Case Digests

Ponencias of J. Caguioa in Civil Law

REPUBLIC v. CAPITAL RESOURCES CORPORATION

G.R. No. 217210. November 7, 2016, First Division (Caguioa, J.)

DOCTRINE

Section 121 of the Public Land Act pertains to acquisitions of public land by a
corporation from a grantee. In this case, the original grantee was Dumuk and he
subsequently transferred the subject property to spouses Milo. In turn, the spouses were
the ones who sold the subject property to Capital Resources and Romeo Roxas. Evidently,
Capital Resources did not acquire the subject property from the original grantee.

As to the provision of the 1973 Constitution proscribing corporations from

acquiring "alienable lands" of the public domain, the consistent ruling of the Supreme
Court is that the prohibition will not apply if the property acquired by the corporation is
private property and not alienable lands of the public domain. The rule is that once a
patent is registered and the corresponding certificate of title is issued, the land covered by
it ceases to be part of the public domain and becomes private property.

FACTS

A Homestead Patent was granted to Dumuk which resulted in the issuance of an

OCT. The OCT was superseded by a TCT in the name of spouses Milo. Capital Resources
Corporation and Romeo Roxas (defendants-appellants) acquired the subject property from
spouses Milo resulting in the cancellation of the TCT and the issuance of a new one.

Defendants-appellants then caused the subdivision of the subject property via the
subdivision plan prepared by Engr. Mercado and it was subdivided into several blocks,
among which are Block 35 (18,079 sq.m.) and Block 36 (16,856 sq.m.). The plan indicated
that Block 35 is a "salvage zone" while a portion of Block 36 appeared to overlap a portion
of the China Sea. The subdivision plan was approved but was subsequently cancelled
pursuant to an Order of Cancellation issued by the DENR.

Based on the Cadastral Survey, Block 35 and Block 36 were projected therein as part
of the identified foreshore land and seabed, respectively. The DENR Committee investigated
and concluded that the submission by defendants-appellants of subdivision plan is
tantamount to an admission that the northwestern portion of the subject property was
eaten up and eroded due to the adverse effects of sea waters. It pointed out that Capital
Resources may not validly acquire the subject property pursuant to Section 119 of Act No.
2874 and the 1973 Constitution.

Consequently, the Republic of the Philippines, through the OSG, filed a Complaint for
Cancellation of Title and Reversion against defendants-appellants and the Register of Deeds
of La Union before the Regional Trial Court. The Republic alleged that from the time that
Homestead Survey Plan was approved until the cadastral survey, the northwestern portion
of the subject property had been washed out and eaten up by the sea waters. Per the ocular
inspection, Blocks 35 to 36 formed part of the public domain. This fact is clearly supported
by subdivision submitted by defendants-appellants wherein the area already consumed by
the sea has already been demarcated or isolated. Thus, the Republic prayed for judgment:
(a) declaring the TCT and its derivative titles as null and void; (b) ordering defendants
appellants to surrender the owner's duplicate of TCT for cancellation; (c) ordering the
defendants, their heirs, agents, assigns or anyone acting in their behalf to cease and desist
from exercising acts of ownership over the subject property and to vacate the same, if they
are in possession thereof; and (d) ordering the reversion of the subject land to the public
domain.

ISSUES

(1) Whether or not the Court may consider the issues raised by petitioner Republic;
and
(2) Whether or not the remaining portion of the Subject Property (being foreshore
and salvaged zones) may be reverted to the public domain.

RULING

1. NO. Petitioner Republic does not dispute the fact that it failed to raise the
contested issues in its Complaint and pre-trial brief. Instead, petitioner Republic argues
that such issues are "within the of the initial issues", being "germane to the sole purpose of
cancelling the TCT in its entirety". Petitioner Republic's contention is not well-taken.
While petitioner Republic's Complaint prayed for the reversion of the entire
Subject Property, the allegations are predicated merely on their assertion that Blocks 35
and 36 have become foreshore lands. In this regard, basic is the rule that it is the
allegations of the complaint and not the prayer that determines the basis of the plaintiff's
relief. In the same vein, the prayer will not be construed as enlarging the complaint so as
to embrace a cause of action not pleaded therein.

While the Complaint prayed for the reversion of the entire Subject Property, the
allegations contained therein pertained only to Blocks 35 and 36. Hence, considering that
the body of the Complaint merely supported the reversion of Blocks 35 and 36, it is of no
moment that there was a general prayer for the reversion of the entire Subject Property.
Any relief granted beyond the allegations of the Complaint would be baseless and would
amount to grave abuse of discretion. Accordingly, contrary to the asseverations of
petitioner Republic, the issues raised in its Motion for Partial Reconsideration cannot be
considered as "within the bounds of the original issues".

Moreover, considering the non-inclusion of the contested issues in the Pre-Trial

Order, such delimitation made by the RTC had effectively barred the consideration of the
said issues, whether during the trial or on appeal. Where the petitioners failed to have the
issue of prescription and laches included in the pre-trial order despite having raised it in
their Answer, this Court held that such issues could no longer be considered on appeal,
the parties being bound by the stipulations made during pre-trial.

2. NO. Petitioner Republic insists that the CA erred in ordering only the reversion
of the portion of the Subject Property pertaining to Blocks 35 and 36, on the ground that:
(i) there are inconsistencies in the land area of the Subject Property, specifically between
the TCT and subdivision plan; and (ii) respondent CRC is ineligible to be a "transferor" of
a homestead patent.
Anent the first issue, petitioner Republic makes much of the fact that the land area
of the Subject Property reflected in TCT is 158,345 square meters, while in subdivision
plan, the land area is 165,582 square meters. However, aside from such observations,
petitioner Republic failed to allege any legal basis that would warrant the outright
cancellation of the TCT and correspondingly, the reversion of the entire Subject Property.

With respect to the second issue, petitioner Republic insists that respondent CRC
is ineligible to acquire the Subject Property under the Public Land Act, which was the law
in force at the time the OCT was issued. Further, petitioner Republic argues that the
transfer of the Subject Property to respondent CRC is violative of Section 11 of the 1973
Constitution, which prohibits private corporations from holding alienable lands of the
public domain except through a lease agreement. Petitioner Republic is mistaken.
Section 121 of the Public Land Act pertains to acquisitions of public land by a
corporation from a grantee. In this particular case, the original grantee was Vitaliano
Dumuk and he subsequently transferred the subject property to spouses Cecilio and
Laura Milo. In turn, the spouses were the ones who sold the subject property to
Capital Resources and Romeo Roxas. Evidently, Capital Resources did not acquire the
subject property from the original grantee. Even if We were to assume that Capital
Resources is ineligible to be a transferee, the fact remains that the subject property was
purchased by Capital Resources and Romeo Roxas and the latter is an individual who is not
barred from acquiring the subject property.

As to the provision of the 1973 Constitution proscribing corporations from

acquiring "alienable lands" of the public domain, the consistent ruling of the Supreme
Court is that the prohibition will not apply if the property acquired by the corporation
is private property and not alienable lands of the public domain. The rule is that once a
patent is registered and the corresponding certificate of title is issued, the land covered by it
ceases to be part of the public domain and becomes private property. In the present case,
the subject property became private property upon the issuance of the OCT to Vitaliano
Dumuk. Necessarily, when the defendants-appellants acquired the subject property
in 1982, the same was no longer a part of the alienable lands of the public domain but
a private property. Hence the prohibition will not apply.
While petitioner Republic was able to show its entitlement to the reversion of
Blocks 35 and 36 to the public domain, it failed to do the same with respect to the
remaining portion of the Subject Property.

HEIRS OF TOMAKIN v. HERIS OF NAVARES

G.R. No. 223624, July 17, 2019, Second Division (Caguioa, J.)

DOCTRINE

It is well-settled that a party may not change his theory of the case on appeal and this
is expressly adopted in Section 15, Rule 44 of the Rules. Defenses not pleaded in the answer
may not be raised for the first time on appeal. It is also well-settled that issues raised for the
first time on appeal and not raised in the proceedings in the lower court are barred by
estoppel.

FACTS

The property in dispute is Lot No. 8467 originally owned by the late Jose Badana
who died without issue. He was survived by his two sisters Quirina Badana and Severina
Badana. Heirs of Celestino Navares, herein respondents, filed a Complaint for
Reconveyance and Damages against the Heirs of Leonarda Nadela Tomakin, herein
petitioners, before the RTC alleging that Quirina Badana as one of the heirs of Jose Badana,
sold one-half of the Lot No. 8467 to spouses Remigio Navares and Cesaria Gaviola, the
portion known as Lot No. 8467-B as evidenced by Sale with Condition; that they inherited
the lot as successors-in-interest of the late souses Narvaes and that their predecessors has
been religiously paying realty taxes; that most of them had been occupying and residing on
the property adversely and openly in the concept of an owner; that Severina Badana, the
other heir of Jose Badana, sold the other half of the subject lot, known as Lot No. 8467-A, to
the spouses Aaron and Felipa, the predecessors-in-interest of petitioners Tomakin.

Petitioners sold a portion of the subject lot to spouses Alfred Dacua Jr. and Clarita
Bacalso as evidenced by a Deed of Absoute Sale. Respondents allege that with the sale,
Dacua Jr caused Lot No. 8467-A to be titled in his name; that the petitioners made it appear
that one Mauricia Bacus, a complete stranger to the property, executed a document
denominated as Extra Judicial Settlement of the Estate of Jose Badana with Confirmation of
Sale for which Dacua Jr. maliciously caused Lot No. 8467-B to be titled in the name of
Leonarda Nadela Tomakin and Lucas J. Nadela; that oral demands for reconveyance of the
Lot No. 8467-B title remained unheeded.

Petitioner Tomakin claimed that they are the heirs of Leonarda Tomakin and that
Lot No. 8467 was purchased by Aaron Nadela and Felipa Jaca from Severina Badana, sister-
heir of the late Jose Badana as evidenced by a Deed of absolute Sale; that Leonarda N.
Tomakin and her brother Lucas J. Nadela executed a Deed of Partition conveying Lot No.
8467 in favor of Leonarda N. Tomakin; that before Leonarda died, she and Lucas sold one-
half of Lot No. 8467 in favor of spouses Dacua Jr. and Bacalso. Leonarda and Lucas have
been exercising acts of ownership over Lot No. 8467 and Lot No. 8467-B; that respondents
Navares are barred by prescription and laches – 49 years having elapsed since the alleged
sale of the one half portion of the property in 1955.

The RTC ruled in favor of petitioner Tomakin but the CA granted respondents
Navares’ appeal and upheld the sale of Lot No. 8467-B to spouses Navares.

ISSUES

1. Whether the CA failed to appreciate that respondents Navares' possession was not
in the concept of an owner;

2. Whether the CA failed to appreciate the indefeasibility of the Torrens title;

3. Whether the CA failed to appreciate that respondents Navares in not previously

filing a case for declaration of heirship as heirs of spouses Remegio Navares and
Cesaria Gaviola have no cause of action against petitioners Tomakin; and

4. Whether the CA failed to appreciate that respondents Navares are guilty of

laches RULING

The petition is denied.

1. NO. The Court ruled that prescription does not run against the plaintiff in actual
possession of the disputed land because such plaintiff has a right to wait until his
possession is disturbed or his title is questioned before initiating an action to vindicate
his right. The action for reconveyance was filed by respondents Navares precisely
because they deemed themselves owner of the litigated property prior to the claim of
petitioners Tomakin. The filing of such action was an assertion of their title to the
property.

2. NO. Contrary to petitioners Tomakin's postulation, respondents Navares availed

themselves of the correct remedy of reconveyance. The Court stated that the sole
remedy of the land owner whose property has been wrongfully or erroneously
registered in another's name is, after one year from the date of the decree, not to set
aside the decree, but, respecting the decree as incontrovertible and no longer open to
review, to bring an ordinary action in the ordinary court of justice for reconveyance or,
if the property has passed into the hands of an innocent purchaser for value, for
damages.

3. NO. Petitioners Tomakin never raised in their Answer the ground that respondents
Navares have no cause of action against them because the former had not previously
filed a petition for declaration of heirship as heirs of spouses Remigio Navares and
Cesaria Gaviola. This issue may no longer be raised by petitioners Tomakin nor ruled
upon on appeal as it is well-settled that a party may not change his theory of the case on
appeal and this is expressly adopted in Section 15, Rule 44 of the Rules.

SEC. 15. Questions that may be raised on appeal. – Whether or not the appellant
has filed a motion for new trial in the court below, he may include in his
assignment of errors any question of law or fact that has been raised in the court
 below and which is within the issues framed by the parties.

Defenses not pleaded in the answer may not be raised for the first time on
appeal. It is also well-settled that issues raised for the first time on appeal and
not raised in the proceedings in the lower court are barred by estoppel and as
such, the Court cannot pass upon the third issue.

4. NO. Respondents Navares, having been in possession of and exercising acts of

dominion over the subject property as found by the CA, cannot be deemed to be guilty of
laches because they cannot be said to have omitted or neglected to assert and exercise
their rights as owner thereof. The Court held that the undisturbed possession of
respondents Navares give them the continuing right to seek the aid of a court of equity
to determine the nature of the adverse claim of petitioners Tomakin and its effect on
their ownership of Lot No. 8467-B.

REPUBLIC OF THE PHILIPPINES vs. POTENCIANO A. LARRAZABAL, SR.,

VICTORIA LARRAZABAL LOCSIN and BETTY LARRAZABAL MACATUAL
G.R. No. 204530, July 26, 2017, First Division (Caguioa, J.)

DOCTRINE
Just compensation is to be ascertained as of the time of the taking, which usually
coincides with the commencement of the expropriation proceedings. Where the institution of
the action precedes entry into the property, the just compensation is to be ascertained as of
the time of the filing of the complaint.

FACTS
Sometime in November 1991, heavy rains in Ormoc City caused the Malbasag River
to overflow resulting in a flashflood throughout the city. To avoid a similar tragedy, the
petitioner, through the Department of Public Works and Highways, undertook a massive
flood mitigation project at the Malbasag River, which required a right of way.

On September 15, 1999, petitioner filed a Complaint with the RTC for expropriation
of portions of three parcels of land that respondents Potenciano, Victoria, and Betty owned.

Respondent Potenciano's commercial property is Lot No. 844 located at Poblacion,

Municipality of Ormoc, Leyte. Respondents Victoria's and Betty's residential properties are
Lot No. 1 located at Barangay Can-adieng, Ormoc City, Leyte and Lot No. 2 in the same
barangay. Petitioner sought to expropriate 1,027 square meters of respondent Potenciano's
property, 575 square meters of respondent Victoria's property, and 4,638 square meters of
respondent Betty's property. Based on Resolution No. 8-98, the properties were appraised
at P1,000.00 per square meter for commercial lots and P800.00 for residential lots.

After the filing of the Complaint, petitioner was allowed to enter the properties,
demolish the improvements thereon, and to deposit the amounts corresponding to the
provisional payments for the properties. Subsequently, respondents filed their Answer
where they prayed that the just compensation for respondent Potenciano's property be
fixed at P25,000.00 per square meter, and P15,000.00 per square meter for respondents
Victoria's and Betty's properties.

The RTC appointed a set of Commissioners to evaluate and recommend the amount
of just compensation for the properties. On November 20, 2001, the Commissioners
submitted their Report with the estimated fair market values of the properties. The
Commissioners considered the three properties as commercial lots and found that one real
estate transaction — sale of the property of William Gothong and Aboitiz where the lot was
sold at P30,000.00 per square meter — nearly reflected the fair market value of commercial
lots in Ormoc City. The Commissioners found that the estimated fair market value of
Potenciano's property was P10,000.00 per square meter, and P4,000.00 per square meter
for Betty's and Victoria's properties.
 Petitioner then filed its Comment on the Commissioners' Report stating that the
appraisal values as stated in Resolution No. 8-98 should be applied instead of the just
compensation determined by the Commissioners.

In its Decision, the RTC approved the value of the properties as fixed by the
Commissioners in their Report. The RTC ruled that in eminent domain cases, the value of
the property as of the date of the filing of the complaint is generally determinative of the
just compensation. The RTC further ruled that "sales so taken in the neighborhood of the
same year of taking, have been considered fair enough as to reflect fair market value of the
property." As basis for approving the value fixed by the Commissioners, the RTC relied on
the sales of properties that were made on November 14, 1997 involving the property of
William Gothong and Aboitiz and on July 10, 2000 involving the property of Mariano Tan.

The CA in its Decision and Resolution affirmed the RTC Decision. The CA made an
extensive discussion on why the RTC correctly disregarded Republic Act (RA) No. 8974,
entitled An Act to Facilitate the Acquisition of Right-Of-Way, Site or Location for National
Government Infrastructure Projects and for Other Purposes and its IRR in determining the
just compensation to be paid to respondents for their properties. The CA ruled that RA No.
8974 was not applicable since it only applies prospectively. Since the Complaint was filed as
early as September 15, 1999, RA No. 8974 was not applicable because it was signed into law
on November 7, 2000 and became effective only on November 26, 2000.

ISSUE
1. Whether RA No. 8974 is applicable to the determination of the just compensation
to be paid to respondents for their properties, and
2. Whether the CA acted correctly in affirming the RTC Decision on the just
compensation for the properties.

RULING

1. NO. RA No. 8974 cannot be made to apply retroactively since it is a substantive law.
There is nothing in RA No. 8974 which expressly provides for retroactive application; and
retroactivity could not necessarily be implied from RA No. 8974. Here, since the complaint
for eminent domain was filed on September 15, 1999, or prior to the effectivity of RA No.
8974 on November 26, 2000, then RA No. 8974 and the standards indicated therein are not
applicable in determining the just compensation in the present case.

2. NO. The Court is constrained to order the remand of this case to the RTC for the proper
determination of just compensation.

The RTC's reliance on the sale of the properties of William Gothong and Mariano
Tan deviated from the settled rule that just compensation should be determined as of
the time of the taking. Just compensation is to be ascertained as of the time of the taking,
which usually coincides with the commencement of the expropriation proceedings. Where
the institution of the action precedes entry into the property, the just compensation is to be
ascertained as of the time of the filing of the complaint.

Since the Complaint in this case was filed on September 15, 1999, with petitioner
being allowed entry to the property thereafter, the just compensation should therefore be
reckoned as of the time of the filing of the Complaint. The two sales relied upon by the RTC
were made on November 14, 1997 and July 10, 2000. These sales — the first being almost 2
years prior to, and the second, being 10 months after, the filing of the Complaint on
September 15, 1999 — were not and could not have been proper bases for determining the
just compensation for the properties. The same is true for the sale between Emmanuel
Antig and Marie Paz Kathryn Porciuncula as the sale was made on December 28, 1995, or
almost four years before the filing of the Complaint. Sales around the time of September 15,
1999, or the year 1999, are the proper bases for determining the just compensation for the
properties, especially considering that no reasons can be found in the records as to why no
such sales during this period were considered by the Commissioners or the RTC.
 More than this, however, the error of the RTC was exacerbated by its reliance solely
on comparative sales of other properties. Just compensation cannot be arrived at
arbitrarily; several factors must be considered such as, but not limited to, acquisition cost,
current market value of like properties, tax value of the condemned property, its size,
shape, and location. But before these factors can be considered and given weight, the same
must be supported by documentary evidence. The amount of just compensation could only
be attained by using reliable and actual data as bases for fixing the value of the condemned
property. A commissioners' report of land prices which is not based on any documentary
evidence is manifestly hearsay and should be disregarded by the court.

Here, the records reveal that the RTC's determination of just compensation did not
consider any of the foregoing factors. The RTC Decision miserably failed to even explain
how the amounts of P10,000.00 per square meter for respondent Potenciano's property,
and P4,000.00 per square meter for respondents Victoria's and Betty's properties were
arrived at. There was no consideration made of the acquisition cost, current market value
of like properties, the tax value of the properties of respondents, and the size, shape and
location of the properties. Clearly, in the absence of any actual and reliable data — and the
abject failure to explain this absence — there can be no other conclusion that can be drawn
except that the RTC's determination of just compensation was arbitrary.

In view of the foregoing, the Court is left with no option except to reverse and set
aside the CA Decision and Resolution that affirmed the RTC Decision. The Court, however, is
not in a position to fix the amount of just compensation for indeed, a review of the records
shows that there is no sufficient evidence to allow any determination of the proper just
compensation. In this regard, the Court cannot also rely only on Resolution No. 8-98 as this
cannot substitute for the judicial determination of just compensation, based on all the
factors mentioned above as jurisprudentially mandated.

AMA LAND, INC., vs. WACK WACK RESIDENTS' ASSOCIATION, INC.

G.R. No. 202342. July 19, 2017, First Division (Caguioa, J.)

DOCTRINE
The temporary easement of right of way under Article 656 of the Civil Code, similar to
the permanent easement of right of way pursuant to its Articles 649 and 650, can only be
granted after proof of compliance with the prerequisites set forth in the articles duly adduced
during a full-blown trial.

