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G.R. No. 147549 October 23, 2003 1. The Defendants, their heirs, assigns or any other persons claiming any right or interest over the subject parcel of land under or in their names to vacate the same and surrender peaceful possession thereof in favor of the Plaintiffs; 2. The Defendants to pay the Plaintiffs damages limited to the fair rental value for the use and occupation of the premises in the amount of Two Thousand and Five Hundred Pesos (P2,500.00) a month from the date of the discovery of the The Case This is a petition for review on certiorari1 seeking to set aside the Decision2 of the Court of Appeals in CA-G.R. SP No. 54055 dated 20 July 2000 and the Resolution dated 23 February 2001 denying the motion for reconsideration. The Court of Appeals reversed the Decision3 of the Regional Trial Court, Branch 22, of Malolos, Bulacan ("RTC") and dismissed the complaint of Jesus Dela Rosa and Lucila Dela Rosa for forcible entry against Santiago Carlos and Teofila Pacheco. The Antecedents This case stemmed from a complaint4 for forcible entry filed by Jesus Dela Rosa and Lucila Dela Rosa ("Spouses Dela Rosa") against Santiago Carlos ("Santiago") and Teofila Pacheco ("Teofila") with the Municipal Trial Court5of Paombong, Bulacan ("MTC"). In their complaint filed on 25 February 1998, the Spouses Dela Rosa alleged that they are the owners of a house and lot ("Property") with an area of 352 square meters located at No. 25 San Roque, Paombong, Bulacan. The Spouses Dela Rosa claimed that Leonardo Carlos ("Leonardo") transferred to them the ownership of the Property under the Absolute Deed of Sale ("Deed of Sale") executed on 1 September 1966. The Spouses Dela Rosa registered on 6 October 1966 the Deed of Sale under Act No. 3344 with the Register of Deeds of Bulacan. The Spouses Dela Rosa asserted that they renovated the house, furnished and occupied the same from 1966 to the present. Since the Spouses Dela Rosa work and their children study in Manila, they reside in the Property only during weekends and holidays. However, they padlock the house on the Property while they are away and instruct relatives who live nearby to watch over the Property. The Spouses Dela Rosa further asserted that they have been paying the taxes for the land since 1966 to 1997, and for the house from 1966 to 1993. In addition, the Spouses Dela Rosa had a perimeter fence built to separate the Property from the municipal road and to protect it from trespassers. The Spouses Dela Rosa also asserted that in October 1997, they discovered that, through stealth and without their knowledge and consent, Santiago had built a house of strong materials on a vacant lot of the Property. Santiago did not secure the necessary building permit from the Municipal Engineers Office. Teofila had also been transferring furniture to the house and sleeping there. On 20 November 1997, the Spouses Dela Rosa, through their counsel, demanded that Santiago and Teofila demolish the house, remove their furniture and vacate the premises within ten days from receipt of the letter. However, Santiago and Teofila did not heed the Spouses Dela Rosas demand. In their answer, Santiago and Teofila alleged that they are the surviving heirs of the Spouses Leonardo and Benita Carlos ("Spouses Carlos"). As heirs of the Spouses Carlos, they, along with Lucila Dela Rosa, are co-owners of the Property. They contended that the Spouses Dela Rosa obtained the Deed of Sale through fraud and undue influence and that their mother did not consent to the sale of the Property which they claimed as conjugal. They maintained that the Spouses Dela Rosa were never in possession of the Property because the latter only went there to visit their parents, and not as owners. Insisting that they have been occupying the Property since birth, Santiago claimed that he constructed the house on the Property in the concept of a co-owner. After submission of the parties position papers, the MTC rendered a Decision dated 30 July 1998, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered declaring the Plaintiffs to be entitled to physical possession of Lot 147-Part particularly described in Tax Declaration No. 97-0297-00342 (Exhibit F) situated at San Roque, Paombong, Bulacan and this Court orders: construction of the improvement (October 1997) until they finally vacate and restore full possession thereof to the Plaintiffs; 3. The award of Twenty Thousand Pesos (P20,000.00) in favor of the Plaintiffs as and by way of attorneys fees and costs; 4. The Defendants counter-claim is hereby dismissed for lack of merit. SO ORDERED.6 Aggrieved, Santiago and Teofila appealed7 to the RTC which rendered a Decision8 dated 31 May 1999 affirming in toto the decision of the MTC. Dissatisfied with the decision of the RTC, Santiago and Teofila filed a petition for review9 with the Court of Appeals. The Court of Appeals rendered a Decision dated 20 July 2000, the dispositive portion of which reads: WHEREFORE, the appealed decision is REVERSED and SET ASIDE and another rendered DISMISSING respondents complaint for forcible entry against petitioners. SO ORDERED.10 Hence, this petition for review. The Ruling of the Trial Courts The MTC, in ruling in favor of the Spouses Dela Rosa, held in part: The evidence at hand disclose [sic] that the Plaintiffs took possession of the subject premises upon the execution of the sale on September 1, 1966 and have been in occupancy thereof since then up to the present. Under the law, possession is transferred to the vendee by virtue of the notarized deed of conveyance. Under Article 1498 of the Civil Code of the Philippines, "when the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred." (Ong Ching Po, et al. vs. Court of Appeals, 239 SCRA 341)1awphi1.nt In the same vein, Article 531 of the statute is explicit, thus: "Possession is acquired by the material possession of a thing or the exercise of a right, or by the fact that it is subject to the action of our will or by the proper acts or legal formalities established for acquiring such right." Aside from the legal formalities as mentioned, Plaintiffs prior material occupation or possession is supported by photographs depicting their residence (Exhibit Q) and their furnishings (Exhibits O and O-1) thereon. Possession in the eyes of the law does not mean that a man has to have his feet on every square meter of ground before it can be said that he is in possession. It is sufficient that petitioner (in this case, the Plaintiffs) was able to subject the property to the action of his will (Somodio vs. Court of Appeals, 235 SCRA 307). x x x11 Finding that the MTCs factual findings are clear and supported by more than mere preponderance of evidence,12the RTC affirmed in toto the decision of the MTC. Consequently, Santiago and Teofila filed a petition for review with the Court of Appeals. The Ruling of the Court of Appeals The Court of Appeals held that the execution of the deed of sale did not transfer physical possession of the Property despite Article 1498 of the Civil Code, which contemplates of constructive, not physical possession. The appellate court also found that there was an obstacle to the delivery of possession because the Spouses Carlos, Santiago and Teofila were residing and continued to reside in the Property. Noting that the Spouses Dela Rosas position paper did not attach the affidavits of witnesses required under Section 10 of Rule 70, the appellate court ruled that the Spouses Dela Rosa failed to prove prior possession of the Property. The appellate court pointed out that instead of proving prior possession, the Spouses Dela Rosa admitted the contrary. In their opposition to the motion to dismiss,13 the Spouses Dela Rosa stated that they do not actually reside in the JESUS DELA ROSA and LUCILA DELA ROSA, petitioners, vs. SANTIAGO CARLOS and TEOFILA PACHECO, respondents. DECISION CARPIO, J.:

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Property but in Manila and visit the Property only during weekends and vacations. The Court of Appeals held that this admission confirms Santiago and Teofilas claim that they have always been in physical possession of the Property since birth. The Court of Appeals also held that the Spouses Dela Rosa did not verify their complaint in violation of Section 4 of Rule 70. Neither did they attach a certification against forum shopping in violation of Section 5 of Rule 7. Moreover, the appellate court ruled that the sale, without the consent of Benita Carlos, is void. Since the sale is void, no title passed to the Spouses Dela Rosa. Lastly, the Court of Appeals ruled that assuming the sale is valid, the sale would apply only to Leonardos share in the Property. Benita retained her one-half share in the Property that her children Santiago, Teofila, Lucila and Francisco acquired by succession on her death. Thus, Lucila Dela Rosa may not dispossess her co-owners Santiago and Teofila of the Property. The Issues The Spouses Dela Rosa assail the decision of the Court of Appeals on the following grounds: 1. THE COURT OF APPEALS GRAVELY ERRED IN CONSIDERING AS ONE OF THE GROUNDS FOR REVERSING THE DECISION OF THE REGIONAL TRIAL COURT AND OF THE MUNICIPAL TRIAL COURT THE ERRONEOUS ASSUMPTION THAT THE COMPLAINT APPENDED TO THE PETITION FOR REVIEW FILED BY RESPONDENTS LACKED VERIFICATION AND CERTIFICATION OF NON-FORUM SHOPPING. 2. THE COURT OF APPEALS GRAVELY ERRED IN ALLOWING A COLLATERAL ATTACK ON THE VALIDITY OF THE DEED OF ABSOLUTE SALE IN AN EJECTMENT PROCEEDING AND RULING THAT THE SAME IS VOID FOR LACK OF MARITAL CONSENT OF BENITA CARLOS. 3. THE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT PETITIONERS FAILED TO PROVE PRIOR PHYSICAL POSSESSION OVER THE PROPERTY DESPITE THE OVERWHELMING EVIDENCE TO THE CONTRARY. 4. THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE RULES OF COOWNERSHIP OVER THE PROPERTY.14 The Courts Ruling We grant the petition. Before resolving the main issue, we shall first dispose of the procedural issues in the instant case. There is no longer any issue on the lack of verification and certification against forum shopping of the complaint for forcible entry. The Court of Appeals itself stated in its assailed Resolution that it was a mere "omission"15 by Santiago and Teofila in their petition for review. Santiago and Teofila failed to append to their petition for review with the Court of Appeals the last page of the complaint containing the verification and certification of non-forum shopping.16 For the failure of Santiago and Teofila to attach to their petition the page of the complaint containing the verification and certification of non-forum shopping, the appellate court should have faulted Santiago and Teofila and not the Spouses Dela Rosa. Another procedural question was the alleged non-submission of affidavits of witnesses that the Spouses Dela Rosa should have attached to their position paper. Section 10 of Rule 70 provides: SEC. 10. Submission of affidavits and position papers. Within ten (10) days from receipt of the order mentioned in the next preceding section, the parties shall submit the affidavits of their witnesses and other evidence on the factual issues defined in the order, together with their position papers setting forth the law and the facts relied upon by them. Section 10 should be read in relation to Section 14 of the same Rule, which states: SEC. 14. Affidavits. The affidavits required to be submitted under this Rule shall state only facts of direct personal knowledge of the affiants which are admissible in evidence, and shall show their competence to testify to the matters stated therein. xxx The Spouses Dela Rosa jointly verified their position paper by stating that all the allegations in the position paper are true and correct of their "own personal knowledge."17 The verification itself is an affidavit.18 Section 4 of Rule 7 states that a "pleading is verified by an affidavit." Thus, the verified position paper constitutes the affidavit of witnesses required under Rule 70. Certainly, the Spouses Dela Rosa qualify as witnesses to their own complaint. While there are no affidavits of other witnesses that support the complaint, the Spouses Dela Rosa attached to their position paper documentary evidence that bolster their claim of prior possession. Santiago and Teofila never raised as an issue the alleged non-attachment to the complaint of affidavits of witnesses, either in the MTC or in the RTC. In their petition for review before the Court of Appeals, Santiago and Teofila did not also raise this issue. The MTC and RTC apparently understood correctly that the verified complaint of the Spouses Dela Rosa constitutes the affidavit of witnesses required under Rule 70. We rule that the Court of Appeals erred in holding that the Spouses Dela Rosa failed to attach to their complaint the affidavits required in Sections 10 and 14 of Rule 70. In a forcible entry case, the principal issue for resolution is mere physical or material possession (possession de facto) and not juridical possession (possession de jure) nor ownership of the property involved.19 In the present case, both parties claim prior possession of the Property. The Spouses Dela Rosa claim that they have been in possession of the Property since 1966 upon the execution of the deed of sale by Leonardo in their favor. On the other hand, Santiago and Teofila claim that they have been continuously occupying the Property since birth and the Spouses Dela Rosa were never in possession of the Property.1vvphi1.nt While admitting that Santiago and Teofila used to reside in the Property since birth, the Spouses Dela Rosa contend that Santiago and Teofila moved out when they married in 1961 and 1959, respectively. According to the Spouses Dela Rosa, Santiago and his family live in Manila (at 3500-F Magsaysay Blvd., Sta. Mesa, Manila)20 while Teofila occupies the lot adjacent to the Property bearing, however, the same address.21 Santiago and Teofila did not dispute these allegations by the Spouses Dela Rosa. On the other hand, Santiago and Teofila admit that the Spouses Dela Rosa visit the Property. Visiting the Property on weekends and holidays is evidence of actual or physical possession. Even if the Spouses Dela Rosa were already residing in Manila, they could continue possessing the Property in Bulacan. The fact of their residence in Manila, by itself, does not result in loss of possession of the Property in Bulacan. The law does not require one in possession of a house to reside in the house to maintain his possession. In Somodio v. Court of Appeals,22 which the Spouses Dela Rosa cited, the petitioner there began construction of a structure on his lot. His employment, however, took him to Kidapawan, North Cotabato, and he left the unfinished structure to the care of his uncle. He would visit the property every three months or on weekends when he had time. The Court ruled that possession in the eyes of the law does not mean that a man has to have his feet on every square meter of the ground before he is deemed in possession.23 There is no cogent reason to deviate from this doctrine. Santiago and Teofila likewise do not deny that the Spouses Dela Rosa renovated the house, furnished the same and constructed a perimeter fence around the Property. Santiago and Teofila contend that these acts did not include the right to possess physically the Property.24 These acts of dominion are clear indications that the Spouses Dela Rosa were in possession of the Property. Santiago and Teofila failed to explain convincingly how the Spouses Dela Rosa were able to renovate, furnish the house and construct a perimeter fence around the Property without physically possessing the Property. It is quite improbable to perform these acts without the Spouses Dela Rosa physically possessing the Property. Santiago and Teofila likewise challenged the validity of the sale between their father Leonardo and the Spouses Dela Rosa. The sale transpired on 1 September 1966, before Leonardos death. The Spouses Dela Rosa registered on 6 October 1966 the Deed of Sale under Act No. 3344 with the Registry of Deeds of Paombong, Bulacan. If Santiago and Teofila truly believed that the Deed of Sale is void, they should have filed an action to annul the same, but they did not. Santiago and Teofila questioned the validity of the Deed of Sale only when the Spouses Dela Rosa filed the forcible entry case. However, Santiago and Teofila cannot properly challenge the validity of the Deed of Sale in the ejectment case because ejectment cases proceed independently of any claim of ownership.25 Santiago and Teofila claim that the Deed of Sale was executed without the

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consent of Benita, Leonardos spouse. They also claim that the Deed of Sale was executed through fraud and undue influence. However, these issues cannot properly be addressed in the present action. These issues can only be resolved in a separate action specifically for the annulment of the Deed of Sale. Resolution of these issues, in turn, will determine whether the surviving heirs of the Spouses Carlos are co-owners of the Property who are likewise entitled to its possession. Co-ownership is only a necessary consequence of the heirs successional rights to the Property, if any. WHEREFORE, we GRANT the petition. The Decision dated 20 July 2000 and Resolution dated 23 February 2001 of the Court of Appeals in CA-G.R. SP No. 54055 are SET ASIDE. The Decision dated 31 May 1999 of the Regional of Trial Court, Branch 22, of Malolos, Bulacan in Civil Case No. 878-M-98, affirming the Decision dated 30 July 1998 of the Municipal Trial Court of Paombong, Bulacan in Civil Case No. 98-720, is REINSTATED. No pronouncement as to costs. SO ORDERED. G.R. No. 146364 June 3, 2004 Aggrieved, Guevarra appealed to the Regional Trial Court of Quezon City, Branch 81 ("RTC"). On 11 November 1996, the RTC affirmed the MTC decision. The dispositive portion of the RTC decision reads: WHEREFORE, premises considered, the Court finds no reversible error in the decision appealed from, being in accord with the law and evidence presented, and the same is hereby affirmed en toto. SO ORDERED.8 Guevarra received the RTC decision on 29 November 1996. Guevarra had only until 14 December 1996 to file his appeal with the Court of Appeals. Instead of filing his appeal with the Court of Appeals, Guevarra filed with the Supreme Court a "Motion for Extension of Time to File Appeal by Certiorari Based on Rule 42" ("motion for extension"). Guevarra theorized that his appeal raised pure questions of law. The Receiving Clerk of the Supreme Court received the motion for extension on 13 December 1996 or one day before the right to appeal expired. On 3 January 1997, Guevarra filed his petition for review with the Supreme Court. On 8 January 1997, the First Division of the Supreme Court issued a Resolution9 referring the motion for extension to the Court of Appeals which has concurrent jurisdiction over the case. The case presented no special and important matter for the Supreme Court to take cognizance of at the first instance. On 28 January 1997, the Thirteenth Division of the Court of Appeals issued a The Case Before us is a petition for review1 of the 21 June 2000 Decision2 and 14 December 2000 Resolution of the Court of Appeals in CA-G.R. SP No. 43129. The Court of Appeals set aside the 11 November 1996 decision3 of the Regional Trial Court of Quezon City, Branch 81,4 affirming the 15 December 1995 decision5 of the Metropolitan Trial Court of Quezon City, Branch 31.6 The Antecedents In June 1979, petitioner Colito T. Pajuyo ("Pajuyo") paid P400 to a certain Pedro Perez for the rights over a 250-square meter lot in Barrio Payatas, Quezon City. Pajuyo then constructed a house made of light materials on the lot. Pajuyo and his family lived in the house from 1979 to 7 December 1985. On 8 December 1985, Pajuyo and private respondent Eddie Guevarra ("Guevarra") executed a Kasunduan or agreement. Pajuyo, as owner of the house, allowed Guevarra to live in the house for free provided Guevarra would maintain the cleanliness and orderliness of the house. Guevarra promised that he would voluntarily vacate the premises on Pajuyos demand. In September 1994, Pajuyo informed Guevarra of his need of the house and demanded that Guevarra vacate the house. Guevarra refused. Pajuyo filed an ejectment case against Guevarra with the Metropolitan Trial Court of Quezon City, Branch 31 ("MTC"). In his Answer, Guevarra claimed that Pajuyo had no valid title or right of possession over the lot where the house stands because the lot is within the 150 hectares set aside by Proclamation No. 137 for socialized housing. Guevarra pointed out that from December 1985 to September 1994, Pajuyo did not show up or communicate with him. Guevarra insisted that neither he nor Pajuyo has valid title to the lot. On 15 December 1995, the MTC rendered its decision in favor of Pajuyo. The dispositive portion of the MTC decision reads: WHEREFORE, premises considered, judgment is hereby rendered for the plaintiff and against defendant, ordering the latter to: A) vacate the house and lot occupied by the defendant or any other person or persons claiming any right under him; B) pay unto plaintiff the sum of THREE HUNDRED PESOS (P300.00) monthly as reasonable compensation for the use of the premises starting from the last demand; C) pay plaintiff the sum of P3,000.00 as and by way of attorneys fees; and D) pay the cost of suit. SO ORDERED.7 Resolution10 granting the motion for extension conditioned on the timeliness of the filing of the motion. On 27 February 1997, the Court of Appeals ordered Pajuyo to comment on Guevaras petition for review. On 11 April 1997, Pajuyo filed his Comment. On 21 June 2000, the Court of Appeals issued its decision reversing the RTC decision. The dispositive portion of the decision reads: WHEREFORE, premises considered, the assailed Decision of the court a quo in Civil Case No. Q-96-26943 is REVERSED and SET ASIDE; and it is hereby declared that the ejectment case filed against defendant-appellant is without factual and legal basis. SO ORDERED.11 Pajuyo filed a motion for reconsideration of the decision. Pajuyo pointed out that the Court of Appeals should have dismissed outright Guevarras petition for review because it was filed out of time. Moreover, it was Guevarras counsel and not Guevarra who signed the certification against forum-shopping. On 14 December 2000, the Court of Appeals issued a resolution denying Pajuyos motion for reconsideration. The dispositive portion of the resolution reads: WHEREFORE, for lack of merit, the motion for reconsideration is hereby DENIED. No costs. SO ORDERED.12 The Ruling of the MTC The MTC ruled that the subject of the agreement between Pajuyo and Guevarra is the house and not the lot. Pajuyo is the owner of the house, and he allowed Guevarra to use the house only by tolerance. Thus, Guevarras refusal to vacate the house on Pajuyos demand made Guevarras continued possession of the house illegal. The Ruling of the RTC The RTC upheld the Kasunduan, which established the landlord and tenant relationship between Pajuyo and Guevarra. The terms of the Kasunduan bound Guevarra to return possession of the house on demand. The RTC rejected Guevarras claim of a better right under Proclamation No. 137, the Revised National Government Center Housing Project Code of Policies and other pertinent laws. In an ejectment suit, the RTC has no power to decide Guevarras rights under these laws. The RTC declared that in an ejectment case, the only issue for resolution is material or physical possession, not ownership. The Ruling of the Court of Appeals

COLITO T. PAJUYO, petitioner, vs. COURT OF APPEALS and EDDIE GUEVARRA, respondents. DECISION CARPIO, J.:

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The Court of Appeals declared that Pajuyo and Guevarra are squatters. Pajuyo and Guevarra illegally occupied the contested lot which the government owned. Perez, the person from whom Pajuyo acquired his rights, was also a squatter. Perez had no right or title over the lot because it is public land. The assignment of rights between Perez and Pajuyo, and the Kasunduan between Pajuyo and Guevarra, did not have any legal effect. Pajuyo and Guevarra are in pari delicto or in equal fault. The court will leave them where they are. The Court of Appeals reversed the MTC and RTC rulings, which held that the Kasunduan between Pajuyo and Guevarra created a legal tie akin to that of a landlord and tenant relationship. The Court of Appeals ruled that theKasunduan is not a lease contract but a commodatum because the agreement is not for a price certain. Since Pajuyo admitted that he resurfaced only in 1994 to claim the property, the appellate court held that Guevarra has a better right over the property under Proclamation No. 137. President Corazon C. Aquino ("President Aquino") issued Proclamation No. 137 on 7 September 1987. At that time, Guevarra was in physical possession of the property. Under Article VI of the Code of Policies Beneficiary Selection and Disposition of Homelots and Structures in the National Housing Project ("the Code"), the actual occupant or caretaker of the lot shall have first priority as beneficiary of the project. The Court of Appeals concluded that Guevarra is first in the hierarchy of priority. In denying Pajuyos motion for reconsideration, the appellate court debunked Pajuyos claim that Guevarra filed his motion for extension beyond the period to appeal. The Court of Appeals pointed out that Guevarras motion for extension filed before the Supreme Court was stamped "13 December 1996 at 4:09 PM" by the Supreme Courts Receiving Clerk. The Court of Appeals concluded that the motion for extension bore a date, contrary to Pajuyos claim that the motion for extension was undated. Guevarra filed the motion for extension on time on 13 December 1996 since he filed the motion one day before the expiration of the reglementary period on 14 December 1996. Thus, the motion for extension properly complied with the condition imposed by the Court of Appeals in its 28 January 1997 Resolution. The Court of Appeals explained that the thirty-day extension to file the petition for review was deemed granted because of such compliance. The Court of Appeals rejected Pajuyos argument that the appellate court should have dismissed the petition for review because it was Guevarras counsel and not Guevarra who signed the certification against forum-shopping. The Court of Appeals pointed out that Pajuyo did not raise this issue in his Comment. The Court of Appeals held that Pajuyo could not now seek the dismissal of the case after he had extensively argued on the merits of the case. This technicality, the appellate court opined, was clearly an afterthought. The Issues Pajuyo raises the following issues for resolution: WHETHER THE COURT OF APPEALS ERRED OR ABUSED ITS AUTHORITY AND DISCRETION TANTAMOUNT TO LACK OF JURISDICTION: 1) in GRANTING, instead of denying, Private Respondents Motion for an Extension of thirty days to file petition for review at the time when there was no more period to extend as the decision of the Regional Trial Court had already become final and executory. 2) in giving due course, instead of dismissing, private respondents Petition for Review even though the certification against forumshopping was signed only by counsel instead of by petitioner himself. 3) in ruling that the Kasunduan voluntarily entered into by the parties was in fact a commodatum, instead of a Contract of Lease as found by the Metropolitan Trial Court and in holding that "the ejectment case filed against defendant-appellant is without legal and factual basis". 4) in reversing and setting aside the Decision of the Regional Trial Court in Civil Case No. Q-96-26943 and in holding that the parties are in pari delicto being both squatters, therefore, illegal occupants of the contested parcel of land. 5) in deciding the unlawful detainer case based on the so-called Code of Policies of the National Government Center Housing Project instead of deciding the same under the Kasunduan voluntarily executed by the parties, the terms and conditions of which are the laws between themselves.13 The Ruling of the Court The procedural issues Pajuyo is raising are baseless. However, we find merit in the substantive issues Pajuyo is submitting for resolution. Procedural Issues Pajuyo insists that the Court of Appeals should have dismissed outright Guevarras petition for review because the RTC decision had already become final and executory when the appellate court acted on Guevarras motion for extension to file the petition. Pajuyo points out that Guevarra had only one day before the expiry of his period to appeal the RTC decision. Instead of filing the petition for review with the Court of Appeals, Guevarra filed with this Court an undated motion for extension of 30 days to file a petition for review. This Court merely referred the motion to the Court of Appeals. Pajuyo believes that the filing of the motion for extension with this Court did not toll the running of the period to perfect the appeal. Hence, when the Court of Appeals received the motion, the period to appeal had already expired. We are not persuaded. Decisions of the regional trial courts in the exercise of their appellate jurisdiction are appealable to the Court of Appeals by petition for review in cases involving questions of fact or mixed questions of fact and law.14 Decisions of the regional trial courts involving pure questions of law are appealable directly to this Court by petition for review.15 These modes of appeal are now embodied in Section 2, Rule 41 of the 1997 Rules of Civil Procedure. Guevarra believed that his appeal of the RTC decision involved only questions of law. Guevarra thus filed his motion for extension to file petition for review before this Court on 14 December 1996. On 3 January 1997, Guevarra then filed his petition for review with this Court. A perusal of Guevarras petition for review gives the impression that the issues he raised were pure questions of law. There is a question of law when the doubt or difference is on what the law is on a certain state of facts.16 There is a question of fact when the doubt or difference is on the truth or falsity of the facts alleged.17 In his petition for review before this Court, Guevarra no longer disputed the facts. Guevarras petition for review raised these questions: (1) Do ejectment cases pertain only to possession of a structure, and not the lot on which the structure stands? (2) Does a suit by a squatter against a fellow squatter constitute a valid case for ejectment? (3) Should a Presidential Proclamation governing the lot on which a squatters structure stands be considered in an ejectment suit filed by the owner of the structure? These questions call for the evaluation of the rights of the parties under the law on ejectment and the Presidential Proclamation. At first glance, the questions Guevarra raised appeared purely legal. However, some factual questions still have to be resolved because they have a bearing on the legal questions raised in the petition for review. These factual matters refer to the metes and bounds of the disputed property and the application of Guevarra as beneficiary of Proclamation No. 137. The Court of Appeals has the power to grant an extension of time to file a petition for review. In Lacsamana v. Second Special Cases Division of the Intermediate Appellate Court,18 we declared that the Court of Appeals could grant extension of time in appeals by petition for review. In Liboro v. Court of Appeals,19 we clarified that the prohibition against granting an extension of time applies only in a case where ordinary appeal is perfected by a mere notice of appeal. The prohibition does not apply in a petition for review where the pleading needs verification. A petition for review, unlike an ordinary appeal, requires preparation and research to present a persuasive position.20 The drafting of the petition for review entails more time and effort than filing a notice of appeal.21 Hence, the Court of Appeals may allow an extension of time to file a petition for review.

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In the more recent case of Commissioner of Internal Revenue v. Court of Appeals,22 we held that Liborosclarification of Lacsamana is consistent with the Revised Internal Rules of the Court of Appeals and Supreme Court Circular No. 1-91. They all allow an extension of time for filing petitions for review with the Court of Appeals. The extension, however, should be limited to only fifteen days save in exceptionally meritorious cases where the Court of Appeals may grant a longer period. A judgment becomes "final and executory" by operation of law. Finality of judgment becomes a fact on the lapse of the reglementary period to appeal if no appeal is perfected.23 The RTC decision could not have gained finality because the Court of Appeals granted the 30-day extension to Guevarra. The Court of Appeals did not commit grave abuse of discretion when it approved Guevarras motion for extension. The Court of Appeals gave due course to the motion for extension because it complied with the condition set by the appellate court in its resolution dated 28 January 1997. The resolution stated that the Court of Appeals would only give due course to the motion for extension if filed on time. The motion for extension met this condition. The material dates to consider in determining the timeliness of the filing of the motion for extension are (1) the date of receipt of the judgment or final order or resolution subject of the petition, and (2) the date of filing of the motion for extension.24 It is the date of the filing of the motion or pleading, and not the date of execution, that determines the timeliness of the filing of that motion or pleading. Thus, even if the motion for extension bears no date, the date of filing stamped on it is the reckoning point for determining the timeliness of its filing. Guevarra had until 14 December 1996 to file an appeal from the RTC decision. Guevarra filed his motion for extension before this Court on 13 December 1996, the date stamped by this Courts Receiving Clerk on the motion for extension. Clearly, Guevarra filed the motion for extension exactly one day before the lapse of the reglementary period to appeal. Assuming that the Court of Appeals should have dismissed Guevarras appeal on technical grounds, Pajuyo did not ask the appellate court to deny the motion for extension and dismiss the petition for review at the earliest opportunity. Instead, Pajuyo vigorously discussed the merits of the case. It was only when the Court of Appeals ruled in Guevarras favor that Pajuyo raised the procedural issues against Guevarras petition for review. A party who, after voluntarily submitting a dispute for resolution, receives an adverse decision on the merits, is estopped from attacking the jurisdiction of the court.25 Estoppel sets in not because the judgment of the court is a valid and conclusive adjudication, but because the practice of attacking the courts jurisdiction after voluntarily submitting to it is against public policy.26 In his Comment before the Court of Appeals, Pajuyo also failed to discuss Guevarras failure to sign the certification against forum shopping. Instead, Pajuyo harped on Guevarras counsel signing the verification, claiming that the counsels verification is insufficient since it is based only on "mere information." A partys failure to sign the certification against forum shopping is different from the partys failure to sign personally the verification. The certificate of non-forum shopping must be signed by the party, and not by counsel.27 The certification of counsel renders the petition defective.28 On the other hand, the requirement on verification of a pleading is a formal and not a jurisdictional requisite.29 It is intended simply to secure an assurance that what are alleged in the pleading are true and correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith.30 The party need not sign the verification. A partys representative, lawyer or any person who personally knows the truth of the facts alleged in the pleading may sign the verification.31 We agree with the Court of Appeals that the issue on the certificate against forum shopping was merely an afterthought. Pajuyo did not call the Court of Appeals attention to this defect at the early stage of the proceedings. Pajuyo raised this procedural issue too late in the proceedings. Absence of Title over the Disputed Property will not Divest the Courts of Jurisdiction to Resolve the Issue of Possession Settled is the rule that the defendants claim of ownership of the disputed property will not divest the inferior court of its jurisdiction over the ejectment case.32 Even if the pleadings raise the issue of ownership, the court may pass on such issue to determine only the question of possession, especially if the ownership is inseparably linked with the possession.33 The adjudication on the issue of ownership is only provisional and will not bar an action between the same parties involving title to the land.34 This doctrine is a necessary consequence of the nature of the two summary actions of ejectment, forcible entry and unlawful detainer, where the only issue for adjudication is the physical or material possession over the real property.35 In this case, what Guevarra raised before the courts was that he and Pajuyo are not the owners of the contested property and that they are mere squatters. Will the defense that the parties to the ejectment case are not the owners of the disputed lot allow the courts to renounce their jurisdiction over the case? The Court of Appeals believed so and held that it would just leave the parties where they are since they are in pari delicto. We do not agree with the Court of Appeals. Ownership or the right to possess arising from ownership is not at issue in an action for recovery of possession. The parties cannot present evidence to prove ownership or right to legal possession except to prove the nature of the possession when necessary to resolve the issue of physical possession.36 The same is true when the defendant asserts the absence of title over the property. The absence of title over the contested lot is not a ground for the courts to withhold relief from the parties in an ejectment case. The only question that the courts must resolve in ejectment proceedings is - who is entitled to the physical possession of the premises, that is, to the possession de facto and not to the possession de jure.37 It does not even matter if a partys title to the property is questionable,38 or when both parties intruded into public land and their applications to own the land have yet to be approved by the proper government agency.39 Regardless of the actual condition of the title to the property, the party in peaceable quiet possession shall not be thrown out by a strong hand, violence or terror.40 Neither is the unlawful withholding of property allowed. Courts will always uphold respect for prior possession. Thus, a party who can prove prior possession can recover such possession even against the owner himself.41Whatever may be the character of his possession, if he has in his favor prior possession in time, he has the security that entitles him to remain on the property until a person with a better right lawfully ejects him.42 To repeat, the only issue that the court has to settle in an ejectment suit is the right to physical possession. In Pitargue v. Sorilla,43 the government owned the land in dispute. The government did not authorize either the plaintiff or the defendant in the case of forcible entry case to occupy the land. The plaintiff had prior possession and had already introduced improvements on the public land. The plaintiff had a pending application for the land with the Bureau of Lands when the defendant ousted him from possession. The plaintiff filed the action of forcible entry against the defendant. The government was not a party in the case of forcible entry. The defendant questioned the jurisdiction of the courts to settle the issue of possession because while the application of the plaintiff was still pending, title remained with the government, and the Bureau of Public Lands had jurisdiction over the case. We disagreed with the defendant. We ruled that courts have jurisdiction to entertain ejectment suits even before the resolution of the application. The plaintiff, by priority of his application and of his entry, acquired prior physical possession over the public land applied for as against other private claimants. That prior physical possession enjoys legal protection against other private claimants because only a court can take away such physical possession in an ejectment case. While the Court did not brand the plaintiff and the defendant in Pitargue44 as squatters, strictly speaking, their entry into the disputed land was illegal. Both the plaintiff and defendant entered the public land without the owners permission. Title to the land remained with the government because it had not awarded to anyone ownership of the contested public land. Both the plaintiff and the defendant were in effect squatting on government property. Yet, we upheld the courts jurisdiction to resolve the issue of possession even if the plaintiff and the defendant in the ejectment case did not have any title over the contested land.

