, prayed for the payment of damages, attorney's fees and costs of suit.

Respondents, on the other hand, averred in their Answer[8] that they were the surviving
heirs of Francisco Ramos,[9] who, during his lifetime, was married to Salud Lozada, one
of the daughters of Dalmacio Lozada, the original owner of Lot No. 12. After subdividing
the said lot, Dalmacio Lozada donated Lot No. 12-C in favor of his daughters Catalina,
married to Sotero Natividad; Isabel, married to Isaac Limense; and Salud, married to
Francisco Ramos. Being the surviving heirs of Francisco Ramos, respondents later
became co-owners of Lot No. 12-C. Lot No. 12-C has served as right of way or common
alley of all the heirs of Dalmacio Lozada since 1932 up to the present. As a common
alley, it could not be closed or fenced by Joaquin Limense without causing damage and
prejudice to respondents.

After trial on the merits, the RTC rendered a Decision[10] dated September 21, 1990
dismissing the complaint of Joaquin Limense. It ruled that an apparent easement of right
of way existed in favor of respondents. Pertinent portions of the decision read as follows:

The Court finds that an apparent easement of right of way exists in favor of the
defendants under Article 624 of the Civil Code. It cannot be denied that there is an alley
which shows its existence. It is admitted that this alley was established by the original
owner of Lot 12 and that in dividing his property, the alley established by him continued
to be used actively and passively as such. Even when the division of the property
occurred, the non-existence of the easement was not expressed in the corresponding titles
nor were the apparent sign of the alley made to disappear before the issuance of said
titles.

The Court also finds that when plaintiff acquired the lot (12-C) which forms the alley, he
knew that said lot could serve no other purpose than as an alley. That is why even after he
acquired it in 1969, the lot continued to be used by defendants and occupants of the other
adjoining lots as an alley. The existence of the easement of right of way was therefore
known to plaintiff who must respect the same in spite of the fact that his transfer
certificate of title does not mention the lot of defendants as among those listed therein as
entitled to such right of way. It is an established principle that actual notice or knowledge
is as binding as registration.[11]

Aggrieved by said decision, Joaquin Limense filed a notice of appeal. The records of the
case were transmitted to the Court of Appeals (CA). During the pendency of the appeal
with the CA, Joaquin Limense died in 1999.[12]

The CA, Seventh Division, in CA-G.R. CV No. 33589, in its Decision[13] dated December
20, 2001 dismissed the appeal and affirmed in toto the decision of the RTC.

Frustrated by this turn of events, petitioners, as surviving heirs of Joaquin Limense,

elevated the case to this Court via a Petition for Review on Certiorari[14] raising the
following issues:

1. DID THE HONORABLE COURT OF APPEALS COMMIT A GRAVE ABUSE

OF DISCRETION AMOUNTING TO LACK OF JURISDICTION, IN
HOLDING, LIKE THE TRIAL COURT DID, THAT RESPONDENTS' LOT 12-
D HAS AN EASEMENT OF RIGHT OF WAY OVER JOAQUIN LIMENSE'S
LOT 12-C?

2. DID THE HONORABLE COURT OF APPEALS COMMIT A GRAVE ABUSE

OF DISCRETION AMOUNTING TO LACK OF JURISDICTION, IN FAILING
TO HOLD, LIKE THE TRIAL COURT DID, THAT THE PROTRUDING
PORTIONS OF RESPONDENTS' HOUSE ON LOT 12-D EXTENDING INTO
JOAQUIN LIMENSE'S LOT 12-C CONSTITUTE A NUISANCE AND, AS
SUCH, SHOULD BE REMOVED?

Petitioners aver that the CA erred in ruling that since Lot No. 12-C was covered by two
TCT's, i.e., TCT Nos. 40043 and 96886, and there was no evidence on record to show
how Joaquin Limense was able to secure another title over an already titled property, then
one of these titles must be of dubious origin. According to the CA, TCT No. 96886,
issued in the name of Joaquin Limense, was spurious because the Lozada sisters never
disposed of the said property covered by TCT No. 40043. The CA further ruled that a co-
ownership existed over Lot No. 12-C between petitioners and respondents. Petitioners
countered that TCT No. 96886, being the only and best legitimate proof of ownership
over Lot No. 12-C, must prevail over TCT No. 40043.

Respondents allege that it was possible that TCT No. 96886, in the name of Joaquin
Limense, was obtained thru fraud, misrepresentation or falsification of documents
because the donees of said property could not possibly execute any valid transfer of title
to Joaquin Limense, as they were already dead prior to the issuance of TCT No. 96886 in
1969. Respondents further allege that petitioners failed to produce proof substantiating
the issuance of TCT No. 96886 in the name of Joaquin Limense.

Apparently, respondents are questioning the legality of TCT No. 96886, an issue that this
Court cannot pass upon in the present case. It is a rule that the validity of a torrens title
cannot be assailed collaterally.[15] Section 48 of Presidential Decree (PD) No.
1529provides that:

[a] certificate of title shall not be subject to collateral attack. It cannot be altered,
modified, or cancelled except in a direct proceeding in accordance with law.

In the case at bar, the action filed before the RTC against respondents was an action for
removal of obstruction and damages. Respondents raised the defense that Joaquin
Limense's title could have been obtained through fraud and misrepresentation in the trial
proceedings before the RTC. Such defense is in the nature of a collateral attack, which is
not allowed by law.

Further, it has been held that a certificate of title, once registered, should not thereafter be
impugned, altered, changed, modified, enlarged or diminished, except in a direct
proceeding permitted by law.Otherwise, the reliance on registered titles would be lost.
The title became indefeasible and incontrovertible after the lapse of one year from the
time of its registration and issuance. Section 32 of PD 1529 provides that "upon the
expiration of said period of one year, the decree of registration and the certificate of title
shall become incontrovertible. Any person aggrieved by such decree of registration in
any case may pursue his remedy by action for damages against the applicant or other
persons responsible for the fraud."[16] It has, therefore, become an ancient rule that the
issue on the validity of title, i.e., whether or not it was fraudulently issued, can only be
raised in an action expressly instituted for that purpose.[17] In the present case, TCT No.
96886 was registered in 1969 and respondents never instituted any direct proceeding or
action to assail Joaquin Limense's title.

Additionally, an examination of TCT No. 40043 would readily show that there is an
annotation that it has been "CANCELLED."[18] A reading of TCT No. 96886 would also
reveal that said title is a transfer from TCT No. 48866[19] and not TCT 40043. Thus, it is
possible that there was a series of transfers effected from TCT No. 40043 prior to the
issuance of TCT No. 96886. Hence, respondents' position that the issuance of TCT No.
96886 in the name of Joaquin Limense is impossible, because the registered owners of
TCT No. 40043 were already dead prior to 1969 and could not have transferred the
property to Joaquin Limense, cannot be taken as proof that TCT No. 96886 was obtained
through fraud, misrepresentation or falsification of documents.

Findings of fact of the CA, although generally deemed conclusive, may admit review by
this Court if the CA failed to notice certain relevant facts that, if properly considered,
would justify a different conclusion, and if the judgment of the CA is premised on a
misapprehension of facts.[20] As with the present case, the CA's observation that TCT No.
96886 is of dubious origin, as TCT No. 40043 does not appear to have been disposed of
by Catalina, Isabel and Salud Lozada, is improper and constitutes an indirect attack on
TCT No. 96886. As we see it, TCT No. 96886, at present, is the best proof of Joaquin
Limense's ownership over Lot No. 12-C. Thus, the CA erred in ruling that respondents
and petitioners co-owned Lot No. 12-C, as said lot is now registered exclusively in the
name of Joaquin Limense.

Due to the foregoing, Joaquin Limense, as the registered owner of Lot 12-C, and his
successors-in-interest, may enclose or fence his land or tenements by means of walls,
ditches, live or dead hedges, or by any other means without detriment to servitudes
constituted thereon.[21]

However, although the owner of the property has the right to enclose or fence his
property, he must respect servitudes constituted thereon. The question now is whether
respondents are entitled to an easement of right of way.

Petitioners contend that respondents are not entitled to an easement of right of way over
Lot No. 12-C, because their Lot No. 12-D is not duly annotated at the back of TCT No.
96886 which would entitle them to enjoy the easement, unlike Lot Nos. 12-A-1, 12-A-2,
12-A-3, 12-A-4, 12-A-5, and 12-A-6. Respondents, on the other hand, allege that they are
entitled to an easement of right of way over Lot No. 12-C, which has been continuously
used as an alley by the heirs of Dalmacio Lozada, the residents in the area and the public
in general from 1932 up to the present. Since petitioners are fully aware of the long
existence of the said alley or easement of right of way, they are bound to respect the
same.

As defined, an easement is a real right on another's property, corporeal and immovable,

whereby the owner of the latter must refrain from doing or allowing somebody else to do
or something to be done on his property, for the benefit of another person or tenement. [22]

Easements may be continuous or discontinuous, apparent or non-apparent.

Continuous easements are those the use of which is or may be incessant, without the
intervention of any act of man. Discontinuous easements are those which are used at
intervals and depend upon the acts of man. Apparent easements are those which are made
known and are continually kept in view by external signs that reveal the use and
enjoyment of the same. Non-apparent easements are those which show no external
indication of their existence.[23]

In the present case, the easement of right of way is discontinuous and apparent. It is
discontinuous, as the use depends upon the acts of respondents and other persons passing
through the property. Being an alley that shows a permanent path going to and from
Beata Street, the same is apparent.

Being a discontinuous and apparent easement, the same can be acquired only by virtue of
a title.[24]

In the case at bar, TCT No. 96886, issued in the name of Joaquin Limense, does not
contain any annotation that Lot No. 12-D was given an easement of right of way over Lot
No. 12-C. However, Joaquin Limense and his successors-in-interests are fully aware that
Lot No. 12-C has been continuously used and utilized as an alley by respondents and
residents in the area for a long period of time.

Joaquin Limense's Attorney-in-Fact, Teofista L. Reyes, testified that respondents and

several other residents in the area have been using the alley to reach Beata Street since
1932. Thus:

Atty. Manuel B. Tomacruz:

Q: Mrs. Witness, by virtue of that Deed of Donation you claim that titles were issued to
the children of Dalmacio Lozada namely Salud Lozada, Catalina Lozada and Isabel
Lozada, is that right?
A: Yes, sir.
Q: And after the said property was adjudicated to his said children the latter constructed
their houses on their lots.
A: Yes, sir.
Q: As a matter of fact, the herein defendants have constructed their houses on the premises
alloted to them since the year 1932?
A: Yes, sir, they were able to construct their house fronting Beata Street.
Q: And that house they have constructed on their lot in 1932 is still existing today?
A: Yes, sir and they still used the alley in question and they are supposed to use Beata
Street but they are not using Beata Street.
Q: They are using the alley?
A: Yes, sir, they are using the alley and they do not pass through Beata Street.
Q: And they have been using the alley since 1932 up to the present?
A: Yes, sir they have been using the alley since that time. That was their mistake and they
should be using Beata Street because they are fronting Beata Strret.
Q: As a matter of fact, it is not only herein defendants who have been using that alley
since 1932 up to the present?
A: Yes, sir they are using the alley up to now.
Q: As a matter of fact, in this picture marked as Exh. "C-1" the alley is very apparent. This
is the alley?
A: Yes, sir.
Q: And there are houses on either side of this alley?
A: Yes, sir.
Q: As a matter of fact, all the residents on either side of the alley are passing through this
alley?
A: Yes, sir, because the others have permit to use this alley and they are now allowed to
use the alley but the Ramos's family are now [not] allowed to use this alley.[25]

In Mendoza v. Rosel,[26] this Court held that:

Petitioners claim that inasmuch as their transfer certificates of title do not mention any
lien or encumbrance on their lots, they are purchasers in good faith and for value, and as
such have a right to demand from respondents some payment for the use of the alley.
However, the Court of Appeals found, as a fact, that when respondents acquired the two
lots which form the alley, they knew that said lots could serve no other purpose than as an
alley. The existence of the easement of right of way was therefore known to petitioners
who must respect the same, in spite of the fact that their transfer certificates of title do
not mention any burden or easement. It is an established principle that actual notice or
knowledge is as binding as registration.

Every buyer of a registered land who takes a certificate of title for value and in good faith
shall hold the same free of all encumbrances except those noted on said certificate. It has
been held, however, that "where the party has knowledge of a prior existing interest that
was unregistered at the time he acquired a right to the same land, his knowledge of that
prior unregistered interest has the effect of registration as to him."[27]

In the case at bar, Lot No. 12-C has been used as an alley ever since it was donated by
Dalmacio Lozada to his heirs. It is undisputed that prior to and after the registration of
TCT No. 96886, Lot No. 12-C has served as a right of way in favor of respondents and
the public in general. We quote from the RTC's decision:

x x x It cannot be denied that there is an alley which shows its existence. It is admitted
that this alley was established by the original owner of Lot 12 and that in dividing his
property the alley established by him continued to be used actively and passively as such.
Even when the division of the property occurred, the non-existence of the easement was
not expressed in the corresponding titles nor were the apparent sign of the alley made to
disappear before the issuance of said titles.

The Court also finds that when plaintiff acquired the lot (12-C) which forms the alley, he
knew that said lot could serve no other purpose than as an alley. That is why even after he
acquired it in 1969 the lot continued to be used by defendants and occupants of the other
adjoining lots as an alley. x x x[28]

Thus, petitioners are bound by the easement of right of way over Lot No. 12-C, even
though no registration of the servitude has been made on TCT No. 96886.

However, respondents' right to have access to the property of petitioners does not include
the right to continually encroach upon the latter's property. It is not disputed that portions
of respondents' house on Lot No. 12-D encroach upon Lot No. 12-C. Geodetic Engineer
Jose Agres, Jr. testified on the encroachment of respondents' house on Lot No. 12-C,
which he surveyed.[29] In order to settle the rights of the parties relative to the
encroachment, We should determine whether respondents were builders in good faith.

Good faith is an intangible and abstract quality with no technical meaning or statutory
definition; and it encompasses, among other things, an honest belief, the absence of
malice and the absence of a design to defraud or to seek an unconscionable advantage.
An individual's personal good faith is a concept of his own mind and, therefore, may not
conclusively be determined by his protestations alone. It implies honesty of intention, and
freedom from knowledge of circumstances which ought to put the holder upon inquiry.
The essence of good faith lies in an honest belief in the validity of one's right, ignorance
of a superior claim, and absence of intention to overreach another. Applied to possession,
one is considered in good faith if he is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it.[30]

Good faith is always presumed, and upon him who alleges bad faith on the part of the
possessor rests the burden of proof.[31] It is a matter of record that respondents'
predecessor-in-interest constructed their residential building on Lot No. 12-D, adjacent to
Lot No. 12-C, in 1932.[32] Respondents' predecessor-in-interest owned the 1/3 portion of
Lot No. 12-C at the time the property was donated to them by Dalmacio Lozada in 1932.
The Deed of Donation executed by the late Dalmacio Lozada, dated March 9, 1932,
specifically provides that:

I hereby grant, cede and donate in favor of Catalina Lozada married to Sotero Natividad,
Isabel Lozada married to Isaac Simense and Salud Lozada married to Francisco Ramos,
all Filipinos, of legal age, the parcel of land known as Lot No. 12-C, in equal parts.[33]

The portions of Lot No. 12-D, particularly the overhang, covering 1 meter in width and
17 meters in length; the stairs; and the concrete structures are all within the 1/3 share
alloted to them by their donor Dalmacio Lozada and, hence, there was absence of a
showing that respondents acted in bad faith when they built portions of their house on Lot
No. 12-C.

Using the above parameters, we are convinced that respondents' predecessors-in-interest

acted in good faith when they built portions of their house on Lot 12-C. Respondents
being builders in good faith, we shall now discuss the respective rights of the parties
relative to the portions encroaching upon respondents' house.

Articles 448 and 546 of the New Civil Code provide:

Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall pay reasonable
rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and, in case of
disagreement, the court shall fix the terms thereof.

Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor
in good faith may retain the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same right
of retention, the person who has defeated him in the possession having the option of
refunding the amount of the expenses or of paying the increase in value which the thing
may have acquired by reason thereof.

In Spouses Del Campo v. Abesia,[34] this provision was applied to one whose house,

despite having been built at the time he was still co-owner, overlapped with the land of
another. In that case, this Court ruled:

The court a quo correctly held that Article 448 of the Civil Code cannot apply where a
co-owner builds, plants or sows on the land owned in common for then he did not build,
plant or sow upon the land that exclusively belongs to another but of which he is a co-
owner. The co-owner is not a third person under the circumstances, and the situation is
governed by the rules of co-ownership.

However, when, as in this case, the ownership is terminated by the partition and it
appears that the house of defendants overlaps or occupies a portion of 5 square meters of
the land pertaining to plaintiffs which the defendants obviously built in good faith, then
the provisions of Article 448 of the new Civil Code should apply. x x x[35]

In other words, when the co-ownership is terminated by a partition, and it appears that the
house of an erstwhile co-owner has encroached upon a portion pertaining to another co-
owner, but the encroachment was in good faith, then the provisions of Article 448 should
apply to determine the respective rights of the parties. In this case, the co-ownership was
terminated due to the transfer of the title of the whole property in favor of Joaquin
Limense.

Under the foregoing provision, petitioners have the right to appropriate said portion of the
house of respondents upon payment of indemnity to respondents, as provided for in
Article 546 of the Civil Code. Otherwise, petitioners may oblige respondents to pay the
price of the land occupied by their house. However, if the price asked for is considerably
much more than the value of the portion of the house of respondents built thereon, then
the latter cannot be obliged to buy the land. Respondents shall then pay the reasonable
rent to petitioners upon such terms and conditions that they may agree. In case of
disagreement, the trial court shall fix the terms thereof. Of course, respondents may
demolish or remove the said portion of their house, at their own expense, if they so
decide.[36]

The choice belongs to the owner of the land, a rule that accords with the principle of
accession that the accessory follows the principal and not the other way around. [37] 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 instead
remove it from the land.[38]

The obvious benefit to the builder under this article is that, instead of being outrightly
ejected from the land, he can compel the landowner to make a choice between two
options: (1) to appropriate the building by paying the indemnity required by law, or (2) to
sell the land to the builder.[39]

The raison d'etre for this provision has been enunciated, thus:

Where the builder, planter or sower has acted in good faith, a conflict of rights arises
between the owners, and it becomes necessary to protect the owner of the improvements
without causing injustice to the owner of the land. In view of the impracticability of
creating a state of forced co-ownership, the law has provided a just solution by giving the
owner of the land the option to acquire the improvements after payment of the proper
indemnity, or to oblige the builder or planter to pay for the land and the sower the proper
rent. He cannot refuse to exercise either option. It is the owner of the land who is
authorized to exercise the option, because his right is older, and because, by the principle
of accession, he is entitled to the ownership of the accessory thing. [40]

In accordance with Depra v. Dumlao,[41] this case must be remanded to the trial court to

determine matters necessary for the proper application of Article 448 in relation to Article
546. Such matters include the option that petitioners would take and the amount of
indemnity that they would pay, should they decide to appropriate the improvements on
the lots.

Anent the second issue, although it may seem that the portions encroaching upon
respondents' house can be considered a nuisance, because it hinders petitioners' use of
their property, it cannot simply be removed at respondents' expense, as prayed for by
petitioner. This is because respondents built the subject encroachment in good faith, and
the law affords them certain rights as discussed above.

WHEREFORE, the petition is DENIED, the Decision of the Court of Appeals dated

December 20, 2001 in CA-G.R. CV No. 33589 is AFFIRMED with the
following MODIFICATIONS:

1. No co-ownership exists over Lot No. 12-C, covered by TCT No. 96886, between
petitioners and respondents.

2. The case is REMANDED to the Regional Trial Court, Branch 15, Manila, for further
proceedings without further delay to determine the facts essential to the proper
application of Articles 448 and 546 of the Civil Code.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 170677, July 31, 2013 ]
VSD REALTY & DEVELOPMENT CORPORATION, PETITIONER, VS.
UNIWIDE SALES, INC. AND DOLORES BAELLO TEJAD RESPONDENTS.

RESOLUTION

PERALTA, J.:

This is a motion for reconsideration of the Decision [1] dated October 24, 2012, the
dispositive portion of which reads:

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals

dated May 30, 2005 and its Resolution dated December 6, 2005 in CA-G.R. CV No. 69824
are REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Caloocan City,
Branch 126, in Civil Case No. C-16933 is REINSTATED with MODIFICATION as follows:
(1) Paragraph 1 of the dispositive portion of the Decision dated October 2, 2000
of the Regional Trial Court of Caloocan City, Branch 126, in Civil Case No. C-16933, is
deleted;

(2) Respondent Dolores Baello and all persons/entities claiming title under her, including
respondent Uniwide Sales, Inc., are ordered to convey and to return the property or the
lot covered by TCT No. T-285312 to petitioner VSD Realty and Development Corporation
upon finality of this Decision;
(3)  Respondent Dolores Baello is ordered to pay just and reasonable compensation for
the occupancy and use of the land of petitioner VSD Realty and Development
Corporation in the amount of P58,333.30 per month from September 12, 1994 until the
Decision is final and executory, with legal interest of six percent (6%) per
annum reckoned from the filing of the Complaint on June 8, 1995 until the finality of this
Decision. Thereafter, respondent Uniwide Sales, Inc. is jointly and severally liable with
Dolores Baello for the payment to petitioner VSD Realty and Development Corporation
of monthly rental in the amount of P58,333.30 from the finality of this Decision until the
land is actually vacated, with twelve percent (12%) interest per annum.

(4) The award of attorney's fees is deleted. No costs.

SO ORDERED.[2]

We recapitulate the facts. On June 8, 1995, petitioner VSD Realty and Development
Corporation (VSD) filed a Complaint for annulment of title and recovery of possession of
property against respondents Uniwide Sales, Inc. (Uniwide) and Dolores Baello [3] with
the Regional Trial Court (RTC) of Caloocan City, Branch 126 (trial court). Petitioner
sought the nullification of Transfer Certificate of Title (TCT) No. (35788) 12754 in the
name of Dolores Baello and the recovery of possession of property that is being
occupied by Uniwide by virtue of a contract of lease with Dolores Baello.

Petitioner VSD alleged that it is the registered owner of a parcel of land in Caloocan City,
with an area of 2,835.30 square meters, more or less, and covered by TCT No. T-
285312[4] of the Register of Deeds of Caloocan City. VSD bought the said property from
Felisa D. Bonifacio, whose title thereto, TCT No. 265777, was registered by virtue of an
Order[5] dated October 8, 1992 authorizing the segregation of the same in Land
Registration Commission (LRC) Case No. C-3288. Petitioner also alleged that its right to
the subject property and the validity and correctness of the technical description and
location of the property are duly established in LRC Case No. C-3288. [6] Petitioner alleged
that its title, TCT No. 285312, is the correct, valid and legal document that covers the
subject property, since it is the result of land registration proceedings in accordance
with law.

Petitioner alleged that respondent Baello’s title, TCT No. 35788, covering the same
property, is spurious and can only be the result of falsification and illegal machinations,
and has no legal basis to establish any right over the subject property. Moreover, the
technical description of Baello’s title is so general that it is impossible to determine with
certainty the exact location of the property covered by it. Petitioner further alleged that
the technical description has no legal basis per the records of the Lands Management
Bureau and the Bureau of Lands. It added that Baello’s title described the property to be
Lot 3-A of subdivision plan Psd 706, but an examination of Psd 706 shows that there is
no Lot 3-A in plan Psd 706. Petitioner contends that in view of the foregoing reasons,
Baello has no legal basis to claim the subject property, and Baello’s title, TCT No. 35788,
is spurious and illegal and should be annulled. Thus, petitioner sought recovery of
possession of the subject property and the payment of rent from respondents.

Respondent Baello filed a Motion to Dismiss on the grounds that the complaint stated
no cause of action, and that the demand for annulment of title and/or conveyance,
whether grounded upon the commission of fraud or upon a constructive trust, has
prescribed, and is barred by laches. The trial court denied Baello’s motion to dismiss as
well as Baello's subsequent motion for reconsideration for lack of merit.

Thereafter, respondent Baello filed an Answer, alleging that the subject property was
bequeathed to her through a will by her adoptive mother, Jacoba Galauran. She alleged
that during the lifetime of Jacoba Galauran, the subject property was originally surveyed
on January 24-26, 19237 and, thereafter, on December 29, 1924. [8]  Baello alleged that
after Jacoba Galauran died in 1952, her will was duly approved by the probate court, the
Court of First Instance, Pasig, Rizal. Baello stated that she registered the subject
property in her name, and TCT No. (35788) 12754 [9] was issued in her favor on
September 6, 1954. In 1959, she had the subject property surveyed. On July 15, 1988,
she entered into a Contract of Lease [10] with respondent Uniwide, which erected in full
public view the building it presently occupies. Baello stated that she has been religiously
paying realty taxes for the subject property, [11] and that the Complaint should be
dismissed as she enjoys a superior right over the subject property because the
registration of her title predates the registration of petitioner’s title by at least 40 years.

The deposition of respondent Baello, which was taken on October 1, 1998 at the
Philippine Consular Office in San Francisco, California, United States of America,
affirmed the same facts stated in her Answer.
On October 2, 2000, the trial court rendered a Decision [12] in favor of petitioner. The trial
court held that the evidence for petitioner showed that it is the rightful owner of the
subject lot covered by TCT No. 285312 of the Register of Deeds of Caloocan City. The lot
was purchased by petitioner from Felisa D. Bonifacio, who became the owner thereof by
virtue of her petition for segregation of the subject property from Original Certificate of
Title (OCT) No. 994 of the Register of Deeds of Rizal in LRC Case No. C-3288. TCT No.
265777 was issued to Felisa Bonifacio pursuant to an Order dated October 8, 1992 by
the RTC of Caloocan City in LRC Case No. C-3288. The trial court stated that it cannot
question the Order (in LRC Case No. C-3288) issued by a co-equal court in this respect,
considering that Regional Trial Courts now have the authority to act not only on
applications for original registration, but also over all petitions filed after original
registration of title, with power to hear and determine all questions arising from such
applications or petitions.

Moreover, the trial court found that the technical description in respondent Baello’s
title is not the same as the technical description in petitioner’s title, and that a mere
reading of the technical description in petitioner’s title and that in Baello’s title would
show that they are not one and the same. The trial court averred that the technical
description of the subject lot in petitioner’s title is recorded with the Register of Deeds
of Caloocan City.[13]

The trial court stated that in the face of the documentary and testimonial evidence of
competent government witnesses who affirmed petitioner’s right to the technical
description, it was incumbent on respondent Baello to present credible evidence to
overcome the same, but she failed to do so. The trial court held that from the evidence
adduced, petitioner is the registered owner of TCT No. 285312, formerly TCT No.
265777 when Felisa D. Bonifacio was the registered owner, while respondent Baello is
the registered owner of a parcel of land covered by TCT No. (35788) 12754 and
respondent Uniwide is a mere lessee of the land. Baello is the holder of a title over a lot
entirely different and not in any way related to petitioner’s title and its technical
description. Petitioner proved its ownership and the identity of the subject property
that it sought to recover, which is an essential requisite in its action for annulment of
title and recovery of possession of property. The dispositive portion of the trial court's
Decision reads:
 WHEREFORE, in the light of the foregoing consideration, judgment is hereby
rendered ordering the following:

1. Declaring TCT No. 35788 [12754] to be null and void;

2. Defendant Baello and all persons/entity claiming title under her, including UNIWIDE,
to convey and to return the property to plaintiff VSD on the basis of the latter's full,
complete, valid and legal ownership;

3. Defendant Baello and UNIWIDE, jointly and severally, to pay a just and reasonable
compensation per month of P1,200,000.00 with legal interest for the occupancy and use
of plaintiff's land from September 12, 1994, until actually vacated by them;

4. Defendants, jointly and severally, to pay attorney's fees of P200,000.00.

SO ORDERED.[14]

Respondents appealed the trial court’s decision to the Court of Appeals, which rendered
a Decision dated May 30, 2005 in favor of respondents, and reversed and set aside the
Decision of the RTC and dismissed petitioner’s complaint.

The Court of Appeals stated that the main issue to be resolved was whether or not there
was a valid ground to annul respondent Baello's TCT No. (35788) 12754 to warrant the
reconveyance of the subject property to petitioner. The Court of Appeals stated that
based on existing jurisprudence, a certificate of title may be annulled or cancelled by the
court under the following grounds: (1) when the title is void because (a) it was procured
through fraud, (b) it was issued for a land already covered by a prior Torrens title, (c) it
covers land reserved for military, naval or civil public purposes, and (d) it covers a land
which has not been brought under the registration proceeding; (2) when the title is
replaced by one issued under a cadastral proceeding; and (3) when the condition for its
issuance has been violated by the registered owner. [15] The Court of Appeals averred
that while petitioner sought to annul respondent Baello's TCT No. 35788 on the ground
that the same was spurious, it failed to prove that Baello’s title was indeed spurious.

The appellate court also noted that the trial court’s decision never mentioned that
Baello's title was spurious. It further stated that any doubt or uncertainty as to the
technical description contained in a certificate of title is not a ground for annulment of
title. It held that since there was no legal basis for the annulment of Baello's TCT No.
35788, the trial court erred in declaring the said title null and void. It stated that well
settled is the rule that a Torrens title is generally conclusive evidence of ownership of
the land referred to therein, and a strong presumption exists that it was regularly issued
and valid.[16] Hence, respondent Baello's TCT No. 35788 enjoys the presumption of
validity.

Petitioner filed a petition for review on certiorari before this Court, raising the following
issues: (1) The Court of Appeals erred in ruling that the burden of proof did not shift to
respondents, notwithstanding the overwhelming evidence presented by petitioner; (2)
the Court of Appeals misconstrued petitioner's allegation that the “issuance of two titles
over the same piece of land has not been proved”; (3) the Court of Appeals erred in
treating petitioner's complaint as one only for annulment of title when petitioner also
sought reconveyance of the lot in question; (4) the Court of Appeals erred in ruling that
respondent Baello's title is not spurious; and (5) respondent Uniwide is not a lessee in
good faith.[17]

This Court discussed the pertinent issues raised with the main issues: whether or not
petitioner is entitled to recover possession of the subject property; and, whether or not
the title of respondent Baello may be annulled.

The established legal principle in actions for annulment or reconveyance of title is that a
party seeking it should establish not merely by a preponderance of evidence but by
clear and convincing evidence that the land sought to be reconveyed is his.[18] Article
434[19] of the Civil Code provides that to successfully maintain an action to recover the
ownership of a real property, the person who claims a better right to it must prove two
(2) things: first, the identity of the land claimed, and; second, his title thereto.[20] In an
action to recover, the property must be identified, and the plaintiff must rely on the
strength of his title and not on the weakness of the defendant's claim. [21]

The Court upheld the decision of the trial court that petitioner was able to establish
through documentary and testimonial evidence that the technical description of its
Torrens title, embodying the identity of the land claimed, covers the property that is
being occupied by respondent Uniwide by virtue of a lease contract with respondent
Baello, and that a comparison of the technical description of the land covered by the
title of petitioner and the technical description of the land covered by the title of Baello
shows that they are not the same. Hence, the Court granted the petition, and reversed
and set aside the Decision of the Court of Appeals and its Resolution denying
petitioners' motion for reconsideration; and the Decision of the RTC was reinstated with
modification. The dispositive portion of the Court's decision has been cited earlier.

Respondent Baello filed a motion for reconsideration [22] of the Court's decision on the
following grounds:

1) This honorable Court erred in not holding that petitioner VSD's Title (Transfer
Certificate of Title No. T-285312) is null and void and that the same cannot give rise to
any claim of ownership or possession over the subject property, having been derived
from the fake and non- existent Original Certificate of Title (OCT) No. 994 dated 19 April
1917, which purportedly covered the non-existent Maysilo estate.

2) This honorable Court erred, and deprived respondent Baello of due process, when it
made a finding that respondent Baello's title ([TCT] No. (35788) 12754) does not cover
the subject property considering that:

(a) Whether respondent Baello's title covers the subject property was never the
issue in this case. In praying for the annulment of respondent Baello's title, the basic
underlying premise and basis of such action is that the two titles, petitioner VSD's title
and respondent Baello's title, cover the same property. Even if VSD's action is
considered as one for reconveyance, the same hinges on the validity of the title of VSD .

(b) A determination of whether a certificate of title's technical description covers a

particular area of land is a matter involving technical expertise, which this Honorable
Court does not have. Such a determination can only be resolved through a survey
conducted by a licensed and reputable geodetic engineer.

(c) In any case, records of the case show that respondent Baello was able to establish
through positive evidence that her title covers the subject property.

3) This honorable Court erred in finding that petitioner VSD was able to prove that it has
a better right to the subject property by mere presentation of TCT No. T-28512
registered under its name and by showing that the technical descriptions contained in
TCT No. T-28512 correctly described the subject property. On the contrary, the evidence
presented by petitioner VSD is insufficient to overcome the presumptive title of
respondent Baello, who has been in possession of the subject property for more than
fifty years. Thus, this instant action for reconveyance of the subject property initiated by
petitioner VSD must fail.

4) This honorable Court erred in not holding that respondent Baello enjoys a superior
right to the disputed property because the registration of her title predated the
registration of petitioner VSD's title by at least 40 years.

5) This honorable Court erred in ordering respondent Baello to pay monthly

compensation to petitioner VSD considering that respondent Baello merely entered into
a contract of lease with Uniwide involving land that is covered by the technical
description of her title – which this Honorable Court has held to be valid. [23]

On February 13, 2013, respondent Baello, [24] by counsel, filed a Motion for Leave and
Time to File Judicial Affidavit of Mr. Felino Cortez and Supplemental Motion for
Reconsideration (Re: Decision dated 24 October 2012). In the said motion, respondent
Baello contended that subsequent to the filing of her motion for reconsideration, she
discovered new evidence, not available at the time of trial and of the filing of her motion
for reconsideration, which established that petitioner VSD's TCT No. T-285312 cannot be
traced to the legitimate and authentic TCT No. 994; hence, petitioner's title is null and
void. Baello's daughter, Bernadette Flores, requested Mr. Felino Cortez, retired and
former Director on Registration of the Land Registration Authority (LRA) to conduct an
investigation on petitioner VSD's TCT No. T-285312. Mr. Cortez examined the
documents with the LRA and the Register of Deeds of Caloocan, and he allegedly found
that the copy of Felisa Bonifacio's TCT No. 265777/T-1325 that was presented to the
Register of Deeds of Caloocan, for the purpose of the issuance of petitioner VSD's TCT
No. T-285312, was tampered to fraudulently reflect that it was derived from the
legitimate and authentic OCT No. 994 dated May 3, 1917. It is alleged that the original
microfilm copy retained by the LRA shows that the same TCT No. 265777/T-1325 did not
originate from the legitimate and authentic OCT No. 994 dated May 3, 1917, but was
instead derived from a certain OCT No. 994 dated April 19, 1912. In view of this
development, and in the interest of justice, and to protect respondent Baello's
constitutional right to property, and to avoid conflicting ruling of this Court, respondent
Baello begged the indulgence of this Court to grant her Motion for Leave and Time to
File Judicial Affidavit of Mr. Felino Cortez and Supplemental Motion for
Reconsideration, which motion was granted by the Court. [25]

On March 14, 2013, respondent Dolores Baello, by counsel, filed a Supplemental Motion
for reconsideration of the Decision dated October 24, 2012 [26] on the following grounds:

1) Felisa Bonifacio's [TCT] No. 265777/T-1325, from which petitioner [VSD]

derived its title, is null and void, having been derived from a fake and non-existent OCT
No. 994. This new evidence bolsters respondent Baello's position that this honorable
Court erred in not holding that petitioner VSD's title (TCT No. T-285312) is null and void
and cannot give rise to any claim of ownership or possession over the subject property;

2)  This honorable Court seriously erred in finding that respondent Baello's TCT No.
(35788) 12754 does not cover the subject property. A careful examination of
respondent Baello's TCT No. (35788) 12754 and petitioner VSD's TCT No. T-285312 will
show that the technical descriptions of the land referred to in those titles both refer to
the same parcel of land;

3) Aside from the manifest irregularities appearing on the face of Felisa Bonifacio's TCT
No. 265777/T-1325 (from which petitioner VSD derived its title), Felisa Bonifacio's TCT
No. 265777/T-1325 cannot be traced back to the legitimate and authentic OCT No. 994.
On the other hand, respondent Baello's TCT No. (35788) 12754 and its predecessor titles
can be traced back to the legitimate and authentic OCT No. 994 dated 3 May 1917. [27]

Petitioner VSD was required to file a comment on the motion for reconsideration. In its
Comment on the motion for reconsideration and the supplemental motion for
reconsideration, petitioner contends that a valid title can arise even from an allegedly
void title if a buyer in good faith, like petitioner, intervenes; that the alleged nullity of its
title cannot be raised for the first time on appeal; that additional evidence cannot be
presented for the first time on appeal, more so in a motion for reconsideration before
this Court; and that respondent Baello failed to prove that her title covers the subject
property, among others.

In the main, respondent Baello contends that the Court erred in not declaring petitioner
VSD's TCT No. T-285312 as null and void, considering that it is derived from Felisa
Bonifacio's TCT No. 265777/T-1325, which, in turn, is derived from the false and
fictitious OCT No. 994 dated April 19, 1917. The records of this case, however, show
that Felisa Bonifacio's TCT No. 265777/T-1325 and VSD's TCT No. T-285312 are derived
from the legitimate OCT No. 994 registered on May 3, 1917, which date has been held
as the correct date of registration of the said OCT in Manotok Realty, Inc. v. CLT Realty
Development Corporation.[28] In her Motion for Leave and Time to File Judicial Affidavit
of Mr. Felino Cortez and Supplemental Motion for Reconsideration, which the Court
granted, respondent Baello contends that she has additional evidence showing that the
copy of Felisa Bonifacio's TCT No. 265777/T-1325 that was presented to the Register of
Deeds of Caloocan, for the purpose of the issuance of petitioner VSD's TCT No. T-
285312, was tampered with to fraudulently reflect that it was derived from the
legitimate and authentic OCT No. 994 dated May 3, 1917. It is alleged that the original
microfilm copy retained by the LRA shows that Felisa Bonifacio's TCT No. 265777/T-1325
did not originate from the legitimate and authentic OCT No. 994 dated May 3, 1917, but
was instead derived from OCT No. 994 dated April 19, 1912.  Baello cited Manotok
Realty, Inc. v. CLT Realty Development Corporation, [29] which allowed the presentation of
evidence before a Special Division of the Court of Appeals to ascertain which of the
conflicting claims of title should prevail, even though the case had already been
decided; and the additional evidence was presented in connection with a motion for
reconsideration of this Court's decision.

The Court notes that in Manotok Realty, Inc. v. CLT Realty Development Corporation,
[30]
 the Court pronounced that there is only one OCT No. 994, which is correctly
registered on May 3, 1917, and that any title that traces its source to OCT No. 994 dated
April 17, 1917 is void, for such mother title is inexistent.

The Court recognizes the importance of protecting the country's Torrens system from
fake land titles and deeds. Considering that there is an issue on the validity of the title of
petitioner VSD, which title is alleged to be traceable to OCT No. 994 registered on April
19, 1917, which mother title was held to be inexistent in Manotok Realty, Inc. v. CLT
Realty Development Corporation,[31] in the interest of justice, and to safeguard the
correct titling of properties, a remand is proper to determine which of the parties
derived valid title from the legitimate OCT No. 994 registered on May 3, 1917. Since this
Court is not a trier of facts and not capacitated to appreciate evidence of the first
instance, the Court may remand this case to the Court of Appeals for further
proceedings, as it has been similarly tasked in Manotok Realty, Inc. v. CLT Realty
Development Corporation[32] on these bases:

Under Section 6 of Rule 46, which is applicable to original cases for certiorari, the
Court may, whenever necessary to resolve factual issues, delegate the reception of the
evidence on such issues to any of its members or to an appropriate court, agency or
office. The delegate need not be the body that rendered the assailed decision.

The Court of Appeals generally has the authority to review findings of fact. Its
conclusions as to findings of fact are generally accorded great respect by this Court. It is
a body that is fully capacitated and has a surfeit of experience in appreciating factual
matters, including documentary evidence.

In fact, the Court had actually resorted to referring a factual matter pending before it to
the Court of Appeals. In Republic v. Court of Appeals, this Court commissioned the
former Thirteenth Division of the Court of Appeals to hear and receive evidence on the
controversy, more particularly to determine “the actual area reclaimed by the Republic
Real Estate Corporation, and the areas of the Cultural Center Complex which are ‘open
spaces’ and/or ‘areas reserved for certain purposes,’ determining in the process the
validity of such postulates and the respective measurements of the areas referred to.”
The Court of Appeals therein received the evidence of the parties and rendered a
“Commissioner’s Report” shortly thereafter. Thus, resort to the Court of Appeals is not a
deviant procedure.

The provisions of Rule 32 should also be considered as governing the grant of authority
to the Court of Appeals to receive evidence in the present case. Under Section 2, Rule
32 of the Rules of Court, a court may, motu proprio, direct a reference to a
commissioner when a question of fact, other than upon the pleadings, arises upon
motion or otherwise, in any stage of a case, or for carrying a judgment or order into
effect. The order of reference can be limited exclusively to receive and report evidence
only, and the commissioner may likewise rule upon the admissibility of evidence. The
commissioner is likewise mandated to submit a report in writing to the court upon the
matters submitted to him by the order of reference. In Republic, the commissioner’s
report formed the basis of the final adjudication by the Court on the matter. The same
result can obtain herein.[33]
Accordingly, the Court hereby remands this case to the Court of Appeals. The Court of
Appeals is tasked to hear and receive evidence, conclude the proceedings and submit to
this Court a report on its findings and recommended conclusions within three (3)
months from finality of this Resolution.

In determining which of the conflicting claims of title should prevail, the Court of
Appeals is directed to establish, based on the evidence already on record and other
evidence that will be presented in the proceedings before it, the following matter:

Whether the title of Felisa D. Bonifacio, TCT No. 265777IT-1325, and the title of VSD, TCT
1) No. T-285312, can be traced back to the legitimate and authentic OCT No. 994 dated May 3, 1917;
Whether Eleuteria Rivera Bonifacio, who allegedly assigned the subject property to Felisa
2) D. Bonifacio, had the right and interest over the subject property, and whether Eleuteria Rivera
Bonifacio was entitled to assign her alleged rights and interests over the subject property, known
as Lot 23-A-4-B-2-A-3-A, Psd 706, covered by OCT No. 994, to Felisa D. Bonifacio;
Whether the copy ofFelisa Bonifacio's TCT No. 265777/T-1325 was tampered with to
3) fraudulently reflect that it was derived from the legitimate and authentic OCT No. 994 dated May
3, 1917;
Whether respondent Baello's TCT No. (35788) 12754 can be traced back to the legitimate
4) and authentic OCT No. 994 dated May 3, 1917;
Whether the technical description of the title of Baello covers the subject property; and
5)
Such other matters necessary and proper in determining which of the conflicting claims of
6) title should prevail.

WHEREFORE, this case is REMANDED to the Court of Appeals for further proceedings in
accordance with the two preceding paragraphs of this Resolution.

SO ORDERED.

FIRST DIVISION
[ G.R. NO. 168732, June 29, 2007 ]
 NATIONAL POWER CORPORATION, PETITIONER, VS. LUCMAN G.
IBRAHIM, OMAR G. MARUHOM, ELIAS G. MARUHOM, BUCAY G.
MARUHOM, FAROUK G. MARUHOM, HIDJARA G. MARUHOM,
ROCANIA G. MARUHOM, POTRISAM G. MARUHOM, LUMBA G.
MARUHOM, SINAB G. MARUHOM, ACMAD G. MARUHOM, SOLAYMAN
G. MARUHOM, MOHAMAD M. IBRAHIM, AND CAIRONESA M.
IBRAHIM, RESPONDENTS.

DECISION

AZCUNA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
annul the Decision[1] dated June 8, 2005 rendered by the Court of Appeals (CA) in C.A.-
G.R. CV No. 57792.

The facts are as follows:

On November 23, 1994, respondent Lucman G. Ibrahim, in his personal capacity and in
behalf of his co-heirs Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom,
Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Rocania G. Maruhom,
Potrisam G. Maruhom, Lumba G. Maruhom, Sinab G. Maruhom, Acmad G. Maruhom,
Solayman G. Maruhom, Mohamad M. Ibrahim and Caironesa M. Ibrahim, instituted an
action against petitioner National Power Corporation (NAPOCOR) for recovery of
possession of land and damages before the Regional Trial Court (RTC) of Lanao del Sur.

In their complaint, Ibrahim and his co-heirs claimed that they were owners of several
parcels of land described in Survey Plan FP (VII-5) 2278 consisting of 70,000 square
meters, divided into three (3) lots, i.e. Lots 1, 2, and 3 consisting of 31,894, 14,915, and
23,191 square meters each respectively. Sometime in 1978, NAPOCOR, through alleged
stealth and without respondents' knowledge and prior consent, took possession of the sub-
terrain area of their lands and constructed therein underground tunnels. The existence of
the tunnels was only discovered sometime in July 1992 by respondents and then later
confirmed on November 13, 1992 by NAPOCOR itself through a memorandum issued by
the latter's Acting Assistant Project Manager. The tunnels were apparently being used by
NAPOCOR in siphoning the water of Lake Lanao and in the operation of NAPOCOR's
Agus II, III, IV, V, VI, VII projects located in Saguiran, Lanao del Sur; Nangca and Balo-
i in Lanao del Norte; and Ditucalan and Fuentes in Iligan City.

On September 19, 1992, respondent Omar G. Maruhom requested the Marawi City Water
District for a permit to construct and/or install a motorized deep well in Lot 3 located in
Saduc, Marawi City but his request was turned down because the construction of the deep
well would cause danger to lives and property. On October 7, 1992, respondents
demanded that NAPOCOR pay damages and vacate the sub-terrain portion of their lands
but the latter refused to vacate much less pay damages. Respondents further averred that
the construction of the underground tunnels has endangered their lives and properties as
Marawi City lies in an area of local volcanic and tectonic activity. Further, these illegally
constructed tunnels caused them sleepless nights, serious anxiety and shock thereby
entitling them to recover moral damages and that by way of example for the public good,
NAPOCOR must be held liable for exemplary damages.

Disputing respondents' claim, NAPOCOR filed an answer with counterclaim denying the
material allegations of the complaint and interposing affirmative and special defenses,
namely that (1) there is a failure to state a cause of action since respondents seek
possession of the sub-terrain portion when they were never in possession of the same, (2)
respondents have no cause of action because they failed to show proof that they were the
owners of the property, and (3) the tunnels are a government project for the benefit of all
and all private lands are subject to such easement as may be necessary for the same. [2]

On August 7, 1996, the RTC rendered a Decision, the decretal portion of which reads as
follows:
WHEREFORE, judgment is hereby rendered:

1. Denying plaintiffs' [private respondents'] prayer for defendant [petitioner] National

Power Corporation to dismantle the underground tunnels constructed between the
lands of plaintiffs in Lots 1, 2, and 3 of Survey Plan FP (VII-5) 2278;

2. Ordering defendant to pay to plaintiffs the fair market value of said 70,000 square
meters of land covering Lots 1, 2, and 3 as described in Survey Plan FP (VII-5)
2278 less the area of 21,995 square meters at P1,000.00 per square meter or a total
of P48,005,000.00 for the remaining unpaid portion of 48,005 square meters; with
6% interest per annum from the filing of this case until paid;

3. Ordering defendant to pay plaintiffs a reasonable monthly rental of P0.68 per

square meter of the total area of 48,005 square meters effective from its occupancy
of the foregoing area in 1978 or a total of P7,050,974.40.

4. Ordering defendant to pay plaintiffs the sum of P200,000.00 as moral damages;

and

5. Ordering defendant to pay the further sum of P200,000.00 as attorney's fees and
the costs.

SO ORDERED.[3]
On August 15, 1996, Ibrahim, joined by his co-heirs, filed an Urgent Motion for
Execution of Judgment Pending Appeal. On the other hand, NAPOCOR filed a Notice of
Appeal by registered mail on August 19, 1996. Thereafter, NAPOCOR filed a vigorous
opposition to the motion for execution of judgment pending appeal with a motion for
reconsideration of the Decision which it had received on August 9, 1996.

On August 26, 1996, NAPOCOR filed a Manifestation and Motion withdrawing its
Notice of Appeal purposely to give way to the hearing of its motion for reconsideration.

On August 28, 1996, the RTC issued an Order granting execution pending appeal and
denying NAPOCOR's motion for reconsideration, which Order was received by
NAPOCOR on September 6, 1996.

On September 9, 1996, NAPOCOR filed its Notice of Appeal by registered mail which
was denied by the RTC on the ground of having been filed out of time. Meanwhile, the
Decision of the RTC was executed pending appeal and funds of NAPOCOR were
garnished by respondents Ibrahim and his co-heirs.

On October 4, 1996, a Petition for Relief from Judgment was filed by respondents Omar
G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G.
Maruhom, Hidjara G. Maruhom, Potrisam G. Maruhom and Lumba G. Maruhom
asserting as follows:
1) they did not file a motion to reconsider or appeal the decision within the reglementary
period of fifteen (15) days from receipt of judgment because they believed in good faith
that the decision was for damages and rentals and attorney's fees only as prayed for in the
complaint:

2) it was only on August 26, 1996 that they learned that the amounts awarded to the
plaintiffs represented not only rentals, damages and attorney's fees but the greatest
portion of which was payment of just compensation which in effect would make the
defendant NPC the owner of the parcels of land involved in the case;

3) when they learned of the nature of the judgment, the period of appeal has already
expired;

4) they were prevented by fraud, mistake, accident, or excusable negligence from taking
legal steps to protect and preserve their rights over their parcels of land in so far as the
part of the decision decreeing just compensation for petitioners' properties;

5) they would never have agreed to the alienation of their property in favor of anybody,
considering the fact that the parcels of land involved in this case were among the valuable
properties they inherited from their dear father and they would rather see their land
crumble to dust than sell it to anybody.[4]
The RTC granted the petition and rendered a modified judgment dated September 8,
1997, thus:
WHEREFORE, a modified judgment is hereby rendered:

1) Reducing the judgment award of plaintiffs for the fair market value of P48,005,000.00
by 9,526,000.00 or for a difference by P38,479,000.00 and by the further sum of
P33,603,500.00 subject of the execution pending appeal leaving a difference of
4,878,500.00 which may be the subject of execution upon the finality of this modified
judgment with 6% interest per annum from the filing of the case until paid.

2) Awarding the sum of P1,476,911.00 to herein petitioners Omar G. Maruhom, Elias G.

Maruhom, Bucay G. Maruhom, Mahmod G. Maruhom, Farouk G. Maruhom, Hidjara G.
Maruhom, Portrisam G. Maruhom and Lumba G. Maruhom as reasonable rental
deductible from the awarded sum of P7,050,974.40 pertaining to plaintiffs.

3) Ordering defendant embodied in the August 7, 1996 decision to pay plaintiffs the sum
of P200,000.00 as moral damages; and further sum of P200,000.00 as attorney's fees and
costs.

SO ORDERED.[5]
Subsequently, both respondent Ibrahim and NAPOCOR appealed to the CA.

In the Decision dated June 8, 2005, the CA set aside the modified judgment and
reinstated the original Decision dated August 7, 1996, amending it further by deleting the
award of moral damages and reducing the amount of rentals and attorney's fees, thus:
WHEREFORE, premises considered, herein Appeals are hereby partially GRANTED,
the Modified Judgment is ordered SET ASIDE and rendered of no force and effect and
the original Decision of the court a quo dated 7 August 1996 is hereby RESTORED with
the MODIFICATION that the award of moral damages is DELETED and the amounts
of rentals and attorney's fees are REDUCED to P6,888,757.40 and P50,000.00,
respectively.

In this connection, the Clerk of Court of RTC Lanao del Sur is hereby directed to reassess
and determine the additional filing fee that should be paid by Plaintiff-Appellant
IBRAHIM taking into consideration the total amount of damages sought in the
complaint vis-á-vis the actual amount of damages awarded by this Court. Such additional
filing fee shall constitute a lien on the judgment.

SO ORDERED.[6]
Hence, this petition ascribing the following errors to the CA:
(a) RESPONDENTS WERE NOT DENIED THE BENEFICIAL USE OF THEIR
SUBJECT PROPERTIES TO ENTITLE THEM TO JUST COMPENSATION BY WAY
OF DAMAGES;
(b) ASSUMING THAT RESPONDENTS ARE ENTITLED TO JUST
COMPENSATION BY WAY OF DAMAGES, NO EVIDENCE WAS PRESENTED
ANENT THE VALUATION OF RESPONDENTS' PROPERTY AT THE TIME OF ITS
TAKING IN THE YEAR 1978 TO JUSTIFY THE AWARD OF ONE THOUSAND
SQUARE METERS (P1000.00/SQ. M.) EVEN AS PAYMENT OF BACK RENTALS
IS ITSELF IMPROPER.
This case revolves around the propriety of paying just compensation to respondents, and,
by extension, the basis for computing the same. The threshold issue of whether
respondents are entitled to just compensation hinges upon who owns the sub-terrain area
occupied by petitioner.

Petitioner maintains that the sub-terrain portion where the underground tunnels were
constructed does not belong to respondents because, even conceding the fact that
respondents owned the property, their right to the subsoil of the same does not extend
beyond what is necessary to enable them to obtain all the utility and convenience that
such property can normally give. In any case, petitioner asserts that respondents were still
able to use the subject property even with the existence of the tunnels, citing as an
example the fact that one of the respondents, Omar G. Maruhom, had established his
residence on a part of the property. Petitioner concludes that the underground tunnels 115
meters below respondents' property could not have caused damage or prejudice to
respondents and their claim to this effect was, therefore, purely conjectural and
speculative.[7]

The contention lacks merit.

Generally, in an appeal by certiorari under Rule 45 of the Rules of Court, the Court does
not pass upon questions of fact. Absent any showing that the trial and appellate courts
gravely abused their discretion, the Court will not examine the evidence introduced by
the parties below to determine if they correctly assessed and evaluated the evidence on
record.[8] The jurisdiction of the Court in cases brought to it from the CA is limited to
reviewing and revising the errors of law imputed to it, its findings of fact being as a rule
conclusive and binding on the Court.

In the present case, petitioner failed to point to any evidence demonstrating grave abuse
of discretion on the part of the CA or to any other circumstances which would call for the
application of the exceptions to the above rule. Consequently, the CA's findings which
upheld those of the trial court that respondents owned and possessed the property and that
its substrata was possessed by petitioner since 1978 for the underground tunnels, cannot
be disturbed. Moreover, the Court sustains the finding of the lower courts that the sub-
terrain portion of the property similarly belongs to respondents. This conclusion is drawn
from Article 437 of the Civil Code which provides:
ART. 437. The owner of a parcel of land is the owner of its surface and of everything
under it, and he can construct thereon any works or make any plantations and excavations
which he may deem proper, without detriment to servitudes and subject to special laws
and ordinances. He cannot complain of the reasonable requirements of aerial navigation.
Thus, the ownership of land extends to the surface as well as to the subsoil under it.
In Republic of the Philippines v. Court of Appeals,[9] this principle was applied to show
that rights over lands are indivisible and, consequently, require a definitive and
categorical classification, thus:
The Court of Appeals justified this by saying there is "no conflict of interest" between the
owners of the surface rights and the owners of the sub-surface rights. This is rather
strange doctrine, for it is a well-known principle that the owner of a piece of land has
rights not only to its surface but also to everything underneath and the airspace above it
up to a reasonable height. Under the aforesaid ruling, the land is classified as mineral
underneath and agricultural on the surface, subject to separate claims of title. This is also
difficult to understand, especially in its practical application.

Under the theory of the respondent court, the surface owner will be planting on the land
while the mining locator will be boring tunnels underneath. The farmer cannot dig a well
because he may interfere with the mining operations below and the miner cannot blast a
tunnel lest he destroy the crops above. How deep can the farmer, and how high can the
miner go without encroaching on each others rights? Where is the dividing line between
the surface and the sub-surface rights?

The Court feels that the rights over the land are indivisible and that the land itself cannot
be half agricultural and half mineral. The classification must be categorical; the land must
be either completely mineral or completely agricultural.
Registered landowners may even be ousted of ownership and possession of their
properties in the event the latter are reclassified as mineral lands because real properties
are characteristically indivisible. For the loss sustained by such owners, they are entitled
to just compensation under the Mining Laws or in appropriate expropriation proceedings.
[10]

Moreover, petitioner's argument that the landowners' right extends to the sub-soil insofar
as necessary for their practical interests serves only to further weaken its case. The theory
would limit the right to the sub-soil upon the economic utility which such area offers to
the surface owners. Presumably, the landowners' right extends to such height or depth
where it is possible for them to obtain some benefit or enjoyment, and it is extinguished
beyond such limit as there would be no more interest protected by law.[11]

In this regard, the trial court found that respondents could have dug upon their property
motorized deep wells but were prevented from doing so by the authorities precisely
because of the construction and existence of the tunnels underneath the surface of their
property. Respondents, therefore, still had a legal interest in the sub-terrain portion
insofar as they could have excavated the same for the construction of the deep well. The
fact that they could not was appreciated by the RTC as proof that the tunnels interfered
with respondents' enjoyment of their property and deprived them of its full use and
enjoyment, thus:
Has it deprived the plaintiffs of the use of their lands when from the evidence they have
already existing residential houses over said tunnels and it was not shown that the tunnels
either destroyed said houses or disturb[ed] the possession thereof by plaintiffs? From the
evidence, an affirmative answer seems to be in order. The plaintiffs and [their] co-heirs
discovered [these] big underground tunnels in 1992. This was confirmed by the defendant
on November 13, 1992 by the Acting Assistant Project Manager, Agus 1 Hydro Electric
Project (Exh. K). On September 16, 1992, Atty. Omar Maruhom (co-heir) requested the
Marawi City Water District for permit to construct a motorized deep well over Lot 3 for
his residential house (Exh. Q). He was refused the permit "because the construction of the
deep well as (sic) the parcels of land will cause danger to lives and property." He was
informed that "beneath your lands are constructed the Napocor underground tunnel in
connection with Agua Hydroelectric plant" (Exh. Q-2). There in fact exists ample
evidence that this construction of the tunnel without the prior consent of plaintiffs
beneath the latter's property endangered the lives and properties of said plaintiffs. It has
been proved indubitably that Marawi City lies in an area of local volcanic and tectonic
activity. Lake Lanao has been formed by extensive earth movements and is considered to
be a drowned basin of volcano/tectonic origin. In Marawi City, there are a number of
former volcanoes and an extensive amount of faulting. Some of these faults are still
moving. (Feasibility Report on Marawi City Water District by Kampsa-Kruger,
Consulting Engineers, Architects and Economists, Exh. R). Moreover, it has been shown
that the underground tunnels [have] deprived the plaintiffs of the lawful use of the land
and considerably reduced its value. On March 6, 1995, plaintiffs applied for a two-
million peso loan with the Amanah Islamic Bank for the expansion of the operation of the
Ameer Construction and Integrated Services to be secured by said land (Exh. N), but the
application was disapproved by the bank in its letter of April 25, 1995 (Exh. O) stating
that:
"Apropos to this, we regret to inform you that we cannot consider your loan application
due to the following reasons, to wit:

That per my actual ocular inspection and verification, subject property offered as
collateral has an existing underground tunnel by the NPC for the Agus I Project, which
tunnel is traversing underneath your property, hence, an encumbrance. As a matter of
bank policy, property with an existing encumbrance cannot be considered neither
accepted as collateral for a loan."
All the foregoing evidence and findings convince this Court that preponderantly plaintiffs
have established the condemnation of their land covering an area of 48,005 sq. meters
located at Saduc, Marawi City by the defendant National Power Corporation without
even the benefit of expropriation proceedings or the payment of any just compensation
and/or reasonable monthly rental since 1978.[12]
In the past, the Court has held that if the government takes property without expropriation
and devotes the property to public use, after many years, the property owner may demand
payment of just compensation in the event restoration of possession is neither convenient
nor feasible.[13] This is in accordance with the principle that persons shall not be deprived
of their property except by competent authority and for public use and always upon
payment of just compensation.[14]

Petitioner contends that the underground tunnels in this case constitute an easement upon
the property of respondents which does not involve any loss of title or possession. The
manner in which the easement was created by petitioner, however, violates the due
process rights of respondents as it was without notice and indemnity to them and did not
go through proper expropriation proceedings. Petitioner could have, at any time, validly
exercised the power of eminent domain to acquire the easement over respondents'
property as this power encompasses not only the taking or appropriation of title to and
possession of the expropriated property but likewise covers even the imposition of a mere
burden upon the owner of the condemned property.[15] Significantly, though, landowners
cannot be deprived of their right over their land until expropriation proceedings are
instituted in court. The court must then see to it that the taking is for public use, that there
is payment of just compensation and that there is due process of law. [16]

In disregarding this procedure and failing to recognize respondents' ownership of the sub-
terrain portion, petitioner took a risk and exposed itself to greater liability with the
passage of time. It must be emphasized that the acquisition of the easement is not without
expense. The underground tunnels impose limitations on respondents' use of the property
for an indefinite period and deprive them of its ordinary use. Based upon the foregoing,
respondents are clearly entitled to the payment of just compensation.[17] Notwithstanding
the fact that petitioner only occupies the sub-terrain portion, it is liable to pay not merely
an easement fee but rather the full compensation for land. This is so because in this case,
the nature of the easement practically deprives the owners of its normal beneficial use.
Respondents, as the owners of the property thus expropriated, are entitled to a just
compensation which should be neither more nor less, whenever it is possible to make the
assessment, than the money equivalent of said property.[18]

The entitlement of respondents to just compensation having been settled, the issue now is
on the manner of computing the same. In this regard, petitioner claims that the basis for
the computation of the just compensation should be the value of the property at the time it
was taken in 1978. Petitioner also impugns the reliance made by the CA upon National
Power Corporation v. Court of Appeals and Macapanton Mangondato[19] as the basis for
computing the amount of just compensation in this action. The CA found that "the award
of damages is not excessive because the P1000 per square meter as the fair market value
was sustained in a case involving a lot adjoining the property in question which case
involved an expropriation by [petitioner] of portion of Lot 1 of the subdivision plan
(LRC) PSD 116159 which is adjacent to Lots 2 and 3 of the same subdivision plan which
is the subject of the instant controversy."[20]

Just compensation has been understood to be the just and complete equivalent of the
loss[21] and is ordinarily determined by referring to the value of the land and its character
at the time it was taken by the expropriating authority.[22] There is a "taking" in this sense
when the owners are actually deprived or dispossessed of their property, where there is a
practical destruction or a material impairment of the value of their property, or when they
are deprived of the ordinary use thereof. There is a "taking" in this context when the
expropriator enters private property not only for a momentary period but for more
permanent duration, for the purpose of devoting the property to a public use in such a
manner as to oust the owner and deprive him of all beneficial enjoyment thereof.
[23]
 Moreover, "taking" of the property for purposes of eminent domain entails that the
entry into the property must be under warrant or color of legal authority.[24]

Under the factual backdrop of this case, the last element of taking mentioned, i.e., that the
entry into the property is under warrant or color of legal authority, is patently lacking.
Petitioner justified its nonpayment of the indemnity due respondents upon its mistaken
belief that the property formed part of the public dominion.

This situation is on all fours with that in the Mangondato case. NAPOCOR in that case
took the property of therein respondents in 1979, using it to build its Aqua I
Hydroelectric Plant Project, without paying any compensation, allegedly under the
mistaken belief that it was public land. It was only in 1990, after more than a decade of
beneficial use, that NAPOCOR recognized therein respondents' ownership and negotiated
for the voluntary purchase of the property.

In Mangondato, this Court held:

The First Issue: Date of Taking or Date of Suit?

The general rule in determining "just compensation" in eminent domain is the value
of the property as of the date of the filing of the complaint, as follows:

"Sec. 4. Order of Condemnation. When such a motion is overruled or when any party
fails to defend as required by this rule, the court may enter an order of condemnation
declaring that the plaintiff has a lawful right to take the property sought to be condemned,
for the public use or purpose described in the complaint, upon the payment of just
compensation to be determined as of the date of the filing of the complaint. x x x" (Italics
supplied).

Normally, the time of the taking coincides with the filing of the complaint for
expropriation. Hence, many ruling of this Court have equated just compensation with the
value of the property as of the time of filing of the complaint consistent with the above
provision of the Rules. So too, where the institution of the action precedes entry to the
property, the just compensation is to be ascertained as of the time of filing of the
complaint.

The general rule, however, admits of an exception: where this Court fixed the value
of the property as of the date it was taken and not the date of the commencement of
the expropriation proceedings.

In the old case of Provincial Government of Rizal vs. Caro de Araullo, the Court ruled
that "x x x the owners of the land have no right to recover damages for this unearned
increment resulting from the construction of the public improvement (lengthening of Taft
Avenue from Manila to Pasay) from which the land was taken. To permit them to do so
would be to allow them to recover more than the value of the land at the time it was
taken, which is the true measure of the damages, or just compensation, and would
discourage the construction of important public improvements."

In subsequent cases, the Court, following the above doctrine, invariably held that
the time of taking is the critical date in determining lawful or just
compensation. Justifying this stance, Mr. Justice (later Chief Justice) Enrique Fernando,
speaking for the Court in Municipality of La Carlota vs. The Spouses Felicidad Baltazar
and Vicente Gan, said, "x x x the owner as is the constitutional intent, is paid what he is
entitled to according to the value of the property so devoted to public use as of the date of
taking. From that time, he had been deprived thereof. He had no choice but to submit. He
is not, however, to be despoiled of such a right. No less than the fundamental law
guarantees just compensation. It would be injustice to him certainly if from such a period,
he could not recover the value of what was lost. There could be on the other hand,
injustice to the expropriator if by a delay in the collection, the increment in price
would accrue to the owner. The doctrine to which this Court has been committed is
intended precisely to avoid either contingency fraught with unfairness."

Simply stated, the exception finds the application where the owner would be given
undue incremental advantages arising from the use to which the government
devotes the property expropriated -- as for instance, the extension of a main
thoroughfare as was in the case in Caro de Araullo. In the instant case, however, it is
difficult to conceive of how there could have been an extra-ordinary increase in the
value of the owner's land arising from the expropriation, as indeed the records do
not show any evidence that the valuation of P1,000.00 reached in 1992 was due to
increments directly caused by petitioner's use of the land. Since the petitioner is
claiming an exception to Rule 67, Section 4, it has the burden in proving its claim that its
occupancy and use -- not ordinary inflation and increase in land values -- was the direct
cause of the increase in valuation from 1978 to 1992.

Side Issue: When is there "Taking" of Property?

But there is yet another cogent reason why this petition should be denied and why the
respondent Court should be sustained. An examination of the undisputed factual
environment would show that the "taking" was not really made in 1978.

This Court has defined the elements of "taking" as the main ingredient in the exercise of
power of eminent domain, in the following words:

"A number of circumstances must be present in "taking" of property for purposes of

eminent domain: (1) the expropriator must enter a private property; (2) the entrance into
private property must be for more than a momentary period; (3) the entry into the
property should be under warrant or color of legal authority; (4) the property must be
devoted to a public use or otherwise informally appropriated or injuriously affected; and
(5) the utilization of the property for public use must be in such a way to oust the owner
and deprive him of all beneficial enjoyment of the property."(Italics supplied)

In this case, the petitioner's entrance in 1978 was without intent to expropriate or was not
made under warrant or color of legal authority, for it believed the property was public
land covered by Proclamation No. 1354. When the private respondent raised his claim of
ownership sometime in 1979, the petitioner flatly refused the claim for compensation,
nakedly insisted that the property was public land and wrongly justified its possession by
alleging it had already paid "financial assistance" to Marawi City in exchange for the
rights over the property. Only in 1990, after more than a decade of beneficial use, did the
petitioner recognize private respondent's ownership and negotiate for the voluntary
purchase of the property. A Deed of Sale with provisional payment and subject to
negotiations for the correct price was then executed. Clearly, this is not the intent nor the
expropriation contemplated by law. This is a simple attempt at a voluntary purchase and
sale. Obviously, the petitioner neglected and/or refused to exercise the power of eminent
domain.

Only in 1992, after the private respondent sued to recover possession and petitioner filed
its Complaint to expropriate, did petitioner manifest its intention to exercise the power of
eminent domain. Thus the respondent Court correctly held:

"If We decree that the fair market value of the land be determined as of 1978, then
We would be sanctioning a deceptive scheme whereby NAPOCOR, for any reason
other than for eminent domain would occupy another's property and when later
pressed for payment, first negotiate for a low price and then conveniently
expropriate the property when the land owner refuses to accept its offer claiming
that the taking of the property for the purpose of the eminent domain should be
reckoned as of the date when it started to occupy the property and that the value of
the property should be computed as of the date of the taking despite the increase in
the meantime in the value of the property."
In Noble vs. City of Manila, the City entered into a lease-purchase agreement of a
building constructed by the petitioner's predecessor-in-interest in accordance with the
specifications of the former. The Court held that being bound by the said contract, the
City could not expropriate the building. Expropriation could be resorted to "only when it
is made necessary by the opposition of the owner to the sale or by the lack of any
agreement as to the price." Said the Court:

"The contract, therefore, in so far as it refers to the purchase of the building, as we have
interpreted it, is in force, not having been revoked by the parties or by judicial decision.
This being the case, the city being bound to buy the building at an agreed price, under a
valid and subsisting contract, and the plaintiff being agreeable to its sale, the
expropriation thereof, as sought by the defendant, is baseless. Expropriation lies only
when it is made necessary by the opposition of the owner to the sale or by the lack of any
agreement as to the price. There being in the present case a valid and subsisting contract,
between the owner of the building and the city, for the purchase thereof at an agreed
price, there is no reason for the expropriation." (Italics supplied)

In the instant case, petitioner effectively repudiated the deed of sale it entered into with
the private respondent when it passed Resolution No. 92-121 on May 25, 1992
authorizing its president to negotiate, inter alia, that payment "shall be effective only after
Agus I HE project has been placed in operation." It was only then that petitioner's intent
to expropriate became manifest as private respondent disagreed and, barely a month, filed
suit.[25]
In the present case, to allow petitioner to use the date it constructed the tunnels as the date
of valuation would be grossly unfair. First, it did not enter the land under warrant or color
of legal authority or with intent to expropriate the same. In fact, it did not bother to notify
the owners and wrongly assumed it had the right to dig those tunnels under their property.
Secondly, the "improvements" introduced by petitioner, namely, the tunnels, in no way
contributed to an increase in the value of the land. The trial court, therefore, as affirmed
by the CA, rightly computed the valuation of the property as of 1992, when respondents
discovered the construction of the huge underground tunnels beneath their lands and
petitioner confirmed the same and started negotiations for their purchase but no
agreement could be reached.[26]

As to the amount of the valuation, the RTC and the CA both used as basis the value of the
adjacent property, Lot 1 (the property involved herein being Lots 2 and 3 of the same
subdivision plan), which was valued at P1,000 per sq. meter as of 1990, as sustained by
this Court in Mangondato, thus:
The Second Issue: Valuation

We now come to the issue of valuation.

The fair market value as held by the respondent Court, is the amount of P1,000.00 per
square meter. In an expropriation case where the principal issue is the determination of
just compensation, as is the case here, a trial before Commissioners is indispensable to
allow the parties to present evidence on the issue of just compensation. Inasmuch as the
determination of just compensation in eminent domain cases is a judicial function and
factual findings of the Court of Appeals are conclusive on the parties and reviewable only
when the case falls within the recognized exceptions, which is not the situation obtaining
in this petition, we see no reason to disturb the factual findings as to valuation of the
subject property. As can be gleaned from the records, the court-and-the-parties-appointed
commissioners did not abuse their authority in evaluating the evidence submitted to them
nor misappreciate the clear preponderance of evidence. The amount fixed and agreed to
by the respondent appellate Court is not grossly exorbitant. To quote:

"Commissioner Ali comes from the Office of the Register of Deeds who may well be
considered an expert, with a general knowledge of the appraisal of real estate and the
prevailing prices of land in the vicinity of the land in question so that his opinion on the
valuation of the property cannot be lightly brushed aside.

"The prevailing market value of the land is only one of the determinants used by the
commissioners' report the other being as herein shown:

xxx

xxx

"Commissioner Doromal's report, recommending P300.00 per square meter, differs from
the 2 commissioners only because his report was based on the valuation as of 1978 by the
City Appraisal Committee as clarified by the latter's chairman in response to
NAPOCOR's general counsel's query."

In sum, we agree with the Court of Appeals that petitioner has failed to show why it
should be granted an exemption from the general rule in determining just compensation
provided under Section 4 of Rule 67. On the contrary, private respondent has convinced
us that, indeed, such general rule should in fact be observed in this case. [27]
Petitioner has not shown any error on the part of the CA in reaching such a valuation.
Furthermore, these are factual matters that are not within the ambit of the present review.

WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals in

C.A.-G.R. CV No. 57792 dated June 8, 2005 is AFFIRMED.

No costs.

SO ORDERED.
 [ G.R. No. 30240, August 23, 1929 ]
AQUILINA TACAS ET AL., PLAINTIFFS AND APPELLEES, VS.
EVARISTO TOBON, DEFENDANT AND APPELLANT.

DECISION

VILLAMOR, J.:

This is an action to recover from the defendant the ownership and possession of
three parcels of land described in the sketch attached to the complaint, together with
the fruits collected by him during the time he was in possession of said land that is, since
January, 1912, it being alleged that the defendant unlawfully took said parcels upon the
death of Francisco Dumadag, predecessor in interest of the plaintiffs; and that he
remained in possession, enjoying the fruits to the value of P700 annually.

In his answer the defendant alleges that he is the owner of said lands, having-purchased
them from one Exequiel or Gil Tacas, deceased, about fifteen years before the amended
answer dated December 5, 1924.

