Arts 523 & ff, Civil Code

G.R. No. L-56838               April 26, 1990

GENARO NAVERA AND EMMA AMADOR, petitioners,

vs.
THE HONORABLE COURT OF APPEALS, ARSENIO NARES AND FELIX NARES, respondents.

Madrid Law Office for petitioners.

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. No.
63926-R affirming in toto the decision of the Court of First Instance of Albay (now Regional Trial
Court) in Civil Case No. 4359 entitled "Arsenio Nares and Felix Nares vs. Genaro Navera and Emma
Amador," which declared the private respondents Arsenio Nares and Felix Nares owners of the land
in dispute.

The antecedent facts of this case are as follows:

Leocadio Navera has five (5) children, namely: Elena, Mariano, Basilio, Eduarda and Felix, all
surnamed Navera. Mariano Navera is the father of petitioner Genaro Navera. Elena Navera, on the
other hand has three children by Antonio Nares. Two of them are respondent Arsenio Nares and
Felix Nares. The other child, Dionisia is already deceased and has left children. Petitioner and
respondents are therefore, first cousins.

Way back in 1916, Leocadio Navera donated to Fausto Mustar in a private instrument a certain
property in consideration of the marriage of the former's son, Mariano Navera, to the daughter of
Fausto Mustar by the name of Restituta Mustar. The said property donated is described as follows:

The land that I am giving to my compadres (Cablaye) is located in Caguiba Camalig, Albay,
Philippines, and the boundaries and area are the following: North, property of Angel Navera,
and measures 98 meters on this side and the visible boundary is a row of Pasao; East,
property of Josefa Moratalla and measures 150 meters on this side with row of Pasao and
bani, on the South, property belong to me and measures 63 meters on this side and the
visible mark is shoulder of the mountain: on the west, my own property and measures 108
meters on this side with row of Pasao with a dita tree." (p. 110, Records)

On July 19, 1927, Original Certificate of Title No. RO-154(NA) was issued in the name of "Elena
Navera, et al.", covering the land in dispute, namely Lot 1460, situated in the Municipality of
Camalig, Albay, particularly described as follows:

A parcel of land (Lot No. 1460 of the Cadastral Survey of Camalig), with all the
improvements thereon; bounded on the SE, along lines 12, by Lot 1459; on the SW, along
lines 2-3-4-5-6-7-8, by creek; on the NE, along line 8-9, by Lot 1474; and on the E, along line
9-1, by Lot 1441, containing an area of TWENTY SIX THOUSAND NINE HUNDRED
NINETY FIVE (26,995) square meters more or less; . . . (pp. 30- 31, Records)

Sometime in 1924, Elena Navera died.

On May 14, 1947, Eduarda Navera, by means of a public instrument, sold to her nephew,
respondent Arsenio Nares, all of her share in Lot 1460, which is titled in the name of "Elena Navera,
et al." Eduarda Navera's share in the aforementioned lot is one-half (1/2) of the total area of Lot
1460. The deed of sale which the latter executed in favor of respondent Arsenio Nares particularly
describes the lot subject of the sale, as follows:

A portion from the tax No. 28081, of one (11) half belong to EDUARDA NAVERA and the
other one (1) half to own by the deceased Lina Navera, only is sold by this present deed of
sale, the one to belong to Eduarda Navera. But the other half being owned by Lina Navera,
is the very deceased mother of the buyer of this deed of absolute sale. Although the other
half to belong to Lina Navera but the present administrator is also name[d] the present
buyer. And by this reason, the whole lot is now under care of Arsenio Nares. The boundaries
of the portion to belong to Eduarda Navera, to sell the said purchaser are: on the North by
Mariano Navera; on the East by Roman Marga, on the South by Enrico Obligado and on the
West by Felix Samson. (pp. 32-33, Records)

On June 26, 1948, Eduarda Navera sold for the second time a portion of Lot 1460 to Mariano
Navera. The property sold is described as follows:

A portion of 50 meters long, 59 meters wide, the length has a terminus consisting of stone set by the
Bureau of Lands from the West and straight to the East, reaching the goal of a tree namely Ditadita
and from, that point down the South reaching the point with the symbol of a Gomian tree and from
Gomian for North Direction reaching Anonang with a dimension of 48 meters and from Anonang tree
curving to the point of a goal set by the Bureau of Lands and from that point at ends North direction
to the last is again a stone placed by the Bureau of Lands, 12 m. This portion is taken from land tax
No. R-124. Title No. ___________________________ and Lot No. _________________________.
The declaration has the value of P280.00. The boundaries of the portion to be sold are: — North, by
Igmedio Navera; on the east by Mariano Navera; on the south by Arsenio Nares, and on the west, by
Januario Nolasco, Arsenio Nares had also same bought a portion from the whole lot. (p. 111,
Records)

On January 30, 1953, respondent Arsenio Nares sold to Perpetua Dacillo a portion of Lot No. 4167
containing an area of five thousand seven hundred twenty six (5,726) square meters (p. 112,
Records). Perpetua Dacillo thereafter donated the said property to Francisco Dacillo. On August 13,
1955, Mariano Navera, sold to his brother-in-law, Serapio Mustar, the lot which he bought from
Eduarda Navera, particularly described as follows:

A certain parcel of land situated in the barrio of Tiniguiban, Caguiba Camalig, Albay,
Philippines, containing an area of (00-09-16) square meters more or less. Bounded on the
North by Igmedio Navera. This property is declared for taxation purposes under Tax No. R-
124. Visible boundaries consist of mojon and other trees. Assessed at P280.00. (pp. 105-
106, Records)

On February 11, 1956, the foregoing deed of sale was supplemented by the following stipulation:

(b) As to the property under paragraph (2) thereof, the same pertains to Cadastral Lot No.
1460, containing an area of 1-99-69 square meters, more or less, (in the said document
there was clerical error of the area, as previously stated in the total area of 00-09-16, which
is hereto corrected as 1-90-71 square meters, as the total area sold). (p. 107, Records)
On April 7, 1959, Serapio Mustar later sold to petitioner Genaro Navera Lot 1460 which he bought
from the latter's father, Mariano Navera, containing an area of nineteen thousand nine hundred sixty
nine (19,969) square meters more or less (p. 160, Records).

On September 3, 1971, Francisco Dacillo sold to petitioner Genaro Navera the land which the former
received by way of donation from Perpetua Dacillo. The lot sold is specifically described as follows:

A parcel of land (Lot No. 1460, Camalig, Cad. Survey), Albay, with all the improvements
thereon. Bounded on the N. by Genaro Navera; on the E by Roman Morga; on the S. by
CIPRIANO Morga and on the W. by Heirs of Felix Samson . . containing an area of seven
thousand and twenty six hundred (7,026) square meters. (p. 101, Records)

All of the foregoing transfers of Lot 1460 were not annotated and inscribed in the Original Certificate
of Title.

In their complaint dated March 14, 1971 filed with the then Court of First Instance of Albay (now
Regional Trial Court), respondents Arsenio Nares and Felix Nares, alleged inter alia: that they are
the absolute owners of the whole of Lot 1460 covered by Original Certificate of Title No. RO-
154(NA), and are entitled to the possession of the same; that Lot 1460 is registered in the name of
"Elena Navera, et al.", the "et. al" being Eduarda Navera; that the respondents acquired the above
described property by inheritance from their deceased mother Elena Navera; that a portion thereof
which had been adjudicated to Eduarda Navera was later sold to respondent Arsenio Nares; that
sometime in August, 1955, Mariano Navera, without any legal right whatsoever and under the
pretense of ownership sold the said property to his brother-in-law Serapio Mustar, who in turn sold
the same to Genaro Navera, son of Mariano. Plaintiffs, respondents herein, also claimed that all the
foregoing sales were sham and manipulated transactions and that Mariano Navera knew fully well
that he had no right to sell the property. Respondents admitted however, that they sold a portion of
the property containing 5,726 square meters to Perpetua Dacillo, so that the remaining portion still
belongs to them. They further contended that petitioner Genaro Navera entered the land after the
sale to him by Mustar and took possession of the same and acquired the produce thereof since 1957
up to the present time; and that respondents have exerted earnest efforts toward a compromise but
petitioners instead challenged them to go to court.

Petitioners Genaro Navera and Emma Amador filed their answer with counterclaim, denying all the
respondents' claims, and alleging inter alia: that Leocadio Navera is the father of five children,
namely, Elena, Mariano, Eduarda, Basilio and Felix; that after deducting 12,415 square meters
which Leocadio Navera donated to Fausto Mustar in 1916, the remaining area of Lot 1460 was
divided in equal shares among Elena, Mariano and Eduarda, to the extent of 4,860 square meters
each; that Basilio and Felix were given their shares in other parcels of land. Petitioners also
submitted that the et. al.  appearing in the title of the property refers to Fausto Mustar-12,415 square
1âwphi1

meters, Eduarda Navera-4,860 square meters, Mariano Navera-4,860 square meters and Elena
Navera-4,860 square meters; that Eduarda Navera sold 2,695 square meters of her share to
Mariano Navera while the remaining 2,166 square meters of her share was sold to Arsenio Nares;
that Arsenio's property totalled 7,026 sq. meters which he later sold to Perpetua Dacillo. Petitioners
further contended that they are presently in possession of Lot 1460 and their possession tacked to
that of their predecessor-in-interest as early as 1916; that the complaint states no cause of action
and that if the respondents had any, the same has long prescribed.

During the pre-trial on December 14, 1973, the parties agreed on the following matters: identity of
the land, the identity of the parties, that 5,726 sq. meters of the said Lot 1460 had already been sold
to Perpetua Dacillo and; that the defendants are in possession of the land in question.
On February 28, 1978, the trial court rendered a decision, the dispositive portion of which states:

PREMISES CONSIDERED, judgment is hereby rendered:

1. Declaring the plaintiff[s] owner[s] of the lot described in the Original Certificate of Title RO-
15480, except 5,726 square meters which rightfully belongs to defendant Genaro Navera.

SO ORDERED. (p. 47, Rollo)

Not satisfied with the decision of the trial court, the petitioner appealed to the Court of Appeals. On
December 16, 1980, the respondent appellate court rendered judgment affirming in toto the decision
of the trial court.

Hence, the instant petition was filed, praying for a reversal of the above-mentioned decision, with the
petitioner assigning the following errors:

1. That the Honorable Court of Appeals failed to appreciate acquisitive prescription in favor
of defendants (now petitioners). (p. 1 0, Rollo)

2. That the Honorable Lower Court failed to apply the rule of law that actual knowledge is
equivalent to, if not serve the purpose of registration. (p. 1 2, Rollo)

3. That the Honorable Court of Appeals erred in finding defendants-appellants (now

petitioners) to be in bad faith instead of the plaintiff-appellees (now private respondents). (p.
13, Rollo)

In their first assigned error, petitioners-spouses Genaro Navera and Emma Amador allege that the
evidence on record, particularly Exhibit 12 and 12-A, clearly show their possession of the disputed
property, the whole of Lot 1460, for more than forty-six (46) years which is tantamount to their
ownership of the same by prescription, be it ordinary or extraordinary prescription; that respondents
Arsenio Nares and Felix Nares should not have been declared owners of Lot 1460 since they have
lost whatever rights they have on the land due to the possession thereof by petitioners; and that the
sale by Eduarda Navera of her property to Arsenio Nares was not recorded or annotated in the title
just like the sale by Eduardo Navera of the same lot to Mariano Navera.

As found by the trial court and respondent appellate court, the property in dispute, namely, the whole
of Lot 1460 is titled in the name of "Elena Navera, et al.", the phrase et. al." referring only to
Eduarda, sister of Elena since the other brothers of Elena and Eduarda namely, Mariano, Basilio and
Felix had received their shares from the other properties of their father Leocadio Navera. These
factual findings are conclusive upon Us. Thus, when Elena Navera died sometime in 1924, her
compulsory heirs including respondents Arsenio Nares and Felix Nares acquired Elena's shares in
Lot 1460 by inheritance, which is one-half of Lot 1460. As to the other half of Lot 1460 owned by
Eduarda Navera, the latter sold the same to two vendees, one in favor of respondent Arsenio Nares
and the other in favor of Mariano Navera, petitioner's predecessor-in-interest.

On this matter of double sale, the appellate court upheld the findings of the trial court, as follows, to
wit:

"As correctly noted by the trial court, all the transfers or conveyances are not inscribed in the
Original Certificate of Title No. RO-15480(NA) ("Exhibit A"). It would not be amiss to state
that the sa[l]e of Eduarda Navera to Arsenio Nares, and the sale of Eduarda Navera to
 Mariano Navera, which as above-mentioned, the property referred to in both sales is the very
same property covered by reconstituted title — Exhibit A. The sale of Eduarda Navera to
appellee Arsenio Nares covered all her portion to the property, thus, she could not possibly
sell on June 26, 1948, another portion of the same property to Mariano Navera. Thus, the
portion referred to in the sale to Mariano Navera by Eduarda Navera may not be validly
transferred by Mariano Navera to Serapio Mustar. It likewise follow that Serapio Mustar may
not effectively convey the same to Genaro Navera . . . It is irremissible to state that the
alleged conveyance made by Serapio Mustar in favor of appellant Genaro Navera have no
legal effect whatsoever, for the simple reason that Serapio Mustar could not properly convey
the portion referred to in the sale of June 26, 1948, by Eduarda Navera in favor of Mariano
Navera. In the first place, Eduarda Navera has no existing right to convey another portion of
the property because she had already sold all her portion to appellee Arsenio Nares. Thus at
the time Eduarda Navera conveyed a portion of the property which she already conveyed to
appellee Arsenio Nares, she has no right on the property and the power to dispose it. It
clearly appears, therefore, that Mariano Navera never acquired that portion subject of the
sale on June 26, 1948. Having acquired that portion of the property subject of the sale on
June 26, 1948 from Mariano Navera, Serapio Mustar has likewise no existing right and
power to dispose of that portion of the property to appellant Genaro Navera.

Contrary to the appellants' claim that they are possessors in good faith, Article 526 of the
New Civil Code provides that a possessor in good faith is one who is not aware that there
exists in his title or mode of acquisition any flaw which invalidates it and a possessor in bad
faith is one who possesses in any case contrary to the foregoing. And our Supreme Court
said "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." His possession is legally
interrupted when he is summoned to trial according to Article 1123 of the New Civil Code.
Tacas v. Tabon, 53 Phil. 356)" (pp. 25-26, Rollo).

We agree with the aforequoted findings and conclusions of the lower court which were affirmed on
appeal by the Court of Appeals. The conclusions and findings of facts by the trial court are entitled to
great weight and will not be disturbed on appeal unless for strong and cogent reasons because the
trial court is in a better position to examine real evidence as well as to observe the demeanor of
witnesses while testifying on the ease. (Macua vs. Intermediate Appellate Court, No. L-70810,
October 26, 1987, 155 SCRA 29).

Clearly applicable herein is Article 1544 of the Civil Code which provides:

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

Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.

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

In the instant case, the first sale of Eduarda Navera's share in the said lot to Arsenio Nares was
made in a public instrument on May 14, 1947. The second sale of the same property was executed
also in a public instrument in favor of Mariano Navera, who is the predecessor in interest of
petitioner Genaro Navera, on June 26, 1948, or more than a year after the first sale. Since the
records show that both sales were not recorded in the Registry of Property, the law clearly vests the
ownership upon the person who in good faith was first in possession of the disputed lot.

The possession mentioned in Article 1544 for determining who has better right when the same piece
of land has been sold several times by the same vendor includes not only the material but also the
symbolic possession, which is acquired by the execution of a public instrument. This means that
after the sale of a realty by means of a public instrument, the vendor, who resells it to another, does
not transmit anything to the second vendee, and if the latter, by virtue of this second sale, takes
material possession of the thing, he does it as mere detainer, and it would be unjust to protect this
detention against the rights of the thing lawfully acquired by the first vendee (Quimson vs. Rosete,
87 Phil. 159; Sanchez vs. Ramos, 40 Phil. 614; Florendo vs. Foz, 20 Phil. 388). In the case at bar,
the prior sale of the land to respondent Arsenio Nares by means of a public instrument is clearly
tantamount to a delivery of the land resulting in the material and symbolic possession thereof by the
latter. Verily, factual evidence points to the prior actual possession by respondent Nares before he
was evicted from the land by petitioners and their predecessors in 1957 when the latter entered the
disputed property. No other evidence exists on record to show the contrary.

Based on the foregoing, it is correct to conclude that the priority of possession stands good in favor
of respondents. It is well-settled in our jurisprudence that prior est in tempore, potior est in jure (he
who is first in time is preferred in right). Ownership should therefore be recognized in favor of the first
vendee, respondent Arsenio Nares.

Petitioners further submit that they have been in possession of the whole lot for more than 46 years,
that this can be gleaned from the letter sent by respondent Nares, wherein the latter admitted that it
was the petitioner Navera who continuously gathered the produce of the land for 46 years; that such
possession for a considerable length of time entitled them to ownership by prescription whether
ordinary or extraordinary.

This contention is devoid of merit. Prescription as a defense, must be expressly relied upon in the
pleadings. It cannot be availed of, unless it is specially pleaded in the answer; and it must be proved
or established with the same degree of certainty as any essential allegation in the civil action
(Hodges vs. Salas, 63 Phil. 567; Corporacion de PP. Autinus Recolectos vs. Crisostomo, 32 Phil.
427). In the instant case, petitioners, who were the defendants in the lower court, did not claim
acquisitive prescription in their answer, and even if they did, it cannot be given judicial sanction on
mere allegations. The law requires one who asserts ownership by adverse possession to prove the
presence of the essential elements of acquisitive prescription (Morales vs. CFI, et al., No. L- 52278,
May 29, 1980, 97 SCRA 872).

After a careful examination of the records, We are of the opinion that there is lack of sufficient proof
to establish clearly and positively petitioner's claim of acquisitive prescription. In fact, We are more
inclined to believe respondents' version that respondent Arsenio Nares was evicted from the
property by petitioner sometime in 1957, thereby showing the latter's bad faith in acquiring the
possession of the property until 1971 when the action against petitioner was filed. Thus, the ordinary
acquisitive prescription of ten years cannot be considered in favor of petitioner in the absence of
good faith. Neither is the petitioner entitled to extraordinary acquisitive prescription, in the absence of
sufficient proof of compliance with the thirty-year requirement of possession in case of bad faith.

Moreover, the law clearly states that "possession has to be in the concept of an owner, public,
peaceful and uninterrupted" (Article 1118, Civil Code). The actuations of petitioners, however, show
the contrary. A reading of the demand letter from respondents dated May 27, 1970, submitted in
evidence by petitioners, shows that the dispute over Lot 1460 had been going on for a number of
years among petitioners, respondents and their families. This goes to show that during the time
when the petitioners bought the land in 1959 and the following years thereafter when the latter
possessed the property, they have known or should have known of the rights and interests of their
cousins, respondents herein, over the disputed land. Moreover, the tax declarations for the years
1951 and 1965 showed that the respondents Arsenio Nares and Felix Nares were the declared
owners (p. 34 and 113, Records). In other words, petitioner's predecessors in interest, namely,
Mariano Navera and the subsequent purchasers of the lot, had not bothered to declare the land in
their own names for purposes of taxation during the time that they were allegedly in possession of
the land. It was only in the year 1966 when petitioner Genaro Navera started to declare himself
owner of the land for taxation purposes (p. 126, Records).

In their second assignment of error, petitioners contend that private respondents are bound by their
knowledge of the previous donation propter nuptias by their ancestor, Leocadio Navera in favor of
Fausto Mustar. This contention has no merit. The respondent appellate court affirmed the findings of
the lower court on this matter, as follows, to wit:

After a careful perusal and thorough review of the whole evidence on record, we cannot find
any basis therein for upholding the claim of appellants, articulated in their appellants' brief. It
is apropos to state that the donation propter nuptias made by Leocadio Navera sometime in
October, 1916, should have been at least recorded in the registry of property or inscribed in
the Original Certificate of Title or the donee shall have titled the property in his name. As the
trial court correctly noted that the alleged donee Fausto Mustar is not a party to the case nor
had he transferred the said donated property to the spouses Mariano Navera in a public
instrument or conveyance. Nowhere in the evidence on record would show that the said
donated property was ever transferred to Mariano Navera, father of defendant-appellant
Genaro Navera." (p. 24, Rollo)

No important reasons exist to compel Us to ignore the findings of the respondent appellate court.
Besides, the knowledge of private respondents concerning the alleged previous donation is
immaterial. The facts are clear that the original certificate of title itself covers the whole of 26,995
square meters of the disputed Lot 1460 in the name of "Elena Navera, et al.", without any mention of
any previous donation of a portion of the said lot to the alleged donee.

Petitioners' third assigned error was already treated and resolved in the foregoing discussions.

ACCORDINGLY, the petition is DENIED but the decision of the Court of Appeals dated December
16, 1980 is hereby MODIFIED to the effect that as against the petitioners Genaro Navera and Emma
Amador, the respondents Arsenio Nares and Felix Nares are declared the rightful owners of the
disputed Lot 1460, except with respect to 5,726 square meters thereof which belongs to petitioner
Genaro Navera, without prejudice however, to whatever rights and interests that the other
compulsory heirs of Elena Navera may have in the one-half portion of Lot 1460. The respective
rights of respondents to Lot 1460 as between themselves is a matter outside of this controversy and
is therefore, beyond the jurisdiction of this Court to pass upon.

SO ORDERED.

G.R. No. 71283 November 12, 1987

MIGUEL ESCRITOR, JR., ANGEL ESCRITOR, RAMON ESCRITOR, JUANA ESCRITOR,

CONCORDIA ESCRITOR, IRENE ESCRITOR, MATILDE ESCRITOR, MERCEDES ESCRITOR,
HEIRS OF LUIS ESCRITOR, represented by RUPERTO ESCRITOR, HEIRS OF PEDO
ESCRITOR, represented by SUSANA VILLAMENA, LINA ESCRITOR, WENDELINA ESCRITOR,
ALFREDO ESCRITOR, SUSANA ESCRITOR and CARMEN ESCRITOR, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and SIMEON ACUNA, respondents.

GANCAYCO, J.:

This is a petition for review on certiorari seeking the reversal of the decision of the Intermediate
Appellate Court in AC-G.R. No. CV-01264-R entitled "Simeon Acuna vs. Miguel Escritor, Jr., et al," a
case which originated from the Court of First Instance of Quezon.

The record of the case discloses the following facts:

Lot No. 2749, located at Atimonan, Quezon, was the subject of cadastral proceedings in the Court of
First Instance of Quezon, Gumaca Branch, Miguel Escritor, as claimant, filed an answer thereto
declaring his ownership over the lot alleging that he acquired it by inheritance from his deceased
father. 1 As required, a notice of hearing was duly published, after which an order of general default was entered.   The lot having become
2

uncontested, only Miguel Escritor appeared in order to adduce his evidence of ownership.

On May 15, 1958, the Court rendered a decision in the abovementioned case, Cadastral Case No.
72, adjudicating the lot with its improvements in favor of claimant Escritor and confirming his title
thereto.   Immediately thereafter, Escritor took possession of the property. On July 15, 1958, the
3

Court, in an Order, directed the Chief of the General Land Registration Office to issue the
corresponding decree of registration in favor of Escritor, the decision in Cadastral Case No. 72
having become final.  4

On August 2, 1958, Simeon S. Acuna, the herein respondent, filed a petition for review of the above-
mentioned decision contending that it was obtained by claimant Escritor through fraud and
misrepresentation.   The petition was granted on July 18, 1960 and a new hearing was set for
5

September 13, 1960.   While the proceedings were going on, claimant Escritor died. His heirs, the
6

petitioners in this case, took possession of the property.

On February 16, 1971 or thirteen years after the disputed decision was rendered, the Court
adjudicated Lot No. 2749 in favor of respondent Acuna, ordering petitioners to vacate the land.   A 7

writ of possession was later issued and petitioners voluntarily gave up their possession.  8

More than four years later, or on October 13, 1975 respondent Acuna filed with the same Court in
Civil Case No. 1138-G, a complaint for recovery of damages against petitioners for the fruits of lot
No. 2749 which was allegedly possessed by the latter unlawfully for thirteen years. According to
respondent Acuña, the registration of the said lot was effectuated by the deceased claimant Escritor
through fraud, malice, and misrepresentation. The lower court, however, rendered a decision
dismissing Acuña's complaint for damages, finding that though petitioners enjoyed the fruits of the
property, they were in good faith possessing under a just title, and the cause of action, if there was
any, has already prescribed.  9

On Appeal to the Intermediate Appellate Court, the judgment of the lower court was reversed in a
decision promulgated on October 31, 1984, the dispositive portion of which reads:
 WHEREFORE, in view of the foregoing considerations, the decision appealed from is
hereby REVERSED and set aside and another one entered herein, ordering the
defendants-appellees jointly and severally (a) to pay the plaintiff- appellant the sum
of P10,725.00 representing the value of the fruits appellees received for the 13 years
they have been in unlawful possession of the land subject-matter; (b) to pay plaintiff-
appellant the sum of P3,000.00 for attorney's fees and expenses of litigation, and (c)
to pay the costs.

Hence this petition.

The main issue that has to be resolved in this case is whether or not petitioners should be held liable
for damages.

Contrary to the finding of the trial court, the Intermediate Appellate Court made the pronouncement
that petitioners were possessors in bad faith from 1958 up to 1971 and should be held accountable
for damages. This conclusion was based on the statement of the cadastral court in its August 21,
1971 decision, readjudicating Lot No. 2749 to respondent Simeon Acuna, that "Miguel Escritor
forcibly took possession of the land in May, 1958, and benefited from the coconut trees
thereon. 10 The Intermediate Appellate Court observed that on the basis of the unimpeached conclusion of the cadastral court, it must be
that the petitioners have wrongfully entered possession of the land. 11 The Intermediate Appellate Court further explains that as such
possessors in bad faith, petitioners must reimburse respondent Acuna for the fruits of the land they had received during their possession. 12

We cannot affirm the position of the Intermediate Appellate Court. It should be remembered that in
the first decision of the cadastral court dated May 15, 1958, Lot No. 2749 was adjudicated in favor of
claimant Escritor, petitioners' predecessor-in-interest. In this decision, the said court found to its
satisfaction that claimant Escritor acquired the land by inheritance from his father who in turn
acquired it by purchase, and that his open, public, continuous, adverse, exclusive and notorious
possession dated back to the Filipino-Spanish Revolution. 13 It must also be recalled that in its Order for the
issuance of decrees dated July 15, 1958, the same Court declared that the above-mentioned decision had become final. Significantly,
nowhere during the entire cadastral proceeding did anything come up to suggest that the land belonged to any person other than Escritor.

On the basis of the aforementioned favorable judgment which was rendered by a court of competent
jurisdiction, Escritor honestly believed that he is the legal owner of the land. With this well-grounded
belief of ownership, he continued in his possession of Lot No. 2749. This cannot be categorized as
possession in bad faith.

As defined in the law, a possessor in bad faith is one in possession of property knowing that his title
thereto is defective. 14 Here, there is no showing that Escritor knew of any flaw in his title. Nor was it proved that petitioners were
aware that the title of their predecessor had any defect.

Nevertheless, assuming that claimant Escritor was a possessor in bad faith, this should not prejudice
his successors-in-interest, petitioners herein, as the rule is that only personal knowledge of the flaw
in one's title or mode of acquisition can make him a possessor in bad faith, for bad faith is not
transmissible from one person to another, not even to an heir. 15 As Article 534 of the Civil Code explicitly provides,
"one who succeeds by hereditary title shall not suffer the consequences of the wrongful possession of the decedent, if it is not shown that he
was aware of the flaws affecting it; ..." The reason for this article is that bad faith is personal and intransmissible. Its effects must, therefore,
be suffered only by the person who acted in bad faith; his heir should not be saddled with such consequences. 16

Under Article 527 of the Civil Code, good faith is always presumed, and upon him who alleges bad
faith on the part of a possessor rests the burden of proof. If no evidence is presented proving bad
faith, like in this case, the presumption of good faith remains.

Respondent Acuna, on the other hand, bases his complaint for damages on the alleged fraud on the
part of the petitioners' predecessor in having the land registered under his (the predecessor's) name.
A review of the record, however, does not indicate the existence of any such fraud. It was not proven
in the cadastral court nor was it shown in the trial court.

Lot No. 2749 was not awarded to Escritor on the basis of his machinations. What is clear is that in
the hearing of January 22, 1958, the Court permitted Escritor to adduce his evidence of ownership
without opposing evidence as the lot had become uncontested. 17 Respondent Acuna himself failed to appear in
this hearing because of a misunderstanding with a lawyer. 18 There is no finding that such failure to appear was caused by petitioners in this
case. On the contrary, all the requirements of publication were followed. Notice of hearing was duly published. Clearly then, the allegation of
fraud is without basis.

Respondent having failed to prove fraud and bad faith on the part of petitioners, We sustain the trial
court's finding that petitioners were possessors in good faith and should, therefore, not be held liable
for damages.

With the above pronouncement, the issue of prescription of cause of action which was also
presented need not be passed upon.

WHEREFORE, the petition is GRANTED and the decision appealed from is hereby REVERSED and
SET ASIDE and another decision is rendered dismissing the complaint. No pronouncement as to
costs.

SO ORDERED.

G.R. No. L-31053 October 23, 1982

PHILIPPINE NATIONAL BANK, petitioner,

vs.
HON. PEDRO SAMSON C. ANIMAS, Judge of the Court of First Instance of South Cotabato
and ABI OLIPON-DAMBONG, respondents.

Conrado E. Medina & Associates for petitioner.

Niceto C. Joaquin for private respondent.

RELOVA, J.:

Appeal by certiorari from an order of the Court of First Instance of South Cotabato, dismissing the
complaint for Ejectment with Damages, docketed as Civil Case No. 1044, on the ground that "the
principal cause of action is within the original exclusive jurisdiction of the City Court."

Petitioner Philippine National Bank, on May 13, 1969, filed with the Court of First Instance of South
Cotabato, Branch II, a complaint for "Ejectment with Damages," the pertinent allegations of which
are as follows:

3. That the plaintiff is the owner of a parcel of unregistered agricultural land located
at Sitio Lamcanal, Barrio of Malungon, Municipality of General Santos, Province of
South Cotabato, Philippines, more particularly described as follows:
Lot No. 458

A parcel of unregistered agricultural land, containing

an area of 13,0000 hectares, more or less, bounded
on the N. by Batigon Apud; on the S., by Elon
Dambong; on the E., by Tinagacan Road; and on the
W., by Hasan Dambong.

which property formerly formed part of an unsurveyed parcel of land containing an

area of 24 hectares, more or less, and is assessed at P3,280.00 under Tax
Declaration No. 412 in the name of the Philippine National Bank, the same having
been acquired from Diamalud Dambong pursuant to a writ 6f execution issued by the
Court of First Instance of Cotabato in Civil Case No. 580 for 'Sum of Money' vs.
Diamalud Dambong for the bid price of P100.00 on said whole parcel of 24 hectares,
in an auction sale held by the Provincial Sheriff of Cotabato on September 11, 1954;

4. That in compliance with law, the corresponding Certificate of Judicial Sale dated
September 13, 1954 covering the said 24 hectares of land was executed and
delivered by the Provincial Sheriff of Cotabato in favor of the plaintiff Bank and was
duly registered in the Register of Deeds of Cotabato Province on September 20,
1954 pursuant to Act 3344;

5. That after the expiration of the right to redeem said property within the one- year
period counted from the date of the auction sale, as provided for in the Certificate of
Judicial Sale (BUT ISNT IT THAT IN JUDICIAL SALE, THERE IS NO RIGHT OF
REDEMPTION), and in compliance with law, a Definite Deed of Sale dated June 11,
1956 was executed and delivered by the said Provincial Sheriff to the plaintiff Bank
which was likewise registered in the Register of Deeds of Cotabato Province on
August 20, 1956 pursuant to Act 3344;

6. That notwithstanding said acquisition of ownership by the plaintiff Bank, defendant

who is the surviving spouse of its former owner, Diamalud Dambong, has continued
to occupy and possess said portion of land (Lot No. 458), which possession by
defendant has been merely tolerated by the plaintiff by reason of the promises of
defendant, Abi Olipon-Dambong and her son, Hasan Dambong to reacquire said
property from the plaintiff Bank;

7. That after failure on the part of defendant to make good her promise to reacquire
said parcel of land, plaintiff thru its representatives, made verbal and written
demands on defendant thru her son, Hasan Dambong, to vacate the premises
thereof, or to deliver plaintiff's share of the income derived from the fruits of the land,
the written demand being made on December 12, 1968; but defendant refused and
still refuses to vacate the premises thereof or to deliver the plaintiff's share of the
income derived from the fruits of the land, without any lawful cause or justification;

8. That the net income from the coconuts and other crops suck as corn being grown
on the land is conservatively estimated at P1,450.00 per year, which plaintiff could
have received if it were enjoying possession of the same;

9. That by her deliberate acts of bad faith in not complying with her promise to
reacquire said property from the plaintiff, and in not placing plaintiff in its peaceful
possession thereby depriving plaintiff its right to sell the same to interested buyers,
 defendant should be liable for exemplary damages, the assessment of which is left to
the sound discretion of the Court. (Emphasis supplied)

Within the time to answer, private respondent Abi Olipon Dambong, on August 12, 1969, filed a
Motion to Dismiss on the ground that the allegations in the complaint are clearly statements of
facts which constitute a case of unlawful detainer, hence, the Court of First Instance had no
jurisdiction over the subject matter or nature of the action.

On August 26, 1969, Court of First Instance Judge Pedro Samson C. Animas, finding the 'motion to
dismiss to be meritorious, issued the following order:

Finding the MOTION TO DISMISS the complaint to be well taken, it appearing on the
face of the complaint that the defendant unlawfully detained the property within a
period of one-year after she was notified to vacate the same, hence, the principal
cause of action is one of UNLAWFUL DETAINER which is within the original
exclusive jurisdiction of the City Court, this case is hereby DISMISSED without
pronouncement as to costs.

On September 9, 1969, petitioner filed a Motion for Reconsideration of the aforesaid order dated
August 26, 1969. On September 13, 1969, respondent court issued an order as follows:

For lack of merit, the MOTION FOR RECONSIDERATION is hereby denied.

Coming to this Court, petitioner alleged that the lower court erred: (1) in holding that respondent Abi
Olipon-Dambong's possession or withholding of the land became unlawful only from the time
demand to vacate the land was made: (2) in holding that since the complaint was filed within the
period of one year after respondent Abi Olipon-Dambong was notified to vacate the land, the
principal cause of action is one of unlawful detainer which is within the original exclusive jurisdiction
of the city court.

It is the position of herein petitioner that since the ejectment case was filed on May 13, 1969, or
almost fourteen (14) years after the expiration of the one-year period of redemption, the case falls
within the exclusive jurisdiction of the Court of First Instance as a case "for illegal possession (accion
publiciana)"; that the possession of the land became illegal after the expiration of the period of
redemption which was on September 11, 1956; that for the action to prosper as an "illegal detainer it
should have been filed within one year from the expiration of one-year period of redemption."

The contention is unmeritorious. It is a fact that private respondent was tolerated by herein petitioner
to stay in the property after September 11, 1956. It was only on December 12, 1968 when petitioner
wrote private respondent "to vacate the premises thereof, or to deliver plaintiff's share of the income
derived from the fruits of the land." Thus, it was only after written demand was made upon the
defendant to leave the premises that her possession became unlawful. As held in the case of
Prieto vs. Reyes, 14 SCRA 430 —

. . . since there can be possession by tolerance, this Court has repeatedly held that
possession or detainer becomes illegal only from the time that there is a
demand to vacate. Hence, the year for bringing the action for illegal detainer should
be counted only from such demand.

And, in the case of Casilan vs. Tomassi, 10 SCRA 267, it was held that "there is no legal obstacle for
the owner to allow a defaulting tenant to remain in the rented property one month, one year, several
years, or even decades. That consent, no matter how long it may last, makes lawful tenant's
possession. Only when that consent is withdrawn and the owner demands tenant to leave the
property is the owner's right of possession asserted and the tenant's refusal or failure to
move out makes his possession unlawful, because it is violative of the owner's preferential
right of possession."

In the case before Us, the demand letter for the respondent to vacate was on December 12, 1968,
and the complaint was filed on May 13, 1969, or within the one-year period. Hence, the case for
unlawful detainer should have been filed in the city court.

WHEREFORE, the order of the lower court dated August 26,1969, dismissing the complaint is
AFFIRMED, with costs against the petitioner.

SO ORDERED.

G.R. No. L-39044 January 3, 1985

MANOTOK REALTY, INC., petitioner,

vs.
THE HON. COURT OF APPEALS and FELIPE CARILLO, respondents.

GUTIERREZ, JR., J.:

In this petition for review, the petitioner asks that we reverse the decision of the Court of Appeals,
now the Intermediate Appellate Court, which declared respondent Felipe Carillo a builder in good
faith with the right to remain in the questioned premises, free of rent, until reimbursed by the
petitioner for the necessary and useful expenses introduced on the land.

The dispositive portion of the Court of Appeals' decision reads:

WHEREFORE, the appealed judgment is hereby modified in the sense that the
appellant being a builder in good faith is entitled to the right of retention of the lot
introduced thereon, and he is not hable to pay rentals for the occupation thereof
pending payment of the indemnity for such improvements. In all other respects, the
appealed judgment is affirmed, without pronouncement as to costs.

The background facts of the case are found in the decision of the respondent court
as follows:

There is no dispute that herein appellee is the registered owner of a parcel of land
covered by Tax Declaration Nos. 2455 and 2456 issued by the City Assessor's Office
of Manila with a total assessed value of P3,059,180.00 and by TCT 55125 (Exh. A)
and TCT No. 76130 of the Register of Deeds of the City of Manila. It acquired the
aforementioned property from the Testate Estate of Clara Tambunting de Legarda,
being the highest bidder in a sale conducted by the Probate Court (Exhs. C-7 & C-7-
A).

After having acquired said property, the appellee subdivided it, but could not take
possession thereof because the whole area is occupied by several houses among
 which is the one belonging to the herein appellant Felipe Carillo, Lot 143, Block 2 of
the subdivision plan (Exh. A-4 Carillo).

Demands to vacate and to surrender possession of the property were made by the
appellee verbally and by publication (Exhs. D, D-1 & D-2) and by circulars served to
the appellant. In spite of such demands, the appellant continued to occupy the
disputed lot and refused to surrender possession thereof to the appellee.

On the other hand, appellant's evidence tends to show that he acquired the lot in
dispute from a certain Delfin Dayrit on September 25, 1962, pursuant to a deed of
assignment (Exh. 1-Carillo); that Dayrit in turn had acquired the property from the
late Carla Tambunting by virtue of a Contract of Sale on Installment Basis (EXIL 2-
Carillo); that Dayrit had religiously paid the monthly installments as they fell due, his
last payment being on May 25, 1954, in the sum of P200.00, then leaving an unpaid
balance of Pl,306.00 when the said parcel was conveyed to defendant Carino, for
which receipts were duly issued (Exhs. 3-Carillo to 24-Carillo); that Dayrit could not
continue paying the succeeding installments as they fen due because Vicente
Legarda, the surviving spouse of Clara Tambunting, refused to receive any payment
for the same and that it was only lately, more specifically on September 25, 1962,
when Dayrit conveyed the lot to appellant Carillo.

After the petitioner failed in its attempts to take possession of the lot, it filed the reivindicatory action
against the respondent.

The trial court decided the case in favor of the petitioner. The dispositive portion of its decision
reads:

In Civil Case No. 64578:

(1) Ordering defendant Felipe Carino to vacate and/or surrender possession to

plaintiff Manotok Realty Inc. of the parcel of land subject matter of the complaint
described in paragraph 2 thereof;

(2) To pay plaintiff the sum of P75.50 per month from January 21, 1961 up to the
time he actually surrenders possession of the said parcel to the plaintiff; and

(3) To pay plaintiff the sum of Pl,000.00 as attorney's fees and to pay costs.

On August 15, 1984, we required the parties to show whether or not the disputed lot falls within the
area expropriated under P.D. No. 1669 and P.D. No. 1670. It appears that the expropriated portion
of the Tambunting Estate is the area located at the east side adjacent to the Chinese Cemetery. The
lot is on the unexpropriated and mainly commercial portion on the west side, across from Rizal
Avenue.

In this petition, the petitioner maintains that the appellate court erred in considering the respondent a
possessor and builder in good faith. It argues that at the time of the execution of the deed of
assignment in favor of the respondent, the land was already registered in its name; and that if the
respondent were really acting in good faith, he should have verified from the Register of Deeds of
Manila who was the registered owner of the land in question.

We agree.
A possessor in good faith is one who is not aware that there exists in his title or mode of acquisition
any flaw which invalidates it. (Caram v. Laureta, 103 SCRA 7, Art. 526, Civil Code). One who
acquires real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has
acquired title thereto in good faith as against the true owner of the land or of an interest therein; and
the same rule must be applied to one who has knowledge of facts which should put a reasonable
man upon his guard, and then claims that he acted in good faith under the belief that there was no
defect in the title of the vendor. (See Leung Yee v. FL Strong Machinery Co., 37 Phil. 644).

The records show that when Dayrit executed the deed of' assignment in favor of the respondent, the
disputed lot was already registered and titled in the name of the petitioner. Such an act of
registration served as a constructive notice to the whole world and the title issued in favor of
petitioner made his ownership conclusive upon and against all persons including Dayrit and. herein
respondent, although no personal notice was served on either of the latter. (See Garcia v. Bello, 13
SCRA 769; Demontano v. Court of Appeals, 81 SCRA 286). Therefore, the presumption of good
faith in favor of the respondent cannot apply because as far as the law is concerned, he had notice
of the ownership by the petitioner over said lot. It is also unthinkable that in the big Tambunting
Estate beset with one of the most serious squatter problems in Metro Manila, any tenant or
prospective buyer would be unaware that the petitioner acquired the estate as highest bidder at the
sale ordered by the probate court. Furthermore, the respondent did not even bother to inquire about
the certificate of title covering the lot in question to verify who was the real owner thereof, despite the
fact that his transferor, Dayrit, never showed him any title thereto; a circumstance which should have
put him upon such inquiry or investigation. His failure to exercise that measure of precaution which
was reasonably required of a prudent man in order to acquaint him with the defects in the title of his
vendor precludes him from claiming possession in good faith.

We agree with the following observations of Justice Guillermo S. Santos in his separate concurring
and dissenting opinion:

The issue now is whether appellant may be considered as a possessor in good faith
of the property in question. Article 256 of the Civil Code defines a possessor in good
faith as one who is not aware that there exists in his title or mode of acquisition any
flaw which invalidates it.

In this case, it was shown that under the contract of sale on installment basis, Delfin
Dayrit had only paid a total of P4,917.30, leaving an unpaid balance of P3,860.20 as
of August 9, 1954 (Dec. RA p. 43). The said contract specifically provides that ". . . if
for some reason or other the purchaser cannot pay a certain installment on the date
agreed upon, it is hereby agreed that said purchaser will be given a maximum limit of
two months' grace in which to pay his arrears, after which the property will revert to
the original owner hereof: the Clara Tambunting Subdivision, No. 50 Reina Regente
St., Binondo, Manila, P.I." The subsequent installment after August 9, 1954, not
having been paid, the property, therefore, reverted to Clara Tambunting and
therefore formed part of her estate, which was subsequently acquired by appellee.
Thus, when appellant purchased the parcel of land in question from Dayrit on August
25, 1962—or eight (8) years after the default—the latter had no more right over the
same.

It was incumbent on appellant to inquire into the title of his vendor over the property.
Had appellant demanded from his vendor, Dayrit, the certificate of his ownership of
the property subject of the negotiation, he would have learned that the latter had no
right, much less, title over the same because of his default in the payment of the
monthly installments. A purchaser cannot close his eyes to facts which should put a
 reasonable man upon his guard and then claim that he acted in good faith under the
behef that there was no defect in the title of the vendor (Leung Yee v. Strong
Machinery Co., 37 Phil. 644). Consequently, appellant cannot be deemed a
possessor in good faith and is not, therefore, entitled to reimbursement for the
improvements he had introduced in the property in question.

No installments and rentals have been paid for the lot since 1954 or for more than thirty (30) years.
While Dayrit transferred to Carillo whatever rights he may have had to the lot and its improvements
on September 25, 1962, the claim for back rentals was from March 20, 1959 while the trial court
ordered payment as of January 21, 1961 or twenty four (24) years ago. Considering the facts,
applicable law, and equities of this case, the decision of the trial court appears to be correct and is,
therefore, reinstated.

WHEREFORE, the questioned decision of the Court of Appeals is hereby SET ASIDE and another
one is entered AFFIRMING in toto the decision of the Court of First Instance of Manila in Civil Case
No. 64578.

SO ORDERED.

G.R. No. L-8108             August 22, 1914

RAMON L. ORTIZ, plaintiff-appellant,
vs.
ASUNCION FUENTABELLA, ET AL., defendants-appellee.

Leoncio Imperial for appellant.

Lucas Paredes for appellees.

ARELLANO, C.J.:

There has been inscribed in their property registry of the Province of Ambos Camarines, since
August 6, 1892, a possessory information regarding a parcel of pasture land in the place called
Tagas in the municipality of San Jose of said province; in area 27 hectares and 90 centares;
bounded on the north by the rivulet Dacuilan and Calauit, on the south by the San Miguel River, on
the east by the sea, and on the west by the lands of Mariano Pelayo, Maria Pagueo, and Gaspar
Codillo. The authenticity of this possessory information is not and never has been questioned.