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Courts must not abdicate their jurisdiction to resolve the issue of physical possession because of the public need to preserve the basic policy behind the summary actions of forcible entry and unlawful detainer. The underlying philosophy behind ejectment suits is to prevent breach of the peace and criminal disorder and to compel the party out of possession to respect and resort to the law alone to obtain what he claims is his.45 The party deprived of possession must not take the law into his own hands.46 Ejectment proceedings are summary in nature so the authorities can settle speedily actions to recover possession because of the overriding need to quell social disturbances.47 We further explained in Pitargue the greater interest that is at stake in actions for recovery of possession. We made the following pronouncements in Pitargue: The question that is before this Court is: Are courts without jurisdiction to take cognizance of possessory actions involving these public lands before final award is made by the Lands Department, and before title is given any of the conflicting claimants? It is one of utmost importance, as there are public lands everywhere and there are thousands of settlers, especially in newly opened regions. It also involves a matter of policy, as it requires the determination of the respective authorities and functions of two coordinate branches of the Government in connection with public land conflicts. Our problem is made simple by the fact that under the Civil Code, either in the old, which was in force in this country before the American occupation, or in the new, we have a possessory action, the aim and purpose of which is the recovery of the physical possession of real property, irrespective of the question as to who has the title thereto. Under the Spanish Civil Code we had the accion interdictal, a summary proceeding which could be brought within one year from dispossession (Roman Catholic Bishop of Cebu vs. Mangaron, 6 Phil. 286, 291); and as early as October 1, 1901, upon the enactment of the Code of Civil Procedure (Act No. 190 of the Philippine Commission) we implanted the common law action of forcible entry (section 80 of Act No. 190), the object of which has been stated by this Court to be "to prevent breaches of the peace and criminal disorder which would ensue from the withdrawal of the remedy, and the reasonable hope such withdrawal would create that some advantage must accrue to those persons who, believing themselves entitled to the possession of property, resort to force to gain possession rather than to some appropriate action in the court to assert their claims." (Supia and Batioco vs. Quintero and Ayala, 59 Phil. 312, 314.) So before the enactment of the first Public Land Act (Act No. 926) the action of forcible entry was already available in the courts of the country. So the question to be resolved is, Did the Legislature intend, when it vested the power and authority to alienate and dispose of the public lands in the Lands Department, to exclude the courts from entertaining the possessory action of forcible entry between rival claimants or occupants of any land before award thereof to any of the parties? Did Congress intend that the lands applied for, or all public lands for that matter, be removed from the jurisdiction of the judicial Branch of the Government, so that any troubles arising therefrom, or any breaches of the peace or disorders caused by rival claimants, could be inquired into only by the Lands Department to the exclusion of the courts? The answer to this question seems to us evident. The Lands Department does not have the means to police public lands; neither does it have the means to prevent disorders arising therefrom, or contain breaches of the peace among settlers; or to pass promptly upon conflicts of possession. Then its power is clearly limited to disposition and alienation, and while it may decide conflicts of possession in order to make proper award, the settlement of conflicts of possession which is recognized in the court herein has another ultimate purpose, i.e., the protection of actual possessors and occupants with a view to the prevention of breaches of the peace. The power to dispose and alienate could not have been intended to include the power to prevent or settle disorders or breaches of the peace among rival settlers or claimants prior to the final award. As to this, therefore, the corresponding branches of the Government must continue to exercise power and jurisdiction within the limits of their respective functions. The vesting of the Lands Department with authority to administer, dispose, and alienate public lands, therefore, must not be understood as depriving the other branches of the Government of the exercise of the respective functions or powers thereon, such as the authority to stop disorders and quell breaches of the peace by the police, the authority on the part of the courts to take jurisdiction over possessory actions arising therefrom not involving, directly or indirectly, alienation and disposition. Our attention has been called to a principle enunciated in American courts to the effect that courts have no jurisdiction to determine the rights of claimants to public lands, and that until the disposition of the land has passed from the control of the Federal Government, the courts will not interfere with the administration of matters concerning the same. (50 C. J. 1093-1094.) We have no quarrel with this principle. The determination of the respective rights of rival claimants to public lands is different from the determination of who has the actual physical possession or occupation with a view to protecting the same and preventing disorder and breaches of the peace. A judgment of the court ordering restitution of the possession of a parcel of land to the actual occupant, who has been deprived thereof by another through the use of force or in any other illegal manner, can never be "prejudicial interference" with the disposition or alienation of public lands. On the other hand, if courts were deprived of jurisdiction of cases involving conflicts of possession, that threat of judicial action against breaches of the peace committed on public lands would be eliminated, and a state of lawlessness would probably be produced between applicants, occupants or squatters, where force or might, not right or justice, would rule. It must be borne in mind that the action that would be used to solve conflicts of possession between rivals or conflicting applicants or claimants would be no other than that of forcible entry. This action, both in England and the United States and in our jurisdiction, is a summary and expeditious remedy whereby one in peaceful and quiet possession may recover the possession of which he has been deprived by a stronger hand, by violence or terror; its ultimate object being to prevent breach of the peace and criminal disorder. (Supia and Batioco vs. Quintero and Ayala, 59 Phil. 312, 314.) The basis of the remedy is mere possession as a fact, of physical possession, not a legal possession. (Mediran vs. Villanueva, 37 Phil. 752.) The title or right to possession is never in issue in an action of forcible entry; as a matter of fact, evidence thereof is expressly banned, except to prove the nature of the possession. (Second 4, Rule 72, Rules of Court.) With this nature of the action in mind, by no stretch of the imagination can conclusion be arrived at that the use of the remedy in the courts of justice would constitute an interference with the alienation, disposition, and control of public lands. To limit ourselves to the case at bar can it be pretended at all that its result would in any way interfere with the manner of the alienation or disposition of the land contested? On the contrary, it would facilitate adjudication, for the question of priority of possession having been decided in a final manner by the courts, said question need no longer waste the time of the land officers making the adjudication or award. (Emphasis ours) The Principle of Pari Delicto is not Applicable to Ejectment Cases The Court of Appeals erroneously applied the principle of pari delicto to this case. Articles 1411 and 1412 of the Civil Code48 embody the principle of pari delicto. We explained the principle of pari delicto in these words: The rule of pari delicto is expressed in the maxims ex dolo malo non eritur actio and in pari delicto potior est conditio defedentis. The law will not aid either party to an illegal agreement. It leaves the parties where it finds them.49

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The application of the pari delicto principle is not absolute, as there are exceptions to its application. One of these exceptions is where the application of the pari delicto rule would violate well-established public policy.50 In Drilon v. Gaurana,51 we reiterated the basic policy behind the summary actions of forcible entry and unlawful detainer. We held that: It must be stated that the purpose of an action of forcible entry and detainer is that, regardless of the actual condition of the title to the property, the party in peaceable quiet possession shall not be turned out by strong hand, violence or terror. In affording this remedy of restitution the object of the statute is to prevent breaches of the peace and criminal disorder which would ensue from the withdrawal of the remedy, and the reasonable hope such withdrawal would create that some advantage must accrue to those persons who, believing themselves entitled to the possession of property, resort to force to gain possession rather than to some appropriate action in the courts to assert their claims. This is the philosophy at the foundation of all these actions of forcible entry and detainer which are designed to compel the party out of possession to respect and resort to the law alone to obtain what he claims is his.52 Clearly, the application of the principle of pari delicto to a case of ejectment between squatters is fraught with danger. To shut out relief to squatters on the ground of pari delicto would openly invite mayhem and lawlessness. A squatter would oust another squatter from possession of the lot that the latter had illegally occupied, emboldened by the knowledge that the courts would leave them where they are. Nothing would then stand in the way of the ousted squatter from re-claiming his prior possession at all cost. Petty warfare over possession of properties is precisely what ejectment cases or actions for recovery of possession seek to prevent.53 Even the owner who has title over the disputed property cannot take the law into his own hands to regain possession of his property. The owner must go to court. Courts must resolve the issue of possession even if the parties to the ejectment suit are squatters. The determination of priority and superiority of possession is a serious and urgent matter that cannot be left to the squatters to decide. To do so would make squatters receive better treatment under the law. The law restrains property owners from taking the law into their own hands. However, the principle of pari delicto as applied by the Court of Appeals would give squatters free rein to dispossess fellow squatters or violently retake possession of properties usurped from them. Courts should not leave squatters to their own devices in cases involving recovery of possession. Possession is the only Issue for Resolution in an Ejectment Case The case for review before the Court of Appeals was a simple case of ejectment. The Court of Appeals refused to rule on the issue of physical possession. Nevertheless, the appellate court held that the pivotal issue in this case is who between Pajuyo and Guevarra has the "priority right as beneficiary of the contested land under Proclamation No. 137."54 According to the Court of Appeals, Guevarra enjoys preferential right under Proclamation No. 137 because Article VI of the Code declares that the actual occupant or caretaker is the one qualified to apply for socialized housing. The ruling of the Court of Appeals has no factual and legal basis. First. Guevarra did not present evidence to show that the contested lot is part of a relocation site under Proclamation No. 137. Proclamation No. 137 laid down the metes and bounds of the land that it declared open for disposition to bona fide residents. The records do not show that the contested lot is within the land specified by Proclamation No. 137. Guevarra had the burden to prove that the disputed lot is within the coverage of Proclamation No. 137. He failed to do so. Second. The Court of Appeals should not have given credence to Guevarras unsubstantiated claim that he is the beneficiary of Proclamation No. 137. Guevarra merely alleged that in the survey the project administrator conducted, he and not Pajuyo appeared as the actual occupant of the lot. There is no proof that Guevarra actually availed of the benefits of Proclamation No. 137. Pajuyo allowed Guevarra to occupy the disputed property in 1985. President Aquino signed Proclamation No. 137 into law on 11 March 1986. Pajuyo made his earliest demand for Guevarra to vacate the property in September 1994. During the time that Guevarra temporarily held the property up to the time that Proclamation No. 137 allegedly segregated the disputed lot, Guevarra never applied as beneficiary of Proclamation No. 137. Even when Guevarra already knew that Pajuyo was reclaiming possession of the property, Guevarra did not take any step to comply with the requirements of Proclamation No. 137. Third. Even assuming that the disputed lot is within the coverage of Proclamation No. 137 and Guevarra has a pending application over the lot, courts should still assume jurisdiction and resolve the issue of possession. However, the jurisdiction of the courts would be limited to the issue of physical possession only. In Pitargue,55 we ruled that courts have jurisdiction over possessory actions involving public land to determine the issue of physical possession. The determination of the respective rights of rival claimants to public land is, however, distinct from the determination of who has the actual physical possession or who has a better right of physical possession.56 The administrative disposition and alienation of public lands should be threshed out in the proper government agency.57 The Court of Appeals determination of Pajuyo and Guevarras rights under Proclamation No. 137 was premature. Pajuyo and Guevarra were at most merely potential beneficiaries of the law. Courts should not preempt the decision of the administrative agency mandated by law to determine the qualifications of applicants for the acquisition of public lands. Instead, courts should expeditiously resolve the issue of physical possession in ejectment cases to prevent disorder and breaches of peace.58 Pajuyo is Entitled to Physical Possession of the Disputed Property Guevarra does not dispute Pajuyos prior possession of the lot and ownership of the house built on it. Guevarra expressly admitted the existence and due execution of the Kasunduan. The Kasunduan reads: Ako, si COL[I]TO PAJUYO, may-ari ng bahay at lote sa Bo. Payatas, Quezon City, ay nagbibigay pahintulot kay G. Eddie Guevarra, na pansamantalang manirahan sa nasabing bahay at lote ng "walang bayad." Kaugnay nito, kailangang panatilihin nila ang kalinisan at kaayusan ng bahay at lote. Sa sandaling kailangan na namin ang bahay at lote, silay kusang aalis ng walang reklamo. Based on the Kasunduan, Pajuyo permitted Guevarra to reside in the house and lot free of rent, but Guevarra was under obligation to maintain the premises in good condition. Guevarra promised to vacate the premises on Pajuyos demand but Guevarra broke his promise and refused to heed Pajuyos demand to vacate. These facts make out a case for unlawful detainer. Unlawful detainer involves the withholding by a person from another of the possession of real property to which the latter is entitled after the expiration or termination of the formers right to hold possession under a contract, express or implied.59 Where the plaintiff allows the defendant to use his property by tolerance without any contract, the defendant is necessarily bound by an implied promise that he will vacate on demand, failing which, an action for unlawful detainer will lie.60 The defendants refusal to comply with the demand makes his continued possession of the property unlawful.61 The status of the defendant in such a case is similar to that of a lessee or tenant whose term of lease has expired but whose occupancy continues by tolerance of the owner.62 This principle should apply with greater force in cases where a contract embodies the permission or tolerance to use the property. The Kasunduan expressly articulated Pajuyos forbearance. Pajuyo did not require Guevarra to pay any rent but only to maintain the house and lot in good condition. Guevarra expressly vowed in theKasunduan that he would vacate the property on demand. Guevarras refusal to comply with Pajuyos demand to vacate made Guevarras continued possession of the property unlawful.

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We do not subscribe to the Court of Appeals theory that the Kasunduan is one of commodatum. In a contract of commodatum, one of the parties delivers to another something not consumable so that the latter may use the same for a certain time and return it.63 An essential feature of commodatum is that it is gratuitous. Another feature of commodatum is that the use of the thing belonging to another is for a certain period.64 Thus, the bailor cannot demand the return of the thing loaned until after expiration of the period stipulated, or after accomplishment of the use for which the commodatum is constituted.65 If the bailor should have urgent need of the thing, he may demand its return for temporary use.66 If the use of the thing is merely tolerated by the bailor, he can demand the return of the thing at will, in which case the contractual relation is called a precarium.67 Under the Civil Code, precarium is a kind of commodatum.68 The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous. While the Kasunduan did not require Guevarra to pay rent, it obligated him to maintain the property in good condition. The imposition of this obligation makes the Kasunduan a contract different from a commodatum. The effects of the Kasunduan are also different from that of a commodatum. Case law on ejectment has treated relationship based on tolerance as one that is akin to a landlord-tenant relationship where the withdrawal of permission would result in the termination of the lease.69 The tenants withholding of the property would then be unlawful. This is settled jurisprudence. Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum, Guevarra as bailee would still have the duty to turn over possession of the property to Pajuyo, the bailor. The obligation to deliver or to return the thing received attaches to contracts for safekeeping, or contracts of commission, administration and commodatum.70 These contracts certainly involve the obligation to deliver or return the thing received.71 Guevarra turned his back on the Kasunduan on the sole ground that like him, Pajuyo is also a squatter. Squatters, Guevarra pointed out, cannot enter into a contract involving the land they illegally occupy. Guevarra insists that the contract is void. Guevarra should know that there must be honor even between squatters. Guevarra freely entered into theKasunduan. Guevarra cannot now impugn the Kasunduan after he had benefited from it. The Kasunduan binds Guevarra. The Kasunduan is not void for purposes of determining who between Pajuyo and Guevarra has a right to physical possession of the contested property. The Kasunduan is the undeniable evidence of Guevarras recognition of Pajuyos better right of physical possession. Guevarra is clearly a possessor in bad faith. The absence of a contract would not yield a different result, as there would still be an implied promise to vacate. Guevarra contends that there is "a pernicious evil that is sought to be avoided, and that is allowing an absentee squatter who (sic) makes (sic) a profit out of his illegal act."72 Guevarra bases his argument on the preferential right given to the actual occupant or caretaker under Proclamation No. 137 on socialized housing. We are not convinced. Pajuyo did not profit from his arrangement with Guevarra because Guevarra stayed in the property without paying any rent. There is also no proof that Pajuyo is a professional squatter who rents out usurped properties to other squatters. Moreover, it is for the proper government agency to decide who between Pajuyo and Guevarra qualifies for socialized housing. The only issue that we are addressing is physical possession. Prior possession is not always a condition sine qua non in ejectment.73 This is one of the distinctions between forcible entry and unlawful detainer.74 In forcible entry, the plaintiff is deprived of physical possession of his land or building by means of force, intimidation, threat, strategy or stealth. Thus, he must allege and prove prior possession.75 But in unlawful detainer, the defendant unlawfully withholds possession after the expiration or termination of his right to possess under any contract, express or implied. In such a case, prior physical possession is not required.76 Pajuyos withdrawal of his permission to Guevarra terminated the Kasunduan. Guevarras transient right to possess the property ended as well. Moreover, it was Pajuyo who was in actual possession of the property because Guevarra had to seek Pajuyos permission to temporarily hold the property and Guevarra had to follow the conditions set by Pajuyo in the Kasunduan. Control over the property still rested with Pajuyo and this is evidence of actual possession. Pajuyos absence did not affect his actual possession of the disputed property. Possession in the eyes of the law does not mean that a man has to have his feet on every square meter of the ground before he is deemed in possession.77 One may acquire possession not only by physical occupation, but also by the fact that a thing is subject to the action of ones will.78 Actual or physical occupation is not always necessary.79 Ruling on Possession Does not Bind Title to the Land in Dispute We are aware of our pronouncement in cases where we declared that "squatters and intruders who clandestinely enter into titled government property cannot, by such act, acquire any legal right to said property."80 We made this declaration because the person who had title or who had the right to legal possession over the disputed property was a party in the ejectment suit and that party instituted the case against squatters or usurpers. In this case, the owner of the land, which is the government, is not a party to the ejectment case. This case is between squatters. Had the government participated in this case, the courts could have evicted the contending squatters, Pajuyo and Guevarra. Since the party that has title or a better right over the property is not impleaded in this case, we cannot evict on our own the parties. Such a ruling would discourage squatters from seeking the aid of the courts in settling the issue of physical possession. Stripping both the plaintiff and the defendant of possession just because they are squatters would have the same dangerous implications as the application of the principle of pari delicto. Squatters would then rather settle the issue of physical possession among themselves than seek relief from the courts if the plaintiff and defendant in the ejectment case would both stand to lose possession of the disputed property. This would subvert the policy underlying actions for recovery of possession. Since Pajuyo has in his favor priority in time in holding the property, he is entitled to remain on the property until a person who has title or a better right lawfully ejects him. Guevarra is certainly not that person. The ruling in this case, however, does not preclude Pajuyo and Guevarra from introducing evidence and presenting arguments before the proper administrative agency to establish any right to which they may be entitled under the law.81 In no way should our ruling in this case be interpreted to condone squatting. The ruling on the issue of physical possession does not affect title to the property nor constitute a binding and conclusive adjudication on the merits on the issue of ownership.82 The owner can still go to court to recover lawfully the property from the person who holds the property without legal title. Our ruling here does not diminish the power of government agencies, including local governments, to condemn, abate, remove or demolish illegal or unauthorized structures in accordance with existing laws. Attorneys Fees and Rentals The MTC and RTC failed to justify the award of P3,000 attorneys fees to Pajuyo. Attorneys fees as part of damages are awarded only in the instances enumerated in Article 2208 of the Civil Code.83 Thus, the award of attorneys fees is the exception rather than the rule.84 Attorneys fees are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate.85 We therefore delete the attorneys fees awarded to Pajuyo. We sustain the P300 monthly rentals the MTC and RTC assessed against Guevarra. Guevarra did not dispute this factual finding of the two courts. We find the amount reasonable compensation to Pajuyo. The P300 monthly rental is counted from the last demand to vacate, which was on 16 February 1995. WHEREFORE, we GRANT the petition. The Decision dated 21 June 2000 and Resolution dated 14 December 2000 of the Court of Appeals in CA-G.R. SP No. 43129 are SET ASIDE. The Decision dated 11 November 1996 of the Regional Trial Court of Quezon City, Branch 81 in Civil Case No. Q-96-26943, affirming the Decision dated 15 December 1995 of the Metropolitan Trial Court of Quezon City, Branch 31 in Civil Case No. 12432, isREINSTATED with MODIFICATION. The award of attorneys fees is deleted. No costs.

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SO ORDERED. G.R. No. L-50264 October 21, 1991 IGNACIO WONG, petitioner, vs. HON. LUCAS D. CARPIO, as Presiding Judge, Court of First Instance of Davao del Sur, Branch V and MANUEL MERCADO, respondents. Rodolfo B. Quiachon for petitioner. Jose M. Ilagan for private respondent. 7). He tried to register the pacto de retro sale with the Register of Deeds by paying the registration fee (Exhibit 8) but due to some technicalities, the pacto de retro sale could not be registered. The defendant Wong placed laborers on the land in suit, built a small farm house after making some clearings and fenced the boundaries. He also placed signboards (T.S.N., pp. 14-15, hearing of September 15, 1977). On September 27, 1976, plaintiff Manuel Mercado again went to the land in suit to make copras. That was the time the matter was brought to the attention of the police of Sta. Maria, BIDIN, J.:p This is a petition for review on certiorari, certified to this Court by the Court of Appeals as it involves purely question of law, seeking the annulment of the September 29, 1978 decision of the then Court of First Instance ** of Davao del Sur, Branch V, in Civil Case No. 1258 which reversed the February 20, 1978 decision of the Municipal Court of Sta. Maria, *** Davao del Sur in an action for Forcible Entry (Civil Case No. 13) ordering the dismissal of the complaint as well as the counterclaim. The undisputed facts of this case, as found by both the trial court and the then Court of First Instance of Davao del Sur, are as follows: On the basis of the admission of parties in their respective pleadings, the oral testimonies of all witnesses for both plaintiff and defendants and the documentary evidence offered and admitted this Court finds that plaintiff Manuel Mercado acquired his rights to possess the land in litigation, particularly lot 3 (LRC) Pcs-295, (situated at Colonga, Sta. Maria, Davao del Sur) and which is particularly described and embraced in Transfer Certificate of title No. (T-4244) T-972 from William Giger by virtue of a deed of sale with right to repurchase which was executed in 1972 for a consideration of P3,500.00 (testimony of plaintiff, T.S.N., p. 3, hearing of January 7, 1977). Then, in 1973, William Giger again asked an additional amount of P2,500.00 from plaintiff and so he required William Giger to sign a new deed of Pacto de Retro Sale (Exhibit "A") on November 5,1973 at Davao City before Notary Public Gregorio C. Batiller (T.S.N., p. 5, hearing of January 7, 1977). In 1972, plaintiff began harvesting only the coconut fruits and he paid the taxes on the land (Exhibits B to E) for Mr. Giger. He went periodically to the land to make copra but he never placed any person on the land in litigation to watch it. Neither did he reside on the land as he is a businessman and storekeeper by occupation and resides at Lower Sta. Maria, Davao del Sur while the land in litigation is at Colongan, Sta. Maria. Neither did he put any sign or hut to show that he is in actual possession (p. 8, T.S.N., p. 7, hearing of January 14, 1978). He knew defendants' laborers were in the land in suit as early as August, 1976 and that they have a hut there but he did not do anything to stop them. Instead plaintiff was happy that there were people and a hut on the land in suit (p. 14, T.S.N., hearing of January 14, 1978). Before July, 1976, defendant Ignacio Wong went to the land in litigation to find out if there were other people residing there or claiming it besides the owner and he found none. So, in July, 1976, defendant Ignacio Wong bought the parcel of land in litigation from William Giger and his wife Cecilia Valenzuela (Exhibit 5). After the execution of Exhibit 5, defendant Ignacio Wong asked for the delivery of the title to him and so he has in his possession TCT No. (T-4244) T-974 (Exhibit 6) in the name of William Giger. Mr. Wong declared the land in suit for taxation purposes in his name (Exhibit Davao del Sur and the incident entered in the police blotter (Exhibit 11). Then on November 18, 1976, defendant Wong ordered the hooking of the coconuts from the land in litigation and nobody disturbed him. But on November 29, 1976, defendant received a copy of plaintiff's complaint for forcible entry with summons to answer which is the case now before the Court. During the pendency of this instant complaint for forcible entry, spouses William Giger and Cecilia Valenzuela filed a case for reformation of instrument with the Court of First Instance of Digos, Davao del Sur against plaintiff Mercado (Exhibit 4). The case pertains to Exhibit "A" of plaintiff. (pp. 1-3, CA Decision, pp. 82-84, Rollo). On the basis of the aforestated undisputed facts, the Municipal Court of Sta. Maria, Davao del Sur in its February 20, 1978 Decision found that herein petitioner (defendant Ignacio Wong) had prior, actual and continuous physical possession of the disputed property and dismissed both the complaint and the counter-claim. On appeal, the then Court of First Instance of Davao del Sur, in its September 29, 1978 Decision drew a completely different conclusion from the same set of facts and ruled in favor of herein private respondent (plaintiff Manuel Mercado). The decretal portion of the said decision, reads: WHEREFORE, the Court finds the plaintiff to have taken possession of the property earlier in point of time and defendant is an intruder and must, as he is hereby ordered to return, the possession of the land in question for the plaintiff, paying a monthly rental of P400.00 from August, 1976, till the property is returned with costs against the defendant. Judgment is reversed. Petitioner filed the instant petition with the Court of Appeals. But the Court of Appeals, in its March 1, 1979 Resolution **** found that the only issue is a pure question of law the correctness of the conclusion drawn from the undisputed facts and certified the case to this Court. In its April 4, 1979 Resolution, the Second Division of this Court docketed the case in this Court and considered it submitted for decision. Petitioner alleged two (2) errors committed by respondent judge, to wit: A) THE CONCLUSION DRAWN BY RESPONDENT JUDGE THAT PETITIONER IS AN INTRUDER IS WITHOUT FACTUAL AND LEGAL BASIS FOR PURPOSES OF A FORCIBLE ENTRY. B) THE CONCLUSION DRAWN BY RESPONDENT JUDGE THAT PETITIONER MUST PAY A MONTHLY RENTAL OF P400.00 FROM AUGUST, 1976 TILL THE PROPERTY IS RETURNED HAS NO LEGAL AND FACTUAL BASIS. The petition is without merit. Petitioner, in claiming that the private respondent has not established prior possession, argues that private respondent's periodic visit to the lot to gather coconuts may have been consented to and allowed or tolerated by the owner thereof for the purposes of paying an obligation that may be due to the person gathering said nuts and that a person who enters a property to gather coconut fruits and convert the same to copras may only be a hired laborer who enters the premises every harvest season to comply with the contract of labor with the true owner of the property. The argument is untenable.

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It should be stressed that "possession is acquired by the material occupation of a thing or the exercise of a right, or by the fact that it is subject to the action of our will, or by the proper acts and legal formalities for acquiring such right." (Art. 531, Civil Code; Rizal Cement Co., Inc. vs. Villareal, 135 SCRA 15 [1985]); and that the execution of a sale thru a public instrument shall be equivalent to the delivery of the thing, unless there is stipulation to the contrary . . . . If, however, notwithstanding the execution of the instrument, the purchaser cannot have the enjoyment and material tenancy of the thing and make use of it herself, because such tenancy and enjoyment are opposed by another, then delivery has not been effected. (Paras, Civil Code of the Philippines, Vol. II, 1989 Ed., p. 400). Applying the above pronouncements on the instant case, it is clear that possession passed from vendor William Giger to private respondent Manuel Mercado by virtue of the first sale a retro (Exhibit A), and accordingly, the later sale a retro (Exhibit 5) in favor of petitioner failed to pass the possession of the property because there is an impediment the possession exercised by private respondent. Possession as a fact cannot be recognized at the same time in two different personalities except in the cases of co-possession. Should a question arise regarding the fact of possession, the present possessor shall be preferred; if there are two possessions, the one longer in possession, if the dates of possession are the same, the one who presents a title; and if these conditions are equal, the thing shall be placed in judicial deposit pending determination of its possession or ownership through proper proceedings (Art. 538, Civil Code). As to petitioner's query that "Is the entry of petitioner to the property characterized by force, intimidation, threat, strategy, or stealth in order to show that private respondent has had possession so that the case is within the jurisdiction of the inferior court?" (p. 15, Petition; p. 16, Rollo). The same is answered in the affirmative. The act of entering the property and excluding the lawful possessor therefrom necessarily implies the exertion of force over the property, and this is all that is necessary. Under the rule, entering upon the premises by strategy or stealth is equally as obnoxious as entering by force. The foundation of the action is really the forcible exclusion of the original possessor by a person who has entered without right. The words "by force, intimidation, threat, strategy, or stealth" include every situation or condition under which one person can wrongfully enter upon real property and exclude another who has had prior possession therefrom. If a trespasser enters upon land in open daylight, under the very eyes of person already clothed with lawful possession, but without the consent of the latter, and there plants himself and excludes such prior possessor from the property, the action of forcible entry and detainer can unquestionably be maintained, even though no force is used by the trespasser other than such as is necessarily implied from the mere acts of planting himself on the ground and excluding the other party. (Tolentino, Civil Code of the Philippines, Vol. II, 1983 Ed., pp. 243-244; Drilon vs. Gaurana, 149 SCRA 342 [1987]). Anent the award of rentals in favor of private respondent, the same is in order. Petitioner's argument that there is no legal or factual basis for the payment of monthly rentals because bad faith on the part of petitioner was never proved deserves no merit. It should be noted that possession acquired in good faith does not lose this character except in the case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. (Art. 528, Civil Code). Possession in good faith ceases from the moment defects in the title are made known to the possessors, by extraneous evidence or by suit for recovery of the property by the true owner. Whatever may be the cause or the fact from which it can be deduced that the possessor has knowledge of the defects of his title or mode of acquisition, it must be considered sufficient to show bad faith. (Tolentino, Civil Code of the Philippines, Vol. II, p. 226). Such interruption takes place upon service of summons (Manotok Realty vs. Judge Tecson, 164 SCRA 587 [1988] citing Mindanao Academy, Inc. v. Yap (13 SCRA 190 [1965]). In the latter case, this Court held: . . . Although the bad faith of one party neutralizes that of the other and hence as between themselves their rights would be as if both of them had acted in good faith at the time of the transaction, this legal fiction of Yap's good faith ceased when the complaint against PANGANIBAN, J.: Tax receipts and declarations are prima facie proofs of ownership or possession of the property for which such taxes have been paid. Coupled with proof of actual possession of the property, they may become the basis of a claim for ownership. By acquisitive prescription, possession in the concept of owner public, adverse, peaceful and uninterrupted may be converted to ownership. On the other hand, mere possession and occupation of land cannot ripen into ownership. The Case Before us is a Petition for Review on Certiorari of the March 19, 1999 Decision 1 of the Court of Appeals 2 (CA) in CA-GR CV No. 43423. The assailed Decision disposed as follows: 3 WHEREFORE, for all the foregoing, the decision of the trial court appealed from is REVERSED and SET ASIDE. In lieu thereof, judgment is hereby rendered declaring . . . Honorata Mendoza Bolante the rightful owner and possessor of the parcel of land which is the subject of this appeal. The Facts The Petition herein refers to a parcel of land situated in Barangay Bangad, Binangonan, Province of Rizal, having an area of 1,728 square meters and covered by Tax Declaration No. 26-0027. The undisputed antecedents of this case are narrated by the Court of Appeals as follows: 4 The facts not disputed revealed that prior to 1954, the land was originally declared for taxation purposes in the name of Sinforoso Mendoza, father of [respondent] and married to Eduarda Apiado. Sinforoso died in 1930. [Petitioners] were the daughters of Margarito Mendoza. On the basis of an affidavit, the tax declaration in the name of Sinforoso Mendoza of the contested lot was cancelled and subsequently declared in the name of Margarito Mendoza. Margarito and Sinforoso are brothers. [Respondent] is the present occupant of the land. Earlier, on October 15, 1975, [respondent] and Miguel Mendoza, another brother of [petitioners], during the cadastral survey had a dispute on [the] ownership of the land.1wphi1.nt During the pre-trial conference, parties stipulated the following facts: 1) The land subject of the case was formerly declared for taxation purposes G.R. No. 137944 April 6, 2000 FERNANDA MENDOZA CEQUEA and RUPERTA MENDOZA LIRIO, petitioners, vs. HONORATA MENDOZA BOLANTE, respondent. him was filed, and consequently the court's declaration of liability for the rents thereafter is correct and proper. A possessor in good faith is entitled to the fruits only so long as his possession is not legally interrupted, and such interruption takes place upon service of judicial summons (Arts. 544 and 1123, Civil Code). A perusal of the records of the case shows that petitioner received private respondent's complaint for forcible entry with summons on November 29, 1976 (Rollo, p. 46). His good faith therefore ceased on November 29,1976. Accordingly, the computation of the payment of monthly rental should start from December, 1976, instead of August, 1976. WHEREFORE, with the modification that the computation of the monthly rental should start from December, 1976 instead of August, 1976, the September 29, 1978 decision of respondent judge is Affirmed in all other respects, with costs against petitioner. SO ORDERED.