FACTS
A commercial and residential building project located at EDSA corner Fordham
Street in Wack Wack Village, Mandaluyong City, was proposed by AMALI in the mid-1990s.
The latter proceeded to secure the needed licenses and permits for the construction of the
project. On March 18, 1996, AMALI notified WWRAI — a registered homeowners'
association of Wack Wack Village — of its intention to use Fordham Street as an access road
and staging area of the project. As AMALI received no response from WWRAI, the former
temporarily enclosed the job site and set up a field office along Fordham Street. WWRAI
claimed, however, that AMALI already converted part of the said street as barrack site and
staging area even before March 18, 1996. All subsequent attempts of WWRAI to remove the
said field office proved futile.

AMALI then filed a petition before the RTC, wherein it seeks the temporary use of
Fordham Street belonging to WWRAI as an access road to AMALI's construction site of its
AMA Tower project pursuant to Article 656of the Civil Code, and to establish a permanent
easement of right of way in its favor over a portion of Fordham Street pursuant to Article
649 of the Civil Code. The RTC granted the writ of preliminary mandatory injunction
"directing WWRAI to allow AMALI to use Fordham Street through a temporary easement of
right of way." The CA granted WWRAI's application for a temporary restraining order, and,
accordingly, AMALI was commanded to cease and desist from further committing the act
complained of, which is the construction of the commercial and residential condominium
project located along EDSA corner Fordham Street in Wack Wack Village.
ISSUE

1. Whether WWRAI is entitled to enjoin the construction of the AMA Tower pending
determination of the original petition for the declaration of temporary and
permanent easements of right of way over a portion of Fordham Street.

2. Whether AMALI, as owner of the dominant estate, may validly claim against
WWRAI a compulsory permanent right of way under Articles 649 and 650 of the Civil Code,
or, a temporary right of way under Article 656 of the Civil Code.

RULING

1. NO. To be entitled to the injunctive writ, the petitioner must show that: (1) there exists a
clear and unmistakable right to be protected; (2) this right is directly threatened by the act
sought to be enjoined; (3) the invasion of the right is material and substantial; and (4) there
is an urgent and paramount necessity for the writ to prevent serious and irreparable
damage.

The grant or denial of the injunctive relief rests on the sound discretion of the court
taking cognizance of the case, since the assessment and evaluation of evidence towards that
end involves findings of fact left to the conclusive determination by such court; and the
exercise of judicial discretion by such court will not be interfered with, except upon a
finding of grave abuse of discretion. In the issuance of the injunctive writ, grave abuse of
discretion implies a capricious and whimsical exercise of judgment equivalent to lack of
jurisdiction; or the exercise of power in an arbitrary or despotic manner by reason of
passion, prejudice or personal aversion amounting to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined or to act at all in contemplation of law.

Guided by the foregoing principles, the CA erred in finding that the RTC committed
grave abuse of discretion in issuing its Orders, denying WWRAI's application for the
issuance of a temporary restraining order and writ of preliminary injunction. WWRAI's
allegation that its members' right to live in a peaceful, quiet and safe environment will be
violated in the event that the condominium project of AMALI will be erected is untenable.
The alleged noise and dust that may be caused by the construction is the natural
consequence thereof. However, this annoyance that may be brought by the construction is
not permanent in nature but is merely temporary and once the building is completed, said
members' right to live in a peaceful, quiet and safe environment will be restored without
noise and dust. As to the allegations that said members' privacy may be invaded for the
reason that they may be photographed or videotaped without their knowledge, these fears
are merely speculative and cannot be taken into consideration. As admitted by WWRAI's
witness, the construction activity is suspended, hence, there is nothing to restrain. There is
no urgent and paramount necessity for the writ to prevent serious damage.

Indeed, WWRAI was unable to convincingly demonstrate a clear and unmistakable

right that must be protected by the injunctive writ. The apprehensions of its members are,
as correctly ruled by the RTC, speculative and insufficient to substantiate the element of
serious and irreparable damage.

2. NO. The denial of WWRAI's application for a writ of preliminary injunction against the
construction of the AMA Tower does not necessarily translate to AMALI's entitlement to a
temporary easement of right of way over a portion of Fordham Street belonging to WWRAI
for use as an access road and staging area of its AMA Tower project before the resolution of
its petition for declaration of easement of right of way (original petition) by the RTC.
WWRAI cannot be compelled at this stage of the proceedings to grant AMALI a temporary
legal easement of right of way over a portion of Fordham Street.

The question of whether or not AMALI, as owner of the dominant estate, may validly
claim against WWRAI a compulsory permanent right of way under Articles 649 and 650 of
the Civil Code, will depend on a finding that AMALI has established the existence of the
following requisites, namely: (1) the dominant estate is surrounded by other immovables;
(2) it is without adequate outlet to a public highway; (3) after the proper indemnity has
been paid; (4) the isolation was not due to the proprietor of the dominant estate's own acts;
and (5) the right of way claimed is at a point least prejudicial to the servient estate. A sixth
requisite is that the right of way must be absolutely necessary for the normal enjoyment of
the dominant estate by its owner. There must be a real, not fictitious or artificial, necessity
for the right of way, and the right cannot be claimed merely for the convenience of the
owner of the enclosed estate. The burden of proving the existence of the foregoing
requisites lies on AMALI, being the owner of the dominant estate. This issue has been
correctly recognized by the CA as still pending determination by the Regional Trial
Court of Pasig City assigned in San Juan (Metropolitan Manila) Branch 264, in Civil
Case No. 65668.

In turn, as regards the question of whether AMALI is entitled to a temporary

easement of right of way, Article 656 of the Civil Code provides that this can be granted
only after the payment of the proper indemnity by AMALI, the owner of the dominant
estate; and only if AMALI has established that the easement is indispensable for the
construction of its AMA Tower Project.

The RTC did not even factor in its Order "directing WWRAI to allow AMALI to use
Fordham Street through a temporary easement right of way and set the compensation for
the use of Fordham Street to P50,000.00 per month of use" the fact that the front portion of
AMALI's property where the proposed AMA Tower project is situated is facing EDSA, which
AMALI describes as a main thoroughfare. The said Order also fails to identify the specific
portion of Fordham Street that would be subject to the temporary easement of right of way.
The RTC erred and/or gravely abused its discretion when it granted AMALI's application
for preliminary mandatory injunction because, in so doing, it prematurely decided disputed
facts and disposed of the merits of the case without the benefit of a full blown trial wherein
testimonial and documentary evidence could be fully and exhaustively presented, heard
and refuted by the parties. As such, the RTC Order insofar as it granted a temporary
easement of right of way over Fordham Street in favor of AMALI is concerned is declared
void and of no force and effect. The RTC lacked jurisdiction to declare a temporary
easement of right of way arising from Article 656 of the Civil Code without a full-blown trial.

Article 656 requires proof of indispensability and receipt of payment of the proper
indemnity for the damage caused by the owner of the dominant estate before the owner of
the servient estate can be compelled to grant a temporary easement of right of way. AMALI
presented no witnesses to establish these prerequisites. Being preconditions, they are akin
to suspensive conditions that must be fulfilled before the obligation on the part of WWRAI
to allow the easements can arise. Until the preconditions are met, AMALI has no legal basis
to use a portion of Fordham Street as an access road and staging area of its AMA Tower
project. To allow AMALI to do so would be in contravention of the legal provisions on the
establishment and grant of the legal easement of right of way under the Civil Code.

To stress, the temporary easement of right of way under Article 656 of the Civil
Code, similar to the permanent easement of right of way pursuant to its Articles 649 and
650, can only be granted after proof of compliance with the prerequisites set forth in the
articles duly adduced during a full-blown trial.

G. HOLDINGS, INC vs. CEPALCO

G.R. No. 226213. September 27, 2017, Second Division (Caguioa,

J.) DOCTRINE

Under Article 1345 of the Civil Code, simulation of a contract may be absolute, when
the parties do not intend to be bound at all, or relative, when the parties conceal their true
agreement. The characteristic of simulation is the fact that the apparent contract is not really
desired or intended to produce legal effects or in any way alter the juridical situation of the
parties. Thus, where a person, in order to place his property beyond the reach of his creditors,
simulates a transfer of it to another, he does not really intend to divest himself of his title and
control of the property; hence, the deed of transfer is but a sham. Further, rescissible contracts
and void or inexistent contracts belong to two mutually exclusive groups.

FACTS

From March 1990 CEPALCO, which operates a light and power distribution system
in Cagayan de Oro City, supplied power to the ferro-alloy smelting plant of FPI at the
PHIVIDEC Industrial Estate in Tagoloan, Misamis Oriental. When FPI defaulted in the
payment of its electric power bills, CEPALCO demanded payment thereof. FPI paid
CEPALCO on three separate dates, leaving a balance. FPI failed again to pay its subsequent
electricity bills, thereby increasing its unpaid electric bills. For failure to pay FPI's
outstanding bills, CEPALCO disconnected the electric power supply to FPI in May 1996.
CEPALCO filed a collection suit against FPI. RTC-Pasig rendered a Decision in favor of
CEPALCO, ordering FPI to pay CEPALCO. CEPALCO moved for execution pending appeal,
which was granted by RTC Pasig. In the meantime, Sheriff Baron of RTC-Pasig issued notices
of levy upon personal and real properties and notices of sale on execution of personal and
real properties.

GHI filed a case against Sheriff Baron, CEPALCO and FPI for Nullification of Sheriff's
Levy on Execution and Auction Sale, Recovery of Possession of Properties and Damages
before the RTC-CDO. GHI claimed that the levied ferro-alloy smelting facility, properties and
equipment are owned by it as evidenced by a Deed of Assignment executed by FPI. In the
unilateral Deed of Assignment, FPI, as the assignor, through its stockholders and Board of
Directors' duly authorized representative and Acting President, Juanito E. Figueroa, in
consideration of obligations conveyed absolutely in favor of GHI, as the assignee, "all of
the [assignor's] properties, equipment and facilities, located in Phividec Industrial
Estate, Tagoloan, Misamis Oriental. Prior to the Deed of Assignment, FPI sent to GHI a
letter dated February 28, 2003 wherein the manner by which the obligation of FPI
amounting to P50,366,926.71 (as of December 31, 2002) would be addressed per their
earlier discussions was confirmed.

CEPALCO filed its answer with compulsory counterclaim and cross-claim. In its
counterclaim, CEPALCO assailed the validity of the Deed of Assignment. CEPALCO
contended that the Deed of Assignment was null and void for being absolutely simulated
and, as a dacion en pago, it did not bear the conformity of the creditor. GHI and FPI have
substantially the same directors. The Deed of Assignment was in fraud of FPI's creditors as
it was made after the RTC-Pasig had already rendered a partial judgment in favor of
CEPALCO and was, therefore, rescissible.

ISSUE

1. Whether the CA was correct in not dismissing CEPALCO's compulsory counterclaim for
non-payment of docket fees.
2. Whether the Deed of Assignment was absolutely simulated as it was done in fraud of
creditors and badges of fraud accompanied its execution, and is therefore not rescissible.

RULING

1. YES. CEPALCO's counterclaim and prayer for rescission of the Deed of Assignment can
only be viewed as a compulsory counterclaim because it "arises out of or is connected with
the transaction or occurrence constituting the subject matter of the opposing party's claim
and does not require for its adjudication the presence of third parties of whom the court
cannot acquire jurisdiction." Being a compulsory counterclaim, the CA was correct when it
ruled that as of the filing of CEPALCO's Answer with Compulsory Counterclaim and Cross-
Claim, it was not liable to pay filing fees on its compulsory counterclaim. Thus, on the first
issue, the CA committed no reversible error when it did not order the dismissal of
CEPALCO's counterclaim, which is compulsory, for non-payment of docket fees.
2. YES. The Deed of Assignment is being questioned for being both rescissible and, at the
same time, an absolute simulation (void or inexistent contracts).

Rescission and nullity can be distinguished in the following manner: (a) by reason of
the basis — rescission is based on prejudice, while nullity is based on a vice or defect of one
of the essential elements of a contract; (2) by reason of purpose — rescission is a reparation
of damages, while nullity is a sanction; (3) by reason of effects — rescission affects private
interest while nullity affects public interest; (4) by reason of nature of action — rescission is
subsidiary while nullity is a principal action; (5) by reason of the party who can bring action
— rescission can be brought by a third person while nullity can only be brought by a party;
and (6) by reason of susceptibility to ratification — rescissible contracts need not be
ratified while void contracts cannot be ratified.

They can likewise be distinguished as follows: (1) as to defect: In rescissible

contracts, there is damage or injury either to one of the contracting parties or to third
persons; while in void or inexistent contracts, one or some of the essential requisites of a
valid contract are lacking in fact or in law; (2) As to effect: The first are considered valid and
enforceable until they are rescinded by a competent court; while the latter do not, as a
general rule, produce any legal effect; (3) As to prescriptibility of action or defense: In the
first, the action for rescission may prescribe; while in the latter, the action for declaration
of nullity or inexistence or the defense of nullity or inexistence does not prescribe; (4) As to
susceptibility of ratification: The first are not susceptible of ratification, but are susceptible
of convalidation; while the latter are not susceptible of ratification; (5) As to who may assail
contracts: The first may be assailed not only by a contracting party but even by a third
person who is prejudiced or damaged by the contract; while the latter may be assailed not
only by a contracting party but even by a third party whose interest is directly affected; (6)
As to how contracts may be assailed: the first may be assailed directly, and not collaterally;
while the latter may be assailed directly or collaterally.

The enumerations and distinctions above indicate that rescissible contracts and void
or inexistent contracts belong to two mutually exclusive groups. A void or inexistent
contract cannot at the same time be a rescissible contract, and vice versa. The latter, being
valid and until rescinded, is efficacious while the former is invalid. There is, however, a
distinction between inexistent contracts and void ones as to their effects. Inexistent
contracts produce no legal effect whatsoever in accordance with the principle "quod nullum
est nullum producit effectum." In case of void contracts where the nullity proceeds from the
illegality of the cause of object, when executed (and not merely executory) they have the
effect of barring any action by the guilty to recover what he has already given under the
contract.

Under Article 1345 of the Civil Code, simulation of a contract may be absolute, when
the parties do not intend to be bound at all, or relative, when the parties conceal their true
agreement. The former is known as contracto simulado while the latter is known as
contracto disimulado. An absolutely simulated or fictitious contract is void while a
relatively simulated contract when it does not prejudice a third person and is not intended
for any purpose contrary to law, morals, good customs, public order or public policy binds
the parties to their real agreement. The characteristic of simulation is the fact that the
apparent contract is not really desired or intended to produce legal effects or in any way
alter the juridical situation of the parties. Thus, where a person, in order to place his
property beyond the reach of his creditors, simulates a transfer of it to another, he does not
really intend to divest himself of his title and control of the property; hence, the deed of
transfer is but a sham.

In the Deed of Assignment, did FPI intend to divest itself of its title and control of the
properties assigned therein?

The lack of intention on the part of FPI to divest its ownership and control of "all of
its properties, equipment and facilities, located in Phividec Industrial Estate, Tagoloan,
Misamis Oriental" — in spite of the wordings in the Deed of Assignment that FPI "assigned,
transferred, ceded and conveyed them absolutely in favor of GHI" — is evident from the
letter dated February 28, 2003 which reveals the true intention of FPI and GHI.

In the letter, it is there provided that the right to the work process, "Outokumpo,"
was to be retained by FPI and would only be made available to GHI under two options. One
option even gave FPI the option to operate the assigned assets with the obligation to pay
GHI a guaranteed revenue. While GHI was given the first crack to choose which of the two
options to take, such chosen option would only last for three years, and subsequently, FPI
would make the choice and the option chosen by FPI would last for the next three years.
The cycle would then be repeated if the ferro-alloy plant would not be operated for six
years from assignment. What is evident, therefore, in the delineation of the different
options available to FPI and GHI in the settlement of FPI's obligations to the latter is that
FPI did not intend to really assign its assets "absolutely" to GHI. This letter belies the
wordings of the Deed of Assignment that, was executed a mere 11 days after the letter.

That there was no intention to absolutely assign to GHI all of FPI's assets was
confirmed by the finding of the RTC-CDO that, according to FPI's Acting President, Juanito E.
Figueroa, "GHI cannot operate the [equipment, machinery and smelting facilities] without
the patented 'Outokumpo' process and GHI has not been operating the same." Moreover, the
equipment and machinery remain physically in the plant premises, slowly depreciating with
the passage of time, and, worse, there also appears to be no effective delivery as the
premises on which these are located remain under the control of FPI which continues to
employ the security and skeletal personnel in the plant premises.

Thus, in executing the Deed of Assignment, FPI's intention was not to transfer
absolutely the assigned assets (admittedly valued at about P280 Million) to GHI in payment
of FPI's obligations to GHI amounting to P50,366,926.71. FPI did not really intend to divest
itself of its title and control of the assigned properties. FPI's real intention was to place
them beyond the reach of its creditor CEPALCO.

As to the presence of badges of fraud, which the RTC-CDO found to have existed and
affirmed by the CA, they do, in fact, confirm the intention of FPI to defraud CEPALCO. But
these findings do not thereby render as rescissible the Deed of Assignment under Article
1381 (3). Rather, they fortify the finding that the Deed of Assignment was "not really
desired or intended to produce legal effects or in any way alter the juridical situation of the
parties" or, put differently, that the Deed of Assignment was a sham, or a contracto
simulado.

Thus, the Deed of Assignment is declared inexistent for being absolutely simulated
or fictitious. The CA was correct in ruling that the Deed of Assignment was absolutely
simulated, although it was in error in affirming the rescission ordered by the RTC-CDO
because rescissible contracts and void or inexistent contracts belong to two mutually
exclusive groups.

PRIVATIZATION AND MANAGEMENT OFFICE vs. EDGARDO V. QUESADA, et.

al. G.R. No. 224507, September 20, 2017, Second Division (Caguioa, J.)

DOCTRINE

Section 107 contemplates ONLY two situations when a petition for surrender of
withheld duplicate certificate of title may be availed of. These are: (1) where it is necessary to
issue a new certificate of title pursuant to any involuntary instrument which divests the title of
the registered owner against his consent, and (2) where a voluntary instrument cannot be
registered by reason of the refusal or failure of the holder to surrender the owner's duplicate
certificate of title.

Further, Section 2 of P.D. No. 1529 has eliminated the distinction between the general
jurisdiction vested in the regional trial court and the limited jurisdiction conferred upon it by
the former law when acting merely as a cadastral court. Under the former law (Act No. 496 or
the Land Registration Act), all summary reliefs such as the instant action to compel surrender
of owner's duplicate of Title could only be filed with the RTC sitting as a land registration court
only if there was unanimity among the parties or there was no adverse claim or serious
objection on the part of any party in interest. Otherwise, if the case became contentious and
controversial, it should be threshed out in an ordinary action or in the case where the incident
properly belonged. Under the amended law, the court is now authorized to hear and decide not
only such non-controversial cases but even the contentious and substantial issues

FACTS

The Quesadas filed a Petition to Surrender TCT No. 27090 pursuant to Section 107 of
P.D. No. 1529. The Quesadas are the owners of a parcel of land situated in Quezon City
under TCT No. 27090. TCT No. 27090 as originally registered in the name of the Quesadas'
predecessors-in-interest and it was donated to them sometime in 1997. The original copy of
TCT No. 27090, on file with the Register of Deeds of Quezon City, was destroyed when the
interior of the Quezon City Hall was gutted by fire. This prompted the Quesadas'
predecessors-in-interest to file a Petition for Reconstitution of Title. The said original TCT,
which has not been reconstructed, may be reconstituted on the basis of the owner's copy
thereof. However, the said owner's copy of the TCT is presently in the possession of PMO,
the government agency that took over the functions of the Asset Privatization Trust. PMO
got hold of the said owner's copy of the TCT because it was delivered in 1983 to Golden
Country Farms, a defunct private corporation, to secure the performance by the Quesadas'
predecessors-in-interest of their obligation in a contract designated as Growership
Agreement which the Quesadas' predecessors-in-interest had entered into with Golden
Country Farms. Golden Country Farms, however, was later considered a crony corporation
and was sequestered by the APT.

Several demands were made to PMO to surrender the said title but the same were
not favorably acted upon by the said office. The Quesadas were constrained to file the
instant petition to surrender the withheld duplicate certificates pursuant to Section 107 of
P.D. No. 1529, otherwise known as the Property Registration Decree.

PMO insists that the original petition failed to state a cause of action because the
allegations therein do not fall under the two circumstances contemplated in Section 107 of
P.D. No. 1529, and that the summary proceedings under the said Section do not empower
the RTC to resolve the conflicting claims of the parties. The Quesadas take the position that
the CA was correct in declaring that the instant case could be converted into an ordinary
action to avoid multiplicity of suits.

