d.
It should only be:
1.) Provincial Assessor of Agusan del Sur v. Filipinas Palm Oil
Plantation, Inc.,
G.R. No. 183416, 5 October 2016
FACTS:
1. The exemption from real property taxes given to cooperatives applies
regardless of whether or not the land owned is leased. This exemption
benefits the cooperative's lessee. The characterization of machinery as real
property is governed by the Local Government Code and not the Civil
Code.
2. This Petition[1] for review assails the Decision [2] dated September 26, 2007 and the
Resolution[3] dated May 26, 2008 of the Court of Appeals in CA-G.R. SP No. 74060. The Court
of Appeals affirmed the Decision of the Central Board of Assessment Appeals (CBAA)
exempting Filipinas Palm Oil Plantation Inc. from payment of real property taxes.[4]
3. Filipinas Palm Oil Plantation Inc. (Filipinas) is a private organization
engaged in palm oil plantation [5] with a total land area of more than 7,000
hectares of National Development Company (NDC) lands in Agusan del
Sur.[6] Harvested fruits from oil palm trees are converted into oil through
Filipinas' milling plant in the middle of the plantation area. [7]Within the
plantation, there are also three (3) plantation roads and a number of
residential homes constructed by Filipinas for its employees. [8]
4. After the Comprehensive Agrarian Reform Law[9] was passed, NDC lands
were transferred to Comprehensive Agrarian Reform Law beneficiaries who
formed themselves as the merged NDC-Guthrie Plantations, Inc. - NDC-
Guthrie Estates, Inc. (NGPI-NGEI) Cooperatives.[10]  [22]
5. Filipinas entered into a lease contract agreement with NGPI-NGEI.[11]
6. The Provincial-Assessor of Agusan del Sur (Provincial Assessor) is a
government agency in charge with the assessment of lands under the public
domain.[12] It assessed Filipinas' properties found within the plantation area,
[13]
 which Filipinas assailed before the Local Board of Assessment Appeals
(LBAA) on the following grounds:
a. (1.) The [petitioner] Provincial Assessors of Agusan del Sur ERRED in finding that
the Market Value of a single fruit bearing oil palm tree is P207.00 when it should
only be P42.00 pesos per tree;
b. (2.) The [petitioner] ERRED in finding that the total number of standing and fruit
bearing oil palm tree is PI 10 [sic] trees per hectare when it should be only 92 trees;
c. (3.) The [petitioner] ERRED in finding that the Market Value[s] of the plantation
roads are:
i. A.) P270,000.00 per kilometer for primary roads
ii. B.) P135,000.00 for secondary roads  c.
iii. C.) P67,567.00 for tertiary roads constructed by the company.
i. A.) P105,000.00 for primary roads
ii. B.) P52,300.00 for secondary roads
iii. C.) P26,250.00 for tertiary roads
e. Likewise, bridges, culverts, canals and pipes should not be assessed separately from
plantation roads, the same being components of the roads thereof;
i. (4.) The [petitioner] ERRED in imposing real property taxes against the
petitioner for roads, bridges, culverts, pipes and canals as these
belonged to the cooperatives;
ii. ([5].) The [petitioner] ERRED in finding that the Market Value of NDC
service area is P11,000.00 per hectare when it should only be P6,000.00
per hectare;
iii. ([6].) The [petitioner] ERRED in imposing realty taxes on Residential
areas built by [respondent] except for three of them;
iv. ([7].) The [petitioner] ERRED when it included haulers and other
equipments [sic] which are unmovable as taxable real properties.[14]
7. In its Decision[15 ]dated June 8, 1999, the LBAA found that the P207.00 market value declared
in the assessment by the Provincial Assessor was unreasonable. [16] It found that the market
value should not have been more than P85.00 per oil palm tree.[17] The sudden increase of realty
tax assessment level from P42.00 for each oil palm tree in 1993 to P207.00 was confiscatory.[18]
8. The LBAA adopted Filipinas' claim that the basis for assessment should only be 98 trees.
[19]
 Although one (1) hectare of land can accommodate 124 oil palm trees, the mountainous
terrain of the plantation should be considered. [20] Because of the terrain, not every meter of land
can be fully planted with trees.[21] The LBAA found that roads of any kind, as well as all their
improvements, should not be taxed since these roads were intermittently used by the public.
 It resolved that the market valuation should be based on the laws of the Department of
Agrarian Reform since the area is owned by the NDC, a quasi-governmental body of the
Philippines.[23]
9. The LBAA exempted the low-cost housing units from taxation except those with a market
value of more than P150,000.00 under the Local Government Code.[24] Finally, the LBAA
considered the road equipment and mini haulers as movables that are vital to Filipinas'
business.
10. Filipinas appealed before the CBAA on July 16, 1999. [26] On November 21, 2001, the CBAA
rendered a decision, the dispositive portion of which reads:
a. WHEREFORE, this Board has decided to set aside, as it does hereby set aside, the
decision rendered by the Local Board of Assessment Appeals of the Province of
Agusan del Sur on June 8, 1999 in an unnumbered case entitled "[F]ilipinas Palm
Oil Co., Inc. Petitioner, versus the Provincial Assessors Office of Agusan del Sur,
Respondent" and hereby orders as follows:
b. A. The market value for each oil palm tree should be FIFTY- SEVEN & 55/100
PESOS (57.55), effective January 1, 1991. The assessment for each municipality
shall be based on the corresponding number of trees as listed in Petitioner-
Appellee's "Hectarage Statement" discussed hereinabove;
B. Petitioner-Appellee should not be made to pay for the real property taxes due on
the roads starting from January 1, 1991;
d. C. Petitioner-Appellee is not liable to the Government for real property taxes on the
 lands owned by the Multi-purpose Cooperative;
e. D. The housing units with a market value of PI75,000.00 or less each shall be
subjected to 0% assessment level, starting 1994;
f. E. Road Equipment and haulers are not real properties and, accordingly,
Petitioner-Appellee is not liable for real property tax thereon;
g. F. Any real property taxes already paid by Petitioner-Appellee which, by virtue "of
this decision, were not due, shall be applied to future taxes rightfully due from
Petitioner-Appellee.
11. The CBAA denied the Motion for Reconsideration filed by the Provincial Assessor. [28] The
Provincial Assessor filed a Petition for Review before the Court of Appeals, which, in turn,
sustained the CBAA's Decision.[29]
12. The Court of Appeals held that the land owned by NGPI-NGEI, which Filipinas has been
leasing, cannot be subjected to real property tax since these are owned by cooperatives
that are tax-exempt.[30] Section 133(n) of the Local Government Code provides:
a. SECTION 133. Common Limitations on the Taxing Powers of Local Government
Units. — Unless otherwise provided herein, the exercise of the taxing powers of
provinces, cities, municipalities, and barangays shall not extend to the levy of the
following:
....
b. (n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprises
and cooperatives duly registered under R.A. No. 6810  and Republic Act Numbered
Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the
"Cooperative Code of the Philippines." (Emphasis supplied)
13. Section 234(d) of the Local Government Code exempts duly registered cooperatives, like
NGPI-NGEI, from payment of real property taxes:
a. SECTION 234. Exemptions from Real Property Tax. — The following are
exempted from payment of the real property tax:
. . . . 
b. (d) All real property owned by duly registered cooperatives as provided for under
R.A. No. 6938[.] (Emphasis supplied)
14. The Court of Appeals held that the pertinent provisions "neither distinguishes nor specifies"
that the exemption only applies to real properties used by the cooperatives. [31] It ruled that
"[t]he clear absence of any restriction or limitation in the provision could only mean that the
exemption applies to wherever the properties are situated and to whoever uses
them."[32] Therefore, the exemption privilege extends to Filipinas as the cooperatives'
lessee.[33]
15. On the roads constructed by Filipinas, the Court of Appeals held that although it is undisputed
that the roads were built primarily for Filipinas' benefit, the roads should be tax-exempt since
these roads were also being used by the cooperatives and the public. [34] It applied, by
analogy, Bislig Bay Lumber Company, Inc. v. Provincial Government of Surigao:[35]
a. We are inclined to uphold the theory of appellee. In the first place, it cannot be
disputed that the ownership of the road that was constructed by appellee belongs to
the government by right accession not only because it is inherently incorporated or
attached to the timber land leased to appellee but also because upon the expiration
of the concession, said road would ultimately pass to the national government. In
the second place, while the road was constructed by appellee primarily for its use
and benefit, the privilege is not exclusive, for, under the lease contract entered into
by the appellee and the government and by public in by the general. Thus, under
said lease contract, appellee cannot prevent the use of portions, of the concession
for homesteading purposes. It is also in duty bound to allow the free use of forest
products within the concession for the personal use of individuals residing in or
within the vicinity of the land. . . . In other words, the government has practically
reserved the rights to use the road to promote its varied activities. Since, as above
shown, the road in question cannot be considered as an improvement which belongs
to appellee, although in part is for its benefit, it is clear that the same cannot be the
subject of assessment within the meaning of section 2 of Commonwealth Act No.
470.[36
16. Furthermore, the Court of Appeals agreed with the CBAA that the roads constructed by
Filipinas had become permanent improvements on the land owned by NGPI-NGEI. [37] Articles
440 and 445 of the Civil Code provide that these improvements redound to the benefit of the
land owner under the right of accession:[38]
a. Article 440. The ownership of property gives the right by accession to everything
which is produced thereby, or which is incorporated or attached thereto, either
naturally or artificially.
....
b. Article 445. Whatever is built, planted or sown on the land of another and the
improvements or repairs made thereon, belong to the owner of the land, subject to
the provisions of the following articles.
17. On the road equipment and mini haulers as real properties subject to tax, the Court of Appeals
affirmed the CBAA's Decision that these are only movables.[39] Section 199(o) of the Local
Government Code provides a definition of machinery subject to real property taxation:
18. The Court of Appeals held that Section 199(o) of the Local Government Code should be
construed to include machineries covered by the meaning of real properties provided for under
Article 415(5) of the Civil Code:[40]
19. The Court of Appeals cited Davao Sawmill Company v. Castillo, [41] where it has been held that
machinery that is movable by nature becomes immobilized only when placed by the owner of
the tenement, but not so when placed by a tenant or any other person having a temporary right
unless this person acts as an agent of the owner. [42] Thus, the mini haulers and other road
equipment retain their nature as movables.[43]
20. The Provincial Assessor filed before this Court a Petition for Review raising the following
issues:
21. First, whether the exemption privilege of NGPI-NGEI from payment of real property tax
extends to respondent Filipinas Palm Oil Plantation Inc. as lessee of the parcel of land owned
by cooperatives; and
22. Second, whether respondent's road equipment and mini haulers are movable properties and
have not been immobilized by destination for real property taxation.
23. Petitioner argues that based on Mactan Cebu International Airport Authority v. Ferdinand J.
Marcos,[44] cooperatives cannot extend its exemption from real property tax to taxable persons.
[45]
 It argues that Sections 198, 199, 205, and 217 of the Local Government Code provide that
real property taxes are assessed based on actual use. [46] Moreover, the exemption of
cooperatives applies only when it is the cooperative that actually, directly, and exclusively
uses and possesses the properties.[47] Sections 198, 199, 205, and 217 of the Local
Government Code provide:
a. SECTION 198. Fundamental Principles. — The appraisal, assessment, levy and
collection of real property tax shall be guided by the following fundamental
principles: . . . .
b. (b) Real property shall be classified for assessment purposes on the basis of its
actual use[.] . . . .
c. SECTION 199. Definition of Terms. — When used in this Title, the term: . . . .
 d. (b) "Actual Use" refers to the purpose for which the property is principally or
predominantly utilized by the person in possession thereof[.] . . . .
e. SECTION 205. Listing of Real Property in the Assessment Rolls. — . . . .
f. (d) Real property owned by the Republic of the Philippines, its instrumentalities and
political subdivisions, the beneficial use of which has been granted, for
consideration or otherwise, to a taxable person, shall be listed, valued and assessed
in the name of the possessor, grantee or of the public entity if such property has
been acquired or held for resale or lease. . . . .   
g. SECTION 217. Actual Use of Real Property as Basis for Assessment. — Real
property shall be classified, valued and assessed on the basis of its actual use
regardless of where located, whoever owns it, and whoever uses it. (Emphasis
supplied)
24. Petitioner claims that Section 199(o) of the Local Government Code specifically covers
respondent's road equipment and mini haulers since these are directly and exclusively
used to meet the needs of respondent's industry, business, or activity.[48] Article 415(5) of
the Civil Code, which defines real property, should not be made to control the Local
Government Code,[49] a subsequent legislation that specifically defines "machinery" for
taxation purposes.[50]
25. Respondent reiterates the rulings of the CBAA and the Court of Appeals
that the exemption of cooperatives from real property taxes extends to it
as the lessee.[56] It asserts that under its lease agreement with NGPI-NGEI, it
pays an Annual Fixed Rental, which includes the payment of taxes. [57] It
claims that in case NGPI-NGEI is liable to the local government for real
property tax on the land, the tax should be taken from the Annual Fixed
Rental.[58] To make respondent pay real property taxes on the leased land
would be equivalent to assessing it twice for the same property.[59]
26. On the road equipment and mini haulers being subjected to real property
taxation, respondent maintains that it should be spared from real property
tax since the equipment and mini haulers are movables.[60]
ISSUES:
1. W/N
RATIO:
1. The Petition is granted to modify the Court of Appeals Decision, but only
with respect to the nature of respondent's road equipment and mini haulers.