The person securing this possessory information was Don Ramon Ortiz, a resident of the said town
of San Jose, who, according to the contents of the information, "provided before the justice of the
peace of that town the possession he had held of said land for fifteen years previously, when he had
acquired it by cultivating it himself, without securing any written title;" and it was approved by order of
July 2, 1892.

On March 10, 1909, Marcelina Ortiz, daughter of the said Don Ramon Ortiz, addressed to Asuncio
Fuentabella the following letter:

I have been informed that you are thinking of setting out coco palms on the lands that out
parents possess in the place called Tagas, of this municipality, used as a pasture for our
cattle, within the boundaries formed on the north by the rivulet Rangas Sadang, on the east
 by the beach, on the south by the San Miguel River that flows into the Sabang Bunga, and
on the west by the lands of Gaspar Codillo and others. If this be true, I request that you
desist from your purpose.

Asuncion Fuentebella answered the foregoing letter on the 19th of the same month and year in the
following words:

Regarding my idea of setting out coco palms, you are misinformed; I am not thinking of
setting out coco palms, as you state, on lands belonging to your parents.

Under date of December 29 of the same year 1909, Asuncion Fuentebella appears in a public
document as the vendee of all the land included in that inscribed information the vendors being the
brother and sister Juan and Sotera Cano, who in said document state nothing more than the
following: "This land has been quietly and peacefully possessed by our late parents for thirty years
prior to this date." Thirty years preceding this date, which is December 29, 1909, are the years that
have elapsed since 1879.

In view of this attitude of Asuncion Fuentebella, Ramon Ortiz filed the present complaint, wherein he
asks for restitution of the possession of said parcel of land and P200 as damages.

Asuncion Fuentebella cited Juan and Sotera Cano in defense of the title. She answer the complaint
on August 21, 1911, and said that she had been in possession of the said land for more than two
years and that she had set out thereon over 5,000 coco palms and built a house, wherefore she
prayed that either the complaint be dismissed, or that the plaintiff pay her P8,000 Philippine currency
for the coco pals set out and the house built. The vendors, Cano and his sister, substantiated their
possession from the time of inheriting the property from their parents to the time of the sale; and
subsidiarily, should this defense fail, they alleged prescription in favor of the defendant Fuentebella.

After examining both the oral and documentary evidence the Court of First Instance of Ambos
Camarines absolved the defendant from the complaint with the costs against the plaintiff, who
appealed from the judgment.

Asuncion Fuentebella cannot make her personal possession prevail over the possession inscribed in
the property years before she filed her answer to the complaint. Primarily and personally the
defendant has no right beyond what she has derived from Juan and Sotera Cano.

With reference to Juan and Sotera Cano's possession, the trial court's conclusions are: That these
Cano defendants have not really and materially possesses a great part of the land; that Felipe Cano,
father of these defendants, had a house built on the tract, and probably exercised acts of possession
over the land in the immediate neighborhood of the house and its vicinity by setting out fruit trees on
a part thereof and now claims to have exercised such acts of possession over the hole of the land in
question, which was only planted in breadfruits and coco palms around his house (B. of E. 15); that
said land was not utilized during this time, except for what said heirs of Felipe Cano had there,
consisting in some plantations of coco palms. (Ibid., 13.)

As for the law on this point, the court reached the two following conclusions:

2. That Felipe Cano was in possession of part of the land during his lifetime and that after his
death this possession passed to his children, two of whom are Juan and Sotera Cano.
 3. That Juan and Sotera Cano in the year 1908 sold this land to the defendant Asuncion
Fuentebella, who then took possession thereof and has held it to date. At the time of his
transfer to the defendant Fuentebella, Juan Cano and Sotera Cano were in possession of
the land as heirs of their father Felipe Cano; but the heirs of Felipe Cano have not joined
with those herein cited to defend the title, Juan Cano and Sotera Cano, in this sale nor have
they appeared as parties and this court holds that their rights were not transferred by their
brother and sister Juan and Sotera Cano to the defendant Asuncion Fuentebella. (B. of E.,
16.)

From this it appears that neither Felipe Cano in his lifetime nor his children after his death
possessed in the place called Tagas more space than was occupied by their house and their small
plantations of breadfruit and coco palms around it, that is to say, merely, a portion of the tract of 27
hectares in question, not all of it; and that, consequently, they could not sell to Fuentebella more
than the space occupied by the house and some small plantations of breadfruit and coco palms, and
of this small part only their hereditary portions, not those which on that hypothesis should pertain to
their coheirs.

Reviewing the evidence, we find the following facts:

Sotera Cano and Juan Cano stated that they had other brothers living, Bernabe and Potenciano
Cano, and also some nephews, the children of other brothers now deceased; and according to Juan
Cano,, the vended Fuentebella was acquainted with this fact.

Juan Peña, witness for the defendant, a man of 68 years of age and brother-in-law of Felipe Cano,
stated that the latter had his house in Tagas "a little outside the land in question, although his
plantation of breadfruit trees was within the land in question" (p. 36); that he had nothing but a house
and that it had been destroyed; that Felipe Cano had been dead for over thirty years, for the witness
was then only a boy, "a child still," according to his own words; that after Felipe Cano had died and
the house had been destroyed, his widow did not rebuild it, but that his heirs "went to live on the
other side of the Mitil Creek, whither they changed their residence" (pp. 41 and 42); and the person
who went to live in the place they left was Cipriano Compuesto, who built his house there; that Don
Ramon Ortiz had carabaos and cattle there from the time of the Spanish Government; and that on
the land in question there are coco palms that were planted by Cipriano Compuesto beside his
house.

This testimony of a witness for the defendant, a resident of the place where the land in question is
located, is of the greatest importance, since it amounts to confirmation of what already, on page 7,
the plaintiff had testified, to wit, that in the year 1882 Cipriano Compuesto, with his consent had set
out coco palms in the place where his cattle pen (the plaintiff's) was constructed-that is, in the place
where, from what the witness Juan Peña says, Felipe Cano's destroyed house had been; and that
the plaintiff had allowed Cipriano Compuesto to set out those coco palms on condition that if he did
not remain on the land he would have to sell them, as indeed happened, those coco palms set out
by Compuesto now belonging to the plaintiff. Already, on page 6, the plaintiff had also declared that
one of the western boundaries of the land in question, as appears in the information inscribed in the
registry, was the land of Maria Pagueo, which passed to Cipriano Compuesto so that in the plan
Exhibit B of the plaintiff, Cipriano Compuesto appears as the owner of the land that adjoins it on the
west; and if, as the witness Juan Peña states, Cipriano Compuesto built his house in the very same
place where Felipe Cano had his, a little outside the land in question, and that his plantation of
breadfruits was on the land in question, and Compuesto also set out his coco palms, on the said
land with the plaintiff's permission, the consequence is that Felipe Cano's house represents nothing
else than Cipriano Compuesto's, and the breadfruit trees of Felipe Cano nothing else than Cipriano
Compuesto's coco palms — that is to say, that both houses were "a little outside the place in
question" and that merely the plantation of breadfruit trees of the one and of coco palms of the other
were those on the land in question, Compuesto's planting of coco palms, which later passed to the
plaintiff, being by permission of the latter.

So the following findings of fact are to be regarded as established upon the foregoing evidence: (1)
That Felipe Cano, the predecessor in interest of the Cano defendants, did not have his house on the
land in question but a little outside of it, and that on it he had only his plantation of coco palms; (2)
that his house was built on the same place that later came to be Maria Paqueo's land, conterminous
on the west with the land in question, according to the possessory information: (3) that this same
land of Maria Paqueo became Cipriano Compuesto's, and it appears in the plan (Exhibit B), made in
1892, as conterminous on the west with the land in question, and of the latter Cipriano occupied only
the place planted in coco palms.

Hence, if Felipe Cano's house had not been destroyed and his heirs had not moved their residence
to the other side of the Mitil Creek and had remained in the same place in 1892, their land would
have appeared as conterminous on the west with the land in question, instead of Maria Paqueo's in
the possessory information and instead of Cipriano Compuesto's in the plan Exhibit B.

Consequently, in 1892, the date of the possessory information, they were not the possessors of the
land in question but only perhaps possessors of a tract of land conterminous with it on the west. But
they could not have committed even to be the possessors in 1892 of this adjoining land on the west,
because, according to the testimony of their own witness, Juan Peña, where their father Felipe Cano
died, they changed their residence to the other side of the Mitil Creek, and their father's death,
according to the same witness, occurred when even he was young; hence it is not hazardous to
conclude that in 1870 he was no longer alive, and that in 1882 either Maria Paqueo or surely
Cipriano Compuesto was on the adjoining land. At all events it has been very convincingly proved
that neither in 1892 nor in 1882 nor in 1870 nor at any time did Felipe Cano and his children possess
the land that is the subject matter of the present litigation, and that at the death of Felipe Cano and
after the house located a little outside of the disputed land had been destroyed his heirs did not
continue to live there but moved their residence to the other side of the Mitil Creek.

Sotera Cano testifies that outside this disputed land, toward the west some 600 or 800 brazas from
its boundary, they had a coco-palm and there they had their house, beside which they also had the
plantations which they had inherited from their father Felipe Cano, this being the only house they
had in that place, and in which they were living at the time of their father's death; that she was
acquainted with the three persons, among them Maria Pagueo, whose lands were conterminous on
the west with the disputed land, all three of which persons had their plantations. "These plantations,"
she adds, "are between our plantations" (p. 57). And Juan Cano says that when their father died
they built the house located in the coco-palm grove; that coming from these coco palms where they
were living to the visita (or barrio there is on the land) one had to cross a creek called Mitil and that
"according to his belief the disputed land is the coco-palm grove where their house is located beside
the plantations toward the west of the visita" (p. 68).

This belief or, as now shown, error of Juan Cano is the cause of all the other errors that have given
rise to this suit.

To offset the possession attested by the registered possessory information it has not been proven in
any way that either at the date of its inscription in 1892 or in 1882 or in 1879 could Felipe Cano or
his children Juan and Sotera Cano have been in possession of the disputed land; and if the
complaint was dismissed it was solely on the basis of the incorrect hypothesis that "at the time when
the plaintiff obtained this title of possessory information, Felipe Cano, father of the persons herein
cited to defend the title, Juan and Sotera Cano, or they themselves if he was dead, were in
possession of said land or a part thereof." (B. of E., 15.) It has been clearly demonstrated that in
1879 Felipe Cano was already dead and that at his death and after the destruction of his house on
the border of the disputed land his children changed their residence and went to live on the other
side of the Mitil creek, some 600 or 700 brazas from those borders, with plantations between, or with
plantations between of the three persons named in the possessory ]information as adjoining on the
west, among these Maria Pagueo.

The authenticity and efficacy of the possessory information having been proven by means of its
inscription in the registry, and not impugned, restitution must be ordered of the possession claimed
by the plaintiff, and also of the land in question, with the costs against the defendants. Consequently,
the judgment appealed from, in so far as it dismisses the complaint, must be reversed.

With reference to the counterclaim set up by the defendant Asuncio Fuentebella, only the following
facts have been proved:

That the defendant has been in possession of the land claimed in the complaint for only about two
years from the date of the answer thereto, since August 21, 1911, that is since some time before
August 21, 1909;

That from the document she has presented in evident she does not appear to have purchased the
land claimed in the complaint until December 29, 1909, after she had already been warned by the
plaintiff's daughter in March of that year not to set out coco palms on said land as it belonged to the
latter's father;

That, if what the defendant and her witness Sotera Cano states it true, the sale was closed in 1908,
but the document had not been drawn up until the price agreed upon had been paid;

That, according to the testimony of Juan Cano, the defendant purchased the land from Juan Cano
and Sotera not knowing perfectly that there were other coheirs, that is, their two brothers and various
nephews whose number was not definitely stated;

That Juan Peña, witness for the defendant, states that Ramon Ortiz has had cattle and carabaos
since the time of the Spanish Government, while it has been seen that, according to this same
witness, Felipe Cano had land in Tagas, not the land in question, but a little outside that land; and
his children, not the same land their father had occupied, for this was later Cipriano Compuesto's,
but some coco-palm groves distant 600 or 800 brazas to the west of the disputed land, whither they
had moved their residence, it thus very clearly appearing in this court that all this litigation has been
maintained on a false basis, which is the belief of the defendant Juan Cano that the land now in
question is exactly this coco-palm grove where his house is located beside the plantations to the
west of the visita, or of the settlement formed on the land of Ramon Ortiz.

These facts being admitted, the defendants called to support the title have been unable to justify the
sale they made of the land in question to Asuncion Fuentebella.

Did Asuncion Fuentebella possess the land in good faith? That is the point to be determined in the
counterclaim.

It has not been proved that the defendant Asuncion Fuentebella has acted in pursuance of some evil
plan in conjunction with her witness Irineo Peñas, who along with his father had from childhood been
after the latter's death continued to be the herdsman of the plaintiff's cattle on the land in question
and was dismissed by the latter on account of his disloyalty and bad conduct. Now it appears that he
is the principal laborer of the defendant in setting out coco palms.

However it be, we do not regard as decisive the evidence presented to prove that the defendant's
possession was in bad faith. The nullity of the greater part of her title is not sufficient argument to
prove that she knew of the defect in her mode of acquisition of a tract of land as belonging to Juan
and Sotera Cano, when it is now demonstrated in this case that neither Sotera, nor Juan Cano, nor
even their father Felipe Cano, had at any time possessed it, but another tract in the neighborhood,
possession whereof might easily have caused error on the part of the purchaser. Defendant's bad
faith began after the warning given in a letter by the plaintiff's daughter in March, 1909, for after
having received it she then had ground to doubt that Sotera and Juan Cano could transfer any title of
possession in the following December.

Possession acquired in good faith does not lose this character, except in the case and from
the moment that the possessor is aware that he possesses the thing illegally. (Civil Code,
art. 435.)

The trial court has declared that it encountered a good deal of difficulty in deciding whether the coco
palms had been set out before or after the receipt of the said letter, but it believes that, in view of the
evidence, a large portion of the land, but not the whole, was already so planted; that the house was
under construction but unfinished; and that "there is no other evidence in the case regarding the
value of said house or the value of the coco palms, except what has been stated by the defendant."
(B. of E., 14) Everything done on the land, expenditures, outlay, improvements, from the
moment when the letter was received bears the stamp of having carried out when the possessor
was not unaware that she was improperly in possession of the land. In the light of this holding must
be determined all the questions that arises concerning the effects of the defendant's possession and
the rights she is entitled to under the provisions of the Civil Code with respect to the house and the
coco palms, that have led to her counterclaim, once it has been ordered in this decision that
possession of the land be restored to the plaintiff.

The judgment is reversed in so far as it absolves the defendants from the complaint, with the costs
against the plaintiff.

Let possession of the land described in the second paragraph of the complaint be restored to the
plaintiff, with the cost in first instance against the defendants, and without special finding with respect
to those of this instance.

Let the case be returned to the lower court so that it may fix exactly the time when the construction
and planting were carried out and determine and declare the rights and obligations of each of the
litigating parties, after weighing the evidence already adduced and what may be newly taken, in so
far as pertinent.

G.R. No. 159578               February 18, 2009

ROGELIA DACLAG and ADELINO DACLAG (deceased), substituted by RODEL M. DACLAG,

and ADRIAN M. DACLAG, Petitioners,
vs.
ELINO MACAHILIG, ADELA MACAHILIG, CONRADO MACAHILIG, LORENZA HABER and
BENITA DEL ROSARIO, Respondents.

RESOLUTION
AUSTRIA-MARTINEZ, J.:

Before us is petitioners' Motion for Reconsideration of our Decision dated July 28, 2008 where we
affirmed the Decision dated October 17, 2001 and the Resolution dated August 7, 2003 of the Court
of Appeals (CA) in CA-G.R. CV No. 48498.

Records show that while the land was registered in the name of petitioner Rogelia in 1984,
respondents’ complaint for reconveyance was filed in 1991, which was within the 10-year
prescriptive period.

We ruled that since petitioners bought the property when it was still an unregistered land, the
defense of having purchased the property in good faith is unavailing. We affirmed the Regional Trial
Court (RTC) in finding that petitioners should pay respondents their corresponding share in the
produce of the subject land from the time they were deprived thereof until the possession is restored
to them.

In their Motion for Reconsideration, petitioners contend that the 10-year period for reconveyance is
applicable if the action is based on an implied or a constructive trust; that since respondents' action
for reconveyance was based on fraud, the action must be filed within four years from the discovery
of the fraud, citing Gerona v. De Guzman,1 which was reiterated in Balbin v. Medalla.2

We do not agree.

In Caro v. Court of Appeals,3 we have explicitly held that "the prescriptive period for the
reconveyance of fraudulently registered real property is 10 years reckoned from the date of
the issuance of the certificate of title x x x."4

However, notwithstanding petitioners' unmeritorious argument, the Court deems it necessary to

make certain clarifications. We have earlier ruled that respondents' action for reconveyance had not
prescribed, since it was filed within the 10-year prescriptive period.

However, a review of the factual antecedents of the case shows that respondents' action for
reconveyance was not even subject to prescription.

The deed of sale executed by Maxima in favor of petitioners was null and void, since Maxima was
not the owner of the land she sold to petitioners, and the one-half northern portion of such land was
owned by respondents. Being an absolute nullity, the deed is subject to attack anytime, in
accordance with Article 1410 of the Civil Code that an action to declare the inexistence of a void
contract does not prescribe. Likewise, we have consistently ruled that when there is a showing of
such illegality, the property registered is deemed to be simply held in trust for the real owner by the
person in whose name it is registered, and the former then has the right to sue for the reconveyance
of the property.5 An action for reconveyance based on a void contract is imprescriptible. 6 As long as
the land wrongfully registered under the Torrens system is still in the name of the person who
caused such registration, an action in personam will lie to compel him to reconvey the property to the
real owner.7 In this case, title to the property is in the name of petitioner Rogelia; thus, the trial court
correctly ordered the reconveyance of the subject land to respondents.

Petitioners next contend that they are possessors in good faith, thus, the award of damages should
not have been imposed. They further contend that under Article 544, a possessor in good faith is
entitled to the fruits received before the possession is legally interrupted; thus, if indeed petitioners
are jointly and severally liable to respondents for the produce of the subject land, the liability should
be reckoned only for 1991 and not 1984.

We find partial merit in this argument.

Article 528 of the Civil Code provides that possession acquired in good faith does not lose this
character, except in a case and from the moment facts exist which show that the possessor is not
unaware that he possesses the thing improperly or wrongfully. Possession in good faith ceases from
the moment defects in the title are made known to the possessors, by extraneous evidence or by
suit for recovery of the

property by the true owner. Whatever may be the cause or the fact from which it can be deduced
that the possessor has knowledge of the defects of his title or mode of acquisition, it must be
considered sufficient to show bad faith.8 Such interruption takes place upon service of summons. 9 lawphil.net

Article 544 of the same Code provides that a possessor in good faith is entitled to the fruits only so
long as his possession is not legally interrupted. Records show that petitioners received a summons
together with respondents' complaint on August 5, 1991; 10 thus, petitioners' good faith ceased on the
day they received the summons. Consequently, petitioners should pay respondents 10 cavans
of palay per annum beginning August 5, 1991 instead of 1984.

Finally, petitioner would like this Court to look into the finding of the RTC that "since Maxima died in
October 1993, whatever charges and claims petitioners may recover from her expired with her"; and
that the proper person to be held liable for damages to be awarded to respondents should be
Maxima Divison or her estate, since she misrepresented herself to be the true owner of the subject
land.

We are not persuaded.

Notably, petitioners never raised this issue in their appellants' brief or in their motion for
reconsideration filed before the CA. In fact, they never raised this matter before us when they filed
their petition for review. Thus, petitioners cannot raise the same in this motion for reconsideration
without offending the basic rules of fair play, justice and due process, specially since Maxima was
not substituted at all by her heirs after the promulgation of the RTC Decision.

WHEREFORE, petitioners’ Motion for Reconsideration is PARTLY GRANTED. The Decision of the

Court of Appeals dated July 28, 2008 is MODIFIED only with respect to prescription as discussed in
the text of herein Resolution, and the dispositive portion of the Decision is MODIFIED to the effect
that petitioners are ordered to pay respondents 10 cavans of palay per annum beginning August 5,
1991 instead of 1984.

SO ORDERED.

G.R. No. L-52361 April 27, 1981

SUNSET VIEW CONDOMINIUM CORPORATION, petitioner,

vs.
THE HON. JOSE C. CAMPOS, JR. OF THE COURT OF FIRST INSTANCE, BRANCH XXX,
PASAY CITY and AGUILAR-BERNARES REALTY, respondents.

G.R. No. L-52524 April 27, 1981

SUNSET VIEW CONDOMINIUM CORPORATION, petitioner,
vs.
THE HON. JOSE C. CAMPOS, JR., PRESIDING JUDGE OF THE COURT OF FIRST INSTANCE,
BRANCH XXX, PASAY CITY, and LIM SIU LENG, respondents.

FERNANDEZ, J.:

These two cases which involve similar facts and raise Identical questions of law were ordered
consolidated by resolution of this Court dated March 17, 1980.  1

The petitioner, Sunset View Condominium Corporation, in both cases, is a condominium corporation
within the meaning of Republic Act No. 4726 in relation to a duly registered Amended Master Deed
with Declaration of Restrictions of the Sunset View Condominium Project located at 2230 Roxas
Boulevard, Pasay City of which said petitioner is the Management Body holding title to all the
common and limited common areas.  2

G.R. NO. 52361

The private respondent, Aguilar-Bernares Realty, a sole proprietorship with business name
registered with the Bureau of Commerce, owned and operated by the spouses Emmanuel G. Aguilar
and Zenaida B. Aguilar, is the assignee of a unit, "Solana", in the Sunset View Condominium Project
with La Perla Commercial, Incorporated, as assignor.   The La Perla Commercial, Incorporated
3

bought the "Solana" unit on installment from the Tower Builders, Inc.   The petitioner, Sunset View
4

Condominium Corporation, filed for the collection of assessments levied on the unit against Aguilar-
Bernares Realty, private respondent herein, a complaint dated June 22, 1979 docketed as Civil
Case No. 7303-P of the Court of First Instance of Pasay City, Branch XXX. The private respondent
filed a Motion to Dismiss the complaint on the grounds (1) that the complaint does not state a cause
of action: (2) that the court has no jurisdiction over the subject or nature other action; and (3) that
there is another action pending between the same parties for the same cause. The petitioner filed its
opposition thereto. The motion to dismiss was granted on December 11, 1979 by the respondent
Judge who opined that the private respondent is, pursuant to Section 2 of Republic Act No. 4726, a
"holder of a separate interest" and consequently, a shareholder of the plaintiff condominium
corporation; and that "the case should be properly filed with the Securities & Exchange Commission
which has exclusive original jurisdiction on controversies arising between shareholders of the
corporation." the motion for reconsideration thereof having been denied, the petitioner, alleging
grave abuse of discretion on the part of respondent Judge, filed the instant petition for certiorari
praying that the said orders be set aside.

G.R. NO. 52524

The petitioner filed its amended complaint dated July 16, 1979 docketed as Civil Case No. 14127 of
Branch I of the City Court of Pasay City for the collection of overdue accounts on assessments and
insurance premiums and the interest thereon amounting to P6,168 06 as of March 31, 1979 against
the private respondent Lim Siu Leng   to whom was assigned on July 11, 1977 a unit called "Alegria"
5

of the Sunset. View Condominium Project by Alfonso Uy   who had entered into a "Contract to Buy
6

and Sell" with Tower Builders, Inc. over the said unit on installment basis. 
7

The private respondent filed a motion to dismiss on the ground of lack of jurisdiction, alleging that
the amount sought to be collected is an assessment. The correctness and validity of which is certain
to involve a dispute between her and the petitioner corporation; that she has automatically become,
as a purchaser of the condominium unit, a stockholder of the petitioner pursuant to Section 2 of the
Condominium Act, Republic Act No. 4726; that the dispute is intra-corporate and is consequently
under the exclusive jurisdiction of the Securities & Exchange Commission as provided in Section 5
of P.D. No. 902-A. 8

The petitioner filed its opposition thereto, alleging that the private respondent who had not fully paid
for the unit was not the owner thereof, consequently was not the holder of a separate interest which
would make her a stockholder, and that hence the case was not an intra-corporate dispute.  9

After the private respondent had filed her answer to the opposition to the motion to dismiss   of the
10

petitioner, the trial court issued an order dated August 13, 1979 denying the motion to dismiss.   The
11

private respondent's motion for reconsideration thereof was denied by the trial court in its Order
dated September 19, 1979.  12

The private respondent then appealed pursuant to Section 10 of Rule 40 of the Rules of Court to the
Court of First Instance, where the appeal was docketed as Civil Case No. 7530P. The petitioner filed
its "Motion to Dismiss Appeal" on the ground that the order of the trial court appealed from is
interlocutory. 
13

The motion to dismiss the appeal was denied and the parties were ordered to submit their respective
memorandum on the issue raised before the trial court and on the disputed order of the trial
judge.   After the parties had submitted their respective memoranda on the matter, the respondent
14

Judge issued an order dated December 14, 1979 in which he directed that "the appeal is hereby
dismissed and d the judgment of the lower court is reversed. The case is dismissed and the parties
are directed to ventilate their controversy with the Securities & Exchange Commission.   The
15

petitioner's motion for reconsideration thereof was denied in an order dated January 14,
1980.   Hence this petition for certiorari, alleging grave abuse of discretion on the part of the
16

respondent Judge.

Issues Common to Both Cases

It is admitted that the private respondents in both cases have not yet fully paid the purchase price of
their units. The Identical issues raised in both petitions are the following:

1. Is a purchaser of a condominium unit in the condominium project managed by the petitioner, who
has not yet fully paid the purchase price thereof, automaticaly a ,stockholder of the petitioner
Condominium Corporation

2. Is it the regular court or the Securities & Exchange Commission that has jurisdiction over cases
for collection of assessments assessed by the Condominium Corporation on condominium units the
full purchase price of which has not been paid?

The private respondents in both cases argue that every purchaser of a condominium unit, regardless
of whether or not he has fully paid the purchase price, is a "holder of a separate interest" mentioned
in Section 2 of Republic Act No. 4726, otherwise known as "The Condominium Act" and is
automatically a shareholder of the condominium corporation.

The contention has no merit. Section 5 of the Condominium Act expressly provides that the
shareholding in the Condominium Corporation will be conveyed only in a proper case. Said Section
5 provides:
 Any transfer or conveyance of a unit or an apartment, office or other space therein,
shall include the transfer or conveyance of the undivided interests in the common
areas or, in a proper case, the membership or shareholding in the condominium
corporation ...

It is clear then that not every purchaser of a condominium unit is a shareholder of the condominium
corporation. The Condominium Act leaves to the Master Deed the determination of when the
shareholding will be transferred to the purchaser of a unit. Thus, Section 4 of said Act provides:

The provisions of this Act shall apply to property divided or to be divided into
condominium only if there shall be recorded in the Register of Deeds of the province
or city in which the property lies and duly annotated in the corresponding certificate
of title of the land ... an enabling or master deed which shall contain, among others,
the following:

xxx xxx xxx

(d) Astatement of the exact nature of the interest acquired or to be acquired by the
purchaser in the separate units and in the common areas of the condominium project
...

The Amended Master Deeds in these cases, which were duly registered in the Register of Deeds,
and which contain, by mandate of Section 4, a statement of the exact nature of the interest acquired
by a purchaser of a unit, provide in Section 6 of Part 1:

(d) Each Unit owner shall, as an essential condition to such ownership, acquire
stockholding in the Condominium Corporation herein below provided ...  17

The Amended Master Deeds likewise provide in Section 7 (b), thus.

(b) All unit owners shall of necessity become stockholders of the Condominium
Corporation. TOWER shall acquire all the shares of stock of SUNSET VIEW and
shall allocate the said shares to the units in proportion to the appurtenant interest in
the COMMON AREAS and LIMITED COMMON AREAS as provided in Section 6 (b)
above. Said shares allocated are mere appurtenances of each unit, and therefore,
the same cannot be transferred, conveyed, encumbered or otherwise disposed of
separately from the Unit ... 
18

It is clear from the above-quoted provisions of the Master Deeds that the shareholding in the
Condominium Corporation is inseparable from the unit to which it is only an appurtenant and that
only the owner of a unit is a shareholder in the Condominium Corporation.

Subparagraph (a) of Part 1, Section 6, of the Master Deeds determines when and under what
conditions ownership of a unit is acquired by a purchaser thus:

(a) The purchaser of a unit shall acquire title or ownership of such Unit, subject to the
terms and conditions of the instrument conveying the unit to such purchaser and to
the terms and conditions of any subsequent conveyance under which the purchaser
takes title to the Unit, and subject further to this MASTER DEED ...  19
The instrument conveying the unit "Solana" in G.R. NO. 52361 is the "Contract to Buy and Sell"
dated September 13, 1977, Annex "D", while that conveying the unit "Alegria" in G.R. NO. 52524 is
the "Contract to Buy and Sell" dated May 12, 1976, Annex "C". In both deeds of conveyance, it is
provided:

4. Upon full payment by the BUYER of the total purchase price and full compliance
by the BUYER of an its obligations herein, the SELLER will convey unto the BUYER,
as soon as practicable after completion of the construction, full and absolute title in
and to the subject unit, to the shares of stock pertaining thereto and to an rights and
interests in connection therewith ... 
20

The share of stock appurtenant to the unit win be transferred accordingly to the purchaser of the unit
only upon full payment of the purchase price at which time he will also become the owner of the unit.
Consequently, even under the contract, it is only the owner of a unit who is a shareholder of the
Condominium Corporation. Inasmuch as owners is conveyed only upon full payment of the purchase
price, it necessarily follows that a purchaser of a unit who has not paid the full purchase price thereof
is not The owner of the unit and consequently is not a shareholder of the Condominium Corporation.

That only the owner of a unit is a stockholder of the Condominium Corporation is inferred from
Section 10 of the Condominium Act which reads:

SEC. 10. ... Membership in a condominium corporation, regardless of whether it is a

stock or non-stock corporation, shall not be transferable separately from the
condominium unit of which it is an appurtenance When a member or stockholder
ceases is to own a unit in the project in which the condominium corporation owns or
holds the common areas, he shall automatically cease to be a member or
stockholder of the condominium corporation.

Pursuant to the above statutory provision, ownership of a unit is a condition sine qua non to being a
shareholder in the condominium corporation. It follows that a purchaser of a unit who is not yet the
owner thereof for not having fully paid the full purchase price, is not a shareholder By necessary
implication, the "separate interest" in a condominium, which entitles the holder to become
automatically a share holder in the condominium corporation, as provided in Section 2 of the
Condominium Act, can be no other than ownership of a unit. This is so because nobody can be a
shareholder unless he is the owner of a unit and when he ceases to be the owner, he also ceases
automatically to be a shareholder.

The private respondents, therefore, who have not fully paid the purchase price of their units and are
consequently not owners of their units are not members or shareholders of the petitioner
condominium corporation,

Inasmuch as the private respondents are not shareholders of the petitioner condominium
corporation, the instant case for collection cannot be a "controversy arising out of intracorporate or
partnership relations between and among stockholders, members or associates; between any or all
of them and the corporation, partnership or association of which they are stockholders, members or
associates, respectively" which controversies are under the original and exclusive jurisdiction of the
Securities & Exchange Commission, pursuant to Section 5 (b) of P.D. No. 902- A. The subject
matters of the instant cases according to the allegations of the complaints are under the jurisdiction
of the regular courts: that of G.R. NO. 52361, which is for the collection of P8,335.38 with interest
plus attorney's fees equivalent to the principal or a total of more than P10,000.00 is under the
jurisdiction of the Court of First Instance; and that of G.R. NO. 52524, which is for the collection of
P6,168-06 is within the jurisdiction of the City Court.
In view of the foregoing, it is no longer necessary to resolve the issue raised in G.R. NO. 52524 of
whether an order of the City Court denying a motion to dismiss on the ground of lack of jurisdiction
can be appealed to the Court of First Instance.

WHEREFORE, the questioned orders of the respondent Judge dated December 11, 1979 and
January 4, 1980 in Civil Case No. 7303-P, subject matter of the Petition in G.R. No. 52361, are set
aside and said Judge is ordered to try the case on the merits. The orders dated December 14, 1979
and January 14, 1980 in Civil Case No. 7530-P, subject matter of the petition in G.R. No. 52524 are
set aside and the case is ordered remanded to the court a quo, City Court of Pasay City, for trial on
the merits, with costs against the private respondents.

SO ORDERED.

G.R. No. L-13298             November 19, 1918

CORNELIO RAMOS, petitioner-appellant,
vs.
THE DIRECTOR OF LANDS, objector-appellee.

Basilio Aromin for appellant.

Office of the Solicitor-General Paredes for appellee.

MALCOLM, J.:

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

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

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

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

We do not stop to decide this contention, although it might be possible, following the doctrine laid
down by the United States Supreme Court with reference to Mexican and Spanish grantes within the
United States, where some recital is claimed to be false, to say that the possessory information,
apparently having taken cognizance of the requisites for title, should not now be disturbed.
(Hancock vs. McKinney [1851], 7 Tex., 192; Hornsby and Roland vs. United States [1869], 10 Wall.,
224.) It is sufficient, as will later appear, merely to notice that the predecessor in interest to the
petitioner at least held this tract of land under color of title.

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

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

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

Actual possession of land consists in the manifestation of acts of dominion over it of such a nature
as a party would naturally exercise over his own property. Relative to actuality of possession, it is
admitted that the petitioner has cultivated only about one fourth of the entire tract. This is
graphically portrayed by Exhibit 1 of the Government, following:
The question at once arises: Is that actual occupancy of a part of the land described in the
instrument giving color of title sufficient to give title to the entire tract of land?
lawphil.net

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

The claimant has color of title; he acted in good faith; and he has had open, peaceable, and
notorious possession of a portion of the property, sufficient to apprise the community and the world
that the land was for his enjoyment. (See arts. 446, 448, Civil Code.) Possession in the eyes of the
law does not mean that a man has to have his feet on every square meter of ground before it can be
said that he is in possession. Ramos and his predecessor in interest fulfilled the requirements of the
law on the supposition that he premises consisted of agricultural public land.
The second division of the law requires consideration of the term "agricultural public land." The law
affirms that the phrase is denied by the Act of Congress of July 1st, 1902, known as the Philippine
bill. Turning to the Philippine Bill, we find in sections 13 to 18 thereof that three classes of land are
mentioned. The first is variously denominated "public land" or "public domain," the second "mineral
land," and the third "timber land." Section 18 of the Act of Congress comes nearest to a precise
definition, when it makes the determination of whether the land is more valuable for agricultural or for
forest uses the test of its character.

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

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

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

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

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

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

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

The Director of Forestry of the Philippine Islands has said:

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

x x x           x x x          x x x

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

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

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

The method employed by the bureau of Forestry in making inspection of lands, in order to
determine whether they are more adapted for agricultural or forest purposes by a technical
and duly trained personnel on the different phases of the conservation of natural resources,
is based upon a previously prepared set of questions in which the different characters of the
land under inspection are discussed, namely:
Slope of land: Level; moderate; steep; very steep.

Exposure: North; South; East; West.

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

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

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

For growth of what agricultural products is this land suitable?

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

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

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

Is this land included or adjoining any proposed or established forest reserve or communal
forest? Description and ownership of improvements.

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

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

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

In the case of lands claimed as private property, the Director of Forestry, by means of his
delegate the examining officer, submits before the court all evidence referring to the present
forest condition of the land, so that the court may compare them with the alleged right by the
claimant. Undoubtedly, when the claimant presents a title issued by the proper authority or
evidence of his right to the land showing that he complied with the requirements of the law,
the forest certificate does not affect him in the least as such land should not be considered
as a part of the public domain; but when the alleged right is merely that of possession, then
the public or private character of the parcel is open to discussion and this character should
be established not simply on the alleged right of the claimant but on the sylvical condition
 and soil characteristics of the land, and by comparison between this area, or different
previously occupied areas, and those areas which still preserve their primitive character.

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

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

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

Judgment is reversed and the lower court shall register in the name of the applicant the entire tract
in parcel No. 1, as described in plan Exhibit A, without special finding as to costs. So ordered.

G.R. No. L-25723 June 29, 1984

THE DIRECTOR OF LANDS and HEIRS OF THE DECEASED HOMESTEADERS, namely,

IGNACIO BANGUG, PASCUAL BANGUG, EUSEBIO GUMIRAN, SANTIAGO AGGABAO and
ANTONIO DERAY, petitioners-appellants,
vs.
COURT OF APPEALS and HEIRS OF BRUNO CABAUATAN, respondents-appellees.

Primitivo P. Cammayo, Magbayad, Macutay & Cendeña, Melanio T. Singson and Silvestre Br. Bello
and Alejandro Mina for petitioners-appellants.

The Solicitor General and Arnulfo Tamayo for respondents-appellees.

AQUINO, J.:

This is a land registration case involving 128 hectares of land located in Cabagan, Isabela. On page
125 of the Gaceta de Manila dated January 30, 1884, it was published that the land applied Or
by Bruno Cabanatan (sic) "en la jurisdiction de Cabagan de la de Isabela de Luzon" was declared
"enagenables" (Exh. P).
On page 142 of the Gaceta de Manila dated August 2, 1885, this entry was published: "Adjudicando
a ... D. Bruno Cabanatan (sic) la extension de 138 hectareas, 91 areas y 50 centiareas de terreno
situado en el pueblo de Cabagan, en Isabela de Luzon, en la cantidad de pfs. 188'71 6/81" (Exh. Q.
The name is "Cabauatan" in Exh. M).

"Bruno Cabanatan "of Cabagan, Isabela appears as No. 322 in a handwritten list of "Expedientes

Remitidos A Terrenos Publicos" (terminated cases) dated November 30, 1901 in the files the
Division of Archives (Exh. L and O).

However, the applicants have not produced in evidence any composition title, the basis of their
application. It was allegedly burned in the house of Pepe Buraga during the war (34 tsn June 26,
1956). So, we do not know the boundaries of the 138 hectares land allegedly adjudicated to
Bruno Cabanatan, granting that he was the same as Bruno Cabauatan, the ancestor of the
applicants; in what barrio or sitio of Cabagan it is located; why in 1932 the 138 hectares had been
increased to 154 hectares. and why in 1921 the same land was declared for tax purposes in the
name of Honofre Cabauatan, Bruno's nephew, and not in the names of Bruno s heirs.

As correctly contended by the Solicitor General, the land applied for must be Identified. The
claim of possession or having a composition title is inutile if the land is not Identified.

Bruno died during the Spanish regime. The year when he died is not known. He is survived by seven
children with the following descendants:

1. Candida, survived by Lucio Guingab and Jose Buraga.

2. Paulina, survived by Maria, Jose Gregorio and Epifania, surnamed Samus

(children of the first marriage) and by Eugenia and Vicente Uanan children of her
second marriage.

3. Francisco, survived by Manuel, Faustina, Juan and Remedios.

4. Bruno 2nd, survived by Purisima, Francisco, Cristeta, Benjamin and Respicio.

5. Salvador, survived by Paz, Lucio, Lourdes and Pilar, who is dead and is in turn
survived by her children Celso Mesa and Ruben, Mesa.

6. Heculina, survived by Faustino, Maria, Alejandra, Genoveva, Amada and

Francisco, all surnamed Cauan. Genoveva Cauan is dead and is survived by her
child, Josefina Balmaceda.

7. Guillermo, survived by his son, Pedro Cabauatan.

Bruno had a brother named Leon, who had a son named Honofre (Onofre) who, curiously enough,
obtained in 1921 a tax declaration for the 138 hectares at P5,200. In that tax declaration, it was
stated that the land is located at Malasi, Cabagan, bounded on the north, east and south by public
land (P.D.) and on the west by a mountain. How Onofre came to have a tax declaration for that land
has not been adequately explained.

Emilio Cabauatan, a son of Onofre, in his opposition and testimony claimed that lawyer Miguel
Binag, in behalf of Bruno's heirs, in 1937 proposed to use the said declaration in the land registration
proceeding. He promised to give the heirs of Onofre Cabauatan one-third of the land. However,
lawyer Binag denied that he ever made such a proposition.

Emilio also claimed that the land of Bruno is in Sitio Malini, three kilometers from Sitio Malasi. The
trial court and Binag denied that there was a sitio in Cabagan called Malini. It was not found in the
list of sitios in the governor's office.

On March 5,1934 Judge Mariano Rosauro issued Decree No. 536561 for the registration of a parcel
of land, plan 95520, with an area of 25 hectares located at the "sitio of Malisi, Barrio of Aggub,"
Cabagan. It was registered in the names of the following heirs of Bruno as proindiviso co-
owners without regard to the right of representation (Exh. J)

1. Candida Cabauatan 16. Rufina

Cabauatan

2. Maria Samus 17. Paz Cabauatan

3. Jose Samus 18. Lucio Cabauatan

4. Gregorio Samus 19. Lourdes

Cabauatan

5. Epifanio Samus 20. Cervex Mesa

6. Eugenia Uanan 21. Ruben Mesa

7. Vicente Uanan 22. Faustino Cauan

8. Manuel 23. Maria Cauan

Cabauatan

9. Faustino 24. Alejandra Cauan

Cabauatan

10. Juan Cabauatan 25. Genoveva

Cauan

11. Remedios 26. Amada Cauan

Cabauatan

12. Purisima 27. Francisco Cauan

Cabauatan

13. Francisco 28. Josefina

Cabauatan Balmaceda

14. Cristeta and

Cabauatan
 15. Benjamin 29. Pedro
Cabauatan Cabauatan

The 25 hectares land already registered has as boundaries parts of the land under controversy.
Thus, the decree states that the 25 hectares are bounded on the northeast and south by public
lands; on the east by property of Tomas Vinarao vs. heirs of Bruno Cabauatan; on the west by
property of Lucas Pagulayan vs. heirs of Bruno Cabauatan and on the northwest by the Lagoon
Malasi Grande and public land.

It may be asked: why did not that 1934 registration case embrace the whole 138 hectares allegedly
covered by Bruno's composition title and why did Bruno's heirs have to resort to a second or another
registration case in 1937? The applicants have not offered any satisfactory explanation.

In 1934, the year the 25 hectares of land located at Malasi, Cabagan, was registered in the names of
Bruno's heirs, they produced a survey plan Psu-95458, for his land which had an area of 154
hectares, much larger than the 138 hectares adjudicated to Bruno in 1885. Clearly, the area was
inflated by 16 hectares. The land consisted of seven contiguous lots located in Barrio Aggub,
Cabagan. It included the 25 hectares of plan Psu-95520 which was already registered and which
was designated as Lot No. 6.

The plan was based on a 1932 survey. The surveyor in 1934 indicated in the plan Psu-95458 the
following claimants of the seven lots (Exh. F)

Lot No. 1 — Claimed by Pascual Bangug.

Lot No. 2 — Claimed by Heirs of Antonio Deray.
Lot No. 3 — Claimed by Heirs of Ignacio Bangug.
Lot No. 4 — Claimed by Eusebio Gumiran.
Lot No. 5 — Uncultivated.
Lot No. 6 — Claimed by Ramon Guingab (already registered,).
Lot No. 7 — Claimed by Vicente Ramos and Casiano Magbayad.

The provincial fiscal, in representation of the Director of Lands, alleged in his opposition that the land
claimed by Bruno's heirs was covered by the approved and subsisting homestead applications of (1)
Santiago Aggabao, deceased, now heirs represented by Simplicio Aggabao; (2) Ignacio Bangug,
deceased, now his heirs represented by Anacleto Bangug; (3) Eusebio Gumiran, deceased, now his
heirs represented by Luis Gumiran; (4) Antonio Deray, deceased, now his heirs represented by
Pablo Deray; (5) Casiano Magbayad, transferor, now Rodolfo Albano, transferee, and (6) Gaudencio
Flores (p. 23, RA).

As already stated, the instant second registration case was filed in 1937 based on an expanded
survey. The applicants are the very same heirs of Bruno who were the applicants in the first
registration case.

They claim the land without taking into account the rule on representation. The record does not
disclose why the case was not finished before liberation. The trial commenced in 1956 or almost
twenty years after the application was filed. That is an unusual feature of the case.

Evidence for the applicants, Bruno's heirs. — From the testimonies of Candida Cabauatan, Jose
Buraga, Gabriel Zipagan and Placido Angoluan, the trial court found that the land in question (128.8
plus 25.4 or 154 hectares) was administered by Bruno's son, Salvador. There were allegedly forty
tenants during the Spanish regime working in the middle portion of the land.

Some of the tenants were still on the land during the American regime. They have been cultivating
the land under the overseers, Zipagan and Angoluan. During the Spanish regime, Bruno's children
received 1/3 of the products, such as corn and palay, as the owner's share. The tenants also planted
kapok, acacia trees and some oranges.

They allegedly constructed rice paddies and built dwelling houses. Bruno's heirs have possessed the
land openly, peacefully, continuously and in the concept of owner since the Spanish regime up to the
present time.

In 1916, about 50 hectares of the land were under cultivation, the greater portion of which is included
in Lot No. 6, which, as already mentioned, was registered in 1934 in the names of Bruno's heirs, the
same applicants in this 1937 case. The land taxes were paid since 1921 in the name of Honofre, not
an heir of Bruno.