ISSUES

1. Whether the RTC can take cognizance of the petition to surrender the duplicate
copy of TCT No. 27090 pursuant to Section 107 of P.D. No. 1529.

2. Whether the RTC, as a land registration court, has jurisdiction to hear and decide
contentious and substantial issues over the original petition for surrender of withheld
duplicate certificate of title.

RULING

1. YES. The jurisdiction of the RTC as a land registration court over all petitions
filed after original registration of title, with power to hear and determine all
questions arising upon such applications or petitions is provided in Section 2 of P.D.
No. 1529.

As correctly observed by PMO, Section 107 contemplates ONLY two situations when
a petition for surrender of withheld duplicate certificate of title may be availed of. These
are: (1) where it is necessary to issue a new certificate of title pursuant to any involuntary
instrument which divests the title of the registered owner against his consent, and (2)
where a voluntary instrument cannot be registered by reason of the refusal or failure of the
holder to surrender the owner's duplicate certificate of title.

Clearly, the original petition before the RTC does not allege an involuntary
instrument which intends to divest the title of the registered owner against his consent.
TCT No. 27090 is registered in the name of the Quesadas' predecessors-in-interest and the
Quesadas are not divesting the title of their predecessors-in-interest against the latter's
will. Rather, the Quesadas require the surrender of the owner's duplicate of TCT No. 27090
in the possession of PMO based on an alleged deed of donation in their favor.

Inasmuch as the original petition before the RTC seeks the surrender of the owner's
duplicate copy of TCT No. 27090 in the possession of PMO so that a voluntary instrument —
a Deed of Donation — can be registered but the registration cannot be made by reason of
the refusal of PMO, the holder, to surrender the same, a cause of action under Section 107
of P.D. No. 1529 has been sufficiently alleged in the original petition. Thus, a dismissal of the
said petition on the ground that it fails to state a cause of action is not warranted.
Consequently, the RTC, as a land registration court, has jurisdiction over the original
petition.

2. YES. With respect to the power of the RTC to hear and decide contentious and substantial
issues, such as, whether the obligation of the Quesadas' predecessors-in-interest under the
Growership Agreement had already been extinguished by prescription and whether the
Decision of the RTC of Pasay City declaring that the Quesadas' predecessors-in-interest had
no more liability to Golden Country Farms (now PMO) or that whatever liability there
might be against them could no longer be enforced, or those that affect the ownership of the
property covered by TCT No. 27090, Section 2 of P.D. No. 1529 confers a broad jurisdiction
upon the RTC "with power to hear and determine all questions arising upon such
[petition]." RTCs now have the power to hear and determine all questions, even
contentious and substantial ones, arising from applications for original registration of titles
to lands and petitions filed after such registration. The matter of whether the RTC
resolves an issue in the exercise of its general jurisdiction or of its limited
jurisdiction as a special court is only a matter of procedure and has nothing to do
with the question of jurisdiction. Indeed, the land registration court can now hear
and decide controversial and contentious cases and those involving substantial
issues.

Considering the serious objection raised by PMO on the Quesadas’ claim, the issue
becomes contentious and the RTC albeit sitting as a land registration court, has the
authority not only to take cognizance of the said petition, but also to thresh out the issue in
a full-blown hearing, to receive evidence of both parties and to determine whether or not
the Quesadas are indeed entitled to the relief prayed for. Verily, after the parties have been
duly heard in a full-blown hearing, the RTC, being a court of general jurisdiction, can
squarely address all the issues to be raised by the parties and resolve their conflicting
claims, applying substantive law and jurisprudence. Indeed, this matter is procedural and
not jurisdictional.

REPUBLIC OF THE PHILIPPINES, vs. THE HEIRS OF MEYNARDO

CABRERA G.R. No. 218418. November 8, 2017, Second Division
(Caguioa, J.)

DOCTRINE

The classification and reclassification of public lands into alienable or disposable,

mineral or forest land is the exclusive prerogative of the Executive Department, and is
exercised by the latter through the President. Furhter, owing to the nature of reversion
proceedings and the outcome which a favorable decision therein entails, the State bears the
burden to prove that the land previously decreed or adjudicated in favor of the defendant
constitutes land which cannot be owned by private individuals.

FACTS
 Sometime in 1971, the Bureau of Lands issued Free Patent No. 516197 in favor of
Meynardo, covering two (2) lots. On the basis of said patent, the ROD issued Original
Certificate of Title covering both lots in Meynardo's name. Thereafter, Lot 1-A was
transferred to Consolacion. Thus, on April 6, 1982, TCT No. 16580 covering Lot 1-A was
issued in Consolacion's name. Later still, Consolacion sold portions of Lot 1-A to several
purchasers. Learning of the issuance of TCT No. 16580, the De Castros, claiming to be
the actual possessors of Lot 1-A, filed before the DENR a petition urging DENR to
conduct an investigation to determine Lot 1-A's land classification status.

Consequently, in the DENR Final Report issued by Erwin D. Talento of the DENR
Land Management Office, Free Patent No. 516197, covering Lots 1, 1-A, and 2
(collectively, Roxas Properties), was declared null and void for having been issued over
land forming part of the public domain (forest lands).

Later, the Republic filed against the Respondents a complaint for the annulment
and/or cancellation of Free Patent No. 516197, OCT No. RP-132 (P-9193), and TCT No.
16580. The Complaint also prayed for the reversion of the Roxas Properties in the
State's favor.

In this Petition, the Republic maintains that the Court's ruling in Animas did not
have the effect of making a positive executive act a necessary requirement for the
purpose of proving the reclassification of alienable and disposable land. Instead, the
Republic posits that Animas affirms its right to institute reversion proceedings in
instances where portions of forest land are erroneously included within the scope of
land patents. Moreover, the Republic argues that in reversion proceedings, the State
should not be made to bear the burden of proving that the land in question constitutes
public domain (i.e., forest land). In any case, the Republic posits that the documentary
and testimonial evidence it had presented sufficiently proved such fact.

ISSUES
Whether the CA is correct when it held that a positive act of government is
necessary to evince the reclassification of land from alienable and disposable to forest.
RULING
YES. The CA did not err when it affirmed the RTC, as the Republic failed to
establish that the Roxas Properties were classified as forest land at the time Free Patent
No. 516197 was issued.

The power to classify and reclassify land lies solely with the Executive Department.

The Regalian Doctrine has long been recognized as the basic foundation of the
State's property regime, and has been consistently adopted under the 1935, 1973, and
1987 Constitutions; it espouses that all lands of the public domain belong to the State,
and that, as a consequence thereof, any asserted right of ownership over land
necessarily traces back to the State. At present, Section 3, Article XII of the 1987
Constitution classifies lands of the public domain into five (5) categories — forest lands,
agricultural lands, timber lands, mineral lands, and national parks. In the absence of any
prior classification by the State, unclassified lands of the public domain assume the
category of forest lands not open to disposition.

In turn, the classification of unclassified lands of the public domain, and the
reclassification of those previously classified under any of the categories set forth in the
1987 Constitution (such as the Roxas Properties), are governed by Commonwealth Act
No. 141 otherwise known as the Public Land Act.

The provisions thereof are clear and leave no room for interpretation — the
classification and reclassification of public lands into alienable or disposable, mineral or
forest land is the exclusive prerogative of the Executive Department, and is exercised by
 the latter through the President, or such other persons vested with authority to exercise
the same on his behalf. Since the power to classify and reclassify land are executive in
nature, such acts, effected without executive authority, are void, and essentially ultra
vires.

In reversion proceedings, the State bears the burden of proving that the property in
question was inalienable at the time it was decreed or adjudicated in favor of the
defendant.

A land registration proceeding is the manner through which an applicant

confirms title to real property. In this proceeding, the applicant bears the burden of
overcoming the presumption of State ownership. Accordingly, the applicant is bound to
establish, through incontrovertible evidence, that the land sought to be registered had
been declared alienable or disposable through a positive act of the State. Conversely,
reversion proceeding is the manner through which the State seeks to revert land to the
mass of the public domain; it is proper when public land is fraudulently awarded and
disposed of in favor of private individuals or corporations, or when a person obtains a
title under the Public Land Act which includes, by oversight, lands which cannot be
registered under the Torrens system as they form part of the public domain.

Owing to the nature of reversion proceedings and the outcome which a favorable
decision therein entails, the State bears the burden to prove that the land previously
decreed or adjudicated in favor of the defendant constitutes land which cannot be
owned by private individuals. Hence, to resolve this Petition, the Court must determine
whether the documentary and testimonial evidence offered by the Republic are
sufficient to sustain its cause.

The Complaint should be dismissed as the Republic failed to show that the Roxas
Properties (including Lot 1-A) were classified as forest land at the time Free Patent
No. 516197 was issued in Meynardo's favor.

To recall, the Republic presented the following pieces of evidence to support its
complaint for reversion: (i) DENR Final Report; (ii) NAMRIA certifications; and (iii) LC
Map 209. However, these documents, whether taken individually or collectively, do not
evince a positive act of reclassification by the Executive Department.

The testimonies confirm that the alleged reclassification of the Roxas Properties
is bereft of basis, as it was done by Engineer Mendez on his sole account, without any
prior directive from the President, or a duly authorized officer from the Executive
Department. In fact, the annotation appearing on LC Map 209 upon which the Republic
relies does not even state upon whose authority the alleged reclassification had been
made, placing the annotation's validity, veracity and worth in serious doubt.

Ultimately, the Republic failed to prove that the Roxas Properties (including Lot
1-A) were classified as forest land when they were decreed in Meynardo's favor in 1971.

PADAYHAG vs. DIRECTOR OF LANDS

SOUTHERN MINDANAO COLLEGES, vs. THE HON. COURT OF APPEALS G.R. No.
202872, G.R. No. 206062, November 22, 2017, Second Division (Caguioa, J.)

DOCTRINE

Anent the publication requirement in reconstitution proceedings under Section 13, RA

26, mere submission of the subject Official Gazette issues would evidence only the first element
— publication in two consecutive issues of the Official Gazette, and what must be proved is not
the content of the Order published in the Official Gazette but the fact of two-time publication
in successive issues at least 30 days before the hearing date. Further, the probative value of
certifications of the Director of the National Printing Office in reconstitution cases. The Court
even quoted therein the lower court's observation that the Official Gazette is an official
publication of the government and consequently, the Court can take judicial notice of its
contents.

FACTS

This case involves six (6) parcels of land. These lots are claimed by two (2) parties,
namely: the Heirs of Lourdes Padayhag, and Southern Mindanao Colleges (SMC). The first
two lots are the Santa Lucia Lots. The other four lots are the Lumbia Lots. The Director of
Lands, acting for and in behalf of the Government, instituted with the then Court of First
instance of Zamboanga del Sur Cadastral Case No. N-17, GLRO CAD Rec. No. N-468 pursuant
to the government's initiative to place all lands under the Cadastral System. The Padayhags
claim that the Spouses Federico and Lourdes Padayhag are the original owners of the
Lumbia Lots. These lots are part of the 5-hectare landholding of their father, Federico
Padayhag. On August 31, 1948, Spouses Federico and Lourdes Padayhag and Southern
Mindanao Institute entered into an Agreement Referring to Real Property conveying the
possession of these lots to SMI in consideration of 30 shares of stock of SMI. When SMC
SMI, Lourdes Padayhag wanted to return the shares of stock issued to them so that the
Padayhags could get back the land subject of the contract. As for the Sta. Lucia Lots the
Padayhags claim that since 1927 they occupied 300 square meters of Lot [No.] 2102 and
412 square meters of Lot [No.] 2104. However, when a cadastral survey was made on [L]ot
[N]os. 2102 and 2104, they were not able to object as they were not informed of such
survey. They protested with the Bureau of Lands asserting that there was error in the
survey of the boundaries. On the other hand, SMC argued that it bought [L]ot [N]o. 2102
from Mangacop Ampato evidenced by a Deed of Conveyance of Real Estate executed on
January 22, 1960; and [L]ot [N]o. 2104 from Adriano Arang evidenced by a Deed of
Absolute Sale. Likewise, the said conveyance was reflected in the Status Book of the Bureau
of Lands.

The RTC, sitting as Land Registration Court, rendered a Decision in favor of SMC.
Aggrieved by the RTC Decision, SMC appealed to the CA. The CA dismissed the appeal for
lack of merit and ruled that there being no indication at all from the records that notice of
the Order for Initial Hearing was published in the Official Gazette and in a newspaper of
general circulation, the decision rendered by the RTC of Pagadian City is void ab initio for
having been rendered without jurisdiction. SMC filed a Motion for Reconsideration, which
was denied by the CA in its Resolution dated January 10, 2013 while the Padayhags filed
their Petition with the Court.

SMC filed an "Urgent Motion for Extension of Time to File Petition for Review on
Certiorari under Rule 45 of the Rules of Court". In a Resolution dated August 12, 2013, the
Court resolved to deny SMC's motion for extension for lack of payment of docket fees.
Thereafter, an Entry of Judgment was issued certifying that the said Resolution had become
final and executory. SMC filed a Petition for Certiorari (under Rule 65 of the Rules of Court).

ISSUES

1. Whether the CA erred in setting aside the RTC Decision and Resolution for want of
jurisdiction as no notice of the Order for Initial Hearing was published in the Official
Gazette and in a newspaper of general circulation

2. Whether the the Court can take judicial notice of the Official Gazette of the
Philippines.

3. Whether the RTC's failure to notify the OSG of the cadastral proceedings and the
orders therein deprived the State of due process and rendered the RTC Decision and
Resolution void;

4. Whether SMC's certiorari petition under Rule 65 is the proper remedy to assail the
CA Decision.
RULING

1. YES. A verification of the documents adverted to by the Padayhags, which bear a

certification by the University of the Philippines Library, Media Service Section, Diliman,
Quezon City that they are microfilm print-outs of the Official Gazette issues concerned,
reveals the presence of a Notice of Initial Hearing in Cadastral Case No. N-17, LRC Cadastral
Record No. N-468 before the then Court of First Instance of Zamboanga del Sur.

Given that the initial hearing based on the published notice was scheduled on
January 16, 1967, the applicable laws were Act 496 and Act 2259 which required only the
notice of initial hearing to be published twice, in successive issues of the Official
Gazette. Thus, it was erroneous for the CA to have required an additional publication of the
said notice in a newspaper of general circulation. Such requirement was imposed only with
the passage of PD 1529.

As proof of the publication in two successive issues of the Official Gazette of the
Notice of Initial Hearing for Cadastral Case No. N-17, LRC Cadastral Record No. N-468, the
Padayhags submitted to the Court microfilm print-outs of the issues of the Official Gazette
with certifications by the University of the Philippines. Adriano Arang, Mangacap Ampato,
and Federico Padayhag, Jr. appear in the said issues among the many claimants of the 1,409
lots with a combined area of 236,6925 hectares situated in the then Municipality of
Pagadian, Province of Zamboanga del Sur and designated as Pagadian Public Lands
Subdivision Pls 119, Case 1. Mangacap Ampato or "Mangacop Ampato" and Adriano Arang
are allegedly predecessors-in-interest of SMC. The case in the RTC is docketed as
"CADASTRAL CASE NO. N-17 LRC CAD. REC. NO. N-468 LOTS NOS. 2102, 2104, and 2883,
2888, 2921 and 2922, Pls
119."

Given that Cadastral Case No. N-17, LRC Cad. Rec. No. N-468 does not only cover the
six lots in dispute in this case, but around 1,409 lots, the copies of the issues of the Official
Gazette where the Notice of the Order for Initial Hearing was published could have been
included in the records of the cadastral proceedings of the other lots included therein. Thus,
it was imprudent for the CA to rule that the Decision rendered by the RTC is void ab initio
for having been rendered without jurisdiction. The repercussion of such pronouncement by
the CA is far-reaching as it would cast doubt on the validity of the cadastral proceedings of
the 1,409 lots in the then Municipality of Pagadian. At the very least, the CA should have
required the parties to present proof of the publication of the Order for Initial Hearing in
the pertinent issues of the Official Gazette.

In Republic v. CA, the Court noted that anent the publication requirement in
reconstitution proceedings under Section 13, RA 26, mere submission of the subject Official
Gazette issues would evidence only the first element — publication in two consecutive
issues of the Official Gazette, and what must be proved is not the content of the Order
published in the Official Gazette but the fact of two-time publication in successive issues at
least 30 days before the hearing date. The Court further stated therein that it has
consistently accepted the probative value of certifications of the Director of the National
Printing Office in reconstitution cases. The Court even quoted therein the lower court's
observation that the Official Gazette is an official publication of the government and
consequently, the Court can take judicial notice of its contents.

In this case, no certification from the Director of the National Printing Office was
presented. The certification alone without the copy of the Notice of Initial Hearing may not
suffice. There is a need to verify the contents of the said Notice to ensure that the subject
properties (6 lots) and parties/claimants are covered thereby. The Notice of Initial Hearing
was not only for subject properties and parties/claimants, but for 1,409 lots and numerous
claimants. If the Notice of Initial Hearing pertained to a specific registered property, as in
the case of the reconstitution of a title, then a certification of publication from the Director
of the National Printing Office in this wise would suffice.
2. YES. Given that the Official Gazette is the official publication of the government, the Court
can take judicial notice thereof pursuant to Section 2 of Rule 129, Rules of Court.

Thus, the Court takes judicial notice of the publication of the Notice of Initial Hearing
for Cadastral Case No. N-17, LRC Cadastral Record No. N-468 in the issues of the Official
Gazette on October 24 and 31, 1966, Volume 62, Number 43, pages 8044 to 8047, and
Number 44, pages 8312 to 8315.

3. NO. Evidently, the herein cadastral proceedings were supposed to have been instituted
by the then Director of Lands represented by the Solicitor General. For the OSG to now
deny that it had no involvement in or that it had not been notified of the proceedings is not
in keeping with the nature of cadastral proceedings. The Court is not prepared to nullify the
cadastral proceedings involving the then municipality of Pagadian without due process
being accorded to all the claimants involved therein and without the OSG going thoroughly
over the records of the entire cadastral proceedings to verify whether it participated
therein. It must be noted that in these petitions, the RTC Decision was finally rendered on
May 30, 2006 after 40 years from June 2, 1966, the date of the Notice of Initial Hearing. To
summarily nullify the cadastral proceedings at this juncture would be unjust. Suffice it say
that for purposes of these cases, the Court is relying on the presumption that official duty
has been regularly performed pursuant to Section 3 (m), Rule 131 of the Rules of Court.

4. YES. SMC availed of the wrong remedy. A petition for review on certiorari before the
Supreme Court under Rule 45 is the proper remedy of a party desiring to appeal by
certiorari a judgment, final order or resolution of the CA.

Also, SMC is not justified to avail itself of a Rule 65 certiorari petition after its earlier
attempt to avail of a Rule 45 certiorari petition had failed. SMC, prior to the filing of the SMC
Petition, attempted to comply with a Rule 45 certiorari petition when on February 5, 2013,
it filed an "Urgent Motion for Extension of Time to File Petition for Review on Certiorari
under Rule 45 of the Rules of Court". However, in its Resolution dated August 12, 2013, the
Court resolved to deny SMC's motion for extension for lack of payment of docket fees
pursuant to Sections 2 and 3, Rule 45 in relation to Section 5 (c), Rule 56 of the 1997 Rules
of Civil Procedure. Thereafter, an Entry of Judgment was issued certifying that the said
Resolution had become final and executory on November 8, 2013.

Given that SMC resorted to successive Rule 45 and Rule 65 certiorari petitions to
question the CA Decision and Resolution and that the Rule 45 certiorari petition had already
been denied, the denial of the SMC Petition is in order because certiorari is not and cannot
be made a substitute for an appeal where the latter remedy is available but was lost through
fault or negligence as in this case where the appeal was lost due to non-payment of docket
fees. The denial of the SMC Petition is, however, of no moment since the instant cases are
being remanded to the CA and the CA will have to pass upon the respective claims of the
Padayhags and SMC on the lots in question in the resolution of the appeals before the CA on
the merits.

COCA-COLA BOTTLERS PHILS., INC., vs. ERNANI GUINGONA MEÑEZ

G.R. No. 209906. November 22, 2017, Second Division (Caguioa,
J.)

DOCTRINE

The cases when moral damages may be awarded are specific. Unless the case falls
under the enumeration as provided in Article 2219, which is exclusive, and Article 2220 of the
Civil Code, moral damages may not be awarded. As to exemplary or corrective damages, these
may be granted in quasi-delicts if the defendant acted with gross negligence pursuant to
Article 2231 of the Civil Code.