2. Under Section 133(n) of the Local Government Code, the taxing power of
local government units shall not extend to the levy of taxes, fees, or charges
on duly registered cooperatives under the Cooperative Code. [61] Section
234(d) of the Local Government Code specifically provides for real
property tax exemption to cooperatives:
a. SECTION 234. Exemptions from Real Property Tax. — The following
are exempted from payment of the real property tax:
b. . . . . (d) All real property owned by duly registered cooperatives as provided for
under [Republic Act] No. 6938[.] (Emphasis supplied)
3. NGPI-NGEI, as the owner of the land being leased by respondent, falls
within the purview of the law. Section 234 of the Local Government Code
exempts all real property owned by cooperatives without distinction.
Nothing in the law suggests that the real property tax exemption only
applies when the property is used by the cooperative itself. Similarly,
the instance that the real property is leased to either an individual or
corporation is not a ground for withdrawal of tax exemption.[62]
4. In arguing the first issue, petitioner hinges its claim on a misplaced reliance
in Mactan, which refers to the revocation of tax exemption due to the
effectivity of the Local Government Code. However, Mactan does not refer
to the tax exemption extended to cooperatives. The portion that petitioner
cited specifically mentions that the exemption granted to cooperatives has
not been withdrawn by the effectivity of the Local Government Code:
a. [S]ection 232 must be deemed to qualify Section 133.
b. Thus, reading together Sections 133, 232, and 234 of the L[ocal] G[overnment]
C[ode], we conclude that as a general rule, as laid down in Section 133, the taxing
powers of local government units cannot extend to the levy of,inter alia, "taxes,
fees and charges of any kind on the National Government, its agencies and
instrumentalities, and local government units"; however, pursuant to Section 232,
provinces, cities, and municipalities in the Metropolitan Manila Area may impose
the real property tax except on, inter alia, "real property owned by the Republic of
the Philippines or any of its political subdivisions except when the beneficial use
thereof has been granted, for consideration or otherwise, to a taxable person," as
provided in item (a) of the first paragraph of Section 234.
c. As to tax exemptions or incentives granted to or presently enjoyed by natural or
juridical persons, including government-owned and controlled corporations, Section
193 of the L[ocal] G[overnment] C[ode] prescribes the general rule, viz., they
are withdrawn upon the effectivity of the L[ocal] G[overnment]
C[ode], except those granted to local water districts, cooperatives duly registered
under R.A. No. 6938, non-stock and non-profit hospitals and educational
institutions, and unless otherwise provided in the L[ocal] Gfovernment] C[ode]. The
latter proviso could refer to Section 234 which enumerates the properties exempt
from real property tax. But the last paragraph of Section 234 further qualifies the
retention of the exemption insofar as real property taxes are concerned by limiting
the retention only to those enumerated therein; all others not included in the
enumeration lost the privilege upon the effectivity of the L[ocal] G[overnment]
C[ode]. Moreover, even as to real property owned by the Republic of the
Philippines or any of its political subdivisions covered by item (a) of the first
paragraph of Section 234, the exemption is withdrawn if the beneficial use of such
property has been granted to a taxable person for consideration or otherwise.
d. Since the last paragraph of Section 234 unequivocally withdrew, upon the
effectivity of the L[ocal] G[overnment] C[ode], exemptions from payment of real
property taxes granted to natural or juridical persons, including government-owned
or controlled corporations, except as provided in the said section, and the petitioner
is, undoubtedly, a government-owned corporation, it necessarily follows that its
exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has
been withdrawn. Any claim to the contrary can only be justified if the petitioner can
seek refuge under any of the exceptions provided in Section 234, but not under
Section 133, as it now asserts, since, as shown above, the said section is qualified
by Sections 232 and 234.
 e. In short, the petitioner can no longer invoke the general rule in Section 133 that the
taxing powers of the local government units cannot extend to the levy of:
i. (o) taxes, fees or charges of any kind on the National Government, its
agencies or instrumentalities, and local government units.
f. It must show that the parcels of land in question, which are real property, are any
one of those enumerated in Section 234, either by virtue of ownership, character, or
use of the property.[63] (Emphasis supplied)
5. The roads that respondent constructed within the leased area should not be
assessed with real property taxes. Bislig Bay finds application here. Bislig
Bay Lumber Company, Inc. (Bislig Bay) was a timber concessionaire of a
portion of public forest in the provinces of Agusan and Surigao. [64] To aid in
developing its concession, Bislig Bay built a road at its expense from a
barrio leading towards its area. [65] The Provincial Assessor of Surigao
assessed Bislig Bay with real property tax on the constructed road, which
was paid by the company under protest.[66] It claimed that even if the road
was constructed on public land, it should be subjected to real property tax
because it was built by the company for its own benefit. [67] On the other
hand, Bislig Bay asserted that the road should be exempted from real
property tax because it belonged to national government by right of
accession.[68] Moreover, the road constructed already became an inseparable
part of the land.[69] The records also showed that the road was not only built
for the benefit of Bislig Bay, but also of the public. [70] This Court ruled for
Bislig Bay, thus:
a. We are inclined to uphold the theory of appellee. In the first place, it cannot be
disputed that the ownership of the road that was constructed by appellee
belongs to the government by right accession not only because it is inherently
incorporated or attached to the timber land leased to appellee but also because
upon the expiration of the concession, said road would ultimately pass to the
national government. ...
b. In the second place, while the road was constructed by appellee primarily for its use
and benefit, the privilege is not exclusive, for, under the lease contract entered into
by the appellee and the government and by public in by the general. Thus, under
said lease contract, appellee cannot prevent the use of portions, of the concession
for homesteading purposes. ... It is also in duty bound to allow the free use of forest
products within the concession for the personal use of individuals residing in or
within the vicinity of the land. ... In other words, the government has practically
reserved the rights to use the road to promote its varied activities. Since, as above
shown, the road in question cannot be considered as an improvement which belongs
to appellee, although in part is for its benefit, it is clear that the same cannot be the
subject of assessment within the meaning of section 2 of Commonwealth Act No.
470.[71]
6. This was reiterated in Board of Assessment Appeals ofZamboanga del Sur
v. Samar Mining Company, Inc.[72]Samar Mining Company, Inc. (Samar
Mining) was a domestic corporation engaged in the mining industry.
[73]
 Since Samar Mining's mining site and mill were in an inland location
entailing long distance from its area to the loading point, Samar Mining was
constrained to construct a road for its convenience. [74] Initially, Samar
Mining filed miscellaneous lease applications for a road right of way
covering lands under the jurisdiction of the Bureau of Lands and the Bureau
of Forestry where the proposed road would pass through.[75] Samar Mining
was given a "temporary permit to occupy and use the lands applied for by
it";[76] hence, it was able to build what was eventually known as the Samico
Road. Samar Mining was assessed by the Provincial Assessor of
Zamboanga del Sur with real property taxes on the road, which prompted it
to appeal before the Board of Assessment Appeals. [77] Invoking Bislig Bay,
Samar Mining claimed that it should not be assessed with real property tax
since the road was constructed on public land. This Court ruled for Samar
Mining, thus:
a. There is no question that the road constructed by respondent Saimar on the public
lands leased to it by the government is an improvement. But as to whether the same
is taxable under the aforequoted provision of the Assessment Law, this question has
already been answered in the negaitive by this Court. In the case of Bislig Bay
Lumber Co., Inc. vs. Provincial Government of Surigao, where a similar issue was
raised. . .. . . . .
b. . . . What is emphasized in the Bislig case is that the improvement is exempt from
taxation because it is an integral part of the public land on which it is constructed
and the improvement is the property of the government by right of accession. Under
Section 3(a) of the Assessment Law, all properties owned by the government,
without any distinction, are exempt from taxation.[79] (Emphasis supplied, citations
omitted)
7. The roads that respondent constructed became permanent
improvements on the land owned by the NGPI-NGEI by right of
accession under the Civil Code, thus:
a. Article 440. The ownership of property gives the right by accession to everything
which is produced thereby, or which is incorporated or attached thereto, either
naturally or artificially.
b. . . . . 
c. Article 445. Whatever is built, planted or sown on the land of another and the
improvements or repairs made thereon, belong to the owner of the land[.]
8. Despite the land being leased by respondent when the roads were
constructed, the ownership of the improvement still belongs to NGPI-
NGEI. As provided under Article 440 and 445 of the Civil Code, the land
is owned by the cooperatives at the time respondent built the roads.
Hence, whatever is incorporated in the land, either naturally or artificially,
belongs to the NGPI-NGEI as the landowner.
9. Although the roads were primarily built for respondent's benefit, the roads
were also being used by the members of NGPI and the public.
[80]
 Furthermore, the roads inured to the benefit of NGPI-NGEI as owners of
the land not only by right of accession but through the express provision in
the lease agreement:
 a. On March 7, 1990 NGPI Multi-Purpose Cooperative, Inc., as Lessor, and NDC-
Guthrie Plantations, Inc., as Lessee, entered into a "Lease Agreement" . . . covering
the agricultural lands transferred by NDC to the DAR, which lands the DAR
ultimately distributed undivided to qualified workers-beneficiaries. . . .
....
b. Clause No. 6.3 of the same lease agreement provides that "All taxes due on the
improvements on the Leased Property except those improvements on the Area that
the LESSOR shall have utilized under Clause 1.2 hereof, shall be for the account of
the LESSEE."
c. Clause No. 9.4 of the same lease agreement provides that ". . . All fixed and
permanent improvements, such as roads and palm trees introduced on the Leased
Property, shall automatically accrue to the LESSOR upon termination of this Lease
Agreement without need of reimbursement."
d. All the above-cited stipulations in the lease agreement between NGPI Multi-
Purpose Cooperative and NDC-Guthrie Plantations, Inc. were reconfirmed and
reaffirmed in the Addendum to Lease Agreement entered into by and between NGPI
Multi-Purpose Cooperative and Filipinas Palmoil Plantations, Inc. on January 30,
1998. . . . The main subject of the said Addendum was the extension of the term of
the lease agreement up to December 31, 2032, along with economic benefits to the
lessor other than rentals.
e. There is no dispute that the roads are on the land owned by NGPI Multi-Purpose
Cooperative which leased the same to Petitioner-Appellee. These roads belong to
the Multi-Purpose Cooperative, not only by right of accession but also by express
provisions of the Contract of Lease[.][81]
10. Respondent claims that under its lease agreement with NGPI-NGEI, it pays an Annual Fixed
Rental, which includes the payment of taxes. [82] If NGPI-NGEI were liable to the local
government for real property tax on the land, the tax should be taken from the Annual Fixed
Rental:
a. "2.1. In consideration of this Lease Agreement, the LESSEE shall pay the LESSOR
the following annual rentals:
i. "1) An annual fixed rental, in the following amount — "SIX HUNDRED
THIRTY FIVE PESOS" (P635.00) PER HECTARE PER ANNUM
which would cover the following:
1. "(1) All Taxes on the Land  works[.]
2. "(2) Administration Charges
3. "(3) Amortization charges
ii. "It is understood that, if the annual fixed rental of "SIX HUNDRED
THIRTY FIVE PESOS" (p 635.00) is insufficient to pay any increase on
the land taxes, the Lessee shall pay the difference, provided such
increase does not exceed ten percent (10%) of the immediately
preceding tax imposed on the land; provided further, that any increase
beyond these percentage shall be borne equally by the LESSOR and
LESSEE.
"The foregoing notwithstanding, it is understood and agreed that at all
times, liability for realty taxes on the Leased Property Primarily and
principally lies with the LESSOR and any reference herein to payment
by LESSEE of said taxes is only for purposes of earmarking the
proceeds of the rentals herein agreed upon."
b. Clause No. 6.3 of the same lease agreement provides that "All taxes due on the
improvements on the Leased Property except those improvements on the Area that
the LESSOR shall have utilized under Clause 1.2 hereof, shall be for the account of
the LESSEE."[83] (Emphasis supplied)
11. Therefore, NGPI-NGEI, as owner of the roads that permanently became
part of the land being leased by respondent, shall be liable for real property
taxes, if any. However, by express provision of the Local Government
Code, NGPI-NGEI is exempted from payment of real property tax.[84]
12. II
13. The road equipment and mini haulers shall be considered as real
property, subject to real property tax.