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in the name of Sinforoso Mendoza prior to 1954 but is now declared in the name of Margarito Mendoza. 2) The parties agree[d] as to the identity of the land subject of instant case. 3) [Petitioners] are the daughters of Margarito Mendoza while the [respondent] is the only daughter of Sinforoso Mendoza. 4) Margarito Mendoza and Sinforoso Mendoza [were] brothers, now deceased. 5) During the cadastral survey of the property on October 15, 1979 there was already a dispute between Honorata M. Bolante and Miguel Mendoza, brother of [petitioners]. 6) [Respondent was] occupying the property in question. The only issue involved [was] who [was] the lawful owner and possessor of the land subject of the case. After trial, the court a quo rendered its judgment in favor of [petitioners], the dispositive portion of which reads as follows: Wherefore, in view of the foregoing considerations, judgment is hereby rendered for the [petitioners] and against the [respondent]: 1. Declaring that the parcel of land situated in Bangad, Binangonan, Rizal covered by tax declaration no. 26-0027 in the name of Margarito Mendoza belong to his heirs, the [petitioners] herein; 2. Ordering [respondent] to vacate the property subject of the case and deliver possession thereof to the heirs of Margarito Mendoza. 3. Ordering the [respondent] to indemnify the [petitioners] in the sum of P10,000.00, as actual damages. 4. Ordering the [respondent] to pay the costs. Ruling of the Court of Appeals The Court of Appeals reversed the trial court because the genuineness and the due execution of the affidavit allegedly signed by the respondent and her mother had not been sufficiently established. The notary public or anyone else who had witnessed the execution of the affidavit was not presented. No expert testimony or competent witness ever attested to the genuineness of the questioned signatures. The CA further ruled that the affidavit was insufficient to overcome the denial of respondent and her mother. The former testified that the latter, never having attended school, could neither read nor write. Respondent also said that she had never been called "Leonor," which was how she was referred to in the affidavit. Moreover, the appellate court held that the probative value of petitioners' tax receipts and declarations paled in comparison with respondent's proof of ownership of the disputed parcel. Actual, physical, exclusive and continuous The Petition has no merit. First Issue: Admissibility of the Affidavit Petitioners dispute the CA's ruling that the affidavit was not the best evidence of their father's ownership of the disputed land, because the "affiant was not placed on the witness stand." They contend that it was unnecessary to present a witness to establish the authenticity of the affidavit because it was a declaration against respondent's interest and was an ancient document. As a declaration against interest, it was an exception to the hearsay rule. As a necessary and trustworthy document, it was admissible in evidence. And because it was executed on March 24, 1953, it was a self-authenticating ancient document. We quote below the pertinent portion of the appellate court's ruling: 7 While it is true that the affidavit was signed and subscribed before a notary public, the general rule is that affidavits are classified as hearsay evidence, unless affiants are placed on the witness stand (People's Bank and Trust Company vs. Leonidas, 207 SCRA 164). Affidavits are not considered the best evidence, if affiants are available as witnesses (Vallarta vs. Court of Appeals, 163 SCRA 587). The due execution of the affidavit was not sufficiently established. The notary public or others who saw that the document was signed or at least [could] confirm its recitals [were] not presented. There was no expert testimony or competent witness who attested to the genuineness of the questioned signatures. Worse, [respondent] denied the genuineness of her signature and that of her mother . . . [Respondent] testified that her mother was an illiterate and as far as she knew her mother could not write because she had not attended school (p. 7, ibid). Her testimony was corroborated by Ma. Sales Bolante Basa, who said the [respondent's] mother was illiterate. The petitioners allegations are untenable. Before a private document offered as authentic can be received in evidence, its due execution and authenticity must be proved first. 8 And before a document is admitted as an exception to the hearsay rule under the Dead Man's Statute, the offeror must show (a) that the declarant is dead, insane or unable to testify; (b) that the declaration concerns a fact possession by respondent since 1985 indeed gave her a better title under Article 538 of the Civil Code. Hence, this Petition. 5 Issues Insisting that they are the rightful owners of the disputed land, the petitioners allege that the CA committed these reversible errors: 6 1. . . . [I]n not considering the affidavit as an exception to the general rule that an affidavit is classified as hearsay evidence, unless the affiant is placed on the witness stand; 2. . . . [I]n holding that respondent has been in actual and physical possession, coupled with . . . exclusive and continuous possession of the land since 1985, which are evidence of the best kind of circumstance proving the claim of the title of ownership and enjoys the presumption of preferred possessor. The Court's Ruling

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cognizable by the declarant; (c) that at the time the declaration was made, he was aware that the same was contrary to his interest; and (d) that circumstances render improbable the existence of any motive to falsify. 9 In this case, one of the affiants happens to be the respondent, who is still alive and who testified that the signature in the affidavit was not hers. A declaration against interest is not admissible if the declarant is available to testify as a witness. 10 Such declarant should be confronted with the statement against interest as a prior inconsistent statement. The affidavit cannot be considered an ancient document either. An ancient document is one that is (1) more than 30 years old, (2) found in the proper custody, and (3) unblemished by any alteration or by any circumstance of suspicion. 11 It must on its face appear to be genuine. The petitioners herein failed, however, to explain how the purported signature of Eduarda Apiado could have been affixed to the subject affidavit if, according to the witness, she was an illiterate woman who never had any formal schooling. This circumstance casts suspicion on its authenticity. Not all notarized documents are exempted from the rule on authentication. Thus, an affidavit does not automatically become a public document just because it contains a notarial jurat. Furthermore, the affidavit in question does not state how the ownership of the subject land was transferred from Sinforoso Mendoza to Margarito Mendoza. By itself, an affidavit is not a mode of acquiring ownership. Second Issue: Preference of Possession The CA ruled that the respondent was the preferred possessor under Article 538 of the Civil Code because she was in notorious, actual, exclusive and continuous possession of the land since 1985. Petitioners dispute this ruling. They contend that she came into possession through force and violence, contrary to Article 536 of the Civil Code. We concede that despite their dispossession in 1985, the petitioners did not lose legal possession because possession cannot be acquired through force or violence. 12 To all intents and purposes, a possessor, even if physically ousted, is still deemed the legal possessor.13 Indeed, anyone who can prove prior possession, regardless of its character, may recover such possession. 14 However, possession by the petitioners does not prevail over that of the respondent. Possession by the former before 1985 was not exclusive, as the latter also acquired it before 1985. The records show that the petitioners' father and brother, as well as the respondent and her mother were simultaneously in adverse possession of the land. Before 1985, the subject land was occupied and cultivated by the respondent's father (Sinforoso), who was the brother of petitioners' father (Margarito), as evidenced by Tax Declaration No. 26425. 15 When Sinforoso died in 1930, Margarito took possession of the land and cultivated it with his son Miguel. At the same time, respondent and her mother continued residing on the lot. When respondent came of age in 1948, she paid realty taxes for the years 19321948. 16 Margarito declared the lot for taxation in his name in 1953 17 and paid its realty taxes beginning 1952. 18 When he died, Miguel continued cultivating the land. As found by the CA, the respondent and her mother were living on the land, which was being tilled by Miguel until 1985 when he was physically ousted by the respondent.19 Based on Article 538 of the Civil Code, the respondent is the preferred possessor because, benefiting from her father's tax declaration of the subject lot since 1926, she has been in possession thereof for a longer period. On the other hand, petitioners' father acquired joint possession only in 1952. Third Issue: Possession of Better Right Finally, the petitioners challenge the CA ruling that "actual and physical coupled with the exclusive and continuous possession [by respondent] of the land since 1985" proved her ownership of the disputed land. The respondent argues that she was legally presumed to possess the subject land with a just title since she possessed it in the concept of owner. Under Article 541 of the Code, she could not be obliged to show or prove such title. The respondent's contention is untenable. The presumption in Article 541 of the Civil Code is merely disputable; it prevails until the contrary is proven. 20 That is, one who is disturbed in one's possession shall, under this provision, be restored thereto by the means established by law. 21 Article 538 settles only the question of possession, and possession is different from ownership. Ownership in this case should be established in one of the ways provided by law. To settle the issue of ownership, we need to determine who between the claimants has proven acquisitive prescription. 22 Ownership of immovable property is acquired by ordinary prescription through possession for ten years.23Being the sole heir of her father, respondent showed through his tax receipt that she had been in possession of the land for more than ten years since 1932. When her father died in 1930, she continued to reside there with her mother. When she got married, she and her husband engaged in kaingin inside the disputed lot for their livelihood. 24 Respondent's possession was not disturbed until 1953 when the petitioners' father claimed the land. But by then, her possession, which was in the concept of owner public, peaceful, and uninterrupted 25 had already ripened into ownership. Furthermore she herself, after her father's demise, declared and paid realty taxes for the disputed land. Tax receipts and declarations of ownership for taxation, when coupled with proof of actual possession of the property, can be the basis of a claim for ownership through prescription. 26 In contrast, the petitioners, despite thirty-two years of farming the subject land, did not acquire ownership. It is settled that ownership cannot be acquired by mere occupation. 27 Unless coupled with the element of hostility toward the true owner, 28 occupation and use, however long, will not confer title by prescription or adverse possession. Moreover, the petitioners cannot claim that their possession was public, peaceful and uninterrupted. Although their father and brother arguably acquired ownership through extraordinary prescription because of their adverse possession for thirty-two years (1953-1985), 29 this supposed ownership cannot extend to the entire disputed lot, but must be limited to the portion that they actually farmed. We cannot sustain the petitioners' contention that their ownership of the disputed land was established before the trial court through the series of tax declarations and receipts issued in the name of Margarito Mendoza. Such documents prove that the holder has a claim of title over the property. Aside from manifesting a sincere desire to obtain title thereto, they announce the holder's adverse claim against the state and other interested parties. 30 However, tax declarations and receipts are not conclusive evidence of ownership. 31 At most, they constitute mere prima facie proof of ownership or possession of the property for which taxes have been paid. 32 In the absence of actual public and adverse possession, the declaration of the land for tax purposes does not prove ownership.33 In sum, the petitioners' claim of ownership of the whole parcel has no legal basis.1wphi1.nt WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioners. SO ORDERED.

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SOTERA PAULINO MARCELO, GABRIELA M. ANGELES, SIMEONA CUENCO, EMILIA MARCELO and RUBEN MARCELO,petitioners, vs. HON. COURT OF APPEALS, FERNANDO CRUZ and SERVANDO FLORES, respondents. DECISION VITUG, J.: The reversal of the 28th November 1996 decision[1] of the Court of Appeals setting aside that of the Regional Trial Court (RTC), Branch 19, of Malolos, Bulacan, is sought in this petition for review on certiorari. Petitioners seek the reinstatement of the RTC decision which has ordered respondents Fernando Cruz and Servando Flores to return the ownership and possession of a portion of unregistered and untitled land located in Sta. Lucia, Angat, Bulacan, to herein petitioners. It would appear that on 06 October 1982, herein petitioners, heirs of the deceased Jose Marcelo, filed with the Regional Trial Court of Malolos, Bulacan, an action for the recovery of a portion of unregistered land in Sta. Lucia, Angat, Bulacan. The complaint, later amended on 12 October 1983, averred that two parcels of land in Sta. Lucia, declared for taxation purposes under Tax Declarations No. 2880 and No. 2882, owned by the late Jose Marcelo and his spouse, Sotera Paulino-Marcelo, had been encroached, to the extent of 7,540[2] square meters thereof, by respondents Fernando Cruz and Servando Flores. In their answer, respondent Cruz and Flores denied the allegations of petitioners, assailing at the same time the jurisdiction of the trial court to act on the complaint which, it was claimed, had effectively asserted a cause of action for ejectment (unlawful detainer). The appellate court adopted the summary of evidence made by the trial court; thus: Evidence adduced by the plaintiffs through the testimony of plaintiff Gabriela Angeles showed that the parcel of land subject of litigation covering Lot 3098 and embraced under Tax Declaration No. 2882 (Exh. A) was originally owned by spouses Jose Marcelo and Sotera Paulino and they had been in continuous possession of said property since 1939. Following the death of plaintiffs father in 1965, they discovered in 1967 that a portion of said property had been encroached by defendant Fernando Cruz. Plaintiffs caused the relocation survey of said property and per plan of Lot 3096 and Lot 3098 of the Angat Cadastre as surveyed for the heirs of Jose Marcelo (Exh. B), 7540 square meters of Lot 3098 had been encroached by defendant Fernando Cruz as indicated in the shaded portion of said plan (Exh. B-1). Defendant Fernando Cruz sold his property with an area of 13,856 square meters to defendant Servando Flores pursuant to a deed of sale (Kasulatan ng Bilihan) dated November 3, 1968 (Exh. C) which sale, includes the encroached portion (7,540 square meters of plaintiffs property) Defendant Fernando Cruz heretofore purchased the said property from Engracia dela Cruz and Vicente Marta and Florentino all surnamed Sarmiento, pursuant to a Kasulatan ng Partisyon sa Labas ng Hukuman at Bilihang Patulayan dated November 19, 1960 (Exh. D) covering an area of 6,000 square meters. The Tax Declaration No. 4482 (Exh. E) covering the property in the name of Jorge Sarmiento and Engracia Cruz covered an area of 6,800[3] square meters. As soon as the said property was sold to Fernando Cruz, the adjoining property described and classified as parang with an area of 7,856 square meters was declared by said Fernando Cruz in his name which circumstance, increased his landholding to 13,856 square meters (Exh. F). The said property was subsequently sold by defendant Fernando Cruz to defendant Servando Flores. According to Gabriela, they attempted to cultivate the disputed portion sometime in 1968, but were barred from doing so by defendant Servando Flores who claimed that the area was part of the land he bought from co-defendant Fernando Cruz. On the other hand, both defendants testified to refute plaintiffs evidence. They invariably declared that the portion sought to be recovered by plaintiffs is part of the land which defendant Fernando Cruz acquired in 1960 from the Heirs of Jorge Sarmiento; that as stated in their document (Exh 2), the land sold to defendant Fernando Cruz contained 6,000 square meters of palayero or riceland and 7,856 square meters of parang or pasture land; that defendant Fernando Cruz caused the entire parcel to be surveyed sometime in 1967 (Exhs. 3 & 4), which he then declared for taxation purposes under Tax Declaration No. 8505 (Exh. F); that on November 3, 1968 defendant Fernando Cruz sold the whole lot to defendant Servando Flores (Exh. I), who thereupon occupied and cultivated it.*4+ Evaluating the evidence of the contending parties, the trial court found and ratiocinated: The crux of the matter at issue apparently resolves on the so-called pasture land (parang) supposedly sold by the Sarmientos and Engracia de la Cruz to defendant Fernando Cruz. The said'parang' was never included and/or embraced in the Tax Declaration No. 4882 (Exh. E) of the Sarmientos at the time of the said sale in favor of defendant Fernando Cruz pursuant to an extrajudicial partition with sale dated November 19, 1960 (Exh. D). This is evident as indicated by the fact that the same was only declared by Fernando Cruz in his name in 1961 as evidenced by the tax declaration issued in his favor (Exh. F). On the other hand, the said parang is a part and parcel of plaintiffs property to which they had been in possession thereof prior to World War II and evidenced by Tax Declaration No. 2882 (Exh. A). The plan of Lot 3096 and Lot 3098 of the Angat Cadastre (Exhs. B and B-1) inevitably indicated that what has been encroached by defendants refers to the parang of 7,540 square meters which defendant Fernando Cruz declared the same in his name in 1961. This explains the unnecessary increase of his property from 6,000 square meters which he purchased from the Sarmientos pursuant to extrajudicial partition with sale and embraced under Tax Declaration No. 4882 (Exh. E), to 13,856 square meters.*5+ The trial court thereupon ruled in favor of petitioners; the dispositive portion of its decision concluded: WHEREFORE, judgment is hereby rendered against the defendants ordering the following: a. To return the ownership and possession of 7,540 square meters to the plaintiffs as

indicated in the relocation survey plan; and b To pay attorneys fees in the amount of P5,000.00;

No actual and/or moral damages (sic) is awarded for lack of factual evidence. The counterclaim is hereby dismissed for lack of factual and/or legal basis.*6+ Respondents Cruz and Flores went to the Court of Appeals; in its now assailed decision, the appellate court reversed the judgment of the court a quo. Petitioners moved for a consideration; the motion, however, was denied. In this latest recourse, petitioners assail the holding of the Court of Appeals that the action initiated in 1982 by petitioners against respondent Flores would not prosper on the theory that Flores already has acquired ownership of the disputed land by ordinary acquisitive prescription. Petitioners argue that 1. The respondent court erred in not applying the doctrine laid down by this Honorable Court in Tero vs. Tero, 131 SCRA 105 considering that respondents never acquired the 7,540 square meters lawfully, as the respondent court already stated that what was sold to respondent Cruz was the 6,800 square meters which he then sold to respondent Flores, hence respondents can not account as to how they acquire said lot, whereas the petitioner proved the 7,540 square meters formed part of 19,231 square meters of their parents in their possession since 1939. 2. The respondent court erred in disregarding the findings of facts of the trial court, and substitute its own perception of the facts contrary to the incontrovertible evidence.*7+ Petitioners assert that the property sold by the Sarmientos to respondent Cruz on 19 November 1960, under a Kasulatan ng Partisyon sa Labas ng Hukuman at Bilihang Patuluyan, covers only the palayero or riceland, which measure about 6,000 square meters, and that the parang, containing 7,856 square meters, has not been included. The petition must be denied. Contrary to the insistence of petitioners, the Kasulatan ng Partisyon sa Labas ng Hukuman at Bilihang Patuluyan. executed on 19 March 1960 by Engracia dela Cruz (widow of Jorge Sarmiento) and her children Vicente Sarmiento, Maria Sarmiento and Florentino Sarmiento, pertained not only to the palayero but also to the parang as well; this agreement provided thus: 1. Na akong si Engracia de la Cruz at ang aking yumao ng asawang si Jorge Sarmiento (nuong nabubuhay ito) ay nakapagpundar ng isang lupa na ang buong description ay gaya ng sumusunod:

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Isang parselang lupang PALAYERO na may kasamang PARANG (Cogonales) na matatagpuan sa Barrio Ng Santa Lucia, Angat, Bulacan, P.I. Ang Palayero ay may sukat na 6,000 metros cuadrados,klasipikado 2-b, amillarado P270.00 Tax No. 4482; at ang parang ay may sukat na 7,856 metros cuadrados. Humahangga sa Norte, kay Antonio de la Rosa; Este, kina Fabian Garcia at Juan Geronimo; Sur, Kina Miguel Illescas, Ciriaco Reyes, y Juan de la Cruz; Oeste, Juan de la Cruz hoy Jose Marcelo y Mariano de la Cruz hoy Felip de Leon. Walang mejoras at ang hangganan sa paligid ay makikilala sa pamamagitan ng matutuwid na sikang o pilapil na buhay. 2. Ayon sa Tax No. 4482 ay lupang palayero lamang ang nakatala, subalit itoy mayroong kasamang parang na hindi lamang naipatala niyang nakaraang pasukan ng lupa sa tanggapan ng Assessor Provincial, kayat ngayon ay magalang naming hinihiling na matala ang naturang parang.[8] (Emphasis supplied) Shortly after the execution of the deed of sale in his favor, respondent Cruz declared both parcels, i.e., the palayero and the parang, for taxation purposes in 1960 in the Office of the Provincial Assessor and forthwith a new tax declaration was issued in his name for the entire 13,856 square meter property. The trial court itself likewise found that the sale by the Sarmientos to respondent Cruz covered both the riceland and the pasture land; it said: x x x. It is worthy to note that the ownership of the adjoining property by defendant Fernando Cruz originated from an extrajudicial partition with sale (Kasulatan ng Partisyon sa Labas ng Hukuman at Bilihang Patuluyan dated November 19, 1960 x x x. Under the said document, Engracia de la Cruz and her children Vicente, Marta, and Florentino, all surnamed Sarmiento, sold to defendant Fernando Cruz a rice land containing an area of 6,000 square meters and embraced under Tax Declaration No. 4482 and a pasture land (parang)[9] containing an area of 7,856 square meters. x x x In turn, respondent Cruz sold, on 03 November 1968, the 13,856 square meters of land to respondent Flores under a Kasulatan ng Bilihan. Respondent Flores immediately took possession of the property to the exclusion of all others and promptly paid the realty taxes thereon. From that time on, Flores had been in possession of the entire area in the concept of an owner and holding it in that capacity for almost fourteen (14) years before petitioners initiated their complaint on 06 October 1982. Acquisitive prescription is a mode of acquiring ownership by a possessor through the requisite lapse of time. In order to ripen into ownership, possession must be in the concept of an owner, public peaceful and uninterrupted.[10] Thus, mere possession with a juridical title, such as, to exemplify, by a usufructuary, a trustee, a lessee, an agent or a pledgee, not being in the concept of an owner, cannot ripen into ownership by acquisitive prescription,[11] unless the juridical relation is first expressly repudiated and such repudiation has been communicated to the other party.[12] Acts of possessory character executed due to license or by mere tolerance of the owner would likewise be inadequate.[13] Possession, to constitute the foundation of a prescriptive right, must be en concepto de dueno, or, to use the common law equivalent of the term, that possession should be adverse; if not, such possessory acts, no matter how long, do not start the running of the period of prescription.[14] Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary. Ordinary acquisitive prescription requires possession of things in good faith and with just title for the time fixed by law;[15] without good faith and just title, acquisitive prescription can only be extraordinary in character. As regards, real or immovable property, Article 1134 of the Civil Code provides: ART. 1134. Ownership and other real rights over immovable property are acquired by ordinary prescription through possession of ten years. Ordinary acquisitive prescription demands, as aforesaid, that the possession be in good faith and with just title.*16+ The good faith of the possessor consists in the reasonable belief that the person from whom the thing is received has been the owner thereof and could thereby transmit that ownership.[17] There is, upon the other hand, just title when the adverse claimant comes into possession of the property through any of the modes recognized by law for the acquisition of ownership or other real rights, but that the grantor is neither the owner nor in a position to transmit the right.[18] In Doliendo vs. Biarnesa,[19] the Supreme Court has PURISIMA, J.: This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court seeking to nullify the decision of the Court of Appeals 1 dated May 25, 1990 2 and the Court of Appeals' Resolution of October 12, 1990, 3 denying petitioner's motion for reconsideration. From the records on hand, the antecedent facts that matter can be culled as follows: Since April 1955, 4 the spouses, Severo S. Rodil and Caridad S. Rodil, occupied and possessed the subject property, 5 which is an agricultural land with an area of 15.0871 hectares. 6 On February 1,1971, they sold the said piece of land to the spouses, Pablo Simeon and Leonora Cayme, for Seven Thousand (P7,000.00) Pesos, as evidenced by the affidavit 7 executed by the former in favor of the latter in the presence of the herein petitioner, Servando Mangahas 8 During the trial below, the lower court gave credence to the evidence on record that it was the herein petitioner himself who approached the buyer and offered to sell subject parcel of land and he was also the one who received said consideration of P7,000,000. G.R. No. 95815 March 10, 1999 SERVANDO MANGAHAS, petitioner, vs. THE HON. COURT OF APPEALS and SPOUSES SIMEON and LEONORA CAYME, respondents. explained the law in Article 1130 of the Civil Code which states that the title for prescription must be true and valid. Thus: We think that this contention is based on a misconception of the scope and effect of the provisions of this article of the Code in its application to ordinary prescription. It is evident that by a titulo verdadero y valido in this connection we are not to understand a titulo que por si solo tiene fuerza de transferir el dominio sin necesidad de la prescricion (a title which of itself is sufficient to transfer the ownership without the necessity of the lapse of the prescription period); and we accept the opinion of a learned Spanish law writer who holds that the titulo verdadero y valido as used in this article of the code prescribes a titulo colorado and not merely putativo; a titulo colorado being one which a person has when he buys a thing, in good faith, from one whom he believes to be the owner, and a titulo putativo being one which is supposed to have preceded the acquisition of a thing, although in fact it did not, as might happen when one is in possession of a thing in the belief that it had been bequeathed to him. (Viso Derecho Civil, Parte Segunda, p. 541)*20+ The records of the case amply supports the holding of the appellate court that the requirements for ordinary prescription hereinabove described have indeed been duly met; it explained: In the instant case, appellant Servando Flores took possession of the controverted portion in good faith and with just title. This is so because the said portion of 7,540 square meters was an integral part of that bigger tract of land which he bought from Fernando Cruz under public document (Exh. I) As explicitly mentioned in the document of sale (Exh. I) executed in 1968, the disputed portion referred to as parang was included in the sale to appellant Flores. Parenthetically, at the time of the sale, the whole area consisting of the riceland and pasture land was already covered by a tax declaration in the name of Fernando Cruz (Exh. F) and further surveyed in his favor (Exhs. 3&4). Hence, appellant Flores possession of the entire parcel which includes the portion sought to be recovered by appellees was not only in the concept of an owner but also public, peaceful and uninterrupted. While it is true that the possession of the entire area by his predecessor-in-interest (Fernando Cruz) may not have been peaceful as it was indeed characterized with violence which resulted in the death of Jose Marcelo, this cannot be said of appellant Flores possession of the property, in respect of which no evidence to the contrary appears on record.*21+ This Court finds no cogent reasons to reverse the above findings of the appellate court and thus gives its affirmance to the assailed decision. WHEREFORE, the petitioner for review on certiorari is DENIED. No costs. SO ORDERED.

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On the same day, the private respondents filed with the Bureau of Lands a Free Patent application for the same land in dispute, which application was approved on August 27, 1975 by the Bureau of Lands under Free Patent No. 576411. 9 Pursuant thereto the Register of Deeds in Mamburao, Occidental Mindoro issued the corresponding Original Certificate of Title No. P-6924. 10 Records show that before the sale, the spouses Rodil had already applied for subject tract of land with the Bureau of Lands which application was not acted upon even until the aforesaid sale. It was also shown that petitioner, Servando Mangahas, had been in possession thereof by virtue of the agreement between him and the spouses Rodil, allowing him (petitioner) to occupy and cultivate the said parcel of land. 11 For allowing him to occupy and cultivate the same, petitioner Servando Mangahas paid the amount of P7,000.00 to the Rodils, as mentioned in the "Kasulatan ng Pagtanggap ng Salapi 12 Twelve (12) hectares of the property were then developed into a fishpond, two (2) hectares planted to rice and one (1) hectare used as "tumana" with a house erected thereon. Petitioner was permitted by the private respondents to continue possessing and working on the same land, even after the sale, upon the request of the private respondents themselves because they were then busy in their palay business. Private respondents did not get any share in the fruits or harvest of the land except on one occasion, when the petitioner gave them onehalf (1/2) "tiklis" (big basket) of "tilapia". However, the private respondents had long before demanded from the petitioner the return of the premises in question but the latter refused to vacate the place. Private respondents tolerated petitioner's possession until February 5, 1985, when they commenced the present action for recovery of ownership and the possession of real property, docketed as Civil Case No. R-528 before Branch 45 of the Regional Trial Court in San Jose, Occidental Mindoro. Petitioner theorized that he entered into the possession of the land under controversy, sometime in 1969, by virtue of a prior sale he inked with the spouses Rodil on December 7, 1969, and since then, he has been in continuous occupation and possession in concepto de dueo up to the present, enjoying the fruits thereof to the exclusion of all others, his right thereto being evidenced by the "Kasulatan ng Pagtangap ng Salapi" dated December 7, 1969. Petitioner denied having offered the same land for sale to the private respondents or ever receiving the amount of P7,000.00, the consideration of the alleged sale of February 1, 1971. 13 He further averred that respondent Leonora Cayme misled the Bureau of Lands into granting her a Free Patent for subject parcel of land on the basis of a "Deed of Relinquishment of Rights", supposedly executed by Severe Rodil, and to which document the signature of petitioner as a witness was procured through fraud, deceit and misrepresentation. 14 In due time, the parties went to trial which culminated in the rendition by the court a quo of its decision of November 14, 1986, in favor of the plaintiffs (now the private respondents), disposing as follows: WHEREFORE, premises considered, judgment is hereby rendered: (a) Declaring the plaintiffs to be the absolute and registered owners of the land in question covered by and described in OCT No. P-6924 (Free Patent NO. 576411) of the Office of the Register of Deeds for the Province of Occidental Mindoro; (b) Ordering defendant and all persons claiming under him to remove their respective houses constructed thereon, and to deliver the possession of the land in question together with all the improvements thereon unto the plaintiffs; (c) Ordering the defendant to pay the plaintiffs the sum of P5, 000. 00 as and for attorney's fees; and (d) Ordering the defendant to pay the costs of suit. SO ORDERED. 15 With the denial 16 of his Motion for Reconsideration and/or New Trial, petitioner seasonably appealed to the Court of Appeals which came out with a judgment of affirmance on May 25, 1990. 17 The issues posited by petitioner boil down to: I WHETHER THE LOWER COURT ERRED IN NOT HOLDING THAT THE LAND IN QUESTION IS NO LONGER PART OF THE PUBLIC DOMAIN FOR THE REASON THAT DEFENDANT IS ALREADY, BY OPERATION OF LAW, THE OWNER THEREOF BY VIRTUE OF A GOVERNMENT GRANT IN ACCORDANCE WITH THE LAW AND EXISTING JURISPRUDENCE. II. WHETHER THE LOWER COURT ERRED IN NOT FINDING PLAINTIFF LEONORA CAYM E GUILTY OF FRAUD AND MISREPRESENTATION IN SECURING FREE PATENT NO. 576411 FROM THE BUREAU OF LANDS. The first issue is mainly predicated on the theory that the petitioner acquired ownership of the disputed land by acquisitive prescription. Petitioner theorized that with the length of possession of his predecessors-in-interest, the spouses Rodil, tacked to his own possession, the total period of possession in his favor would suffice to vest in him the ownership of the property under the law on prescription. 18 So also, citing the early case of Cario vs. Insular Government 19 up to and including the more recent cases of The Director of Lands vs. Bengzon, et al. 20 and The Director of Lands vs. Manila Electric Company, et al. 21, petitioner stressed that by prescription, he became the owner of subject property ipso jure, which land became a private property by operation of law, and had been withdrawn and segregated from the alienable and disposable part of the public domain. Consequently, the Bureau of Lands had no authority to issue the Free Patent in question, which was then null and void; 22 petitioner argued. The factual milieu obtaining with respect to the petition under scrutiny has rendered petitioner's reliance on the applicability of the aforestated principles misplaced. In disposing of the issue, the Court of Appeals opined: . . . Even if we were to disregard the need for a proper application, Article 1138 of the Civil Code provides, In the computation of time necessary for prescription the following rules srules shall be observed: (1) The present possessor may complete the period necessary for prescription by tacking his possession to that of his grantor or predecessor in interest . . . The defendant-appellant's grantor or predecessor in interest (Severo Rodil) possession of the property, subject matter of the litigation, on April 1955 (Exhibit "F" for the plaintiff-appellees and exhibit "5" for the defendant). Since the complaint in the case at bar was filed on February 25, 1985, 23 the requirement of at least thirty years continuous possession has not been complied with even if We were to tack Rodil's period of possession. . . . 24 As found by the lower court below, petitioner had admitted, 25 contrary to his disclaimer, that the possession of the spouses Rodil, from whom he traces the origin of his supposed title, commenced only in April 1955. Petitioner can not now feign ignorance of such judicial admission which he has resolutely repudiated in his present petition. 26Acquisition of

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ownership under the law on prescription cannot be pleaded in support of petitioner's submission that subject land has ipso jure become his private property. As regards the issue of fraud tainting the acquisition of the questioned Free Patent, the Court discerns no basis for disturbing the finding by the lower court as affirmed by the Court of Appeals. Findings of fact by the trial court are not to be disturbed on appeal, except for cogent reasons, as when the findings of fact are not duly supported by evidence. 27 On the other hand, findings by the Court of Appeals on factual questions are conclusive and ought not to be disregarded. But the rule admits of some exceptions as when such findings of fact are contrary to what the trial court found. 28 Mere allegation of error without more will not prevail over the findings by the trial court, especially when affirmed by the Court of Appeals, as in the case under consideration. Petitioner has not adduced before the lower court a preponderance of evidence of fraud. It is well settled that a party who alleges a fact has the burden of proving it. 29 Thus, whoever alleges fraud or mistake affecting a transaction must substantiate his allegation, since it is presumed that a person takes ordinary care of his concerns and private transactions have been fair and regular. 30 The requirement that fraud must be established by clear and convincing evidence has been reiterated in Cuizon vs. Court of Appeals, 31 viz.: We are not, however, inclined to toe the line of the trial court's finding that private respondents are liable for fraud. Fraud is the deliberate or intentional evasion of the normal fulfillment of an obligation. The mere failure of private respondents to execute a deed of sale because they demanded first an accounting of the lots used as collaterals by petitioner and the amount of loans secured could not be considered as fraud. Fraud is never presumed. It must be alleged and proven. Fraus est odiosa et non praesumeda . . . (Emphasis ours). In the petition under scrutiny, the fraud theorized upon by petitioner is belied by what the Court of Appeals found, to wit: This court has found that the defendant-appellant is a person whose credibility is much in doubt. On the other hand, We have found the plaintiff-appellee Leonora Simeon Cayme to be straightforward and credible. She has convincingly shown to this court, through her testimony and the supporting documentary evidence, that she is in fact the rightful owner of the property in dispute . . . 32 (Emphasis supplied.) WHEREFORE, the petition is DENIED and the decision appealed from AFFIRMED. No pronouncement as to costs. SO ORDERED. WHEREFORE, for all the foregoing, the decision of the trial court appealed from is REVERSED and SET ASIDE. In lieu thereof, judgment is hereby rendered declaring . . . Honorata Mendoza Bolante the rightful owner and possessor of the parcel of land which is the subject of this appeal. The Facts The Petition herein refers to a parcel of land situated in Barangay Bangad, Binangonan, Province of Rizal, having an area of 1,728 square meters and covered by Tax Declaration No. 26-0027. The undisputed antecedents of this case are narrated by the Court of Appeals as follows: 4 The facts not disputed revealed that prior to 1954, the land was originally declared for taxation purposes in the name of Sinforoso Mendoza, father of [respondent] and married to Eduarda Apiado. Sinforoso died in 1930. [Petitioners] were the daughters of Margarito Mendoza. On the basis of an affidavit, the tax declaration in the name of Sinforoso Mendoza of the contested lot was cancelled and subsequently declared in the name of Margarito Mendoza. Margarito and Sinforoso are brothers. [Respondent] is the present occupant of the land. Earlier, on October 15, 1975, [respondent] and Miguel Mendoza, another brother of [petitioners], during the cadastral survey had a dispute on [the] ownership of the land.1wphi1.nt During the pre-trial conference, parties stipulated the following facts: 1) The land subject of the case was formerly declared for taxation purposes in the name of Sinforoso Mendoza prior to 1954 but is now declared in the name of Margarito Mendoza. 2) The parties agree[d] as to the identity of the land subject of instant case. 3) [Petitioners] are the daughters of Margarito Mendoza while the [respondent] is the only daughter of Sinforoso Mendoza. 4) Margarito Mendoza and Sinforoso Mendoza [were] brothers, now deceased. 5) During the cadastral survey of the property on October 15, 1979 there was G.R. No. 137944 April 6, 2000 FERNANDA MENDOZA CEQUEA and RUPERTA MENDOZA LIRIO, petitioners, vs. HONORATA MENDOZA BOLANTE, respondent. already a dispute between Honorata M. Bolante and Miguel Mendoza, brother of [petitioners]. 6) [Respondent was] occupying the property in question. PANGANIBAN, J.: Tax receipts and declarations are prima facie proofs of ownership or possession of the property for which such taxes have been paid. Coupled with proof of actual possession of the property, they may become the basis of a claim for ownership. By acquisitive prescription, possession in the concept of owner public, adverse, peaceful and uninterrupted may be converted to ownership. On the other hand, mere possession and occupation of land cannot ripen into ownership. The Case Before us is a Petition for Review on Certiorari of the March 19, 1999 Decision 1 of the Court of Appeals 2 (CA) in CA-GR CV No. 43423. The assailed Decision disposed as follows: 3 The only issue involved [was] who [was] the lawful owner and possessor of the land subject of the case. After trial, the court a quo rendered its judgment in favor of [petitioners], the dispositive portion of which reads as follows: Wherefore, in view of the foregoing considerations, judgment is hereby rendered for the [petitioners] and against the [respondent]: 1. Declaring that the parcel of land situated in Bangad, Binangonan, Rizal covered by tax declaration no. 26-0027 in the name of Margarito Mendoza

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belong to his heirs, the [petitioners] herein; 2. Ordering [respondent] to vacate the property subject of the case and deliver possession thereof to the heirs of Margarito Mendoza. 3. Ordering the [respondent] to indemnify the [petitioners] in the sum of P10,000.00, as actual damages. 4. Ordering the [respondent] to pay the costs. Ruling of the Court of Appeals The Court of Appeals reversed the trial court because the genuineness and the due execution of the affidavit allegedly signed by the respondent and her mother had not been sufficiently established. The notary public or anyone else who had witnessed the execution of the affidavit was not presented. No expert testimony or competent witness ever attested to the genuineness of the questioned signatures. The CA further ruled that the affidavit was insufficient to overcome the denial of respondent and her mother. The former testified that the latter, never having attended school, could neither read nor write. Respondent also said that she had never been called "Leonor," which was how she was referred to in the affidavit. Moreover, the appellate court held that the probative value of petitioners' tax receipts and declarations paled in comparison with respondent's proof of ownership of the disputed parcel. Actual, physical, exclusive and continuous possession by respondent since 1985 indeed gave her a better title under Article 538 of the Civil Code. Hence, this Petition. 5 Issues Insisting that they are the rightful owners of the disputed land, the petitioners allege that the CA committed these reversible errors: 6 1. . . . [I]n not considering the affidavit as an exception to the general rule that an affidavit is classified as hearsay evidence, unless the affiant is placed on the witness stand; 2. . . . [I]n holding that respondent has been in actual and physical possession, coupled with . . . exclusive and continuous possession of the land since 1985, which are evidence of the best kind of circumstance proving the claim of the title of ownership and enjoys the presumption of preferred possessor. The Court's Ruling The Petition has no merit. First Issue: Admissibility of the Affidavit Petitioners dispute the CA's ruling that the affidavit was not the best evidence of their father's ownership of the disputed land, because the "affiant was not placed on the witness stand." They contend that it was unnecessary to present a witness to establish the authenticity of the affidavit because it was a declaration against respondent's interest and was an ancient document. As a declaration against interest, it was an exception to the hearsay rule. As a necessary and trustworthy document, it was admissible in evidence. And because it was executed on March 24, 1953, it was a self-authenticating ancient document. We quote below the pertinent portion of the appellate court's ruling: 7 While it is true that the affidavit was signed and subscribed before a notary public, the general rule is that affidavits are classified as hearsay evidence, unless affiants are placed on the witness stand (People's Bank and Trust Company vs. Leonidas, 207 SCRA 164). Affidavits are not considered the best evidence, if affiants are available as witnesses (Vallarta vs. Court of Appeals, 163 SCRA 587). The due execution of the affidavit was not sufficiently established. The notary public or others who saw that the document was signed or at least [could] confirm its recitals [were] not presented. There was no expert testimony or competent witness who attested to the genuineness of the questioned signatures. Worse, [respondent] denied the genuineness of her signature and that of her mother . . . [Respondent] testified that her mother was an illiterate and as far as she knew her mother could not write because she had not attended school (p. 7, ibid). Her testimony was corroborated by Ma. Sales Bolante Basa, who said the [respondent's] mother was illiterate. The petitioners allegations are untenable. Before a private document offered as authentic can be received in evidence, its due execution and authenticity must be proved first. 8 And before a document is admitted as an exception to the hearsay rule under the Dead Man's Statute, the offeror must show (a) that the declarant is dead, insane or unable to testify; (b) that the declaration concerns a fact cognizable by the declarant; (c) that at the time the declaration was made, he was aware that the same was contrary to his interest; and (d) that circumstances render improbable the existence of any motive to falsify. 9 In this case, one of the affiants happens to be the respondent, who is still alive and who testified that the signature in the affidavit was not hers. A declaration against interest is not admissible if the declarant is available to testify as a witness. 10 Such declarant should be confronted with the statement against interest as a prior inconsistent statement. The affidavit cannot be considered an ancient document either. An ancient document is one that is (1) more than 30 years old, (2) found in the proper custody, and (3) unblemished by any alteration or by any circumstance of suspicion. 11 It must on its face appear to be genuine. The petitioners herein failed, however, to explain how the purported signature of Eduarda Apiado could have been affixed to the subject affidavit if, according to the witness, she was an illiterate woman who never had any formal schooling. This circumstance casts suspicion on its authenticity. Not all notarized documents are exempted from the rule on authentication. Thus, an affidavit does not automatically become a public document just because it contains a notarial jurat. Furthermore, the affidavit in question does not state how the ownership of the subject land was transferred from Sinforoso Mendoza to Margarito Mendoza. By itself, an affidavit is not a mode of acquiring ownership. Second Issue: Preference of Possession The CA ruled that the respondent was the preferred possessor under Article 538 of the Civil Code because she was in notorious, actual, exclusive and continuous possession of the land since 1985. Petitioners dispute this ruling. They contend that she came into possession through force and violence, contrary to Article 536 of the Civil Code.