FACTS
 Research scientist Meñ ez was a frequent customer of Rosante Bar and Restaurant of
Dumaguete City. He ordered pizza and a bottle of "Sprite." Meñ ez then took a bite of pizza
and drank from the straw the contents of the Sprite bottle. He noticed that the taste of the
softdrink was not one of Sprite but of a different substance repulsive to taste. The substance
smelled of kerosene. He then felt a burning sensation in his throat and stomach and could
not control the urge to vomit. He left his table for the toilet to vomit but was unable to reach
the toilet room. Instead, he vomited on the lavatory found immediately outside the said
toilet. Upon returning to the table, he picked up the bottle of Sprite and brought it to the
place where the waitresses were and angrily told them that he was served kerosene. Meñ ez
even handed the bottle to the waitresses who passed it among themselves to smell it. All of
the waitresses confirmed that the bottle smelled of kerosene and not of Sprite.

Meñ ez reported the incident and requested the latter to accompany him to the
Silliman University Medical Center. Heading to SUMC for medical attention, Ovas brought
the bottle of Sprite with him. While at the Emergency Room, [Meñ ez] again vomited before
the hospital staff could examine him. [Meñ ez] had to be confined in the hospital for three
(3) days.

Later, [Meñ ez] came to know that a representative from [Rosante] came to the
hospital and informed the hospital staff that Rosante [would] take care of the hospital and
medical bills. [Meñ ez] filed a complaint against [CCBPI and Rosante] and prayed for the
actual, moral, and exemplary damages and attorney’s fees.

[Rosante] argued that [Meñ ez] has no cause of action against it as it merely received
said bottle of Sprite allegedly containing kerosene from [CCBPI], as a matter of routinary
procedure. It argued that Rosante is not expected to open and taste each and every
[content] in order to make sure it is safe for every customer. CCBPI for its part filed a
motion to dismiss the complaint. CCBPI interposed that a perusal of the complaint revealed
that there is no allegation therein which states that CCBPI uses noxious or harmful
substance in the manufacture of its products. What the complaint repeatedly stated is that
the bottle with the name SPRITE on it contained a substance which was later identified as
pure kerosene.

Further, CCBPI cited Republic Act No. 3720, and that pursuant to the law, [Meñ ez] failed to
avail of and exhaust an administrative remedy provided for prior to a filing of a suit in
court. From this provision, CCBPI concluded that an administrative remedy was existing
and that [Meñ ez] failed to avail thereof. CCBPI further argued that the doctrine of strict
liability tort on product liability is but a creation of American Jurisprudence, as clearly
shown by the cases cited in support thereof, and never before adopted as a doctrine of the
Supreme Court. Hence, it submits that at most it only has a persuasive effect and should not
be used as a precedent in fixing the liability of CCBPI.

ISSUES

1. Whether the CA is correct in holding that Meñ ez did not violate the doctrine of
exhaustion of administrative remedies and prior resort to the Bureau of Food and Drugs
(BFD) is not necessary.
2. Whether the CA erred in awarding moral damages, exemplary damages and
attorney’s fees to Meñ ez.

RULING

1. YES. The CA correctly ruled that prior resort to BFD is not necessary for a suit for
damages under Article 2187 of the Civil Code to prosper. Article 2187 provides:

ART. 2187. Manufacturers and processors of foodstuffs, drinks, toilet articles and
similar goods shall be liable for death or injuries caused by any noxious or harmful
substances used, although no contractual relation exists between them and the consumers.
 Quasi-delict being the source of obligation upon which Meñ ez bases his cause of
action for damages against CCBPI, the doctrine of exhaustion of administrative remedies is
not applicable. Such is not a condition precedent required in a complaint for damages with
respect to obligations arising from quasi-delicts.

2. YES. The cases when moral damages may be awarded are specific. Unless the case falls
under the enumeration as provided in Article 2219, which is exclusive, and Article 2220 of
the Civil Code, moral damages may not be awarded. Article 2219 provides:

ART. 2219. Moral damages may be recovered in the following and analogous cases:
(2) Quasi-delicts causing physical injuries;

Article 2220 provides the following additional legal grounds for awarding moral
damages: (1) willful injury to property if the court should find that, under the
circumstances, such damages are justly due; and (2) breaches of contract where the
defendant acted fraudulently or in bad faith.

Apparently, the only ground which could sustain an award of moral damages in favor
of Meñ ez and against CCBPI is Article 2219 (2) — quasi-delict under Article 2187 causing
physical injuries.

Unfortunately, Meñ ez has not presented evidence to prove that he suffered physical
injuries when he allegedly ingested kerosene from the "Sprite" bottle in question. Nowhere
in the CA Decision is the physical injury of Meñ ez discussed. The RTC Decision states the
diagnosis of the medical condition of Meñ ez in the medical abstract prepared by Dr. Abel
Hilario Gomez, who was not presented as a witness, and signed by Dr. Magbanua, Jr. "the
degree of poisoning on the plaintiff [Meñ ez] was mild, since the amount ingested was
minimal and did not have severe physical effects on his body." In his testimony, Dr.
Magbanua, Jr. stated: "To my mind, [Meñ ez] had taken in kerosene of exactly undetermined
amount, apparently or probably, only a small amount because the degree of adverse effect
on his body is very minimal knowing that if he had taken in a large amount he would have
been in very serious trouble and we would have seen this when we examined him." The
statements of the doctors who tended to the medical needs of Meñ ez were equivocal.
"Physical effects on the body" and "adverse effect on his body" are not very clear and
definite as to whether or not Meñ ez suffered physical injuries and if these statements
indicate that he did, what their nature was or how extensive they were. Consequently, in
the absence of sufficient evidence on physical injuries that Meñ ez sustained, he is not
entitled to moral damages.

As to exemplary or corrective damages, these may be granted in quasi-delicts if the

defendant acted with gross negligence pursuant to Article 2231 of the Civil Code.

The CA justified its award of exemplary damages in the following manner: “On the
liability of manufacturers, the principle of strict liability applies. It means that proof of
negligence is not necessary. It applies even if the defendant manufacturer or processor has
exercised all the possible care in the preparation and sale of his product. Extra-ordinary
diligence is required of them because the life of the consuming public is involved in the
consumption of the foodstuffs or processed products. “

Evidently, the CA's reasoning is not in accord with the gross negligence requirement
for an award of exemplary damages in a quasi-delict case. Moreover, Meñ ez has failed to
establish that CCBPI acted with gross negligence. Other than the opened "Sprite" bottle
containing pure kerosene allegedly served to him at the Rosante, Meñ ez has not presented
any evidence that would show CCBPI's purported gross negligence. There was failure on the
part of Meñ ez to categorically establish the chain of custody of the "Sprite" bottle which was
the very core of the evidence in his complaint for damages and that, considering that the
"Sprite" bottle allegedly contained pure kerosene, it was quite surprising why the
employees of Rosante did not notice its distinct, characteristic smell. Thus, Meñ ez is not
entitled to exemplary damages absent the required evidence. The only evidence presented
by Meñ ez is the opened "Sprite" bottle containing pure kerosene. Nothing more.

Regarding attorney's fees, the CA Decision did not even provide the basis for the
award of P50,000.00 as attorney's fees and cost of suit. The award is found only in the
dispositive portion and, unlike the award of moral and exemplary damages, there was no
explanation provided in the body of the Decision. It can only be surmised that the CA
awarded attorney's fees only because it awarded exemplary damages. In any event, based
on Article 2208 of the Civil Code, Meñ ez is not entitled to attorney's fees and expenses of
litigation because, as with his claim for exemplary damages, he has not established any
other ground that would justify this award.

ARACELI MAYUGA, vs. ANTONIO ATIENZA

G.R. No. 208197. January 10, 2018, Second Division (Caguioa, J.)

DOCTRINE

Assuming that Perfecto owned the disputed lots and the Confirmation Affidavit was a
deed of partition, Perfecto could have legally partitioned his estate during his lifetime. Under
Article 1080 of the Civil Code: "should a person make a partition of his estate by an act inter
vivos, or by will, such partition shall be respected, insofar as it does not prejudice the legitime
of the compulsory heirs."

FACTS

Araceli Mayuga instituted a petition for Cancellation and Recall of Free Patent
Application and Reconveyance against Antonio Atienza. In her Petition, Araceli, alleged, that
she, Benjamin A. Atienza, Sr. and Armando A. Atienza are the surviving legitimate, legal and
forced heirs of the late Perfecto Atienza who died intestate on June 1, 1978. She alleged that
through manipulation and misrepresentation with intent to defraud a co-heir, respondent
Antonio L. Atienza [son of deceased Armando Atienza, while respondent Benjamin A.
Atienza were both able to secure Free Patents. Araceli was not notified of the application
filed with public respondent CENRO nor any notice of hearings of proceedings as required
by law, being a co-heir and party- in-interest. Thus, she prayed for:

1. The recall and cancellation of Free patent issued to Antonio Atienza and also
the Free Patent issued to Benjamin Atienza.

2. The division of the two lots into three (3) equal parts among the three (3)
forced heirs, namely: Araceli, Benjamin and Armando.

According to defendants, the basis for their Application for Free Patent with the
CENRO is a Confirmation Affidavit of Distribution of Real Estate executed by their father,
Perfecto Atienza, confirming partition in 1960.

ISSUES

1. Whether the complaint of the petitioner for cancellation of free patent and reconveyance
should be dismissed.

2. Whether Araceli can claim preterition.

RULING

1. YES. The Court is not convinced with the petitioner's allegation of fraud and
misrepresentation in the execution of the Confirmation Affidavit by the petitioner's
father,the late Perfecto Atienza). Being a notarized document, it is imbued with the legal
presumption of validity, its due execution and authenticity not having been impugned by
the mere self-serving allegations of the petitioner.
 An action for reconveyance involving land that is titled pursuant to a free patent is
one that seeks to transfer property, wrongfully registered by another, to its rightful and
legal owner or to one with a better title. As such, two facts must be alleged in the complaint
and proved during the trial, namely: (1) the plaintiff was the owner of the land or
possessed it in the concept of owner, and (2) the defendant illegally divested him of
ownership and dispossessed him of the land.

Such facts were not only not alleged in the amended complaint, the petitioner
Araceli also failed to prove that she was entitled to 1/3 of the two lots in dispute by
succession. Apparently, Araceli had taken the position that being one of the surviving
compulsory heirs of their late father, Perfecto, she was entitled to 1/3 of the disputed lots
on the assumption that the decedent left only three legal heirs (his children Araceli,
Benjamin, Sr. and Armando) and that the disputed lots were part of the inheritance left by
their father when he died in 1978. Araceli, however, overlooked the fact that Perfecto
executed the Confirmation Affidavit almost five years prior to his death on June 1, 1978.
Araceli did not even bother to provide the Court a copy thereof so that the Court could
make a determination of its legal import. And the CA correctly accorded the Confirmation
Affidavit the legal presumption of validity, being a duly notarized document, where its
validity could not be impugned by mere self-serving allegations.

Assuming that Perfecto owned the disputed lots and the Confirmation Affidavit was a
deed of partition, Perfecto could have legally partitioned his estate during his lifetime.
Under Article 1080 of the Civil Code, "should a person make a partition of his estate by an
act inter vivos, or by will, such partition shall be respected, insofar as it does not prejudice
the legitime of the compulsory heirs."

Since the Civil Code allows partition inter vivos, it is incumbent upon the compulsory
heir questioning its validity to show that his legitime is impaired. Unfortunately, Araceli has
not shown to what extent the Confirmation Affidavit prejudiced her legitime.

2. NO. Araceli could not also claim preterition by virtue of the Confirmation Affidavit on the
assumption that the disputed two lots pertained to Perfecto's inheritance, he had only three
legal heirs and he left Araceli with no share in the two lots.

Although Araceli was a compulsory heir in the direct descending line, she could not
have been preterited. Firstly, Perfecto left no will. As contemplated in Article 854, the
presence of a will is necessary. Secondly, before his death, Perfecto had properties in Limon,
Rizal which was almost 50 hectares, part of which was developed for residential and
agricultural purposes, and in Odiongan. Araceli could not have been totally excluded in the
inheritance of Perfecto even if she was not allegedly given any share in the disputed two
lots.

If Araceli's share in the inheritance of Perfecto as claimed by her was indeed

impaired, she could have instituted an action for partition or a settlement of estate
proceedings instead of her complaint for cancellation of free patent and reconveyance.

Furthermore, as the persons who applied for and were awarded free patents, the
respondents are the rightful, legal owners of the disputed lots. The free patents having been
issued by the Department of Environment and Natural Resources and recorded in the Book
of Entries at the Office of the Registry of Deeds the respondents' certificates of title have
already become indefeasible pursuant to Section 32 of the Property Registration Decree,
which pertinently provides: "Upon the expiration of said period of one year [from and after
the date of entry of the decree of registration], the decree of registration and the certificate
of title issued shall become incontrovertible.

REPUBLIC OF THE PHILIPPINES vs. FILEMON SAROMO

G.R. No. 189803. March 14, 2018, Second Division (Caguioa, J.)
DOCTRINE

Testimonial evidence on the physical layout or condition of the subject land — that it
was planted with coconut trees and beach houses had been constructed thereon — are not
conclusive on the classification of the subject land as alienable agricultural land. Rather, it is
the official proclamation releasing the land classified as public forest land to form part of
disposable agricultural lands of the public domain that is definitive. Such official
proclamation, if there is any, is conspicuously missing in the instant case.

FACTS

Respondent Saromo executed an Application for Free Patent covering the subject
property, which he filed with the Bureau of Lands, District Land Office. The application
stated among others that the land is an agricultural public land containing an area of
45,808 square meters and that Saromo first occupied and cultivated the land by himself.
Alberto A. Aguilar executed an investigation report stating that he went to and examined
the land applied for by Saromo; that the land applied for is inside agricultural area.

The District Land Officer, issued an Order approving the application for free patent
of Saromo and ordering the issuance of Patent No. 17522 in his favor. The Order stated that
the land applied for has been classified as alienable and disposable; the investigation
conducted by Land Investigation/Inspector Alberto A. Aguilar revealed that the land
applied for has been occupied and cultivated by the applicant himself and/or his
predecessors-in-interest. The Original Certificate of Title was issued in the name of Filemon
Saromo.

A certain Luis Mendoza filed with the Bureau of Lands a protest against the Free
Patent awarded to Saromo. An investigation team was created to verify and determine the
legality of the issuance of the Free Patent in the name of Saromo covering the subject parcel
of land. It found that the subject land was not alienable and disposable at the time of the
issuance thereof, as it was found upon investigation to be "inside unclassified public forest
and covered by Proclamation No. 1801 declaring the whole of Batangas Coastline as tourist
zone. The Republic filed this case for Reversion/Cancellation of Title before the RTC.

ISSUES

1. Whether the subject land is alienable and disposable at the time of issuance of free patent
title to Saromo.

2. Whether testimonial evidence on the physical layout or condition of the subject land —
are conclusive on the classification of the subject land as alienable agricultural land.

3. Whether Section 91 of the Public Land Act on fraud and misrepresentation and the
attendant fraud and misrepresentation of Saromo in his free patent application should be
taken in consideration.

4. Whether the presumption of regularity in the performance of official duties of the officer
who issued Saromo's free patent should be applied.

RULING

1. NO. The subject land is unclassified public forest land.

The presidential declaration that the whole of the Batangas coastline is a tourist
zone and marine reserve is not sufficient to prove that the subject land is inalienable and
non disposable. Unfortunately, the very survey plan that Saromo submitted to the then
Bureau of Lands as basis for his application for free patent and its approval contains a
notation that the subject land is "inside unclassified public forest land." To recall, the NOTE
appearing at the bottom left hand portion of the Survey Plan No. prepared by Engr. Guevara
states: "This survey is formerly a portion of China Sea. This survey is inside unclassified
public forest land.
As is, the NOTE qualifies as an admission of Saromo that the subject land is "inside
unclassified public forest land." Thus, unless Saromo is able to rebut in a clear and
convincing manner such admission or declaration, it will remain as an admission against
his interest and binding upon him.

2. NO. Both the RTC and the CA erred in unduly relying on the testimony of Engr. Guevara
because his observation as to the physical features of the subject land is not conclusive to
remove the subject land from its "unclassified forest land" classification and overturn the
NOTE that the area he surveyed was "inside unclassified public forest land." Similarly, the
testimonies of Engr. Guevara, Aguilar and Engr. Cabrera on their observations as to the
physical features of the subject land during their ocular inspection are not clear and
convincing proof that the subject land is alienable and disposable.

Forest land of the public domain in the context of both the Public Land Act and the
Constitution is a classification descriptive of its legal nature or status and does not have to
be descriptive of what the land looks like. Forests do not necessarily refer to large tracts of
wooded land or expanses covered by dense growths of trees and underbrushes. Unless and
until the land classified as "forest" is released in an official proclamation to that effect so
that it may form part of the disposable agricultural lands of the public domain, the rules on
confirmation of imperfect title do not apply.

From the foregoing, testimonial evidence on the physical layout or condition of the
subject land — that it was planted with coconut trees and beach houses had been
constructed thereon — are not conclusive on the classification of the subject land as
alienable agricultural land. Rather, it is the official proclamation releasing the land
classified as public forest land to form part of disposable agricultural lands of the
public domain that is definitive. Such official proclamation, if there is any, is
conspicuously missing in the instant case.

The term "unclassified land" is likewise a legal classification and a positive act is
required to declassify inalienable public land into disposable agricultural land.

Without the official declaration that the subject land is alienable and
disposable or proof of its declassification into disposable agricultural land, the
"unclassified public forest land's" legal classification of the subject land remains.

3. YES. Reversion of the subject land is warranted under Section 91 of Commonwealth

Act No. (CA) 141.

There are several discrepancies in the documents relative to Saromo’s free patent
application, which indicate incorrect and misleading facts and statements. Taken together,
they can be considered as “false statements” on the essential conditions for the grant of the
free patent in favor of Saromo, and as such, they ipso facto justify the cancellation of the free
patent and the corresponding Torrens certificate of title issued to him.

4. NO. Even if Section 91 of CA 141 is ruled out, reversion is warranted based on

mistake or error on the part of government officials or agents.

Since, at the very least, the government officials concerned in the processing and
approval of Saromo's free patent application erred or were mistaken in granting a free
patent over unclassified public forest land, which could not be registered under the
Torrens system and over which the Director of Lands had no jurisdiction, the free patent
issued to Saromo ought to be cancelled. In the same vein, the Torrens title issued pursuant
to the invalid free patent should likewise be cancelled. Since the reversion of the subject
land to the State is in order, needless to say that the Regalian doctrine has been accordingly
applied in the resolution of this case.
 REPUBLIC OF THE PHILIPPINES vs. NORTHERN CEMENT
CORPORATION G.R. No. 200256, April 11, 2018, Second Division
(Caguioa, J.)

DOCTRINE

The phrase "adverse, continuous, open, public, and in concept of owner," is a conclusion
of law. Burden of proof is on the person seeking original registration of land to prove by clear,
positive and convincing evidence that his possession and that of his predecessors-in-interest
was of the nature and duration required by law.

FACTS
On June 16, 2000, Northern Cement filed with the RTC an application for the
registration of title over the Subject Lot — a 58,617.96 square meters lot in Barangay
Labayug, Sison, Pangasinan — pursuant to Presidential Decree No. 1529 (PD 1529) and to
have the title thereto registered and confirmed under its name (Application).

To support its Application, Northern Cement offered, inter alia,the following

documents: (1) Deed of Sale dated December 28, 1968 executed by Chichioco in favor of
Northern Cement; (2) Affidavits of alleged adjoining landowners Eugenia Batnag and
Placido Saro attesting that Northern Cement is the owner and possessor of the Subject Lot;
(3) seven (7) Tax Declarations for various years from 1971 to 2003 in the name of
Northern Cement and a Tax Declaration for year 1970 in the name of Chichioco; (4) Tax
Clearance Certificate dated May 21, 2007; (5) Technical Description of the Subject Lot; (6)
Approved Plan certified by the Department of Environment and Natural Resources (DENR)
stating that the Subject Lot is "x x x inside alienable and disposable area as per project No.
63, L.C. Map No. 698, certified on November 21, 1927.

The RTC granted the Application for registration of Northern Cement. The RTC ruled
that from the evidence presented, Northern Cement was able to prove, by preponderance of
evidence, its claim of ownership over the Subject Lot. The Republic appealed to the CA,
alleging that the RTC erred in granting the application for registration despite the failure of
Northern Cement to observe the requirements for original registration of title under PD
1529. The Republic pointed out, among others, that the CENRO Report and the Approved
Plan submitted in evidence by Northern Cement hardly suffice to prove that the Subject Lot
is an alienable portion of the public domain. The CA denied the Republic's appeal and
affirmed in toto the Decision of the RTC.

ISSUE

Whether the CA erred in affirming the RTC's Decision granting the application for
registration of title in favor of Northern Cement despite non-compliance with the
requirements under PD 1529.

RULING

YES. The Republic, in its Petition, is correct in alleging that Northern Cement is not
qualified to have the Subject Lot registered in its name under Section 14 of PD 1529.