At the trial the parties adduced their respective evidence, and thereafter the trial court
declared it sufficiently proven by a preponderance of the evidence that the three parcels
of land under discussion, were parts of an estate belonging to Francisco Dumadag, whose
title is a possessory information recorded in the registry of deeds of Ilocos Sur, having
inherited them from his parents (Exhibit H) ; that during his lifetime, said Francisco
Dumadag w,as in possession of the land as owner for many years, until his death on
November 17, 1911, enjoying its fruits, consisting in rice, corn, tobacco, and vegetables;
that said Francisco Dumadag had filed a declaration for tax purposes in his own name;
that the land tax had been paid by Francisco Dumadag during the years 1908 and 1911,
and in his name in the years from 1912 to 1914 (Exhibits I to P); that in January, 1912,
during the season for planting tobacco immediately following the death of Francisco
Dumadag, Evaristo Tobon took possession of the three parcels of land in question
planting them with tobacco; that from 1912 up to the present, the defendant Evaristo
Tobon has been collecting the fruits therefrom, consisting of 300 sheaves of rice and
300 manos of first, second, and third-class tobacco each year, at the approximate rate of
P0.30 for each sheaf of rice, and P3 for each mano of first-class tobacco, P2.50 for
second-class tobacco, and P2 for third-class tobacco. There is no evidence of record
regarding the amount and price of the corn collected by the defendant. And by virtue
thereof, the trial court declared the plaintiffs to be the absolute owners of the three parcels
of land in litigation, and ordered the defendant Evaristo Tobon to deliver said parcels of
land to the plaintiffs, together with the fruits collected each year since 1912 until the
complete termination of this case, and in default thereof, to pay to said plaintiffs the sum
of P1,040, which is the total value of the rice and tobacco from 1912 to 1927, at P0.30
per sheaf of rice, and P2 per mano of tobacco. From this judgment, the defendant duly
appealed in time, prosecuting his appeal to this court by the proper bill of exceptions.

The appellant has made several assignments of error. In the first place, he contends that
the identity of the pieces of land in litigation has not been established. We find no merit
in this contention. It appears from the allegations of the complaint and the answer, that
the case refers to the lands held by defendant and alleged by the latter to have been
purchased from one Exequiel or Gil Tacas, brother to the plaintiff Aquilina Tacas.

With regard to the probatory value of the documents presented by the parties, to wit,
Exhibit H of the plaintiffs, and Exhibits 1 and 2 of the defendant, it is well to note that
Exhibit H is a possessory information record duly approved on March 22, 1895 and
inscribed in the registry of deeds of Ilocos Sur on November 4, 1917 in favor of
Francisco Dumadag, covering some land situated in the sitio of Sisin, municipality of
Magsingal, Ilocos Sur.

On the other hand, Exhibit 1 of the defendant is an instrument executed on January 17,
1905 whereby one Exequiel or Gil Tacas sold three parcels of farm land in the place
called Sisin to Evaristo Tobon for P300 conan. And Exhibit 2 of the same defendant is
another instrument executed on May 15, 1909 from which it appears that Francisco
Dumadag and his brother-in-law, Gil Tacas, agreed that the three parcels of land
belonging to the latter, together with the two parcels of the former in Anteng, barrio of
Carisquis, would be put in Dumadag's name in the possessory proceedings.

The court below made a detailed analysis of the signature of Ramon G. Tolentino who, as
justice of the peace, signed the ratification of the document Exhibit 1, comparing it with
the unquestioned signatures of the same person, appearing in Exhibit 2, and concludes
that the instrument Exhibit 1 is false.

It is unnecessary to descend to the discussion of the characteristics of Ramon G.

Tolentino's signature, he being the justice of the peace who ratified the document Exhibit
1, for, even granting that said instrument is genuine, it appears that Gil or Exequiel Tacas
could not validly convey the lands in question to the defendant Evaristo Tobon, inasmuch
as according to the possessory information, said lands belong to and were in possession
of Francisco Dumadag even before 1895, until his death, which took place in November,
1911.

The document Exhibit 2 argues nothing against our conclusion, for it is a contradiction to
hold that in 1909 Francisco Dumadag agreed with his brother-in-law, Exequiel Tacas,
that the three parcels of land belonging to the latter should be included in the former's
possessory proceeding, considering that the latter had already been approved by the order
of March 22, 1895. In the ordinary course of events, if such an agreement had really been
entered into, it should have been at the time of the institution of the possessory
proceeding. Dumadag did not know how to sign his name, and besides, no one has
identified said document, Exhibit 2.

There is another reason why Exhibit 1 cannot prevail over Exhibit H, namely, that
supposing that a sale was made in favor of the defendant in 1905, it was only in 1909 that
Exhibit 2 was drawn in order to legalize the alleged transfer. Besides, despite the transfer
of the lands in favor of the defendant having taking place in 1905, according to Exhibit 1,
the defendant did not enter upon the possession of said lands until after the death of the
original owner Francisco Dumadag, which occurred in November, 1911.

Another error alleged by the appellant is that the trial court ordered him to deliver to the
plaintiffs the fruits of the land from 1912 to 1927, or to pay their value, P11,040.

The complaint in this case was filed on February 1, 1918. The bill of exceptions does not
show when the defendant was summoned but it does show that the latter docketed his
answer to the complaint on April 11, 1918.

Evidence being lacking to show that when he entered upon the possession of the lands in
question, he was aware of any flaw in his title or mode of acquiring it, he is deemed a
possessor in good faith (article 433, Civil Code), and in accordance with article 451 of
the Civil Code, the fruits of said lands were his, until he was summoned upon the
complaint, or until he filed his answer thereto. (Saul vs. Hawkins, 1 Phil., 275; Javier vs.
Javier, 6 Phil., 493; Cleto vs. Salvador, 11 Phil., 416; Valencia vs. Jimenez and Fuster, 11
Phil, 492; Araujo vs. Celis, 16 Phil., 329; Alcala and Alviedo S. Hernandez and Pacleb,
32 Phil., 628; Tolentino vs. Vitug, 39 Phil., 126; Aquino vs. Tafiedo, 39 Phil., 517;
Rivera vs. Roman Catholic Archbishop of Manila, 40 Phil., 717; and Velazquez vs.
Teodoro, 46 Phil., 757.)

Article 451 of the same Code provides:

"ART. 451. Fruits received by one in possession in good faith before possession is legally
interrupted become his own.

"Natural and industrial fruits are deemed to have been received as soon as they are
gathered or harvested.

"Civil fruits are deemed to accrue from day to day, and belong to the possessor in good
faith in this proportion."

In his comments upon this article of the Civil Code, Manresa, among other things, says:
"But to every possessor in good faith there comes a time when he is considered a
possessor in bad faith. When the owner or possessor with a better right comes along,
when he becomes aware that what he had taken for granted is at least doubtful, and when
he learns the grounds in support of the adverse contention, good faith ceases. The
possessor may still believe that his right is more secure, because we resign ourselves with
difficulty to the sight of our vanishing hopes; but when the final judgment of the court
deprives him of the possession, all illusion necessarily disappears. Although he may not
have been convinced of it before, the possessor becomes aware that his possession is
unlawful from the time he learns of the complaint, from the time he is summoned to the
trial. It is at this time that his possession is interrupted, according to article 1945, and that
he ceases to receive the fruits, according to the first paragraph of article 451. The ruling
of the court retro acts to that time; but shall good faith be deemed to cease then?
Although there is a great difference between requiring the possessor in good faith to
return the fruits he received from the time when his possession was legally interrupted,
and considering him a possessor in bad faith for all legal purposes from that time, the law
had to establish a definite rule in the matter, which is none other than that deducible from
a combination of articles 452, 1945, and 435. Whether or not the defendant be a
possessor in good faith, for there is no doubt that he can be, and the law makes no attempt
to deny it, from the service of judicial summons, there exists an act that this possessor
knows that his right is not secure, that someone disputes it, and that he may yet lose it;
and if the court holds that restitution be made, that time determines all the legal
consequences of the interruption, the time when the possession in good faith ceased to be
so before the law,

"The decisions of April 27, 1877, April 22, May 10, and June 13, 1878, February 11, and
October 5, 1885, March 17, 1891, March 4, and May 17, 1893, held that good faith
ceased when the answer to the complaint was filed, taking this doctrine from
the Partidos. By analogy, the service of the summons, doubtless more certain and more
difficult to evade, is now admitted, according to articles 451 and 1945 of the Code, and it
is in this sense that the decisions of the Supreme Court of January 28, 1896, December 7,
1899, November 23, 1900, and July 11, 1903, must be understood, all of them holding
that even the possessor in good faith must return the fruits received from the time the
answer to the complaint was filed, that is, from the time he became aware that he was in
undue possession" (Manresa, Commentaries on the Spanish Civil Code, vol. 4, pp. 270,
271.)

By virtue of the foregoing, the judgment appealed from must be, as it is hereby, affirmed
in so far as it holds that the plaintiffs are the owners of the lands in question, and that the
defendant is bound to return them to the former.

And with regard to the award of damages, said judgment is hereby modified so that the
defendant is only bound to return to the plaintiffs the fruits received from April, 1918 to
1927, that is, 300 sheaves of rice and 300 manos of tobacco, with the right to deduct the
expenses of planting and harvesting (art. 365 of the Civil Code), which shall be
determined by the trial court, after hearing both parties.

The appellant shall pay the costs of this trial. So ordered.

Avanceña, C. J., Johnson, Street, Johns, Romualdez, and Villa-Real, JJ., concur

[ G. R. No. 35223, September 17, 1931 ]

THE BACHRACH MOTOR CO., INC., PLAINTIFF AND APPELLEE, VS.
TALISAY-SILAY MILLING CO. ET AL., DEFENDANTS AND APPELLEES.
THE PHILIPPINE NATIONAL BANK, INTERVENOR AND APPELLANT.

DECISION

ROMUALDEZ, J.:

This proceeding originated in a complaint filed by the Bachrach Motor Co., Inc., against
the Talisay-Silay Milling Co., Inc., for the delivery of the amount of P13,850 or
promissory notes or other instruments of credit for that sum payable on June 30, 1930, as
bonus in favor of Mariano Lacson Ledesma; the complaint further prays that the sugar
central be ordered to render an accounting of the amounts it owes Mariano Lacson 
Ledesma  by way of bonus, dividends, or  otherwise, and to pay the plaintiff a sum
sufficient  to satisfy the judgment mentioned  in  the complaint, and that the sale made by
said Mariano Lacson Ledesma be declared null and void.

The Philippine National Bank filed a third  party claim alleging a preferential right to
receive any  amount which Mariano Lacson Ledesma might be entitled to from the
Talisay-Silay Milling Co.  as bonus, because  that would be civil fruits of the  land
mortgaged to said  bank by said debtor for the  benefit of  the central referred to, and by
virtue of a deed of assignment, and praying that said central be ordered to deliver directly
to the intervening bank said sum on account of the latter's credit against the aforesaid
Mariano Lacson Ledesma.

The corporation Talisay-Silay Milling Co.,  Inc., answered the complaint stating  that of
Mariano Lacson Ledesma's credit, P7,500 belonged to Cesar Ledesma because he had
purchased it, and praying that it be absolved from the com- plaint and that the proper
party be named  so that the remainder might be delivered.

Cesar Ledesma, in turn, claiming to be the owner by purchase in good faith and for a
consideration of the P7,500 which is a part of  the credit referred to above, answered
praying that he be absolved from the complaint.
The plaintiff  Bachrach  Motor Co.,  Inc.,  answered the third party claim alleging that its
credit against Mariano Lacson Ledesma was prior and preferential to that of the
intervening bank, and praying that the latter's complaint be dismissed.

At the trial all the parties agreed to recognize and respect the sale made in favor of Cesar
Ledesma of the P7,500 part of the credit in question, for which reason the trial court
dismissed the complaint and cross-complaint against Cesar Ledesma authorizing the
defendant central to deliver to him the  aforementioned sum of P7,500.  And upon
conclusion of  the hearing, the 'court held that the Bachrach Motor Co.,  Inc., had a
preferred right to receive the amount of P11,076.02 which was Mariano Lacson
Ledesma's bonus, and it ordered the defendant central to deliver said sum to the plaintiff.

The Philippine National Bank appeals, assigning the following alleged errors as
committed by the trial court:

1. In holding that the  bonus which the  Talisay-Silay Milling Co., Inc., bound itself
to pay the planters who had mortgaged  their land to the Philippine National Bank
to secure the payment of the debt of said central to said bank is not civil  fruits of
said land.
2. In not holding that said bonus became subject to the mortgage executed  by the 
defendant Mariano  Lacson  Ledesma to the Philippine National Bank to secure
the payment of his personal debt to  said bank when it fell due.
3. In holding that the assignment (Exhibit 9, P. N.  B.) of said bonus made on March
7, 1930,  by Mariano Lacson Ledesma to the Philippine  National Bank to  be
applied to the payment of his debt to said Philippine National Bank is fraudulent.
4. In holding that the Bachrach Motor Co., Inc., in civil case No. 31597 of the Court 
of First  Instance of Manila levied a valid attachment upon the bonus in question.
5. In admitting and considering the  supplementary complaint filed by the  Bachrach 
Motor  Co., Inc.,  alleging  as a cause of  action the attachment of the bonus  in
question which said Bachrach Motor Co., Inc., in civil case No. 31821 of the
Court of First Instance of Manila levied after the filing of the  original  complaint
in this case,  and  after Mariano Lacson Ledesma in this case had been declared in
default.                                             *
6. In holding that the Bachrach Motor Co., Inc., has a preferential right to receive
from the Talisay-Silay Milling Co., Inc., the amount of P11,076.02 which is in the
possession of said corporation as the bonus to be paid to Mariano Lacson
Ledesma, and in ordering the Talisay-Silay Milling Co., Inc., to deliver said
amount to  the Bachrach  Motor Co., Inc.
7. In not holding that the Philippine National Bank has a preferential right  to receive
from the Talisay-Silay Milling Co., Inc., the amount of P11,076.02 held by said
 corporation as Mariano Lacson Ledesma's  bonus, and in not ordering said
Talisay-Silay Milling Co., Inc.,  to deliver said amount to the  Philippine National
Bank.
8. In not holding that the amended complaint and the supplementary complaint of the
Bachrach Motor Co., Inc., do not state facts sufficient to constitute a cause of 
action in favor of the Bachrach Motor Co., Inc., and  against the Talisay-Silay 
Milling Co.,  Inc., or against the  Philippine National Bank.*'

The appellant bank bases its preferential right upon the contention  that the  bonus in 
question is  civil fruits  of the land which the owners had mortgaged for the benefit  of the
central giving the bonus, and that, as civil fruits of said land, said bonus was assigned by
Mariano Lacson Ledesma on  March  7, 1930,  by virtue of the document Exhibit  S of
said intervening  institution, which admitted in its brief that "if  the bonus  in  question is
not civil  fruits or rent which became subject  to the  mortgage  in favor of the Philippine
National Bank when Mariano Lacson Ledesma's personal obligation fell due,  the
assignment of  March 7, 1930  (Exhibit 9, P. N. B.),  is null and void, not because it is
fraudulent, for there was no intent of fraud in execufcing the deed, but that the cause or
consideration of the as- signment was erroneous, for it was based upon the propo- sition
that the bonus was civil fruits of the land mortgaged to the Philippine National Bank."  
(P. 31.)

The fundamental question, then, submitted to our consid- eration is whether or not the
bonus in question is civil fruits.

This is how that bonus came to be granted:  On December 22, 1923, the Talisay-Silay
Milling Co., Inc.,  was  indebted to the  Philippine National  Bank.  To secure  the
payment  of its debt, it succeeded in inducing  its planters, among whom was  Mariano
Lacson  Ledesma, to mortgage their land to the creditor bank.  And in order to
compensate those planters for the risk they were running with their property  under that
mortgage, the aforesaid central, by a  resolution passed on that same  date, i. e.,
December  22, 1923, and amended on March 23, 1928, undertook to credit the  owners of
the plantation thus  mortgaged every year with a sum equal to two per centum of the debt
secured according to the  yearly balance, the payment of  the bonus being made at once,
or in part from time to time, as soon as the central became free of its  obligations to the
aforesaid bank, and of those contracted by virtue of the contract of supervision, and  had
funds which might be so used, or as soon as it obtained from said bank authority to make
such payment.  (Exhibits 5, 6; P. N. B.)

Article 355 of the Civil Code considers three  things as civil fruits: First,  the rents of
buildings; second, the proceeds from leases  of  lands; and, third,  the income from
perpetual or  life annuities, or other  similar sources  of revenue.  It may be noted that
according to the context of the law, the phrase "u otras andlogas" refers only to rents or
income, for the adjectives "otras" and "andlogas" agree with the  noun "rentes," as do
also the other adjectives "perpetuas" and  "vitalicias"  That  is why we  say that  by "civil
fruits" the Civil Code understands one of three and only three things, to wit: the rent of a
building, the rent of land, and certain kinds of income.

As the bonus in question is not the rent of a building or of land, the  only meaning of
"civil fruits" left to be examined is that of "income."

Assuming that in the broad juridical sense of the word "income"  it might be  said that the
bonus  in question is "income"  under article 355 of the Civil Code, it is obvious to
inquire whether it is derived from the land mortgaged by  Mariano  Lacson Ledesma to
the  appellant  bank  for the benefit of the central; for if it is not obtained from that land
but from something  else, it is not civil fruits of that land, and  the bank's contention is
untenable.

It is to  be noted that the said bonus bears no immediate, but only a remote and
accidental  relation to the land mentioned, having been granted as compensation for the
risk of having subjected  one's land to a lien in favor of the bank, for the benefit of the
entity granting said bonus. If this bonus be  income or civil  fruits  of anything, it is
income arising from said risk, or, if one chooses, from Mariano Lac- son Ledesma's
generosity in facing the danger for the pro- tection of the central, but certainly it is not
civil fruits or income from the mortgaged property, which, as far as this case is
concerned, has nothing to do with it.  Hence, the amount of the bonus, according to the
resolution of the cen- tral granting it, is not based upon the value, importance or any other
circumstance of the mortgaged property,  but upon the total value of the debt thereby
secured, according to the annual balance, which is something  quite distinct from and
independent of the property referred  to.

Finding no merit in this appeal, the judgment appealed from is affirmed, without express
finding as to costs.  So ordered.

FIRST DIVISION
[ G.R. No. 140528, December 07, 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.

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 Decision [1] dated June 29, 1999 and
Resolution [2] 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 Partition [9] dated December 3, 1962.

On December 12, 1964, the Torbela siblings executed a Deed of Absolute

Quitclaim [10] over Lot No. 356-A in favor of Dr. Rosario.  According to the said Deed,
the Torbela siblings “for and in consideration of the sum of NINE PESOS (P9.00) x x x
transfer[red] and convey[ed] x x x unto the said Andres T. Rosario, that undivided
portion of THREE HUNDRED SEVENTY-FOUR square meters of that parcel of land
embraced in Original Certificate of Title No. 16676 of the land records of Pangasinan x x
x.” [11]  Four days later, on December 16, 1964, OCT No. 16676 in Valeriano’s name was
partially cancelled as to Lot No. 356-A and TCT No. 52751 [12] was issued in Dr.
Rosario’s name covering the said property.

Another Deed of Absolute Quitclaim [13] was subsequently executed on December 28,

1964, this time by Dr. Rosario, acknowledging that he only borrowed Lot No. 356-A
from the Torbela siblings and was already returning the same to the latter for P1.00.  The
Deed stated:

That for and in consideration of the sum of one peso (P1.00), Philippine Currency and
the fact that I only borrowed the above described parcel of land from MARIA
TORBELA, married to Eulogio Tosino, EUFROSINA TORBELA, married to Pedro
Rosario, PEDRO TORBELA, married to Petra Pagador, LEONILA TORBELA, married
to Fortunato Tamen, FERNANDO TORBELA, married to Victoriana Tablada,
DOLORES TORBELA, widow, LEONORA TORBELA, married to Matias Agustin and
SEVERINA TORBELA, married to Jorge Ildefonso, x x x by these presents do hereby
cede, transfer and convey by way of this ABSOLUTE QUITCLAIM unto the said Maria,
Eufrosina, Pedro, Leonila, Fernando, Dolores, Leonora and Severina, all surnamed
Torbela the parcel of land described above. [14]  (Emphasis ours.)

The aforequoted Deed was notarized, but was not immediately annotated on TCT No.
52751.

Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan from the
Development Bank of the Philippines (DBP) on February 21, 1965 in the sum of
P70,200.00, secured by a mortgage constituted on Lot No. 356-A.  The mortgage was
annotated on TCT No. 52751 on September 21, 1965 as Entry No. 243537. [15]  Dr.
Rosario used the proceeds of the loan for the construction of improvements on Lot No.
356-A.

On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit of Adverse

Claim, [16] on behalf of the Torbela siblings.  Cornelio deposed in said Affidavit:
3.   That ANDRES T. ROSARIO later quitclaimed his rights in favor of the former
owners by virtue of a Deed of Absolute Quitclaim which he executed before Notary
Public Banaga, and entered in his Notarial Registry as Dec. No. 43; Page No. 9; Book
No. I; Series of 1964;

4.   That it is the desire of the parties, my aforestated kins, to register ownership over the
above-described property or to perfect their title over the same but their Deed could not
be registered because the registered owner now, ANDRES T. ROSARIO mortgaged the
property with the DEVELOPMENT BANK OF THE PHILIPPINES, on September 21,
1965, and for which reason, the Title is still impounded and held by the said bank;

5.   That pending payment of the obligation with the DEVELOPMENT BANK OF THE
PHILIPPINES or redemption of the Title from said bank, I, CORNELIO T. TOSINO, in
behalf of my mother MARIA TORBELA-TOSINO, and my Aunts EUFROSINA
TORBELA, LEONILA TORBELA-TAMEN, DOLORES TORBELA, LEONORA
TORBELA-AGUSTIN, SEVERINA TORBELA-ILDEFONSO, and my Uncles PEDRO
TORBELA and FERNANDO, also surnamed TORBELA, I request the Register of Deeds
of Pangasinan to annotate their adverse claim at the back of Transfer Certificate of Title
No. 52751, based on the annexed document, Deed of Absolute Quitclaim by ANDRES T.
ROSARIO, dated December 28, 1964, marked as Annex “A” and made a part of this
Affidavit, and it is also requested that the DEVELOPMENT BANK OF THE
PHILIPPINES be informed accordingly. [17]

The very next day, on May 17, 1967, the Torbela siblings had 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.
274471 [18] 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. 52751 [20] dated March 6, 1981, the mortgage appearing under Entry No. 243537 was
cancelled per the Cancellation and Discharge of Mortgage executed by DBP in favor of
Dr. Rosario and ratified before a notary public on July 11, 1980.

In the meantime, Dr. Rosario acquired another loan from the Philippine National Bank
(PNB) sometime in 1979-1981.  Records do not reveal though the original amount of the
loan from PNB, but the loan agreement was amended on March 5, 1981 and the loan
amount was increased to P450,000.00.  The loan was secured by mortgages constituted
on the following properties: (1) Lot No. 356-A, covered by TCT No. 52751 in Dr.
Rosario’s name; (2) Lot No. 4489, with an area of 1,862 square meters, located in
Dagupan City, Pangasinan, covered by TCT No. 24832; and (3) Lot No. 5-F-8-C-2-B-2-
A, with an area of 1,001 square meters, located in Nancayasan, Urdaneta, Pangasinan,
covered by TCT No. 104189. [21]  The amended loan agreement and mortgage on Lot No.
356-A was annotated on TCT No. 52751 on March 6, 1981 as Entry No. 520099. [22]

Five days later, on March 11, 1981, another annotation, Entry No. 520469, [23] was made
on TCT No. 52751, canceling the adverse claim on Lot No. 356-A under Entry Nos.
274471-274472, on the basis of the Cancellation and Discharge of Mortgage executed by
Dr. Rosario on March 5, 1981.  Entry No. 520469 consisted of both stamped and
handwritten portions, and exactly reads:

Entry No. 520469.  Cancellation of Adverse Claim executed by Andres Rosario in favor

of same.  The incumbrance/mortgage appearing under Entry No. 274471-72 is now
cancelled as per Cancellation and Discharge of Mortgage Ratified before Notary
Public Mauro G. Meris on March 5, 1981: Doc. No. 215; Page No. 44; Book No. 1;
Series Of 1981.

Lingayen, Pangasinan, 3-11, 19981

[Signed: Pedro dela Cruz]

Register of Deeds [24]

On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario (spouses Rosario),
acquired a third loan in the amount of P1,200,000.00 from Banco Filipino Savings and
Mortgage Bank (Banco Filipino).  To secure said loan, the spouses Rosario again
constituted mortgages on Lot No. 356-A, Lot No. 4489, and Lot No. 5-F-8-C-2-B-2-A. 
The mortgage on Lot No. 356-A was annotated on TCT No. 52751 as Entry No.
533283 [25] on December 18, 1981.  Since the construction of a two-storey commercial
building on Lot No. 5-F-8-C-2-B-2-A was still incomplete, the loan value thereof as
collateral was deducted from the approved loan amount.  Thus, the spouses Rosario could
only avail of the maximum loan amount of P830,064.00 from Banco Filipino.

Because Banco Filipino paid the balance of Dr. Rosario’s loan from PNB, the mortgage
on Lot No. 356-A in favor of PNB was cancelled per Entry No. 533478 [26] on TCT No.
52751 dated December 23, 1981.

On February 13, 1986, the Torbela siblings filed before the Regional Trial Court (RTC)
of Urdaneta, Pangasinan, a Complaint for recovery of ownership and possession of Lot
No. 356-A, plus damages, against the spouses Rosario, which was docketed as Civil
Case No. U-4359.  On the same day, Entry Nos. 593493 and 593494 were made on TCT
No. 52751 that read as follows:
Entry No. 593494 – Complaint – Civil Case No. U-4359 (For: Recovery of Ownership
and Possession and Damages. (Sup. Paper).
Entry No. 593493 – Notice of Lis Pendens – The parcel of land described in this title is
subject to Lis Pendens executed by Liliosa B. Rosario, CLAO, Trial Attorney dated
February 13, 1986.  Filed to TCT No. 52751
February 13, 1986-1986 February 13 – 3:30 p.m.

(SGD.)    PACIFICO M. BRAGANZA

Register of Deeds [27]

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 P743,296.82 and  P151,524.00, respectively. [28]

Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-A, Lot No. 4489,
and Lot No. 5-F-8-C-2-B-2-A.  During the public auction on April 2, 1987, Banco
Filipino was the lone bidder for the three foreclosed properties for the price of
P1,372,387.04.  The Certificate of Sale [29] dated April 2, 1987, in favor of Banco
Filipino, was annotated on TCT No. 52751 on April 14, 1987 as Entry No. 610623. [30]

On December 9, 1987, the Torbela siblings filed before the RTC their Amended
Complaint, [31] impleading Banco Filipino as additional defendant in Civil Case No. U-
4359 and praying that the spouses Rosario be ordered to redeem Lot No. 356-A from
Banco Filipino.

The spouses Rosario instituted before the RTC on March 4, 1988 a case for annulment of
extrajudicial foreclosure and damages, with prayer for a writ of preliminary injunction
and temporary restraining order, against Banco Filipino, the Provincial Ex Officio Sheriff
and his Deputy, and the Register of Deeds of Pangasinan.  The case was docketed
as Civil Case No. U-4667.  Another notice of lis pendens was annotated on TCT No.
52751 on March 10, 1988 as Entry No. 627059, viz:

Entry No. 627059 – Lis Pendens – Dr. Andres T. Rosario and Lena Duque Rosario,
Plaintiff versus Banco Filipino, et. al. Civil Case No. U-4667 or Annulment of
ExtraJudicial Foreclosure of Real Estate Mortgage – The parcel of land described in this
title is subject to Notice of Lis Pendens subscribed and sworn to before Notary Public
Mauro G. Meris, as Doc. No. 21; Page No. 5; Book 111; S-1988.  March 7, 1988-1988
March 10, 1:00 p.m.

(SGD.)    RUFINO M. MORENO, SR.

Register of Deeds [32]

The Torbela siblings intervened in Civil Case No. U-4667.  Eventually, on October 17,
1990, the RTC issued an Order [33] dismissing without prejudice Civil Case No. U-4667
due to the spouses Rosario’s failure to prosecute.

Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from Banco Filipino, but
their efforts were unsuccessful.  Upon the expiration of the one-year redemption period in
April 1988, the Certificate of Final Sale [34] and Affidavit of Consolidation [35] 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
Complaint [37] 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 Decision [38] on these three cases was promulgated on January 15, 1992, the
dispositive portion of which reads:

WHEREFORE, judgment is rendered:

1.  Declaring the real estate mortgage over Lot 356-A covered by TCT 52751 executed
by Spouses Andres Rosario in favor of Banco Filipino, legal and valid;

2.  Declaring the sheriff’s sale dated April 2, 1987 over Lot 356-A covered by TCT
52751 and subsequent final Deed of Sale dated May 14, 1988 over Lot 356-A covered by
TCT No. 52751 legal and valid;

3.  Declaring Banco Filipino the owner of Lot 356-A covered by TCT No. 52751 (now
TCT 165813);

4.  Banco Filipino is entitled to a Writ of Possession over Lot 356-A together with the
improvements thereon (Rose Inn Building).  The Branch Clerk of Court is hereby ordered
to issue a writ of possession in favor of Banco Filipino;

5.  [The Torbela siblings] are hereby ordered to render accounting to Banco Filipino the
rental they received from tenants of Rose Inn Building from May 14, 1988;

6.  [The Torbela siblings] are hereby ordered to pay Banco Filipino the sum of
P20,000.00 as attorney’s fees;

7.  Banco Filipino is hereby ordered to give [the Torbela siblings] the right of first refusal
over Lot 356-A.  The Register of Deeds is hereby ordered to annotate the right of [the
Torbela siblings] at the back of TCT No. 165813 after payment of the required fees;

8.  Dr. Rosario and Lena Rosario are hereby ordered to reimburse [the Torbela siblings]
the market value of Lot 356-A as of December, 1964 minus payments made by the
former;

9.  Dismissing the complaint of [the Torbela siblings] against Banco Filipino, Pedro
Habon and Rufino Moreno in Civil Case No. U-4733; and against Banco Filipino in Civil
Case No. U-4359. [39]

The RTC released an Amended Decision [40] dated January 29, 1992, adding the following
paragraph to the dispositive:

Banco Filipino is entitled to a Writ of Possession over Lot-5-F-8-C-2-[B]-2-A of the

subdivision plan (LRC) Psd-122471, covered by Transfer Certificate of Title 104189 of
the Registry of Deeds of Pangasinan[.] [41]

The Torbela siblings and Dr. Rosario appealed the foregoing RTC judgment before the
Court of Appeals.  Their appeal was docketed as CA-G.R. CV No. 39770.

In its Decision [42] dated June 29, 1999, the Court of Appeals decreed:

WHEREFORE, foregoing considered, the appealed decision is

hereby AFFIRMED with modification.  Items No. 6 and 7 of the appealed decision
are DELETED.  Item No. 8 is modified requiring [Dr. Rosario] to pay [the Torbela
siblings] actual damages, in the amount of P1,200,000.00 with 6% per annum interest
from finality of this decision until fully paid.  [Dr. Rosario] is further ORDERED to pay
[the Torbela siblings] the amount of P300,000.00 as moral damages; P200,000.00 as
exemplary damages and P100,000.00 as attorney’s fees.

Costs against [Dr. Rosario]. [43]

The Court of Appeals, in a Resolution [44] dated October 22, 1999, denied the separate
Motions for Reconsideration of the Torbela siblings and Dr. Rosario.

The Torbela siblings come before this Court via the Petition for Review in G.R.
No. 140528, with the following assignment of errors:

First Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING

THAT THE REGISTRATION OF THE DEED OF ABSOLUTE QUITCLAIM
EXECUTED BY [DR. ANDRES T. ROSARIO] IN FAVOR OF THE [TORBELA
SIBLINGS] DATED DECEMBER 28, 1964 AND THE REGISTRATION OF THE
NOTICE OF ADVERSE CLAIM EXECUTED BY THE [TORBELA SIBLINGS],
SERVE AS THE OPERATIVE ACT TO CONVEY OR AFFECT THE LAND AND
IMPROVEMENTS THEREOF IN SO FAR AS THIRD PERSONS ARE
CONCERNED.

Second Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

THE SUBJECT PROPERTY COVERED BY T.C.T. NO. 52751 IS CLEAN AND
FREE, DESPITE OF THE ANNOTATION OF ENCUMBRANCES OF THE NOTICE
OF ADVERSE CLAIM AND THE DEED OF ABSOLUTE QUITCLAIM APPEARING
AT THE BACK THEREOF AS ENTRY NOS. 274471 AND 274472, RESPECTIVELY.

Third Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

THE NOTICE OF ADVERSE CLAIM OF THE [TORBELA SIBLINGS] UNDER
ENTRY NO. 274471 WAS VALIDLY CANCELLED BY THE REGISTER OF
DEEDS, IN THE ABSENCE OF A PETITION DULY FILED IN COURT FOR ITS
CANCELLATION.

Fourth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

RESPONDENT BANCO FILIPINO SAVINGS AND MORTGAGE BANK IS A
MORTGAGEE IN GOOD FAITH.

Fifth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING

THAT THE FILING OF A CIVIL CASE NO. U-4359 ON DECEMBER 9, 1987,
IMPLEADING RESPONDENT BANCO FILIPINO AS ADDITIONAL PARTY
DEFENDANT, TOLL OR SUSPEND THE RUNNING OF THE ONE YEAR PERIOD
OF REDEMPTION.

Sixth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING

THAT THE OWNERSHIP OVER THE SUBJECT PROPERTY WAS
PREMATURELY CONSOLIDATED IN FAVOR OF RESPONDENT BANCO
FILIPINO SAVINGS AND MORTGAGE BANK.

Seventh Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

THE SUBJECT PROPERTY IS AT LEAST WORTH P1,200,000.00. [45]

The Torbela siblings ask of this Court:

WHEREFORE, in the light of the foregoing considerations, the [Torbela siblings] most
respectfully pray that the questioned DECISION promulgated on June 29, 1999 (Annex
“A”, Petition) and the RESOLUTION dated October 22, 1999 (Annex “B”, Petition) be
REVERSED and SET ASIDE, and/or further MODIFIED in favor of the [Torbela
siblings], and another DECISION issue ordering, among other reliefs, the respondent
Banco Filipino to reconvey back Lot No. 356-A, covered by T.C.T. No. 52751, in favor
of the [Torbela siblings] who are the actual owners of the same.

The [Torbela siblings] likewise pray for such other reliefs and further remedies as may be
deemed just and equitable under the premises. [46]

Duque-Rosario, now legally separated from Dr. Rosario, avers in her Petition for Review
in G.R. No. 140553 that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A were registered in
her name, and she was unlawfully deprived of ownership of said properties because of
the following errors of the Court of Appeals:

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:

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.  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
P200.00;
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. Veloso [51]:

The foregoing provisions are quite clear.  Section 2 specifies the conditions under which
the Lupon of a barangay “shall have authority” to bring together the disputants for
amicable settlement of their dispute:  The parties must be “actually residing in the
same city or municipality.”  At the same time, Section 3 — while reiterating that the
disputants must be “actually residing in the same barangay” or in “different barangays”
within the same city or municipality — unequivocably declares that the Lupon shall have
“no authority” over disputes “involving parties who actually reside in barangays
of different cities or municipalities,” except where such barangays adjoin each other.

Thus, by express statutory inclusion and exclusion, the Lupon shall have no
jurisdiction over disputes where the parties are not actual residents of the same city
or municipality, except where the barangays in which they actually reside adjoin
each other.

It is true that immediately after specifying the barangay whose Lupon shall take
cognizance of a given dispute, Sec. 3 of PD 1508 adds:
"However, all disputes which involve real property or any interest therein shall be
brought in the barangay where the real property or any part thereof is situated."
Actually, however, this added sentence is just an ordinary proviso and should operate as
such.

The operation of a proviso, as a rule, should be limited to its normal function, which is to
restrict or vary the operation of the principal clause, rather than expand its scope, in the
absence of a clear indication to the contrary.
“The natural and appropriate office of a proviso is . . . to except something from the
enacting clause; to limit, restrict, or qualify the statute in whole or in part; or to exclude
from the scope of the statute that which otherwise would be within its terms.” (73 Am Jur
2d 467.)
Therefore, the quoted proviso should simply be deemed to restrict or vary the rule on
venue prescribed in the principal clauses of the first paragraph of Section 3,
thus:  Although venue is generally determined by the residence of the parties,
disputes involving real property shall be brought in the barangay where the real
property or any part thereof is situated, notwithstanding that the parties reside
elsewhere within the same city/municipality. [52] (Emphases supplied.)

The original parties in Civil Case No. U-4359 (the Torbela siblings and the spouses
Rosario) do not reside in the same barangay, or in different barangays within the same
city or municipality, or in different barangays of different cities or municipalities but are
adjoining each other.  Some of them reside outside Pangasinan and even outside of the
country altogether.  The Torbela siblings reside separately in Barangay Macalong,
Urdaneta, Pangasinan; Barangay Consolacion, Urdaneta, Pangasinan; Pangil, Laguna;
Chicago, United States of America; and Canada.  The spouses Rosario are residents of
Calle Garcia, Poblacion, Urdaneta, Pangasinan.  Resultantly, the Lupon had no
jurisdiction over the dispute and barangay conciliation was not a pre-condition for the
filing of Civil Case No. U-4359.

The Court now looks into the merits of Civil Case No. U-4359.

There was an express trust between

the Torbela siblings and Dr. Rosario.

There is no dispute that the Torbela sibling inherited the title to Lot No. 356-A from their
parents, the Torbela spouses, who, in turn, acquired the same from the first registered
owner of Lot No. 356-A, Valeriano.

Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim on December 12,
1964 in which they transferred and conveyed Lot No. 356-A to Dr. Rosario for the
consideration of P9.00.  However, the Torbela siblings explained that they only executed
the Deed as an accommodation so that Dr. Rosario could have Lot No. 356-A registered
in his name and use said property to secure a loan from DBP, the proceeds of which
would be used for building a hospital on Lot No. 356-A – a claim supported by
testimonial and documentary evidence, and borne out by the sequence of events
immediately following the execution by the Torbela siblings of said Deed. 
On December 16, 1964, TCT No. 52751, covering Lot No. 356-A, was already issued in
Dr. 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 P1.00.  On February 21, 1965, Dr. Rosario’s loan in the amount of
P70,200.00, 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
P25,000.00, 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 P9.00.00), the same could not be said for the
second Deed of Absolute Quitclaim dated December 28, 1964 executed by Dr. Rosario. 
In fact, Dr. 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
P1.00.00) 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 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 (P450,000.00) and to secure any and all negotiations
with PNB, whether contracted before, during or after the date of this instrument,
acknowledged before Notary Public of Pangasinan Alejo M. Dato as Doc. No. 198, Page
No. 41, Book No. 11, Series of 1985.

Date of Instrument March 5, 1981

Date of Inscription March 6, 1981 [73]

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 world [74] that Lot No. 356-A was mortgaged by Dr. Rosario to PNB
as security for a loan, the amount of which was increased to P450,000.00.  Hence, Dr.
Rosario is deemed to have effectively repudiated the express trust between him and the
Torbela siblings on March 6, 1981, on which day, the prescriptive period for the
enforcement of the express trust by the Torbela siblings began to run.

From March 6, 1981, when the amended loan and mortgage agreement was registered on
TCT No. 52751, to February 13, 1986, when the  Torbela siblings instituted before the
RTC Civil Case No. U-4359 against the spouses Rosario, only about five years had
passed.  The Torbela siblings were able to institute Civil Case No. U-4359 well before
the lapse of the 10-year prescriptive period for the enforcement of their express trust with
Dr. Rosario.

Civil Case No. U-4359 is likewise not barred by laches.  Laches means the failure or
neglect, for an unreasonable and unexplained length of time, to do that which by
exercising due diligence could or should have been done earlier.  It is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it.  As the Court
explained in the preceding paragraphs, the Torbela siblings instituted Civil Case No. U-
4359 five years after Dr. 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 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 P1,200,000.00 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
Piao [78] 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.”
If the rationale of the law was for the adverse claim to ipso facto lose force and effect
after the lapse of thirty days, then it would not have been necessary to include the
foregoing caveat to clarify and complete the rule.  For then, no adverse claim need be
cancelled.  If it has been automatically terminated by mere lapse of time, the law would
not have required the party in interest to do a useless act.

A statute's clauses and phrases must not be taken separately, but in its relation to the
statute's totality.  Each statute must, in fact, be construed as to harmonize it with the pre-
existing body of laws.  Unless clearly repugnant, provisions of statutes must be
reconciled.  The printed pages of the published Act, its history, origin, and its purposes
may be examined by the courts in their construction. x x x.

xxxx

Construing the provision as a whole would reconcile the apparent inconsistency between
the portions of the law such that the provision on cancellation of adverse claim by
verified petition would serve to qualify the provision on the effectivity period.  The law,
taken together, simply means that the cancellation of the adverse claim is still
necessary to render it ineffective, otherwise, the inscription will remain annotated
and shall continue as a lien upon the property.  For if the adverse claim has already
ceased to be effective upon the lapse of said period, its cancellation is no longer
necessary and the process of cancellation would be a useless ceremony.
It should be noted that the law employs the phrase "may be cancelled," which obviously
indicates, as inherent in its decision making power, that the court may or may not order
the cancellation of an adverse claim, notwithstanding such provision limiting the
effectivity of an adverse claim for thirty days from the date of registration.  The court
cannot be bound by such period as it would be inconsistent with the very authority vested
in it.  A fortiori, the limitation on the period of effectivity is immaterial in determining
the validity or invalidity of an adverse claim which is the principal issue to be decided in
the court hearing. It will therefore depend upon the evidence at a proper hearing for the
court to determine whether it will order the cancellation of the adverse claim or not.

To interpret the effectivity period of the adverse claim as absolute and without
qualification limited to thirty days defeats the very purpose for which the statute provides
for the remedy of an inscription of adverse claim, as the annotation of an adverse claim is
a measure designed to protect the interest of a person over a piece of real property where
the registration of such interest or right is not otherwise provided for by the Land
Registration Act or Act 496 (now P.D. 1529 or the Property Registration Decree), and
serves as a warning to third parties dealing with said property that someone is claiming
an interest or the same or a better right than the registered owner thereof.

The reason why the law provides for a hearing where the validity of the adverse
claim is to be threshed out is to afford the adverse claimant an opportunity to be
heard, providing a venue where the propriety of his claimed interest can be
established or revoked, all for the purpose of determining at last the existence of any
encumbrance on the title arising from such adverse claim.  This is in line with the
provision immediately following:
“Provided, however, that after cancellation, no second adverse claim shall be registered
by the same claimant.”
Should the adverse claimant fail to sustain his interest in the property, the adverse
claimant will be precluded from registering a second adverse claim based on the same
ground.

It was held that “validity or efficaciousness of the claim may only be determined by the
Court upon petition by an interested party, in which event, the Court shall order the
immediate hearing thereof and make the proper adjudication as justice and equity may
warrant. And it is only when such claim is found unmeritorious that the registration of the
adverse claim may be cancelled, thereby protecting the interest of the adverse claimant
and giving notice and warning to third parties.” [80] (Emphases supplied.)

Whether under Section 110 of the Land Registration Act or Section 70 of the Property
Registration Decree, notice of adverse claim can only be cancelled after a party in interest
files a petition for cancellation before the RTC wherein the property is located, and the
RTC conducts a hearing and determines the said claim to be invalid or unmeritorious.
No petition for cancellation has been filed and no hearing has been conducted herein to
determine the validity or merit of the adverse claim of the Torbela siblings.  Entry No.
520469 cancelled the adverse claim of the Torbela siblings, annotated as Entry Nos.
274471-774472, upon the presentation by Dr. Rosario of a mere Cancellation and
Discharge of Mortgage.

Regardless of whether or not the Register of Deeds should have inscribed Entry No.
520469 on TCT No. 52751, Banco Filipino could not invoke said inscription in support
of its claim of good faith.  There were several things amiss in Entry No. 520469 which
should have already aroused suspicions in Banco Filipino, and compelled the bank to
look beyond TCT No. 52751 and inquire into Dr. Rosario’s title.  First, Entry No. 520469
does not mention any court order as basis for the cancellation of the adverse claim. 
Second, the adverse claim was not a mortgage which could be cancelled with Dr.
Rosario’s Cancellation and Discharge of Mortgage.  And third, the adverse claim was
against Dr. Rosario, yet it was cancelled based on a document also executed by Dr.
Rosario.

It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the vendor or mortgagor.  His mere
refusal to believe that such defect exists, or his willful closing of his eyes to the
possibility of the existence of a defect in the vendor's or mortgagor's title, will not make
him an innocent purchaser or mortgagee for value, if it afterwards develops that the title
was in fact defective, and it appears that he had such notice of the defects as would have
led to its discovery had he acted with the measure of precaution which may be required of
a prudent man in a like situation. [81]

While the defective cancellation of Entry Nos. 274471-274472 by Entry No. 520469
might not be evident to a private individual, the same should have been apparent to
Banco Filipino.  Banco Filipino is not an ordinary mortgagee, but is a mortgagee-bank,
whose business is impressed with public interest.  In fact, in one case, [82] the Court
explicitly declared that the rule that persons dealing with registered lands can rely solely
on the certificate of title does not apply to banks.  In another case, [83] the Court adjudged
that unlike private individuals, a bank is expected to exercise greater care and prudence in
its dealings, including those involving registered lands.  A banking institution is expected
to exercise due diligence before entering into a mortgage contract.  The ascertainment of
the status or condition of a property offered to it as security for a loan must be a standard
and indispensable part of its operations.

Banco Filipino cannot be deemed a mortgagee in good faith, much less a purchaser in
good faith at the foreclosure sale of Lot No. 356-A.  Hence, the right of the Torbela
siblings over Lot No. 356-A is superior over that of Banco Filipino; and as the true
owners of Lot No. 356-A, the Torbela siblings are entitled to a reconveyance of said
property even from Banco Filipino.

Nonetheless, the failure of Banco Filipino to comply with the due diligence requirement
was not the result of a dishonest purpose, some moral obliquity, or breach of a known
duty for some interest or ill will that partakes of fraud that would justify damages. [84]

Given the reconveyance of Lot No. 356-A to the Torbela siblings, there is no more need
to address issues concerning redemption, annulment of the foreclosure sale and certificate
of sale (subject matter of Civil Case No. U-4733), or issuance of a writ of possession in
favor of Banco Filipino (subject matter of Pet. Case No. U-822) insofar as Lot No. 356-A
is concerned.  Such would only be superfluous.  Banco Filipino, however, is not left
without any recourse should the foreclosure and sale of the two other mortgaged
properties be insufficient to cover Dr. 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.”

There is no question that Dr. Rosario is the builder of the improvements on Lot No. 356-
A.  The Torbela siblings themselves alleged that they allowed Dr. Rosario to register Lot
No. 356-A in his name so he could obtain a loan from DBP, using said parcel of land as
security; and with the proceeds of the loan, Dr. Rosario had a building constructed on Lot
No. 356-A, initially used as a hospital, and then later for other commercial purposes.  Dr.
Rosario supervised the construction of the building, which began in 1965; fully liquidated
the loan from DBP; and maintained and administered the building, as well as collected
the rental income therefrom, until the Torbela siblings instituted Civil Case No. U-4359
before the RTC on February 13, 1986.

When it comes to the improvements on Lot No. 356-A, both the Torbela siblings (as
landowners) and Dr. Rosario (as builder) are deemed in bad faith.  The Torbela siblings
were aware of the construction of a building by Dr. Rosario on Lot No. 356-A, while Dr.
Rosario proceeded with the said construction despite his knowledge that Lot No. 356-A
belonged to the Torbela siblings.  This is the case contemplated under Article 453 of the
Civil Code, which reads:

ART. 453.  If there was bad faith, not only on the part of the person who built, planted or
sowed on the land of another, but also on the part of the owner of such land, the rights of
one and the other shall be the same as though both had acted in good faith.

It is understood that there is bad faith on the part of the landowner whenever the act was
done with his knowledge and without opposition on his part.  (Emphasis supplied.)

When both the landowner and the builder are in good faith, the following rules govern:

ART. 448.  The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper rent. 
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees.  In such case, he shall pay reasonable
rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity.  The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.

ART. 546.  Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same right
of retention, the person who has defeated him in the possession having the option of
refunding the amount of the expenses or of paying the increase in value which the thing
may have acquired by reason thereof.

ART. 548.  Expenses for pure luxury or mere pleasure shall not be refunded to the
possessor in good faith; but he may remove the ornaments with which he has embellished
the principal thing if it suffers no injury thereby, and if his successor in the possession
does not prefer to refund the amount expended.

Whatever is built, planted, or sown on the land of another, and the improvements or
repairs made thereon, belong to the owner of the land.  Where, however, the planter,
builder, or sower has acted in good faith, a conflict of rights arises between the owners
and it becomes necessary to protect the owner of the improvements without causing
injustice to the owner of the land.  In view of the impracticability of creating what
Manresa calls a state of "forced co-ownership," the law has provided a just and equitable
solution by giving the owner of the land the option to acquire the improvements after
payment of the proper indemnity or to oblige the builder or planter to pay for the land and
the sower to pay the proper rent.  It is the owner of the land who is allowed to exercise
the option because his right is older and because, by the principle of accession, he is
entitled to the ownership of the accessory thing. [85]

The landowner has to make a choice between appropriating the building by paying the
proper indemnity or obliging the builder to pay the price of the land.  But even as the
option lies with the landowner, the grant to him, nevertheless, is preclusive.  He must
choose one.  He cannot, for instance, compel the owner of the building to remove the
building from the land without first exercising either option.  It is only if the owner
chooses to sell his land, and the builder or planter fails to purchase it where its value is
not more than the value of the improvements, that the owner may remove the
improvements from the land.  The owner is entitled to such remotion only when, after
having chosen to sell his land, the other party fails to pay for the same. [86]

This case then must be remanded to the RTC for the determination of matters necessary
for the proper application of Article 448, in relation to Article 546, of the Civil Code. 
Such matters include the option that the Torbela siblings will choose; the amount of
indemnity that they will pay if they decide to appropriate the improvements on Lot No.
356-A; the value of Lot No. 356-A if they prefer to sell it to Dr. Rosario; or the
reasonable rent if they opt to sell Lot No. 356-A to Dr. Rosario but the value of the land
is considerably more than the improvements.  The determination made by the Court of
Appeals in its Decision dated June 29, 1999 that the current value of Lot No. 356-A is
P1,200,000.00 is not supported by any evidence on record.

Should the Torbela siblings choose to appropriate the improvements on Lot No. 356-A,
the following ruling of the Court in Pecson v. Court of Appeals [87] is relevant in the
determination of the amount of indemnity under Article 546 of the Civil Code:

Article 546 does not specifically state how the value of the useful improvements should
be determined. The respondent court and the private respondents espouse the belief that
the cost of construction of the apartment building in 1965, and not its current market
value, is sufficient reimbursement for necessary and useful improvements made by the
petitioner. This position is, however, not in consonance with previous rulings of this
Court in similar cases. In Javier vs. Concepcion, Jr., this Court pegged the value of the
useful improvements consisting of various fruits, bamboos, a house and camarin made of
strong material based on the market value of the said improvements.  In Sarmiento vs.
Agana, despite the finding that the useful improvement, a residential house, was built in
1967 at a cost of between eight thousand pesos (P8,000.00) to ten thousand pesos
(P10,000.00), the landowner was ordered to reimburse the builder in the amount of forty
thousand pesos (P40,000.00), the value of the house at the time of the trial.  In the
same way, the landowner was required to pay the "present value" of the house, a useful
improvement, in the case of De Guzman vs. De la Fuente, cited by the petitioner.

The objective of Article 546 of the Civil Code is to administer justice between the parties
involved. In this regard, this Court had long ago stated in Rivera vs. Roman Catholic
Archbishop of Manila that the said provision was formulated in trying to adjust the rights
of the owner and possessor in good faith of a piece of land, to administer complete justice
to both of them in such a way as neither one nor the other may enrich himself of that
which does not belong to him.  Guided by this precept, it is therefore the current market
value of the improvements which should be made the basis of reimbursement.  A
contrary ruling would unjustly enrich the private respondents who would otherwise be
allowed to acquire a highly valued income-yielding four-unit apartment building for a
measly amount.  Consequently, the parties should therefore be allowed to adduce
evidence on the present market value of the apartment building upon which the trial
court should base its finding as to the amount of reimbursement to be paid by the
landowner. [88] (Emphases supplied.)

Still following the rules of accession, civil fruits, such as rents, belong to the owner of the
building. [89]  Thus, Dr. Rosario has a right to the rents of the improvements on Lot No.
356-A and is under no obligation to render an accounting of the same to anyone.  In fact,
it is the Torbela siblings who are required to account for the rents they had collected from
the lessees of the commercial building and turn over any balance to Dr. Rosario.  Dr.
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 P300,000.00 as
moral damages; P200,000.00 as exemplary damages; and P100,000.00 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 P200,000.00.

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 P100,000.00.

As regards attorney's fees, they may be awarded when the defendant's act or omission has
compelled the plaintiff to litigate with third persons or to incur expenses to protect his
interest.  Because of Dr. Rosario’s acts, the Torbela siblings were constrained to institute
several cases against Dr. Rosario and his spouse, Duque-Rosario, as well as Banco
Filipino, which had lasted for more than 25 years.  Consequently, the Torbela siblings are
entitled to an award of attorney's fees and the amount of P100,000.00 may be  considered
rational, fair, and reasonable.

Banco Filipino is entitled to a writ of

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

Equally unpersuasive is Duque-Rosario’s argument that the writ of possession over Lot
No. 5-F-8-C-2-B-2-A should not be issued given the defects in the conduct of the
foreclosure sale (i.e., lack of personal notice to Duque-Rosario) and consolidation of
title (i.e., failure to provide Duque-Rosario with copies of the Certificate of Final Sale).
The right of the purchaser to the possession of the foreclosed property becomes absolute
upon the expiration of the redemption period.  The basis of this right to possession is the
purchaser's ownership of the property.  After the consolidation of title in the buyer's name
for failure of the mortgagor to redeem, the writ of possession becomes a matter of right
and its issuance to a purchaser in an extrajudicial foreclosure is merely a ministerial
function. [96]

The judge with whom an application for a writ of possession is filed need not look into
the validity of the mortgage or the manner of its foreclosure.  Any question regarding the
validity of the mortgage or its foreclosure cannot be a legal ground for the refusal to issue
a writ of possession.  Regardless of whether or not there is a pending suit for the
annulment of the mortgage or the foreclosure itself, the purchaser is entitled to a writ of
possession, without prejudice, of course, to the eventual outcome of the pending
annulment case.  The issuance of a writ of possession in favor of the purchaser in a
foreclosure sale is a ministerial act and does not entail the exercise of discretion. [97]

WHEREFORE, in view of the foregoing, the Petition of the Torbela siblings in G.R.
No. 140528 is GRANTED, while the Petition of Lena Duque-Rosario in G.R. No.
140553 is DENIED for lack of merit.  The Decision dated June 29, 1999 of the Court of
Appeals in CA-G.R. CV No. 39770, which affirmed with modification the Amended
Decision dated January 29, 1992 of the RTC in Civil Case Nos. U-4359 and U-4733 and
Pet. Case No. U-822, is AFFIRMED WITH MODIFICATIONS, to now read as
follows:

(1)   Banco Filipino is ORDERED to reconvey Lot No. 356-A to the Torbela siblings;

(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;

(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 P200,000.00 as moral
damages, P100,000.00 as exemplary damages, and P100,000.00 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.

 G.R. No. 44606, November 28, 1938 ]

VICENTE STO. DOMINGO BERNARDO, PLAINTIFF AND APPELLANT,
VS. CATALINO BATACLAN, DEFENDANT AND APPELLANT. TORIBIO
TEODORO, PURCHASER AND APPELLEE.

DECISION

LAUREL, J.:

This is an appeal taken by both the plaintiff and the defendant from the order of
September 26, 1935, hereinbelow referred to, of the Court of First Instance of Cavite in
Civil Case No. 2423.

There is no controversy as to the facts. By a contract of sale executed on July 17, 1920,
the plaintiff herein acquired from Pastor Samonte and others ownership of a parcel of
land of about 90 hectares situated in sitio Balayunan, Silang, Cavite. To secure
possession of the land from the vendors the said plaintiff, on July 20, 1929, instituted
Civil Case No, 1935 in the Court of First Instance of Cavite. The trial court found for the
plaintiff in a decision which was affirmed by this Supreme Court on appeal (G. R. No.
33017).[1] When plaintiff entered upon the premises, however, he found the defendant
herein, Catalino Bataclan, who appears to have been authorized by former owners, as far
back as 1922, to clear the land and make improvements thereon. As Bataclan was not a
party in Case No. 1935, plaintiff, on June 11, 1931, instituted against him, in the Court of
First Instance of Cavite, Civil Case No. 2428. In this case, plaintiff was declared owner
but the defendant was held to be a possessor in good faith, entitled to reimbursement in
the total sum of P1,642, for work done and improvements made. The dispositive part of
the decision reads:

"Por las consideraciones expuestas, se declara al demandante Vicente Santo Domingo

Bernardo dueno con derecho a la posesion del terreno que se describe en la demanda, y al
demandado Catalino Bataclan con derecho a que el demandante le pague la suma de
P1,642 por gastos utiles hechos de buena fe en el terreno, y por el cerco y ponos de coco
y abaca existentes en el mismo, y con derecho, ademas a retener la posesion del terreno
hasta que se le pague dicha cantidad. Al demandante puede optar, en el plazo de treinta
dias, a partir de la fecha en que fuere notificado de la presente, por pagar esa suma al
demandado, haciendo asi suyos el cerco y todas las plantaciones existentes en el terreno,
u obligar al demandado a pagarle el precio del terreno, a razon de trescientos pesos la
hectarea. En el caso de que el demandante optara por que el demandado le pagara el
precio del terreno, el demandado efectuara el pago en el plazo conveniente por las partes
o que sera fijado por el Juzgado. Sin costas."

Both parties appealed to this court (G. R. No. 87319).[1] The decision appealed from was
modified by allowing the defendant to recover compensation amounting to P2,212 and by
reducing the price at which the plaintiff could require the defendant to purchase the land
in question from P300 to P200 per hectare. Plaintiff was given by this court 30 days from
the date when the decision became final within which to exercise his option, either to sell
the land to the defendant or to buy the improvements from him. On January 9, 1934, the
plaintiff manifested to the lower court his desire "to require the defendant to pay him the
value of the land at the rate of P200 per hectare or a total price of P18,000 for the whole
tract of land." The defendant informed the lower court that he was unable to pay for the
land and, on January 24, 1934, an order was issued giving the plaintiff 30 days within
which to pay the defendant the sum of P2,212 stating that, in the event of failure to make
such payment, the land would be ordered sold at public auction "Para hacer pago al
demandante de la suma de P2,212 y el remanente despues de deducidos los gastos
legales de la venta en publica subasta sera entregado al demandante." On February 21,
1934, plaintiff moved to reconsider the foregoing order so that he would have preference
over the defendant in the order of payment. The motion was denied on March 1, 1934 but
on March 16 following the court below, motu proprio, modified its order of January 24,
"en el sentido de que el demandante tiene derecho preference al importe del terreno no
se vendiere en publica subasta, a razon de P200 por hectarea y el remanente, si acaso lo
hubiere se entregara at demandado en pago de la cantidad de P2,212 por la limpieza del
terreno y las mejoras introducidas en el mismo por el citado demandado." On April 24,
1934, the court below, at the instance of the plaintiff and without objection on the part of
the defendant, ordered the sale of the land in question at public auction. The land was
sold on April 5, 1935 to Toribio Teodoro, the highest bidder, for P8,000. In the certificate
of sale issued to said purchaser on the very day of sale, it was stated that the period of
redemption of the land sold was to expire on April 5, 1936. Upon petition of Toribio
Teodoro the court below ordered the provincial sheriff to issue another certificate not
qualified by any equity of redemption. This was complied with by the sheriff on July 30,
1935. On September 18, 1935, Teodoro moved that ha be placed in possession of the land
purchased by him. The motion was granted by order of September 26, 1935, the
dispositive part of which is as follows:
"Por tanto, se ordena al Sheriff Provincial de Cavite ponga a Toribio Teodoro en posesion
del terreno comprado por el en subasta publica y por el cual se le expidio certificado de
venta definitiva, reservando al demandado su derecho de ejercitar una accion ordinaria
para reclamar del demandante la cantidad de P2,212 a que tiene derecho por la limpieza y
mejoras del terreno y cuya suma, en justicia y equidad, debe ser descontada y deducida
de la suma de P8,000 que ya ha recibido el demandante."

The Civil Code confirms certain time-honored principles of the law of property. One of
these is the principle of accession whereby the owner of property acquires not only that
which it produces but that which is united to it either naturally or artificially. (Art. 353.)
Whatever is built, planted or sown on the land of another, and the improvements or
repairs made thereon, belong to the owner of the land (art. 358). Where, however, the
planter, builder, of 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 coownership" (vol. 3, 4th ed., p. 213), 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 (art 361). 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 (3 Manresa, 4th ed., p. 213). In the case before us, the plaintiff, as owner of the
land, chose to require the defendant, as owner of the improvements, to pay for the land.

The defendant dates that he is a possessor in good faith and that the amount of P2,212 to
which he is entitled has not yet been paid to him. Therefore, he says, he has a right to
retain the land in accordance with the provisions of article 453 of the Civil Code. We do
not doubt the validity of the premises stated. "Considera la ley tan sagrada y legitima la
deuda, que, hasta que sea pagada, no consiente que la cosa se restituya al vencedor." (4
Manresa. 4th ed., p., 304.) We find, however, that the defendant has lost his right of
retention. In obedience to the decision of this court in G. R. No. 37319, the plaintiff
expressed his desire to require the defendant to pay for the value of the lard. The said
defendant could have become owner of both land and improvements and continued in
possession thereof. But he said he could not pay and the land was sold at public auction
to Toribio Teodoro. The law, as we have already said, requires no more than that the
owner of the land should choose between indemnifying the owner of the improvements
or requiring the latter to pay for the land. When he failed to pay for the land, the
defendant herein lost his right of retention.

The sale at public auction having been asked by the plaintiff himself (p. 22, bill of
exceptions) and the purchase price of P8,000 received by him from Toribio Teodoro, we
find no reason to justify a rupture of the situation thus created between them, the
defendant-appellant not being entitled, after all, to recover from the plaintiff the sum of
P2,212.

The judgment of the lower court is accordingly modified by eliminating therefrom the
reservation made in favor of the defendant-appellant to recover from the plaintiff the sum
of P2,212. In all other respects, the same is affirmed, without pronouncement regarding
costs. So ordered.

[ G.R. No. L-21783, March 25, 1970 ]

PACIFIC FARMS, INC., PLAINTIFF-APPELLEE, VS. SIMPLICIO G.
ESGUERRA, ET AL., DEFENDANTS, CARRIED LUMBER COMPANY,
DEFENDANT-APPELLANT.

R E S O L U T I O N

RUIZ CASTRO, J.:

Subject of this resolution is a motion filed by the plaintiff-appellee Pacific Farms,

Inc. for reconsideration of our decision of November 29, 1969.

Briefly stated, the plaintiff-appellee's first argument is that it should not have been
found liable for the payment of the unpaid portion of the procurement price of the
lumber and construction materials furnished by the appellant to its predecessor-in-
interest, the Insular Farms, Inc., because it was a purchaser for value and in good faith
of the six buildings in question. The flaw in this argument lies in its assumption that the
reason we held the appellee liable is that it was not a buyer in good faith and for value,
which is incorrect. When we applied Article 447 of the Civil Code by analogy to this case,
we did so on the assumption that the plaintiff-appellee was in good faith. Thus, after
quoting said article, we stated:

"Although it does not appear from the records of this case that the land upon which the
six buildings were built is owned by the appellee, nevertheless, that the appellee claims
that it owns the six buildings constructed out of the lumber and construction materials
furnished by the appellant, is indubitable. Therefore, applying Article 447 by analogy, we
perforce consider the buildings as the principal and the lumber and construction
materials that went into their construction as the accessory. Thus, the appellee, if it
does own the six buildings, must bear the obligation to pay for the value of the said
materials; the appellant - which apparently has no desire to remove the materials, and,
even if it were minded to do so, cannot remove them without necessarily damaging the
buildings - has the corresponding right to recover the value of the unpaid lumber and
construction materials." (Decision, pp. 4-5; italics supplied)

Indeed, because we assumed that the appellee was in good faith, we did not pronounce
it liable for the reparation of damages but only for the payment of the unpaid price of
the lumber and construction materials due to the appellant as unpaid furnisher thereof.
Based on this same assumption, we likewise held that the appellant has no right to
remove the materials but only to recover the value of the unpaid lumber and
construction materials. Thus, since the appellee benefited from the accession, i.e., from
the lumber and materials that went into the construction of the six buildings, it should
shoulder the compensation due to the appellant as unpaid furnisher of materials,
pursuant to the rule we cited in our decision that compensation should be borne by the
person who has been benefited by the accession.

Under the overall environmental circumstances of the case, considering that although
the appellee was in a better position to protect its own interest it took no action to
intervene in the suit filed by the appellant against the Insular Farms, Inc. or to hold the
latter to account therefor, notwithstanding that it concededly acquired knowledge, after
its purchase from the Insular Farms, Inc., on March 21, 1958 of the six buildings in
question, of the filing and pendency of the appellant's suit for payment of the unpaid
balance of the price of the lumber and construction materials delivered to the Insular
Farms, Inc. and used in the construction of the said buildings, the Court believes that its
decision upholding the sheriff's sale of the six buildings but granting the appellee the
option of redeeming the same by paying to the appellant the unpaid balance with
interest owing to it as supplier of the construction materials, is completely in
consonance w^th justice and equity.

ACCORDINGLY, the plaintiff-appellee's motion for reconsideration dated December 12,

1969 is hereby denied.

SECOND DIVISION
 [ G.R. Nos. 99338-40, February 01, 1993 ]
HEIRS OF NICOLAS Y. OROSA, (REPRESENTED HEREIN BY THEIR
ATTORNEY-IN-FACT, RICARDO Q. OROSA), PETITIONERS, VS. THE
HON. EUTROPIO MIGRINO, PRESIDING JUDGE, REGIONAL TRIAL
COURT OF PASIG, M.M. BRANCH 151 AND GOLDENROD, INC.,
RESPONDENTS.

DECISION

FELICIANO, J.:

In Maria Mayug Vda. de Cailles v. Dominador Mayuga, et. al., [1] the Court
affirmed the decision of the Court of Appeals in C.A.-G.R. No.31887-R, confirming
ownership over a fifty-three (53) hectare parcel of land located in Las Pinas, Rizal, more
particularly referred to as Lot 9 Psu-11411 Amd-2, favor of one Dominador Mayuga. The
Court also extended the benefit of such confirmation to the latter's successor-in-
interest, the late Nicolas Orosa.

After the case was remanded to Branch 151 of the Regional Trial Court, Pasig, where it
was originally docketed in 1958 as Land Registration Case ("LRC") No. 2839, the heirs of
Nicolas Orosa (petitioners herein) moved for execution of judgment. This motion was
granted by the lower court in its Order dated 25 October 1989, directing the Land
Registration Authority ("LRA") to submit the property's amended technical description
for approval.[2]

However, the LRA did not comply with said order because, among others, its records
indicated that the property had previously been decreed in favor of one Jose T.
Velasquez, to whom was issued Original Certificate of Title No. 6122. [3]

On 10 September 1990, Goldenrod, Inc. ("Goldenrod") filed a motion for leave to

intervene in the execution proceeding, alleging an interest in the property which is the
subject matter of LRC No. 2839.[4]

Petitioners opposed Goldenrod's motion, without success. The lower court permitted
Goldenrod to file its pleading in intervention through its Order dated 7 December 1990.
Petitioners' motion for reconsideration therefrom was likewise denied in an Order dated
11 April 1991.[5]

Hence this Petition for Certiorari and Prohibition.

After reviewing the comment required of private respondent Goldenrod, the Court
resolved to give due course to the petition and to issue a temporary restraining order to
enjoin the public respondent lower court from taking further action in LRC No. 2839.
Upon filing of petitioner's reply to said comment, the case was submitted for decision.

Two (2) ultimate issues are posed for the Court's consideration in this case: 1) whether
Goldenrod has shown in its pleadings in intervention a sufficient legal interest in the
land which is the subject matter of LRC No. 2839; and 2) whether the legal interest
actually shown by Goldenrod over the land can be protected in a proceeding separate
from LRC No.2839.

In respect of the first issue, the Court must observe that the lower court had evaded
resolving this matter before permitting Goldenrod's intervention:
"The Orosa heirs also contend that the purported intervenor failed to establish its
alleged legal interest in these proceedings to the subject parcel of land. Precisely, this
case has to be set for hearing to enable Goldenrod to prove its claim to the land in
question."[6] (Underscoring supplied)
As the Court understands it, Goldenrod attempts to augment the ruling of the
lower court by showing in its pleadings in intervention, as well as in its comment before
the Court, the existence of a legal interest in the land sufficient to justify its
intervention.

Goldenrod claims that in 1977, during the pendency of this case before the Court in G.R.
No. L-30859, Delta Motors Corporation (Delta) acquired for value the contingent rights
of Nicolas Orosa over the property, as well as the conflicting claims thereto of one Jose
Velasquez.[7] In 1980, the land registration court trying Jose Velasquez' claims in LRC No.
N-5416 excluded therefrom the land referred to as Lot 9 Psu-11411 Amd-2 in G.R. No. L-
30859.[8] Meanwhile, Delta somehow managed to obtain transfer certificates of titles
over the land and sold this acquisition to Goldenrod in 1987.[9] The latter then succeeded
in obtaining issuance in its favor of Transfer Certificates of Title Nos. 4893 and 4901,
whose technical descriptions overlapped "big portions" of the land referred to as Lot 9
Psu-11411 Amd-2 in G.R. No. L-30859.[10] In February 1989, Goldenrod sold the land
covered by said transfer certificates of title to a consortium composed of Fil Estate
Management Inc., Arturo Y. Dy, Megatop Realty Development Inc., Peaksun Enterprises
and Export Corporation, and Elena D. Jao ("Consortium"). [11] The contract of sale
contained an undertaking on Goldenrod's part to "defend the title of the VENDEES to
the property against claims of any third person whatsoever."[12] It is on the basis of this
stipulation that Goldenrod seeks to intervene in the execution proceedings of LRC No.
2839.

Taking Goldenrod's own admissions at their face value, it is quite apparent that
whatever direct and actual legal interest it may have had over the land had been
disposed of by it for value in favor of the consortium in 1989 and that whatever residual
legal interest in the property can be premised on Goldenrod's contractual undertaking,
actually an express warranty against eviction, is expectant or contingent in nature.
Presently, Goldenrod has no legal interest in the property and its warranty can only be
enforced by the consortium if the latter is dispossessed of the land by virtue of a proper
action instituted by the Orosa heirs as registered owners thereof. [13]

But, the legal interest which entitles a person to intervene in a suit must be actual and
material, direct and immediate. A party seeking to intervene in a pending case must
show that he will either gain or lose by the direct legal operation and effect of a
judgment.[14]

In the present case, Goldenrod has failed to meet this criteria and the lower court
gravely abused its discretion in permitting intervention after having overlooked this
matter.

One of the other reasons invoked by the public respondent in permitting intervention at
the execution stage of LRC No. 2839, follows:
"The Orosa heirs contend that intervention can not be allowed at this stage of
the proceedings in this case. They forget that in a land registration case even when the
decree has been issued, the case can be re-opened within (1) year from issuance of said
decree to enable any prejudiced party to present evidence in support of his claim." [15]
 It appears that the lower court cited Section 32 of P.D. 1529, [16] permitting the
reopening of a decree of registration within one year after its entry, if the same was
procured through actual fraud and a person is thereby deprived of any interest over the
affected land.

The difficulty with this view is that, as earlier noted, Goldenrod had not shown any
actual interest in the land of which it could have been deprived, on the basis of an actual
or extrinsic fraud perpetrated by petitioners in the course of procuring their decree of
confirmation. Goldenrod had merely alleged, rather ambiguously, a cause of action
against petitioners in that they "suddenly breached and disregarded the 1977
Agreement" (the sale between Nicolas Orosa and Delta). [17] Even the public respondent
made no finding that Goldenrod was the apparent victim of an actual fraud. Hence its
invocation of the remedy provided in Section 32 of P.D. 1529 was bereft of basis.

The action of the lower court in permitting Goldenrod's intervention at this late stage of
the proceedings in LRC No. 2839 is also flawed by another, more serious defect. It must
be remembered that upon entry of the Court's judgment in G.R. No. L-30859, the
confirmation of a registerable title, and the consequent adjudication of ownership over
Lot 9 Psu-11411 Amd-2, in favor of petitioners' predecessors-in-interest became a final
and settled matter.[18] Such entry of judgment operated ipso facto to divest the lower
court of its general jurisdiction to act in LRC No. 2839, save for the limited matter of
supervising the process of executing the Court's decision. The public respondent simply
cannot, as it appears to be trying to do in this case, interpret or reverse the implication
of this Court's ruling that petitioners are entitled to a Torrens title over Lot 9 Psu-11411
Amd-2, just because Goldenrod seeks to recall execution by making a supervening
allegation that petitioners are no longer the owners thereof. [19]

Goldenrod attempted to broaden the jurisdiction of the lower court, so as to enable the
latter to take cognizance of its motion for intervention, by invoking the Court's ruling
in Suson v. Court of Appeals:[20]
"It cannot be overlooked that the hearing before the respondent court on
the motion for demolition (underscoring supplied by the Court) was in connection with
the implementation or execution of a final judgment in Civil Case No. R-14351.
Petitioner was precisely given an opportunity to intervene in order to guide the court in
disposing of private respondent's motion for demolition in the light of petitioner's claim
that his house was erected on the disputed lot (underscoring supplied by the Court), and
yet, he was not an original party to the action. Petitioner was thus given a chance to
raise and prove his claim of ownership over a part of the lot in question (underscoring
supplied by the Court), but he ignored such opportunity. He cannot now complain that
he was denied due process. 'A case in which an execution has been issued is regarded as
still pending so that all proceedings on the execution are proceedings in the suit. There is
no question that the court which rendered the judgment has a general supervisory
control over its process of execution, and this power carries with it the right to
determine every question of fact and law which may be involved in the
execution.'" (Underscoring supplied by Goldenrod)
But it is evident that Goldenrod's reliance upon the Suson case is misplaced
because the intervenor therein had a direct and actual legal interest in the property
sought to be recovered by the prevailing party at execution. Consequently, the
executing court thereat had to accord the intervenor a full hearing on whatever claim he
might seek to make, disregarding the rules of procedure limiting intervention to the
period before or during a trial of a case,[21] in the interest of observing due process as an
aspect of substantial justice.