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We concede that despite their dispossession in 1985, the petitioners did not lose legal possession because possession cannot be acquired through force or violence. 12 To all intents and purposes, a possessor, even if physically ousted, is still deemed the legal possessor.13 Indeed, anyone who can prove prior possession, regardless of its character, may recover such possession. 14 However, possession by the petitioners does not prevail over that of the respondent. Possession by the former before 1985 was not exclusive, as the latter also acquired it before 1985. The records show that the petitioners' father and brother, as well as the respondent and her mother were simultaneously in adverse possession of the land. Before 1985, the subject land was occupied and cultivated by the respondent's father (Sinforoso), who was the brother of petitioners' father (Margarito), as evidenced by Tax Declaration No. 26425. 15 When Sinforoso died in 1930, Margarito took possession of the land and cultivated it with his son Miguel. At the same time, respondent and her mother continued residing on the lot. When respondent came of age in 1948, she paid realty taxes for the years 19321948. 16 Margarito declared the lot for taxation in his name in 1953 17 and paid its realty taxes beginning 1952. 18 When he died, Miguel continued cultivating the land. As found by the CA, the respondent and her mother were living on the land, which was being tilled by Miguel until 1985 when he was physically ousted by the respondent.19 Based on Article 538 of the Civil Code, the respondent is the preferred possessor because, benefiting from her father's tax declaration of the subject lot since 1926, she has been in possession thereof for a longer period. On the other hand, petitioners' father acquired joint possession only in 1952. Third Issue: Possession of Better Right Finally, the petitioners challenge the CA ruling that "actual and physical coupled with the exclusive and continuous possession [by respondent] of the land since 1985" proved her ownership of the disputed land. The respondent argues that she was legally presumed to possess the subject land with a just title since she possessed it in the concept of owner. Under Article 541 of the Code, she could not be obliged to show or prove such title. The respondent's contention is untenable. The presumption in Article 541 of the Civil Code is merely disputable; it prevails until the contrary is proven. 20 That is, one who is disturbed in one's possession shall, under this provision, be restored thereto by the means established by law. 21 Article 538 settles only the question of possession, and possession is different from ownership. Ownership in this case should be established in one of the ways provided by law. To settle the issue of ownership, we need to determine who between the claimants has proven acquisitive prescription. 22 Ownership of immovable property is acquired by ordinary prescription through possession for ten years.23Being the sole heir of her father, respondent showed through his tax receipt that she had been in possession of the land for more than ten years since 1932. When her father died in 1930, she continued to reside there with her mother. When she got married, she and her husband engaged in kaingin inside the disputed lot for their livelihood. 24 Respondent's possession was not disturbed until 1953 when the petitioners' father claimed the land. But by then, her possession, which was in the concept of owner public, peaceful, and uninterrupted 25 had already ripened into ownership. Furthermore she herself, after her father's demise, declared and paid realty taxes for the disputed land. Tax receipts and declarations of ownership for taxation, when coupled with proof of actual possession of the property, can be the basis of a claim for ownership through prescription. 26 ROMERO, J.: Like a priceless treasure coveted by many, but capable of ownership by only one, this 20,592 square-meter parcel of land located at Barrio Titong, Masbate, Masbate is claimed by two contestants in this petition for review oncertiorari. Unfortunately, legal title over the property can be vested in only one of them. The case originated from an action for quieting of title filed by petitioner Mario Titong. The Regional Trial Court of Masbate, Masbate, Branch 44 1 ruled in of private respondents, Victorico Laurio and Angeles Laurio, adjudging them the true and lawful owners of the disputed land. Affirmed on appeal to the Court, of Appeals, petitioner comes to us for a favorable reversal. Petitioner alleges that he is the owner of an unregistered parcel of land with an area of 3.2800 hectares, more or less, surveyed as Lot No. 3918, and declared for taxation purposes in his name. He claims that on three separate occasions in September 1983, private respondents, with their hired laborers, forcibly entered a portion of the land containing an area of approximately two (2) hectares; and began plowing the same under pretext of ownership. Private respondents denied this allegation, and averred that the disputed property formed part of the 5.5-hectare agricultural land which they had purchased from their predecessor-ininterest, 2 Pablo Espinosa on August 10, 1981. In his testimony, petitioner identified Espinosa as his adjoining owner 3, asserting that no controversy had sprouted between them for twenty years until the latter sold Lot No. 3479 to private respondent Victorico Laurio. 4This was corroborated by Ignacio Villamor, who had worked on the land even before its sale to Espinosa in 1962. The boundary between the land sold to Espinosa and what of petitioner's property was the old Bugsayon river. When petitioner G.R. No. 111141 March 6, 1998 MARIO Z. TITONG, petitioner, vs. THE HONORABLE COURT OF APPEALS (4th Division), VICTORICO LAURIO and ANGELES LAURIO,respondents. In contrast, the petitioners, despite thirty-two years of farming the subject land, did not acquire ownership. It is settled that ownership cannot be acquired by mere occupation. 27 Unless coupled with the element of hostility toward the true owner, 28 occupation and use, however long, will not confer title by prescription or adverse possession. Moreover, the petitioners cannot claim that their possession was public, peaceful and uninterrupted. Although their father and brother arguably acquired ownership through extraordinary prescription because of their adverse possession for thirty-two years (1953-1985), 29 this supposed ownership cannot extend to the entire disputed lot, but must be limited to the portion that they actually farmed. We cannot sustain the petitioners' contention that their ownership of the disputed land was established before the trial court through the series of tax declarations and receipts issued in the name of Margarito Mendoza. Such documents prove that the holder has a claim of title over the property. Aside from manifesting a sincere desire to obtain title thereto, they announce the holder's adverse claim against the state and other interested parties. 30 However, tax declarations and receipts are not conclusive evidence of ownership. 31 At most, they constitute mere prima facie proof of ownership or possession of the property for which taxes have been paid. 32 In the absence of actual public and adverse possession, the declaration of the land for tax purposes does not prove ownership.33 In sum, the petitioners' claim of ownership of the whole parcel has no legal basis.1wphi1.nt WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioners. SO ORDERED.

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employed Bienvenido Lerit as his tenant in 1962, he instructed Lerit to change the course of the old river and direct the flow of water to the lowland at the southern of petitioner' s property, thus converting the old river into a riceland. 5 For his part, private respondent anchors his defense on the following facts: He denied petitioner's claim of ownership, recounting that the area and boundaries of the disputed land remained unaltered during the series of conveyances prior to its coming into his hands. According to him, petitioner first declared the land for taxation purposes under Tax Declaration No. 2916, 6 which showed that the land had an area of 5.5 hectares and was bounded on the North by the Bugsayon River; on the East by property under the ownership of Lucio Lerit; on the South by property owner by Potenciano Zaragoza; and on the West by property owned by Agapito de la Cruz. 7Private Respondent then alleges that, on December 21, 1960, petitioner sold this property to Concepcion Verano vda. de Cabug, after which Tax Declaration No. 5339 8 was issued in her favor. In compliance with their mutual agreement to repurchase the same, petitioner reacquired the property by way of sale 9 on August 24, 1962 and then declared it for taxation purposes in his name under Tax Declaration No. 5720. 10 However, the property remained in petitioner's hands for only four (4) days because, on August 28, 1962, he sold it to Espinosa 11 who then declared it in his name under Tax Declaration No. 12311. 12 Consequently, the property became a part of the estate of Pablo Espinosa's wife, the late Segundina Liao Espinosa. On August 10, 1981, her heirs executed an instrument denominated as "Extrajudicial Settlement of Estate with Simultaneous Sale" whereby the 5.5hectare property under Tax Declaration No. 12311 was sold to private respondent 13 in consideration of the amount of P5,000.00. Thereafter, Tax Declaration No. 12738 was issued in the name of private respondent. In all these conveyances, the area and boundaries of the property remained exactly the same as those appearing in Tax Declaration No. 2916 under petitioner's name. It was proved at the proceedings in the court a quo that two (2) surveys were made of the disputed property. The first survey 14 was made for petitioner, while the second was the relocation survey ordered by the lower court. As anticipated, certain discrepancies between the two surveys surfaced. Thus, contrary to petitioner's allegation in his complaint that he is the owner of only 3.2800 hectares, he was actually claiming 5.9789 hectares, the total areas of Lot Nos. 3918, 3918-A and 3606. On the other hand, Lot No. 3479 pertaining to Espinosa, was left with only an area of 4.1841 hectares instead of the 5.5 hectares sold by petitioner to him. Apprised of the discrepancy, private respondent filed a protest 15 before the Bureau of Lands against the first survey, likewise filing a case for alteration of boundaries before the municipal trial court, the proceedings of which, however, were suspended of the instant case. 16 Private respondent testified that petitioner is one of the four heirs of his mother, Leonida Zaragoza. In the Extrajudicial Settlement with Sale of Estate of the deceased Leonida Zaragoza, 17 the heirs adjudicated unto themselves the 3.6-hectare property of the deceased. The property involved is described in the instrument as having been declared under Tax Declaration No. 3301 18 and as bounded on the North by Victor Verano, on the East by Benigno Titong, on the South by the Bugsayon River and on the West by Benigno Titong. On September 9, 1969, Tax Declaration No. 8723 was issued to petitioner for his corresponding share in the estate. However, instead of reflecting only .9000 hectare as his rightful share in the extrajudicial settlement 19 petitioner's share was bloated to 2.4 hectares. It therefore appeared to private respondent that petitioner encroached upon his (Laurio's) property and declared it a part of his inheritance. 20 The boundaries were likewise altered so that it was bounded on the North by Victor Verano, on the East by Benigno Titong, on the South by property owner Espinosa, and on the West by property owner Adolfo Titong. 21 Private respondent accordingly denied that petitioner had diverted the course of the Bugsayon River after he had repurchased the land from Concepcion Verano vda. de Cabug 22 because the land was immediately sold to Espinosa shortly thereafter. 23 The lower court rendered a decision in favor of private respondents, declaring him as the true and absolute owner of the litigated property and ordering petitioner to respect private respondents' title and ownership over the property and to pay attorney's fees, litigation expenses, costs and moral damages. Petitioner appealed to the Court of Appeals, which affirmed the decision. On motion for reconsideration, the same was denied for lack of merit. Hence, this petition for review on certiorari. At the outset, we hold that the instant petition must be denied for the reason that the lower court should have outrightly dismissed the complaint for quieting of title. The remedy of quieting of title may be availed of under the circumstances enumerated in the Civil Code: Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to remove such cloud or to quiet the title. An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein. Under this provision, a claimant must show that there is an instrument, record, claim, encumbrance or proceeding which constitutes or casts a cloud, doubt, question or shadow upon the owner's title to or interest in real property.24 The ground or reason for filing a complaint for quieting of title must therefore be "an instrument, record, claim, encumbrance or proceeding." Under the maxim expresio mius est exclusio alterius, these grounds are exclusive so that other reasons outside of the purview of these reasons may not be considered valid for the same action. 25 Had the lower court thoroughly considered the complaint filed, it would have had no other course of action under the law but to dismiss it. The complaint failed to allege that an "instrument, record, claim, encumbrance or proceeding" beclouded the plaintiff's title over the property involved. Petitioner merely alleged that the defendants (respondents herein), together with their hired laborers and without legal justification, forcibly entered the southern portion of the land of the plaintiff and plowed the same. He then proceeded to claim damages and attorney's fees. He prayed that, aside from issuing a writ or preliminary injunction enjoining private respondents and their hired laborers from intruding into the land, the court should declare him "the true and absolute owner" thereof. Hence, through his allegations, what petitioner imagined as clouds cast on his title to the property were private respondents' alleged acts of physical intrusion into his purported property. Clearly, the acts alleged may be considered grounds for an action for forcible entry but definitely not one for quieting of title. When the issues were joined by the filing of the answer to the complaint, it would have become apparent to the court that the case was a boundary dispute. The answer alleged, among other matters, that petitioner, "in bad faith, surreptitiously, maliciously and fraudulently had the land in question included in the survey of his land which extends to the south only as far as the Bugsayon River which is the visible and natural and common boundary between the properties." 26 Moreover, during the hearing of the case, petitioner proved that it was actually a boundary dispute by evidence showing what he considered as the boundary of his property which private respondents perceived as actually encroaching on their property. In this regard, the following pronouncements of the Court are apropos: . . . (T)he trial court (and likewise the respondent Court) cannot, in an action for quieting of title, order the determination of the boundaries of the claimed property, as that would be tantamount to awarding to one or some of the parties the disputed property in an action where the sole issue is limited to whether the instrument, record, claim, encumbrance or proceeding involved constitutes a cloud upon the petitioners' interest or title in and to said property. Such determination of boundaries is appropriate in adversarial proceedings where possession or ownership may properly be considered and where evidence aliunde, other than the

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"instrument, record, claim, encumbrance or proceeding" itself, may be introduced. An action for forcible entry, whenever warranted by the period prescribed in Rule 70, or for recovery of possession de facto, also within the prescribed period, may be availed of by the petitioners, in which proceeding the boundary dispute may be fully threshed out. 27 Nonetheless, even if the complaint below were to be considered as a valid one for quieting of title, still, the instant petition for review on certiorari must fail. As a general rule, findings of fact of the Court of Appeals are binding and conclusive upon this Court. Such factual findings shall not be disturbed normally unless the same are palpably unsupported by the evidence on record or the judgment itself is based on a misapprehension of facts. 28 Upon an examination of the records, the Court finds no evident reason to depart from the general rule. The courts below correctly held that when petitioner "sold, ceded, transferred and conveyed" the 5.5-hectare land in favor of Pablo Espinosa, his rights of ownership and possession pertaining thereto ceased and these were transferred to the latter. In the same manner, Espinosa's rights of ownership over the land ceased and were transferred to private respondent upon its sale to the latter. This finds justification in the Civil Code, as follows: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. In other words, a sale is a contract transferring dominion and other real rights in the thing sold. 29 In the case at bar, petitioner's claim of ownership must of necessary fail because he has long abdicated his rights over the land when he sold it to private respondent's predecessor-in-interest. Petitioner's claim that he acquired ownership over the disputed land through possession for more than twenty (20) years is likewise unmeritorious. While Art. 1134 of the Civil Code provides that "(o)wnership and other real rights over immovable property are acquired by ordinary prescription through possession of ten years," this provision of law must be read in conjunction with Art. 1117 of the same Code. This article states that ". . . (o)rdinary acquisitive prescription of things requires possession in good faith and with just title for the time fixed by law." Hence, a prescriptive title to real estate is not acquired by mere possession thereof under claim of ownership for a period of tea years unless such possession was acquired con justo tilulo y buena fe (with color of title and good faith). 30The good faith of the possessor consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership. 31 For purposes of prescription, there is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights but the grantor was not the owner or could not transmit any right. 32 Petitioners have not satisfactorily met the requirements of good faith and just title. As aptly observed by the trial court, the plaintiff's admitted acts of converting boundary line (Bugsayon River) into a ricefield and thereafter claiming ownership thereof were acts constituting deprivation of the rights of others and therefore "tantamount to bad faith." 33 To allow petitioner to benefit from his own wrong would run counter to the maxim ex dolo malo non oritur actio (no man can allowed to found a claim upon his own wrongdoing). Extraordinary acquisitive prescription cannot similarly vest ownership over the property upon petitioner. Art. 1137 of the Civil Code states that "(o)wnership and other real rights over immovables prescribe through uninterrupted adverse possession thereof for thirty years, without need of title or of good faith." Petitioner's alleged possession in 1962 up to September 1983 when private respondents entered the property in question spanned twenty-one (21) years. This period of time is short of the thirty-year requirement mandated by Art. 1137. Petitioner basically anchors his claim over the property on the survey plan prepared upon his request, 34 the tax declaration in his name, 35 the commissioner's report on the relocation survey, 36 and the survey plan. 37Respondent court correctly held that these documents do not conclusively demonstrate petitioner's title over Lot Nos. 3918-A and 3606. A survey is the act by which the quantity of a parcel of land is ascertained and so a paper containing a statement of courses, distances, and quantity of land. 38 A survey under a proprietary title is not a conveyance. It is an instrument sui generis in the nature of a partition; a customary mode in which a proprietor has set off to himself in severalty a part of the common estate. 39Therefore, a survey, not being a conveyance, is not a mode of acquiring ownership. A fortiori, petitioner cannot found his claim on the survey plan reflecting a subdivision of land because it is not conclusive as to ownership as it may refer only to a delineation of possession. 40 Furthermore, the plan was not verified and approved by the Bureau of Lands in accordance with Sec. 28, paragraph 5 of Act No. 2259, the Cadastral Act, as amended by Sec. 1862 of Act No. 2711. Said law ordains that private surveyors send their original field notes, computations, reports, surveys, maps and plots regarding a piece of property to the Bureau of Lands for verification and approval. 41 A survey plan not verified and approved by said Bureau is nothing more than a private writing, the due execution and authenticity of which must be proven in accordance with Sec. 20 of Rule 132 of the Rules of Court. The circumstance that the plan was admitted in evidence without any objection as to its due execution and authenticity does not signify that the courts shall give probative value therefor. To admit evidence and not to believe it subsequently are not contradictory to each other. This Court cannot alter the conclusions of the Court of Appeals on the credibility accorded to evidence presented by the parties. 42 Similarly, petitioner's tax declaration issued under his name is not even persuasive evidence of his claimed ownership over the land in dispute. A tax declaration, by itself, is not considered conclusive evidence of ownership.43 It is merely an indicium of a claim of ownership. 44 Because it does not by itself give title, it is of little value in proving one's ownership. 45 Moreover, the incompatibility in petitioner's tax declaration and the commissioner's report as regards the area of his claimed property is much too glaring to be ignored. Tax Declaration No. 8717 states that petitioner's property has an area of 3.2800 hectares while the totality of his claim according to the commissioned geodetic engineer's survey amounts to 4.1385 hectares. There is therefore a notable discrepancy of 8,585 square meters. On the other hand, private respondent's claimed property, as borne out by Tax Declaration No. 12738, totals 5.5 hectares, a more proximate equivalent of the 5.2433-hectare property as shown by the commissioner's report. There is also nothing in the commissioner's report that substantiates petitioner's claim that the disputed land was inside his property. Petitioner capitalizes on the lower court's statement in its decision 46 that "as reflected in the commissioner's report dated May 23, 1984 (Exhibit 3-3A), the area claimed is inside lot 3918 of the defendants(Exhibit 2)" 47 or the private respondents. A careful reading of the decision would show that this statement is found in the summary of defendants' (herein private respondents) evidence. Reference to Lot No. 3918 may, therefore, be attributed to mere oversight as the lower court even continues to state the defendants' assertion that the 2-hectare land is part of their 5.5-hectare property. Hence, it is not amiss to conclude that either petitioner misapprehended the lower court's decision or he is trying to contumaciously mislead or worse, deceive this Court. With respect to the awards of moral damages of P10,000.00 and attorney's fees of P2,000.00, the Court finds no cogent reason to delete the same. Jurisprudence is replete with rulings to the effect that where fraud and bad faith have been established, the award of moral damages is in order. 48 This pronouncement finds support in Art. 2219 (10) of the Civil Code allowing the recovery of moral damages for acts enumerated in Art. 21 of the same Code. This article states that "(a)ny person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage." The moral damages are hereby increased to P30,000.00. We agree with the respondent court in holding that the award of attorney's fees is justified because petitioner filed a clearly unfounded civil action. 49

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WHEREFORE, the instant petition for review on certiorari is hereby DENIED and the questioned Decision of the Court of Appeals AFFIRMED. This Decision is immediately executory. Costs against petitioner. SO ORDERED. G.R. No. 134329 January 19, 2000 The Municipal Circuit Trial Court rendered judgment in favor of petitioner spouses. It made the following findings: After a careful study of the evidence submitted by both parties, the court finds that the evidence adduced by plaintiff failed to establish his ownership over . . . Cadastral Lot No. 5581 . . . while defendants has [sic] successfully proved by preponderance of evidence that said property is still under a community of ownership among the heirs of the late Jacinto Pada who died intestate. If there was some truth that Marciano Pada and Ananias Pada has [sic] been adjudicated jointly of [sic] the above-described residential property . . . as their share of the inheritance on the basis of the alleged extra judicial settlement, how come that since 1951, the date of partition, the share of the late Marciano Pada was not transferred in the name of his heirs, one of them Maria Pada-Pavo and still remain [sic] in the name of Jacinto Pada up to the present while the part pertaining to the share of Ananias Pada was easily transferred in the name of his heirs . . .. The alleged extra judicial settlement was made in private writing and the genuineness and due execution of said document was assailed as doubtful and it appears that most of the heirs were not participants and signatories of said settlement, and there was lack of special power of attorney to [sic] those who claimed to have represented their co-heirs in the participation [sic] and signing of the said extra judicial statement. Defendants were already occupying the northern portion of the above-described property long before the sale of said property on November 17, 1993 was executed between Maria Pada-Pavo, as vendor and the plaintiff, as vendee. They are in possession of said portion of the above-described property since the year 1960 with the consent of some of the heirs of Jacinto Pada and up to the [sic] present some of the heirs of Jacinto Pada has [sic] donated . . . their share of [sic] the above-described property to them, virtually converting defendants' standing as co-owners of the land under controversy. Thus, defendants as co-owners became the undivided owners of the whole estate . . . . As co-owners of . . . Cadastral Lot No. 5581 . . . their possession in the northern portion is being [sic] lawful.10 From the foregoing decision, private respondent appealed to the Regional Trial Court. On November 6, 1997, it rendered a judgment of reversal. It held: . . . [T]he said conveyances executed by Juanita Pada and Maria Pada Pavo were never questioned or assailed by their co-heirs for more than 40 years, thereby lending credence on [sic] the fact that the two vendors were indeed legal and lawful owners of properties ceded or sold. . . . At any rate, granting that the coheirs of Juanita Pada and Maria Pada Pavo have some interests on the very lot assigned to Marciano and Ananias, nevertheless, said interests had long been sadly lost by prescription, if not laches or estoppel. It is true that an action for partition does not prescribe, as a general rule, but this doctrine of imprescriptibility cannot be invoked when one of the heirs possessed the property as an owner and for a period sufficient to acquire it by prescription because from the moment one of the co-heirs claim [sic] that he is the absolute owner and denies the rest their share of the community property, the question then involved is no longer one for partition but of ownership. . . . Since [sic] 1951 up to 1993 covers a period of 42 long years. Clearly, whatever right some of the co-heirs may have, was long extinguished by laches, estoppel or prescription. xxx xxx xxx

VERONA PADA-KILARIO and RICARDO KILARIO, petitioners, vs. COURT OF APPEALS and SILVERIO PADA, respondents. DE LEON, JR., J.: The victory1 of petitioner spouses Ricardo and Verona Kilario in the Municipal Circuit Trial Court2 in an ejectment suit3 filed against them by private respondent Silverio Pada, was foiled by its reversal4 by the Regional Trial Court5 on appeal. They elevated their cause6 to respondent Court of Appeals7 which, however, promulgated a Decision8 on May 20, 1998, affirming the Decision of the Regional Trial Court. The following facts are undisputed: One Jacinto Pada had six (6) children, namely, Marciano, Ananias, Amador, Higino, Valentina and Ruperta. He died intestate. His estate included a parcel of land of residential and coconut land located at Poblacion, Matalom, Leyte, denominated as Cadastral Lot No. 5581 with an area of 1,301.92 square meters. It is the northern portion of Cadastral Lot No. 5581 which is the subject of the instant controversy. During the lifetime of Jacinto Pada, his half-brother, Feliciano Pada, obtained permission from him to build a house on the northern portion of Cadastral Lot No. 5581. When Feliciano died, his son, Pastor, continued living in the house together with his eight children. Petitioner Verona Pada-Kilario, one of Pastor's children, has been living in that house since 1960. Sometime in May, 1951, the heirs of Jacinto Pada entered into an extra-judicial partition of his estate. For this purpose, they executed a private document which they, however, never registered in the Office of the Registrar of Deeds of Leyte. At the execution of the extra-judicial partition, Ananias was himself present while his other brothers were represented by their children. Their sisters, Valentina and Ruperta, both died without any issue. Marciano was represented by his daughter, Maria; Amador was represented by his daughter, Concordia; and Higina was represented by his son, Silverio who is the private respondent in this case. It was to both Ananias and Marciano, represented by his daughter, Maria, that Cadastral Lot No. 5581 was allocated during the said partition. When Ananias died, his daughter, Juanita, succeeded to his right as co-owner of said property. On June 14, 1978, Juanita Pada sold to Engr. Ernesto Paderes, the right of his father, Ananias, as co-owner of Cadastral Lot No. 5881. On November 17, 1993, it was the turn of Maria Pada to sell the co-ownership right of his father, Marciano. Private respondent, who is the first cousin of Maria, was the buyer. Thereafter, private respondent demanded that petitioner spouses vacate the northern portion of Cadastral Lot No. 5581 so his family can utilize the said area. They went through a series of meetings with the barangay officials concerned for the purpose of amicable settlement, but all earnest efforts toward that end, failed. On June 26, 1995, private respondent filed in the Municipal Circuit Trial Court of Matalom, Leyte, a complaint for ejectment with prayer for damages against petitioner spouses. On July 24, 1995, the heirs of Amador Pada, namely, Esperanza Pada-Pavo, Concordia PadaBartolome, and Angelito Pada, executed a Deed of Donation9 transferring to petitioner Verona Pada-Kilario, their respective shares as co-owners of Cadastral Lot No. 5581. On February 12, 1996, petitioner spouses filed their Answer averring that the northern portion of Cadastral Lot No. 5581 had already been donated to them by the heirs of Amador Pada. They contended that the extra-judicial partition of the estate of Jacinto Pada executed in 1951 was invalid and ineffectual since no special power of attorney was executed by either Marciano, Amador or Higino in favor of their respective children who represented them in the extra-judicial partition. Moreover, it was effectuated only through a private document that was never registered in the office of the Registrar of Deeds of Leyte.