14. Section 199(o) of the Local Government Code defines "machinery" as real
property subject to real property tax,[85]thus:
a. SECTION 199. Definition of Terms. — When used in this Title, the term:
....
b. (o) "Machinery" embraces machines, equipment, mechanical contrivances,
instruments, appliances or apparatus which may or may not be attached,
permanently or temporarily, to the real property. It includes the physical facilities
for production, the installations and appurtenant service facilities, those which are
mobile, self-powered or self-propelled, and those not permanently attached to the
real property which are actually, directly, and exclusively used to meet the needs of
the particular industry, business or activity and which by their very nature and
purpose are designed for, or necessary to its manufacturing, mining, logging,
commercial, industrial or agricultural purposes[.]
15. Article 415(5) of the New Civil Code defines "machinery" as that which
constitutes an immovable property:
a. Article 415. The following are immovable property:
. . . .
(5) Machinery, receptacles, instruments or implements intended by the owner of the
tenement for an industry or works which may be carried on in a building or on a
piece of land, and which tend directly to meet the needs of the said industry or
16. Petitioner contends that the second sentence of Section 199(o) includes the
road equipment and mini haulers since these are directly and exclusively
used by respondent to meet the needs of its operations. [86] It further claims
that Article 415(5) of the New Civil Code should not control the Local
Government Code, a subsequent legislation.[87]
17. On the other hand, respondent claims that the road equipment and mini
haulers are movables by nature. It asserts that although there may be a
difference between the meaning of "machinery" under the Local
Government Code arid that of immovable property under Article 415(5) of
the Civil Code, "the controlling interpretation of Section 199(o) of [the
Local Government Code] is the interpretation of Article 415(5) of the Civil
Code."[88]
18. In Manila Electric Company v. City Assessor,[89] a similar issue of which definition of "machinery" prevails
to warrant the assessment of real property tax on it was raised.
19. Manila Electric Company (MERALCO) insisted on harmonizing the provisions of the Civil Code and the
Local Government Code and asserted that "machinery" contemplated under Section 199(o) of the Local
Government must still be within the contemplation of immovable property under Article 415 of the Civil
Code.[90] However, this Court ruled that harmonizing such laws "would necessarily mean imposing additional
requirements for classifying machinery as real property for real property tax purposes not provided for, or
even in direct conflict with, the provisions of the Local Government Code."[91] Thus:
a. While the Local Government Code still does not provide for a specific definition of "real
property," Sections 199(o) and 232 of the said Code, respectively, gives an extensive definition
of what constitutes "machinery" and unequivocally subjects such machinery to real property tax.
The Court reiterates that the machinery subject to real property tax under the Local Government
Code "may or may not be attached, permanently or temporarily to the real property"; and the
physical facilities for production, installations, and appurtenant service facilities, those which
are mobile, self-powered or self-propelled, or are not permanently attached must (a) be actually,
directly, and exclusively used to meet the needs of the particular industry, business, or activity;
and (b) by their very nature and purpose, be designed for, or necessary for manufacturing,
mining, logging, commercial, industrial, or agricultural purposes.
....
b. The properties under Article 415, paragraph (5) of the Civil Code are immovables by
destination, or "those which are essentially movables, but by the purpose for which they have
been placed in an immovable, partake of the nature of the latter because of the added utility
derived therefrom." These properties, including machinery, become immobilized if the
following requisites concur: (a) they are placed in the tenement by the owner of such tenement;
(b) they are destined for use in the industry or work in the tenement; and (c) they tend to
directly meet the needs of said industry or works. The first two requisites are not found
anywhere in the Local Government Code.[92] 
20. Section 199(o) of the Local Government prevails over Article 415(5) of the Civil Code. In Manila Electric
Company:
a. As between the Civil Code, a general law governing property and property relations, and the
Local Government Code, a special law granting local government units the power to impose
real property tax, then the latter shall prevail.
b. Furthermore, in Caltex (Philippines), Inc. v. Central Board of Assessment Appeals, the Court
acknowledged that "[i]t is a familiar phenomenon to see things classed as real property for
purposes of taxation which on general principle might be considered personal property[.]"
c. Therefore, for determining whether machinery is real property subject to real property tax, the
definition and requirements under the Local Government Code are controlling.[93] (Emphasis
supplied, citations omitted)
21. Respondent is engaged in palm oil plantation. [94] Thus, it harvests fruits
from palm trees for oil conversion through its milling plant. [95] By the nature
of respondent's business, transportation is indispensable for its operations.
22. Under the definition provided in Section 199(o) of the Local Government
Code, the road equipment and the mini haulers are classified as
machinery, thus:
a. SECTION 199. Definition of Terms. — When used in this Title, the terra:
....
b. (o) "Machinery" . . . includes the  physical facilities for production, the installations
and appurtenant service facilities, those which are mobile, self-powered or self-
propelled, and those not permanently attached to the real property which are
actually, directly, and exclusively used to meet the needs of the particular
industry, business or activity and which by their very nature and purpose are
designed for, or necessary to its manufacturing, mining, logging, commercial,
industrial or agricultural purposes [.]
23. Petitioner is correct in claiming that the phrase pertaining to physical
facilities for production is comprehensive enough to include the road
equipment and mini haulers as actually, directly, and exclusively used by
respondent to meet the needs of its operations in palm oil production.
[96]
 Moreover, "mini-haulers are farm tractors pulling attached trailers used
in the hauling of seedlings during planting season and in transferring fresh
palm fruits from the farm [or] field to the processing plant within the
plantation area."[97] The indispensability of the road equipment and mini
haulers in transportation makes it actually, directly, and exclusively used in
the operation of respondent's business.
24. In its Comment, respondent claims that the equipment is no longer vital to its operation
because it is currently employing equipment outside the company to do the task. [98] However,
respondent never raised this contention before the lower courts. Hence, this is a factual issue of
which this Court cannot take cognizance. This Court is not a trier of facts. [99] Only questions of
law are entertained in a petition for review assailing a Court of Appeals decision.[100]
25. WHEREFORE, the Petition is PARTLY GRANTED. The Decision of
the Court of Appeals dated September 26, 2007 and the Resolution dated
May 26, 2008 in CA-G.R. SP No. 74060 are AFFIRMED with
MODIFICATION, in that the road equipment and the mini haulers should
be assessed with real property taxes.
2.) Espinoza v. Mayandoc
G.R. No. 211170, 3 June 2017
FACTS:
1. Before this Court is the Petition for Review on Certiorari under Rule 45, dated March 21,
2014, of petitioners-spouses Maximo Espinoza and Winifreda De Vera, that seeks to reverse
and set aside the Decision1 dated September 17, 2013 of the (CA) which, in turn, affirmed with
modifications the Decision2 dated February 18, 2011 of the (RTC),  Branch 42, Dagupan City,
in a complaint for useful expenses under Articles 448 3 and 5464 of the New Civil Code of the
Philippines.
2. A parcel of land located in Dagupan City was originally owned by Eusebio
Espinoza. After the death of Eusebio, the said parcel of land was divided
among his heirs, namely: Pastora Espinoza, Domingo Espinoza and Pablo
Espinoza. Petitioner Maximo is the son of Domingo Espinoza, who died on
November 3, 1965, and Agapita Cayabyab, who died on August 11, 1963.
3. Thereafter, on May 25, 1972, Pastora Espinoza executed a Deed of Sale
conveying her share of the same property to respondents and Leopoldo
Espinoza.
4. However, on that same date, a fictitious deed of sale was executed by
petitioner Maximo's father, Domingo Espinoza, conveying the three-fourth
(3/4) share in the estate in favor of respondent Erlinda Cayabyab
Mayandoc's parents; thus, TCT No. 28397 was issued in the names of the
latter.
5. On July 9, 1977, a fictitious deed of sale was executed by Nemesio
Cayabyab, Candida Cruz, petitioners-spouses Maximo Espinoza and
Winifreda De Vera and Leopoldo Espinoza over the land in favor of
 respondents- spouses Antonio and Erlinda Mayandoc; thus, TCT No. 37403
was issued under the names of the latter.
6. As a result of the foregoing, petitioners filed an action for annulment of
document with prayer for the nullification of TCT No. 37403 and, on
August 16, 1999, the RTC, Branch 40, Dagupan City rendered a Decision in
favor of petitioners and ordering respondents to reconvey the land in dispute
and to pay attorney's fees and the cost of the suit.
7. Respondents appealed, but the CA, in its Decision dated February 6, 2004,
affirmed the RTC with modifications that the award of attorney's fees and
litigation expenses be deleted for lack of factual basis. The said CA
Decision became final and executory on March 8, 2004.
8. Thus, respondents filed a complaint for reimbursement for useful expenses,
pursuant to Articles 448 and 546 of the New Civil Code, alleging that the
house in question was built on the disputed land in good faith sometime in
1995 and was finished in 1996. According to respondents, they then
believed themselves to be the owners of the land with a claim of title thereto
and were never prevented by the petitioners in constructing the house. They
added that the new house was built after the old house belonging to
respondent Erlinda Mayandoc's father was torn down due to termite
infestation and would not have reconstructed the said house had they been
aware of the defect in their title. As such, they claimed that they are entitled
to reimbursement of the construction cost of the house in the amount of
₱800,000.00. They further asserted that at the time that their house was
constructed, they were possessors in good faith, having lived over the land
in question for many years and that petitioners questioned their ownership
and possession only in 1997 when a complaint for nullity of documents was
filed by the latter.
9. Petitioners, in their Answer, argued that respondents can never be
considered as builders in good faith because the latter were aware that the
deeds of sale over the land in question were fictitious and, therefore, null
and void; thus, as builders in bad faith, they lose whatever has been built
over the land without right to indemnity.
10. Respondents, on January 5, 2011, manifested their option to buy the land
where the house stood, but petitioners expressed that they were not
interested to sell the land or to buy the house in question.
11. The RTC, on February 18, 2011, rendered its Decision with the following
dispositive portion:
a. WHEREFORE, judgment is hereby rendered requiring the defendants to sell the
land, where the plaintiffs' house stands, to the latter at a reasonable price based on
the zonal value determined by the Bureau of Internal Revenue (BIR).
12. Petitioners appealed to the CA, but the latter, in its Decision dated
September 17, 2013, affirmed the decision of the RTC with modifications.
The dispositive portion of the Decision reads:
a. WHEREFORE, the Decision dated February 18, 2011 by the Regional Trial Court,
Branch 42 of Dagupan City, in Civil Case No. 2005- 0271-D is hereby AFFIRMED
with MODIFICATIONS.
b. Let the case be REMANDED to the aforementioned trial court for further
proceedings consistent with the proper application of Articles 448, 546 and 548 of
the New Civil Code and to render a complete judgment of the case.
13. Hence, the present petition. Petitioners raise the following issues:
14. According to petitioners, whether or not respondents were in bad faith in
introducing improvements on the subject land is already moot, since the
judgment rendered by the RTC of Dagupan City, Branch 40 and affirmed
by the CA, that declared the two Deeds of Definite/ Absolute Sale dated
May 25, 1972 and July 9, 1977 as null and void, had long become final and
executory on March 8, 2004. They also argue that respondents had not
successfully shown any right to introduce improvements on the said land as
their claim of laches and acquisitive prescription have been rejected by the
CA on appeal; thus, it follows that the respondents were builders in bad
faith because knowing that the land did not belong to them and that they had
no right to build thereon, they still caused the house to be erected. They
further insist that respondents are deemed builders in bad faith because their
house has been built and reconstructed into a bigger one after respondent
Erlinda's parents forged a fictitious sale. Finally, they claim that the
principle of res judicata in the mode of "conclusiveness of judgment"
applies in this case.
ISSUES:
1. I. WHETHER THE HONORABLE COURT OF APPEALS ERRED IN
RULING THAT THE PETITIONERS WERE NOT ABLE TO PROVE
BAD FAITH ON THE PART OF THE RESPONDENTS.
2. II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING
THAT RES JUDJCATA DOES NOT APPLY IN THE INST ANT CASE.