The Application itself does not enlighten as to whether it was filed under Section 14
(1) or Section 14 (2) of PD 1529. Northern Cement made no allegation nor presented
evidence that it had been in possession of the subject property since June 12, 1945 or
earlier. At any rate, the evidence reveal that the present controversy was filed and tried
based on Section 14 (2) of PD 1529. Thus, the Petition shall be resolved on Northern
Cement's proof of its acquisition of the Subject Lot by prescription.

Unlike Section 14 (1) which requires an open, continuous, exclusive, and notorious
manner of possession and occupation since June 12, 1945 or earlier, Section 14 (2) is silent
as to the nature and period of such possession and occupation necessary. This necessitates
a reference to the relevant provisions of the Civil Code on prescription. Prescription is
another mode of acquiring ownership and other real rights over immovable property. The
possession should be in the concept of an owner, public, peaceful, uninterrupted and
adverse. Possession is open when it is patent, visible, apparent, notorious and not
clandestine. It is continuous when uninterrupted, unbroken and not intermittent or
occasional; exclusive when the adverse possessor can show exclusive dominion over
the land and an appropriation of it to his own use and benefit; and notorious when it
is so conspicuous that it is generally known and talked of by the public or the people
in the neighborhood.

Here, the Court is unconvinced by the pieces of evidence submitted by Northern

Cement to prove compliance with the requirement of possession under Section 14 (2) of PD
1529 in relation to Articles 1137 and 1118 of the Civil Code for original registration of land.
The RTC erred in haphazardly concluding otherwise and the CA, in turn, erred in affirming
the RTC.

First,the seven (7) tax declarations in the name of Northern Cement and one (1) tax
declaration in the name of its predecessor-in-interest for a claimed possession of at least
thirty-two (32) years (1968-2000) do not qualify as competent evidence to prove the
required possession. It has been held that this type of intermittent and sporadic assertion of
alleged ownership does not prove open, continuous, exclusive and notorious possession
and occupation. The Court has, in a catena of cases, found as lacking, episodic and random
payments of realty taxes.

Moreover, Tax Declarations are not conclusive evidence of ownership but only a
basis for inferring possession. It is only when these tax declarations are coupled with proof
of actual possession of the property that they may become the basis of a claim of
ownership.

Second,even if it be assumed that Northern Cement had been in possession of the

subject property since 1968, it still failed to sufficiently demonstrate that its supposed
possession was of the nature and character contemplated by law.

The testimonies of the adjoining owners presented by Northern Cement do not

deserve serious consideration and they do not augment the inadequacy of the Tax
Declarations. The two witnesses, claiming to be heirs of the owners of the lands adjoining
the subject property, did not testify as to the specific acts of possession and ownership
exercised by Northern Cement and/or its predecessors-in-interest. They merely made a
uniform and sweeping claim that the subject property "is owned and possessed by
[Northern Cement]," which is a mere conclusion of law. This evidence is tenuous, at best.

Third,Northern Cement miserably failed to prove possession of the Subject Lot in the
concept of an owner, with the records bare as to any acts of occupation, development,
cultivation or maintenance by it over the property. Indeed, from the evidence presented,
the only "improvements" on the Subject Lot were "cogon" and "unirrigated rice."

Cogon grass is hardly the "improvement" contemplated by law to prove satisfaction

of the requirements of registering lands. It is a matter of common knowledge that cogon
grass grows casually on lands in this country, without need of cultivation, and hardly has
utility. More than anything, it is usually indicia that the land on which it grows is idle.
As for the unirrigated rice which appeared latest in the 1995 Tax Declaration, plain
common sense dictates that the fact of it being unirrigated and uncultivated further
cements the character of the land as idle.

The importance of exercising acts of dominion on a land sought to be registered

cannot be downplayed. In a plethora of cases, the Court has disallowed registration of lands
where, although plants and fruit-bearing trees existed on the contested lands, it was not
proven that they were cultivated by the registrant, or that they were actively and regularly
cultivated and maintained and not merely casually or occasionally tended to by the
registrant, or that they were planted by him or his predecessors-in-interest.

Evidently, this case where cogon and unirrigated rice appear to be the only things
standing on the Subject Lot and with no allegations or testimony that the same had been
planted or cultivated by Northern Cement, pales in comparison with the aforementioned
cases.

On a final note, this Court is well-aware that the Republic has raised issues bearing
on the registrable nature of the subject property, pursuant to the landmark and oft-quoted
case of Malabanan v. Republic in relation to the relevant Civil Code provisions, i.e., whether
it was validly and sufficiently declared alienable and disposable and, even so, if it was
further declared as no longer intended for public use or service or for the development of
national wealth and whether the latter declaration is necessary for the subject land to be
registrable. The Court deems it no longer necessary to address these matters as this case
can be amply decided on the basis of the evident failure of Northern Cement to satisfy the
required possession under PD 1529, Section 14 (2) in relation to Articles 1137 and 1118 of
the Civil Code.Perhaps, that issue is fated to be scrupulously discussed in a more opportune
case.

ASTRID A. VAN DE BRUG vs. PHILIPPINE NATIONAL BANK

G.R. No. 207004, June 6, 2018, Second Division (Caguioa, J.)

DOCTRINE

In order to be liable for damages under the abuse of rights principle, the following
requisites must concur: (a) the existence of a legal right or duty; (b) which is exercised in bad
faith; and (c) for the sole intent of prejudicing or injuring another.

FACTS

The late spouses Aguilar used to be borrowing clients of PNB. The late spouses
Aguilar's sugar crop loans, which were obtained sometime between the late 1970's and the
early 1980's, were secured by real estate mortgage over four registered parcels of land.
However, for failure of the late spouses Aguilar to pay their obligations with PNB, the
mortgage was foreclosed in 1985 and subsequently, ownership of the subject four pieces of
property was consolidated under the name of PNB.

With the enactment of RA 7202, the late Romulus Aguilar wrote [PNB] on July 5,
1995, and he stated: "Since our indebtedness with the PNB had been foreclosed, we are asking
your good Office for a reconsideration of our account based on the Sugar Restitution Law."
After the death of Romulus Aguilar, his spouse, the late Evelyn Aguilar, received a letter
from [PNB] during which occasion [PNB] informed the late Evelyn Aguilar that while the
subject loan account was covered by the provisions of RA 7202 and have been audited by
the COA, the late Evelyn Aguilar was still required to comply with certain PNB
Requirements.

Hence, the case for implementation of RA 7202, with prayer for payment of moral
damages and exemplary damages was filed by the Aguilars.

The RTC justified the reconveyance or restitution of the residential lot in Sagay City
to the Aguilars by crediting in their favor the proceeds of the Voluntary Offer to Sell to the
DAR of the two agricultural lots. The RTC justified the judgment in favor of the Aguilars as
in keeping with public policy behind RA 7202.

The RTC found PNB guilty of malice and bad faith in not pursuing its duty in helping
the Aguilars avail of the benefits of RA 7202 and, pursuant to Articles 19 and 21 of the Civil
Code, justified the award of moral and exemplary damages as well as attorney's fees and
litigation expenses in favor of the Aguilars.
 The CA granted the appeal and reversed the RTC Decision. In applying RA 7202, the
CA found that the account of the late spouses Aguilar qualified under the law because
indisputably, their sugar crop loans were obtained within the period covered by the law.
However, based on PNB's recomputation applying 12% per annum interest, which was
audited and certified by the COA, the Aguilars were not entitled to restitution absent any
excess payment after recomputation. The CA did not credit the proceeds of the VOS to the
DAR in favor of the Aguilars, but it in effect considered the account of the late spouses
Aguilar as having been fully paid "through foreclosure of collateral" pursuant to Section 6
of the IRR.

Based on the Petition of the Aguilars, the computation of the CA is disputed by them
because it did not "include the sums and amounts which accrued to [PNB] from DAR's
payment on account of [their] properties." The Aguilars take the position that the total
amount which PNB received from the Land Bank should be deducted from their total
outstanding loan obligations (for RA 7202 and non-RA 7202 accounts) as of the date of
foreclosure of the collaterals. Based on PNB's recomputation which the CA upheld, there is
no excess payment made by the late spouses Aguilar that has to be restituted to the
Aguilars. The Aguilars further implore the Court, as they did unsuccessfully with the CA, to
compel PNB to extend to them the accommodation that PNB made with spouses Pfleider
wherein in the Compromise that PNB entered into with the spouses Pfleider, PNB credited
in favor of the spouses Pfleider the value of their agricultural lots that PNB had also
foreclosed and transferred via VOS to DAR. The Aguilars argue that "[they] are similarly
circumstanced as the Pfleiders[,] [and] [t]here was no reason for PNB to treat [them]
differently."

ISSUES

1. Whether the late spouses Aguilar had accounts that were covered by RA 7202.

2. Whether the CA erred in not including the sums and amounts which accrued to PNB from
DAR's payment on account of the properties of the Aguilars.

3. Whether PNB has an obligation to accord the Aguilars the same treatment as it accorded
the spouses Pfleider regarding the crediting of the VOS or CARP proceeds of their respective
agricultural lots against their respective sugar crop loans covered by RA 7202.

RULING

1. YES. At the core of the instant case is RA 7202, which was approved on February 29,
1992, and its declared policy is "to restitute the losses suffered by the sugar producers due
to actions taken by government agencies in order to revive the economy in the sugar-
producing areas of the country."

The account of the late spouses Aguilar qualified under RA 7202 since indisputably,
the sugar crop loans of the late spouses Aguilar, which were considered fully paid upon
foreclosure of the mortgaged pieces of property, were obtained within the period covered
by the law. Succinctly, the sugar producer concerned was entitled to the benefit of
recomputation of his loan account, and if warranted, to restitution of any excess payment
on interests, penalties and surcharges, pursuant to Section 3 of RA 7202.

Now that certain accounts of the late spouses Aguilar have been established to be
covered by RA 7202, the next question would be: what benefits does the law confer upon
the Aguilars?

As provided in Section 3 of RA 7202, the Aguilars are entitled to: (1) condonation of
interest charged in excess of 12% per annum and all penalties and surcharges; (2)
recomputation of their sugar crop loans, and if there is interest in excess of 12% per annum,
interests, penalties and surcharges, application of the excess payment as an offset and/or as
payment for the late spouses Aguilar's outstanding loan obligations; and (3) restructuring
or amortization of the recomputed loans for a period of 13 years inclusive of a three-year
grace period on the principal, effective upon the approval of RA 7202.

The CA found that PNB recomputed the RA 7202 accounts of the late spouses
Aguilar, which were audited and certified by the COA, and the recomputation resulted in
the absence of any excess payment

2 & 3. NO. The sources of obligations under Article 1157 of the Civil Code are: (1) law; (2)
contracts; (3) quasi-contracts; (4) acts or omissions punished by law; and (5) quasi-delicts.
Immediately, sources (2), (3) and (4) are inapplicable in this case. The Aguilars are not
privies to the Compromise Agreement between PNB and the spouses Pfleider. Regarding
law, as PNB's source of obligation, the CA correctly ruled that the Aguilars are not entitled
to restitution under RA 7202. Thus, RA 7202 cannot be invoked as the statutory basis to
compel PNB to treat the Aguilars similarly with the spouses Pfleider.

PNB has explained that there are differences in the circumstances of its two sugar
crop loan debtors which, to PNB, justify the different accommodations that it accorded to
them. PNB insists that the spouses Pfleider first gave their conformity to the recomputation
made by PNB (as audited by COA) on their loan accounts without crediting therein as loan
payments the value of the CARP proceeds of the agricultural lots. After recomputation of the
crop loans and condonation of interest in excess of 12% per annum, penalties and
surcharges, the spouses Pfleider confirmed and acknowledged as accurate the recomputed
balance on their loans and, thereafter they signed the Compromise Agreement with PNB.
The spouses Pfleider were then allowed to restructure their account for 13 years. On PNB's
part, it agreed that the value of the Escalante agricultural lots transferred by PNB to DAR
would be deducted from the aggregate amount due on the loans upon settlement by DAR
and/or LBP of the just compensation due PNB for the transfer of said lots to the Republic of
the Philippines. The settlement agreement between PNB and the spouses Pfleider was to
the effect that PNB would credit as payment the CARP proceeds of the foreclosed
agricultural properties in the Compromise Agreement provided that the case filed against
PNB was withdrawn.

According to PNB, the Aguilars, on the other hand, did not signify their conformity to
the recomputation as audited and certified by the COA and refused to sign the restructuring
agreement because they insisted that the CARP proceeds be first considered as loan
payments and should be deducted from their loan accounts. PNB has taken the position that
if the CARP proceeds were to be credited to the loan accounts of the Aguilars in the
recomputation, then, the restructuring agreement would no longer be needed because the
CARP proceeds were more than enough to cover the net balance of their accounts and, if
that was allowed, there would be nothing to amortize.

PNB further contends that the Aguilars cannot invoke its Compromise Agreement
with the spouses Pfleider because: (1) the former are not parties thereto; (2) the principle
of relativity of contract would be violated; and (3) PNB's freedom to enter into contracts
would also be violated if PNB would be compelled to accommodate the Aguilars.
Given the foregoing explanation by PNB, it was incumbent upon the Aguilars, to
make PNB liable for damages based on the principle of abuse of rights, to prove that PNB
acted in bad faith and that its sole intent was to prejudice or injure them. The Aguilars,
however, failed in this regard.

Also, the Court notes from the duly notarized Compromise Agreement between the
spouses Pfleider and PNB dated December 30, 1999 that the accounts of the former to the
latter were crop loans ("sugar and sugar-related loans") and, thus, covered by RA 7202,
unlike the accounts of the Aguilars which included non-RA 7202 accounts, as mentioned in
the narration of facts. Since the Aguilars were delinquent in their accounts, including their
non-RA 7202 accounts, and the mortgaged properties of the Aguilars similarly secured the
non-RA 7202 accounts, PNB had no option but to foreclose the mortgage.

In order to be liable for damages under the abuse of rights principle, the following
requisites must concur: (a) the existence of a legal right or duty; (b) which is exercised in
bad faith; and (c) for the sole intent of prejudicing or injuring another.

In this case, the Aguilars failed to substantiate the above requisites to justify the
award of damages in their favor against PNB, who merely exercised its legal right as a
creditor pursuant to RA 7202.

D.M. RAGASA ENTERPRISES, INC. vs. BANCO DE ORO, INC.

G.R. No. 190512, June 20, 2018, Second Division (Caguioa, J.)

DOCTRINE

Article 1170 of the Civil Code mandates that those who, in the performance of their
obligations, are guilty of fraud, negligence, or delay, and those who, in any manner,
contravene the tenor thereof, are liable for damages. Thus, having contravened the tenor of
the Lease Contract regarding its term or period, the bank should be liable for damages.
However, how much in damages should the bank be liable? Generally, if the lessor or the lessee
should not comply with their obligations, the aggrieved party may ask for either the rescission
of the contract and indemnification for damages, or only the latter, allowing the contract to
remain in force.

A penal clause is an accessory obligation which the parties attach to a principal

obligation for the purpose of insuring the performance thereof by imposing on the debtor a
special prestation (generally consisting in the payment of a sum of money) in case the
obligation is not fulfilled or is irregularly or inadequately fulfilled. Evidently, the penal clause
may be considered either reparation, compensation or substitute for damages, on one hand, or
as a punishment in case of breach of the obligation, on the other. When considered as
reparation or compensation, the question as to the appropriate amount of damages is resolved
once and for all because the stipulated indemnity represents a legitimate estimate made by the
contracting parties of the damages caused by the nonfulfillment or breach of the obligation.
Proof of actual damages is, consequently, not necessary in order that the stipulated penalty
may be demanded. When considered as a punishment, the question of damages is not yet
resolved inasmuch as the right to damages, besides the penalty, still subsists. Thus, if the
injured party desires to recover the damages actually suffered by him in addition to the
penalty, he must prove such damages.

FACTS

On January 30, 1998, Ragasa and then Equitable Bank executed a Lease Contract, as
lessor and lessee, over the ground and second floors of a commercial building for a period
of five years, commencing on February 1, 1998 up to January 31, 2003, with a monthly
rental of P122,607.00. Meanwhile, Equitable Bank entered into a merger with PCI Bank
thereby forming Equitable PCI Bank, Inc. The latter would eventually, pending the present
case, merge with Banco de Oro, Inc. to form the respondent bank. As a result of the merger,
one of the branches which had to be closed is the branch located in the subject premises.

For this reason, the bank sent a notice informing Ragasa that the former was pre
terminating their Lease Contract effective June 30, 2001. Ragasa responded with a demand
letter for payment of monthly rentals for the remaining term of the Lease Contract from July
1, 2001 to January 31, 2003 totaling P3,146,596.42, inasmuch as there is no express
provision in the Lease Contract allowing pre-termination. The bank countered, through a
letter dated June 26, 2001, that its only liability for pre-terminating the contract is the
forfeiture of its security deposit pursuant to item 8 (m) of the Lease Contract. On June 30,
2001, the bank vacated the subject premises without heeding Ragasa's demand for
payment.

Ragasa filed with the RTC the Complaint for Collection of Sum of Money and
Damages. Ragasa argued that under the Lease Contract, the forfeiture of the bank's security
deposit does not exempt it from payment of the rentals for the remaining term of the lease
because the bank's act of pre-terminating the contract was a major breach of its terms.
Moreover, item 8 (m) expressly provides that the security deposit shall not be applied to
the rentals. The bank argued that item 8 (m) of the Lease Contract is actually a penalty
clause which, in line with Article 1226 of the Civil Code, takes the place of damages and
interests in case of breach. Hence, for breaching the Lease Contract by pre-terminating the
same, the bank is liable to forfeit its security deposit in favor of Ragasa but would not be
liable for rentals corresponding to the remaining life of the Contract.

ISSUES

1. What is the liability of the bank, if any, for its act of pre-terminating the Lease
Contract?
2. Whether the bank can insist on paying only the penalty pursuant to the penalty
clause.

RULING

1. In the case at bar, there is no question that the bank breached the Lease Contract.
When it served upon Ragasa the Notice of Pre-termination effective June 30, 2001 and when
it, indeed, vacated the subject premises on said date, the bank, in effect, breached item 2 of
the Lease Contract, providing for a five-year term. It must be noted that the Lease Contract
does not contain a pre-termination clause.

Article 1170 of the Civil Code mandates that those who, in the performance of their
obligations, are guilty of fraud, negligence, or delay, and those who, in any manner,
contravene the tenor thereof, are liable for damages.

In the present case, there is an express stipulation in item 8 (p) of the Lease Contract
that "[b]reach or non-compliance of any of the provisions of this Contract, especially non
payment of two consecutive monthly rentals on time, shall mean the termination of this
Contract." Pursuant to the automatic termination clause of the Lease Contract, which is in
furtherance of the autonomy characteristic of contracts, the Lease Contract was terminated
upon its unauthorized pre-termination by the bank on June 30, 2001. Ragasa is, thus,
precluded from availing of the second option which is to claim damages by reason of the
breach and allow the lease to remain in force. With the lease having been automatically
resolved or terminated by agreement of the parties, Ragasa is entitled only to
indemnification for damages. To force either party to continue with a contract that is
automatically terminated in case of its breach by either party (pursuant to its express
provision) is not in furtherance of or sanctioned by the contract. Rather, it is a
contravention thereof and it negates the autonomy characteristic of contracts.

The provision or clause that is applicable in case of non-compliance of the Term or

period of the Lease Contract is item 8 (m) which mandates that the full deposit of
P367,821.00 or the equivalent of three months rentals shall be forfeited with the proviso
that the deposit cannot be applied to rental. Item No. 8 (m) is a penalty or penal clause.
Item 8 (m) of the Lease Contract is an accessory obligation or prestation to the principal
obligation of lease. It specifies the stipulated amount of liquidated damages — the full
deposit — to be awarded to the injured party in case of breach of the Term or period of the
principal obligation. Since the herein parties have agreed on a specific amount of penalty,
P367,821.00 or the full deposit, the Court will not even second guess whether it is
substantial enough to insure the compliance of the lease period. The Court will simply rule
that it is reasonable. As a rule, the penalty is fixed by the contracting parties as a
compensation or substitute for damages in case of breach of the obligation; and it is,
therefore, clear that the penalty in its compensatory aspect is the general rule, while the
penalty in its strictly penal aspect is the exception. It is also clear from paragraph 1 of
Article 1226 that when an obligation or a contract contains a penal clause, the penalty shall
substitute the indemnity for damages and the payment of interests in case of
noncompliance with or breach of the principal obligation.

Clearly, the requisites for the demandability of the penal clause are present in this
case. These are: (1) that the total non-fulfillment of the obligation or the defective
fulfillment is chargeable to the fault of the debtor; and (2) that the penalty may be enforced
in accordance with the provisions of law. As to the second requisite, the penalty is
demandable when the debtor is in mora in regard to obligations that are positive (to give
and to do) where demand may be necessary unless it is excused; and with regard to
negative obligations, when an act is done contrary to that which is prohibited.