. . . [T]he deed of donation executed by the Heirs of Amador Pada, a brother of Marciano Pada, took place only during the inception of the case or after the lapse of more than 40 years reckoned from the time the extrajudicial partition was made in 1951. Therefore, said donation is illegal and invalid [sic] the donors,

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among others, were absolutely bereft of any right in donating the very property in question.11 The dispositive portion of the decision of the Regional Trial Court reads as follows: WHEREFORE, a judgment is hereby rendered, reversing the judgment earlier promulgated by the Municipal Circuit Trial Court of Matalom, Leyte, [sic] consequently, defendants-appellees are hereby ordered: 1. To vacate the premises in issue and return peaceful possession to the appellant, being the lawful possessor in concept of owner; 2. To remove their house at their expense unless appellant exercises the option of acquiring the same, in which case the pertinent provisions of the New Civil Code has to be applied; 3. Ordering the defendants-appellees to pay monthly rental for their occupancy and use of the portion of the land in question in the sum of P100.00 commencing on June 26, 1995 when the case was filed and until the termination of the present case; 4. Ordering the defendants to pay to the appellant the sum of P5,000.00 as moral damages and the further sum of P5,000.00 as attorney's fees; 5. Taxing defendants to pay the costs of suit.12 Petitioners filed in the Court of Appeals a petition for review of the foregoing decision of the Regional Trial Court. On May 20, 1998, respondent Court of Appeals rendered judgment dismissing said petition. It explained: Well-settled is the rule that in an ejectment suit, the only issue is possession de facto or physical or material possession and not de jure. Hence, even if the question of ownership is raised in the pleadings, the court may pass upon such issue but only to determine the question of possession, specially if the former is inseparably linked with the latter. It cannot dispose with finality the issue of ownership, such issue being inutile in an ejectment suit except to throw light on the question of possession . . . . Private respondent Silverio Pada anchors his claim to the portion of the land possessed by petitioners on the Deed of Sale executed in his favor by vendor Maria Pada-Pavo, a daughter of Marciano, son of Jacinto Pada who was the registered owner of the subject lot. The right of vendee Maria Pada to sell the property was derived from the extra-judicial partition executed in May 1951 among the heirs of Jacinto Pada, which was written in a Bisayan dialect signed by the heirs, wherein the subject land was adjudicated to Marciano, Maria Pavo's father, and Ananias Pada. Although the authenticity and genuineness of the extra-judicial partition is now being questioned by the heirs of Amador Pada, no action was ever previously filed in court to question the validity of such partition.1wphi1.nt Notably, petitioners in their petition admitted among the antecedent facts that Maria Pavo is one of the co-owners of the property originally owned by Jacinto Pada . . . and that the disputed lot was adjudicated to Marciano (father of Maria Pavo) and Ananias, and upon the death of Marciano and Ananias, their heirs took possession of said lot, i.e. Maria Pavo the vendor for Marciano's share and Juanita for Ananias' share . . . . Moreover, petitioners do not dispute the findings of the respondent court that during the cadastral survey of Matalom, Leyte, the share of Maria Pada Pavo was denominated as Lot No. 5581, while the share of Juanita Pada was denominated as Lot No. 6047, and that both Maria Pada Pavo and Juanita were in possession of their respective hereditary shares. Further, petitioners in their Answer admitted that they have been occupying a portion of Lot No. 5581, now in dispute without paying any rental owing to the liberality of the plaintiff . . . . Petitioners cannot now impugn the aforestated extrajudicial partition executed by the heirs in 1951. As owner and possessor of the disputed property, Maria Pada, and her vendee, private respondent, is entitled to possession. A voluntary division of the estate of the deceased by the heirs among themselves is conclusive and confers upon said heirs exclusive ownership of the respective portions assigned to them . . .. The equally belated donation of a portion of the property in dispute made by the heirs of Amador Pada, namely, Concordia, Esperanza and Angelito, in favor of petitioner Verona Pada is a futile attempt to confer upon the latter the status of co-owner, since the donors had no interest nor right to transfer. . . . This gesture appears to be a mere afterthought to help petitioners to prolong their stay in the premises. Furthermore, the respondent court correctly pointed out that the equitable principle of laches and estoppel come into play due to the donors' failure to assert their claims and alleged ownership for more than forty (40) years . . . . Accordingly, private respondent was subrogated to the rights of the vendor over Lot No. 5581 which include [sic] the portion occupied by petitioners.13 Petitioner spouses filed a Motion for Reconsideration of the foregoing decision. On June 16, 1998, respondent Court of Appeals issued a Resolution denying said motion. Hence this petition raising the following issues: I. WHETHER THE COURT OF APPEALS ERRED IN NOT RULING THAT PETITIONERS, AS CO-OWNERS, CANNOT BE EJECTED FROM THE PREMISES CONSIDERING THAT THE HEIRS OF JACINTO PADA DONATED TO THEM THEIR UNDIVIDED INTEREST IN THE PROPERTY IN DISPUTE. II. WHETHER THE COURT OF APPEALS ERRED IN NOT RULING THAT WHAT MARIA PADA SOLD WAS HER UNDIVIDED SHARE IN THE PROPERTY IN DISPUTE. III. WHETHER OR NOT THE PETITIONERS ARE BUILDERS IN GOOD FAITH.14 There is no merit to the instant petition. First. We hold that the extrajudicial partition of the estate of Jacinto Pada among his heirs made in 1951 is valid, albeit executed in an unregistered private document. No law requires partition among heirs to be in writing and be registered in order to be valid.15 The requirement in Sec. 1, Rule 74 of the Revised Rules of Court that a partition be put in a public document and registered, has for its purpose the protection of creditors and the heirs themselves against tardy claims.16 The object of registration is to serve as constructive notice to others. It follows then that the intrinsic validity of partition not executed with the prescribed formalities is not undermined when no creditors are involved.17 Without creditors to take into consideration, it is competent for the heirs of an estate to enter into an agreement for distribution thereof in a manner and upon a plan different from those provided by the rules from which, in the first place, nothing can be inferred that a writing or other formality is essential for the partition to be valid.18 The partition of inherited property need not be embodied in a public document so as to be effective as regards the heirs that participated therein.19 The requirement of Article 1358 of the Civil Code that acts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property, must appear in a public instrument, is only for convenience, noncompliance with which does not affect the validity or enforceability of the acts of the parties as among themselves.20 And neither does the Statute of Frauds under Article 1403 of the New Civil Code apply because partition among heirs is not legally deemed a conveyance of real property, considering that it involves not a transfer of property from one to the other but rather, a confirmation or ratification of title or right of property that an heir is renouncing in favor of another heir who accepts and receives the inheritance.21 The 1951 extrajudicial partition of Jacinto Pada's estate being legal and effective as among his heirs, Juanita and Maria Pada validly transferred their ownership rights over Cadastral Lot No. 5581 to Engr. Paderes and private respondent, respectively.22 Second. The extrajudicial partition which the heirs of Jacinto Pada executed voluntarily and spontaneously in 1951 has produced a legal status.23 When they discussed and agreed on the division of the estate Jacinto Pada, it is presumed that they did so in furtherance of their

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mutual interests. As such, their division is conclusive, unless and until it is shown that there were debts existing against the estate which had not been paid.24 No showing, however, has been made of any unpaid charges against the estate of Jacinto Pada. Thus, there is no reason why the heirs should not be bound by their voluntary acts. The belated act of Concordia, Esperanza and Angelito, who are the heirs of Amador Pada, of donating the subject property to petitioners after forty four (44) years of never having disputed the validity of the 1951 extrajudicial partition that allocated the subject property to Marciano and Ananias, produced no legal effect. In the said partition, what was allocated to Amador Pada was not the subject property which was a parcel of residential land in Sto. Nino, Matalom, Leyte, but rather, one-half of a parcel of coconut land in the interior of Sto. Nino St., Sabang, Matalom, Leyte and one-half of a parcel of rice land in Itum, Sta. Fe, Matalom, Leyte. The donation made by his heirs to petitioners of the subject property, thus, is void for they were not the owners thereof. At any rate it is too late in the day for the heirs of Amador Pada to repudiate the legal effects of the 1951 extrajudicial partition as prescription and laches have equally set in. Third. Petitioners are estopped from impugning the extrajudicial partition executed by the heirs of Jacinto Pada after explicitly admitting in their Answer that they had been occupying the subject property since 1960 without ever paying any rental as they only relied on the liberality and tolerance of the Pada family.25 Their admissions are evidence of a high order and bind them insofar as the character of their possession of the subject property is concerned. Considering that petitioners were in possession of the subject property by sheer tolerance of its owners, they knew that their occupation of the premises may be terminated any time. Persons who occupy the land of another at the latter's tolerance or permission, without any contract between them, is necessarily bound by an implied promise that they will vacate the same upon demand, failing in which a summary action for ejectment is the proper remedy against them.26 Thus, they cannot be considered possessors nor builders in good faith. It is well-settled that both Article 44827 and Article 54628 of the New Civil Code which allow full reimbursement of useful improvements and retention of the premises until reimbursement is made, apply only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof.29 Verily, persons whose occupation of a realty is by sheer tolerance of its owners are not possessors in good faith. Neither did the promise of Concordia, Esperanza and Angelito Pada that they were going to donate the premises to petitioners convert them into builders in good faith for at the time the improvements were built on the premises, such promise was not yet fulfilled, i.e., it was a mere expectancy of ownership that may or may not be realized.30 More importantly, even as that promise was fulfilled, the donation is void for Concordia, Esperanza and Angelito Pada were not the owners of Cadastral Lot No. 5581. As such, petitioners cannot be said to be entitled to the value of the improvements that they built on the said lot. WHEREFORE, the petition for review is HEREBY DENIED. Costs against petitioners. SO ORDERED. G.R. No. 109840 January 21, 1999 JOSE L. CHUA and CO SIO ENG, petitioners, vs. THE HONORABLE COURT OF APPEALS and RAMON IBARRA, respondents. SO ORDERED. On appeal by both parties, the Regional Trial Court, Branch 59 of Makati ruled that the lease was for a fixed period of five (5) years and that, upon its expiration on January 1, 1990, petitioners' continued stay in the premises became illegal. As provided in Art. 1687 of the Civil Code, the power of the courts to fix the period of lease is limited only to cases where the period has not been fixed by the parties themselves. The dispositive portion of the decision 3 states: Premises considered, judgment is hereby rendered modifying the appealed decision, as follows: 1. Ordering the defendants (herein petitioners) and all persons claiming and/or acting for and in their behalf to vacate the premises known as door No. 3086 Redemptorist, corner G.C. Cruz Streets, Baclaran, Paraaque, Metro Manila and turn over possession thereof to the plaintiff (herein private respondent); 2. Ordering the defendants to pay the plaintiff the following: a) the amount of P42,306.00 representing MENDOZA, J.: This is a petition for review on certiorari of the decision, 1 dated October 8, 1992 of the Court of Appeals affirming the decision of the Regional Trial Court, Branch 59 of Makati, Metro Manila, ordering the ejectment of petitioners from the premises owned by private respondent. Petitioners were lessees of a commercial unit at No. 3086 Redemptorist Street in Baclaran, Paraque, Metro Manila. The lease was for a period of five (5) years, from January 1, 1985 to December 31, 1989. The contract expressly provided for the renewal of the lease at the option of the lessees "in accordance with the terms of agreement and conditions set by the lessor." Prior to the expiration of the lease, the parties discussed the possibility of renewing it. They accrued or back rentals from January 1, 1987 to December 31, 1989; b) a monthly rental of P7,320.50 for exchanged proposal and counterproposal, but they failed to reach agreement. The dispute was referred to the barangay captain for conciliation but still no settlement was reached by the parties. On July 24, 1990, private respondent filed a complaint for unlawful detainer against petitioner's in the Metropolitan Trial Court of Paraaque, Metro Manila, which on February 4, 1992 rendered a decision, the dispositive portion of which reads: 2 WHEREFORE, premises considered, judgment is hereby, rendered as follows: 1. The defendants (herein petitioners) are hereby given a period of two (2) years extension of occupancy of the subject premises starting the date of the filling of the instant complaint; 2. The defendants are hereby ordered to pay the plaintiff (herein private respondent) the sum of P188,806.00 representing back rentals as of the year 1991 and a monthly rental of P10,000.00 thereafter until the expiration of the aforesaid extension of their occupancy or until the subject premises is actually vacated. 3. Defendants are hereby ordered to pay the plaintiff the amount of P15,000.00 as attorney's fees; and 4. Defendants are hereby ordered to pay the cost of suit.

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the use or occupancy of the premises starting January 1, 1990 until July 24, 1990 and at Ten Thousand (P10,000.00) Pesos from July 24, 1990 until the defendants shall have vacated the same; c) the amount of P10,000.00 representing reasonable attorney's fees: 3. Dismissing defendants' counterclaim for lack of merit; and 4. With costs against the defendants. Petitioners appealed to the Court of Appeals which affirmed the decision. In its decision, dated October 8, 1992, the Court of Appeals ordered: WHEREFORE, except for the modification that the monthly rental that petitioners should pay private respondent from July 24, 1990 until the latter finally vacate the premises in question is reduced to P7,320.00, the decision of the respondent court in this case is AFFIRMED in all other respects, with costs against petitioners Jose L. Chua and Ko Sio Eng. Petitioners' motion for reconsideration was likewise denied. Hence, this petition for review for certiorari. Petitioners assign several errors as having been allegedly committed by the Court of Appeals. First. Petitioners allege that the Court of Appeals erred in affirming the lower court's finding that they owe private respondent the amount of P42,306.00 as unpaid rentals from January 1, 1987 to December 31, 1989 because neither the letter of demand nor the complaint for unlawful detainer alleged a claim for unpaid rentals. As the Court of Appeals pointed out, however, the issue of arrearages was raised at the pre-trial by private respondent and evidence on this question was presented without objection from petitioners: 5 First of all, while it is true that there was no express demand in private respondent's complaint for unlawful detainer against petitioners for the latters payment of rental arrearages, private respondent in a pleading dated December 17, 1990 filed with the MTC (by way of comment to petitioners' motion to admit amended answer) stated: That moreover the unpaid rentals from January 1987 to December 31, 1989 amounts to FORTY TWO THOUSAND THREE HUNDRED SIX PESOS (P42,306,00), exclusive of rentals from January 1 to December 31, 1990 which would be one hundred eighty thousand pesos (P180,000.00) or a total of TWO HUNDRED TWENTY TWO THOUSAND THREE HUNDRED SIX PESOS (222,306,00) (p. 75 Orig. Rec). Then, at the pre-trial of December 17, 1990, among the issues proposed by counsel for plaintiff (now private respondent) was whether: 3. defendants are in arrears for the rentals from Dec. 31, 1987 to January 1989, in accordance with the contract: (p. 8, tsn Dec. 17, 1990: p. 87, id.) Counsel for defendants (herein petitioners) did not object to the statement of issues made by plaintiffs counsel and instead simply stated as their own main issue whether plaintiff had a valid cause of action for ejectment against them as he is not the sole owner of the leased premises, and then averred that "based on this premise, the other issues raised by plaintiff could be dependent on the resolution of the stated issues" (id., p. 88. Orig. Rec.). Later, at the hearing of February 12, 1990. plaintiff Ramon Ibarra testified that although his lease contract (Exh. "A") with petitioners stipulated an annual ten percent (10%) additional rental starting in 1986 (i.e., the monthly rental in 1986 was P5,500, in 1987, it was P6,050; in 1988, it was P6,655.00; and in 1989, it was P7,320.50), petitioners continued to pay only the original monthly rental of P5,000 stipulated in their contract (Exh. "A"), so that petitioners had incurred total rental arrearages at the end of 1989 of P42,306.00 (pp. 6-8,. tsn,op cit.: pp. 113-115. Orig. Rec.). . . . Obviously, then, petitioners' rental arrearages from 1986 to 1989 as an issue raised at the pre-trial and on which issue private respondent presented evidence without any objection from petitioners. And considering that the petitioners incurred said rental arrearages because they did not pay private respondent the automatic 10% increase in their monthly rental every year for the years 1986 to 1989 as agreed upon and stipulated in their lease contract (Exh. "A".) which contract is the law between the parties, justice and good faith demand that petitioners should pay said rental arrearages. As correctly ruled by the respondent court, "to absolve the defendants from paying rentals in arrears while they continue occupying and enjoying the premises would be allowing the defendants to enrich themselves at the expense of the plaintiff. (p, 55, Rollo). Indeed, any objection to the admissibility of evidence should be made at the time such evidence is offered or as soon thereafter as the objection to its admissibility becomes apparent, 6 otherwise the objection will be considered waived and such evidence will form part of the records of the case as competent and admissible evidence. 7 Rule 10, 5 8 of the Rules of Civil Procedure allows the amendment of the pleadings in order to make them conform to the evidence in the record. Second. Petitioners claim that they are entitled to an estension of time to occupy the premises in question. This, too, is without merit. After the lease terminated on January 1, 1990 and without the parties thereafter reaching any agreement for its renewal, petitioners became deforciants subject to ejectment from the premises. 9

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Neither did the Court of Appeals err in ruling that petitioners are not entitled to a reasonable extension of time to occupy the premises on account of the fact that the lease contract between the parties has already expired. As there was no longer any lease to speak of which could be extended, the Metropolitan Trial Court was in effect making a contract for the parties which it obviously did not have the power to do. 10 The potestative authority of the courts to fix a longer term for a lease under Art. 1687 of the Civil Code 11 applies only to cases where there is no period fixed by the parties. To the contrary, in this case, the contract of lease provided for a fixed period of five (5) years from January 1, 1985 to December 31, 1989. As the Court held in Bacolod-Murcia Milling Co., Inc. v. Banco Nacional Filipino: 12 It is not the province of the court to alter a contract by construction or to make a new contract for the parties; its duty is confined to the interpretation of the one which they have made for themselves, without regard to its wisdom or folly, as the court cannot supply material stipulations or read into contract words which it does not contain. Indeed, Art. 1675 of the Civil Code excludes cases falling under Art. 1673 (which provides among others, that the lessor may judicially eject the lessee when the period agreed upon or that which is fixed has expired) from the cases wherein, pursuant to Art. 1687, courts may fix a longer period of lease. For these reasons, we hold that the Court of Appeals did not err in ruling that petitioners were not entitled to an extension of the lease upon its expiration. Third. The appellate court found petitioners guilty of bad faith in refusing to leave the premises. But petitioners contend that they acted in good faith under the belief that they were entitled to an extension of the lease because they had made repairs and improvements on the premises. This contention is devoid of merit. The fact that petitioners allegedly made repairs on the premises in question is not a reason for them to retain the possession of the premises. There is no provision of law which grants the lessee a right of retention over the leased premises on that ground. Art. 448 of the Civil Code, in relation to Art. 546, which provides for full reimbursement of useful improvements and retention of the premises until reimbursement is made, applies only to a possessor in good faith, i.e., one who builds on a land in the belief that he is the owner thereof. In a number of cases, the Court has held that this right does not apply to a mere lessee, like the petitioners, otherwise, it would always be in his power to "improve" his landlord out of the latter's property.13 Art. 1678 merely grants to such a lessee making in good faith useful improvements the right to be reimbursed one-half of the value of the improvements upon the termination of the lease, or, in the alternative, to remove the improvements if the lessor refuses to make reimbursement. Petitioners were thus correctly ordered to pay attorney's fees considering that private respondent had to go to court to protect his interest. 14 The award of P10,000.00 is reasonable in view of the time it has taken this rather simple case for ejectment to be decided. Fourth. Petitioners contend that the Court of Appeals erred in affirming the denial of their counterclaim for damages for their failure to enjoy the peaceful possession of the premises because private respondent allowed vendors to ply their trade at the front portion of the leased premises. Petitioners claim that, as a result, they suffered business losses and moral injuries. As both the Metropolitan Trial Court and Regional Trial Court held, however, there is no evidence to support this claim. As the Court of Appeals said, petitioners never complained before about the sidewalk vendors occupying a portion of the leased property. It was only after negotiations for renewal of the lease had failed and private respondent had filed a complaint for unlawful detainer against them did they complain about the vendors. WHEREFORE, the decision of the Court of Appeals, dated October 8, 1992, is AFFIRMED.1wphi1.nt Costs against petitioners. SO ORDERED. Respondent, on the other hand, is a domestic corporation engaged in the business of leasing stalls and commercial store spaces located inside SM Malls found all throughout the ERMINDA F. FLORENTINO, Petitioner, country.[5] G.R. No. 172384 Petitioner is doing business under the business name Empanada Royale, a sole proprietorship engaged in the retail ofempanada with outlets in different malls and business establishments within Metro Manila.[4] The factual and procedural antecedents of the instant petition are as follows: WHEREFORE, premises considered, the appeal is PARTLY GRANTED. The April 30, 2001 Decision of the Regional Trial Court ofMakati, Branch 57 is therefore MODIFIED to wit: (a) the portion ordering the [herein respondent] to pay the amount of P192,000.00 representing the security deposits and P50,000.00 as attorneys fees in favor of the [herein petitioner] as well as Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitionerErminda F. Florentino, seeking to reverse and set aside the Decision,[1] dated 10 October 2003 and the Resolution,[2] dated 19 April 2006 of the Court of Appeals in CA-G.R. CV No. 73853. The appellate court, in its assailed Decision and Resolution, modified the Decision dated 30 April 2001 of the Regional Trial Court (RTC) of Makati, Branch 57, in Civil Case No. 00-1015, finding the respondent Supervalue, Inc., liable for the sum of P192,000.00, representing the security deposits made by the petitioner upon the commencement of their Contract of Lease. The dispositive portion of the assailed appellate courts Decision thus reads: CHICO-NAZARIO, J.: DECISION x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x SUPERVALUE, INC., Respondent. - versus Present:

YNARES-S Chair

AUSTRIA-

CHICO-NA

NACHURA

REYES, JJ.

Promulga

Septembe

giving [respondent] the option to reimburse [petitioner] of the value of the improvements introduced by the [petitioner] on the leased [premises] should [respondent] choose to appropriate itself or require the [petitioner] to remove the improvements, is hereby REVERSED and SET ASIDE; and (b) the portion ordering the return to [petitioner] the properties seized by [respondent] after the former settled her obligation with the latter is however MAINTAINED.[3]

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On 8 March 1999, petitioner and respondent executed three Contracts of Lease containing similar terms and conditions over the cart-type stalls at SM North Edsa and SM Southmall and a store space at SM Megamall. The term of each contract is for a period of four months and may be renewed upon agreement of the parties.[6] Further, petitioner claimed that the respondent seized her equipment and personal belongings found inside the store space in SM Megamall after the lease contract for the said outlet expired and despite repeated written demands from the petitioner, respondent continuously refused to return the seized items.[19] Upon the expiration of the original Contracts of Lease, the parties agreed to renew the same by extending their terms until 31 March 2000.[7] Petitioner thus prayed for the award of actual damages in the sum of P472,000.00, representing the sum of security deposits, cost of improvements and the value of the personal Before the expiration of said Contracts of Lease, or on 4 February 2000, petitioner received two letters from the respondent, both dated 14 January 2000, transmitted through facsimile transmissions.[8] properties seized. Petitioner also asked for the award of P300,000.00 as moral damages; P50,000.00 as exemplary damages; and P80,000.00 as attorneys fees and expenses of litigation.[20]

In the first letter, petitioner was charged with violating Section 8 of the Contracts of Lease by not opening on 16 December 1999 and 26 December 1999.[9]

For its part, respondent countered that petitioner committed several violations of the terms of their Contracts of Lease by not opening from 16 December 1999 to 26 December 1999, and by introducing a new variety of empanada without the prior consent of the

Respondent also charged petitioner with selling a new variety of empanada called miniembutido and of increasing the price of her merchandise from P20.00 to P22.00, without the prior approval of the respondent.[10]

respondent, as mandated by the provision of Section 2 of the Contract of Lease. Respondent also alleged that petitioner infringed the lease contract by frequently closing earlier than the agreed closing hours. Respondent finally averred that petitioner is liable for the amount P106,474.09, representing the penalty for selling a new variety of empanada,

Respondent observed that petitioner was frequently closing earlier than the usual mall hours, either because of non-delivery or delay in the delivery of stocks to her outlets, again in violation of the terms of the contract. A stern warning was thus given to petitioner to refrain from committing similar infractions in the future in order to avoid the termination of the lease contract.[11]

electricity and water bills, and rental adjustment, among other charges incidental to the lease agreements. Respondent claimed that the seizure of petitioners personal belongings and equipment was in the exercise of its retaining lien, considering that the petitioner failed to settle the said obligations up to the time the complaint was filed.[21]

Considering that petitioner already committed several breaches of contract, the In the second letter, respondent informed the petitioner that it will no longer renew the Contracts of Lease for the three outlets, upon their expiration on 31 March 2000.[12] respondent thus opted not to renew its Contracts of Lease with her anymore. The security deposits were made in order to ensure faithful compliance with the terms of their lease agreements; and since petitioner committed several infractions thereof, respondent was In a letter-reply dated 11 February 2000, petitioner explained that the mini-embutido is not a new variety of empanada but had similar fillings, taste and ingredients as those of pork empanada; only, its size was reduced in order to make it more affordable to the buyers.[13] On 30 April 2001, the RTC rendered a Judgment[22] in favor of the petitioner and found that the physical takeover by the respondent of the leased premises and the seizure of petitioners equipment and personal belongings without prior notice were Such explanation notwithstanding, respondent still refused to renew its Contracts of Lease with the petitioner. To the contrary, respondent took possession of the store space in SM Megamall and confiscated the equipment and personal belongings of the petitioner found therein after the expiration of the lease contract.[14] WHEREFORE, premises duly considered, judgment is hereby rendered ordering the [herein respondent] to pay [herein petitioner] the amount of P192,000.00 representing the security deposits made by the [petitioner] and P50,000.00 as and for attorneys fees. In a letter dated 8 May 2000, petitioner demanded that the respondent release the equipment and personal belongings it seized from the SM Megamall store space and return the security deposits, in the sum of P192,000.00, turned over by the petitioner upon signing of the Contracts of Lease. On 15 June 2000, petitioner sent respondent another letter reiterating her previous demands, but the latter failed or refused to comply therewith. [15] Lastly, the [respondent] may choose either to reimburse the [petitioner] one half (1/2) of the value of the improvements introduced by the plaintiff at SM Megamall should [respondent] On 17 August 2000, an action for Specific Performance, Sum of Money and Damages was filed by the petitioner against the respondent before the RTC of Makati, Branch 57.[16] choose to appropriate the improvements to itself or require the [petitioner] to remove the improvements, even though the principal thing may suffer damage thereby. [Petitioner] shall not, however, cause anymore impairment upon the said leased premises than is necessary. In her Complaint docketed as Civil Case No. 00-1015, petitioner alleged that the respondent made verbal representations that the Contracts of Lease will be renewed from time to time and, through the said representations, the petitioner was induced to introduce improvements upon the store space at SM Megamall in the sum of P200,000.00, only to find out a year later that the respondent will no longer renew her lease contracts for all three outlets.[17] Aggrieved, the respondent appealed the adverse RTC Judgment to the Court of Appeals. The other damages claimed by the plaintiff are denied for lack of merit. The [respondent] is likewise ordered to return to the [petitioner] the various properties seized by the former after settling her account with the [respondent]. illegal. The decretal part of the RTC Judgment reads: justified in forfeiting the security deposits in the latters favor.

In addition, petitioner alleged that the respondent, without justifiable cause and without previous demand, refused to return the security deposits in the amount of P192,000.00.[18]

In a Decision[23] dated 10 October 2003, the Court of Appeals modified the RTC Judgment and found that the respondent was justified in forfeiting the security deposits and

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was not liable to reimburse the petitioner for the value of the improvements introduced in the leased premises and to pay for attorneys fees. In modifying the findings of the lower court, the appellate court declared that in view of the breaches of contract committed by the petitioner, the respondent is justified in forfeiting the security deposits. Moreover, since the petitioner did not obtain the consent of the respondent before she introduced improvements on the SM Megamall store space, the respondent has therefore no obligation to reimburse the petitioner for the amount expended in connection with the said improvements.[24] The Court of Appeals, however, maintained the order of the trial court for respondent to return to petitioner her properties after she has settled her obligations to the respondent. The appellate court denied petitioners Motion for Reconsideration in a Resolution[25] dated 19 April 2006. Art. 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for damages and the payment of interests in case of noncompliance, if there is no stipulation to the contrary. Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the fulfillment of the obligation. Hence, this instant Petition for Review on Certiorari[26] filed by the petitioner assailing the Court of Appeals Decision. For the resolution of this Court are the following issues: The penalty may be enforced only when it is demandable in accordance with the provisions of this Code. A penal clause is an accessory undertaking to assume greater liability in case of breach. It is attached to an obligation in order to insure performance and has a double function: (1) to provide for liquidated damages, and (2) to strengthen the coercive force of the obligation by the threat of greater responsibility in the event of breach.[29] The obligor would then be bound to pay the stipulated indemnity without the necessity of proof of the existence and the measure of damages caused by the breach.[30] Article 1226 of the Civil Code states:

I.

Whether or not the respondent is liable to return the security deposits to the petitions.

As a general rule, courts are not at liberty to ignore the freedoms of the parties to agree on such terms and conditions as they see fit as long as they are not contrary to law, morals,

II.

Whether or not the respondent is liable to reimburse the petitioner for the sum of the

good customs, public order or public policy. Nevertheless, courts may equitably reduce a stipulated penalty in the contracts in two instances: (1) if the principal obligation has been partly or irregularly complied with; and (2) even if there has been no compliance if the penalty

improvements she introduced in the leased premises.

III.

Whether or not the respondent is liable for attorneys fees.[27]

is iniquitous or unconscionable in accordance with Article 1229 of the Civil Code which clearly provides:

The appellate court, in finding that the respondent is authorized to forfeit the security deposits, relied on the provisions of Sections 5 and 18 of the Contract of Lease, to wit: Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been Section 5. DEPOSIT. The LESSEE shall make a cash deposit in the sum of SIXTY THOUSAND PESOS (P60,000.00) equivalent to three (3) months rent as security for the full and faithful performance to each and every term, provision, covenant and condition of this lease and not as a pre-payment of rent. If at any time during the term of this lease the rent is increased[,] the LESSEE on demand shall make an additional deposit equal to the increase in rent. The LESSOR shall not be required to keep the deposit separate from its general funds and the deposit shall not be entitled to interest. The deposit shall remain intact during the entire term and shall not be applied as payment for any monetary obligations of the LESSEE under this contract. If the LESSEE shall faithfully perform every provision of this lease[,] the deposit shall be refunded to the LESSEE upon the expiration of this Lease and upon satisfaction of all monetary obligation to the LESSOR. The question of whether a penalty is reasonable or iniquitous can be partly subjective and partly objective. Its resolution would depend on such factor as, but not necessarily confined to, the type, extent and purpose of the penalty, the nature of the obligation, the mode of breach and its consequences, the supervening realities, the standing and relationship of the parties, and the like, the application of which, by and large, is addressed to the sound discretion of the court. xxx. xxxx In ascertaining whether the penalty is unconscionable or not, this court set out the following standard in Ligutan v. Court of Appeals,[32] to wit: partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.[31]

Section 18. TERMINATION. Any breach, non-performance or non-observance of the terms and conditions herein provided shall constitute default which shall be sufficient ground to terminate this lease, its extension or renewal. In which event, the LESSOR shall demand that LESSEE immediately vacate the premises, and LESSOR shall forfeit in its favor the deposit tendered without prejudice to any such other appropriate action as may be legally authorized.[28]

In the instant case, the forfeiture of the entire amount of the security deposits in the sum of P192,000.00 was excessive and unconscionable considering that the gravity of the breaches committed by the petitioner is not of such degree that the respondent was unduly prejudiced thereby. It is but equitable therefore to reduce the penalty of the petitioner to 50% of the total amount of security deposits.

It is in the exercise of its sound discretion that this court tempered the penalty for the breaches Since it was already established by the trial court that the petitioner was guilty of committing several breaches of contract, the Court of Appeals decreed that she cannot therefore rightfully demand the return of the security deposits for the same are deemed forfeited by reason of evident contractual violations. committed by the petitioner to 50% of the amount of the security deposits. The forfeiture of the entire sum of P192,000.00 is clearly a usurious and iniquitous penalty for the transgressions committed by the petitioner. The respondent is therefore under the obligation to return the 50% ofP192,000.00 to the petitioner.

It is undisputed that the above-quoted provision found in all Contracts of Lease is in the nature of a penal clause to ensure petitioners faithful compliance with the terms and conditions of the said contracts.

Turning now to the liability of the respondent to reimburse the petitioner for one-half of the expenses incurred for the improvements on the leased store space at SM Megamall, the following provision in the Contracts of Lease will enlighten us in resolving this issue:

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Section 11. ALTERATIONS, ADDITIONS, IMPROVEMENTS, ETC. The LESSEE shall not make any alterations, additions, or improvements without the prior written consent of LESSOR; and all alterations, additions or improvements made on the leased premises, except movable or fixtures put in at LESSEEs expense and which are removable, without defacing the buildings or damaging its floorings, shall becomeLESSORs property without compensation/reimbursement but the LESSOR reserves the right to require the removal of the said alterations, additions or improvements upon expiration of the lease. Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms The foregoing provision in the Contract of Lease mandates that before the petitioner can introduce any improvement on the leased premises, she should first obtain respondents consent. In the case at bar, it was not shown that petitioner previously secured the consent of the respondent before she made the improvements on the leased space in SM Megamall. It was not even alleged by the petitioner that she obtained such consent or she at least attempted to secure the same. On the other hand, the petitioner asserted that respondent allegedly misrepresented to her that it would renew the terms of the contracts from time to time after their expirations, and that the petitioner was so induced thereby that she expended the sum of P200,000.00 for the improvement of the store space leased. Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may This argument was squarely addressed by this court in Fernandez v. Court of Appeals,[33] thus: Thus, to be entitled to reimbursement for improvements introduced on the property, the The Court ruled that the stipulation of the parties in their lease contract to be renewable at the option of both parties stresses that the faculty to renew was given not to the lessee alone nor to the lessor by himself but to the two simultaneously; hence, both must agree to renew if a new contract is to come about. petitioner must be considered a builder in good faith. Further, Articles 448 and 546 of the Civil Code, which allow full reimbursement of useful improvements and retention of the premises until reimbursement is made, apply only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof. A builder in good faith is one who is unaware of any flaw in his title to the land at the time he builds on it.[35] In this case, the petitioner Petitioners contention that respondents had verbally agreed to extend the lease indefinitely is inadmissible to qualify the terms of the written contract under the parole evidence rule, and unenforceable under the statute of frauds.[34] In Geminiano v. Court of Appeals,[36] this Court was emphatic in declaring that lessees are not possessors or builders in good faith, thus: Moreover, it is consonant with human experience that lessees, before occupying the leased premises, especially store spaces located inside malls and big commercial establishments, would renovate the place and introduce improvements thereon according to the needs and nature of their business and in harmony with their trademark designs as part of their marketing ploy to attract customers. Certainly, no inducement or misrepresentation from the lessor is necessary for this purpose, for it is not only a matter of necessity that a lessee should re-design its place of business but a business strategy as well. In a plethora of cases, this Court has held that Article 448 of the Civil Code, in relation to Article 546 of the same Code, which allows full reimbursement of useful improvements and retention of the premises until reimbursement is made, applies only to a possessor in good faith, i.e., one In ruling that the respondent is liable to reimburse petitioner one half of the amount of improvements made on the leased store space should it choose to appropriate the same, the RTC relied on the provision of Article 1678 of the Civil Code which provides: Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary. Anent the claim for attorneys fees, we resolve to likewise deny the award of the same. Attorneys fees may be awarded when a party is compelled to litigate or to incur While it is true that under the above-quoted provision of the Civil Code, the lessor is under the obligation to pay the lessee one-half of the value of the improvements made should the lessor choose to appropriate the improvements, Article 1678 however should be read together with Article 448 and Article 546 of the same statute, which provide: In the instant petition, it was not shown that the respondent unjustifiably refused to grant the demands of the petitioner so as to compel the latter to initiate legal action to enforce her expenses to protect its interest by reason of unjustified act of the other.[37] Since petitioners interest in the store space is merely that of the lessee under the lease contract, she cannot therefore be considered a builder in good faith. Consequently, respondent may appropriate the improvements introduced on the leased premises without any obligation to reimburse the petitioner for the sum expended. who builds on land with the belief that he is the owner thereof. It does not apply where one's only interest is that of a lessee under a rental contract; otherwise, it would always be in the power of the tenant to "improve" his landlord out of his property. Being mere lessees, the private respondents knew that their occupation of the premises would continue only for the life of the lease. Plainly, they cannot be considered as possessors nor builders in good faith. cannot claim that she was not aware of any flaw in her title or was under the belief that she is the owner of the subject premises for it is a settled fact that she is merely a lessee thereof. have acquired by reason thereof. Art. 546. Necessary expenses shall be refunded to every possessor; but only possessor in good faith may retain the thing until he has been reimbursed therefor. xxxx thereof.

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right. As we have found herein, there is basis for respondents refusal to return to petitioner the security deposits and to reimburse the costs of the improvements in the leased premises. The award of attorneys fees is therefore not proper in the instant case. In Caro v. Court of Appeals,[3] we have explicitly held that the prescriptive period for the reconveyance of fraudulently registered real property is 10 years reckoned from the date of WHEREFORE, premises considered, the instant Petition is PARTLY GRANTED. The Court of Appeals Decision dated 10 October 2003 in CA-G.R. CV No. 73853 is hereby AFFIRMED with the MODIFICATION that the respondent may forfeit only 50% of the total amount of the security deposits in the sum of P192,000.00, and must return the remaining 50% to the petitioner. No costs. However, notwithstanding petitioners' unmeritorious argument, the Court deems it necessary to make certain clarifications. We have earlier ruled that respondents' action for reconveyance had not prescribed, since it was filed within the 10-year prescriptive period. the issuance of the certificate of title x x x.[4] We do not agree.