Here, these considerations do not obtain and the lower court, in permitting
intervention, caused needless complication, expense and delay in the execution
proceedings of LRC No. 2839, to the prejudice of petitioners' right to a speedy
disposition thereof.

Turning to the second issue posed in this case, given the remote and contingent nature
of Goldenrod's legal interest over the real property which is the subject matter of LRC
No. 2839, the Court believes that Goldenrod can and should, protect such interest in a
separate proceeding.

The public respondent invoked the following to support its view that the execution
stage of the land registration proceeding was the proper venue within which Goldenrod
can protect its interest in the property:[22]
"Movants also contend that the granting of leave to intervene will unduly delay
the disposition of this case.  The adjudication of Goldenrod, Inc.'s interest in the subject
parcel of land in the instant case would be for the benefit not only of Goldenrod, Inc.
itself, (but) also of the Orosa heirs, because thereafter there will be no cloud in the title
of the party to whom the ownership of said parcel of land may be adjudicated.

Finally, the movants contend that the intervenor's interest can be protected in a
separate proceedings (sic). The Court doubts if this is true. In any event, as above
adverted to, everybody will be benefited by this Court adjudicating in this case the claim
of the intervenor." (Underscoring supplied)
It would appear that the public respondent premised its ruling solely on the belief
that a cloud had descended on the title over the real property which is the subject
matter of LRC No. 2839 and that this cloud had to be removed.

This justification does not persuade. Under Article 447 of the Civil Code, [23] the plaintiff
in an action for quieting of title must at least have equitable title to or an interest in the
real property which is the subject matter of the action. Evidence of Goldenrod's capacity
on this point is inexistent because Goldenrod is not asserting a claim to the property.
[24]
 On the contrary, it had admitted having alienated its interest in the land referred to
as Lot 9 Psu-11411 Amd-2 to the consortium. Thus, Goldenrod is not an interested party
capable of instituting an action to quiet title, either by intervening in LRC No. 2839 or by
instituting a separate action. The right to commence such a separate action pertains to
its Vendee, if the latter wishes to defend the validity of its 1987 purchase from
Goldenrod and to hold the Vendor Goldenrod liable on its warranty of title.

WHEREFORE, the Petition for Certiorari and Prohibition is hereby GRANTED. The Orders

of the public respondent dated 7 December 1990 and 11 April 1991, being issued with
grave abuse of discretion amounting to excess of jurisdiction, are
hereby ANNULLED and SET ASIDE. The public respondent's Order dated 25 October
1989 is hereby REINSTATED and the Temporary Restraining Order issued by the Court in
this case is correspondingly LIFTED. In view of the long pendency of LRC No. 2839, the
public respondent is hereby enjoined to terminate the proceeding as soon as possible by
completing the execution of the Court's Decision in G.R. No. L-30859 with all deliberate
speed. This Decision is immediately executory. No costs.
SO ORDERED.

[ G.R. No. L-175, April 30, 1946 ]

DAMIAN IGNACIO, FRANCISCO IGNACIO AND LUIS IGNACIO,
PETITIONERS, VS. ELIAS HILARIO AND WIFE DIONISIA DRES, AND
 FELIPE NATIVIDAD, JUDGE OF THE COURT OF FIRST INSTANCE OF
PANGASINAN, RESPONDENTS.

DECISION

MORAN, C.J.:

This is a petition for certiorari arising from a case in the Court of First Instance of
Pangasinan between the herein respondents Elias Hilario and his wife Dionisia Dres as
plaintiffs, and the herein petitioners Damian, Francisco and Luis, surnamed Ignacio; as
defendants, con cerning the ownership of a parcel of land, partly rice-land and partly
residential. After the trial of the case, the lower Court presided over by Honorable
Alfonso Felix, rendered judgment holding plaintiffs as the legal owners of the whole
property but conceding to defendants the ownership of the houses and granaries built
by them on the residential portion with the rights of a possessor in good faith, in
accordance with article 361 of the Civil Code. The dispositive part of the decision, hub of
this controversy, follows:

"WHEREFORE, judgment is hereby rendered declaring:

"(1) That the plaintiffs are the owners of the whole property described in transfer
certificate of title No. 12872 (Exh. A) issued in their name, and entitled to the possession
of the same:

"(2) That the defendants are entitled to hold the possession of the residential lot until after
they are paid the actual market value of their houses and granaries erected thereon, unless
the plaintiffs prefer to sell them said residential lot, in which case defendants shall pay
the plaintiffs the proportionate value of said residential lot taking as a basis the price paid
for the whole land according to Exh. B; and

"(3) That upon defendants' failure to purchase the residential lot in question, said
defendants shall remove their houses and granaries after this decision becomes final and
within the period of sixty (60) days from the date that the court is informed in writing of
the attitude of the parties in this respect.

"No pronouncement is made as to damages and costs.

"Once this decision becomes final, the plaintiffs and defendants may appear again before
this court for the purpose of determining their respective rights under article 361 of the
Civil Code, if they cannot come to an extra-judicial settlement with regard to said rights."
Subsequently, in a motion filed in the same Court of First Instance but now presided over
by the herein respondent Judge Honorable Felipe Natividad, the plaintiffs prayed "for an
order of execution alleging that since they chose neither to pay defendants for the
buildings nor to sell to them the residential lot, said defendants should be "ordered to
remove the structure at their own expense and to restore plaintiffs in the possession of
said lot. Defendants objected to this motion which, after hearing," was granted by Judge
Natividad. Hence, this petition by defendants praying for (a) a restraint and annulment of
the order of execution issued by Judge Natividad: (b) an order to compel plaintiffs to pay
them the sum of P2,000 for the buildings, or sell to them the residential lot for P45; or
(c), a rehearing of the case for a determination of the rights of the parties upon failure of
extra-judicial settlement.

The judgment rendered by Judge Felix is founded on articles 361 and 453 of the Civil
Code which are as follows:

"Art. 361. The owner of land on which anything has been built, sown or planted in good
faith; shall have the right to appropriate as his own the work, sowing or planting, after the
payment of the indemnity stated in Articles 453 and 454, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the proper rent.

"Art. 453. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until such expenses are made good to him.

"Useful expenses shall be refunded to the possessor in good faith with the same right of
retention, the person who has defeated him in the possession having the option of
refunding the amount of the expenses or paying the increase in value which the thing may
have acquired in consequence thereof."

The owner of the building erected in good faith on a land owned by another, is entitled to
retain the possession of the land until he is paid the value of his building, under article
453. The owner of the land, upon the other hand, has the option, under article 361, either
to pay for the building or to sell his land to the owner of the building. But he cannot, as
respondents here did, refuse both to pay for the building and to sell the land and compel
the owner of the building to remove it from the land where it is erected. He is entitled to
such remotion only when, after having chosen to sell his land, the other party fails to pay
for the same. But this is not the case before us.

We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners

to remove their buildings from the land belonging to plaintiffs-respondents only because
the latter chose neither to pay for such buildings nor to sell the land, is null and void, for
it amends substantially the judgment sought to be executed and is, furthermore, offensive
to articles 361 and 453 of the Civil Code.
There is, however, in the decision of Judge Felix ,a question of procedure which calls for
clarification, to avoid uncertainty and delay in the disposition of cases. In that decision,
the rights of both parties are well defined under articles 361 and 453 of the Civil Code,
but it fails to determine the value of the buildings and of the lot where they are erected as
well as the periods of time within which the option may be exercised and payment should
be made, these particulars having been left for determination apparently after the
judgment has become final. This procedure is erroneous, for after the judgment has
become final, no additions can be made thereto and nothing can be done therewith except
its execution. And execution cannot be had, the sheriff being ignorant to how, for how
much, and within what time may the option be exercised, and certainly no authority is
vested in him to settle these matters which involve exercise of judicial discretion. Thus
the judgment rendered by Judge Felix has never become final, it having left matters to be
settled for its completion in a subsequent proceeding, matters which remained unsettled
up to the time the petition is filed in the instant case.

For all the foregoing, the writ of execution issued, by Judge Natividad is hereby set aside
and the lower court ordered to hold a hearing in the principal case wherein it must
determine the prices of the buildings and of the residential lot where they are erected, as
well as the period of time within which the plaintiffs-respondents may exercise their
option either to pay for the buildings or to sell their land, and, in the last instance, the
period of time within which the defendants-petitioners may pay for the land, all these
periods to be counted from the date of judgment becomes executory or unappealable.
After such hearing, the court shall render a final judgment according to the evidence
presented by the parties.

The costs shall be paid by plaintiffs-respondents.

[ G.R. No. L-14043, April 16, 1959 ]

BELEN UY TAYAG, ET AL., PETITIONERS, VS. ROSARIO YUSECO, ET
AL., AND HON. ANTONIO CANIZARES, ETC., RESPONDENTS.

DECISION

MONTEMAYOR, J.:

This is a long drawn out litigation that has lasted many years; in its first phase,  it
has  involved a  long decision by  the  Court of Appeals and an  eight-page  decision  of
this Tribunal;  and in  its second  phase, an  eleven-page decision of the same Court of
Appeals and a resolution of this Tribunal dismissing a petition for certiorari to review
said last decision  of the Court of Appeals.   The third phase of the litigation is the
present petition for mandamus to compel the lower court to approve the record on
appeal filed by petitioners, wherein they tried to appeal the order of  execution  of the
trial court  to implement the  last decision of the Court of Appeals.

For a clear and comprehensive statement of the first part of the history of this case, as
well as the issues involved therein  and the determination thereof, we  can  do no better
than reproduce  a pertinent portion  of the  well written second  decision of the Court
of  Appeals,  penned by Justice Felipe Natividad,  based  in part  on our aforementioned
decision  in  the first phase of the litigation:
"This case is once more before this Court on the appeal taken by the plaintiffs
from an order of the  Court of First Instance of Manila fixing the value of the two 
buildings involved therein  at P50,000 and providing that the plaintiffs  should  pay  that 
amount to  the defendants  if they desire  to  appropriate  said buildings.

"The  records  disclose that prior  to  the year  1930  defendant Joaquin C.  Yuseco,  an 
attorney-at-law, had been rendering without compensation  professional services to
Maria  Lim.  To  show  her appreciation of such services,  Maria Lim offered  to  Joaquin
C. Yuseco and his wife, defendant  Rosario Yuseco, for them to build a  house thereon,
Lots 11-A and  11-B, Block 2251, of the Hacienda de San Lazaro, registered in her  name
under  Transfer Certificate of Title Nos. 36400 and 36401,  Office of  the Register of
Deeds of the City  of Manila. The Yusecos accepted the offer,  and in the middle  part of
that year they built a dwelling  house and an annex for garage and servant  quarters on
said  lots.  To legalize  the possession of said lots by the Yusecos, Maria Lim and the
Yusecos executed  a  contract of lease covering them, which  was to run  for a  period of
five years,  with a yearly rental of  P120.

"On  November  29,  1945,  a few days  before her death,  Maria Lim sold the  two lots 
above referred to to her daughter, plaintiff Belen  Uy Tayag,  married to  Jesus B.  Tayag,
for  the sum of P4,000.  In  the year 1946,  the Tayags asked the Yusecos to remove
their  house from the lots, or else  pay to them a monthly rent of P120 therefor.  The
latter  refused.  Because of this  attitude of  the Yusecos, the Tayags brought against the
latter in the Municipal Court of the city of Manila an action of ejection for the restitution
of the lots  to them and the recovery of a monthly  rental of P500 from November 30,
1945, up to the date of the restitution.  Judgment was rendered in that court in favor  of
the plaintiffs.  The defendants appealed.

"The case was duly  tried in the  Court  of First Instance of Manila.  After such trial, that
court rendered judgment adjudicating to  the plaintiff Belen Uy Tayag the possession  of
the two lots involved in the action, with right to appropriate the two  building is existing
thereon  upon  payment  to the  defendants  of their value, which  it assessed at the sum
of  P50,000, and providing that should the plaintiffs  fail to pay this  amount within  90 
days after  the decision shall have become  final, the defendants  shall have the  right to 
purchase said lots for the sum  of  P10,000  to  be paid within 90 days from the date the
plaintiffs  shall have failed  to buy  the buildings.  From this judgment,  the plaintiffs
appealed.

"The Court of Appeals, finding that the defendants were possessors of the lots in good
faith, affirmed the judgment of the  Court of First Instance of  Manila.   Not satisfied with
this judgment, the plaintiffs appealed  therefrom  by  certiorari to  the  Supreme  Court.  
The latter, after due hearing, rendered judgment,  the dispositive  part of which  reads 
as  follows:

"Affirming the decision of the Court  of Appeals in  so  far as  it finds  and declares 
respondents to  be  possessors in  good  faith, let this case be remanded to  the  trial
court for further  proceedings,  particularly to  give an  opportunity to plaintiffs-
petitioners to  exercise  their  choice  and  option;  and for  purpose  of   said choice and 
option  the trial court  will  admit evidence  and make a  finding as to the  amount  of the
useful expenditures  or   "the increase in  value which the thing  has acquired by reason
thereof", under Art.  453  of the  old  Civil  Code, to be  refunded  or   paid by  the
petitioners should they choose to appropriate the buildings; "the  value  of the  land"
under Art. 361  of the same  Code,  to be  paid by  the  defendants-respondents in case
plaintiffs-petitioner? elect  to compel  them  to  buy the land.   No costs."

"Upon  the case being  remanded to the Court  of First Instance, of  Manila,  the latter, 
in consonance  with the  Directive  of the Supreme  Court, issued  on July 11,  1956,  an 
order requiring the plaintiffs to make  their  choice in  writing within 10 days whether
they  would  purchase the buildings erected on the lots,  or  allow the defendants to buy
said lots, and set the case for  hearing on August 3, 1956, for the reception of the
evidence of the parties regarding the value of said  lots and  buildings.  Complying with
this order, on  July 20, 1956, the plaintiffs, through counsel, filed  a  manifestation 
stating that

"they  are not willing  to sell the  lot involved in  this  case, but that they are
willing to appropriate the building erected thereon if  its valuation  is  as it should be and
is  properly and fairly determined pursuant to, and  in accordance with the  evidence
and the  law."

On August  3, 1956, when the case was  called for hearing, the  trial court, in  open
court,  issued the following order:

'Considering  that  choice  made by  the plaintiffs, the  Court is of the opinion that
the next step now is to adduce  evidence in  connection  with the value of the buildings
erected on the  land pursuant to the  dispositive  part  of the decision of  the Supreme
Court.  And the  Court believes that under the circumstances since the  defendants will
be the  sellers,  they have  the burden  of proving the value  of the buildings  which 
belong to  them, giving the plaintiffs  opportunity to offer their own  evidence as
rebuttal. That is the ruling of the Court.'

The plaintiffs  asked for a  reconsideration of this order, and  for the issuance of another
allowing them  to  adduce evidence on  the value of the buildings as well as the lots.  
This motion was denied.

"The case was  finally heard  in, the Court of First Instance of Manila on  August  23  and 
24,  1956.   Evidence was  presented in said hearings by  the plaintiffs  and the
defendants.  The evidence of the plaintiffs tends to show that the value  of the  two
buildings erected on the lots in question cannot  be more than P40,000.  That of the 
defendants,  on the other  hand,  establishes that the value of the chalet erected on the
lots was  from P45,000 to P50.000,  and of the garage and dwelling house, from P5.000 
to P6,000.  Upon  the evidence thus submitted, the trial court, in its order of August  28,
1956, fixed the reasonable value  of the two buildings on the lots at P50,000, and
ordered that  that  amount  should  be  paid  by  the plaintiffs to the  defendants  if they 
desire  to  appropriate said buildings.  This is the  order  appealed from.

"Appellants concede that the fact that the appellees were possessors in good faith of
the lots in  question is res judicata between  the parties.  They contend,  however, first, 
that the trial court erred in limiting the  reception of the evidence  to the value of the
buildings erected  on the lots in  question, instead of admitting evidence  on the value of
both  said lots and buildings; and, second,  that the trial court erred in assessing at 
P50,000  the  value of the  two buildings on said  lots.

"1.  Appellants contend under the first proposition that the decision of the Supreme
Court of October 24, 1955, affirming the finding of the Court of Appeals that the
appellees  were possessors of the lots in question in good faith and  ordering the
remand of the case to the court of origin,  contemplates the reception of evidence   as
to the values of  both said lots' and the buildings  existing thereon irrespective of the
choice and option  the  appellants  may exercise in the premises, and,  consequently, the
trial court, in limiting  the reception of  evidence on the value of  the buildings, failed to
fully implement the  instructions of the Supreme Court.

"We do not  share appellants'  view.  The pertinent part of  the decision of the Supreme 
Court of October 24, 1955, reads as follows:

" '* * * and   for  purposes   of  said  choice  and  option   the trial court will admit
evidence and make a  finding as to the amount of  the useful expenditures  or  "the 
increase in  value  which the thing has  acquired  by reason . thereof",  under Art. 453:
of  the old  Civil Code, to be  refunded or paid by the petitioners should they choose to
appropriate the  buildings;  "the value of the land" under  Art. 361  of the same Code, to
be paid by the defendants-respondents in  case plaintiffs-petitioners  elect to compel
them to buy the land.'

"It will be noted that the directive made in the above decision is in  alternative. The
clause having reference to the admission of evidence regarding  the value  of the
buildings is separated  by a semi-colon from the clause  referring to the value  of the 
lots on which said buildings are erected; and the first clause ends with tho phrase 'to be
refunded or paid to the petitioners should they choose to appropriate  the  buildings',
while the second clause  terminates with  the phrase 'to be paid by the defendants
respondents  in  case plaintiffs-petitioners  elect  to compel  them  to  buy  the  land.' It
would seem clear, therefore,  from the language of the decision  that evidence as to the
value of  said buildings should  be admitted' only if the appellants choose to appropriate 
the buildings, and that, in case the appellants  should elect to compel the  appellees to
buy the lots,  then  evidence  concerning  the value  of said  lots must be admitted. This,
in  our opinion, is the most sensible construction that could be given to the decision
above referred  to.  Any other construction would bring about unnecessary confusion  in
the evidence, to say nothing of the valuable time  of the Court that  will necessarily be
wasted. For, it stands  to  reason, that  if the appellants chose not to  sell the lots  to  the
appellees and  to  appropriate  the buildings, which cannot be  ordered removed by  the 
builders, the thing in order would be the reception of evidence having reference to the
value of  said buildings  only.  Evidence as to  the value of the lots  would  be
superfluous, impertinent  and immaterial.   This was what the trial court did.  We,
therefore, find  the action of the trial court complained  of in accordance with law." * *
*
Under  the second  decision of  the Court of  Appeals,  the value of the two
buildings in  question fixed by  the trial court at P50,000 was reduced to P47,500.   With
that modification, the decision of the trial court was affirmed.   As already stated,
petitioners herein filed with us a petition for  certiorari to  review said decision  of the
Court  of Appeals, but we dismissed said petition for lack of merit. In other words, we
found said decision to be correct.

When said  decision  finally reached  the  trial  court, the latter issued  the corresponding
writ of  execution to collect  from petitioners the sum of P47,500 for the  buildings  in
litigation.   Petitioners protested the  writ of execution,  claiming  that  it varied the 
terms  of the  final decision, and  upon denial of their petition for reconsideration, tried
to appeal therefrom by preparing the corresponding record  on appeal.  The  trial  court
refused to approve the record on  appeal, saying that the order for the writ of execution
issued by it was fully in accordance with the  terms of the decision.   Hence, the present
petition  for  mandamus  to  compel the trial  court  to elevate the case to us on appeal.

We are satisfied that the trial court' acted correctly in ordering  the  writ of execution  to
issue.  The  main contention of herein petitioners is  that they still  retain the right of
option, that is to say, to make a choice of either buying the house or compelling  the 
owners thereof to buy the land; and that  furthermore, even if they already had made
that choice, nevertheless, they cannot be compelled to pay the price fixed by the courts
for the purchase of  the  said houses, because of their inability to  pay the said  price. 
We  find  both  arguments   untenable.  The question of whether petitioners had  finally 
made their choice,  namely, to buy the houses because they were  unwilling to sell the
land, was directly in issue before the Court of Appeals which definitely decided that
petitioners had made their choice not to sell their  land but to buy the houses built
thereon.   As we have  already said, by our refusal to review said decision of the Court of
Appeals, we agreed with the said court on its stand on this point; consequently, the trial
court was fully warranted in limiting the presentation  of evidence to the value of the
said houses, not of the land.

As  regards the alleged inability of petitioners to pay the value  of the buildings finally
fixed by the courts at P47,500, claimed by them to be a good reason for not compelling
them to buy the buildings,  we cannot sanction  said theory. Otherwise, were that claim
or contention to be sustained, and if  petitioners were allowed to change their mind,
repudiate  their choice made in court not to sell the land but to buy the buildings, and
then  compel the owners of the houses, respondents herein, instead to buy land, then
what if respondents also claimed  inability to pay the price of the land, claiming that it is
also a good and valid reason for not  compelling them  to make the  purchase?  How
would this litigation end, if it ever would end?

We hold that once a party, in conformity with a court decision,  has  made his choice,
and has duly  informed the court of said  choice,  and  is accordingly  ordered to comply 
with the  same by  buying the  building erected on  his land and pay the value thereof
fixed by the courts, that duty is converted into a money obligation which can be  
enforced by execution,  regardless of the unwillingness and alleged inability of the party
concerned to  pay the amount.   Here there is a final decision of the petitioners to buy
the houses and pay the value thereof.  If petitioners were ready, willing and able to pay
the amount, there would be  no need for execution.  It is precisely because they are
unwilling and allegedly unready and unable to pay the sum, that  execution issues.  That
is part of  the judicial  machinery  of due process in  action,  and  we find nothing wrong
in it.

As to the alleged absence in the order of execution for the houseowners to make the
transfer of  the houses to the petitioners, that is to be understood, that upon  full
payment of the price of the  houses, the respondents herein will make and  execute the
corresponding deed of transfer.

In  view  of the  foregoing, the petition for mandamus is  hereby denied,  with costs. 
The  writ of preliminary injunction heretofore issued is hereby ordered dissolved.
 THIRD DIVISION
[ G.R. No. 72876, January 18, 1991 ]
FLORENCIO IGNAO, PETITIONER, VS. HON. INTERMEDIATE
APPELLATE COURT, JUAN IGNAO, SUBSTITUTED BY HIS LEGAL
HEIRS, AND ISIDRO IGNAO, RESPONDENTS.

DECISION

FERNAN, C.J.:

In this petition for review by certiorari, petitioner seeks the reversal of the
decision of the Intermediate Appellate Court (now Court of Appeals) affirming in
toto the decision of the Court of First instance of Cavite, ordering petitioner Florencio
Ignao to sell to private respondents Juan and Isidro Ignao, that part of his property
where private respondents had built a portion of their houses.

The antecedent facts are as follows:

Petitioner Florencio Ignao and his uncles private respondents Juan Ignao and Isidro
Ignao were co-owners of a parcel of land with an area of 534 square meters situated in
Barrio Tabon, Municipality of Kawit, Cavite.  Pursuant to an action for partition filed by
petitioner docketed as Civil Case No. N-1681, the then Court of First Instance of Cavite in
a decision dated February 6, 1975 directed the partition of the aforesaid land, alloting
133.5 square meters or 2/8 thereof to private respondents Juan and Isidro, and giving
the remaining portion with a total area of 266.5 square meters to petitioner Florencio. 
However, no actual partition was ever effected. [1]

On July 17, 1978, petitioner instituted a complainant for recovery of possession of real
property against private respondents Juan and Isidro before the Court of First Instance
of Cavite, docketed as Civil Case No. 2662.  In his complaint petitioner alleged that the
area occupied by the two (2) houses built by private respondents exceeded the 133.5
square meters previously alloted to them by the trial court in Civil Case No. N-1681.

Consequently, the lower court conducted an ocular inspection.  It was found that the
houses of Juan and Isidro actually encroached upon a portion of the land belonging to
Florencio.  Upon agreement of the parties, the trial court ordered a licensed geodetic
engineer to conduct a survey to determine the exact area occupied by the houses of
private respondents.  The survey subsequently disclosed that the house of Juan
occupied 42 square meters while that of Isidro occupied 59 square meters of Florencio's
land or a total of 101 square meters.

In its decision, the trial court (thru Judge Luis L. Victor) ruled that although private
respondents occupied a portion of Florencio's property, they should be considered
builders in good faith.  The trial court took into account the decision of the Court of First
Instance of Cavite in the action for partition[2]  and quoted:
"x x x. Hence, it is the well-considered opinion of the Court that although it
turned out that the defendants had, before partition, been in possession of more than
what rightfully belongs to them, their possession of what is in excess of their rightful
share can at worst be possession in good faith which exempts them from being
condemned to pay damages by reason thereof."[3]
Furthermore, the trial court stated that pursuant to Article 448 of the Civil Code,
the owner of the land (Florencio) should have the choice to either appropriate that part
of the house standing on his land after payment of indemnity or oblige the builders in
good faith (Juan and Isidro) to pay the price of the land.  However, the trial court
observed that based on the facts of the case, it would be useless and unsuitable for
Florencio to exercise the first option since this would render the entire houses of Juan
and Isidro worthless.  The trial court then applied the ruling in the similar case of Grana
vs. Court of Appeals,[4]  where the Supreme Court had advanced a more "workable
solution".  Thus, it ordered Florencio to sell to Juan and Isidro those portions of his land
respectively occupied by the latter.  The dispositive portion of said decision reads as
follows:
"WHEREFORE, judgment is hereby rendered in favor of the defendants and -

"(a)   Ordering the plaintiff Florencio Ignao to sell to the defendants Juan and Isidro
Ignao that portion of his property with an area of 101 square meters at P40.00 per
square meter, on which part the defendants had built their houses; and

"(b)   Ordering the said plaintiff to execute the necessary deed of conveyance to the
defendants in accordance with paragraph (a) hereof.
"Without pronouncement as to costs."[5]
Petitioner Florencio Ignao appealed to the Intermediate Appellate Court.  On
August 27, 1985, the Appellate Court, Second Civil Cases Division, promulgated a
decision,[6]  affirming the decision of the trial court.

Hence the instant petition for review which attributes to the Appellate Court the
following errors:
"1.  That the respondent Court has considered private respondents builders in
good faith on the land in question, thus applying Art. 448 of the Civil Code, although the
land in question is still owned by the parties in co-ownership, hence, the applicable
provision is Art. 486 of the Civil Code, which was not applied.

"2.  That, granting for the sake of argument that Art. 448 x x x is applicable, the
respondent Court has adjudged the working solution suggested in Grana and Torralba
vs. C.A. (109 Phil. 260), which is just an opinion by way of passing, and not the judgment
rendered therein, which is in accordance with the said provision of the Civil Code,
wherein the owner of the land to buy (sic) the portion of the building within 30 days
from the judgment or sell the land occupied by the building.

"3.  That, granting that private respondents could buy the portion of the land occupied
by their houses, the price fixed by the court is unrealistic and pre-war price." [7]
The records of the case reveal that the disputed land with an area of 534 square
meters was originally owned by Baltazar Ignao who married twice.  In his first marriage,
he had four children, namely Justo (the father of petitioner Florencio), Leon and private
respondents Juan and Isidro.  In his second marriage, Baltazar had also four children but
the latter waived their rights over the controverted land in favor of Justo.  Thus, Justo
owned 4/8 of the land which was waived by his half-brothers and sisters plus his 1/8
share or a total of 5/8.  Thereafter, Justo acquired the 1/8 share of Leon for P500.00
which he later sold to his son Florencio for the same amount.  When Justo died,
Florencio inherited the 5/8 share of his father Justo plus his 1/8 share of the land which
he bought or a total of 6/8 (representing 400.5 square meters).  Private respondents,
Juan and Isidro, on the other hand, had 1/8 share (66.75 square meters) each of the
land or a total of 133.5 square meters.
Before the decision in the partition case was promulgated, Florencio sold 134 square
meters of his share to a certain Victa for P5,000.00 on January 27, 1975.  When the
decision was handed down on February 6, 1975, the lower court alloted 2/8 of the land
to private respondents Juan and Isidro, or a total of 133.5 square meters.

It should be noted that prior to partition, all the co-owners hold the property in
common dominion but at the same time each is an owner of a share which is abstract
and undetermined until partition is effected.  As cited in Eusebio vs. Intermediate
Appellate Court,[8]  “an undivided estate is co-ownership by the heirs".

As co-owners, the parties may have unequal shares in the common property,
quantitatively speaking.  But in a qualitative sense, each co-owner has the same right as
any one of the other co-owners.  Every co-owner is therefore the owner of the whole,
and over the whole he exercises the right of dominion, but he is at the same time the
owner of a portion which is truly abstract, because until division is effected such portion
is not concretely determined.[9]

Petitioner Florencio, in his first assignment of error, asseverates that the court a quo
erred in applying Article 448 of the Civil Code, since this article contemplates a situation
wherein the land belongs to one person and the thing built, sown or planted belongs to
another.  In the instant case, the land in dispute used to be owned in common by the
contending parties.

Article 448 provides:

"ART. 448.  The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent.  However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees.   In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity.  The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof."
 Whether or not the provisions of Article 448 should apply to a builder in good
faith on a property held in common has been resolved in the affirmative in the case
of Spouses del Campo vs. Abesia,[10]  wherein the Court ruled that:
"The court a quo correctly held that Article 448 of the Civil Code cannot apply
where a co-owner builds, plants or sows on the land owned in common for then he did
not build, plant or sow upon land that exclusively belongs to another but of which he is
a co?owner.  The co-owner is not a third person under the circumstances, and the
situation is governed by the rules of co-ownership.

"However, when, as in this case, the ownership is terminated by the partition and it
appears that the home of defendants overlaps or occupies a portion of 5 square meters
of the land pertaining to plaintiffs which the defendants obviously built in good faith,
then the provisions of Article 448 of the new Civil Code should apply.  Manresa and
Navarro Amandi agree that the said provision of the Civil Code may apply even when
there is a co-ownership if good faith has been established”. [11]
In other words, when the co-ownership is terminated by a partition and it
appears that the house of an erstwhile co-owner has encroached upon a portion
pertaining to another co-owner which was however made in good faith, then the
provisions of Article 448 should apply to determine the respective rights of the parties.

Petitioner's second assigned error is however well taken.  Both the trial court and the
Appellate Court erred when they peremptorily adopted the “workable solution” in the
case of Grana vs. Court of Appeals,[12]  and ordered the owner of the land, petitioner
Florencio, to sell to private respondents, Juan and Isidro, the part of the land they
intruded upon, thereby depriving petitioner of his right to choose.  Such ruling
contravened the explicit provisions of Article 448 to the effect that "(t)he owner of the
land xxx shall have the right to appropriate xxx or to oblige the one who built xxx to pay
the price of the land xxx." The law is clear and unambiguous when it confers the right of
choice upon the landowner and not upon the builder and the courts.

Thus, in Quemuel vs. Olaes,[13]    the Court categorically ruled that the right to
appropriate the works or improvements or to oblige the builder or planter to pay the
price of the land belongs to the landowner.

As to the third assignment of error, the question on the price to be paid on the land
need not be discussed as this would be premature inasmuch as petitioner Florencio has
yet to exercise his option as the owner of the land.

WHEREFORE, the decision appealed from is hereby MODIFIED as follows:  Petitioner

Florencio Ignao is directed within thirty (30) days from entry of judgment to exercise his
option to either appropriate as his own the portions of the houses of Juan and Isidro
Ignao occupying his land upon payment of indemnity in accordance with Articles 546
and 548 of the Civil Code, or sell to private respondents the 101 square meters occupied
by them at such price as may be agreed upon.  Should the value of the land exceed the
value of the portions of the houses that private respondents have erected thereon,
private respondents may choose not to buy the land but they must pay reasonable rent
for the use of the portion of petitioner's land as may be agreed upon by the parties.  In
case of disagreement, the rate of rental and other terms of the lease shall be
determined by the trial court.  Otherwise, private respondents may remove or demolish
at their own expense the said portions of their houses encroaching upon petitioner's
land.[14]  No costs.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 115814, May 26, 1995 ]
PEDRO P. PECSON, PETITIONER, VS. COURT OF APPEALS, SPOUSES
JUAN NUGUID AND ERLINDA NUGUID, RESPONDENTS.

DECISION

DAVIDE, JR., J.:

This petition for review on certiorari seeks to set aside the decision[1] of the Court of
Appeals in CA-G.R. SP No. 32679 affirming in part the order[2] of the Regional Trial
Court (RTC) of Quezon City, Branch 101, in Civil Case No. Q-41470.

The factual and procedural antecedents of this case as gathered from the record are as
follows:
Petitioner Pedro P. Pecson was the owner of a commercial lot located in Kamias Street,
Quezon City, on which he built a four-door two-storey apartment building.  For his
failure to pay realty taxes amounting to twelve thousand pesos (P12,000.00), the lot was
sold at public auction by the City Treasurer of Quezon City to Mamerto Nepomuceno
who in turn sold it on 12 October 1983 to the private respondents, the spouses Juan
Nuguid and Erlinda Tan-Nuguid, for one hundred three thousand pesos (P103,000.00).

The petitioner challenged the validity of the auction sale in Civil Case No. Q-41470
before the RTC of Quezon City.  In its decision of 8 February 1989, the RTC dismissed
the complaint, but as to the private respondents' claim that the sale included the apartment
building, it held that the issue concerning it was "not a subject of the . . . litigation." In
resolving the private respondents' motion to reconsider this issue, the trial court held that
there was no legal basis for the contention that the apartment building was included in the
sale.[3]

Both parties then appealed the decision to the Court of Appeals.  The case was docketed
as CA-G.R. CV No. 2931.  In its decision of 30 April 1992,[4] the Court of Appeals
affirmed in toto the assailed decision. It also agreed with the trial court that the apartment
building was not included in the auction sale of the commercial lot.  Thus:

Indeed, examining the record we are fully convinced that it was only the land -- without
the apartment building — which was sold at the auction sale, for plaintiff's failure to pay
the taxes due thereon.  Thus, in the Certificate of Sale of Delinquent Property To
Purchaser (Exh. K, p. 352, Record) the property subject of the auction sale at which
Mamerto Nepomuceno was the purchaser is referred to as Lot No. 21-A, Block No. K-34,
at Kamias, Barangay Piñahan, with an area of 256.3 sq.m., with no mention whatsoever,
of the building thereon. The same description of the subject property appears in the Final
Notice To Exercise The Right of Redemption (over subject property) dated September
14, 1981 (Exh. L, p. 353, Record) and in the Final Bill of Sale over the same property
dated April 19, 1982 (Exh. P, p. 357, Record).  Needless to say, as it was only the land
without any building which Nepomuceno had acquired at the auction sale, it was also
only that land without any building which he could have legally sold to the
Nuguids.  Verily, in the Deed of Absolute Sale of Registered Land executed by Mamerto
Nepomuceno in favor of the Nuguids on October 25, 1983 (Exh. U, p. 366, Record) it
clearly appears that the property subject of the sale for P103,000.00 was only the parcel
of land, Lot 21-A, Blk. K-34 containing an area of 256.3 sq. meters, without any mention
of any improvement, much less any building thereon.  (Italics supplied)

The petition to review the said decision was subsequently denied by this Court. [5] Entry of
judgment was made on 23 June 1993.[6]

On November 1993, the private respondents filed with the trial court a motion for
delivery of possession of the lot and the apartment building, citing Article 546 of the
Civil Code.[7] Acting thereon, the trial court issued on 15 November 1993 the challenged
order[8] which reads as follows:

Submitted for resolution before this Court is an uncontroverted [sic] for the Delivery of
Possession filed by defendants Erlinda Tan, Juan Nuguid, et al. considering that despite
personal service of the Order for plaintiff to file within five (5) days his opposition to said
motion, he did not file any.

In support of defendant's motion, movant cites the law in point as Article 546 of the Civil
Code ...

Movant agrees to comply with the provisions of the law considering that plaintiff is a
builder in good faith and he has in fact, opted to pay the cost of the construction spent by
plaintiff. From the complaint itself the plaintiff stated that the construction cost of the
apartment is much more than the lot, which apartment he constructed at a cost of
P53,000.00 in 1965 (par. 8 complaint).  This amount of P53,000.00 is what the movant is
supposed to pay under the law before a writ of possession placing him in possession of
both the lot and apartment would be issued.

However, the complaint alleges in paragraph 9 that three doors of the apartment are being
leased.  This is further confirmed by the affidavit of the movant presented in support of
the motion that said three doors are being leased at a rental of P7,000.00 a month each. 
The movant further alleges in his said affidavit that the present commercial value of the
lot is P10,000.00 per square meter or P2,500,000.00 and the reasonable rental value of
said lot is no less than P21,000.00 per month.

The decision having become final as per Entry of Judgment dated June 23, 1993 and from
this date on, being the uncontested owner of the property, the rents should be paid to him
instead of the plaintiff collecting them.  From June 23, 1993, the rents collected by
plaintiff amounting to more than P53,000.00 from tenants should be offset from the rents
due to the lot which according to movant's affidavit is more than P21,000.00 a month.

WHEREFORE, finding merit in the Motion, the Court hereby grants the following prayer
that:

1. The movant shall reimburse plaintiff the construction cost of P53,000.00.

2. The payment of P53,000.00 as reimbursement for the construction cost, movant

Juan Nuguid is hereby entitled to immediate issuance of a writ of possession over
the lot and improvements thereon.

3. The movant having been declared as the uncontested owner of the lot in question
as per Entry of Judgment of the Supreme Court dated June 23, 1993, the plaintiff
 should pay rent to the movant of no less than P21,000.00 per month from said date
as this is the very same amount paid monthly by the tenants occupying the lot.

4. The amount of P53,000.00 due from the movant is hereby offset against the
amount of rents collected by the plaintiff from June 23, 1993, to September 23,
1993."

SO ORDERED.

The petitioner moved for the reconsideration of the order but it was not acted upon by the
trial court. Instead, on 18 November 1993, it issued a writ of possession directing the
deputy sheriff "to place said movant Juan Nuguid in possession of subject property
located at No. 79 Kamias Road, Quezon City, with all the improvements thereon and to
eject therefrom all occupants therein, their agents, assignees, heirs and representatives." [9]

The petitioner then filed with the Court of Appeals a special civil action
for certiorari and prohibition assailing the order of 15 November 1993, which was
docketed as CA-G.R. SP No. 32679.[10] In its decision of 7 June 1994, the Court of
Appeals affirmed in part the order of the trial court citing Article 448 of the Civil Code. 
In disposing of the issues, it stated:

As earlier pointed out, private respondent opted to appropriate the improvement

introduced by petitioner on the subject lot, giving rise to the right of petitioner to be
reimbursed of the cost of constructing said apartment building, in accordance with Article
546 of the ... Civil Code, and of the right to retain the improvements until he is
reimbursed of the cost of the improvements, because, basically, the right to retain the
improvement while the corresponding indemnity is not paid implies the tenancy or
possession in fact of the land on which they are built .... [2 TOLENTINO, CIVIL CODE
OF THE PHILIPPINES (1992) p. 112]. With the facts extant and the settled principle as
guides, we agree with petitioner that respondent judge erred in ordering that "the movant
having been declared as the uncontested owner of the lot in question as per Entry of
Judgment of the Supreme Court dated June 23, 1993, the plaintiff should pay rent to the
movant of no less than P21,000 per month from said date as this is the very same amount
paid monthly by the tenants occupying the lot."

We, however, agree with the finding of respondent judge that the amount of P53,000.00
earlier admitted as the cost of constructing the apartment building can be offset from the
amount of rents collected by petitioner from June 23, 1993 up to September 23, 1993
which was fixed at P7,000.00 per month for each of the three doors.  Our underlying
reason is that during the period of retention, petitioner as such possessor and receiving
the fruits from the property, is obliged to account for such fruits, so that the amount
thereof may be deducted from the amount of indemnity to be paid to him by the owner of
the land, in line with Mendoza vs. De Guzman, 52 Phil. 164....

The Court of Appeals then ruled as follows:

WHEREFORE, while it appears that private respondents have not yet indemnified
petitioner with the cost of the improvements, since Annex I shows that the Deputy Sheriff
has enforced the Writ of Possession and the premises have been turned over to the
possession of private respondents, the quest of petitioner that he be restored in possession
of the premises is rendered moot and academic, although it is but fair and just that private
respondents pay petitioner the construction cost of P53,000.00; and that petitioner be
ordered to account for any and all fruits of the improvements received by him starting on
June 23, 1993, with the amount of P53,000.00 to be offset therefrom.

IT IS SO ORDERED.[11]

Aggrieved by the Court of Appeals' decision, the petitioner filed the instant petition.

The parties agree that the petitioner was a builder in good faith of the apartment building
on the theory that he constructed it at the time when he was still the owner of the lot, and
that the key issue in this case is the application of Articles 448 and 456 of the Civil Code.

The trial court and the Court of Appeals, as well as the parties, concerned themselves
with the application of Articles 448 and 546 of the Civil Code.  These articles read as
follows:

ART. 448.  The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper rent. 
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees.  In such case, he shall pay reasonable
rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity.  The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.  (361a)

      . . .                         . . .                                . . .

ART. 546.  Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same right
of retention, the person who has defeated him in the possession having the option of
refunding the amount of the expenses or of paying the increase in value which the thing
may have acquired by reason thereof.  (453a)

By its clear language, Article 448 refers to a land whose ownership is claimed by two or
more parties, one of whom has built some works, or sown or planted something.  The
building, sowing or planting may have been made in good faith or in bad faith.  The rule
on good faith laid down in Article 526 of the Civil Code shall be applied in determining
whether a builder, sower or planter had acted in good faith.[12]

Article 448 does not apply to a case where the owner of the land is the builder, sower, or
planter who then later loses ownership of the land by sale or donation.  This Court said so
in Coleongco vs. Regalado:[13]

Article 361 of the old Civil Code is not applicable in this case, for Regalado constructed
the house on his own land before he sold said land to Coleongco.  Article 361 applies
only in cases where a person constructs a building on the land of another in good or in
bad faith, as the case may be.  It does not apply to a case where a person constructs a
building on his own land, for then there can be no question as to good or bad faith on the
part of the builder.

Elsewise stated, where the true owner himself is the builder of works on his own land, the
issue of good faith or bad faith is entirely irrelevant.

Thus in strict point of law, Article 448 is not apposite to the case at bar.  Nevertheless, we
believe that the provision therein on indemnity may be applied by analogy considering
that the primary intent of Article 448 is to avoid a state of forced co-ownership and that
the parties, including the two courts below, in the main agree that Articles 448 and 546 of
the Civil Code are applicable and indemnity for the improvements may be paid although
they differ as to the basis of the indemnity.

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.,[14] 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,[15] despite the finding that the useful improvement, a residential house, was built
in 1967 at a cost of between eight thousand pesos (P8,000.00) to ten thousand pesos
(P10,000.00), the landowner was ordered to reimburse the builder in the amount of forty
thousand pesos (P40,000.00), the value of the house at the time of the trial.  In the same
way, the landowner was required to pay the "present value" of the house, a useful
improvement, in the case of De Guzman vs. De la Fuente,[16] 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[17] 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.

The trial court also erred in ordering the petitioner to pay monthly rentals equal to the
aggregate rentals paid by the lessees of the apartment building.  Since the private
respondents have opted to appropriate the apartment building, the petitioner is thus
entitled to the possession and enjoyment of the apartment building, until he is paid the
proper indemnity, as well as of the portion of the lot where the building has been
constructed.  This is so because the right to retain the improvements while the
corresponding indemnity is not paid implies the tenancy or possession in fact of the land
on which it is built, planted or sown.[18] The petitioner not having been so paid, he was
entitled to retain ownership of the building and, necessarily, the income therefrom.

It follows, too, that the Court of Appeals erred not only in upholding the trial court's
determination of the indemnity, but also in ordering the petitioner to account for the
rentals of the apartment building from 23 June 1993 to 23 September 1993.

WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679 and the
Order of 15 November 1993 of the Regional Trial Court, Branch 101, Quezon City in
Civil Case No. Q-41470 are hereby SET ASIDE.

The case is hereby remanded to the trial court for it to determine the current market value
of the apartment building on the lot.  For this purpose, the parties shall be allowed to
adduce evidence on the current market value of the apartment building.  The value so
determined shall be forthwith paid by the private respondents to the petitioner otherwise
the petitioner shall be restored to the possession of the apartment building until payment
of the required indemnity.

No costs.

SO ORDERED.
 [ G.R. No. 79688, February 01, 1996 ]
PLEASANTVILLE DEVELOPMENT CORPORATION, PETITIONER, VS.
COURT OF APPEALS, WILSON KEE, C.T. TORRES ENTERPRISES, INC.
AND ELDRED JARDINICO, RESPONDENTS.

DECISION

PANGANIBAN, J.:

Is a lot buyer who constructs improvements on the wrong property erroneously

delivered by the owner’s agent, a builder in good faith?  This is the main issue resolved
in this petition for review on certiorari to reverse the Decision [1] of the Court of
Appeals[2] in CA-G.R. SP No. 11040, promulgated on August 20, 1987.

By resolution dated November 13, 1995, the First Division of this Court resolved to
transfer this case (along with several others) to the Third Division. After due deliberation
and consultation, the Court assigned the writing of this Decision to the
undersigned ponente.

The Facts

The facts, as found by respondent Court, are as follows:

Edith Robillo purchased from petitioner a parcel of land designated as Lot 9, Phase II and
located at Taculing Road, Pleasantville Subdivision, Bacolod City. In 1975, respondent
Eldred Jardinico bought the rights to the lot from Robillo. At that time, Lot 9 was vacant.

Upon completing all payments, Jardinico secured from the Register of Deeds of Bacolod
City on December 19, 1978 Transfer Certificate of Title No. 106367 in his name. It was
then that he discovered that improvements had been introduced on Lot 9 by
respondent Wilson Kee, who had taken possession thereof.

It appears that on March 26, 1974, Kee bought on installment Lot 8 of the same
subdivision from C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate agent of
petitioner. Under the Contract to Sell on Installment, Kee could possess the lot even
before the completion of all installment payments. On January 20, 1975, Kee paid CTTEI
the relocation fee of P50.00 and another P50.00 on January 27, 1975, for the
preparation of the lot plan.  These amounts were paid prior to Kee’s taking actual
possession of Lot 8. After the preparation of the lot plan and a copy thereof given to
Kee, CTTEI through its employee, Zenaida Octaviano, accompanied Kee’s wife,
Donabelle Kee, to inspect Lot 8. Unfortunately, the parcel of land pointed by Octaviano
was Lot 9. Thereafter, Kee proceeded to construct his residence, a store, an auto repair
shop and other improvements on the lot.

After discovering that Lot 9 was occupied by Kee, Jardinico confronted him.  The parties
tried to reach an amicable settlement, but failed.

On January 30, 1981, Jardinico’s lawyer wrote Kee, demanding that the latter remove all
improvements and vacate Lot 9. When Kee refused to vacate Lot 9, Jardinico filed with
the Municipal Trial Court in Cities, Branch 3, Bacolod City (MTCC), a complaint for
ejectment with damages against Kee.

Kee, in turn, filed a third-party complaint against petitioner and CTTEI.

The MTCC held that the erroneous delivery of Lot 9 to Kee was attributable to CTTEI. It
further ruled that petitioner and CTTEI could not successfully invoke as a defense the
failure of Kee to give notice of his intention to begin construction required under
paragraph 22 of the Contract to Sell on Installment and his having built a sari-sari store
without. the prior approval of petitioner required under paragraph 26 of said contract,
saying that the purpose of these requirements was merely to regulate the type of
improvements to be constructed on the lot [3].

However, the MTCC found that petitioner had already rescinded its contract with Kee
over Lot 8 for the latter’s failure to pay the installments due, and that Kee had not
contested the rescission.  The rescission was effected in 1979, before the complaint was
instituted.  The MTCC concluded that Kee no longer had any right over the lot subject of
the contract between him and petitioner. Consequently, Kee must pay reasonable
rentals for the use of Lot 9, and, furthermore, he cannot claim reimbursement for the
improvements he introduced on said lot.
 The MTCC thus disposed:

"IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered as follows:

1. Defendant Wilson Kee is ordered to vacate tithe premises of Lot 9, covered by TCT
No. 106367 and to remove all structures and improvements he introduced thereon;

2. Defendant Wilson Kee is ordered to pay to the plaintiff rentals at the rate of P 15.00 a
day computed from the time this suit was filed on March 12, 1981 until he actually
vacates the premises. This amount shall bear interests (sic) at the rate of 12 per cent
(sic) per annum.

3. Third-Party Defendant CT. Torres Enterprises, Inc. and Pleasantville Subdivision are
ordered to pay the plaintiff jointly and severally the sum of P3,000.00 as attorney’s fees
and P700.00 as cost and litigation expenses."[4]

On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC) ruled that petitioner
and CTTEI were not at fault or were not negligent, there being no preponderant
evidence to show that they directly participated in the delivery of Lot 9 to Kee.[5] It
found Kee a builder in bad faith. It further ruled that even assuming arguendo that Kee
was acting in good faith, he was, nonetheless, guilty of unlawfully usurping the
possessory right of Jardinico over Lot 9 from the time he was served with notice to
vacate said lot, and thus was liable for rental.

The RTC thus disposed:

"WHEREFORE, the decision appealed from is affirmed with respect to the order against
the defendant to vacate the premises of Lot No. 9 covered by Transfer Certificate of
Title No. T-106367 of the land records of Bacolod City; the removal of all structures and
improvements introduced thereon at his expense and the payment to plaintiff (sic) the
sum of Fifteen (P 15.00) Pesos a day as reasonable rental to be computed from January
30, 1981, the date of the demand, and not from the date of the filing of the complaint,
until he had vacated (sic) the premises, with interest thereon at 12% per annum. This
Court further renders judgment against the defendant to pay the plaintiff the sum of
Three Thousand (P3,000.00) Pesos as attorney’s fees, plus costs of litigation.
"The third-party complaint against Third-Party Defendants Pleasantville Development
Corporation and C.T. Torres Enterprises, Inc. is dismissed.  The order against Third-Party
Defendants to pay attorney’s fees to plaintiff and costs of litigation is reversed." [6]

Following the denial of his motion for reconsideration on October 20, 1986, Kee
appealed directly to the Supreme Court, which referred the matter to the Court of
Appeals.

The appellate court ruled that Kee was a builder in good faith, as he was unaware of the
"mix-up" when he began construction of the improvements on Lot 8. It further ruled
that the erroneous delivery was due to the negligence of CTTEI, and that such wrong
delivery was likewise imputable to its principal, petitioner herein.  The appellate court
also ruled that the award of rentals was without basis.

Thus, the Court of Appeals disposed:

"WHEREFORE, the petition is GRANTED, the appealed decision is REVERSED, and

judgment is rendered as follows:

1. Wilson Kee is declared a builder in good faith with respect to the improvements he
introduced on Lot 9, and is entitled to the rights granted him under Articles 448, 546
and 548 of the New Civil Code.

2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development

Corporation are solidarily liable under the following circumstances:

a. If Eldred Jardinico decides to appropriate the improvements and, thereafter, remove

these structures, the third-party defendants shall answer for all demolition expenses
and the value of the improvements thus destroyed or rendered useless;

b. If Jardinico prefers that Kee buy the land, the third-party defendants shall answer for
the amount representing the value of Lot 9 that Kee should pay to Jardinico.

3. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development

Corporation are ordered to pay in solidum the amount of P3,000.00 to Jardinico as
attorney’s fees, as well as litigation expenses.

4. The award of rentals to Jardinico is dispensed with.

"Furthermore, the case is REMANDED to the court of origin for the determination of the
actual value of the improvements and the property (Lot 9), as well as for further
proceedings in conformity with Article 448 of the New Civil Code." [7]

Petitioner then filed the instant petition against Kee, Jardinico and CTTEI.

The Issues

The petition submitted the following grounds to justify a review of the respondent
Court’s Decision, as follows:

"1. The Court of Appeals has decided the case in a way probably not in accord
with law or the the (sic) applicable decisions of the Supreme Court on third-party
complaints, by ordering third-party defendants to pay the demolition expenses and/or
price of the land;

"2. The Court of Appeals has so far departed from the accepted course of judicial
proceedings, by granting to private respondent-Kee the rights of a builder in good faith
in excess of what the law provides, thus enriching private respondent Kee at the
expense of the petitioner;

"3. In the light of the subsequent events or circumstances which changed the rights of
the parties, it becomes imperative to set aside or at least modify the judgment of the
Court of Appeals to harmonize with justice and the facts;

"4. Private respondent-Kee in accordance with the findings of facts of the lower court is
clearly a builder in bad faith, having violated several provisions of the contract to sell on
installments;
"5. The decision of the Court of Appeals, holding the principal, Pleasantville
Development Corporation (liable) for the acts made by the agent in excess of its
authority is clearly in violation of the provision of the law;

"6. The award of attorney’s fees is clearly without basis and is equivalent to putting a
premium in (sic) court litigation."

From these grounds, the issues could be re-stated as follows:

(1) Was Kee a builder in good faith?

(2) What is the liability, if any, of petitioner and its agent, C.T. Torres Enterprises, Inc.?
and

(3) Is the award of attorney’s fees proper?

The First Issue: Good Faith

Petitioner contends that the Court of Appeals erred in reversing the RTC’s ruling that
Kee was a builder in bad faith.

Petitioner fails to persuade this Court to abandon the findings and conclusions of the
Court of Appeals that Kee was a builder in good faith. We agree with the following
observation of the Court of Appeals:

"The roots of the controversy can be traced directly to the errors committed by
CTTEI, when it pointed the wrong property to Wilson Kee and his wife. It is highly
improbable that a purchaser of a lot would knowingly and willingly build his residence
on a lot owned by another, deliberately exposing himself and his family to the risk of
being ejected from the land and losing all improvements thereon, not to mention the
social humiliation that would follow.

"Under the circumstances, Kee had acted in the manner of a prudent man in
ascertaining the identity of his property. Lot 8 is covered by Transfer Certificate of Title
No. T-69561, while Lot 9 is identified in Transfer Certificate of Title No. T-106367. Hence,
under the Torrens system of land registration, Kee is presumed to have knowledge of
the metes and bounds of the property with which he is dealing. x x x

xxx      xxx       xxx

"But as Kee is a layman not versed in the technical description of his property, he had to
find a way to ascertain that what was described in TCT No. 69561 matched Lot 8.  Thus,
he went to the subdivision developer’s agent and applied and paid for the relocation of
the lot, as well as for the production of a lot plan by CTTEI’s geodetic engineer. Upon
Kee’s receipt of the map, his wife went to the subdivision site accompanied by CTTEI’s
employee, Octaviano, who authoritatively declared that the land she was pointing to
was indeed Lot 8. Having full faith and confidence in the reputation of CTTEI, and
because of the company’s positive identification of the property, Kee saw no reason to
suspect that there had been a misdelivery. The steps Kee had taken to protect his
interests were reasonable. There was no need for him to have acted ex-
abundantia cautela, such as being present during the geodetic engineer’s relocation
survey or hiring an independent geodetic engineer to countercheck for errors, for the
final delivery of subdivision lots to their owners is part of the regular course of everyday
business of CTTEI. Because of CTTEI’s blunder, what Kee had hoped to forestall did in
fact transpire. Kee’s efforts all went to naught."[8]

Good faith consists in the belief of the builder that the land he is building on is his and
his ignorance of any defect or flaw in his title. [9] And as good faith is presumed,
petitioner has the burden of proving bad faith on the part of Kee. [10]

At the time he built improvements on Lot 8, Kee believed that said lot was what he
bought from petitioner. He was not aware that the lot delivered to him was not Lot 8.
Thus, Kee’s good faith. Petitioner failed to prove otherwise.

To demonstrate Kee’s bad faith, petitioner points to Kee’s violation of paragraphs 22

and 26 of the Contract of Sale on Installment.
We disagree. Such violations have no bearing whatsoever on whether Kee was a builder
in good faith, that is, on his state of mind at the time he built the improvements on Lot
9. These alleged violations may give rise to petitioner’s cause of action against Kee
under the said contract (contractual breach), but may not be bases to negate the
presumption that Kee was a builder in good faith.

Petitioner also points out that, as found by the trial court, the Contract of Sale on
Installment covering Lot 8 between it and Kee was rescinded long before the present
action was instituted. This has no relevance on the liability of petitioner, as such fact
does not negate the negligence of its agent in pointing out the wrong lot to Kee. Such
circumstance is relevant only as it gives Jardinico a cause of action for unlawful detainer
against Kee.

Petitioner next contends that Kee cannot "claim that another lot was erroneously
pointed out to him" because the latter agreed to the following provision in the Contract
of Sale on Installment, to wit:

"13. The Vendee hereby declares that prior to the execution of his contract
he/she has personally examined or inspected the property made subject-matter hereof,
as to its location, contours, as well as the natural condition of the lots and from the date
hereof whatever consequential change therein made due to erosion, the said Vendee
shall bear the expenses of the necessary fillings, when the same is so desired by
him/her."[11]

The subject matter of this provision of the contract is the change of the location,
contour and condition of the lot due to erosion. It merely provides that the vendee,
having examined the property prior to the execution of the contract, agrees to shoulder
the expenses resulting from such change.

We do not agree with the interpretation of petitioner that Kee contracted away his right
to recover damages resulting from petitioner’s negligence. Such waiver would be
contrary to public policy and cannot be allowed. "Rights may be waived, unless the
waiver is contrary to law, public order, public policy, morals, or good customs, or
prejudicial to a third person with a right recognized by law." [12]
 The Second Issue: Petitioner’s Liability

Kee filed a third-party complaint against petitioner and CTTEI, which was dismissed by
the RTC after ruling that there was no evidence from which fault or negligence on the
part of petitioner and CTTEI can be inferred. The Court of Appeals disagreed and found
CTTEI negligent for the erroneous delivery of the lot by Octaviano, its employee.

Petitioner does not dispute the fact that CTTEI was its agent.  But it contends that the
erroneous delivery of Lot 9 to Kee was an act which was clearly outside the scope of its
authority, and consequently, CTTEI alone should be liable. It asserts that "while [CTTEI]
was authorized to sell the lot belonging to the herein petitioner, it was never authorized
to deliver the wrong lot to Kee."[13]

Petitioner’s contention is without merit.

The rule is that the principal is responsible for the acts of the agent, done within the
scope of his authority, and should bear the damage caused to third persons. [14] On the
other hand, the agent who exceeds his authority is personally liable for the damage. [15]

CTTEI was acting within its authority as the sole real estate representative of petitioner
when it made the delivery to Kee. In acting within its scope of authority, it was,
however, negligent.  It is this negligence that is the basis of petitioner’s liability, as
principal of CTTEI, per Articles 1909 and 1910 of the Civil Code.

Pending resolution of the case before the Court of Appeals, Jardinico and Kee on July 24,
1987 entered into a deed of sale, wherein the former sold Lot 9 to Kee. Jardinico and
Kee did not inform the Court of Appeals of such deal.

The deed of sale contained the following provision:

"1. That Civil Case No. 3815 entitled "Jardinico vs. Kee" which is now pending appeal
with the Court of Appeals, regardless of the outcome of the decision shall be mutually
disregarded and shall not be pursued by the parties herein and shall be considered
dismissed and without effect whatsoever;[16]
Kee asserts though that the "terms and conditions in said deed of sale are strictly for the
parties thereto" and that "(t)here is no waiver made by either of the parties in said deed
of whatever favorable judgment or award the honorable respondent Court of Appeals
may make in their favor against herein petitioner Pleasantville Development
Corporation and/or private respondent C.T. Torres Enterprises, Inc." [17]

Obviously, the deed of sale can have no effect on the liability of petitioner.  As we have
earlier stated, petitioner’s liability is grounded on the negligence of its agent.  On the
other hand, what the deed of sale regulates are the reciprocal rights of Kee and
Jardinico; it stressed that they had reached an agreement independent of the outcome
of the case.

Petitioner further assails the following holding of the Court of Appeals:

"2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville

Development Corporation are solidarily liable under the following circumstances:

"a. If Eldred Jardinico decides to appropriate the improvements and, thereafter, remove
these structures, the third-party defendants shall answer for all demolition expenses
and the value of the improvements thus destroyed or rendered useless;

"b. If Jardinico prefers that Kee buy the land, the third-party defendants shall answer for
the amount representing the value of Lot 9 that Kee should pay to Jardinico." [18]

Petitioner contends that if the above holding would be carried out, Kee would be
unjustly enriched at its expense. In other words, Kee would be -able to own the lot, as
buyer, without having to pay anything on it, because the aforequoted portion of
respondent Court’s Decision would require petitioner and CTTEI jointly and solidarily to
"answer" or reimburse Kee there for.

We agree with petitioner.

Petitioner’s liability lies in the negligence of its agent CTTEI. For such negligence, the
petitioner should be held liable for damages.  Now, the extent and/or amount of
damages to be awarded is a factual issue which should be determined after evidence is
adduced.  However, there is no showing that such evidence was actually presented in
the trial court; hence no damages could now be awarded.

The rights of Kee and Jardinico vis-a-vis each other, as builder in good faith and owner in
good faith, respectively, are regulated by law (i.e., Arts. 448, 546 and 548 of the Civil
Code). It was error for the Court of Appeals to make a "slight modification" in the
application of such law, on the ground of "equity". At any rate, as it stands now, Kee and
Jardinico have amicably settled through their deed of sale their rights and obligations
with regards to Lot 9. Thus, we delete items 2 (a) and (b) of the dispositive portion of
the Court of Appeals’ Decision [as reproduced above] holding petitioner and CTTEI
solidarily liable.

The Third Issue: Attorney’s Fees

The MTCC awarded Jardinico attorney’s fees and costs in the amount of P3,000.00 and
P700.00, respectively, as prayed for in his complaint.  The RTC deleted the award,
consistent with its ruling that petitioner was without fault or negligence. The Court of
Appeals, however, reinstated the award of attorney’s fees after ruling that petitioner
was liable for its agent’s negligence.

The award of attorney’s fees lies within the discretion of the court and depends upon
the circumstances of each case.[19] We shall not interfere with the discretion of the Court
of Appeals. Jardinico was compelled to litigate for the protection of his interests and for
the recovery of damages sustained as a result of the negligence of petitioner’s agent. [20]

In sum, we rule that Kee is a builder in good faith.  The disposition of the Court of
Appeals that Kee "is entitled to the rights granted him under Articles 448, 546 and 548
of the New Civil Code" is deleted, in view of the deed of sale entered into by Kee and
Jardinico, which deed now governs the rights of Jardinico and Kee as to each other.
There is also no further need, as ruled by the appellate Court, to remand the case to the
court of origin "for determination of the actual value of the improvements and the
property (Lot 9), as well as for further proceedings in conformity with Article 448 of the
New Civil Code."
WHEREFORE, the petition is partially GRANTED.  The Decision of the Court of Appeals is
hereby MODIFIED as follows:

(1) Wilson Kee is declared a builder in good faith;

(2) Petitioner Pleasantville Development Corporation and respondent C.T. Tones

Enterprises, Inc. are declared solidarily liable for damages due to negligence; however,
since the amount and/or extent of such damages was not proven during the trial, the
same cannot now be quantified and awarded;

(3) Petitioner Pleasantville Develpment Corporation and respondent C.T. Torres

Enterprises, Inc. are ordered to pay in solidum the amount of P3,000.00 to Jardinico as
attorney’s fees, as well as litigation expenses; and

(4)  The award of rentals to Jardinico is dispensed with.

SO ORDERED.

THIRD DIVISION
[ G.R. NO. 167680, November 30, 2006 ]
SAMUEL PARILLA, CHINITA PARILLA AND DEODATO PARILLA,
PETITIONERS, VS. DR. PROSPERO PILAR, RESPONDENT.

DECISION

CARPIO MORALES, J.:

Assailed via Petition for Review on Certiorari is the Court of Appeals Decision [1] of
January 19, 2005 reversing that of the Regional Trial Court (RTC) of Vigan City, Branch
20[2] which affirmed the Decision[3] of February 3, 2003 of the Municipal Trial Court
(MTC) of Bantay, Ilocos Sur.

Petitioner-spouses Samuel and Chinita Parilla and their co-petitioner-son Deodato

Parilla, as dealers[4] of Pilipinas Shell Petroleum Corporation (Pilipinas Shell), have been
in possession of a parcel of land (the property) located at the poblacion of Bantay, Ilocos
Sur which was leased to it by respondent Dr. Prospero Pilar under a 10-year Lease
Agreement[5] entered into in 1990.

When the lease contract between Pilipinas Shell and respondent expired in 2000,
petitioners remained in possession of the property on which they built improvements
consisting of a billiard hall and a restaurant, maintained a sari-sari store managed by
Leonardo Dagdag, Josefina Dagdag and Edwin Pugal, and allowed Flor Pelayo, Freddie
Bringas and Edwin Pugal to use a portion thereof as parking lot. [6]

Despite demands to vacate, petitioners[7] and the other occupants[8] remained in the

property.

Hence, respondent who has been residing in the United States, [9] through his attorney-
in-fact Marivic Paz Padre, filed on February 4, 2002 a complaint for ejectment before the
Bantay MTC with prayer for the issuance of a writ of preliminary injunction with
damages[10] against petitioners and the other occupants of the property.

After trial, the MTC, by Decision of February 3, 2003, ordered herein petitioners and
their co-defendants and all persons claiming rights under them to vacate the property
and to pay the plaintiff-herein respondent the amount of P50,000.00 as reasonable
compensation for the use of the property and P10,000.00 as attorney's fees and to pay
the cost of suit. And it ordered the plaintiff-
herein respondent to reimburse defendants Samuel Parilla, Chinita Parilla and Deodato
Parilla the amount of Two Million Pesos (P2,000,000.00) representing the value of the
improvements introduced on the property.

Respondent appealed to the RTC of Vigan City that portion of the trial court's decision
ordering him to reimburse petitioners the amount of Two Million Pesos. The RTC
affirmed the MTC Decision, however.[11]

On respondent's petition for review, the Court of Appeals set aside the questioned
order for respondent to reimburse petitioners Two Million Pesos. [12] In setting aside the
questioned order, the appellate court, applying Article 546 of the New Civil Code which
provides:
 ART. 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same
right of retention, the person who has defeated him in the possession having the option
of refunding the amount of the expenses or of paying the increase in value which the
thing may have acquired by reason thereof[,]
held that "[herein petitioners]" tolerated occupancy . . . could not be interpreted
to mean . . . that they are builders or possessors in good faith" [13] and that for one to be
a builder in good faith, it is assumed that he claims title to the property which is not the
case of petitioners.

Hence, the present petition which faults the appellate court to have erred
I

. . . WHEN IT SET ASIDE THE DECISIONS OF THE TRIAL COURTS WHICH ORDERED THE
RESPONDENT TO REIMBURSE PETITIONERS THE AMOUNT OF TWO MILLION
(P2,000,000.00) PESOS FOR THE SUBSTANTIAL IMPROVEMENTS INTRODUCED BY THEM
ON THE SUBJECT PREMISES.

II

. . . IN NOT HOLDING THAT PETITIONERS ARE BUILDERS IN GOOD FAITH OF THE

SUBSTANTIAL IMPROVEMENTS THEY HAD INTRODUCED ON THE PREMISES, HENCE,
THEY ARE ENTITLED TO REIMBURSEMENT OF SUCH IMPROVEMENTS.

III

. . . IN NOT HOLDING THAT THE BUILDING WHICH PETITIONERS ERECTED ON THE

PREMISES WAS WORTH, AND THAT THE PETITIONERS ACTUALLY SPENT, THE AMOUNT
OF TWO MILLION (P2,000,000.00) PESOS.

IV

. . . IN NOT HOLDING THAT PETITIONERS HAVE THE RIGHT OF RETENTION OF THE

PREMISES UNTIL THEY ARE REIMBURSED OF THE SAID AMOUNT ADJUDGED IN THEIR
FAVOR BY THE COURTS A QUO.[14]
Petitioners, proffering that neither respondent nor his agents or representatives
performed any act to prevent them from introducing the improvements, [15] contend that
the appellate court should have applied Article 453 of the New Civil Code which
provides that "[i]f there was bad faith not only on the part of the person who built,
planted or sowed on the land of another, but also on the part of the owner of such land,
the rights of one and the other shall be the same as though both had acted in good
faith."[16]

Petitioners thus conclude that being builders in good faith, until they are reimbursed of
the Two Million Peso-value of the improvements they had introduced on the property,
they have the right of retention or occupancy thereof pursuant to Article 448, in relation
to Article 546, of the New Civil Code, [17] otherwise, respondent would be unjustly
enriched at their expense.

The petition fails in light of the following discussions.

The evidence shows that in 1960, a lease contract over the property was forged
between Shell Company of the Philippines Limited and respondent's predecessors-in-
interest. In 1990, the lease contract was renewed by Pilipinas Shell and respondent.

Petitioners, being dealers of Pilipinas Shell's petroleum products, were allowed to

occupy the property. Petitioners are thus considered agents [18] of Pilipinas Shell. The
factual milieu of the instant case calls then for the application of the provisions on lease
under the New Civil Code.

The right of the lessor upon the termination of a lease contract with respect to useful
improvements introduced on the leased property by a lessee is covered by Article 1678
which reads:
Art. 1678. If the lessee makes, in good faith, useful improvements which are
suitable to the use for which the lease is intended, without altering the form or
substance of the property leased, the lessor upon the termination of the lease shall
pay the lessee one-half of the value of the improvements at that time. Should the
lessor refuse to reimburse said amount, the lessee may remove the improvements, even
though the principal thing may suffer damage thereby. He shall not, however, cause any
more impairment upon the property leased than is necessary.

x x x x (Emphasis supplied)
The foregoing provision is a modification of the old Code under which the lessee
had no right at all to be reimbursed for the improvements introduced on the leased
property, he being entitled merely to the rights of a usufructuary – right of removal and
set-off, but not of reimbursement.[19]

The modification introduced in the above-quoted paragraph of Article 1678 on partial

reimbursement was intended to prevent unjust enrichment of the lessor which now has
to pay one-half of the value of the improvements at the time the lease terminates
because the lessee has already enjoyed the same, whereas the lessor could enjoy them
indefinitely thereafter.[20]

As the law on lease under the New Civil Code has specific rules concerning useful
improvements introduced by a lessee on the property leased, it is erroneous on the part
of petitioners to urge this Court to apply Article 448, in relation to Article 546, regarding
their claim for reimbursement and to invoke the right of retention before
reimbursement is made. Article 448 and Article 546 read:
ART. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof.

ART. 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same
right of retention, the person who has defeated him in the possession having the option
of refunding the amount of the expenses or of paying the increase in value which the
thing may have acquired by reason thereof.
Jurisprudence is replete with cases [21] which categorically declare that Article 448
covers only cases in which the builders, sowers or planters believe themselves to be
owners of the land or, at least, have a claim of title thereto, but not when the interest is
merely that of a holder, such as a mere tenant, agent or usufructuary. A tenant cannot
be said to be a builder in good faith as he has no pretension to be owner.[22]
In a plethora of cases,[23] this Court has held that Articles 448 of the Civil Code, in
relation to Article 546 of the same Code, which allows full reimbursement of useful
improvements and retention of the premises until reimbursement is made, applies only
to a possessor in good
faith, i.e., one who builds on land with the belief that he is the owner thereof. It
does not apply where one's only interest is that of a lessee under a rental contract;
otherwise, it would always be in the power of the tenant to "improve" his landlord out
of his property. [24] (Underscoring supplied)
Sia v. Court of Appeals, [25] which cites Cabangis v. Court of Appeals,
[26]
 exhaustively explains the applicability of Article 1678 on disputes relating to useful
improvements introduced by a lessee on leased premises, viz:
xxxx

Second. Petitioner stubbornly insists that he may not be ejected from private
respondent's land because he has the right, under Articles 448 and 546 of the New Civil
Code, to retain possession of the leased premises until he is paid the full fair market
value of the building constructed thereon by his parents. Petitioner is wrong, of course.
The Regional Trial Court and the Court of Appeals correctly held that it is Article 1678 of
the New Civil Code that governs petitioner's right vis-a-vis the improvements built by his
parents on private respondent's land.

In the 1991 case of Cabangis v. Court of Appeals where the subject of the lease contract
was also a parcel of land and the lessee's father constructed a family residential house
thereon, and the lessee subsequently demanded indemnity for the improvements built
on the lessor's land based on Articles 448 and 546 of the New Civil Code, we pointed out
that reliance on said legal provisions was misplaced.

"The reliance by the respondent Court of Appeals on Articles 448 and 546 of the Civil
Code of the Philippines is misplaced. These provisions have no application to a contract
of lease which is the subject matter of this controversy. Instead, Article 1678 of the Civil
Code applies. . . .

xxxx

On the other hand, Article 448 governs the right of accession while Article 546 pertains
to effects of possession. The very language of these two provisions clearly manifest their
inapplicability to lease contracts. . . .

xxxx

Thus, the improvements that the private respondent's father had introduced in the leas
ed premises were done at his own risk as lessee. The right to indemnity equivalent to
one-half of the value of the said improvements — the house, the filling materials, and
the hollow block fence or wall —
is governed, as earlier adverted to, by the provisions of Art. 1678, first paragraph of the
Civil Code above quoted.
But this right to indemnity exists only if the lessor opts to appropriate the improvements 
(Alburo v. Villanueva, supra, note 10 at 279-280; Valencia v. Ayala de Roxas, supra, note
10 at 46). The refusal of the lessor to pay the lessee one-
half of the value of the useful improvements gives rise to the right of removal. On this
score, the commentary of Justice Paras is enlightening.
'Note that under the 1st paragraph of Art. 1678, the law on the right of REMOVAL
says that 'should the lessor refuse to reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer thereby.' While the phrase
'even though' implies that Art. 1678 always applies regardless of whether or not the
improvements can be removed without injury to the leased premises, it is believed that
application of the Article cannot always be done. The rule is evidently intended for cases
where a true accession takes place as when part of the land leased is, say, converted
into a fishpond; and certainly not where as easily removable thing (such as a wooden
fence) has been introduced. There is no doubt that in a case involving such a detachable
fence, the lessee can take the same away with him when the lease expires (5 E. Paras,
Civil Code of the Philippines Annotated 345 [11th ed., 1986]).'

xxxx
 Clearly, it is Article 1678 of the New Civil Code which applies to the present case.