2. NO. In the present case, the bank pre-terminated the Lease Contract which is not
expressly allowed therein. For not complying with its Term or period, the bank did an act
contrary to what is not allowed in the Lease Contract. Additionally, the bank cannot insist
on paying only the penalty. This is proscribed under Article 1227.

There is nothing in the Lease Contract which provides that the bank can exempt
itself from the performance of any provision therein, including the Term or period, by
simply paying the penalty. Items 8 (m) and 10 do not contain any such exemption.

Ragasa cannot insist on the performance of the lease, i.e., for the lease to continue
until expiration of its term, because the lease has been automatically terminated when the
bank breached it by pre-terminating its terms. Thus, Ragasa is only entitled to damages.

That said, that is, even as items 8 (m) and 10 are considered strictly penal or
punishment, Ragasa, as the injured party, is nonetheless required to prove the "other
damages" that it actually suffered before it can be entitled thereto. However, Ragasa simply
insisted that the bank should be liable for the amount representing the monthly rentals for
the unexpired term of the Lease Contract. Ragasa did not adduce any evidence to support its
claim that it actually suffered damages of such amount in terms of lost income. In this
regard, it must be emphasized that Ragasa could have leased the Leased Premises as early
as July 1, 2001 because the bank had completely vacated the same as of June 30, 2001. That
Ragasa chose not to lease the Leased Premises and not earn any rental therefrom in the
meantime that its complaint for damages against the bank was being litigated was its own
decision and doing.
Article 2203 of the Civil Code provides that "[t]he party suffering loss or injury must
exercise the diligence of a good father of a family to minimize the damages resulting from
the act or omission." Ragasa likewise failed in this respect.

In conclusion, the Court rules that Ragasa is not entitled to the rental for the
unexpired period of the Lease Contract, and it is only entitled to the forfeiture of the full
deposit pursuant to item 8 (m) and P15,000.00 as attorney's fees pursuant to item 10.

BENEDICTO V. YUJUICO, vs. FAR EAST BANK AND TRUST

COMPANY G.R. No. 186196. August 15, 2018, Second Division
(Caguioa, J.)

DOCTRINE

Novation is governed principally by Articles 1291 and 1292 of the Civil Code, which
provide: ART. 1291. Obligations may be modified by: (1) Changing their object or principal
conditions; (2) Substituting the person of the debtor; (3) Subrogating a third person in the
rights of the creditor. Further, ART. 1292 provides that in order that an obligation may be
extinguished by another which substitutes the same, it is imperative that it be so declared in
unequivocal terms, or that the old and the new obligations be on every point incompatible
with each other.

FACTS

Far East Bank and Trust Company (appellant bank,) approved the renewal of
appellee GTI Sportswear Corporation's Omnibus Credit Line (OCL) with a total amount of
P35,000,000.00. This was secured by a Comprehensive Surety Agreement executed by
appellee Benedicto V. Yujuico in his personal capacity. He was also the president of appellee
GTI. Sometime in May 1995, negotiations were undertaken to settle appellee GTI's trust
receipt obligation under the OCL. During these negotiations, appellee GTI made known to
appellant bank its request for the conversion of its peso loan to US dollar-denominated loan.
An exchange of communications concerning the conversion transpired but no definite
agreement on the said conversion was put into writing.

On June 26, 1995, appellee Yujuico, in behalf of appellee GTI and in his personal
capacity as surety, and appellant's First Vice President Ricardo G. Lazatin, in behalf of
appellant bank, signed a Loan Restructuring Agreement (LRA), the subject of which was
appellee GTI's outstanding balance on its Omnibus Credit Line.The agreement expressly
stated that the restructured loan continues to be secured by the Comprehensive Surety
Agreement previously executed by appellee Yujuico in favor of appellant bank. Appellant
bank, however, denied the request and informed appellees that the conversion was not
deemed workable.

Appellees filed against appellant bank a Complaint for Specific Performance with
Preliminary Injunction with the Regional Trial Court of Makati City. Appellees alleged that
during the signing of the loan restructuring agreement, they were assured by the officers of
appellant bank that after a few payments on its obligation, appellee GTI's peso loan would
be converted to US dollars.

Hence, appellees prayed that appellant bank be directed to convert GTI's loan to US
dollars retroactively effective October 1, 1996 and that appellant bank be directed to pay
appellees P2,844,228.00 representing savings that could have accrued in favor of appellees

in terms of the difference in interest payments. They also prayed for exemplary damages
and attorney's fees.

Petitioner Yujuico argues that "in converting the restructured Omnibus Credit
Line/loan of GTI Sportswear Corporation from Philippine Peso to United States Dollar
denominated [respondent] has clearly and definitely partially executed the
judgment/decision of the Trial Court and/or has voluntarily acquiesced or ratified partially
the execution of the judgment/decision of the Trial Court."

ISSUES

1. Whether the CA has legal basis to entertain the appeal as respondent had already
performed a partial execution of the Decision of the RTC which prevents and/or precludes
respondent from questioning and/or appealing the judgment/Decision of the RTC.

2. Whether the CA has legal basis to resolve and declare that there was no novation
between GTI and respondent;

3. Whether the CA has legal basis to resolve and declare that petitioner Yujuico remains
liable as surety of the obligation of GTI.

RULING

1. YES. The party, who is barred from appealing and claiming that he has not recovered
enough, must have recovered a judgment upon a claim which is indivisible and, after its
rendition, has coerced by execution full or partial satisfaction. Thus, having elected to
collect from the judgment by execution, he has ratified it, either in toto or partially, and
should be estopped from prosecuting an appeal inconsistent with his collection of the
amount adjudged to him.

In fine, the claim must be one which is indivisible and there must be an execution of
the judgment, either partially or fully. Indeed, the claim of respondent against GTI and
petitioner Yujuico is indivisible since it cannot be split up and made the basis for several
causes of action. However, there is yet no execution of the RTC Decision, either fully or
partially. Respondent merely acceded to the directive of the RTC "to acknowledge and
confirm its obligation to convert the restructured Omnibus Credit Line of GTI from
Philippine Peso loan account into a US Dollar denominated loan obligation." In fact, the
RTC, while it recognized that GTI is indebted to respondent, ruled that "the liquidation of
this obligation is however subject to a condition that the bank [(respondent)] must first
comply with its obligation to convert the Peso loan account into a US Dollar denominated
loan and thereafter [compute] the outstanding obligation of [GTI and petitioner Yujuico] to
it." Thus, GTI or petitioner Yujuico has not been coerced by execution to satisfy the RTC
judgment; and respondent is not precluded to appeal the resolution of the RTC that there is
novation and petitioner Yujuico is released from his obligation as a surety.

2. YES. Novation has been defined as the substitution or alteration of an obligation by a

subsequent one that cancels or modifies the preceding one.

Here, the attendant facts do not make out a case of novation in the sense of a total or
extinctive novation. There is no document that states in unequivocal terms that the
agreement to convert the loan from peso to US dollar would abrogate the loan restructuring
agreement or the omnibus credit line. Instead what is readily apparent from the exchange
of communications concerning the request for conversion is that the parties recognize the
subsistence of the loan restructuring agreement.

Neither do We see any substantial incompatibility between the obligations of the

parties under the restructuring agreement and the agreement to convert the loan as to
warrant a finding of an implied novation. Implied novation necessitates that the
incompatibility between the old and new obligations be total on every point such that the
old obligation is completely superseded by the new one. This is not the case here. The only
modification that the conversion agreement introduced was that [GTI's and petitioner
Yujuico's] loan obligation would be payable in US dollars instead of Philippine pesos.
Incidentally, the applicable interest rate is lower on account of the change in currency.
These alterations, however, do not suffice to constitute novation.
The agreement to convert the Peso-denominated restructured loan into a US Dollar
denominated one is an implied or tacit, partial, modificatory novation. There was merely a
change in the method of payment.

3. YES. Without a total or extinctive novation, the surety agreement subsists.

Aside from the absence of a "perfect" novation, another circumstance that militates
against the release of [petitioner] Yujuico as surety is the fact that he executed a
comprehensive or continuing surety, one which is not limited to a single transaction, but
which contemplates a future course of dealing, covering a series of transactions, generally
for an indefinite time or until revoked."

While Article 1215 of the Civil Code provides that novation, compensation or
remission of the debt, made by any of the solidary creditors or with any of the solidary
debtors, shall extinguish the obligation, the novation contemplated therein is a total or
extinctive novation of the old obligation. Also, the Comprehensive Surety Agreement that
petitioner Yujuico executed in favor of respondent is so worded that it covers "any and all
other indebtedness of every kind which is now or may hereafter become due or owing to
[respondent] by the Borrower."

SPOUSES BELTRAN vs. SPOUSES CANGAYDA

G.R. No. 225033, August 15, 2018, Second Division (Caguioa, J.)

DOCTRINE
 In a contract of sale, title passes to the vendee upon the delivery of the thing sold;
whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is not
to pass until the full payment of the price. In a contract of sale, the vendor has lost and cannot
recover ownership until and unless the contract is resolved or rescinded; whereas in a contract
to sell, title is retained by the vendor until the full payment of the price.

FACTS

Sometime in August 1989, respondents verbally agreed to sell the disputed property
to petitioners for P35,000.00. After making an initial payment, petitioners took possession
of the disputed property and built their family home thereon. Petitioners subsequently
made additional payments. However, despite respondents' repeated demands, petitioners
failed to pay their remaining balance of P5,310.00. This prompted respondents to refer the
matter to the Office of the Barangay Chairman. Before the OBC, the parties signed an
Amicable Settlement that respondent Apolonio, Jr. should be willing to sign a deed of sale
agreement after petitioner Antonio were able to pay the remaining balance. Failure to
comply on the said agreement, the OBC is willing to indorse this case to the higher court for
proper legal action. Petitioners failed to pay within the period set forth in the Amicable
Settlement.

On January 14, 2009, or nearly 17 years after the expiration of petitioners' period to
pay their remaining balance, respondents served upon petitioners a "Last and Final
Demand" to vacate the disputed property within 30 days from notice. This demand was left
unheeded. Consequently, respondents filed a complaint for recovery of possession and
damages (Complaint) before the RTC. Respondents alleged, among others, that petitioners
had been occupying the disputed property without authority, and without payment of
rental fees. The RTC characterized the oral agreement between the parties as a contract to
sell. The RTC held that the consummation of this contract to sell was averted due to
petitioners' failure to pay the purchase price in full. Hence the RTC held that ownership
over the disputed property never passed to petitioners. The CA affirmed the findings of the
RTC anent the nature of the contract entered into by the parties. In addition, it rejected
petitioners' invocation of the Maceda Law.

Petitioners maintain, as they did before the CA, that the oral agreement they entered
into with respondents is a contract of sale, and that, as a necessary incident of such contract,
ownership over the disputed property had been transferred in their favor when they took
possession and built improvements thereon. Further, petitioners argue that respondents
are not entitled to recover possession of the disputed property since they failed to cancel
their oral agreement by way of a notarial act, in accordance with the provisions of the
Maceda Law. Finally, petitioners aver that respondents' Complaint is an action upon a
written agreement, as it is based on the Amicable Settlement. Thus, petitioners conclude
that respondents' action already prescribed, since it was filed more than 10 years after the
lapse of petitioners' period to pay their outstanding balance. Petitioners further argue that
the Complaint is also barred by laches, considering that respondents allowed petitioners to
continue staying in the disputed property for a period of 17 years after such failure to pay

ISSUES

1. Whether the CA is correct in characterizing the oral agreement between the parties as a
contract to sell;

2. Whether slight delay in the payment of the purchase price is a sufficient ground for the
rescission of a sale of real property.

3. Whether the oral agreement between the parties is covered by the Maceda Law; and

4. Whether respondents' action for recovery of possession should have been dismissed on
the ground of prescription and/or laches.
RULING

1. NO. The agreement between the parties is an oral contract of sale. As a consequence,
ownership of the disputed property passed to petitioners upon its delivery.

Contrary to the CA's findings, neither respondent Loreta's testimony nor clause 6 of
the Amicable Settlement supports the conclusion that the parties' agreement is not contract
of sale, but only a contract to sell —the reason being that it is not evident from said
testimony and clause 6 that there was an express agreement to reserve ownership despite
delivery of the disputed property.

Loreta's testimony shows that the parties' oral agreement constitutes a meeting of
the minds as to the sale of the disputed property and its purchase price. Respondent
Loreta's statements do not in any way suggest that the parties intended to enter into a
contract of sale at a later time. Such statements only pertain to the time at which
petitioners expected, or at least hoped, to acquire the sufficient means to pay the
purchase price agreed upon.

Clause 6 of the Amicable Settlement merely states respondent Apolonio, Jr.'s

commitment to formalize and reduce the oral agreement of the parties into a public
instrument upon payment of petitioners' outstanding balance. It bears emphasizing that a
formal document is not necessary for the sale transaction to acquire binding effect.
Hence, the subsequent execution of a formal deed of sale does not negate the perfection of
the parties' oral contract of sale which had already taken place upon the meeting of the
parties' minds as to the subject of the transaction and its purchase price.

In a contract of sale, ownership of a thing sold shall pass to the buyer upon actual or
constructive delivery thereof in the absence of any stipulation to the contrary. Ownership of
the disputed property passed to petitioners when its possession was transferred in their
favor, as no reservation to the contrary had been made. Considering that respondents'
Complaint is anchored upon their alleged ownership of the disputed property, their prayer
to recover possession thereof as a consequence of such alleged ownership cannot prosper.

2. NO. Slight delay is not sufficient to justify rescission.

Article 1191 of the Civil Code lays down the remedies that the injured party may
resort to in case of breach of a reciprocal obligation — fulfillment of the obligation or
rescission thereof, with damages in either case. Thus, in a contract of sale, the vendor's
failure to pay the price agreed upon generally constitutes breach, and extends to the vendor
the right to demand the contract's fulfillment or rescission. The right of rescission granted
to the injured party under Article 1191 is predicated on a breach of faith by the other party
who violates the reciprocity between them. Rescission may not be resorted to in the
absence of breach of faith. In this connection, Article 1592 extends to the vendee in a sale of
immovable property the right to effect payment even after expiration of the period agreed
upon, as long as no demand for rescission has been made upon him by the vendor.

Article 1592 in conjunction with Article 1191 suggests that in the absence of any
stipulation to the contrary, the vendor's failure to pay within the period agreed upon shall
not constitute a breach of faith, so long as payment is made before the vendor demands for
rescission, either judicially, or by notarial act.

Hence, slight delay in the payment of the purchase price does not serve as a
sufficient ground for the rescission of a sale of real property.

3. NO. Despite the denomination of the deed as a "Deed of Conditional Sale" a reading of the
conditions therein set forth reveals the contrary. Nowhere in the said contract in question
could we find a proviso or stipulation to the effect that title to the property sold is reserved
in the vendor until full payment of the purchase price. There is also no stipulation giving the
vendor (petitioner Taguba) the right to unilaterally rescind the contract the moment the
vendee (private respondent de Leon) fails to pay within a fixed period.

Considering, therefore, the nature of the transaction between petitioner Taguba and
private respondent, as a contract of sale, absolute in nature, the applicable provision is
Article 1592 of the New Civil Code. In the case at bar, petitioner Taguba never notified
private respondent by notarial act that he was rescinding the contract, and neither had he
filed a suit in court to rescind the sale.

Where time is not of the essence of the agreement, a slight delay on the part of
one party in the performance of his obligation is not a sufficient ground for the
rescission of the agreement." Considering that in the instant case, private respondent
had already actually paid the sum of P12,500.00 of the total stipulated purchase price
of P18,000.00 and had tendered payment of the balance of P5,500.00 within the
grace period of six months from December 31, 1972, equity and justice mandate that
she be given additional period within which to complete payment of the purchase
price. Here, petitioners acknowledge that they failed to settle the purchase price of the
disputed property in full within the deadline set by the Amicable Settlement. Nevertheless,
the Court does not lose sight of the fact that petitioners have already paid more than three-
fourths of the purchase price agreed upon. Further, petitioners have constituted their
family home on the disputed property in good faith, and have lived thereon for 17 years
without protest.

In addition, respondents do not dispute that petitioners offered to settle their

outstanding balance of P5,310.00 "two (2) days after the deadline [set by the Amicable
Settlement] and a few times thereafter,” which offers respondents refused to accept.
Respondents also do not claim to have made a demand for rescission at any time before
petitioners made such offers to pay, either through judicial or extra-judicial means, such as
through a notarial act.

Thus, pursuant to Article 1592, and consistent with the Court's rulings in Taguba
and Dignos, the Court deems it proper to grant petitioners a period of 30 days from notice
of this Decision to settle their outstanding balance.

4. Assuming that petitioners' failure to pay constitutes breach, respondents' cause of

action is already barred by prescription.

Respondents hinge their cause of action on petitioners' failure to pay within the
period set by the Amicable Settlement. Hence, this would mean that respondents' action is
one that proceeds from a breach of a written agreement, which, under Article 1144 of the
Civil Code, prescribes in 10 years. Respondents' Complaint was filed 17 years after the
expiration of the payment period stipulated in the Amicable Settlement. Assuming that
petitioners' failure to pay within said period constitutes sufficient breach which gives rise
to a cause of action, such action has clearly prescribed.

SPOUSES ABRAHAM AND MELCHORA ERMINO vs. GOLDEN VILLAGE

HOMEOWNERS ASSOCIATION, INC.
G.R. No. 180808, August 15, 2018, Second Division (Caguioa, J.)

DOCTRINE

The act of replacing the steel grille gate with a concrete fence was within the
legitimate exercise of GVHAI's proprietary rights over its property. The law recognizes in the
owner the right to enjoy and dispose of a thing, without other limitations than those
established by law. Article 430 of the Civil Code provides that "(e)very owner may enclose or
fence his land or tenements by means of walls, ditches, live or dead hedges, or by any other
means without detriment to servitudes constituted thereon."

Where the waters which flow from a higher state are those which are artificially
collected in man-made lagoons, any damage occasioned thereby entitles the owner of the
lower or servient estate to compensation. Lower estates are only obliged to receive water
naturally flowing from higher estates and such should be free from any human intervention. In
the instant case, what flowed from Hilltop City Subdivision was not water that naturally
flowed from a higher estate.

FACTS

Spouses Ermino are residents of Alco Homes, a subdivision located beside Golden
Village Subdivision (Golden Village) in Barangay Carmen, Cagayan de Oro City. On days
prior to August 12, 1995 and September 10, 1995, there was continuous heavy rain which
caused a large volume of water to fall from the hilltop subdivision to the subdivisions
below. The volume of water directly hit Spouses Ermino's house and damaged their fence,
furniture, appliances and car. Spouses Ermino filed a complaint for damages against E.B.
Villarosa, the developer of Hilltop City Subdivision, and GVHAI. The Hilltop City Subdivision
is found at the upper portion of Alco Homes, making it a higher estate, while Golden Village
is located beside Alco Homes, which makes both Alco Homes and Golden Village lower
estates vis-à -vis Hilltop City Subdivision. Spouses Ermino blamed E.B. Villarosa for
negligently failing to observe Department of Environment and Natural Resources rules and
regulations and to provide retaining walls and other flood control devices which could have
prevented the softening of the earth and consequent inundation. They likewise claimed
that GVHAI committed a wrongful act in constructing the concrete fence which diverted the
flow of water to Alco Homes, hence, making it equally liable to Spouses Ermino.

Spouses Ermino prayed that E.B. Villarosa and GVHAI be made jointly and severally
liable. E.B. Villarosa argued that the location of the house of Spouses Ermino is located at
the lower portion of the Dagong Creek and is indeed flooded every time there is a heavy
downpour, and that the damage was further aggravated by GVHAI's construction of the
concrete fence. It contended, however, that the damage was due to a fortuitous event.
Meanwhile, GVHAI averred that the construction of the concrete fence was in the exercise of
its proprietary rights and that it was done in order to prevent outsiders from using the
steel grille from entering the subdivision. It likewise asserted that they "should not be
made inutile and lame-duck recipients of whatever waters and/or garbage" that come from
Alco Homes. GVHAI attributed sole liability on E.B. Villarosa for having denuded Hilltop
City Subdivision and for its failure to provide precautionary measures.

ISSUES

1. Whether the CA is correct in ruling that GVHAI was not responsible for the damage to
Spouses Ermino's properties.

2. Whether GVHAI was negligent in building its concrete fence causing the softening of the
earth.

3. Whether GVHAI is imposed with the responsibility on lower estates to receive waters
from higher estates.

4. Whether E.B. Villarosa is responsible for the damage suffered by Spouses

Ermino. RULING

1. YES. Malice or bad faith, at the core of Articles 20 and 21, implies a conscious and
intentional design to do a wrongful act for a dishonest purpose or moral obliquity. While
GVHAI replaced the steel grille gate with a concrete fence, the construction was not
intended to obstruct whatever waters that may naturally flow from the higher estates. The
concrete fence was made to ward off undesirable elements from entering the subdivision.
Thus, for purposes of Articles 20 and 21, the construction of the concrete fence is not
contrary to any law, morals, good customs, or public policy.
2. NO. When GVHAI decided to construct the concrete fence, it could not have reasonably
foreseen any harm that could occur to Spouses Ermino. Any prudent person exercising
reasonable care and caution could not have envisaged such an outcome from the mere
exercise of a proprietary act.