RATIO:
1. The petition lacks merit.
2. To be deemed a builder in good faith, it is essential that a person asserts title
to the land on which he builds, i.e., that he be a possessor in the concept of
owner, and that he be unaware that there exists in his title or mode of
acquisition any flaw which invalidates it.10 The RTC, as affirmed by the
CA, found respondents to be builders in good faith, thus:
a. The plaintiffs are builders in good faith. As asserted by plaintiffs and not rebutted
by defendants, the house of plaintiffs was built on the lot owned by defendants in
1995. The complaint for nullity of documents and reconveyance was filed in 1997,
about two years after the subject conjugal house was constructed. Defendants-
spouses believed that at the time when they constructed their house on the lot of
defendants, they have a claim of title. Art. 526, New Civil Code, states that a
possessor in good faith is one who has no knowledge of any flaw or defect in his
title or mode of acquisition. This determines whether the builder acted in good faith
or not. Surely, plaintiffs would not have constructed the subject house which
 plaintiffs claim to have cost them ₱800,000.00 to build if they knew that there is a
flaw in their claim of title. Nonetheless, Art. 527, New Civil Code, states clearly
that good faith is always presumed, and upon him who alleges bad faith on the part
of the possessor lies the burden of proof. The records do not show that the burden of
proof was successfully discharged by the defendants.
b. xxxx
c. Plaintiffs are in good faith in building their conjugal house in 1995 on the lot they
believed to be their own by purchase. They also have in their favor the legal
presumption of good faith. It is the defendants who had the burden to prove
otherwise. They failed to discharge such burden until the Regional Trial Court, Br.
40, Dagupan City, promulgated an adverse ruling in Civil Case No. 97-0187-D.
Thus, Art. 448 comes in to protect the plaintiffs-owners of their improvement
without causing injustice to the lot owner. Art. 448 comes in to protect the plaintiff-
owners of their improvement without causing injustice to the lot owner. Art. 448
provided a just resolution of the resulting "forced-ownership" by giving the
defendants lot owners the option to acquire the conjugal house after payment of the
proper indemnity or to oblige the builder plaintiffs to pay for the lot. It is the
defendants-lot owners who are authorized to exercise the option as their right is
older, and under the principle of accession where the accessory (house) follows the
principal. x x x.11
3. The settled rule is bad faith should be established by clear and convincing
evidence since the law always presumes good faith. 12 In this particular case,
petitioners were not able to prove that respondents were in bad faith in
constructing the house on the subject land. Bad faith does not simply
connote bad judgment or negligence. 13 It imports a dishonest purpose or
some moral obliquity and conscious doing of a wrong. 14 It means breach of
a known duty through some motive, interest or ill will that partakes of the
nature of fraud.15 For anyone who claims that someone is in bad faith, the
former has the duty to prove such. Hence, petitioners err in their argument
that respondents failed to prove that they are builders in good faith in spite
of the findings of the RTC and the CA that they are.
4. As such, Article 44816 of the Civil Code must be applied. It applies when the
builder believes that he is the owner of the land or that by some title he has
the right to build thereon,17 or that, at least, he has a claim of title thereto.18 
5. In Tuatzs v. Spouses Escol, et al.,19 this Court ruled that the seller (the
owner of the land) has two options under Article 448: (1) he may
appropriate the improvements for himself after reimbursing the buyer (the
builder in good faith) the necessary and useful expenses under Articles
54620 and 54821 of the Civil Code; or (2) he may sell the land to the buyer,
unless its value is considerably more than that of the improvements, in
which case, the buyer shall pay reasonable rent, thus:
a. The rule that the choice under Article 448 of the Civil Code belongs to the owner of
the land is in accord with the principle of accession, i.e., that the accessory follows
the principal and not the other way around. Even as the option lies with the
landowner, the grant to him, nevertheless, is preclusive. The landowner cannot
refuse to exercise either option and compel instead the owner of the building to
remove it from the land.
b. The raison d'etre for this provision has been enunciated thus: Where the builder,
planter or sower has acted in good faith, a conflict of rights arises between the
owners, and it becomes necessary to protect the owner of the improvements without
causing injustice to the owner of the land. In view of the impracticability of creating
a state of forced co-ownership, the law has provided a just solution by giving the
owner of the land the option to acquire the improvements after payment of the
proper indemnity, or to oblige the builder or planter to pay for the land and the
sower the proper rent. He cannot refuse to exercise either option. It is the owner of
the land who is authorized to exercise the option, because his right is older, and
because, by the principle of accession, he is entitled to the ownership of the
accessory thing.22
6. The CA, therefore, did not err in its ruling that instead of requiring the
petitioners to sell the land, the R TC must determine the option which the
petitioners would choose. As aptly ruled by the CA: 
a. The rule that the right of choice belongs to the owner of the land is in accordance
with the principle of accession. However, even if this right of choice is exclusive to
the land owner, he cannot refuse to exercise either option and demand, instead for
the removal of the building.
b. Instead of requiring defendants-appellants to sell the land, the court a
quo must determine the option which they would choose. The first option to
appropriate the building upon payment of indemnity or the second option, to sell the
land to the plaintiffs-appellees. Moreover, the court a quo should also ascertain: (a)
under the first option, the amount of indemnification for the building; or (b) under
the second option, the value of the subject property vis-a-vis that of the building,
and depending thereon, the price of, or the reasonable rent for, the subject prope1iy.
c. Hence, following the ruling in the recent case of Briones v. Macabagdal,  this case
must be remanded to the court a quo for the conduct of further proceedings to
assess the current fair market of the land and to determine other matters necessary
for the proper application of Article 448, in relation to Articles 546 and 548 of the
New Civil Code.23
7. Therefore, this Court agrees with the CA that there is a need to remand the
case to the RTC for further proceedings, specifically, in assessing the
current fair market value of the subject land and other matters that are
appropriate in the application of Article 448, in relation to Articles 546 and
548 of the New Civil Code. 
8. As to the issue of res judicata, the CA is correct in its ruling that there is no identity of subject matter and
cause of action between the prior case of annulment of document and the present case, thus:
a. In the instant case, res judicata will not apply since there is no identity of subject matter and
cause of action. The first case is for annulment of document, while the instant case is for
reimbursement of useful expenses as builders in good faith under article 448 in relation to
Articles 546 and 548 of the New Civil Code.
b. Moreover, We are not changing or reversing any findings of the RTC and by this Court in Our 6
February 2004 decision. The Court is still bound by this judgment insofar as it found the Deeds
of Absolute Sale null and void, and that defendants-appellants are the rightful owners of the lot
in question.
c. However, if the court a quo did not take cognizance of the instant case, plaintiffs-appellees shall
lose ownership of the building worth Php316,400.00 without any compensation. While, the
defendant-appellants not only will recover the land but will also acquire a house without
payment of indemnity. The fairness of the rules enunciated in Article 448 is explained by the
Supreme Court in the case of Depra v. Dumlao, viz.:
i. Where the builder, planter or sower has acted in good faith, a conflict of rights
arises between the owners, and it becomes necessary to protect the owner of the
improvements without causing injustice to the owner of the land. In view of the
 impracticability of creating a state of forced ownership, the law has provided a just
solution by giving the owner of the land the option to acquire the improvements
after payment of the proper indemnity, or to oblige the builder or planter to pay for
the land and the sower to pay the proper rent. It is the owner of the land who is
authorized to exercise the option, because his right is older, and because, by the
principle of accession, he is entitled to the ownership of the accessory thing.
d. Finally, "the decision of the court a quo should not be viewed as a denigration of the doctrine of
immutability of final judgments, but a recognition of the equally sacrosanct doctrine that a
person should not be allowed Io profit or enrich himself inequitably at anal her's expense."24
9. The well-settled rule is that the principle or rule of res judicata is primarily one of public policy. It is based
on the policy against multiplicity of suits, 26 whose primary objective is to avoid unduly burdening the
dockets of the courts.27In this case, however, such principle is inapplicable.
10. WHEREFORE, the Petition for Review on Certiorari under Rule 45,
dated March 21, 2014, of petitioners-spouses Maximo Espinoza and
Winifreda De Vera, is DENIED. Consequently, the Decision dated
September 17, 2013 and Resolution dated January 28, 2014, both of the
Court of Appeals are AFFIRMED.
3.) Leviste Management System, Inc. v. Legaspi Towers 200, Inc.,
G.R. No. 199353, 4 April 2018
FACTS:
1. The Civil Code provisions on builders in good faith presuppose that the
owner of the land and the builder are two distinct persons who are not
bound either by specific legislation on the subject property or by contract.
Properties recorded in accordance with Section 4 1 of Republic Act No.
47262 (otherwise known as the Condominium Act) are governed by said
Act; while the Master Deed and the By Laws of the condominium
corporation establish the contractual relations between said condominium
corporation and the unit owners.
2. These are consolidated petitions under Rule 45 filed by Leviste Management System, Inc. (LEMANS) and
Legaspi Towers 200, Inc. (Legaspi Towers), both assailing the Decision 3 dated May 26, 2011 of the Court of
Appeals in CA-G.R. CV No. 88082. The assailed Decision 4 affirmed the October 25, 2005 Decision of the
Regional Trial Court (RTC), Branch 135 of Makati City in Civil Case No. 91-634.
3. The facts, as culled by the Court of Appeals from the records, follow:
4. Legaspi Towers is a condominium building located at Paseo de Roxas,
Makati City. It consists of seven (7) floors, with a unit on the roof
deck and two levels above said unit called Concession 2 and Concession
3. The use and occupancy of the condominium building is governed by the
Master Deed with Declaration of Restrictions of Legaspi Towers (hereafter
"Master Deed") annotated on the transfer certificate of title of the developer,
Legaspi Towers Development Corporation.
5. Concession 3 was originally owned by Leon Antonio Mercado. On 9 March
1989, Lemans, through Mr. Conrad Leviste, bought Concession 3 from
Mercado.
6. Sometime in 1989, Lemans decided to build another unit (hereafter
"Concession 4") on the roof deck of Concession 3. Lemans was able to
secure the building permit for the construction of Concession 4 and
commenced the construction thereof on October 1990.
7. Despite Legaspi Corporation's notice that the construction of Concession 4
was illegal, Lemans refused to stop its construction. Due to this, Legaspi
Corporation forbade the entry of Lemans' construction materials to be used
in Concession 4 in the condominium. Legaspi Corporation similarly wrote
letters to the Building Official Nelson Irasga ("hereafter Irasga"), asking
that the [building permit of Lemans for Concession 4 be cancelled. Trasga,
however, denied the requested cancellation, stating that the applicant
complied with the requirements for a building permit and that the
application was signed by the then president of Legaspi Corporation.
8. Lemans filed the Complaint dated February 20, 1991 with the RTC, praying
among others that a writ of mandatory injunction be issued to allow the
completion of the construction of Concession 4. On 3 April 1991, the RTC
issued the writ prayed for by Lemans.
9. Later, Legaspi Corporation filed the Third Party Complaint dated October 7,
1991. This was against Irasga, as the Municipal Building Official of Makati,
and Jose de Jesus (herafter "De Jesus"), as the Secretary of Public Works
and Highways (collectively referred to as the ""third-party defendants-
appellees") so as to nullify the building permit issued in favor of Lemans for
the construction of Concession 4.
10. After the parties had presented and formally offered their respective pieces
of evidence, but before the rendition of a judgment on the main case, the
RTC, in its Order dated May 24, 2002, found the application of Article 448
of the Civil Code and the ruling in the Depra vs. Dumlao [case]
(hereafter "Depra Case") to be proper.
11. Lemans moved for the reconsideration o[f] the aforementioned order. The
RTC denied this and further ruled:
a. The main issue in this case is whether or not [LEMANS] owns the air space above
its condominium unit. As owner of the said air space, [LEMANS) contends that its
construction of another floor was in the exercise of its rights.
b. It is the [finding] of the Court that [LEMANS) is not the owner of the air space
above its unit. [LEMANS'] claim of ownership is without basis in fact and in law.
The air space which [LEMANS] claims is not on top of its unit but also on top of
the condominium itself, owned and operated by defendant Legaspi Towers.
c. Since it appears that both plaintiff and defendant Legaspi Towers were in good
faith, the Court finds the applicability of the ruling in Depra vs. Dumlao, 136 SCRA
475.
12. From the foregoing, Lemans filed the Petition for Certiorari dated
November 13, 2002 with the Court of Appeals], docketed as CA G.R. SP.
No. 73621, which was denied in the Decision promulgated on March 4,
2004. The Court did not find grave abuse of discretion, amounting to lack or
excess of jurisdiction, on the RTC's part in issuing the above orders.
Lemans sought reconsideration of this decision but failed.