Petitioners' claim for reimbursement of the alleged entire value of the improvements
does not thus lie under Article 1678. Not even for one-half of such alleged value, there
being no substantial evidence, e.g., receipts or other documentary evidence detailing
costs of construction. Besides, by petitioners' admission, of the structures they originally
built — the billiard hall, restaurant, sari-sari store and a parking lot, only the "bodega-
like" sari-sari  store and the parking lot now exist.[27]

At all events, under Article 1678, it is the lessor who is given the option, upon
termination of the lease contract, either to appropriate the useful improvements by
paying one-half of their value at that time, or to allow the lessee to remove the
improvements. This option solely belongs to the lessor as the law is explicit that
"[s]hould the lessor refuse to reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer damage thereby." It appears
that the lessor has opted not to reimburse.

WHEREFORE, the petition is DENIED. The Court of Appeals Decision of January 19, 2005
is AFFIRMED in light of the foregoing discussions.

Costs against petitioners.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 108894, February 10, 1997 ]
TECNOGAS PHILIPPINES MANUFACTURING CORPORATION,
PETITIONER, VS. COURT OF APPEALS (FORMER SPECIAL
SEVENTEENTH DIVISION) AND EDUARDO UY, RESPONDENTS.

DECISION

PANGANIBAN, J.:
 The parties in this case are owners of adjoining lots in Parañaque, Metro Manila.
It was discovered in a survey that a portion of a building of petitioner, which was
presumably constructed by its predecessor-in-interest, encroached on a portion of the
lot owned by private respondent. What are the rights and obligations of the parties? Is
petitioner considered a builder in bad faith because, as held by respondent Court, he is
“presumed to know the metes and bounds of his property as described in his certificate
of title”? Does petitioner succeed into the good faith or bad faith of his predecessor-in-
interest which presumably constructed the building?

These are the questions raised in the petition for review of the Decision [1] dated August
28, 1992, in CA-G.R. CV No. 28293 of respondent Court [2] where the disposition reads:[3]

“WHEREFORE, premises considered, the Decision of the Regional Trial Court is

hereby reversed and set aside and another one entered -

1. Dismissing the complaint for lack of cause of action;

2. Ordering Tecnogas to pay the sum of P2,000.00 per month as reasonable rental from
October 4, 1979 until appellee vacates the land;

3. To remove the structures and surrounding walls on the encroached area;

4. Ordering appellee to pay the value of the land occupied by the two-storey building;

5. Ordering appellee to pay the sum of P20,000.00 for and as attorney’s fees;

6. Costs against appellee.”

Acting on the motions for reconsideration of both petitioner and private
respondent, respondent Court ordered the deletion of paragraph 4 of the dispositive
portion in an Amended Decision dated February 9, 1993, as follows: [4]

“WHEREFORE, premises considered, our decision of August 28, 1992 is hereby modified
deleting paragraph 4 of the dispositive portion of our decision which reads:

‘4.           Ordering appellee to pay the value of the land occupied by the two-storey
building.’
The motion for reconsideration of appellee is hereby DENIED for lack of merit.”

The foregoing Amended Decision is also challenged in the instant petition.

The Facts

The facts are not disputed. Respondent Court merely reproduced the factual findings of
the trial court, as follows:[5]

“That plaintiff (herein petitioner) which is a corporation duly organized and

existing under and by virtue of Philippine laws is the registered owner of a parcel of land
situated in Barrio San Dionisio, Parañaque, Metro Manila known as Lot 4331-A (should
be 4531-A) of Lot 4531 of the Cadastral Survey of Parañaque, Metro Manila, covered by
Transfer Certificate of Title No. 409316 of the Registry of Deeds of the Province of Rizal;
that said land was purchased by plaintiff from Pariz Industries, Inc. in 1970, together
with all the buildings and improvements including the wall existing thereon; that the
defendant (herein private respondent) is the registered owner of a parcel of land known
as Lot No. 4531-B of Lot 4531 of the Cadastral Survey of Parañaque, LRC (GLRO) Rec. No.
19645 covered by Transfer Certificate of Title No. 279838, of the Registry of Deeds for
the Province of Rizal; that said land which adjoins plaintiff’s land was purchased by
defendant from a certain Enrile Antonio also in 1970; that in 1971, defendant purchased
another lot also adjoining plaintiff’s land from a certain Miguel Rodriguez and the same
was registered in defendant’s name under Transfer Certificate of Title No. 31390, of the
Registry of Deeds for the Province of Rizal; that portions of the buildings and wall
bought by plaintiff together with the land from Pariz Industries are occupying a portion
of defendant’s adjoining land; that upon learning of the encroachment or occupation by
its buildings and wall of a portion of defendant’s land, plaintiff offered to buy from
defendant that particular portion of defendant’s land occupied by portions of its
buildings and wall with an area of 770 square meters, more or less, but defendant,
however, refused the offer. In 1973, the parties entered into a private agreement before
a certain Col. Rosales in Malacañang, wherein plaintiff agreed to demolish the wall at
the back portion of its land thus giving to defendant possession of a portion of his land
previously enclosed by plaintiff’s wall; that defendant later filed a complaint before the
office of Municipal Engineer of Parañaque, Metro Manila as well as before the Office of
the Provincial Fiscal of Rizal against plaintiff in connection with the encroachment or
occupation by plaintiff’s buildings and walls of a portion of its land but said complaint
did not prosper; that defendant dug or caused to be dug a canal along plaintiff’s wall, a
portion of which collapsed in June, 1980, and led to the filing by plaintiff of the
supplemental complaint in the above-entitled case and a separate criminal complaint
for malicious mischief against defendant and his wife which ultimately resulted into the
conviction in court of defendant’s wife for the crime of malicious mischief; that while
trial of the case was in progress, plaintiff filed in Court a formal proposal for settlement
of the case but said proposal, however, was ignored by defendant.”
After trial on the merits, the Regional Trial Court [6] of Pasay City, Branch 117, in
Civil Case No. PQ-7631-P, rendered a decision dated December 4, 1989 in favor of
petitioner who was the plaintiff therein. The dispositive portion reads: [7]
”WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendant and ordering the latter to sell to plaintiff that portion of land owned by him
and occupied by portions of plaintiff’s buildings and wall at the price of P2,000.00 per
square meter and to pay the former:
1. The sum of P44,000.00 to compensate for the losses in materials and
properties incurred by plaintiff through thievery as a result of the destruction of its wall;

2. The sum of P7,500.00 as and by way of attorney’s fees; and

3. The costs of this suit.”

Appeal was duly interposed with respondent Court, which as previously stated, reversed
and set aside the decision of the Regional Trial Court and rendered the assailed Decision
and Amended Decision. Hence, this recourse under Rule 45 of the Rules of Court.

The Issues

The petition raises the following issues:[8]

“(A)

Whether or not the respondent Court of Appeals erred in holding the petitioner a
builder in bad faith because it is ‘presumed to know the metes and bounds of his
property.’
 (B)

Whether or not the respondent Court of Appeals erred when it used the amicable
settlement between the petitioner and the private respondent, where both parties
agreed to the demolition of the rear portion of the fence, as estoppel amounting to
recognition by petitioner of respondent’s right over his property including the portions
of the land where the other structures and the building stand, which were not included
in the settlement.

(C)

Whether or not the respondent Court of Appeals erred in ordering the removal of the
‘structures and surrounding walls on the encroached area’ and in withdrawing its earlier
ruling in its August 28, 1992 decision for the petitioner ‘to pay for the value of the land
occupied’ by the building, only because the private respondent has ‘manifested its
choice to demolish’ it despite the absence of compulsory sale where the builder fails to
pay for the land, and which ‘choice’ private respondent deliberately deleted from its
September 1, 1980 answer to the supple-mental complaint in the Regional Trial Court.”

In its Memorandum, petitioner poses the following issues:

“A

The time when to determine the good faith of the builder under Article 448 of the New
Civil Code, is reckoned during the period when it was actually being built; and in a case
where no evidence was presented nor introduced as to the good faith or bad faith of the
builder at that time, as in this case, he must be presumed to be a ‘builder in good faith,’
since ‘bad faith cannot be presumed.’[9]

B.

In a specific ‘boundary overlap situation’ which involves a builder in good faith, as in this
case, it is now well settled that the lot owner, who builds on the adjacent lot is not
charged with ‘constructive notice’ of the technical metes and bounds contained in their
torrens titles to determine the exact and precise extent of his boundary perimeter. [10]
 C.

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

D.

Quite contrary to respondent Uy’s reasoning, petitioner Tecnogas continues to be a

builder in good faith, even if it subsequently built/repaired the walls/other permanent
structures thereon while the case a quo was pending and even while respondent sent
the petitioner many letters/filed cases thereon. [12]

D. (E.)

The amicable settlement between the parties should be interpreted as a contract and
enforced only in accordance with its explicit terms, and not over and beyond that
agreed upon; because the courts do not have the power to create a contract nor expand
its scope.[13]

E. (F.)

As a general rule, although the landowner has the option to choose between: (1) ‘buying
the building built in good faith’, or (2) ‘selling the portion of his land on which stands the
building’ under Article 448 of the Civil Code; the first option is not absolute, because an
exception thereto, once it would be impractical for the landowner to choose to exercise
the first alternative, i.e. buy that portion of the house standing on his land, for the
whole building might be rendered useless. The workable solution is for him to select the
second alternative, namely, to sell to the builder that part of his land on which was
constructed a portion of the house.”[14]

Private respondent, on the other hand, argues that the petition is “suffering from the
following flaws:[15]

1.  It did not give the exact citations of cases decided by the Honorable Supreme Court
that allegedly contradicts the ruling of the Hon. Court of Appeals based on the doctrine
laid down in Tuason vs. Lumanlan case citing also Tuason vs. Macalindong case (Supra).

2.  Assuming that the doctrine in the alleged Co Tao vs. Chico case is contradictory to
the doctrine in Tuason vs. Lumanlan and Tuason vs. Macalindong, the two cases being
more current, the same should prevail.”

Further, private respondent contends that the following “unmistakably” point to the
bad faith of petitioner: (1) private respondent’s purchase of the two lots, “was ahead of
the purchase by petitioner of the building and lot from Pariz Industries”; (2) the
declaration of the General Manager of Tecnogas that the sale between petitioner and
Pariz Industries “was not registered” because of some problems with China Banking
Corporation; and (3) the Deed of Sale in favor of petitioner was registered in its name
only in “the month of May 1973.”[16]

The Court’s Ruling

The petition should be granted.

Good Faith or Bad Faith

Respondent Court, citing the cases of J. M. Tuason & Co., Inc. vs. Vda. de
Lumanlan[17] and J. M. Tuason & Co., Inc. vs. Macalindong, [18] ruled that petitioner
“cannot be considered in good faith” because as a land owner, it is “presumed to know
the metes and bounds of his own property, specially if the same are reflected in a
properly issued certificate of title. One who erroneously builds on the adjoining lot
should be considered a builder in (b)ad (f)aith, there being presumptive knowledge of
the Torrens title, the area, and the extent of the boundaries.” [19]

We disagree with respondent Court. The two cases it relied upon do not support its
main pronouncement that a registered owner of land has presumptive knowledge of the
metes and bounds of its own land, and is therefore in bad faith if he mistakenly builds
on an adjoining land. Aside from the fact that those cases had factual moorings radically
different from those obtaining here, there is nothing in those cases which would
suggest, however remotely, that bad faith is imputable to a registered owner of land
when a part of his building encroaches upon a neighbor’s land, simply because he is
supposedly presumed to know the boundaries of his land as described in his certificate
of title. No such doctrinal statement could have been made in those cases because such
issue was not before the Supreme Court. Quite the contrary, we have rejected such a
theory in Co Tao vs. Chico,[20] where we held that unless one is versed in the science of
surveying, “no one can determine the precise extent or location of his property by
merely examining his paper title.”

There is no question that when petitioner purchased the land from Pariz Industries, the
buildings and other structures were already in existence. The record is not clear as to
who actually built those structures, but it may well be assumed that petitioner’s
predecessor-in-interest, Pariz Industries, did so. Article 527 of the Civil Code presumes
good faith, and since no proof exists to show that the encroachment over a narrow,
needle-shaped portion of private respondent’s land was done in bad faith by the builder
of the encroaching structures, the latter should be presumed to have built them in good
faith.[21] It is presumed that possession continues to be enjoyed in the same character in
which it was acquired, until the contrary is proved.[22] Good faith consists in the belief of
the builder that the land he is building on is his, and his ignorance of any defect or flaw
in his title.[23] Hence, such good faith, by law, passed on to Pariz’s successor, petitioner in
this case. And possession acquired in good faith does not lose this character except in
case and Further, “(w)here one derives title to property from another, the act,
declaration, or omission of the latter, while holding the title, in relation to the property,
is evidence against the former.”[24] from the moment facts exist which show that the
possessor is not unaware that he possesses the thing improperly or wrongfully. [25] The
good faith ceases from the moment defects in the title are made known to the
possessor, by extraneous evidence or by suit for recovery of the property by the true
owner.[26]

Recall that the encroachment in the present case was caused by a very slight deviation
of the erected wall (as fence) which was supposed to run in a straight line from point 9
to point 1 of petitioner’s lot. It was an error which, in the context of the attendant facts,
was consistent with good faith. Consequently, the builder, if sued by the aggrieved
landowner for recovery of possession, could have invoked the provisions of Art. 448 of
the Civil Code, which reads:

”The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the building or
trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.”
The obvious benefit to the builder under this article is that, instead of being
outrightly ejected from the land, he can compel the landowner to make a choice
between the two options: (1) to appropriate the building by paying the indemnity
required by law, or (2) sell the land to the builder. The landowner cannot refuse to
exercise either option and compel instead the owner of the building to remove it from
the land.[27]

The question, however, is whether the same benefit can be invoked by petitioner who,
as earlier stated, is not the builder of the offending structures but possesses them as
buyer.

We answer such question in the affirmative.

In the first place, there is no sufficient showing that petitioner was aware of the
encroachment at the time it acquired the property from Pariz Industries. We agree with
the trial court that various factors in evidence adequately show petitioner’s lack of
awareness thereof. In any case, contrary proof has not overthrown the presumption of
good faith under Article 527 of the Civil Code, as already stated, taken together with the
disputable presumptions of the law on evidence. These presumptions state, under
Section 3 (a) of Rule 131 of the Rules of Court, that the person is innocent of a crime or
wrong; and under Section 3 (ff) of Rule 131, that the law has been obeyed. In fact,
private respondent Eduardo Uy himself was unaware of such intrusion into his property
until after 1971 when he hired a surveyor, following his purchase of another adjoining
lot, to survey all his newly acquired lots. Upon being apprised of the encroachment,
petitioner immediately offered to buy the area occupied by its building -- a species of
conduct consistent with good faith.

In the second place, upon delivery of the property by Pariz Industries, as seller, to the
petitioner, as buyer, the latter acquired ownership of the property. Consequently and as
earlier discussed, petitioner is deemed to have stepped into the shoes of the seller in
regard to all rights of ownership over the immovable sold, including the right to compel
the private respondent to exercise either of the two options provided under Article 448
of the Civil Code.

Estoppel

Respondent Court ruled that the amicable settlement entered into between petitioner
and private respondent estops the former from questioning the private respondent’s
“right” over the disputed property. It held that by undertaking to demolish the fence
under said settlement, petitioner recognized private respondent’s right over the
property, and “cannot later on compel” private respondent “to sell to it the land since”
private respondent “is under no obligation to sell.” [28]

We do not agree. Petitioner cannot be held in estoppel for entering into the amicable
settlement, the pertinent portions of which read: [29]

”That the parties hereto have agreed that the rear portion of the fence that
separates the property of the complainant and respondent shall be demolished up to
the back of the building housing the machineries which demolision (sic) shall be
undertaken by the complainant at anytime.

That the fence which serve(s) as a wall housing the electroplating machineries shall not
be demolished in the mean time which portion shall be subject to negotiation by herein
parties.”
From the foregoing, it is clear that petitioner agreed only to the demolition of a
portion of the wall separating the adjoining properties of the parties -- i.e. “up to the
back of the building housing the machineries.” But that portion of the fence which
served as the wall housing the electroplating machineries was not to be demolished.
Rather, it was to “be subject to negotiation by herein parties.” The settlement may have
recognized the ownership of private respondent but such admission cannot be equated
with bad faith. Petitioner was only trying to avoid a litigation, one reason for entering
into an amicable settlement.

As was ruled in Osmeña vs. Commission on Audit,[30]

 “A compromise is a bilateral act or transaction that is expressly acknowledged as
a juridical agreement by the Civil Code and is therein dealt with in some detail. `A
compromise,’ declares Article 2208 of said Code, `is a contract whereby the parties, by
making reciprocal concessions, avoid a litigation or put an end to one already
commenced.’

xxx                xxx       xxx

The Civil Code not only defines and authorizes compromises, it in fact encourages them
in civil actions. Art. 2029 states that `The Court shall endeavor to persuade the litigants
in a civil case to agree upon some fair compromise.’ x x x.”
In the context of the established facts, we hold that petitioner did not lose its
rights under Article 448 of the Civil Code on the basis merely of the fact that some years
after acquiring the property in good faith, it learned about -- and aptly recognized -- the
right of private respondent to a portion of the land occupied by its building. The
supervening awareness of the encroachment by petitioner does not militate against its
right to claim the status of a builder in good faith. In fact, a judicious reading of said
Article 448 will readily show that the landowner’s exercise of his option can only take
place after the builder shall have come to know of the intrusion -- in short, when both
parties shall have become aware of it. Only then will the occasion for exercising the
option arise, for it is only then that both parties will have been aware that a problem
exists in regard to their property rights.

Options of Private Respondent

What then is the applicable provision in this case which private respondent may invoke
as his remedy: Article 448 or Article 450[31] of the Civil Code?

In view of the good faith of both petitioner and private respondent, their rights and
obligations are to be governed by Art. 448. The essential fairness of this codal provision
has been pointed out by Mme. Justice Ameurfina Melencio-Herrera, citing Manresa and
applicable precedents, in the case of Depra vs. Dumlao,[32] to wit:

“Where the builder, planter or sower has acted in good faith, a conflict of rights
arises between the owners, and it becomes necessary to protect the owner of the
improvements without causing injustice to the owner of the land. In view of the
impracticality of creating a state of forced co-ownership, the law has provided a just
solution by giving the owner of the land the option to acquire the improvements after
payment of the proper indemnity, or to oblige the builder or planter to pay for the land
and the sower to pay the proper rent. It is the owner of the land who is authorized to
exercise the option, because his right is older, and because, by the principle of
accession, he is entitled to the ownership of the accessory thing. (3 Manresa 213;
Bernardo vs. Bataclan, 37 Off. Gaz. 1382; Co Tao vs. Chan Chico, G. R. No. 49167, April
30, 1949; Article applied; see Cabral, et al. vs. Ibanez [S.C.] 52 Off. Gaz. 217; Marfori vs.
Velasco, [C.A.] 52 Off. Gaz. 2050).”
The private respondent’s insistence on the removal of the encroaching structures
as the proper remedy, which respondent Court sustained in its assailed Decisions, is
thus legally flawed. This is not one of the remedies bestowed upon him by law. It would
be available only if and when he chooses to compel the petitioner to buy the land at a
reasonable price but the latter fails to pay such price. [33] This has not taken place. Hence,
his options are limited to: (1) appropriating the encroaching portion of petitioner’s
building after payment of proper indemnity, or (2) obliging the latter to buy the lot
occupied by the structure. He cannot exercise a remedy of his own liking.

Neither is petitioner’s prayer that private respondent be ordered to sell the land[34] the
proper remedy. While that was dubbed as the “more workable solution” in Grana and
Torralba vs. The Court of Appeals, et al., [35] it was not the relief granted in that case as
the landowners were directed to exercise “within 30 days from this decision their option
to either buy the portion of the petitioners’ house on their land or sell to said
petitioners the portion of their land on which it stands.” [36] Moreover, in Grana and
Torralba, the area involved was only 87 square meters while this case involves 520
square meters[37]. In line with the case of Depra vs. Dumlao, [38] this case will have to be
remanded to the trial court for further proceedings to fully implement the mandate of
Art. 448. It is a rule of procedure for the Supreme Court to strive to settle the entire
controversy in a single proceeding leaving no root or branch to bear the seeds of future
litigation.[39]

Petitioner, however, must also pay the rent for the property occupied by its building as
prescribed by respondent Court from October 4, 1979, but only up to the date private
respondent serves notice of its option upon petitioner and the trial court; that is, if such
option is for private respondent to appropriate the encroaching structure. In such event,
petitioner would have a right of retention which negates the obligation to pay rent.
[40]
 The rent should however continue if the option chosen is compulsory sale, but only
up to the actual transfer of ownership.

The award of attorney’s fees by respondent Court against petitioner is unwarranted

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

WHEREFORE, premises considered, the petition is hereby GRANTED and the assailed

Decision and the Amended Decision are REVERSED and SET ASIDE. In accordance with
the case of Depra vs. Dumlao, [42] this case is REMANDED to the Regional Trial Court of
Pasay City, Branch 117, for further proceedings consistent with Articles 448 and
546 [43] of the Civil Code, as follows:

The trial court shall determine:

a)           the present fair price of private respondent’s 520 square-meter area of land;

b)      the increase in value (“plus value”) which the said area of 520 square meters may
have acquired by reason of the existence of the portion of the building on the area;

c)           the fair market value of the encroaching portion of the building; and

d)      whether the value of said area of land is considerably more than the fair market
value of the portion of the building thereon.

2. After said amounts shall have been determined by competent evidence, the regional
trial court shall render judgment as follows:

a)  The private respondent shall be granted a period of fifteen (15) days within which to
exercise his option under the law (Article 448, Civil Code), whether to appropriate the
portion of the building as his own by paying to petitioner its fair market value, or to
oblige petitioner to pay the price of said area. The amounts to be respectively paid by
petitioner and private respondent, in accordance with the option thus exercised by
written notice of the other party and to the court, shall be paid by the obligor within
fifteen (15) days from such notice of the option by tendering the amount to the trial
court in favor of the party entitled to receive it;

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

c)  In any event, petitioner shall pay private respondent an amount computed at two
thousand pesos (P2,000.00) per month as reasonable compensation for the occupancy
of private respondent’s land for the period counted from October 4, 1979, up to the
date private respondent serves notice of its option to appropriate the encroaching
structures, otherwise up to the actual transfer of ownership to petitioner or, in case a
forced lease has to be imposed, up to the commencement date of the forced lease
referred to in the preceding paragraph;
d)  The periods to be fixed by the trial court in its decision shall be non-extendible, and
upon failure of the party obliged to tender to the trial court the amount due to the
obligee, the party entitled to such payment shall be entitled to an order of execution for
the enforcement of payment of the amount due and for compliance with such other
acts as may be required by the prestation due the obligee.

No costs.
SO ORDERED.

THIRD DIVISION
[ G.R. No. 163794, November 28, 2008 ]
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ROMEO T.
ACOSTA (FORMERLY JOSE D. MALVAS), DIRECTOR OF FOREST
MANAGEMENT BUREAU, DEPARTMENT OF ENVIRONMENT AND
NATURAL RESOURCES, PETITIONERS, VS. HON. NORMELITO J.
BALLOCANAG, PRESIDING JUDGE, BRANCH 41, REGIONAL TRIAL
COURT, PINAMALAYAN, ORIENTAL MINDORO AND DANILO REYES,
RESPONDENTS.

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the

Rules of Civil Procedure seeking the reversal of the Court of Appeals (CA)
Decision[2] dated June 4, 2004, in CA-G.R. SP No. 52261, which affirmed the Joint
Order[3] of the Regional Trial Court (RTC) of Pinamalayan, Oriental Mindoro, Branch 41,
dated December 28, 1998.

The facts, as summarized by the CA, are as follows:

Sometime in 1970, [private respondent Danilo] Reyes bought the subject
182,941-square-meter land at Bgy. Banus, Pinamalayan, Oriental Mindoro [subject land]
from one Regina Castillo (or Castillo) in whose name it was titled under Original Transfer
Certificate of Title No. P-2388 issued pursuant to Free Patent No. V-79606. Right after
his purchase, Reyes introduced improvements and planted the land with fruit trees,
including about a thousand mango[es], more than a hundred Mandarin citrus, and more
than a hundred guyabanos. He also had the title transferred in his name and was issued
TCT No. 45232.

Reyes so prized this land which he bought in good faith. Unfortunately, it turned out
that about 162,500 square meters of this land is part of the timberland of Oriental
Mindoro and, therefore, cannot be subject to any disposition or acquisition under any
existing law, and is not registrable.

Thus, in the Complaint (Annex "A", pp. 15 to 21, rollo) for "Cancellation of Title and/or
Reversion" filed by the Office of the Solicitor General (or OSG) in behalf of the Republic
[petitioner], as represented by the Bureau of Forest Development (or BFD), it was
explained that the source[,] Original Transfer Certificate of Title No. P-2388 of Castillo,
issued pursuant to Free Patent No. V-79606, is spurious, fictitious and irregularly issued
on account of:
a) ONE HUNDRED SIXTY-TWO THOUSAND FIVE HUNDRED (162,500) SQUARE
METERS, more or less, of the land covered by OCT No. P-2388 was, at the time it was
applied for patent and or titling, a part of the timberland of Oriental Mindoro, per BFD
Land Classification Map Nos. 2319 and 1715. Copy of said maps are attached hereto
as Annexes "B" and "C";

b) The 162,500 square meters covered by OCT No. P-2388 are entirely inside the 140
hectares Agro-Forestry Farm Lease Agreement No. 175 in favor of Atty. Augusto D.
Marte[4] [Atty. Marte], copy of the Map of AFFLA No. 175 and AFFLA No. 175 are
attached hereto as Annexes "D" and "E";

c) Neither the private defendant nor his predecessors-in-interest have been in

possession of the property because the rightful occupant is Atty. Augusto D. Marte by
virtue of the Agro-Forestry Farm Lease Agreement [AFFLA] No. 175, issued to him by the
Ministry of Natural Resources in 1986 to expire on December 21, 2011;

d) Since the parcel of land covered by TCT No. 45232, in the name of defendant Danilo
Reyes, is a part of the timberland of Oriental Mindoro, per BFD Land Classification Map
Nos. 2319 & 1715, the same cannot be the subject of any disposition or acquisition
under any existing law (Li Hong Giap vs. Director of Lands, 55 Phil. 693; Veno vs. Gov't of
P.I. 41 Phil. 161; Director of Lands vs. Abanzado, 65 SCRA 5). (pp. 18 to 19, rollo)
Aside from the documentary evidence presented to support these allegations,
the Republic presented as well and called to the witness stand:

a) Armando Cruz, the supervising cartographer of the DENR, who explained that based
on Land Classification Map No. 1715 (Exh. "A") which was later amended to LC Map No.
2319 (Exh. "B"), the plotting shows that the 162,000 square meters covered by OCT No.
2388 are entirely inside the 140 hectares of the Agro-Forestry Farm Lease Agreement
No. 175 in favor of Atty. Marte and the alienable and disposable area of Castillo's land is
only around two (2) hectares;

b) Alberto Cardiño, an employee of the DENR who conducted the survey on the land
under litigation, corroborated the testimony of Cruz that only two hectares is alienable
and disposable land; and

c) Vicente Mendoza, a Geodetic Engineer, who expounded on the procedure before the
title could be issued to an applicant for a disposable and alienable public land. He
clarified that he did not make the survey for Castillo but upon presentation to him of
the carpeta in open court he noticed that, while it appears to be valid, it however has no
certification of the Bureau of Forestry - an essential requirement before title could be
issued.

For his side, Reyes presented evidence showing his extensive development of and
investment in the land, but however failed to traverse squarely the issue raised by the
Republic against the inalienability and indisposability of his acquired land. His lame
argument that the absence of the Certification by the Bureau of Forestry on
his carpeta does not necessarily mean that there was none issued, failed to convince the
court a quo.

Hence, Judge Edilberto Ramos, the then Presiding Judge of Branch 41 of the Regional
Trial Court of Pinamalayan, Oriental Mindoro, held [5] that:

The defendants in this case did not assail the evidence of the plaintiff but concentrated
itself to the expenses incurred in the cultivation and in the planting of trees in that
disputed areas. Aside thereto, the plaintiff cited that it is elementary principle of law
that said areas not being capable of registration their inclusion in a certification of
ownership or confer title on the registrant. (Republic of the Philippines, et al. vs. Hon.
Judge Jaime de los Angeles of the Court of First Instance of Balayan, Batangas, et al.,
G.R. No. L-30240) It is also a matter of principle that public forest [are non-alienable
public lands. Accession of public forests] on the part of the claimant, however long,
cannot convert the same into private property. (Vano v. Government of PI, 41 Phils. 161)

In view thereof, it appears that the preponderance of evidence is in favor of the

plaintiff and against the defendants and therefore it is hereby declared that Free
Patent No. V-79606 issued on July 22, 1957 with Psu No. 155088 and OCT No. P-2388
in the name of Regina Castillo and its derivative TCT No. 45232 in the name of Danilo
Reyes is hereby declared null and void; and the defendant Danilo Reyes is hereby
ordered to surrender the owner's duplicate copy of TCT No. 45232 and to vacate the
premises and directing the defendant Register of Deeds of Calapan, Oriental Mindoro,
to cancel the title as null and void ab initio; and declaring the reversion of the land in
question to the government subject to the Agro-Forestry Farm Lease Agreement No.
175, to form part of the public domain in the province of Oriental Mindoro.

The two-hectare lot, which appears disposable and alienable, is declared null and void
for failure to secure certification from the Bureau of Forest Development.

The counter-claim of the defendant is hereby denied for lack of merit, with cost
against the defendant.[6]
Reyes appealed the aforementioned RTC Decision to the CA. In its
Decision[7] dated September 16, 1996, the CA affirmed the RTC Decision. His motion for
reconsideration was denied.[8]

Thus, Reyes sought relief from this Court via a petition for review on certiorari. But in
our Resolution[9] dated June 23, 1997, we resolved to deny his petition for failure to
sufficiently show that the CA had committed any reversible error in the questioned
judgment. On November 24, 1997, this Court denied with finality Reyes' motion for
reconsideration.[10]

On February 4, 1998, Reyes filed a Motion [11] to Remove Improvements Introduced by

Defendant Danilo D. Reyes on the Property which is the Subject of Execution in
Accordance with Rule 39, Section 10, paragraph (d) of the 1997 Rules of Civil Procedure
(motion).[12] There he averred that: he occupied in good faith the subject land for around
thirty years; he had already spent millions of pesos in planting fruit-bearing trees
thereon; and he employed many workers who regularly took care of the trees and other
plants. Reyes prayed that he and/or his agents be given at least one (1) year from the
issuance of the corresponding order to remove his mango, citrus and guyabano trees,
and that they be allowed to stay in the premises within that period to work on the
cutting and removal of the said trees. He also asked the RTC that in the meantime that
these trees are not yet removed, all the unharvested fruits be appropriated by him, as
provided for by law, to the exclusion of all other persons who may take advantage of the
situation and harvest said fruits.

Petitioner opposed the motion, citing the principle of accession under Article 440 [13] of
the Civil Code. It further argued that the subject land, being

timber land, is property of public dominion and, therefore, outside the commerce of
man and cannot be leased, donated, sold, or be the object of any contract. This being
the case, there are no improvements to speak of, because the land in question never
ceased to be a property of the Republic, even if Reyes claimed that he was a purchaser
for value and in good faith and was in possession for more than thirty (30) years .
Moreover, petitioner averred that, assuming Reyes was initially a planter/sower in good
faith, Article 448 of the Civil Code cannot be of absolute application since from the time
the reversion case was filed by the petitioner on May 13, 1987, Reyes ceased to be a
planter/sower in good faith and had become a planter/sower in bad faith.[14]

Meanwhile, on March 2, 1998, Atty. Marte filed a Complaint for Injunction With an
Ancillary Prayer for the Immediate Issuance of a Temporary Restraining Order against
Reyes for allegedly encroaching upon and taking possession by stealth, fraud and
strategy some 16 hectares of his leased area without his permission or acquiescence
and planted trees thereon in bad faith despite the fact that the area is non-disposable
and part of the public domain, among others.

But the respondent RTC dismissed the said complaint in the assailed Joint Order and
ruled in favor of Reyes, finding Rule 39, Section 10, paragraph (d) of the 1997 Rules of
Civil Procedure, applicable. The RTC ratiocinated:
Under the circumstance, it is but just and fair and equitable that Danilo Reyes be
given the opportunity to enjoy the fruits of his labor on the land which he honestly
believes was legally his. He was not aware that his certificate of title which was derived
from OCT No. P-2388 issued in 1957 by the government itself in the name of Regina
Castillo contained legal infirmity, otherwise he would not have expoused (sic) himself
from the risk of being ejected from the land and losing all improvements thereon. Any
way, if the court will grant the motion for the defendant's (sic) Danilo Reyes to remove
his improvements on the disputed property, it will not prejudice Augusto Marte,
otherwise, as the court sees it, he will immensely [benefit] from the toils of Danilo
Reyes.
and then disposed, as follows:
WHEREFORE, premises considered, the motion to remove improvements filed by
defendant Danilo Reyes dated January 28, 1998 is hereby GRANTED pursuant to the
provisions of section 10, paragraph (d) of Rule 39 of the 1997 Rules of Civil Procedure
and he is given a period of one (1) year from the issuance of this ORDER to remove, cut
and appropriate the fruit-bearing trees which he had planted in the property in disputes
(sic).

The COMMENT filed by the Office of the Solicitor General dated August 11, 1998 is
hereby denied for lack of merit.

The [C]omplaint for Injunction filed by Augusto D. Marte on March 2, 1998 against
Danilo Reyes is hereby ordered dismissed for lack of merit.
Petitioner, through the OSG, filed its Motion for Reconsideration [15] which was
denied by the RTC.[16] Aggrieved, petitioner went to the CA via Certiorari under Rule 65
of the Rules of Civil Procedure [17] ascribing to the RTC grave abuse of discretion and
acting without jurisdiction in granting Reyes' motion to remove improvements.

However, the CA dismissed the petition for certiorari, and affirmed the ruling of the RTC,
in this wise:
It is notable that in the course of the suit for "Cancellation of Title and/or
Reversion" there was not an iota of evidence presented on record that Reyes was in bad
faith in acquiring the land nor in planting thereon perennial plants. So it could never be
said and held that he was a planter/sower in bad faith. Thus, this Court holds that Reyes
sowed and planted in good faith, and that being so the appropriate provisions on right
accession are Articles 445 and 448 also of the Civil Code. [18]
Hence, this Petition based on the sole ground that:
THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE TRIAL
COURT HOLDING THAT THE MOTION TO REMOVE IMPROVEMENTS FILED BY PRIVATE
RESPONDENT IS BUT AN INCIDENT OF THE REVERSION CASE OVER WHICH THE TRIAL
COURT STILL HAS JURISDICTION DESPITE THE FACT THAT THE DECISION IN THE
REVERSION CASE HAD LONG BECOME FINAL AND EXECUTORY. [19]
The OSG posits that Reyes' assailed motion is barred by prior judgment under
Section 47, Rule 39 of the 1997 Rules of Civil Procedure because said motion merely
sprang from the civil case of reversion tried and decided on the merits by the RTC, and
the decision is already final, after it was duly affirmed by the CA and by this Court. The
OSG stresses that one of Reyes' assigned errors in the reversion case before the CA was
that the RTC "erred in not granting his (Reyes') counterclaims as well as his claims for
improvements." The OSG claims that such assigned error was duly resolved by the CA
when it held, to wit:
The non-award of appellant's "counterclaims" is understandable.

To begin with, no evidence whatsoever was presented by the appellant to sustain his
plea for damages. In fact, appellant never testified to prove his allegations as regards his
counterclaims.

Then, too, there is no showing that appellant paid the docket fees for the court to
acquire jurisdiction over his purported counterclaims (Metal Engineering Resources
Corp. vs. Court of Appeals, 203 SCRA 273).

Lastly, the allegations made in the Answer in support of the so-called "counterclaims"
clearly negate the nature of the claims as compulsory counterclaim like that of
reimbursement of the useful expenses (Cabangis vs. Court of Appeals, 200 SCRA 414). [20]
Thus, the OSG posits that the issue of the improvements cannot be made the
subject of the assailed motion on the pretext that such removal of improvements is
merely incidental to the reversion case. The OSG submits that the consideration of the
issue is now barred by res judicata. Lastly, the OSG argues that: the RTC and CA cannot
vary a decision which has already attained finality; for purposes of execution, what is
controlling is the dispositive portion of the decision; the RTC, except to order the
execution of a decision which had attained finality, had long lost jurisdiction over the
case; and the RTC erred and acted without jurisdiction when it granted Reyes' motion to
remove the improvements when the dispositive portion of the decision in the reversion
case did not provide for the removal of the same. [21]

In his Comment[22] on the OSG petition, Reyes avers that the points raised by the OSG
are merely rehashed arguments which were adequately passed upon by the CA. He fully
agrees with the ruling of the CA that: he is a planter/sower in good faith, as such,
Articles 445 and 448 of the New Civil Code are applicable; his motion is not entirely a
new case, but merely an incident to the reversion case, a consequence of its grant and a
legal solution to an important issue overlooked, if not ignored by the State and by the
courts in their decisions in the reversion case; under Section 10, Rule 39 of the 1997
Rules of Civil Procedure, he is allowed to remove the improvements; and the instant
Petition failed to abide with the proper manner as to the "proof of service" required
under Section 13, Rule 13 of the 1997 Rules of Civil Procedure. Most importantly, Reyes
avers that the land on which about 1,000 mango trees, 100 mandarin citrus trees and
100 guyabano trees are planted, was leased by the government to Atty. Marte, who
entered into the possession of the subject land when the trees were already bearing
fruits. Thus, if said trees are not removed, Atty. Marte would be unduly enriched as the
beneficiary of these fruits without even spending a single centavo, at the expense of
Reyes. Reyes posits that it is a well-established fact, unrebutted by the petitioner, that
he planted these trees and to deny him the right to remove them would constitute a
grave injustice and amount to confiscation without just compensation which is violative
of the Constitution.

The OSG counters that copies of the instant Petition were properly served as shown by
the photocopies of the registry return cards. Moreover, the OSG avers that granting,
without admitting, that another person would stand to be benefited by the
improvements that Reyes introduced on the land is beside the point and is not the fault
of the petitioner because the particular issue of the improvements was already resolved
with finality in the reversion case. The OSG claims that a lower court cannot reverse or
set aside decisions or orders of a superior court, for to do so will negate the principle of
hierarchy of courts and nullify the essence of review - a final judgment, albeit
erroneous, is binding on the whole world. [23]
The instant Petition lacks merit.

In an action for reversion, the pertinent allegations in the complaint would admit State
ownership of the disputed land. [24] Indeed, the ownership over the subject land reverted
to the State by virtue of the decisions of the

RTC and CA and our Resolution on the matter. But these decisions simply ordered the
reversion of the property to the State, and did not consider the improvements that
Reyes had introduced on the property or provide him with any remedy relative thereto.
Thus, Reyes was left out in the cold, faced with the prospect of losing not only the land
which he thought he owned, but also of forfeiting the improvements that he
painstakingly built with his effort, time and money.

We cannot agree with the OSG that the denial by the CA of Reyes' counterclaim in the
reversion case had the effect of completely foreclosing whatever rights Reyes may have
over these improvements. We note that the counterclaim was denied because Reyes
failed to prove that it was in the nature of a compulsory counterclaim, and he did not
pay docket fees thereon, even as the CA found that Reyes "never testified to prove his
allegations as regards his counterclaims." Yet, the records of the reversion case reveal
that Reyes adduced ample evidence of the extent of the improvements he introduced
and the expenses he incurred therefor. This is reflected in the findings of the CA in the
case at bench, and we concur with the appellate court when it said:
But this Court notes that while Reyes was half-hearted in his opposition to the
reversion, he instead focused on proving the improvements he has introduced on the
land, its extent and his expenses. Despite these proofs, the Decision of April 13, 1992
made no mention nor provision for the improvements on the land. With this legal
vacuum, Reyes could not exercise the options allowed the sower and planter in good
faith. This thus left him no other alternative but to avail of Paragraph (d) of Section 10 of
Rule 39 of the 1997 Rules of Civil Procedure in order to collect or get a return of his
investment as allowed to a sower and planter in good faith by the Civil Code.
Correlatively, the courts in the reversion case overlooked the issue of whether
Reyes, vis-à-vis his improvements, is a builder or planter in good faith. In the instant
case, the issue assumes full significance, because Articles 448 [25] and 546[26] of the Civil
Code grant the builder or planter in good faith full reimbursement of useful
improvements and retention of the premises until reimbursement is made. A builder or
planter in good faith is one who builds or plants on land with the belief that he is the
owner thereof, unaware of any flaw in his title to the land at the time he builds or plants
on it. [27]

On this issue, we are disposed to agree with the CA that Reyes was a planter in good
faith. Reyes was of the belief that he was the owner of the subject land; in fact, a TCT
over the property was issued in his name. He tilled the land, planted fruit trees thereon,
and invested money from 1970. He received notice of the Republic's claim only when
the reversion case was filed on May 13, 1987. The trees are now full-grown and fruit-
bearing.

To order Reyes to simply surrender all of these fruit-bearing trees in favor of the State --
because the decision in the reversion case declaring that the land is part of inalienable
forest land and belongs to the State is already final and immutable -- would inequitably
result in unjust enrichment of the State at the expense of Reyes, a planter in good faith.

Nemo cum alterius detrimento locupletari potest.[28] This basic doctrine on unjust

enrichment simply means that a person shall not be allowed to profit or enrich himself
inequitably at another's expense.[29] There is unjust enrichment when a person unjustly
retains a benefit to the loss of another, or when a person retains money or property of
another against the fundamental principles of justice, equity and good conscience.
[30]
 Article 22 of the Civil Code states the rule in this wise:
ART. 22. Every person who, through an act of performance by another, or any
other means, acquires or comes into possession of something at the expense of the
latter without just or legal ground, shall return the same to him.
The requisites for the application of this doctrine are present in the instant case.
There is enrichment on the part of the petitioner, as the State would come into
possession of -- and may technically appropriate -- the more than one thousand fruit-
bearing trees planted by the private respondent. There is impoverishment on the part of
Reyes, because he stands to lose the improvements he had painstakingly planted and
invested in. There is lack of valid cause for the State to acquire these improvements,
because, as discussed above, Reyes introduced the improvements in good faith. Thus,
the Court of Appeals did not commit any error in ruling that Reyes is entitled to the
benefits of Articles 448 and 546 of the Civil Code.
Thus, even if we accept the OSG's submission that Reyes' entitlement to these benefits
is not absolute because he can no longer claim good faith after the filing of the reversion
case in 1987, still, there is no gainsaying that prior to that — all the way back to 1970 —
he had possessed the land and introduced improvements thereon in good faith. At the
very least, then, Reyes is entitled to these benefits for the 17 years that he had been a
planter in good faith.

However, we are mindful of the fact that the subject land is currently covered by Agro-
Forestry Farm Lease Agreement (AFFLA) No. 175 issued by the Ministry of (now
Department of Environment and) Natural Resources in favor of Atty. Augusto D. Marte,
which will expire on December 21, 2011. By the terms of the AFFLA, the lessee shall,
among others, do all in his power to suppress fires, cooperate with the Bureau of Forest
Development (BFD) in the protection and conservation of the forest growth in the area
and undertake all possible measures to insure the protection of watershed and
environmental values within the leased area and areas adjacent thereto. This obligation
to prevent any damage to the land subject of the lease is consonant with fundamental
principles and state policies set forth in Section 16, [31] Article II and Section 4,[32] Article
XII of the Constitution.

To allow Reyes to remove the fruit-bearing trees now full-grown on the subject land,
even if he is legally entitled to do so, would be risking substantial damage to the land. It
would negate the policy consideration underlying the AFFLA -- to protect and preserve
the biodiversity and the environment, and to prevent any damage to the land. Further,
it would violate the implicit mandate of Article 547 of the Civil Code which provides:
ART. 547. If the useful improvements can be removed without damage to the
principal thing, the possessor in good faith may remove them unless the person who
recovers the possession exercises the option under paragraph 2 of the preceding article.
In this light, the options that Reyes may exercise under Articles 448 and 546 of
the Civil Code have been restricted. It is no longer feasible to permit him to remove the
trees he planted. The only equitable alternative would be to order the Republic to pay
Reyes the value of the improvements he introduced on the property. This is only fair
because, after all, by the terms of the AFFLA, upon the expiration of the lease or upon
its cancellation if there be any violation or breach of its terms, all permanent
improvements on the land shall pass to the ownership of the Republic without any
obligation on its part to indemnify the lessee.

However, the AFFLA is not due to expire until December 21, 2011. In the interim, it is
logical to assume that the lessee, Atty. Augusto D. Marte, will derive financial gain from
the fruits that the trees planted by Reyes would yield. In fact, Atty. Marte may already
have profited therefrom in the past several years. It is, therefore, reasonable to grant
the Republic the right of subrogation against the lessee who may have benefited from
the improvements. The Republic may, thus, demand reimbursement from Atty. Marte
for whatever amount it will have to pay Reyes for these improvements.

As to the OSG's insistent invocation of res judicata  and the immutability of final
judgments, our ruling in Temic Semiconductors, Inc. Employees Union (TSIEU)-FFW, et al.
v. Federation of Free Workers (FFW), et al.[33] is instructive:
It is axiomatic that a decision that has acquired finality becomes immutable and
unalterable. A final judgment may no longer be modified in any respect, even if the
modification is meant to correct erroneous conclusions of fact and law; and whether it
be made by the court that rendered it or by the highest court in the land. Any act which
violates such principle must immediately be struck down. Indeed, the principle of
conclusiveness of prior adjudications is not confined in its operation to the judgments of
what are ordinarily known as courts, but it extends to all bodies upon which judicial
powers had been conferred.
The only exceptions to the rule on the immutability of a final judgment are: (1)
the correction of clerical errors; (2) the so-called nunc pro tunc entries which cause no
prejudice to any party; (3) void judgments; and (4) whenever circumstances transpire
after the finality of the decision rendering its execution unjust and inequitable.

In the exercise of our mandate as a court of justice and equity, [34] we rule in favor of
Reyes pro hac vice. We reiterate that this Court is not precluded from rectifying errors of
judgment if blind and stubborn adherence to the doctrine of immutability of final
judgments would involve the sacrifice of justice for technicality. [35] Indubitably, to order
the reversion of the subject land without payment of just compensation, in absolute
disregard of the rights of Reyes over the improvements which he, in good faith,
introduced therein, would not only be unjust and inequitable but cruel as well.
WHEREFORE, the instant Petition is DENIED. The Decision dated June 4, 2004 of the
Court of Appeals is AFFIRMED with MODIFICATION in that:
1) The Regional Trial Court of Pinamalayan, Oriental Mindoro, Branch 41, is
hereby DIRECTED to determine the actual improvements introduced on the subject
land, their current value and the amount of the expenses actually spent by private
respondent Danilo Reyes for the said improvements thereon from 1970 until May 13,
1987 with utmost dispatch.

2) The Republic, through the Bureau of Forest Development of the Department of

Environment and Natural Resources, is DIRECTED to pay private respondent Danilo
Reyes the value of such actual improvements he introduced on the subject land as
determined by the Regional Trial Court, with the right of subrogation against Atty.
Augusto D. Marte, the lessee in Agro-Forestry Farm Lease Agreement No. 175.

No costs.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 170923, January 20, 2009 ]
SULO SA NAYON, INC. AND/OR PHILIPPINE VILLAGE HOTEL, INC.
AND JOSE MARCEL E. PANLILIO, PETITIONERS, VS. NAYONG
PILIPINO FOUNDATION, RESPONDENT.

DECISION

PUNO, J.:

On appeal are the Court of Appeals' (CA's) October 4, 2005 Decision[1] in CA-G.R. SP
No. 74631 and December 22, 2005 Resolution,[2] reversing the November 29, 2002
Decision[3] of the Regional Trial Court (RTC) of Pasay City in Civil Case No. 02-0133.
The RTC modified the Decision[4] of the Metropolitan Trial Court (MeTC) of Pasay City
which ruled against petitioners and ordered them to vacate the premises and pay their
arrears. The RTC declared petitioners as builders in good faith and upheld their right to
indemnity.
The facts are as follows:

Respondent Nayong Pilipino Foundation, a government-owned and controlled

corporation, is the owner of a parcel of land in Pasay City, known as the Nayong Pilipino
Complex. Petitioner Philippine Village Hotel, Inc. (PVHI), formerly called Sulo sa
Nayon, Inc., is a domestic corporation duly organized and existing under Philippine laws.
Petitioner Jose Marcel E. Panlilio is its Senior Executive Vice President.

On June 1, 1975, respondent leased a portion of the Nayong Pilipino Complex, consisting
of 36,289 square meters, to petitioner Sulo sa Nayon, Inc. for the construction and
operation of a hotel building, to be known as the Philippine Village Hotel. The lease was
for an initial period of 21 years, or until May 1996. It is renewable for a period of 25
years under the same terms and conditions upon due notice in writing to respondent of
the intention to renew at least 6 months before its expiration. Thus, on March 7, 1995,
petitioners sent respondent a letter notifying the latter of their intention to renew the
contract for another 25 years. On July 4, 1995, the parties executed a Voluntary
Addendum to the Lease Agreement. The addendum was signed by petitioner Jose Marcel
E. Panlilio in his official capacity as Senior Executive Vice President of the PVHI and by
Chairman Alberto A. Lim of the Nayong Pilipino Foundation. They agreed to the renewal
of the contract for another 25 years, or until 2021. Under the new agreement, petitioner
PVHI was bound to pay the monthly rental on a per square meter basis at the rate of
P20.00 per square meter, which shall be subject to an increase of 20% at the end of every
3-year period. At the time of the renewal of the lease contract, the monthly rental
amounted to P725,780.00.

Beginning January 2001, petitioners defaulted in the payment of their monthly rental.
Respondent repeatedly demanded petitioners to pay the arrears and vacate the premises.
The last demand letter was sent on March 26, 2001.

On September 5, 2001, respondent filed a complaint for unlawful detainer before the
MeTC of Pasay City. The complaint was docketed as Civil Case No. 708-01. Respondent
computed the arrears of petitioners in the amount of twenty-six million one hundred
eighty-three thousand two hundred twenty-five pesos and fourteen centavos
(P26,183,225.14), as of July 31, 2001.

On February 26, 2002, the MeTC rendered its decision in favor of respondent. It ruled,
thus:
. . . . The court is convinced by the evidence that indeed, defendants defaulted in the
payment of their rentals. It is basic that the lessee is obliged to pay the price of the lease
according to the terms stipulated (Art. 1657, Civil Code). Upon the failure of the lessee to
pay the stipulated rentals, the lessor may eject (sic) and treat the lease as rescinded and
sue to eject the lessee (C. Vda[.] De Pamintuan v. Tiglao, 53 Phil. 1). For non-payment of
rentals, the lessor may rescind the lease, recover the back rentals and recover possession
of the leased premises. . .

xxx

. . . . Improvements made by a lessee such as the defendants herein on leased premises

are not valid reasons for their retention thereof. The Supreme Court has occasion to
address a similar issue in which it ruled that: "The fact that petitioners allegedly made
repairs on the premises in question is not a reason for them to retain the possession of
the premises. There is no provision of law which grants the lessee a right of retention
over the leased premises on that ground. Article 448 of the Civil Code, in relation to
Article 546, which provides for full reimbursement of useful improvements and retention
of the premises until reimbursement is made, applies only to a possessor in good faith,
i.e., one who builds on a land in the belief that he is the owner thereof. This right of
retention does not apply to a mere lessee, like the petitioners, otherwise, it would always
be in his power to "improve" his landlord out of the latter's property (Jose L. Chua and
Co Sio Eng vs. Court of Appeals and Ramon Ibarra, G.R. No. 109840, January 21,
1999)."

Although the Contract of Lease stipulates that the building and all the improvements in
the leased premises belong to the defendants herein, such will not defeat the right of the
plaintiff to its property as the defendants failed to pay their rentals in violation of the
terms of the contract. At most, defendants can only invoke [their] right under Article
1678 of the New Civil Code which grants them the right to be reimbursed one-half of the
value of the building upon the termination of the lease, or, in the alternative, to remove
the improvements if the lessor refuses to make reimbursement.
The dispositive portion of the decision reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of Nayong
Pilipino Foundation, and against the defendant Philippine Village Hotel, Inc[.], and all
persons claiming rights under it, ordering the latter to:

1. VACATE the subject premises and surrender possession thereof to plaintiff;

2. PAY plaintiff its rental arrearages in the sum of TWENTY SIX MILLION ONE
HUNDRED EIGHTY THREE THOUSAND TWO HUNDRED TWENTY FIVE
PESOS AND 14/100 (P26,183,225.14) incurred as of July 31, 2001;

3. PAY plaintiff the sum of SEVEN HUNDRED TWENTY FIVE THOUSAND

SEVEN HUNDRED EIGHTY PESOS (P725,780.00) per month starting from
August 2001 and every month thereafter by way of reasonable compensation for
the use and occupation of the premises;

4. PAY plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00) by way of

attorney's fees[; and]
 5. PAY the costs of suit.

The complaint against defendant Jose Marcel E. Panlilio is hereby dismissed for lack of
cause of action. The said defendant's counterclaim however is likewise dismissed as the
complaint does not appear to be frivolous or maliciously instituted.

SO ORDERED.[5]
Petitioners appealed to the RTC which modified the ruling of the MeTC. It held that:
. . . it is clear and undisputed that appellants-lessees were expressly required to construct
a first-class hotel with complete facilities. The appellants were also unequivocally
declared in the Lease Agreement as the owner of the improvements so constructed. They
were even explicitly allowed to use the improvements and building as security or
collateral on loans and credit accommodations that the Lessee may secure for the purpose
of financing the construction of the building and other improvements (Section 2; pars.
"A" to "B," Lease Agreement). Moreover, a time frame was setforth (sic) with respect to
the duration of the lease initially for 21 years and renewable for another 25 years in order
to enable the appellants-lessees to recoup their huge money investments relative to the
construction and maintenance of the improvements.

xxx

Considering therefore, the elements of permanency of the construction and substantial

value of the improvements as well as the undispute[d] ownership over the land
improvements, these, immensely engender the application of Art. 448 of the Civil Code.
The only remaining and most crucial issue to be resolved is whether or not the appellants
as builders have acted in good faith in order for Art. 448 in relation to Art. 546 of the
Civil Code may apply with respect to their rights over improvements.

xxx

. . . it is undeniable that the improvement of the hotel building of appellants (sic) PVHI
was constructed with the written consent and knowledge of appellee. In fact, it was
precisely the primary purpose for which they entered into an agreement. Thus, it could
not be denied that appellants were builders in good faith.

Accordingly, and pursuant to Article 448 in relation to Art. 546 of the Civil Code,
plaintiff-appellee has the sole option or choice, either to appropriate the building, upon
payment of proper indemnity consonant to Art. 546 or compel the appellants to purchase
the land whereon the building was erected. Until such time that plaintiff-appellee has
elected an option or choice, it has no right of removal or demolition against appellants
unless after having selected a compulsory sale, appellants fail to pay for the land (Ignacio
vs. Hilario; 76 Phil. 605). This, however, is without prejudice from the parties agreeing to
adjust their rights in some other way as they may mutually deem fit and proper.
The dispositive portion of the decision of the RTC reads as follows:
WHEREFORE, and in view of the foregoing, judgment is hereby rendered modifying the
decision of [the] MTC, Branch 45 of Pasay City rendered on February 26, 2002 as
follows:

1. Ordering plaintiff-appellee to submit within thirty (30) days from receipt of a copy
of this decision a written manifestation of the option or choice it selected, i.e., to
appropriate the improvements upon payment of proper indemnity or compulsory
sale of the land whereon the hotel building of PVHI and related improvements or
facilities were erected;

2. Directing the plaintiff-appellee to desist and/or refrain from doing acts in the
furtherance or exercise of its rights and demolition against appellants unless and
after having selected the option of compulsory sale and appellants failed to pay
[and] purchase the land within a reasonable time or at such time as this court will
direct;

3. Ordering defendants-appellants to pay plaintiff-appellee [their] arrears in rent

incurred as of July 31, 2001 in the amount of P26,183,225.14;

4. Ordering defendants-appellants to pay to plaintiff-appellee the unpaid monthly

rentals for the use and occupation of the premises pending this appeal from July to
November 2002 only at P725,780.00 per month;

5. The fourth and fifth directives in the dispositive portion of the trial court's decision
including that the last paragraph thereof JME Panlilio's complaint is hereby
affirmed;

6. The parties are directed to adjust their respective rights in the interest of justice as
they may deem fit and proper if necessary.

SO ORDERED.[6]
Respondent appealed to the CA which held that the RTC erroneously applied the rules on
accession, as found in Articles 448 and 546 of the Civil Code when it held that petitioners
were builders in good faith and, thus, have the right to indemnity. The CA held:
By and large, respondents are admittedly mere lessees of the subject premises and as
such, cannot validly claim that they are builders in good faith in order to solicit the
application of Articles 448 and 546 of the Civil Code in their favor. As it is, it is glaring
error on the part of the RTC to apply the aforesaid legal provisions on the supposition
that the improvements, which are of substantial value, had been introduced on the leased
premises with the permission of the petitioner. To grant the respondents the right of
retention and reimbursement as builders in good faith merely because of the valuable and
substantial improvements that they introduced to the leased premises plainly contravenes
the law and settled jurisprudential doctrines and would, as stated, allow the lessee to
easily "improve" the lessor out of its property.
. . . . Introduction of valuable improvements on the leased premises does not strip the
petitioner of its right to avail of recourses under the law and the lease contract itself in
case of breach thereof. Neither does it deprive the petitioner of its right under Article
1678 to exercise its option to acquire the improvements or to let the respondents remove
the same.

Petitioners' Motion for Reconsideration was denied.

Hence, this appeal.[7]

Petitioners assign the following errors:

I

THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE

ERROR IN NOT HOLDING THAT PETITIONERS WERE BUILDERS IN GOOD
FAITH OVER THE SUBSTANTIAL AND VALUABLE IMPROVEMENTS WHICH
THEY HAD INTRODUCED ON THE SUBJECT PROPERTY, THUS COMPELLING
THE APPLICATION OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO
ARTICLE 546 OF THE SAME CODE, INSTEAD OF ARTICLE 1678 OF THE CIVIL
CODE.

II

THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS

REVERSIBLE ERROR WHEN IT DISREGARDED THE FACT THAT THE LEASE
CONTRACT GOVERNS THE RELATIONSHIP OF THE PARTIES AND
CONSEQUENTLY THE PARTIES MAY BE CONSIDERED TO HAVE IMPLIEDLY
WAIVED THE APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE TO THE
INSTANT CASE.

III

ASSUMING ARGUENDO THAT THE PETITIONERS ARE NOT BUILDERS IN

GOOD FAITH, THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE
REVERSIBLE ERROR WHEN IT OVERLOOKED THE FACT THAT RESPONDENT
ALSO ACTED IN BAD FAITH WHEN IT DID NOT HONOR AND INSTEAD
BREACHED THE LEASE CONTRACT BETWEEN THE PARTIES, THUS BOTH
PARTIES ACTED AS IF THEY ARE IN GOOD FAITH.

IV
TO SANCTION THE APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE
INSTEAD OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO ARTICLE
546 OF THE SAME CODE WOULD NOT ONLY WREAK HAVOC AND CAUSE
SUBSTANTIAL INJURY TO THE RIGHTS AND INTERESTS OF PETITIONER
PHILIPPINE VILLAGE HOTEL, INC. WHILE RESPONDENT NAYONG PILIPINO
FOUNDATION, IN COMPARISON THERETO, WOULD SUFFER ONLY SLIGHT
OR INCONSEQUENTIAL INJURY OR LOSS, BUT ALSO WOULD CONSTITUTE
UNJUST ENRICHMENT ON THE PART OF RESPONDENT AT GREAT EXPENSE
AND GRAVE PREJUDICE OF PETITIONERS.

THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE

ERROR IN NOT HOLDING THAT THE COURTS A QUO DID NOT ACQUIRE
JURISDICTION OVER THE UNLAWFUL DETAINER CASE FOR NON-
COMPLIANCE WITH JURISDICTIONAL REQUIREMENTS DUE TO THE
ABSENCE OF A NOTICE TO VACATE UPON PETITIONERS. [8]
First, we settle the issue of jurisdiction. Petitioners argue that the MeTC did not acquire
jurisdiction to hear and decide the ejectment case because they never received any
demand from respondent to pay rentals and vacate the premises, since such demand is a
jurisdictional requisite. We reiterate the ruling of the MeTC, RTC and CA. Contrary to
the claim of petitioners, documentary evidence proved that a demand letter dated March
26, 2001 was sent by respondent through registered mail to petitioners, requesting them
"to pay the rental arrears or else it will be constrained to file the appropriate legal action
and possess the leased premises."

Further, petitioners' argument that the demand letter is "inadequate" because it contained
no demand to vacate the leased premises does not persuade. We have ruled that:
. . . . The word "vacate" is not a talismanic word that must be employed in all notices.
The alternatives in this case are clear cut. The tenants must pay rentals which are fixed
and which became payable in the past, failing which they must move out. There can be
no other interpretation of the notice given to them. Hence, when the petitioners demanded
that either he pays P18,000 in five days or a case of ejectment would be filed against him,
he was placed on notice to move out if he does not pay. There was, in effect, a notice or
demand to vacate.[9]
In the case at bar, the language of the demand letter is plain and simple: respondent
demanded payment of the rental arrears amounting to P26,183,225.14 within ten days
from receipt by petitioners, or respondent will be constrained to file an appropriate legal
action against petitioners to recover the said amount. The demand letter further stated that
respondent will possess the leased premises in case of petitioners' failure to pay the rental
arrears within ten days. Thus, it is clear that the demand letter is intended as a notice to
petitioners to pay the rental arrears, and a notice to vacate the premises in case of failure
of petitioners to perform their obligation to pay.

Second, we resolve the main issue of whether the rules on accession, as found in Articles
448 and 546 of the Civil Code, apply to the instant case.

Article 448 and Article 546 provide:

Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall pay reasonable
rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.

Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor
in good faith may retain the thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the same right
of retention, the person who has defeated him in the possession having the option of
refunding the amount of the expenses or of paying the increase in value which the thing
may have acquired by reason thereof.

We uphold the ruling of the CA.

The late Senator Arturo M. Tolentino, a leading expert in Civil Law, explains:
This article [Article 448] is manifestly intended to apply only to a case where one builds,
plants, or sows on land in which he believes himself to have a claim of title, [10] and not to
lands where the only interest of the builder, planter or sower is that of a holder, such as a
tenant.[11]
In the case at bar, petitioners have no adverse claim or title to the land. In fact, as lessees,
they recognize that the respondent is the owner of the land. What petitioners insist is that
because of the improvements, which are of substantial value, that they have introduced
on the leased premises with the permission of respondent, they should be considered
builders in good faith who have the right to retain possession of the property until
reimbursement by respondent.

We affirm the ruling of the CA that introduction of valuable improvements on the leased
premises does not give the petitioners the right of retention and reimbursement which
rightfully belongs to a builder in good faith. Otherwise, such a situation would allow the
lessee to easily "improve" the lessor out of its property. We reiterate the doctrine that a
lessee is neither a builder in good faith nor in bad faith[12] that would call for the
application of Articles 448 and 546 of the Civil Code. His rights are governed by Article
1678 of the Civil Code, which reads:
Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to
the use for which the lease is intended, without altering the form or substance of the
property leased, the lessor upon the termination of the lease shall pay the lessee one-half
of the value of the improvements at that time. Should the lessor refuse to reimburse said
amount, the lessee may remove the improvements, even though the principal thing may
suffer damage thereby. He shall not, however, cause any more impairment upon the
property leased than is necessary.

With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no damage is
caused to the principal thing, and the lessor does not choose to retain them by paying
their value at the time the lease is extinguished.
Under Article 1678, the lessor has the option of paying one-half of the value of the
improvements which the lessee made in good faith, which are suitable for the use for
which the lease is intended, and which have not altered the form and substance of the
land. On the other hand, the lessee may remove the improvements should the lessor
refuse to reimburse.

Petitioners argue that to apply Article 1678 to their case would result to sheer injustice, as
it would amount to giving away the hotel and its other structures at virtually bargain
prices. They allege that the value of the hotel and its appurtenant facilities amounts to
more than two billion pesos, while the monetary claim of respondent against them only
amounts to a little more than twenty six-million pesos. Thus, they contend that it is the
lease contract that governs the relationship of the parties, and consequently, the parties
may be considered to have impliedly waived the application of Article 1678.

We cannot sustain this line of argument by petitioners. Basic is the doctrine that laws are
deemed incorporated in each and every contract. Existing laws always form part of any
contract. Further, the lease contract in
the case at bar shows no special kind of agreement between the parties as to how to
proceed in cases of default or breach of the contract. Petitioners maintain that the lease
contract contains a default provision which does not give respondent the right to
appropriate the improvements nor evict petitioners in cases of cancellation or termination
of the contract due to default or breach of its terms. They cite paragraph 10 of the lease
contract, which provides that:
10. DEFAULT. - . . . Default shall automatically take place upon the failure of the
LESSEE to pay or perform its obligation during the time fixed herein for such obligations
without necessity of demand, or, if no time is fixed, after 90 days from the receipt of
notice or demand from the LESSOR. . .

In case of cancellation or termination of this contract due to the default or breach of its
terms, the LESSEE will pay all reasonable attorney's fees, costs and expenses of litigation
that may be incurred by the LESSOR in enforcing its rights under this contract or any of
its provisions, as well as all unpaid rents, fees, charges, taxes, assessment and others
which the LESSOR may be entitled to.
Petitioners assert that respondent committed a breach of the lease contract when it filed
the ejectment suit against them. However, we find nothing in the above quoted provision
that prohibits respondent to proceed the way it did in enforcing its rights as lessor. It can
rightfully file for ejectment to evict petitioners, as it did before the court a quo.

IN VIEW WHEREOF, petitioners' appeal is DENIED. The October 4, 2005 Decision

of the Court of Appeals in CA-G.R. SP No. 74631 and its December 22, 2005 Resolution
are AFFIRMED. Costs against petitioners.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 178906, February 18, 2009 ]
ELVIRA T. ARANGOTE, PETITIONER, VS. SPS. MARTIN MAGLUNOB
AND LOURDES S. MAGLUNOB, AND ROMEO SALIDO, RESPONDENTS.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997
Revised Rules of Civil Procedure seeking to reverse and set aside the Decision [1] dated 27
October 2006 and Resolution[2] dated 29 June 2007 of the Court of Appeals in CA-G.R.
SP No. 64970. In its assailed Decision, the appellate court affirmed the Decision [3] dated
12 September 2000 of the Regional Trial Court (RTC), 6th Judicial Region, Branch 1,
Kalibo, Aklan, in Civil Case No. 5511, which reversed the Decision [4] dated 6 April 1998
of the 7th Municipal Circuit Trial Court (MCTC) of Ibajay-Nabas, Ibajay, Aklan, in Civil
Case No. 156; and declared[5] the herein respondent-Spouses Martin and Lourdes
Maglunob (Spouses Maglunob) and respondent Romeo Salido (Romeo) as the lawful
owners and possessors of Lot 12897 with an area of 982 square meters, more or less,
located in Maloco, Ibajay, Aklan (subject property). In its assailed Resolution, the
appellate court denied herein petitioner Elvira T. Arangote's Motion for Reconsideration.

Elvira T. Arangote, herein petitioner married to Ray Mars E. Arangote, is the registered
owner of the subject property, as evidenced by Original Certificate of Title (OCT) No.
CLOA-1748.[6] Respondents Martin (Martin II) and Romeo are first cousins and the
grandnephews of Esperanza Maglunob-Dailisan (Esperanza), from whom petitioner
acquired the subject property.

The Petition stems from a Complaint[7] filed by petitioner and her husband against the
respondents for Quieting of Title, Declaration of Ownership and Possession, Damages
with Preliminary Injunction, and Issuance of Temporary Restraining Order before the
MCTC, docketed as Civil Case No. 156.

The Complaint alleged that Esperanza inherited the subject property from her uncle
Victorino Sorrosa by virtue of a notarized Partition Agreement[8] dated 29 April 1985,
executed by the latter's heirs. Thereafter, Esperanza declared the subject property in her
name for real property tax purposes, as evidenced by Tax Declaration No. 16218 (1985).
[9]

The Complaint further stated that on 24 June 1985, Esperanza executed a Last Will and
Testament[10] bequeathing the subject property to petitioner and her husband, but it was
never probated. On 9 June 1986, Esperanza executed another document, an Affidavit,
[11]
 in which she renounced, relinquished, waived and quitclaimed all her rights, share,
interest and participation whatsoever in the subject property in favor of petitioner and her
husband. On the basis thereof, Tax Declaration No. 16218 in the name of Esperanza was
cancelled and Tax Declaration No. 16666[12] (1987) was issued in the name of the
petitioner and her husband.

In 1989, petitioner and her husband constructed a house on the subject property. On 26
March 1993, OCT No. CLOA-1748 was issued by the Secretary of the Department of
Agrarian Reform (DAR) in the name of petitioner, married to Ray Mars E. Arangote.
However, respondents, together with some hired persons, entered the subject property on
3 June 1994 and built a hollow block wall behind and in front of petitioner's house, which
effectively blocked the entrance to its main door.

As a consequence thereof, petitioner and her husband were compelled to institute Civil
Case No. 156.

In their Answer with Counterclaim in Civil Case No. 156, respondents averred that they
co-owned the subject property with Esperanza. Esperanza and her siblings, Tomas and
Inocencia, inherited the subject property, in equal shares, from their father Martin
Maglunob (Martin I). When Tomas and Inocencia passed away, their shares passed on by
inheritance to respondents Martin II and Romeo, respectively. Hence, the subject
property was co-owned by Esperanza, respondent Martin II (together with his wife
Lourdes), and respondent Romeo, each holding a one-third pro-indiviso share therein.
Thus, Esperanza could not validly waive her rights and interest over the entire subject
property in favor of the petitioner.
Respondents also asserted in their Counterclaim that petitioner and her husband, by
means of fraud, undue influence and deceit were able to make Esperanza, who was
already old and illiterate, affix her thumbmark to the Affidavit dated 9 June 1986,
wherein she renounced all her rights and interest over the subject property in favor of
petitioner and her husband. Respondents thus prayed that the OCT issued in petitioner's
name be declared null and void insofar as their two-thirds shares are concerned.

After trial, the MCTC rendered its Decision dated 6 April 1998 in Civil Case No. 156,
declaring petitioner and her husband as the true and lawful owners of the subject
property. The decretal portion of the MCTC Decision reads:
WHEREFORE, judgment is hereby rendered:

A. Declaring the [herein petitioner and her husband] the true, lawful and exclusive
owners and entitled to the possession of the [subject property] described and
referred to under paragraph 2 of the [C]omplaint and covered by Tax Declaration
No. 16666 in the names of the [petitioner and her husband];

B. Ordering the [herein respondents] and anyone hired by, acting or working for
them, to cease and desist from asserting or claiming any right or interest in, or
exercising any act of ownership or possession over the [subject property];

C. Ordering the [respondents] to pay the [petitioner and her husband] the amount of
P10,000.00 as attorney's fee. With cost against the [respondents].[13]

The respondents appealed the aforesaid MCTC Decision to the RTC. Their appeal was
docketed as Civil Case No. 5511.

Respondents argued in their appeal that the MCTC erred in not dismissing the Complaint
filed by the petitioner and her husband for failure to identify the subject property therein.
Respondents further faulted the MCTC for not declaring Esperanza's Affidavit dated 9
June 1986 -- relinquishing all her rights and interest over the subject property in favor of
petitioner and her husband -- as null and void insofar as respondents' two-thirds share in
the subject property is concerned.

On 12 September 2000, the RTC rendered its Decision reversing the MCTC Decision
dated 6 April 1998. The RTC adjudged respondents, as well as the other heirs of Martin
Maglunob, as the lawful owners and possessors of the entire subject property. The RTC
decreed:
WHEREFORE, judgment is hereby rendered as follows:

1) The appealed [D]ecision is REVERSED;

2) [Herein respondents] and the other heirs of Martin Maglunob are declared the lawful
owners and possessors of the whole [subject property] as described in Paragraph 2 of the
[C]omplaint, as against the [herein petitioner and her husband].

3) [Petitioner and her husband] are ordered to immediately turn over possession of the
[subject property] to the [respondents] and the other heirs of Martin Maglunob; and

4) [Petitioner and her husband] are ordered to pay [respondents] attorney's fees of
P5,000.00, other litigation expenses of P5,000.00, moral damages of P10,000.00 and
exemplary damages of P5,000.00.[14]
Petitioner and her husband filed before the RTC, on 26 September 2000, a Motion for
New Trial or Reconsideration[15] on the ground of newly discovered evidence consisting
of a Deed of Acceptance[16] dated 23 September 2000, and notice[17] of the same, which
were both made by the petitioner, for herself and in behalf of her husband, [18] during the
lifetime of Esperanza. In the RTC Order[19] dated 2 May 2001, however, the RTC denied
the aforesaid Motion for New Trial or Reconsideration.

The petitioner and her husband then filed a Petition for Review, under Rule 42 of the
1997 Revised Rules of Civil Procedure, before the Court of Appeals, where the Petition
was docketed as CA-G.R. SP No. 64970.