Evidence for the Director of Lands and homesteaders. — As oppositor, the Director of Lands
presented the following documentary evidence:

(1) The 1924 homestead application of Eusebio Gumiran and his intention to make
final proof dated July 22, 1930 for 24 hectares of land located at Sitio Malasi, Barrio
Aggub, Cabagan (Exh- 1-3).

(2) The order dated August 28, 1931 for the issuance of a patent to Pascual
Bangug for 24 hectares covered by his 1911 application (Exh. 5 and 6-DL).

(3) The approval dated November 23, 1931 of Ignacio Bangug's homestead

application for 10 hectares (Exh. 7 and 8-DL).

(4) The approval dated March 23, 1932 of Casiano Mabbayad's homestead

application for 24 hectares (Exh. 10 and 11-DL)

(5) The approval dated August 12, 1950 of Gaudencio Flores' homestead application
for 24 hectares (Exh. 12 and 13-DL).

(6) The approval dated August 24, 1932 of Santiago Agabao's 1926 homestead
application for 24 hectares (Exh. 14 and 16-DL).

(7) The approval dated May 15, 1928 of Antonio Deray's homestead application for
24 hectares (Exh. 17-DL).

As noted by the Solicitor General, the Court of Appeals failed to mention in its decision the evidence
for the homesteaders. The following is a summary of that evidence by the Solicitor General and the
trial court.

Ignacio Bangug in 1917 occupied about ten hectares of the land in Sitio Malasi. He planted it to rice,
corn, tobacco and beans. He applied in 1926 for a homestead over that parcel of land (Exh. 11). He
paid the land taxes as early as 1922 (Exh. 1 to 10). His application was approved in 1931. After his
death in 1931, his son Jose continued to occupy the homestead. Jose Bangug did not know that the
land was included in the survey made for Bruno's heirs.
Pascual Bangug, who died in 1950, had cultivated a portion of the disputed land since 1910 and in
1911 he filed his homestead application (Exh. F). He declared it for tax purposes and paid the land
taxes since 1916 (Exh. 2 to 24). The homestead patent was issued in 1931 (Exh. 25). He built his
house on the land. His heirs continued his possession after his death. Pascual planted the land to
rice, corn, mongo, peanuts, oranges, lemon, acacia and bamboos.

Eusebio Gumiran occupied in 1924 a portion of Lots Nos. 4 and 5 (Exh. K). He filed his homestead
application in that same year. He planted the land to rice and other staple crops. He made a final
proof in 1930. After his death in 1942, his children and widow continued to possess the homestead.

Santiago Aggabao started occupying the land in Sitio Malasi in 1927. It has an area of 24 hectares.
His homestead application was approved in 1932 (Exh. 16). His children have possessed the
homestead after his death. They planted it to rice, corn and vegetables.

Antonio Deray filed in 1924 his homestead application for 24 hectares in what is now Lot No. 2 of
the survey plan. It was approved in 1928 (Exh. 17 and 18-DL). His heirs have been in possession of
the homestead.

Gaudencio Flores and the heirs of Honofre Cabauatan also presented evidence as oppositors but
they did not appeal to this Court.

Ruling. — The trial court granted the application for registration of the six lots with an area of 128
hectares, in addition to the often mentioned 25 hectares already registered. It reasoned out that if
Bruno's heirs had possession of the said 25 hectares, they could be deemed to have
"constructive possession" of the remaining part of the land provided that the same is not in
the adverse possession of another person (Ramos vs. Director of Lands, 39 Phil. 175). lwphl@itç

We hold that the rule on constructive possession does not apply to this case because the major
portion of the disputed 128 hectares has been in the adverse possession of homesteaders
and their heirs and is still part of the public domain until the patents are issued.

The area claimed is in excess of that mentioned in the committed position title. The alleged
lost composition title cannot be given any probative value. Its contents were not proven by
secondary evidence. The precise location of the land and the possession thereof were not proven by
the applicants. The alleged possession of Bruno's heirs may refer to the 25 hectares already
registered in their names. Inexplicably, the registration of the 154 hectares was made in two
installments.

WHEREFORE, the decisions of the Court of Appeals and the trial court are reversed and set aside.
The application for registration is dismissed. The Director of Lands should issue to appellant heirs of
the deceased homesteaders their patents in accordance with the Public Land Law. Costs against the
applicants.

SO ORDERED.

Cachuela v. Francisco, 48 SCRA 172

G.R. No. L-36789 July 25, 1983

FELIPA CORDERO (Deceased) MAURO OCAMPO, CASIMIRO OCAMPO and ELISEA

OCAMPO, petitioners,
vs.
VICTORIA P. CABRAL, ALEJANDRO BERBOSO, DALMACIO MONTAOS and HONORABLE
COURT OF APPEALS, respondents.

ABAD SANTOS, J.:

Petition to review a decision of the defunct Court of Appeals.

In Civil Case No. 2323 of the defunct Court of First Instance of Bulacan, Felipa Cordero and her
children Mauro, Casimiro and Elisea all surnamed Ocampo sued Victoria Cabral, Alejandro Berboso
and Dalmacio Montaos in a Complaint which reads as follows:

1. That the plaintiffs are all of legal age, all residing and with postal address at
Meycauayan, Bulacan; Felipa Cordero is a widow while Elisea Ocampo is single; and
the defendants are all of legal age, Victoria P. Cabral is married but she is living
apart and separate from her husband so the latter is not included herein as party
defendant, and all of them are residing and with postal address at Meycauayan,
Bulacan, where they may be served with summons;

2. That Mr. Gregorio Z. Ocampo of Meycauayan, Bulacan, husband of the plaintiff

Felipa Cordero and father of the other plaintiffs surnamed Ocampo, died on May 17,
1958, and that said deceased left several properties, which were inherited by the
plaintiffs, one of which is a parcel of land described as follows:

A parcel of land (Lot No. 5, plan Psu-43302), with the improvements

thereon, situated in the barrio of Saluysoy, Municipality of
Meycauayan. Bounded on the N. by Sapa and properties of Pedro
Dazo and Catalino Exaltacion; on the NE. by property of Trinidad
Rodriguez & Mateo Mistica; on the SE. by properties of Vicente
Mistica, Antonio Rodriguez, Hermogenes Blanco, Lucio Sulbera and
Pablo Francia; on the SW. by properties of Concepcion Rodriguez
and Alejandro de la Cruz; and on NW. by a Sapa ... ; containing an
area of Seventy-eight thousand one hundred and eighty-one square
meters (78,181), more or less. With TRANSFER CERTIFICATE OF
TITLE NO. 14513 in the name of Gregorio Z. Ocampo and has Tax
Declaration No. 2819 and is assessed at P4,290.00.

which parcel of land was originally registered in accordance with the Land
Registration Act on December 14, 1933, and was registered and/or transferred in the
name of Mr. Gregorio Z. Ocampo on July 31, 1934;

3. That after the death of the said Mr. Gregorio Z. Ocampo the plaintiffs herein took
possession of the properties left by him, among others is the afore-described parcel
of land which is a riceland, but they found out that the southern portion of the same
with an area 4,303 square meters, more or less, upon verification, was possessed by
the defendants herein, Victoria P. Cabral, Alejandro Berboso and Dalmacio Montaos
and that the defendant Victoria P. Cabral claimed to be the owner of said portion
while her co-defendants co-possessed the same as her tenants;
 4. That the plaintiffs demanded of the defendants to surrender to the former
possession of the afore-mentioned portion of land and/or vacate it but they refused
and failed to do so, and the defendant Victoria P. Cabral continued claiming to be the
owner of the same while her co-defendants continued recognizing her as the owner
thereof instead of the plaintiffs; that the plaintiffs had the afore-described parcel of
land (with T.C.T. No. 14513) relocated in the presence of the defendants'
representatives and it was found and/or determined that the afore-said portion of
land with the area of 4,303 square meters, more or less, was a part of the plaintiffs'
land with T.C.T. No. 14513; that even after the said relocation the defendant Victoria
P. Cabral persisted and still persist in her claim of ownership over the said portion
and her co-defendants persisted and still persist in recognizing her as the owner
thereof instead of the plaintiffs; that the defendants continue in possession of the
same; and that the defendants still refuse and fail to surrender and/or vacate said
portion of land inspite of demands made on them by the plaintiffs;

5. That because of the defendants' occupancy of the aforementioned plaintiffs'

portion of land with the area of 4,303 square meters, more or less, to the exclusion of
the latter, the said plaintiffs failed to realize a yearly harvest of at least ten (10)
cavanes of palay at the rate of P10.00 per cavan, from the harvest-time of 1958 up to
the present;

6. That because of the defendants' refusal to recognize plaintiffs' ownership over the
afore-mentioned portion of land and also because of their refusal and failure to
surrender and/or vacate the same the plaintiffs were forced to employ the services of
the undersigned counsel to institute this action at an agreed fees of P500.00.

WHEREFORE, premises considered, the plaintiffs herein respectfully pray of this Hon. Court to
render judgment in favor of the plaintiffs and against the defendants thus ordering them:

a) To recognize the ownership of the plaintiffs over the afore-

mentioned portion of land with an area of 4,303 square meters, more
or less, and to surrender it to the plaintiffs or vacate the same;

b) To deliver, jointly and severally, to the plaintiffs palay in the amount

of ten (10) cavanes or pay their market price at the rate of P10.00 per
cavan per harvest-time beginning the year 1958 up to the time of
their delivery or payment.

c) To pay, jointly and severally, the plaintiffs' lawyer's fees in the

amount of P500.00; and

d) To pay the costs of this suit.

And to grant any remedy and relief just and equitable in the premises." (Record on Appeal, pp. 2-6.)

The Answer of the defendants contains the following allegations:

I. That defendants have no knowledge or information sufficient to form a belief as to

the truth of the allegations in paragraph 2 of the complaint;
 II. That defendants admit being in possession of the portion of land alleged in
paragraph 3 of the complaint, as said portion of land belongs to defendant Victoria P.
Cabral;

III. That defendants deny the allegation in paragraph 4 of the complaint to the effect
that the said portion of 4,303 square meters, more or less, is a part of the plaintiffs'
land;

IV. That defendants have no knowledge or information sufficient to form a belief as to

the truth of the allegations in paragraph 5 of the complaint;

V. That defendants likewise have no knowledge or information sufficient to form a

belief as to the truth of the allegations in paragraph 6 of the complaint;

And by way of SPECIAL DEFENSE, defendants allege:

VI. That defendant Victoria P. Cabral and her predecessors in interest before
her are the real owners, and have been in actual, adverse, peaceful and
continuous possession, of that portion of land claimed by the plaintiffs in their
complaint, which portion is more particularly described as Lot 5-B of plan Psd-
11496, duly approved by the Director of Lands on December 21, 1935;

VII. That the deceased Gregorio Z. Ocampo and/or his heirs, the herein plaintiffs,
have admitted, acknowledged and recognized the defendant Cabral and her
predecessors in said portion of land, as the real owners thereof;

VIII. That the deceased Gregorio Z. Ocampo and his predecessors in interest, as
well as the defendant Cabral and her predecessors in interest, have always
recognized as the boundary between their respective properties, a barrio road which
has existed since the Spanish regime and has continued to exist up to the present
time; and all the residents of the rural areas using said barrio road know for a fact
that, with respect to the respective properties of the parties hereto, said road is the
boundary between said properties;

IX. That the inclusion of that portion claimed by the plaintiffs in their complaint in the
original registration of their property was obtained thru error or fraud by the original
applicant, but was never possessed by him nor by his successors in interest, as they
have always openly recognized the ownership of said portion as belonging to
defendant Cabral and her predecessors in interest before her;

And by way of COUNTER CLAIM, defendants allege:

X. That all the foregoing paragraphs are pleaded herein and made parts hereof;

XI. That the defendant Victoria P. Cabral is the real owner of Lot No. 5- B, plan Psd-
11496, with an area of 4,303 square meters, more or less, erroneously or
fraudulently included in the property described in Transfer Certificate of Title No.
14513 of the Register of Deeds of the Province of Bulacan, registered in the name of
the deceased Gregorio Z. Ocampo and now claimed by the herein plaintiffs;
 XII. That defendant Cabral and her predecessors in interest have been in possession
of said portion of land for more than fifty years, their possession being actual,
adverse, peaceful and continuous, as owners thereof;

XIII. That said deceased Gregorio Z. Ocampo and/or his heirs, and their
predecessors in interest have openly admitted, acknowledged and recognized the
defendant Victoria P. Cabral and her predecessors in interest as the real owners of
said portion of land, Lot 5-B plan Psd-11496, and said Gregorio Z. Ocampo and/or
his heirs and their predecessors in interest have never been in possession of said
portion of land;

XIV. That the plaintiffs, claiming to be the heirs of the deceased Gregorio Z. Ocampo,
are therefore under obligation to execute a deed of transfer of said portion of land in
favor of the true owner thereof, the herein defendant Victoria P. Cabral, in
accordance with law;

XV. That because of the present action filed by the plaintiffs, the defendants have
suffered damages in the amount of Pl,000.00;

WHEREFORE, defendants pray that judgment be rendered:

(a) dismissing the complaint, with costs against the plaintiffs;

(b) declaring the defendant Victoria P. Cabral as the owner of Lot 5-B, plan Psd-
11496, which has been erroneously included in the property of the deceased
Gregorio Z. Ocampo covered by Transfer Certificate of Title No. 14513, Bulacan, and
ordering the herein plaintiffs to execute a deed of transfer of said Lot No. 5-B, plan
Psd-11 496 in favor of the defendant Victoria P. Cabral; and

(c) ordering the plaintiffs to pay to the defendants the sum of P l,000.00.

Defendants further pray for such other reliefs and remedies which may be proper and
just under the premises. (R.A., pp. 8-13.)

The plaintiffs filed a Reply and Answer to Counterclaim as follows:

1. That the plaintiffs deny the allegation in paragraph II of the Answer that the portion
of land now under litigation belongs to the defendant Victoria P. Cabral, and likewise
deny the allegations in paragraphs VI and XI of the same that the defendant Victoria
P. Cabral and her predecessors in interest are the real owners of this portion (under
litigation) with an area of 4,303 square meters, Lot 5-B of plan Psd-11496 with
Transfer Certificate of Title No. 14513 in the name of Mr. Gregorio Z. Ocampo,
because the truth is that the said Mr. Ocampo and his successors in interest, the
plaintiffs herein, are the real owners thereof; and that said portion is a part and is
included in the plaintiffs' big parcel of land known as Lot 5, Psu-43302, and covered
by the afore-mentioned Certificate;

That the defendant Victoria P. Cabral and her predecessors in interest were never
the owners of the said portion of land and in fact none of them, much less Victoria P.
Cabral, has been in possession or in possession of any title or any document. either
public or private, showing his or her ownership, and not even a Tax Declaration for
taxation purposes; the truth is that when the late Mr. Antonio Rodriguez, original
owner of the land with plan Psu-100536, adjacent to that of the plaintiffs, sold said
land to his successor Segunda Prodon he did not include in the said sale this portion,
under litigation, Lot 5-B, of plan Psd-11496 with an area of 4,303 square meters,
more or less, knowing that it did not belong to him; and because of Segunda Prodon
has not acquired this portion of land with an area of 4,303 square meters, more or
less, it is clear, therefore, that she could not have transmitted it to her successors
including the herein defendant, Victoria P. Cabral;

2. That the plaintiffs deny the defendants' allegations in paragraphs VI and XII of
their Answer that the defendant Victoria P. Cabral and her predecessors in interest
have been in actual, adverse, peaceful and continuous possession of this portion of
land for a period of more than 50 years because the truth is that, if they were ever in
possession of the same, their possession was 'not adverse' and 'not continuous'.
When Mr. Gregorio Z. Ocampo bought the parcel of land known as Lot 5, Psu-43302
with an area of 78,181 square meters, more or less, in 1934, (wherein this portion
under litigation is included) the said Mr. Ocampo took possession of this whole land.
In the year 1935 the adjoining owner of the said property, the late Mr. Antonio
Rodriguez and predecessor of the defendant Victoria P. Cabral, requested Mr.
Ocampo to sell to him a portion of said land with an area of 4,303 square meters,
more or less, to which Mr. Ocampo agreed. As there was already a meeting of the
mind Mr. Rodriguez requested Mr. Ocampo that he be allowed to possess the said
portion as they were going to make the formal deed of sale, to which proposition Mr.
Ocampo likewise agreed. This proposed sale never materialized so if Mr.
Rodriguez ever possessed the said portion of land, now under litigation, he did
not possess it as owner but only as a 'prospective owner'. His possession
cannot, therefore, be termed 'adverse'. Such possession cannot also be termed
'continuous' for 50 years because Mr. Ocampo was in possession of the same in
1934 before Mr. Rodriguez came in possession of the same, first, with the consent
and later by toleration of Mr. Ocampo.

Granting but without admitting, that the defendant Cabral and her predecessors in
interest have been in possession of this portion of land with an area of 4,303 square
meters, more or less for more than 50 years, does she mean to imply now that she
acquires ownership over the same by virtue of 'prescription' She must remember
that this property is titled under Act 496 and, therefore, 'imprescriptible',

3. That the plaintiffs deny the defendants' allegations in paragraphs VI and IX of their
Answer that the plaintiffs have admitted, acknowledged and recognized the
defendant Cabral and her predecessors in said land as the real owners thereof,
because the truth is that the plaintiffs are the real owners of the same, and that they
have never admitted, acknowledged nor recognized the defendant Cabral nor any of
her predecessors in interest as the owners of said portion of land;

4. That the plaintiffs admit he allegation in paragraph VIII of the Answer that the
defendant Victoria P. Cabral owns an adjoining property which is described in her
plan Psu-100536 but they deny there is a 'barrio road' between her land and that of
the plaintiffs which serves as the boundary and that there has never been any road
much less a barrio road between their properties.

That, if the defendants are referring to Lot 5-B, plan Psd- 11496, and the rest of the
land of the plaintiffs Lot No. 5, Psu-43302, which said Lot 5-B is a part, the plaintiffs
 deny the existence of such road much less a barrio road, and that there has never
been a road therein. With the permission of the Hon. Court the existence or non-
existence of a road can be verified by an ocular inspection and if need be with the aid
of a licensed surveyor;

5. That the plaintiffs deny the allegations in paragraphs IX and XIII of the Answer that
Mr. Gregorio Z. Ocampo and his successors in interest have never been in
possession of this portion of land now under litigation. Mr. Gregorio Z. Ocampo took
possession of said property after he bought it in 1934 and if the predecessors in
interest of the defendant Cabral happened to be in its possession it was, first, with
the consent of Mr. Ocampo and later by his toleration as we have already explained
in paragraph 2 of this Reply;

6. That the plaintiffs deny the allegation in paragraph IX of the Answer that the
inclusion of this portion of property under litigation was 'obtained thru error or fraud'
by the original applicant, and they likewise deny the allegation in paragraph XI of the
Answer that this portion with an area of 4,303 square meters, more or less, was
erroneously and fraudulently included in the property described in Transfer
Certificate of Title No. 14513 of the Register of Deeds of the Province of Bulacan,
because in truth and in fact there was no such error or fraud. The title of this property
was granted and obtained in a regular proceeding. If there was any error or fraud the
predecessor in interest of the defendant Victoria P. Cabral would have filed a petition
for review or would have sued for damages. Or the said defendant or any of her
predecessors in interest would have resorted to some legal remedy.

The fact is that the defendant Victoria P. Cabral or any of her predecessors in
interest did not sincerely and honestly believe that they were the owners of this
portion of property. In fact they did not have and do not have any kind of title or any
kind of document, either public or private, over this property and they did not even
have this property declared in their names for taxation purposes.

Granting, but without admitting, that the title to this property was obtained either by
error or fraud yet the defendant Victoria P. Cabral can have no valid claim against
the plaintiffs because she has never been the owner of said property and also
because the plaintiffs' predecessor, Mr. Gregorio Z. Ocampo, acquired this property
as 'an innocent purchaser, in good faith and for value.

7. That the plaintiffs deny the allegation in paragraph XIV of the Answer that the
plaintiffs are under obligation to execute a deed of transfer of the portion of land in
favor of the defendant Victoria P. Cabral because, first, the title to this land was
obtained in a regular proceeding where there was neither error nor fraud; second,
said defendant or her predecessors in interest are not the owners of said land much
less said defendant Cabral who has nothing at all in her possession to show any kind
of right over said portion of land, and third, Mr. Gregorio Z. Ocampo, the predecessor
in interest of the plaintiffs, acquire this property as an 'innocent purchaser, in good
faith and for value', and

8. That the plaintiffs have no knowledge or information sufficient to form a belief as to

the truth of the allegation in paragraph XV of the defendants, Answer (Counterclaim).

WHEREFORE, it is respectfully prayed of this Hon. Court to grant the plaintiffs Petition in their
Complaint." (R.A., pp. 14-21.)
It can be seen that the thrust of the Complaint is that a piece of land covered by T.C.T. No. 14513 in
the name of Gregorio Z. Ocampo was illegally possessed by the defendants. Upon the other hand,
the thrust of the Answer is that "the defendant Victoria P. Cabral is the real owner of Lot No. 5-B,
plan Psd-11496, with an area of 4,303 square meters, more or less, erroneously or fraudulently
included in the property described in Transfer Certificate of Title No. 14513 of the Register of Deeds
of the Province of Bulacan, registered in the name of the deceased Gregorio Z. Ocampo and now
claimed by the herein plaintiffs." (Answer, par. XI.)

The decision of the trial court is not clear as to whether or not the disputed lot is included in T.C.T.
No. 14513. However, the decision contains the following statement: "if it is included in their title, such
title is void insofar as the portion of the Pandayan road is concerned." (R.A., p. 30.)

The trial court gave the following judgment:

WHEREFORE, plaintiffs' complaint is hereby DISMISSED, without costs. For lack of

proof that plaintiffs were in bad faith in the filing of the present action, defendants'
counter-claim is likewise dismissed. (R.A., p. 30.)

The plaintiffs appealed to the Court of Appeals and made the following assignment of errors:

I. THE LOWER COURT ERRED IN HOLDING THAT THE PANDAYAN ROAD IS

LOCATED INSIDE THE PROPERTY DESCRIBED IN T.C.T. NO. 14513 AND
INCONSEQUENTLY HOLDING THAT THE SAME CONSTITUTES THE
BOUNDARY LINE BETWEEN THE PROPERTIES OF PLAINTIFFS-APPELLANTS
AND DEFENDANT-APPELLEE VICTORIA CABRAL.

II. THE LOWER COURT ERRED IN HOLDING THAT T.C.T. NO. 14513 IS 'VOID
INSOFAR AS THE PORTION FROM THE PANDAYAN ROAD IS CONCERNED',
AND IN NOT HOLDING THAT SAID T.C.T. IS INCONTROVERTIBLE.

III. THE LOWER COURT ERRED IN GIVING IMPORTANCE TO DEFENDANTS-

APPELLEES' ALLEGED 'OPEN, CONTINUOUS AND ADVERSE POSSESSION'
AND IN DISMISSING PLAINTIFFS-APPELLANTS' COMPLAINT." (Brief, pp. a-b).

The Court of Appeals found as a fact: "That disputed portion Lot 5-a is admittedly part of the land
originally registered in the name of plaintiff's predecessor in interest, there should be no question
that that title had become imprescriptible and original registrant as well as his successors had the
right to vindicate their ownership against any body else. " (Rollo, p. 54.)

But the Court of Appeals went further. Seizing a statement in the Reply and Answer to Counterclaim
filed by the plaintiffs, it held that Gregorio Z. Ocampo had by an oral contract sold the disputed
land to Antonio Rodriguez the defendant's predecessor in interest. The Court of Appeals
further said "that agreement oral albeit, became binding upon Ocampo, it was even executed in part
by the actual delivery of possession, it amounted to a supervening fact, posterior to the title, and the
fact that Ocampo's title was not afterwards cancelled can not at all mean that the title could be used
as a weapon to annul that posterior agreement by Ocampo voluntarily entered into and by reason of
which he had delivered possession unto defendant's predecessor; of course, no deed of sale was
formalized for a reason not clear in the evidence; but whether or not formalized, it was a binding
personal agreement upon Ocampo. " (Rollo, pp. 56-57.)

The statement upon which the Court of Appeals built its decision is as follows:
 When Mr. Gregorio Z. Ocampo bought the parcel of land known as Lot 5, Psu-43302
with an area of 78,181 square meters, more or less, in 1934, (wherein this portion
under litigation is included), the said Mr. Ocampo took possession of this whole land.
In the year 1935 the adjoining owner of the said property, the late Mr. Antonio
Rodriguez and predecessor of the defendant Victoria P. Cabral, requested Mr.
Ocampo to sell to him a portion of said land with an area of 4,303 square meters,
more or less, to which Mr. Ocampo agreed. As there was already a meeting of the
mind Mr. Rodriguez requested Mr. Ocampo that he be allowed to possess the said
portion as they were going to make the formal deed of sale, to which proposition Mr.
Ocampo likewise agreed. This proposed sale never materialized so if Mr. Rodriguez
ever possessed the said portion of land, now under litigation, he did not possess it as
owner but only as a 'prospective owner'. His possession cannot, therefore, be termed
'adverse'. Such possession cannot also be termed 'continuous' for 50 years because
Mr. Ocampo was in possession of the same in 1934 before Mr. Rodriguez came to
possession of the same, first, with the consent and later by toleration of Mr. Ocampo.
(R.A. pp. 15-16.)

It passes understanding why the plaintiffs mentioned a non-consummated transaction between

Gregorio Z. Ocampo and Antonio Rodriguez when the defendants made no claim of such
transaction nor was the name of Antonio Rodriguez even mentioned in their Answer.

Even as the Court of Appeals found that the disputed piece of land is registered in the name of the
plaintiffs but because of the supposed oral sale of the same to the predecessors of the defendants, it
affirmed the judgment of the trial court dismissing the complaint for the recovery of the land.

The instant petition assails the Court of Appeals for rendering a decision based on a ground which
was never raised nor discuss whether in the trial court or before it by any of the parties. The ground
to be sure, is the supposed oral contract of sale made to the predecessors of the defendants
covering the disputed piece of land.

The petition is highly impressed with merit.

It is a well-settled rule that, except questions on jurisdiction, no question will be entertained on

appeal unless it has been raised in the court below and it is within the issues made by the parties in
their pleadings. (See cases cited in II Moran, Rules of Court, pp. 504-505 [1970].)

In this case, the Court of Appeals erred when it rendered a decision based on a ground which
was not litigated in the trial court and which could not have been raised on appeal. That the
supposed oral contract of sale was never an issue is demonstrated by the following.

1. The pleadings of the parties have been purposely reproduced in full above. It can
be seen therefrom that no issue in respect of the supposed oral sale actually
emerged.

2. The decision of the trial court is absolutely silent on the supposed oral contract of
sale.

3. The plaintiffs who appealed the decision of the trial court to the Court of Appeals
did not make an assignment of error in respect of the supposed oral sale.
The Court of Appeals found as a fact that the disputed piece of land is registered in the name
of the plaintiffs' predecessor.

The defendants claimed in their answer that they and their predecessors are the owners of the land
in dispute but that the plaintiffs' predecessor was able to register the same in his name through error
or fraud.

However, the trial court made no categorical finding on this claim of the defendants otherwise it
would have granted the affirmative relief which they asked, namely: "(b) declaring the defendant
Victoria P. Cabral as the owner of Lot 5-B, plan Psd-11496, which has been erroneously included in
the property of the deceased Gregorio Z. Ocampo covered by Transfer Certificate of Title No. 14513,
Bulacan, and ordering the herein plaintiffs to execute a deed of transfer of said Lot No. 5-B, plan
Psd- 11496 in favor of the defendant Victoria P. Cabral." The Court of Appeals did not deal with this
issue because there was no appeal made by the defendants.

The following conclusions have to be made.

1. The disputed land is included in T.C.T. No. 14513 issued to Gregorio Z. Ocampo,
the predecessor of the plaintiffs.

2. The original registration which includes the disputed land was not vitiated by error
or fraud.

3. The Court of Appeals erred when it held that Gregorio Z. Ocampo had orally sold
the disputed land to the predecessors of the defendants.

4. The defendants, by their own admission, are in possession of the disputed land.
There is no evidence that they were possessors in bad faith. However, their good
faith ceased when they were served with summons to answer the complaint. (Art.
528, Civil Code; Tacas vs. Tobon, 53 Phil. 356 [1929].) As possessors in bad faith
from the service of the summons they "shall reimburse the fruits received and
those which the legitimate possessor could have received, ... (Art. 549, Civil
Code.)

WHEREFORE, the judgment of the Court of Appeals is hereby reversed and another one rendered
in that the defendants shall vacate and surrender the land in question to the plaintiffs; and the
defendants shall also account for the fruits thereof pursuant to Article 549 of the Civil Code from the
service of the summons. Costs against the defendants.

SO ORDERED.

G.R. No. 3088            February 6, 1907

EL BANCO ESPAÑOL-FILIPINO, plaintiff-appellant,
vs.
JAMES PETERSON, sheriff of the city of Manila, ET AL., defendants-appellees.

Del-Pan, Ortigas & Fisher for appellant.

Hartigan, Marple, Rohde, & Gutierrez for appellees.
TORRES, J.:

On the 24th of October, 1905, the Spanish-Filipino Bank, a corporation, through its attorneys, Del-
Pan, Ortigas and Fisher, filed a complaint against the sheriff of the city of Manila and the other
defendant, Juan Garcia, praying that judgment be rendered against the said sheriff, declaring that
the execution levied upon the property referred to in the complaint, to wit, wines, liquors, canned
goods, and other similar merchandise, was illegal, and directing the defendants to return the said
goods to the plaintiff corporation, and in case that he had disposed of the same, to pay the value
thereof, amounting to P30,000, Philippine currency, and further that it be declared that the said
plaintiff corporation, under the contract of pledge referred to in the complaint had the right to apply
the proceeds of the sale of the said goods to the payment of the debt of P40,000, Philippine
currency, for the security of which the said merchandise was pledged, with preference over the claim
of the other defendant, Juan Garcia and that both defendants be held jointly liable to the plaintiff for
the sum of P500, Philippine currency, as damages, and the said defendants to pay the costs of the
proceedings, and for such other and further relief as the plaintiff might be entitled to under the law.
Plaintiff alleges in its complaint that under the contract entered into on the 4th of March, 1905, by
and between the Spanish-Filipino Bank and Francisco Reyes, the former, loaned to the latter the
sum of P141,702, Philippine currency; that on the same date Francisco Reyes was already indebted
to the bank in the sum of P84,415.38, Philippine currency, which, added to the amount of the loan,
made a total of P226,117.38, Philippine currency, received by the said Reyes as a loan from the
plaintiff bank, the entire sum at an annual interest of 8 per cent; that to secure the payment of these
two sums and the interest thereon, the debtor, Francisco Reyes, by a public instrument executed
before a notary on the aforesaid date mortgaged in favor of the plaintiff bank several pieces of
property belonging to him, and pledged to the said bank part of his personal property, specifying
the proportion on which the said real and personal property thus mortgaged and pledged in favor of
the plaintiff corporation would be respectively liable for the payment of the debt; that the property
pledged by the debtor to the bank included a stock or merchandise, consisting of wines, liquors,
canned goods, and other similar articles valued at P90,591.75, Philippine currency, then stored in
the warehouses of the debtor, Reyes, No. 12 Plaza Moraga, in the city of Manila, which said goods
and merchandise were liable for the payment of the said sum of P90,591.75, Philippine currency;
that in the aforesaid deed of pledge it was agreed by and between the bank and the debtor, Reyes,
that the goods should be delivered to Ramon Garcia y Planas for safe-keeping, the debtor
having actually turned over to the said Garcia y Planas the goods in question by delivering to him the
keys of the warehouse in which they were kept; that in a subsequent contract entered into by and
between the debtor, Reyes, and the plaintiff bank on the 29th of September, 1905, the said contract
executed on the 4th of March was modified so as to provide that the goods then (September 29) in
possession the depositary should only be liable for the sum of P40,000, Philippine currency, the said
contract of the 4th of March remaining in all other respects in full force and effect, Luis M.a Sierra
having been subsequently appointed by agreement between the bank and the debtor as depositary
of the goods thus pledged in substitution for the said Ramon Garcia y Planas.

On the 19th of October, 1905, in an action brought in the Court of First Instance of the city of Manila
by Juan Garcia y Planas against Francisco Reyes and Ramon Agtarat, judgment was rendered
against the last-mentioned two for the sum of P15,000, Philippine currency, to be paid by them
severally or jointly, upon which judgment execution was issued against the property of the
defendants, Reyes and Agtarap. On the aforesaid 19th day of October, for the purpose of levying
upon the property of the defendants, the sheriff at the request of Garcia, the plaintiff in that
case, entered the warehouse where the goods pledged to the plaintiff bank were stored under
the custody of the depositary, Sierra, and levied upon them as per list attached to the complaint
marked "Exhibit A." The sheriff seized the goods which had been pledged to the bank, depriving the
latter of the possession of the same, to which said contract executed on the 4th of March, 1905.
Without the authority of the bank, Reyes could not dispose of the said goods. The value of the goods
seized by the sheriff was P30,000, Philippine currency, the said sheriff, having refused, and still
refusing, to return to the same to the bank, notwithstanding repeated demands made upon him to
this effect, and it being alleged in the complaint that unless prohibited by the court the sheriff would
proceed to sell the said goods at public auction and apply the proceeds to the satisfaction of the
judgment rendered in favor of the Juan Garcia y Planas, while the other debtor Reyes had not paid
to the bank the P40,000, Philippine currency, to secure the payment of which the goods mentioned
in Exhibit A had been pledged to the bank, that is, to secure the payment of a sum in excess of the
actual value of the goods in the hands of the sheriff.

The defendant sheriff, James J. Peterson, and Juan Garcia, his codefendant, through their
attorneys, Hartigan, Marple, Rohde and Gutierrez, answering the complaint, stated that they
admitted the allegations contained in paragraphs 1, 2, 3, 4, 5, 12, and 17 of the complaint, but
denied the allegations contained in paragraphs 6, 7, 8, 9, 10, 11, 14, 16, and 18. They further denied
the allegations contained in paragraph 12, with the exception that the defendant sheriff levied upon
the goods mentioned in Exhibit A attached to the complaint for the purpose of satisfying the
judgment referred to therein; and also the allegations contained in paragraph 13 of the complaint,
with the exception that the sheriff seized the property mentioned in Exhibit A under the execution
referred to therein; and finally defendants denied the allegation contained in paragraph 15 of the
complaint, with the exception of the allegation that the value of the property seized is P30,000. They
accordingly asked that the action be dismissed and that it be adjudged that the plaintiff had no
interest whatever in the property described in the complaint, and that the plaintiff be taxed with the
costs of these proceedings.

The testimony introduced by the parties having been received, and the exhibits having been
attached to the record, the court below entered judgment on the 4th of January, 1906, dismissing
plaintiff's action and directing that the defendant recover from the Spanish-Filipino Bank the costs of
this action, for which execution was duly issued. To this judgment counsel for plaintiff excepted and
announced his intention of prosecuting a bill of exceptions, and further made a motion for a new trial
on the ground that the judgment of the court below was contrary to law and that the findings of fact
were plainly and manifestly contrary to the weight of the evidence.

The decision of this case depends mainly upon the question as to whether the contract of pledge
entered into by and between the Spanish-Filipino Bank and Francisco Reyes to secure a loan
made by the former to the latter was valid, all the requisites prescribed by the Civil Code
having been complied with.

If so, the bank's claim had preference over the claim of a third person not secured, as was the
bank's, by a pledge, with reference to the property pledged to the extent of its value, and therefore
such property could not have been legally levied upon by the sheriff at the request of the defendant,
Juan Garcia. (Arts. 1921, 1922, Civil Code.)

The contract in question complies with all the requisites provided in article 1857 of the Civil Code,
such as that the property was pledged to secure a debt, the date of the execution, the terms of the
pledge, and the property pledged, all of which appears in a public document, and the property
pledged was placed in the hands of a third person by common consent of the debtor and creditor,
under the supervision of an agent of the bank. (Arts. 1863, 1865, 1866, 1869, 1871, Civil Code.) The
defect alleged to exist in the said contract is that the debtor, Reyes, continued in possession of the
property pledged; that he never parted with the said property, and that neither the creditor nor the
depositary appointed by common consent of the parties were ever in possession of the property
pledged, and for this reason, and upon the further ground that the contract was fraudulent, the court
below dismissed the complaint with the costs against the plaintiff.
In the motion for a new trial it was alleged by the plaintiff that the judgment of the court below was
contrary to law, and that the findings of fact contained therein were plainly and manifestly against the
weight of the evidence. If plaintiffs contention is correct, then the judgment of the court below should
be reversed.

From the evidence introduced at the trial, both oral and documentary, it appears that a third person,
appointed by the common consent of the debtor and creditor, was in possession of the goods
pledged in favor of the bank under the direct supervision of an agent of the bank expressly
appointed for this purpose, and it has not been shown that the said Reyes continued in the
possession of the goods after they had been pledged to the plaintiff bank.

Exhibit C and the testimony of Francisco Reyes, Luis M.a Sierra, and Mariano Rodriguez
corroborate the existence and authenticity of the contract of pledge recorded in a public instrument
and conclusively and satisfactorily show that the debtor, after the pledge of the property, parted with
the possession of the same, and that it was delivered to a third person designated by common
consent of the parties. For the purpose of giving this possession greater effect, the pledgee
appointed a person to examine daily the property in the warehouse where the same was kept.

The witness Matias Garcia also testified as to the status of these goods, and informed Juan Garcia
of such status before the same were levied upon.

The sheriff's testimony supports the allegation that the depositary, Sierra, was present at the place
where the goods were kept, as well as the representative of the bank, Rodriguez, when he, the
sheriff, went there for the purpose of levying upon the said property. He further testified that
Rodriguez, the representative of the bank, then protested and notified him that the property in
question was pledged to the Spanish-Filipino Bank.

The contract in question was, therefore, a perfect contract of pledge under articles 1857 and
1863 of the Civil Code, it having been conclusively shown that the pledgee took charge and
possession of the goods pledged through a depository and a special agent appointed by it, each of
whom had a duplicate key to the warehouse wherein the said goods were stored, and that the
pledgee, itself, received and collected the proceeds of the goods as they were sold.

The fact that the said goods continued in the warehouse which was formerly rented by the pledgor,
Reyes, does not affect the validity and legality of the pledge, it having been demonstrated that after
the pledge had been agreed upon, and after the depository appointed with the common consent of
the parties had taken possession of the said property, the owner, the pledgor, could no longer
dispose of the same, the pledgee being the only one authorized to do so through the depositary and
special agent who represented it, the symbolical transfer of the goods by means of the delivery
of the keys to the warehouse where the goods were stored being sufficient to show that the
depositary appointed by the common consent of the parties was legally placed in possession
of the goods. (Articles 438, 1463, Civil Code.)

The fact that the debtor, Reyes, procured purchasers and made arrangements for the sale of the
goods pledged and that the bills for the goods thus sold were signed by him does not affect the
validity of the contract, for the pledgor, Reyes, continued to be the owner of the goods, (art. 1869,
Civil Code), he being the one principally interested in the sale of the property on the best possible
terms.

As to the reservation stipulated in paragraph 13 of the contract executed on the 4th of March, 1905,
it could not affect the contract in question for the reason that reservation referred to the rent from the
property mortgaged, to the bank and the dividends from the shares of stock also pledged to the
bank, and not the merchandise so pledged, and such reservation could not have rendered the
contract of pledge null.

If the case is to be decided in accordance with the facts alleged and established, the defendant not
having introduced any evidence to show that the said contract of pledge was fraudulent as to other
creditors, there was no legal ground upon which the court below could have held that the contract
evidenced by the instrument in question was entered into to defraud other creditors of the pledgor.

For the reason hereinbefore set out, and the judgment of the court below being contrary to the
evidence, the said judgment is hereby reversed, and it is hereby adjudged that the plaintiff
corporation, under and by virtue of the contract of pledge in question, had a preferential right
over that of the defendant, Juan Garcia, to the goods pledged or the value thereof, the value
to be applied to the payment of the debt of P40,000, Philippine currency, for the security of which
the said property was pledged, and the defendants are accordingly hereby ordered to return to the
plaintiff corporation the property improperly levied upon, or to pay its value, amounting to P30,000,
Philippine currency, without special provision as to costs. After the expiration of twenty days let
judgment be entered in accordance herewith, and ten days thereafter the case be remanded to the
court below for execution. So ordered.

Arellano, C.J., Mapa, Carson and Willard, JJ,. concur.

G.R. No. 128177            August 15, 2001

HEIRS OF ROMAN SORIANO, petitioners,

vs.
THE HONORABLE COURT OF APPEALS, SPOUSES BRAULIO ABALOS and AQUILINA
ABALOS, respondents.

YNARES-SANTIAGO,J.:

May a winning party in a land registration case effectively eject the possessor thereof, whose
security of tenure rights are still pending determination before the DARAB?

The instant petition for certiorari seeks to set aside the Decision 1 dated September 20, 1996 of the
Court of Appeals in CA-G.R. SP No. 34930 as well as its Resolution 2 dated January 15, 1997,
denying petitioners' Motion for Reconsideration.

We quote the undisputed facts as narrated by the Court of Appeals, to wit —

The property subject of this case is a parcel of land containing an area of 24,550 square
meters, more or less, located in Lingayen, Pangasinan, and particularly described as follows:

A parcel of land (Nipa with an area of 8,410 square meters; fishpond with an area of
14,000 square meters; and residential land with an area of 1,740 square meters,
more or less. Bounded on the N, by river and Filemon Anselmo; on the South by
Alejandro Soriano and Filemon Anselmo; and on the West by Fortunata Soriano.

Originally owned by Adriano Soriano until his death in 1947, the above-described property
passed on to his heirs who leased the same to spouses David de Vera and Consuelo
Villasista for a period of fifteen (15) years beginning July 1, 1967 with Roman Soriano, one of
the children of Adriano Soriano, acting as caretaker of the property during the period of the
lease. After executing an extra judicial settlement among themselves, the heirs of Adriano
Soriano subsequently subdivided the property into two (2) lots, Lot No. 60052 and Lot No.
8459. Lot No. 60052 was assigned to Lourdes, Candido and the heirs of Dionisia while Lot
No. 8459 was assigned to Francisca, Librada, Elocadio and Roman. In 1971, Lot No. 60052
was sold by Lourdes, Candido and the heirs of Dionisia to petitioner spouses Braulio and
Aquilina Abalos (hereinafter referred to as petitioners), while, Elocadio, Francisca and
Librada sold their three-fourths shares in Lot No. 8459 also to petitioners.

On March 14, 1968, the de Vera spouses ousted Roman Soriano as caretaker and
appointed Isidro Verzosa and Vidal Verzosa as his substitutes. Thereafter, Roman Soriano
filedCAR Case No. 1724-P-68 for reinstatement and reliquidation against the de Vera
spouses. The agrarian court authorized the ejectment of Roman Soriano but on appeal, the
decision was reversed by the Court of Appeals, which decision became final and executory.
However, prior to the execution of the said decision, the parties entered into a post-
decisional agreement wherein the de Vera spouses allowed Roman Soriano to sub-lease the
property until the termination of the lease in 1982. In an Order dated December 22, 1972, the
post-decisional agreement was approved by the agrarian court.

On August 16, 1976, petitioners filed with the Regional Trial Court of Lingayen, Pangasinan,
Branch 38, an application for registration of title over Lot No. 60052 and three-fourths
(3/4)pro-indiviso of Lot No. 8459, docketed asLRC Case No. N-3405. Said application for
registration was granted by the trial court, acting as a land registration court, per Decision
dated June 27, 1983. On appeal, the Court of Appeals affirmed the decision of the land
registration court. The petition for review filed with the Supreme Court by Roman Soriano
docketed asG.R. 70842, was denied for lack of merit and entry of judgment was entered on
December 16, 1985.

Meanwhile, it appears that on July 15, 1983, a day after the promulgation of the land
registration court's decision, Roman Soriano, together with Elocadio and Librada Soriano,
filed before the Regional Trial Court of Lingayen, Branch 37, and against petitioners, an
action for annulment of document and/or redemption, ownership and damages, docketed
asCivil Case No. 159568 (sic; should be 15958). Petitioners filed a motion to dismiss on the
ground ofres judicata, pendency of another action, laches, misjoinder of parties and lack of
jurisdiction, which was denied by the trial court.

Thereafter, on August 22, 1984, or eleven (11) years after the approval of the post-decisional
agreement between Roman Soriano and the spouses de Vera inCAR Case No. 1724-P-
68 for reinstatement and reliquidation, petitioners filed with the agrarian court a motion for
execution of said post-decisional agreement which allowed Roman Soriano to sub-lease the
property. The motion prayed that petitioners be placed in possession of the subject property,
jointly with Roman Soriano, and to levy so much of Roman's property to answer for the use
and occupation by Soriano of 6/7 share of the property. On October 25, 1984, Roman
Soriano filed a motion to suspend hearing on the rental demanded by petitioners, which,
however, was denied by the agrarian court. The agrarian court likewise authorized the
substitution of the de Vera spouses by petitioners. Soriano's motion for reconsideration was
also denied, prompting Soriano to file a petition for certiorari with the Court of Appeals.