13. Meanwhile, Lemans adduced evidence before the RTC to establish that the
actual cost for the construction of Concession 4 was Eight Hundred
Thousand Eight Hundred Ninety-seven and 96/100 Pesos (PhP800,897.96)
and that the fair market value of Concession 4 was Six Million Pesos
(PhP6,000,000.00). Afterwards, the RTC rendered the Assailed Decision.5
14. Reiterating its previous ruling regarding the applicability of Article 448 of
the Civil Code to the case, the RTC in its October 25, 2005 Decision
disposed of the dispute in this wise:
a. WHEREFORE, judgment is hereby rendered ordering defendant Legaspi Towers
200, Inc. to exercise its option to appropriate the additional structure constructed on
top of the penthouse owned by plaintiff Leviste Management Systems, Inc. within
sixty [60] days from the time the Decision becomes final and executory. Should
defendant Legaspi Towers 200, Inc. choose not to appropriate the additional
structure after proper indemnity, the parties shall agree upon the terms of the lease
and in case of disagreement, the Court shall fix the terms thereof.
b. For lack of merit, the third party complaint and the counterclaims are hereby
dismissed.
c. Costs against the plaintiff.6
15. When the parties respective motions for reconsideration were denied by the
trial court, both elevated the matter to the Court of Appeals.
16. On May 26, 2011, the Court of Appeals, acting on the consolidated appeals
of LEMANS and Legaspi Towers, rendered its Decision affirming the
decision of the RTC of Makati City.
17. The Court of Appeals held that the appeal of LEMANS should be dismissed for failure to comply with
Section 13, Rule 44 in relation to Section 1(f), Rule 50 of the Rules of Court, as the subject index of
LEMANS' brief did not contain a digest of its arguments and a list of textbooks and statutes it cited. 7 For this
reason, the appellate court no longer passed upon the sole issue raised by LEMANS, i.e., whether its
construction of Concession 4 should be valued at its actual cost or its market value.
18. As regards the appeal of Legaspi Towers, the Court of Appeals held that
while Concession 4 is indeed a nuisance, LEMANS has been declared a
builder in good faith, and noted that Legaspi Towers failed to contest this
declaration. Since Concession 4 was built in good faith, it cannot be
demolished. The Court of Appeals likewise affirmed the validity of the
building permit for Concession 4, holding that if the application and the
plans appear to be in conformity with the requirements of governmental
regulation, the issuance of the permit may be considered a ministerial duty
of the building official. 8
19. Consequently, LEMANS and Legaspi Towers filed separate Petitions for
Review on Certiorari with this Court based on the following grounds:
ISSUES:
1. W/N At the crux of the present controversy is the legal issue whether
Article 448 of the Civil Code and our ruling in Depra v. Dumlao 12 are
applicable to the parties' situation.
RATIO:
1. We proceed to the merits of these consolidated cases.
2. First, we find no cogent reason to disturb the finding of the lower courts that
it is Legaspi Towers which owns the air space above Concession 3 as the
same is in keeping with the facts and the applicable law. We quote with
approval the following discussion from the Court of Appeals Decision dated
March 4, 2004 in CA-G.R. SP No. 73621:
a. As correctly pointed out by the private respondent Legaspi, the air space wherein
Concession 4 was built is not only above Concession 3, but above the entire
condominium building. The petitioner's [LEMANS'] ownership of Concession 3
does not necessarily extend to the area above the same, which is actually the "air
space" of the entire condominium building. The ownership of the air space above
Concession 3 is not a necessary incident of the ownership of Concession 3.
b. It may be well to state here the following provisions of Republic Act No. 4726,
otherwise known as The Condominium Act:
i. Section 2. A condominium is an interest in real property consisting of a
separate interest in a unit in a residential, industrial or commercial
building and an undivided interest in common directly or indirectly, in
the land on which it is located and in other common areas of the
building. A condominium may include, in addition, a separated interest
on other portions of such real property. Title to the common areas,
including the land, or the appurtenant interests in such areas, may be
held by a corporation specially formed for the purpose (hereinafter
known as the "condominium corporation") in which the holders of
separate interests shall automatically be members or shareholders, to the
exclusion of others, in proportion to the appurtenant interest of their
respective units in the common areas. (RA 4726, The Condominium
Act)
ii. Section 3 (d). "Common areas" means the entire project excepting all
units separately granted or held or reserved.
iii. Section 6. Unless otherwise expressly provided in the enabling or master
deed or the declaration of restrictions, the incidents of the condominium
grant are as follows:
1. (a) The boundary of the unit granted are the interior surfaces
of the perimeter walls, ceilings, windows and doors
thereof.1âwphi1 The following are not part of the unit -
bearing walls, columns, walls, roofs, foundations and other
common structural elements of the building x x x.
c. Evidently, what a unit includes is only the four walls, ceilings, windows and
doors thereof. It certainly does not include the roof or the areas above it.
d. In a condominium, common areas and facilities are "portions of the condominium
 property not included in the units," whereas, a unit is a part of the condominium
property which is to be subject to private ownership." Inversely, that which is not
considered a unit should fall under common areas and facilities.
e. Inasmuch as the air space or the area above Concession 3 is not considered as
part of the unit, it logically forms part of the common areas.
f. The petitioner's efforts to establish that Concession 3 and the open area in the roof
deck are reserved and separately granted from the condominium project are futile,
inasmuch as even if the same is established, it would not prove that the area above it
is not part of the common area. Admittedly, there is nothing in the Master Deed
which prohibits the construction of an additional unit on top of Concession 3,
however, there is also nothing which allows the same. The more logical inference is
that the unit is limited to that stated in the Condominium Act, considering that the
Master Deed with Declaration of Restrictions does not expressly declare otherwise.
g. To allow the petitioner's claim over the air space would not prevent the petitioner
from further constructing another unit on top of Concession 4 and so on. This would
clearly open the door to further "impairment of the structural integrity of the
condominium building" which is explicitly proscribed in the Master Deed.19
3. Significantly, the parties are no longer questioning before us the past rulings regarding Legaspi
Towers' ownership of the air space above Concession 3 which is the air space above the
condominium building itself.
4. The principal bones of contention here are the legal consequences of such
ownership and the applicability of Article 448 of the Civil Code and our
ruling in Depra v. Dumlao20 on the factual antecedents of these cases.
5. The ruling of this Court in Depra v. Dumlao extensively cited by both
parties pertains to the application of Articles 448 and 546 of the Civil Code,
which respectively provide:
a. Art. 448. The owner of the land on which anything has been built, sown or planted
in good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and
548, or to oblige the one who built or planted to pay the price of the land,  and
the one who sowed, the proper rent. However, the builder or planter cannot be
obliged to buy the land if its value is considerably more than that of the building or
trees. In such case, he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper indemnity. The parties shall
agree upon the terms of the lease and in case of disagreement, the court shall fix the
terms thereof.
b. 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.
c. 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.
6. To recap, the defendant in Depra constructed his house on his lot but, in
good faith, encroached on an area of 34 square meters of the property of
plaintiff on which defendant's kitchen was built. The Court ruled that
pursuant to Article 448 of the Civil Code, plaintiff, as the owner of the land,
has the option either to pay for the encroaching part of the kitchen, or to sell
the encroached 34 square meters of his lot to the defendant, the builder in
good faith. The owner of the land cannot refuse to pay for the encroaching
part of the building and to sell the encroached part of the land. Pursuant to
Articles 448 and 546 of the Civil Code, the Court remanded the case to the
RTC to determine the following:
a. (1) the present fair price of the 34-square meter encroached area of the land;
b. (2) the amount of expenses spent in building the kitchen;
c. (3) the increase in value the area may have acquired by reason of the building; and
d. (4) whether the value of the 34-square meter area is considerably more than that of
the kitchen built thereon.
7. After the RTC has determined the four items above, the RTC shall grant the
owner a period of 15 days to exercise his option whether (a) to
appropriate the kitchen by paying the amount of expenses spent for building
the same or the increase of such area's value by reason of the building or (b)
to oblige the builder in good faith to pay the price of said area. The Court
thereafter provided for further contingencies based on the RTC finding in
the fourth item.
8. In the case at bar, LEMANS prays that, pursuant to Depra, the Court should
determine the value of Concession 4, and find such value to be Six Million
Eight Hundred Thousand Eight Hundred Ninety-Seven and 96/100 Pesos
(₱6,800,897.96) plus legal interest. Legaspi Towers, on the other hand,
prays for the extrajudicial abatement of Concession 4, on the ground that
the applicable provision of the Civil Code is Article 699, which provides:
a. Article 699. The remedies against a public nuisance are:
b. (1) A prosecution under the Penal code or any local ordinance; or
c. (2) A civil action; or
d. (3) Abatement, without judicial proceedings.
9. Legaspi Towers also argues that Concession 4 is an illegal construction, for
being in violation of the Condominium Act and the By Laws of Legaspi
Towers. Legaspi Towers stresses that LEMANS failed to comply with the
Condominium Act, which requires the consent of the registered owners of
the condominium project for the amendment of the Master Deed.
10. Indeed, the last paragraph of Section 4 of the Condominium Act provides:
a. The enabling or master deed may be amended or revoked upon registration of an
instrument executed by the registered owner or owners of the property and
consented to by all registered holders of any lien or encumbrance on the land or
building or portion thereof. The term "registered owner" shall include the registered
owners of condominiums in the project. Until registration of a revocation, the
provisions of this Act shall continue to apply to such property.
11. The Master Deed of Legaspi Towers 21 states the number of stories and
basements, and the number of units and accessories, and contains as an
attachment a diagrammatic floor plan of the building as required by Section
4(b)22of the Condominium Act. Section 2 of the Master Deed states:
 a. Section 2. The Building and the Units. The building included in the condominium
project is a commercial building constructed of reinforced concrete and consisting
of seven (7) storeys with a basement, a ground floor, a deck roof, and two levels
above the deck roof. x x x.23
12. The construction by LEMANS of Concession 4 contravenes the Master
Deed by adding a third level above the roof deck. As pointed out by Legaspi
Towers and shown in the records, the Master Deed was never amended to
reflect the building of Concession 4. Furthermore, LEMANS failed to
procure the consent of the registered owners of the condominium project as
required in the last paragraph of Section 4 of the Condominium Act.
13. The By-Laws of Legaspi Towers 24 specifically provides that extraordinary
improvements or additions must be approved by the members in a regular or
special meeting called for the purpose prior to the construction:
a. ARTICLE V IMPROVEMENTS AND ADDITIONS
b. XXXX
c. Section 2. Extraordinary Improvements. Improvements or additions to the common
areas which shall cost more than ₱100,000.00 or which involve structural
construction or modification must be approved by the members in a regular or
special meeting called for the purpose before such improvements or additions are
made. x x
14. Said By-Laws also provides for the process by which violations of the
Master Deed are redressed, and the same coincides with the prayer of
Legaspi Towers:
a. ARTICLE VII ABATEMENT OF VIOLATIONS
b. Section 1. Power to Abate Violations. In the event that any member or his tenant or
lessee fails or refuses to comply with any limitation, restriction, covenant or
condition of the Master Deed with Declaration of Restrictions, or with the rules and
regulations on the use, enjoyment and occupancy of office/units or other property in
the project, within the time fixed in the notice given him by the Board of Directors,
the latter or its duly authorized representative shall have the right to enjoin, abate or
remedy the continuance of such breach or violation by appropriate legal
proceedings.
c. The Board shall assess all expenses incurred in abatement of the violation,
including interest, costs and attorney's fees, against the defaulting member.26
15. Instead of procuring the required consent by the registered owners of the
condominium project pursuant to the Condominium Act, or having
Concession 4 approved by the members in a regular or special meeting
called for the purpose pursuant to the By-Laws, LEMANS merely had an
internal arrangement with the then president of Legaspi Towers. The same,
however, cannot bind corporations, which includes condominium
corporations such as Legaspi Towers, as they can act only through their
Board of Directors.27
16. Unperturbed, LEMANS argues that the internal arrangement shows its good
faith in the construction of Concession 4, and claims the application of the
aforementioned Articles 448 and 546 of the Civil Code. For reference,
Article 448 provides:
17. Firstly, it is recognized in jurisprudence that, as a general rule, Article 448
on builders in good faith does not apply where there is a contractual
relation between the parties.28
18. Morever, in several cases, this Court has explained that the raison d'etre for
Article 448 of the Civil Code is to prevent the impracticability of creating a
state of forced co-ownership:
a. The rule that the choice under Article 448 of the Civil Code belongs to the owner of
the land is in accord with the principle of accession, i.e., that the accessory follows
the principal and not the other way around. Even as the option lies with the
landowner, the grant to him, nevertheless, is preclusive. The landowner cannot
refuse to exercise either option and compel instead the owner of the building to
remove it from the land.
b. The raison d'etre for this provision has been enunciated thus: Where the builder,
planter or sower has acted in good faith, a conflict of rights arises between the
owners, and it becomes necessary to protect the owner of the improvements without
causing injustice to the owner of the land. In view of the impracticability of creating
a state of forced co-ownership, the law has provided a just solution by giving the
owner of the land the option to acquire the improvements after payment of the
proper indemnity, or to oblige the builder or planter to pay for the land and the
sower the proper rent. He cannot refuse to exercise either option. It is the owner of
the land who is authorized to exercise the option, because his right is older, and
because, by the principle of accession, he is entitled to the ownership of the
accessory thing. 29
19. In the case at bar, however, the land belongs to a condominium corporation,
wherein the builder, as a unit owner, is considered a stockholder or member
in accordance with Section 10 of the Condominium Act, which provides:
a. SECTION 10. Whenever the common areas in a condominium project are held by a
condominium corporation, such corporation shall constitute the management body
of the project.1âwphi1 The corporate purposes of such a corporation shall be
limited to the holding of the common areas, either in ownership or any other interest
in real property recognized by law, to the management of the project, and to such
other purposes as may be necessary, incidental or convenient to the accomplishment
of said purposes. The articles of incorporation or by-laws of the corporation shall
not contain any provision contrary to or inconsistent with the provisions of this Act,
the enabling or master deed, or the declaration of restrictions of the project.