In their Petition before the appellate court, petitioner and her husband raised the
following errors committed by the RTC in its 12 September 2000 Decision:

I. It erred in reversing the [D]ecision of the [MCTC];

II. It erred in declaring the [herein respondents] and the other heirs of Martin
Maglunob as the lawful owners and possessors of the whole [subject property];

III. It erred in declaring [OCT] No. CLOA-1748 in the name of [herein petitioner]
Elvie T. Arangote as null and void;

IV. It erred in denying [petitioner and her husband's] [M]otion for [N]ew [T]rial or
[R]econsideration dated [26 September 2000; and

V. It erred in not declaring the [petitioner and her husband] as possessors in good
faith.[20]

On 27 October 2006, the Court of Appeals rendered a Decision denying the Petition for
Review of petitioner and her husband and affirming the RTC Decision dated 12
September 2000. Petitioner and her husband's subsequent Motion for Reconsideration
was similarly denied by the Court of Appeals in its Resolution dated 29 June 2007.
Hence, petitioner[21] now comes before this Court raising in her Petition the following
issues:

I. Whether the [RTC] acted with grave abuse of discretion amounting to lack or
excess of jurisdiction when it declared the [petitioner and her husband's title to the
subject property] null and void;

II. Whether the [RTC] acted with grave abuse of discretion amounting to lack of
jurisdiction when it declared the Affidavit of Quitclaim null and void; and

III. Whether the [RTC] and the Honorable Court of Appeals acted with grave abuse of
discretion amounting to lack or excess of jurisdiction when it rejected petitioner's
claim as possessors (sic) in good faith, hence, entitled to the rights provided in
[Article] 448 and [Article] 546 of the Civil Code.[22]

Petitioner contends that the aforesaid OCT No. CLOA-1748 was issued in her name on
26 March 1993 and was registered in the Registry of Deeds of Aklan on 20 April 1993.
From 20 April 1993 until the institution of Civil Case No. 156 on 10 June 1994 before the
MCTC, more than one year had already elapsed. Considering that a Torrens title can only
be attacked within one year after the date of the issuance of the decree of registration on
the ground of fraud and that such attack must be through a direct proceeding, it was an
error on the part of the RTC and the Court of Appeals to declare OCT No. CLOA-1748
null and void.

Petitioner additionally posits that both the RTC and the Court of Appeals committed a
mistake in declaring null and void the Affidavit dated 9 June 1986 executed by
Esperanza, waiving all her rights and interest over the subject property in favor of
petitioner and her husband. Esperanza's Affidavit is a valid and binding proof of the
transfer of ownership of the subject property in petitioner's name, as it was also coupled
with actual delivery of possession of the subject property to petitioner and her husband.
The Affidavit is also proof of good faith on the part of petitioner and her husband.

Finally, petitioner argues that, assuming for the sake of argument, that Esperanza's
Affidavit is null and void, petitioner and her husband had no knowledge of any flaw in
Esperanza's title when the latter relinquished her rights to and interest in the subject
property in their favor. Hence, petitioner and her husband can be considered as
possessors in good faith and entitled to the rights provided under Articles 448 and 546 of
the Civil Code.

This present Petition is devoid of merit.

It is a hornbook doctrine that the findings of fact of the trial court are entitled to great
weight on appeal and should not be disturbed except for strong and valid reasons,
because the trial court is in a better position to examine the demeanor of the witnesses
while testifying. It is not a function of this Court to analyze and weigh evidence by the
parties all over again. This Court's jurisdiction is, in principle, limited to reviewing errors
of law that might have been committed by the Court of Appeals.[23] This rule, however, is
subject to several exceptions,[24] one of which is present in this case, i.e., when the factual
findings of the Court of Appeals and the trial court are contradictory.

In this case, the findings of fact of the MCTC as regards the origin of the subject property
are in conflict with the findings of fact of both the RTC and the Court of Appeals. Hence,
this Court will have to examine the records to determine first the true origin of the subject
property and to settle whether the respondents have the right over the same for being co-
heirs and co-owners, together with their grand aunt, Esperanza, before this Court can
resolve the issues raised by the petitioner in her Petition.

After a careful scrutiny of the records, this Court affirms the findings of both the RTC
and the Court of Appeals as regards the origin of the subject property and the fact that
respondents, with their grand aunt Esperanza, were co-heirs and co-owners of the subject
property.

The records disclosed that the subject property was part of a parcel of land[25] situated in
Maloco, Ibajay, Aklan, consisting of 7,176 square meters and commonly owned in equal
shares by the siblings Pantaleon Maglunob (Pantaleon) and Placida Maglunob-Sorrosa
(Placida). Upon the death of Pantaleon and Placida, their surviving and legal heirs
executed a Deed of Extrajudicial Settlement and Partition of Estate in July 1981,
[26]
 however, the Deed was not notarized. Considering that Pantaleon died without issue,
his one-half share in the parcel of land he co-owned with Placida passed on to his four
siblings (or their respective heirs, if already deceased), namely: Placida, Luis, Martin I,
and Victoria, in equal shares.

According to the aforementioned Deed of Extrajudicial Settlement and Partition of

Estate, the surviving and legal heirs of Pantaleon and Placida agreed to have the parcel of
land commonly owned by the siblings declared for real property tax purposes in the name
of Victorino Sorrosa (Victorino), Placida's husband. Thus, Tax Declarations No. 5988
(1942),[27] No. 6200 (1945)[28] and No. 7233 (1953)[29] were all issued in the name of
Victorino.

Since Martin I already passed away when the Deed of Extrajudicial Settlement and
Partition of Estate was executed, his heirs[30] were represented therein by Esperanza. By
virtue of the said Deed, Martin I received as inheritance a portion of the parcel of land
measuring 897 square meters.

After the death of Victorino, his heirs[31] executed another Partition Agreement on 29

April 1985, which was notarized on the same date. The Partition Agreement mentioned
four parcels of land. The subject property, consisting of a portion of the consolidated
parcels 1, 2, and 3, and measuring around 982 square meters, was allocated to Esperanza.
In comparison, the property given to Esperanza under the Partition Agreement is bigger
than the one originally allocated to her earlier under the Deed of Extrajudicial Settlement
and Partition of Estate dated July 1981, which had an area of only 897 square meters. It
may be reasonably assumed, however, that the subject property, measuring 982 square
meters, allocated to Esperanza under the Partition Agreement dated 29 April 1985, is
already inclusive of the smaller parcel of 897 square meters assigned to her under the
Deed of Extrajudicial Settlement and Partition of Estate dated July 1981. As explained by
the RTC in its 12 September 2000 Decision:
The [subject property] which is claimed by the [herein petitioner and her husband] and
that which is claimed by the [herein respondents] are one and the same, the difference in
area and technical description being due to the repartition and re-allocation of the parcel
of land originally co-owned by Pantaleon Maglunob and his sister Placida Maglunob and
subsequently declared in the name of [Victorino] under Tax Declaration No. 5988 of
1949.[32]
It is clear from the records that the subject property was not Esperanza's exclusive share,
but also that of the other heirs of her father, Martin I. Esperanza expressly affixed her
thumbmark to the Deed of Extrajudicial Settlement of July 1981 not only for herself, but
also on behalf of the other heirs of Martin I. Though in the Partition Agreement dated 29
April 1985 Esperanza affixed her thumbmark without stating that she was doing so not
only for herself, but also on behalf of the other heirs of Martin I, this does not mean that
Esperanza was already the exclusive owner thereof. The evidence shows that the subject
property is the share of the heirs of Martin I. This is clear from the sketch[33] attached to
the Partition Agreement dated 29 April 1985, which reveals the proportionate areas given
to the heirs of the two siblings, Pantaleon and Placida, who were the original owners of
the whole parcel of land[34] from which the subject property was taken.

Further, it bears emphasis that the Partition Agreement was executed by and among the
son, grandsons, granddaughters and cousins of Victorino. Esperanza was neither the
granddaughter nor the cousin of Victorino, as she was only Victorino's grandniece. The
cousin of Victorino is Martin I, Esperanza's father. In effect, therefore, the subject
property allotted to Esperanza in the Partition Agreement was not her exclusive share, as
she holds the same for and on behalf of the other heirs of Martin I, who was already
deceased at the time the Partition Agreement was made.

To further bolster the truth that the subject property was not exclusively owned by
Esperanza, the Affidavit she executed in favor of petitioner and her husband on 6 June
1985 was worded as follows:
That I hereby renounce, relinquish, waive and quitclaim all my rights, share, interest
and participation whatsoever in the [subject property] unto the said Sps. Ray Mars
Arangote and Elvira T. Arangote, their heirs, successors, and assigns including the
improvement found thereon;[35]
Logically, if Esperanza fully owned the subject property, she would have simply waived
her rights to and interest in the subject property, without mentioning her "share" and
"participation" in the same. By including such words in her Affidavit, Esperanza was
aware of and was limiting her waiver, renunciation, and quitclaim to her one-third share
and participation in the subject property.

Going to the issues raised by the petitioner in this Petition, this Court will resolve the
same concurrently as they are interrelated.

In this case, the petitioner derived her title to the subject property from the notarized
Affidavit executed by Esperanza, wherein the latter relinquished her rights, share, interest
and participation over the same in favor of the petitioner and her husband.

A careful perusal of the said Affidavit reveals that it is not what it purports to be.
Esperanza's Affidavit is, in fact, a Donation. Esperanza's real intent in executing the said
Affidavit was to donate her share in the subject property to petitioner and her husband.

As no onerous undertaking is required of petitioner and her husband under the said
Affidavit, the donation is regarded as a pure donation of an interest in a real property
covered by Article 749 of the Civil Code.[36] Article 749 of the Civil Code provides:
Art. 749. In order that the donation of an immovable may be valid, it must be made in a
public document, specifying therein the property donated and the value of the charges
which the donee must satisfy.

The acceptance may be made in the same deed of donation or in a separate public
document, but it shall not take effect unless it is done during the lifetime of the donor.

If the acceptance is made in a separate instrument, the donor shall be notified thereof in
an authentic form, and this step shall be noted in both instruments.
From the aforesaid provision, there are three requisites for the validity of a simple
donation of a real property, to wit: (1) it must be made in a public instrument; (2) it must
be accepted, which acceptance may be made either in the same Deed of Donation or in a
separate public instrument; and (3) if the acceptance is made in a separate instrument, the
donor must be notified in an authentic form, and the same must be noted in both
instruments.

This Court agrees with the RTC and the Court of Appeals that the Affidavit executed by
Esperanza relinquishing her rights, share, interest and participation over the subject
property in favor of the petitioner and her husband suffered from legal infirmities, as it
failed to comply with the aforesaid requisites of the law.

In Sumipat v. Banga,[37] this Court declared that title to immovable property does not pass
from the donor to the donee by virtue of a Deed of Donation until and unless it has been
accepted in a public instrument and the donor duly notified thereof. The acceptance
may be made in the very same instrument of donation. If the acceptance does not appear
in the same document, it must be made in another. Where the Deed of Donation fails to
show the acceptance, or where the formal notice of the acceptance, made in a separate
instrument, is either not given to the donor or else not noted in the Deed of Donation and
in the separate acceptance, the donation is null and void.[38]

In the present case, the said Affidavit, which is tantamount to a Deed of Donation, met
the first requisite, as it was notarized; thus, it became a public instrument. Nevertheless, it
failed to meet the aforesaid second and third requisites. The acceptance of the said
donation was not made by the petitioner and her husband either in the same Affidavit or
in a separate public instrument. As there was no acceptance made of the said donation,
there was also no notice of the said acceptance given to the donor, Esperanza. Therefore,
the Affidavit executed by Esperanza in favor of petitioner and her husband is null
and void.

The subsequent notarized Deed of Acceptance[39] dated 23 September 2000, as well as the

notice[40] of such acceptance, executed by the petitioner did not cure the defect. Moreover,
it was only made by the petitioner several years after the Complaint was filed in court, or
when the RTC had already rendered its Decision dated 12 September 2000, although it
was still during Esperanza's lifetime. Evidently, its execution was a mere afterthought, a
belated attempt to cure what was a defective donation.

It is true that the acceptance of a donation may be made at any time during the
lifetime of the donor. And granting arguendo that such acceptance may still be admitted
in evidence on appeal, there is still need for proof that a formal notice of such
acceptance was received by the donor and noted in both the Deed of Donation and
the separate instrument embodying the acceptance.[41] At the very least, this last legal
requisite of annotation in both instruments of donation and acceptance was not fulfilled
by the petitioner. Neither the Affidavit nor the Deed of Acceptance bears the fact that
Esperanza received notice of the acceptance of the donation by petitioner. For this reason,
even Esperanza's one-third share in the subject property cannot be adjudicated to the
petitioner.

With the foregoing, this Court holds that the RTC and the Court of Appeals did not err in
declaring null and void Esperanza's Affidavit.

The next issue to be resolved then is whether the RTC, as well as the Court of Appeals,
erred in declaring OCT No. CLOA-1748 in the name of petitioner and her husband null
and void.

Again, this Court answers the said issue in the negative.

Section 48 of Presidential decree No. 1529 states:
SEC. 48. Certificate not subject to collateral attack. - A certificate of title shall not be
subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct
proceeding in accordance with law.
Such proscription has long been enshrined in Philippine jurisprudence. The judicial
action required to challenge the validity of title is a direct attack, not a collateral attack. [42]

The attack is considered direct when the object of an action is to annul or set aside such
proceeding, or enjoin its enforcement. Conversely, an attack is indirect or collateral
when, in an action to obtain a different relief, an attack on the proceeding is nevertheless
made as an incident thereof. Such action to attack a certificate of title may be an
original action or a counterclaim, in which a certificate of title is assailed as void.[43]

A counterclaim is considered a new suit in which the defendant is the plaintiff and the
plaintiff in the complaint becomes the defendant. It stands on the same footing as, and is
to be tested by the same rules as if it were, an independent action. [44]

In their Answer to the Complaint for Quieting of Title filed by the petitioner and her
husband before the MCTC, respondents included therein a Counterclaim wherein they
repleaded all the material allegations in their affirmative defenses, the most essential of
which was their claim that petitioner and her husband -- by means of fraud, undue
influence and deceit -- were able to make their grand aunt, Esperanza, who was already
old and illiterate, affix her thumbmark to the Affidavit, wherein she renounced, waived,
and quitclaimed all her rights and interest over the subject property in favor of petitioner
and her husband. In addition, respondents maintained in their Answer that as petitioner
and her husband were not tenants either of Esperanza or of the respondents, the DAR
could not have validly issued in favor of petitioner and her husband OCT No. CLOA-
1748. Thus, the respondents prayed, in their counterclaim in Civil Case No. 156 before
the MCTC, that OCT No. CLOA-1748 issued in the name of petitioner, married to Ray
Mars E. Arangote, be declared null and void, insofar as their two-thirds shares in the
subject property are concerned.

It is clear, thus, that respondents' Answer with Counterclaim was a direct attack on
petitioner's certificate of title. Furthermore, since all the essential facts of the case for the
determination of the validity of the title are now before this Court, to require respondents
to institute a separate cancellation proceeding would be pointlessly circuitous and against
the best interest of justice.

Esperanza's Affidavit, which was the sole basis of petitioner's claim to the subject
property, has been declared null and void. Moreover, petitioner and her husband were not
tenants of the subject property. In fact, petitioner herself admitted in her Complaint filed
before the MCTC that her husband is out of the country, rendering it impossible for him
to work on the subject property as a tenant. Instead of cultivating the subject property,
petitioner and her husband possessed the same by constructing a house thereon. Thus, it
is highly suspicious how the petitioner was able to secure from the DAR a Certificate of
Land Ownership Award (CLOA) over the subject property. The DAR awards such
certificates to the grantees only if they fulfill the requirements of Republic Act No. 6657,
otherwise known as the Comprehensive Agrarian Reform Program (CARP).[45] Hence,
the RTC and the Court of Appeals did not err in declaring null and void OCT No. CLOA-
1748 in the name of the petitioner, married to Ray Mars E. Arangote.

Considering that Esperanza died without any compulsory heirs and that the supposed
donation of her one-third share in the subject property per her Affidavit dated 9 June
1985 was already declared null and void, Esperanza's one-third share in the subject
property passed on to her legal heirs, the respondents.

As petitioner's last-ditch effort, she claims that she is a possessor in good faith and, thus,
entitled to the rights provided for under Articles 448 and 546 of the Civil Code.

This claim is untenable.

The Civil Code describes a possessor in good faith as follows:

Art. 526. He is deemed a possessor in good faith who is not aware that there exists in his
title or mode of acquisition any flaw which invalidates it.

He is deemed a possessor in bad faith who possesses in any case contrary to the
foregoing.

Mistake upon a doubtful or difficult question of law may be the basis of good faith.

Art. 1127. The good faith of the possessor consists in the reasonable belief that the person
from whom he received the thing was the owner thereof, and could transmit his
ownership.
Possession in good faith ceases from the moment defects in the title are made known to
the possessor by extraneous evidence or by a suit for recovery of the property by the true
owner. Every possessor in good faith becomes a possessor in bad faith from the moment
he becomes aware that what he believed to be true is not so. [46]

In the present case, when respondents came to know that an OCT over the subject
property was issued and registered in petitioner's name on 26 March 1993, respondents
brought a Complaint on 7 August 1993 before the Lupon of Barangay Maloco, Ibajay,
Aklan, challenging the title of petitioner to the subject property on the basis that said
property constitutes the inheritance of respondent, together with their grandaunt
Esperanza, so Esperanza had no authority to relinquish the entire subject property to
petitioner. From that moment, the good faith of the petitioner had ceased.
Petitioner cannot be entitled to the rights under Articles 448 and 546 of the Civil Code,
because the rights mentioned therein are applicable only to builders in good faith and not
to possessors in good faith.

Moreover, the petitioner cannot be considered a builder in good faith of the house on the
subject property. In the context that such term is used in particular reference to Article
448 of the Civil Code, a builder in good faith is one who, not being the owner of the
land, builds on that land, believing himself to be its owner and unaware of any
defect in his title or mode of acquisition.[47]

The various provisions of the Civil Code, pertinent to the subject, read:
Article 448. The owner of the land on which anything has been built, sown, or planted in
good faith, shall have the right to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such a case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the building or
trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.

Article 449. He who builds, plants, or sows in bad faith on the land of another, loses what
is built, planted or sown without right to indemnity.

Article 450. The owner of the land on which anything has been built, planted or sown in
bad faith may demand the demolition of the work, or that the planting or sowing be
removed, in order to replace things in their former condition at the expense of the person
who built, planted or sowed; or he may compel the builder or planter to pay the price of
the land, and the sower the proper rent.
Under the foregoing provisions, the builder in good faith can compel the landowner to
make a choice between appropriating the building by paying the proper indemnity or
obliging the builder to pay the price of the land. The choice belongs to the owner of the
land, a rule that accords with the principle of accession, i.e., that the accessory follows
the principal and not the other way around. 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 instead remove it from the land. In order, however,
that the builder can invoke that accruing benefit and enjoy his corresponding right to
demand that a choice be made by the landowner, he should be able to prove good faith on
his part.[48]

Good faith, here understood, is an intangible and abstract quality with no technical
meaning or statutory definition, and it encompasses, among other things, an honest belief,
the absence of malice and the absence of design to defraud or to seek an unconscionable
advantage. An individual's personal good faith is a concept of his own mind and,
therefore, may not conclusively be determined by his protestations alone. It implies
honesty of intention, and freedom from knowledge of circumstances which ought to put
the holder upon inquiry. The essence of good faith lies in an honest belief in the validity
of one's right, ignorance of a superior claim, and absence of intention to overreach
another. Applied to possession, one is considered in good faith if he is not aware that
there exists in his title or mode of acquisition any flaw which invalidates it.[49]

In this case, the subject property waived and quitclaimed by Esperanza to the petitioner
and her husband in the Affidavit was only covered by a tax declaration in the name of
Esperanza. Petitioner did not even bother to look into the origin of the subject property
and to probe into the right of Esperanza to relinquish the same. Thus, when petitioner and
her husband built a house thereon in 1989 they cannot be considered to have acted in
good faith as they were fully aware that when Esperanza executed an Affidavit
relinquishing in their favor the subject property the only proof of Esperanza's ownership
over the same was a mere tax declaration. This fact or circumstance alone was enough to
put the petitioner and her husband under inquiry. Settled is the rule that a tax declaration
does not prove ownership. It is merely an indicium of a claim of ownership. Payment of
taxes is not proof of ownership; it is, at best, an indicium of possession in the concept of
ownership. Neither tax receipts nor a declaration of ownership for taxation purposes is
evidence of ownership or of a right to possess realty when not supported by other
effective proofs.[50]

With the foregoing, the petitioner is not entitled to the rights under Article 448 and 546 as
the petitioner is not a builder and possessor in good faith.

WHEREFORE, premises considered, the instant Petition is hereby DENIED. The

Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 64970, dated 27
October 2006 and 29 June 2007, respectively, affirming the RTC Decision dated 12
September 2000 in Civil Case No. 5511 and declaring the respondents the lawful owners
and possessors of the subject property are hereby AFFIRMED. No costs.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 180587, March 20, 2009 ]
SIMEON CABANG, VIRGINIA CABANG AND VENANCIO CABANG ALIAS
"DONDON", PETITIONERS, VS. MR. & MRS. GUILLERMO BASAY,
RESPONDENTS.
 DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul
and set aside the Decision of the Court of Appeals in CA-G.R. CV No. 76755 [1] dated
May 31, 2007[2] which reversed the Order[3] of the Regional Trial Court of Molave,
Zamboanga Del Sur, Branch 23 in Civil Case No. 99-20-127 which denied respondents'
motion for execution on the ground that petitioners' family home was still subsisting.
Also assailed is the Resolution dated September 21, 2007 denying the motion for
reconsideration.

The facts as summarized by the appellate court:

Deceased Felix Odong was the registered owner of Lot No. 7777, Ts- 222 located in
Molave, Zamboanga del Sur. Said lot was covered by Original Certificate of Title No. 0-
2,768 pursuant to Decree No. N-64 and issued on March 9, 1966.  However, Felix Odong
and his heirs never occupied nor took possession of the lot.

On June 16, 1987, plaintiff-appellants bought said real property from the heirs of Felix
Odong for P8,000.00.  Consequently, OCT No. 0-2,768 was cancelled and in its stead,
Transfer Certificate of Title No. T-22,048 was issued on August 6, 1987 in the name of
plaintiff-appellants.  The latter also did not occupy the said property.

Defendant-appellees, on the other hand, had been in continuous, open, peaceful and
adverse possession of the same parcel of land since 1956 up to the present.  They were
the awardees in the cadastral proceedings of Lot No. 7778 of the Molave Townsite, Ts-
222.  During the said cadastral proceedings, defendant-appellees claimed Lot No. 7778
on the belief that the area they were actually occupying was Lot No. 7778.  As it turned
out, however, when the Municipality of Molave relocated the townsite lots in the area in
1992 as a big portion of Lot No. 7778 was used by the government as a public road and
as there were many discrepancies in the areas occupied, it was then discovered that
defendant-appellees were actually occupying Lot No. 7777.

On June 23, 1992, plaintiff-appellants filed a Complaint docketed as Civil Case No. 92-
20-127 for Recovery of Property against defendant-appellees.

On July 19, 1996, the trial court rendered its decision, the dispositive portion of which
reads, thus:

WHEREFORE, judgment is hereby rendered in favor of the defendants and against the
plaintiff -
 1. Holding that the rights of the plaintiffs to recover the land registered in their
names, have been effectively barred by laches; and

2. Ordering the dismissal of the above-entitled case.

No pronouncement as to cost.

SO ORDERED.
Aggrieved, plaintiff-appellants filed an appeal before the Court of Appeals assailing the
above-decision.  Said appeal was docketed as CA-G.R. CV No. 55207.

On December 23, 1998, the Court of Appeals, through the then Second Division,
rendered a Decision reversing the assailed decision and decreed as follows:
WHEREFORE, the judgment herein appealed from is hereby REVERSED, and judgment
is hereby rendered declaring the plaintiffs-appellants to be entitled to the possession of
Lot No. 7777 of the Molave Townsite, subject to the rights of the defendants-appellees
under Article (sic) 448, 546, 547 and 548 of the New Civil Code.

The records of this case are hereby ordered remanded to the court of origin for further
proceedings to determine the rights of the defendants-appellees under the aforesaid article
(sic) of the New Civil Code, and to render judgment thereon in accordance with the
evidence and this decision.

No pronouncement as to costs.

SO ORDERED.
Defendant-appellees thereafter filed a petition for review on certiorari under Rule 45 of
the Rules of Court before the Supreme Court docketed as G.R. No. 139601.  On October
18, 1999, the Supreme Court issued a Resolution denying the petition for late filing and
lack of appropriate service.

Subsequently, or on February 15, 2000, the Supreme Court Resolution had become final
and executory.

Consequently, the case was remanded to the court a quo and the latter commissioned the
Municipal Assessor of Molave, Zamboanga del Sur to determine the value of the
improvements introduced by the defendant-appellees.

The Commissioner's Report determined that at the time of ocular inspection, there were
three (3) residential buildings constructed on the property in litigation.  During the ocular
inspection, plaintiff-appellants' son, Gil Basay, defendant-appellee Virginia Cabang, and
one Bernardo Mendez, an occupant of the lot, were present.  In the report, the following
appraised value of the improvements were determined, thus:
 Owner Lot No. Area (sq.m.) Improvement Appraised Value
         
Virginia Cabang 7777 32.55 Building P21,580.65
Jovencio Capuno 7777 15.75 Building 18,663.75
Amelito Mata 7777 14.00 Building 5,658.10
      Toilet 1,500.00
      Plants & Trees 2,164.00
    TOTAL   P49,566.50

Thereafter, upon verbal request of defendant-appellees, the court a quo in its Order
declared that the tie point of the survey should be the BLLM (Bureau of Lands Location
Monument) and authorized the official surveyor of the Bureau of Lands to conduct the
survey of the litigated property.

Pursuant to the above Order, the Community Environment and Natural Resources Office
(CENRO) of the Department of Environment and Natural Resources (DENR)-Region XI
designated Geodetic Engineer Diosdado L. de Guzman to [act] as the official surveyor. 
On March 2002, Engr. De Guzman submitted his survey report which stated, inter alia:

1. That on September 18, 2001, the undersigned had conducted verification survey of
Lot 7777, Ts-222 and the adjacent lots for reference purposes-with both parties
present on the survey;

2. That the survey was started from BLLM #34, as directed by the Order, taking
sideshots of lot corners, existing concrete fence, road and going back to BLLM
#34, a point of reference;

3. Considering that there was only one BLLM existing on the ground, the
undersigned conducted astronomical observation on December 27, 2001 in order
to check the carried Azimuth of the traverse;

4. That per result of the survey conducted, it was found out and ascertained that the
area occupied by Mrs. Virginia Cabang is a portion of Lot 7777, with lot
assignment to be known as Lot 7777-A with an area of 303 square meters and
portion of Lot 7778 with lot assignment to be known as Lot 7778-A with an area
of 76 square meters.  On the same lot, portion of which is also occupied by Mr.
Bernardo Mendez with lot assignment to be known as Lot 7777-B with an area of
236 square meters and Lot 7778-B with an area of 243 square meters as shown on
the attached sketch for ready reference;

5. That there were three (3) houses made of light material erected inside Lot No.
7777-A, which is owned by Mrs. Virginia Cabang and also a concrete house
erected both on portion of Lot No. 7777-B and Lot No. 7778-B, which is owned
by Mr. Bernardo Mendez. x x x;
 6. That the existing road had been traversing on a portion of Lot 7778 to be know
(sic) as Lot 7778-CA-G.R. SP No. with an area of 116 square meters as shown on
attached sketch plan.

During the hearing on May 10, 2002, plaintiff-appellants' offer to pay P21,000.00 for the
improvement of the lot in question was rejected by defendant-appellees.  The court a
quo disclosed its difficulty in resolving whether or not the houses may be subject of an
order of execution it being a family home.

On June 18, 2002, plaintiff-appellants filed their Manifestation and Motion for Execution
alleging therein that defendant-appellees refused to accept payment of the improvements
as determined by the court appointed Commissioner, thus, they should now be ordered to
remove said improvements at their expense or if they refused, an Order of Demolition be
issued.

On September 6, 2002, the court a quo issued the herein assailed Order denying the
motion for execution.[4]

Respondents thereafter elevated their cause to the appellate court which reversed the trial
court in its May 31, 2007 Decision in CA-G.R. CV No. 76755.  Petitioners' Motion for
Reconsideration was denied by the Court of Appeals in its Resolution[5] dated September
21, 2007.
Hence, this petition.

Petitioners insist that the property subject of the controversy is a duly constituted family
home which is not subject to execution, thus, they argue that the appellate tribunal erred
in reversing the judgment of the trial court.

The petition lacks merit.

It bears stressing that the purpose for which the records of the case were remanded to the
court of origin was for the enforcement of the appellate court's final and executory
judgment[6] in CA-G.R. CV No. 55207 which, among others, declared herein
respondents entitled to the possession of Lot No. 7777 of the Molave Townsite subject to
the provisions of Articles 448,[7] 546,[8] 547[9] an 548[10] of the Civil Code.  Indeed, the
decision explicitly decreed that the remand of the records of the case was for the court of
origin "[t]o determine the rights of the defendants-appellees under the aforesaid
article[s] of the New Civil Code, and to render judgment thereon in accordance with
the evidence and this decision."

A final and executory judgment may no longer be modified in any respect, even if the
modification is meant to correct erroneous conclusions of fact or law and whether it will
be made by the court that rendered it or by the highest court in the land.[11]  The only
exceptions to this rule are the correction of (1) clerical errors; (2) the so-called nunc pro
tunc entries which cause no prejudice to any party, and (3) void judgments.[12]

Well-settled is the rule that there can be no execution until and unless the judgment has
become final and executory, i.e. the period of appeal has lapsed without an appeal having
been taken, or, having been taken, the appeal has been resolved and the records of the
case have been returned to the court of origin, in which event, execution shall issue as a
matter of right.[13]  In short, once a judgment becomes final, the winning party is entitled
to a writ of execution and the issuance thereof becomes a court's ministerial duty.[14]

Furthermore, as a matter of settled legal principle, a writ of execution must adhere to

every essential particulars of the judgment sought to be executed.[15]  An order of
execution may not vary or go beyond the terns of the judgment it seeks to enforce. [16]  A
writ of execution must conform to the judgment and if it is different from, goes beyond
or varies the tenor of the judgment which gives it life, it is a nullity.[17]  Otherwise stated,
when the order of execution and the corresponding writ issued pursuant thereto is not in
harmony with and exceeds the judgment which gives it life, they have pro tanto no
validity[18] - to maintain otherwise would be to ignore the constitutional provision against
depriving a person of his property without due process of law.[19]

As aptly pointed out by the appellate court, from the inception of Civil Case No. 99-20-
127, it was already of judicial notice that the improvements introduced by petitioners
on the litigated property are residential houses not family homes. Belatedly interposing
such an extraneous issue at such a late stage of the proceeding is tantamount to
interfering with and varying the terms of the final and executory judgment and a violation
of respondents' right to due process because -
As a general rule, points of law, theories and issues not brought to the attention of the
trial court cannot be raised for the first time on appeal. For a contrary rule would be
unfair to the adverse party who would have no opportunity to present further evidence
material to the new theory, which it could have done had it been aware of if at the time of
the hearing before the trial court.[20]
 The refusal, therefore, of the trial court to enforce the execution on the ground that the
improvements introduced on the litigated property are family homes goes beyond the pale
of what it had been expressly tasked to do, i.e. its ministerial duty of executing the
judgment in accordance with its essential particulars.  The foregoing factual, legal and
jurisprudential scenario reduces the raising of the issue of whether or not the
improvements introduced by petitioners are family homes into a mere afterthought.

Even squarely addressing the issue of whether or not the improvements introduced by
petitioners on the subject land are family homes will not extricate them from their
predicament.

As defined, "[T]he family home is a sacred symbol of family love and is the repository of
cherished memories that last during one's lifetime.[21]  It is the dwelling house where the
husband and wife, or an unmarried head of a family reside, including the land on which it
is situated.[22]  It is constituted jointly by the husband and the wife or by an unmarried
head of a family."[23] Article 153 of the Family Code provides that -
The family home is deemed constituted from the time it is occupied as a family residence.
From the time of its constitution and so long as any of its beneficiaries actually resides
therein, the family home continues to be such and is exempt from execution, forced sale
or attachment except as hereinafter provided and to the extent of the value allowed by
law.
The actual value of the family home shall not exceed, at the time of its constitution, the
amount of P300,000.00 in urban areas and P200,000.00 in rural areas.[24]  Under the
afore-quoted provision, a family home is deemed constituted on a house and a lot from
the time it is occupied as a family residence.  There is no need to constitute the same
judicially or extra-judicially.[25]

There can be no question that a family home is generally exempt from execution,
[26]
 provided it was duly constituted as such.  It is likewise a given that the family home
must be constituted on property owned by the persons constituting it.  Indeed as pointed
out in Kelley, Jr. v. Planters Products, Inc.[27]  "[T]he family home must be part of the
properties of the absolute community or the conjugal partnership, or of the exclusive
properties of either spouse with the latter's consent, or on the property of the unmarried
head of the family."[28]  In other words:
The family home must be established on the properties of (a) the absolute community,
or (b) the conjugal partnership, or (c) the exclusive property of either spouse with the
consent of the other. It cannot be established on property held in co-ownership with
third persons. However, it can be established partly on community property, or conjugal
property and partly on the exclusive property of either spouse with the consent of the
latter.

If constituted by an unmarried head of a family, where there is no communal or conjugal

property existing, it can be constituted only on his or her own property.[29] (Emphasis and
italics supplied)
Therein lies the fatal flaw in the postulate of petitioners.  For all their arguments to the
contrary, the stark and immutable fact is that the property on which their alleged family
home stands is owned by respondents and the question of ownership had been long laid
to rest with the finality of the appellate court's judgment in CA-G.R. CV No. 55207. 
Thus, petitioners' continued stay on the subject land is only by mere tolerance of
respondents.

All told, it is too late in the day for petitioners to raise this issue. Without doubt, the
instant case where the family home issue has been vigorously pursued by petitioners is
but a clear-cut ploy meant to forestall the enforcement of an otherwise final and
executory decision.  The execution of a final judgment is a matter of right on the part of
the prevailing party whose implementation is mandatory and ministerial on the court or
tribunal issuing the judgment.[30]

The most important phase of any proceeding is the execution of judgment.[31]  Once a
judgment becomes final, the prevailing party should not, through some clever maneuvers
devised by an unsporting loser, be deprived of the fruits of the verdict.[32]  An unjustified
delay in the enforcement of a judgment sets at naught the role of courts in disposing of
justiciable controversies with finality.[33]  Furthermore, a judgment if not executed would
just be an empty victory for the prevailing party because execution is the fruit and end of
the suit and very aptly called the life of the law.[34]

The issue is moreover factual and, to repeat that trite refrain, the Supreme Court is not a
trier of facts.  It is not the function of the Court to review, examine and evaluate or weigh
the probative value of the evidence presented.  A question of fact would arise in such
event.  Questions of fact cannot be raised in an appeal via certiorari before the Supreme
Court and are not proper for its consideration.[35]  The rationale behind this doctrine is that
a review of the findings of fact of the appellate tribunal is not a function this Court
normally undertakes.  The Court will not weigh the evidence all over again unless there is
a showing that the findings of the lower court are totally devoid of support or are clearly
erroneous so as to constitute serious abuse of discretion.[36]  Although there are
recognized exceptions[37] to this rule, none exists in this case to justify a departure
therefrom.

WHEREFORE, the petition is DENIED.  The Decision of the Court of Appeals dated
May 31, 2007 in CA-G.R. CV No. 76755 declaring respondents entitled to the writ of
execution and ordering petitioners to vacate the subject property, as well as the
Resolution dated September 21, 2007 denying the motion for reconsideration,
are AFFIRMED.  Costs against petitioners.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 165907, July 27, 2009 ]
SPS. DOMINADOR R. NARVAEZ AND LILIA W. NARVAEZ,
PETITIONERS, VS. SPS. ROSE OGAS ALCISO AND ANTONIO ALCISO,
RESPONDENTS.

DECISION
CARPIO, J.:

The Case

This is a petition[1] for review on certiorari under Rule 45 of the Rules of Court. The
petition challenges the 29 October 2004 Decision[2] of the Court of Appeals in CA-G.R.
CV No. 63757. The Court of Appeals affirmed with modification the 6 April 1998
Decision[3] of the Regional Trial Court (RTC), Judicial Region 1, Branch 8, La Trinidad,
Benguet, in Civil Case No. 84-CV-0094.

The Facts

Larry A. Ogas (Ogas) owned a 1,329-square meter parcel of land situated in Pico, La
Trinidad, Benguet. The property was covered by Transfer Certificate of Title (TCT) No.
T-1068, and a portion was subject to a 30-year lease agreement[4] with Esso Standard
Eastern, Inc. Ogas sold the property to his daughter Rose O. Alciso (Alciso). TCT No. T-
1068 was cancelled and TCT No. T-12422[5] was issued in the name of Alciso.

On 25 August 1979, Alciso entered into a Deed of Sale with Right to Repurchase,
[6]
 selling the property to Jaime Sansano (Sansano) for P10,000. Alciso later repurchased
the property from Sansano and, on 28 March 1980, she entered into another Deed of
Absolute Sale,[7] this time selling the property to Celso S. Bate (Bate) for P50,000. The
Deed stated that:

The SELLER warrants that her title to and ownership of the property herein conveyed are
free from all liens and encumbrances except those as appear on the face of the title,
specifically, that lease over the said property in favor of ESSO STANDARD EASTERN,
INC., the rights over which as a lessor the SELLER likewise hereby transfers in full to
the buyer.[8]

TCT No. T-12422 was cancelled and TCT No. T-16066[9] was issued in the name of Bate.
On 14 August 1981, Bate entered into a Deed of Sale of Realty,[10] selling the property to
the spouses Dominador R. Narvaez and Lilia W. Narvaez (Spouses Narvaez) for P80,000.
TCT No. T-16066 was cancelled and TCT No. T-16528[11] was issued in the name of the
Spouses Narvaez. In 1982, the Spouses Narvaez built a commercial building on the
property amounting to P300,000.

Alciso demanded that a stipulation be included in the 14 August 1981 Deed of Sale of
Realty allowing her to repurchase the property from the Spouses Narvaez. In compliance
with Alciso's demand, the Deed stated that, "The SELLER (Bate) carries over the
manifested intent of the original SELLER of the property (Alciso) to buy back the same
at a price under such conditions as the present BUYERS (Spouses Narvaez) may
impose." The Spouses Narvaez furnished Alciso with a copy of the Deed.

Alciso alleged that she informed the Spouses Narvaez that she wanted to repurchase the
property. The Spouses Narvaez demanded P300,000, but Alciso was willing to pay only
P150,000. Alciso and the Spouses Narvaez failed to reach an agreement on the
repurchase price.

In a Complaint[12] dated 15 June 1984 and filed with the RTC, Alciso prayed that (1) the
25 August 1979 Deed of Sale with Right to Repurchase, the 28 March 1980 Deed of
Absolute Sale, and the 14 August 1981 Deed of Sale of Realty be annulled; (2) the
Register of Deeds be ordered to cancel TCT Nos. T-16066 and T-16528; (3) the Spouses
Narvaez be ordered to reconvey the property; and (4) Sansano, Bate, and the Spouses
Narvaez be ordered to pay damages, attorney's fees and expenses of litigation. Alciso
claimed that the intention of the parties was to enter into a contract of real estate
mortgage and not a contract of sale with right of repurchase. She stated that:

[C]ontrary to the clear intention and agreement of the parties, particularly the plaintiffs
herein, defendant JAIME SANSANO, taking advantage of the good faith and financial
predicament and difficulties of plaintiffs at the time, caused to be prepared and induced
with insidous [sic] words and machinations, prevailed upon plaintiff to sign a contract
denominated as "Sale With Right to Repurchase", instead of Deed of Real Estate
Mortgage as was the clear intention and agreement of the parties.

xxxx

Defendant JAIME SANSANO caused to be prepared a contract denominated as DEED

OF ABSOLUTE SALE, covering the lot in question, contrary to the clear intention and
understanding of plaintiff who was inveigled into signing said contract under the
impression that what she was executing was a real estate mortgage. [13]

The RTC's Ruling

In its 6 April 1998 Decision, the RTC held that (1) the 25 August 1979 Deed of Sale with
Right to Repurchase became functus officio when Alciso repurchased the property; (2)
the action to annul the 28 March 1980 Deed of Absolute Sale had prescribed; (3) Alciso
had no legal personality to annul the 14 August 1981 Deed of Sale of Realty; (4) the 14
August 1981 Deed of Sale of Realty contained a stipulation pour autrui in favor of Alciso
-- Alciso could repurchase the property; (5) Alciso communicated to the Spouses Narvaez
her acceptance of the favor contained in the stipulation pour autrui; (6) the repurchase
price was P80,000; (7) Alciso could either appropriate the commercial building after
payment of the indemnity equivalent to one-half of its market value when constructed or
sell the land to the Spouses Narvaez; and (8) Alciso was entitled to P100,000 attorney's
fees and P20,000 nominal damages.

The Spouses Narvaez appealed to the Court of Appeals. In their Appellants Brief [14] dated
21 November 2000, the Spouses Narvaez claimed that (1) the 14 August 1981 Deed of
Sale of Realty did not contain a stipulation pour autrui -- not all requisites were present;
(2) the RTC erred in setting the repurchase price at P80,000; (3) they were purchasers for
value and in good faith; and (4) they were builders in good faith.

The Court of Appeals' Ruling

In its 29 October 2004 Decision, the Court of Appeals held that (1) the 14 August 1981
Deed of Sale of Realty contained a stipulation pour autrui; (2) Alciso accepted the favor
contained in the stipulation pour autrui; (3) the RTC erred in setting the repurchase price
at P80,000; (4) the 14 August 1981 Deed of Sale of Realty involved a contract of sale
with right of repurchase and not real estate mortgage; (5) the Spouses Narvaez were
builders in good faith; and (6) Alciso could either appropriate the commercial building
after payment of the indemnity or oblige the Spouses Narvaez to pay the price of the
land, unless the price was considerably more than that of the building. The Court of
Appeals remanded the case to the RTC for determination of the property's reasonable
repurchase price.

The Issue

The Spouses Narvaez elevated the case to the Court. In their Petition dated 15 December
2004, the Spouses Narvaez claimed that Alciso did not communicate her acceptance of
the favor contained in the stipulation pour autrui; thus, she could not repurchase the
property.

The Court's Ruling

The petition is unmeritorious.

Article 1311, paragraph 2, of the Civil Code states the rule on stipulations pour autrui:

If a contract should contain some stipulation in favor of a third person, he may demand
its fulfillment provided he communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is not sufficient. The
contracting parties must have clearly and deliberately conferred a favor upon a third
person.
In Limitless Potentials, Inc. v. Quilala,[15] the Court laid down the requisites of a
stipulation pour autrui: (1) there is a stipulation in favor of a third person; (2) the
stipulation is a part, not the whole, of the contract; (3) the contracting parties clearly and
deliberately conferred a favor to the third person -- the favor is not an incidental benefit;
(4) the favor is unconditional and uncompensated; (5) the third person communicated his
or her acceptance of the favor before its revocation; and (6) the contracting parties do not
represent, or are not authorized by, the third party.

All the requisites are present in the instant case: (1) there is a stipulation in favor of
Alciso; (2) the stipulation is a part, not the whole, of the contract; (3) Bate and the
Spouses Narvaez clearly and deliberately conferred a favor to Alciso; (4) the favor is
unconditional and uncompensated; (5) Alciso communicated her acceptance of the favor
before its revocation -- she demanded that a stipulation be included in the 14 August
1981 Deed of Sale of Realty allowing her to repurchase the property from the Spouses
Narvaez, and she informed the Spouses Narvaez that she wanted to repurchase the
property; and (6) Bate and the Spouses Narvaez did not represent, and were not
authorized by, Alciso.

The Spouses Narvaez claim that Alciso did not communicate her acceptance of the favor.
They state that:

A perusal of the provision of the Deed of Sale of Realty between Celso Bate and the
spouses Dominador R. Narvaez and Lilia W. Narvaez (Annex "B") which clearly
provides that "the third person" (Rose O. Alciso) must have communicated her
acceptance to the obligors (spouses Dominador R. Narvaez and Lilia W. Narvaez) before
its revocation was not complied with. The acceptance is at best by mere inference.

xxxx

Petitioner Narvaez clearly stated that while the contract (Deed of Sale of Realty, Annex
"D") contained an [sic] stipulation in favor of a third person (Rose O. Alciso), she did not
demand its fulfillment and communicate her acceptance to the obligors before its
revocation.

xxxx

We maintain that the stipulation aforequoted is not a stipulation pour autrui. Let the
following be emphasized:

1. While the contract contained a stipulation in favor of a third person (Rose Alciso)
she did not demand its fulfillment and she never communicated her acceptance to
 the obligors (Spouses Narvaez) before its revocation (Uy Tam vs. Leonard, 30
Phil. 471; Coquia vs. Fieldmen's Insurance Co., Inc., 26 SCRA 178)

2. Granting arguendo that the stipulation is a pour autrui yet in the three meetings

Rose Alciso had with Mrs. Narvaez she never demanded fulfillment of the alleged
stipulation pour autrui and, what is worse, she did not communicate her
acceptance to the obligors before it is revoked.[16]

A petition for review on certiorari under Rule 45 of the Rules of Court should include
only questions of law -- questions of fact are not reviewable. A question of law exists
when the doubt centers on what the law is on a certain set of facts, while a question of
fact exists when the doubt centers on the truth or falsity of the alleged facts. There is a
question of law if the issue raised is capable of being resolved without need of reviewing
the probative value of the evidence. Once the issue invites a review of the evidence, the
question is one of fact.[17]

Whether Alciso communicated to the Spouses Narvaez her acceptance of the favor
contained in the stipulation pour autrui is a question of fact. It is not reviewable.

The factual findings of the trial court, especially when affirmed by the Court of Appeals,
are binding on the Court.[18] In its 6 April 1998 Decision, the RTC found that Alciso
communicated to the Spouses Narvaez her acceptance of the favor contained in the
stipulation pour autrui. The RTC stated that:

Rose Alciso communicated her acceptance of such favorable stipulation when she
went to see defendant Lillia [sic] Narvaez in their house. Under the foregoing
circumstances, there is no question that plaintiff Rose Alciso can maintain her instant
action for the enforcement and/or fulfillment of the aforestated stipulation in her favor to
by [sic] back the property in question.[19] (Emphasis supplied)

In Florentino v. Encarnacion, Sr.,[20] the Court held that the acceptance may be made at
any time before the favorable stipulation is revoked and that the acceptance may be
in any form -- it does not have to be formal or express but may be implied. During the
trial, Alciso testified that she informed the Spouses Narvaez that she wanted to
repurchase the property:

q - What was your proposal to Mrs. Narvaez by way of settlement?

a - I tried to go to her and asked her if I could redeem the property and Mrs. Narvaez told
me why not, you could redeem the property but not our price.

xxxx
q - Now, when you went back to her, what if any did you propose to her or tell her,
Madam witness?

a - I just asked for the redemption for the property, sir and she just told me wa [sic] the
price that I could only redeem the property.

q - Three Hundred thousand pesos?

a - Yes, sir.

q - Did you make any counter proposal?

a - Yes, for the third time I want [sic] back again your Honor... [21]

The exceptions to the rule that the factual findings of the trial court are binding on the
Court are (1) when there is grave abuse of discretion; (2) when the findings are grounded
on speculations; (3) when the inference made is manifestly mistaken; (4) when the
judgment of the Court of Appeals is based on a misapprehension of facts; (5) when the
factual findings are conflicting; (6) when the Court of Appeals went beyond the issues of
the case and its findings are contrary to the admissions of the parties; (7) when the Court
of Appeals overlooked undisputed facts which, if properly considered, would justify a
different conclusion; (8) when the findings of the Court of Appeals are contrary to those
of the trial court; (9) when the facts set forth by the petitioners are not disputed by the
respondents; and (10) when the findings of the Court of Appeals are premised on the
absence of evidence and are contradicted by the evidence on record.[22] The Spouses
Narvaez did not show that the instant case falls under any of the exceptions.

In its 29 October 2004 Decision, the Court of Appeals held that Bate and the Spouses
Narvaez entered into a sale with right of repurchase and that, applying Article 448 of the
Civil Code, Alciso could either appropriate the commercial building after payment of the
indemnity or oblige the Spouses Narvaez to pay the price of the land, unless the price was
considerably more than that of the building. Article 448 states:

Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or the trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the building or
trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.
The Court of Appeals stated that:

[T]he contract between defendants-appellants Bate and Narvaez spouses is a contract of

sale with a stipulation granting plaintiffs-appellees the right to repurchase the property at
a reasonable price. Being the absolute owners of the property in question, defendants-
appellants Narvaez spouses have the undisputed right to use, enjoy and build thereon.

Having built the improvement on the land they own and registered in their names, they
are likened to builders in good faith and their rights over the improvement shall be
governed by Article 448 of the Civil Code which provides:

ART. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or tress. In such case, he shall pay reasonable
rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.

Applying said Article, plaintiffs-appellees, after repurchasing the land, will have the
following options:

(1) to appropriate for themselves the building upon payment of its value to defendants-
appellants Narvaez spouses; OR

(2) to compel the defendants-appellants Narvaez spouses to buy the land, unless the value
of thereof [sic] be considerably more than that of the building, in which case, said
spouses may lease the land instead. The parties shall agree upon the terms of the lease
and in case of disagreement, the courts shall fix the terms thereof. [23]

The Court disagrees.

The rule is that only errors specifically assigned and properly argued in the appellant's
brief will be considered, except jurisdictional and clerical errors. [24] However, the Court is
clothed with ample authority to review matters not assigned as errors if their
consideration is necessary in arriving at a just decision.[25]

Article 448 is inapplicable in cases involving contracts of sale with right of repurchase --
it is inapplicable when the owner of the land is the builder, sower, or planter. In Pecson v.
Court of Appeals,[26] the Court held that:
Article 448 does not apply to a case where the owner of the land is the builder,
sower, or planter who then later loses ownership of the land by sale or donation. This
Court said so in Coleongco v. Regalado:

Article 361 of the old Civil Code is not applicable in this case, for Regalado
constructed the house on his own land before he sold said land to Coleongco. Article
361 applies only in cases where a person constructs a building on the land of another
in good or in bad faith, as the case may be. It does not apply to a case where a
person constructs a building on his own land, for then there can be no question as to
good or bad faith on the part of the builder.

Elsewise stated, where the true owner himself is the builder of the works on his own
land, the issue of good faith or bad faith is entirely irrelevant. (Emphasis supplied)

Article 448 is inapplicable in the present case because the Spouses Narvaez built the
commercial building on the land that they own. Besides, to compel them to buy the land,
which they own, would be absurd.

As the Court of Appeals correctly observed, the terms of the 14 August 1981 Deed of
Sale of Realty show that Bate and the Spouses Narvaez entered into a sale with right of
repurchase, where Bate transferred his right of repurchase to Alciso. The Deed states that,
"The SELLER (Bate) carries over the manifested intent of the original SELLER of the
property (Alciso) to buy back the same at a price under such conditions as the present
BUYERS (Spouses Narvaez) may impose." Article 1601 of the Civil Code states that,
"Conventional redemption shall take place when the vendor reserves the right to
repurchase the thing sold, with the obligation to comply with the provisions of Article
1616 and other stipulations which may have been agreed upon." In Gallar v. Husain,
[27]
 the Court held that "the right of repurchase may be exercised only by the vendor in
whom the right is recognized by contract or by any person to whom the right may have
been transferred."

In a sale with right of repurchase, the applicable provisions are Articles 1606 and 1616 of
the Civil Code, not Article 448. Articles 1606 and 1616 state:

Art. 1606. The right referred to in Article 1601, in the absence of an express agreement,
shall last four years from the date of the contract.

Should there be an agreement, the period cannot exceed ten years.

However, the vendor may still exercise the right to repurchase within thirty days from the
time final judgment was rendered in a civil action on the basis that the contract was a true
sale with right to repurchase.
Art. 1616. The vendor cannot avail himself of the right of repurchase without returning to
the vendee the price of the sale, and in addition:

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

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

Under Article 1616, Alciso may exercise her right of redemption by paying the Spouses
Narvaez (1) the price of the sale, (2) the expenses of the contract, (3) legitimate payments
made by reason of the sale, and (4) the necessary and useful expenses made on the thing
sold. In the present case, the cost of the building constitutes a useful expense. Useful
expenses include improvements which augment the value of the land. [28]

Under the first paragraph of Article 1606, Alciso had four years from 14 August 1981 to
repurchase the property since there was no express agreement as to the period when the
right can be exercised. Tender of payment of the repurchase price is necessary in the
exercise of the right of redemption. Tender of payment is the seller's manifestation of his
or her desire to repurchase the property with the offer of immediate performance.[29]

Alciso's intimation to the Spouses Narvaez that she wanted to repurchase the property
was insufficient. To have effectively exercised her right of repurchase, Alciso should
have tendered payment. In Lee v. Court of Appeals,[30] the Court held that:

The rule that tender of payment of the repurchase price is necessary to exercise the right
of redemption finds support in civil law. Article 1616 of the Civil Code of the Philippines
x x x furnishes the guide, to wit: "The vendor cannot avail himself of the right of
repurchase without returning to the vendee the price of the sale..."

Thus, in the case of Angao vs. Clavano, 17 Phil. 152, it was held that "it is not sufficient
for the vendor to intimate or to state to the vendee that the former desires to redeem the
thing sold, but he must immediately thereupon offer to repay the price..." Likewise, in
several other cases decided by the Supreme Court (Fructo vs. Fuentes, 15 Phil. 362; Retes
vs. Suelto, 20 Phil. 394; Rosales vs. Reyes, et al., 25 Phil. 495; Canuto vs. Mariano, 37
Phil. 840; De la Cruz, et al. vs. Resurreccion, et al., 98 Phil. 975; and other cases) where
the right to repurchase was held to have been properly exercised, there was a definite
finding of tender of payment having been made by the vendor. (Emphasis supplied)

Nevertheless, under the third paragraph of Article 1606, Alciso has 30 days from the
finality of this Decision to exercise her right of repurchase. In Laserna v. Javier,[31] the
Court held that:
The new Civil Code in Article 1606, thereof gives the vendors a retro "the right to
repurchase within thirty days from the time final judgment was rendered in a civil action,
on the basis that the contract was a true sale with the right to repurchase." This provision
has been construed to mean that "after the courts have decided by a final or executory
judgment that the contract was a pacto de retro and not a mortgage, the vendor (whose
claim as mortgagor had definitely been rejected) may still have the privilege of
repurchasing within 30 days." (Perez, et al. vs. Zulueta, 106 Phil., 264.)

The third paragraph of Article 1606 allows sellers, who considered the transaction they
entered into as mortgage, to repurchase the property within 30 days from the time they
are bound by the judgment finding the transaction to be one of sale with right of
repurchase.

WHEREFORE, the Court DENIES the petition. The Court AFFIRMS the 29 October

2004 Decision of the Court of Appeals in CA-G.R. CV No. 63757
with MODIFICATION. Respondent Rose O. Alciso may exercise her right of
redemption by paying the petitioners Spouses Dominador R. Narvaez and Lilia W.
Narvaez (1) the price of the sale, (2) the expenses of the contract, (3) legitimate payments
made by reason of the sale, and (4) the necessary and useful expenses made on the
subject property. The Court DIRECTS the Regional Trial Court, Judicial Region 1,
Branch 8, La Trinidad, Benguet, to determine the amounts of the expenses of the
contract, the legitimate expenses made by reason of the sale, and the necessary and useful
expenses made on the subject property.

After such determination, respondent Rose O. Alciso shall have 30 days to pay the
amounts to petitioners Spouses Dominador R. Narvaez and Lilia W. Narvaez.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 175399, October 27, 2009 ]
OPHELIA L. TUATIS, PETITIONER, VS. SPOUSES ELISEO ESCOL AND
VISMINDA ESCOL; HONORABLE COURT OF APPEALS, 22ND DIVISION,
CAGAYAN DE ORO CITY; REGIONAL TRIAL COURT, BRANCH 11,
SINDANGAN, ZAMBOANGA DEL NORTE; AND THE SHERIFF OF RTC,
BRANCH 11, SINDANGAN, ZAMBOANGA DEL NORTE, RESPONDENTS.

DECISION
CHICO-NAZARIO, J.:

This Petition for Certiorari and Mandamus[1] under Rule 65 of the Rules of Court seeks

the annulment of the following Resolutions of the Court of Appeals in CA-G.R. SP No.
00737-MIN: (a) Resolution[2] dated 10 February 2006 dismissing the Petition
for Certiorari, Prohibition and Mandamus with Prayer for the Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction of herein petitioner Ophelia L.
Tuatis (Tuatis); (b) Resolution[3] dated 25 July 2006 denying Tuatis' Motion for
Reconsideration of the Resolution dated 10 February 2006; and (c) Resolution[4] dated 9
October 2006 denying Tuatis' Motion for Leave to File a Second Motion for
Reconsideration. The instant Petition further prays for the annulment of the Order [5] dated
26 September 2005 of the Regional Trial Court (RTC) of Sindangan, Zamboanga del
Norte, Branch 11, in Civil Case No. S-618, ordering the Sheriff to immediately serve the
Writ of Execution issued on 7 March 2002.

The dispute arose from the following factual and procedural antecedents:

On 18 June 1996, Tuatis filed a Complaint for Specific Performance with

Damages[6] against herein respondent Visminda Escol (Visminda) before the RTC,
docketed as Civil Case No. S-618.

Tuatis alleged in her Complaint that sometime in November 1989, Visminda, as seller,
and Tuatis, as buyer, entered into a Deed of Sale of a Part of a Registered Land by
Installment[7] (Deed of Sale by Installment). The subject matter of said Deed was a piece
of real property situated in Poblacion, Sindangan, Zamboanga del Norte and more
particularly described as "[a] part of a registered land being known as Lot No. 251, Pls-66
covered under OCT [Original Certificate of Title] No. P-5421; x x x with an area of
THREE HUNDRED (300) square meters, more or less" (subject property).

The significant portions of the Deed of Sale by Installment stated:

That for and in consideration of the sum of TEN THOUSAND PESOS (P10,000.00),
Philippine currency, the SELLER [Visminda[8]] hereby SELLS to the BUYER [Tuatis],
the above-described parcel of land under the following terms and conditions:

1. That the BUYER [Tuatis] shall pay to the SELLER [Visminda] the amount of
THREE THOUSAND PESOS (P3,000.00), as downpayment;

2. That the BUYER [Tuatis] shall pay to the SELLER [Visminda] the amount of
FOUR THOUSAND PESOS (P4,000.00), on or before December 31, 1989;
 3. That the remaining balance of THREE THOUSAND PESOS (P3,000.00) shall be
paid by the BUYER [Tuatis] to the SELLER [Visminda] on or before January 31,
1990;

4. That failure of the BUYER [Tuatis] to pay the remaining balance within the period
of three months from the period stipulated above, then the BUYER [Tuatis] shall
return the land subject of this contract to the SELLER [Visminda] and the
SELLER [Visminda] [shall] likewise return all the amount paid by the BUYER
[Tuatis].[9]

Tuatis claimed that of the entire purchase price of P10,000.00, she had paid Visminda
P3,000.00 as downpayment. The exact date of said payment was not, however, specified.
Subsequently, Tuatis paid P3,000.00 as installment on 19 December 1989, and another
P1,000.00 installment on 17 February 1990. Tuatis averred that she paid Visminda the
remaining P3,000.00 on 27 February 1990 in the presence of Eric Selda (Eric), a clerk in
the law office of one Atty. Alanixon Selda. In support of this averment, Tuatis attached to
her Complaint a certification[10] executed by Eric on 27 May 1996.

In the meantime, Tuatis already took possession of the subject property and constructed a
residential building thereon.

In 1996, Tuatis requested Visminda to sign a prepared absolute deed of sale covering the
subject property, but the latter refused, contending that the purchase price had not yet
been fully paid. The parties tried to amicably settle the case before the Lupon Barangay,
to no avail.[11]

Tuatis contended that Visminda failed and refused to sign the absolute deed of sale
without any valid reason. Thus, Tuatis prayed that the RTC order Visminda to do all acts
for the consummation of the contract sale, sign the absolute deed of sale and pay
damages, as well as attorney's fees.

In her Answer,[12] Visminda countered that, except for the P3,000.00 downpayment and
P1,000.00 installment paid by Tuatis on 19 December 1989 and 17 February 1990,
[13]
 respectively, Tuatis made no other payment to Visminda. Despite repeated verbal
demands, Tuatis failed to comply with the conditions that she and Visminda agreed upon
in the Deed of Sale by Installment for the payment of the balance of the purchase price
for the subject property. Visminda asked that the RTC dismiss Tuatis' Complaint, or in
the alternative, order Tuatis to return the subject property to Visminda after Visminda's
reimbursement of the P4,000.00 she had received from Tuatis.

After trial, the RTC rendered a Decision[14] on 29 April 1999 in Civil Case No. S-618 in
Visminda's favor. The RTC concluded:
Under the facts and circumstances, the evidence for [Tuatis] has not established by
satisfactory proof as to (sic) her compliance with the terms and conditions setforth (sic) in
[the Deed of Sale by Installment] x x x.

xxxx

In contracts to sell, where ownership is retained by the seller and is not to pass until the
full payment, such payment, as we said, is a positive suspensive condition, the failure of
which is not a breach, casual or serious, but simply an event that prevented the obligation
of the vendor to convey title from acquiring binding force x x x.

xxxx

As the contract x x x is clear and unmistakable and the terms employed therein have not
been shown to belie or otherwise fail to express the true intention of the parties, and that
the deed has not been assailed on the ground of mutual mistake which would require its
reformation, [the] same should be given its full force and effect.

EVIDENCE (sic) at hand points of no full payment of the price, hence No. 4 of the
stipulation applies[,] which provides:

"That failure (sic) of the Buyer [Tuatis] to pay the remaining balance within the period of
three months from the period stipulated above, then the Buyer [Tuatis] shall return the
land subject of this Contract to the Seller [Visminda] and the Seller [Visminda] [shall]
likewise return all the (sic) amount paid by the Buyer [Tuatis]."

This stipulation is the law between the [Buyer] and [Seller], and should be complied with
in good faith x x x.

[Tuatis] constructed the building x x x in bad faith for, (sic) she had knowledge of the
fact that the Seller [Visminda] is still the absolute owner of the subject land. There was
bad faith also on the part of [Visminda] in accordance with the express provisions of
Article 454 [of the New Civil Code][15] since [she] allowed [Tuatis] to construct the
building x x x without any opposition on [her] part and so occupy it. The rights of the
parties must, therefore, be determined as if they both had acted in bad faith. Their rights
in such cases are governed by Article 448 of the New Civil Code of the Philippines. [16]

The RTC decreed the dismissal of Tuatis' Complaint for lack of merit, the return by
Tuatis of physical possession of the subject property to Visminda, and the return by
Visminda of the P4,000.00 she received from Tuatis.

Tuatis filed an appeal with the Court of Appeals, docketed as CA-G.R. CV No. 65037. In
a Resolution[17] dated 29 August 2000, however, the appellate court dismissed the appeal
for failure of Tuatis to serve and file her appellant's brief within the second extended
period for the same. An Entry of Judgment[18] was made in CA-G.R. CV No. 65037 on 29
September 2000, as a result of which, the appealed RTC Decision dated 29 April 1999 in
Civil Case No. S-618 became final and executory.

Visminda filed a Motion for Issuance of a Writ of Execution[19] before the RTC on 14

January 2002. The RTC granted Visminda's Motion in a Resolution dated 21 February
2002, and issued the Writ of Execution[20] on 7 March 2002.

Tuatis thereafter filed before the RTC on 22 April 2002 a Motion to Exercise Right under
Article 448 of the Civil Code of the Philippines.[21] Tuatis moved that the RTC issue an
order allowing her to buy the subject property from Visminda. While Tuatis indeed had
the obligation to pay the price of the subject property, she opined that such should not be
imposed if the value of the said property was considerably more than the value of the
building constructed thereon by Tuatis. Tuatis alleged that the building she constructed
was valued at P502,073.00,[22] but the market value of the entire piece of land measuring
4.0144 hectares, of which the subject property measuring 300 square meters formed a
part, was only about P27,000.00.[23] Tuatis maintained that she then had the right to
choose between being indemnified for the value of her residential building or buying
from Visminda the parcel of land subject of the case. Tuatis stated that she was opting to
exercise the second option.

On 20 December 2004, Visminda deposited the amount of P4,000.00 to the office of the
Clerk of Court of the RTC, pursuant to the Decision of the trial court dated 29 April
1999.[24]

In the intervening time, the Writ of Execution issued on 7 March 2002 was yet to be
served or implemented by the Sheriff. This prompted Visminda to write a letter to the
Office of the Court Administrator (OCA) to complain about the said delay. The OCA
endorsed the letter to the RTC.

On 26 September 2005, the RTC issued an Order[25] directing the Sheriff to immediately

serve or enforce the Writ of Execution previously issued in Civil Case No. S-618, and to
make a report and/or return on the action taken thereon within a period of fifteen (15)
days from receipt of the order.

On 10 October 2005, Tuatis filed before the RTC a Motion for Reconsideration[26] of the
Order dated 26 September 2005, praying that the same be set aside in view of the
pendency of her previous Motion to Exercise Right under Article 448 of the Civil Code
of the Philippines. However, before the RTC could rule upon Tuatis' Motion for
Reconsideration, the Sheriff enforced the Writ of Execution on 27 October 2005 and
submitted his Return to the RTC on 2 November 2005, reporting that the subject writ was
fully satisfied.
Tuatis immediately filed with the Court of Appeals a Petition for Certiorari, Prohibition
and Mandamus with Prayer for the Issuance of a Temporary Restraining Order and/or
Writ of Preliminary Injunction,[27] which was docketed as CA-G.R. No. 00737-MIN.
Tuatis sought in said Petition the annulment of the RTC Order dated 26 September 2005,
as well as the issuance of an order commanding the RTC and the Sheriff to desist from
undertaking any further proceedings in Civil Case No. S-618, and an order directing the
RTC to determine the rights of the parties under Article 448 of the Civil Code.

In a Resolution[28] dated 10 February 2006, the Court of Appeals dismissed outright

Tuatis' Petition for failure to completely pay the required docket fees, to attach a certified
true or authenticated copy of the assailed RTC Order dated 26 September 2005, and to
indicate the place of issue of her counsel's IBP and PTR Official Receipts.

Tuatis filed a Motion for Reconsideration[29] of the Resolution dated 10 February 2006,
but said Motion was denied by the appellate court in another Resolution dated 25 July
2006 on the ground that Tuatis had not taken any action to rectify the infirmities of her
Petition.

Tuatis subsequently filed a Motion for Leave to File a Second Motion for
Reconsideration,[30] but it was similarly denied by the Court of Appeals in a Resolution
dated 9 October 2006, as Section 2, Rule 52[31] of the Rules of Court proscribes the filing
of a second motion for reconsideration.

Hence, Tuatis filed the instant Petition, principally arguing that Article 448 of the Civil
Code must be applied to the situation between her and Visminda.

According to Tuatis, grave abuse of discretion, amounting to lack or excess of their

jurisdiction, was committed by the RTC in issuing the Order dated 26 September 2005,
and by the Sheriff in enforcing the Writ of Execution on 27 October 2005. Tuatis insists
that the Motion for Reconsideration of the Order dated 26 September 2005 that she filed
on 10 October 2005 legally prevented the execution of the RTC Decision dated 29 April
1999, since the rights of the parties to the case had yet to be determined pursuant to
Article 448 of the Civil Code.[32] Tuatis reiterates that the building she constructed is
valued at P502,073.00, per assessment of the Municipal Assessor of Sindangan,
Zamboanga del Norte; while the entire piece of land, which includes the subject property,
has a market value of only about P27,000.00, based on Tax Declaration No. 12464 issued
in the year 2000.[33] Such being the case, Tuatis posits that she is entitled to buy the land
at a price to be determined by the Court or, alternatively, she is willing to sell her house
to Visminda in the amount of P502,073.00.

In addition, Tuatis attributes grave abuse of discretion amounting to lack or excess of

jurisdiction on the part of the Court of Appeals for dismissing outright her Petition
for Certiorari, Prohibition and Mandamus with Prayer for the Issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction, and subsequently denying her
Motion for Reconsideration and Motion for Leave to File a Second Motion for
Reconsideration.

The Court grants the present Petition but for reasons other than those proffered by Tuatis.

Procedural deficiencies of Tuatis' Petition before the Court of Appeals

It is true that Tuatis committed several procedural faux pas that would have, ordinarily,
warranted the dismissal of her Petition in CA-G.R. No. 00737-MIN before the Court of
Appeals.

In its Resolution dated 10 February 2006, the Court of Appeals dismissed outright the
Petition for Certiorari, Prohibition and Mandamus with Prayer for the Issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction filed by Tuatis for
failure to comply with the following requirements for such a petition: (a) to completely
pay the required docket fees, (b) to attach a certified true or authenticated copy of the
assailed RTC Order dated 26 September 2005, and (c) to indicate the place of issue of her
counsel's IBP and PTR Official Receipts.

Section 3, Rule 46 of the Rules of Court lays down the requirements for original cases
filed before the Court of Appeals and the effect of non-compliance therewith, relevant
portions of which are reproduced below:

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. - x x

x.

xxxx

It shall be filed in seven (7) clearly legible copies together with proof of service thereof
on the respondent with the original copy intended for the court indicated as such by the
petitioner, and shall be accompanied by a clearly legible duplicate original or
certified true copy of the judgment, order, resolution, or ruling subject thereof, such
material portions of the record as are referred to therein, and other documents relevant or
pertinent thereto. The certification shall be accomplished by the proper clerk of court or
by his duly authorized representative, or by the proper officer of the court, tribunal,
agency or office involved or by his duly authorized representative. The other requisite
number of copies of the petition shall be accompanied by clearly legible plain copies of
all documents attached to the original.

xxxx
The petitioner shall pay the corresponding docket and other lawful fees to the clerk of
court and deposit the amount of P500.00 for costs at the time of the filing of the
petition.

The failure of the petitioner to comply with any of the foregoing requirements shall
be sufficient ground for the dismissal of the petition. (Emphases ours.)

The sound reason behind the policy of the Court in requiring the attachment to the
petition for certiorari, prohibition, mandamus, or quo warranto of a clearly legible
duplicate original or certified true copy of the assailed judgment or order, is to ensure that
the said copy submitted for review is a faithful reproduction of the original, so that the
reviewing court would have a definitive basis in its determination of whether the court,
body, or tribunal which rendered the assailed judgment or order committed grave abuse
of discretion.[34] Also, the Court has consistently held that payment of docket fees within
the prescribed period is jurisdictional and is necessary for the perfection of an appeal. [35]

Indeed, the last paragraph of Section 3, Rule 46 states that non-compliance with any of
the requirements stated therein shall constitute sufficient ground for the dismissal of the
petition. However, the Court, in several cases,[36] also declared that said provision must
not be taken to mean that the petition shall be automatically dismissed in every instance
of non-compliance. The power conferred upon the Court of Appeals to dismiss an appeal,
or even an original action, as in this case, is discretionary and not merely ministerial.
With that affirmation comes the caution that such discretion must be a sound one, to be
exercised in accordance with the tenets of justice and fair play, having in mind the
circumstances obtaining in each case.[37]

It must be borne in mind that the rules of procedure are intended to promote, rather than
frustrate, the ends of justice, and while the swift unclogging of court dockets is a laudable
objective, it, nevertheless, must not be met at the expense of substantial justice. Technical
and procedural rules are intended to help secure, not suppress, the cause of justice; and a
deviation from the rigid enforcement of the rules may be allowed to attain that prime
objective for, after all, the dispensation of justice is the core reason for the existence of
courts.[38]

Hence, technicalities must be avoided. The law abhors technicalities that impede the
cause of justice. The court's primary duty is to render or dispense justice. A litigation is
not a game of technicalities. Lawsuits, unlike duels, are not to be won by a rapier's thrust.
Technicality, when it deserts its proper office as an aid to justice and becomes its great
hindrance and chief enemy, deserves scant consideration from courts. Litigations must be
decided on their merits and not on technicality. Every party-litigant must be afforded the
amplest opportunity for the proper and just determination of his cause, free from the
unacceptable plea of technicalities. Thus, dismissal of appeals purely on technical
grounds is frowned upon where the policy of the court is to encourage hearings of
appeals on their merits and the rules of procedure ought not to be applied in a very rigid,
technical sense; rules of procedure are used only to help secure, not override, substantial
justice. It is a far better and more prudent course of action for the court to excuse a
technical lapse and afford the parties a review of the case on appeal to attain the ends of
justice rather than dispose of the case on technicality and cause a grave injustice to the
parties, giving a false impression of speedy disposal of cases while actually resulting in
more delay, if not a miscarriage, of justice.[39]

In this case, the Court finds that the Court of Appeals committed grave abuse of
discretion in focusing on the procedural deficiencies of Tuatis' Petition and completely
turning a blind eye to the merits of the same. The peculiar circumstances of the present
case and the interest of substantial justice justify the setting aside, pro hac vice, of the
procedural defects of Tuatis' Petition in CA-G.R. No. 00737-MIN.

Perusal of the RTC Decision dated

29 April 1999

The RTC, in the body of its Decision dated 29 April 1999 in Civil Case No. S-618, found
that Tuatis breached the conditions stipulated in the Deed of Sale by Installment between
her and Visminda; but since both Tuatis and Visminda were guilty of bad faith, "[t]heir
rights in such cases are governed by Article 448 of the New Civil Code of the
Philippines."[40]

Article 448 of the Civil Code, referred to by the RTC, provides:

ART. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy
the land if its value is considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof. (Emphases
supplied.)

According to the aforequoted provision, the landowner can choose between appropriating
the building by paying the proper indemnity for the same, as provided for in Articles
546[41] and 548[42] of the Civil Code; or obliging the builder to pay the price of the land,
unless its value is considerably more than that of the structures, in which case the builder
in good faith shall pay reasonable rent.[43]
The Court notes, however, that the RTC, in the dispositive portion of its 29 April 1999
Decision, which exactly reads -

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

(1) DISMISSING the Complaint for lack of merit;

(2) ORDERING [Tuatis] to return the physical possession of the land in question to
[Visminda]; and,

(3) ORDERING [Visminda] to return the P4,000.00 she received as evidenced by Exhibit
"B" and Exhibit "C" [44] to [Tuatis].[45]

utterly failed to make an adjudication on the rights of Tuatis and Visminda under Article
448 of the Civil Code. It would seem that the decretal part of said RTC judgment was
limited to implementing the following paragraph in the Deed of Sale by Installment:

4. That failure of the BUYER [Tuatis] to pay the remaining balance within the period
of three months from the period stipulated above, then the BUYER [Tuatis] shall
return the land subject of this contract to the SELLER [Visminda] and the
SELLER [Visminda] [shall] likewise return all the amount paid by the BUYER
[Tuatis].[46]

without considering the effects of Article 448 of the Civil Code.

It was this apparent incompleteness of the fallo of the RTC Decision dated 29 April 1999
that resulted in the present controversy, and that this Court is compelled to address for a
just and complete settlement of the rights of the parties herein.