In the meantime, Roman Soriano died on December 11, 1985. Thus, the complaint inCivil
Case No. 159568 (sic) for annulment of document and/or redemption, ownership and
damages, was amended to substitute Soriano's heirs, herein private respondents, as party-
plaintiffs. The complaint was again amended to include Juanito Ulanday as party-defendant
for having allegedly purchased part of the disputed property from petitioners. On motion of
petitioners, the re-amended complaint was dismissed by the trial court on the ground that the
re-amended complaint altered the cause of action. Upon reconsideration, the dismissal was
set aside and petitioners were ordered to file their Answer, in view of which petitioners filed a
petition for certiorari and prohibition with the Court of Appeals, docketed asC.A. GR SP No.
22149.

On April 25, 1990, the Court of Appeals denied the petition filed by Roman Soriano
(substituted by private respondents) impugning the denial of their motion to suspend hearing
on the rental demanded by petitioners, and authorizing the substitution of the de Vera
spouses by petitioners, on the ground that no grave abuse of discretion was committed by
the agrarian court. Thus, private respondents filed a petition for review on certiorari with the
Supreme Court, docketed asG.R. 93401.

Meanwhile, on December 7, 1990, the Court of Appeals inC.A. GR SP No. 22149, also
denied the petition for certiorari and prohibition filed by petitioners, ruling that the land
registration court committed no error when it refused to adhere to the rule ofres judicata.
Petitioners then filed with the Supreme Court a petition for review on certiorari, docketed
asG.R. 99843.

On June 26, 1991, the Supreme Court promulgated its decision inG.R. 93401, and granted
the petition filed by private respondents. Thus, the decision of the Court of Appeals denying
the petition of private respondents was set aside, and the motion for execution filed by
petitioners inCAR Case No. 1724-P-48 was denied.

On June 22, 1993, the Supreme Court, inG.R. 99843, reversed and set aside the denial of
the Court of Appeals inC.A. GR SP No. 22149, and consequently,Civil Case No. 15958 for
annulment of document and/or redemption, ownership and damages, was ordered
dismissed.

On October 18, 1993, private respondents filed with the Department of Agrarian Adjudication
Board (sic), a complaint against petitioners for "Security of Tenure with prayer for Status Quo
Order and Preliminary Injunction" docketed asDARAB Case No. 528-P-93.

Meanwhile, it appears that the decision of the land registration court inLRC Case No. N-
3405 was partially executed with the creation of a Committee on Partition per Order dated
March 25, 1987. On July 27, 1988, the land registration court approved the partition of Lot
No. 8459, with Lot No. 8459-A assigned to private respondent, and Lot No. 8459-B assigned
to petitioners. For Lot No. 60052, O.C.T. No. 22670 was issued in the name of petitioners;
for Lot No. 8459-B, O.C.T. No. 22687 was issued, also in the name of petitioner; and for Lot
No. 8459-A, O.C.T. No. 22686 was issued in the name of Roman Soriano. Dissatisfied with
said partition, private respondents appealed to the Court of Appeals, docketed asCA G.R.
SP No. 119497. The appellate court affirmed the partition but reversed the order of the land
registration court directing the issuance of a writ of possession on the ground of pendency
ofCivil Case No. 15958.

On November 15, 1993, the trial court in compliance with the decision of the Supreme Court
inG.R. No. 99843, dismissedCivil Case No. 15958, in view of which, petitioner, on November
25, 1993, inLRC Case No. N-3405, moved for the issuance of an alias writ of execution
and/or writ of possession to place them in possession of Lot No. 60052 and Lot No. 8459-B.
Per Resolution dated January 21, 1994, said motion was held in abeyance by the land
registration court until and afterDARAB Case No. 528-P-93 for security of tenure with prayer
forstatus quo, has been resolved.
 Their motion for reconsideration having been denied on April 5, 1984, petitioners interposed
an appeal to the Supreme Court, docketed asG.R. 115073. In a Resolution dated July 27,
1994 issued by the Supreme Court, petitioners' appeal, which was treated as a petition for
certiorari, was referred to this Court [of Appeals] for determination and disposition.3

The Court of Appeals annulled and set aside the Resolution of the land registration court and
ordered instead the issuance of the corresponding writ of possession in favor of private respondents.
With the denial of their Motion for Reconsideration, petitioners are now before us raising the
following grounds:

1. THE DECISION AND RESOLUTION OF THE RESPONDENT COURT OF APPEALS

ARE CONTRARY TO THE PROVISIONS OF THE AGRARIAN REFORM LAWS AND
JURISPRUDENCE ON THE SECURITY OF TENURE OF TENANT-CARETAKER.

2. THE DECISION AND RESOLUTION OF THE RESPONDENT COURT OF APPEALS

ARE VIOLATIVE OF THE PROVISION ON RIGHT TO DUE PROCESS.

3. THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN

GIVING DUE COURSE TO THE PETITION CONSIDERING THAT PRIVATE
RESPONDENTS HAD EARLIER PERFECTED AN APPEAL OF THE RESOLUTION
SUBJECT OF THEIR PETITION. 4

Possession and ownership are distinct legal concepts. There is ownership when a thing pertaining to
one person is completely subjected to his will in a manner not prohibited by law and consistent with
the rights of others. Ownership confers certain rights to the owner, among which are the right to
enjoy the thing owned and the right to exclude other persons from possession thereof. On the other
hand, possession is defined as the holding of a thing or the enjoyment of a right. Literally, to possess
means to actually and physically occupy a thing with or without right. Possession may be had in one
of two ways: possession in the concept of an owner and possession of a holder. A person may be
5 

declared owner but he may not be entitled to possession. The possession may be in the hands of
another either as a lessee or a tenant. A person may have improvements thereon of which he may
not be deprived without due hearing. He may have other valid defenses to resist surrender of
possession. A judgment for ownership, therefore, does not necessarily include possession as a
necessary incident. 6

There is no dispute that private respondents' (petitioners below) title over the land under litigation
has been confirmed with finality. As explained above, however, such declaration pertains only to
ownership and does not automatically include possession, especially so in the instant case where
there is a third party occupying the said parcel of land, allegedly in the concept of an agricultural
tenant.

While the issue of ownership of the subject land has been laid to rest in the final judgment of the
land registration court, the right of possession thereof is, as yet, controverted. This is precisely what
is put in issue in the security of tenure case filed by petitioners (private respondents below) before
the DARAB.

It is important to note that although private respondents have been declared titled owners of the
subject land, the exercise of their rights of ownership are subject to limitations that may be imposed
by law. The Tenancy Act provides one such limitation. Agricultural lessees are entitled to security of
7 

tenure and they have the right to work on their respective landholdings once the leasehold
relationship is established. Security of tenure is a legal concession to agricultural lessees which they
value as life itself and deprivation of their landholdings is tantamount to deprivation of their only
means of livelihood. The exercise of the right of ownership, then, yields to the exercise of the rights
8 

of an agricultural tenant.

However, petitioners' status as tenant has not yet been declared by the DARAB. In keeping with
judicial order, we refrain from ruling on whether petitioners may be dispossessed of the subject
property. As ratiocinated inNona v. Plan —
9 

It is to the credit of respondent Judge that he has shown awareness of the recent
Presidential Decrees which are impressed with an even more solicitous concern for the
rights of the tenants.If, therefore, as he pointed out in his order granting the writ of
possession, there is a pending case between the parties before the Court of Agrarian
Relations, ordinary prudence, let alone the letter of the law, ought to have cautioned him
against granting the plea of private respondents that they be placed in possession of the
land in controversy,x x x. At the time the challenged orders were issued, without any showing
of how the tenancy controversy in the Court of Agrarian Relations was disposed of,
respondent Judge could not by himself and with due observance of the restraints that cabin
and confine his jurisdiction pass upon the question of tenancy. (Emphasis ours)

In its challenged Decision, the Court of Appeals relied heavily on the principle of finality of
judgments. It applied the legal doctrine that once a judgment has become final, the issuance of a writ
of execution becomes ministerial. The appellate court held that petitioner's situation does not fall
under any of the exceptions to this rule since his occupation of the subject land did not transpire
after the land registration court's adjudication became final.

In so ruling, however, the Court of Appeals loses sight of the fact that petitioner's claim of
possession as a tenant of the litigated property, if proven, entitles him to protection against
dispossession.

Private respondents argue that petitioners' tenancy claim is barred byres judicata, having been ruled
upon in G.R. Nos. 99843 and 93401. However, not being an issue in the case before us, this
question should properly be resolved in DARAB Case No. 528-P-93. To restate, the only issue
before us is whether or not a winning party in a land registration case can effectively eject the
possessor thereof, whose security of tenure rights are still pending determination before the DARAB.

A judgment in a land registration case cannot be effectively used to oust the possessor of the land,
whose security of tenure rights are still pending determination before the DARAB. Stated differently,
the prevailing party in a land registration case cannot be placed in possession of the area while it is
being occupied by one claiming to be an agricultural tenant, pending a declaration that the latter's
occupancy was unlawful.

WHEREFORE, the instant petition for certiorari is hereby GRANTED. The Decision of respondent
Court of Appeals in CA-G.R. SP No. 34930 dated September 20, 1996, as well as its Resolution
dated January 15, 1997 are SET ASIDE. The Resolution of the Regional Trial Court of Lingayen,
Pangasinan in LRC Case No. N-3405 dated January 21, 1994 is ordered REINSTATED.

SO ORDERED.

Arts 539 & ff, Civil Code

G.R. No. L-28066 September 22, 1976

PEREGRINA ASTUDILLO, petitioner-appellant,
vs.
THE BOARD OF DIRECTORS OF PEOPLE'S HOMESITE AND HOUSING CORPORATION,
RAMON P. MITRA, SALUD O. MITRA, and REGISTER OF DEEDS, QUEZON CITY, respondents-
appellees.

Jose Villa Agustin for petitioner-appellant.

San Juan, Africa, Gonzales & San Agustin for appellees Mitras.

Manuel L. Lazaro & Leonardo A. Reyes, Gov't. Corp. Counsel's Office for appellee Board of Director
of the PHHC.

AQUlNO, J.: têñ.£îhqwâ£

Peregrina Astudillo appealed from the "resolution" dated April 18, 1967 of the Court of First Instance
of Rizal, Quezon City Branch V, granting the motion for summary judgment filed by Ramon P. Mitra
and dismissing her petition for certiorari and mandamus (Civil Case No. Q-8741).

According to the pleadings of respondents Mitra and the People's Homesite and Housing
Corporation (PHHC) *, Mitra on December 28, 1957 applied, in behalf of his minor son, Ramon Mitra Ocampo, for the purchase of
Lot 16, Block E-155 of the East Avenue Subdivision of the PHHC in Piñahan, Quezon City.

His application was approved on January 3, 1958. He made a downpayment of P840, an amount
equivalent to ten percent of the price of the lot. On September 9, 1961 the PHHC and Mitra executed
a contract of conditional sale. After Mitra had paid in full the price, which totalled more than nine
thousand pesos, a final deed of sale was executed in his favor on February 18, 1965. Transfer
Certificate of Title No. 89875 was issued to him on March 1, 1965.

The lot in question is acqually in the possession of Peregrina Astudillo. She constructed thereon a
residential house (a shanty, according to Mitra). She admits that she has been squatting on the
said lot "uninterruptedly since 1957 up to the present" (p. 52, Record). She filed with the
administrative investigating committee of the PHHC a request dated February 24, 1963, praying for
the cancellation of the award of Lot 16 to Congressman Mitra and asking the committee to
recommend that it be re-awarded to her. No action was taken on that request.

On May 3, 1965 Peregrina filed in the lower court her aforementioned petition against the PHHC
board of directors, the register of deeds of Quezon City and the spouses Ramon P. Mitra and Salud
O. Mitra. She questioned the legality of the award of Lot 16 to Mitra. She asked that Lot 16 be sold
to her.

After the respondents had filed their answers, the Mitra spouses filed a verified motion for summary
judgment. They assumed that there was no genuine issue as to any material fact. Peregrina
Astudillo opposed the motion. The parties submitted memoranda.

The lower court treated the motion for summary judgment as a motion to dismiss. It dismissed
Peregrina's petition on the grounds that she is a mala fide squatter and that the sale of Lot 16
to Mitra cannot be assailed by means of certiorari and mandamus. Peregrina appealed to this
Court.
Her four assignments of error raise questions of law. She contends that the lower court erred in
holding that certiorari and mandamus do not lie in this case and that she has no right to question the
award to Mitra, and in not holding that the award of Lot 16 to him was in contravention of the Anti-
Graft and Corrupt Practice Law and of the constitutional provision that a Senator or Representative
should not directly or indirectly be financially interested in any contract with the government of any
subdivision or instrumentality thereof during his term of office.

In the ultimate analysis the issue is whether Peregrina Astudillo has a cause of action to annul
the sale of Lot 16 to Mitra and to compel the PHHC board to award that lot to her.

We hold that she has no cause of action to impugn the award to Mitra and to require that she be
allowed to purchase the lot. As a squatter, she has no possessory rights over Lot 16. In the eyes of
the law, the award to Mitra did not prejudice her since she was bereft of any rights over the said lot
which could have been impaired by that award (Bañez vs. Court of Appeals, L-30351, September
11, 1974, 59 SCRA 15, 22).

The record does not show, and Peregrina does not claim, that she is a member of the Piñahan
Homeowners Association some of whose members are "deserving squatters" (Kempis vs. Gonzales,
L-31701, October 31, 1974, 60 SCRA 439).

In the familiar language of procedure, she was not entitled to sue Mitra and the PHHC for the
enforcement or protection of a right, or the prevention of a wrong. Those respondents did not commit
any delict or wrong in violation of her rights because, in the first place, she has no right to the lot. Not
being principally or subsidiarily bound in the contract of sale between Mitra and the PHHC, she is not
entitled to ask for its annulment (Art. 1397, Civil Code).

Peregrina invokes the PHHC charter (erroneously referred to as section 11 of Commonwealth Act
No. 648) which provides that the PHHC should acquire buildings so as to provide "decent housing
for those who may be unable otherwise to provide themselves therewith" and that it should acquire
large estates for their resale to bona fide occupants.

Those provisions do not sustain her action in this case. They do not justify her act of squatting on a
government-owned lot and then demanding that the lot be sold her because she does not yet own a
residential lot and house. She is not a bona fide occupant of Lot 16.

The State is committed to promote social justice and to maintain adequate social services in the field
of housing (Secs. 6 and 7, Art. II, New Constitution). But the State's solicitude for the destitute and
the have-nots does not mean that it should tolerate usurpations of property, public or private.

"In carrying out its social readjustment policies, the government could not simply lay aside moral
standards, and aim to favor usurpers, squatters, and intruders, unmindful of the lawful and unlawful
origin and character of their occupancy. Such a Policy would perpetuate conflicts instead of attaining
their just solution" (Bernardo vs. Bernards, 96 Phil. 202, 206).

Indeed, the government has enunciated a militant policy against squatters. Thus, Letter of Instruction
No. 19 dated October 2, 1972 orders city and district engineers "to remove all illegal constructions,
including buildings ... and those built without permits on public or private property" and provides for
the relocation of squatters (68 O.G. 7962. See Letter of Instruction No. 19-A). As noted by Justice
Sanchez, "since the last global war, squatting on another's property in this country has become a
widespread vice" (City of Manila vs. Garcia, L-26053, February 21, 1967, 19 SCRA 413, 418).
The lower court did not err in holding that Peregrina Astudillo cannot use the special civil actions of
certiorari and mandamus to secure a judicial review of the award of Lot 16 to Mitra. Rule 65 of the
Rules of Court provides:  ñé+.£ªwph!1

SECTION 1. Petition for certiorari. — When any tribunal, board, or officer exercising
judicial functions, has acted without or in excess of its or his jurisdiction, or with grave
abuse of discretion and there is no appeal, nor any plain, speedy, and adequate
remedy in the ordinary course of law, a person aggrieved thereby may file a verified
petition in the proper court alleging the facts with certainty and praying that judgment
be rendered annulling or modifying the proceedings, as the law requires, of such
tribunal, board or officer.

The petition shall be accompanied by a certified true copy of the judgment or order
subject thereof, together with copies of all pleadings and documents relevant and
pertinent thereto.

SEC. 3. Petition for mandamus. — When any tribunal, corporation, board, or person
unlawfully neglects the performance of an act which the law specifically enjoins as a
duty resulting from an office, trust, or station, or unlawfully excludes another from the
use and enjoyment of a right or office to which such other is entitled, and there is no
other plain, speedy and adequate remedy in the ordinary course of law, the person
agrieved thereby may file a verified petition in the proper court alleging the facts with
certainty and praying that judgment be rendered commanding the defendant,
immediately or at some other specified time, to do the act required to be done to
protect the rights of the petitioner, and to pay the damages sustained by the
petitioner by reason of the wrongful acts of the defendant.

Respondent PHHC board is not the board contemplated in section 1 of Rule 65. It does not exercise
judicial functions. The award being questioned was a routinary corporate act that was within the
board's competence. No jurisdictional issue was involved in that award. certiorari lies only for the
correction of jurisdictional errors (Gov't. of the P.I. vs. Judge of 1st Instance of Iloilo 34 Phil 157,
159).

Nor is the relief sought by Peregrina Astudillo, which is to compel the PHHC board to cancel the
award of Lot 16 to Mitra and to resell it to her, a right that can be enforced by mandamus. What she
wants is to force the PHHC to execute a contract of sale in her favor. That is not within the purview
of the writ of mandamus.

Thus, it was held that "the writ of mandamus is not an appropriate or even admissible remedy to
enforce, the performance of a private contract which has not been fully performed by either party"
(Quiogue vs. Romualdez, 46 Phil. 337). In Jacinto vs. Director of Lands, 49 Phil. 853, a petition for a
writ of mandamus to compel the Director of Lands to execute a deed of conveyance for certain lots
in favor of the petitioner was denied. Generally, title to property cannot be litigated in a mandamus
proceeding (City of Manila vs. Posadas, 48 Phil. 309, 337).

It is not a ministerial duty of the PHHC board to award Lot 16 to Peregrina. Anyway, it has already
been shown that as a squatter she is not clothed with any right to Lot 16 that may be enforced in a
court of justice.

The PHHC board completely ignored the alleged demands of Peregrina for the purchase of Lot 16. It
did not render any decision against her. Its inaction cannot be assailed by certiorari or mandamus.
Peregrina's other assignment of error is that the award of Lot 16 to Congressman Mitra was a
violation of section 3(h) of the Anti-Graft and Corrupt Practices Law and of section 17, Article VI of
the 1935 Constitution, now section 11, Article VIII of the new Constitution.

On the other hand, Mitra contends that the PHHC performs proprietary functions. He observed that
the following high-ranking officials were awarded PHHC lots: Felixberto Serrano, Dominador
Antonio, Manuel Lim, Fernando Lopez, Pacita M. Gonzales, Genaro Magsaysay, Daniel Romualdez,
Felipe A. Abrigo, Bartolome Cabangbang, Juan Duran, Manuel Enverga, Angel Fernandez, Jose
Nuguid, Antonio de Pio, Lorenzo Teves, Faustino Tobia, Pedro Trono, Marcelino Veloso and
Valeriano Yancha.

We are of the opinion that that assignment of error need not be resolved in this case. Having shown
that Peregrina has no cause of action to assail the award of Lot 16 to Mitra, it follows that in this
particular case she cannot assail that award by invoking the provisions of the Anti-Graft and Corrupt
Practices Law and the Constitution. This is not the proper forum for the ventilation of that question.
(See Commonwealth Act No. 626; Hernandez vs. Albano, 112 Phil. 506; Solidum and Concepcion,
Jr. vs. Hernandez, 117 Phil. 335).

WHEREFORE, the lower court's order of dismissal is affirmed. No costs.

SO ORDERED.

G.R. No. L-57259 October 13, 1983

ANGEL P. PERAN, petitioner,
vs.
THE HONORABLE PRESIDING JUDGE, BRANCH II, COURT OF FIRST INSTANCE OF
SORSOGON, 10th JUDICIAL DISTRICT, RAMON ESPERA and ENCARNACION EVASCO, as
private-respondents, respondents.

Irene P. Escandor for petitioner.

Esteban Escalante, Jr. for private respondents.

MELENCIO-HERRERA, J.:

The decision of the then Court of First Instance of Sorsogon, Branch II, Gubat, Sorsogon, rendered
in the exercise of its appellate jurisdiction, dismissing Civil Case No. 1277, entitled "Angel P. Peran
vs. Encarnacion Evasco, et al.", for Forcible Entry and Illegal Detainer, is being assailed in this
Petition for Review on certiorari on a question of law. Said Decision reversed the judgment of the
2nd Municipal Circuit Court of Bulusan-Barcelona, Sorsogon, for Forcible Entry & Illegal Detainer.

The antecedent facts follow:

The property in question, an unregistered residential land, with an area of 1,225 square meters more
or less, situated at Tagdon Barcelona, Sorsogon, was originally owned by Jose Evasco. On
December 29, 1950, Jose Evasco executed a "Reparticion Ex-trajudicial" whereby he partitioned his
properties among his five heirs.   Subject property was one of those alloted to his son, Alejandro
1

Evasco, who had it surveyed in 1956 (Exhibits "I" and "I-1") who had it declared in his name under
Tax Declaration No. 1900. The other heirs received their own shares, one of them, the deceased
Anacleto Evasco, one of whose children was listed as Encarnacion, possibly, the principal private
respondent herein.

Alejandro Evasco sold his property to Jose E. Torella on December 31, 1972,   who declared it for
2

taxation purposes under Tax Declaration No. 5157.   On July 10, 1977, Jose E. Torella, in turn, sold
3

the land to Jose Enriquez Sabater,   and the latter also declared the property in his name under Tax
4

Declaration No. 7127.   Petitioner Angel P. Peran acquired the land by purchase from Jose Enriquez
5

Sabater on December 27, 1978,   and subsequently declared it, too, in his name under Tax
6

Declaration No. 7310.  The sale was duly recorded in the Register of Deeds' Office of the province of
7

Sorsogon on January 3, 1979 in accordance with the provisions of Sec. 194 of the Revised
Administrative Code as amended by Act No. 3344.

Sometime in January 1979, petitioner personally asked private respondents, Encarnacion Evasco
and her common-law husband Ramon Espera, whose house is erected on a 440 square meter
portion (44 sq, ms. according to petitioner) of the lot in question, to remove the same and vacate the
premises. Respondents refused, and consequently, a confrontation between the parties was had
before the, Municipal Mayor of Barcelona and later before the Municipal Judge of Bulusan-Barcelona
to settle the dispute, but to no avail.

On February 8, 1979, petitioner filed a complaint for Forcible Entry and Illegal Detainer against
private respondents before the 2nd Municipal Circuit Court of Bulusan-Barcelona, seeking the
ejectment of the latter from the portion in question contending that respondents are mere squatters
thereon; that they had prevented plaintiff from entering the property and deprived him of possession;
and that they were tolerating persons in getting soil and bringing about a gradual erosion of the land
to his extreme prejudice.

Private respondents answered denying the material allegations of the Complaint, and alleging that
they are the lawful possessors for more than twenty (20) years of the said portion, which formerly
belonged to Jose Evasco, grandfather of Encarnacion Evasco and that petitioner has no right to
eject them therefrom.

On September 1, 1979, the 2nd Municipal Circuit Court of Bulusan-Barcelona rendered its Decision
ordering private respondents to vacate the lot in question, return its possession to petitioner,
reimburse him attorney's fees of P300.00 and litigation expenses, and to pay the costs.
Reconsideration of the said decision filed by private respondents was denied by said Court on
November 12, 1979. Private respondents appealed to respondent Court of First Instance of
Sorsogon, Branch II.

Respondent Court reversed the Municipal Circuit Court and dismissed the case on March 28, 1980,
ruling that said Court had no jurisdiction over the case as the same was filed only on February 4, (8),
1979, which was well beyond the one-year-period of limitation, the cause of action having accrued
from the sale of the property by Alejandro Evasco to Jose E. Torella on December 31, 1972; and
that since the only issue in an illegal detainer case is physical possession, "whoever has prior
possession, no matter in what character, is protected by law."

Reconsideration of the said Decision sought by petitioner was denied by respondent Court.

Petitioner appealed said judgment directly to this Tribunal on a question of law, raising as the lone
issue:
 ... whether the respondent court was in error when for purposes of determining the
jurisdiction of the 2nd Municipal Circuit Court of Bulusan-Barcelona, to try Civil Case
No. 1227, for Illegal Detainer:

(a) it reckoned the counting of one-year period within which to file the action from the
sale of the property in question by Alejandro Evasco to Jose Torella on December
31, 1972 and not from the date of demand made by the petitioner upon the
respondents; and

(b) by assuming that "prior possession in whatever character is protected by law.

We rule for petitioner.

Private respondents admit that the land in question was originally owned by Jose Evasco. The tax
declarations covering their house clearly state "house built on land owned by Jose Evasco under
Tax No. 1599".   Since the land had been partitioned to Alejandro Evasco by his father, Jose Evasco,
8

respondent Encarnacion can lay no claim to the property even as a grand-daughter of Jose Evasco.
Respondents may have been in possession of the portion they occupy prior to petitioner but they
have not proved their title thereto, nor their right to possess the same. As the 2nd Municipal Circuit
Court of Bulusan-Barcelona found, no concrete evidence was introduced by respondents on this
point. Moreover, it is noteworthy that the validity of the "Reparticion Extrajudicial" whereby said lot
was adjudicated to Alejandro Evasco by his father Jose Evasco, predecessors-in-interest of
petitioner, had never been challenged.

If at all, private respondents' possession of their portion of the property was by mere tolerance of
petitioner's predecessors-in-interest, which, however, does not vest in them a right which they can
assert against petitioner. Possession by tolerance is lawful but this becomes illegal when, upon
demand to vacate by the owner, the possessor refuses to comply with such demand.   A possessor
9

by tolerance is necessarily bound by an implied promise to vacate upon demand, failing which a
summary action for ejectment is the proper remedy against him.   It is not necessary that there be a
10

formal agreement or contract of lease before an unlawful detainer suit may be filed against a
possessor by tolerance.   Neither is prior physical possession of the property by petitioner an
11

indispensable requisite.   The ruling of respondent Court, therefore, that "since the only issue in
12

forcible entry and illegal detainer action is the physical possession of real property—possession de
facto and n t possession de jure—whoever has prior possession, no matter in what character, is
protected by law," is erroneous under the factual milieu herein,

A Forcible Entry and Unlawful Detainer action must be brought within one year from the unlawful
deprivation or withholding of possession.   The one-year-period of limitation commences from the
13

time of demand to vacate, and when several demands are made, the same is counted from the last
letter of demand.   Demand may either be personal or in writing.   The demand to vacate having
14 15

been made by petitioner in January 1979, and the ejectment suit having been instituted on February
8, 1979, the 2nd Municipal Circuit Court of Bulusan-Barcelona acted well within its jurisdiction in
taking cognizance of the case.

WHEREFORE, the assailed Decision of respondent Court of First Instance of Sorsogon, Branch II,
in Civil Case No.1227, is SET ASIDE, and the Decision of the 2nd Municipal Circuit Court of
Bulusan-Barcelona is hereby reinstated,

Costs against private respondents.

SO ORDERED.
G.R. No. 50025 August 21, 1980

ALFONSO YU and SOLEDAD YU, petitioners,

vs.
HON. JUDGE REYNALDO P. HONRADO, Presiding Judge of the Court of First Instance of
Rizal, Branch XXV-Pasig, MARCELO STEEL CORPORATION, Detective CARLOS C. NUESTRO
and PEOPLE OF THE PHILIPPINES, respondents.

AQUINO, J.:

For adjudication in this certiorari, prohibition and mandamus case is the possession of about forty-
two metric tons of scrap engine blocks (valued at more than forty thousand pesos), part of a stock
which Marcelo Steel Corporation sold to an alleged swindler and which scrap iron was allegedly
purchased in good faith by the Yu spouses from the swindler but retrieved from the purchasers by
Marcelo Steel Corporation by means of a search warrant.

The record shows that on June 27, 1978, Detective Carlos C. Nuestro of the police department of
Makati, Metro Manila filed with the Court of First Instance of Rizal, Pasig Branch XXV an application
for a search warrant, entitled "People vs. Alfonso Yu, Proprietor, Soledad Junk Shop, 171-173 Maria
Clara Street, Corner 8th Avenue, Grace Park, Caloocan, Metro Manila.

In that application, Nuestro alleged that he "has been informed and verily believes that Alfonso Yu"
was in possession of "about 55 metric tons of unstripped assorted cast iron engine blocks
embezzled" and that he "has verified the report and found (it) to be a fact" (p. 41, Rollo).

In his testimony before respondent, Judge Nuestro declared that he had personal knowledge that
Alfonso Yu kept the said engine blocks, which were "embezzled"; that the said goods were
purchased by Carlito Refuerzo on June 10, 1978 from Marcelo Steel Corporation; that
Refuerzo paid for the goods with a check in the sum of P61,808.25, which check was
dishonored for insufficient funds; that Refuerzo sold the engine blocks on June 12, 1978 to
the Soledad Junk Shop and that Refuerzo was later apprehended and detained in the
municipal jail of Makati (pp. 5-8 and 44-47, Rollo).

On that same day, June 27, or after the taking of Nuestro's testimony, respondent Judge issued a
search warrant, commanding any peace officer to search the premises of the Soledad Junk Shop, to
seize therefrom "55 metric tons of unstripped assorted cast iron engine blocks" and bring them to the
court "to be dealt with as the law directs" (pp. 43, 47-48, Rollo).

Nuestro and four policemen implemented the search warrant on the following day, June 28. They
seized from the Soledad Junk Shop 42.8 metric tons of engine blocks, which were loaded in six
trucks and brought for safekeeping to the premises of Marcelo Steel Corporation, Punta, Sta. Ana,
Manila with the understanding that they were in custodia legis (pp- 102-107, Rollo).

On July 12, 1978, the spouses Alfonso Yu and Soledad Yu filed with respondent Judge a motion to
set aside the search warrant and for the return of the engine blocks. Marcelo Steel Corporation
opposed the motion.
After hearing, respondent Judge denied the motion in his order of November 9, 1978. The Yus'
motion for the reconsideration of that order was also denied. On March 1, 1979, they filed in this
Court the instant petition.

Parallel to or contemporaneously with the search warrant proceeding was the complaint for estafa
filed by Marcelo Steel Corporation against Refuerzo, Soledad Yu and Refuerzo's confederates in the
office of the provincial fiscal of Rizal (I.S. No. 78-6734).

Assistant Fiscal Ricardo S. Sumaway in a resolution dated October 22, 1979 in the case of Marcelo
Steel Corporation vs. Refuerzo, et al., found that Refuerzo, Ernesto Dumlao, Jose Alla and two other
persons named Larry and Boy defrauded Marcelo Steel Corporation in the sum of P95,434.50 as the
value of 90,890 kilos of scrap materials delivered to Refuerzo which were not paid for and that the
Soledad Junk Shop paid Refuerzo P44,000 for 50,000 kilos of scrap materials (p. 306310, Rollo).

Fiscal Sumaway found that Soledad Yu was not a co-conspirator of Refuerzo and that she was
an innocent purchaser for value (p. 309, Rollo).

The fiscal filed in the Court of First Instance of Rizal an information for estafa also dated October 22,
1979 charging Refuerzo, Dumlao, and Alla with having obtained through false pretenses from
Marcelo Steel Corporation 90,890 kilos of scrap cast iron engine blocks valued at P95,434.50
(Criminal Case No. 32394, p. 311, Rollo).

However, because the accused in that case have not been arrested, the trial court in its order of
April 30, 1980 temporarily archived the case. Thus, there is no movement in that case. On the other
hand, it is imperative that a resolution be rendered as to the conflicting claims of the Yu spouses and
Marcelo Steel Corporation with respect to the scrap engine blocks.

Considering the present situation of the parties and the absence of any final judgment in the estafa
case as to the civil liability of the accused to make restitution, we hold that the Yu spouses are
entitled to retain possession of the scrap engine blocks.

This case is governed by the ruling in Chua Hai vs. Kapunan, Jr.; etc. and Ong Shu 104 Phil. 110
"that the acquirer and possessor in good faith of a chattel or movable property is entitled to
be respected and protected in his possession, as if he were the true owner thereof, until a
competent court rules otherwise".

It was further ruled in the Chua Hai case that "the filing of an information charging that the
chattel was illegally obtained through estafa from its true owner by the transferor of the bona
fide possessor does not warrant disturbing the possession of the chattel against the win of
the possessor".

In the Chua Hai case, it appears that Roberto Soto purchased on January 31, 1956 for P6,137.70
from Ong Shu's hardware store 700 sheets of corrugated galvanized iron and 249 pieces of round
iron bar. Soto issued a bouncing check in payment for the GI sheets.

He sold in Pangasinan 165 GI sheets of which 100 were sold to Chua Hai. Soto was charged with
estafa in the Court of First Instance of Manila. In that case, Ong Shu the seller and complainant, filed
a petition asking that the 700 GI sheets, which were deposited with the Manila Police Department,
be returned to him.
Chua Hai opposed the petition as to the 100 GI sheets. The trial court ordered the return of the GI
sheets to Ong Shu on condition that, as to the 100 sheets, he should post in favor of Chua Hai a
bond for twice the value of the 100 GI sheets.

This Court reversed that order because "the possession of movable property acquired in good
faith is equivalent to a title" and "every possessor has a right to be respected in his
possession" (Arts. 539 and 559, Civil Code).

The instant case is similar to the Chua Hai case. The Yu spouses bought the scrap engine blocks in
good faith for 44,000 from the alleged swindler without any notice that the same were obtained
under false pretenses or by means of a bouncing check. The purchase by the Yu spouses of the
scrap engine blocks from Refuerzo, doing business under the tradename C. C. Varried Corporation,
was covered by a sales invoice and seemed to have been made in the ordinary course of business
(p. 223, Rollo).

Marcelo Steel Corporation contends that it recovered the scrap engine blocks by means of a valid
warrant. The Yu spouses counter that the search warrant was void because it was issued without
probable cause on the basis of Nuestro's hearsay testimony.

We hold that the search warrant was lawfully issued. Respondent Judge complied with the
requirements for its issuance as prescribed in section 3, Article IV of the Constitution and in sections
3 and 4, Rule 126 of the Rules of Court.

While Nuestro's knowledge of the alleged estafa was initially hearsay, yet his comprehensive
investigation of the case enabled him to have direct knowledge of the sale made by Pablo Tiangco
of Marcelo Steel Corporation to Refuerzo and the sale made by Refuerzo and his confederates to
the Yu spouses.

Nuestro's testimony was a sufficient justification for an examining magistrate to conclude that the
scrap engine blocks were the subject of estafa. That conclusion was confirmed by the filing of the
information for estafa.

But from the fact that the search warrant was validly issued, it does not follow that Marcelo
Steel Corporation is entitled to retain the same. There is as yet no decree of restitution in the
criminal case entitling Marcelo Steel Corporation to recover the scrap iron from the third
person who bought it in good faith and for value.

Article 105 of the Revised Penal Code provides that the restitution of the thing itself must be made
whenever possible "even though it be found in the possession of a third person who has
acquired it by lawful means, saving to the latter his action against the proper person who
may be liable to him". However, there is no restitution in case "the thing has been acquired by the
third person in the manner and under the requirements which, by law, bar an action for its recovery.

Hence, in the absence of any adjudication as to the civil liability, there is no legal basis for allowing
Marcelo Steel Corporation to recover possession of the scrap engine blocks. Indeed, there is
cogency in the view of Justice Felix in his concurring opinion in the Chua Hai case that restitution
should not be required in a case where the offended party voluntarily delivered the thing to the
offender-purchaser in the expectation of being paid the price and where, thereafter, the offender sold
the thing to an innocent third party. That situation should be distinguished from the cases of theft and
robbery where the offended party was involuntarily deprived of his property (104 Phil. 110, 120).
The case may be viewed from another angle. Since Marcelo Steel Corporation and the Yu spouses
acted in good faith, the question is which of them should suffer the loss occasioned by the acts of
the alleged swindler?

The answer is found in the rule, enunciated by Justice Holmes in Eliason vs. Wilborn, 281 U.S. 457
(applied here by analogy), that, "as between two innocent persons, one of whom must suffer the
consequence of a breach of trust, the one who made it possible by his act of confidence must bear
the loss".

WHEREFORE, respondent Marcelo Steel Corporation is ordered to return and deliver to the Yu
spouses within ten days from notice of the entry of judgment in this case the 42.8 tons of scrap
engine blocks in question. No costs.

SO ORDERED.

G.R. No. 71393 June 28, 1989

MANILA ELECTRIC COMPANY, petitioner,

vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT AND ELPIDIA, FELICIDAD, ISABEL,
JOSE, EUGENIA, AQUILINA, CONSUELO AND NATIVIDAD, all surnamed LEYVA, and
EDUARDA Vda. de LEYVA, respondents.

Angara, Abello, Concepcion, Regala & Cruz for petitioner.

Sumulong Law Offices for respondents.

MEDIALDEA, J.:

This is a petition to review by way of an appeal by certiorari under Rule 45 of the Rules of Court the
decision of the Intermediate Appellate Court (now Court of Appeals), dated April 12, 1985 (p.
36, Rollo) affirming in toto the decision of the lower court, holding petitioner Manila Electric Company
("MERALCO", for brevity) liable to private respondents Elpidia, Felicidad, Isabel, Jose, Eugenia,
Aquilina, Consuelo and Natividad, all surnamed Leyva and Eduarda Vda. de Leyva ("LEYVA's", for
short) for damages and compensation, and its Resolution, dated June 28, 1985, denying petitioner's
Motion for Reconsideration.

Based on the respondent court's decision the facts of the case are as follows:

Nazario Crisostomo and Maria Escusar owned a parcel of land with an area of 5,216.60 square
meters, situated in Cainta, Rizal at the corner of Ortigas Avenue and the road leading to the town
center of Cainta, covered by O.C.T. 4416, issued in 1931. Upon the death of both, the property
passed on to their daughter Bibiana Crisostomo Vda. de Eladio Leyva, whose title was evidenced by
TCT 8144. Ultimately, the property was inherited by the LEYVAs who were the children of Bibiana.

Prior to the issuance of OCT 4416, in the name of Nazario Crisostomo between 1929 and 1930,
MERALCO erected thereon two transmission steel towers numbered 86 and 87, later renumbered
76 (situated in Lot 1-K which is owned in common by the LEYVAs and covered by TCT No. 297168)
and 77 (situated in Lot 2-V-6, which is also owned in-common by the LEYVAs and covered by TCT
No. 338524), (par. 3, Partial Stipulation of Facts, quoted in CA Decision, p. 39, Rollo). In 1931, when
O.C.T. 4416 was issued, no encumbrance was annotated thereon.

On August 4, 1973, the LEYVAs sued MERALCO for damages and sum of money with prayer for
attorney's fees and exemplary damages for its continued use of the LEYVAs' property, claiming that
the property became off limits because of the high voltage of electric current running in the cable
lines.

In its answer, MERALCO claimed that it had acquired a grant from the original owner of the land,
Nazario Crisostomo, for a perpetual easement of right of way for the erection and operation of the
transmission steel towers for which it had paid Crisostomo the total sum of $12.40. Moreover, even
without the grant of perpetual easement, the LEYVAs' complaint is deemed barred by prescription
and laches, because of MERALCO's open, continuous and uninterrupted enjoyment of the easement
for a period of 43 years.

MERALCO did not present any proof regarding the alleged contract/grant with Nazario Crisostomo.
Instead, it presented a deposition of a certain Leland Gardner, a retired MERALCO field auditor, who
testified on the alleged payment by MERALCO of the sum of $12.40 for the grant of right of way,
claiming thus, that in the absence of the original document, Lelands deposition must be admitted as
secondary evidence of an original document, pursuant to Sec. 4, Rule 130 of the Rules of Court.

The lower court decided in favor of the LEYVAs, as follows:

WHEREFORE, in view of the foregoing premises, this Court rules against the
defendant MERALCO and finds MERALCO LIABLE TO PLAINTIFFS as follows:

l) the total sum of Two Hundred Thousand Pesos (P200,000.00) as

temperate damages suffered by the plaintiffs for the entire period
starting the year 1930 up to 10 August 1973.

2) the amount of Six Thousand Pesos (P6,000.00 ) as annual of (sic)

yearly compensation for loss of use and deprivation of opportunity to
profit and benefit from their lands to be computed from August 11,
1973, the date of filing of the complaint and computed for the same
amount annually thereafter;

3) the legal rate of interest of all the foregoing sums in addition

thereto computed from the date of this Decision;

4) the amount of Ten Thousand Pesos (P10,000.00) as and for

attorney's fees in favor of the plaintiffs;

5) the cost of suit;

In addition, the counterclaim filed by defendant MERALCO is hereby ordered

dismissed for lack of basis and merit;

Finally, there is no pronouncement as to exemplary damages against any party.

SO ORDERED (pp. 36-37, Rollo).

MERALCO appealed, assigning the following errors:

THE TRIAL COURT ERRED IN NOT HOLDING THAT APPELLANT ACQUIRED BY

TITLE AN EASEMENT OF RIGHT OF WAY OVER APPELLEES' PROPERTY.

II

ASSUMING ARGUENDO THAT APPELLANT DID NOT ACQUIRE THE EASEMENT

BY TITLE, THE TRIAL COURT ERRED IN NOT HOLDING THAT APPELLANT
ACQUIRED THE EASEMENT BY PRESCRIPTION.

III

THE TRIAL COURT ERRED IN NOT DECLARING THAT APPELLEES' CAUSE OR

CAUSES OF ACTION, IF ANY, HAVE PRESCRIBED OR HAVE BEEN BARRED BY
LACHES.

IV

THE TRIAL COURT ERRED IN AWARDING TEMPERATE DAMAGES AND

ANNUAL COMPENSATION TO APPELLEES FOR PURPORTED LOSS OF USE
AND DEPRIVATION OF OPPORTUNITY TO PROFIT AND BENEFIT FROM THEIR
LANDS.

THE TRIAL COURT ERRED IN AWARDING ATTORNEYS FEES IN FAVOR OF

APPELLANT (pp. 37-38, Rollo.)

Respondent court affirmed the decision in toto.

The only issue to be resolved in this case is whether or not MERALCO acquired a perpetual
easement of right of way, over subject property.

Respondent court has ruled out the existence of a contract to support MERALCO's claim and
consequently, its absence renders the inadmisibility of the Gardner deposition as secondary
evidence based on See. 4, Rule 130 which provides as follows:

SEC. 4. Secondary evidence when original is lost or destroyed. — When the original
writing has been lost or destroyed, or cannot be introduced in court, upon proof of its
execution and loss or destruction, or unavailability, its contents may be proved by a
copy, or by a recital of its contents in some authentic document, or by the recollection
of witnesses.

We agree with respondent court. It is a rule that "before a party can be permitted to introduce
secondary evidence of the contents of a written instrument, satisfactory proof must be made of
the former existence of the instrument and this necessarily involves proof of its proper execution or
genuineness". (V. Francisco, Revised Rules of Court, Ann., Vol. VII, p. 132, 1973 Ed.).
Respondent court quotes portions of the Gardner deposition (pp. 40-42, Rollo):

8. Q: Were these grants of right of way public instruments or merely

simple statements?

A: In my judgment, they were not public documents, as it is doubtful if

they were recorded in any deeds. They were written statements (p. 2,
Answers to Cross-Interrogations).

xxx xxx xxx

81. Q: Does the defendant MERALCO still have copies of the written
grant of right of way executed by Nazario Crisostomo?

A: No more.

82. Q: Why does not defendant Meralco have any more copies?

A: All the copies of the grant were burned during the war.

83. Q: Where does Meralco usually place said copies?

A: In the files of the accounting department.

94. Q: What efforts, if any, did you exert to locate copies of this
particular grant of right of way?

A: We have exerted diligent and extensive effort. (pp. 9-10 of the

deposition)

xxx xxx xxx

40. Q: From whom did you get the date for the entries made in Exhibit
'I-D' ?

A: From the receipts signed by the owners of land granting the right
of way through the personnel of the right of way department. Such
receipts covered the money paid as shown under the heading in the
report 'amount' — all the other items covered expenses of Meralco.

41. Q: When were these data given to you?

A: Sometime after the transaction to which they refer.

42. Q: Why were these datas (sic) given to you?

A: It was routine — being done at that time as part of the standard

operating procedure.

43. Q: What, if any, did you do with such data after you received it?
 A: The date (sic) was sent to Manila Office which was later entered in
this report. (p. 5 of his deposition)

52. Q: Why were such amounts paid to the persons listed in Schedule
16?

A: The amounts were paid to these persons in consideration for the

grant of a right of way for the erection and maintenance of the steel
tower.

53. Q: Do you know who made payment to the persons listed in

Schedule 16?

A: The personnel of the right of way department.

54. Q: What participation, if any, did you have in making payments to

the persons listed in Schedule 16?