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 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.
20. The builder is therefore already in a co-ownership with other unit
owners as members or stockholders of the condominium corporation,
whose legal relationship is governed by a special law, the Condominium
Act. It is a basic tenet in statutory construction that between a general law
and a special law, the special law prevails. Generalia specialibus non
derogant.30 The provisions of the Civil Code, a general law, should
 therefore give way to the Condominium Act, a special law, with regard to
properties recorded in accordance with Section 4 31 of said Act. Special laws
cover distinct situations, such as the necessary co-ownership between unit
owners in condominiums and the need to preserve the structural integrity of
condominium buildings; and these special situations deserve, for
practicality, a separate set of rules.
21. Articles 448 and 546 of the Civil Code on builders in good faith are
therefore inapplicable in cases covered by the Condominium Act where
the owner of the land and the builder are already bound by specific
legislation on the subject property (the Condominium Act), and by
contract (the Master Deed and the By-Laws of the condominium
corporation). This Court has ruled that upon acquisition of a condominium
unit, the purchaser not only affixes his conformity to the sale; he also binds
himself to a contract with other unit owners.32
22. In accordance therefore with the Master Deed, the By-Laws of Legaspi
Towers, and the Condominium Act, the relevant provisions of which were
already set forth above, Legaspi Towers is correct that it has the right to
demolish Concession 4 at the expense of LEMANS.
23. Indeed, the application of Article 448 to the present situation is highly
iniquitous, in that an owner, also found to be in good faith, will be forced to
either appropriate the illegal structure and impliedly be burdened with the
cost of its demolition) or to allow the continuance of such an illegal
structure that violates the law and the Master Deed, and threatens the
structural integrity of the condominium building upon the payment of rent.
The Court cannot countenance such an unjust result from an erroneous
application of the law and jurisprudence.
24. We will no longer pass upon the issue of the validity of building permit for
Concession 4 as the same has no bearing on the right of Legaspi Towers to
an abatement of Concession 4.
25. Finally, we are constrained to deny the Petition of LEMANS in view of our
ruling that the doctrine in Depra and Articles 448 and 546 of the Civil Code
were improperly applied in these cases.
26. WHEREFORE, the Petition in G.R. No. 199353 is hereby DENIED for
lack of merit. The Petition in G.R. No. 199389 is GRANTED. The
Decision dated May 26, 2011 and Resolution dated November 17, 2011 of
the Court of Appeals in CA-G.R. CV No. 88082
are REVERSED and SET ASIDE. Leviste Management System, Inc.
is ORDERED to remove Concession 4 at its own expense.
4.) Aquino v. Aguilar,
G.R. No. 182754, 29 June 2015
FACTS:
1. In this Petition for Review on Certiorari 1 filed under Rule 45 of the Rules of Court, Petitioner
spouses Crispin and Teresa Aquino (petitioners) assail the (CA) Decision dated 25 April
20082 in CA-GR SP No. 92778. The CA modified the Decisions of both the Metropolitan Trial
Court (MeTC) and the Regional Trial Court (RTC). The CA ruled that although respondent
spouses Eusebio and Josefina Aguilar (respondents) cannot be considered builders in good
faith, they should still be reimbursed for the improvements they have introduced on petitioners'
property.3
2. Teresa Vela Aquino (Teresa) and her husband, Crispin Aquino, are the
owners of a house and lot located at No. 6948, Rosal Street, Guadalupe
Viejo, Makati City as evidenced by Transfer of Certificate Title No.
148338.
3. Since 1981, this property has been occupied by Teresa's sister, Josefina
Vela Aguilar; Josefina's spouse Eusebio; and their family.5 It appears from
the record that respondents stayed on the property with the consent and
approval of petitioners, who were then residing in the United States. 6
4. While respondents were in possession of the property, the house previously
constructed therein was demolished, and a three-storey building built in its
place.7 Respondents occupied half of the third floor of this new building for
the next 20 years without payment of rental.8
5. On 22 September 2003, petitioners sent a letter to respondents informing
them that an immediate family member needed to use the premises and
demanding the surrender of the property within 10 days from
notice.9 Respondents failed to heed this demand, prompting petitioners to
file a Complaint for ejectment against them before the office of the
barangay captain of Guadalupe Viejo.10 The parties attempted to reach an
amicable settlement in accordance with Section 412 of the Local
Government Code, but these efforts proved unsuccessful.11
6. On 19 November 2003, petitioner spouses Aquino filed a Complaint 12 with
the MeTC of Makati City praying that respondents be ordered to (a) vacate
the portion of the building they were then occupying; and (b) pay petitioner
a reasonable amount for the use and enjoyment of the premises from the
time the formal demand to vacate was made.13
7. In their Answer with Counterclaim, 14 respondents claimed that they had
contributed to the improvement of the property and the construction of the
building, both in terms of money and management/supervision services.
Petitioners purportedly agreed to let them contribute to the costs of
construction in exchange for the exclusive use of a portion of the building.
Respondents averred:
a. 2.3 That the construction of the three (3) storey building was also at the
uncompensated supervision of defendant Eusebio Aguilar, of which only P 2
Million was spent by plaintiffs while defendants spent around P 1 Million as
contribution to the construction cost. It was defendants who introduced
improvements on subject lot because at the time plaintiffs bought the property it
was marshy which was filled up by defendants (sic) truck load with builders, adobe
and scumbro that elevated the ground;
 b. 2.4 The original agreement was for my client to contribute his share so that they
will have the portion of the subject building for their own exclusive use. It turned
out later that the agreement they had was disowned by plaintiffs when they saw the
totality of the building constructed thereon coupled by the fact, that the value of the
lot has tremendously appreciated due to the commercialization of the vicinity which
will command higher price and windfall profits should plaintiffs sell the property
which they are now contemplating on (sic);
c. 2.5 The portion which plaintiffs want defendants to vacate is a portion which the
latter built with their own money upon your clients agreement and consent whom
they built in good faith knowing and hoping that later on the same will be theirs
exclusively. It was never an act of generosity, liberality and tolerance. Conversely,
it was one of the implied co-ownership or partnership, because aside from the fact
that defendants, who were then peacefully residing in Laguna, made unquantifiable
contributions in terms of money and services arising from his uncompensated
management and supervision over the entire subject property while plaintiffs are
abroad. By legal implications he is an industrial partner responsible for the
development and improvements of the subject property. His contribution was never
without the consent of plaintiffs. Whatever contribution defendants introduced over
the said property was made and built in good faith;15
8. Since they were allegedly co-owners of the building and builders in good
faith, respondents claimed that they had the right to be compensated for the
current value of their contribution.16 Accordingly, they prayed for the
dismissal of the Complaint and the award of ₱5 million as compensation for
their contributions to the construction of the building, as well as moral
damages, attorney's fees and costs of litigation.17
9. THE RULING OF THE METC
10. In a Decision18 dated 12 November 2004, the MeTC ruled in favor of petitioners, stating that
they had the right to enjoy possession of the property as the registered owners thereof. 19 Since
the case was merely one for ejectment, the court held that it was no longer proper to resolve
respondents' claim of co-ownership over the building.20
11. The MeTC also declared that respondents were builders in bad faith who were not entitled to
recover their purported expenses for the construction of the building. 21 It emphasized that their
occupation of the property was by mere tolerance of petitioners and, as such, could be
terminated at any time.22 The court further noted that in a letter dated 15 July 1983, petitioners
had already asked respondents to refrain from constructing improvements on the property
because it was intended to be sold.23
12. The dispositive portion of the MeTC Decision, which ordered respondents to vacate the
property, reads:
a. WHEREFORE, premises considered, judgment is hereby rendered ordering
defendants Eusebio & Josefina Aguilar and all persons claiming rights under them
to immediately vacate the subject property, and deliver peaceful possession thereof
to the plaintiffs. Defendants are likewise ordered to pay plaintiffs ₱7,000.00
monthly rental commencing 22 October 2003 until such time that defendant finally
vacate the premises, ₱10,000.00 as and by way of attorney's fees, and the cost of
suit.24
13. On 14 September 2005, respondents appealed the MeTC's Decision to the RTC. 25
14. THE RULING OF THE RTC
15. In their Memorandum on Appeal26 before the R TC, respondents assailed the MeTC's finding
that petitioners, as the registered owners of the land, were also the owners of the improvement
constructed thereon.27 Respondents asserted that they were co-owners of the building since they
built a portion thereof using their own funds, as evidenced by various receipts they presented
before the MeTC.28
16. Respondents also maintained that they were builders in good faith. They pointed out that
petitioners never objected to the construction of the improvement on their
property.29 According to respondents, petitioners' letter dated 15 July 1983 was written at a
time when an old dilapidated house was still standing on the property. 30 Subsequently however,
the house was demolished and the new building was constructed thereon by respondents, with
petitioners' knowledge and consent.31
17. In a Decision32 dated 3 January 2006, the RTC denied the appeal and affirmed the MeTC's
Decision. According to the court, respondents did not become co-owners of the property
although they may have contributed to the construction of the building thereon. 33 Hence, their
stay in the premises remained to be by mere tolerance of the petitioners.34
18. The RTC also ruled that respondents cannot be considered builders in good faith. 35 The court
found that as early as 1983, petitioners had informed respondents of the intention to eventually
dispose of the property.36 The RTC concluded that petitioners never consented to the
construction of any form of structure on the property. 37 Since respondents participated in the
construction of the building even after they had been notified that their occupation may be
terminated anytime, the R TC ruled that they did not build the structures in good faith. 38 The
RTC likewise noted that "the improvements in question as well as other personal belongings of
the appellants were removed from the premises through a writ of demolition, and these
properties are now in their possession."39
19. THE RULING OF THE CA
20. Aggrieved by the RTC Decision, respondents elevated the matter to the CA. They reiterated
that they owned one-half of the third floor of the building on the property, having spent their
own funds for the construction thereof. Respondents also asserted that because they built that
portion in good faith, with no objection from petitioners, they were entitled to reimbursement
of all necessary and useful expenses incurred in the construction.
21. On 25 April 2008, the CA affirmed the conclusion of the lower courts that respondents could
not be considered co-owners of the property or builders in good faith. 40 According to the
appellate court, respondents were aware that their right to possess the property had a limitation,
because they were not the owners thereof. They knew that their occupation of the building was
by mere tolerance or permission of petitioners, who were the registered owners of the property.
The CA likewise noted that respondents failed to prove the alleged agreement between the
parties with respect to the ownership of one-half of the third floor of the improvement. There
being no contract between them, respondents are necessarily bound to vacate the property upon
demand.41 The CA ruled:
a. The Supreme Court has consistently held that those who occupy the land of another
at the latter's tolerance or permission, without any contract between them, are
necessarily bound by an implied promise that the occupants will vacate the property
upon demand. Based on the principles enunciated in Calubayan v. Pascual, the
status of petitioners is analogous to that of a lessee or a tenant whose term of lease
has expired but whose occupancy continued by tolerance of the owner. In such a
case, the unlawful deprivation or withholding of possession is to be reckoned from
the date of the demand to vacate.42 (Citations omitted)
22. Nevertheless, the CA declared that respondents should be reimbursed for the necessary and
useful expenses they had introduced on petitioners' property, pursuant to Articles 1678 and 548
of the Civil Code.43 The dispositive portion of the CA Decision dated 25 April 200844 reads:
a. WHEREFORE, the assailed Decision is AFFIRMED with the following
MODIFICATIONS:
b. 1. The case is REMANDED to the court of origin for further proceedings to
determine the facts essential to the application of Article 1678 and Article 546 of
the Civil Code, specifically on the following matters:
 c. a) To determine the cost of necessary expenses incurred by petitioners during their
period of possession.
d. b) To determine the cost of useful improvements introduced by petitioners in the
construction of the building.
e. 2. After said amounts shall have been determined by competent evidence:
f. a) Respondents Aquino are ordered to pay petitioners the costs of necessary
improvements incurred during the period of their occupation.
g. b) Petitioners Aguilar are to be reimbursed one half (1/2) of the amount they
expended on the construction of the building should respondents decided to
appropriate the same. Should respondents refuse to reimburse the costs of the
improvements, petitioners may remove the improvements even though the principal
thing may suffer damage thereby.
h. c) In both instances, petitioners shall have no right of retention over the subject
premises.
i. d) In any event, petitioners shall pay respondents the amount of Php7,000.00 as
monthly rental commencing 22 October 2003 until such time that petitioners finally
vacate the premises. No pronouncement as to costs.