SO ORDERED. ROGELIA DACLAG and ADELINO DACLAG (deceased), substituted by RODEL M. DACLAG, and ADRIAN M. DACLAG, Petitioners, QUISUMBING,* J. CARPIO,** J. - versus AUSTRIA-MARTINEZ,***J., Acting Chairperson, ELINO MACAHILIG, ADELA MACAHILIG, CONRADO MACAHILIG, LORENZA HABER and BENITA DEL ROSARIO, Respondents. Promulgated: February 18, 2009 CHICO-NAZARIO, and NACHURA, JJ. Present: G.R. No. 159578

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

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

x----------------------------------------------------------x Petitioners next contend that they are possessors in good faith, thus, the award of damages should not have been imposed. They further contend that under Article 544, a possessor in RESOLUTION good faith is entitled to the fruits received before the possession is legally interrupted; thus, if indeed petitioners are jointly and severally liable to respondents for the produce of the subject land, the liability should be reckoned only for 1991 and not 1984. AUSTRIA-MARTINEZ, J.: We find partial merit in this argument. Before us is petitioners' Motion for Reconsideration of our Decision dated July 28, 2008 where we affirmed the Decision datedOctober 17, 2001 and the Resolution dated August 7, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 48498.

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

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

evidence or by suit for recovery of the

property by the true owner. Whatever may be the cause or the fact from which it can be deduced that the possessor has knowledge of the defects of his title or mode of acquisition, it

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

must be considered sufficient to show bad faith.[8] Such interruption takes place upon service of summons.[9]

Article 544 of the same Code provides that a possessor in good faith is entitled to the fruits only so long as his possession is not legally interrupted. Records show that petitioners received a summons together with respondents' complaint on August 5, 1991;[10] thus, petitioners'

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

good faith ceased on the day they received the summons. Consequently, petitioners should pay respondents 10 cavans of palay per annum beginning August 5, 1991 instead of 1984.

Finally, petitioner would like this Court to look into the finding of the RTC that since Maxima died in October 1993, whatever charges and claims petitioners may recover from her expired with her; and that the proper person to be held liable for damages to be awarded to

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respondents should be Maxima Divison or her estate, since she misrepresented herself to be the true owner of the subject land. d. e. Lot No. 12-D in favor of Salud Lozada, married to Francisco Lot No. 12-E in favor of Isabel Lozada, married to Isaac Ramos; and Limense, and Felicidad

Lozada, married to Galicano Centeno. We are not persuaded. By virtue of the Deed of Donation executed by Dalmacio Lozada, OCT No. 7036, which Notably, petitioners never raised this issue in their appellants' brief or in their motion for reconsideration filed before the CA. In fact, they never raised this matter before us when they filed their petition for review. Thus, petitioners cannot raise the same in this motion for reconsideration without offending the basic rules of fair play, justice and due process, specially since Maxima was not substituted at all by her heirs after the promulgation of the RTC Decision. TCT No. 40043, which covered Lot No. 12-C, was issued in the name of its co-owners Catalina Lozada, married to Sotero Natividad; Isabel Lozada, married to Isaac Limense; and WHEREFORE, petitioners Motion for Reconsideration is PARTLY GRANTED. The Decision of the Court of Appeals dated July 28, 2008 is MODIFIED only with respect to prescription as discussed in the text of herein Resolution, and the dispositive portion of the Decision is MODIFIED to the effect that petitioners are ordered to pay respondents 10 cavans of palayper annum beginning August 5, 1991 instead of 1984. On May 16, 1969, TCT No. 96886[6] was issued in the name of Joaquin Limense covering SO ORDERED. HEIRS OF THE LATE JOAQUIN LIMENSE, namely: CONCESA LIMENSE, Surviving Spouse; and DANILO and JOSELITO, both surnamed Limense, children, Petitioners, - versus RITA VDA. DE RAMOS, RESTITUTO RAMOS, VIRGILIO DIAZ, IRENEO RAMOS, BENJAMIN RAMOS, WALDYTRUDES RAMOSBASILIO, TRINIDAD RAMOS-BRAVO, PAZ RAMOS-PASCUA, FELICISIMA RAMOS-REYES, and JACINTA RAMOS, Respondents. X-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X On October 1, 1981, Joaquin Limense secured a building permit for the construction of a hollow block fence on the boundary line between his aforesaid property and the adjacent parcel of land located at 2759 Beata Street, Pandacan, Manila, designated as Lot No. 12-D, which was being occupied by respondents. The fence, however, could not be constructed because a substantial portion of respondents' residential building in Lot No. 12-D encroached upon portions of Joaquin Limense's property in Lot No. 12-C. Joaquin Limense demanded the removal of the encroached area; however, respondent ignored both oral and written demands. The parties failed to amicably settle the differences between them despite referral to the barangay. Thus, on March 9, 1983, Joaquin Limense, This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set aside the Decision[1] of the Court of Appeals dated December 20, 2001 in CAG.R. CV No. 33589 affirming in toto the Decision[2] of the Regional Trial Court of Manila, Branch 15, dated September 21, 1990 in Civil Case No. 83-16128. Joaquin Limense prayed that the RTC issue an order directing respondents, jointly and The antecedent facts are as follows: severally, to remove the portion which illegally encroached upon his property on Lot No. 12-C and, likewise, prayed for the payment of damages, attorneys fees and costs of suit. Dalmacio Lozada was the registered owner of a parcel of land identified as Lot No. 12, Block No. 1074 of the cadastral survey of the City of Manila covered by Original Certificate of Title (OCT) No. 7036 issued at the City of Manila on June 14, 1927,[3]containing an area of 873.80 square meters, more or less, located in Beata Street, Pandacan, Manila. Respondents, on the other hand, averred in their Answer[8] that they were the surviving heirs of Francisco Ramos,[9] who, during his lifetime, was married to Salud Lozada, one of the daughters of Dalmacio Lozada, the original owner of Lot No. 12. After subdividing the said lot, Dalmacio Lozada donated Lot No. 12-C in favor of his daughters Catalina, married to Sotero Dalmacio Lozada subdivided his property into five (5) lots, namely: Lot Nos. 12-A, 12-B, 12-C, 12-D and 12-E. Through a Deed of Donation dated March 9, 1932,[4] he donated the subdivided lots to his daughters, namely: Isabel, Salud, Catalina, and Felicidad, all surnamed Lozada. The Deed of Donation was registered with the office of the Register of Deeds of Manila on March 15, 1932. Natividad; Isabel, married to Isaac Limense; and Salud, married to Francisco Ramos. Being the surviving heirs of Francisco Ramos, respondents later became co-owners of Lot No. 12C. Lot No. 12-C has served as right of way or common alley of all the heirs of Dalmacio Lozada since 1932 up to the present. As a common alley, it could not be closed or fenced by Joaquin Limense without causing damage and prejudice to respondents. duly represented by his Attorney-in-Fact, Teofista L. Reyes, instituted a Complaint[7] against respondents before the Regional Trial Court (RTC) of Manila, Branch 15, for removal of obstruction and damages. the very same area of Lot No. 12-C. Salud Lozada, married to Francisco Ramos. It covered an area of 68.60 square meters, more or less, was bounded on the northeast by Lot No. 12-A, on the southwest by Calle Beata, and on the northwest by Lot No. 12-D of the subdivision plan. In 1932, respondents' predecessor-ininterest constructed their residential building on Lot No. 12-D, adjacent to Lot No. 12-C. was registered in his name, was cancelled and, in lieu thereof, Transfer Certificates of Title (TCTs) bearing Nos. 40041, 40042, 40043, 40044, and 40045 were issued in favor of the donees, except TCT No. 40044, which remained in his name. These new TCTs were annotated at the back of OCT No. 7036.[5]

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

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

a. b. c.

Lot No. 12-A in favor of Isabel Lozada, married to Isaac Lot No. 12-B in favor of Catalina Lozada, married to Sotero Lot No. 12-C in favor of Catalina Lozada, married to Sotero

Limense; Natividad; Natividad; Isabel The Court finds that an apparent easement of right of way exists in favor of the defendants under Article 624 of the Civil Code. It cannot be denied that there is an alley which shows its existence. It is admitted that this alley was established by the original owner of Lot 12 and that in dividing his property, the alley established by him continued to be used actively and

Lozada, married to Isaac Limense; and Salud parts;

Lozada, married to Francisco Ramos, in equal

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passively as such. Even when the division of the property occurred, the non-existence of the easement was not expressed in the corresponding titles nor were the apparent sign of the alley made to disappear before the issuance of said titles. [a] certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.

The Court also finds that when plaintiff acquired the lot (12-C) which forms the alley, he knew that said lot could serve no other purpose than as an alley. That is why even after he acquired it in 1969, the lot continued to be used by defendants and occupants of the other adjoining lots as an alley. The existence of the easement of right of way was therefore known to plaintiff who must respect the same in spite of the fact that his transfer certificate of title does not mention the lot of defendants as among those listed therein as entitled to such right of way. It is an established principle that actual notice or knowledge is as binding as registration.[11] Further, it has been held that a certificate of title, once registered, should not thereafter be impugned, altered, changed, modified, enlarged or diminished, except in a direct proceeding permitted by law. Otherwise, the reliance on registered titles would be lost. Aggrieved by said decision, Joaquin Limense filed a notice of appeal. The records of the case were transmitted to the Court of Appeals (CA). During the pendency of the appeal with the CA, Joaquin Limense died in 1999.[12] The title became indefeasible and incontrovertible after the lapse of one year from the time of its registration and issuance. Section 32 of PD 1529 provides that upon the expiration of said period of one year, the decree of registration and the certificate of title shall become incontrovertible. Any person aggrieved by such decree of registration in any case may pursue The CA, Seventh Division, in CA-G.R. CV No. 33589, in its Decision[13] dated December 20, 2001 dismissed the appeal and affirmed in toto the decision of the RTC. his remedy by action for damages against the applicant or other persons responsible for the fraud.[16] It has, therefore, become an ancient rule that the issue on the validity of title, i.e., whether or not it was fraudulently issued, can only be raised in an action expressly Frustrated by this turn of events, petitioners, as surviving heirs of Joaquin Limense, elevated the case to this Court via a Petition for Review on Certiorari[14] raising the following issues: Additionally, an examination of TCT No. 40043 would readily show that there is an 1. DID THE HONORABLE COURT OF APPEALS COMMIT A GRAVE ABUSE OF DISCRETION annotation that it has beenCANCELLED.[18] A reading of TCT No. 96886 would also reveal that said title is a transfer from TCT No. 48866[19] and not TCT 40043. Thus, it is possible that there was a series of transfers effected from TCT No. 40043 prior to the issuance of TCT No. 96886. Hence, respondents' position that the issuance of TCT No. 96886 in the name of Joaquin Limense is impossible, because the registered owners of TCT No. 40043 were already 2. DID THE HONORABLE COURT OF APPEALS COMMIT A GRAVE ABUSE OF DISCRETION dead prior to 1969 and could not have transferred the property to Joaquin Limense, cannot be taken as proof that TCT No. 96886 was obtained through fraud, misrepresentation or falsification of documents. instituted for that purpose.[17] In the present case, TCT No. 96886 was registered in 1969 and respondents never instituted any direct proceeding or action to assail Joaquin Limense's title. In the case at bar, the action filed before the RTC against respondents was an action for removal of obstruction and damages. Respondents raised the defense that Joaquin Limense's title could have been obtained through fraud and misrepresentation in the trial proceedings before the RTC. Such defense is in the nature of a collateral attack, which is not allowed by law.

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

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

Findings of fact of the CA, although generally deemed conclusive, may admit review by this Court if the CA failed to notice certain relevant facts that, if properly considered, would justify a different conclusion, and if the judgment of the CA is premised on a misapprehension

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

of facts.[20] As with the present case, the CA's observation that TCT No. 96886 is of dubious origin, as TCT No.40043 does not appear to have been disposed of by Catalina, Isabel and Salud Lozada, is improper and constitutes an indirect attack on TCT No. 96886. As we see it, TCT No. 96886, at present, is the best proof of Joaquin Limenses ownership over Lot No. 12C. Thus, the CA erred in ruling that respondents and petitioners co-owned Lot No. 12-C, as said lot is now registered exclusively in the name of Joaquin Limense.

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

Respondents allege that it was possible that TCT No. 96886, in the name of Joaquin Limense, was obtained thru fraud, misrepresentation or falsification of documents because the donees of said property could not possibly execute any valid transfer of title to Joaquin Limense, as they were already dead prior to the issuance of TCT No. 96886 in 1969. Respondents further allege that petitioners failed to produce proof substantiating the issuance of TCT No. 96886 in the name of Joaquin Limense. Apparently, respondents are questioning the legality of TCT No. 96886, an issue that this Court cannot pass upon in the present case. It is a rule that the validity of a torrens title cannot be assailed collaterally.[15] Section 48 of Presidential Decree (PD) No. 1529 provides that:

thereon.[21]

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

Petitioners contend that respondents are not entitled to an easement of right of way over Lot No. 12-C, because their Lot No. 12-D is not duly annotated at the back of TCT No. 96886 which would entitle them to enjoy the easement, unlike Lot Nos. 12-A-1, 12-A-2, 12-A-3,

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12-A-4, 12-A-5, and 12-A-6. Respondents, on the other hand, allege that they are entitled to an easement of right of way over Lot No. 12-C, which has been continuously used as an alley by the heirs of Dalmacio Lozada, the residents in the area and the public in general from 1932 up to the present. Since petitioners are fully aware of the long existence of the said alley or easement of right of way, they are bound to respect the same. Q: As defined, an easement is a real right on another's property, corporeal and immovable, whereby the owner of the latter must refrain from doing or allowing somebody else to do or something to be done on his property, for the benefit of another person or tenement.[22] Q: Easements may be continuous or discontinuous, apparent or non-apparent. As a matter of fact, in this picture marked as Exh. C-1 the alley is very apparent. This is As a matter of fact, it is not only herein defendants who have been using that alley since Q: A: And they have been using the alley since 1932 up to the present? Yes, sir they have been using the alley since that time. That was their mistake and they

should be using Beata Street because they are fronting Beata Strret.

1932 up to the present? A: Yes, sir they are using the alley up to now.

the alley? A: Yes, sir.

Continuous easements are those the use of which is or may be incessant, without the intervention of any act of man. Discontinuous easements are those which are used at intervals and depend upon the acts of man. Apparent easements are those which are made known and are continually kept in view by external signs that reveal the use and enjoyment of the same. Non-apparent easements are those which show no external indication of their existence.[23] Q: alley? In the present case, the easement of right of way is discontinuous and apparent. It is discontinuous, as the use depends upon the acts of respondents and other persons passing through the property. Being an alley that shows a permanent path going to and from Beata Street, the same is apparent. In Mendoza v. Rosel,[26] this Court held that: Being a discontinuous and apparent easement, the same can be acquired only by virtue of a title.[24] Petitioners claim that inasmuch as their transfer certificates of title do not mention any lien or encumbrance on their lots, they are purchasers in good faith and for value, and as such In the case at bar, TCT No. 96886, issued in the name of Joaquin Limense, does not contain any annotation that Lot No. 12-D was given an easement of right of way over Lot No. 12-C. However, Joaquin Limense and his successors-in-interests are fully aware that Lot No. 12C has been continuously used and utilized as an alley by respondents and residents in the area for a long period of time. have a right to demand from respondents some payment for the use of the alley. However, the Court of Appeals found, as a fact, that when respondents acquired the two lots which form the alley, they knew that said lots could serve no other purpose than as an alley. The existence of the easement of right of way was therefore known to petitioners who must respect the same, in spite of the fact that their transfer certificates of title do not mention any burden or easement. It is an established principle that actual notice or knowledge is as binding as Joaquin Limense's Attorney-in-Fact, Teofista L. Reyes, testified that respondents and several other residents in the area have been using the alley to reach Beata Street since 1932. Thus: registration. Every buyer of a registered land who takes a certificate of title for value and in good faith shall hold the same free of all encumbrances except those noted on said certificate. It has been held, however, that where the party has knowledge of a prior existing interest that was Atty. Manuel B. Tomacruz: Q: Mrs. Witness, by virtue of that Deed of Donation you claim that titles were issued to the unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him.[27] A: Yes, sir, because the others have permit to use this alley and they are now allowed to As a matter of fact, all the residents on either side of the alley are passing through this Q: A: And there are houses on either side of this alley? Yes, sir.

use the alley but the Ramos's family are now [not] allowed to use this alley.[25]

children of Dalmacio Lozada namely Salud Lozada, Catalina Lozada and Isabel Lozada, is that right? A: Yes, sir. In the case at bar, Lot No. 12-C has been used as an alley ever since it was donated by Dalmacio Lozada to his heirs. It is undisputed that prior to and after the registration of TCT No. 96886, Lot No. 12-C has served as a right of way in favor of respondents and the public in Q: And after the said property was adjudicated to his said children the latter constructed general. We quote from the RTC's decision:

their houses on their lots. A: Yes, sir. x x x It cannot be denied that there is an alley which shows its existence. It is admitted that this alley was established by the original owner of Lot 12 and that in dividing his property the alley Q: As a matter of fact, the herein defendants have constructed their houses on the established by him continued to be used actively and passively as such. Even when the division of the property occurred, the non-existence of the easement was not expressed in the corresponding titles nor were the apparent sign of the alley made to disappear before the issuance of said titles.

premises alloted to them since the year 1932? A: Q: A: Yes, sir, they were able to construct their house fronting Beata Street. And that house they have constructed on their lot in 1932 is still existing today? Yes, sir and they still used the alley in question and they are supposed to use Beata

Street but they are not using Beata Street.

The Court also finds that when plaintiff acquired the lot (12-C) which forms the alley, he knew that said lot could serve no other purpose than as an alley. That is why even after he acquired

Q: A:

They are using the alley? Yes, sir, they are using the alley and they do not pass through Beata Street.

it in 1969 the lot continued to be used by defendants and occupants of the other adjoining lots as an alley. x x x[28]

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Thus, petitioners are bound by the easement of right of way over Lot No. 12-C, even though no registration of the servitude has been made on TCT No. 96886. Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor. Useful expenses shall be refunded only to the possessor in good faith with the same right of However, respondents right to have access to the property of petitioners does not include the right to continually encroach upon the latters property. It is not disputed that portions of respondents' house on Lot No. 12-D encroach upon Lot No. 12-C. Geodetic Engineer Jose Agres, Jr. testified on the encroachment of respondents' house on Lot No. 12-C, which he surveyed.[29] In order to settle the rights of the parties relative to the encroachment, We should determine whether respondents were builders in good faith. In Spouses Del Campo v. Abesia,[34] this provision was applied to one whose house, despite having been built at the time he was still co-owner, overlapped with the land of Good faith is an intangible and abstract quality with no technical meaning or statutory definition; and it encompasses, among other things, an honest belief, the absence of malice and the absence of a design to defraud or to seek an unconscionable advantage. An individuals personal good faith is a concept of his own mind and, therefore, may not conclusively be determined by his protestations alone. It implies honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. The essence of good faith lies in an honest belief in the validity of ones right, ignorance of a superior claim, and absence of intention to overreach another. Applied to possession, one is considered in good faith if he is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.[30] However, when, as in this case, the ownership is terminated by the partition and it appears that the house of defendants overlaps or occupies a portion of 5 square meters of the land pertaining to plaintiffs which the defendants obviously built in good faith, then the provisions Good faith is always presumed, and upon him who alleges bad faith on the part of the possessor rests the burden of proof.[31] It is a matter of record that respondents' predecessorin-interest constructed their residential building on Lot No. 12-D, adjacent to Lot No. 12-C, in 1932.[32] Respondents' predecessor-in-interest owned the 1/3 portion of Lot No. 12-C at the time the property was donated to them by Dalmacio Lozada in 1932. The Deed of Donation executed by the late Dalmacio Lozada, datedMarch 9, 1932, specifically provides that: In other words, when the co-ownership is terminated by a partition, and it appears that the house of an erstwhile co-owner has encroached upon a portion pertaining to another coowner, but the encroachment was in good faith, then the provisions of Article 448 should apply to determine the respective rights of the parties. In this case, the co-ownership was terminated due to the transfer of the title of the whole property in favor of Joaquin Limense. I hereby grant, cede and donate in favor of Catalina Lozada married to Sotero Natividad, Isabel Lozada married to Isaac Simense and Salud Lozada married to Francisco Ramos, all Filipinos, of legal age, the parcel of land known as Lot No. 12-C, in equal parts.[33] Under the foregoing provision, petitioners have the right to appropriate said portion of the house of respondents upon payment of indemnity to respondents, as provided for in Article 546 of the Civil Code. Otherwise, petitioners may oblige respondents to pay the price of the land occupied by their house. However, if the price asked for is considerably much more The portions of Lot No. 12-D, particularly the overhang, covering 1 meter in width and 17 meters in length; the stairs; and the concrete structures are all within the 1/3 share alloted to them by their donor Dalmacio Lozada and, hence, there was absence of a showing that respondents acted in bad faith when they built portions of their house on Lot No. 12-C. than the value of the portion of the house of respondents built thereon, then the latter cannot be obliged to buy the land. Respondents shall then pay the reasonable rent to petitioners upon such terms and conditions that they may agree. In case of disagreement, the trial court shall fix the terms thereof. Of course, respondents may demolish or remove the said portion of their house, at their own expense, if they so decide.[36] Using the above parameters, we are convinced that respondents' predecessors-ininterest acted in good faith when they built portions of their house on Lot 12-C. Respondents being builders in good faith, we shall now discuss the respective rights of the parties relative to the portions encroaching upon respondents' house. The choice belongs to the owner of the land, a rule that accords with the principle of accession that the accessory follows the principal and not the other way around.[37] Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive. He must choose one. He cannot, for instance, compel the owner of the building to instead remove it Articles 448 and 546 of the New Civil Code provide: from the land.[38] of Article 448 of the new Civil Code should apply. x x x[35] The court a quo correctly held that Article 448 of the Civil Code cannot apply where a co-owner builds, plants or sows on the land owned in common for then he did not build, plant or sow upon the land that exclusively belongs to another but of which he is a co-owner. The co-owner is not a third person under the circumstances, and the situation is governed by the rules of coownership. another. In that case, this Court ruled: retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof.

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

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

The raison detre for this provision has been enunciated, thus:

Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the

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improvements without causing injustice to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower the proper rent. He cannot refuse to exercise either option. It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing.[40] In accordance with Depra v. Dumlao,[41] this case must be remanded to the trial court to determine matters necessary for the proper application of Article 448 in relation to Article 546. Such matters include the option that petitioners would take and the amount of indemnity that they would pay, should they decide to appropriate the improvements on the lots. Canton, Limited, the sum of 10,000 pesos and to pay the costs of the prosecution. From this sentence the defendant appealed and made the following assignment of errors: (1) The court erred in finding that the crime of robbery had been committed. (2) The sentence of the court is contrary to the evidence and the law. By these assignments of error the defendant presents two questions, one of law and one of fact. An examination of the record brought to this court shows that some facts were admitted and some were denied by the respective parties. The facts admitted were substantially as follows: That on or about the 19th day of September, 1905, the steamer Cantabria sailed from the port of Manila, destined for the pueblo of Tabaco, in the Province of Albay, and after remaining in quarantine at the quarantine station of Mariveles, continued the journey from said quarantine station on the 24th day of September, and on or about the 26th day of said month said ship Anent the second issue, although it may seem that the portions encroaching upon respondents' house can be considered a nuisance, because it hinders petitioners' use of their property, it cannot simply be removed at respondents' expense, as prayed for by petitioner. This is because respondents built the subject encroachment in good faith, and the law affords them certain rights as discussed above. was totally wrecked off the small Island of Mababuy and all its officers, passengers, and cargo were totally lost. It is proved that said ship had on board at the time of sailing from the city of Manila, as a part of her cargo, three boxes containing money, amounting to at least 25,000 pesos. There is some confusion in the evidence concerning the exact amount of money. This money was shipped by the firms of Urrutia & Co. and Muoz & Co. WHEREFORE, the petition is DENIED, the Decision of the Court of Appeals dated December 20, 2001 in CA-G.R. CV No. 33589 is AFFIRMED with the following MODIFICATIONS: It is proved that one Jesus A. de Sendagorta, in the month of January, 1906, recovered from the wreck of said ship the sum of 10,000 pesos. It is approved that of the 25,000 pesos shipped on the said Cantabria, 20,000 of said amount 1. No co-ownership exists over Lot No. 12-C, covered by TCT No. 96886, between belonged to Urrutia & Co. and 5,000 belonged to Muoz & Co. It is admitted that on the 16th day of October, Mr. Edward E. Hill, as agent for Union Insurance Company of Canton, Limited, paid to Urrutia & Co. the sum of 35,000 pesos for losses which 2. The case is REMANDED to the Regional Trial Court, Branch 15, Manila, for further the said company incurred by reason of the wreck of said steamer, and that 20,000 of said amount was for the purpose of covering the 20,000 pesos shipped by the said Urrutia & Co. on said steamer on the 19th day of September. The facts charged by the fiscal and denied by the defendant are substantially as follows: That the defendant, with several others, on the 28th day of September, 1905, after having discovered the existence and location of the wrecked steamer, took from the said wrecked steamer the sum of 15,000 pesos a part of which was distributed among his companions the This defendant was charged with the crime of robbery in the Court of First Instance of the subprovince of Masbate in the words and figures following: The undersigned Laurente Rey, as principal, of the crime of robbery, committed as follows: That on or about the 26th of September, 1905, in the municipality of San Jacinto, subprovince of Masbate, Philippine Islands, the accused Laurente Rey, in company with Hipolito Roblora, Lucio Estay, Jose Sudueo, Demetrio Sudueno, Melecio Hernandez, and Luis Almosara, willfully, intentionally, maliciously, with intent of profiting thereby, against the will of its owner and employing force with regard to the property, took possession of the sum of fifteen thousand pesos, in silver currency and paper certificates, and all the legal tender of the Philippine Islands; that said amount is the property of Urrutia & Co. and of Muoz & Co., both commercial firms doing business in the city of Manila; that the above mentioned amount was placed by those firms on board the steamship Cantabria, which was totally wrecked and lost off the land of Mababuy, within the municipality of San Jacinto, subprovince of Masbate, Philippine Islands; that said amount was packed in several boxes; that those boxes were reenforced with iron straps and nails, which were broken by the accused in order to take possession of the said sum of money; that the accused, once having taken possession of the money, delivered to Petrona Justiniano, who had knowledge of the perpetration of the crime, the paper certificates, which were dried out by her with a smoothing iron and were kept by her with the intent of appropriating the same. All contrary to the statute. Masbate, March 14, 1906. After hearing the evidence adduced during the trial of the said cause, the lower court found that the defendant guilty of the crime charged in the complaint and sentenced him to be imprisoned for a period of four years, and to restore to the Union Insurance Company of largest portion of which was retained by the said defendant. The lower court made the following finding of facts from the evidence adduced during the trial of the cause: That on the 19th of September, 1905, silver and paper money amounting to 25,000 pesos belonging to the firms of Urrutia & Co. and Muoz & Co., of Manila, was placed on the steamer Cantabria at Manila by said firms for shipment; that 5,000 pesos of the said money belonged to Muoz & Co. and 20,000 pesos to Urrutia & Co; that on the 26th day of September the Cantabria was totally wrecked off the Island of Mababuy, every person on her being drowned, the bills of lading of said money being lost, and the money sunk with the ship; that on the 28th day of September, the defendant, Laurente Rey, with the assistance of several men who were in his employ, proceeded to said wrecked steamer and willfully, unlawfully, and with the intention of appropriating it to his own use took therefrom two boxes, one containing 10,000 pesos and the other 5,000 pesos; that 10,000 pesos of the said money was the property of Urrutia & Co. and 5,000 pesos was the property of Muoz & Co. Admitting the foregoing disputed facts to be true for the purpose of discussing the first assignment of error made by the appellant, the question arises whether or not the defendant, under these facts, is guilty of he crime of robbery, under the provisions of Penal Code. The theory of the defendant and appellant is that the said property which was sunk with the wrecked steamer, the said Cantabria, was abandoned properly and therefore, granting that he had taken possession of said property and appropriated it to his own use, he was not guilty of the crime of robbery. The defendant and appellant, in his brief, admits the following fact: That it was more than six weeks after the cyclone (in which the Cantabria was sunk) before any definite knowledge was received in regard to the fate of the Cantabria, thus admitting that the

petitioners and respondents.

proceedings without further delay to determine the facts essential to the proper application of Articles 448 and 546 of the Civil Code. G.R. No. L-3326 September 7, 1907

THE UNITED STATES, plaintiff-appellee, vs. LAURENTE REY, defendant-appellant.

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owner of the money alleged to has been robbed and no definite knowledge of its lost for six weeks or more after the destruction of said ship. Article 460 of the Civil Code provides how the possessor of property may lose his possession of the same: (1) By abandonment of the thing. (2) By the transfer to another for a good and valuable consideration. (3) By the destruction of total loss of the thing or by the thing becoming unmarketable. (4) By the possession of another, even against the will of the former possessor, if the new possessor has lasted more than one year. The evidence shows, if it can be believed, that the defendant and his companions entered the wrecked ship and removed therefrom the said money and appropriated the same to hiss own use in about twenty-four hours after the time of sinking of the said ship. Can one be charged with the abandonment of his property without even knowing that the same has passed out of his possession or has been lost? We are of the opinion, and so hold, that this question must be answered in the negative. Manresa, in his Commentaries upon the provisions of the Civil Code, says (vol. 4, p. 291): He who has a right may renounce it. This act by which thing is voluntary renounced constitutes an abandonment. There is no real intention to abandon a property when, as in the case of a shipwreck or a fire, things are thrown into the sea upon the highway. Certainly the owner of the property ca not be held to have abandoned the same until at least he has some knowledge of the loss of its possession or of the loss of the thing. Property can not be considered abandoned under the law and the possession left vacant for the finder until thespes recuperandi is gone and the animus revertendi is finally given up. (The Ann L. Lockwood, 37 Fed. Rep., 233.) The theory of abandonment on the part of the owners of the money stolen is fully refuted by the fact that some weeks after the wreck of the said ship they sent men to the place of the wreck for the purpose of recovering the property which belonged to them, which was on board the ship at the time of her sinking. The mere fact that cargo is sunk with a ship wrecked at sea by no means deprives the owner of said cargo of his property therein. The owner certainly still had the right to reclaim such property and to recover the same if possible. If it should be recovered by others, the real owner would be entitled to recover its value less the necessary expense of recovering the same and carrying it shore by the most approved appliances for that purpose by others. (Murphyvs. Dunham, 38 Fed. Rep., 503.) If the defendant and his companions had recovered the cargo from the sunken ship for the benefit of the owners of the same, he might have been entitled to compensation of his labor, but when he entered the sunken ship and took therefrom, by force, the property of another before actual abandonment by the owner and appropriated the same to his own use, he was, under the provisions of the Penal Code in force in the Philippine Islands, guilty of the crime of robbery. Upon the question whether or not the defendant and his companions did actually commit the acts charged in the said complaint, we are of the opinion, and so hold, that the evidence adduced during the trial in the lower court fully shows that the defendant did commit such acts in the manner and form as charged in said complaint. Therefore we do hereby affirm the sentence of the lower court and do hereby sentence the defendant to imprisonment for a period of four years of presidio correccional, under the provisions of paragraph 5 article 512 of the Penal Code, to return it Urrutia & Co. and Muoz & Co., or the Union Insurance Company of Canton , Limited, the sum of 15,000 pesos, in case of insolvency to suffer subsidiary imprisonment in accordance of paragraph 1 of article 50 of the Penal Code, and to pay the costs. So ordered. SO ORDERED. G.R. No. L-16084 November 30, 1962 Ceferino R. Magat for plaintiff-appellee. A. Agustines for defendants-appellants MAKALINTAL, J.: This is an ejectment case, decided first by the Justice of the Peace Court of Caloocan and, on appeal, Court of First Instance of Rizal, Pasig branch, ordered the defendants "to vacate the premises in petition, to pay the monthly rental of P115.00 to begin from the time this action was filed up to the time they the premises, and to pay the costs." The pertinent facts are the subject of stipulation below, Lot No. 14, block No. 51-C of the Grace Park subdivision with an area of 682.5 meters, is the disputed property. It was originally registered in 1916 (O.C.T. No. 868 of the Registry of Deeds of Rizal), subsequently acquired by the Philippine Realty Corporation (T.C.T. No. 22104) and sold by it on 28 November 1956 to plaintiff-appellant John O. Yu, a Filipino citizen, who obtained T.C.T 11267 in his name. In 1945 several persons settled on the property and constructed houses thereon without mission from, or contract with, the Philippine Corporation, then the registered owner. On various dates thereafter, between 1947 and 1952, appellants here brought the houses of those settlers and continued in occupancy thereof without paying any rents to the owner of the land. In February 1957 plaintiff-appellee advised them in writing to vacate within 30 days, and in view of their refusal filed a complaint of unlawful detainer within the statutory period of one year. The first point raised by appellants is that the Philippine Realty Corporation had lost possession of the property by abandonment, under Article 555, paragraph 1, of the Civil Code, in failing to take the action against them and showing them lack of interest in said property since they started their occupancy. The circumstances adverted to are insufficient to constitute abandonment, which requires not only physical relinquishment of the thing but also a clear intention not to reclaim or reassume ownership or enjoyment thereof. Indeed, abandonment which according to Manresa (Vol. 4, 5th ed., p. 277) convert the thing into res nullius, ownership of which may be acquired by occupation, can hardly apply to land, as to which said mode of acquisition is not available (Art. 714, Civil Code), let alone to registered land, to which "no title . . . in derogation to that of the registered owner shall be acquired by occupation, can hardly apply to land, as to which said mode of acquisition is not available (Art. 714, Civil Code), let alone to registered land, to which "no title . . . in derogation to that of the registered owner shall be acquired by prescription or adverse possession." (Sec. 46, Act No. 496). No possessory rights whatsoever can be recognized in favor of appellants, because they are in fact nothing but squatters, who settled on the land without any agreement with the owner paying neither rents to him, nor land taxes to the government, and who impliedly recognized their squatters' status by purchasing only the houses built by the original settlers. Their occupancy of the land was at the owner's sufference, and their acts were merely tolerated which could not affect the owner's possession (Arts. 537 and 1119, Civil Code). Appellants next contend that since there is no showing that there was any promise on their part, express or implied, to return the land to appellee, or that they failed to do so after their right to retain it had expired, they cannot be considered as unlawfully withholding possession within the meaning of Section 1 of Rule 72. The implication of the argument is that this action of unlawful detainer was improperly brought against them in the Justice of the Peace Court of Caloocan. A person who occupies the land of another at the latter's tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate upon demand, failing which a summary fiction for ejectment is the property remedy against him. In any event, whatever might be said on this point in so far as it relates to the original jurisdiction of the Justice of the Peace Court and hence to the appellate jurisdiction Court of First Instance it does not appear that the question was raised in the former court at all. Consequently the latter court could take cognizance of the case as one for recovery by the owner of the right of possession in the exercise of its original jurisdiction, pursuant to section 11 of Rule 40. The third and last contention of appellants is that the Court of First Instance lacked jurisdiction to this case because there were prejudicial question pending before us on appeal in cases G.R. Nos. L-12614 and L-12615 concerning the same property. The issue in those two cases was the propriety of the registration of appellants' adverse claim to the said land, which was resolved

JOHN O. YU, plaintiff-appellee, vs. MAXIMO DE LARA, JUAN PANLILIO, LUCIA RIVERO, FLORENTINO ROQUE and DOMINGO SAMSON,defendants-appellants.