Indeed, the act of replacing the steel grille gate with a concrete fence was within the
legitimate exercise of GVHAI's proprietary rights over its property. The law recognizes in
the owner the right to enjoy and dispose of a thing, without other limitations than those
established by law. Article 430 of the Civil Code provides that "(e)very owner may enclose
or fence his land or tenements by means of walls, ditches, live or dead hedges, or by any
other means without detriment to servitudes constituted thereon."

3. NO. Spouses Ermino likewise ascribe liability to GVHAI relying on Article 637 of the Civil
Code and Article 50 of the Water Code.

Alco Homes and Golden Village are lower in elevation than the Hilltop City Subdivision, and
thus, are legally obliged to receive waters which naturally flow from the latter, as provided
under Article 637 of the Civil Code and Article 50 of the Water Code. An easement or
servitude is "a real right constituted on another's property, corporeal and immovable, by
virtue of which the owner of the same has to abstain from doing or to allow somebody else
to do something on his property for the benefit of another thing or person." The statutory
basis of this right is Article 613 of the Civil Code.

In this regard, Hilltop City Subdivision, the immovable in favor of which the easement is
established, is the dominant estate; while Alco Homes and Golden Village, those that are
subject of the easement, are the servient estates. It must be noted, however, that there is a
concomitant responsibility on the part of Hilltop City Subdivision not to make the obligation
of these lower estates/servient estates more onerous. This obligation is enunciated under
second paragraph of Article 637, as abovementioned, and Article 627 of the Civil Code:

ARTICLE 627. The owner of the dominant estate may make, at his own expense, on the
servient estate any works necessary for the use and preservation of the servitude, but
without altering it or rendering it more burdensome.

Based on the ocular of the Hilltop City Subdivision, the area was bulldozed and the
hills were flattened. There were no retaining walls constructed to prevent the water from
flowing down and the soil was soft. This flattening of the area due to bulldozing changed the
course of water, which ultimately led to the passing of said water to the house of Spouses
Ermino.

Where the waters which flow from a higher state are those which are
artificially collected in man-made lagoons, any damage occasioned thereby entitles
the owner of the lower or servient estate to compensation. Thus, the bulldozing and
construction works done by E.B. Villarosa, not to mention the denudation of the vegetation
at the Hilltop City Subdivision, made Alco Homes and Golden Village's obligation, as lower
estates, more burdensome than what the law contemplated. Lower estates are only
obliged to receive water naturally flowing from higher estates and such should be
free from any human intervention. In the instant case, what flowed from Hilltop City
Subdivision was not water that naturally flowed from a higher estate. The bulldozing
and flattening of the hills led to the softening of the soil that could then be easily carried by
the current of water whenever it rained. Thus, Alco Homes and Golden Village are not
anymore obligated to receive such waters and earth coming from Hilltop City Subdivision.

The Court also agrees with the CA's observation that the concrete fence cannot be
considered as an impediment to Golden Village's obligation to receive the water, because if
only naturally flowing water, without any human intervention, cascaded down from the
Hilltop City Subdivision, the concrete fence would not pose as an obstruction to its flow. In
this regard, the closure of the steel grille gate was effected even before the construction
made by E.B. Villarosa.
4. YES. E.B. Villarosa is responsible for the damage suffered by Spouses Ermino. E.B.
Villarosa should have provided for the necessary measures such as retaining walls and
drainage so that the large volume of water emanating from it would not unduly cause
inconvenience, if not injury, to the lower estates. E.B. Villarosa's negligence is the
proximate cause of the injury. Had it only exercised prudence, reasonable care and caution
in the construction of Hilltop City Subdivision, then Spouses Ermino would not have
experienced the injury that they suffered.

SAMUEL AND EDGAR BUYCO v. REPUBLIC OF THE PHILIPPINES

G.R. No. 197733, August 29, 2018, Second Division (Caguioa, J.)

DOCTRINE

A CENRO or PENRO certification is not enough to prove the alienable and disposable
nature of the property sought to be registered because the only way to prove the classification
of the land is through the original classification approved by the DENR Secretary or the
President himself.

FACTS

The brothers Edgardo H. Buyco and Samuel H. Buyco, through their attorney-in-fact
Rieven H. Buyco, filed an application for registration of a parcel of land with then CFI of
Romblon, Branch 82. The Republic of the Philippines through the Director of Lands opposed
the application for registration. The Land Registration Court rendered its judgment granting
aforesaid application. The Director of Lands appealed said Decision to the CA on the basis
that the trial court erred in not declaring the applicants barred by the Constitution from
applying for registration because they are American citizens and are thus disqualified from
acquiring lands in the Philippines; in holding that applicants had established proprietary
rights over the land even before acquiring American citizenship through naturalization; in
not dismissing the application for registration because of applicants' failure to
overthrow the presumption that the land applied for is public land belonging to the
State. The CA dismissed for lack of merit the appeal interposed by the Director of Lands.
The Supreme Court rendered its judgment and granted the petition of the Director of Lands
and reaffirmed the decision of the RTC of Romblon.

Six years later, Edgar Buyco and Samuel Buyco filed for the second time an
application for registration of title covering the same parcel of land. The appellant Republic
of the Philippines filed its opposition with a motion to dismiss the application for
registration of title on the bases that 1) res judicata has already set in; and that 2) the
applicants did not acquire vested rights over the subject parcel of land before acquiring
American citizenship.
The Buycos opposed the Republic's motion to dismiss contending that res judicata was not
applicable to the present case and that appellee Samuel A. Buyco has already reacquired his
Filipino citizenship.

The trial court denied the Republic's motion to dismiss, opining that, in the case at
bar being a land registration case, the provisions of Act No. 496 prevails over those of the
Rules of Court. since the order of dismissal is without prejudice, it goes without saying that
the applicant, notwithstanding of the dismissal of his application, can, if he believes his
evidence warrants for a tenable subsequent application for registration, file another
application for because the dismissal of his previous application was without prejudice. He
is not barred by the rule on prior judgment or res judicata because this rule has been
expressly made not applicable in the case at bar by said Sec. 37 of Act No. 496. After trial on
the merits, the trial court rendered judgment granting the application for registration of
title by the Buycos. The CA, in its Decision dated January 26, 2011, granted the appeal
holding that res judicata finds application to land registration cases and that all its elements
are present in this case. Also, the case concerning the petitioners' first application for land
registration, had been decided with finality. Based on the doctrine of finality of judgment,
the issue or cause involved therein should be laid to rest.
ISSUE
Whether or not the subject land sought to be registered by the Buycos is alienable
and disposable.

RULING

NO. One of the obstacles to their first registration application to bring within the
operation of the Land Registration Act the Subject Land as found by the Court in The
Director of Lands v. Buyco was the absence of evidence to prove that the Subject Land is
alienable and disposable.

In the recent case of In Re: Application for Land Registration Suprema T. Dumo v.
Republic of the Philippines, the Court reiterated the requirement it set in Republic of the
Philippines v. T.A.N. Properties, Inc. that there are TWO documents that must be
presented to prove that the land subject of the application for registration is
alienable and disposable:

(1) a copy of the original classification approved by the DENR Secretary and certified
as a true copy by the legal custodian of the official records, and
(2) a certificate of land classification status issued by the CENRO or the Provincial
Environment and Natural Resources Office (PENRO) based on the land classification
approved by the DENR Secretary.

Dumo also stated that: "a CENRO or PENRO certification is not enough to prove
the alienable and disposable nature of the property sought to be registered because
the only way to prove the classification of the land is through the original
classification approved by the DENR Secretary or the President himself."

Given that the proofs which the petitioners presented in this case to prove the
alienable and disposable character of the Subject Land proceed mainly from a Certification
dated August 14, 1998 issued by the CENRO of Odiongan, Romblon, which is insufficient,
their second attempt to register the Subject Land under the Torrens system must suffer the
same fate as their first.

REPUBLIC OF THE PHILIPPINES REPRESENTED BY DPWH v. HEIRS OF ELIGIO

CRUZ, REPRESENTED BY CRISANTA OLIQUINO, AND HEIRS OF ELIGIO CRUZ,
REPRESENTED BY MAXIMINO AGALABIA
G.R. No. 208956, October 17, 2018, Second Division (Caguioa, J.)

DOCTRINE

Article 2028 of the Civil Code defines a compromise as a "contract whereby the parties,
by making reciprocal concessions, avoid litigation or put an end to one already commenced.”
Before approving a compromise, courts are thus bound to strictly scrutinize the same to
ensure that the compromise and its execution are compliant with the law and consistent with
procedural rules.

FACTS
Sometime in 1977, the DPWH, then Ministry of Public Highways, conducted the
widening of Visayas Avenue, Quezon City. The construction encroached upon a 4,757-
square meter portion (Disputed Portion) of Lot 643 owned by Virginia B. Uichanco (Lot
643-a-2), Julita B. Uichanco-Denoga (Lot 643-A-3), and Eligio Cruz (Lot 643-B). The
Disputed Portion was subdivided, and thereafter registered in the name of the Republic.
However, no payment of just compensation was made.

Subsequently, a certain Crisanta Oliquino filed with the DPWH a claim for payment
of just compensation for and on behalf of several heirs of Eligio Cruz. Oliquino demanded
just compensation for the Disputed Portion at the rate of Php15,000.00 per square meter.
In exchange for Atty. Borja's services, Oliquino executed a Deed of Assignment ceding in his
favor the amount of Php14,000,000.00 out of the Php71,355,000.00 she expected to receive
from the Republic. Oliquino later repudiated the deed, prompting the Republic to release
the partial payment of Php39,533,239.13 in Oliquino's favor. Confronted with conflicting
claims of ownership over the Disputed Portion of Lot 643 left unpaid, the Republic
withheld further payments and demanded the claimants to settle their opposing claims
through litigation. Since the claimants failed to do so, the Republic was constrained to file
the Interpleader impleading as defendants the Oliquino group, Agalabia group, and Atty.
Borja. The De Leon group filed a Motion for Intervention, also claiming just compensation
as heirs of Eligio Cruz which was then granted.

After termination of the mediation, the Oliquino group presented before the RTC a
Compromise Agreement for approval. While said agreement allocated the remaining
balance of just compensation corresponding to the Disputed Portion among the
defendants in the Interpleader, only the Oliquino and Agalabia groups agreed upon
the allocation. The RTC ruled m favor of the Oliquino and Agalabia groups and granted
their motion for execution. The Republic filed several motions to avert execution but was
denied. The CA issued the Assailed Decision dismissing the Republic's petition for certiorari
for lack of merit. In so ruling, the CA held that since the Partial Judgment had attained
finality, it may neither be amended nor corrected. Hence, the final and only action to be
taken is to have the judgment executed in accordance with Rule 39 of the Rules of Court.
According to the CA, it is "immaterial" that the issue raised in the Interpleader has yet to be
resolved, as this does not derogate the judgment's susceptibility to execution.

ISSUE

Whether the CA erred when it affirmed the validity of the Order directing the
immediate execution of the Partial Judgment.

RULING

YES. A compromise intended to resolve a matter under litigation is referred to as a

judicial compromise. The effect of a judicial compromise is well established:“Once stamped
with judicial imprimatur, a compromise agreement becomes more than a mere contract
binding upon the parties; having the sanction of the court and entered as its determination
of the controversy, it has the force and effect of any other judgment. It has the effect and
authority of res judicata, although no execution may issue until it would have received
the corresponding approval of the court where the litigation pends and its
compliance with the terms of the agreement is thereupon decreed.”

Before approving a compromise, courts are thus bound to strictly scrutinize the
same to ensure that the compromise and its execution are compliant with the law and
consistent with procedural rules. To recall, the Compromise Agreement divides the
Republic's entire remaining balance between and among the defendants, in accordance
with the terms agreed upon by the Oliquino and Agalabia groups. The allocation of the
remaining balance was determined without the participation of all other claimants
who likewise stand as parties to the Interpleader.

Clearly, the immediate execution of the Partial Judgment approving the Compromise
Agreement facilitates the premature distribution of the Republic's remaining balance
without affording the De Leon group and Atty. Borja of the opportunity to establish their
entitlement, if any, to compensation beyond the amounts unilaterally set by the Oliquino
and Agalabia groups. This defeats the very purpose for which the Republic's Interpleader
had been filed, as it opens the portals to protracted litigation not only among the opposing
claimants, but also between said claimants and the Republic.

By affirming the July 2011 Omnibus Order and November 2011 Order, the CA
erroneously exposed the Republic to the very risk against which it sought protection
through its Interpleader.
 INDUSTRIAL PERSONNEL AND MANAGEMENT SERVICES, INC. v. COUNTRY BANKERS
INSURANCE CORPORATION
G.R. No. 194126, October 17, 2018, Second Division (Caguioa, J.)

DOCTRINE

According to the autonomy characteristic of contracts, the contracting parties may

establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public order, or
public policy.

Article 2199 of the Civil Code states: Except as provided by law or by stipulation, one
is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has
duly proved. Such compensation is referred to as actual or compensatory damages.

FACTS

In 2000, Industrial Personnel and Management Services, Inc. (IPAMS) began

recruiting registered nurses for work deployment in the US. It takes eighteen (18) to twenty
four (24) months for the entire immigration process to complete. As the process requires
huge amounts of money, such amounts are advanced to the nurse applicants. By reason of
the advances made to the nurse applicants, the latter were required to post surety bond.
The purpose of the bond is to guarantee the following during its validity period: (a) that
they will comply with the entire immigration process, (b) that they will complete the
documents required, and (c) that they will pass all the qualifying examinations for the
issuance of immigration visa. The Country Bankers Insurance Corporation and IPAMS
agreed to provide bonds for the said nurses. Under the agreement of IPAMS and Country
Bankers, the latter will provide surety bonds and the premiums therefor were paid by
IPAMS on behalf of the nurse applicants.

The surety bonds issued specifically state that the liability of the surety company, i.e.,
respondent Country Bankers, "shall be limited only to actual damages arising from Breach
of Contract by the applicant." In 2004, Country Bankers was not able to pay six (6) claims of
IPAMS. The claims were not denied by Country Bankers, which instead asked for time
within which to pay the claims, as it alleged to be cash strapped at that time. Thereafter, the
number of unpaid claims increased. By February 16, 2007, the total amount of unpaid
claims was P11,309,411.56.

The counsel of Country Bankers, Atty. Marisol Caleja, started to oppose the payment
of claims and insisted on the production of official receipts of IPAMS on the expenses it
incurred for the application of nurses. IPAMS opposed this, saying that the Country
Bankers' insistence on the production of official receipts was contrary to, and not
contemplated in, the MOA and was an impossible condition considering that the U.S.
authorities did not issue official receipts. In lieu of official receipts, IPAMS submitted
statements of accounts, as provided in the MOA.

The IC issued a Resolution and held that there is no ground for the refusal of Country
Bankers to pay the claims of IPAMS. Its failure to settle the claim after having entered into
an Agreement with the complainant, IPAMS, demonstrates respondent's bad faith in the
fulfillment of their obligation, to the prejudice of the complainant. The DOF decided to
affirm the assailed orders of the IC. The CA held that respondent Country Bankers was
justified in delaying the payment of the claims to petitioner IPAMS because of the
purported lack of submission by petitioner IPAMS of official receipts and other competent
proof on the expenses incurred by petitioner IPAMS in its recruitment of nurse applicants.

ISSUE

Whether there is a valid ground for Country Bankers’ refusal to pay the claims to
IPAMS due to lack of official receipts.
RULING

NO. According to the autonomy characteristic of contracts, the contracting parties

may establish such stipulations, clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals, good customs, public order,
or public policy.

The stipulation of the MOA at issue is the provision enumerating requirements that
must be presented by petitioner IPAMS in order to make a valid claim against the surety
bond. Petitioner IPAMS and respondent Country Bankers in essence made a stipulation to
the effect that mere demand letters, affidavits, and statements of accounts are enough proof
of actual damages — that more direct and concrete proofs of expenditures by the petitioner
such as official receipts have been dispensed with in order to prove actual losses.

Can the parties stipulate on the requirements that must be presented in order
to claim against a surety bond? And the answer is a definite YES, pursuant to the
autonomy characteristic of contracts, they can. In an insurance contract, founded on the
autonomy of contracts, the parties are generally not prevented from imposing the terms
and conditions that determine the contract's obligatory force. Thus, the view posited by the
CA that the Requirements for Claim Clause is contrary to law because it is incongruent with
Article 2199 of the Civil Code and, therefore, an exception to the rule on autonomy of
contracts is erroneous.

Article 2199 of the Civil Code states: Except as provided by law or by stipulation,
one is entitled to an adequate compensation only for such pecuniary loss suffered by him as
he has duly proved. Such compensation is referred to as actual or compensatory damages.

The law is clear and unequivocal when it states that one is entitled to adequate
compensation for pecuniary loss only for such losses as he has duly proved EXCEPT: (1)
when the law provides otherwise, or (2) by stipulation of the parties.

The submission of official receipts and other pieces of evidence as a prerequisite for the
payment of claims is excused by stipulation of the parties; and in lieu thereof, the presentation
of statement of accounts with detailed expenses, demand letters, and affidavits is, by express
stipulation, sufficient evidence for the payment of claims.

Hence, it is crystal clear that the petitioner IPAMS and respondent Country Bankers,
by express stipulation, agreed that in order for the former to have a valid claim under the
surety bond, the only requirements that need to be submitted are the two demand letters,
an Affidavit stating reason of any violation to be executed by responsible officer of the
Recruitment Agency, a Statement of Account detailing the expenses incurred, and the
Transmittal Claim Letter. Evidently, the parties did not include as preconditions for the
payment of claims the submission of official receipts or any other more direct or
concrete piece of evidence to substantiate the expenditures of petitioner IPAMS. If the
parties truly had the intention of treating the submission of official receipts as a
requirement for the payment of claims, they would have included such requirement in the
MOA. But they did not. The SC found that, by stipulation of petitioner IPAMS and
respondent Country Bankers in their MOA, the parties waived the requirement of actually
proving the expenses incurred by petitioner IPAMS through the submission of official
receipts and other documentary evidence. Thus, respondent Country Bankers was not
justified in denying the payment of claims presented by petitioner IPAMS based on the lack
of official receipts.

REPUBLIC OF THE PHILIPPINES v. SPS. ILDEFONSO ALEJANDRE AND ZENAIDA

FERRER ALEJANDRE
G.R. No. 217336, October 17, 2018, Second Division (Caguioa J.)
DOCTRINE
Accordingly, public lands not shown to have been classified, reclassified or released as
alienable agricultural land or alienated to a private person by the State remain part of the
inalienable lands of public domain. Therefore, the onus to overturn, by incontrovertible
evidence, the presumption that the land subject of an application for registration is alienable
and disposable rests with the applicant.

FACTS
On July 18, 1991, Spouses Alejandre filed an application for the registration of Lot
No. 6487 under P.D. No. 1529 with an area of 256 square meters. They alleged that they are
the owners of the subject property by virtue of a deed of sale or conveyance; that the
subject property was sold to them by its former owner Angustia Lizardo Taleon by way of a
Deed of Absolute Sale executed on June 20, 1990; that the said land is presently occupied
by the applicants-spouses. The Office of the Solicitor General, as counsel for the Republic,
entered its appearance. The LRA submitted a Report noting that there were discrepancies
in the plan submitted by the applicant spouses, which discrepancies were referred to the
Lands Management Sector for verification and correction.

The trial court issued an order of general default and allowed the applicants-spouses
to present their evidence. The trial court granted the applicant spouses' motion to submit
original tracing cloth plan and technical description for purposes of facilitating the approval
of the re-surveyed plans as well as the submission of the new plan for the scrutiny and
approval of the LRA. The LRA submitted its Final Report stating that it applied the corrected
technical description of the subject lot and no more discrepancy exists, however, the area
was increased by six (6) meters. As such, the trial court ordered the submission of
publication of the amended or new technical description. On May 6, 2000, the trial court
issued another Notice setting the case for Initial Hearing on July 25, 2000.

The Republic filed its Opposition to the application based on the following
grounds:
(1) that neither the applicants nor their predecessors-in-interest have been in open,
continuous, exclusive and notorious possession and occupation of the land in
question since June 12, 1945 or earlier as required by Section 48 (b) of
Commonwealth Act No. 141, as amended by Presidential Decree No. 1073;
(2) that applicants failed to adduce any muniment of title and/or the tax
declarations with the petition to evidence bona fide acquisition of the land applied
for or of its open, continuous, exclusive and notorious possession and occupation
thereof in the concept of an owner since 12 June 1945 or earlier; that the tax
declaration adverted to in the petition does not appear to be genuine and the tax
declaration indicates pretended possession of applicants to be of recent vintage and

(3) that the subject property applied for is a portion of the public domain belonging
to the Republic of the Philippines which is not subject to private appropriation.