Finality of the RTC Decision dated

19 April 1999

The Court has not lost sight of the fact that the RTC Decision dated 29 April 1999 in
Civil Case No. S-618 already became final and executory in view of the dismissal by the
appellate court of Tuatis' appeal in CA-G.R. CV No. 650307 and the entry of judgment
made on 29 September 2000.

Nothing is more settled in law than that when a final judgment is executory, it thereby
becomes immutable and unalterable. The judgment may no longer be modified in any
respect, even if the modification is meant to correct what is perceived to be an erroneous
conclusion of fact or law, and regardless of whether the modification is attempted to be
made by the court rendering it or by the highest Court of the land. The doctrine is
founded on considerations of public policy and sound practice that, at the risk of
occasional errors, judgments must become final at some definite point in time. The only
recognized exceptions are the corrections of clerical errors or the making of the so-
called nunc pro tunc entries, in which case there is no prejudice to any party, and, of
course, where the judgment is void.[47]

Equally well-settled is the rule that the operative part in every decision is the dispositive
portion or the fallo, and where there is conflict between the fallo and the body of the
decision, the fallo controls. This rule rests on the theory that the fallo is the final order,
while the opinion in the body is merely a statement, ordering nothing.[48]

Jurisprudence also provides, however, that where there is an ambiguity caused by an

omission or a mistake in the dispositive portion of the decision, the Court may clarify
such an ambiguity by an amendment even after the judgment has become final. In
doing so, the Court may resort to the pleadings filed by the parties and the findings of fact
and the conclusions of law expressed in the text or body of the decision. [49] Therefore,
even after the RTC Decision dated 29 April 1999 had already become final and
executory, this Court cannot be precluded from making the necessary amendment
thereof, so that the fallo will conform to the body of the said decision.

If the Court does not act upon the instant Petition, Tuatis loses ownership over the
building she constructed, and in which she has been residing, allegedly worth
P502,073.00, without any recompense therefor whatsoever; while Visminda, by returning
Tuatis' previous payments totaling P4,000.00, not just recovers the subject property, but
gains the entire building without paying indemnity for the same. Hence, the decision of
the Court to give due course to the Petition at bar, despite the finality of the RTC
Decision dated 29 April 1999, should not be viewed as a denigration of the doctrine of
immutability of final judgments, but a recognition of the equally sacrosanct doctrine that
a person should not be allowed to profit or enrich himself inequitably at another's
expense.

Furthermore, the Court emphasizes that it is not even changing or reversing any of the
findings of fact and law of the RTC in its Decision dated 29 April 1999. This Court is
still bound by said RTC judgment insofar as it found that Tuatis failed to fully pay for the
price of the subject property; but since both Tuatis and Visminda were in bad faith,
Article 448 of the Civil Code would govern their rights. The Court herein is simply
clarifying or completing the obviously deficient decretal portion of the decision, so that
said portion could effectively order the implementation of the actual ruling of the RTC,
as clearly laid down in the rationale of the same decision.

Applying Article 448 and other

related provisions of the Civil Code
Taking into consideration the provisions of the Deed of Sale by Installment and Article
448 of the Civil Code, Visminda has the following options:

Under the first option, Visminda may appropriate for herself the building on the subject
property after indemnifying Tuatis for the necessary[50] and useful expenses[51] the latter
incurred for said building, as provided in Article 546 of the Civil Code.

It is worthy to mention that in Pecson v. Court of Appeals,[52] the Court pronounced that

the amount to be refunded to the builder under Article 546 of the Civil Code should be
the current market value of the improvement, thus:

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 [40 Phil. 717 (1920)] 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. (Emphasis ours.)

Until Visminda appropriately indemnifies Tuatis for the building constructed by the
latter, Tuatis may retain possession of the building and the subject property.

Under the second option, Visminda may choose not to appropriate the building and,
instead, oblige Tuatis to pay the present or current fair value of the land.[53] The
P10,000.00 price of the subject property, as stated in the Deed of Sale on Installment
executed in November 1989, shall no longer apply, since Visminda will be obliging
Tuatis to pay for the price of the land in the exercise of Visminda's rights under Article
448 of the Civil Code, and not under the said Deed. Tuatis' obligation will then be
statutory, and not contractual, arising only when Visminda has chosen her option under
Article 448 of the Civil Code.

Still under the second option, if the present or current value of the land, the subject
property herein, turns out to be considerably more than that of the building built thereon,
Tuatis cannot be obliged to pay for the subject property, but she must pay Visminda
reasonable rent for the same. Visminda and Tuatis must agree on the terms of the lease;
otherwise, the court will fix the terms.
Necessarily, the RTC should conduct additional proceedings before ordering the
execution of the judgment in Civil Case No. S-618. Initially, the RTC should determine
which of the aforementioned options Visminda will choose. Subsequently, the RTC
should ascertain: (a) under the first option, the amount of indemnification Visminda must
pay Tuatis; or (b) under the second option, the value of the subject property vis-à-vis that
of the building, and depending thereon, the price of, or the reasonable rent for, the subject
property, which Tuatis must pay Visminda.

The Court highlights that the options under Article 448 are available to Visminda, as the
owner of the subject property. There is no basis for Tuatis' demand that, since the value
of the building she constructed is considerably higher than the subject property, she may
choose between buying the subject property from Visminda and selling the building to
Visminda for P502,073.00. Again, the choice of options is for Visminda, not Tuatis, to
make. And, depending on Visminda's choice, Tuatis' rights as a builder under Article 448
are limited to the following: (a) under the first option, a right to retain the building and
subject property until Visminda pays proper indemnity; and (b) under the second option,
a right not to be obliged to pay for the price of the subject property, if it is considerably
higher than the value of the building, in which case, she can only be obliged to pay
reasonable rent for the same.

The rule that the choice under Article 448 of the Civil Code belongs to the owner of the
land is in accord with the principle of accession, i.e., that the accessory follows the
principal and not the other way around. Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive.[54] The landowner cannot refuse to exercise
either option and compel instead the owner of the building to remove it from the land.[55]

The raison d'etre for this provision has been enunciated thus: Where the builder, planter
or sower has acted in good faith, a conflict of rights arises between the owners, and it
becomes necessary to protect the owner of the improvements without causing injustice to
the owner of the land. In view of the impracticability of creating a state of forced co-
ownership, the law has provided a just solution by giving the owner of the land the option
to acquire the improvements after payment of the proper indemnity, or to oblige the
builder or planter to pay for the land and the sower the proper rent. He cannot refuse to
exercise either option. It is the owner of the land who is authorized to exercise the option,
because his right is older, and because, by the principle of accession, he is entitled to the
ownership of the accessory thing.[56]

Visminda's Motion for Issuance of Writ of Execution cannot be deemed as an expression

of her choice to recover possession of the subject property under the first option, since the
options under Article 448 of the Civil Code and their respective consequences were also
not clearly presented to her by the 19 April 1999 Decision of the RTC. She must then be
given the opportunity to make a choice between the options available to her after being
duly informed herein of her rights and obligations under both.
As a final note, the directives given by the Court to the trial court in Depra v.
Dumlao[57] may prove useful as guidelines to the RTC herein in ensuring that the
additional proceedings for the final settlement of the rights of the parties under Article
448 of the Civil Code shall be conducted as thoroughly and promptly as possible.

WHEREFORE, premises considered, the Court:

(1) GRANTS the instant Petition;

(2) ANNULS AND SETS ASIDE (a) the Resolution dated 21 February 2002 of the
Regional Trial Court of Sindangan, Zamboanga del Norte, Branch 11, ordering the
issuance of a writ for the execution of the Decision dated 19 April 1999 of the said trial
court in Civil Case No. S-618; (b) the Writ of Execution issued on 7 March 2002; and (c)
the actions undertaken by the Sheriff to enforce the said Writ of Execution;

(3) DIRECTS the Regional Trial Court of Sindangan, Zamboanga del Norte, Branch 11,
to conduct further proceedings to determine with deliberate dispatch: (a) the facts
essential to the proper application of Article 448 of the Civil Code, and (b) respondent
Visminda Escol's choice of option under the same provision; and

(4) Further DIRECTS the Regional Trial Court of Sindangan, Zamboanga del Norte,

Branch 11, to undertake the implementation of respondent Visminda Escol's choice of
option under Article 448 of the Civil Code, as soon as possible.

No costs.

SO ORDERED.

EN BANC
[ G.R. No. 178902, April 21, 2010 ]
MANUEL O. FUENTES AND LETICIA L. FUENTES, PETITIONERS, VS.
CONRADO G. ROCA, ANNABELLE R. JOSON, ROSE MARIE R.
CRISTOBAL AND PILAR MALCAMPO, RESPONDENTS.

DECISION
ABAD, J.:

This case is about a husband's sale of conjugal real property, employing a

challenged affidavit of consent from an estranged wife. The buyers claim valid consent,
loss of right to declare nullity of sale, and prescription.

The Facts and the Case

Sabina Tarroza owned a titled 358-square meter lot in Canelar, Zamboanga City. On
October 11, 1982 she sold it to her son, Tarciano T. Roca (Tarciano) under a deed of
absolute sale. [1] But Tarciano did not for the meantime have the registered title
transferred to his name.

Six years later in 1988, Tarciano offered to sell the lot to petitioners Manuel and Leticia
Fuentes (the Fuentes spouses). They arranged to meet at the office of Atty. Romulo D.
Plagata whom they asked to prepare the documents of sale. They later signed an
agreement to sell that Atty. Plagata prepared[2] dated April 29, 1988, which agreement
expressly stated that it was to take effect in six months.

The agreement required the Fuentes spouses to pay Tarciano a down payment of
P60,000.00 for the transfer of the lot's title to him. And, within six months, Tarciano was
to clear the lot of structures and occupants and secure the consent of his estranged
wife, Rosario Gabriel Roca (Rosario), to the sale. Upon Tarciano's compliance with these
conditions, the Fuentes spouses were to take possession of the lot and pay him an
additional P140,000.00 or P160,000.00, depending on whether or not he succeeded in
demolishing the house standing on it. If Tarciano was unable to comply with these
conditions, the Fuentes spouses would become owners of the lot without any further
formality and payment.

The parties left their signed agreement with Atty. Plagata who then worked on the other
requirements of the sale. According to the lawyer, he went to see Rosario in one of his
trips to Manila and had her sign an affidavit of consent.[3] As soon as Tarciano met the
other conditions, Atty. Plagata notarized Rosario's affidavit in Zamboanga City. On
January 11, 1989 Tarciano executed a deed of absolute sale [4] in favor of the Fuentes
spouses. They then paid him the additional P140,000.00 mentioned in their agreement.
A new title was issued in the name of the spouses [5] who immediately constructed a
building on the lot. On January 28, 1990 Tarciano passed away, followed by his wife
Rosario who died nine months afterwards.

Eight years later in 1997, the children of Tarciano and Rosario, namely, respondents
Conrado G. Roca, Annabelle R. Joson, and Rose Marie R. Cristobal, together with
Tarciano's sister, Pilar R. Malcampo, represented by her son, John Paul M. Trinidad
(collectively, the Rocas), filed an action for annulment of sale and reconveyance of the
land against the Fuentes spouses before the Regional Trial Court (RTC) of Zamboanga
City in Civil Case 4707. The Rocas claimed that the sale to the spouses was void since
Tarciano's wife, Rosario, did not give her consent to it. Her signature on the affidavit of
consent had been forged. They thus prayed that the property be reconveyed to them
upon reimbursement of the price that the Fuentes spouses paid Tarciano. [6]

The spouses denied the Rocas' allegations. They presented Atty. Plagata who testified
that he personally saw Rosario sign the affidavit at her residence in Paco, Manila, on
September 15, 1988. He admitted, however, that he notarized the document in
Zamboanga City four months later on January 11, 1989.[7] All the same, the Fuentes
spouses pointed out that the claim of forgery was personal to Rosario and she alone
could invoke it. Besides, the four-year prescriptive period for nullifying the sale on
ground of fraud had already lapsed.

Both the Rocas and the Fuentes spouses presented handwriting experts at the trial.
Comparing Rosario's standard signature on the affidavit with those on various
documents she signed, the Rocas' expert testified that the signatures were not written
by the same person. Making the same comparison, the spouses' expert concluded that
they were.[8]

On February 1, 2005 the RTC rendered judgment, dismissing the case. It ruled that the
action had already prescribed since the ground cited by the Rocas for annulling the sale,
forgery or fraud, already prescribed under Article 1391 of the Civil Code four years after
its discovery. In this case, the Rocas may be deemed to have notice of the fraud from
the date the deed of sale was registered with the Registry of Deeds and the new title
was issued. Here, the Rocas filed their action in 1997, almost nine years after the title
was issued to the Fuentes spouses on January 18, 1989. [9]
Moreover, the Rocas failed to present clear and convincing evidence of the fraud. Mere
variance in the signatures of Rosario was not conclusive proof of forgery. [10] The RTC
ruled that, although the Rocas presented a handwriting expert, the trial court could not
be bound by his opinion since the opposing expert witness contradicted the same. Atty.
Plagata's testimony remained technically unrebutted. [11]

Finally, the RTC noted that Atty. Plagata's defective notarization of the affidavit of
consent did not invalidate the sale. The law does not require spousal consent to be on
the deed of sale to be valid. Neither does the irregularity vitiate Rosario's consent. She
personally signed the affidavit in the presence of Atty. Plagata. [12]

On appeal, the Court of Appeals (CA) reversed the RTC decision. The CA found sufficient
evidence of forgery and did not give credence to Atty. Plagata's testimony that he saw
Rosario sign the document in Quezon City. Its jurat said differently. Also, upon
comparing the questioned signature with the specimen signatures, the CA noted
significant variance between them. That Tarciano and Rosario had been living separately
for 30 years since 1958 also reinforced the conclusion that her signature had been
forged.

Since Tarciano and Rosario were married in 1950, the CA concluded that their property
relations were governed by the Civil Code under which an action for annulment of sale
on the ground of lack of spousal consent may be brought by the wife during the
marriage within 10 years from the transaction. Consequently, the action that the Rocas,
her heirs, brought in 1997 fell within 10 years of the January 11, 1989 sale.

Considering, however, that the sale between the Fuentes spouses and Tarciano was
merely voidable, the CA held that its annulment entitled the spouses to reimbursement
of what they paid him plus legal interest computed from the filing of the complaint until
actual payment. Since the Fuentes spouses were also builders in good faith, they were
entitled under Article 448 of the Civil Code to payment of the value of the
improvements they introduced on the lot. The CA did not award damages in favor of the
Rocas and deleted the award of attorney's fees to the Fuentes spouses. [13]
Unsatisfied with the CA decision, the Fuentes spouses came to this court by petition for
review.[14]

The Issues Presented

The case presents the following issues:

1. Whether or not Rosario's signature on the document of consent to her husband

Tarciano's sale of their conjugal land to the Fuentes spouses was forged;

2. Whether or not the Rocas' action for the declaration of nullity of that sale to the
spouses already prescribed; and

3. Whether or not only Rosario, the wife whose consent was not had, could bring the
action to annul that sale.

The Court's Rulings

First. The key issue in this case is whether or not Rosario's signature on the document of
consent had been forged. For, if the signature were genuine, the fact that she gave her
consent to her husband's sale of the conjugal land would render the other issues merely
academic.

The CA found that Rosario's signature had been forged. The CA observed a marked
difference between her signature on the affidavit of consent [15] and her specimen
signatures.[16] The CA gave no weight to Atty. Plagata's testimony that he saw Rosario
sign the document in Manila on September 15, 1988 since this clashed with his
declaration in the jurat that Rosario signed the affidavit in Zamboanga City on January
11, 1989.

The Court agrees with the CA's observation that Rosario's signature strokes on the
affidavit appears heavy, deliberate, and forced. Her specimen signatures, on the other
hand, are consistently of a lighter stroke and more fluid. The way the letters "R" and "s"
were written is also remarkably different. The variance is obvious even to the untrained
eye.
Significantly, Rosario's specimen signatures were made at about the time that she
signed the supposed affidavit of consent. They were, therefore, reliable standards for
comparison. The Fuentes spouses presented no evidence that Rosario suffered from any
illness or disease that accounted for the variance in her signature when she signed the
affidavit of consent. Notably, Rosario had been living separately from Tarciano for 30
years since 1958. And she resided so far away in Manila. It would have been quite
tempting for Tarciano to just forge her signature and avoid the risk that she would not
give her consent to the sale or demand a stiff price for it.

What is more, Atty. Plagata admittedly falsified the jurat of the affidavit of consent. That
jurat declared that Rosario swore to the document and signed it in Zamboanga City on
January 11, 1989 when, as Atty. Plagata testified, she supposedly signed it about four
months earlier at her residence in Paco, Manila on September 15, 1988. While a
defective notarization will merely strip the document of its public character and reduce
it to a private instrument, that falsified jurat, taken together with the marks of forgery in
the signature, dooms such document as proof of Rosario's consent to the sale of the
land. That the Fuentes spouses honestly relied on the notarized affidavit as proof of
Rosario's consent does not matter. The sale is still void without an authentic consent.

Second. Contrary to the ruling of the Court of Appeals, the law that applies to this case
is the Family Code, not the Civil Code. Although Tarciano and Rosario got married in
1950, Tarciano sold the conjugal property to the Fuentes spouses on January 11, 1989, a
few months after the Family Code took effect on August 3, 1988.

When Tarciano married Rosario, the Civil Code put in place the system of conjugal
partnership of gains on their property relations. While its Article 165 made Tarciano the
sole administrator of the conjugal partnership, Article 166 [17] prohibited him from selling
commonly owned real property without his wife's consent. Still, if he sold the same
without his wife's consent, the sale is not void but merely voidable. Article 173 gave
Rosario the right to have the sale annulled during the marriage within ten years from
the date of the sale. Failing in that, she or her heirs may demand, after dissolution of the
marriage, only the value of the property that Tarciano fraudulently sold. Thus:

Art. 173. The wife may, during the marriage, and within ten years from the
transaction questioned, ask the courts for the annulment of any contract of the
husband entered into without her consent, when such consent is required, or any act
or contract of the husband which tends to defraud her or impair her interest in the
conjugal partnership property. Should the wife fail to exercise this right, she or her
heirs, after the dissolution of the marriage, may demand the value of property
fraudulently alienated by the husband.

But, as already stated, the Family Code took effect on August 3, 1988. Its Chapter 4
on Conjugal Partnership of Gains expressly superseded Title VI, Book I of the Civil Code
on Property Relations Between Husband and Wife.[18] Further, the Family Code
provisions were also made to apply to already existing conjugal partnerships without
prejudice to vested rights.[19] Thus:

Art. 105. x x x The provisions of this Chapter shall also apply to conjugal
partnerships of gains already established between spouses before the effectivity of
this Code, without prejudice to vested rights already acquired in accordance with the
Civil Code or other laws, as provided in Article 256. (n)

Consequently, when Tarciano sold the conjugal lot to the Fuentes spouses on January
11, 1989, the law that governed the disposal of that lot was already the Family Code.

In contrast to Article 173 of the Civil Code, Article 124 of the Family Code does not
provide a period within which the wife who gave no consent may assail her husband's
sale of the real property. It simply provides that without the other spouse's written
consent or a court order allowing the sale, the same would be void. Article 124 thus
provides:

Art. 124. x x x In the event that one spouse is incapacitated or otherwise unable
to participate in the administration of the conjugal properties, the other spouse may
assume sole powers of administration. These powers do not include the powers of
disposition or encumbrance which must have the authority of the court or the written
consent of the other spouse. In the absence of such authority or consent, the
disposition or encumbrance shall be void. x x x

Under the provisions of the Civil Code governing contracts, a void or inexistent contract
has no force and effect from the very beginning. And this rule applies to contracts that
are declared void by positive provision of law, [20] as in the case of a sale of conjugal
property without the other spouse's written consent. A void contract is equivalent to
nothing and is absolutely wanting in civil effects. It cannot be validated either by
ratification or prescription.[21]

But, although a void contract has no legal effects even if no action is taken to set it
aside, when any of its terms have been performed, an action to declare its inexistence is
necessary to allow restitution of what has been given under it. [22] This action, according
to Article 1410 of the Civil Code does not prescribe. Thus:

Art. 1410. The action or defense for the declaration of the inexistence of a
contract does not prescribe.

Here, the Rocas filed an action against the Fuentes spouses in 1997 for annulment of
sale and reconveyance of the real property that Tarciano sold without their mother's
(his wife's) written consent. The passage of time did not erode the right to bring such an
action.

Besides, even assuming that it is the Civil Code that applies to the transaction as the CA
held, Article 173 provides that the wife may bring an action for annulment of sale on the
ground of lack of spousal consent during the marriage within 10 years from the
transaction. Consequently, the action that the Rocas, her heirs, brought in 1997 fell
within 10 years of the January 11, 1989 sale. It did not yet prescribe.

The Fuentes spouses of course argue that the RTC nullified the sale to them based on
fraud and that, therefore, the applicable prescriptive period should be that which
applies to fraudulent transactions, namely, four years from its discovery. Since notice of
the sale may be deemed given to the Rocas when it was registered with the Registry of
Deeds in 1989, their right of action already prescribed in 1993.

But, if there had been a victim of fraud in this case, it would be the Fuentes spouses in
that they appeared to have agreed to buy the property upon an honest belief that
Rosario's written consent to the sale was genuine. They had four years then from the
time they learned that her signature had been forged within which to file an action to
annul the sale and get back their money plus damages. They never exercised the right.

If, on the other hand, Rosario had agreed to sign the document of consent upon a false
representation that the property would go to their children, not to strangers, and it
turned out that this was not the case, then she would have four years from the time she
discovered the fraud within which to file an action to declare the sale void. But that is
not the case here. Rosario was not a victim of fraud or misrepresentation. Her consent
was simply not obtained at all. She lost nothing since the sale without her written
consent was void. Ultimately, the Rocas ground for annulment is not forgery but the lack
of written consent of their mother to the sale. The forgery is merely evidence of lack of
consent.

Third. The Fuentes spouses point out that it was to Rosario, whose consent was not
obtained, that the law gave the right to bring an action to declare void her husband's
sale of conjugal land. But here, Rosario died in 1990, the year after the sale. Does this
mean that the right to have the sale declared void is forever lost?

The answer is no. As stated above, that sale was void from the beginning. Consequently,
the land remained the property of Tarciano and Rosario despite that sale. When the two
died, they passed on the ownership of the property to their heirs, namely, the Rocas.
[23]
 As lawful owners, the Rocas had the right, under Article 429 of the Civil Code, to
exclude any person from its enjoyment and disposal.

In fairness to the Fuentes spouses, however, they should be entitled, among other
things, to recover from Tarciano's heirs, the Rocas, the P200,000.00 that they paid him,
with legal interest until fully paid, chargeable against his estate.

Further, the Fuentes spouses appear to have acted in good faith in entering the land and
building improvements on it. Atty. Plagata, whom the parties mutually entrusted with
closing and documenting the transaction, represented that he got Rosario's signature on
the affidavit of consent. The Fuentes spouses had no reason to believe that the lawyer
had violated his commission and his oath. They had no way of knowing that Rosario did
not come to Zamboanga to give her consent. There is no evidence that they had a
premonition that the requirement of consent presented some difficulty. Indeed, they
willingly made a 30 percent down payment on the selling price months earlier on the
assurance that it was forthcoming.

Further, the notarized document appears to have comforted the Fuentes spouses that
everything was already in order when Tarciano executed a deed of absolute sale in their
favor on January 11, 1989. In fact, they paid the balance due him. And, acting on the
documents submitted to it, the Register of Deeds of Zamboanga City issued a new title
in the names of the Fuentes spouses. It was only after all these had passed that the
spouses entered the property and built on it. He is deemed a possessor in good faith,
said Article 526 of the Civil Code, who is not aware that there exists in his title or mode
of acquisition any flaw which invalidates it.

As possessor in good faith, the Fuentes spouses were under no obligation to pay for
their stay on the property prior to its legal interruption by a final judgment against
them.[24] What is more, they are entitled under Article 448 to indemnity for the
improvements they introduced into the property with a right of retention until the
reimbursement is made. Thus:

Art. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works, sowing
or planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof. (361a)

The Rocas shall of course have the option, pursuant to Article 546 of the Civil Code, [25] of
indemnifying the Fuentes spouses for the costs of the improvements or paying the
increase in value which the property may have acquired by reason of such
improvements.

WHEREFORE, the Court DENIES the petition and AFFIRMS WITH MODIFICATION the

decision of the Court of Appeals in CA-G.R. CV 00531 dated February 27, 2007 as
follows:

1. The deed of sale dated January 11, 1989 that Tarciano T. Roca executed in favor of
Manuel O. Fuentes, married to Leticia L. Fuentes, as well as the Transfer Certificate of
Title T-90,981 that the Register of Deeds of Zamboanga City issued in the names of the
latter spouses pursuant to that deed of sale are DECLARED void;
2. The Register of Deeds of Zamboanga City is DIRECTED to reinstate Transfer Certificate
of Title 3533 in the name of Tarciano T. Roca, married to Rosario Gabriel;

3. Respondents Gonzalo G. Roca, Annabelle R. Joson, Rose Marie R. Cristobal, and Pilar
Malcampo are ORDERED to pay petitioner spouses Manuel and Leticia Fuentes the
P200,000.00 that the latter paid Tarciano T. Roca, with legal interest from January 11,
1989 until fully paid, chargeable against his estate;

4. Respondents Gonzalo G. Roca, Annabelle R. Joson, Rose Marie R. Cristobal, and Pilar
Malcampo are further ORDERED, at their option, to indemnify petitioner spouses
Manuel and Leticia Fuentes with their expenses for introducing useful improvements on
the subject land or pay the increase in value which it may have acquired by reason of
those improvements, with the spouses entitled to the right of retention of the land until
the indemnity is made; and

5. The RTC of Zamboanga City from which this case originated is DIRECTED to receive
evidence and determine the amount of indemnity to which petitioner spouses Manuel
and Leticia Fuentes are entitled.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 185020, October 06, 2010 ]
FILOMENA R. BENEDICTO, PETITIONER, VS. ANTONIO VILLAFLORES,
RESPONDENT.

RESOLUTION

NACHURA, J.:
 Petitioner Filomena R. Benedicto (Filomena) appeals by certiorari the September
30, 2008 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 80103, which
affirmed with modification the decision [2] dated December 10, 2002 of the Regional Trial
Court (RTC) of Malolos, Bulacan, Branch 19, in Civil Case No. 674-M-2000.

The antecedents.

Maria Villaflores (Maria) was the owner of Lot 2-A, with an area of 277 square meters, in
Poblacion, Meycauayan, Bulacan, covered by Transfer Certificate of Title (TCT) No. T-
84.761 (M).  In 1980, Maria sold a portion of Lot 2-A to her nephew, respondent Antonio
Villaflores (Antonio).  Antonio then took possession of the portion sold to him and
constructed a house thereon.  Twelve (12) years later, or on August 15, 1992, Maria
executed in favor of Antonio a Kasulatan ng Bilihang Tuluyan [3] covering the entire Lot 2-
A.  However, Antonio did not register the sale or pay the real property taxes for the
subject land.

On August 31, 1994, Maria sold the same Lot 2-A to Filomena, evidenced by a Kasulatan
ng Bilihang Tuluyan.[4] Filomena registered the sale with the Registry of Deeds of
Meycauayan on September 6, 1994. Consequently, TCT No. T-84.761 (M) in the name of
Maria was cancelled and TCT No. T-208265 (M) was issued in the name of Filomena. 
Since then Filomena paid the real property taxes for the subject parcel of land.

On September 28, 2000, Filomena filed a case for Accion Publiciana with Cancellation of
Notice of Adverse Claim, Damages and Attorney's Fees [5] against Antonio. She alleged
that she acquired Lot 2-A in 1994 from her grandaunt Maria by virtue of the Kasulatan
ng Bilihang Tuluyan. At the time of the sale, she was not aware that Antonio had any
claim or interest over the subject property. Antonio assured her that there was no
impediment to her acquisition of the land, and promised to vacate the property five (5)
years after the sale.  In August 1999, Antonio requested an extension of one (1) year,
and offered to pay a monthly rental of P2,000.00, which she granted.  However, in 2000,
Antonio refused to vacate the property and, instead, claimed absolute ownership of Lot
2-A.

Antonio traversed the complaint, asserting absolute ownership over Lot 2-A.  He alleged
that he purchased the subject property from Maria in 1980; and that he took possession
of the same and constructed his house thereon.  He came to know of the sale in favor of
Filomena only in 2000 when the latter demanded that he vacate the property.  He
averred that Filomena was aware of the sale; hence, the subsequent sale in favor of 
Filomena was rescissible, fraudulent, fictitious, or simulated. [6]

After trial, the RTC rendered a decision [7] sustaining Filomena's ownership. According to
the RTC, Filomena was the one who registered the sale in good faith; as such, she has
better right than Antonio. It rejected Antonio's allegation of bad faith on the part of
Filomena because no sufficient evidence was adduced to prove it. Likewise, the RTC
found Antonio's evidence of ownership questionable.  Nevertheless, it declared Antonio
a builder in good faith.

The RTC disposed, thus:

WHEREFORE, judgment is hereby rendered as follows:

a) [Filomena] is adjudged the absolute and real owner of the property-in-

question and covered by TCT No. T-208265 (M) registered in her name;

b) ordering [Antonio] and all persons claiming right under her to vacate the premises;

c) [Antonio] is declared to be a builder in good faith of his improvement/building

erected in TCT No. T-208268 (M) and the provisions of Art. 448 of the New Civil Code
applies;

d) all other claims of [Filomena] and counterclaim of [Antonio] are dismissed for lack of
legal as well as factual basis.

SO ORDERED.[8]

Both parties moved for reconsideration of the decision, but the RTC denied the motions
for lack of merit.

Filomena and Antonio then filed their separate appeals with the CA. Filomena assailed
the RTC pronouncement that Antonio was a builder in good faith, and the denial of her
claim for damages.  Antonio, on the other hand, faulted the RTC for sustaining
Filomena's ownership of the subject lot.

On September 30, 2008, the CA rendered the now challenged Decision [9] affirming with
modification the RTC decision. The CA affirmed the RTC for upholding Filomena's
ownership of Lot 2-A and for declaring Antonio a builder in good faith.  However, it
remanded the case to the RTC for further proceedings to determine the respective
rights of the parties under Articles 448 and 546 of the Civil Code, and the amount due
Antonio.

The dispositive portion of the CA Decision reads:

WHEREFORE, in view of the foregoing, the appeal of [respondent] Antonio

Villaflores is GRANTED in part.  The Decision dated December 10, 2002 issued by Branch
19, Regional Trial Court, Malolos, Bulacan in Civil Case No. 674-M-2000
is AFFIRMED with MODIFICATION that Antonio Villaflores, being a builder in good faith,
is entitled to reimbursement of the necessary and useful expense with the right of
retention until reimbursement of said expenses in full.  The partial appeal of [petitioner]
Filomena Benedicto is DENIED.

In accordance with the foregoing disquisitions, let the case be REMANDED to the trial
court which is DIRECTED to receive evidence, with dispatch, to determine the amount
due [respondent], the rights of the parties under Arts. 448 and 546; and to render a
complete judgment of the case.

SO ORDERED.[10]

Before us, Filomena faults the CA for holding that Antonio was a builder in good faith
and was entitled to reimbursement for the necessary and useful expenses incurred, with
right of retention until reimbursement of the said expenses in full.  Filomena asserts
that Antonio is not entitled to any reimbursement because he possessed the property
by mere tolerance.  Maria merely allowed Antonio to construct his house on a portion of
Lot 2-A; hence, he is not entitled to any reimbursement or retention.

The appeal lacks merit.

The question of whether a possessor is in good or bad faith is a factual matter. As a rule,
a party may raise only questions of law in an appeal by certiorari under Rule 45 of the
Rules of Court.[11] The Supreme Court is not duty bound to analyze and weigh again the
evidence considered in the proceedings below. This Court is not a trier of facts and does
not embark on a reexamination of the evidence introduced by the parties during trial. [12] 
This rule assumes greater force in the instant case where the CA affirmed the factual
findings of the trial court.

It is not disputed that the construction of Antonio's house was undertaken long before
the sale in favor of Filomena; that when Filomena bought the property from Maria,
Antonio's house which he used as residence had already been erected on the property. 
As explained by the CA:

[Antonio] claims not being aware of any flaw in his title.  He believed being the
owner of the subject premises on account of the Deed of Sale thereof in his favor
despite his inability to register the same.  The improvement was, in fact, introduced by
Antonio prior to Filomena's purchase of the land. x x x.[13]

Thus, we sustain the finding that Antonio is a builder in good faith.

Under Article 448, a landowner is given the option to either  appropriate the
improvement as his own upon payment of the proper amount of indemnity, or sell the
land to the possessor in good faith. Relatedly, Article 546 provides that a builder in good
faith is entitled to full reimbursement for all the necessary and useful expenses
incurred; it also gives him right of retention until full reimbursement is made. [14]

The RTC found good faith on the part of Antonio.  Yet, it did not order the
reimbursement of the necessary and useful expenses he incurred.

The pronouncement of this Court in Pecson v. CA,[15] which was reiterated in Tuatis v.

Escol,[16] is instructive, viz.:

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 [40 Phil. 717 (1920)] 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.

Thus, the CA correctly ordered the remand of the case to the RTC for further
proceedings.

Filomena then argues that the CA overstepped its bounds when it ruled on Antonio's
right to reimbursement and retention.  She asserts that this issue was not raised in the
proceedings a quo.

Indeed, the issue of Antonio's right to reimbursement and retention was not specifically
raised during the pre-trial because Antonio insisted on his claim of ownership. However,
Filomena is now estopped from questioning the CA for ruling on this issue because she
was the one who raised it in her appeal before the CA.

More importantly, the CA had to rule on the issue because it is essential and
indispensable for the just resolution of the case.  In Villaflores v. RAM System Services,
Inc.,[17] we had occasion to state that issues or errors not raised by the parties may be
resolved by this Court when it is necessary to arrive at a just decision, and the resolution
of the issues raised by the parties depend upon the determination of the unassigned
issue or error, or is necessary to give justice to the parties.

Finally Filomena faults the RTC and the CA for denying her claim for attorney's fees.  She
asserts that there is overwhelming proof on record to support her claim, and insists on
entitlement to attorney's fees and litigation expenses amounting to P440,700.00

We disagree.

It is settled that the award of attorney's fees is the exception rather than the general
rule; counsel's fees are not awarded every time a party prevails in a suit because of the
policy that no premium should be placed on the right to litigate. Attorney's fees, as part
of damages, are not necessarily equated to the amount paid by a litigant to a lawyer. In
the ordinary sense, attorney's fees represent the reasonable compensation paid to a
lawyer by his client for the legal services he has rendered to the latter; while in its
extraordinary concept, they may be awarded by the court as indemnity for damages to
be paid by the losing party to the prevailing party. Attorney's fees as part of damages
are awarded only in the instances specified in Article 2208 of the Civil Code. As such, it is
necessary for the court to make findings of fact and law that would bring the case within
the ambit of these enumerated instances to justify the grant of such award, and in all
cases it must be reasonable.[18]

Certainly, Filomena was compelled to file this suit to vindicate her rights. However, by
itself, it will not justify an award of attorney's fees. In Mindex Resources Development v.
Morillo,[19] this Court, in denying a claim for attorney's fees, held:

We find the award of attorney's fees to be improper. The reason which the RTC
gave ¾ because petitioner had compelled respondent to file an action against it ¾ falls
short of our requirement in Scott Consultants and Resource Development v. CA from
which we quote:

"It is settled that the award of attorney's fees is the exception rather than the
rule and counsel's fees are not to be awarded every time a party wins suit. The power of
the court to award attorney's fees under Article 2208 of the Civil Code demands factual,
legal, and equitable justification; its basis cannot be left to speculation or conjecture.
Where granted, the court must explicitly state in the body of the decision, and not only
in the dispositive portion thereof, the legal reason for the award of attorney's fees."

Moreover, a recent case ruled that "in the absence of stipulation, a winning party may
be awarded attorney's fees only in case plaintiff's action or defendant's stand is so
untenable as to amount to gross and evident bad faith."

Indeed, respondent was compelled to file this suit to vindicate his rights. However, such
fact by itself will not justify an award of attorney's fees, when there is no sufficient
showing of petitioner's bad faith in refusing to pay the said rentals as well as the repair
and overhaul costs.
Thus, we sustain the denial by the RTC and the CA of Filomena's claim for attorney's fees
and litigation expenses.

In fine, we find no reversible error committed by the CA in the challenged Decision.

WHEREFORE, the petition is DENIED.  The Decision of the Court of Appeals in CA-G.R. CV
No. 80103 is AFFIRMED. Costs against petitioner.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 157150, September 21, 2011 ]
PEDRO ANGELES, REPRESENTED BY ADELINA T. ANGELES,
ATTORNEY-IN FACT, PETITIONER, VS. ESTELITA B. PASCUAL, MARIA
THERESA PASCUAL, NERISSA PASCUAL, IMELDA PASCUAL, MA.
LAARNI PASCUAL AND EDWIN PASCUAL, RESPONDENTS.

RESOLUTION

BERSAMIN, J.:

Under appeal is the decision promulgated on January 31, 2002 in CA- G.R. CV No.
61600,[1] which involved a dispute about the true location of the respective lots of the
parties, with the respondents claiming that the petitioner had encroached on their lot
but the latter denying the encroachment.

Antecedents

Neighbors Regidor Pascual (Pascual) and Pedro Angeles (Angeles) were registered
owners of adjacent parcels of land located in Cabanatuan City.  Pascual owned Lot 4,
Block 2 (Lot 4) of the consolidation-subdivision plan (LRC) Psd-951, a portion of the
consolidation of Lots 1419-B-2B-3, 1419-B-2-B-4 and 1419-B-2-B-5, Psd- 9016, LGC
(GLRO) Cadastral Record No. 94 covered by Transfer Certificate Title No. T-43707 of the
Registry of Deeds of Nueva Ecija;[2] Angeles owned Lot 5, Block 2 (Lot 5) of the same
consolidation-subdivision plan covered by TCT No. T-9459 of the Registry of Deeds of
Nueva Ecija.[3] Each of them built a house on his respective lot, believing all the while
that his respective lot was properly delineated. It was not until Metropolitan Bank and
Trust Company (Metrobank), as the highest bidder in the foreclosure sale of the
adjacent Lot 3, Block 2 (Lot 3), caused the relocation survey of Lot 3 that the geodetic
engineer discovered that Pascual's house had encroached on Lot 3. As a consequence,
Metrobank successfully ejected Pascual.

In turn, Pascual caused the relocation survey of his own Lot 4 and discovered that
Angeles' house also encroached on his lot. Of the 318 square meters comprising Lot 4,
Angeles occupied 252 square meters, leaving Pascual with only about 66 square meters.
Pascual demanded rentals for the use of the encroached area of Lot 4 from Angeles, or
the removal of Angeles' house. Angeles refused the demand.  Accordingly, Pascual sued
Angeles for recovery of possession and damages in the Regional Trial Court (RTC) in
Cabanatuan City.

In the course of the trial, Pascual presented Clarito Fajardo, the geodetic engineer who
had conducted the relocation survey and had made the relocation plan of Lot 4.
[4]
 Fajardo testified that Angeles' house was erected on Lot 4. On the other hand,
Angeles presented Juan Fernandez, the geodetic engineer who had prepared the sketch
plan relied upon by Angeles to support his claim that there had been no encroachment.
[5]
 However, Fernandez explained that he had performed only a "table work," that is, he
did not actually go to the site but based the sketch plan on the descriptions and
bearings appearing on the TCTs of Lot 4, Lot 5 and Lot 6; and recommended the conduct
of a relocation survey.[6]

In its decision of November 3, 1998,[7] the RTC held that there was no dispute that
Pascual and Angeles were the respective registered owners of Lot 4 and Lot 5; that what
was disputed between them was the location of their respective lots; that Pascual
proved Angeles' encroachment on Lot 4 by preponderant evidence; and that Pascual
was entitled to relief.  The RTC thus disposed:

WHEREFORE, premises considered, judgment is rendered in favor of the plaintiff

and against the defendant as follows:
 1) ordering the defendant or persons claiming right through him to cause the
removal of his house insofar as the same occupies the portion of Lot 4, Block 2 (TCT No.
T-43707), of an area of 252 square meters, as particularly indicated in the Sketch Plan
(Exhibit C-1);  and

2) and without pronouncement to damages in both the complainant and counterclaim.

With Costs.

SO ORDERED.[8]

Angeles appealed to the CA.

On January 31, 2002, the CA affirmed the RTC, [9] and held that as between the findings
of the geodetic engineer (Fajardo) who had actually gone to the site and those of the
other (Fernandez) who had based his findings on the TCTs of the owners of the three
lots, those of the former should prevail.  However, the CA, modifying the RTC's ruling,
applied Article 448 of the Civil Code (which defined the rights of a builder, sower and
planter in good faith).  The decision decreed thus:[10]

WHEREFORE, the decision appealed from is MODIFIED.  Plaintiffs-appellees are

ordered to exercise within thirty (30) days from the finality of this decision their option
to either buy the portion of defendant-appellant's house on their Lot. No. 4, or to sell to
defendant-appellant the portion of their land on which his house stands. If plaintiffs-
appellees elect to sell the land or buy the improvement, the purchase price must be at
the prevailing market price at the time of payment. If buying the improvement will
render the defendant-appellant's house useless, then plaintiffs-appellees should sell the
encroached portion of their land to defendant-appellant. If plaintiffs-appellees choose
to sell the land but defendant-appellant is unwilling or unable to buy, then the latter
must vacate the subject portion and pay reasonable rent from the time plaintiffs-
appellees made their choice up to the time they actually vacate the premises. But if the
value of the land is considerably more than the value of the improvement, then
defendant-appellant may elect to lease the land, in which case the parties shall agree
upon the terms of the lease.  Should they fail to agree on said terms, the court of origin
is directed to fix the terms of the lease. From the moment plaintiffs-appellees shall have
exercised their option, defendant-appellant shall pay reasonable monthly rent up to the
time the parties agree on the terms of the lease or until the court fixes such terms. This
is without prejudice to any future compromise which may be agreed upon by the
parties.

SO ORDERED.

Angeles expectedly sought reconsideration, but the CA denied his motion on February
13, 2003.

Issues

Hence, Angeles appeals, assailing: (a) the credence the CA accorded to the testimony
and relocation plan of Fajardo as opposed to the survey plan prepared by Fernandez;
and (b) the options laid down by the CA, i.e., for Pascual either to buy the portion of
Angeles' house or to sell to Angeles the portion of his land occupied by Angeles were
contrary to its finding of good faith.

Ruling

The petition lacks merit.

I
The Court, not being a trier of facts,
cannot review factual issues

Section 1, Rule 45 of the Rules of Court explicitly states that the petition for review
on certiorari "shall raise only questions of law, which must be distinctly set forth." In
appeal by certiorari, therefore, only questions of law may be raised, because the
Supreme Court is not a trier of facts and does not normally undertake the re-
examination of the evidence presented by the contending parties during the trial. The
resolution of factual issues is the function of lower courts, whose findings thereon are
received with respect and are binding on the Supreme Court subject to certain
exceptions.[11] A question, to be one of law, must not involve an examination of the
probative value of the evidence presented by the litigants or any of them.  There is a
question of law in a given case when the doubt or difference arises as to what the law is
on certain state of facts; there is a question of fact when the doubt or difference arises
as to the truth or falsehood of alleged facts.[12]

Whether certain items of evidence should be accorded probative value or weight, or

should be rejected as feeble or spurious; or whether or not the proofs on one side or
the other are clear and convincing and adequate to establish a proposition in issue;
whether or not the body of proofs presented by a party, weighed and analyzed in
relation to contrary evidence submitted by adverse party, may be said to be strong,
clear and convincing; whether or not certain documents presented by one side should
be accorded full faith and credit in the face of protests as to their spurious character by
the other side;  whether or not inconsistencies in the body of proofs of a party are of
such gravity as to justify refusing to give said proofs weight - all these are issues of fact. 
Questions like these are not reviewable by the Supreme Court whose review of cases
decided by the CA is confined only to questions of law raised in the petition and therein
distinctly set forth.[13]

Nonetheless, the Court has recognized several exceptions to the rule, including: (a)
when the findings are grounded entirely on speculation, surmises or conjectures; (b)
when the inference made is manifestly mistaken, absurd or impossible; (c) when there is
grave abuse of discretion; (d) when the judgment is based on a misapprehension of
facts; (e) when the findings of facts are conflicting; (f) when in making its findings the
Court of Appeals went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (g) when the findings are contrary to
those of the trial court; (h) when the findings are conclusions without citation of specific
evidence on which they are based; (i) when the facts set forth in the petition as well as
in the petitioner's main and reply briefs are not disputed by the respondent; (j) when
the findings of fact are premised on the supposed absence of evidence and contradicted
by the evidence on record; and (k) when the Court of Appeals manifestly overlooked
certain relevant facts not disputed by the parties, which, if properly considered, would
justify a different conclusion.[14] The circumstances of this case indicate that none of
such exceptions is attendant herein.

The credence given by the RTC to the testimony and relocation plan of Fajardo was
conclusive upon this Court especially by virtue of the affirmance by the CA of the RTC. 
Resultantly, the fact of Angeles' encroachment on Pascual's Lot 4 was proved by
preponderant evidence.
It is noteworthy to point out, too, that the argument of Angeles based on the
indefeasibility and incontrovertibility of Torrens titles pursuant to Presidential Decree
No. 1529 (The Property Registration Decree) is inapplicable considering that the
ownership of Lot 4 and Lot 5 was not the issue. Nor were the metes and bounds of the
lots as indicated in the respective TCTs being assailed, for the only issue concerned the
exact and actual location of Lot 4 and Lot 5.

II
Angeles was a builder in good faith

To be next determined is whether the CA's application of Article 448 of the Civil

Code was correct and proper.

Article 448 of the Civil Code provides thusly:

Article 448.  The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent.  However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees.   In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity.  The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof.

The provision contemplates a person building, or sowing, or planting in good faith on

land owned by another.  The law presupposes that the land and the building or plants
are owned by different persons, like here. The RTC and CA found and declared Angeles
to be a builder in good faith.  We cannot veer away from their unanimous conclusion,
which can easily be drawn from the fact that Angeles insists until now that he built his
house entirely on his own lot. Good faith consists in the belief of the builder that the
land he is building on is his and in his ignorance of a defect or flaw in his title. [15]

With the unassailable finding that Angeles' house straddled the lot of Pascual, and that
Angeles had built his house in good faith, Article 448 of the Civil Code, which spells out
the rights and obligations of the owner of the land as well as of the builder, is
unquestionably applicable.  Consequently, the land being the principal and the building
the accessory, preference is given to Pascual as the owner of the land to make the
choice as between appropriating the building or obliging Angeles as the builder  to pay
the value of the land.  Contrary to the insistence of Angeles, therefore, no inconsistency
exists between the finding of good faith in his favor and the grant of the reliefs set forth
in Article 448 of the Civil Code.

WHEREFORE, the Court DENIES the petition for review on certiorari; and AFFIRMS the

decision promulgated on January 31, 2002 by the Court of Appeals in C.A.-G.R. CV No.
61600. No pronouncement on costs of suit.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 140528, December 07, 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.

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 Decision [1] dated June 29, 1999 and
Resolution [2] 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 Partition [9] dated December 3, 1962.

On December 12, 1964, the Torbela siblings executed a Deed of Absolute

Quitclaim [10] over Lot No. 356-A in favor of Dr. Rosario.  According to the said Deed,
the Torbela siblings “for and in consideration of the sum of NINE PESOS (P9.00) x x x
transfer[red] and convey[ed] x x x unto the said Andres T. Rosario, that undivided
portion of THREE HUNDRED SEVENTY-FOUR square meters of that parcel of land
embraced in Original Certificate of Title No. 16676 of the land records of Pangasinan x x
x.” [11]  Four days later, on December 16, 1964, OCT No. 16676 in Valeriano’s name was
partially cancelled as to Lot No. 356-A and TCT No. 52751 [12] was issued in Dr.
Rosario’s name covering the said property.

Another Deed of Absolute Quitclaim [13] was subsequently executed on December 28,

1964, this time by Dr. Rosario, acknowledging that he only borrowed Lot No. 356-A
from the Torbela siblings and was already returning the same to the latter for P1.00.  The
Deed stated:

That for and in consideration of the sum of one peso (P1.00), Philippine Currency and
the fact that I only borrowed the above described parcel of land from MARIA
TORBELA, married to Eulogio Tosino, EUFROSINA TORBELA, married to Pedro
Rosario, PEDRO TORBELA, married to Petra Pagador, LEONILA TORBELA, married
to Fortunato Tamen, FERNANDO TORBELA, married to Victoriana Tablada,
DOLORES TORBELA, widow, LEONORA TORBELA, married to Matias Agustin and
SEVERINA TORBELA, married to Jorge Ildefonso, x x x by these presents do hereby
cede, transfer and convey by way of this ABSOLUTE QUITCLAIM unto the said Maria,
Eufrosina, Pedro, Leonila, Fernando, Dolores, Leonora and Severina, all surnamed
Torbela the parcel of land described above. [14]  (Emphasis ours.)

The aforequoted Deed was notarized, but was not immediately annotated on TCT No.
52751.

Following the issuance of TCT No. 52751, Dr. Rosario obtained a loan from the
Development Bank of the Philippines (DBP) on February 21, 1965 in the sum of
P70,200.00, secured by a mortgage constituted on Lot No. 356-A.  The mortgage was
annotated on TCT No. 52751 on September 21, 1965 as Entry No. 243537. [15]  Dr.
Rosario used the proceeds of the loan for the construction of improvements on Lot No.
356-A.

On May 16, 1967, Cornelio T. Tosino (Cornelio) executed an Affidavit of Adverse

Claim, [16] on behalf of the Torbela siblings.  Cornelio deposed in said Affidavit:

3.   That ANDRES T. ROSARIO later quitclaimed his rights in favor of the former
owners by virtue of a Deed of Absolute Quitclaim which he executed before Notary
Public Banaga, and entered in his Notarial Registry as Dec. No. 43; Page No. 9; Book
No. I; Series of 1964;

4.   That it is the desire of the parties, my aforestated kins, to register ownership over the
above-described property or to perfect their title over the same but their Deed could not
be registered because the registered owner now, ANDRES T. ROSARIO mortgaged the
property with the DEVELOPMENT BANK OF THE PHILIPPINES, on September 21,
1965, and for which reason, the Title is still impounded and held by the said bank;

5.   That pending payment of the obligation with the DEVELOPMENT BANK OF THE
PHILIPPINES or redemption of the Title from said bank, I, CORNELIO T. TOSINO, in
behalf of my mother MARIA TORBELA-TOSINO, and my Aunts EUFROSINA
TORBELA, LEONILA TORBELA-TAMEN, DOLORES TORBELA, LEONORA
TORBELA-AGUSTIN, SEVERINA TORBELA-ILDEFONSO, and my Uncles PEDRO
TORBELA and FERNANDO, also surnamed TORBELA, I request the Register of Deeds
of Pangasinan to annotate their adverse claim at the back of Transfer Certificate of Title
No. 52751, based on the annexed document, Deed of Absolute Quitclaim by ANDRES T.
ROSARIO, dated December 28, 1964, marked as Annex “A” and made a part of this
Affidavit, and it is also requested that the DEVELOPMENT BANK OF THE
PHILIPPINES be informed accordingly. [17]

The very next day, on May 17, 1967, the Torbela siblings had 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.
274471 [18] 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. 52751 [20] dated March 6, 1981, the mortgage appearing under Entry No. 243537 was
cancelled per the Cancellation and Discharge of Mortgage executed by DBP in favor of
Dr. Rosario and ratified before a notary public on July 11, 1980.

In the meantime, Dr. Rosario acquired another loan from the Philippine National Bank
(PNB) sometime in 1979-1981.  Records do not reveal though the original amount of the
loan from PNB, but the loan agreement was amended on March 5, 1981 and the loan
amount was increased to P450,000.00.  The loan was secured by mortgages constituted
on the following properties: (1) Lot No. 356-A, covered by TCT No. 52751 in Dr.
Rosario’s name; (2) Lot No. 4489, with an area of 1,862 square meters, located in
Dagupan City, Pangasinan, covered by TCT No. 24832; and (3) Lot No. 5-F-8-C-2-B-2-
A, with an area of 1,001 square meters, located in Nancayasan, Urdaneta, Pangasinan,
covered by TCT No. 104189. [21]  The amended loan agreement and mortgage on Lot No.
356-A was annotated on TCT No. 52751 on March 6, 1981 as Entry No. 520099. [22]

Five days later, on March 11, 1981, another annotation, Entry No. 520469, [23] was made
on TCT No. 52751, canceling the adverse claim on Lot No. 356-A under Entry Nos.
274471-274472, on the basis of the Cancellation and Discharge of Mortgage executed by
Dr. Rosario on March 5, 1981.  Entry No. 520469 consisted of both stamped and
handwritten portions, and exactly reads:

Entry No. 520469.  Cancellation of Adverse Claim executed by Andres Rosario in favor

of same.  The incumbrance/mortgage appearing under Entry No. 274471-72 is now
cancelled as per Cancellation and Discharge of Mortgage Ratified before Notary
Public Mauro G. Meris on March 5, 1981: Doc. No. 215; Page No. 44; Book No. 1;
Series Of 1981.

Lingayen, Pangasinan, 3-11, 19981

[Signed: Pedro dela Cruz]

Register of Deeds [24]

On December 8, 1981, Dr. Rosario and his wife, Duque-Rosario (spouses Rosario),
acquired a third loan in the amount of P1,200,000.00 from Banco Filipino Savings and
Mortgage Bank (Banco Filipino).  To secure said loan, the spouses Rosario again
constituted mortgages on Lot No. 356-A, Lot No. 4489, and Lot No. 5-F-8-C-2-B-2-A. 
The mortgage on Lot No. 356-A was annotated on TCT No. 52751 as Entry No.
533283 [25] on December 18, 1981.  Since the construction of a two-storey commercial
building on Lot No. 5-F-8-C-2-B-2-A was still incomplete, the loan value thereof as
collateral was deducted from the approved loan amount.  Thus, the spouses Rosario could
only avail of the maximum loan amount of P830,064.00 from Banco Filipino.

Because Banco Filipino paid the balance of Dr. Rosario’s loan from PNB, the mortgage
on Lot No. 356-A in favor of PNB was cancelled per Entry No. 533478 [26] on TCT No.
52751 dated December 23, 1981.

On February 13, 1986, the Torbela siblings filed before the Regional Trial Court (RTC)
of Urdaneta, Pangasinan, a Complaint for recovery of ownership and possession of Lot
No. 356-A, plus damages, against the spouses Rosario, which was docketed as Civil
Case No. U-4359.  On the same day, Entry Nos. 593493 and 593494 were made on TCT
No. 52751 that read as follows:

Entry No. 593494 – Complaint – Civil Case No. U-4359 (For: Recovery of Ownership
and Possession and Damages. (Sup. Paper).
Entry No. 593493 – Notice of Lis Pendens – The parcel of land described in this title is
subject to Lis Pendens executed by Liliosa B. Rosario, CLAO, Trial Attorney dated
February 13, 1986.  Filed to TCT No. 52751
February 13, 1986-1986 February 13 – 3:30 p.m.

(SGD.)    PACIFICO M. BRAGANZA

Register of Deeds [27]

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 P743,296.82 and  P151,524.00, respectively. [28]

Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-A, Lot No. 4489,
and Lot No. 5-F-8-C-2-B-2-A.  During the public auction on April 2, 1987, Banco
Filipino was the lone bidder for the three foreclosed properties for the price of
P1,372,387.04.  The Certificate of Sale [29] dated April 2, 1987, in favor of Banco
Filipino, was annotated on TCT No. 52751 on April 14, 1987 as Entry No. 610623. [30]

On December 9, 1987, the Torbela siblings filed before the RTC their Amended
Complaint, [31] impleading Banco Filipino as additional defendant in Civil Case No. U-
4359 and praying that the spouses Rosario be ordered to redeem Lot No. 356-A from
Banco Filipino.

The spouses Rosario instituted before the RTC on March 4, 1988 a case for annulment of
extrajudicial foreclosure and damages, with prayer for a writ of preliminary injunction
and temporary restraining order, against Banco Filipino, the Provincial Ex Officio Sheriff
and his Deputy, and the Register of Deeds of Pangasinan.  The case was docketed
as Civil Case No. U-4667.  Another notice of lis pendens was annotated on TCT No.
52751 on March 10, 1988 as Entry No. 627059, viz:

Entry No. 627059 – Lis Pendens – Dr. Andres T. Rosario and Lena Duque Rosario,
Plaintiff versus Banco Filipino, et. al. Civil Case No. U-4667 or Annulment of
ExtraJudicial Foreclosure of Real Estate Mortgage – The parcel of land described in this
title is subject to Notice of Lis Pendens subscribed and sworn to before Notary Public
Mauro G. Meris, as Doc. No. 21; Page No. 5; Book 111; S-1988.  March 7, 1988-1988
March 10, 1:00 p.m.

(SGD.)    RUFINO M. MORENO, SR.

Register of Deeds [32]

The Torbela siblings intervened in Civil Case No. U-4667.  Eventually, on October 17,
1990, the RTC issued an Order [33] dismissing without prejudice Civil Case No. U-4667
due to the spouses Rosario’s failure to prosecute.

Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from Banco Filipino, but
their efforts were unsuccessful.  Upon the expiration of the one-year redemption period in
April 1988, the Certificate of Final Sale [34] and Affidavit of Consolidation [35] 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
Complaint [37] 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 Decision [38] on these three cases was promulgated on January 15, 1992, the
dispositive portion of which reads:

WHEREFORE, judgment is rendered:

1.  Declaring the real estate mortgage over Lot 356-A covered by TCT 52751 executed
by Spouses Andres Rosario in favor of Banco Filipino, legal and valid;

2.  Declaring the sheriff’s sale dated April 2, 1987 over Lot 356-A covered by TCT
52751 and subsequent final Deed of Sale dated May 14, 1988 over Lot 356-A covered by
TCT No. 52751 legal and valid;

3.  Declaring Banco Filipino the owner of Lot 356-A covered by TCT No. 52751 (now
TCT 165813);

4.  Banco Filipino is entitled to a Writ of Possession over Lot 356-A together with the
improvements thereon (Rose Inn Building).  The Branch Clerk of Court is hereby ordered
to issue a writ of possession in favor of Banco Filipino;

5.  [The Torbela siblings] are hereby ordered to render accounting to Banco Filipino the
rental they received from tenants of Rose Inn Building from May 14, 1988;

6.  [The Torbela siblings] are hereby ordered to pay Banco Filipino the sum of
P20,000.00 as attorney’s fees;

7.  Banco Filipino is hereby ordered to give [the Torbela siblings] the right of first refusal
over Lot 356-A.  The Register of Deeds is hereby ordered to annotate the right of [the
Torbela siblings] at the back of TCT No. 165813 after payment of the required fees;

8.  Dr. Rosario and Lena Rosario are hereby ordered to reimburse [the Torbela siblings]
the market value of Lot 356-A as of December, 1964 minus payments made by the
former;

9.  Dismissing the complaint of [the Torbela siblings] against Banco Filipino, Pedro
Habon and Rufino Moreno in Civil Case No. U-4733; and against Banco Filipino in Civil
Case No. U-4359. [39]

The RTC released an Amended Decision [40] dated January 29, 1992, adding the following
paragraph to the dispositive:

Banco Filipino is entitled to a Writ of Possession over Lot-5-F-8-C-2-[B]-2-A of the

subdivision plan (LRC) Psd-122471, covered by Transfer Certificate of Title 104189 of
the Registry of Deeds of Pangasinan[.] [41]

The Torbela siblings and Dr. Rosario appealed the foregoing RTC judgment before the
Court of Appeals.  Their appeal was docketed as CA-G.R. CV No. 39770.

In its Decision [42] dated June 29, 1999, the Court of Appeals decreed:

WHEREFORE, foregoing considered, the appealed decision is

hereby AFFIRMED with modification.  Items No. 6 and 7 of the appealed decision
are DELETED.  Item No. 8 is modified requiring [Dr. Rosario] to pay [the Torbela
siblings] actual damages, in the amount of P1,200,000.00 with 6% per annum interest
from finality of this decision until fully paid.  [Dr. Rosario] is further ORDERED to pay
[the Torbela siblings] the amount of P300,000.00 as moral damages; P200,000.00 as
exemplary damages and P100,000.00 as attorney’s fees.

Costs against [Dr. Rosario]. [43]

The Court of Appeals, in a Resolution [44] dated October 22, 1999, denied the separate
Motions for Reconsideration of the Torbela siblings and Dr. Rosario.

The Torbela siblings come before this Court via the Petition for Review in G.R.
No. 140528, with the following assignment of errors:

First Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING

THAT THE REGISTRATION OF THE DEED OF ABSOLUTE QUITCLAIM
EXECUTED BY [DR. ANDRES T. ROSARIO] IN FAVOR OF THE [TORBELA
SIBLINGS] DATED DECEMBER 28, 1964 AND THE REGISTRATION OF THE
NOTICE OF ADVERSE CLAIM EXECUTED BY THE [TORBELA SIBLINGS],
SERVE AS THE OPERATIVE ACT TO CONVEY OR AFFECT THE LAND AND
IMPROVEMENTS THEREOF IN SO FAR AS THIRD PERSONS ARE
CONCERNED.

Second Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

THE SUBJECT PROPERTY COVERED BY T.C.T. NO. 52751 IS CLEAN AND
FREE, DESPITE OF THE ANNOTATION OF ENCUMBRANCES OF THE NOTICE
OF ADVERSE CLAIM AND THE DEED OF ABSOLUTE QUITCLAIM APPEARING
AT THE BACK THEREOF AS ENTRY NOS. 274471 AND 274472, RESPECTIVELY.

Third Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

THE NOTICE OF ADVERSE CLAIM OF THE [TORBELA SIBLINGS] UNDER
ENTRY NO. 274471 WAS VALIDLY CANCELLED BY THE REGISTER OF
DEEDS, IN THE ABSENCE OF A PETITION DULY FILED IN COURT FOR ITS
CANCELLATION.

Fourth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

RESPONDENT BANCO FILIPINO SAVINGS AND MORTGAGE BANK IS A
MORTGAGEE IN GOOD FAITH.

Fifth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING

THAT THE FILING OF A CIVIL CASE NO. U-4359 ON DECEMBER 9, 1987,
IMPLEADING RESPONDENT BANCO FILIPINO AS ADDITIONAL PARTY
DEFENDANT, TOLL OR SUSPEND THE RUNNING OF THE ONE YEAR PERIOD
OF REDEMPTION.

Sixth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING

THAT THE OWNERSHIP OVER THE SUBJECT PROPERTY WAS
PREMATURELY CONSOLIDATED IN FAVOR OF RESPONDENT BANCO
FILIPINO SAVINGS AND MORTGAGE BANK.

Seventh Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

THE SUBJECT PROPERTY IS AT LEAST WORTH P1,200,000.00. [45]
The Torbela siblings ask of this Court:

WHEREFORE, in the light of the foregoing considerations, the [Torbela siblings] most
respectfully pray that the questioned DECISION promulgated on June 29, 1999 (Annex
“A”, Petition) and the RESOLUTION dated October 22, 1999 (Annex “B”, Petition) be
REVERSED and SET ASIDE, and/or further MODIFIED in favor of the [Torbela
siblings], and another DECISION issue ordering, among other reliefs, the respondent
Banco Filipino to reconvey back Lot No. 356-A, covered by T.C.T. No. 52751, in favor
of the [Torbela siblings] who are the actual owners of the same.

The [Torbela siblings] likewise pray for such other reliefs and further remedies as may be
deemed just and equitable under the premises. [46]

Duque-Rosario, now legally separated from Dr. Rosario, avers in her Petition for Review
in G.R. No. 140553 that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A were registered in
her name, and she was unlawfully deprived of ownership of said properties because of
the following errors of the Court of Appeals:

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.

THE COURT OF APPEALS PATENTLY ERRED IN REFUSING TO RULE THAT

THE FILING OF THE COMPLAINT BEFORE THE COURT A QUO BY THE
[TORBELA SIBLINGS] HAD ALREADY BEEN PRESCRIBED. [47]

Duque-Rosario prays that the appealed decision of the Court of Appeals be reversed and
set aside, and that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A be freed from all
obligations and encumbrances and returned to her.

Review of findings of fact by the RTC

and the Court of Appeals warranted. 

A disquisition of the issues raised and/or errors assigned in the Petitions at bar
unavoidably requires a re-evaluation of the facts and evidence presented by the parties in
the court a quo.
In Republic v. Heirs of Julia Ramos, [48] the Court summed up the rules governing the
power of review of the Court:

Ordinarily, this Court will not review, much less reverse, the factual findings of the Court
of Appeals, especially where such findings coincide with those of the trial court.  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
P200.00;
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. Veloso [51]:

The foregoing provisions are quite clear.  Section 2 specifies the conditions under which
the Lupon of a barangay “shall have authority” to bring together the disputants for
amicable settlement of their dispute:  The parties must be “actually residing in the
same city or municipality.”  At the same time, Section 3 — while reiterating that the
disputants must be “actually residing in the same barangay” or in “different barangays”
within the same city or municipality — unequivocably declares that the Lupon shall have
“no authority” over disputes “involving parties who actually reside in barangays
of different cities or municipalities,” except where such barangays adjoin each other.

Thus, by express statutory inclusion and exclusion, the Lupon shall have no
jurisdiction over disputes where the parties are not actual residents of the same city
or municipality, except where the barangays in which they actually reside adjoin
each other.

It is true that immediately after specifying the barangay whose Lupon shall take
cognizance of a given dispute, Sec. 3 of PD 1508 adds:
"However, all disputes which involve real property or any interest therein shall be
brought in the barangay where the real property or any part thereof is situated."
Actually, however, this added sentence is just an ordinary proviso and should operate as
such.

The operation of a proviso, as a rule, should be limited to its normal function, which is to
restrict or vary the operation of the principal clause, rather than expand its scope, in the
absence of a clear indication to the contrary.
“The natural and appropriate office of a proviso is . . . to except something from the
enacting clause; to limit, restrict, or qualify the statute in whole or in part; or to exclude
from the scope of the statute that which otherwise would be within its terms.” (73 Am Jur
2d 467.)
Therefore, the quoted proviso should simply be deemed to restrict or vary the rule on
venue prescribed in the principal clauses of the first paragraph of Section 3,
thus:  Although venue is generally determined by the residence of the parties,
disputes involving real property shall be brought in the barangay where the real
property or any part thereof is situated, notwithstanding that the parties reside
elsewhere within the same city/municipality. [52] (Emphases supplied.)

The original parties in Civil Case No. U-4359 (the Torbela siblings and the spouses
Rosario) do not reside in the same barangay, or in different barangays within the same
city or municipality, or in different barangays of different cities or municipalities but are
adjoining each other.  Some of them reside outside Pangasinan and even outside of the
country altogether.  The Torbela siblings reside separately in Barangay Macalong,
Urdaneta, Pangasinan; Barangay Consolacion, Urdaneta, Pangasinan; Pangil, Laguna;
Chicago, United States of America; and Canada.  The spouses Rosario are residents of
Calle Garcia, Poblacion, Urdaneta, Pangasinan.  Resultantly, the Lupon had no
jurisdiction over the dispute and barangay conciliation was not a pre-condition for the
filing of Civil Case No. U-4359.

The Court now looks into the merits of Civil Case No. U-4359.
There was an express trust between
the Torbela siblings and Dr. Rosario.

There is no dispute that the Torbela sibling inherited the title to Lot No. 356-A from their
parents, the Torbela spouses, who, in turn, acquired the same from the first registered
owner of Lot No. 356-A, Valeriano.

Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim on December 12,
1964 in which they transferred and conveyed Lot No. 356-A to Dr. Rosario for the
consideration of P9.00.  However, the Torbela siblings explained that they only executed
the Deed as an accommodation so that Dr. Rosario could have Lot No. 356-A registered
in his name and use said property to secure a loan from DBP, the proceeds of which
would be used for building a hospital on Lot No. 356-A – a claim supported by
testimonial and documentary evidence, and borne out by the sequence of events
immediately following the execution by the Torbela siblings of said Deed. 
On December 16, 1964, TCT No. 52751, covering Lot No. 356-A, was already issued in
Dr. 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 P1.00.  On February 21, 1965, Dr. Rosario’s loan in the amount of
P70,200.00, 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
P25,000.00, 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 P9.00.00), the same could not be said for the
second Deed of Absolute Quitclaim dated December 28, 1964 executed by Dr. Rosario. 
In fact, Dr. 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
P1.00.00) 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 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 (P450,000.00) and to secure any and all negotiations
with PNB, whether contracted before, during or after the date of this instrument,
acknowledged before Notary Public of Pangasinan Alejo M. Dato as Doc. No. 198, Page
No. 41, Book No. 11, Series of 1985.

Date of Instrument March 5, 1981

Date of Inscription March 6, 1981 [73]

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 world [74] that Lot No. 356-A was mortgaged by Dr. Rosario to PNB
as security for a loan, the amount of which was increased to P450,000.00.  Hence, Dr.
Rosario is deemed to have effectively repudiated the express trust between him and the
Torbela siblings on March 6, 1981, on which day, the prescriptive period for the
enforcement of the express trust by the Torbela siblings began to run.

From March 6, 1981, when the amended loan and mortgage agreement was registered on
TCT No. 52751, to February 13, 1986, when the  Torbela siblings instituted before the
RTC Civil Case No. U-4359 against the spouses Rosario, only about five years had
passed.  The Torbela siblings were able to institute Civil Case No. U-4359 well before
the lapse of the 10-year prescriptive period for the enforcement of their express trust with
Dr. Rosario.

Civil Case No. U-4359 is likewise not barred by laches.  Laches means the failure or
neglect, for an unreasonable and unexplained length of time, to do that which by
exercising due diligence could or should have been done earlier.  It is negligence or
omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it.  As the Court
explained in the preceding paragraphs, the Torbela siblings instituted Civil Case No. U-
4359 five years after Dr. 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 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 P1,200,000.00 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
Piao [78] 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.”
If the rationale of the law was for the adverse claim to ipso facto lose force and effect
after the lapse of thirty days, then it would not have been necessary to include the
foregoing caveat to clarify and complete the rule.  For then, no adverse claim need be
cancelled.  If it has been automatically terminated by mere lapse of time, the law would
not have required the party in interest to do a useless act.

A statute's clauses and phrases must not be taken separately, but in its relation to the
statute's totality.  Each statute must, in fact, be construed as to harmonize it with the pre-
existing body of laws.  Unless clearly repugnant, provisions of statutes must be
reconciled.  The printed pages of the published Act, its history, origin, and its purposes
may be examined by the courts in their construction. x x x.

xxxx

Construing the provision as a whole would reconcile the apparent inconsistency between
the portions of the law such that the provision on cancellation of adverse claim by
verified petition would serve to qualify the provision on the effectivity period.  The law,
taken together, simply means that the cancellation of the adverse claim is still
necessary to render it ineffective, otherwise, the inscription will remain annotated
and shall continue as a lien upon the property.  For if the adverse claim has already
ceased to be effective upon the lapse of said period, its cancellation is no longer
necessary and the process of cancellation would be a useless ceremony.

It should be noted that the law employs the phrase "may be cancelled," which obviously
indicates, as inherent in its decision making power, that the court may or may not order
the cancellation of an adverse claim, notwithstanding such provision limiting the
effectivity of an adverse claim for thirty days from the date of registration.  The court
cannot be bound by such period as it would be inconsistent with the very authority vested
in it.  A fortiori, the limitation on the period of effectivity is immaterial in determining
the validity or invalidity of an adverse claim which is the principal issue to be decided in
the court hearing. It will therefore depend upon the evidence at a proper hearing for the
court to determine whether it will order the cancellation of the adverse claim or not.

To interpret the effectivity period of the adverse claim as absolute and without
qualification limited to thirty days defeats the very purpose for which the statute provides
for the remedy of an inscription of adverse claim, as the annotation of an adverse claim is
a measure designed to protect the interest of a person over a piece of real property where
the registration of such interest or right is not otherwise provided for by the Land
Registration Act or Act 496 (now P.D. 1529 or the Property Registration Decree), and
serves as a warning to third parties dealing with said property that someone is claiming
an interest or the same or a better right than the registered owner thereof.

The reason why the law provides for a hearing where the validity of the adverse
claim is to be threshed out is to afford the adverse claimant an opportunity to be
heard, providing a venue where the propriety of his claimed interest can be
established or revoked, all for the purpose of determining at last the existence of any
encumbrance on the title arising from such adverse claim.  This is in line with the
provision immediately following:
“Provided, however, that after cancellation, no second adverse claim shall be registered
by the same claimant.”
Should the adverse claimant fail to sustain his interest in the property, the adverse
claimant will be precluded from registering a second adverse claim based on the same
ground.

It was held that “validity or efficaciousness of the claim may only be determined by the
Court upon petition by an interested party, in which event, the Court shall order the
immediate hearing thereof and make the proper adjudication as justice and equity may
warrant. And it is only when such claim is found unmeritorious that the registration of the
adverse claim may be cancelled, thereby protecting the interest of the adverse claimant
and giving notice and warning to third parties.” [80] (Emphases supplied.)

Whether under Section 110 of the Land Registration Act or Section 70 of the Property
Registration Decree, notice of adverse claim can only be cancelled after a party in interest
files a petition for cancellation before the RTC wherein the property is located, and the
RTC conducts a hearing and determines the said claim to be invalid or unmeritorious.

No petition for cancellation has been filed and no hearing has been conducted herein to
determine the validity or merit of the adverse claim of the Torbela siblings.  Entry No.
520469 cancelled the adverse claim of the Torbela siblings, annotated as Entry Nos.
274471-774472, upon the presentation by Dr. Rosario of a mere Cancellation and
Discharge of Mortgage.

Regardless of whether or not the Register of Deeds should have inscribed Entry No.
520469 on TCT No. 52751, Banco Filipino could not invoke said inscription in support
of its claim of good faith.  There were several things amiss in Entry No. 520469 which
should have already aroused suspicions in Banco Filipino, and compelled the bank to
look beyond TCT No. 52751 and inquire into Dr. Rosario’s title.  First, Entry No. 520469
does not mention any court order as basis for the cancellation of the adverse claim. 
Second, the adverse claim was not a mortgage which could be cancelled with Dr.
Rosario’s Cancellation and Discharge of Mortgage.  And third, the adverse claim was
against Dr. Rosario, yet it was cancelled based on a document also executed by Dr.
Rosario.