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against them by the Land Registration Commissioner. In the first place the issue was not prejudicial in nature: it could not affect appellee's right to the possess his land, which has nothing to do with the registration or non-registrability of appellants' alleged adverse and secondly, the said cases have already been decided by us on January 29, 1960, by upholding the action by the Land Registration Commissioner. The judgment appealed from is affirmed, with costs against appellants. Lots 1, 2, 3, and 4 in Psu-194357, situated at Poblacion Central, La Trinidad, Benguet, docketed as LRC N91, said Lots being the sites of the Catholic Church building, convents, high school building, school gymnasium, school dormitories, social hall, G.R. No. 80294-95 September 21, 1988 CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner, vs. COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ, respondents. Valdez, Ereso, Polido & Associates for petitioner. Claustro, Claustro, Claustro Law Office collaborating counsel for petitioner. Jaime G. de Leon for the Heirs of Egmidio Octaviano. Cotabato Law Office for the Heirs of Juan Valdez. stonewalls, etc. On March 22, 1963 the Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title thereto. After trial on the merits, the land registration court promulgated its Decision, dated November 17, 1965, confirming the registrable title of VICAR GANCAYCO, J.: The principal issue in this case is whether or not a decision of the Court of Appeals promulgated a long time ago can properly be considered res judicata by respondent Court of Appeals in the present two cases between petitioner and two private respondents. Petitioner questions as allegedly erroneous the Decision dated August 31, 1987 of the Ninth Division of Respondent Court of Appeals 1 in CA-G.R. No. 05148 [Civil Case No. 3607 (419)] and CA-G.R. No. 05149 [Civil Case No. 3655 (429)], both for Recovery of Possession, which affirmed the Decision of the Honorable Nicodemo T. Ferrer, Judge of the Regional Trial Court of Baguio and Benguet in Civil Case No. 3607 (419) and Civil Case No. 3655 (429), with the dispositive portion as follows: WHEREFORE, Judgment is hereby rendered ordering the defendant, Catholic Vicar Apostolic of the Mountain Province to return and surrender Lot 2 of Plan Psu-194357 to the plaintiffs. Heirs of Juan Valdez, and Lot 3 of the same Plan to the other set of plaintiffs, the Heirs of Egmidio Octaviano (Leonardo Valdez, et al.). For lack or insufficiency of evidence, the plaintiffs' claim or damages is hereby denied. Said defendant is ordered to pay costs. (p. 36, Rollo) Respondent Court of Appeals, in affirming the trial court's decision, sustained the trial court's conclusions that the Decision of the Court of Appeals, dated May 4,1977 in CA-G.R. No. 38830R, in the two cases affirmed by the Supreme Court, touched on the ownership of lots 2 and 3 in question; that the two lots were possessed by the predecessors-in-interest of private respondents under claim of ownership in good faith from 1906 to 1951; that petitioner had been in possession of the same lots as bailee in commodatum up to 1951, when petitioner repudiated the trust and when it applied for registration in 1962; that petitioner had just been in possession as owner for eleven years, hence there is no possibility of acquisitive prescription which requires 10 years possession with just title and 30 years of possession without; that the principle of res judicata on these findings by the Court of Appeals will bar a reopening of these questions of facts; and that those facts may no longer be altered. Petitioner's motion for reconsideation of the respondent appellate court's Decision in the two aforementioned cases (CA G.R. No. CV-05418 and 05419) was denied. The facts and background of these cases as narrated by the trail court are as follows ... The documents and records presented reveal that the whole controversy started when the defendant Catholic Vicar Apostolic of the Mountain Province (VICAR for brevity) filed with the Court of First Instance of Baguio Benguet on September 5, 1962 an application for registration of title over to Lots 1, 2, 3, and 4. The Heirs of Juan Valdez (plaintiffs in the herein Civil Case No. 3655) and the Heirs of Egmidio Octaviano (plaintiffs in the herein Civil Case No. 3607) appealed the decision of the land registration court to the then Court of Appeals, docketed as CA-G.R. No. 38830-R. The Court of Appeals rendered its decision, dated May 9, 1977, reversing the decision of the land registration court and dismissing the VICAR's application as to Lots 2 and 3, the lots claimed by the two sets of oppositors in the land registration case (and two sets of plaintiffs in the two cases now at bar), the first lot being presently occupied by the convent and the second by the women's dormitory and the sister's convent. On May 9, 1977, the Heirs of Octaviano filed a motion for reconsideration praying the Court of Appeals to order the registration of Lot 3 in the names of the Heirs of Egmidio Octaviano, and on May 17, 1977, the Heirs of Juan Valdez and Pacita Valdez filed their motion for reconsideration praying that both Lots 2 and 3 be ordered registered in the names of the Heirs of Juan Valdez and Pacita Valdez. On August 12,1977, the Court of Appeals denied the motion for reconsideration filed by the Heirs of Juan Valdez on the ground that there was "no sufficient merit to justify reconsideration one way or the other ...," and likewise denied that of the Heirs of Egmidio Octaviano.

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Thereupon, the VICAR filed with the Supreme Court a petition for review on certiorari of the decision of the Court of Appeals dismissing his (its) application for registration of Lots 2 and 3, docketed as G.R. No. L-46832, entitled 'Catholic Vicar Apostolic of the Mountain Province vs. Court of Appeals and Heirs of Egmidio Octaviano.' From the denial by the Court of Appeals of their motion for reconsideration the Heirs of Juan Valdez and Pacita Valdez, on September 8, 1977, filed with the Supreme Court a petition for review, docketed as G.R. No. L-46872, entitled, Heirs of Juan Valdez and Pacita Valdez vs. Court of Appeals, Vicar, Heirs of Egmidio Octaviano and Annable O. Valdez. On January 13, 1978, the Supreme Court denied in a minute resolution both petitions (of VICAR on the one hand and the Heirs of Juan Valdez and Pacita Valdez on the other) for lack of merit. Upon the finality of both Supreme Court resolutions in G.R. No. L-46832 and G.R. No. L- 46872, the Heirs of Octaviano filed with the then Court of First Instance of Baguio, Branch II, a Motion For Execution of Judgment praying that the Heirs of Octaviano be placed in possession of Lot 3. The Court, presided over by Hon. Salvador J. Valdez, on December 7, 1978, denied the motion on the ground that the Court of Appeals decision in CA-G.R. No. 38870 did not grant the Heirs of Octaviano any affirmative relief. On February 7, 1979, the Heirs of Octaviano filed with the Court of Appeals a petitioner for certiorari and mandamus, docketed as CA-G.R. No. 08890-R, entitled Heirs of Egmidio Octaviano vs. Hon. Salvador J. Valdez, Jr. and Vicar. In its decision dated May 16, 1979, the Court of Appeals dismissed the petition. It was at that stage that the instant cases were filed. The Heirs of Egmidio Octaviano filed Civil Case No. 3607 (419) on July 24, 1979, for recovery of possession of Lot 3; and the Heirs of Juan Valdez filed Civil Case No. 3655 (429) on September 24, 1979, likewise for recovery of possession of Lot 2 (Decision, pp. 199-201, Orig. Rec.). In Civil Case No. 3607 (419) trial was held. The plaintiffs Heirs of Egmidio Octaviano presented one (1) witness, Fructuoso Valdez, who testified on the alleged ownership of the land in question (Lot 3) by their predecessor-in-interest, Egmidio Octaviano (Exh. C ); his written demand (Exh. BB-4 ) to defendant Vicar for the return of the land to them; and the reasonable rentals for the use of the land at P10,000.00 per month. On the other hand, defendant Vicar presented the Register of Deeds for the Province of Benguet, Atty. Nicanor Sison, who testified that the land in question is not covered by any title in the name of Egmidio Octaviano or any of the plaintiffs (Exh. 8). The defendant dispensed with the testimony of Mons.William Brasseur when the plaintiffs admitted that the witness if called to the witness stand, would testify that defendant Vicar has been in possession of Lot 3, for seventy-five (75) years continuously and peacefully and has constructed permanent structures thereon. In Civil Case No. 3655, the parties admitting that the material facts are not in dispute, submitted the case on the sole issue of whether or not the decisions of the Court of Appeals and the Supreme Court touching on the ownership of Lot 2, which in effect declared the plaintiffs the owners of the land constitute res judicata. In these two cases , the plaintiffs arque that the defendant Vicar is barred from setting up the defense of ownership and/or long and continuous possession of the two lots in question since this is barred by prior judgment of the Court of Appeals in CA-G.R. No. 038830-R under the principle of res judicata. Plaintiffs contend that the question of possession and ownership have already been determined by the Court of Appeals (Exh. C, Decision, CA-G.R. No. 038830-R) and affirmed by the Supreme Court (Exh. 1, Minute Resolution of the Supreme Court). On his part, defendant Vicar maintains that the principle of res judicata would not prevent them from litigating the issues of long possession and ownership because the dispositive portion of the prior judgment in CA-G.R. No. 038830R merely dismissed their application for registration and titling of lots 2 and 3. Defendant Vicar contends that only the dispositive portion of the decision, and not its body, is the controlling pronouncement of the Court of Appeals. 2 The alleged errors committed by respondent Court of Appeals according to petitioner are as follows: 1. ERROR IN APPLYING LAW OF THE CASE AND RES JUDICATA; 2. ERROR IN FINDING THAT THE TRIAL COURT RULED THAT LOTS 2 AND 3 WERE ACQUIRED BY PURCHASE BUT WITHOUT DOCUMENTARY EVIDENCE PRESENTED; 3. ERROR IN FINDING THAT PETITIONERS' CLAIM IT PURCHASED LOTS 2 AND 3 FROM VALDEZ AND OCTAVIANO WAS AN IMPLIED ADMISSION THAT THE FORMER OWNERS WERE VALDEZ AND OCTAVIANO; 4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF PRIVATE RESPONDENTS WHO WERE IN POSSESSION OF LOTS 2 AND 3 AT LEAST FROM 1906, AND NOT PETITIONER; 5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD FREE PATENT APPLICATIONS AND THE PREDECESSORS OF PRIVATE RESPONDENTS ALREADY HAD FREE PATENT APPLICATIONS SINCE 1906; 6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS 2 AND 3 ONLY IN 1951 AND JUST TITLE IS A PRIME NECESSITY UNDER ARTICLE 1134 IN RELATION TO ART. 1129 OF THE CIVIL CODE FOR ORDINARY ACQUISITIVE PRESCRIPTION OF 10 YEARS;

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7. ERROR IN FINDING THAT THE DECISION OF THE COURT OF APPEALS IN CA G.R. NO. 038830 WAS AFFIRMED BY THE SUPREME COURT; 8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO. 038830 TOUCHED ON OWNERSHIP OF LOTS 2 AND 3 AND THAT PRIVATE RESPONDENTS AND THEIR PREDECESSORS WERE IN POSSESSION OF LOTS 2 AND 3 UNDER A CLAIM OF OWNERSHIP IN GOOD FAITH FROM 1906 TO 1951; 9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION OF LOTS 2 AND 3 MERELY AS BAILEE BOR ROWER) IN COMMODATUM, A GRATUITOUS LOAN FOR USE; 10. ERROR IN FINDING THAT PETITIONER IS A POSSESSOR AND BUILDER IN GOOD FAITH WITHOUT RIGHTS OF RETENTION AND REIMBURSEMENT AND IS BARRED BY THE FINALITY AND CONCLUSIVENESS OF THE DECISION IN CA G.R. NO. 038830. 3 The petition is bereft of merit. Petitioner questions the ruling of respondent Court of Appeals in CA-G.R. Nos. 05148 and 05149, when it clearly held that it was in agreement with the findings of the trial court that the Decision of the Court of Appeals dated May 4,1977 in CA-G.R. No. 38830-R, on the question of ownership of Lots 2 and 3, declared that the said Court of Appeals Decision CA-G.R. No. 38830R) did not positively declare private respondents as owners of the land, neither was it declared that they were not owners of the land, but it held that the predecessors of private respondents were possessors of Lots 2 and 3, with claim of ownership in good faith from 1906 to 1951. Petitioner was in possession as borrower in commodatum up to 1951, when it repudiated the trust by declaring the properties in its name for taxation purposes. When petitioner applied for registration of Lots 2 and 3 in 1962, it had been in possession in concept of owner only for eleven years. Ordinary acquisitive prescription requires possession for ten years, but always with just title. Extraordinary acquisitive prescription requires 30 years. 4 On the above findings of facts supported by evidence and evaluated by the Court of Appeals in CA-G.R. No. 38830-R, affirmed by this Court, We see no error in respondent appellate court's ruling that said findings are res judicata between the parties. They can no longer be altered by presentation of evidence because those issues were resolved with finality a long time ago. To ignore the principle of res judicata would be to open the door to endless litigations by continuous determination of issues without end. An examination of the Court of Appeals Decision dated May 4, 1977, First Division 5 in CA-G.R. No. 38830-R, shows that it reversed the trial court's Decision 6 finding petitioner to be entitled to register the lands in question under its ownership, on its evaluation of evidence and conclusion of facts. The Court of Appeals found that petitioner did not meet the requirement of 30 years possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the requirement of 10 years possession for ordinary acquisitive prescription because of the absence of just title. The appellate court did not believe the findings of the trial court that Lot 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired also by purchase from Egmidio Octaviano by petitioner Vicar because there was absolutely no documentary evidence to support the same and the alleged purchases were never mentioned in the application for registration. By the very admission of petitioner Vicar, Lots 2 and 3 were owned by Valdez and Octaviano. Both Valdez and Octaviano had Free Patent Application for those lots since 1906. The predecessors of private respondents, not petitioner Vicar, were in possession of the questioned lots since 1906. There is evidence that petitioner Vicar occupied Lots 1 and 4, which are not in question, but not Lots 2 and 3, because the buildings standing thereon were only constructed after liberation in 1945. Petitioner Vicar only declared Lots 2 and 3 for taxation purposes in 1951. The improvements oil Lots 1, 2, 3, 4 were paid for by the Bishop but said Bishop was appointed only in 1947, the church was constructed only in 1951 and the new convent only 2 years before the trial in 1963. When petitioner Vicar was notified of the oppositor's claims, the parish priest offered to buy the lot from Fructuoso Valdez. Lots 2 and 3 were surveyed by request of petitioner Vicar only in 1962. Private respondents were able to prove that their predecessors' house was borrowed by petitioner Vicar after the church and the convent were destroyed. They never asked for the return of the house, but when they allowed its free use, they became bailors in commodatum and the petitioner the bailee. The bailees' failure to return the subject matter of commodatum to the bailor did not mean adverse possession on the part of the borrower. The bailee held in trust the property subject matter of commodatum. The adverse claim of petitioner came only in 1951 when it declared the lots for taxation purposes. The action of petitioner Vicar by such adverse claim could not ripen into title by way of ordinary acquisitive prescription because of the absence of just title. The Court of Appeals found that the predecessors-in-interest and private respondents were possessors under claim of ownership in good faith from 1906; that petitioner Vicar was only a bailee in commodatum; and that the adverse claim and repudiation of trust came only in 1951. We find no reason to disregard or reverse the ruling of the Court of Appeals in CA-G.R. No. 38830-R. Its findings of fact have become incontestible. This Court declined to review said decision, thereby in effect, affirming it. It has become final and executory a long time ago. Respondent appellate court did not commit any reversible error, much less grave abuse of discretion, when it held that the Decision of the Court of Appeals in CA-G.R. No. 38830-R is governing, under the principle of res judicata, hence the rule, in the present cases CA-G.R. No. 05148 and CA-G.R. No. 05149. The facts as supported by evidence established in that decision may no longer be altered. WHEREFORE AND BY REASON OF THE FOREGOING, this petition is DENIED for lack of merit, the Decision dated Aug. 31, 1987 in CA-G.R. Nos. 05148 and 05149, by respondent Court of Appeals is AFFIRMED, with costs against petitioner. SO ORDERED. G.R. No. L-3546 September 13, 1907

PIA DEL ROSARIO, plaintiff-appellant, vs. JUAN LUCENA, ET AL., defendants-appellees. Perfecto Gabriel for appellant. Vicente Ilustre for appellees. ARELLANO, C.J.: A complaint having been filed against Juan Lucena as his wife, Praxedes Flores, and also against Teresa Verches the last named alone appeared at the trial and answered the complaint. Among the facts alleged in the complaint, the following are of importance in this appeal: I. That the plaintiff is the lower of the jewels, which are subsequently specified together with their respective valuation. II. That the said jewels are now detained by the defendant Teresa Verches, to whom they were pawned by the other defendants, the married coupled, without the knowledge or consent of the plaintiff, for which act the defendant Praxedes was convicted of estafa by this same court and sentenced to five months ofpresidio correccional, both she and her husband being bound to return the jewels otherwise to pay for them. The principal object of the complaint was to obtain from the court a declaration that the jewels were the property of the plaintiff and that, in view thereof, they should be returned to her and the defendants sentenced to pay the costs and expresses of the action. The court rendered judgment in favor of the plaintiff, Pia del Rosario, and against the defendant Teresa Verches, for the possession of the jewels described in the complaint provided, however, that 500 pesos, Philippine currency plaintiff to the defendant Teresa Verches, or in case the jewel could not be returned the married couple, Juan Lucena and Praxedes Flores, jointly and severally, and against Teresa Verches for the sum of P1,555, less P500, and the costs in the action. The plaintiff appealed from this decision, and in her brief she sets forth the alleged errors contained in the judgment appealed from. The conclusion is: 1. That the defendant in answer to the complaint alleged

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III. That the said jewels we pledge by the other defendant, Praxedes Flores, in the name of the plaintiff, Da. Pia del Rosario, which act was subsequently ratified by the plaintiff. (B. of E., 4.) 2. That it is an undisputed fact that the jewels were delivered by Pia del Rosario to Praxedes Flores for sale on commission for the term of two months, after which, if not sold, that should be returned to the owner; and, 3. That by reason of having pledged them for the purpose of gain to the amount of 500 pesos. Praxedes Flores was convicted of estafa in, criminal proceedings instituted against her. From the answer of the defendant it appears that she accepted the contract of pledge, and that she received the jewels in the name of Pia del Rosario, without the least proof appearing in the record of the case that Praxedes Flores had any authority from Pia del Rosario to pledge them; rather, on the contrary, it is acknowledged in the judgment appealed from that the transaction carried out by Praxedes Flores was made without the knowledge or consent of Pia del Rosario. If Teresa Verches accepted the jewels as a pledge constitution by Praxedes Flores in the name of Pia del Rosario without ascertaining whether the latter had given the former any order or authority for the pledging given of her jewels, Teresa Verches must stand the risk if when relying from her acceptance of the pledge, even if when relying upon her judgment she was improperly or falsely informed; and it would not just nor logical that the consequences of her reception, due to her own mistake, or to deceit employed by a stranger, should fall on the owner of the jewels who, without having taken any part in the transaction, became the victim of a crime. The conflict between the right of the owner of movable property who has either lost it or been illegally therefore and that of the creditor who has loaned money thereon and holds it in pledge can not be decided against the owner, to whom the Civil Code grants ba right of action to recover the property from whoever may be in possession. (Art. 464.) The exceptions to article 464 are herein contained, namely: (1) If the possessors of personal property, lost or stolen, has acquired it at a public sale; (2) in favor of Montes de Piedad established under authorization of the Government; and (3) with regard to things acquired on exchange, or at this fairs or markets or from a merchant lawfully engage in similar business. the defendant was not with any of the exception under which she could refuse to make restitution of the property without reimbursement of the amount advanced upon the pledge. Therefore the decision which provides for such reimbursement before the return of the jewels is not based on any law whatever. On the contrary, it is in violation of article 464 of the Civil Code. It is true that a subsequent ratification by the owner, of the illegal act performed by an agent without, his consent, is equivalent to an order, and confirms the otherwise unlawful act of the agent; but such subsequent ratification must appear in like manner as the order itself. No such ratification of the illegal act committed by Paraxedes Flores can arise out of the fact that a son of the plaintiff called at the house of the defendant in order to inquire if the that he intended to redeem them. Nor is a real intent to redeem stolen property a subsequent ratification of an illegal act whereby the owner was deprived of the same. We therefore hold that it is improper to compel the plaintiff to reimburse the defendant in the sum of 3500 pesos, Philippine Currency, which Praxedes Flores obtained through the commission of an unlawful act, but that it is proper and in accordance with the law to compel the defendant to returned to the plaintiff, absolutely and unconditionally, the jewels in question. Wherefore the judgment appealed from is hereby reversed without special as to costs, and the jewels shall be forthwith returned to the plaintiff. So ordered. G.R. No. L-3890 January 2, 1908 TORRES, J.: Some time during the months of November and December, 1905, Nicolasa Pascual received from Josefa Varela several jewels, whereof the quantity and description are stated in the judgment appealed from; some of the jewels were owned by Varela and other belonged to strangers; all, however, came from Varela and were delivered to Pascual to be sold on commission, with the express obligation on the part of the latter to pay to the former the proceeds of the sale of said jewels, or to return them if unsold. Nicolasa Pascual, however, far from complying with her duty, pawned the said jewels at various dates during said months, as appears from the pawn tickets issued by the owner of H.J. Finnick's pawnshop, where the jewels had been pledged; that jewels were thus misappropriated, and the amount of the loan granted thereon embezzled, to the prejudice of Josefa Varela. Upon the filing of the complaint, proceedings were instituted, under cause No. 2429, against Nicolas Pascual for the crime of estafa, and the accused, being found guilty under articles 534 and 535, paragraph 5, of the Penal Code, was sentenced to the penalty of one year and eleven months of prision correccional, to make restitution of the jewels misappropriated or to pay the value thereof, and, in case of insolvency, to suffer the corresponding subsidiary imprisonment; said judgment became final and the accused is now undergoing the penalty imposed upon her. On the 22nd of September, 1906, the representative of Josefa Varela claimed, in writing, the return of the jewels above referred to, which were the subject matter of said prosecution, and separate proceedings having been instituted, the manager of the property of the late Finnick was made a party thereto. On the 17th of October, in answer to the complaint of Josefa Varela, the manager denied all that had been alleged by the latter, and, although admitting that the jewels had been pledged at the pawnshop of the late Finnick, further denied that they were the subject of estafa or any other crime committed by Nicolasa Pascual; she further stated that Finnick was provided with a license to engage in the loan business under the laws in force, and that he accepted the said jewels in good faith because Nicolasa Pascual was fully and duly authorized to pledge the same; therefore, the defendant was entitled to their possession, and she finally asked that the request of Josefa Varela be dismissed with costs. Neither in the said cause nor in the present proceedings does it appear as proven that Josefa Varela authorized Nicolasa Pascual to pledge the jewels or to dispose of the pawn tickets issued by the pawnshop, and the mere affirmation of Nicolasa Pascual is insufficient when the same is contradicted and denied by Josefa Varela. If said affirmation had been substantiated, the crime of estafa could not have been proven, and the accused would not have been convicted in said cause. Article 17 of the Penal Code provides that Every person criminally liable for a crime or misdemeanor is also civilly liable. In accordance with this provision the supreme court [of Spain] in its decision of the 3d of January, 1877, has established the following doctrine: In order that civil liability may be decreed in a prosecution it is necessary that it arise from or be the consequence of criminal liability; therefore, if the accused was acquitted of a crime, any court sentencing him by reason of the same to pay certain indemnity does so in violation of this article. Nicolasa Pascual was convicted of estafa of the jewels in question, and as the sentence became final, so much so that she is now undergoing her term of imprisonment, the balance of the judgment must be complied with that is, the restitution of the jewels misappropriated, because they are at hand and have not disappeared. This restitution must be made even if the jewels are in the possession of a third party, such as a pawnshop, and notwithstanding the fact that they were lawfully acquired by it, its right to institute proceedings against whoever may be liable therefor being reserved as provided by article 120 of the Penal Code. The exception contained in paragraph 3 of said article is not applicable to the present case because a pawnshop does not enjoy the privilege established by article 464 of the Civil Code. The owner of the loan office of Finnick Brothers, notwithstanding the fact that he acted in good faith, did not acquire the jewels at a public sale; it is not a question of public property, securities, or other such effects, the transfer, sale, or disposal of which is subject to the

JOSEFA VARELA, plaintiff-appellee, vs. JOSEPHINE FINNICK, defendant-appellant. Gibbs and Gale, for appellant. Southworth and Ingersoll, for appellee.

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provisions of the Code of Commerce. Neither does a pawnshop enjoy the privilege granted to a Monte de Piedad; therefore, Josefa Varela, who lost said jewels and was deprived of the same in consequence of a crime, is entitled to the recovery thereof from the pawnshop of Finnick Brothers, where they were pledged; the latter can not lawfully refuse to comply with the provisions of article 120 of the Penal Code, as it is a question of jewels which have been misappropriated by the commission of the crime of estafa, and the execution of the sentence which orders the restitution of the jewels can not be avoided because of the good faith with which the owner of the pawnshop acquired them, inasmuch as they were delivered to the accused, who was not the owner nor authorized to dispose of the same. Article 1857 of the Civil Code provides that The following are essential requisites of the contracts of pledge and of mortgage: 1. . . . 2. That the thing pledged or mortgaged be owned by the person who pledges or mortgages it. Nicolasa Pascual was not the owner of the jewels pledged at the pawnshop of Finnick. Article 1859 of said code provides that A creditor can not appropriate to himself the things given in pledge or under mortgage, nor dispose of them. While actual possession of personal property is equivalent to a title thereto, so long as no proof is offered that the same was acquired in bad faith, yet from the time that the latter condition is proven, such as the loss of the thing, or that the owner was unlawfully deprived of it, the latter is entitled to the recovery thereof within the limits fixed by law, because the holder lacks the good faith indispensable to the protection of his possession. Article 1955 of said code prescribes: The ownership of personal property prescribes by uninterrupted possession in good faith for a period of three years. That ownership of personal property also prescribed by uninterrupted for six years, without the necessity of any other condition. The provisions of article 464 of this code shall be observed with regard to the rights of the owner to recover the personal property lost or of which he may have been illegally deprived, and also with regard to those acquired at an auction, on exchanges, at fairs or markets, or from a merchant legally established or customarily engaged in the traffic of similar objects. In the present case not only has the ownership and the origin of the jewels misappropriated been unquestionably proven but also that the accused, acting fraudulently and in bad faith, disposed of them and pledged them contrary to agreement, with no right of ownership, and to the prejudice of the injured party, who was thereby illegally deprived of said jewels; therefore, in accordance with the provisions of article 464, the owner has an absolute right to recover the jewels from the possession of whosoever holds them, in accordance with the judgment entered in the aforesaid cause for estafa, wherein, the accused having been found guilty, the right of Josefa Varela to recover the jewels in question is expressly acknowledged. Therefore, in view of the foregoing, and accepting the conclusions stated in the judgment appealed from, it is our opinion that the same should be affirmed, and it is so ordered. One pair of gold picaporte earrings with two diamonds of ordinary size and two small ones The plaintiffs alleged that the said jewelry, during the last part of April or the beginning of May, 1908, was delivered to Elena de Vega to sell on commission, and that the latter, in turn, delivered it to Conception Perello, likewise to sell on commission, but that Perello, instead of fulfilling her trust, pledged the jewelry in the defendant's pawnshop, situated at No. 33 Calle de Ilaya, Tondo, and appropriated to her own use the money thereby obtained; that on July 30, 1908, Conception Perello was prosecuted for estafa, convicted, and the judgment became final; that the said jewelry was then under the control and in the possession of the defendant, as a result of the pledge by Perello, and that the former refused to deliver it to the plaintiffs, the owners thereof, wherefore counsel for the plaintiffs asked that judgment be rendered sentencing the defendant to make restitution of the said jewelry and to pay the costs. In the affidavit presented by the attorney for the plaintiffs dated September 2, 1908, after a statement and description of the jewelry mentioned, it is set forth that the defendant was retaining it for the reason given in the complaint, and that it was not sequestrated for the purpose of satisfying any tax or fine or by reason of any attachment issued in compliance with any judgment rendered against the plaintiffs' property. In discharge of the writ of seizure issued for the said jewelry on the 2nd of September, 1908, aforementioned, the sheriff of this city made the return that he had, on the same date, delivered one copy of the bond and another of the said writ to the defendant personally and, on the petition and designation of the attorney for the plaintiffs, proceeded to seize the jewelry described in the writ, taking it out of the defendant's control, and held it in his possession during the five days prescribed by law. On the 15th of the same month and year, five days having elapsed without the defendant's having given bond before the court, the sheriff made delivery of all the jewelry described in the said order to the attorney for the plaintiff to the latter's entire satisfaction, who with the sheriff signed the return of the writ. After the demurrer to the complaint had been overruled the defendant answered, setting forth that he denied each and all of the allegations thereof which were not specifically admitted, explained, or qualified, and as a special defense alleged that the jewelry, the subject matter of the complaint was pledged on his pawnshop by Conception Perello, the widow of Pazos, as security for a loan of P1,524, with the knowledge, consent, and mediation of Gabriel La O, a son of the plaintiffs, as their agent, and that, in consequence thereof, the said plaintiffs were estopped from disavowing the action of the said Perello; the defendant therefore prayed that G.R. No. L-5741 March 13, 1911 the complaint be dismissed and that the jewelry seized at the instance of the plaintiffs, or the amount of the loan made thereon, together with the interest due, be returned to the defendant, with the costs of the suit against the plaintiffs. The case came up for hearing on March 17, 1909, and after the presentation of oral testimony by both parties, the count, on June 23 of the same year, rendered judgment sentencing the defendant to restore to the plaintiff spouses the jewelry described in the complaint, the right being reserved to the defendant to institute his action against the proper party. The counsel for the defendant excepted to this judgment, asked that the same be set aside, and a new trial granted. This motion was denied, exceptions was taken by the appellant, and the proper bill of exceptions was duly approved certified to, and forwarded to the clerk of this court. ESTANISLAUA ARENAS, ET AL., plaintiffs-appellees, vs. FAUSTO O. RAYMUNDO, defendant-appellant. A.D. Gibbs, for appellant. Gabriela La O, for appellees. TORRES, J.: This is an appeal field by the defendant from a judgment of conviction rendered by the Hon. Judge Araullo. On the date of August 31, 1908, the attorneys for the plaintiffs, Estanislaua Arenas and Julian La O, brought suit against Fausto O. Raymundo, alleging, as a cause of action, that Estanislaua One gold bracelet with five small diamonds and eightbrillantitos de almendras One gold ring set with a diamond of ordinary size One lady's comb for fastening the hair, made of gold and silver, adorned with pearls of ordinary size and many small pearls, one of which is missing Arenas was the owner and proprietor of the jewelry described below with the respective value thereof: Two gold tamborin rosaries, without bow or reliquary at P40 each