23. Respondents no longer appealed the Decision of the CA. This time,
petitioners elevated the matter to this Court through the instant Petition for
Review46 under Rule 45 of the Rules of Court.
24. PROCEEDINGS BEFORE THIS COURT
25. In their Petition, petitioners allege that the CA seriously erred in remanding
the case to the court of origin for the purpose of ascertaining the right of
respondents to be reimbursed for the improvements introduced on the
property.47 They emphasize that respondents were builders in bad faith, and,
as such, are not entitled to reimbursement under Articles 449, 450 and 451
of the Civil Code.
26. In their Comment,48 respondents assert that the CA correctly ruled that their
status is akin to that of a lessee or tenant whose term of lease has expired,
but whose occupancy continues by virtue of the tolerance of the owner.
They aver that the CA properly upheld their entitlement to reimbursement
pursuant to Articles 167849 and 54650 of the Civil Code.51
27. In their Reply,  petitioners argue against supposed improvements
52
constructed by respondents from 1999 to 2003 amounting to ₱995,995.94.
Petitioners say this claim is highly ridiculous and unbelievable. 53
ISSUES:
1. W/N
RATIO:
1. T Since respondents no longer appealed the Decision of the CA,54 they are
considered bound by its findings and conclusions. These include its
affirmation of the earlier findings of the MeTC and the RTC that
respondents cannot be considered builders in good faith:
a. Both the MeTC and the RTC have rejected the idea that petitioners are builders in
good faith. We agree. The resolution of the issues at bar calls for the application of
the rules on accession under the Civil Code. The term "builder in good faith" as
used in reference to Article 448 of the Civil Code, refers to one who, not being the
owner of the land, builds on that land believing himself to be its owner and unaware
of the land, builds on that land, believing himself to be its owner and unaware of the
defect in his title or mode of acquisition. The essence of good faith lies in an honest
belief in the validity of one's right, ignorance of a superior claim, and absence of
intention to overreach another.
b. In the instant case, the Spouses Aguilar cannot be considered as builders in
good faith on account of their admission that the subject lot belonged to the
Spouses Aquino when they constructed the building. At the onset, petitioners
were aware of a flaw in their title and a limit to their right to possess the property.
By law, one is considered in good faith if he is not aware that there exists in his title
or mode of acquisition any flaw which invalidates it.55
2. Respondents are deemed to have acquiesced to the foregoing findings when
they failed to appeal the CA Decision. A party who does not appeal from a
judgment can no longer seek the modification or reversal
thereof.56 Accordingly, the only issue left for this Court to determine is that
which is now raised by petitioners - whether the CA erred in remanding this
case to the court of origin for the determination of the necessary and useful
expenses to be reimbursed to respondents pursuant to Articles 1678 and 546
of the Civil Code.
3. We resolve to PARTLY GRANT the Petition and modify the ruling of the
CA.
4. Article 1678 is not applicable to this case.
5. In its Decision, the CA found that respondents were occupants of the property by mere
tolerance or generosity of petitioners and were bound by an implied promise to vacate the
premises upon demand.57
6. Based on this finding, the CA held that "the status of petitioners is analogous to that of a lessee
or a tenant whose term of lease has expired but whose occupancy continued by tolerance of
owner"58 pursuant to this Court's ruling in Calubayan v. Pascual, 59 As a result, the CA
concluded that Articles 1678 and 546 of the Civil Code must be applied to allow respondents to
be reimbursed for their necessary and useful expenses.
7. We disagree. By its express provision, Article 1678 of the Civil Code applies only to
lessees who build useful improvements on the leased property. It does not apply to those
who possess property by mere tolerance of the owners, without a contractual right.
8. A careful reading of the statement made by this Court in Calubayan would show that it did not,
as it could not, modify the express provision in Article 1678, but only noted an "analogous"
situation. According to the Court, the analogy between a tenant whose term of lease has
expired and a person who occupies the land of another at the latter's tolerance lies in their
implied obligation to vacate the premises upon demand of the owner. The Court stated:
a. To begin with, it would appear that although the defendant is regarded by the
plaintiffs as a "squatter" his occupancy of the questioned premises had been
permitted or tolerated even before the Philippine Realty Corporation sold the lots to
the plaintiffs. Otherwise, the latter would not have found him on the premises. It
may be true that upon their acquisition of the parcels of land in 1957, plaintiffs
notified and .requested defendant to see them, but despite defendant's failure to heed
these requests, plaintiffs did not choose to bring an action in court but suffered the
defendant instead to remain in the premises for almost six years. Only on February
 2, 1963, did the plaintiffs for the first time notify the defendant that "they now need
the two parcels of land in question" and requested him to vacate the same. In
allowing several years to pass without requiring the occupant to vacate the premises
nor filing an action to eject him, plaintiffs have acquiesced to defendant's
possession and use of the premises. It has been held that a person who occupies the
land of another at the latter's tolerance or permission, without any contract between
them, is necessarily bound by an implied promise that he will vacate upon demand,
failing which a summary action for ejectment is the proper remedy against them.
The status of defendant is analogous to that of a lessee or tenant whose term of lease
has expired but whose occupancy continued by tolerance of the owner. In such a
case, the unlawful deprivation or withholding of possession is to be counted from
the date of the demand to vacate.60(Emphasis in the original)
9. It is clear from the above that Calubayan is not sufficient basis to confer the status and rights of
a lessee on those who occupy property by mere tolerance of the owner.
10. In this case, there is absolutely no evidence of any lease contract between the parties. In fact,
respondents themselves never alleged that they were lessees of the lot or the building in
question. Quite the opposite, they insisted that they were co-owners of the building and
builders in good faith under Article 448 of the Civil Code. For that reason, respondents argue
that it was erroneous for the CA to consider them as lessees and to determine their rights in
accordance with Article 1678.
11. As builders in bad faith, respondents are
not entitled to reimbursement of useful expenses.
12. Furthermore, even if we were to subscribe to the CA' s theory that the
situation of respondents is "analogous to that of a lessee or tenant whose
term of lease has expired but whose occupancy continued by tolerance," the
absence of good faith on their part prevents them from invoking the
provisions of Article 1678.
13. As discussed above, the MeTC, the RTC and the CA all rejected the claims
of respondents that they were builders in good faith. This pronouncement is
considered conclusive upon this Court, in view of respondents' failure to
appeal from the CA decision. This rule bars the application of Article
1678 as well as Articles 448 and 576 of the Civil Code and all other
provisions requiring good faith on the part of the builder.
14. We are aware that in some instances, this Court has allowed the application
of Article 448 to a builder who has constructed improvements on the land of
another with the consent of the owner.61 In those cases, the Court found that
the owners knew and approved of the construction of improvements on the
property. Hence, we ruled therein that the structures were built in good
faith, even though the builders knew that they were constructing the
improvement on land owned by another.
15. Although the factual circumstances in the instant case are somewhat similar,
there is one crucial factor that warrants a departure from the above-
described rulings: the presence of evidence that petitioners prohibited
respondents from building their own structure on a portion of the
property.
16. Based on the findings of fact of the MeTC and the RTC, petitioners had
already warned respondents not to build a structure on the property as early
as 1983. The MeTC explained:
a. Likewise, in a letter dated 15 July 1983 sent by plaintiffs to the defendants marked
as Exhibit "2" of defendants' Position Paper, Teresa Aquino made known to the
defendants not to construct on the premises as she planned to sell the same when the
value of the property shall increase (sic). Defendants are undoubtedly builders in
bad faith for despite the prohibition made upon them, they continued their
construction activities upon respondents' property.62
17. This ruling was affirmed by the R TC in its Decision dated 3 January 2006,
which reads:
a. An examination of appellants' Exhibit "2" which is a letter dated July 15, 1983, sent
to appellant Josefina Aguilar, the sister of appellee Teresa Aquino, abundantly
shows that their occupancy of the premises in question is by tolerance of the
appellees. Thus, the letter expressly states that the appellants are advised not to
put up a shop, as the appellees had plan (sic) then of disposing the property
(the land) in question for a reasonable profit after a period of three or four
years, thereby placing on notice them (appellants) that their possession of the
said property is temporary in nature and by mere generosity of the appellees,
they being sisters.
b. The letter likewise advised them to apply for a housing project so that by the time
the property in question is sold, they have a place to transfer to. All these
undisputed antecedents which can be considered as judicially admitted by the
appellants being their own evidence marked as Exhibit "2", coupled with the fact
that since the time they occupied the premises in 1983 up to the time when the
complaint was filed, they were not asked to pay any monthly rental for the use,
enjoyment and occupancy of the said property, ineluctably established the fact that
their possession of the said property is by mere tolerance of the appellees.63
c. xxxx
d. Their contention that pursuant to Article 453 of the Civil Code, they should be
considered builders in good faith even if they have acted in bad faith, since their act
of introducing improvements to one-half of the third floor of the three storey
building was with knowledge and without opposition on the part of the appellants,
cannot be sustained, principally on the ground that as stated earlier, their Exhibit "2"
is very limpid on the act that they were already forewarned as early as 1983 not to
introduce any improvements thereon as the property is slated to be sold as it was
only bought for investment purposes. The fact that the appellees did not thereafter
remind them of this, is of no moment, as this letter was not likewise withdrawn by a
subsequent one or modified by the appellees.64
18. We find no reason to depart from the conclusions of the trial courts.
Respondents were evidently prohibited by petitioners from building
improvements on the land because the latter had every intention of selling it.
That this sale did not materialize is irrelevant. What is crucial is that
petitioners left respondents clear instructions not to build on the land.
19. We also agree with the RTC's ruling that the lack of constant
reminders from petitioners about the "prohibition" expressed in the
1983 letter was immaterial. The prohibition is considered extant and
continuing since there is no evidence that this letter was ever
withdrawn or modified. Moreover, no evidence was presented to show
that petitioners were aware of what was happening: that respondents were
 constructing a portion of the building with their own funds and for their
exclusive use and ownership. Neither were respondents able to present
evidence that petitioners had agreed to share the expenses with them, or that
the former had given consent to the latter's contribution, if any.
20. In view of the foregoing, this Court's previous rulings on Article 448 cannot
be applied to this case. Hence, we hold that petitioners, as the owners of
the land, have the right to appropriate what has been built on the
property, without any obligation to pay indemnity therefor; 65 and that
respondents have no right to a refund of any improvement built
therein,66 pursuant to Articles 449 and 450 of the Civil Code:
a. Art. 449. He who builds, plants or sows in bad faith on the land of another, loses
what is built, planted or sown without right of indemnity.
b. Art. 450. The owner of the land on which anything has been built, planted or sown
in bad faith may demand the demolition of the work, or that the planting or sowing
be removed, in order to replace things in their former condition at the expense of the
person who built, planted or sowed; or he may compel the builder or planter to pay
the price of the land, and the sower the proper rent.
c. Art. 451. In the cases of the two preceding articles, the landowner is entitled to
damages from the builder, planter or sower.
21. Respondents may recover the
necessary expenses incurred for the
preservation of the property but
without the right of retention.
22. Pursuant to Article 452 of the Civil Code, a builder in bad faith is entitled to
recoup the necessary expenses incurred for the preservation of the
land.67 The CA correctly ruled that respondents in this case are similarly
entitled to this reimbursement. However, being builders in bad faith, they do
not have the right of retention over the premises.68
23. While the evidence before this Court does not establish the amount of
necessary expenses incurred by respondents during their stay in the
property, we note that even petitioners do not deny that such expenses were
incurred.
24. In fact, in a letter dated 15 July 1983, petitioners acknowledged that
respondents had spent personal money for the maintenance of the
property. Petitioners even promised to reimburse them for those
expenses.69 In this light, we find it proper to order the remand of this case to
the court a quo for the purpose of determining the amount of necessary
expenses to be reimbursed to respondents.
25. With respect to the award of actual damages to petitioners, we find no
reason to reverse or modify the ruling of the CA.1âwphi1 This Court has
consistently held that those who occupy the land of another at the latter's
tolerance or permission, even without any contract between them, are
necessarily bound by an implied promise that the occupants would vacate
the property upon demand.70 Failure to comply with this demand renders
the possession unlawful and actual damages may be awarded to the
owner from the date of the demand to vacate71 until the actual
surrender of the property.