It is a well-settled rule that a purchaser or mortgagee cannot close his eyes to facts which
should put a reasonable man upon his guard, and then claim that he acted in good faith
under the belief that there was no defect in the title of the vendor or mortgagor.  His mere
refusal to believe that such defect exists, or his willful closing of his eyes to the
possibility of the existence of a defect in the vendor's or mortgagor's title, will not make
him an innocent purchaser or mortgagee for value, if it afterwards develops that the title
was in fact defective, and it appears that he had such notice of the defects as would have
led to its discovery had he acted with the measure of precaution which may be required of
a prudent man in a like situation. [81]

While the defective cancellation of Entry Nos. 274471-274472 by Entry No. 520469
might not be evident to a private individual, the same should have been apparent to
Banco Filipino.  Banco Filipino is not an ordinary mortgagee, but is a mortgagee-bank,
whose business is impressed with public interest.  In fact, in one case, [82] the Court
explicitly declared that the rule that persons dealing with registered lands can rely solely
on the certificate of title does not apply to banks.  In another case, [83] the Court adjudged
that unlike private individuals, a bank is expected to exercise greater care and prudence in
its dealings, including those involving registered lands.  A banking institution is expected
to exercise due diligence before entering into a mortgage contract.  The ascertainment of
the status or condition of a property offered to it as security for a loan must be a standard
and indispensable part of its operations.

Banco Filipino cannot be deemed a mortgagee in good faith, much less a purchaser in
good faith at the foreclosure sale of Lot No. 356-A.  Hence, the right of the Torbela
siblings over Lot No. 356-A is superior over that of Banco Filipino; and as the true
owners of Lot No. 356-A, the Torbela siblings are entitled to a reconveyance of said
property even from Banco Filipino.

Nonetheless, the failure of Banco Filipino to comply with the due diligence requirement
was not the result of a dishonest purpose, some moral obliquity, or breach of a known
duty for some interest or ill will that partakes of fraud that would justify damages. [84]

Given the reconveyance of Lot No. 356-A to the Torbela siblings, there is no more need
to address issues concerning redemption, annulment of the foreclosure sale and certificate
of sale (subject matter of Civil Case No. U-4733), or issuance of a writ of possession in
favor of Banco Filipino (subject matter of Pet. Case No. U-822) insofar as Lot No. 356-A
is concerned.  Such would only be superfluous.  Banco Filipino, however, is not left
without any recourse should the foreclosure and sale of the two other mortgaged
properties be insufficient to cover Dr. 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.”

There is no question that Dr. Rosario is the builder of the improvements on Lot No. 356-
A.  The Torbela siblings themselves alleged that they allowed Dr. Rosario to register Lot
No. 356-A in his name so he could obtain a loan from DBP, using said parcel of land as
security; and with the proceeds of the loan, Dr. Rosario had a building constructed on Lot
No. 356-A, initially used as a hospital, and then later for other commercial purposes.  Dr.
Rosario supervised the construction of the building, which began in 1965; fully liquidated
the loan from DBP; and maintained and administered the building, as well as collected
the rental income therefrom, until the Torbela siblings instituted Civil Case No. U-4359
before the RTC on February 13, 1986.

When it comes to the improvements on Lot No. 356-A, both the Torbela siblings (as
landowners) and Dr. Rosario (as builder) are deemed in bad faith.  The Torbela siblings
were aware of the construction of a building by Dr. Rosario on Lot No. 356-A, while Dr.
Rosario proceeded with the said construction despite his knowledge that Lot No. 356-A
belonged to the Torbela siblings.  This is the case contemplated under Article 453 of the
Civil Code, which reads:

ART. 453.  If there was bad faith, not only on the part of the person who built, planted or
sowed on the land of another, but also on the part of the owner of such land, the rights of
one and the other shall be the same as though both had acted in good faith.

It is understood that there is bad faith on the part of the landowner whenever the act was
done with his knowledge and without opposition on his part.  (Emphasis supplied.)

When both the landowner and the builder are in good faith, the following rules govern:

ART. 448.  The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper rent. 
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees.  In such case, he shall pay reasonable
rent, if the owner of the land does not choose to appropriate the building or trees after
proper indemnity.  The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.

ART. 546.  Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the possessor in good faith with the same right
of retention, the person who has defeated him in the possession having the option of
refunding the amount of the expenses or of paying the increase in value which the thing
may have acquired by reason thereof.

ART. 548.  Expenses for pure luxury or mere pleasure shall not be refunded to the
possessor in good faith; but he may remove the ornaments with which he has embellished
the principal thing if it suffers no injury thereby, and if his successor in the possession
does not prefer to refund the amount expended.

Whatever is built, planted, or sown on the land of another, and the improvements or
repairs made thereon, belong to the owner of the land.  Where, however, the planter,
builder, or sower has acted in good faith, a conflict of rights arises between the owners
and it becomes necessary to protect the owner of the improvements without causing
injustice to the owner of the land.  In view of the impracticability of creating what
Manresa calls a state of "forced co-ownership," the law has provided a just and equitable
solution by giving the owner of the land the option to acquire the improvements after
payment of the proper indemnity or to oblige the builder or planter to pay for the land and
the sower to pay the proper rent.  It is the owner of the land who is allowed to exercise
the option because his right is older and because, by the principle of accession, he is
entitled to the ownership of the accessory thing. [85]

The landowner has to make a choice between appropriating the building by paying the
proper indemnity or obliging the builder to pay the price of the land.  But even as the
option lies with the landowner, the grant to him, nevertheless, is preclusive.  He must
choose one.  He cannot, for instance, compel the owner of the building to remove the
building from the land without first exercising either option.  It is only if the owner
chooses to sell his land, and the builder or planter fails to purchase it where its value is
not more than the value of the improvements, that the owner may remove the
improvements from the land.  The owner is entitled to such remotion only when, after
having chosen to sell his land, the other party fails to pay for the same. [86]

This case then must be remanded to the RTC for the determination of matters necessary
for the proper application of Article 448, in relation to Article 546, of the Civil Code. 
Such matters include the option that the Torbela siblings will choose; the amount of
indemnity that they will pay if they decide to appropriate the improvements on Lot No.
356-A; the value of Lot No. 356-A if they prefer to sell it to Dr. Rosario; or the
reasonable rent if they opt to sell Lot No. 356-A to Dr. Rosario but the value of the land
is considerably more than the improvements.  The determination made by the Court of
Appeals in its Decision dated June 29, 1999 that the current value of Lot No. 356-A is
P1,200,000.00 is not supported by any evidence on record.

Should the Torbela siblings choose to appropriate the improvements on Lot No. 356-A,
the following ruling of the Court in Pecson v. Court of Appeals [87] is relevant in the
determination of the amount of indemnity under Article 546 of the Civil Code:

Article 546 does not specifically state how the value of the useful improvements should
be determined. The respondent court and the private respondents espouse the belief that
the cost of construction of the apartment building in 1965, and not its current market
value, is sufficient reimbursement for necessary and useful improvements made by the
petitioner. This position is, however, not in consonance with previous rulings of this
Court in similar cases. In Javier vs. Concepcion, Jr., this Court pegged the value of the
useful improvements consisting of various fruits, bamboos, a house and camarin made of
strong material based on the market value of the said improvements.  In Sarmiento vs.
Agana, despite the finding that the useful improvement, a residential house, was built in
1967 at a cost of between eight thousand pesos (P8,000.00) to ten thousand pesos
(P10,000.00), the landowner was ordered to reimburse the builder in the amount of forty
thousand pesos (P40,000.00), the value of the house at the time of the trial.  In the
same way, the landowner was required to pay the "present value" of the house, a useful
improvement, in the case of De Guzman vs. De la Fuente, cited by the petitioner.

The objective of Article 546 of the Civil Code is to administer justice between the parties
involved. In this regard, this Court had long ago stated in Rivera vs. Roman Catholic
Archbishop of Manila that the said provision was formulated in trying to adjust the rights
of the owner and possessor in good faith of a piece of land, to administer complete justice
to both of them in such a way as neither one nor the other may enrich himself of that
which does not belong to him.  Guided by this precept, it is therefore the current market
value of the improvements which should be made the basis of reimbursement.  A
contrary ruling would unjustly enrich the private respondents who would otherwise be
allowed to acquire a highly valued income-yielding four-unit apartment building for a
measly amount.  Consequently, the parties should therefore be allowed to adduce
evidence on the present market value of the apartment building upon which the trial
court should base its finding as to the amount of reimbursement to be paid by the
landowner. [88] (Emphases supplied.)

Still following the rules of accession, civil fruits, such as rents, belong to the owner of the
building. [89]  Thus, Dr. Rosario has a right to the rents of the improvements on Lot No.
356-A and is under no obligation to render an accounting of the same to anyone.  In fact,
it is the Torbela siblings who are required to account for the rents they had collected from
the lessees of the commercial building and turn over any balance to Dr. Rosario.  Dr.
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 P300,000.00 as
moral damages; P200,000.00 as exemplary damages; and P100,000.00 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 P200,000.00.

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 P100,000.00.

As regards attorney's fees, they may be awarded when the defendant's act or omission has
compelled the plaintiff to litigate with third persons or to incur expenses to protect his
interest.  Because of Dr. Rosario’s acts, the Torbela siblings were constrained to institute
several cases against Dr. Rosario and his spouse, Duque-Rosario, as well as Banco
Filipino, which had lasted for more than 25 years.  Consequently, the Torbela siblings are
entitled to an award of attorney's fees and the amount of P100,000.00 may be  considered
rational, fair, and reasonable.

Banco Filipino is entitled to a writ of

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

Equally unpersuasive is Duque-Rosario’s argument that the writ of possession over Lot
No. 5-F-8-C-2-B-2-A should not be issued given the defects in the conduct of the
foreclosure sale (i.e., lack of personal notice to Duque-Rosario) and consolidation of
title (i.e., failure to provide Duque-Rosario with copies of the Certificate of Final Sale).

The right of the purchaser to the possession of the foreclosed property becomes absolute
upon the expiration of the redemption period.  The basis of this right to possession is the
purchaser's ownership of the property.  After the consolidation of title in the buyer's name
for failure of the mortgagor to redeem, the writ of possession becomes a matter of right
and its issuance to a purchaser in an extrajudicial foreclosure is merely a ministerial
function. [96]

The judge with whom an application for a writ of possession is filed need not look into
the validity of the mortgage or the manner of its foreclosure.  Any question regarding the
validity of the mortgage or its foreclosure cannot be a legal ground for the refusal to issue
a writ of possession.  Regardless of whether or not there is a pending suit for the
annulment of the mortgage or the foreclosure itself, the purchaser is entitled to a writ of
possession, without prejudice, of course, to the eventual outcome of the pending
annulment case.  The issuance of a writ of possession in favor of the purchaser in a
foreclosure sale is a ministerial act and does not entail the exercise of discretion. [97]
WHEREFORE, in view of the foregoing, the Petition of the Torbela siblings in G.R.
No. 140528 is GRANTED, while the Petition of Lena Duque-Rosario in G.R. No.
140553 is DENIED for lack of merit.  The Decision dated June 29, 1999 of the Court of
Appeals in CA-G.R. CV No. 39770, which affirmed with modification the Amended
Decision dated January 29, 1992 of the RTC in Civil Case Nos. U-4359 and U-4733 and
Pet. Case No. U-822, is AFFIRMED WITH MODIFICATIONS, to now read as
follows:

(1)   Banco Filipino is ORDERED to reconvey Lot No. 356-A to the Torbela siblings;

(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;

(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 P200,000.00 as moral
damages, P100,000.00 as exemplary damages, and P100,000.00 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.

SECOND DIVISION
[ G.R. No. 176791, November 14, 2012 ]
 COMMUNITIES CAGAYAN, INC., PETITIONER, VS. SPOUSES ARSENIO
(DECEASED) AND ANGELES NANOL AND ANYBODY CLAIMING
RIGHTS UNDER THEM, RESPONDENTS.

DECISION

DEL CASTILLO, J.:

Laws fill the gap in a contract.

This Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court assails the
December 29, 2006 Decision[2] and the February 12, 2007 Order[3] of the Regional Trial
Court (RTC), Cagayan de Oro City, Branch 18, in Civil Case No. 2005-158.

Factual Antecedents

Sometime in 1994, respondent-spouses Arsenio and Angeles Nanol entered into a

Contract to Sell[4] with petitioner Communities Cagayan, Inc.,[5] whereby the latter
agreed to sell to respondent-spouses a house and Lots 17 and 19 [6] located at Block 16,
Camella Homes Subdivision, Cagayan de Oro City,[7] for the price of P368,000.00.[8] 
Respondent-spouses, however, did not avail of petitioner’s in-house financing due to its
high interest rates.[9]  Instead, they obtained a loan from Capitol Development Bank, a
sister company of petitioner, using the property as collateral.[10]  To facilitate the loan, a
simulated sale over the property was executed by petitioner in favor of respondent-
spouses.[11]  Accordingly, titles were transferred in the names of respondent-spouses
under Transfer Certificates of Title (TCT) Nos. 105202 and 105203, and submitted to
Capitol Development Bank for loan processing.[12]  Unfortunately, the bank collapsed and
closed before it could release the loan. [13]

Thus, on November 30, 1997, respondent-spouses entered into another Contract to

Sell[14] with petitioner over the same property for the same price of P368,000.00. [15]  This
time, respondent-spouses availed of petitioner’s in-house financing [16] thus, undertaking
to pay the loan over four years, from 1997 to 2001.[17]

Sometime in 2000, respondent Arsenio demolished the original house and constructed a
three-story house allegedly valued at P3.5 million, more or less.[18]

In July 2001, respondent Arsenio died, leaving his wife, herein respondent Angeles, to
pay for the monthly amortizations. [19]

On  September  10,  2003,  petitioner  sent  respondent-spouses  a  notarized Notice of

Delinquency and Cancellation of Contract to Sell[20] due to the latter’s failure to pay the
monthly amortizations.

In December 2003, petitioner filed before Branch 3 of the Municipal Trial Court in Cities
of Cagayan de Oro City, an action for unlawful detainer, docketed as C3-Dec-2160,
against respondent-spouses.[21]  When the case was referred for mediation, respondent
Angeles offered to pay P220,000.00 to settle the case but petitioner refused to accept
the payment.[22]  The case was later withdrawn and consequently dismissed because the
judge found out that the titles were already registered under the names of respondent-
spouses.[23]

Unfazed by the unfortunate turn of events, petitioner, on July 27, 2005, filed before
Branch 18 of the RTC, Cagayan de Oro City, a Complaint for Cancellation of Title,
Recovery of Possession, Reconveyance and Damages, [24] docketed as Civil Case No.
2005-158, against respondent-spouses and all persons claiming rights under them. 
Petitioner alleged that the transfer of the titles in the names of respondent-spouses was
made only in compliance with the requirements of Capitol Development Bank and that
respondent-spouses failed to pay their monthly amortizations beginning January 2000.
[25]
  Thus, petitioner prayed that TCT Nos. T-105202 and T-105203 be cancelled, and that
respondent Angeles be ordered to vacate the subject property and to pay petitioner
reasonable monthly rentals from January 2000 plus damages. [26]

In her Answer,[27] respondent Angeles averred that the Deed of Absolute Sale is valid,
and that petitioner is not the proper party to file the complaint because petitioner is
different from Masterplan Properties, Inc. [28]  She  also  prayed for damages by way of
compulsory counterclaim.[29]

In its Reply,[30] petitioner attached a copy of its Certificate of Filing of Amended Articles

of Incorporation[31] showing that Masterplan Properties, Inc. and petitioner are one and
the same.  As to the compulsory counterclaim for damages, petitioner denied the same
on the ground of “lack of knowledge sufficient to form a belief as to the truth or falsity
of such allegation.”[32]

Respondent Angeles then moved for summary judgment and prayed that petitioner be
ordered to return the owner’s duplicate copies of the TCTs. [33]

Pursuant to Administrative Order No. 59-2005, the case was referred for mediation.
[34]
 But since the parties failed to arrive at an amicable settlement, the case was set for
preliminary conference on February 23, 2006.[35]

On July 7, 2006, the parties agreed to submit the case for decision based on the
pleadings and exhibits presented during the preliminary conference. [36]

Ruling of the Regional Trial Court

On December 29, 2006, the RTC rendered judgment declaring the Deed of Absolute Sale
invalid for lack of consideration.[37]  Thus, it disposed of the case in this wise:

WHEREFORE, the Court hereby declares the Deed of Absolute

Sale VOID. Accordingly, Transfer Certificate[s] of Title Nos. 105202 and 105203 in the
names of the [respondents], Arsenio (deceased) and Angeles Nanol, are
ordered CANCELLED. The [respondents] and any person claiming rights under them are
directed to turn-over the possession of the house and lot to [petitioner], Communities
Cagayan, Inc., subject to the latter’s payment of their total monthly installments and the
value of the new house minus the cost of the original house.

SO ORDERED.[38]

Not satisfied, petitioner moved for reconsideration of the Decision but the
Motion[39] was denied in an Order[40] dated February 12, 2007.

Issue

Instead of appealing the Decision to the Court of Appeals (CA), petitioner opted to file
the instant petition directly with this Court on a pure question of law, to wit:
 WHETHER X X X THE ACTION [OF] THE [RTC] BRANCH 18  X X X IN ORDERING THE
RECOVERY OF POSSESSION BY PETITIONER ‘subject to the latter’s payment of their total
monthly installments and the value of the new house minus the cost of the original
house’ IS CONTRARY TO LAW AND JURISPRUDENCE X X X.[41]

Petitioner’s Arguments

Petitioner seeks to delete from the dispositive portion the order requiring petitioner to
reimburse respondent-spouses the total monthly installments they had paid and the
value of the new house minus the cost of the original house. [42]  Petitioner claims that
there is no legal basis for the RTC to require petitioner to reimburse the cost of the new
house because respondent-spouses were in bad faith when they renovated and
improved the house, which was not yet their own. [43] Petitioner further contends that
instead of ordering mutual restitution by the parties, the RTC should have applied
Republic Act No. 6552, otherwise known as the Maceda Law, [44] and that instead of
awarding respondent-spouses a refund of all their monthly amortization payments, the
RTC should have ordered them to pay petitioner monthly rentals. [45]

Respondent Angeles’ Arguments

Instead of answering the legal issue raised by petitioner, respondent Angeles asks for a
review of the Decision of the RTC by interposing additional issues. [46] She maintains that
the Deed of Absolute Sale is valid.[47]  Thus, the RTC erred in cancelling TCT Nos. 105202
and 105203.

Our Ruling

The petition is partly meritorious.

At the outset, we must make it clear that the issues raised by respondent Angeles may
not be entertained.  For failing to file an appeal, she is bound by the Decision of the
RTC.  Well entrenched is the rule that “a party who does not appeal from a judgment
can no longer seek modification or reversal of the same.  He may oppose the appeal of
the other party only on grounds consistent with the judgment.” [48]  For this reason,
respondent Angeles may no longer question the propriety and correctness of the
annulment of the Deed of Absolute Sale, the cancellation of TCT Nos. 105202 and
105203, and the order to vacate the property.

Hence,  the only issue that must be resolved in this case is whether the RTC erred in
ordering petitioner to reimburse respondent-spouses the “total monthly installments
and the value of the new house minus the cost of the original house.” [49]  Otherwise
stated, the issues for our resolution are:

1)  Whether petitioner is obliged to refund to respondent-spouses all the monthly

installments paid; and

2)  Whether petitioner is obliged to reimburse respondent-spouses the value of the new
house minus the cost of the original house.

Respondent-spouses are entitled to the

cash surrender value of the payments
on the property equivalent to 50% of
the total payments made.

Considering that this case stemmed from a Contract to Sell executed by the petitioner
and the respondent-spouses, we agree with petitioner that the Maceda Law, which
governs sales of real estate on installment, should be applied.

Sections 3, 4, and 5 of the Maceda Law provide for the rights of a defaulting buyer, to
wit:

Section 3. In all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act Numbered
Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three
hundred eighty-nine, where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in the payment of succeeding
installments:

(a) To pay, without additional interest, the unpaid installments due within the total
grace period earned by him which is hereby fixed at the rate of one month grace period
for every one year of installment payments made: Provided, That this right shall be
exercised by the buyer only once in every five years of the life of the contract and its
extensions, if any.

(b) If the contract is canceled, the seller shall refund to the buyer the cash surrender
value of the payments on the property equivalent to fifty percent of the total
payments made, and, after five years of installments, an additional five per cent every
year but not to exceed ninety per cent of the total payments made: Provided, That the
actual cancellation of the contract shall take place after thirty days from receipt by the
buyer of the notice of cancellation or the demand for rescission of the contract by a
notarial act and upon full payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the

computation of the total number of installment payments made. (Emphasis supplied.)

Section 4.  In case where less than two years of installments were paid, the seller shall
give the buyer a grace period of not less than sixty days from the date the installment
became due.

If the buyer fails to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act.

Section 5.  Under Sections 3 and 4, the buyer shall have the right to sell his rights or
assign the same to another person or to reinstate the contract by updating the account
during the grace period and before actual cancellation of the contract. The deed of sale
or assignment shall be done by notarial act.

In this connection, we deem it necessary to point out that, under the Maceda Law, the
actual cancellation of a contract to sell takes place after 30 days from receipt by the
buyer of the notarized notice of cancellation, [50] and upon full payment of the cash
surrender value to the buyer.[51]  In other words, before a contract to sell can be validly
and effectively cancelled, the seller has (1) to send a notarized notice of cancellation to
the buyer and (2) to refund the cash surrender value. [52]  Until and unless the seller
complies with these twin mandatory requirements, the contract to sell between the
parties remains valid and subsisting. [53]  Thus, the buyer has the right to continue
occupying the property subject of the contract to sell, [54] and may “still reinstate the
contract by updating the account during the grace period and before the actual
cancellation”[55] of the contract.

In this case, petitioner complied only with the first condition by sending a notarized
notice of cancellation to the respondent-spouses. It failed, however, to refund the cash
surrender value to the respondent-spouses.  Thus, the Contract to Sell remains valid and
subsisting and supposedly, respondent-spouses have the right to continue occupying
the subject property.  Unfortunately, we cannot reverse the Decision of the RTC
directing respondent-spouses to vacate and turn-over possession of the subject
property to petitioner because respondent-spouses never appealed the order.  The RTC
Decision as to respondent-spouses is therefore considered final.

In addition, in view of respondent-spouses’ failure to appeal, they can no longer

reinstate the contract by updating the account.  Allowing them to do so would be unfair
to the other party and is offensive to the rules of fair play, justice, and due process. 
Thus, based on the factual milieu of the instant case, the most that we can do is to order
the return of the cash surrender value.  Since respondent-spouses paid at least two
years of installment,[56] they are entitled to receive the cash surrender value of the
payments they had made which, under Section 3(b) of the Maceda Law, is equivalent to
50% of the total payments made.

Respondent-spouses are entitled to

reimbursement of the improvements
made on the property.

Petitioner posits that Article 448 of the Civil Code does not apply and that respondent-
spouses are not entitled to reimbursement of the value of the improvements made on
the property because they were builders in bad faith.  At the outset, we emphasize that
the issue of whether respondent-spouses are builders in good faith or bad faith is a
factual question, which is beyond the scope of a petition filed under Rule 45 of the Rules
of Court.[57]  In fact, petitioner is deemed to have waived all factual issues since it
appealed the case directly to this Court, [58] instead of elevating the matter to the CA.  It
has likewise not escaped our attention that after their failed preliminary conference, the
parties agreed to submit the case for resolution based on the pleadings and exhibits
presented.  No trial was conducted.  Thus, it is too late for petitioner to raise at this
stage of the proceedings the factual issue of whether respondent-spouses are builders
in bad faith.  Hence, in view of the special circumstances obtaining in this case, we are
constrained to rely on the presumption of good faith on the part of the respondent-
spouses which the petitioner failed to rebut.  Thus, respondent-spouses being presumed
builders in good faith, we now rule on the applicability of Article 448 of the Civil Code.

As a general rule, Article 448 on builders in good faith does not apply where there is a
contractual relation between the parties, [59] such as in the instant case.  We went over
the records of this case and we note that the parties failed to attach a copy of the
Contract to Sell.  As such, we are constrained to apply Article 448 of the Civil Code,
which provides viz:

ART. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms thereof.

Article 448 of the Civil Code applies when the builder believes that he is the owner of
the land or that by some title he has the right to build thereon, [60] or that, at least, he
has a claim of title thereto. [61]  Concededly, this is not present in the instant case.  The
subject property is covered by a Contract to Sell hence ownership still remains with
petitioner being the seller.  Nevertheless, there were already instances where this Court
applied Article 448 even if the builders do not have a claim of title over the property. 
Thus:

This Court has ruled that this provision covers only cases in which the builders,
sowers or planters believe themselves to be owners of the land or, at least, to have a
claim of title thereto.  It does not apply when the interest is merely that of a holder,
such as a mere tenant, agent or usufructuary.  From these pronouncements, good faith
is identified by the belief that the land is owned; or that – by some title – one has the
right to build, plant, or sow thereon.

However, in some special cases, this Court has used Article 448 by recognizing good
faith beyond this limited definition.  Thus, in Del Campo v. Abesia, this provision was
applied to one whose house – despite having been built at the time he was still co-
owner – overlapped with the land of another.  This article was also applied to cases
wherein a builder had constructed improvements with the consent of the owner.  The
Court ruled that the law deemed the builder to be in good faith.  In Sarmiento v. Agana,
the builders were found to be in good faith despite their reliance on the consent of
another, whom they had mistakenly believed to be the owner of the land.[62]

The Court likewise applied Article 448 in Spouses Macasaet v. Spouses

Macasaet[63] notwithstanding the fact that the builders therein knew they were not the
owners of the land.  In said case, the parents who owned the land allowed their son and
his wife to build their residence and business thereon.  As found by this Court, their
occupation was not by mere tolerance but “upon the invitation of and with the
complete approval of (their parents), who desired that their children would occupy the
premises.  It arose from familial love and a desire for family solidarity x x x.” [64]  Soon
after, conflict between the parties arose.  The parents demanded their son and his wife
to vacate the premises.  The Court thus ruled that as owners of the property, the
parents have the right to possession over it.  However, they must reimburse their son
and his wife for the improvements they had introduced on the property because they
were considered builders in good faith even if they knew for a fact that they did not own
the property, thus:

Based on the aforecited special cases, Article 448 applies to the present factual
milieu.  The established facts of this case show that respondents fully consented to the
improvements introduced by petitioners.  In fact, because the children occupied the lots
upon their invitation, the parents certainly knew and approved of the construction of
the improvements introduced thereon.  Thus, petitioners may be deemed to have been
in good faith when they built the structures on those lots.

The instant case is factually similar to Javier v. Javier.  In that case, this Court deemed
the son to be in good faith for building the improvement (the house) with the
knowledge and consent of his father, to whom belonged the land upon which it was
built.  Thus, Article 448 was applied.[65]

In fine, the Court applied Article 448 by construing good faith beyond its limited
definition.  We find no reason not to apply the Court’s ruling in Spouses Macasaet v.
Spouses Macasaet in this case.  We thus hold that Article 448 is also applicable to the
instant case.  First, good faith is presumed on the part of the respondent-spouses. 
Second, petitioner failed to rebut this presumption.  Third, no evidence was presented
to show that petitioner opposed or objected to the improvements introduced by the
respondent-spouses.  Consequently, we can validly presume that petitioner consented
to the improvements being constructed.  This presumption is bolstered by the fact that
as the subdivision developer, petitioner must have given the respondent-spouses
permits to commence and undertake the construction.  Under Article 453 of the Civil
Code, “[i]t is understood that there is bad faith on the part of the landowner whenever
the act was done with his knowledge and without opposition on his part.”

In view of the foregoing, we find no error on the part of the RTC in requiring petitioner
to pay respondent-spouses the value of the new house minus the cost of the old house
based on Article 448 of the Civil Code, subject to succeeding discussions.

Petitioner has two options under

Article 448 and pursuant to the
ruling in Tuatis v. Escol.[66]

In  Tuatis, we ruled that the seller (the owner of the land) has two options under Article
448: (1) he may appropriate the improvements for himself after reimbursing the buyer
(the builder in good faith) the necessary and useful expenses under Articles 546 [67]  and
548[68] of the Civil Code; or (2) he may sell the land to the buyer, unless its value is
considerably more than that of the improvements, in which case, the buyer shall pay
reasonable rent.[69]  Quoted below are the pertinent portions of our ruling in that case:

Taking into consideration the provisions of the Deed of Sale by Installment and
Article 448 of the Civil Code, Visminda has the following options:

Under the first option, Visminda may appropriate for herself the building on the
subject property after indemnifying Tuatis for the necessary and useful expenses the
latter incurred for said building, as provided in Article 546 of the Civil Code.

It is worthy to mention that in Pecson v. Court of Appeals, the Court pronounced that

the amount to be refunded to the builder under Article 546 of the Civil Code should be
the current market value of the improvement, thus:

x x x x

Until Visminda appropriately indemnifies Tuatis for the building constructed by the
latter, Tuatis may retain possession of the building and the subject property.

Under the second option, Visminda may choose not to appropriate the building and,
instead, oblige Tuatis to pay the present or current fair value of the land.  The
P10,000.00 price of the subject property, as stated in the Deed of Sale on Installment
executed in November 1989, shall no longer apply, since Visminda will be obliging Tuatis
to pay for the price of the land in the exercise of Visminda’s rights under Article 448 of
the Civil Code, and not under the said Deed. Tuatis’ obligation will then be statutory,
and not contractual, arising only when Visminda has chosen her option under Article
448 of the Civil Code.

Still under the second option, if the present or current value of the land, the subject
property herein, turns out to be considerably more than that of the building built
thereon, Tuatis cannot be obliged to pay for the subject property, but she must pay
Visminda reasonable rent for the same. Visminda and Tuatis must agree on the terms
of the lease; otherwise, the court will fix the terms.

Necessarily, the RTC should conduct additional proceedings before ordering the
execution of the judgment in Civil Case No. S-618. Initially, the RTC should determine
which of the aforementioned options Visminda will choose. Subsequently, the RTC
should ascertain: (a) under the first option, the amount of indemnification Visminda
must pay Tuatis; or (b) under the second option, the value of the subject property vis-à-
vis that of the building, and depending thereon, the price of, or the reasonable rent for,
the subject property, which Tuatis must pay Visminda.

The Court highlights that the options under Article 448 are available to Visminda, as the
owner of the subject property. There is no basis for Tuatis’ demand that, since the value
of the building she constructed is considerably higher than the subject property, she
may choose between buying the subject property from Visminda and selling the building
to Visminda for P502,073.00. Again, the choice of options is for Visminda, not Tuatis, to
make. And, depending on Visminda’s choice, Tuatis’ rights as a builder under Article 448
are limited to the following: (a) under the first option, a right to retain the building and
subject property until Visminda pays proper indemnity; and (b) under the second
option, a right not to be obliged to pay for the price of the subject property, if it is
considerably higher than the value of the building, in which case, she can only be
obliged to pay reasonable rent for the same.

The rule that the choice under Article 448 of the Civil Code belongs to the owner of the
land is in accord with the principle of accession, i.e., that the accessory follows the
principal and not the other way around. Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive. The landowner cannot refuse to exercise either
option and compel instead the owner of the building to remove it from the land.

The raison d’etre for this provision has been enunciated thus: Where the builder,
planter or sower has acted in good faith, a conflict of rights arises between the owners,
and it becomes necessary to protect the owner of the improvements without causing
injustice to the owner of the land. In view of the impracticability of creating a state of
forced co-ownership, the law has provided a just solution by giving the owner of the
land the option to acquire the improvements after payment of the proper indemnity, or
to oblige the builder or planter to pay for the land and the sower the proper rent. He
cannot refuse to exercise either option. It is the owner of the land who is authorized to
exercise the option, because his right is older, and because, by the principle of
accession, he is entitled to the ownership of the accessory thing.

Visminda’s Motion for Issuance of Writ of Execution cannot be deemed as an expression

of her choice to recover possession of the subject property under the first option, since
the options under Article 448 of the Civil Code and their respective consequences
were also not clearly presented to her by the 19 April 1999 Decision of the RTC. She
must then be given the opportunity to make a choice between the options available to
her after being duly informed herein of her rights and obligations under both.
[70]
 (Emphasis supplied.)
In conformity with the foregoing pronouncement, we hold that petitioner, as
landowner, has two options.  It may appropriate the new house by reimbursing
respondent Angeles the current market value thereof minus the cost of the old house.
Under this option, respondent Angeles would have “a right of retention which negates
the obligation to pay rent.”[71]  In the alternative, petitioner may sell the lots to
respondent Angeles at a price equivalent to the current fair value thereof.  However, if
the value of the lots is considerably more than the value of the improvement,
respondent Angeles cannot be compelled to purchase the lots.  She can only be obliged
to pay petitioner reasonable rent.

In view of the foregoing disquisition and in accordance with Depra v.

Dumlao[72] and Technogas Philippines Manufacturing Corporation v. Court of Appeals,
[73]
 we find it necessary to remand this case to the court of origin for the purpose of
determining matters necessary for the proper application of Article 448, in relation to
Articles 546 and 548 of the Civil Code.

WHEREFORE, the petition is hereby PARTIALLY GRANTED. The assailed Decision dated

December 29, 2006 and the Order dated February 12, 2007 of the Regional Trial Court,
Cagayan de Oro City, Branch 18, in Civil Case No. 2005-158 are hereby AFFIRMED with
MODIFICATION that petitioner Communities Cagayan, Inc. is hereby ordered
to RETURN the cash surrender value of the payments made by respondent-spouses on
the properties, which is equivalent to 50% of the total payments made, in accordance
with Section 3(b) of Republic Act No. 6552, otherwise known as the Maceda Law.

The case is hereby REMANDED to the Regional Trial Court,  Cagayan de Oro City, Branch
18, for further proceedings consistent with the proper application of Articles 448, 546
and 548 of the Civil Code, as follows:

1. The trial court shall determine:

a) the present or current fair value of the lots;

b) the current market value of the new house;
c)  the cost of the old house; and
d) whether the value of the lots is considerably more than the current market value of
the new house minus the cost of the old house.
2. After said amounts shall have been determined by competent evidence, the trial
court shall render judgment as follows:
 
a) Petitioner shall be granted a period of 15 days within which to exercise its
option under the law (Article 448, Civil Code), whether to appropriate the new house by
paying to respondent Angeles the current market value of the new house minus the cost
of the old house, or to oblige respondent Angeles to pay the price of the lots. The
amounts to be respectively paid by the parties, in accordance with the option thus
exercised by written notice to the other party and to the court, shall be paid by the
obligor within 15 days from such notice of the option by tendering the amount to the
trial court in favor of the party entitled to receive it.

b)   If petitioner exercises the option to oblige respondent Angeles to pay the price of
the lots but the latter rejects such purchase because, as found by the trial court, the
value of the lots is considerably more than the value of the new house minus the cost of
the old house, respondent Angeles shall give written notice of such rejection to
petitioner and to the trial court within 15 days from notice of petitioner’s option to sell
the land. In that event, the parties shall be given a period of 15 days from such notice of
rejection within which to agree upon the terms of the lease, and give the trial court
formal written notice of the agreement and its provisos. If no agreement is reached by
the parties, the trial court, within 15 days from and after the termination of the said
period fixed for negotiation, shall then fix the period and terms of the lease, including
the monthly rental, which shall be payable within the first five days of each calendar
month.  Respondent Angeles shall not make any further constructions or improvements
on the building. Upon expiration of the period, or upon default by respondent Angeles
in the payment of rentals for two consecutive months, petitioner shall be entitled to
terminate the forced lease, to recover its land, and to have the new house removed by
respondent Angeles or at the latter’s expense.

c)   In any event, respondent Angeles shall pay petitioner reasonable compensation for
the occupancy of the property for the period counted from the time the Decision dated
December 29, 2006 became final as to respondent Angeles or 15 days after she received
a copy of the said Decision up to the date petitioner serves notice of its option to
appropriate the encroaching structures, otherwise up to the actual transfer of
ownership to respondent Angeles or, in case a forced lease has to be imposed, up to the
commencement date of the forced lease referred to in the preceding paragraph.

d)   The periods to be fixed by the trial court in its decision shall be non-extendible, and
upon failure of the party obliged to tender to the trial court the amount due to the
obligee, the party entitled to such payment shall be entitled to an order of execution for
the enforcement of payment of the amount due and for compliance with such other
acts as may be required by the prestation due the obligee.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 126363, June 26, 1998 ]
THE CONGREGATION OF THE RELIGIOUS OF THE VIRGIN MARY
PETITIONER, VS. THE COURT OF APPEALS AND SPOUSES JEROME
AND TERESA PROTASIO, RESPONDENTS.

DECISION

MARTINEZ, J.:

Petitioner, The Congregation Of The Religious Of The Virgin Mary, has filed this
petition for review on certiorari, urging us to reverse the decision [1] of the Court of
Appeals dated September 12, 1996, in CA-G.R. CV No. 43311, entitled “SPS. JEROME and
TERESA PROTASIO, Plaintiffs-Appellees, versus, THE RELIGIOUS OF THE VIRGIN MARY,
Defendant-Appellant.” The decision affirmed the judgment of the Regional Trial Court of
Davao City in Civil Case No. 29,960-91, ordering the petitioner to return the possession
of the disputed land to the respondents-spouses and to pay them damages.

The facts of this case, as found by the respondent court,[2] are as follows:

On December 26, 1964, Gervacio Serapio, the grandfather of herein respondents-spouses

Jerome and Teresa Protasio, sold to herein petitioner, the Congregation of the Religious
of the Virgin Mary, two (2) lots identified as Lot No. 5-A and Lot No. 5-C which were
covered by TCT Nos. 14834 and 14835, respectively. In between Lot No. 5-A and Lot
No. 5-C is Lot No. 5-B. Petitioner did not buy it when it was offered for sale by Gervacio
Serapio. In 1978, Gervacio died and his estate consisting of several parcels of land was
settled extra-judicially among his heirs.

In October of 1989, respondents-spouses purchased Lot No. 5-B from the heirs of
Gervacio Serapio. Accordingly, TCT No. 148595 was issued in their name. Sometime in
November of 1989, respondents-spouses had the subject Lot No. 5-B surveyed and they
discovered that 664 square meters of their 858 square meters property was fenced and
occupied by petitioner. They also found out that a building for the boys’ quarters and a
portion of petitioner’s gymnasium were constructed inside Lot No. 5-B. The
encroachment by petitioner on respondents-spouses land was made without the latter’s
knowledge and consent. Despite repeated demands by respondents-spouses, petitioner
failed and refused to (1) restore to the spouses possession of the encroached property; (2)
demolish the improvements constructed thereon, and (3) pay damages and back rentals.
Thus, on September 23, 1991, a complaint for recovery of possession of real property,
damages, back rentals and attorney's fees was filed by respondents-spouses against the
petitioner. The complaint was docketed as Civil Case No. 20,960-91 of the Regional Trial
Court of Davao City, Branch 15. In answer to the complaint, petitioner admitted that it
occupies part of the litigated property but averred that Lot No. 5-B was supposed to be a
road lot that would give their Lots 5-A and 5-C means of entry and egress to the public
road and, therefore, was beyond the commerce of man. Petitioner further claims that
respondents-spouses, as successors-in-interest of Gervacio Serapio, have the obligation to
respect the perpetual use of Lot No. 5-B ceded to it by Serapio.

After trial on the merits, the trial court rendered judgment in favor of respondents-
spouses and against the petitioner. It rejected petitioner’s claim of being a builder in good
faith of the improvements it introduced on the disputed lot of respondents-spouses. The
dispositive portion of the decision dated July 30, 1993 reads:

“WHEREFORE, judgment is rendered ordering the defendant (now petitioner):

1. To vacate the part of the plaintiffs’ (now respondents-spouses’) lot covered by TCT
No. 148595 it is presently occupying and to peaceably return the possession to the
plaintiffs at its own expense.

2. To demolish the buildings and improvements it introduced on the lot of the plaintiffs at
its own expense.

3. To pay one hundred thousand pesos (P100,000.00) as moral damages.

4. To pay back rentals of fifteen thousand pesos (P15,000.00) with legal interests to be
computed from January 31, 1991 until fully paid.
5. To pay one hundred thousand pesos (P100,000.00) as attorney’s fees, four thousand
pesos (P4,000.00) as litigation expenses and the costs of suit.

“SO ORDERED.”[3]

Upon appeal by petitioner to the respondent court, the latter affirmed in toto the judgment
of the trial court.

Still dissatisfied, petitioner now comes to us via the present petition, assailing the
respondent court’s decision on the following grounds:

“I

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT FINDING THAT

PRIVATE RESPONDENTS’ ANCESTOR, GERVACIO SERAPIO, HAD CEDED TO
THE PETITIONER THE PERPETUAL USE OF LOT 5-B.

II

THE PUBLIC RESPONDENT GRIEVOUSLY IGNORED THE EVIDENCE ON

RECORD AND ERRED IN NOT HOLDING THAT PRIVATE RESPONDENTS’
CLAIM HAD CLEARLY BEEN BARRED BY LACHES.

III

THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION

WHEN IT AWARDED ACTUAL DAMAGES IN THE FORM OF BACK RENTALS
WITHOUT PROOF TO SUPPORT THE SAME.

IV

THE PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION IN

AWARDING MORAL DAMAGES TO PRIVATE RESPONDENTS –

(A) IN THE ABSENCE OF A PRAYER FOR THE AWARD NOR PROOF OF THE
SAME.

(B) IN THE FACE OF EVIDENCE CLEARLY SHOWING THAT PRIVATE

RESPONDENTS WERE PURCHASERS IN BAD FAITH.”[4]

The above-quoted errors allegedly committed by the respondent court call for a review of
its findings of facts. As a general rule, the re-examination of the evidence submitted by
the contending parties during the trial of the case is not a function that this Court
normally undertakes inasmuch as the findings of facts of the respondent court are
generally binding and conclusive on the Supreme Court.[5] The jurisdiction of this Court
in a petition for review on certiorari under Rule 45 of the Revised Rules of Court is
limited to reviewing only errors of law,[6] not of fact, unless the factual findings
complained of are devoid of support by the evidence on record or the assailed judgment
is based on misapprehension of facts.[7]

Petitioner contends that its case should be treated as an exception to the said general rule
since the respondent court “overlooked certain relevant facts not disputed by the parties,
which if properly considered, would justify a different conclusion.”[8]

Let us examine these “relevant facts” which the respondent court allegedly overlooked
when it rendered the assailed decision.

First. Petitioner maintains that Gervacio Serapio, the original owner of the land in
question (Lot 5-B), had in his lifetime represented, committed and warranted that the said
lot would be for petitioner’s perpetual use as a road lot, it being the only access to the
public road for Lot 5-A and Lot 5-C, and to each other.[9]

In support of this posture, petitioner cited the document entitled “Agreement Of Purchase
And Sale”[10] dated July 8, 1959, executed between Gervacio Serapio and petitioner,
which Agreement shows a sketch attached thereto as Annex “A” [11] indicating the location
of the two (2) lots subject of the Agreement and two (2) proposed roads, the Simeon de
Jesus St. and Padre Faura St. (which is the disputed Lot B). Petitioner argues that
“without that map (sketch) and the implicit assurance that goes with it, there could not
have been a sale.”[12]

There is nothing significant in the said sketch which would justify a reversal of the
findings and conclusions reached by the respondent court. It is merely a sketch of the
location of the two (2) lots subject of the sale. There is no express or implied agreement
in said annex containing the sketch which would confirm petitioner’s claim that
Geronimo Serapio “had ceded to the petitioner the perpetual use of Lot 5-B.” If
petitioner’s claim was true, then the same could have easily been inserted as an additional
agreement between the parties. That it was not made so, only shows that petitioner’s
claim is nothing but a mere conjecture, which has zero evidentiary weight. Section 9,
Rule 130 of the Revised Rules of Court provides in part that where, as here, “the terms of
an agreement have been reduced to 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.” Simply
put, any oral evidence of an agreement should be excluded when after all, the existing
agreement is already in writing.[13] Thus, we are not prepared to disturb the following
findings and conclusions of the respondent court:
“Appellant first argues that the original owner of the subject land, Gervacio Serapio, had
intended, represented and warranted that the same would be for its perpetual use as a road
lot. Involving as it does a transmission of real rights, this claim should be based on
something more concrete than bare allegations and speculations. In the instant case,
however, there is notably no concrete evidence supporting appellant’s claim.

“Appellant would have Us believe that the map attached to the Agreement of Purchase
and Sale between it and Gervacio Serapio, containing as it does the proposed roads in the
area, implicitly carries the assurance that Gervacio Serapio had made with respect to said
proposed roads.

“Even the most careful perusal of the map attached to the Agreement of Purchase and
Sale between appellant and Gervacio Serapio, however, does not reveal anything other
than that it merely shows the location of the lots subject of such Agreement. Indeed, from
the Agreement itself, it is clear that said map was attached simply to identify the location
of the lots covered by the Agreement; and that reference to the map was simply as
follows –

x x x, the SELLER by these presents PROMISE TO SELL to said BUYER, these

portions of land more particularly identified and designated as Lot Nos. “A” and “C” in
the sketch hereto attached and marked as Annex “A,” xxx. (Exh. 16, Agreement of
Purchase and Sale) [underline ours]

“There being no provision in the Agreement, whatsoever, regarding the subject lot, or the
grant of its use unto appellant, We cannot now accept appellant’s bare allegations on
Gervacio Serapio’s representation and warranty that the subject land would be for its
perpetual use as a road lot. At any rate, it has been ruled that in case of doubt in the
provisions of the Deed of Sale, the least transmission of rights should prevail (Gacos vs.
Court of Appeals, 212 SCRA 8).

“The rest of appellant’s arguments in support of its claim regarding perpetual use of the
subject land as a road lot are nothing but mere speculations which, as We have stressed,
cannot suffice for Us to uphold any transmission of real rights. Being painfully bereft of
concrete evidence, said claim of appellant must be brushed aside.” [14]

Even if we were to accept as true petitioner’s stance that Lot 5-B was intended by
Gervacio Serapio as a road right of way for petitioner’s perpetual use, still a grant of a
right of way in favor of petitioner does not legally entitle it to occupy part of the said lot
which is registered in respondents-spouses’ name, more so to introduce permanent
improvements thereon such as a gymnasium and a boys’ quarters/dormitory.

Thus, what is actually at issue here is not whether the petitioner could use Lot 5-B in
question as a road, but rather whether the petitioner could legally possess/occupy part of
the said lot. This is, in fact, the only issue as agreed upon by the contending parties
during the pre-trial conference of this case before the trial court.[15] As discussed earlier,
petitioner has no right whatsoever to possess and construct permanent structures on the
questioned land owned by respondents-spouses. Petitioner admits in its answer to the
complaint that it introduced improvements on the subject lot without the consent and
knowledge of respondents-spouses.[16] It is thus a builder in bad faith. Again, we find no
reversible error in the following ruling of the respondent court:

“Which leads us to a discussion of whether or not appellant was in bad faith in

introducing improvements on the subject land. It cannot be denied that appellant never
gained title to the subject land as it admits to not having purchased the said lot (TSN, p.
81, November 9, 1992). Neither has appellant successfully shown any right to introduce
improvements on the said land (its claim of grant of perpetual use of the same as a road
lot and its right to build on a right of way both having been rejected above). This being
so, it follows that appellant was a builder in bad faith in that, knowing that the land did
not belong to it and that it had no right to build thereon, it nevertheless caused the
improvements in question to be erected.

“Next, appellant claims that granting that it was in bad faith, appellees and their
predecessors-in-interest were equally guilty of bad faith in allowing the construction of
the improvements. This bad faith on the part of the appellees and their predecessors-in-
interest should, however, have been proved at the hearing below, for in the absence of
such proof, it must be presumed that with the unlawful trespass upon the subject land, the
buildings were commenced thereon without the knowledge and consent of the owners
thereof (Rivera vs. Archbishop of Manila, 40 Phil. 717). Again, We find such proof
absent in the instant case."[17]

Second. Petitioner contends that the respondent court struck down its defense of laches
“with a grossly erroneous and unfair declaration that since the private respondents
themselves did not sleep on their rights, there could be no laches.”[18] Suffice it to state
that no evidence was presented by petitioner during the trial to prove that the
improvements constructed on the subject property were made during the lifetime of
Gervacio Serapio, nor that Serapio, his heirs or respondents-spouses were aware of, much
less tolerated, the said structures so as to make them guilty of laches. In this regard, we
find the respondent court’s disputation on the issue of laches proper:

"Neither are We convinced by appellant’s argument that appellee’s claim is barred by

laches. In Olizon vs. Court of Appeals, 236 SCRA 148, the Supreme Court once again
defined laches –

xxx as 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.

“Here, the improvements introduced by appellant were finished in 1988. In November

1989, a month after appellees purchased the subject lot, they had the same surveyed, after
which they immediately sought to inform the appellant about the encroachment they had
discovered (TSN, pp. 8-11, August 26, 1992). Thereafter, on October 26, 1990, appellees,
through their lawyer, sent a demand letter to appellant regarding the matter, followed by
another demand letter dated January 31, 1991. Finally the Complaint was filed on
September 23, 1991. All told, We do not find laches to have set in to effectively bar
appellees from the claims contained in their Complaint. By any indication, the lapse of a
mere three (3) years from the time the improvements were constructed up to the time of
the filing of the Complaint cannot be construed as sufficient to hold the complainant as
barred by laches. Especially so since during the interim, appellees were diligent in having
the subject land surveyed and in sending demand letters to appellant.”[19]

Third. Petitioner claims that the respondent court committed grave abuse of discretion
when it awarded respondents-spouses actual damages in the form of back rentals of
P15,000.00 a month, plus the legal rate of interest, to be reckoned from January, 1991,
without proof to support the same. We have examined the respondents-spouses’
complaint and the testimony of respondent Jerome Protasio on the matter of back rentals
prayed for in the complaint, and we find no factual basis how such award was arrived at.
Thus, we have to discard such award of damages. A party is entitled to an adequate
compensation for such pecuniary loss actually suffered by him as he has duly proved.
[20]
 Such damages, to be recoverable, must not only be capable of proof, but must actually
be proved with a reasonable degree of certainty.[21] These damages cannot be presumed,
[22]
 and the courts in making such award of damages must point out specific facts which
could afford a basis for measuring whatever compensatory or actual damages are borne.
[23]

Fourth. We also agree with the petitioner that the respondent court should not have
awarded respondents-spouses moral damages of P100,000.00 simply because their
complaint did not specifically ask for such relief. Moral damages must be disallowed
when it is not specifically prayed for in the complaint.[24] It is elementary that in order that
moral damages may be awarded, there must be pleading and proof of moral suffering,
mental anguish, fright and the like,[25] both of which are absent in this case.

Finally. We further agree with the petitioner that the award of attorney’s fees of
P100,000.00 should be eliminated for lack of factual basis and legal justification. The
only evidence to support respondents-spouses’ claim for attorney’s fees is the testimony
of Jerome Protasio to the effect that his agreement with the law firm handling his case is
that he is obligated to pay “25% of the obligation receivable x x x.”[26] That is all. Both
the trial court and respondent Court of Appeals likewise did not cite specific factual basis
to justify the award of attorney’s fees, which is in violation of the proscription against the
imposition of a penalty on the right to litigate.[27] As we enunciated in Refractories
Corporation of the Philippines vs. Intermediate Appellate Court:[28]

“x x x. The award of attorney’s fees is the exception rather than the general rule and
counsel’s fees is not to be awarded every time a party wins a suit. The discretion of the
court to award attorney’s fees under Article 2208 of the Civil Code ‘demands factual,
legal and equitable justification, without which the award is a conclusion without a
premise, its basis being improperly left to speculation and conjecture.’ In all events, the
court must state the reason for the award of attorney’s fees.”

WHEREFORE, the decision of the respondent Court of Appeals dated September 12,
1996, in CA-G.R. CV No. 43311, is hereby MODIFIED in the sense that the awards of
back rentals, moral damages and attorney’s fees are hereby DELETED. In all other
respects, the assailed decision is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 97761, April 14, 1999 ]
AGUEDA DE VERA, MARIO DE LA CRUZ, EVANGELINE DELA CRUZ,
AND EDRONEL DE LA CRUZ, PETITIONERS, VS. HON. COURT OF
APPEALS, AND RICARDO RAMOS, RESPONDENTS.

DECISION

PURISIMA, J.:

At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of

Court, seeking to reverse and set aside the Decision[1] of the Court of Appeals[2] in CA-
G.R. CV No. 21507 affirming with modification the Decision[3] dated August 2, 1988 of
the Regional Trial Court, Branch 19,[4] Cauayan, Isabela, in Civil Case No. Br. II-1861.

From the records on hand, it appears that:

On January 14, 1983, private respondent Ricardo Ramos filed a Complaint[5] against the
herein petitioners for recovery of property with damages, docketed as Civil Case No. Br
II-1861 before the said court of origin. On June 29, 1983, an Amended Complaint[6] was
presented the pertinent portion of which alleged:
"xxx

2. That the plaintiff is the legal and absolute owner of a certain parcel of land known as
Lot 2, H-4-617, and particularly described as follows:
`Bounded on the NE., by Road; on the SW, by Provincial Road; and on the W., by
National Road. containing an area of 3,670 square meters, more or less.'
his title thereto being evidenced by Original Certificate of Title No. P-5619 of the
Register of Deeds of Isabela;

3. That the defendants are occupying a triangular portion of the above-described

property containing an area of 22 square meters, more or less, and which is bounded as
follows:
`On the NE., by the Road; on the SE., by Lot 3841-B of the subdivision plan, Psd 2-02-
013907'
wherein they have constructed a house of strong and permanent materials this year 1983
after removing their previous building of light materials in January or February of 1970;

4. That the plaintiff has demanded that the defendants remove their improvement thereon
and vacate the said portion, ... but the defendants have refused and failed, without any
just or lawful cause to do so, to the present time; xxx"
In their Answer,[7] the herein petitioners theorized, inter alia, that they have been in
possession not only of 22 square meters but 70 square meters of land through their
predecessor-in-interest, Teodoro de la Cruz (husband of defendant-appellant Agueda De
Vera and father of the rest of the defendants-appellants) and subsequently by themselves,
as owners, before 1956; that said 70 square meter area occupied by them is a portion of
Lot 7005, Cad 211, over which their predecessor-in-interest, Teodoro de la Cruz, had,
during his lifetime, a pending Miscellaneous Sales Application which was given due
course and favorably recommended by the District Land Officer for Isabela to the
Director of Lands; that Teodoro de la Cruz also declared the said land for taxation
purposes and after his death, by his heirs, and that plaintiff-appellee's cause of action is
already barred by prescription and/or laches.

During the pre-trial conference on November 15, 1983, as agreed upon by the parties, the
trial court appointed the Chief of the Survey Party of the Bureau of Lands in Cauayan,
Isabela, as Commissioner of the court to conduct a relocation survey of subject property
and to indicate in the survey returns or commissioner's report whether or not the land in
dispute forms part of the property and road-right-of-way of the private respondent.

On April 30, 1984, the said Commissioner submitted his Report On The Result Of The
Relocation Survey,[8] relevant portion of which, stated:
"III. RESULT OF THE RELOCATION SURVEY

Attached herewith, which is made part of this report, is a Relocation Survey Plan No. 2-
02-000160 duly approved by the Regional Director, Region II, Bureau of Lands,
Tuguegarao, Cagayan, showing the result of the relocation survey, to wit:

1. Area bounded by black lines designated as Lot 9841-A, Psd-2-02-013907 a portion of

Lot 7004, Cad. 211 with an area of 22 Sq. Meters represents the land being covered by
Transfer Certificate of Title No. T-133705 of the Plaintiff Ricardo Ramos;

xxx

4. Areas designated as portions `A,' `B' and `C,' represents the land in question between
the parties in Civil Case No. Br. II-1861, which portions are respectively described, to
wit:

a. Portion `A' with an area of 51 Square Meters, which is a portion of Lot 7005, Cad.
211, represents the land being claimed by the defendants Agueda de Vera, Et al, said
area allegedly being covered by Miscellaneous Sales Application of their predecessor-in-
interest the late Teodoro dela Cruz;

b. Portion `B' with an area of 5 Square Meters, represents that part of Lot 9841-B, Psd-
2-02-013905 of Ricardo Ramos, being occupied by the house of defendants Agueda de
Vera, Et al;

c. Portion `C' with an area of 18 Square Meters, represents that part of Lot 9841-B, Psd-
2-02-013907 of Ricardo Ramos, being occupied by the house of defendants, Agueda de
Vera, Et al;

5. Portion `A' being a part of Lot 7005, Cad. 211, is separate and distinct from the 22
Square Meters lot covered by Transfer Certificate of Title No. T-133705 of the plaintiff
Ricardo Ramos, said 22 Sq. Meters lot being a part of Lot 7004, Cad. 211;

xxx

7. That the adjoining boundary of Lot 9841-A, Psd-2-02-013907 on the Northwest, which
appears as National Road in Transfer Certificate of Title No. T-133705 is erroneous,
considering that there is still a gap (designated as Portion `A' in the attached Relocation
Plan) between said Lot 9841-A and that of the 60 meters National Road-right-of-way;

x x x"
On October 24, 1984, the private respondent sent in his Opposition[9] to the
aforesaid Report, branding the same as erroneous. On March 4, 1985, after the filing of
private respondent's Reply[10] to petitioners' Rejoinder,[11] the court of origin issued
an Order,[12] holding thus:
"Since the purpose of the appointment of the Court Commissioner is to determine
whether or not the area occupied by the defendants is within the titled property of the
plaintiff, the relocation of the land in question became imperative. As a matter of fact, the
record shows that both parties agreed to said relocation (See order of November 15,
1983). It must be noticed that the report of the Commissioner is adverse to the plaintiff as
the former's findings show that only a portion of 22 square meters of the plaintiff's lot is
occupied by the defendants and that between the National Road and the plaintiff's
property is an area of 51 square meters (portion A) which the Commissioner found to be
part of Lot 7005, Cad. 211.

Inasmuch as the plaintiff was given the full opportunity to check the accurateness of
Commissioner's Report and there being no proof adduced by him that the same is
erroneous, except the blue print plan of the subdivision survey Psd-2-02-013907, the
execution of which, the defendants had no participation whatsoever, the Court has no
other alternative but to reject the plaintiff's objection to said report.

WHEREFORE, in view of the foregoing considerations and finding no error in the report
of the Commissioner, the Court hereby approves the same.

SO ORDERED."(Underline supplied)
After trial on the merits, or on August 2, 1988, to be precise, the same trial court
promulgated its Decision,[13] the decretal portion of which is to the following effect:
"WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:

(1) DECLARING the plaintiff the owner of all lands adjoining Lot 9841-A in the West up
to the National Road, and ORDERING the defendants, their agents, representatives, or
any person or persons acting on their authority, to vacate the same and to deliver the
possession thereof to the plaintiff;

(2) ORDERING the defedants (sic) to remove, at their expense, all improvements they
have constructed or erected thereon within thirty (30) days from the finality of this
decision;

(3) ORDERING the defendants, jointly and severally, to pay the plaintiff a monthly rent
of P273.70 from April 27, 1981, and an additional P724.70 a month from receipt of this
decision until the possession of saidland (sic) is delivered to the plaintiff;

(4) ORDERING the defendants, jointly and severally, to pay the plaintiff the sum of
P5,000.00 as attorney's fees; and

(5) ORDERING the defendants, jointly and severally, to pay the costs.

SO ORDERED."
Not satisfied with the judgment below, petitioners elevated the case to the Court of
Appeals, arguing, among others, that: (1) the trial court erred in not dismissing the
complaint on the ground of laches; (2) the trial court erred in holding that defendants-
appellants are possessors in bad faith and (3) that defendants-appellants cannot be made
liable to plaintiff-appellee for rental payments for the use of the disputed property, for
attorney's fees and the costs of suit.

On March 21, 1991, the Court of Appeals decided the case, modifying the Decision
below and disposing thus:
"CONFORMABLY TO THE FOREGOING, the judgment appealed from is
hereby MODIFIED, dismissing plaintiff-appellee's complaint as regards Portion "A",
consequently deleting the monthly rents decreed by the lower court in favor of plaintiff-
appellee as regards said portion, and is AFFIRMED in all other respects.

No pronouncement as to costs.

SO ORDERED."
Undaunted, petitioners have come to this Court via the present petition; contending that:
"THE DECISION DATED 13 MARCH 1991 (ANNEX `A') RENDERED WITH
GRAVE ABUSE OF DISCRETION BY RESPONDENT HONORABLE COURT OF
APPEALS, INSOFAR AS IT AFFIRMS THE DECISION DATED 02 AUGUST 1988
OF THE LOWER COURT, WAS PASSED ON A QUESTION OF SUBSTANCE IN A
WAY NOT IN ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS
OF THIS HONORABLE COURT, CONSIDERING THAT:

I.

LACHES CAN DEFEAT THE TITLE OF PRIVATE RESPONDENT OVER THE

PROPERTIES DESCRIBED BY RESPONDENT HONORABLE COURT OF
APPEALS AS PORTIONS "B" AND "C" OF THE DISPUTED PROPERTY
CONSIDERING THAT SAID PRIVATE RESPONDENT HAD KNOWLEDGE OF
THE PRESENCE OF THE PETITIONERS ON SAID PORTIONS OF THE
PROPERTY EVEN BEFORE HE APPLIED IN 1947 FOR A HOMESTEAD PATENT
THEREFOR.

II.

PETITIONERS WERE NOT POSSESSORS IN BAD FAITH OF PORTIONS "B" AND

"C" OF THE DISPUTED PROPERTY: THUS, THEY CANNOT BE MADE LIABLE
TO PRIVATE RESPONDENT FOR THEIR USE THEREOF."
The pivotal issue for determination here is: whether or not the Court of Appeals erred in
adjudging the herein petitioners as possessors and builders in bad faith of Portions "B"
and "C" of the property under controversy.
Germane records on hand disclose that on September 20, 1947, private respondent
Ricardo Ramos filed a homestead application for the parcel of land in litigation here. His
Homestead Application No. 4-617 was approved by the District Land Officer on
November 22, 1947. In 1949, the said private respondent had fully complied with the
cultivation and residence requirements of the Public Land Act. Thus, on December 15,
1955, Homestead Patent No. V-62617[14] was issued to homestead applicant Ricardo
Ramos, on the basis of which Original Certificate of Title No. P-5619[15] was issued by
the Register of Deeds of Isabela, covering an area of 9 hectares, 28 acres and 20 centares.

After the issuance of his Homestead Patent No. V-62617, Ricardo Ramos brought a
complaint for recovery of possession against several people before the then Court of First
Instance of Isabela, docketed as Civil Case No. Br. II-162, entitled "Ricardo Ramos vs.
Eleuterio Viernes, et al." Therein, a decision for the ejectment of the said defendants was
rendered.[16]

However, a protracted litigation between Ricardo Ramos and the defendants in Civil
Case No Br. II-162, led by Jose Ganadin, ensued with the latter averring that Homestead
Patent No. V-62617 and Original Certificate No. P-5619 were obtained in violation of
Section 19 of the Public Land Law, as amended by Act No. 456, and consequently, null
and void. The case eventually reached this Court which, on January 27, 1981, came out
with a decision adjudging the validity of the title of the private respondent, Ricardo
Ramos.[17]

On April 27, 1981, private respondent wrote petitioners reminding them that their house
is on his titled property, and asking them, (de Veras) whether they were going to buy the
portion occupied by them (de Veras) or to lease the same on a yearly or monthly basis;
otherwise, he (Ricardo Ramos) would be constrained to take proper legal action against
them. But the letter of private respondent was ignored by petitioners.

In light of the factual background of the case, the Court is of the irresistible conclusion
that the principle of laches finds no application under the premises.

Laches is "the failure of 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, or to
assert a right within reasonable time, warranting a presumption that the party entitled
thereto has either abandoned it or declined to assert it."[18]

Fundamentally, "laches is an equitable doctrine, its application is controlled by equitable

considerations."[19] Concomitantly, "it is a better rule that courts, under the principle of
equity, will not be guided or bound strictly by the statute of limitations or the doctrine of
laches when to do so, manifest wrong or injustice would result." [20]
Under the factual milieu of the case at bar, private respondent's failure to assert his rights
over subject parcel of land for 23 years (1958-81) was due to the prolonged litigation he
was embroiled with the herein petitioners, in Civil Case No. Br. II -162. As the validity of
his patent itself was being questioned, the cause of action of private respondent vis-a-vis
the land he acquired by homestead patent had to be kept dormant, pending determination
of the validity of the said homestead patent. Therefore, the delay is not unreasonable and
considering that the essence of laches is the unreasonableness of the delay in the
prosecution or institution of a case, the principle of laches finds no room for application
here. The Court of Appeals explained thus:
"xxx It is inequitous for Us to consider said 23 year period, on which plaintiff-appellee's
ownership over said portions still hanged as a big question, as part of plaintiff-appellee's
alleged delay in enforcing his rights where the pendency of said question precisely
crippled his actions. Sans said 23 year period, plaintiff-appellee, far from being
neglectful, has been vigilant over his rights, as evidenced by his letter (1981) and the
ultimate filing of the instant complaint (1983)."[21]
Furthermore, the question of laches is addressed to the sound discretion of the court, and
we find no fact or circumstance of such substance as to disturb the lower court's finding
on this point. Thus, from the foregoing, laches cannot defeat private respondent's
ownership and recovery of possession of Portions "B" and "C."

In theorizing that their possession of the land in litigation could not have been in bad
faith, petitioners alleged that their possession over Portions "B" and "C" was by virtue of
a valid title, viz: the Miscellaneous Sales Application, and in possessing the said Portions
"B" and "C", they honestly believed that the same formed part of the lot with an area of
70 square meters covered by their Miscellaneous Sales Application; private respondent's
knowledge that they (petitioners) had been occupying the said portions for several years
prior to his filing of the application for a homestead patent, opens to question the validity
of his homestead patent and the title derived therefrom; petitioners reasoned out.

Article 526 of the New Civil Code, provides:

"Article 526 - He is deemed a possessor in good faith who is not aware that there exists
in his title or mode of acquisition any flaw which invalidates it.

He is deemed a possessor in bad faith who possesses in any case contrary to the
foregoing.

Mistake upon a doubtful or difficult question of law may be the basis of good faith."
In his Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. II,
1993 ed., Dr. Arturo Tolentino opines:
"In distinguishing good faith and bad faith possession, the Code refers to the manner of
acquisition in general. A possessor in good faith is one who is unaware that there exists
a flaw which invalidates his acquisition of the thing. Good faith consists in the
possessor's belief that the person from whom he received a thing was the owner of the
same and could convey his title. It consists in an honest intention to abstain from taking
any unconscientious advantage of another, and is the opposite of fraud. Since good faith
is a state of the mind, and is not a visible, tangible fact that can be seen or touched, it can
only be determined by outward acts and proven conduct. It implies freedom from
knowledge and circumstances which ought to put a person on inquiry. xxx"  [22]
Records disclose that prior to the construction in 1983 of petitioners' house on the land
under controversy (Portions "B" and "C"), a demand letter dated April 27, 1981 was sent
by private respondent to the petitioners, informing them that the land they were
possessing and occupying is within his (private respondent's) titled property.

In the same letter, the private respondent gave petitioner Agueda de Vera the option to
either pay him the value of the property or lease the same on a yearly or monthly basis.
However, the contending parties failed to reach a compromise agreement. The lower
court found, "that the defendants (herein petitioners) are occupying ... an area of 22
square meters (Portions "B" and "C"),..., in which land, defendants constructed a house
of strong materials in 1983 after dismantling heir (sic) previous building erected thereon
on or about January or February, 1970."[23]

The facts and circumstances aforestated are "outward acts and proven

conduct" indicating bad faith of petitioners as possessor and builder.

Articles 449, 450 and 451 of the New Civil Code, read:
"Article 449 - He who builds ... in bad faith on the land of another, losses what is
built, ... without right to indemnity."

xxx xxx xxx

"Article 450 - The owner of the land on which anything has been built, ... in bad faith
may demand the demolition of the work, ... in order to replace things in their former
condition at the expense of the person who built, ...; or he may compel the builder ... to
pay the price of the land, ..."

- and -

"Article 451 - In the cases of the two preceding articles, the landowner is entitled to
damages from the builder..."
Under the aforecited Articles 449 and 450, the landowner has three alternative rights,
either:

1. to appropriate what has been built without any obligation to pay indemnity
therefor; or

2. to demand the builder to remove what he had built; or

 3. to compel the builder to pay the value of the land.

In any event, he (landowner) is entitled to be indemnified by the builder in bad faith,

pursuant to Article 451 supra.

In the case under consideration, private respondent Ricardo Ramos availed of the second
alternative,[24] which option is legally feasible under the attendant facts and
circumstances.

Lastly, the land titles relied upon by herein petitioners do not suffice to establish good
faith on their part. Even the action on their public land application is
only recommendatory and not yet final, as it was still subject to the approval of the
Director of Lands. The tax declarations prove only the de Veras' claim of ownership, and
when not supported by other effective evidence, are no proof of the right of possession of
subject realty.[25]

In contrast, Portions "B" and "C" are covered by Original Certificate of Title No. P-5619
and Transfer Certificate of Title No. T-133705, issued in the name of private respondent
Ricardo Ramos, which is conclusive as to all matters therein contained, particularly, the
identity of the owner of the land covered thereby.

All things studiedly considered, the court believes, and so holds, that the respondent court
erred not in modifying the decision of the trial court of origin in Civil Case No. Br. II-
1861.

WHEREFORE, for lack of merit, the Petition is hereby DENIED and the Decision of

the Court of Appeals in CA GR CV No. 21507 AFFIRMED in toto. No pronouncement
as to costs.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 134329, January 19, 2000 ]
VERONA PADA-KILARIO AND RICARDO KILARIO PETITIONERS, VS.
COURT OF APPEALS AND SILVERIO PADA, RESPONDENTS.

DECISION
DE LEON, JR., J.:

The victory[1] of petitioner spouses Ricardo and Verona Kilario in the Municipal
Circuit Trial Court[2] in an ejectment suit[3] filed against them by private respondent
Silverio Pada, was foiled by its reversal[4] by the Regional Trial Court[5] on appeal. They
elevated their cause[6] to respondent Court of Appeals [7] which, however, promulgated a
Decision[8] on May 20, 1998, affirming the Decision of the Regional Trial Court.

The following facts are undisputed:

One Jacinto Pada had six (6) children, namely, Marciano, Ananias, Amador, Higino,
Valentina and Ruperta. He died intestate. His estate included a parcel of land of
residential and coconut land located at Poblacion, Matalom, Leyte, denominated as
Cadastral Lot No. 5581 with an area of 1,301.92 square meters. It is the northern
portion of Cadastral Lot No. 5581 which is the subject of the instant controversy.

During the lifetime of Jacinto Pada, his half-brother, Feliciano Pada, obtained permission
from him to build a house on the northern portion of Cadastral Lot No. 5581. When
Feliciano died, his son, Pastor, continued living in the house together with his eight
children. Petitioner Verona Pada-Kilario, one of Pastor's children, has been living in that
house since 1960.

Sometime in May, 1951, the heirs of Jacinto Pada entered into an extra-judicial partition
of his estate. For this purpose, they executed a private document which they, however,
never registered in the Office of the Registrar of Deeds of Leyte.

At the execution of the extra-judicial partition, Ananias was himself present while his
other brothers were represented by their children. Their sisters, Valentina and Ruperta,
both died without any issue. Marciano was represented by his daughter, Maria; Amador
was represented by his daughter, Concordia; and Higino was represented by his son,
Silverio who is the private respondent in this case. It was to both Ananias and Marciano,
represented by his daughter, Maria, that Cadastral Lot No. 5581 was allocated during
the said partition. When Ananias died, his daughter, Juanita, succeeded to his right as
co-owner of said property.
On June 14, 1978, Juanita Pada sold to Engr. Ernesto Paderes, the right of his father,
Ananias, as co-owner of Cadastral Lot No. 5881.

On November 17, 1993, it was the turn of Maria Pada to sell the co-ownership right of
his father, Marciano. Private respondent, who is the first cousin of Maria, was the buyer.

Thereafter, private respondent demanded that petitioner spouses vacate the northern
portion of Cadastral Lot No. 5581 so his family can utilize the said area. They went
through a series of meetings with the barangay officials concerned for the purpose of
amicable settlement, but all earnest efforts toward that end, failed.

On June 26, 1995, private respondent filed in the Municipal Circuit Trial Court of
Matalom, Leyte, a complaint for ejectment with prayer for damages against petitioner
spouses.

On July 24, 1995, the heirs of Amador Pada, namely, Esperanza Pada-Pavo, Concordia
Pada-Bartolome, and Angelito Pada, executed a Deed of Donation[9] transferring to
petitioner Verona Pada-Kilario, their respective shares as co-owners of Cadastral Lot No.
5581.

On February 12, 1996, petitioner spouses filed their Answer averring that the northern
portion of Cadastral Lot No. 5581 had already been donated to them by the heirs of
Amador Pada. They contended that the extra-judicial partition of the estate of Jacinto
Pada executed in 1951 was invalid and ineffectual since no special power of attorney
was executed by either Marciano, Amador or Higino in favor of their respective children
who represented them in the extra-judicial partition. Moreover, it was effectuated only
through a private document that was never registered in the office of the Registrar of
Deeds of Leyte.

The Municipal Circuit Trial Court rendered judgment in favor of petitioner spouses. It
made the following findings:
"After a careful study of the evidence submitted by both parties, the court finds
that the evidence adduced by plaintiff failed to establish his ownership over x x x
Cadastral Lot No. 5581 x x x while defendants has [sic] successfully proved by
preponderance of evidence that said property is still under a community of ownership
among the heirs of the late Jacinto Pada who died intestate. If there was some truth
that Marciano Pada and Ananias Pada has [sic] been adjudicated jointly of [sic] the
above-described residential property x x x as their share of the inheritance on the basis
of the alleged extra judicial settlement, how come that since 1951, the date of partition,
the share of the late Marciano Pada was not transferred in the name of his heirs, one of
them Maria Pada-Pavo and still remain [sic] in the name of Jacinto Pada up to the
present while the part pertaining to the share of Ananias Pada was easily transferred in
the name of his heirs x x x.