A: I did not personally make the payments. (pp. 6-7, Deposition) (pp.
40-42, Rollo)

The foregoing testimony does not constitute evidence of a contract much less its execution. To
quote counsel for the LEYVAs in his Comment (p. 93, Rollo):

In point of fact, there is no evidence that Nazario Crisostomo even executed the
alleged grant. Leland Gardner, in his deposition, never stated positively that there
was an alleged grant of right of way by Nazario Crisostomo. What he saw was the
receipt supposedly signed by Nazario Crisostomo for $7.50 allegedly paid for the
erection of the two towers, which receipt was secured by "someone" from the right of
way department and filed by that "someone" with the Manila office. Because of this
receipt which Leland Gardner saw in the Manila Office, he assumed that Nazario
Crisostomo executed a grant of right of way in favor of Meralco because according to
him it was standard operating procedure to require the execution of the grant of right
of way after payment of the consideration for the erection of the towers. In other
words, Leland Gardner who was not present when the receipt was signed by
someone purporting to be Nazario Crisostomo, assumed that it was truly the
signature of Nazario Crisostomo, and because of the said receipt he further assumed
that the real Nazario Crisostomo executed a grant of right of way in favor of Meralco.
It is an assumption based on another assumption ....

Alternatively, MERALCO claims that in the absence of a grant or contract to support its title to the
grant, it nonetheless acquired title by prescription because it had been in possession of the property
since 1930 or for over 43 years.

Again, respondent court correctly ruled that:

.... There being no evidence that the original use of the property in question by
Meralco was based upon any express grant of a fee to the said property, or of an
easement of right of way nor that it began under the assertion of a right on its part,
the presumption must be that the origin of the use was the mere tolerance or license
of Nazalio Crisostomo. Thus, in Cuaycong vs. Benedicto (37 Phil. 781, 792-793) it
was held:

It is a fundamental principle of the law in this jurisdiction concerning

the possession of real property that such possession is not affected
by acts of a possessory character which are 'merely tolerated' by the
possessor, or which are due to his license (Civil Code, Arts. 444 and
1942). This principle is applicable not only with respect to the
prescription of the dominium as a whole, but to the prescription of
right in rem. In the case of Cortes vs. Palanca Yu-Tibo (2 Phil. Rep.,
24, 38) the Court said:

The provision of Article 1942 of the Civil Code to the effect that acts
which are merely tolerated produce no effect with respect to
possession is applicable as much to the prescription of real rights as
to the prescription of the fee, it being a glaring and self-evident error
to affirm the contrary, as does the appellant in his motion papers.
Possession is the fundamental basis of the prescription. Without it no
kind of prescription is possible, not even the extraordinary.
Consequently, if acts of mere tolerance produce no effect with
respect to possession, as that article provides, in conformity with
Article 444 of the same Code, it is evident that they can produce no
effect with respect to prescription, whether ordinary or extraordinary.
This is true whether the prescriptive acquisition be of a fee or of real
rights, for the same reason holds in one and the other case; that is,
that there has been no true possession in the legal sense of the
word. (See also Ayala de Roxas vs. Maglonso, 8 Phil. Rep., 745;
Municipality of Nueva Caceres vs. Director of Lands and Roman
Catholic Bishop of Nueva Caceres, 24 Phil. Rep., 485).

Possession, under the Civil Code, to constitute the foundation of a

prescriptive right, must be possession under claim of title (en
concepto de dueño) or to use the common law equivalent of the term,
it must be adverse. Acts of a possessory character performed by one
who holds by mere tolerance of the owner are clearly not en
concepto de dueño and such possessory acts, no matter how long so
continued, do not start the running of the period of prescription.

In the case at bar, the evidence discloses that sometime after the war, plaintiffs
complained against MERALCO's use and occupancy of the premises. Subsequently,
defendant sometime in 1968 negotiated with plaintiff for the purchase of the entire lot
but the negotiation did not prosper as MERALCO suspended the negotiations on the
ground that it was considering the selection of another site. Finally, plaintiff filed the
present action on August 7, 1973 after their demand for compensation was refused.
It is obvious that there can be no prescription or laches to bar plaintiffs' present
action.

xxx xxx xxx

(pp. 42-44, Rollo)
Based on the foregoing, it is clear that MERALCO never acquired any easement over the LEYVAs'
property to construct and operate the steel towers. Consequently, the LEYVAs must be
compensated and awarded temperate damages, attorney's fees and annual compensation for the
loss of use and deprivation of opportunity to profit and benefit from their lands. As respondent court
pointed out (pp. 44-45, Rollo):

In this case, there is no doubt that plaintiffs' property has been practically off-limits to
its entirety because of the danger posed by the high voltage electric current being
conducted through cable lines hanging through the steel transmission towers,
thereby prejudicing plaintiffs from reaping profits and benefits from their lands.
Aggravating the situation, plaintiffs remain as owners only to be liable to payment of
real estate taxes and other related dues and levies. Meanwhile, the MERALCO does
nothing except to reap benefits and profits in its business concern to the prejudice of
plaintiffs; or as Manresa has pined — 'to the annulment of right' of ownership of
plaintiffs. For this plaintiffs should not be without redress.

ACCORDINGLY, the petition is hereby DENIED and the decision of the respondent court is
AFFIRMED in toto with costs against petitioner.

G.R. No. L-36566 November 7, 1979

URBANO JAVIER and LEONILA ALBIELA, petitioners,

vs.
HON. HERMOGENES CONCEPCION, JR., Hon. ANDRES REYES, Hon. LUIS REYES, LIM
CHUA, TAN TIAN ON alias TAN TIAN UNA and TAN SIOK TAN alias TAN SIOK
TUAN, respondents.

Diogracias de Luna for petitioners.

Bengzon, Bengzon, Villaroman & De Vera for private respondents.

SANTOS, J.:

This is a petition for review by certiorari filed on April 12, 1973, of the decision of the Court of
Appeals, in CA-G.R. No. 46801-R, entitled "Lim Chua, et al., plaintiffs-appellees versus Urbano
Javier, et al., defendants-appellants", which upheld the decision of the Court of First Instance of
Quezon in Civil Case 6253 ordering the reconveyance of the landholdings subject matter of the case
to herein private respondents, plaintiffs-appellees below.

On April 24, 1973, We resolved, giving without due course to the petition, to require the private
respondents, plaintiffs appellees below to comment within ten (10) days from notice.   On May 16,
1

1973 they filed their comment claiming that the petition raises no important and substantial question
of law as would warrant a review of the appealed decision, since only questions of fact were raised
in the Court of Appeals, and that the decision itself "will show conclusively" that it was based on the
findings of fact of respondent Court.   In a resolution of May 21, 1973, We gave due course to the
2

petition.   On September 29, 1973, petitioners, defendants-appellants below filed their
3

brief.   Respondents' brief having been filed out of time, We resolved on December 17, 1973 to
4

expunge the said brief from the records, and to return the same to the said parties.   On January 10,
5

1974, the case was considered submitted for decision without respondents' brief.   On January 26,
6
1974, respondents, through counsel, filed a petition for leave to file the incorporated
memorandum,   but We resolved on February 8, 1974 to deny the same. 
7 8

The factual and procedural antecedents which gave rise to this petition follow. On October 17, 1959,
respondents as plaintiffs, Lim Chua, Tan Tian On alias Tan Tian Una and Tan Sick Tan alias Tan
Shiok Tuan filed against herein petitioners, then defendants- spouses, Urbano Javier and Leonila
Albiela, with the Court of First Instance of the Province of Quezon, Civil Case No. 6253, for the
reconveyance to the former of a parcel of land with improvements thereon, known as Lot 12
consisting of fifty (50) hectares, more or less, and an accounting and recovery of the produce of the
land from the time the latter, i.e., petitioners herein, took possession of the same in 1945 up to the
time possession is returned to the former.   Lot 12 is allegedly a portion of a big parcel of land
9

designated as Lot 6, PSU-5967, located in Quezon Province and covered by Transfer Certificate of
Title No. 16817 issued by the Office of the Register of Deeds of Quezon Province in the name of
herein respondents, which parcel of land is more particularly described as follows:

A parcel of land (Lot No. 6, Plan Psu-5967), with improvements thereon, situated in
the Barrio of Ayusan, Municipality of Dolores. Bounded on the NE. by a creek and
properties of Vicente Gaurano, Dionisio Capino, Isidro Briones and Macario G.
Caranto; on the S. by property of Crispo Ella; on the SW by properties of Francisco
Natividad, Rufino Flores, Isidro Bumiel and Margarita Valenzuela; on the SW by the
property of Bernardo Marquez; and on the NW. by the Cabatang River, properties of
Marcos Gaurano, Luciano Santos and Juan Poloa, a creek and property of Vicente
Gaurano; containing an area of ONE MILLION EIGHT HUNDRED FORTY NINE
THOUSAND ONE HUNDRED AND SEVENTY-TWO SQUARE METERS,
(1,849,172), more or less. 10

It was further alleged that on April 10, 1930, in Expediente No. 1509, G.L.R.O. Record No. 25133,
and in Expediente No. 1679, G.L.R.O. Record No. 26112 in which Cosme U. Castillo and Florentina
Arcoires were applicants, said Lot 12 was ordered excluded from Psu-16536, G.L.R.O. Record No.
25133 and in Plan Psu-13449, G.L.R.O. Record No. 26112 for the reason that the same was already
awarded to herein respondents as owners in Expediente No. 356, Record No. 14322.  11

In an amended answer filed on November 11, 1959, defendants below, now petitioners denied the
material averments of the complaint and pointed out that Lot 12 could never be a part of Lot 6, Plan
Psu-5967, because between the two lots there exists a big river more than fifty (50) meters wide and
more than twenty (20) meters deep known as the Guhit River which serves as the natural boundary
between the municipalities of Dolores and Candelaria of Quezon Province; that Lot No. 6, Plan Psu-
5967 is situated within the jurisdiction of Dolores, Quezon while Lot No. 12 is situated within the
jurisdiction of Candelaria, Quezon. 12

As special defenses, defendants-petitioners alleged inter alia: (1) that they acquired Lot No. 12 partly
by purchase and partly by inheritance and they, as well as their predecessors-in-interest, have been
in possession of the same adversely, publicly, continuously, peacefully, and in the concept of owners
against the whole world since the Spanish time up to the present; (2) that they have title to it granted
by the Spanish government on March 11, 1888; (3) that the lot in question had been adjudicated to
defendants-petitioners' predecessors-in-interest by the Court of First Instance of Tayabas (now
Quezon) in the decision dated January 14, 1930 rendered in Land Registration Cases Nos. 1509
and 1679; (4) that they have declared the land for tax purposes since 1906 paying taxes therefor; (5)
that they have cleared the land and planted on it numerous trees, like coconuts, coffee, bananas,
mangoes, lanzones, oranges, avocado, jack fruits and bamboos, without any interference from
plaintiffs-respondents or their predecessors-in-interest; (6) that plaintiffs-respondents had never
been the owners and possessors of Lot No. 12 or portion thereof, and if the same had been included
in their title, i.e. TCT No. 16817 of the Register of Deeds of Quezon Province, the registration and
issuance of the same in their favor had been secured thru fraud and deceit, by making it appear in
the application for registration and the notices of publication that said Lot No. 6 belonged to them
and is within the jurisdiction of Dolores, Quezon, which is not true since the same is within the
jurisdiction of Candelaria, Quezon, thus deceiving the whole world of the proper location of the land
subject of registration and publication; and (7) that if plaintiffs-respondents have cause or causes of
action the same have already been barred by the statute of limitations.  13

By way of counterclaim, defendants-petitioners claimed P5,000.00 for attorney's fees and P1,000.00
for litigation expenses and that in the event that plaintiffs-respondents are declared the lawful
owners of the lot in question, they be reimbursed the amount of P150,000.00 for the reasonable
value of improvements they introduced thereon consisting of a house, camarin made of strong
materials and various fruit trees. 
14

On June 25, 1968 the court a quo rendered a decision the pertinent portions of which read as
follows:

After a careful scrutiny and deliberation on the evidence presented by the plaintiffs
and the defendants and after a long search in the archive of this court for
the Expediente of Case No. 1679, Record No. 26112, Land Registration Case No.
1509 and Case No. 356 which involves said records, the court has arrived at the
ineludable (sic) conclusion that the property in question, consisting of about sixty (60)
hectares, more or less, and known as Lot No. 12, Psu-13449, now Psu-16536-Amd.
GLRO Record No. 27112 is included and comprised within Plan Psu-5967, for Lot
No. 6, GLRO Record No. 14232. That Lot No. 6 covering and which includes lot No.
12, the property in question, is covered by Transfer Certificate of 'Title No. 16817 of
the Register of Deeds of Quezon and issued in the name of the herein plaintiffs; that
the defendant Urtano Javier, since 1924, knew of the fact that the property in
question, Lot No. 12. plan Psu-13449, now Psu-16536-Amd, is a part and parcel of
Lot No. 6.

This conclusion of the Court is supported by the records of Case No. 1679 wherein
the defendant Urbano Javier was one of the oppositors; Case No, 356, and Land
Registration Case No. 1509. From the records of Case No. 1679, the Chief Surveyor
of the General Land Registration Office filed with this Court on February 15, 1927 a
manifestation calling the attention of the Court to the fact that the land described in
plan Psu-13449, Record No. 26112 which refer to Lot No. 12 and which is the
property in question, is also included in plan Psu-5967 for Lot No. 6. This Chief
Surveyor of the General Land Registration Office again on April 28, 1939 filed
another manifestation reiterating his previous manifestation of February 15, 1927 and
at the same time informing this court that Lot No. 6 of Plan Psu-5967 has already
been adjudicated to the herein plaintiffs as could be found in Expediente 356, GLRO
Record No. 14912 and that in said plan Psu-5967 for Lot No. 6, is included Lot No.
12 (the property in question) of plan Psu-13449 and in said manifestation of the Chief
Surveyor of the General Land Registration Office, he recommended to this Court the
issuance of an order for the exclusion from plan Psu-16536, GLRO Record No.
15113 and plan Psu-13449, GLRO Record No. 26112 involving Lot No. 12, from
portion now in conflict with Lot No. 6 of Plan Psu-395967 which was included and
formerly decreed in Expediente 356, GLRO Record No. 14232 in favor of the herein
plaintiffs.
 From the indubitable document found in the record of the court, one could readily see
that the claim of the defendants to the effect that Lot No. 12 which is the property in
question, is not a part of lot No. 6 is untenable, the defendants' contention that the
commissioner's report, Exhibit "X", and the plotted area in conflict prepared by the
court's commissioner, should not be admitted and given credit because the I.R.
(Investigation Report) 268 wherein the commissioner's report was based was not
presented finds no merit because the commissioner's report is confirmed by the
manifestation of the Chief Surveyor of the General Land Registration Office filed with
this court dated February 15, 1927 and April 18, 1939.

With respect to the claim of the defendants that they acquired the property by
prescription, the same is without merit taking into consideration that the defendant
Urbano Javier knew that the property in question is within lot No. 6 and covered by a
certificate of title in favor of the plaintiffs since 1924 when he filed an opposition to
the registration of the land in question and, therefore, could not be said to have acted
in good faith for the purpose of applying the provision of the Civil Code in ordinary
prescription. Neither could the defendants acquire the property by ordinary
prescription because the defendant has not possessed the property for a period of
thirty (30) years. Finally, the defendant could not acquire the property in question for
the simple reason that the same is titled in the name of the plaintiffs and as such the
law and jurisprudence says that no title to registered land may be acquired by
prescription or adverse possession. (Section 46, Act No. 496; Rodriguez , Sr. vs.
Francisco, L-12039, June 30, 1961).

VIEWED IN THE LIGHT OF ALL THE FOREGOING, and by preponderance of

evidence, the court hereby renders judgment in favor of the plaintiffs and against the
defendants:

1. Declaring the plaintiffs as the owners of the land in question;

2. Ordering the defendants to surrender the possession of the same to the plaintiffs;

3. Ordering the defendants to render an accounting of the fruits received by them

from 1945 up to the time they shall deliver possession to the plaintiffs;

4. To pay the plaintiffs the amount of P20,000.00 as attorney's fees; and to pay the
cost of the proceedings. 15

Appellants, now petitioners, appealed the above decision to respondent Court of Appeals. On
January 31, 1973 the said Court rendered a decision affirming that of the court a quo, with the
modification that the award of attorney's fees be disallowed on the ground that appellants, petitioners
herein, did not act with evident bad faith in occupying the land in question.   Motion for
16

reconsideration of the Court of Appeals decision having been denied, appellants-petitioners resorted
to this Court by way of this petition for review by certiorari.

Petitioners aver in their brief before this Court that the Court of Appeals erred —

(1) in holding that there was no fraud in the registration of Lot No. 12, Plan Psu-
16536-AMD-3;
 (2) in holding that the cause of action of the private respondents has not been barred
by the Statute of Limitation or by laches;

(3) in not ordering the private respondents to reconvey the land in question to the
petitioners; and

(4) in not ordering private respondents to pay for the improvements introduced by
them on the land in question from 1945.  17

We shall now consider and resolve the foregoing in seriatim.

1. Defendants-petitioners assail the registration of the land in question (Lot No. 12, Plan Psu-16536-
AMD-3) as having been secured through fraud and misrepresentation, considering that in the Notice
of Initial Hearing in Land Registration Case No. 365, G.L.R.O. Record No. 14232, Lot No. 6, which,
as found by the lower court includes Lot No: 12, was made to appear as situated in Barrio Ayusan,
Municipality of Dolores only, when in fact it is also situated in Barrio Masalocot Municipality of
Candelaria, both of the province of Quezon, thereby depriving the whole world, including the
petitioners, defendants below, of their opportunity to oppose the registration thereof. In this
connection, respondent Court of Appeals explicitly found that "after going over the records, the
pleadings and the evidence adduced, We found no trace of fraud and misrepresentation in the
procurement of the transfer certificate of title.   Fraud as a legal basis for review of a decree means
18

actual or positive fraud as distinguished from constructive or legal fraud.   Since the existence or
19

attendance of actual or positive fraud is a question of fact, and respondent Court having ruled out
the same, We have no basis to sustain defendants-petitioners' contention that it attended the
procurement of the title. The lot in question, Lot No. 12, Plan Psu-16536-AMD was also found to be
"part and parcel of Lot No. 6" for which TCT No. 16817 of the Register of Deeds of Quezon was
issued on July 9, 1941 in the name of plaintiffs, now respondents.   This factual finding stands in the
20

absence of weighty considerations to warrant its reversal. As held in Evangelista & Co., et al., v.
Abad Santos  "(I)t is not the function of the Supreme Court to analyze or weigh such evidence all
21

over again, its jurisdiction being limited to reviewing errors of law that might have been committed by
the lower court." Moreover, the factual conclusion in the case at bar, as in Evangelista & Co., et al.
v. Abad Santos, has been arrived at after weighing both the testimonial and documentary evidence
presented. Finally, the decree of registration has long become final, absent a showing that the same
was questioned within one (1) year after the entry thereof was made. Under Section 38 of the Land
Registration Act, as amended, the person allegedly deprived of the land by a decree of registration
obtained by fraud should file in the competent Court of First Instance a petition for review within one
year after the entry of the decree provided no innocent purchaser for value has acquired an interest.
Thus, granting that there was actual or positive fraud in securing the title, defendants-petitioners are
now barred from questioning the same.

2. Petitioners next contend that respondents' cause of action has already been barred by the statute
of limitations or by laches since they never asserted their right over the land in question wire
petitioners, defendants below, were in continuous, public and peaceful possession thereof during the
period from December 29, 1927 when the Original Certificate of Title was issued up to October 17,
1959 when the complaint was filed, and, therefore, the land in question should be reconveyed to
them.

In a similar case   for recovery of possession of registered land, the defendant set up the defense of
22

prescription and title in himself through "open, continuous, exclusive and public and notorious
possession under claim of ownership, adverse to the entire world ... from time immemorial" and that
the registration of the land in dispute was obtained through. "fraud or error and without knowledge
(of) or notice either personal or thru publication to defendant and/or predecessors-in-interest." 'This
Court there held, citing Sorongon v. Makalintal,   thus:
23

As the land in dispute is covered by plaintiff's Torrens Certificate of Title and was
registered in 1914, the decree of registration can no longer be impugned on the
ground of fraud, error or lack of notice to defendant, as more than one year has
already elapsed from the issuance and entry of the decree. Neither could the decree
be collaterally attacked by any person claiming title to, or interest in, the land prior to
the registration proceedings.

Defendants', now petitioners', position is untenable, the established rule being that one cannot
acquire title to a registered land by prescription or adverse possession. Thus, in the same case
of Tuason v. Bolanos, supra, this Court reiterated this principle when it held:

... Nor could title to that land in derogation of that of plaintiff, the registered owner, be
acquired by prescription or adverse possession. (Section 46, Act No. 496). Adverse,
notorious and continuous possession under claim of ownership for the period fixed
by law is ineffective against a Torrens title. (Valiente vs. Judge of CFI of Tarlac, etc.,
45 Off. Gaz., Supp. 9, p. 43) and it is likewise settled that the right to secure
possession under a decree of registration does not prescribe. (Francisco vs. Cruz, 43
Off. Gaz., 5105, 5109-5110) A recent decision of this Court on this point is that
rendered in the case of Jose Alcantara, et al. vs. Mariano, et al., 92 Phil. 796 ...

Hence, defendants-petitioners' claim that plaintiffs-respondents' cause of action has prescribed is

without merit.

On the defense of laches, petitioners rely on the authority of Mejia de Lucas vs. Gamponia, 100 Phil.
277 (1956). There is no parallelism between the case at bar and that cited by petitioners. In the
Mejia de Lucas case, which was an action for reconveyance, the land was acquired by Domingo
Mejia by means of free patent. Eleven (1 1) days after the issuance of the patent and before that of
the certificate of title, Domingo Mejia sold the land to Zacarias Ciscar who immediately took
possession and enjoyed the fruits thereof. Upon the latter's death the land was included in the
distribution of his estate and adjudicated to Roque Sanchez who in turn sold the same to Andres
Gamponia, the defendant. The time during which the land in question was successively held in
possession by Ciscar, Sanchez and Gamponia covered a period of 37 years. Meanwhile, Domingo
Mejia died leaving his brother, Pedro Mejia, as his only surviving kin. When the latter also died, he
was survived by his daughter Concordia Mejia de Lucas, the plaintiff therein.

On the foregoing facts, this Court upheld the equitable defense of laches in this wise:

Upon a careful consideration of the facts and circumstances, we are constrained to

find, however, that while no legal defense to the action lies, an equitable one lies in
favor of the defendant and that is, the equitable defense of laches. No (sic, should be
We) hold that the defense of prescription or adverse possession in derogation of the
title of the registered owner Domingo Mejia does not lie, but that of the equitable
defense of laches. Otherwise stated, We hold that while defendant may not be
considered as having acquired title by virtue of his and his predecessors' long
continued possession for 37 years, the original owner's right to recover back the
possession of the property and the title thereto from the defendant has, by the long
period of 37 years and by patentee's inaction and neglect, been converted into a
stale demand.  24
It can be readily seen that in the above-cited case the land in question came into the possession of
the defendant-appellant Gamponia after a series of transfers from Domingo Mejia, the original owner
and plaintiff-appellee's (Mejia de Lucas') predecessor-in-interest to three other persons and their
successors-in-interest, whose rights and obligation would have been affected by a contrary decision.
Said the Court:

... All of these transfer(s) from Zacarias Ciscar to his heirs, to Roque Sanchez and to
defendant Andres Gamponia, acts which covered a period of 37 years, would all
have to be undone and the respective rights and obligations of the parties affected
adjusted, unless the defense is sustained.  25

This circumstance obtaining in the Mejia de Lucas case is not present in the case at bar. Here, there
are no intervening rights of third persons which may be affected or prejudiced by a decision directing
the return of Lot No. 12 to plaintiffs-respondents, Hence, the equitable defense of laches will not also
apply as against the registered owners in this case.

3. The third assigned error does not raise an issue, and is merely a consequence of the first and
second assigned errors. In the light of our resolution therein as shown in the foregoing, the same is
without merit.

4. As regard the 4th and last issue, We agree with respondent Court of Appeals' finding that
petitioners did not act with evident bad faith in occupying the land in question. This being likewise a
question of fact, and there being substantial evidence in the records to support the finding, We
reiterate the established principle applied in Evangelista v. Abad Santos, et al., supra, and a host of
other cases cited, that as a rule the same should not be disturbed.

As possessors in good faith, petitioners are entitled to the fruits received before their possession
was legally interrupted   upon receipt of judicial summons   in connection with the filing of the
26 27

complaint for reconveyance on October 17, 1959.   However, the records do not show when the
28

summons were received by the defendants-spouses, Javier, In the absence of such proof and in the
interest of justice, We hold that possession in good faith was legally interrupted on November 11,
1959, when their amended answer was filed, * — which is less than a month from the date the summons was apparently
received. For the difference of a few days or about two (2) weeks in reckoning the starting date of possession in bad faith will not materially
affect the prevailing party's entitlement to the fruits of the holding since the same will be reckoned seasonally. Petitioners should also be
refunded the necessary and useful expenses, with the right to retain the land until reimbursed of the same, pursuant to Article 546 of the Civil
Code. Under the said provision, respondents have the option to refund the amount of useful expenses or to pay the increase in value which
the land may have acquired by reason thereof. In this connection, petitioners have placed the market value of improvements on the property
consisting of various fruit trees, bamboos, a house and camarin made of strong materials, at P150, 000.00 29 and this amount does not
appear to be disputed. The average share of the owner was likewise compromised at sixty (60) cavans per year, 30 at an average price of
seven pesos (P7.00) per cavan 31 as of the date of the hearing on September 23, 1960.

In view of Article 544 of the Civil Code, supra, petitioners shall be accountable for the fruits of
subject property only after 1959, not from 1945.

WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED, with the modification that
petitioners render an accounting of the entire produce of the holding from November 11, 1959,
which, with respect to palay crop had been fixed at sixty (60) cavans a year at seven pesos (p7.00)
per cavan as of September 23, 1960, up to the time the subject land is actually reconveyed to
private respondents. The value of necessary and useful expenses due petitioners in the amount of
One Hundred Fifty Thousand Pesos P150,000.00) having been proved and not controverted, no
further proof is required.
Let the records of this case be remanded to the Court of origin for the determination of the value of
the entire produce, in addition to the palay crop, to which private respondents are entitled from
November 11, 1959 to the time possession of subject property is delivered to them by petitioners.

SO ORDERED.

.R. No. L-29972 January 26, 1976

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

MAKASIAR, J.

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

The dispositive part of the challenged resolution reads:

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

Without costs.

The facts of the case as follows:

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

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

Respondent Poncio, unable to keep up with the installments due on the mortgage, approached
petitioner one day and offered to sell to the latter the said lot, excluding the house wherein
respondent lived. Petitioner accepted the offer and proposed the price of P9.50 per square meter.
Respondent Poncio, after having secured the consent of his wife and parents, accepted the price
proposed by petitioner, on the condition that from the purchase price would come the money to be
paid to the bank.
Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and secured the
consent of the President thereof for her to pay the arrears on the mortgage and to continue the
payment of the installments as they fall due. The amount in arrears reached a total sum of P247.26.
But because respondent Poncio had previously told her that the money, needed was only P200.00,
only the latter amount was brought by petitioner constraining respondent Jose Poncio to withdraw
the sum of P47.00 from his bank deposit with Republic Savings Bank. But the next day, petitioner
refunded to Poncio the sum of P47.00.

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

CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM

JOSE PONCIO

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

(Sgd)
JOSE
PONCI
O
(Sgd.)
ROSA
RIO
CARB
ONELL
(Sgd)
CONS
TANCI
O
MEON
ADA
Witnes
s

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

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

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

On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a gate.
Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse claim over the
land in question with the Office of the Register of Deeds of Rizal. Atty. Garcia actually sent a letter of
inquiry to the Register of Deeds and demand letters to private respondents Jose Poncio and Emma
Infante.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hence, this appeal by certiorari.

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

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

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

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

Should there be no inscription, the ownership shall pertain to the person who in good

faith was first in the possession; and, in the absence thereof, to the person who
presents the oldest title, provided there is good faith (emphasis supplied).

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

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

If there is no inscription, what is decisive is prior possession in good faith. If there is inscription, as in
the case at bar, prior registration in good faith is a pre-condition to superior title.

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

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

(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was informed by
Poncio that he sold the lot to Infante but several days before Infante registered her deed of sale.
This indicates that Infante knew — from Poncio and from the bank — of the prior sale of the lot by
Poncio to Carbonell. Ordinarily, one will not refuse to see a neighbor. Infante lives just behind the
house of Carbonell. Her refusal to talk to Carbonell could only mean that she did not want to listen to
Carbonell's story that she (Carbonell) had previously bought the lot from Poncio.
(2) Carbonell was already in possession of the mortgage passbook [not Poncio's saving deposit
passbook — Exhibit "1" — Infantes] and Poncio's copy of the mortgage contract, when Poncio sold
the lot Carbonell who, after paying the arrearages of Poncio, assumed the balance of his mortgaged
indebtedness to the bank, which in the normal course of business must have necessarily informed
Infante about the said assumption by Carbonell of the mortgage indebtedness of Poncio. Before or
upon paying in full the mortgage indebtedness of Poncio to the Bank. Infante naturally must have
demanded from Poncio the delivery to her of his mortgage passbook as well as Poncio's mortgage
contract so that the fact of full payment of his bank mortgage will be entered therein; and Poncio, as
well as the bank, must have inevitably informed her that said mortgage passbook could not be given
to her because it was already delivered to Carbonell.

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

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

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

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

As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the preceding case of
Rosario Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante (1-11231, May 12, 1958),
Poncio alleged in his answer:
 ... that he had consistently turned down several offers, made by plaintiff, to buy the
land in question, at P15 a square meter, for he believes that it is worth not less than
P20 a square meter; that Mrs. Infante, likewise, tried to buy the land at P15 a square
meter; that, on or about January 27, 1955, Poncio was advised by plaintiff that
should she decide to buy the property at P20 a square meter, she would allow him to
remain in the property for one year; that plaintiff then induced Poncio to sign a
document, copy of which if probably the one appended to the second amended
complaint; that Poncio signed it 'relying upon the statement of the plaintiff that the
document was a permit for him to remain in the premises in the event defendant
decided to sell the property to the plaintiff at P20.00 a square meter'; that on January
30, 1955, Mrs. Infante improved her offer and agreed to sell the land and its
improvement to her for P3,535.00; that Poncio has not lost 'his mind,' to sell his
property, worth at least P4,000, for the paltry sum P1,177.48, the amount of his
obligation to the Republic Saving s Bank; and that plaintiff's action is barred by the
Statute of Frauds. ... (pp. 38-40, ROA, emphasis supplied).

II

EXISTENCE OF THE PRIOR SALE TO CARBONELL

DULY ESTABLISHED

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

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

Apart from the foregoing, there are in the case at bar several circumstances

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

Then, also, defendants say in their brief:

The only allegation in plaintiff's complaint that bears any relation to

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

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

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

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

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

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

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

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

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

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

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

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

III

ADEQUATE CONSIDERATION OR PRICE FOR THE SALE

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

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

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

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

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

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

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

As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he reiterated in his
dissent from the resolution of the majority of the Special Division. of Five on October 30, 1968,
Exhibit A, the private document in the Batanes dialect, is a valid contract of sale between the parties,
since sale is a consensual contract and is perfected by mere consent (Couto vs. Cortes, 8 Phil. 459).
Even an oral contract of realty is all between the parties and accords to the vendee the right to
compel the vendor to execute the proper public document As a matter of fact, Exhibit A, while merely
a private document, can be fully or partially performed, to it from the operation of the statute of
frauds. Being a all consensual contract, Exhibit A effectively transferred the possession of the lot to
the vendee Carbonell by constitutum possessorium (Article 1500, New Civil Code); because
thereunder the vendor Poncio continued to retain physical possession of the lot as tenant of the
vendee and no longer as knew thereof. More than just the signing of Exhibit A by Poncio and
Carbonell with Constancio Meonada as witness to fact the contract of sale, the transition was further
confirmed when Poncio agreed to the actual payment by at Carbonell of his mortgage arrearages to
the bank on January 27, 1955 and by his consequent delivery of his own mortgage passbook to
Carbonell. If he remained owner and mortgagor, Poncio would not have surrendered his mortgage
passbook to' Carbonell.

IV

IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE MEMORANDUM EXHIBIT

"A"

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

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

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

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

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

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

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

PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL

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

WITH COSTS AGAINST PRIVATE RESPONDENTS.

G.R. No. 46623 December 7, 1939

MARCIAL KASILAG, petitioner,
vs.
RAFAELA RODRIGUEZ, URBANO ROQUE, SEVERO MAPILISAN and IGNACIO DEL
ROSARIO, respondents.

Luis M. Kasilag for petitioner.

Fortunato de Leon for respondents.

IMPERIAL, J.:

This is an appeal taken by the defendant-petitioner from the decision of the Court of Appeals which
modified that rendered by the court of First Instance of Bataan in civil case No. 1504 of said court
and held: that the contract Exhibit "1" is entirely null and void and without effect; that the plaintiffs-
respondents, then appellants, are the owners of the disputed land, with its improvements, in
common ownership with their brother Gavino Rodriguez, hence, they are entitled to the possession
thereof; that the defendant-petitioner should yield possession of the land in their favor, with all the
improvements thereon and free from any lien; that the plaintiffs-respondents jointly and severally pay
to the defendant-petitioner the sum of P1,000 with interest at 6 percent per annum from the date of
the decision; and absolved the plaintiffs-respondents from the cross-complaint relative to the value
of the improvements claimed by the defendant-petitioner. The appealed decision also ordered the
registrar of deeds of Bataan to cancel certificate of title No. 325, in the name of the deceased
Emiliana Ambrosio and to issue in lieu thereof another certificate of title in favor of the plaintiffs-
respondents and their brother Gavino Rodriguez, as undivided owners in equal parts, free of all liens
and incumbrances except those expressly provided by law, without special pronouncement as to the
costs.

The respondents, children and heirs of the deceased Emiliana Ambrosio, commenced the aforesaid
civil case to the end that they recover from the petitioner the possession of the land and its
improvements granted by way of homestead to Emiliana Ambrosio under patent No. 16074 issued
on January 11, 1931, with certificate of title No. 325 issued by the registrar of deeds of Bataan on
June 27, 1931 in her favor, under section 122 of Act No. 496, which land was surveyed and
identified in the cadastre of the municipality of Limay, Province of Bataan, as lot No. 285; that the
petitioner pay to them the sum of P650 being the approximate value of the fruits which he received
from the land; that the petitioner sign all the necessary documents to transfer the land and its
possession to the respondents; that he petitioner be restrained, during the pendency of the case,
from conveying or encumbering the land and its improvements; that the registrar of deeds of Bataan
cancel certificate of title No. 325 and issue in lieu thereof another in favor of the respondents, and
that the petitioner pay the costs of suit.

The petitioner denied in his answer all the material allegations of the complaint and by way of special
defense alleged that he was in possession of the land and that he was receiving the fruits thereof by
virtue of a mortgage contract, entered into between him and the deceased Emiliana Ambrosio on
May 16, 1932, which was duly ratified by a notary public; and in counterclaim asked that the
respondents pay him the sum of P1,000 with 12 per cent interest per annum which the deceased
owed him and that, should the respondents be declared to have a better right to the possession of
the land, that they be sentenced to pay him the sum of P5,000 as value of all the improvements
which he introduced upon the land. lawphil.net
On May 16, 1932 Emiliana Ambrosio, in life, and the petitioner executed the following public deed:

"This agreement, made and entered into this 16th day of May, 1932, by and between Emiliana
Ambrosio, Filipino, of legal age, widow and resident of Limay, Bataan, P.L., hereinafter called the
party of the first part, and Marcial Kasilag, Filipino, of legal age, married to Asuncion Roces, and
resident at 312 Perdigon Street, Manila, P.L., hereinafter called party of the second part.

WITNESSETH: That the parties hereto hereby covenant and agree to and with each other as
follows:

ARTICLE I. That the party of the first part is the absolute registered owner of a parcel of land
in the barrio of Alngan, municipality of Limay, Province of Bataan, her title thereto being
evidenced by homestead certificate of title No. 325 issued by the Bureau of Lands on June
11, 1931, said land being lot No. 285 of the Limay Cadastre, General Land Registration
Office Cadastral Record No. 1054, bounded and described as follows:

Beginning at point marked 1 on plan E-57394, N. 84º 32' W. 614.82 m. from B.B.M. No. 3, thence N.
66º 35' E. 307.15 m. to point "2"; S. 5º 07' W. to point "5"; S.6º 10' E. 104.26 m. to point "4"; S. 82º
17' W. to point "5"; S. 28º 53' W. 72.26 m. to point "6"; N. 71º 09' W. to point "7"; N. 1º 42' E. 173.72
m. to point 1, point of beginning, "Containing an area of 6.7540 hectares. "Points 1,2,6 and 7, B.L.;
points 3,4 and 5, stakes; points 4, 5 and 6 on bank of Alangan River. "Bounded on the North, by
property claimed by Maria Ambrosio; on the East, by Road; on the South, by Alangan River and
property claimed by Maxima de la Cruz; and on the West, by property claimed by Jose del Rosario.
"Bearing true. Declination 0º 51' E. "Surveyed under authority of sections 12-22, Act No. 2874 and in
accordance with existing regulations of the Bureau of Lands, by Mamerto Jacinto, public land
surveyor, on July 8, 1927 and approved on February 25, 1931.

ARTICLE II. That the improvements on the above described land consist of the following:

Four (4) mango trees, fruit bearing: one hundred ten (110) hills of bamboo trees; one (1)
tamarind and six (6) boñga trees.

ARTICLE III. That the assessed value of the land is P940 and the assessed value of the
improvements is P860, as evidenced by tax declaration No. 3531 of the municipality of
Limay, Bataan.

ARTICLE IV. That for and in consideration of the sum of one thousand pesos (P1,000)
Philippine currency, paid by the party of second part to the party of the first part, receipt
whereof is hereby acknowledged, the party of the first part hereby encumbers and
hypothecates, by way of mortgage, only the improvements described in Articles II and III
hereof, of which improvements the party of the first part is the absolute owner.

ARTICLE V. That the condition of said mortgage is such that if the party of the first part shall
well and truly pay, or cause to paid to the party of the second part, his heirs, assigns, or
executors, on or before the 16th day of November, 1936, or four and one-half (4½) years
after date of the execution of this instrument, the aforesaid sum of one thousand pesos
(P1,000) with interest at 12 per cent per annum, then said mortgage shall be and become
null and void; otherwise the same shall be and shall remain in full force and effect, and
subject to foreclosure in the manner and form provided by law for the amount due
thereunder, with costs and also attorney's fees in the event of such foreclosure. lawphil.net
ARTICLE VI. That the party of the first part shall pay all taxes and assessments which are or
may become due on the above described land and improvements during the term of this
agreement.

ARTICLE VII. That within thirty (30) days after date of execution of this agreement, the party
of the first part shall file a motion before the Court of First Instance at Balanga, Bataan, P. I.,
requesting cancellation of Homestead Certificate of Title No. 325 referred to in Article I
hereof and the issuance, in lieu thereof, of a certificate of title under the provisions of Land
Registration Act No. 496, as amended by Act 3901.

ARTICLE III. It if further agreed that if upon the expiration of the period of time (4½) years
stipulated in this mortgage, the mortgagor should fail to redeem this mortgage, she would
execute a deed of absolute sale of the property herein described for the same amount as
this mortgage, including all unpaid interests at the rate of 12 per cent per annum, in favor of
the mortgagee.

ARTICLE IX. That in the event the contemplated motion under Article VII hereof is not
approved by the Court, the foregoing contract of sale shall automatically become null and
void, and the mortgage stipulated under Article IV and V shall remain in full force and effect.

In testimony whereof, the parties hereto have hereunto set their hands the day and year first
herein before written.

(Sgd.) MARCIAL KASILAG

(Sgd.) EMILIANA AMBROSIO

Signed in the presence of:

(Sgd.) ILLEGIBLE

(Sgd.) GAVINO RODRIGUEZ.

PHILIPPINE ISLANDS } ss.

BALANGA, BATAAN } ss.

Before me this day personally appeared Emiliana Ambrosio without cedula by reason of her
sex, to me known and known to me to be the person who signed the foregoing instrument,
and acknowledged to me that she executed the same as her free and voluntary act and
deed.

I hereby certify that this instrument consists of three (3) pages including this page of the
acknowledgment and that each page thereof is signed by the parties to the instrument and
the witnesses in their presence and in the presence of each other, and that the land treated
in this instrument consists of only one parcel.

In witness whereof I have hereunto set my hand and affixed my notarial seal, this 16th day of
May, 1932.
 (Sgd.) NICOLAS NAVARRO
Notary Public

My commission expires December 31, 1933.

Doc. No. 178

Page 36 of my register
Book No. IV

One year after the execution of the aforequoted deed, that is, in 1933, it came to pass that Emiliana
Ambrosio was unable to pay the stipulated interests as well as the tax on the land and its
improvements. For this reason, she and the petitioner entered into another verbal contract whereby
she conveyed to the latter the possession of the land on condition that the latter would not collect the
interest on the loan, would attend to the payment of the land tax, would benefit by the fruits of the
land, and would introduce improvements thereon. By virtue of this verbal contract, the petitioner
entered upon the possession of the land, gathered the products thereof, did not collect the interest
on the loan, introduced improvements upon the land valued at P5,000, according to him and on May
22, 1934 the tax declaration was transferred in his name and on March 6, 1936 the assessed value
of the land was increased from P1,020 to P2,180.

After an analysis of the conditions of Exhibit "1" the Court of Appeals came to the conclusion and so
held that the contract entered into by and between the parties, set out in the said public deed, was
one of absolute purchase and sale of the land and its improvements. And upon this ruling it held null
and void and without legal effect the entire Exhibit 1 as well as the subsequent verbal contract
entered into between the parties, ordering, however, the respondents to pay to the petitioner, jointly
and severally, the loan of P1,000 with legal interest at 6 per cent per annum from the date of the
decision. In this first assignment of error the petitioner contends that the Court of Appeals violated
the law in holding that Exhibit 1 is an absolute deed of sale of the land and its improvements and
that it is void and without any legal effect.

The cardinal rule in the interpretation of contracts is to the effect that the intention of the contracting
parties should always prevail because their will has the force of law between them. Article 1281 of
the Civil Code consecrates this rule and provides, that if the terms of a contract are clear and leave
no doubt as to the intention of the contracting parties, the literal sense of its stipulations shall be
followed; and if the words appear to be contrary to the evident intention of the contracting parties,
the intention shall prevail. The contract set out in Exhibit 1 should be interpreted in accordance with
these rules. As the terms thereof are clear and leave no room for doubt, it should be interpreted
according to the literal meaning of its clauses. The words used by the contracting parties in Exhibit 1
clearly show that they intended to enter into the principal contract of loan in the amount of P1,000,
with interest at 12 per cent per annum, and into the accessory contract of mortgage of the
improvements on the land acquired as homestead, the parties having moreover, agreed upon the
pacts and conditions stated in the deed. In other words, the parties entered into a contract of
mortgage of the improvements on the land acquired as homestead, to secure the payment of the
indebtedness for P1,000 and the stipulated interest thereon. In clause V the parties stipulated that
Emiliana Ambrosio was to pay, within four and a half years, or until November 16, 1936, the debt
with interest thereon, in which event the mortgage would not have any effect; in clause VI the parties
agreed that the tax on the land and its improvements, during the existence of the mortgage, should
be paid by the owner of the land; in clause VII it was covenanted that within thirty days from the date
of the contract, the owner of the land would file a motion in the Court of First Instance of Bataan
asking that certificate of title No. 325 be cancelled and that in lieu thereof another be issued under
the provisions of the Land Registration Act No. 496, as amended by Act No. 3901; in clause VIII the
parties agreed that should Emiliana Ambrosio fail to redeem the mortgage within the stipulated
period of four years and a half, she would execute an absolute deed of sale of the land in favor of
the mortgagee, the petitioner, for the same amount of the loan of P1,000 including unpaid interest;
and in clause IX it was stipulated that in case the motion to be presented under clause VII should be
disapproved by the Court of First Instance of Bataan, the contract of sale would automatically
become void and the mortgage would subsist in all its force.

Another fundamental rule in the interpretation of contracts, not less important than those indicated, is
to the effect that the terms, clauses and conditions contrary to law, morals and public order should
be separated from the valid and legal contract and when such separation can be made because they
are independent of the valid contract which expresses the will of the contracting parties. Manresa,
commenting on article 1255 of the Civil Code and stating the rule of separation just mentioned, gives
his views as follows:

On the supposition that the various pacts, clauses or conditions are valid, no difficulty is
presented; but should they be void, the question is as to what extent they may produce the
nullity of the principal obligation. Under the view that such features of the obligation are
added to it and do not go to its essence, a criterion based upon the stability of juridical
relations should tend to consider the nullity as confined to the clause or pact suffering
therefrom, except in case where the latter, by an established connection or by manifest
intention of the parties, is inseparable from the principal obligation, and is a condition,
juridically speaking, of that the nullity of which it would also occasion. (Manresa,
Commentaries on the Civil Code, Volume 8, p. 575.)