The CA denied the appeal of the Republic. The CA justified that based on the
allegations of the applicants spouses Ildefonso Alejandre and Zenaida Ferrer Alejandre in
their application for land registration and subsequent pleadings, they come under
paragraph 4 of Section 14, Presidential Decree No. 1529 - those who have acquired
ownership of lands in any manner provided for by law - because they acquired the
land in question by virtue of a Deed of Absolute Sale executed on June 20, 1990 from
Angustia Alejandre Taleon who acquired the land from her mother by inheritance.

ISSUE
Whether the subject land is either alienable and disposable land of public domain.

RULING

NO. Under Section 14 of P.D. No. 1529, the following persons may file in the
proper Court of First Instance an application for registration of title to land, whether
personally or through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in

 open, continuous, exclusive and notorious possession and occupation of alienable and
disposable lands of the public domain under a bona fide claim of ownership since June
12, 1945, or earlier.
(4) Those who have acquired ownership of land in any other manner provided
for by law.

In the case at bar, basing from the allegations of the applicants spouses in their
application for land registration and subsequent pleadings, clearly, they come under
Paragraph 4 of the quoted section and not under Paragraph 1 of the same section. It is
undisputed that they acquired the land in question by virtue of a Deed of Absolute Sale
executed on June 20, 1990 from Angustia Alejandre Taleon who acquired the land from her
mother by inheritance. In other words, the applicant spouses acquired ownership over
Lot 6487 through a contract of sale, which is well within the purview of Paragraph 4
of Section 14 of P.D. No. 1529.

As a consequence, the requirement of open, continuous, exclusive and notorious

possession and/or occupation in the concept of an owner has no application in the case at
bar. Not even the requirement that the land applied for should have been declared
disposable and alienable applies considering that this is just one of the requisites to be
proven when applicants for land registration fall under Paragraph 1 of Section 14 of P.D. No.
1529, which is not the case at bar.

The Republic argues that under the law, citing Section 24 of PD 1529 and Section
48(b) of Commonwealth Act No. 141, as amended by Section 4 of PD 1073, before an
applicant can register his title over a particular parcel of land, he must show that:

(a) he, by himself or through his predecessors-in-interest, has been in open,

continuous, exclusive and notorious possession and occupation of the subject land
under a bona fide claim of ownership since June 12, 1945, or earlier; and

(b) the subject land falls within the alienable and disposable portion of the public
domain.

Pursuant to Article 419 of the Civil Code, property, in relation to the person to whom
it belongs, is either of public dominion or of private ownership. There are three kinds of
property of public dominion: (1) those intended for public use; (2) those intended for some
public service; and (3) those intended for the development of national wealth. In turn, the
Civil Code classifies property of private ownership into three categories: (1) patrimonial
property of the State under Articles 421 and 422; (2) patrimonial property of LGUs under
Article 424; and (3) property belonging to private individuals under Article 425. With
respect to lands, which are immovable property pursuant to Article 415(1) of the Civil Code,
they can either be lands of public dominion or of private ownership following the general
classification of property under Article 419.

Thus, it can be gathered from the foregoing that the subject of the land registration
application under Section 14 of PD 1529 is either alienable and disposable land of public
domain or private land. While Section 14(4) does not describe or identify the kind of land
unlike in (1), which refer to "alienable and disposable lands of the public domain;" (2),
which refer to "private lands"; and (3) "private lands or abandoned river beds," the land
covered by (4) cannot be other than alienable and disposable land of public domain,
i.e., public agricultural lands and private lands or lands of private ownership in the context
of Article 435. Accordingly, public lands not shown to have been classified,
reclassified or released as alienable agricultural land or alienated to a private
person by the State remain part of the inalienable lands of public domain.Therefore,
the onus to overturn, by incontrovertible evidence, the presumption that the land
subject of an application for registration is alienable and disposable rests with the
applicant.

Respondents, based on the evidence that they adduced, are apparently claiming
ownership over the land subject of their application for registration by virtue of tradition,
as a consequence of the contract of sale, and by succession in so far as their predecessors-in
interest are concerned. Both modes are derivative modes of acquiring ownership. Yet, they
failed to prove the nature or classification of the land. The fact that they acquired the
same by sale and their transferor by succession is not incontrovertible proof that it is of
private dominion or ownership. In the absence of such incontrovertible proof of private
ownership, the well-entrenched presumption arising from the Regalian doctrine that the
subject land is of public domain or dominion must be overcome. Respondents failed to do
this.

NARCISO MELENDRES, SUBSTITUTED BY HIS WIFE, OFELIA MELENDRES AND

CHILDREN JOSE MARI MELENDRES, AND NARCISO MELENDRES, JR., PETITIONERS, v.
ALICIA CATAMBAY, LORENZA BENAVIDEZ, IN SUBSTITUTION OF HER HUSBAND
EDMUNDO BENAVIDEZ, AND THE REGISTER OF DEEDS OF RIZAL (MORONG
BRANCH) G.R. No. 198026, November 28, 2018, Second Division, (Caguioa J.)

DOCTRINE
If the land in question is proven to be of private ownership and, therefore, beyond the
jurisdiction of the Director of Lands, the free patent and subsequent title issued pursuant
thereto are null and void. The indefeasibility and imprescriptibility of a Torrens title issued
pursuant to a patent may be invoked only, when the land involved originally formed part of
the public domain. If it was a private land, the patent and certificate of title issued upon the
patent are a nullity.
Section 44, Chapter VI of Commonwealth Act No. 141 or the Public Land Act, states that
a free patent may issue in favor of an applicant only if (1) the applicant has continuously
occupied and cultivated, either by himself or through his predecessors-in-interest, a tract or
tracts of agricultural public lands subject to disposition, or (2) who shall have paid the real
estate tax thereon while the same has not been occupied by any person.

FACTS

The instant case is centered on a 1,622-square-meter property located in Plaza

Aldea, Tanay, Rizal, described as Lot No. 3302, Cad-393, Tanay Cadastre. Petitioner Narciso
claimed that he inherited the subject property from Ariston Melendres, who died on
January 1, 1992. Petitioner Narciso likewise alleged that respondent Alicia Catambay's
predecessor-in
interest, Alejandro Catambay, like the other previous tenants and adjoining farmers of the
subject property, had previously attested that he and Ariston owned the subject property,
which had an original area of 13,742 square meters, and that Petitioner Narciso and his
father Ariston were actually, publicly, openly, adversely and continuously in possession of
the subject property for more than thirty (30) years. Petitioner Narciso also maintained that
they planted it with palay on a regular seasonal basis; the subject property became a private
land by operation of law and it may not be treated as a public land falling under the
jurisdiction of the Bureau of Lands for the purpose of issuance of Homestead Patent.
Petitioner Narciso also asserted that Ariston paid the taxes on the subject property as
evidenced by various tax declaration receipts spanning several years.

Petitioner Narciso also alleged that what respondent Catambay actually owns is the
1,353-square-meter parcel of land adjoining the subject property on the eastern side of the
subject property, which respondent Catambay inherited from the late Alejandro. According
to petitioner Narciso, in 1971, unknown to him and Ariston, a Cadastral Survey Team from
the Bureau of Lands surveyed the subject property, the property of respondent Catambay,
and other properties in Barangay Plaza Aldea, Tanay, Rizal. An alleged gross error was

committed by the Cadastral Survey Team of the Bureau of Lands, which resulted in the
reduction of the original area of the subject property from 13,742 square meters to 4,762
square meters, docketed as Lot No. 3300. OCT No. 1112, which contains an area of only
4,762 square meters, was issued to Ariston.
 On the other hand, OCT No. M-2177 for Lot No. 3302, which covers the subject
property was supposedly mistakenly issued in favor of Alejandro with an area of 1,622
square meters. Upon the death of Alejandro, TCT No. M-28802 was issued in favor of
respondent Catambay after the extrajudicial settlement of the estate of Alejandro.
Eventually, TCT No. M-28802 was cancelled and TCT No. M-39517 was issued in favor of
respondents Spouses Edmundo and Lorenza Benavidez (collectively, respondents Sps.
Benavidez) who bought the property from respondent Catambay.

Petitioner Narciso discovered the grave errors in the survey and registration of the
subject property sometime on September 13, 1989 and brought the same to the attention of
respondent Catambay who pointed to respondent Edmundo as her persistent buyer of the
subject property.

A petition for reinvestigation was filed by petitioner Narciso before the CENRO of the
DENR in Taytay, Rizal. The DENR Regional Office No. IV denied the petition filed by
petitioner Narcisio, holding that there was no error committed in the cadastral survey of
the Tanay Cadastre. The OP found that based on the evidence on record and the findings of
the DENR investigators themselves, "the area being actually worked and cultivated by
respondent Catambay through her overseer was included in the title of Amonoy and not
the subject property. The OP also found that petitioner Narciso and his predecessors-in-
interest were the ones "in actual possession" of the subject property and that petitioner
Narciso "was still occupying and tilling the same area, which was not actually possessed
and occupied by both Catambay and Amonoy." Further, the OP held that the OCT issued in
favor of Catambay is "void." Petitioner Narciso and his tenant, Mendez, likewise filed a
complaint for illegal conversion against respondents Catambay and Benavidez before the
DARAB. The DARAB ordered respondents Catambay and Edmundo to pay petitioners'
tenant, Mendez, P61,875.00 as disturbance compensation.

Petitioner Narciso filed before the RTC a Complaint for Annulment of Deed of
Absolute Sale with Reconveyance and Damages with Prayer for Preliminary Injunction and
Restraining Order against respondents Catambay, the Sps. Benavidez, and the Register of
Deeds. The RTC denied the petition. The CA denied petitioners' appeal, affirming the RTC
Decision due to its belief that the proper recourse to remedy the situation is an action for
reversion to be filed solely and exclusively by the Republic of the Philippines, through the
Solicitor General, and not an action filed by a private person.

ISSUE

Whether there is sufficient cause to cancel the certificate of title covering the subject
property currently in the name of respondents Sps. Benavidez, i.e., TCT No. M-39517, which
traces its origin from OCT No. M-2177 issued in favor of Alejandro Catambay, and to
reconvey the subject property in favor of petitioners.

RULING

YES. At the heart of petitioners' Complaint for Annulment of Deed of Absolute Sale
and Reconveyance is the allegation that OCT No. M-2177, which was issued in favor of
Alejandro Catambay, and from where respondents Benavidez trace their title over the
subject property, was invalidly issued and that they, petitioners, are the true owners of the
subject property by virtue of their actual, public, open, adverse and continuous possession
of the subject property for more than 30 years.

The records show that in 1974, Alejandro filed with the DENR an application for free
patent covering the subject property. With the DENR considering the subject property as
alienable and disposable land of the public domain, it issued, Free Patent No. (IV-1)
001692 covering the subject property in the name of Alejandro. Pursuant thereto, the RD
issued the corresponding OCT, i.e., the assailed OCT No. M-2177 in the name of Alejandro.
In its Decision denying petitioners' Complaint, the RTC essentially invoked the
indefeasibility of OCT No. M-2177 and held that petitioners failed to present sufficient
evidence that the said title was invalidly issued in the name of respondents' predecessor-
in-interest, Alejandro.

While the SC is not unaware that upon the expiration of one year, the decree of
registration and the certificate of title issued shall become incontrovertible and
indefeasible, the indefeasibility of title could be claimed only if a previous valid title to the
same parcel of land does not exist. As a matter of fact, an action for reconveyance is a
recognized remedy available to a person whose property has been wrongfully registered
under the Torrens system in another's name; reconveyance is always available as long as
the property has not passed to an innocent third person for value. Further, the
incontestable and indefeasible character of a Torrens certificate of title does not operate
when the land covered thereby is not capable of registration.

In connection with these doctrines, the Court has previously held in Agne, et al. v. The
Director of Lands, et al.,that if the land in question is proven to be of private ownership and,
therefore, beyond the jurisdiction of the Director of Lands, the free patent and
subsequent title issued pursuant thereto are null and void. The indefeasibility and
imprescriptibility of a Torrens title issued pursuant to a patent may be invoked only,
when the land involved originally formed part of the public domain. If it was a private
land, the patent and certificate of title issued upon the patent are a nullity.

The Court, in the aforesaid case, further explained that the rule on the
incontrovertibility of a certificate of title does not apply where an action for the cancellation
of a patent and a certificate of title issued pursuant thereto is instituted on the ground that
they are null and void because the Bureau of Lands had no jurisdiction to issue them, the
land in question having been withdrawn from the public domain prior to the subsequent
award of the patent and the grant of a certificate of title to another person.

Section 44, Chapter VI of Commonwealth Act No. 141 or the Public Land Act, states
that a free patent may issue in favor of an applicant only if (1) the applicant has
continuously occupied and cultivated, either by himself or through his predecessors-in
interest, a tract or tracts of agricultural public lands subject to disposition, or (2) who shall
have paid the real estate tax thereon while the same has not been occupied by any person.

Similarly, in Heirs of Santiago v. Heirs of Santiago, the Court explained that it is a

settled rule that a free patent issued over a private land is null and void, and produces no
legal effects whatsoever. Private ownership of land — as when there is a prima facie proof
of ownership like a duly registered possessory information or a clear showing of open,
continuous, exclusive, and notorious possession, by present or previous occupants — is not
affected by the issuance of a free patent over the same land, because the Public Land Law
applies only to lands of the public domain. The Director of Lands has no authority to
grant free patent to lands that have ceased to be public in character and have passed
to private ownership. Consequently, a certificate of title issued pursuant to a
homestead patent partakes of the nature of a certificate issued in a judicial
proceeding only if the land covered by it is really a part of the disposable land of the
public domain.

A hard second look at the factual findings of the various courts and administrative
bodies, as well as the evidence on record, reveals that Free Patent No. (IV-1) 001692 issued
in favor of Alejandro did not satisfy the abovementioned requisites for the issuance of a free
patent, making it null and void.

In sum, based on an exhaustive review of the records of the instant case, as well as
the clear and unequivocal factual findings made by several courts, including various
administrative bodies, the Court finds that respondent Catambay and her predecessor
in-interest did not actually occupy the subject property as to warrant the issuance of
Free Patent No. (IV-1) 001692; respondent Catambay and her predecessor-in-interest
actually occupied and cultivated the adjoining property adjacent to the subject
property and not the subject property; and petitioners, through their predecessors
in-interest, have actually, publicly, openly, adversely and continuously possessed the
subject property in the concept of an owner since the 1940's, cultivating the said
property as a rice field.

Significantly, during the trial, respondent Catambay herself testified

categorically that respondents Sps. Benavidez had knowledge of the claims of
petitioner Narciso over the subject property prior to the sale entered into with her. It
bears stressing that even the RTC itself, in its Decision, found that "defendants Alicia
Catambay and defendants-spouses Benavidez had knowledge of the conflicts over the
subject property during their sale transaction." A person who deliberately ignores a
significant fact which would create suspicion in an otherwise reasonable man is not an
innocent purchaser for value. A purchaser cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he acted in good faith under the belief
that there was no defect in the title of the vendor. All told, there is absolutely no doubt in
the mind of the Court that respondents Sps. Benavidez were not innocent purchasers
of the subject property.

It should be clarified, however, that notwithstanding the Court's declaration that the
subject property is private property belonging to petitioners and that Free Patent No. (IV-1)
001692, as well as all the certificates of title originating therefrom, are null and void, the
title of petitioners over the subject property is still imperfect; the issuance of a
certificate of title in favor of petitioners is still subject to the rules on confirmation of
title under Section 48 (b) of the Public Land Act. Nevertheless, as similarly held in Heirs
of Santiago v. Heirs of Santiago, this imperfect title of the petitioners is enough to defeat the
free patent and certificate of title issued over the subject property in favor of respondents
and their predecessors-in-interest. As petitioners are deemed the lawful owners of the
subject property ipso jure by virtue of their open, continuous, exclusive, and
notorious possession and occupation of the subject property, they have the exclusive
right to apply for the issuance of a certificate of title through judicial confirmation of
an imperfect title under Section 48 of the Public Land Act.

JUN MIRANDA v. SPS. ENGR. ERNESTO AND AIDA MALLARI AND SPS. DOMICIANO C.
REYES AND CARMELITA PANGAN
G.R. No. 218343, November 28, 2018, Second Division (Caguioa,

J.) DOCTRINE

Accion publiciana is a plenary action to recover the better right of possession

(possession de jure), which should be brought in the proper inferior court or Regional Trial
Court (depending upon the value of the property) when the dispossession has lasted for more
than one year (or for less than a year in cases other than those mentioned in Rule 70 of the
Rules). The issue in an accion publiciana is the "better right of possession" of real property
independently of title. This "better right of possession" may or may not proceed from a Torrens
Title.

FACTS

On March 3, 2004, the Spouses Mallari filed the suit for recovery of possession
against Jun Miranda. Thereunder, they alleged that, sometime after causing the Certificate
of Sale in their favor to be annotated in TCT No. NT-266485, they conducted an inspection
of the subject property. They discovered that the same was in the possession of Miranda
who claimed to be the owner thereof, having bought the property from the Spouses Reyes
sometime in 1996. Claiming to be entitled to the ownership and possession of the property,
they prayed that Miranda be ordered to vacate and to surrender the possession thereof to
them.

Miranda averred that he is already, and continues to be, the owner of the subject
property as he bought the same from the Spouses Reyes way back March 20, 1996 despite
that he failed to cause the registration of the sale as he lost the owner's copy of TCT No. NT
266485. Asserting that the Spouses Reyes no longer have rights or interests over the
subject property at the time of the levy, he maintained that the Spouses Mallari acquired no
right over the same. Claiming to be an innocent purchaser for value who cannot be
deprived of possession over the subject property, he prayed that the complaint be
dismissed, that he be declared the rightful owner of the subject property, and for an award
of damages.

Miranda filed a Third-Party Complaint against the Spouses Reyes. Maintaining that
the Spouses Reyes, as sellers, impliedly warranted his protection against eviction, he, thus,
prayed that the said spouses be held liable for any and all damages that he may incur should
he be deprived of the subject property.

The RTC rendered the assailed Decision granting the Spouses Mallari's complaint
and dismissing Miranda's third-party complaint. It pronounced that Miranda is estopped
from claiming ownership over the subject property in view of his failure to annotate his
interest thereto in TCT No. NT-266485; and, that the levy, execution, and sale of the subject
property to the Spouses Mallari is valid because Miranda's claim of ownership, even if true,
cannot prevail over the rights of the said spouses. In dismissing the third-party complaint,
the RTC ratiocinated that the warranty against eviction does not apply because, first, the
Spouses Reyes, as vendors, had no participation in the execution sale and, second, it was
Miranda who failed to safeguard his right over the property.

The CA affirmed the RTC decision. The CA ruled that the right of Spouses Ernesto
and Aida Mallari having been annotated on TCT NT-266485 through the Notice of Levy
prevails over that of Miranda "in line with the jurisprudential rule that preference is given
to a duly registered levy on attachment or execution over a prior unregistered sale.

ISSUE

Whether the Spouses Mallari have a better right to possession over the subject
property.

RULING

NO. Accion publiciana is a plenary action to recover the better right of possession
(possession de jure), which should be brought in the proper inferior court or Regional Trial
Court (depending upon the value of the property) when the dispossession has lasted for
more than one year (or for less than a year in cases other than those mentioned in Rule 70
of the Rules). The issue in an accion publiciana is the "better right of possession" of real
property independently of title. This "better right of possession" may or may not proceed
from a Torrens title. Despite the lack of an express Rule, however, there is ample
jurisprudential support for upholding the power of a court hearing an accion
publiciana to also rule provisionally on the issue of ownership.

Since the resolution of the issue of ownership in an accion publiciana, like forcible
entry and unlawful detainer, is passed upon only to determine the issue of possession, the
defense of ownership raised by the defendant (i.e., that he, and not the plaintiff, is the
rightful owner) will not trigger a collateral attack on the plaintiff’s certificate of title.

Spouses Mallari claim that they are entitled to the possession of the subject property,
being its rightful owners by virtue of a registered execution sale. On the other hand,
Miranda claims a superior right as an owner of the subject property by virtue of an
unregistered Deed of Absolute Sale. From then on, Miranda asserts that he occupied the
subject property in the concept of an owner and is the actual tiller thereof.

Given the nature of accion publiciana, the rulings of the RTC and the CA on the issue
of ownership should be considered as merely provisional and not conclusive. Since both
parties, Spouses Mallari and Miranda, claim exclusive ownership over the subject property,
the right of ownership recognized in favor of one necessarily excludes the other of such
right since this is not a case of co-ownership.