26. Accordingly, we affirm the CA's award of actual damages to petitioners in
the amount of ₱7 ,000 per month from the date of demand (22 October
2003) until the subject properties are vacated. This amount represents a
reasonable compensation for the use and occupation of respondents'
property72 as determined by the RTC and the MeTC.
27. As to petitioners' prayer for attorney's fees, we find no cogent basis for the
award. WHEREFORE, the Petition is PARTLY GRANTED.
28. The Court of Appeals Decision dated 25 April 2008 is REVERSED insofar
as it ordered: (a) the reimbursement of the useful expenses incurred by
respondents while in possession of the property; and (b) the determination
of the cost of these useful improvements by the court of origin. The rest of
the Decision of the Court of Appeals is hereby AFFIRMED.
29. Accordingly, this case is REMANDED to the court of origin for the
determination of the necessary expenses of preservation of the land, if any,
incurred by respondent spouses Eusebio and Josefina Aguilar while they
were in possession of the property, which expenses shall be reimbursed to
them by petitioner spouses Crispin and Teresa Aquino.
30. On the other hand, respondents and all persons claiming rights under them
are ordered, upon finality of this Decision without awaiting the resolution of
the matter of necessary expenses by the trial court, to immediately
VACATE the subject property and DELIVER its peaceful possession to
petitioners. Respondents are likewise ordered to PAY petitioners ₱7 ,000 as
monthly rental plus interest thereon at the rate of 6% per annum, to be
computed from 22 October 2003 until the finality of this Decision.
5.) Delos Reyes v. Municipality of Kalibo,
G.R. No. 214587, 26 February 2018
FACTS:
1. This is a petition for review seeking to annul and set aside the Decision [1] of the (CA) Cebu, Nineteenth (19th)
Division, dated September 28, 2012, and its Resolution [2] dated August 28, 2014 in CA-G.R. CEB-CV No.
00700 which reversed and set aside the Decision [3] of the (RTC), Branch 6 of Kalibo, Aklan on February 22,
2005 in Civil Case No. 5440, thereby declaring the subject properties as part of public land.
2. Lot No. 2076 of the Kalibo Cadastre, with a total area of 101,897 square
meters (sq.m.), was covered by Original Certificate of Title (OCT) No.
24435 RO-831, and registered in the name of Ana O. Peralta. Upon her
demise, her property passed on to her brother, Jose Peralta, who caused
registration of the same in his name under Transfer Certificate of Title
(TCT) No. T-5547, issued on January 13, 1975.
3. Jose later had the property divided into Lots 2076-A and 2076-B, and sold
the latter portion. Lot 2076-A, on the other hand, remained in Jose's name
and was registered under TCT No. 6166 on November 17, 1975.
4. In the meantime, allegedly through accretion, land was added to Lot No.
2076. Said area was first occupied by and declared for taxation purposes
(Tax Declaration No. 6466) in the name of Ambrocio Ignacio in 1945. He
was the Peraltas' tenant, but he later executed a Quitclaim of Real Property
in Jose's favor for the amount of P70.44 on March 14, 1955. When Jose
died, Lot 2076-A, together with the supposed area of accretion, was
transferred to his son, Juanito Peralta. While TCT T-13140 was issued for
Lot 2076-A on September 1, 1983, the area of accretion was apportioned
and registered under Tax Declaration Nos. 21162-A, 21163-A, 21164-A,
and 21165-A in the names of siblings Juanito, Javier Peralta, Josephine
delos Reyes, and Julius Peralta. Subsequently, Juanito likewise died.
5. On the other hand, the Municipality of Kalibo, through its then Mayor
Diego Luces and the members of its Sangguniang Bayan, sought to convert
more or less four (4) hectares of said area of accretion into a garbage
dumpsite. On November 10, 1992, Juanito, in his capacity as his siblings'
representative, opposed said project in a letter.
6. For failure to get a favorable response from the mayor's office, he wrote a
formal protest to the Secretary of the Department of Environment and
Natural Resources (DENR) on October 2, 1997.
7. Despite the Peraltas' opposition, the Municipality of Kalibo continued the
project under the justification that the contested property is actually part of
the public domain. Moreover, the DENR's Environmental Compliance
Certificate (ECC) showed that the project would not harm the dumpsite's
neighboring areas, including the water systems. Thus, the municipality built
a retaining wall on the property facing the Aklan river in 1996. More of the
structures were built on the area from 1997 to 1998. Later, the area was
enclosed with a perimeter fence.
8. On January 26, 1998, the Peraltas filed a Complaint [4] for quieting of title
over the two (2) portions of accretion declared in their names for taxation
purposes.
9. The Peraltas' prayer for an injunctive writ against the construction of the
dumpsite was denied, but on February 22, 2005, the RTC of Kalibo, ruled in
their favor, thus:  Registration under the Land Registration and Cadastral Act does not vest or
a. WHEREFORE, in view of the foregoing considerations, judgment is hereby
rendered in favor of the plaintiffs and against the defendants declaring the
aforedescribed parcels of land as an accretion and not a public land. Defendants are
also ordered to cease and desist from occupying that portion of the garbage
dumpsite with an area of 31,320 square meters, indicated in Parcels I, II and III of
Annex A of the Commissioner's Report (Exh. "13") which are within Lots 3 and 4
of plaintiffs' property. No award for damages and attorney's fees for want of
evidence to support the same.
10. Undaunted, the Municipality of Kalibo brought the matter to the CA Cebu.
On September 28, 2012, the CA granted its appeal and reversed the assailed
RTC ruling, hence: 
a. IN LIGHT OF THE FOREGOING, the appeal is GRANTED. The assailed
February 22, 2005 Decision of the Regional Trial Court, Branch 6 of Kalibo, Aklan
in Civil Case No. 5440 is hereby REVERSED and SET ASIDE.
11. The Peraltas then filed a Motion for Reconsideration, but the same was
denied in a Resolution dated August 28, 2014. Hence, the instant petition.
ISSUES:
1. The main issue in this case is whether or not the CA committed an error
when it reversed the RTC, which declared the subject parcels of land as
accretion and not part of the public domain.
RATIO:
1. The Court rules in the negative. 
2. In order that an action for quieting of title may prosper, the plaintiff must
have legal or equitable title to, or interest in, the property which is the
subject matter of the action. While legal title denotes registered ownership,
equitable title means beneficial ownership. In the absence of such legal or
equitable title, or interest, there is no cloud to be prevented or removed.
[7]
 Likewise, the plaintiff must show that the deed, claim, encumbrance, or
proceeding that purportedly casts a cloud on their title is in fact invalid or
inoperative despite its prima facie appearance of validity or legal efficacy. [8]
3. It must be noted that the Peraltas, the petitioners in the instant case, are not
even registered owners of the area adjacent to the increment claimed, much
less of the subject parcels of land. Only the late Juanito became the
registered owner of Lot 2076-A, the lot next to the supposed accretion.
Assuming that the petitioners are Juanito's rightful successors, they still did
not register the subject increment under their names.
4. It is settled that an accretion does not automatically become registered land
just because the lot that receives such accretion is covered by a Torrens
Title. Ownership of a piece of land is one thing; registration under the
Torrens system of that ownership is another. Ownership over the accretion
received by the land adjoining a river is governed by the Civil Code;
imprescriptibility of registered land is provided in the registration law.
give title to the land, but merely confirms and, thereafter, protects the title
already possessed by the owner, making it imprescriptible by occupation of
third parties. But to obtain this protection, the land must be placed under the
operation of the registration laws, wherein certain judicial procedures have
been provided.[9]
5. If at all, whatever rights the Peraltas derived from their predecessors-in-
interest respecting the area in question came only from the quitclaim of real
 property executed by Ignacio in Jose's favor in 1955. There is no concrete
evidence showing any right of title on Ignacio's part for him to be able to
legally and validly cede the property to Jose. What the quitclaim merely
proves is that Ignacio had forfeited any claim or interest over the accretion
in Jose's favor.
6. It is settled that equitable title is defined as a title derived through a valid
contract or relation, and based on recognized equitable principles, or the
right in the party, to whom it belongs, to have the legal title transferred to
him. In order that a plaintiff may draw to himself an equitable title, he must
show that the one from whom he derives his right had himself a right to
transfer.[10] Considering the aforementioned facts, the plaintiffs have neither
legal nor equitable title over the contested property.  evidence, even if such evidence is not overwhelming or even preponderant.
7. Moreover, even the character of the land subject of the quitclaim is highly
questionable. Ignacio, who was purportedly the first occupant of the area in
1945 and who was also in the best position to describe the lot, stated that
"the said parcel of swampy land is an integral expansion or continuity of the
said Cadastral Lot No. 2076, formed by a change of the shoreline of the
Visayan Sea, which shoreline has receded towards the North, thus, leaving
the swampy or parcel of land described in the immediately preceding
paragraph which accrues to the owner of said right of said Cadastral Lot No.
2076 (Torrens Title No. 24435), Jose O. Peralta by right of lawful accretion
or accession."[11]
8. Article 457 of the Civil Code of the Philippines, under which the Peraltas
claim ownership over the disputed parcels of land, provides:  period of time, does not constitute proof of possession, nor is it proof of
a. Art. 457. To the owners of lands adjoining the banks of rivers belong the accretion
which they gradually receive from the effects of the current of the waters.
9. Accretion is the process whereby the soil is deposited along the banks of
rivers. The deposit of soil, to be considered accretion, must be: (a) gradual
and imperceptible; (b) made through the effects of the current of the water;
and (c) taking place on land adjacent to the banks of rivers.[12]
10. Here, Ignacio characterized the land in question as swampy and its increase
in size as the effect of the change of the shoreline of the Visayan Sea, and
not through the gradual deposits of soil coming from the river or the sea.
11. Also, Baltazar Gerardo, the Officer-in-Charge of the Community
Environment and Natural Resources Office of the Bureau of Lands, found
upon inspection in 1987 that the subject area was predominantly composed
of sand rather than soil.[13] One of the plaintiffs, Javier, also testified that in
1974 or 1976, the Visayan Sea was around one (1) kilometer from the land
in question, and in 2003, the distance already became around three (3)
kilometers, giving the impression that the increment was actually the result
of additional area of sand deposits left by the sea when it had receded, and
not by gradual deposits of soil or sediment caused by the action of water.
12. In addition, the DENR has remained firm and consistent in classifying the
area as land of the public domain for being part of either the Visayan Sea of
the Sooc Riverbed and is reached by tide water. Further, the Sheriffs Report
dated July 13, 1998 shows that when he conducted an ocular inspection of
the area, part of it was reached by the tide. At around 11:30 a.m., he was
able to measure the deepest portion of the high tide at around nineteen (19)
inches, and its wideness at five (5) meters near the concrete wall.[14]
13. Indeed, by reason of their special knowledge and expertise over matters
falling under their jurisdiction, administrative agencies, like the DENR, are
in a better position to pass judgment on the same, and their findings of fact
are generally accorded great respect, if not finality, by the courts. Such
findings must be respected as long as they are supported by substantial
[15]
 Hence, the questionable character of the land, which could most
probably be part of the public domain, indeed bars Jose from validly
transferring the increment to any of his successors.
14. Indubitably, the plaintiffs are merely successors who derived their alleged
right of ownership from tax declarations. But neither can they validly rely
on said tax declarations and the supposed actual, open, continuous,
exclusive, and notorious possession of the property by their predecessors-in-
interest.
15. Any person who claims ownership by virtue of tax declarations must also
prove that he has been in actual possession of the property. Thus, proof that
the property involved had been declared for taxation purposes for a certain
ownership, in the absence of the claimant's actual possession of said
property.[16] In the case at bar, the Peraltas failed to adequately prove their
possession and that of their predecessors-in-interest.
16. Verily, in civil cases, the party having the burden of proof must do so with a
preponderance of evidence, with plaintiff having to rely on the strength of
his own evidence and not upon the defendant's weakness. Preponderance of
evidence is the weight, credit, and value of the aggregate evidence on either
side and is usually considered to be synonymous with the term "greater
weight of evidence" or "greater weight of credible evidence." Succinctly
put, it only requires that evidence be greater or more convincing than the
opposing evidence.[17] 
17. Since the Peraltas must first establish their legal or equitable title to or
interest in the property in order for their action for quieting of title may
prosper, failure to do so would mean lack of cause of action on their part to
pursue said remedy. 
18. WHEREFORE, PREMISES CONSIDERED, the Court DENIES the
petition, and AFFIRMS the Decision of the Court of Appeals Cebu,
Nineteenth (19th) Division, dated September 28, 2012, and Resolution dated
August 28, 2014 in CA-G.R. CEB-CV No. 00700.