The same view prevails in the Anglo-American law, as condensed in the following words:

Where an agreement founded on a legal consideration contains several promises, or a

promise to do several things, and a part only of the things to be done are illegal, the
promises which can be separated, or the promise, so far as it can be separated, from the
illegality, may be valid. The rule is that a lawful promise made for a lawful consideration is
not invalid merely because an unlawful promise was made at the same time and for the
same consideration, and this rule applies, although the invalidity is due to violation of a
statutory provision, unless the statute expressly or by necessary implication declares the
entire contract void. . . . (13 C. J., par. 470, p. 512; New York Cent. etc. R. Co. v. Gray, 239
U.S., 583; 60 Law ed., 451; U.S. v. Mora, 97 U.S., 413, 24 Law. ed., 1017; U.S. v. Hodson,
10 Wall, 395; 19 Law ed. 937; Gelpcke v. Dubuque, 1 Wall. 175, 17 Law ed., 520; U.S. v.
Bradly, 10 Pet. 343, 9 Law. ed., 448; Borland v. Prindle, 144 Fed 713; Western Union Tel.
Co. v. Kansas Pac. R. Co., 4 Fed., 284; Northern Pac. R. Co. v. U.S., 15 Ct. Cl., 428.)

Addressing ourselves now to the contract entered into by the parties, set out in Exhibit 1, we stated
that the principal contract is that of loan and the accessory that of mortgage of the improvements
upon the land acquired as a homestead. There is no question that the first of these contract is valid
as it is not against the law. The second, or the mortgage of the improvements, is expressly
authorized by section 116 of Act No. 2874, as amended by section 23 of Act No. 3517, reading:

SEC. 116. Except in favor of the Government or any of its branches, units or institutions, or
legally constituted banking corporations, lands acquired under the free patent or homestead
provisions shall not be subject to encumbrance or alienation from the date of the approval of
the application and for a term of five years from and after the date of issuance of the patent
or grant, nor shall they become liable to the satisfaction of any debt contracted prior to the
 expiration of said period; but the improvements or crops on the land may be mortgaged or
pledged to qualified persons, associations, or corporations.

It will be recalled that by clause VIII of Exhibit 1 the parties agreed that should Emiliana Ambrosio fail
to redeem the mortgage within the stipulated period of four and a half years, by paying the loan
together with interest, she would execute in favor of the petitioner an absolute deed of sale of the
land for P1,000, including the interest stipulated and owing. The stipulation was verbally modified by
the same parties after the expiration of one year, in the sense that the petitioner would take
possession of the land and would benefit by the fruits thereof on condition that he would condone
the payment of interest upon the loan and he would attend to the payment of the land tax. These
pacts made by the parties independently were calculated to alter the mortgage a contract clearly
entered into, converting the latter into a contract of antichresis. (Article 1881 of the Civil Code.) The
contract of antichresis, being a real encumbrance burdening the land, is illegal and void because it is
legal and valid.

The foregoing considerations bring us to the conclusion that the first assignment of error is well-
founded and that error was committed in holding that the contract entered into between the parties
was one of absolute sale of the land and its improvements and that Exhibit 1 is null and void. In the
second assignment of error the petitioner contends that the Court of Appeals erred in holding that he
is guilty of violating the Public Land Act because he entered into the contract, Exhibit 1. The
assigned error is vague and not specific. If it attempts to show that the said document is valid in its
entirety, it is not well-founded because we have already said that certain pacts thereof are illegal
because they are prohibited by section 116 of Act No. 2874, as amended.

In the third assignment of error the petitioner insists that his testimony, as to the verbal agreement
entered into between him and Emiliana Ambrosio, should have been accepted by the Court of
Appeals; and in the fourth and last assignment of error the same petitioner contends that the Court
of Appeals erred in holding that he acted in bad faith in taking possession of the land and in taking
advantage of the fruits thereof, resulting in the denial of his right to be reimbursed for the value of the
improvements introduced by him.

We have seen that subsequent to the execution of the contract, Exhibit 1, the parties entered into
another verbal contract whereby the petitioner was authorized to take possession of the land, to
receive the fruits thereof and to introduce improvements thereon, provided that he would renounce
the payment of stipulated interest and he would assume payment of the land tax. The possession by
the petitioner and his receipt of the fruits of the land, considered as integral elements of the contract
of antichresis, are illegal and void agreements because, as already stated, the contract of antichresis
is a lien and such is expressly prohibited by section 116 of Act No. 2874, as amended. The Court of
Appeals held that the petitioner acted in bad faith in taking possession of the land because he knew
that the contract he made with Emiliana Ambrosio was an absolute deed of sale and, further, that the
latter could not sell the land because it is prohibited by section 116. The Civil Code does not
expressly define what is meant by bad faith, but section 433 provides that "Every person who is
unaware of any flaw in his title, or in the manner of its acquisition, by which it is invalidated, shall be
deemed a possessor in good faith"; and provides further, that "Possessors aware of such flaw are
deemed possessors in bad faith". Article 1950 of the same Code, covered by Chapter II relative to
prescription of ownership and other real rights, provides, in turn, that "Good faith on the part of the
possessor consists in his belief that the person from whom he received the thing was the owner of
the same, and could transmit the title thereto." We do not have before us a case of prescription of
ownership, hence, the last article is not squarely in point. In resume, it may be stated that a person is
deemed a possessor in bad faith when he knows that there is a flaw in his title or in the manner of its
acquisition, by which it is invalidated.
Borrowing the language of Article 433, the question to be answered is whether the petitioner should
be deemed a possessor in good faith because he was unaware of any flaw in his title or in the
manner of its acquisition by which it is invalidated. It will be noted that ignorance of the flaw is the
keynote of the rule. From the facts found established by the Court of Appeals we can neither deduce
nor presume that the petitioner was aware of a flaw in his title or in the manner of its acquisition,
aside from the prohibition contained in section 116. This being the case, the question is whether
good faith may be premised upon ignorance of the laws. Manresa, commenting on article 434 in
connection with the preceding article, sustains the affirmative. He says:

"We do not believe that in real life there are not many cases of good faith founded upon an error of
law. When the acquisition appears in a public document, the capacity of the parties has already
been passed upon by competent authority, and even established by appeals taken from final
judgments and administrative remedies against the qualification of registrars, and the possibility of
error is remote under such circumstances; but, unfortunately, private documents and even verbal
agreements far exceed public documents in number, and while no one should be ignorant of the law,
the truth is that even we who are called upon to know and apply it fall into error not infrequently.
However, a clear, manifest, and truly unexcusable ignorance is one thing, to which undoubtedly
refers article 2, and another and different thing is possible and excusable error arising from complex
legal principles and from the interpretation of conflicting doctrines.

But even ignorance of the law may be based upon an error of fact, or better still, ignorance of
a fact is possible as to the capacity to transmit and as to the intervention of certain persons,
compliance with certain formalities and appreciation of certain acts, and an error of law is
possible in the interpretation of doubtful doctrines. (Manresa, Commentaries on the Spanish
Civil Code. Volume IV, pp. 100, 101 and 102.)

According to this author, gross and inexcusable ignorance of law may not be the basis of good faith,
but possible, excusable ignorance may be such basis. It is a fact that the petitioner is not conversant
with the laws because he is not a lawyer. In accepting the mortgage of the improvements he
proceeded on the well-grounded belief that he was not violating the prohibition regarding the
alienation of the land. In taking possession thereof and in consenting to receive its fruits, he did not
know, as clearly as a jurist does, that the possession and enjoyment of the fruits are attributes of the
contract of antichresis and that the latter, as a lien, was prohibited by section 116. These
considerations again bring us to the conclusion that, as to the petitioner, his ignorance of the
provisions of section 116 is excusable and may, therefore, be the basis of his good faith. We do not
give much importance to the change of the tax declaration, which consisted in making the petitioner
appear as the owner of the land, because such an act may only be considered as a sequel to the
change of possession and enjoyment of the fruits by the petitioner, to about which we have stated
that the petitioner's ignorance of the law is possible and excusable. We, therefore, hold that the
petitioner acted in good faith in taking possession of the land and enjoying its fruits.

The petitioner being a possessor in good faith within the meaning of article 433 of the Civil Code and
having introduced the improvements upon the land as such, the provisions of article 361 of the same
Code are applicable; wherefore, the respondents are entitled to have the improvements and plants
upon indemnifying the petitioner the value thereof which we fix at P3,000, as appraised by the trial
court; or the respondents may elect to compel the petitioner to have the land by paying its market
value to be fixed by the court of origin.

The respondents also prayed in their complaint that the petitioner be compelled to pay them the sum
of P650, being the approximate value of the fruits obtained by the petitioner from the land. The Court
of Appeals affirmed the judgment of the trial court denying the claim or indemnity for damages, being
of the same opinion as the trial court that the respondents may elect to compel the petitioner to have
the land. The Court of Appeals affirmed the judgment of the trial court that the respondents have not
established such damages. Under the verbal contract between the petitioner and the deceased
Emiliana Ambrosio, during the latter's lifetime, the former would take possession of the land and
would receive the fruits of the mortgaged improvements on condition that he would no longer collect
the stipulated interest and that he would attend to the payment of the land tax. This agreement, at
bottom, is tantamount to the stipulation that the petitioner should apply the value of the fruits of the
land to the payment of stipulated interest on the loan of P1,000 which is, in turn, another of the
elements characterizing the contract of antichresis under article 1881 of the Civil Code. It was not
possible for the parties to stipulate further that the value of the fruits be also applied to the payment
of the capital, because the truth was that nothing remained after paying the interest at 12% per
annum. This interest, at the rate fixed, amounted to P120 per annum, whereas the market value of
the fruits obtainable from the land hardly reached said amount in view of the fact that the assessed
value of said improvements was, according to the decision, P860. To this should be added the fact
that, under the verbal agreement, from the value of the fruits had to be taken a certain amount to pay
the annual land tax. We mention these data here to show that the petitioner is also not bound to
render an accounting of the value of the fruits of the mortgaged improvements for the reason stated
that said value hardly covers the interest earned by the secured indebtednes.

For all the foregoing considerations, the appealed decision is reversed, and we hereby adjudge: (1)
that the contract of mortgage of the improvements, set out in Exhibit 1, is valid and binding; (2) that
the contract of antichresis agreed upon verbally by the parties is a real incumbrance which burdens
the land and, as such, is a null and without effect; (3) that the petitioner is a possessor in good faith;
(4) that the respondents may elect to have the improvements introduced by the petitioner by paying
the latter the value thereof, P3,000, or to compel the petitioner to buy and have the land where the
improvements or plants are found, by paying them its market value to be filed by the court of origin,
upon hearing the parties; (5) that the respondents have a right to the possession of the land and to
enjoy the mortgaged improvements; and (6) that the respondents may redeem the mortgage of the
improvements by paying to the petitioner within three months the amount of P1,000, without interest,
as that stipulated is set off by the value of the fruits of the mortgaged improvements which petitioner
received, and in default thereof the petitioner may ask for the public sale of said improvements for
the purpose of applying the proceeds thereof to the payment of his said credit. Without special
pronouncement as to the costs in all instances. So ordered.

G.R. No. L-62943 July 14, 1986

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner,

vs.
COURT OF APPEALS (Now INTERMEDIATE APPELLATE COURT) and THE PHILIPPINE
NATIONAL BANK, respondents.

Juan J. Diaz and Cesar T. Basa for respondent PNB.

San Juan, Africa, Gonzales & San Agustin Law Offices for respondent PCIB.

GUTIERREZ, JR., J.:

This petition for review asks us to set aside the October 29, 1982 decision of the respondent Court
of Appeals, now Intermediate Appellate Court which reversed the decision of the Court of First
Instance of Manila, Branch XL, and dismissed the plaintiff's complaint, the third party complaint, as
well as the defendant's counterclaim.
The background facts which led to the filing of the instant petition are summarized in the decision of
the respondent Court of Appeals:

Metropolitan Waterworks and Sewerage System (hereinafter referred to as MWSS)

is a government owned and controlled corporation created under Republic Act No.
6234 as the successor-in- interest of the defunct NWSA. The Philippine National
Bank (PNB for short), on the other hand, is the depository bank of MWSS and its
predecessor-in-interest NWSA. Among the several accounts of NWSA with PNB is
NWSA Account No. 6, otherwise known as Account No. 381-777 and which is
presently allocated No. 010-500281. The authorized signature for said Account No. 6
were those of MWSS treasurer Jose Sanchez, its auditor Pedro Aguilar, and its
acting General Manager Victor L. Recio. Their respective specimen signatures were
submitted by the MWSS to and on file with the PNB. By special arrangement with the
PNB, the MWSS used personalized checks in drawing from this account. These
checks were printed for MWSS by its printer, F. Mesina Enterprises, located at 1775
Rizal Extension, Caloocan City.

During the months of March, April and May 1969, twenty-three (23) checks were
prepared, processed, issued and released by NWSA, all of which were paid and
cleared by PNB and debited by PNB against NWSA Account No. 6, to wit:

Check No. Date Payee Amount Date Paid

By PNB

1. 59546 8-21-69 Deogracias P 3,187.79 4-2-69

Estrella

2. 59548 3-31-69 Natividad 2,848.86 4-23 69

Rosario

3. 59547 3-31-69 Pangilinan 195.00 Unreleased

Enterprises

4. 59549 3-31-69 Natividad 3,239.88 4-23-69

Rosario

5. 59552 4-1-69 Villarama 987.59 5-6-69

& Sons

6. 59554 4-1-69 Gascom 6,057.60 4-16 69

Engineering

7. 59558 4-2-69 The Evening 112.00 Unreleased

News

8. 59544 3-27-69 Progressive 18,391.20 4-18 69

Const.

9. 59564 4-2-69 Ind. Insp. 594.06 4-18 69

Int. Inc.

10. 59568 4-7-69 Roberto 800.00 4-22-69

Marsan

11. 59570 4-7-69 Paz Andres 200.00 4-22-69

12. 59574 4-8-69 Florentino 100,000.00 4-11-69

Santos

13. 59578 4-8-69 Mla. Daily 95.00 Unreleased

Bulletin

14. 59580 4-8-69 Phil. Herald 100.00 5-9-69

15. 59582 4-8-69 Galauran 7,729.09 5-6-69

& Pilar

16. 59581 4-8-69 Manila 110.00 5-12 69

Chronicle

17. 59588 4-8-69 Treago 21,583.00 4-11 69

Tunnel

18. 59587 4-8-69 Delfin 120,000.00 4-11-69

Santiago

19. 59589 4-10-69 Deogracias 1,257.49 4-16 69

Estrella

20. 59594 4-14-69 Philam Ac- 33.03 4-29 69

cident Inc.
21. 59577 4-8-69 Esla 9,429.78 4-29 69

22. 59601 4-16-69 Justino 20,000.00 4-18-69

Torres

23. 59595 4-14-69 Neris Phil. 4,274.00 5-20-69

Inc. --------------------

P 320,636.26

During the same months of March, April and May 1969, twenty-three (23) checks
bearing the same numbers as the aforementioned NWSA checks were likewise paid
and cleared by PNB and debited against NWSA Account No. 6, to wit:

Check Date Payee Amount Date Paid

No. Issued By PNB

1. 59546 3-6-69 Raul Dizon P 84,401.00 3-16-69

2. 59548 3-11-69 Raul Dizon 104,790.00 4-1-69

3. 59547 3-14-69 Arturo Sison 56,903.00 4-11-69

4. 59549 3-20-69 Arturo Sison 48,903.00 4-15-69

5. 59552 3-24-69 Arturo Sison 63,845.00 4-16-69

6. 59544 3-26-69 Arturo Sison 98,450.00 4-17-69

7. 59558 3-28-69 Arturo Sison 114,840.00 4-21-69

8. 59544 3-16-69 Antonio 38,490.00 4-22-69 Mendoza

9. 59564 3-31-69 Arturo Sison 180,900.00 4-23-69

10.59568 4-2-69 Arturo Sison 134,940.00 4- 5-69

11.59570 4-1-69 Arturo Sison 64,550.00 4-28-69

12.59574 4-2-69 Arturo Sison 148,610.00 4-29-69

13.59578 4-10-69 Antonio 93,950.00 4-29-69

Mendoza

14.59580 4-8-69 Arturo Sison 160,000.00 5-2-69

15.59582 4-10-69 Arturo Sison 155,400.00 5-5-69

16.59581 4-8-69 Antonio 176,580.00 5-6-69

Mendoza

17.59588 4-16-69 Arturo Sison 176,000.00 5-8-69

18.59587 4-16-69 Arturo Sison 300,000.00 5-12-69

19.59589 4-18-69 Arturo Sison 122,000.00 5-14-69

20.59594 4-18-69 Arturo Sison 280,000.00 5-15-69

21.59577 4-14-69 Antonio 260,000.00 5-16-69

Mendoza

22.59601 4-18-69 Arturo Sison 400,000.00 5-19-69

23.59595 4-28-69 Arturo Sison 190,800.00 5-21-69

---------------

P3,457,903.00

The foregoing checks were deposited by the payees Raul Dizon, Arturo Sison and
Antonio Mendoza in their respective current accounts with the Philippine Commercial
and Industrial Bank (PCIB) and Philippine Bank of Commerce (PBC) in the months of
March, April and May 1969. Thru the Central Bank Clearing, these checks were
presented for payment by PBC and PCIB to the defendant PNB, and paid, also in the
months of March, April and May 1969. At the time of their presentation to PNB these
checks bear the standard indorsement which reads 'all prior indorsement and/or lack
of endorsement guaranteed.'

Subsequent investigation however, conducted by the NBI showed that Raul Dizon,
Arturo Sison and Antonio Mendoza were all fictitious persons. The respective
balances in their current account with the PBC and/or PCIB stood as follows: Raul
Dizon P3,455.00 as of April 30, 1969; Antonio Mendoza P18,182.00 as of May 23,
1969; and Arturo Sison Pl,398.92 as of June 30, 1969.

On June 11, 1969, NWSA addressed a letter to PNB requesting the immediate
restoration to its Account No. 6, of the total sum of P3,457,903.00 corresponding to
the total amount of these twenty-three (23) checks claimed by NWSA to be forged
and/or spurious checks. "In view of the refusal of PNB to credit back to Account No. 6
the said total sum of P3,457,903.00 MWSS filed the instant complaint on November
10, 1972 before the Court of First Instance of Manila and docketed thereat as Civil
Case No. 88950.

In its answer, PNB contended among others, that the checks in question were
regular on its face in all respects, including the genuineness of the signatures of
 authorized NWSA signing officers and there was nothing on its face that could have
aroused any suspicion as to its genuineness and due execution and; that NWSA was
guilty of negligence which was the proximate cause of the loss.

PNB also filed a third party complaint against the negotiating banks PBC and PCIB
on the ground that they failed to ascertain the Identity of the payees and their title to
the checks which were deposited in the respective new accounts of the payees with
them.

xxx xxx xxx

On February 6, 1976, the Court of First Instance of Manila rendered judgment in favor of the MWSS.
The dispositive portion of the decision reads:

WHEREFORE, on the COMPLAINT by a clear preponderance of evidence and in

accordance with Section 23 of the Negotiable Instruments Law, the Court hereby
renders judgment in favor of the plaintiff Metropolitan Waterworks and Sewerage
System (MWSS) by ordering the defendant Philippine National Bank (PNB) to restore
the total sum of THREE MILLION FOUR HUNDRED FIFTY SEVEN THOUSAND
NINE HUNDRED THREE PESOS (P3,457,903.00) to plaintiff's Account No. 6,
otherwise known as Account No. 010-50030-3, with legal interest thereon computed
from the date of the filing of the complaint and until as restored in the said Account
No. 6.

On the THIRD PARTY COMPLAINT, the Court, for lack of evidence, hereby renders
judgment in favor of the third party defendants Philippine Bank of Commerce (PBC)
and Philippine Commercial and Industrial Bank (PCIB) by dismissing the Third Party
Complaint.

The counterclaims of the third party defendants are likewise dismissed for lack of
evidence.

No pronouncement as to costs.

As earlier stated, the respondent court reversed the decision of the Court of First Instance of Manila
and rendered judgment in favor of the respondent Philippine National Bank.

A motion for reconsideration filed by the petitioner MWSS was denied by the respondent court in a
resolution dated January 3, 1983.

The petitioner now raises the following assignments of errors for the grant of this petition:

I. IN NOT HOLDING THAT AS THE SIGNATURES ON THE CHECKS WERE

FORGED, THE DRAWEE BANK WAS LIABLE FOR THE LOSS UNDER SECTION
23 OF THE NEGOTIABLE INSTRUMENTS LAW.

II. IN FAILING TO CONSIDER THE PROXIMATE NEGLIGENCE OF PNB IN

ACCEPTING THE SPURIOUS CHECKS DESPITE THE OBVIOUS IRREGULARITY
OF TWO SETS OF CHECKS BEARING IdENTICAL NUMBER BEING ENCASHED
WITHIN DAYS OF EACH OTHER.
 III. IN NOT HOLDING THAT THE SIGNATURES OF THE DRAWEE MWSS BEING
CLEARLY FORGED, AND THE CHECKS SPURIOUS, SAME ARE INOPERATIVE
AS AGAINST THE ALLEGED DRAWEE.

The appellate court applied Section 24 of the Negotiable Instruments Law which provides:

Every negotiable instrument is deemed prima facie to have been issued for valuable
consideration and every person whose signature appears thereon to have become a
party thereto for value.

The petitioner submits that the above provision does not apply to the facts of the instant case
because the questioned checks were not those of the MWSS and neither were they drawn by its
authorized signatories. The petitioner states that granting that Section 24 of the Negotiable
Instruments Law is applicable, the same creates only a prima facie presumption which was
overcome by the following documents, to wit: (1) the NBI Report of November 2, 1970; (2) the NBI
Report of November 21, 1974; (3) the NBI Chemistry Report No. C-74891; (4) the Memorandum of
Mr. Juan Dino, 3rd Assistant Auditor of the respondent drawee bank addressed to the Chief Auditor
of the petitioner; (5) the admission of the respondent bank's counsel in open court that the National
Bureau of Investigation found the signature on the twenty-three (23) checks in question to be
forgeries; and (6) the admission of the respondent bank's witness, Mr. Faustino Mesina, Jr. that the
checks in question were not printed by his printing press. The petitioner contends that since the
signatures of the checks were forgeries, the respondent drawee bank must bear the loss under the
rulings of this Court.

A bank is bound to know the signatures of its customers; and if it pays a forged
check it must be considered as making the payment out of its obligation funds, and
cannot ordinarily charge the amount so paid to the account of the depositor whose
name was forged.

xxx xxx xxx

The signatures to the checks being forged, under Section 23 of the Negotiable
Instruments Law they are not a charge against plaintiff nor are the checks of any
value to the defendant.

It must therefore be held that the proximate cause of loss was due to the negligence
of the Bank of the Philippine Islands in honoring and cashing the two forged checks.
(San Carlos Milling Co. v. Bank of the P. I., 59 Phil. 59)

It is admitted that the Philippine National Bank cashed the check upon a forged
signature, and placed the money to the credit of Maasim, who was the forger. That
the Philippine National Bank then endorsed the chock and forwarded it to the
Shanghai Bank by whom it was paid. The Philippine National Bank had no license or
authority to pay the money to Maasim or anyone else upon a forged signature. It was
its legal duty to know that Malicor's endorsement was genuine before cashing the
check. Its remedy is against Maasim to whom it paid the money. (Great Eastern Life
Ins. Co. v. Hongkong & Shanghai Bank, 43 Phil. 678).

We have carefully reviewed the documents cited by the petitioner. There is no express and
categorical finding in these documents that the twenty-three (23) questioned checks were indeed
signed by persons other than the authorized MWSS signatories. On the contrary, the findings of the
National Bureau of Investigation in its Report dated November 2, 1970 show that the MWSS fraud
was an "inside job" and that the petitioner's delay in the reconciliation of bank statements and the
laxity and loose records control in the printing of its personalized checks facilitated the fraud.
Likewise, the questioned Documents Report No. 159-1074 dated November 21, 1974 of the National
Bureau of Investigation does not declare or prove that the signatures appearing on the questioned
checks are forgeries. The report merely mentions the alleged differences in the type face,
checkwriting, and printing characteristics appearing in the standard or submitted models and the
questioned typewritings. The NBI Chemistry Report No. C-74-891 merely describes the inks and
pens used in writing the alleged forged signatures.

It is clear that these three (3) NBI Reports relied upon by the petitioner are inadequate to sustain its
allegations of forgery. These reports did not touch on the inherent qualities of the signatures which
are indispensable in the determination of the existence of forgery. There must be conclusive findings
that there is a variance in the inherent characteristics of the signatures and that they were written by
two or more different persons.

Forgery cannot be presumed (Siasat, et al. v. Intermediate Appellate Court, et al, 139 SCRA 238). It
must be established by clear, positive, and convincing evidence. This was not done in the present
case.

The cases of San Carlos Milling Co. Ltd. v. Bank of the Philippine Islands, et al. (59 Phil. 59)
and Great Eastern Life Ins., Co. v. Hongkong and Shanghai Bank (43 Phil. 678) relied upon by the
petitioner are inapplicable in this case because the forgeries in those cases were either clearly
established or admitted while in the instant case, the allegations of forgery were not clearly
established during trial.

Considering the absence of sufficient security in the printing of the checks coupled with the very
close similarities between the genuine signatures and the alleged forgeries, the twenty-three (23)
checks in question could have been presented to the petitioner's signatories without their knowing
that they were bogus checks. Indeed, the cashier of the petitioner whose signatures were allegedly
forged was unable to ten the difference between the allegedly forged signature and his own genuine
signature. On the other hand, the MWSS officials admitted that these checks could easily be passed
on as genuine.

The memorandum of Mr. A. T. Tolentino, no, Assistant Chief Accountant of the drawee Philippine
National Bank to Mr. E. Villatuya, Executive Vice-President of the petitioner dated June 9, 1969 cites
an instance where even the concerned NWSA officials could not ten the differences between the
genuine checks and the alleged forged checks.

At about 12:00 o'clock on June 6, 1969, VP Maramag requested me to see him in his
office at the Cashier's Dept. where Messrs. Jose M. Sanchez, treasurer of NAWASA
and Romeo Oliva of the same office were present. Upon my arrival I observed the
NAWASA officials questioning the issue of the NAWASA checks appearing in their
own list, xerox copy attached.

For verification purposes, therefore, the checks were taken from our file. To
everybody there present namely VIP Maramag, the two abovementioned NAWASA
officials, AVP, Buhain, Asst. Cashier Castelo, Asst. Cashier Tejada and Messrs. A.
Lopez and L. Lechuga, both C/A bookkeepers, no one was able to point out any
difference on the signatures of the NAWASA officials appearing on the checks
compared to their official signatures on file. In fact 3 checks, one of those under
question, were presented to the NAWASA treasurer for verification but he could not
 point out which was his genuine signature. After intent comparison, he pointed on the
questioned check as bearing his correct signature.

xxx xxx xxx

Moreover, the petitioner is barred from setting up the defense of forgery under Section 23 of the
Negotiable Instruments Law which provides that:

SEC. 23. FORGED SIGNATURE; EFFECT OF.- When the signature is forged or

made without authority of the person whose signature it purports to be, it is wholly
inoperative, and no right to retain the instrument, or to give a discharge therefor, or to
enforce payment thereof against any party thereto can be acquired through or under
such signature unless the party against whom it is sought to enforce such right is
precluded from setting up the forgery or want of authority.

because it was guilty of negligence not only before the questioned checks were negotiated but even
after the same had already been negotiated. (See Republic v. Equitable Banking Corporation, 10
SCRA 8) The records show that at the time the twenty-three (23) checks were prepared, negotiated,
and encashed, the petitioner was using its own personalized checks, instead of the official PNB
Commercial blank checks. In the exercise of this special privilege, however, the petitioner failed to
provide the needed security measures. That there was gross negligence in the printing of its
personalized checks is shown by the following uncontroverted facts, to wit:

(1) The petitioner failed to give its printer, Mesina Enterprises, specific instructions relative to the
safekeeping and disposition of excess forms, check vouchers, and safety papers;

(2) The petitioner failed to retrieve from its printer all spoiled check forms;

(3) The petitioner failed to provide any control regarding the paper used in the printing of said
checks;

(4) The petitioner failed to furnish the respondent drawee bank with samples of typewriting, cheek
writing, and print used by its printer in the printing of its checks and of the inks and pens used in
signing the same; and

(5) The petitioner failed to send a representative to the printing office during the printing of said
checks.

This gross negligence of the petitioner is very evident from the sworn statement dated June 19, 1969
of Faustino Mesina, Jr., the owner of the printing press which printed the petitioner's personalized
checks:

xxx xxx xxx

7. Q: Do you have any business transaction with the National

Waterworks and Sewerage Authority (NAWASA)?

A: Yes, sir. I have a contract with the NAWASA in printing NAWASA

Forms such as NAWASA Check

xxx xxx xxx

15. Q: Were you given any ingtruction by the NAWASA in connection
with the printing of these check vouchers?

A: There is none, sir. No instruction whatsoever was given to me.

16. Q: Were you not advised as to what kind of paper would be used
in the check vouchers?

A: Only as per sample, sir.

xxx xxx xxx

20. Q: Where did you buy this Hammermill Safety check paper?

A: From Tan Chiong, a paper dealer with store located at Juan Luna,
Binondo, Manila. (In front of the Metropolitan Bank).

xxx xxx xxx

24. Q: Were all these check vouchers printed by you submitted to

NAWASA?

A: Not all, sir. Because we have to make reservations or allowances

for spoilage.

25. Q: Out of these vouchers printed by you, how many were spoiled
and how many were the excess printed check vouchers?

A: Approximately four hundred (400) sheets, sir. I cannot determine

the proportion of the excess and spoiled because the final act of
perforating these check vouchers has not yet been done and
spoilage can only be determined after this final act of printing.

26. Q: What did you do with these excess check vouchers?

A: I keep it under lock and key in my firing cabinet.

xxx xxx xxx

28. Q: Were you not instructed by the NAWASA authorities to bum

these excess check vouchers?

A: No, sir. I was not instructed.

29. Q: What do you intend to do with these excess printed check

vouchers?

A: I intend to use them for future orders from the

xxx xxx xxx

 32. Q: In the process of printing the check vouchers ordered by the
NAWASA, how many sheets were actually spoiled?

A: I cannot approximate, sir. But there are spoilage in the process of

printing and perforating.

33. Q: What did you do with these spoilages?

A: Spoiled printed materials are usually thrown out, in the garbage

can.

34. Q: Was there any representative of the NAWASA to supervise the

printing or watch the printing of these check vouchers?

A: None, sir.

xxx xxx xxx

39. Q: During the period of printing after the days work, what
measures do you undertake to safeguard the mold and other
paraphernalia used in the printing of these particular orders of
NAWASA?

A: Inasmuch as I have an employee who sleeps in the printing shop

and at the same time do the guarding, we just leave the mold
attached to the machine and the other finished or unfinished work
check vouchers are left in the rack so that the work could be
continued the following day.

The National Bureau of Investigation Report dated November 2, 1970 is even more explicit. Thus—

xxx xxx xxx

60. We observed also that there is some laxity and loose control in
the printing of NAWASA cheeks. We gathered from MESINA
ENTERPRISES, the printing firm that undertook the printing of the
check vouchers of NAWASA that NAWASA had no representative at
the printing press during the process of the printing and no particular
security measure instructions adopted to safeguard the interest of the
government in connection with printing of this accountable form.

Another factor which facilitated the fraudulent encashment of the twenty-three (23) checks in
question was the failure of the petitioner to reconcile the bank statements with its own records.

It is accepted banking procedure for the depository bank to furnish its depositors bank statements
and debt and credit memos through the mail. The records show that the petitioner requested the
respondent drawee bank to discontinue the practice of mailing the bank statements, but instead to
deliver the same to a certain Mr. Emiliano Zaporteza. For reasons known only to Mr. Zaporteza
however, he was unreasonably delayed in taking prompt deliveries of the said bank statements and
credit and debit memos. As a consequence, Mr. Zaporteza failed to reconcile the bank statements
with the petitioner's records. If Mr. Zaporteza had not been remiss in his duty of taking the bank
statements and reconciling them with the petitioner's records, the fraudulent encashments of the first
checks should have been discovered, and further frauds prevented. This negligence was, therefore,
the proximate cause of the failure to discover the fraud. Thus,

When a person opens a checking account with a bank, he is given blank checks
which he may fill out and use whenever he wishes. Each time he issues a check, he
should also fill out the check stub to which the check is usually attached. This stub, if
properly kept, will contain the number of the check, the date of its issue, the name of
the payee and the amount thereof. The drawer would therefore have a complete
record of the checks he issues. It is the custom of banks to send to its depositors a
monthly statement of the status of their accounts, together with all the cancelled
checks which have been cashed by their respective holders. If the depositor has
filled out his check stubs properly, a comparison between them and the cancelled
checks will reveal any forged check not taken from his checkbook. It is the duty of a
depositor to carefully examine the bank's statement, his cancelled checks, his check
stubs and other pertinent records within a reasonable time, and to report any errors
without unreasonable delay. If his negligence should cause the bank to honor a
forged check or prevent it from recovering the amount it may have already paid on
such check, he cannot later complain should the bank refuse to recredit his account
with the amount of such check. (First Nat. Bank of Richmond v. Richmond Electric
Co., 106 Va. 347, 56 SE 152, 7 LRA, NS 744 [1907]. See also Leather
Manufacturers' Bank v. Morgan, 117 US 96, 6 S. Ct. 657 [1886]; Deer Island Fish
and Oyster Co. v. First Nat. Bank of Biloxi, 166 Miss. 162, 146 So. 116 [1933]).
Campos and Campos, Notes and Selected Cases on Negotiable Instruments Law,
1971, pp. 267-268).

This failure of the petitioner to reconcile the bank statements with its cancelled checks was noted by
the National Bureau of Investigation in its report dated November 2, 1970:

58. One factor which facilitate this fraud was the delay in the reconciliation of bank
(PNB) statements with the NAWASA bank accounts. x x x. Had the NAWASA
representative come to the PNB early for the statements and had the bank been
advised promptly of the reported bogus check, the negotiation of practically all of the
remaining checks on May, 1969, totalling P2,224,736.00 could have been prevented.

The records likewise show that the petitioner failed to provide appropriate security measures over its
own records thereby laying confidential records open to unauthorized persons. The petitioner's own
Fact Finding Committee, in its report submitted to their General manager underscored this laxity of
records control. It observed that the "office of Mr. Ongtengco (Cashier No. VI of the Treasury
Department at the NAWASA) is quite open to any person known to him or his staff members and
that the check writer is merely on top of his table."

When confronted with this report at the Anti-Fraud Action Section of the National Bureau of
Investigation. Mr. Ongtengco could only state that:

A. Generally my order is not to allow anybody to enter my office. Only

authorized persons are allowed to enter my office. There are some
cases, however, where some persons enter my office because they
are following up their checks. Maybe, these persons may have been
authorized by Mr. Pantig. Most of the people entering my office are
changing checks as allowed by the Resolution of the Board of
Directors of the NAWASA and the Treasurer. The check writer was
 never placed on my table. There is a place for the check write which
is also under lock and key.

Q. Is Mr. Pantig authorized to allow unauthorized persons to enter

your office?

A. No, sir.

Q. Why are you tolerating Mr. Pantig admitting unauthorized persons

in your office?

A. I do not want to embarrass Mr. Pantig. Most of the people following

up checks are employees of the NAWASA.

Q. Was the authority given by the Board of Directors and the approval
by the Treasurer for employees, and other persons to encash their
checks carry with it their authority to enter your office?

A. No, sir.

xxx xxx xxx

Q. From the answers that you have given to us we observed that

actually there is laxity and poor control on your part with regards to
the preparations of check payments inasmuch as you allow
unauthorized persons to follow up their vouchers inside your office
which may leakout confidential informations or your books of account.
After being apprised of all the shortcomings in your office, as head of
the Cashiers' Office of the Treasury Department what remedial
measures do you intend to undertake?

A. Time and again the Treasurer has been calling our attention not to
allow interested persons to hand carry their voucher checks and we
are trying our best and if I can do it to follow the instructions to the
letter, I will do it but unfortunately the persons who are allowed to
enter my office are my co-employees and persons who have
connections with our higher ups and I can not possibly antagonize
them. Rest assured that even though that everybody will get hurt, I
win do my best not to allow unauthorized persons to enter my office.

xxx xxx xxx

Q. Is it not possible inasmuch as your office is in charge of the

posting of check payments in your books that leakage of payments to
the banks came from your office?

A. I am not aware of it but it only takes us a couple of minutes to

process the checks. And there are cases wherein every information
about the checks may be obtained from the Accounting Department,
Auditing Department, or the Office of the General Manager.
Relying on the foregoing statement of Mr. Ongtengco, the National Bureau of Investigation
concluded in its Report dated November 2, 1970 that the fraudulent encashment of the twenty-three
(23)cheeks in question was an "inside job". Thus-

We have all the reasons to believe that this fraudulent act was an inside job or one
pulled with inside connivance at NAWASA. As pointed earlier in this report, the serial
numbers of these checks in question conform with the numbers in current use of
NAWASA, aside from the fact that these fraudulent checks were found to be of the
same kind and design as that of NAWASA's own checks. While knowledge as to
such facts may be obtained through the possession of a NAWASA check of current
issue, an outsider without information from the inside can not possibly pinpoint which
of NAWASA's various accounts has sufficient balance to cover all these fraudulent
checks. None of these checks, it should be noted, was dishonored for insufficiency of
funds. . .

Even if the twenty-three (23) checks in question are considered forgeries, considering the petitioner's
gross negligence, it is barred from setting up the defense of forgery under Section 23 of the
Negotiable Instruments Law.

Nonetheless, the petitioner claims that it was the negligence of the respondent Philippine National
Bank that was the proximate cause of the loss. The petitioner relies on our ruling in Philippine
National Bank v. Court of Appeals (25 SCRA 693) that.

Thus, by not returning the cheek to the PCIB, by thereby indicating that the PNB had
found nothing wrong with the check and would honor the same, and by actually
paying its amount to the PCIB, the PNB induced the latter, not only to believe that the
check was genuine and good in every respect, but, also, to pay its amount to
Augusto Lim. In other words, the PNB was the primary or proximate cause of the
loss, and, hence, may not recover from the PCIB.

The argument has no merit. The records show that the respondent drawee bank, had taken the
necessary measures in the detection of forged checks and the prevention of their fraudulent
encashment. In fact, long before the encashment of the twenty-three (23) checks in question, the
respondent Bank had issued constant reminders to all Current Account Bookkeepers informing them
of the activities of forgery syndicates. The Memorandum of the Assistant Vice-President and Chief
Accountant of the Philippine National Bank dated February 17, 1966 reads in part:

SUBJECT: ACTIVITIES OF FORGERY SYNDICATE

From reliable information we have gathered that personalized checks of current

account depositors are now the target of the forgery syndicate. To protect the interest
of the bank, you are hereby enjoined to be more careful in examining said checks
especially those coming from the clearing, mails and window transactions. As a
reminder please be guided with the following:

1. Signatures of drawers should be properly scrutinized and compared with those we

have on file.

2. The serial numbers of the checks should be compared with the serial numbers
registered with the Cashier's Dept.
 3. The texture of the paper used and the printing of the checks should be compared
with the sample we have on file with the Cashier's Dept.

4. Checks bearing several indorsements should be given a special attention.

5. Alteration in amount both in figures and words should be carefully examined even
if signed by the drawer.

6. Checks issued in substantial amounts particularly by depositors who do not

usually issue checks in big amounts should be brought to the attention of the drawer
by telephone or any fastest means of communication for purposes of confirmation.

and your attention is also invited to keep abreast of previous circulars and memo
instructions issued to bookkeepers.

We cannot fault the respondent drawee Bank for not having detected the fraudulent encashment of
the checks because the printing of the petitioner's personalized checks was not done under the
supervision and control of the Bank. There is no evidence on record indicating that because of this
private printing the petitioner furnished the respondent Bank with samples of checks, pens, and inks
or took other precautionary measures with the PNB to safeguard its interests.

Under the circumstances, therefore, the petitioner was in a better position to detect and prevent the
fraudulent encashment of its checks.

WHEREFORE, the petition for review on certiorari is hereby DISMISSED for lack of merit. The
decision of the respondent Court of Appeals dated October 29, 1982 is AFFIRMED. No
pronouncement as to costs.

SO ORDERED.

G.R. No. L-30402 January 28, 1980

MANGULON CALAGAN, FERNANDO CALAGAN, ASUNCION CALAGAN, MIRASOL CALAGAN,

ARSENIA CALAGAN, PAULA CALAGAN, CRISTITUTO CALAGAN, CANDELARIA CALAGAN
and CRISPINA CALAGAN, petitioners,
vs.
HON. COURT OF FIRST INSTANCE OF DAVAO (BRANCH II) and PETRA
SANDOVAL, respondents.

G. F. Vega for petitioners.

T Q. Osorio for private respondent.

MELENCIO-HERRERA, J.:

Sought to be reviewed herein is that portion of the judgment of the Court of First Instance of Davao,
Branch II, ordering the payment by petitioners to private respondent of the amount of P3,000.00
representing the value of the house constructed on the homestead in question by said private
respondent.
The antecedent facts show that in 1954, petitioner Mangulon Calagan and his wife, Takura, were
granted a Homesstead Patent over a 5.2905 hectares in Dawis Digos Davao, and were issued
Original Certificate of Title No. P-2388 therefor.

In 1955, Takura died. survived by her husband, Mangulan and their children, Fernando, Asuncion,
Mirasol, Arsenia, Paula, Cristituto, Candelaria and Crispina, all surnamed Calagan, all of whom are
petitioners herein.

On August 8, 1961, Mangulon and his daughter, Paula sold a portion of 9,230 square meters of their
homestead to private respondent, Petra Sandoval in consideration of the sum of P2,340.00.
Petitioners title to the land was borrowed by private respondent so that the latter could have the sale
annotated thereon. In 1963, Mangulon offered to the portion sold but private respondent refuse.
Petition subsequent offers to repurchase but private was adamant. The latter maintains that she was
to comply with petitioners' demands provided she was imbursed the value of the house that she had
constructed on the subject land

On April 15, 1966, petitioners brought this action for reconveyance against private respondent On
October 10, 1968, the trial Court rendered judgment, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING judgment is hereby entered for the plaintiffs and
against the defendant:

(1) That the defendant is ordered to reconvey unto the plaintiffs the piece of land
having an area of 9,230 described in the complaint upon returning of the sum of
P2,340.00 and payment of P3,000 as value of the house constructed in good faith by
the defendant on the said lot.

(2) To deliver to the plaintiffs the duplicate certificate of Title No. P-2388.

(3) To pay attorney's fees in the sum of P500.00.

(4) And to pay the costs.

SO ORDERED.

In this appeal petitioners maintain solely that the Court erred in ordering petitioners to pay the sum of
P3,000.00 "as value of the house constructed in good faith."

There is no dispute on the following basic points: 1) the subject land is a portion of a homestead
belonging to petitioners; 2) a repurchase is proper pursuant to Section 119 of the Public Land Act
(CA No. 141) providing that "every conveyance of land acquired under the free patent or homestead
provisions, when proper, shall be subject to repurchase by the applicant, his widow or legal heir
within a period of five years from the date of the conveyance"; and 3) this action for repurchase was
filed within the five-year period from the date of sale.

The controversy revolves around the legality of that portion of the judgment requiring petitioners to
pay private respondent another amount of P3,000.00 representing the value of the residential house
built by private respondent on the portion of the land which petitioners seek to repurchase.

Petitioner present their digest of arguments thus:

 1. Only necessary expenses are subject to reimbursement. House constructed on a
coconut land is not necessary It is only useful,

2. In a repurchase under Section 119 of the Public Land Act,, a homesteader is only
supposed to tender the purchase price. To require him to pay for the value of the
house constructed on the land sought to be repurchased, in addition to the purchase
price, constitutes a circumvention of the Public Land Act.

3. A vendee who introduced a building on a land sought to be repurchased under the

Public Land Act, and during the time when the homesteader can validly repurchase
the same, cannot be considered a in good faith, because his possesion over the land
is of a precarious character: 
1

Private respondent's counter-argument is that when she bought the land in dispute "she was not
merely a tenant nor a lessee or a possessor in good faith therein but the owner of the tenement
itself.   As she needed a house where she and her family could live, she constructed a modest house
2

in the lawful exercise of her rights as an owner.

There is no provision in the Public Land Act (CA No. 141) which provides for the terms and
conditions under which repurchase may be effected by a homesteader except that it should be made
within five years from the date of conveyance. That Act is silent as to the nature of expenses that
should be reimbursed by a repurchasing homesteader or his heir. Resort may, however, be had to
the general provisions of the Civil Code on the subject, particularly Article 1616 (formerly Article
1518), which provides:

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 ligitimate payments made by reason
of the sale;

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

Under the above-quoted codal provision, the vendor a retro cannot avail himself of the right of
repurchase without returning to the vendee the price of the sale, the expenses of the contract and
other legitimate payments, and the necessary and useful expenses made on the thing sold.

There can be no question but that the house which private respondent constructed is a useful
expense, defined as that which increases the value or augments the income of the property, as
contrasted to a necessary expense which is incurred for the preservation of the thing. 3

We agree that the provision of Article 1616 of the Civil Code, supra, on redemption, is, in general,
the applicable law to a homesteader desirous to redeem his property. However, considering the
purpose of the law on homesteads, which is to conserve ownership in the hands of the homesteader
and his family Article 1616 of the Civil Code should be construed in conjunction with Articles 546 and
547 of the Civil Code prescribing the rules on refund of necessary and useful expenses, inasmuch
as a vendee a retro is, as a rule, considered in good faith. Said Articles read thus:

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. 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.