"The alleged extra judicial settlement was made in private writing and the genuineness
and due execution of said document was assailed as doubtful and it appears that most
of the heirs were not participants and signatories of said settlement, and there was lack
of special power of attorney to [sic] those who claimed to have represented their co-
heirs in the participation [sic] and signing of the said extra judicial statement.

"Defendants were already occupying the northern portion of the above-described

property long before the sale of said property on November 17, 1993 was executed
between Maria Pada-Pavo, as vendor and the plaintiff, as vendee. They are in
possession of said portion of the above-described property since the year 1960 with the
consent of some of the heirs of Jacinto Pada and up to the [sic] present some of the
heirs of Jacinto Pada has [sic] donated x x x their share of [sic] the above-described
property to them, virtually converting defendants' standing as co-owners of the land
under controversy. Thus, defendants as co-owners became the undivided owners of the
whole estate x x x. As co-owners of x x x Cadastral Lot No. 5581 x x x their possession in
the northern portion is being [sic] lawful."[10]
From the foregoing decision, private respondent appealed to the Regional Trial
Court. On November 6, 1997, it rendered a judgment of reversal. It held:
"x x x [T]he said conveyances executed by Juanita Pada and Maria Pada Pavo
were never questioned or assailed by their co-heirs for more than 40 years, thereby
lending credence on [sic] the fact that the two vendors were indeed legal and lawful
owners of properties ceded or sold. x x x At any rate, granting that the co-heirs of
Juanita Pada and Maria Pada Pavo have some interests on the very lot assigned to
Marciano and Ananias, nevertheless, said interests had long been sadly lost by
prescription, if not laches or estoppel.
"It is true that an action for partition does not prescribe, as a general rule, but this
doctrine of imprescriptibility cannot be invoked when one of the heirs possessed the
property as an owner and for a period sufficient to acquire it by prescription because
from the moment one of the co-heirs claim [sic] that he is the absolute owner and
denies the rest their share of the community property, the question then involved is no
longer one for partition but of ownership. x x x Since [sic] 1951 up to 1993 covers a
period of 42 long years. Clearly, whatever right some of the co-heirs may have, was long
extinguished by laches, estoppel or prescription.

"x x x

"x x x [T]he deed of donation executed by the Heirs of Amador Pada, a brother of
Marciano Pada, took place only during the inception of the case or after the lapse of
more than 40 years reckoned from the time the extrajudicial partition was made in
1951. Therefore, said donation is illegal and invalid [sic] the donors, among others, were
absolutely bereft of any right in donating the very property in question." [11]
The dispositive portion of the decision of the Regional Trial Court reads as
follows:
"WHEREFORE, a judgment is hereby rendered, reversing the judgment earlier
promulgated by the Municipal Circuit Trial Court of Matalom, Leyte, [sic] consequently,
defendants-appellees are hereby ordered:

"1. To vacate the premises in issue and return peaceful possession to the appellant,
being the lawful possessor in concept of owner;

"2. To remove their house at their expense unless appellant exercises the option of
acquiring the same, in which case the pertinent provisions of the New Civil Code has to
be applied;

"3. Ordering the defendants-appellees to pay monthly rental for their occupancy and
use of the portion of the land in question in the sum of P100.00 commencing on June
26, 1995 when the case was filed and until the termination of the present case;

"4. Ordering the defendants to pay to the appellant the sum of P5,000.00 as moral
damages and the further sum of P5,000.00 as attorney's fees;

"5. Taxing defendants to pay the costs of suit."[12]

Petitioners filed in the Court of Appeals a petition for review of the foregoing
decision of the Regional Trial Court.

On May 20, 1998, respondent Court of Appeals rendered judgment dismissing said
petition. It explained:
"Well-settled is the rule that in an ejectment suit, the only issue is possession de
facto or physical or material possession and not de jure. Hence, even if the question of
ownership is raised in the pleadings, the court may pass upon such issue but only to
determine the question of possession, specially if the former is inseparably linked with
the latter. It cannot dispose with finality the issue of ownership, such issue being inutile
in an ejectment suit except to throw light on the question of possession x x x.

"Private respondent Silverio Pada anchors his claim to the portion of the land possessed
by petitioners on the Deed of Sale executed in his favor by vendor Maria Pada-Pavo, a
daughter of Marciano, son of Jacinto Pada who was the registered owner of the subject
lot. The right of vendee Maria Pada to sell the property was derived from the extra-
judicial partition executed in May 1951 among the heirs of Jacinto Pada, which was
written in a Bisayan dialect signed by the heirs, wherein the subject land was
adjudicated to Marciano, Maria Pavo's father, and Ananias Pada. Although the
authenticity and genuineness of the extra-judicial partition is now being questioned by
the heirs of Amador Pada, no action was ever previously filed in court to question the
validity of such partition.

"Notably, petitioners in their petition admitted among the antecedent facts that Maria

Pavo is one of the co-owners of the property originally owned by Jacinto Pada x x x and
that the disputed lot was adjudicated to Marciano (father of Maria Pavo) and Ananias,
and upon the death of Marciano and Ananias, their heirs took possession of said lot, i.e.
Maria Pavo the vendor for Marciano's share and Juanita for Ananias' share x x x.
Moreover, petitioners do not dispute the findings of the respondent court that during
the cadastral survey of Matalom, Leyte, the share of Maria Pada Pavo was denominated
as Lot No. 5581, while the share of Juanita Pada was denominated as Lot No. 6047, and
that both Maria Pada Pavo and Juanita were in possession of their respective hereditary
shares. Further, petitioners in their Answer admitted that they have been occupying a
portion of Lot No. 5581, now in dispute without paying any rental owing to the liberality
of the plaintiff x x x. Petitioners cannot now impugn the aforestated extrajudicial
partition executed by the heirs in 1951. As owner and possessor of the disputed
property, Maria Pada, and her vendee, private respondent, is entitled to possession. A
voluntary division of the estate of the deceased by the heirs among themselves is
conclusive and confers upon said heirs exclusive ownership of the respective portions
assigned to them x x x.

"The equally belated donation of a portion of the property in dispute made by the heirs
of Amador Pada, namely, Concordia, Esperanza and Angelito, in favor of petitioner
Verona Pada is a futile attempt to confer upon the latter the status of co-owner, since
the donors had no interest nor right to transfer. x x x This gesture appears to be a mere
afterthought to help petitioners to prolong their stay in the premises. Furthermore, the
respondent court correctly pointed out that the equitable principle of laches and
estoppel come into play due to the donors' failure to assert their claims and alleged
ownership for more than forty (40) years x x x. Accordingly, private respondent was
subrogated to the rights of the vendor over Lot No. 5581 which include [sic] the portion
occupied by petitioners."[13]
Petitioner spouses filed a Motion for Reconsideration of the foregoing decision.

On June 16, 1998, respondent Court of Appeals issued a Resolution denying said motion.

Hence this petition raising the following issues:

"I.

WHETHER THE COURT OF APPEALS ERRED IN NOT RULING THAT PETITIONERS, AS CO-
OWNERS, CANNOT BE EJECTED FROM THE PREMISES CONSIDERING THAT THE HEIRS OF
JACINTO PADA DONATED TO THEM THEIR UNDIVIDED INTEREST IN THE PROPERTY IN
DISPUTE.

"II.

WHETHER THE COURT OF APPEALS ERRED IN NOT RULING THAT WHAT MARIA PADA
SOLD WAS HER UNDIVIDED SHARE IN THE PROPERTY IN DISPUTE.
 "III.

WHETHER OR NOT THE PETITIONERS ARE BUILDERS IN GOOD FAITH."[14]

There is no merit to the instant petition.

First. We hold that the extrajudicial partition of the estate of Jacinto Pada among his
heirs made in 1951 is valid, albeit executed in an unregistered private document. No law
requires partition among heirs to be in writing and be registered in order to be valid.
[15]
 The requirement in Sec. 1, Rule 74 of the Revised Rules of Court that a partition be
put in a public document and registered, has for its purpose the protection of creditors
and the heirs themselves against tardy claims. [16] The object of registration is to serve as
constructive notice to others. It follows then that the intrinsic validity of partition not
executed with the prescribed formalities is not undermined when no creditors are
involved.[17] Without creditors to take into consideration, it is competent for the heirs of
an estate to enter into an agreement for distribution thereof in a manner and upon a
plan different from those provided by the rules from which, in the first place, nothing
can be inferred that a writing or other formality is essential for the partition to be valid.
[18]
 The partition of inherited property need not be embodied in a public document so as
to be effective as regards the heirs that participated therein. [19] The requirement of
Article 1358 of the Civil Code that acts which have for their object the creation,
transmission, modification or extinguishment of real rights over immovable property,
must appear in a public instrument, is only for convenience, non-compliance with which
does not affect the validity or enforceability of the acts of the parties as among
themselves.[20] And neither does the Statute of Frauds under Article 1403 of the New
Civil Code apply because partition among heirs is not legally deemed a conveyance of
real property, considering that it involves not a transfer of property from one to the
other but rather, a confirmation or ratification of title or right of property that an heir is
renouncing in favor of another heir who accepts and receives the inheritance. [21] The
1951 extrajudicial partition of Jacinto Pada's estate being legal and effective as among
his heirs, Juanita and Maria Pada validly transferred their ownership rights over
Cadastral Lot No. 5581 to Engr. Paderes and private respondent, respectively. [22]

Second. The extrajudicial partition which the heirs of Jacinto Pada executed voluntarily
and spontaneously in 1951 has produced a legal status. [23] When they discussed and
agreed on the division of the estate of Jacinto Pada, it is presumed that they did so in
furtherance of their mutual interests. As such, their division is conclusive, unless and
until it is shown that there were debts existing against the estate which had not been
paid.[24] No showing, however, has been made of any unpaid charges against the estate
of Jacinto Pada. Thus, there is no reason why the heirs should not be bound by their
voluntary acts.

The belated act of Concordia, Esperanza and Angelito, who are the heirs of Amador
Pada, of donating the subject property to petitioners after forty four (44) years of never
having disputed the validity of the 1951 extrajudicial partition that allocated the subject
property to Marciano and Ananias, produced no legal effect. In the said partition, what
was allocated to Amador Pada was not the subject property which was a parcel of
residential land in Sto. Nino, Matalom, Leyte, but rather, one-half of a parcel of coconut
land in the interior of Sto. Nino St., Sabang, Matalom, Leyte and one-half of a parcel of
rice land in Itum, Sta. Fe, Matalom, Leyte. The donation made by his heirs to petitioners
of the subject property, thus, is void for they were not the owners thereof. At any rate it
is too late in the day for the heirs of Amador Pada to repudiate the legal effects of the
1951 extrajudicial partition as prescription and laches have equally set in.

Third. Petitioners are estopped from impugning the extrajudicial partition executed by
the heirs of Jacinto Pada after explicitly admitting in their Answer that they had been
occupying the subject property since 1960 without ever paying any rental as they only
relied on the liberality and tolerance of the Pada family. [25] Their admissions are
evidence of a high order and bind them insofar as the character of their possession of
the subject property is concerned.

Considering that petitioners were in possession of the subject property by sheer

tolerance of its owners, they knew that their occupation of the premises may be
terminated any time. Persons who occupy the land of another at the latter's tolerance
or permission, without any contract between them, is necessarily bound by an implied
promise that they will vacate the same upon demand, failing in which a summary action
for ejectment is the proper remedy against them. [26] Thus, they cannot be considered
possessors nor builders in good faith. It is well-settled that both Article 448 [27] and Article
546[28] of the New Civil Code which allow full reimbursement of useful improvements
and retention of the premises until reimbursement is made, apply only to a possessor in
good faith, i.e., one who builds on land with the belief that he is the owner thereof.
[29]
 Verily, persons whose occupation of a realty is by sheer tolerance of its owners are
not possessors in good faith. Neither did the promise of Concordia, Esperanza and
Angelito Pada that they were going to donate the premises to petitioners convert them
into builders in good faith for at the time the improvements were built on the premises,
such promise was not yet fulfilled, i.e., it was a mere expectancy of ownership that may
or may not be realized.[30] More importantly, even as that promise was fulfilled, the
donation is void for Concordia, Esperanza and Angelito Pada were not the owners of
Cadastral Lot No. 5581. As such, petitioners cannot be said to be entitled to the value of
the improvements that they built on the said lot.

WHEREFORE, the petition for review is HEREBY DENIED.

Costs against petitioners.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 136456, October 24, 2000 ]
HEIRS OF RAMON DURANO, SR., RAMON DURANO III, AND
ELIZABETHHOTCHKISS DURANO, PETITIONERS, VS. SPOUSES
ANGELES SEPULVEDA UY AND EMIGDIO BING SING UY, SPOUSES
FAUSTINO ALATAN AND VALERIANA GARRO, AURELIA MATA,
SILVESTRE RAMOS, HERMOGENES TITO, TEOTIMO GONZALES,
PRIMITIVA GARRO, JULIAN GARRO, ISMAEL GARRO, BIENVENIDO
CASTRO, GLICERIO BARRIGA, BEATRIZ CALZADA, ANDREA MATA
DE BATULAN, TEOFISTA ALCALA, FILEMON LAVADOR, CANDELARIO
LUMANTAO, GAVINO QUIMBO, JUSTINO TITO, MARCELINO
GONZALES, SALVADOR DAYDAY, VENANCIA REPASO, LEODEGARIO
GONZALES, AND RESTITUTA GONZALES, RESPONDENTS.

DECISION

GONZAGA-REYES, J.:

Petitioners seek the reversal of the decision of the First Division of the Court of Appeals
dated November 14, 1997 in CA-G.R. CV No. 27220, entitled "Heirs of Ramon Durano,
Sr., et. al. versus Spouses Angeles Supelveda Uy, et. al.", and the resolution of the Court
of Appeals dated October 29, 1998 which denied petitioners' motion for reconsideration.

The antecedents of this case may be traced as far back as August 1970; it involves a 128-
hectare parcel of land located in the barrios of Dunga and Cahumayhumayan, Danao
City. On December 27, 1973, the late Congressman Ramon Durano, Sr., together with his
son Ramon Durano III, and the latter's wife, Elizabeth Hotchkiss Durano (petitioners in
the herein case), instituted an action for damages against spouses Angeles Supelveda Uy
and Emigdio Bing Sing Uy, spouses Faustino Alatan and Valeriana Garro, spouses
Rufino Lavador and Aurelia Mata, Silvestre Ramos, Hermogenes Tito, Teotimo
Gonzales, Primitiva Garro, Julian Garro, Ismael Garro, Bienvenido Castro, Glicerio
Barriga, Beatriz Calzada, Andrea Mata de Batulan, Teofista Alcala, Filemon Lavador,
Candelario Lumantao, Gavino Quimbo, Justino Tito, Marcelino Gonzales, Salvador
Dayday, Venancia Repaso, Leodegario Gonzales, Jose de la Calzada, Restituta Gonzales,
and Cosme Ramos (herein respondents[1]) before Branch XVII of the then Court of First
Instance of Cebu, Danao City.

In that case, docketed as Civil Case No. DC-56, petitioners accused respondents of
officiating a "hate campaign" against them by lodging complaints in the Police
Department of Danao City in August 1970, over petitioners' so-called "invasion" of
respondents' alleged properties in Cahumayhumayan, Danao City. This was followed by
another complaint sent by respondents to the President of the Philippines in February
1971, which depicted petitioners as "oppressors", "landgrabbers" and "usurpers" of
respondents' alleged rights. Upon the direction of the President, the Department of Justice
through City Fiscal Jesus Navarro and the Philippine Constabulary of Cebu
simultaneously conducted investigations on the matter. Respondents' complaints were
dismissed as "baseless", and they appealed the same to the Secretary of Justice, who
called for another investigation to be jointly conducted by the Special Prosecutor and the
Office of the City Fiscal of Danao City. During the course of said joint investigation,
respondents Hermogenes Tito and Salvador Dayday again lodged a complaint with the
Office of the President, airing the same charges of "landgrabbing". The investigations on
this new complaint, jointly conducted by the 3rd Philippine Constabulary Zone and the
Citizens Legal Assistance Office resulted in the finding that "(petitioners) should not be
held answerable therefor."[2]

Petitioners further alleged in their complaint before the CFI that during the course of the
above investigations, respondents kept spreading false rumors and damaging tales which
put petitioners into public contempt and ridicule.[3]

In their Answer, respondents lodged their affirmative defenses, demanded the return of
their respective properties, and made counterclaims for actual, moral and exemplary
damages. Respondents stated that sometime in the early part of August 1970 and months
thereafter they received mimeographed notices dated August 2, 1970 and signed by the
late Ramon Durano, Sr., informing them that the lands which they are tilling and residing
in, formerly owned by the Cebu Portland Cement Company (hereafter, "Cepoc"), had
been purchased by Durano & Co., Inc. The notices also declared that the lands were
needed by Durano & Co. for planting to sugar and for roads or residences, and directed
respondents to immediately turn over the said lands to the representatives of the
company. Simultaneously, tall bamboo poles with pennants at the tops thereof were
planted in some areas of the lands and metal sheets bearing the initials "RMD" were
nailed to posts.

As early as the first week of August 1970, and even before many of the respondents
received notices to vacate, men who identified themselves as employees of Durano & Co.
proceeded to bulldoze the lands occupied by various respondents, destroying in their
wake the plantings and improvements made by the respondents therein. On some
occasions, respondents alleged, these men fired shots in the air, purportedly acting upon
the instructions of petitioner Ramon Durano III and/or Ramon Durano, Jr. On at least one
instance, petitioners Ramon Durano III and Elizabeth Hotchkiss Durano were seen on the
site of the bulldozing operations.

On September 15, 1970, Durano & Co. sold the disputed property to petitioner Ramon
Durano III, who procured the registration of these lands in his name under TCT No. T-
103 and TCT No. T-104.

Respondents contended that the display of force and the known power and prestige of
petitioners and their family restrained them from directly resisting this wanton
depredation upon their property. During that time, the mayor of Danao City was Mrs.
Beatriz Durano, wife of Ramon Durano, Sr. and mother of petitioner Ramon Durano III.
Finding no relief from the local police, who respondents said merely laughed at them for
daring to complain against the Duranos, they organized themselves and sent a letter to
then President Ferdinand Marcos reporting dispossession of their properties and seeking a
determination of the ownership of the land. This notwithstanding, the bulldozing
operations continued until the City Fiscal was requested by the Department of Justice to
conduct an investigation on the matter. When, on July 27, 1971, the City Fiscal
announced that he would be unable to conduct a preliminary investigation, respondents
urged the Department of Justice to conduct the preliminary investigation. This was
granted, and the investigations which spanned the period March 1972 to April 1973 led to
the conclusion that respondents' complaint was untenable.[4]

In their counterclaim, respondents alleged that petitioners' acts deprived most of them of
their independent source of income and have made destitutes of some of them. Also,
petitioners have done serious violence to respondents' spirit, as citizens and human
beings, to the extent that one of them had been widowed by the emotional shock that the
damage and dispossession has caused. [5] Thus, in addition to the dismissal of the
complaint, respondents demanded actual damages for the cost of the improvements they
made on the land, together with the damage arising from the dispossession itself; moral
damages for the anguish they underwent as a result of the high-handed display of power
by petitioners in depriving them of their possession and property; as well as exemplary
damages, attorney's fees and expenses of litigation.

Respondents' respective counterclaims --- referring to the improvements destroyed, their

values, and the approximate areas of the properties they owned and occupied --- are as
follows:

a) TEOFISTA ALCALA - Tax Declaration No. 00223; .2400 ha.; bulldozed on August,
10, 1970. Improvements destroyed consist of 47 trees, 10 bundles beatilis firewood and 2
sacks of cassava, all valued at P5,437.00. (Exh. B, including submarkings)

b) FAUSTINO ALATAN and VALERIANA GARRO - Tax Declaration No. 30758; .

2480 ha.; Tax Declaration No. 32974; .8944 ha.; Tax Declaration No. 38908; .8000 ha.;
Bulldozed on September 9, 1970; Improvements destroyed consist of 682 trees, a
cornfield with one cavan per harvest 3 times a year, valued at P71,770.00; Bulldozed on
March 13, 1971; 753 trees, 1,000 bundles beatilis firewood every year, valued at
P29,100.00; Cut down in the later part of March, 1971 - 22 trees, 1,000 bundles beatilis
firewood every year, 6 cavans corn harvest per year, valued at P1,940.00 or a total value
of P102,810.00. (Exh. C, including submarkings)

c) ANDREA MATA DE BATULAN - Tax Declaration No. 33033; .4259 has.; bulldozed
on September 11, 1970. Improvements destroyed consist of 512 trees and 15 sacks
cassava all valued at P79,425.00. (Exh. D, including submarkings)

d) GLICERIO BARRIGA - Tax Declaration No. 32290; .4000 ha.; bulldozed on

September 10, 1990. Improvements destroyed consist of 354 trees, cassava field if
planted with corn good for one liter, 30 cavans harvest a year of corn, and one resthouse,
all valued at P35,500.00. (Exh. E, including submarkings)

e) BEATRIZ CALZADA - Tax Declaration No. 03449; .900 ha.; Bulldozed on June 16,
1971. Improvements destroyed consist of 2,864 trees, 1,600 bundles of beatilis firewood,
12 kerosene cans cassava every year and 48 cavans harvest a year of corn all valued at
P34,800.00. (Exh. F, including submarkings)

f) BIENVENIDO CASTRO - Tax Declaration No. 04883; .6000 ha.; bulldozed on

September 10, 1970. Improvements destroyed consist of 170 trees, 10 sacks cassava
every year, 500 bundles beatilis firewood every year, 60 cavans corn harvest per year, all
valued at (5,550.00. (Exh. G, including submarkings)

g) ISMAEL GARRO - Tax Declaration No. 7185; 2 has. Bulldozed in August, 1970.
Improvements destroyed consist of 6 coconut trees valued at P1,800.00. Bulldozed on
February 3, 1971 - improvements destroyed consist of 607 trees, a corn field of 5 cavans
produce per harvest thrice a year, all valued at P67,890.00. (Exh. H, including
submarkings)

h) JULIAN GARRO - Tax Declaration No. 28653; 1 ha.; Bulldozed in the latter week of
August, 1970. Improvements destroyed consist of 365 trees, 1 bamboo grove, 1 tisa,
1,000 bundles of beatilis firewood, 24 cavans harvest a year of corn, all valued at
P46,060.00. (Exh. I, including submarkings)

i) PRIMITIVA GARRO - Tax Declaration No. 28651; .3000 ha.; Bulldozed on

September 7, 1970. Improvements destroyed consist of 183 trees, 10 pineapples, a
cassava field, area if planted with corn good for ½ liter, sweet potato, area if planted with
corn good for ½ liter all valued at P10,410.00. (Exh. J, including submarkings)

j) TEOTIMO GONZALES - Tax Declaration No. 38159; .8644 ha.; Tax Declaration No.
38158; .8000 ha.; Bulldozed on September 10, 1970 - improvements destroyed consist of
460 trees valued at P20,000.00. Bulldozed on December 10, 1970 - Improvements
destroyed consist of 254 trees valued at P65,600.00 - or a total value of P85,600.00. (Exh.
K, including submarkings)

k) LEODEGARIO GONZALES - Tax Declaration No. 36884; Bulldozed on February

24, 1971. Improvements destroyed consist of 946 trees, 40 ubi, 15 cavans harvest a year
of corn, all valued at P72,270.00. (Exh. L, including submarkings)

l) FILEMON LAVADOR - Tax Declaration No. 14036; 1 ha.; Bulldozed on February 5,

1971. Improvements destroyed consist of 675 trees and 9 cavans harvest a year of corn all
valued at P63,935.00. (Exh. M, including submarkings)

m) CANDELARIO LUMANTAO - Tax Declaration No. 18791; 1.660 ha. Bulldozed on

the second week of August, 1970 - Improvements destroyed consist of 1,377 trees, a
cornfield with 3 cavans per harvest thrice a year and a copra dryer all valued at
P193,960.00. Bulldozed on February 26, 1971 - Improvements destroyed consist of 44
trees, one pig pen and the fence thereof and the chicken roost all valued at P12,650.00.
Tax Declaration No. 33159; 3.500 has. Bulldozed in the last week of March, 1971 -
Improvements destroyed consist of 13 trees valued at P1,550.00. Bulldozed in the latter
part consist of 6 Bamboo groves and Ipil-Ipil trees valued at P700.00 with total value of
P208,860.00. (Exh. N, including submarkings)

n) AURELIA MATA - Tax Declaration No. 38071; .3333 ha.; Bulldozed sometime in the
first week of March, 1971 - Improvements destroyed consist of 344 trees and 45 cavans
corn harvest per year valued at P30,965.00. (Exh. Q, including submarkings)
o) GAVINO QUIMBO - Tax Declaration No. 33231; 2.0978 has.; Tax Declaration No.
24377; .4960 ha. (.2480 ha. Belonging to your defendant) Bulldozed on September 12,
1970 - Improvements destroyed consist of 200 coconut trees and 500 banana fruit trees
valued at P68,500.00. Bulldozed on consist of 59 trees, 20 sacks cassava and 60 cavans
harvest a year of corn valued at P9,660.00 or a total value of P78,160.00. (Exh. R,
including submarkings)

p) SILVESTRE RAMOS - Tax Declaration No. 24288; 1.5568 has.; Bulldozed on

February 23, 1971. - Improvements destroyed consist of 737 trees, a cornfield with 3
cavans per harvest 3 times a year and 50 bundles of beatilis firewood, all valued at
P118,170.00. (Exh. S, including submarkings) .

q) MARCELINO GONZALES - Tax Declaration No. 34057; .4049 ha. Bulldozed on

March 20, 1972 - Improvements destroyed consist of 5 coconut trees and 9 cavans
harvest a year of corn valued at P1,860.00. Bulldozed on July 4, 1972 - destroying 19
coconut trees valued at P5,700.00 or a total value of P7,560.00. (Exh. U, including
submarkings)

r) JUSTINO TITO -Tax Declaration No. 38072; .2000 has.; Bulldozed on February 25,
1971 - Improvements destroyed consist of 338 trees and 5 kamongay all valued at
P29,650.00. (Exh. T, including submarkings)

s) EMIGDIO BING SING UY and ANGELES SEPULVEDA UY - Transfer Certificate

of Title No. T-35 (Register of Deeds of Danao City); 140.4395 has.; Area bulldozed-
20.000 has. Bulldozed on August 5, 6 and 7, 1970 - destroying 565 coconut trees, 2-1/2
yrs. old, 65,422 banana groves with 3,600 mango trees, 3 years old, grafted and about to
bear fruit valued at P212,260.00. Bulldozed on November 24, 1970 and on February 16,
1971 - destroying 8,520 madri-cacao trees and 24 cylindrical cement posts boundaries
valued at P18,540.00. Bulldozed on November 24, 1970 - destroying 90 coconut trees, 3
years old cornfield at 40 cavans per harvest and at 3 harvests a year (120 cavans) valued
at P31,800.00. Bulldozed on February 16, 1971 - destroying 25,727 trees and sugarcane
field value P856,725.00 or a total value of P1,123,825.00. (Exh. V, including
submarkings)

t) SALVADOR DAYDAY - Tax Declaration No. (unnumbered) dated September 14,

1967; 4.000 has. Bulldozed on May 6, 1971 - destroying 576 trees, 9 cavans yearly of
corn, 30 kerosene cans of cassava yearly valued at P4,795.00. Bulldozed from March 26,
1973 to the first week of April, 1973 - destroying 108 trees and cornland, 6 cavans
harvest per year valued at P53,900.00 or a total value of P58,695.00. (Exh. A, including
submarkings)

u) VENANCIA REPASO - Tax Declaration No. 18867; 1.1667 has. Bulldozed on April
15, 1971 - Improvements destroyed were 775 trees, 500 abaca, about to be reaped, and
being reaped 3 times a year 2 bamboo groves all valued at P47,700.00. (Exh. O, including
submarkings)

v) HERMOGENES TITO - Tax Declaration No. 38009; over one (1) ha. Bulldozed in the
latter part of September, 1970 - destroying 1 coconut tree, 18 sacks of corn per year
valued at P1,020.00. Bulldozed on March 15, 1973 - destroying 2 coconut trees, 5 buri
trees, 1 bamboo grove valued at P1,400.00. Bulldozed on March 26, 1974 - destroying 3
coconut trees valued at P1,500.00 with a total value of P3,920.00. (Exh. P, including
submarkings).[6]

On April 22, 1975, petitioners moved to dismiss their complaint with the trial court. The
trial court granted the motion to dismiss, without prejudice to respondents' right to
proceed with their counterclaim. Hence, the trial proceeded only on the counterclaim.

On September 23, 1980, this Court issued a resolution in Administrative Matter No. 6290
changing the venue of trial in Civil Case No. DC-56 to the Regional Trial Court of Cebu
City.

The change was mainly in line with the transfer of Judge Bernardo Ll. Salas, who
presided over the case in Danao City, to Cebu City. The parties agreed to dispense with
pre-trial, and for the evidence-in-chief to be submitted by way of affidavits together with
a schedule of documentary exhibits, subject to additional direct examination, cross
examination and presentation of rebuttal evidence by the parties.

The trial court and later, the Court of Appeals, took note of the following portions of
affidavits submitted by petitioners:

xxx City Fiscal Jesus Navarro said that in August, 1967, he issued subpoenas to several
tenants in Cahumayhumayan upon representation by Cepoc, the latter protesting failure
by the tenants to continue giving Cepoc its share of the corn produce. He learned from
the tenants that the reason why they were reluctant and as a matter of fact some defaulted
in giving Cepoc its share, was that Uy Bing Sepulveda made similar demands to them for
his share in the produce, and that they did not know to whom the shares should be given.

xxx xxx xxx

Jesus Capitan said that he is familiar with the place Cahumayhumayan and that the
properties in said locality were acquired by Durano and Company and Ramon Durano III,
but formerly owned by Cepoc.

When the properties of Ramonito Durano were cultivated, the owners of the plants
requested him that they be given something for their effort even if the properties do not
belong to them but to Cepoc, and that he was directed by Ramonito Durano to do a listing
of the improvements as well as the owners. After he made a listing, this was given to
Ramonito who directed Benedicto Ramos to do payment.

When he was preparing the list, they did not object to the removal of the plants because
the counterclaimants understood that the lands did not belong to them, but later and
because of politics a complaint was filed, and finally that when he was doing the listing,
the improvements were even pointed to him by the counterclaimants themselves. (Exh.
48, Records, p. 385-386).

xxx xxx xxx

Ruperto Rom said that he had an occasion to work at Cepoc from 1947 to 1950 together
with Benedicto and Tomas Ramos, the latter a capataz of the Durano Sugar Mills. Owner
of the properties, subject of the complaint, was Cepoc.

The persons who eventually tilled the Cepoc properties were merely allowed to do
cultivation if planted to corn, and for Cepoc to be given a share, which condition was
complied with by all including the counterclaimants. He even possessed one parcel which
he planted to coconuts, jackfruit trees and other plants. (Exh. 51, Records, pp. 383-384)

xxx xxx xxx

Co-defendant Ramon Durano III said that he agreed with the dismissal of the complaint
because his father's wish was reconciliation with the defendants following the death of
Pedro Sepulveda, father of Angeles Sepulveda Uy, but inspite of the dismissal of the
complaint, the defendants still prosecuted their counterclaim.

The disputed properties were owned formerly by Cepoc, and then of the latter selling the
properties to Durano and Company and then by the latter to him as of September 15,
1970. As a matter of fact, TCT T-103 and T-104 were issued to him and that from that
time on, he paid the taxes.

At the time he purchased the properties, they were not occupied by the defendants. The
first time he learned about the alleged bulldozing of the improvements was when the
defendants filed the complaint of land grabbing against their family with the Office of the
President and the attendant publicity. Precisely his family filed the complaint against
them. (Exh. 57, Records, pp. 723-730)

xxx xxx xxx

Congressman Ramon Durano said he is familiar with the properties, being owned
originally by Cepoc. Thereafter they were purchased by Durano and Company and then
sold to Ramon Durano III, the latter now the owner. He filed a motion to dismiss the case
against Angeles Sepulveda et al. as a gesture of respect to the deceased Pedro Sepulveda,
father of Angeles Sepulveda, and as a Christian, said Pedro Sepulveda being the former
Mayor of Danao, if only to stop all misunderstanding between their families.

xxx xxx xxx

He was the one who did the discovery of the properties that belonged to Cepoc, which
happened when he was doing mining work near Cahumayhumayan and without his
knowledge extended his operation within the area belonging to Cepoc. After Cepoc
learned of the substantial coal deposits, the property was claimed by Cepoc and then a
survey was made to relocate the muniments. Eventually he desisted doing mining work
and limited himself within the confines of his property that was adjacent to Cepoc's
property. All the claimants except Sepulveda Uy were occupants of the Cepoc properties.
Durano and Company purchased the property adjacent to Cepoc, developed the area,
mined the coal and had the surveyed area planted with sugar cane, and finally the notices
to the occupants because of their intention to plant sugar cane and other crops (T.S. N.
December 4, 1985, pp. 31-32, 44-54, RTC Decision, pp. 16-19, Records, pp. 842-845). [7]

Petitioners also presented Court Commissioner, Engineer Leonidas Gicain, who was
directed by the trial court to conduct a field survey of the disputed property. Gicain
conducted surveys on the areas subjected to bulldozing, including those outside the
Cepoc properties. The survey --- which was based on TCT No. T-103 and TCT No. T-
104, titled in the name of Ramon Durano III, and TCT No. 35, in the name of respondent
Emigdio Bing Sing Uy --- was paid for by petitioners.[8]

Respondents, for their part, also presented their affidavits and supporting documentary
evidence, including tax declarations covering such portions of the property as they
formerly inhabited and cultivated.

On March 8, 1990, the RTC issued a decision upholding respondents' counterclaim. The
dispositive portion of said decision reads:

"THE FOREGOING CONSIDERED, judgment is hereby rendered in favor of the

counter claimants and against the plaintiffs directing the latter to pay the former:

a) With respect to Salvador P

Dayday 14,400.00
b) With respect to Teofista
4,400.00
Alcala
c) With respect to Faustino
118,400.00
Alatan
 d) With respect to Andrea Mata
115,050.00
de Batulan
e) With respect to Glicerio
35,500.00
Barriga
f) With respect to Beatriz
70,300.00
Galzada
g) With respect to Bienvenido
5,000.00
Castro
h) With respect to Ismael Garro 66,060.00
i) With respect to Julian Garro 48,600.00
j) With respect to Primitiva
13,000.00
Garro
k) With respect to Teotimo
63,200.00
Gonzales
l) With respect to Leodegario
85,300.00
Gonzales
m) With respect to Filemon
70,860.00
Lavador
n) With respect to Venancia
101,700.00
Repaso
o) With respect to Candelario
192,550.00
Lumantao
p) With respect to Hermogenes
1,200.00
Tito
q) With respect to Aurelia Mata 28,560.00
r) With respect to Gavino
81,500.00
Quimbo
s) With respect to Silvestre
101,700.00
Ramos
t) With respect to Justino Tito 27,800.00
u) With respect to Marcelino
2,360.00
Gonzales
v) With respect to Angeles
902,840.00
Supelveda

P120,000.00 should be the figure in terms of litigation expenses and a separate amount of
P100,000.00 as attorney's fees.

Return of the properties to Venancia Repaso, Hermogenes Tito and Marcelino Gonzales
is hereby directed. With respect to counter claimant Angeles Sepulveda Uy, return of the
property to her should be with respect to the areas outside of the Cepoc property, as
mentioned in the sketch, Exhibit 56-A.

Finally with costs against the plaintiffs.

SO ORDERED. [9]

The RTC found that the case preponderated in favor of respondents, who all possessed
their respective portions of the property covered by TCT Nos. T-103 and T-104 thinking
that they were the absolute owners thereof. A number of these respondents alleged that
they inherited these properties from their parents, who in turn inherited them from their
own parents. Some others came into the properties by purchase from the former
occupants thereof. They and their predecessors were responsible for the plantings and
improvements on the property. They were the ones who sought for the properties to be
tax-declared in their respective names, and they continually paid the taxes thereto.
Respondents maintained that they were unaware of anyone claiming adverse possession
or ownership of these lands until the bulldozing operations in 1970.

As for Venancia Repaso, Hermogenes Tito and Marcelino Gonzales, the Court found that
the properties they laid claim to were not part of the land that was purchased by Durano
& Co. from Cepoc. Thus, it found the bulldozing of these lands by petitioners totally
unjustified and ordered not only the total reimbursement of useful and necessary
expenses on the properties but also the return of these properties to Repaso, Tito and
Gonzales, respectively. As for all the other respondents, the RTC found their possession
of the properties to be in the concept of owner and adjudged them to be builders in good
faith. Considering that petitioners in the instant case appropriated the improvements on
the areas overran by the bulldozers, the RTC ruled that "(t)he right of retention to the
improvements necessarily should be secured (in favor of respondents) until reimbursed
not only of the necessary but also useful expenses."[10]

On the matter of litigation expenses and attorney's fees, the RTC observed that the trial
period alone consisted of forty (40) trial dates spread over a period of sixteen (16) years.
At the time, respondents were represented by counsel based in Manila, and the trial court
took into consideration the travel, accommodation and miscellaneous expenses of their
lawyer that respondents must have shouldered during the trial of the case.

Dissatisfied, petitioners appealed the RTC decision to the Court of Appeals, which, in
turn, affirmed the said decision and ordered the return of the property to all the
respondents-claimants, in effect modifying the RTC decision which allowed return only
in favor of respondents Repaso, Tito and Gonzales.

In its decision, the Court of Appeals upheld the factual findings and conclusions of the
RTC, including the awards for actual damages, attorney's fees and litigation expenses,
and found additionally that the issuance of TCT Nos. T-103 and T-104 in the name of
Ramon Durano III was attended by fraud. Evaluating the evidence before it, the Court of
Appeals observed that the alleged reconstituted titles of Cepoc over the property, namely,
TCT No. (RT-38) (T-14457) -4 and TCT No. (RT-39) (T-14456) -3 (Exhibits "19" and
"20" of this case), which were claimed to be the derivative titles of TCT Nos. T-103 and
T-104, were not submitted in evidence before the RTC. Thus, in an Order dated June 15,
1988, the RTC ordered Exhibits "19" and "20" deleted from petitioners' Offer of Exhibits.
The Court of Appeals further noted that even among the exhibits subsequently produced
by petitioners before the RTC, said Exhibits "19" and "20" were still not submitted.
[11]
 Moreover, Cepoc had no registered title over the disputed property as indicated in
TCT Nos. T-103 and T-104. Thus:

TRANSFER CERTIFICATE OF TITLE NO.

- 103 -

xxx xxx

IT IS FURTHER CERTIFIED that said land was originally registered on the N.A. day

of N.A., in the year nineteen hundred and N.A. in Registration Book No. N.A.
page N.A. of the Office of the Register of Deeds of N.A., as Original Certificate of Title
No. N.A., pursuant to a N.A. patent granted by the President of the Philippines, on
the N.A. day of N.A., in the year nineteen hundred and N.A., under Act No. N.A.

This certificate is a transfer from Transfer Certificate of Title No. (RT-39) (T-14456) -3
which is cancelled by virtue hereof in so far as the above described land is concerned.

xxx xxx

TRANSFER CERTIFICATE OF TITLE

NO. T - 104 -

xxx xxx

IT IS FURTHER CERTIFIED that said land was originally registered on the N.A. day

of N.A., in the year nineteen hundred and N.A. in Registration Book
No. N.A. page N.A. of the Office of the Register of Deeds of N.A., as Original Certificate
of Title No. N.A., pursuant to a N.A. patent granted by the President of the Philippines,
on the N.A. day of N.A., in the year nineteen hundred and N.A., under Act No. N.A.

This certificate is a transfer from Transfer Certificate of Title No. (RT-38) (T-14457)

-4 which is cancelled by virtue hereof in so far as the above described land is concerned.
[12]
From the foregoing, the Court of Appeals concluded that the issuance of the TCT Nos. T-
103 and T-104 in favor of petitioner Ramon Durano III was attended by fraud; hence,
petitioners could not invoke the principle of indefeasibility of title. Additionally, the
Court of Appeals found that the alleged Deed of Absolute Sale, undated, between Cepoc
Industries, Inc. and Durano & Co. was not notarized and thus, unregistrable.

The Court of Appeals went on to state that while, on the one hand, no valid issuance of
title may be imputed in favor of petitioners from the private Deed of Sale and the alleged
reconstituted titles of Cepoc that were not presented in evidence, respondents, in contrast
--- who although admittedly had no registered titles in their names --- were able to
demonstrate possession that was public, continuous and adverse --- or possession in the
concept of owner, and which was much prior (one or two generations back for many of
respondents) to the claim of ownership of petitioners.

Thus, the Court of Appeals ordered the return of the properties covered by TCT Nos. T-
103 and T-104 to all respondents who made respective claims thereto. Corollarily, it
declared that petitioners were possessors in bad faith, and were not entitled to
reimbursement for useful expenses incurred in the conversion of the property into
sugarcane lands. It also gave no merit to petitioners' allegation that the actual damages
awarded by the trial court were excessive, or to petitioners' argument that they should not
have been held personally liable for any damages imputable to Durano & Co.

Following is the dispositive portion of the decision of the Court of Appeals:

WHEREFORE, the appealed decision of the lower court in Civil Case No. DC-56 is
hereby AFFIRMED with MODIFICATION ordering the return of the respective subject
properties to all the defendants-appellees, without indemnity to the plaintiffs-appellants
as regards whatever improvements made therein by the latter. In all other respects, said
decision in affirmed.

Costs against plaintiffs-appellants.

SO ORDERED.[13]

On October 29, 1998, the Court of Appeals denied petitioners' motion for reconsideration
for lack of merit. Hence, this petition.

Petitioners assign the following errors from the CA decision:

1. The Court of Appeals erred in granting relief to the respondents who did not
appeal the decision of the lower court.

2. The Court of Appeals erred in collaterally attacking the validity of the title of
petitioner Ramon Durano III.
 3. The respondents should not have been adjudged builders in good faith.

4. The petitioners should not be held personally liable for damages because of the
doctrine of separate corporate personality.

5. It was an error to hold that the respondents had proved the existence of
improvements on the land by preponderance of evidence, and in awarding
excessive damages therefor.

6. It was error to direct the return of the properties to respondents Venancia Repaso,
Hermogenes Tito and Marcelino Gonzales.

7. The award of litigation expenses and attorney's fees was erroneous.

8. The petitioners are not possessors in bad faith.

On their first assignment of error, petitioners contend that before the Court of Appeals,
they only questioned that portion of the RTC decision which directed the return of the
properties to respondents Repaso, Tito and Gonzales. They argued that the return of the
properties to all the other respondents by the Court of Appeals was erroneous because it
was not among the errors assigned or argued by petitioners on appeal. Besides, since
respondents themselves did not appeal from the RTC decision on the issue of return of
the physical possession of the property, it is understood that judgment as to them has
already become final by operation of law. To support its argument, petitioners cited the
cases of Madrideo vs. Court of Appeals[14] and Medida vs. Court of Appeals[15], which
held that "whenever an appeal is taken in a civil case an appellee who has not himself
appealed cannot obtain from the appellate court any affirmative relief other than the ones
granted in the decision of the court below."

Rule 51 of the New Rules of Civil Procedure provides:

Sec. 8. Questions that may be decided. --- No error which does not affect the jurisdiction
over the subject matter or the validity of the judgment appealed from or the proceedings
therein will be considered unless stated in the assignment of errors, or closely related to
or dependent on an assigned error and properly argued in the brief, save as the court may
pass upon plain errors and clerical errors.

We find untenable petitioners' argument that since no party (whether petitioners or

respondents) appealed for the return of the properties to respondents other than Repaso,
Tito and Gonzales, that portion of the RTC decision that awards damages to such other
respondents is final and may no longer be altered by the Court of Appeals. A reading of
the provisions of Section 8, Rule 51, aforecited, indicates that the Court of Appeals is not
limited to reviewing only those errors assigned by appellant, but also those that are
closely related to or dependent on an assigned error. [16] In other words, the Court of
Appeals is imbued with sufficient discretion to review matters, not otherwise assigned as
errors on appeal, if it finds that their consideration is necessary in arriving at a complete
and just resolution of the case. In this case, the Court of Appeals ordered the return of the
properties to respondents merely as a legal consequence of the finding that respondents
had a better right of possession than petitioners over the disputed properties, the former
being possessors in the concept of owner. Thus, it held ---

Plaintiffs-appellants have to return possession of the subject property, not only to

defendants-appellees Venancia Repaso, Hermogenes Tito and Marcelino Gonzales but to
all other defendants-appellees herein, by virtue of the latter's priority in time of declaring
the corresponding portions of the subject properties in their name and/or their
predecessors-in-interest coupled with actual possession of the same property through
their predecessors-in-interest in the concept of an owner. Plaintiffs-appellants who had
never produced in court a valid basis by which they are claiming possession or ownership
over the said property cannot have a better right over the subject properties than
defendants-appellees.[17]

Moreover, petitioners' reliance on the Madrideo and Medida cases is misplaced. In

the Madrideo case, the predecessors-in-interest of the Llorente Group sold the disputed
property to the Alcala Group, who in turn sold the same to the spouses Maturgo. The
RTC adjudged the spouses Maturgo purchasers in good faith, such that they could retain
their title to the property, but held that the Lllorente Group was unlawfully divested of its
ownership of the property by the Alcala Group. The Alcala Group appealed this decision
to the Court of Appeals, who denied the appeal and ordered the reinstatement in the
records of the Registry of Deeds of the Original Certificates of Title of the predecessors-
in-interest of the Llorente Group. In setting aside the decision of the Court of Appeals,
this Court held that no relief may be afforded in favor of the Llorente Group to the
prejudice of the spouses Maturgo, who --- the Court carefully emphasized --- were third
parties to the appeal, being neither appellants nor appellees before the Court of Appeals,
and whose title to the disputed property was confirmed by the RTC. The application of
the ruling in Madrideo to the instant case bears no justification because it is clear that
petitioners, in appealing the RTC decision, impleaded all the herein respondents.

Meanwhile, in the Medida case, petitioners (who were the appellees before the Court of
Appeals) sought the reversal of a finding of the RTC before the Supreme Court. The
Court explained that since petitioners failed to appeal from the RTC decision, they --- as
appellees before the Court of Appeals --- could only argue for the purpose of sustaining
the judgment in their favor, and could not ask for any affirmative relief other than that
granted by the court below. The factual milieu in Medida is different from that of the
instant case, where the return of the properties to respondents was not an "affirmative
relief" sought by respondents but an independent determination of the Court of Appeals
proceeding from its findings that respondents were long-standing possessors in the
concept of owner while petitioners were builders in bad faith. Certainly, under such
circumstances, the Court of Appeals is not precluded from modifying the decision of the
RTC in order to accord complete relief to respondents.

Moving now to the other errors assigned in the petition, the return of the properties to
respondents Repaso, Tito and Gonzales was premised upon the factual finding that these
lands were outside the properties claimed by petitioners under TCT Nos. T-103 and T-
104. Such factual finding of the RTC, sustained by the Court of Appeals, is now final and
binding upon this Court.

In respect of the properties supposedly covered by TCT Nos. T-103 and T-104, the Court
of Appeals basically affirmed the findings of the RTC that respondents have shown prior
and actual possession thereof in the concept of owner, whereas petitioners failed to
substantiate a valid and legitimate acquisition of the property --- considering that the
alleged titles of Cepoc from which TCT Nos. T-103 and T-104 were supposed to have
derived title were not produced, and the deed of sale between Cepoc and Durano & Co.
was unregistrable.

The records clearly bear out respondents' prior and actual possession; more exactly, the
records indicate that respondents' possession has ripened into ownership by acquisitive
prescription.

Ordinary acquisitive prescription, in the case of immovable property, requires possession

of the thing in good faith and with just title,[18] for a period of ten years. [19] A possessor is
deemed to be "in good faith" when he is not aware of any flaw in his title or mode of
acquisition of the property.[20] On the other hand, there is "just title" when the adverse
claimant came into possession of the property through one of the modes for acquiring
ownership recognized by law, but the grantor was not the owner or could not transmit any
right.[21] The claimant by prescription may compute the ten-year period by tacking his
possession to that of his grantor or predecessor-in-interest.[22]

The evidence shows that respondents successfully complied with all the requirements for
acquisitive prescription to set in. The properties were conveyed to respondents by
purchase or inheritance, and in each case the respondents were in actual, continuous,
open and adverse possession of the properties. They exercised rights of ownership over
the lands, including the regular payment of taxes and introduction of plantings and
improvements. They were unaware of anyone claiming to be the owner of these lands
other than themselves until the notices of demolition in 1970 --- and at the time each of
them had already completed the ten-year prescriptive period either by their own
possession or by obtaining from the possession of their predecessors-in-interest. Contrary
to the allegation of petitioners that the claims of all twenty-two (22) respondents were
lumped together and indiscriminately sustained, the lower courts (especially the RTC)
took careful consideration of the claims individually, taking note of the respective modes
and dates of acquisition. Whether respondents' predecessors-in-interest in fact had title to
convey is irrelevant under the concept of just title and for purposes of prescription.

Thus, respondents' counterclaim for reconveyance and damages before the RTC was
premised upon a claim of ownership as indicated by the following allegations:

(Y)our defendants are owners and occupants of different parcels of land located in Barrio
Cahumayhumayan, your defendants having occupied these parcels of land for various
periods by themselves or through their predecessors-in-interest, some for over fifty years,
and some with titles issued under the Land Registration Act; xxxxx [23]

Respondents' claim of ownership by acquisitive prescription (in respect of the properties

covered by TCT Nos. T-103 and T-104) having been duly alleged and proven, the Court
deems it only proper that such claim be categorically upheld. Thus, the decision of the
Court of Appeals insofar as it merely declares those respondents possessors in the
concept of owner is modified to reflect the evidence on record which indicates that such
possession had been converted to ownership by ordinary prescription.

Turning now to petitioners' claim to ownership and title, it is uncontested that their claim
hinges largely on TCT Nos. T-103 and T-104, issued in the name of petitioner Ramon
Durano III. However, the validity of these certificates of title was put to serious doubt by
the following: (1) the certificates reveal the lack of registered title of Cepoc to the
properties;[24] (2) the alleged reconstituted titles of Cepoc were not produced in evidence;
and (3) the deed of sale between Cepoc and Durano & Co. was unnotarized and thus,
unregistrable.

It is true that fraud in the issuance of a certificate of title may be raised only in an action
expressly instituted for that purpose,[25] and not collaterally as in the instant case which is
an action for reconveyance and damages. While we cannot sustain the Court of Appeals'
finding of fraud because of this jurisdictional impediment, we observe that the above-
enumerated circumstances indicate none too clearly the weakness of petitioners' evidence
on their claim of ownership. For instance, the non-production of the alleged reconstituted
titles of Cepoc despite demand therefor gives rise to a presumption (unrebutted by
petitioners) that such evidence, if produced, would be adverse to petitioners. [26] Also, the
unregistrability of the deed of sale is a serious defect that should affect the validity of the
certificates of title. Notarization of the deed of sale is essential to its registrability, [27] and
the action of the Register of Deeds in allowing the registration of the unacknowledged
deed of sale was unauthorized and did not render validity to the registration of the
document.[28]

Furthermore, a purchaser of a parcel of land cannot close his eyes to facts which should
put a reasonable man upon his guard, such as when the property subject of the purchase is
in the possession of persons other than the seller. [29] A buyer who could not have failed to
know or discover that the land sold to him was in the adverse possession of another is a
buyer in bad faith.[30] In the herein case, respondents were in open possession and
occupancy of the properties when Durano & Co. supposedly purchased the same from
Cepoc. Petitioners made no attempt to investigate the nature of respondents' possession
before they ordered demolition in August 1970.

In the same manner, the purchase of the property by petitioner Ramon Durano III from
Durano & Co. could not be said to have been in good faith. It is not disputed that Durano
III acquired the property with full knowledge of respondents' occupancy thereon. There
even appears to be undue haste in the conveyance of the property to Durano III, as the
bulldozing operations by Durano & Co. were still underway when the deed of sale to
Durano III was executed on September 15, 1970. There is not even an indication that
Durano & Co. attempted to transfer registration of the property in its name before it
conveyed the same to Durano III.

In the light of these circumstances, petitioners could not justifiably invoke the defense of
indefeasibility of title to defeat respondents' claim of ownership by prescription. The rule
on indefeasibility of title, i.e., that Torrens titles can be attacked for fraud only within one
year from the date of issuance of the decree of registration, does not altogether deprive an
aggrieved party of a remedy at law. As clarified by the Court in Javier vs. Court of
Appeals[31] ---

The decree (of registration) becomes incontrovertible and can no longer be reviewed after
one (1) year from the date of the decree so that the only remedy of the landowner whose
property has been wrongfully or erroneously registered in another's name is to bring an
ordinary action in court for reconveyance, which is an action in personam and is always
available as long as the property has not passed to an innocent third party for value. If the
property has passed into the hands of an innocent purchaser for value, the remedy is an
action for damages.

In the instant case, respondents' action for reconveyance will prosper, it being clear that
the property, wrongfully registered in the name of petitioner Durano III, has not passed to
an innocent purchaser for value.

Since petitioners knew fully well the defect in their titles, they were correctly held by the
Court of Appeals to be builders in bad faith.

The Civil Code provides:

Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is
built, planted or sown without right of indemnity.
Art. 450. The owner of the land on which anything has been built, planted or sown in bad
faith may demand the demolition of the work, or that the planting or sowing be removed,
in order to replace things in their former condition at the expense of the person who built,
planted or sowed; or he may compel the builder or planter to pay the price of the land,
and the sower the proper rent.

Art. 451. In the cases of the two preceding articles, the landowner is entitled to damages
from the builder, planter or sower.

Based on these provisions, the owner of the land has three alternative rights: (1) to
appropriate what has been built without any obligation to pay indemnity therefor, or (2)
to demand that the builder remove what he had built, or (3) to compel the builder to pay
the value of the land.[32] In any case, the landowner is entitled to damages under Article
451, abovecited.

We sustain the return of the properties to respondents and the payment of indemnity as
being in accord with the reliefs under the Civil Code.

On petitioners' fifth assignment of error that respondents had not proved the existence of
improvements on the property by preponderance of evidence, and that the damages
awarded by the lower courts were excessive and not actually proved, the Court notes that
the issue is essentially factual. Petitioners, however, invoke Article 2199 of the Civil
Code which requires actual damages to be duly proved. Passing upon this matter, the
Court of Appeals cited with approval the decision of the RTC which stated:

The counter claimants made a detail of the improvements that were damaged. Then the
query, how accurate were the listings, supposedly representing damaged improvements.
The Court notes, some of the counter claimants' improvements in the tax declarations did
not tally with the listings as mentioned in their individual affidavits. Also, others did not
submit tax declarations supporting identity of the properties they possessed. The disparity
with respect to the former and absence of tax declarations with respect to the latter,
should not be a justification for defeating right of reimbursement. As a matter of fact, no
controverting evidence was presented by the plaintiffs that the improvements being
mentioned individually in the affidavits did not reflect the actual improvements that were
overran by the bulldozing operation. Aside from that, the City Assessor, or any member
of his staff, were not presented as witnesses. Had they been presented by the plaintiffs,
the least that can be expected is that they would have enlightened the Court the extent of
their individual holdings being developed in terms of existing improvements. This, the
plaintiffs defaulted. It might be true that there were tax declarations, then presented as
supporting documents by the counter claimants, but then mentioning improvements but in
variance with the listings in the individual affidavits. This disparity similarly cannot be
accepted as a basis for the setting aside of the listing of improvements being adverted to
by the counter claimants in their affidavits. This Court is not foreclosing the possibility
that the tax declarations on record were either table computations by the Assessor or his
deputy, or tax declarations whose entries were merely copied from the old tax
declarations during the period of revision. (RTC Decision, p. 36, Records, p. 862)[33]

The right of the owner of the land to recover damages from a builder in bad faith is
clearly provided for in Article 451 of the Civil Code. Although said Article 451 does not
elaborate on the basis for damages, the Court perceives that it should reasonably
correspond with the value of the properties lost or destroyed as a result of the occupation
in bad faith, as well as the fruits (natural, industrial or civil) from those properties that the
owner of the land reasonably expected to obtain. We sustain the view of the lower courts
that the disparity between respondents' affidavits and their tax declarations on the amount
of damages claimed should not preclude or defeat respondents' right to damages, which is
guaranteed by Article 451. Moreover, under Article 2224 of the Civil Code:

Temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary loss
has been suffered but its amount cannot, from the nature of the case, be proved with
certainty. We also uphold the award of litigation expenses and attorney's fees, it being
clear that petitioners' acts compelled respondents to litigate and incur expenses to regain
rightful possession and ownership over the disputed property.[34]

The last issue presented for our resolution is whether petitioners could justifiably invoke
the doctrine of separate corporate personality to evade liability for damages. The Court of
Appeals applied the well-recognized principle of "piercing the corporate veil", i.e., the
law will regard the act of the corporation as the act of its individual stockholders when it
is shown that the corporation was used merely as an alter ego by those persons in the
commission of fraud or other illegal acts. The test in determining the applicability of the
doctrine of piercing the veil of corporate fiction is as follows:

1. Control, not mere majority or complete stock control, but complete domination,
not only of finances but of policy and business practice in respect to the
transaction attacked so that the corporate entity as to this transaction had at the
time no separate mind, will or existence of its own;

2. Such control must have been used by the defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other positive legal duty, or dishonest and
unjust acts in contravention of plaintiff's legal rights; and

3. The aforesaid control and breach of duty must proximately cause the injury or
unjust loss complained of. The absence of any one of these elements prevents
"piercing the corporate veil". In applying the "instrumentality" or "alter ego"
doctrine, the courts are concerned with reality and not form, with how the
 corporation operated and the individual defendant's relationship to that operation.
[35]

The question of whether a corporation is a mere alter ego is purely one of fact. [36] The
Court sees no reason to reverse the finding of the Court of Appeals. The facts show that
shortly after the purported sale by Cepco to Durano & Co., the latter sold the property to
petitioner Ramon Durano III, who immediately procured the registration of the property
in his name. Obviously, Durano & Co. was used by petitioners merely as an
instrumentality to appropriate the disputed property for themselves.

WHEREFORE, the instant petition is DENIED. The decision of the Court of Appeals
is MODIFIED to declare respondents with claims to the properties covered by Transfer
Certificate of Title Nos. T-103 and T-104 owners by acquisitive prescription to the extent
of their respective claims. In all other respects, the decision of the Court of Appeals
is AFFIRMED. Costs against petitioners.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 160708, October 16, 2009 ]
PATROCINIA RAVINA AND WILFREDO RAVINA,PETITIONERS,VS.
MARY ANN P. VILLA ABRILLE, FOR HERSELF AND IN BEHALF OF
INGRID D’LYN P. VILLA ABRILLE, INGREMARK D’WIGHT VILLA
ABRILLE, INGRESOLL DIELS VILLA ABRILLE AND INGRELYN DYAN
VILLA ABRILLE, RESPONDENTS.

DECISION

QUISUMBING, ACTING C.J.:

For review are the Decision[1] dated February 21, 2002 and the Resolution[2] dated
October 7, 2003 of the Court of Appeals in CA-G.R. CV No. 54560.  The appellate court
modified the Decision[3]

dated September 26, 1995 of the Regional Trial Court (RTC) of Davao City, Branch 15.

Simply stated, the facts as found by the Court of Appeals[4] are as follows:

Respondent Mary Ann Pasaol Villa Abrille and Pedro Villa Abrille are husband and wife.
They have four children, who are also parties to the instant case and are represented by
their mother, Mary Ann.

In 1982, the spouses acquired a 555-square meter parcel of land denominated as Lot 7,
located at Kamuning Street, Juna Subdivision, Matina, Davao City, and covered by
Transfer Certificate of Title (TCT) No. T-88674 in their names.  Said lot is adjacent to a
parcel of land which Pedro acquired when he was still single and which is registered
solely in his name under TCT No. T-26471.

Through their joint efforts and the proceeds of a loan from the Development Bank of the
Philippines (DBP), the spouses built a house on Lot 7 and Pedro’s lot.  The house was
finished in the early 1980’s but the spouses continuously made improvements, including
a poultry house and an annex.

In 1991, Pedro got a mistress and began to neglect his family.  Mary Ann was forced to
sell or mortgage their movables to support the family and the studies of her children.  By
himself, Pedro offered to sell the house and the two lots to herein petitioners, Patrocinia
and Wilfredo Ravina. Mary Ann objected and notified the petitioners of her objections,
but Pedro nonetheless sold the house and the two lots without Mary Ann’s consent, as
evidenced by a Deed of Sale[5] dated June 21, 1991.  It appears on the said deed that Mary
Ann did not sign on top of her name.

On July 5, 1991 while Mary Ann was outside the house and the four children were in
school, Pedro together with armed members of the Civilian Armed Forces Geographical
Unit (CAFGU) and acting in connivance with petitioners [6] began transferring all their
belongings from the house to an apartment.

When Mary Ann and her daughter Ingrid Villa Abrille came home, they were stopped
from entering it.  They waited outside the gate until evening under the rain.  They sought
help from the Talomo Police Station, but police authorities refused to intervene, saying
that it was a family matter.  Mary Ann alleged that the incident caused stress, tension and
anxiety to her children, so much so that one flunked at school.  Thus, respondents Mary
Ann and her children filed a complaint for Annulment of Sale, Specific Performance,
Damages and Attorney’s Fees with Preliminary Mandatory Injunction [7] against Pedro
and herein petitioners (the Ravinas) in the RTC of Davao City.

During the trial, Pedro declared that the house was built with his own money.  Petitioner
Patrocinia Ravina testified that they bought the house and lot from Pedro, and that her
husband, petitioner Wilfredo Ravina, examined the titles when they bought the property.

On September 26, 1995, the trial court ruled in favor of herein respondent Mary Ann P.
Villa Abrille as follows:
WHEREFORE, judgment is rendered as follows:

1. The sale of lot 8 covered by TCT No. 26471 by defendant Pedro Abrille
appearing in the Deed of Sale marked as Exh. “E” is void as to one half or
277.5 square meters representing the share of plaintiff Mary Villa Abrille.
2. That sale of Lot 7 covered by TCT No. [88674] by defendant Pedro Villa
Abrille in the Deed of Sale (Exh. “A”) is valid as to one half or 277.5
square meters of the 555 square meters as one half belongs to defendant
Pedro Abrille but it is void as to the other half or 277.5 square meters as it
belongs to plaintiff Mary Abrille who did not sell her share nor give her
consent to the sale.
3. That sale of the house mentioned in the Deed of Sale (Exh. “A”) is valid as
far as the one half of the house representing the share of defendant Pedro
Abrille is concerned but void as to the other half which is the share of
plaintiff Mary Abrille because she did not give her consent/sign the said
sale.
4. The defendants shall jointly pay the plaintiffs.

4. A.    Seventeen Thousand Pesos (P17,000.00) representing the value of

the movables and belonging[s] that were lost when unknown men
unceremoniously and without their knowledge and consent removed their
movables from their house and brought them to an apartment.

4. B.    One Hundred Thousand Pesos (P 100,000.00) to plaintiff Mary

Abrille as moral damages.

4. C.    Fifty Thousand Pesos (P50,000.00) to each of the four children as

moral damages, namely:

a) Ingrid Villa Abrille – Fifty Thousand Pesos (P50,000.00), b) Ingremark

Villa Abrille – Fifty Thousand Pesos (P50,000.00), c) Ingresoll Villa
Abrille – Fifty Thousand Pesos (P50,000.00) and d) Ingrelyn Villa Abrille
– Fifty Thousand Pesos (P50,000.00).

5. Ten Thousand Pesos (P10,000.00) as exemplary damages by way of

example and correction for the public good.
6. The costs of suit. [8]

On appeal, the Court of Appeals modified the decision, thus:

WHEREFORE, the appealed judgment is hereby MODIFIED as follows:

 1. The sale of lot covered by TCT No. 26471 in favor of defendants spouses
Wilfredo and Patrocinia Ravina is declared valid.
2. The sale of lot covered by TCT No. 88674 in favor of said defendants
spouses Ravina, together with the house thereon, is declared null and void.
3. Defendant Pedro Abrille is ordered to return the value of the
consideration for the lot covered by TCT No. 88674 and the house thereon
to co-defendants spouses Ravina.
4. Defendants spouses Ravina [a]re ordered to reconvey the lot and house
covered by TCT No. 88674 in favor of spouses Pedro and Mary Villa
Abrille and to deliver possession to them.
5. Plaintiffs are given the option to exercise their rights under Article [450] of
the New Civil Code with respect to the improvements introduced by
defendant spouses Ravina.
6. Defendants Pedro Villa Abrille and spouses Ravina are ordered to pay
jointly and severally the plaintiffs as follows:

a) One Hundred Thousand Pesos (P100,000.00) to plaintiff Mary Villa

Abrille as moral damages.

b) Fifty Thousand Pesos (P50,000.00) as moral damages to each of the four

children, namely: Ingrid Villa Abrille, Ingremark Villa Abrille, Ingresoll
Villa Abrille and Ingrelyn Villa Abrille.

c) Ten Thousand (P10,000.00) as exemplary damages by way of example

and correction for the public good.

SO ORDERED.[9]

Their Motion for Reconsideration having been denied, petitioners filed this petition. 
Petitioners argue that:

I.

THE COURT OF APPEALS ERRED WHEN IT DECLARED x x x THE SALE OF

LOT COVERED BY TCT NO. 88674 IN FAVOR OF SPOUSES RAVINA,
TOGETHER WITH THE HOUSE THEREON, AS NULL AND VOID SINCE IT IS
CLEARLY CONTRARY TO LAW AND EVIDENCE.

II.

THE COURT OF APPEALS ERRED WHEN IT RULED THAT PETITIONERS

PATROCIN[I]A RAVINA AND WILFREDO RAVINA ARE NOT INNOCENT
PURCHASERS FOR VALUE, THE SAME BEING CONTRARY TO LAW AND
EVIDENCE.

III.

THE COURT OF APPEALS ERRED WHEN IT RULED THAT PETITIONERS

PATROCIN[I]A RAVINA AND WILFREDO RAVINA ARE LIABLE FOR
DAMAGES, THE SAME BEING CONTRARY TO LAW AND EVIDENCE. [10]

In essence, petitioners assail the appellate court’s declaration that the sale to them by
Pedro of the lot covered by TCT No. T-88674 is null and void. However, in addressing
this issue, it is imperative to determine: (1) whether the subject property covered by TCT
No. T-88674 is an exclusive property of Pedro or conjugal property, and (2) whether its
sale by Pedro was valid considering the absence of Mary Ann’s consent.

Petitioners assert that the subject lot covered by TCT No. T-88674 was the exclusive
property of Pedro having been acquired by him through barter or exchange. [11] They
allege that the subject lot was acquired by Pedro with the proceeds of the sale of one of
his exclusive properties. Allegedly, Pedro and his sister Carmelita initially agreed to
exchange their exclusive lots covered by TCT No. T-26479 and TCT No. T-26472,
respectively.  Later, however, Pedro sold the lot covered by TCT No. T-26472 to one
Francisca Teh Ting and purchased the property of Carmelita using the proceeds of the
sale.  A new title, TCT No. T-88674, was issued thereafter.  Thus, petitioners insist that
the subject lot remains to be an exclusive property of Pedro as it was acquired or
purchased through the exclusive funds or money of the latter.

We are not persuaded. Article 160 of the New Civil Code provides, “All property of the
marriage is presumed to belong to the conjugal partnership, unless it be proved that it
pertains exclusively to the husband or to the wife.”

There is no issue with regard to the lot covered by TCT No. T-26471, which was an
exclusive property of Pedro, having been acquired by him before his marriage to Mary
Ann.  However, the lot covered by TCT No. T-88674 was acquired in 1982 during the
marriage of Pedro and Mary Ann. No evidence was adduced to show that the subject
property was acquired through exchange or barter.  The presumption of the conjugal
nature of the property subsists in the absence of clear, satisfactory and convincing
evidence to overcome said presumption or to prove that the subject property is
exclusively owned by Pedro.[12] Petitioners’ bare assertion would not suffice to overcome
the presumption that TCT No. T-88674, acquired during the marriage of Pedro and Mary
Ann, is conjugal.  Likewise, the house built thereon is conjugal property, having been
constructed through the joint efforts of the spouses, who had even obtained a loan from
DBP to construct the house.
Significantly, a sale or encumbrance of conjugal property concluded after the effectivity
of the Family Code on August 3, 1988, is governed by Article 124 of the same Code that
now treats such a disposition to be void if done (a) without the consent of both the
husband and the wife, or (b) in case of one spouse’s inability, the authority of the court. 
Article 124 of the Family Code, the governing law at the time the assailed sale was
contracted, is explicit:

ART. 124. The administration and enjoyment of the conjugal partnership property shall
belong to both spouses jointly.  In case of disagreement, the husband’s decision shall
prevail, subject to recourse to the court by the wife for proper remedy which must be
availed of within five years from the date of the contract implementing such decision.

In the event that one spouse is incapacitated or otherwise unable to participate in the
administration of the conjugal properties, the other spouse may assume sole powers of
administration.  These powers do not include the powers of disposition or encumbrance
which must have the authority of the court or the written consent of the other spouse.  In
the absence of such authority or consent, the disposition or encumbrance shall be
void. However, the transaction shall be construed as a continuing offer on the part of the
consenting spouse and the third person, and may be perfected as a binding contract upon
the acceptance by the other spouse or authorization by the court before the offer is
withdrawn by either or both offerors.  (Emphasis supplied.)

The particular provision in the New Civil Code giving the wife ten (10) years to annul the
alienation or encumbrance was not carried over to the Family Code.  It is thus clear that
alienation or encumbrance of the conjugal partnership property by the husband without
the consent of the wife is null and void.

Hence, just like the rule in absolute community of property, if the husband, without
knowledge and consent of the wife, sells conjugal property, such sale is void.  If the sale
was with the knowledge but without the approval of the wife, thereby resulting in a
disagreement, such sale is annullable at the instance of the wife who is given five (5)
years from the date the contract implementing the decision of the husband to institute the
case. [13]

Here, respondent Mary Ann timely filed the action for annulment of sale within five (5)
years from the date of sale and execution of the deed.  However, her action to annul the
sale pertains only to the conjugal house and lot and does not include the lot covered by
TCT No. T-26471, a property exclusively belonging to Pedro and which he can dispose
of freely without Mary Ann’s consent.

On the second assignment of error, petitioners contend that they are buyers in good faith.
[14]
 Accordingly, they need not inquire whether the lot was purchased by money
exclusively belonging to Pedro or of the common fund of the spouses and may rely on the
certificates of title.

The contention is bereft of merit.  As correctly held by the Court of Appeals, a purchaser
in good faith is one who buys the property of another without notice that some other
person has a right to, or interest in, such property and pays a full and fair price for the
same at the time of such purchase, or before he has notice of the claim or interest of some
other person in the property.[15] To establish his status as a buyer for value in good faith, a
person dealing with land registered in the name of and occupied by the seller need only
show that he relied on the face of the seller’s certificate of title.  But for a person dealing
with land registered in the name of and occupied by the seller whose capacity to sell is
restricted, such as by Articles 166 and 173 of the Civil Code or Article 124 of the Family
Code, he must show that he inquired into the latter’s capacity to sell in order to establish
himself as a buyer for value in good faith.[16]

In the present case, the property is registered in the name of Pedro and his wife, Mary
Ann.  Petitioners cannot deny knowledge that during the time of the sale in 1991, Pedro
was married to Mary Ann. However, Mary Ann’s conformity did not appear in the deed. 
Even assuming that petitioners believed in good faith that the subject property is the
exclusive property of Pedro, they were apprised by Mary Ann’s lawyer of her objection
to the sale and yet they still proceeded to purchase the property without Mary Ann’s
written consent.  Moreover, the respondents were the ones in actual, visible and public
possession of the property at the time the transaction was being made.  Thus, at the time
of sale, petitioners knew that Mary Ann has a right to or interest in the subject properties
and yet they failed to obtain her conformity to the deed of sale.  Hence, petitioners cannot
now invoke the protection accorded to purchasers in good faith.

Now, if a voidable contract is annulled, the restoration of what has been given is proper. 
The relationship between the parties in any contract even if subsequently annulled must
always be characterized and punctuated by good faith and fair dealing. [17] Hence, in
consonance with justice and equity and the salutary principle of non-enrichment at
another’s expense, we sustain the appellate court’s order directing Pedro to return to
petitioner spouses the value of the consideration for the lot covered by TCT No. T-88674
and the house thereon.

However, this court rules that petitioners cannot claim reimbursements for improvements
they introduced after their good faith had ceased.  As correctly found by the Court of
Appeals, petitioner Patrocinia Ravina made improvements and renovations on the house
and lot at the time when the complaint against them was filed.  Ravina continued
introducing improvements during the pendency of the action.[18]
Thus, Article 449 of the New Civil Code is applicable.  It provides that, “(h)e who builds,
plants or sows in bad faith on the land of another, loses what is built, planted or sown
without right to indemnity.”[19]

On the last issue, petitioners claim that the decision awarding damages to respondents is
not supported by the evidence on record.[20]

The claim is erroneous to say the least.  The manner by which respondent and her
children were removed from the family home deserves our condemnation.  On July 5,
1991, while respondent was out and her children were in school, Pedro Villa Abrille
acting in connivance with the petitioners[21] surreptitiously transferred all their personal
belongings to another place.  The respondents then were not allowed to enter their
rightful home or family abode despite their impassioned pleas.

Firmly established in our civil law is the doctrine that: “Every person must, in the
exercise of his rights and in the performance of his duties, act with justice, give everyone
his due, and observe honesty and good faith.” [22] When a right is exercised in a manner
that does not conform with such norms and results in damages to another, a legal wrong
is thereby committed for which the wrong doer must be held responsible.  Similarly, any
person who willfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the damages
caused. [23] It is patent in this case that petitioners’ alleged acts fall short of these
established civil law standards.

WHEREFORE, we deny the instant petition for lack of merit.  The Decision dated
February 21, 2002 and the Resolution dated October 7, 2003 of the Court of Appeals in
CA-G.R. CV No. 54560 are AFFIRMED.

Costs against petitioners.

SO ORDERED.