Applying Article 547, therefore, the homesteader desiring to repurchase should be given the option
to require the vendee a retro to remove the useful improvements on the land subject of the sale a
retro, which option is not granted the vendor a retro under Article 1616. Under the latter Article, the
vendor a retro must pay for the useful improvements introduced by the vendee a retro, otherwise,
the latter may retain possession of the property until reimbursement is made.   To allow a vendee a
4

retro of a homestead, however, the right of retention until payment of useful expenses is made by
the redemptioner would be to render nugatory the right of repurchase granted by law to a
homesteader because all a vendee a retro can do to prevent repurchase is to build something on
the homestead beyond the capacity to pay of the homesteader who seeks to repurchase. Such a
situation should not be allowed to pass. To the same effect was our ruling in Philippine National
Bank v. Landeta   where we held that although the mortgagee-bank therein (after it had bought it at
5

the foreclosure sale), had sold the homestead to a third party within the five-year period, the
homesteader should be allowed to repurchase the mortgaged homestead from the bank and not
from the third person for, otherwise, a vendee a retro could make "conveyance of the property for
amounts beyond the capacity of said owner to pay.

To recapitulate, it being obvious that petitioners are not exercising the option to refund the amount of
the expenses incurred by private respondent for the house that the latter built, not to pay the
increase in value acquired by the land by reason of such expenses as provided for in Article 546 of
the Civil Code, private respondent, as the vendee a retro, may remove her house since this can be
done without damage to the principal thing, as stipulated in Article 547 of the Civil Code. Petitioners
should not, as opined by the trial Court, be made to refund the value of that house to private
respondent, else, the salutary policy behind the Public Land Law would be thwarted and rendered
meaningless.

WHEREFORE, the judgment appealed from is modified by eliminating that portion requiring
petitioners to pay private respondent the amount of P3,000.00 representing the value of the house
constructed by her. Private respondent, however, is given the right to remove her house without
damage to the land on which it is built. In all other respects, the judgment of the trial Court is
affirmed.

No costs.

SO ORDERED.

G.R. No. L-30817 September 29, 1972

DOMINADOR DIZON, doing business under the firm name "Pawnshop of Dominador
Dizon", petitioner,
vs.
LOURDES G. SUNTAY, respondent.
Andres T. Velarde for petitioner.

Rafael G. Suntay for respondent.

FERNANDO, J.:p

In essence there is nothing novel in this petition for review of a decision of the Court of Appeals affirming a lower court judgment sustaining
the right of an owner of a diamond ring, respondent Lourdes G. Suntay, as against the claim of petitioner Dominador Dizon, who owns and
operates a pawnshop. The diamond ring was turned over to a certain Clarita R. Sison, for sale on commission, along with other pieces of
jewelry of respondent Suntay. It was then pledged to petitioner. Since what was done was violative of the terms of the agency, there was an
attempt on her part to recover possession thereof from petitioner, who refused. She had to file an action then for its recovery. She was
successful, as noted above, both in the lower court and thereafter in the Court of Appeals. She prevailed as she had in her favor the
protection accorded by Article 559 of the Civil Code. 1 The matter was then elevated to us by petitioner. Ordinarily, our discretion would have
been exercised against giving due course to such petition for review. The vigorous plea however, grounded on estoppel, by his counsel, Atty.
Andres T. Velarde, persuaded us to act otherwise. After a careful perusal of the respective contentions of the parties, we fail to perceive any
sufficient justification for a departure from the literal language of the applicable codal provision as uniformly interpreted by this Court in a
number of decisions. The invocation of estoppel is therefore unavailing. We affirm.

The statement of the case as well as the controlling facts may be found in the Court of Appeals
decision penned by Justice Perez. Thus: "Plaintiff is the owner of a three-carat diamond ring valued
at P5,500.00. On June 13, 1962, the plaintiff and Clarita R. Sison entered into a transaction wherein
the plaintiff's ring was delivered to Clarita R. Sison for sale on commission. Upon receiving the ring,
Clarita R. Sison executed and delivered to the plaintiff the receipt ... . The plaintiff had already
previously known Clarita R. Sison as the latter is a close friend of the plaintiff's cousin and they had
frequently met each other at the place of the plaintiff's said cousin. In fact, about one year before
their transaction of June 13, 1962 took place, Clarita R. Sison received a piece of jewelry from the
plaintiff to be sold for P500.00, and when it was sold, Clarita R. Sison gave the price to the plaintiff.
After the lapse of a considerable time without Clarita R. Sison having returned to the plaintiff the
latter's ring, the plaintiff made demands on Clarita R. Sison for the return of her ring but the latter
could not comply with the demands because, without the knowledge of the plaintiff, on June 15,
1962 or three days after the ring above-mentioned was received by Clarita R. Sison from the
plaintiff, said ring was pledged by Melia Sison, niece of the husband of Clarita R. Sison, evidently in
connivance with the latter, with the defendant's pawnshop for P2,600.00 ... ."  Then came this portion 2

of the decision under review: "Since the plaintiff insistently demanded from Clarita R. Sison the
return of her ring, the latter finally delivered to the former the pawnshop ticket ... which is the receipt
of the pledge with the defendant's pawnshop of the plaintiff's ring. When the plaintiff found out that
Clarita R. Sison pledged, she took steps to file a case of estafa against the latter with the fiscal's
office. Subsequently thereafter, the plaintiff, through her lawyer, wrote a letter ... dated September
22, 1962, to the defendant asking for the delivery to the plaintiff of her ring pledged with defendant's
pawnshop under pawnshop receipt serial-B No. 65606, dated June 15, 1962 ... . Since the
defendant refused to return the ring, the plaintiff filed the present action with the Court of First
Instance of Manila for the recovery of said ring, with P500.00 as attorney's fees and costs. The
plaintiff asked for the provisional remedy of replevin by the delivery of the ring to her, upon her filing
the requisite bond, pending the final determination of the action. The lower court issued the writ of
replevin prayed for by plaintiff and the latter was able to take possession of the ring during the
pendency of the action upon her filing the requisite bond."  It was then noted that the lower court
3

rendered judgment declaring that plaintiff, now respondent Suntay, had the right to the possession of
the ring in question. Petitioner Dizon, as defendant, sought to have the judgment reversed by the
Court of Appeals. It did him no good. The decision of May 19, 1969, now on review, affirmed the
decision of the lower court.
In the light of the facts as thus found by the Court of Appeals, well-nigh conclusive on use, with the
applicable law being what it is, this petition for review cannot prosper. To repeat, the decision of the
Court of Appeals stands.

1. There is a fairly recent restatement of the force and effect of the governing codal norm in De
Gracia v. Court of Appeals.  Thus: "The controlling provision is Article 559 of the Civil Code. It reads
4

thus: 'The possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof may recover it
from the person in possession of the same. If the possessor of a movable lost of which the owner
has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot
obtain its return without reimbursing the price paid therefor.' Respondent Angelina D. Guevara,
having been unlawfully deprived of the diamond ring in question, was entitled to recover it from
petitioner Consuelo S. de Garcia who was found in possession of the same. The only exception the
law allows is when there is acquisition in good faith of the possessor at a public sale, in which case
the owner cannot obtain its return without reimbursing the price. As authoritatively interpreted
in Cruz v. Pahati, the right of the owner cannot be defeated even by proof that there was good faith
in the acquisition by the possessor. There is a reiteration of this principle in Aznar v. Yapdiangco.
Thus: 'Suffice it to say in this regard that the right of the owner to recover personal property acquired
in good faith by another, is based on his being dispossessed without his consent. The common
law principle that were one of two innocent persons must suffer by a fraud perpetrated by another,
the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to
be committed, cannot be applied in a case which is covered by an express provision of the new Civil
Code, specifically Article 559. Between a common law principle and a statutory provision, the latter
must prevail in this jurisdiction." "
5

2. It must have been a recognition of the compulsion exerted by the above authoritative precedents
that must have caused petitioner to invoke the principle of estoppel. There is clearly
misapprehension. Such a contention is devoid of any persuasive force.

Estoppel as known to the Rules of Court  and prior to that to the Court of Civil Procedure,  has its
6 7

roots in equity. Good faith is its basis.  It is a response to the demands of moral right and natural
8

justice.  For estoppel to exist though, it is indispensable that there be a declaration, act or omission
9

by the party who is sought to be bound. Nor is this all. It is equally a requisite that he, who would
claim the benefits of such a principle, must have altered his position, having been so intentionally
and deliberately led to comport himself thus, by what was declared or what was done or failed to be
done. If thereafter a litigation arises, the former would not be allowed to disown such act, declaration
or omission. The principle comes into full play. It may successfully be relied upon. A court is to see
to it then that there is no turning back on one's word or a repudiation of one's act. So it has been
from our earliest decisions. As Justice Mapa pointed out in the first case, a 1905 decision, Rodriguez
v. Martinez,   a party should not be permitted "to go against his own acts to the prejudice of
10

[another]. Such a holding would be contrary to the most rudimentary principles of justice and
law."   He is not, in the language of Justice Torres, in Irlanda v. Pitargue,   promulgated in 1912,
11 12

"allowed to gainsay [his] own acts or deny rights which [he had] previously recognized."   Some of
13

the later cases are to the effect that an unqualified and unconditional acceptance of an agreement
forecloses a claim for interest not therein provided.   Equally so the circumstance that about a month
14

after the date of the conveyance, one of the parties informed the other of his being a minor,
according to Chief Justice Paras, "is of no moment, because [the former's] previous
misrepresentation had already estopped him from disavowing the contract.   It is easily
15

understandable why, under the circumstances disclosed, estoppel is a frail reed to hang on to. There
was clearly the absence of an act or omission, as a result of which a position had been assumed by
petitioner, who if such elements were not lacking, could not thereafter in law be prejudiced by his
belief in what had been misrepresented to him.   As was put by Justice Labrador, "a person claimed
16

to be estopped must have knowledge of the fact that his voluntary acts would deprive him of some
rights because said voluntary acts are inconsistent with said rights."   To recapitulate, there is this
17

pronouncement not so long ago, from the pen of Justice Makalintal, who reaffirmed that estoppel
"has its origin in equity and, being based on moral right and natural justice, finds applicability
wherever and whenever the special circumstances of a case so demand."  18

How then can petitioner in all seriousness assert that his appeal finds support in the doctrine of
estoppel? Neither the promptings of equity nor the mandates of moral right and natural justice come
to his rescue. He is engaged in a business where presumably ordinary prudence would
manifest itself to ascertain whether or not an individual who is offering a jewelry by way of a
pledge is entitled to do so. If no such care be taken, perhaps because of the difficulty of resisting
opportunity for profit, he should be the last to complain if thereafter the right of the true owner of
such jewelry should be recognized. The law for this sound reason accords the latter protection. So it
has always been since Varela v.
Finnick,   a 1907 decision. According to Justice Torres: "In the present case not only has the
19

ownership and the origin of the jewels misappropriated been unquestionably proven but also that the
accused, acting fraudulently and in bad faith, disposed of them and pledged them contrary to
agreement, with no right of ownership, and to the prejudice of the injured party, who was thereby
illegally deprived of said jewels; therefore, in accordance with the provisions of article 464, the owner
has an absolute right to recover the jewels from the possession of whosoever holds
them, ... ."   There have been many other decisions to the same effect since then. At least nine may
20

be cited.   Nor could any other outcome be expected, considering the civil code provisions both in
21

the former Spanish legislation   and in the present Code.   Petitioner ought to have been on his
22 23

guard before accepting the pledge in question. Evidently there was no such precaution availed of.
He therefore, has only himself to blame for the fix he is now in. It would be to stretch the concept of
estoppel to the breaking point if his contention were to prevail. Moreover, there should have been a
realization on his part that courts are not likely to be impressed with a cry of distress emanating from
one who is in a business authorized to impose a higher rate of interest precisely due to the
greater risk assumed by him. A predicament of this nature then does not suffice to call for less
than undeviating adherence to the literal terms of a codal provision. Moreover, while the activity he is
engaged in is no doubt legal, it is not to be lost sight of that it thrives on taking advantage of the
necessities precisely of that element of our population whose lives are blighted by extreme poverty.
From whatever angle the question is viewed then, estoppel certainly cannot be justly invoked.

WHEREFORE, the decision of the Court of Appeals of May 19, 1969 is affirmed, with costs against
petitioner.

G.R. No. L-8257             April 13, 1956

JOSE R. CRUZ, plaintiff-appellant,
vs.
REYNALDO PAHATI, ET AL., defendants-appellees.

Panganiban Law Offices and Arsenio Roldan for appellant.

Carlos, Laurea, Fernando and Padilla for appellees.

BAUTISTA ANGELO, J.:

This is an action of replevin instituted by plaintiff in the Court of Firts Instance of Manila to recover
the possession of an automobile and certain amount as damages and attorney's fees resulting from
his illegal deprivation thereof.
The original defendants were Reynaldo Pahati and Felixberto Bulahan but, upon amendment of the
complaint, Jesusito Belizo was included as party defendant who was summoned by publication
because his whereabouts were not known. Belizo failed to appear or answer the complaint and so
he was declared default.

Pahati admitted having bought the automobile from Bulahan, for the sum of P4,900 which he paid in
check. When the Manila Police Department impounded the automobile, he cancelled the sale and
stopped the payment of the check and as a result he returned the automobile to Bulahan who in
turned surrended the check for cancellation. He set up a counterclaim for the sum of P2,000 as
attorney's fees.

Bulahan on his part claims that he acquired the automobile from Jesusito Belizo for value and
without having any knowledge of any defect in the title of the latter; that plaintiff had previously
acquired title to said automobile by purchase from Belizo as evidenced by a deed of sale executed
to that effect; that later plaintiff delivered the possession of the automobile to Belizo for resale and to
facilitate it he gave the latter a letter of authority to secure a new certificate of registration in his
name (plaintiff's) and that by having clothed Belizo with an apparent ownership or authority to sell
the automobile, plaintiff is now estopped to deny such ownership or authority. Bulahan claims that
between two innocent parties, he who gave occasion, through his conduct, to the falsification
committed by Belizo, should be the one to suffer the loss and this one is the plaintiff. Bulahan also
set up a counterclaim for P17,000 as damages and attorney's fees.

After the presentation of the evidence, the court rendered judgment declaring defendant Bulahan
entitled to the automobile in question and consequently ordered the plaintiff to return it to said
defendant and, upon his failure to do so, to pay him the sum of P4,900, with legal interest from the
date of the decision. The claim for damages and attorney's fees of Bulahan was denied. Defendant
Belizo was however ordered to indemnify the plaintiff in the amount of P4,900 and pay the sum of
P5,000 as moral damages. The counterclaim of defendant Pahati was denied for lack of evidence.
The case was taken directly to this Court by the plaintiff.

The lower court found that the automobile in question was originally owned by the Nothern Motors,
Inc. which later sold it to Chinaman Lu Dag. This Chinaman sold it afterwards to Jesusito Belizo and
the latter in turn sold it to plaintiff. Belizo was then a dealer in second hand cars. One year
thereafter, Belizo offered the plaintiff to sell the automobile for him claiming to have a buyer for it.
Plaintiff agreed. At that time, plaintiff's certificate of registration was missing and, upon the
suggestion of Belizo, plaintiff wrote a letter addressed to the Motor Section of the Bureau of Public
Works for the issuance of a new registration certificate alleging as reason the loss of the one
previously issued to him and stating that he was intending to sell his car. This letter was
delivered to Belizo on March 3, 1952. He also turned over Belizo the automobile on the latter's
pretext that he was going to show it to a prospective buyer. On March 7, 1952, the letter was falsified
and converted into an authorized deed of sale in favor of Belizo by erasing a portion thereof and
adding in its place the words "sold the above car to Mr. Jesusito Belizo of 25 Valencia, San
Francisco del Monte, for Five Thousand Pesos (P5,000)." Armed with this deed of sale, Belizo
succeeded in ontaining a certificate of registration in his name on the same date, March 7, 1952, and
also on the same date, Belizo sold the car to Felixberto Bulahan who in turn sold it to Reynaldo
Pahati, a second hand car dealer. These facts show that the letter was falsified by Belizo to enable
him to sell the car to Bulahan for a valuable consideration.

This is a case which involves a conflict of rights of two persons who claim to be the owners of the
same property; plaintiff and defendant Bulahan. Both were found by the lower court to be innocent
and to have acted in good faith. They were found to be the victims of Belizo who falsified the letter
given him by plaintiff to enable him to sell the car of Bulahan for profit. Who has, therefore, a better
right of the two over the car?.

The law applicable to the case is Article 559 of the new Civil Code which provides:

ART. 559. The possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.

It appears that "one who has lost any movable or has been unlawfully deprived thereof, may recover
it from the person in possession of the same" and the only defense the latter may have is if he "has
acquired it in good faith at a public sale" in which case "the owner cannot obtain its return without
reimbursing the price paid therefor." And supplementing this provision, Article 1505 of the same
Code provides that "where goods are sold by a person who is not the owner thereof, and who does
not sell them under authority or with the consent of the owner, the buyer acquires no better title to
the goods than the seller had, unless the owner of the goods is by his conduct precluded from
denying the seller's authority to sell.

Applying the above legal provisions to the facts of this case, one is inevitably led to the conclusion
that plaintiff has a better right to the car in question than defendant Bulahan for it cannot be
disputed that plaintiff had been illegally deprived thereof because of the ingenious scheme
utilized by Belizo to enable him to dispose of it as if he were the owner thereof. Plaintiff
therefore can still recover the possession of the car even if defendant Bulahan had acted in good
faith in purchasing it from Belizo. Nor can it be pretended that the conduct of plaintiff in giving Belizo
a letter to secure the issuance of a new certificate of registration constitutes a sufficient defense that
would preclude recovery because of the undisputed fact that that letter was falsified and this fact can
be clearly seen by a cursory examination of the document. If Bulahan had been more diligent he
could have seen that the pertinent portion of the letter had been erased which would have placed
him on guard to make an inquiry as regards the authority of Belizo to sell the car. This he failed to
do.

The right of the plaintiff to the car in question can also be justified under the doctrine laid down in U.
S. vs. Sotelo, 28 Phil., 147. This is a case of estafa wherein one Sotelo misappropriated a ring
belonging to Alejandra Dormir. In the course of the decision, the Court said that "Whoever may have
been deprived of his property in consequence of a crime is entitled to the recovery thereof, even if
such property is in the possession of a third party who acquired it by legal means other than those
expressly stated in Article 464 of the Civil Code" (p. 147), which refers to property pledged in the
"Monte de Piedad", an establishment organized under the authority of the Government. The Court
further said: It is a fundamental principle of our law of personal property that no man can be
divested of it without his own consent; consequently, even an honest purchaser, under a
defective title, cannot resist the claim of the true owner. The maxim that 'No man can transfer a
better title than he has himself "obtain in the civil as well as in the common law." (p. 158).

Counsel for appellee places much reliance on the common law principle that "Where one of two
innocent parties must suffer by a fraud perpetrated by another, the law imposes the loss upon the
party who, by his misplaced confidence, has enabled the fraud to be committed" (Sager vs. W. T.
Rawleight Co. 153 Va. 514, 150 S. E. 244, 66 A.L.R. 305), and contends that, as between plaintiff
and Bulahan, the former should bear the loss because of the confidence he reposed in Belizo which
enabled the latter to commit the falsification. But this principle cannot be applied to this case which is
coverred by an express provision of our new Civil Code. Between a common law principle and a
statutory provision, the latter must undoubtedly prevail in this jurisdiction. Moreover we entertain
serious doubt if, under the circumstances obtaining, Bulahan may be considered more innocent than
the plaintiff in dealing with the car in question. We prefer not to elaborate on this matter it being
necessary considering the conclusion we have reached.

Wherefore, the decision appealed from is reversed. The Court declares plaintiff to be entitled to
recover the car in question, and orders defendant Jesusito Belizo to pay him the sum of P5,000 as
moral damages, plus P2,000 as attorney's fees. The Court absolves defendant Bulahan and Pahati
from the complaint as regards the claim for damages, reserving to Bulahan whatever action he may
deem proper to take against Jesusito Belizo. No costs.

G.R. No. L-9989            March 13, 1918

EDUARDO CUAYCONG, ET AL., plaintiffs-appellees,

vs.
RAMONA BENEDICTO, ET AL., defendants-appellants.

Ruperto Montinola and Aurelio Montinola for appellants.

No appearance for appellees.

FISHER, J.:

The issues in this case relate to the right of plaintiffs to make use of two roads existing on the
Hacienda Toreno, a tract of land in the municipality of Victorias, Negros Occidental, the property of
the defendants, Blasa Benedicto and Ramona Benedicto. One of these roads is referred to in the
proceedings as the Nanca-Victorias road and the other as the Dacuman — Toreno road. The Court
of First Instance held that those of the plaintiffs who claimed to be entitled to make use of the
Dacuman — Toreno road had failed to establish the asserted right, and dismissed the action as to
them. From this decision they appealed to this court but, their brief not having been filed within the
time prescribed by the rules, their appeal was dismissed, on motion of defendants, by resolution
dated February 14, 1916. Consequently, the issues presented on this appeal are limited to those
which relate to the rights of the parties with respect to the Nanca-Victorias road, and the
determination of the correctness of the decision of the court concerning that part of the controversy
submitted to its decision.

The allegations in the complaint with respect to the Nanca-Victorias road are that the appellees,
Eduardo Cuaycong, Lino Cuaycong, and Eulalio Dolor, are the owners of a group of haciendas
situated between the southern boundary of the Hacienda Toreno and the barrio of Nanca, of the
municipality of Seravia, and that the appellees Silverio Ginoo, Gervasio Ascalon, and Juan
Ledesma, are the lessees of part of said haciendas; that more than twenty years the appellees and
their predecessors in interest have made use of the Nanca-Victorias road, which crosses the
Hacienda Toreno, openly, publicly, and continiously, with the knowledge of the owners of the said
hacienda, for the purpose of conveying the products of their haciendas to the town of Victorias and
to the landing place there situated, and for the purpose of transporting supplies from those points to
their haciendas, making use of the said road by means of carts, carabaos, and other usual means of
transportation; that there is no outlet to a public road from the hacienda occupied by these plaintiffs,
the only road and way by which the products of the plaintiffs' property can be taken to the town of
Victorias and to the landing place there being across the Hacienda Toreno by the road marked on
the plan attached to the complaint; that on the fifteenth day of November, 1912, the defendants
closed the road in question at the point at which it crosses the Hacienda Toreno, and refused to
permit plaintiffs to continue using it; that plaintiffs were about to commence to grind their crop of
sugar cane, and that, if prevented from transporting their sugar across the Hacienda Toreno to their
point of embarkation, would suffer damages difficult to estimate. Upon these averments of fact the
plaintiffs prayed for a judgment that they are entitled to use the road in question as they have been
using it in the past, and that a perpetual injunction be issued against plaintiffs restraining them from
impending such use. Upon the filing of the complaint, plaintiffs moved the court to issue a
preliminary injunction restraining defendants from interfering with the use of the road during the
pendency of the suit, which motion was granted by the court.

Defendants in their answer put in issue all the special averments of the complaint, as above set
forth, and by way of counterclaim and special defense, averred that the road crossing the Hacienda
Toreno, over which plaintiffs claim the right of passage, is the private property of defendants; and,
further, that they have not refused plaintiffs permission to pass over this road but have required them
to pay toll for the privilege of doing so. Defendants also claimed damages for the use of the road by
plaintiffs during the pendency of the suit, alleging that the preliminary injunction had been
improvidently issued upon false statements contained in the verified complaint filed by plaintiffs.

The case was tried in July, 1913. The court on December 8, 1913, rendered judgment, dismissing
the complaint with respect to the plaintiffs Felix Suarez, Probo Jereza, Enrique Azcona, and Melecio
Pido, these being the plaintiffs who claimed the right to use the Dacuman — Toreno road. With
respect to the Nanca-Victorias road, the court held that it was a public highway over which the public
had acquired a right of use by immemorial prescription, and ordered the issuance of a perpetual
injunction against plaintiffs, restraining them from interfering in any manner with the use of the said
road.

The conclusion of the court with respect to the facts affecting the Nanca-Victorias road are as
follows:

Turning to a consideration of the evidence relative to the Nanca-Victorias road we find

incontestable proof that it has been in existence for at least forty years. That the hacenderos
located in the southwestern section of Victorias and the public generally passed over it freely
and that it was used for all purposes of transportation of farm produce, animals, etc. and by
pedestrians as well as carromatas and other conveyances without break or interruption until
two or three years ago when the defendants announced that the road was private and that
those who wished to pass over it with sugar carts would be obliged to pay a toll of ten
centavos — all other vehicles, it appears, were permitted to pass free charge. This
arrangement seems to have existed during the years of 1911 and 1912 and part of 1913, the
money being collected apparently from some hacenderos and not from others. There is
some reason to believe from the evidence presented by defendants themselves that the
practice of making these payments to hacienda 'Toreno' originated in an attempt to raise a
fund for the repair of the road. There is no evidence that any other hacenderos between
Nanca and Victorias or any other person made any attempt to close the road or to collect toll.
On the contrary the road appears to have been repaired by the hacenderos when it needed
repairing and everyone used it on equal terms until the defendants in 1910 or 1911
interposed the objection that the road in dispute was private. This we think is a fair deduction
from the evidence and although it is asserted that toll was collected at an earlier date by the
late Leon Montinola, brother of the defendant Ruperto Montinola, there is no tangible
evidence that this was so and that toll has been paid only during the years of 1911, 1912,
and part of 1913.

The question presented by the assignment of error are in effect:

(a) Is the Nanca-Victorias road at the point at which it traverses the Hacienda Toreno a public
highway or not?

(b) If it be held that the road in question is not a public highway, have plaintiffs proven their
acquisition of an easement of way over the Hacienda Toreno at the point traversed by the road in
question?

The trial judge, in holding that the road in question is public, bases in conclusion upon the fact, which
he deems to have been proven, that the road has been in existence "from time immemorial," and
had been "continiously used as a public road . . . and open to public as such for thirty or forty
years . . . until . . . the defendants undertook to claim it as private and to collect toll for the passage
of carts." (Bill of Exceptions, p. 56.) There is no doubt that for the past thirty or forty years a road has
existed between the former site of the town of Victorias and the barrio of Nanca, of the municipality
of Seravia, and that this road crosses defendants' hacienda. It is also true that during this period the
plaintiffs and their predecessors in the ownership of the hacienda now held by them have made use
of this road for the purpose of going and coming from their haciendas to the town of Victorias; but
the question is whether this use was limited to the plaintiffs, and their tenants and employees, or
whether it was, as held by the lower court, a use enjoyed by the public in general. Plaintiffs produced
only two witnesses, Segundo de Leon (stet. notes, pp. 21-22) and Eduardo Cuaycong, (stet. notes,
pp. 27-33) to testify as regards the use of the Nanca-Victorias road. Several other witnesses testified
on behalf of plaintiffs, but their testimony relates to the Dacuman — Toreno road, which is not
involved in this appeal. We have carefully read the testimony of the witnesses Leon and Cuaycong,
given upon their direct and cross examination, but we have been unable to find that either of them
has testified that the road in question was ever used by the public in general. These witnesses
testified with regard to the use of the road by the present and former owners and occupants of the
estates of Bacayan, Esperanza, Alcaigan, Pusot, and Dolores for the transportation of the products
of these estates to the town of Victorias, and of supplies and agricultural implements from Victorias
to the haciendas, but neither of them testified expressly that any other use had been made of said
road. Nevertheless, it may be reasonably inferred from the testimony of these witnesses that all
persons having occasion to travel between Victorias and the haciendas of Bacayan, Esperanza,
Alacaigan, Pusot, and Dolores, whether or not they were owners, tenants, or employees of said
estates, made use of the road now in dispute, crossing the Hacienda Toreno, and to this limited
extent it may be said that the public made use of the road, but there is nothing in the evidence to
indicate that the so — called public use extended beyond this.

Apart from the fact that there is no direct evidence to support the finding of the court concerning the
general public use of the road in dispute, the record contains data strongly tending to show that
when the complaint was filed plaintiffs did not contend that the road was a public highway, but
merely contended that they had acquired by prescription an easement of way across the Hacienda
Toreno. For example, the action is entitled an "action concerning a right of away." (Bill of Exceptions,
pp. 64 and 65.) It is not averred in the complaint that the road in question was used by the public. On
the contrary, it is averred that it was used by the plaintiffs and their predecessors. The averment in
paragraph 8 of the complaint that the plaintiffs have no other "outlet to a public road" than that which
they have been accustomed to used by going across the defendants' hacienda for the purpose of
going to the town of Victorias also shows that when they commenced this action they had in mind
the provisions of articles 564, et seq. of the Civil Code, which relate to the method of establishing the
compulsory easement of way. The owners of an existing easement, as well as those whose
properties are adjacent with a public road, have no occasion to invoke these provisions of the Code,
which relate to the creation of new rights, and not the enforcement of rights already in existence.

It is true in the opening statement made to the court, counsel for plaintiffs, who was not the same
attorney by whom the complaint was signed, stated that plaintiffs contend that the road in question is
public, but as no evidence was introduced tending to establish this contention concerning the Nanca
— Victorias road, counsel for defendants had no occasion to object upon the ground that such
testimony was not relevant to the averments of the complaint. No evidence was taken to indicate
that at any time since the road in question has been in existence any part of the expense of its
upkeep has been defrayed by the general government, the province, or the municipality. The trial
judge said upon this subject:

It is true that whatever repairs were made on the road were made irregularly. The
municipality of Victorias had no funds to devote to the construction and repair of roads, and
the upkeep of the road depending entirely therefore on the initiative of the persons who used
it, was attended to only at such times as repairs were absolutely necessary. (Bill of
Exceptions, p. 49.)

The court also held that it appears from the government grant issued in 1885 to the original owner of
the hacienda adjacent to the Hacienda Toreno on its western boundary, that the Nanca-Victorias
road at that time separated that estate from the Jalbuena Hacienda, and that these facts constitute
"circumstantial evidence that the road was in existence in 1885." We have examined the document
to which the court refers, and we agree that the road in question existed in 1885; but we do not
believe that the document in question proves that the road was public highway.

Another circumstance established by the evidence, and which is some importance in the
determination of this issue, is that although the defendants closed the Nanca-Victorias road in the
month of February, 1911, and since that time have collected toll from persons passing over it with
carts loaded with sugar, including those belonging to several of the plaintiffs, nothing was done by
them to prevent the continuation of this restriction until December, 1912, when this action was
commenced. It is natural to assume that if plaintiffs had considered that the road in question was
public, they would have protested immediately against the action of the defendants, and would have
either commenced a civil action, as they subsequently did, or would have brought about a
prosecution under section 16 of Act No. 1511.

Upon the evidence taken and admissions contained in the pleadings and those made during the
course of the trial we consider that the following findings are warranted:

1. The town of Victorias has always been the shipping point of the products of the Hacienda Toreno,
and of the haciendas of appellees, as well as the place from which supplies were brought to those
properties.

2. For thirty or forty years before the commencement of the suit a wagon road, herein called the
Nanca-Victorias road, has been in existence, connecting the haciendas of appellees with the town of
Victorias, and this road traverses the property of defendants. Since the removal of the town of
Victorias to a new site the Nanca-Victorias road has been used by appellees in travelling between
their properties and the provincial road which crosses the Hacienda Toreno from east to west.

3. No public funds have at any time been expended on the construction or upkeep of the Nanca-
Victorias road, but from time to time work has been done on it by the laborers employed by the
present and former owners of the Hacienda Toreno and the haciendas owned by the appellees and
their predecessors in title.

4. The Nanca-Victorias wagon road, including that part of it which crosses the Hacienda Toreno, has
for thirty-five or forty years been used by the appellees and their predecessors in title for the
transportation, by the usual means, of the products of their estates to their shipping points in or near
the town of Victorias, and the transportation to their estates of all supplies required by them, and has
been used by all persons having occasion to travel to and from all or any of the estates now owned
by the appellees.

5. The use of the Nanca-Victorias road in the manner and by the person above mentioned was
permitted without objection by the owners of the Hacienda Toreno until the year 1911, when they
closed it, and began charging a toll of 5 centavos for each cart which passed over the road, including
carts belonging to the appellants, until restrained from continuing to do so by the preliminary
injunction granted in this case.

6. The Nanca-Victorias road constitutes the only outlet from the estates of appellants to the nearest
public road which is the provincial road which crosses the Hacienda Toreno from east to west.

Upon these facts the questions of law to be decided are:

(a) Is the Nanca-Victorias road a public highway?

(b) If the Nanca-Victoria road, or that part of it which crosses the Hacienda Toreno, is not a public
highway, is it subject to a private easement of way in favor of the appellees?

The defendants are the owners of the Hacienda Toreno under a Torrens title issued in accordance
with the Land Registration Act, conferring to them its absolute ownership, subject only to the
limitations of paragraph four of section 39 of said Act. It is admitted that there is no annotation on the
certificate of title regarding the road here in question, either as a "public road" or as a "private way
established by law," and, therefore, the questions presented by this appeal are to be determined
precisely as they would be had the Hacienda Toreno not been brought under the operation of the
Land Registration Act. The plaintiffs being the owners of the property in question, the presumption of
law is that it is free from any lien or encumbrance whatever, and the burden therefore rests upon
plaintiffs to establish the contrary. As this court said in case of Fabie vs. Lichauco and the children of
Francisco L. Roxas (11 Phil. Rep., 14):

It is settled of law that a property is assumed to be free from all encumbrance unless the
contrary is proved.

There is admittedly no evidence to show that the land occupied by the road here in question was any
time conveyed to the general government or any of its political subdivisions by the present or any of
the former owners of the Hacienda Toreno. There is no evidence, even remotely, tending to show
that the road existed prior to the time when the property now known as the Hacienda Toreno passed
from the State into private ownership. The record fails to disclose any evidence whatever tending to
show that the Government has at any time asserted any right or title in or to the land occupied by the
road, or that it has incurred any expense whatever in its upkeep or construction. The Civil Code
defines as public roads those which are constructed by the State (art. 339), and as provincial and
town roads those "the expense of which is borne by such towns or provinces." (Civil Code, art. 344.)
While it is not contended that this definition is exclusive, it does show that during the Spanish
regime, under normal conditions, roads which were public were maintained at the public expense,
and that the fact that at no time was any expense incurred by the Government with respect to the
road here in question tends strongly to support the contention of the defendants that it is private way.

During the Spanish regime the law required each able to bodied citizen not within one of the
exempted classes to work a certain number of days in each year, his labor to be devoted to
"services of general utility" to the municipality of his residence. (Royal Decree of July 11, 1883, art.
5.) Under this Decree and the Regulations for its enforcement (Berriz, vol. 11, 258) the greater part
of the work on the public road of the Islands was accomplished. Had the road here in question been
a public way, it is reasonable to assume that the polistas of the town of Victorias would have been
employed in maintaining it. It is most significant that no mention is made in the testimony of the
plaintiffs' witnesses of any work of this character having been done on the road at any time,
particularly in view of the fact that their attention was drawn to this point. (Stet. note, pp. 8, 10, 11,
12, 13 and 14.)

The evidence shows that the repairs were made by the owners of the estates benefited by the road,
and by their laborers, as a pure voluntary act for their own convenience and interest. There being no
evidence of a direct grant to the government of the land occupied by the road in question or that any
Government funds or labor were expended upon it, the question presents itself whether the use to
which the road has been put was such as to justify the conclusion of the lower court that it has
become public property. There being no evidence that the original use of the road by plaintiffs'
predecessors was based upon any grant of the fee to the road or of an easement of way, or that it
began under the assertion of a right on their part, the presumption must be that the origin of the use
was the mere tolerance or license of the owners of the estates affected.

This being so, has that merely permissive use been converted into a title vested in the public at
large, or in the plaintiffs by reason of their ownership of the land beneficially affected by the use?

Had it been shown that the road had been maintained at the public expense, with the acquiescence
of the owners of the estates crossed by it, this would indicate such adverse possession by the
government as in course of time would ripen into title or warrant the presumption of a grant or of a
dedication. But in this case there is no such evidence, and the claims of plaintiffs, whether regarded
as members of the public asserting a right to use the road as such, or as persons claiming a private
easement of way over the land of another must be regarded as resting upon the mere fact of user.

If the owner of a tract of land, to accommodate his neighbors or the public in general, permits them
to cross his property, it is reasonable to suppose that it is not his intention, in so doing, to divest
himself of the ownership of the land so used, or to establish an easement upon it and that the
persons to whom such permission, tacit or express, is granted, do not regard their privilege of use as
being based upon an essentially revocable license. If the use continues for a long period of time, no
change being made in the relations of the parties by any express or implied agreement, does the
owner of the property affected lose his right of revocation? Or, putting the same question in another
form, does the mere permissive use ripen into title by prescription?

It is a fundamental principle of the law in this jurisdiction concerning the possession of real property
that such possession is not affected by acts of a possessory character which are "merely tolerated"
by the possessor, or which are due to his license (Civil Code, arts. 444 and 1942). This principle is
applicable not only with respect to the prescription of the dominium as a whole, but to the
prescription of right in rem. In the case of Cortes vs. Palanca Yu Tibo (2 Phil. Rep., 24, 38), the
Court said:

The provision of article 1942 of the Civil Code to the effect that acts which are merely
tolerated produce no effect with respect to possession is applicable as much to the
prescription of real rights as to the prescription of the fee, it being a glaring and self-evident
error to affirm the contrary, as does the appellant in his motion papers. Possession is the
fundamental basis of the prescription. Without it no kind of prescription is possible, not even
the extraordinary. Consequently, if acts of mere tolerance produce no effect with respect to
possession, as that article provides, in conformity with article 444 of the same Code, it is
evident that they can produce no effect with respect to prescription, whether ordinary or
extraordinary. This is true whether the prescriptive acquisition be of a fee or of real rights, for
the same reason holds in one and the other case; that is, that there has been no true
 possession in the legal sense of the word. (See also Ayala de Roxas vs. Maglonso, 8 Phil
Rep., 745; Municipality of Nueva Caceres vs. Director of Lands and Roman Catholic Bishop
of Nueva Caceres, 24 Phil. Rep., 485.)

Possession, under the Civil Code, to constitute the foundation of a prescriptive right, must be
possession under claim of title (en concepto de dueno), or use the common law equivalent of the
term, it must be adverse. Acts of a possessory character performed by one who holds by mere
tolerance of the owner are clearly not en concepto de dueño, and such possessory acts, no matter
how long so continued, do not start the running of the period of prescription.

A similar question was presented in the case of the Roman Catholic Archbishop of Manila vs. Roxas
(22 Phil. Rep., 450), in which case it appeared that Roxas, the owner of the Hacienda de San Pedro
Macati, claimed a right of way across the property of the church to Calle Tejeron, a public street of
the town of San Pedro Macati. The proof showed that the road in question had been used by the
tenants of the Hacienda de San Pedro Macati for the passage of carts in coming and leaving the
hacienda "from time immemorial," and further that the road had been used for time out of mind, not
only by the tenants of the hacienda but by many other people in going and coming from a church
half-way between the boundary line of the hacienda and Calle Tejeron. The court held that the facts
did not give rise to a prescriptive right of easement in favor of the owner of the hacienda, upon the
ground that such use "is to be regarded as permissive and under an implied license, and not
adverse. Such a use is not inconsistent with the only use which the proprietor thought fit to make of
the land, and until the appellee thinks proper to inclose it, such use is not adverse and will not
preclude it from enclosing the land when other views of its interest render it proper to do so. And
though an adjacent proprietor may make such use of the open land more frequently than another,
yet the same rule will apply unless there be some decisive act indicating a separate and exclusive
use under a claim of right. A different doctrine would have a tendency to destroy all neighborhood
accommodations in the way of travel; for if it were once understood that a man, by allowing his
neighbor to pass through his farm without objection over the pass-way which he used himself, would
thereby, after the lapse of time, confer a right on such neighbor to require the pass-way to be kept
open for his benefit and enjoyment, a prohibition against all such travel would immediately ensue."

The decisions of the supreme court of Louisiana, a State whose jurisdiction is based, as is our own,
upon the Roman Law, and whose Civil Code is taken, as is our own,. very largely from the Code of
Napoleon, are particularly persuasive in matters of this character. In the case of Torres vs. Fargoust
(37 La. Ann., 497), cited by appellants in their brief, in which the issues were very similar to those of
the present case, the court held that—

The mere fact that for thirty or forty years the public was permitted to pass over this ground
would not of itself constitute the place a locus publicus . . . dedication must be shown by
evidence so conclusive as to exclude all idea of private ownership; . . . such dedication
cannot be inferred from ere user alone; . . . no one is presumed to give away his property.
The burden is on him who avers a divestiture of ownership to prove it clearly.

We are, therefore, of the opinion, and so hold, that upon the facts established by the evidence it
does not appear that the road in question is a public road or way. We are also of the opinion that
plaintiffs have failed to show that they have acquired by prescription a private right of passage over
the lands of defendants. The supreme court of Spain has decided that under the law in force before
the enactment of the Civil Code, the easement of way was discontinous, and that while such an
easement might be acquired by prescription, it must be used in good faith, in the belief of the
existence of the right, and such user must have been continuous from time immemorial. (Judgment
of December 15, 1882.) In the appealed decision the court below says that the plaintiffs and their
predecessors made use of the road in question "from time immemorial," but there is no evidence
whatever in the record to sup[port this finding, although it is true that the evidence shows the
existence of the road and its use by the plaintiffs and their predecessors for thirty-five or forty years.
Speaking of the evidence required under the present Code of Civil Procedure to show immemorial
use of an easement, this court said in the case of Ayal de Roxas vs. Case (8 Phil. Rep., 197, 198):

Third Partida in title 31, law 15 . . . says that discontinues servitudes . . . must be proved by
usage or a term so long that men can not remember its commencement. . . . In many
judgments the supreme court of Spain has refused to accept proof of any definite number of
years as a satisfaction of this requirement of the law. . . . We are of the opinion that in order
to establish a right of prescription [title of prescription based upon use from time immemorial]
something more required than memory of living witnesses. Whether this something should
be the declaration of persons long dead, repeated by those who testify, as exacted by the
Spanish law, or should be the common reputation of ownership recognized by the Code of
Procedure, it is unnecessary for us to decide. On either theory the appellant has failed in his
proof . . . .

The same thing may be said in this case. Witnesses have testified that they have known the road for
a certain period of years, beginning at a time prior to the enactment of the Civil Code, but no
evidence has been made to prove immemorial use by either of the means of proof mentioned in this
decision cited, nor is immemorial user averred in the complaint as the basis of the right. It is evident,
therefore, that no vested right by user from time immemorial had been acquired by plaintiffs at the
time the Civil Code took effect. Under that Code (art 539) no discontinuous easement could be
acquired by prescription in any event. Assuming, without deciding, that this rule has been changed
by the provisions of the present Code of Civil Procedure relating to prescription, and that since its
enactment discontinuous easement may be required by prescription, it is clear that this would not
avail plaintiffs. The Code of Civil Procedure went into effect on October 1, 1901. The term of
prescription for the acquisition of rights in real estate is fixed by the Code (sec. 41) at ten years. The
evidence shows that in February, 1911, before the expiration of the term of ten years since the time
the Code of Civil Procedure took effect, the defendants interrupted the use of the road by the
plaintiffs by constructing and maintaining a toll gate on it and collecting toll from persons making use
of it with carts and continued to do so until they were enjoined by the granting of the preliminary
injunction by the trial court in December, 1912. Our conclusion is, therefore, that the plaintiffs have
not acquired by prescription a right to an easement of way over the defendant's property; that their
use of the Nanca-Victorias road across the Hacienda Toreno was due merely to the tacit license and
tolerance of the defendants and their predecessors in title; that license was essentially revokable;
and that, therefore, the defendants were within their rights when they closed the road in 1911.

While in the allegations from the plaintiffs' complaint it might be inferred that it was their purpose to
seek to impose upon the defendants the easement to which arts. 564 et seq. of the Civil Code relate,
that purpose was evidently abandoned, and the case was tried upon a wholly different theory. Proof
was offered to show that the right of passage across defendants' land is necessary to enable
plaintiffs to get their products to market, but there was no offer on their part to pay defendants the
indemnity required by section 564.

For the reasons stated the judgment of the court below is reversed, the injunction issued against
defendants is allowed on this appeal. So ordered.

G.R. No. L-33397 June 22, 1984

ROMEO F. EDU, in his capacity as Commissioner of Land Transportation, EDUARDO

DOMINGO, CARLOS RODRIGUEZ and PATRICIO YAMBAO in their capacity as ANCAR
Agents, petitioners,
vs.
HONORABLE AMADOR E. GOMEZ, in his capacity as Judge of the Court of First Instance of
Manila, Branch 1, THE SHERIFF of Quezon City, and LUCILA ABELLO, respondents.

Coronel Law Office for petitioners.

The Solicitor General for respondents.

RELOVA, J.:

Subject matter of this case is a 1968 model Volkswagen, bantam car, Engine No. H-5254416,
Chassis No. 118673654, allegedly owned by Lt. Walter A. Bala of Clark Airbase, Angeles City, under
whose name the car was allegedly registered on May 19, 1970 at the Angeles City Land
Transportation Commission Agency, under File No. 2B-7281.

The Office of the Commission on Land Transportation received a report on August 25, 1970 from the
Manila Adjustment Company that the abovementioned car was stolen on June 29, 1970 from the
residence of Lt. Bala, at 63 Makiling Street, Plaridel Subdivision, Angeles City. Petitioners Eduardo
Domingo, Carlos Rodriguez, and Patricio Yambao, agents of Anti-Carnapping Unit (ANCAR) of the
Philippine Constabulary, on detail with the Land Transportation Commission, on February 2, 1971,
recognized subject car in the possession of herein private respondent Lucila Abello and immediately
seized and impounded the car as stolen property. Likewise, herein petitioner Romeo F. Edu, then
Commissioner of Land Transportation, seized the car pursuant to Section 60 of Republic Act 4136
which empowers him to seize the motor vehicle for delinquent registration aside from his implicit
power deducible from Sec. 4(5), Sec. 5 and 31 of said Code, "to seize motor vehicles fraudulently or
otherwise not properly registered."

On February 15, 1971, herein private respondent Lucila Abello filed a complaint for replevin with
damages in respondent court, docketed as Civil Case No. 82215, impleading herein petitioners,
praying for judgment, among others, to order the sheriff or other proper officer of the court to take
the said property (motor vehicle) into his custody and to dispose of it in accordance with law.

On February 18, 1971, respondent judge of the then Court of First Instance of Manila issued the
order for the seizure of the personal property. Solicitor Vicente Torres, appearing for the herein
petitioners, submits that the car in question legally belongs to Lt. Walter A. Bala under whose name
it is originally registered at Angeles City Land Transportation Commission Agency; that it was stolen
from him and, upon receipt by the Land Transportation Commissioner of the report on the theft case
and that the car upon being recognized by the agents of the ANCAR in the possession of private
respondent Lucila Abello, said agents seized the car and impounded it as stolen vehicle. With
respect to the replevin filed by private respondent Lucila Abello, respondent Court of First Instance
Judge found that the car in question was acquired by Lucila Abello by purchase from its registered
owner, Marcelino Guansing, for the valuable consideration of P9,000.00, under the notarial deed of
absolute sale, dated August 11, 1970; that she has been in possession thereof since then until
February 3, 1971 when the car was seized from her by the petitioners who acted in the belief that it
is the car which was originally registered in the name of Lt. Walter A. Bala and from whom it was
allegedly stolen sometime in June 1970.

Finding for the private respondent, respondent judge held that —

 The complaint at bar is for replevin, or for the delivery of personal property, based on
the provisions of Rule 60, Sections 1 and 2 of the Rules of Court. All the
requirements of the law are present in the verified averments in the complaint, viz:

1. That plaintiff is the owner of the automobile in question.- petition.

2. That the aforesaid property was seized from her against her will not for a tax
assessment or fine pursuant to law, not under a writ of execution or attachment
against her properties;

3. That the property is wrongfully detained by the defendants, who allegedly seized it
from her on February 3, 1971, "allegedly for the purpose of verifying the same" (see
par. 3, Complaint), but have refused since then until now to return the same to the
plaintiff.

4. That plaintiff was ready to put up a bond in double the value of the car, and has in
fact already put up an P18,000.00 bond to the defendants for the return thereof to the
latter, if that shall be the ultimate judgment of the court, and to pay defendants
damages that they may incur.

The issuance therefore, by this Court of the order of seizure of the said chattel by the
sheriff and for the latter to take it into his custody, is precisely pursuant to the existing
law, governing the subject.

If defendants object to the seizure, the remedy provided for by law is set out in
Section 5 of Rule 60 and that is for them to put up a counter-bond for the same
amount of P18,000.00, which is double the value of the car in question. Defendants
may not ignore the law under the claim that, on complaint of a certain party, the
Manila Adjustment Company, they have a right to seize the same as it appears to be
the property that was stolen from Lt. Walter A. Bala several months ago. (p. 19,
Rollo)

There is no merit in the petition considering that the acquirer or the purchaser in good faith of a
chattel of movable property is entitled to be respected and protected in his possession as if he were
the true owner thereof until a competent court rules otherwise. In the meantime, as the true owner,
the possessor in good faith cannot be compelled to surrender possession nor to be required to
institute an action for the recovery of the chattel, whether or not an indemnity bond is issued in his
favor. The filing of an information charging that the chattel was illegally obtained through estafa from
its true owner by the transferor of the bona fide possessor does not warrant disturbing the
possession of the chattel against the will of the possessor.

Finally, the claim of petitioners that the Commission has the right to seize and impound the car
under Section 60 of Republic Act 4136 which reads:

Sec. 60. The lien upon motor vehicles. Any balance of fees for registration, re-
registration or delinquent registration of a motor vehicle, remaining unpaid and all
fines imposed upon any vehicle owner, shall constitute a first lien upon the motor
vehicle concerned.

is untenable. it is clear from the provision of said Section 60 of Republic Act 4136 that the
Commissioner's right to seize and impound subject property is only good for the proper enforcement
of lien upon motor vehicles. The Land Transportation Commission may issue a warrant of
constructive or actual distraint against motor vehicle for collection of unpaid fees for registration, re-
registration or delinquent registration of vehicles.

ACCORDINGLY, the petition is hereby DENIED.

SO ORDERED.

G.R. No. 80298               April 26, 1990

EDCA PUBLISHING & DISTRIBUTING CORP., petitioner,

vs.
THE SPOUSES LEONOR and GERARDO SANTOS, doing business under the name and style
of "SANTOS BOOKSTORE," and THE COURT OF APPEALS, respondents.

Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner.

Cendana Santos, Delmundo & Cendana for private respondents.

CRUZ, J.:

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

Art. 559. The possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived has
acquired it in good faith at a public sale, the owner cannot obtain its return without
reimbursing the price paid therefor.

The movable property in this case consists of books, which were bought from the petitioner by an
impostor who sold it to the private respondents. Ownership of the books was recognized in the
private respondents by the Municipal Trial Court,   which was sustained by the Regional Trial
1

Court,   which was in turn sustained by the Court of Appeals.   The petitioner asks us to declare that
2 3

all these courts have erred and should be reversed.

This case arose when on October 5, 1981, a person identifying himself as Professor Jose Cruz
placed an order by telephone with the petitioner company for 406 books, payable on
delivery.   EDCA prepared the corresponding invoice and delivered the books as ordered, for which
4

Cruz issued a personal check covering the purchase price of P8,995.65.   On October 7, 1981, Cruz
5

sold 120 of the books to private respondent Leonor Santos who, after verifying the seller's ownership
from the invoice he showed her, paid him P1,700.00.  6

Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before
clearing of his first check, made inquiries with the De la Salle College where he had claimed to be a
dean and was informed that there was no such person in its employ. Further verification revealed
that Cruz had no more account or deposit with the Philippine Amanah Bank, against which he had
drawn the payment check.   EDCA then went to the police, which set a trap and arrested Cruz on
7

October 7, 1981. Investigation disclosed his real name as Tomas de la Peña and his sale of 120 of
the books he had ordered from EDCA to the private respondents.  8

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

Protesting this high-handed action, the private respondents sued for recovery of the books after
demand for their return was rejected by EDCA. A writ of preliminary attachment was issued and the
petitioner, after initial refusal, finally surrendered the books to the private respondents.   As
10

previously stated, the petitioner was successively rebuffed in the three courts below and now hopes
to secure relief from us.

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

Now to the merits

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

The argument that the private respondents did not acquire the books in good faith has been
dismissed by the lower courts, and we agree. Leonor Santos first ascertained the ownership of the
books from the EDCA invoice showing that they had been sold to Cruz, who said he was selling
them for a discount because he was in financial need. Private respondents are in the business of
buying and selling books and often deal with hard-up sellers who urgently have to part with their
books at reduced prices. To Leonor Santos, Cruz must have been only one of the many such sellers
she was accustomed to dealing with. It is hardly bad faith for any one in the business of buying and
selling books to buy them at a discount and resell them for a profit.

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

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

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

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

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

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

x x x           x x x          x x x

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

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

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

Non-payment only creates a right to demand payment or to rescind the contract, or to criminal
prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery of the
thing sold will effectively transfer ownership to the buyer who can in turn transfer it to another.

In Asiatic Commercial Corporation v. Ang,  the plaintiff sold some cosmetics to Francisco Ang, who
11

in turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it sued for the recovery of the
articles from Tan, who claimed he had validly bought them from Ang, paying for the same in cash.
Finding that there was no conspiracy between Tan and Ang to deceive Asiatic the Court of Appeals
declared:

Yet the defendant invoked Article 464   of the Civil Code providing, among other things that
12

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

In Tagatac v. Jimenez,  the plaintiff sold her car to Feist, who sold it to Sanchez, who sold it to
13

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

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

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

x x x           x x x          x x x

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

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

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

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

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

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

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

It would certainly be unfair now to make the private respondents bear the prejudice sustained by
EDCA as a result of its own negligence.  We cannot see the justice in transferring EDCA's loss to
1âwphi1

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

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

WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED, with costs against
the petitioner.

G.R. No. 5051           September 27, 1910

THE HEIRS OF JUMERO, plaintiff-appellants,

vs.
JACINTO LIZARES, ET AL., defendants-appellees.

Jose M. Arroyo, for appellants.

Vicente Franco and Espiridion Guanco, for appellees.

ARELLANO, C.J.:

Under the name of the heirs of Jumero, fifteen persons, as the grandchildren and great
grandchildren of Benedicto Jumero, demand the restitution of a piece of land which is, and has been
for the past forty years, in the possession of Jacinto Lizares. This land has an area of five hectares
and sixty ares, and adjoins on the north, east, and west, the property of Aniceto Lacson, and on the
south, that of Gregoria Vinco. It is alleged in the complaint that this land belonged to Benedicto
Jumero, and that he willed it of his four children, all now deceased as well as the said Jumero,
named Luisa, Felix, Florentino, and Pedro, and that the plaintiffs, grandchildren and great
grandchildren, descend from the three last mentioned. The only descendant of Luisa, Gregoria
Meruegos, is not a party to the suit and therefore appears as a defendant together with Jacinto
Lizares.

At the conclusion of the trial, Florentino's children, named Anatolio, Hilaria, and Felisa, having
testified as witnesses for the defendant, Lizares, in opposition to the allegations of the complaint,
were likewise therein included as defendants, by an amendment authorized by the court. So that, of
the heirs of Benedicto Jumero, the descendant of one entire branch, Luisa, and three of those of
another branch, that Florentino, impugned the complaint and take no part in the claim for the
restitution of the land of their common predecessor in interest.

The following facts are admitted: First, that all the heirs named Jumero are actually the descendants
of Benedicto Jumero; second, that the land, which is the subject of the suit, passed into the
possession of Jacinto Lizares, for the sum of 50 pesos, about forty years before; and third, that the
reason for his transfer was the fact that Nicolas Jumero, a son of Felix, was drafted for the army, and
to secure his release from the military service, or to pay the attorney who was to negotiate the
release, the 50 pesos were required.

The whole question involved is whether the 50 pesos were received as a mortgage loan, as the
plaintiffs claim, or as the price of sale, as maintained from the beginning by the defendants, Jacinto
Lizares and Gregoria Meruegos, and subsequently by Anatolio, Hilaria, and Felisa Jumero, the latter
represented by her husband, Basilio Alferio. The plaintiffs claim that the land was delivered under
mortgage in order that Lizares might have the usufruct until it should be redeemed through the
payment of the 50 pesos. The defendants assert the land was sold outright to Lizares for the price of
50 pesos.

The Court of First Instance of Occidental Negros decided the case in favor of the defendants and
absolved them from the complaint. The plaintiffs appealed.

Having forwarded a bill of exceptions, with a right to a revision of the evidence, two errors are
alleged in this instance against the judgment of the lower court.

First. For having admitted, notwithstanding the objection of the plaintiffs, the testimony introduced by
the appellees relative to the purchase of the land in question by Jacinto Lizares.

Second. Because the trial judge entertained doubt as to the character of the contract, by virtue of
which the defendant, Jacinto Lizares, possesses the land in question, and because, by reason of
this doubt, he absolved the defendants, and did not declare that there was preponderance of
evidence in favor of the plaintiff appellants.

With respect to the first assignment of error, it is alleged that, as the question involves the purchase
of real estate, the testimony of witnesses is not admissible, and that at the time the land in question
was supposed to have been purchased, the laws of the Partidas were in force, and, in accordance
with law 6, title 5, of the 5th Partida, it was necessary for the validity of the contract that the sale be
made by a public instrument. The law cited provides that the purchase and sale may be made in two
ways — by a public instrument, and without one. The first is when the vendee says to the vendor: "I
wish that a document of sale be made." Such a sale, although the vendee and the vendor agree on
the price, is not completed until the instrument is made and executed, because, before that is done,
one or the other may repent. The sale may be made without an instrument when the vendee and the
vendor both agree upon the price thereof and exchange the thing for the price, without mentioning
the instrument.

The first assignment of error is therefore without foundation. In accordance with the legislation of
the Partidas, patterned after the Roman law, the contract of purchase and sale is eminently
consensual and, consequently only requires consent for its perfection. In order that an instrument be
necessary, it was required that this form should also be the subject of consent and that the validity of
the contract be made defendant thereon: I wish a bill of sale to be made of the thing sold, was what
the vendee should say to the vendor, according to the law cited, in order that he might not be bound
until after the execution of the instrument.

As to the second assignment of error, it is true that the trial judge while in doubt, and by reason of
his doubt, which still existed after weighing the contradictory testimony, decided the suit in favor of
the defendant. In so doing, he committed no error whatever, but, on the contrary, complied with the
second paragraph of article 6 of the Civil Code, which provides:

When there is no law exactly applicable to the point in controversy, the customs of the place
shall be observed, and, in the absence thereof, the general principles of law.
And it is a general principle of law that, in case of doubt, the condition of he who possesses is the
better one. The defendant in whose favor the doubt was decided is the possessor.

But, in reality, it was not a case of doubt, neither with respect to the law nor the facts adduced by the
witnesses, whose testimony, rationally weighed, does not show an evident preponderance of proof
in favor of the plaintiffs, but all to the contrary.

By law, in conformity with article 448 of the Civil Code, this case could not but be decided in favor of
the defendant.

The possessor by virtue or ownership has in his favor the legal presumption that he holds
possession by reason of a sufficient title and he can not be forced to show it.

The defendant, Lizares, who was possessed the land in litigation for forty years, alleges that he is
possession thereof by virtue of a title of purchase and sale, which is a title of transfer of ownership;
he is, consequently, the possessor under title of ownership, and, in conformity with the law, he has in
his favor the legal presumption that he possesses the land under sufficient title and he ca not be
obliged to produce it. A purchase verbally made gives a perfect title which, with the occupation or
possession of the thing, confers ownership upon the possessor, provided that he holds himself out
as its owner, until it be proved that he is not. It was incumbent upon the plaintiffs to prove a
character distinct from that of owner, and only then could they compel the defendant to prove (rather
than to show, as ) very properly observes the learned commentator, Manresa) the title which actually
confers upon him the status of owner. But the plaintiffs were unable to prove a character distinct
from that of owner, by due and sufficient proof of a title under mortgage, or that of antichresis, which
latter was certainly unknown in the Philippine Islands before the publication of the Civil Code, except
in exceedingly rare cases of pretorian pledges judicially established and approved — and this they
were unable to do, for the reason that, as established at the trial, no instrument whatever was
executed of the alleged mortgage of or of such an antichresis; and, at all times, at least since the
promulgation of the Civil Code, the mortgage and the antichresis, as restrictions of the ownership,
must necessarily be recorded in writing, under the first paragraph of rule 4 of the transitory
provisions of the Civil Code, in connection with articles 1875, 1279, and 1280.

On these grounds alone, the judgment appealed from should be affirmed. But conceding, for a
moment, some value to the testimony taken, and on the hypothesis that it were necessary to
consider it critically and reasonably in order to reach a conviction beyond all doubt, by a
preponderance of evidence offered by one of the litigating parties, even then, and in such a case,
this preponderance could not be admitted in favor of the plaintiffs.

The following witnesses testified for the plaintiffs: Dionisio Acodo, as to the delivery of the 50 pesos
under security of the land; Gregorio Vinco, Romualda Jumero, and Cosme Jumero, to the effect that,
twenty years before, according to the first two, and two years before, according to the last, the
defendant, Jacinto Lizares, had negotiated with their predecessors in interest, Felix Jumero and
Pedro Jumero, respectively, for the conversion of the mortgage into a sale; Rufino Brasileño, with
respect to what he had heard Jacinto Lizares say to Gregoria Vinco and another woman, that if they
had not sued him, he would have allowed them to redeem the land; and Aniceto Lacson, as to his
attempt, at the request of Jacinto Lizares, to buy the land for the latter.

Examining all this testimony in detail, the following particular can not be criticized:

First. Gregoria Vinco, the adjacent owner to the south of the land in litigation, testified that twenty
years before Jacinto Lizares sent for her father-in-law, Felix Jumero, who went to the house of
Jacinto Lizares in company with his eldest son, Nicolas, the husband of the witness, with her
husband's sister, Romualda, and the witness herself, and that there Lizares told them that, as the
land was mortgaged, he would add 150 pesos more, in order that the land might be sold to him.
When the witness was asked on cross-examination when she had married her husband, Nicolas,
she replied: "Thirty-eight years ago; that is, two or four years after he was chosen as a recruit."

Romualda Jumero testified:

When my brother was drafted, it happened that my father did not have the money to redeem
him, and he went and borrowed the sum of 50 pesos from Lieutenant Jacinto Lizares, and
gave him that land as security.

Q. Who told you that your father and Jacinto Lizares made that agreement?—A. I
accompanied my father when we went to Lizares's house.

Q. Who was your companion when you and your father went of Jacinto Lizares's house?—A.
We two, my father and I.

Q. Can you tell us when you went with your father to Lizares's house?—A. About forty years
ago.

Q. How many times were you in Lieutenant Lizares's house to talk about that land?—A. I
only went once.

The conclusion is, first, that Romualda Jumero, contrary to the statement made by Gregoria Vinco,
did not go to Jacinto Lizares's house, and did not hear what is asserted to have been said about the
conversion of the mortgage into a sale; and, second, that this witness testified in regard to the
alleged contract of guaranty, made as she herself asserted, forty years before, and when questioned
at the beginning of her testimony, "How old are you?" replied, "About forty years, I believe."

The following witnesses testified for the defendant: Gregoria Meruegos, Hilaria Jumero, Anatolio
Jumero, Basilio Alferio as the husband of Felisa Jumero, Simon Lizares, and Francisco Lizares. Of
these, the first four, and the last, averred that the sale was made by the Jumero family; that is, by the
four children of Benedicto Jumero, because of the need to redeem from the military service a son of
Felix Jumero, the husband of Gregoria Vinco who, as aforesaid, is an adjacent owner of land to the
south of the property in question and the same person who, according to the testimony of Hilaria
Jumero, built two houses, a large and a small one, on the land in dispute "and on account of that the
suit began." The witness Hilaria Jumero testified that Aniceto Lacson made her an offer to buy the
land in question for 700 pesos, inasmuch as it had been acquired very cheaply. This testimony was
confirmed by Aniceto Lacson, in rebuttal, who stated that he had offered her 400 pesos, but that
Hilaria Jumero replied that Jacinto Lizares had also made her an offer.

Gregoria Meruegos, on cross-examination, stated that she had on some occasion said that the land
in question was pledged to Lizares, but that as it had not been redeemed it was the same as though
the latter had acquired it by purchase. "If you had not sued me, I would have allowed you to redeem
the land," are words that the plaintiffs' witness, Rufino Brasileño, attributes to Lizares. Such are the
results obtained from the original evidence.

With all the testimony of the witnesses, proof was not adduced of the existence of the mortgage
contract, which, on the other hand, would not cause the debtor's land to pass to the control of the
creditor.
It is not irrational to accept as conclusive the testimony of the defendant's witnesses, although they
were partners-on-shares of, or in any other manner defendant on, the defendant, because they
testified against their own interest in affirming that the land had been transferred by sale.

It is likely, considering the custom of the locality, and indeed a general one throughout the Islands,
that the land was sold with right of redemption, and hence that its redemption should be spoken of
as possible or as a mere concession on the part of the creditor; but, on such a hypothesis, it was
redemption which could not be demanded of the vendee, by reason of the prescription acquired,
whether the time is computed in accordance with the previous legislation, or whether, as it is strictly
proper, such time limit, already expired, be that specified in the Civil Code; inasmuch as, even
admitting that it was stipulated that the right to repurchase or redeem should last for an indefinite
time, such period is restricted to ten years, under paragraph 2 of article 1508 of the Civil Code, and
this period has already elapsed since its promulgation. (Art. 1939, Civil Code.)

The judgment appealed from is affirmed, with the costs of this instance against the appellants.

G.R. No. 169956             January 19, 2009

SPOUSES JONEL PADILLA and SARAH PADILLA, Petitioners,

vs.
ISAURO A. VELASCO, TEODORA A. VELASCO, DELIA A. VELASCO, VALERIANO A.
VELASCO, JR., IDA A. VELASCO, AMELITA C. VELASCO, ERIBERTO C. VELASCO, JR., and
CELIA C. VELASCO, Respondents.

DECISION

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the Decision1 dated February 11, 2005 and the Resolution 2 dated October 4, 2005 of the Court of
Appeals (CA) in CA-G.R. CV No. 69997 entitled “Isauro A. Velasco, Teodora A. Velasco, Delia A.
Velasco, Valeriano A. Velasco, Jr., Ida A. Velasco, Amelita C. Velasco, Eriberto C. Velasco, Jr. and
Celia C. Velasco v. Spouses Jonel Padilla and Sarah Padilla.”

The facts

The facts of the case are as follows:

Respondents are the heirs of Dr. Artemio A. Velasco (Artemio), who died single and without any
issue on January 22, 1949. During his lifetime, Artemio acquired Lot No. 2161 consisting of 7,791
square meters situated at Barangay Pinagsanjan, Pagsanjan, Laguna, covered by Tax Declaration
No. 4739. Artemio acquired the lot from spouses Brigido Sacluti and Melitona Obial, evidenced by a
deed of sale dated February 14, 1944.

In October 1987, petitioners entered the property as trustees by virtue of a deed of sale executed by
the Rural Bank of Pagsanjan in favor of spouses Bartolome Solomon, Jr. and Teresita Padilla
(Solomon spouses).

Respondents demanded that petitioners vacate the property, but the latter refused. The matter was
referred to the barangay for conciliation; however, the parties failed to reach an amicable settlement.
Thereafter, petitioners caused the cutting of trees in the area, fenced it and built a house thereon.
They harvested the crops and performed other acts of dominion over the property.

On October 14, 1991, respondents filed a complaint for accion publiciana, accounting and damages
against petitioners before the Regional Trial Court (RTC) of Santa Cruz, Laguna. They asked the
court to order petitioners to vacate the property and to pay moral and exemplary damages,
attorney’s fees and cost of suit.

Isauro A. Velasco (Isauro), the brother of the deceased Artemio, as administrator of the property,
was presented as a witness. He testified that Artemio owned the property. As evidence thereof, he
presented the Kasulatan ng Bilihang Tuluyan executed by spouses Brigido Sacluti and Melitona
Obial in favor of Artemio, and declared that he (Isauro) was present during the signing of the
instrument. He offered in evidence tax declarations and tax receipts covering Lot No. 2161 which
were all in the name of Artemio. A certification from the Land Registration Authority (LRA) was
likewise presented by Isauro which states that based on the records of the LRA, Decree No. 403348
was issued on October 10, 1930 covering Lot No. 2161. 3

Rolando R. Flores, a geodetic engineer, also testified that on January 16, 1993, upon prior notice to
petitioners, he conducted a survey of the land based on the technical description of the property and
the map from the Bureau of Lands. The purpose of the survey was to verify if the area occupied by
petitioners was Lot No. 2161. Upon his examination and based on his survey, he concluded that the
land occupied by petitioners was Lot No. 2161. 4

On the other hand, petitioners averred that the Solomon spouses owned the property; that the said
spouses bought it from the Rural Bank of Pagsanjan as evidenced by a deed of sale dated
September 4, 1987; that the land was identified as Lot No. 76-pt, consisting of 10,000 square
meters, located at Pinagsanjan, Pagsanjan, Laguna; and that the spouses authorized petitioners to
occupy the land and introduce improvements thereon.

Petitioners further claimed that subsequent to the sale of the property to the Solomon spouses, Lot
No. 76-pt. was levied on in Civil Case No. 320 under the jurisdiction of the Municipal Trial Court of
Pagsanjan, Laguna. The case was entitled “Rural Bank of Pagsanjan, Inc. v. Spouses Hector and
Emma Velasco, Valeriano Velasco and Virginia Miso.” Petitioners alleged that Valeriano Velasco
obtained a loan from the Rural Bank of Pagsanjan, with Hector Velasco as co-maker, and the land
was mortgaged by Valeriano as collateral. Valeriano’s failure to pay the loan caused the foreclosure
of the land, and on September 17, 1980, Lot No. 76-pt was sold at a public auction by the Provincial
Sheriff. The Rural Bank of Pagsanjan was the highest bidder.

Pedro Zalameda Trinidad, Jr. (Pedro), as a witness for the petitioners, testified that he was born in
Barangay Pinagsanjan, Pagsanjan, Laguna, and had been residing there since birth. He said that
based on his knowledge, the land belonged to Nonong (Valeriano) Velasco because he used to buy
coconuts harvested from the said land and it was Nonong Velasco who caused the gathering of
coconuts thereon.5

Petitioner Jonel Padilla also took the witness stand. He testified that Pedro was occupying the land
when he initially visited it. A representative of the Rural Bank of Pagsanjan disclosed to him that the
land previously belonged to Valeriano. He verified from the Municipal Assessor the technical
description of the land, but no longer verified from the Bureau of Lands because he trusted the bank.
Upon his recommendation, his sister and his brother-in-law purchased the property after verifying
the supporting documents. It was his brother-in-law who went to the Bureau of Lands and found that
it was Lot No. 2161.6
On July 27, 1999, the RTC rendered a Decision,7 the dispositive portion of which reads:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of the

[respondents] ordering the [petitioners] to vacate the land presently occupied by them and restore
possession thereof to the [respondents], to render an accounting of the proceeds from the crop
harvested therefrom starting September 1987 up to the time the property is returned to the
[respondents], and to remove at their expense all the structures they constructed thereon. 8

Petitioners filed an appeal before the CA, but on February 11, 2005, the CA issued the assailed
decision affirming the decision of the RTC. They consequently filed a motion for reconsideration.
However, the same was denied in the assailed resolution dated October 4, 2005.

Hence, the instant petition.

The Issues

Petitioners anchor their petition on the following grounds:

I. The alleged sale executed between Brigido Sacluti and Melitona Obial as seller and Dr. Artemio
[Velasco] as buyer was never established, respondents having failed to present the original copy
thereof during the trial despite their clear and categorical commitment to do so. Furthermore, the
purported Original Certificate of Title issued in the name of Brigido Sacluti and Melitona Obial was
never presented in evidence, thus, creating the presumption that had it been presented, the same
would have been adverse to respondents.9

II. The spouses Solomon acquired the subject property from its lawful owner in good faith and for
value.10

III. The spouses Solomon acquired the subject property at the public auction sale conducted by the
provincial sheriff of Laguna based on the judgment and writ of execution issued by the Municipal
Trial Court of Laguna against respondent Valeriano Velasco for non-payment of a loan considering
that (1) the issuance of Tax Declaration No. 4624 in the name of respondent Valeriano Velasco is
entitled to the presumption of regularity especially since respondents have not explained how and
why it was wrongly issued in the name of their own brother, respondent Valeriano Velasco and
without any of them taking any action to correct the alleged mistake; and (2) by their failure to assert
their alleged ownership of the property and their inaction [by not] questioning the legal action taken
by the bank against their co-respondent Valeriano Velasco and the subject property despite their full
awareness since 1980, respondents are barred by estoppel from denying the title of the bank and
the Solomon spouses.11

IV. The action a quo was barred by prescription considering that respondents filed their legal action
against the petitioners only on October 14, 1991, more than ten (10) years after the bank had
acquired the subject property on September 17, 1980 at the public auction conducted by the
Provincial Sheriff of Laguna. 12

V. At the very least, respondents are guilty of laches, they having slept on their rights for an
unreasonable length of time such that to dispossess petitioners of the property after they had
introduced substantial improvements thereon in good faith would result in undue damage and injury
to them all due to the silence and inaction of respondents in asserting their alleged ownership over
the property.13
VI. The evidence proves that Lot no. 2161 and Lot no. 76-pt are one and the same. 14

VII. The failure of Atty. Asinas to present other witnesses, additional documents and to respond to
certain pleadings brought about by his serious illnesses constitutes excusable negligence or
incompetency to warrant a new trial considering that the Supreme Court itself had recognized
“negligence or incompetency of counsel as a ground for new trial” especially if it has resulted in
serious injustice or to an uneven playing field. 15

VIII. The overwhelming testimonial and documentary evidence, if presented, would have altered the
result and the decision now appealed from.16

IX. The petitioners should be awarded their counterclaim for exemplary damages, attorney’s fees
and litigation expenses.17

The arguments submitted by petitioners may be summed up in the following issues:

I. Who, as between the parties, have a better right of possession of Lot No. 2161;

II. Whether the complaint for accion publiciana has already prescribed; and

III. Whether the negligence of respondent’s counsel entitles them to a new trial.

The Ruling of the Court

We deny the instant petition.

First. The instant case is for accion publiciana, or for recovery of the right to possess. This was a
plenary action filed in the regional trial court to determine the better right to possession of realty
independently of the title.18 Accion publiciana is also used to refer to an ejectment suit where the
cause of dispossession is not among the grounds for forcible entry and unlawful detainer, or when
possession has been lost for more than one year and can no longer be maintained under Rule 70 of
the Rules of Court. The objective of the plaintiffs in accion publiciana is to recover possession only,
not ownership.19

Based on the findings of facts of the RTC which were affirmed by the CA, respondents were able to
establish lawful possession of Lot No. 2161 when the petitioners occupied the property. Lot No.
2161 was the subject of Decree No. 403348 based on the decision dated October 10, 1930 in
Cadastre (Cad.) Case No. 11, LRC Record No. 208. The Original Certificate of Title to the land was
issued to Brigido Sacluti and Melitona Obial. On February 14, 1944, the original owners of the land
sold the same to Artemio. From the date of sale, until Artemio’s death on January 22, 1949, he was
in continuous possession of the land. When Artemio died, Isauro acted as administrator of the land
with Tomas Vivero as caretaker. In 1987, petitioners occupied the property by virtue of a deed of
sale between the Rural Bank of Pagsanjan and the Solomon spouses. The land bought by the
Solomon spouses from the Bank is denominated as Lot No. 76-pt and previously owned by
Valeriano. However, it was proved during trial that the land occupied by petitioners was Lot No. 2161
in the name of Artemio, whereas the land sold by the bank to the petitioners was Lot No. 76-pt.

Given this factual milieu, it can readily be deduced that respondents are legally entitled to the
possession of Lot No. 2161.
It is a long-standing policy of this Court that the findings of facts of the RTC which were adopted and
affirmed by the CA are generally deemed conclusive and binding. This Court is not a trier of facts
and will not disturb the factual findings of the lower courts unless there are substantial reasons for
doing so.20 In the instant case, we find no exceptional reason to depart from this policy.

Second. The case filed by respondents for accion publiciana has not prescribed. The action was
filed with the RTC on October 14, 1991. Petitioners dispossessed respondents of the property in
October 1987. At the time of the filing of the complaint, only four (4) years had elapsed from the time
of dispossession.

Under Article 555(4) of the Civil Code of the Philippines, the real right of possession is not lost till
after the lapse of ten years. It is settled that the remedy of accion publiciana prescribes after the
lapse of ten years.21 Thus, the instant case was filed within the allowable period.

Third. Petitioners put in issue that Lot No. 2161 and Lot 76-pt are one and the same, and that the
land was owned by Valeriano when it was foreclosed by the bank. This, in effect, is a collateral
attack on the title over the property which is registered in the name of Artemio.

We cannot countenance this stance of the petitioners, and perforce, must strike it down. Title to a
registered land cannot be collaterally attacked.22 A separate action is necessary to raise the issue of
ownership.

In accion publiciana, the principal issue is possession, and ownership is merely ancillary thereto.
Only in cases where the possession cannot be resolved without resolving the issue of ownership
may the trial court delve into the claim of ownership. This rule is enunciated in Refugia v.
CA,23 where the Court declared, viz.:

Where the question of who has prior possession hinges on the question of who the real owner of the
disputed portion is, the inferior court may resolve the issue of ownership and make a declaration as
to who among the contending parties is the real owner. In the same vein, where the resolution of the
issue of possession hinges on a determination of the validity and interpretation of the document of
title or any other contract on which the claim of possession is premised, the inferior court may
likewise pass upon these issues. This is because, and it must be so understood, that any such
pronouncement made affecting ownership of the disputed portion is to be regarded merely as
provisional, hence, does not bar nor prejudice an action between the same parties involving title to
the land.

Fourth. Petitioners aver that they are entitled to a new trial due to the failure of their counsel in the
proceedings before the RTC to present testimonial and documentary evidence necessary for them to
obtain a favorable judgment. They maintain that the failure of their counsel to present these other
evidence was due to counsel’s lingering illness at that time, and therefore, constitutes excusable
negligence.

It may be reiterated that mistakes of counsel as to the competency of witnesses, the sufficiency and
relevancy of evidence, the proper defense, or the burden of proof, as well as his failure to introduce
certain evidence or to summon witnesses and to argue the case, are not proper grounds for a new
trial, unless the incompetence of counsel be so great that his client is prejudiced and prevented from
fairly presenting his case.24

In this case, the illness of petitioners’ counsel and his alleged failure to present additional evidence
during the trial of the case do not constitute sufficient ground for a new trial. The Order 25 issued by
the trial court in its denial of the motion for new trial filed by petitioners aptly explains the reason why
a new trial is unnecessary, viz.:

Assuming that Atty. Asinas failed to perform the imputed acts by reason of his ailments, still, the
same is insufficient ground to grant a new trial. The evidence on record established the fact that
[respondents] and their predecessors-in-interest have been in possession of the subject realty for a
long time. Their possession was interrupted by [petitioners] who entered the property in [1987]
pursuant to a deed of sale between the Rural Bank of Pagsanjan and spouses Bartolome C.
Solomon and Teresita Padilla. Considering that this is an accion publiciana and [respondents’]
earlier rightful possession of the subject parcel of land has been adequately established, the
testimonial and documentary evidence sought to be adduced in a new trial would not adversely
affect the findings of the Court. The ownership and possession of the property purchased by the
Solomon spouses from the Rural Bank of Pagsanjan could be the subject of an appropriate action.

WHEREFORE, the instant petition is DENIED for lack of merit. Costs against the petitioners.

SO ORDERED.

G.R. No. L-36434 October 27, 1973

ELISA ALCANTARA-PICA, petitioner,
vs.
HONORABLE JUDGE, COURT OF FIRST INSTANCE OF RIZAL, BRANCH IV, QUEZON CITY,
ANATOLIO CARIGO Y TAMBONGCO, respondents.

Virgilio B. Alcantara for petitioner.

TEEHANKEE, J.:

In this petition for review of respondent court's orders upholding respondent's right to possession of
the car in question as against petitioner in an interpleader proceeding filed by the Metrocom which
had impounded the car, the Court reaffirms once again the governing provisions of Article 559 of the
Civil Code and its long-established doctrinal jurisprudence that petitioner as owner of the car of
which she had been unduly deprived may recover the same as against the possessor (without
reimbursement of the sum received in a private sale by the embezzler or wrongdoer from the
possessor) even assuming that the possessor had purchased the same in good faith, since an
owner cannot be dispossessed of his property without his consent and the wrongdoer cannot
transfer to another a title that he does not have.

Petitioner Elisa Alcantara-Pica, a lieutenant-colonel in the AFP Nurse Corps, is the lawful owner of a
1966 model motor vehicle, Toyota 1600 S. Engine No. 4R-411530, having purchased the same on
installment basis from Delta Motor Sales Corporation to which she mortgaged the same to secure
payment of the balance of the price thereof which amounted to P12,252.87, interests included, as of
July 2, 1972. 1

Private respondent Anatolio Carigo in turn claims ownership of the same vehicle by purchase on
July 30, 1971 for $11,000.00 from one Monico Maniquiz. The latter traced his title to the vehicle by
purchase for P6,500.00 on December 28, 1970 from one Rafael Pica who held special power of
attorney from petitioner (executed on June 30, 1969) authorizing him only "to ask, demand, sue for,
and received all sums of money ... which or now hereafter (sic) shall be or become due, owing,
payable, belonging to me" and "to deposit money and to withdraw the same by check, receipt, draft
or otherwise in any bank in my name" and not to sell or dispose of any property of petitioner's. 2

The car in question was impounded by the PC Metrocom, Camp Crame, Quezon City in connection
with Criminal Case No. Q-2008 of the respondent Rizal court of first instance (Quezon City Branch)
entitled "People of the Philippines vs. Anatolio T. Carigo" wherein respondent Carigo was charged
for illegal possession of firearm and ammunition which had been intercepted from said vehicle.

Upon motion of petitioner as well as upon a separate motion of the Metrocom commanding general
who impleaded both petitioner and respondent as conflicting claimant of the same car, stating that
"both defendants claim that each is solely entitled to the custody of the Toyota Corona car in
question, and plaintiff has no means of knowing definitely to whom of the two claimants said car
should be delivered" and prayed "that a resolution be issued ordering defendants to interplead and
litigate their conflicting claims," respondent court issued its order dated June 23, 1972 setting aside a
previous order to release the car to the respondent-accused and directed trial fiscal Narciso T.
Atienza to investigate the conflicting claims over the car and to submit to it his findings, meanwhile
ordering "that the vehicle in question shall remain in possession of the Metrocom, until the real
owner of the car is determined."

The trial fiscal accordingly issued subpoenas and subpoenae duces tecum to the claimants and their
respective witnesses, and in his manifestation dated August 7, 1972 reported to respondent court
that from the documentary evidence submitted by claimants and their witnesses, the following facts
were established: the history of the car and the transactions concerning it as above stated; that
petitioner had executed the special power of attorney dated June 30, 1969 in favor of her husband,
Rafael C. Pica, in view of her assignment to Vietnam as a member of the PHILCON; that the sale of
the car by Rafael C. Pica as petitioner's attorney-in-fact to Maniquez and by Maniquiz in turn to
respondent were registered, and respondent was in possession of the car since July 30, 1971 as
registered owner until he was apprehended by the Metrocom on April 8, 1972; and that the car is still
mortgaged to Delta Motor Sales Corporation by petitioner with an outstanding balance of P12,252.87
as of July 2, 1972.

The trial fiscal thus recommended that the car be released to respondent on the following grounds:

1. Anatolio T. Carigo is a purchaser of the Toyota car in good faith, and therefore, his
possession of the same is equivalent to a title (Art. 559, NCC);

2. Registration of a motor vehicle in the name of a person is prima facie evidence of

the fact that the person in whose name said vehicle is registered is the owner (Motor
Vehicle Law);

3. The registered owner of a motor vehicle is the recognized owner thereof for all
intents and purposes (Uy vs. Commonwealth Insurance Co., Inc. CA-GR No. 24136-
R, Jan. 17, 1964); and

4. The validity of the Deed of Sale executed by and between Rafael C. Pica and
Monico Maniquiz cannot be attacked collaterally." 3

Respondent court in its order dated August 8, 1972 approved the trial fiscal's recommendation and
reproducing the very same erroneous grounds advanced by the fiscal as above-quoted, ordered the
release of the car "in favor of claimant Anatolio T. Carigo, it appearing that he is the lawful owner of
the same.
Petitioner filed her motion for reconsideration dated November 29, 1972 expressly calling
respondent court's attention that "the special power of attorney previously executed by herein
movant in favor of Rafael Pica, and which is relied upon by the investigating fiscal in recommending
the release of the vehicle to Anatolio T. Carigo did not, contrary to the opinion of the said officer,
under its terms, authorize Rafael Pica to sell any property of the movant. Said power of attorney
merely empowered Pica to collect and receive sums due the movant and to deposit and withdraw
the same, from the bank." 4

Respondent court in its order dated January 15, 1973  denied reconsideration but added that "(A)
5

question of ownership of the motor vehicle is not a proper subject to be resolved in a criminal case
for illegal possession of firearms and ammunition. The questioned order is therefore construed as
without prejudice on the part of the parties to bring the proper civil action in court to recover the
possession of said motor vehicle during which action the issue of ownership may properly be
resolved between the parties."

Petitioner filed another motion for reconsideration dated February 6, 1973 stating that by virtue of the
interpleader filed by the Metrocom for the parties to litigate their conflicting claims over the car,
respondent court had "taken cognizance and jurisdiction over the subject matter" under its order of
June 23, 1972 which ordered the investigation of the conflicting claims and resulted in its order of
August 8, 1972 for the release of the car in favor of respondent, and prayed that the car be either
ordered returned to her or placed back in the Metrocom's custody for safekeeping.

This last motion was denied as "not meritorious" per respondent court's order dated February 10,
1973.

Hence, the present petition. Since the only issue is the proper application of Article 559 of the Civil
Code which has been the subject of long-established authoritative precedents holding that the right
of the owner of movable property cannot be defeated even by proof of good faith in the acquisition
thereof by the possessor, the Court resolved as per its resolution of October 25, 1973, upon noting
respondent's failure for over a month and a half to file his answer within the period given him which
expired on September 10, 1973, to consider the case submitted for decision, for a prompt and
expeditious determination thereof in the interest of justice.

Respondent court manifestly acted arbitrarily and with grave abuse of discretion in having directed
release of the car to respondent rather than to petitioner as the rightful owner who has been
unlawfully deprived thereof in disregard of the express provisions of Article 559  of the Civil Code
6

and of the long established doctrinal jurisprudence of this Court as early as 1911  that the owner
7

may recover the lost article of which he or she has been unlawfully deprived without reimbursement
of the sum received by the embezzler or wrongdoer from the possessor, even granting that the
possessor acquired possession by purchase or other means in good faith.

Article 559 of the Civil Code was correctly cited but wrongly applied by respondent court to order
release of the car to respondent, when as stressed by the Court in Aznar vs. Yapdiangco  dealing8

similarly with a car which a wrongdoer had succeeded in registering in his own name and selling to a
third party who acquired the same in good faith, for valuable consideration and without notice of any
defect in the vendor's title, under the cited codal article, "the rule is to the effect that if the owner has
lost a thing, or if he has been unlawfully deprived of it, he has a right to recover it, not only from the
finder, thief or robber, but also from third persons who may have acquired it in good faith from such
finder, thief or robber." The only exception provided - which is not applicable here — is where such
third party has acquired in good faith the article "at a public sale" in which case "the owner cannot
obtain its return without reimbursing the price paid therefor." The Court therein added that "the right
of the owner to recover personal property acquired in good faith by another is based on his being
dispossessed without his consent" and cited the maxim that "no man can transfer to another a better
title than he has himself."
9

In the latest case of Dizon vs. Suntay,   the Court once again reaffirmed the binding force and effect
10

of Article 559 of the Civil Code as upholding an owner's right to recover an article which he has lost
or has been unlawfully deprived of as against a third party-possessor in good faith.

Here, petitioner had been unlawfully deprived of her car by her attorney-in-fact Rafael Pica who
succeeded in illegally disposing the same for the obviously inadequate price of P6,500.00 to
Maniquiz notwithstanding that his special power of attorney on its face and by its express
terms did not authorize him to sell any property of petitioner but merely to collect and receive sums
of money due and owing to petitioner and to deposit and withdraw the same from the bank. Thus,
from the very documents submitted by the parties to respondent court, Rafael Pica as an attorney-in-
fact with very limited powers had no authority to, and could not, transfer title of the car to Maniquiz
from whom respondent claims to have purchased it in turn for P11,000.00, "free from all liens and
encumbrances." Prescinding from the fact that the car was admittedly mortgaged by petitioner-owner
with a balance of P12,252.87 as of July 2, 1972, it is difficult to surmise how Rafael Pica's
transferees could in good faith have overlooked such subsisting mortgage and secure registration of
the car free from any lien.

Finally, respondent court had duly taken cognizance of the interpleader motion filed by the Metrocom
and required the conflicting claimants to litigate their respective claims and had commissioned the
trial fiscal to receive the parties' and their witnesses' evidence and upon receipt of the fiscal's report,
handed down its resolution of the dispute.

The Court, therefore, sees no useful end or purpose that can be served by respondent court's last
order of January 15, 1973 belatedly reserving to the parties the bringing of a proper court action to
recover possession of the car and litigate once more the issue of ownership thereof — when for all
intents and purposes such action has already been duly submitted to respondent court and its
resolution is now properly the subject of the present petition. The Court holds that the issue of
possession and ownership of the vehicle having been duly litigated below should properly be
determinately resolved in the present case, without further waste of time and effort that would be
needlessly expended in a separate action that would just duplicate the proceedings already had in
the case at bar.

ACCORDINGLY, respondent court's orders of August 8, 1972, January 15, 1973 and February 10,
1973 recognizing respondent's right to possession of the Toyota car (with Motor No. 4R-411530) are
hereby set aside and in lieu thereof judgment is hereby rendered declaring petitioner as the lawful
owner of the car to be entitled to its possession and ordering that the same be immediately returned
to her. This order for the return of the possession of the car to petitioner shall be immediately
execute upon promulgation of this decision. No costs, none having been prayed for.