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This is an action for the replevin of certain jewelry delivered by its owner for sale on commission, and pledged without his knowledge by Concepcion Perello in the pawnshop of the defendant, Fausto O. Raymundo, who refuses to deliver the said jewelry unless first redeemed. The said Concepcion Perello, who appropriated to herself the money derived from the pledging of the jewels before mentioned, together with others, to the prejudice of their owner Estanislaua Arenas, was prosecuted in the Court of First Instance of this City in cause No. 3955 and sentenced on July 30, 1908, to the penalty of one year eight months and twenty-one days of prision correccional, to restore to the offended party the jewelry specified in the complaint, or to pay the value thereof, amounting to P8,660, or, in case of insolvency, to suffer the corresponding subsidiary imprisonment, and to pay the costs. This judgment is attested by the certified copy attached under letter D to folio 26 of the record of the proceedings in the case of the same plaintiff against Antonio Matute the pledgee of the other jewelry also appropriated by the said Concepcion Perello which record forms a part of the evidence in this cause. Perello having pledged the jewelry in question to the defendant Raymundo, and not having redeemed it by paying him the amount received, it follows that the convicted woman, now serving the sentence imposed upon her, could not restore the jewelry as ordered in that judgment, which has become final by the defendant's acquiescence. Article 120 of the Penal Code prescribes: The restitution of the thing itself must be made, if be in the possession of a third person, who had acquired it in a legal manner, reserving, however, his action against the proper person. Restitution shall be made, even though the thing may be in the possession of a third person, who had acquired it in a legal manner, reserving, however, his action against the proper person. This provision is not applicable to a case in which the third person has acquired the thing in the manner and with the requisites established by law to make it unrecoverable. The provisions contained in the first two paragraphs of the preinserted article are based on the uncontrovertible principle of justice that the party injured through a crime has, as against all others, a preferential right to be indemnified, or to have restored to him the thing of which he was unduly deprived by criminal means. In view of the harmonious relation between the different codes in force in these Islands, it is natural and logical that the aforementioned provision of the Penal Code, based on the rule established in article 17 of the same, to wit, that every person criminally liable for a crime or misdemeanor is also civilly liable, should be in agreement and accordance with the provisions of article 464 of the Civil Code which prescribes: The possession of personal property, acquired in good faith, is equivalent to a title thereto. However, the person who has lost personal property or has been illegally deprived thereof may recover it from whoever possesses it. If the possessor of personal property, lost or stolen, has acquired it in good faith at a public sale, the owner can not recover it without reimbursing the price paid therefor. Neither can the owner of things pledged in pawnshops, established with the authorization of the Government, recover them, whosoever may be the person who pledged them, without previously refunding to the institution the amount of the pledge and the interest due. With regard to things acquired on exchange, or at fairs or markets or from a merchant legally established and usually employed in similar dealings, the provisions of the Code of Commerce shall be observed. On January 2, 1908, this court had occasion to decide, among other cases, two which were entirely analogous to the present one. They were No. 3889, Varela vs. Matute, and No. 3890, Varela vs. Finnick (9 Phil., 479, 482). In the decisions in both cases it appears that Nicolasa Pascual received various jewels from Josefa Varela to sell on commission and that, instead of fulfilling the trust or returning the jewels to their owner, she pledged some of them in the pawnshop of Antonio Matute and others in that of H.J. Finnick and appropriated to herself the amounts that she received, to the detriment of the owner of the jewelry. Tried estafa in cause No. 2429, the said Pascual was convicted and sentenced to the penalty of one year and eleven months of prision correccional, to restore to Varela, the jewelry appropriated, or to pay the value thereof, and, in case of insolvency, to subsidiary imprisonment; this judgment became final, whereupon the defendant began to serve her sentence. The case just cited is identical to that of Concepcion Perello. Josefa Varela, in separate incidental proceedings, demanded the restitution or delivery of possession of the said jewelry; the pledgees, the pawnbrokers, refused to comply with her demand, alleging, among other reasons, that they were entitled to possession. The two cases were duly tried, and the Court of First Instance pronounced judgment, supporting the plaintiff's claims in each. Both cases were appealed by the defendants, Matute and Finnick, and this court affirmed the judgments on the same grounds, with costs, and the decisions on appeal established the following legal doctrines: 1. Crimes against property; criminal and civil liability. Where, in a proceeding instituted by reason of a crime committed against property, the criminal liability of the accused has been declared, it follows that he shall also be held civilly liable therefor, because every person who is criminally responsible on account of a crime or misdemeanor is also civilly liable. 2. Id.; Recovery of property unlawfully in possession. Whoever may have been deprived this property in consequence of a crime is entitled to the recovery thereof, even if such property is in the possession of a third party who acquired it by legal means other than those expressly stated in article 464 of the Civil Code. 3. Personal property; title by possession. In order that the possession of personal property may be considered as a title thereto it is indispensable that the same shall have been acquired in good faith. 4. Id.; Ownership; prescription. The ownership of personal property prescribes in the manner and within the time fixed by articles 1955 and 1962, in connection with article 464, of the Civil Code. In the cause prosecuted against Perello, as also in the present suit, it was not proven that Estanislaua Arenas authorized the former to pawn the jewelry given to her by Arenas to sell on commission. Because of the mere fact of Perello's having been convicted and sentenced for estafa, and for the very reason that she is now serving her sentence must be complied with, that is, the jewelry misappropriated must be restored to its owner, inasmuch as it exists and has not disappeared this restitution must be made, although the jewelry is found in the pawnshop of Fausto O. Raymundo and the latter had acquired it by legal means. Raymundo however retains his right to collect the amounts delivered upon the pledge, by bringing action against the proper party. This finding is in accord with the provisions of the above article 120 of the Penal Code and first paragraph of article 464 of the Civil Code. The aforementioned decision, No. 3890, Varela vs. Finnick, recites among other considerations, the following: The exception contained in paragraph 3 of said article is not applicable to the present case because a pawnshop does not enjoy the privilege established by article 464 of the Civil Code. The owner of the loan office of Finnick Brothers, notwithstanding the fact that he acted in good faith, did not acquire the jewels at a public sale; it is not a question of public property, securities, or other such effects, the transfer, sale, or disposal of which is subject to the provisions of the Code of Commerce. Neither does a pawnshop enjoy the privilege granted to a monte de piedad; therefore, Josefa Varela, who lost said jewels and was deprived of the same in consequence of a crime, is entitled to the recovery thereof from the pawnshop of Finnick Brothers, where they were pledged; the latter can not lawfully refuse to comply with the provisions of article 120 of the Penal Code, as it is a question of jewels which has been misappropriated by the commission of the crime of estafa, and the execution of the sentence which

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orders the restitution of the jewels can not be avoided because of the good faith with which the owner of the pawnshop acquired them, inasmuch as they were delivered to the accused, who was not the owner nor authorized to dispose of the same. Even supposing that the defendant Raymundo had acted in good faith in accepting the pledge of the jewelry in litigation, even then he would not be entitled to retain it until the owner thereof reimburse him for the amount loaned to the embezzler, since the said owner of the jewelry, the plaintiff, did not make any contract with the pledgee, that would obligate him to pay the amount loaned to Perello, and the trial record does not disclose any evidence, even circumstantial, that the plaintiff Arenas consented to or had knowledge of the pledging of her jewelry in the pawnshop of the defendant. For this reason, and because Conception Perello was not the legitimate owner of the jewelry which she pledged to the defendant Raymundo, for a certain sum that she received from the latter as a loan, the contract of pledge entered the jewelry so pawned can not serve as security for the payment of the sum loaned, nor can the latter be collected out of the value of the said jewelry. Article 1857 of the Civil Code prescribes as one of the essential requisites of the contracts of pledge and of mortgage, that the thing pledged or mortgaged must belong to the person who pledges or mortgages it. This essential requisite for the contract of pledge between Perello and the defendant being absent as the former was not the owner of the jewelry given in pledge, the contract is as devoid of value and force as if it had not been made, and as it was executed with marked violation of an express provision of the law, it can not confer upon the defendant any rights in the pledged jewelry, nor impose any obligation toward him on the part of the owner thereof, since the latter was deprived of her possession by means of the illegal pledging of the said jewelry, a criminal act. Between the supposed good faith of the defendant Raymundo and the undisputed good faith of the plaintiff Arenas, the owner of the jewelry, neither law nor justice permit that the latter, after being the victim of the embezzlement, should have to choose one of the two extremes of a dilemma, both of which, without legal ground or reason, are injurious and prejudicial to her interest and rights, that is, she must either lose her jewelry or pay a large sum received by the embezzler as a loan from the defendant, when the plaintiff Arenas is not related to the latter by any legal or contractual bond out of which legal obligations arise. It is true that the plaintiffs' son, attorney Gabriel La O, intervened and gave his consent when the Concepcion Perello pawned the jewelry in litigation with Fausto Raymundo for P1,524? In view of the evidence offered by the trial record, the answer is, of course, in the negative. The parents of the attorney Gabriel La O being surprised by the disagreeable news of the disappearance of various jewels, amounting in value to more than P8,600, delivered to Elena Vega for sale on commission and misappropriated by Conception Perello, who received them from Vega for the same purpose, it is natural that the said attorney, acting in representation of his parents and as an interested party, should have proceeded to ascertain the whereabouts of the embezzled jewelry an to enter into negotiations with the pawnshop of Fausto O. Raymundo, in whose possession he had finally learned were to be found a part of the embezzled jewels, as he had been informed by the said Perello herself; and although, at first, at the commencement of his investigations, he met with opposition on the part of the pledgee Raymundo, who objected to showing him the jewels that he desired to see in order to ascertain whether they were those embezzled and belonging to his mother, the plaintiff Arenas, thanks to the intervention of attorney Chicote and to the fact that they succeeded in obtaining from the embezzler, among other papers, the pawn ticket issued by Raymundo's pawnshop, Exhibit E, of the date of May 4, 1908, folio 19 of the record in the case against Matute, Gabriel La O succeeded in getting the defendant to show him the jewelry described in the said ticket together with other jewels that did not belong to La O's mother, that had been given the defendant by Ambrosia Capistrano, Perello's agent, in pledge or security for a loan of P170. Gabriel La O, continuing the search for other missing jewelry belonging to his mother, found that Fausto O. Raymundo was in possession of it and had received it from the same embezzler G.R. No. L-18536 March 31, 1965 as security for a debt, although the defendant Raymundo would not exhibit it until he issued the pawn tickets corresponding to such jewels; therefore, at Raymundo's request, Perello, by means of the document Exhibit C, signed by herself and bearing date of June 10, 1908, folio 28 of the record, authorized her son Ramon to get from the defendant, in her name, the pawn tickets of the said other jewelry, for which such tickets had not yet been issued; Raymundo then wrote out the tickets Exhibits L, LL, and M, all dated June 22, 1908, and found on folios 20, 21 and 22 of the record of the aforesaid proceedings against Matute in the presence of the attorney Gabriel La O, who kept the said three pawn tickets, after he had made sure that the jewels described therein and which Raymundo, taking them out of his cabinet, exhibited to him at the time, were among those embezzled from his mother. So that, when the three aforementioned pawn tickets, Exhibits L, LL, and M, from the pawnshop of the defendant were made out, the latter already, and for some time previous, had in his possession as a pledge the jewelry described in them, and the plaintiffs' son naturally desiring to recover his parent's jewelry, was satisfied for the time being with keeping the three pawn tickets certifying that such jewelry was pawned to the defendant. Moreover, the record discloses no proof that the attorney Gabriel La O consented to or took any part in the delivery of the jewelry in question to the defendant as a pledge, and both the said defendant, Raymundo, and the embezzler Perello, averred in their respective testimony that the said attorney La O had no knowledge of and took no part in the pledging of the jewelry, and Perello further stated that she had received all the money loaned to her by the defendant Raymundo. (Folios 13 to 14, and 76 to 80 of the record in the case against Matute.) The business of pawnshops, in exchange for the high and onerous interest which constitutes its enormous profits, is always exposed to the contingency of receiving in pledge or security for the loans, jewels and other articles that have been robbed, stolen, or embezzled from their legitimate owners; and as the owner of the pawnshop accepts the same and asks for money on it, without assuring himself whether such bearer is or is not the owner thereof, he can not, by such procedure, expect from the law better and more preferential protection than the owner of the jewels or other articles, who was deprived thereof by means of a crime and is entitled to be excused by the courts. Antonio Matute, the owner of another pawnshop, being convinced that he was wrong, refrained from appealing from the judgment wherein he was sentenced to return, without redemption, to the plaintiffs, another jewel of great value which had been pledged to him by the same Perello. He undoubtedly had in mind some of the previous decisions of this court, one of which was against himself. For the foregoing reasons, whereby the errors attributed to the judgment of the Court of First Instance have been discussed and decided upon, and the said judgment being in harmony with the law, the evidence and the merits of the case, it is proper, in our opinion, to affirm the same, as we hereby do, with the costs against the appellant. So ordered.

JOSE B. AZNAR, plaintiff-appellant, vs. RAFAEL YAPDIANGCO, defendant-appellee; TEODORO SANTOS, intervenor-appellee. Florentino M. Guanlao for plaintiff-appellant. Rafael Yapdiangco in his own behalf as defendant-appellee. Lorenzo Sumulong, R. B. Hilao and B. S. Felipe for intervenor-appellee. REGALA, J.: This is an appeal, on purely legal questions, from a decision of the Court of First Instance of Quezon City, Branch IV, declaring the intervenor-appellee, Teodoro Santos, entitled to the possession of the car in dispute. The records before this Court disclose that sometime in May, 1959, Teodoro Santos advertised in two metropolitan papers the sale of his FORD FAIRLANE 500. In the afternoon of May 28, 1959, a certain L. De Dios, claiming to be a nephew of Vicente Marella, went to the Santos residence to answer the ad. However, Teodoro Santos was out during this call and only the

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latter's son, Irineo Santos, received and talked with De Dios. The latter told the young Santos that he had come in behalf of his uncle, Vicente Marella, who was interested to buy the advertised car. On being informed of the above, Teodoro Santos instructed his son to see the said Vicente Marella the following day at his given address: 1642 Crisostomo Street, Sampaloc, Manila. And so, in the morning of May 29, 1959, Irineo Santos went to the above address. At this meeting, Marella agreed to buy the car for P14,700.00 on the understanding that the price would be paid only after the car had been registered in his name. Irineo Santos then fetched his father who, together with L. De Dios, went to the office of a certain Atty. Jose Padolina where the deed of the sale for the car was executed in Marella's favor. The parties to the contract thereafter proceeded to the Motor Vehicles Office in Quezon City where the registration of the car in Marella's name was effected. Up to this stage of the transaction, the purchased price had not been paid. From the Motor Vehicles Office, Teodoro Santos returned to his house. He gave the registration papers and a copy of the deed of sale to his son, Irineo, and instructed him not to part with them until Marella shall have given the full payment for the car. Irineo Santos and L. De Dios then proceeded to 1642 Crisostomo Street, Sampaloc, Manila where the former demanded the payment from Vicente Marella. Marella said that the amount he had on hand then was short by some P2,000.00 and begged off to be allowed to secure the shortage from a sister supposedly living somewhere on Azcarraga Street, also in Manila. Thereafter, he ordered L. De Dios to go to the said sister and suggested that Irineo Santos go with him. At the same time, he requested the registration papers and the deed of sale from Irineo Santos on the pretext that he would like to show them to his lawyer. Trusting the good faith of Marella, Irineo handed over the same to the latter and thereupon, in the company of L. De Dios and another unidentified person, proceeded to the alleged house of Marella's sister. At a place on Azcarraga, Irineo Santos and L. De Dios alighted from the car and entered a house while their unidentified companion remained in the car. Once inside, L. De Dios asked Irineo Santos to wait at the sala while he went inside a room. That was the last that Irineo saw of him. For, after a considerable length of time waiting in vain for De Dios to return, Irineo went down to discover that neither the car nor their unidentified companion was there anymore. Going back to the house, he inquired from a woman he saw for L. De Dios and he was told that no such name lived or was even known therein. Whereupon, Irineo Santos rushed to 1642 Crisostomo to see Marella. He found the house closed and Marella gone. Finally, he reported the matter to his father who promptly advised the police authorities. That very same day, or on the afternoon of May 29, 1959 Vicente Marella was able to sell the car in question to the plaintiff-appellant herein, Jose B. Aznar, for P15,000.00. Insofar as the above incidents are concerned, we are bound by the factual finding of the trial court that Jose B. Aznar acquired the said car from Vicente Marella in good faith, for a valuable consideration and without notice of the defect appertaining to the vendor's title. While the car in question was thus in the possession of Jose B. Aznar and while he was attending to its registration in his name, agents of the Philippine Constabulary seized and confiscated the same in consequence of the report to them by Teodoro Santos that the said car was unlawfully taken from him. In due time, Jose B. Aznar filed a complaint for replevin against Captain Rafael Yapdiangco, the head of the Philippine Constabulary unit which seized the car in question Claiming ownership of the vehicle, he prayed for its delivery to him. In the course of the litigation, however, Teodoro Santos moved and was allowed to intervene by the lower court. At the end of the trial, the lower court rendered a decision awarding the disputed motor vehicle to the intervenor-appellee, Teodoro Santos. In brief, it ruled that Teodoro Santos had been unlawfully deprived of his personal property by Vicente Marella, from whom the plaintiffappellant traced his right. Consequently, although the plaintiff-appellant acquired the car in good faith and for a valuable consideration from Vicente Marella, the said decision concluded, still the intervenor-appellee was entitled to its recovery on the mandate of Article 559 of the New Civil Code which provides: ART. 559. The possession of movable property acquired in good faith is equivalent to title. Nevertheless, one who lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. From this decision, Jose B. Aznar appeals. The issue at bar is one and simple, to wit: Between Teodoro Santos and the plaintiff-appellant, Jose B. Aznar, who has a better right to the possession of the disputed automobile? We find for the intervenor-appellee, Teodoro Santos. The plaintiff-appellant accepts that the car in question originally belonged to and was owned by the intervenor-appellee, Teodoro Santos, and that the latter was unlawfully deprived of the same by Vicente Marella. However, the appellant contends that upon the facts of this case, the applicable provision of the Civil Code is Article 1506 and not Article 559 as was held by the decision under review. Article 1506 provides: ART. 1506. Where the seller of goods has a voidable title thereto, but his, title has not been voided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith, for value, and without notice of the seller's defect of title. The contention is clearly unmeritorious. Under the aforequoted provision, it is essential that the seller should have a voidable title at least. It is very clearly inapplicable where, as in this case, the seller had no title at all. Vicente Marella did not have any title to the property under litigation because the same was never delivered to him. He sought ownership or acquisition of it by virtue of the contract. Vicente Marella could have acquired ownership or title to the subject matter thereof only by the delivery or tradition of the car to him. Under Article 712 of the Civil Code, "ownership and other real rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and in consequence of certain contracts, by tradition." As interpreted by this Court in a host of cases, by this provision, ownership is not transferred by contract merely but by tradition or delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the mode of accomplishing the same (Gonzales v. Rojas, 16 Phil. 51; Ocejo, Perez and Co. v. International Bank, 37 Phil. 631, Fidelity and Deposit Co. v. Wilson, 8 Phil. 51; Kuenzle & Streiff v. Wacke & Chandler, 14 Phil. 610; Easton v. Diaz Co., 32 Phil. 180). For the legal acquisition and transfer of ownership and other property rights, the thing transferred must be delivered, inasmuch as, according to settled jurisprudence, the tradition of the thing is a necessary and indispensable requisite in the acquisition of said ownership by virtue of contract. (Walter Laston v. E. Diaz & Co. & the Provincial Sheriff of Albay, supra.) So long as property is not delivered, the ownership over it is not transferred by contract merely but by delivery. Contracts only constitute titles or rights to the transfer or acquisition of ownership, while delivery or tradition is the method of accomplishing the same, the title and the method of acquiring it being different in our law. (Gonzales v. Roxas, 16 Phil. 51) In the case on hand, the car in question was never delivered to the vendee by the vendor as to complete or consummate the transfer of ownership by virtue of the contract. It should be recalled that while there was indeed a contract of sale between Vicente Marella and Teodoro Santos, the former, as vendee, took possession of the subject matter thereof by stealing the same while it was in the custody of the latter's son. There is no adequate evidence on record as to whether Irineo Santos voluntarily delivered the key to the car to the unidentified person who went with him and L. De Dios to the place on Azcarraga where a sister of Marella allegedly lived. But even if Irineo Santos did, it was not the delivery contemplated by Article 712 of the Civil Code. For then, it would be indisputable that he turned it over to the unidentified companion only so that he may drive Irineo Santos and De

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Dios to the said place on Azcarraga and not to vest the title to the said vehicle to him as agent of Vicente Marella. Article 712 above contemplates that the act be coupled with the intent of delivering the thing. (10 Manresa 132) The lower court was correct in applying Article 559 of the Civil Code to the case at bar, for under it, the rule is to the effect that if the owner has lost a thing, or if he has been unlawfully deprived of it, he has a right to recover it, not only from the finder, thief or robber, but also from third persons who may have acquired it in good faith from such finder, thief or robber. The said article establishes two exceptions to the general rule of irrevindicability, to wit, when the owner (1) has lost the thing, or (2) has been unlawfully deprived thereof. In these cases, the possessor cannot retain the thing as against the owner, who may recover it without paying any indemnity, except when the possessor acquired it in a public sale. (Del Rosario v. Lucena, 8 Phil. 535; Varela v. Finnick, 9 Phil. 482; Varela v. Matute, 9 Phil. 479; Arenas v. Raymundo, 19 Phil. 46. Tolentino, id., Vol. II, p. 261.) In the case of Cruz v. Pahati, et al., 52 O.G. 3053 this Court has already ruled that Under Article 559 of the new Civil Code, a person illegally deprived of any movable may recover it from the person in possession of the same and the only defense the latter may have is if he has acquired it in good faith at a public sale, in which case, the owner cannot obtain its return without reimbursing the price paid therefor. In the present case, plaintiff has been illegally deprived of his car through the ingenious scheme of defendant B to enable the latter to dispose of it as if he were the owner thereof. Plaintiff, therefore, can still recover possession of the car even if it is in the possession of a third party who had acquired it in good faith from defendant B. The maxim that "no man can transfer to another a better title than he had himself" obtains in the civil as well as in the common law. (U.S. v. Sotelo, 28 Phil. 147) Finally, the plaintiff-appellant here contends that inasmuch as it was the intervenor-appellee who had caused the fraud to be perpetrated by his misplaced confidence on Vicente Marella, he, the intervenor-appellee, should be made to suffer the consequences arising therefrom, following the equitable principle to that effect. Suffice it to say in this regard that the right of the owner to recover personal property acquired in good faith by another, is based on his being dispossessed without his consent. The common law principle that where one of two innocent persons must suffer by a fraud perpetrated by another, the law imposes the loss upon the party who, by his misplaced confidence, has enabled the fraud to be committed, cannot be applied in a case which is covered by an express provision of the new Civil Code, specifically Article 559. Between a common law principle and a statutory provision, the latter must prevail in this jurisdiction. (Cruz v. Pahati, supra) UPON ALL THE FOREGOING, the instant appeal is hereby dismissed and the decision of the lower court affirmed in full. Costs against the appellant. G.R. No. 80298 April 26, 1990 EDCA PUBLISHING & DISTRIBUTING CORP., petitioner, vs. THE SPOUSES LEONOR and GERARDO SANTOS, doing business under the name and style of "SANTOS BOOKSTORE," and THE COURT OF APPEALS, respondents. Emiliano S. Samson, R. Balderrama-Samson, Mary Anne B. Samson for petitioner. Cendana Santos, Delmundo & Cendana for private respondents. If the possessor of a movable lost or of which the owner has been unlawfully deprived has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. The movable property in this case consists of books, which were bought from the petitioner by an impostor who sold it to the private respondents. Ownership of the books was recognized in the private respondents by the Municipal Trial Court, 1 which was sustained by the Regional Trial Court, 2 which was in turn sustained by the Court of Appeals. 3 The petitioner asks us to declare that all these courts have erred and should be reversed. This case arose when on October 5, 1981, a person identifying himself as Professor Jose Cruz placed an order by telephone with the petitioner company for 406 books, payable on delivery. 4 EDCA prepared the corresponding invoice and delivered the books as ordered, for which Cruz issued a personal check covering the purchase price of P8,995.65. 5 On October 7, 1981, Cruz sold 120 of the books to private respondent Leonor Santos who, after verifying the seller's ownership from the invoice he showed her, paid him P1,700.00. 6 Meanwhile, EDCA having become suspicious over a second order placed by Cruz even before clearing of his first check, made inquiries with the De la Salle College where he had claimed to be a dean and was informed that there was no such person in its employ. Further verification revealed that Cruz had no more account or deposit with the Philippine Amanah Bank, against which he had drawn the payment check. 7 EDCA then went to the police, which set a trap and arrested Cruz on October 7, 1981. Investigation disclosed his real name as Tomas de la Pea and his sale of 120 of the books he had ordered from EDCA to the private respondents. 8 On the night of the same date, EDCA sought the assistance of the police in Precinct 5 at the UN Avenue, which forced their way into the store of the private respondents and threatened Leonor Santos with prosecution for buying stolen property. They seized the 120 books without warrant, loading them in a van belonging to EDCA, and thereafter turned them over to the petitioner. 9 Protesting this high-handed action, the private respondents sued for recovery of the books after demand for their return was rejected by EDCA. A writ of preliminary attachment was issued and the petitioner, after initial refusal, finally surrendered the books to the private respondents. 10 As previously stated, the petitioner was successively rebuffed in the three courts below and now hopes to secure relief from us. To begin with, the Court expresses its disapproval of the arbitrary action of the petitioner in taking the law into its own hands and forcibly recovering the disputed books from the private respondents. The circumstance that it did so with the assistance of the police, which should have been the first to uphold legal and peaceful processes, has compounded the wrong even more deplorably. Questions like the one at bar are decided not by policemen but by judges and with the use not of brute force but of lawful writs. Now to the merits It is the contention of the petitioner that the private respondents have not established their ownership of the disputed books because they have not even produced a receipt to prove they had bought the stock. This is unacceptable. Precisely, the first sentence of Article 559 provides that "the possession of movable property acquired in good faith is equivalent to a title," thus dispensing with further proof. The argument that the private respondents did not acquire the books in good faith has been dismissed by the lower courts, and we agree. Leonor Santos first ascertained the ownership of CRUZ, J.: The case before us calls for the interpretation of Article 559 of the Civil Code and raises the particular question of when a person may be deemed to have been "unlawfully deprived" of movable property in the hands of another. The article runs in full as follows: Art. 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same. the books from the EDCA invoice showing that they had been sold to Cruz, who said he was selling them for a discount because he was in financial need. Private respondents are in the business of buying and selling books and often deal with hard-up sellers who urgently have to part with their books at reduced prices. To Leonor Santos, Cruz must have been only one of the many such sellers she was accustomed to dealing with. It is hardly bad faith for any one in the business of buying and selling books to buy them at a discount and resell them for a profit. But the real issue here is whether the petitioner has been unlawfully deprived of the books because the check issued by the impostor in payment therefor was dishonored.

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In its extended memorandum, EDCA cites numerous cases holding that the owner who has been unlawfully deprived of personal property is entitled to its recovery except only where the property was purchased at a public sale, in which event its return is subject to reimbursement of the purchase price. The petitioner is begging the question. It is putting the cart before the horse. Unlike in the cases invoked, it has yet to be established in the case at bar that EDCA has been unlawfully deprived of the books. The petitioner argues that it was, because the impostor acquired no title to the books that he could have validly transferred to the private respondents. Its reason is that as the payment check bounced for lack of funds, there was a failure of consideration that nullified the contract of sale between it and Cruz. The contract of sale is consensual and is perfected once agreement is reached between the parties on the subject matter and the consideration. According to the Civil Code: Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contracts. xxx xxx xxx Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. Art. 1478. The parties may stipulate that ownership in the thing shall not pass to the purchaser until he has fully paid the price. It is clear from the above provisions, particularly the last one quoted, that ownership in the thing sold shall not pass to the buyer until full payment of the purchase only if there is a stipulation to that effect. Otherwise, the rule is that such ownership shall pass from the vendor to the vendee upon the actual or constructive delivery of the thing sold even if the purchase price has not yet been paid. Non-payment only creates a right to demand payment or to rescind the contract, or to criminal prosecution in the case of bouncing checks. But absent the stipulation above noted, delivery of the thing sold will effectively transfer ownership to the buyer who can in turn transfer it to another. In Asiatic Commercial Corporation v. Ang, 11 the plaintiff sold some cosmetics to Francisco Ang, who in turn sold them to Tan Sit Bin. Asiatic not having been paid by Ang, it sued for the recovery of the articles from Tan, who claimed he had validly bought them from Ang, paying for the same in cash. Finding that there was no conspiracy between Tan and Ang to deceive Asiatic the Court of Appeals declared: Yet the defendant invoked Article 464 12 of the Civil Code providing, among other things that "one who has been unlawfully deprived of personal property may recover it from any person possessing it." We do not believe that the plaintiff has been unlawfully deprived of the cartons of Gloco Tonic within the scope of this legal provision. It has voluntarily parted with them pursuant to a contract of purchase and sale. The circumstance that the price was not subsequently paid did not render illegal a transaction which was valid and legal at the beginning. In Tagatac v. Jimenez, 13 the plaintiff sold her car to Feist, who sold it to Sanchez, who sold it to Jimenez. When the payment check issued to Tagatac by Feist was dishonored, the plaintiff sued to recover the vehicle from Jimenez on the ground that she had been unlawfully deprived of it by reason of Feist's deception. In ruling for Jimenez, the Court of Appeals held: The point of inquiry is whether plaintiff-appellant Trinidad C. Tagatac has been unlawfully deprived of her car. At first blush, it would seem that she was unlawfully deprived thereof, considering that she was induced to part with it by reason of the chicanery practiced on her by Warner L. Feist. Certainly, swindling, like robbery, is an illegal method of deprivation of property. In a manner of speaking, plaintiff-appellant was "illegally deprived" of her car, for the way by which Warner L. Feist induced her to part with it is illegal and is punished by law. But does this "unlawful deprivation" come within the scope of Article 559 of the New Civil Code? xxx xxx xxx . . . The fraud and deceit practiced by Warner L. Feist earmarks this sale as a voidable contract (Article 1390 N.C.C.). Being a voidable contract, it is susceptible of either ratification or annulment. If the contract is ratified, the action to annul it is extinguished (Article 1392, N.C.C.) and the contract is cleansed from all its defects (Article 1396, N.C.C.); if the contract is annulled, the contracting parties are restored to their respective situations before the contract and mutual restitution follows as a consequence (Article 1398, N.C.C.). However, as long as no action is taken by the party entitled, either that of annulment or of ratification, the contract of sale remains valid and binding. When plaintiff-appellant Trinidad C. Tagatac delivered the car to Feist by virtue of said voidable contract of sale, the title to the car passed to Feist. Of course, the title that Feist acquired was defective and voidable. Nevertheless, at the time he sold the car to Felix Sanchez, his title thereto had not been avoided and he therefore conferred a good title on the latter, provided he bought the car in good faith, for value and without notice of the defect in Feist's title (Article 1506, N.C.C.). There being no proof on record that Felix Sanchez acted in bad faith, it is safe to assume that he acted in good faith. The above rulings are sound doctrine and reflect our own interpretation of Article 559 as applied to the case before us. Actual delivery of the books having been made, Cruz acquired ownership over the books which he could then validly transfer to the private respondents. The fact that he had not yet paid for them to EDCA was a matter between him and EDCA and did not impair the title acquired by the private respondents to the books. One may well imagine the adverse consequences if the phrase "unlawfully deprived" were to be interpreted in the manner suggested by the petitioner. A person relying on the seller's title who buys a movable property from him would have to surrender it to another person claiming to be the original owner who had not yet been paid the purchase price therefor. The buyer in the second sale would be left holding the bag, so to speak, and would be compelled to return the thing bought by him in good faith without even the right to reimbursement of the amount he had paid for it. It bears repeating that in the case before us, Leonor Santos took care to ascertain first that the books belonged to Cruz before she agreed to purchase them. The EDCA invoice Cruz showed her assured her that the books had been paid for on delivery. By contrast, EDCA was less than cautious in fact, too trusting in dealing with the impostor. Although it had never transacted with him before, it readily delivered the books he had ordered (by telephone) and as readily accepted his personal check in payment. It did not verify his identity although it was easy enough to do this. It did not wait to clear the check of this unknown drawer. Worse, it indicated in the sales invoice issued to him, by the printed terms thereon, that the books had been paid for on delivery, thereby vesting ownership in the buyer. Surely, the private respondent did not have to go beyond that invoice to satisfy herself that the books being offered for sale by Cruz belonged to him; yet she did. Although the title of Cruz was presumed under Article 559 by his mere possession of the books, these being movable property, Leonor Santos nevertheless demanded more proof before deciding to buy them.

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It would certainly be unfair now to make the private respondents bear the prejudice sustained by EDCA as a result of its own negligence. We cannot see the justice in transferring EDCA's loss to the Santoses who had acted in good faith, and with proper care, when they bought the books from Cruz. While we sympathize with the petitioner for its plight, it is clear that its remedy is not against the private respondents but against Tomas de la Pea, who has apparently caused all this trouble. The private respondents have themselves been unduly inconvenienced, and for merely transacting a customary deal not really unusual in their kind of business. It is they and not EDCA who have a right to complain. WHEREFORE, the challenged decision is AFFIRMED and the petition is DENIED, with costs against the petitioner. Subsequently, on August 31, 1989, Franco opened three accounts, namely, a current,[4] savings,[5] and time deposit,[6] with BPI-FB. The current and savings accounts were respectively funded with an initial deposit of P500,000.00 each, while the time deposit account had P1,000,000.00 with a maturity date of August 31, 1990. The total amount of P2,000,000.00 used to open these accounts is traceable to a check issued by Tevesteco allegedly in consideration of Francos introduction of Eladio Teves,[7] who was looking for a conduit bank to facilitate Tevestecos business transactions, to Jaime Sebastian, who was then BPI-FB SFDMs Branch Manager. In turn, the funding for the P2,000,000.00 check was part of the P80,000,000.00 debited by BPI-FB from FMICs time deposit account and credited to Tevestecos current account pursuant to an Authority to Debit purportedly signed by FMICs officers. BPI FAMILY BANK, Petitioner, G.R. No. 123498 It appears, however, that the signatures of FMICs officers on the Authority to Debit Present:were forged.[8] On September 4, 1989, Antonio Ong,[9] upon being shown the Authority to Debit, personally declared his signature therein to be a forgery. Unfortunately, Tevesteco had already effected YNARES-SANTIAGO, J., several withdrawals from its current account (to which had been credited the P80,000,000.00 covered by the forged Authority to Debit) amounting to P37,455,410.54, Chairperson, - versus including the AUSTRIA-MARTINEZ, P2,000,000.00 paid to Franco. CHICO-NAZARIO, On September 8, 1989, impelled by the need to protect its interests in light of FMICs forgery NACHURA, and claim, BPI-FB, thru its Senior Vice-President, Severino Coronacion, instructed Jesus REYES, JJ. Arangorin[10] to debit Francos savings and current accounts for the amounts remaining AMADO FRANCO and COURT OF APPEALS, Respondents. therein.[11] However, Francos time deposit account could not be debited due to the capacity Promulgated: limitations of BPI-FBs computer.[12] November 23, 2007 In the meantime, two checks[13] drawn by Franco against his BPI-FB current account x------------------------------------------------------------------------------------x were dishonored upon presentment for payment, and stamped with a notation account under garnishment. Apparently, Francos current account was garnished by virtue of an Order of Attachment issued by the Regional Trial Court of Makati (Makati RTC) in Civil Case No. 89-4996 DECISION (Makati Case), which had been filed by BPI-FB against Franco et al.,[14] to recover the P37,455,410.54 representing Tevestecos total withdrawals from its account. NACHURA, J.: Notably, the dishonored checks were issued by Franco and presented for payment at BPI-FB prior to Francos receipt of notice that his accounts were under garnishment.[15] In fact, at the time the Notice of Garnishment dated September 27, 1989 was served on BPI-FB, Franco had yet to be impleaded in the Makati case where the writ of attachment was issued.

Banks are exhorted to treat the accounts of their depositors with meticulous care and utmost fidelity. We reiterate this exhortation in the case at bench.

It was only on May 15, 1990, through the service of a copy of the Second Amended Complaint in Civil Case No. 89-4996, that Franco was impleaded in the Makati case.[16] Immediately, upon receipt of such copy, Franco filed a Motion to

Before us is a Petition for Review on Certiorari seeking the reversal of the Court of Appeals (CA) Decision[1] in CA-G.R. CV No. 43424 which affirmed with modification the judgment[2] of the Regional Trial Court, Branch 55, Manila (Manila RTC), in Civil Case No. 9053295.

Discharge Attachment which the Makati RTC granted on May 16, 1990. The Order Lifting the Order of Attachment was served on BPI-FB on even date, with Franco demanding the release to him of the funds in his savings and current accounts. Jesus Arangorin, BPI-FBs new manager, could not forthwith comply with the demand as the funds, as previously stated, had already been debited because of FMICs forgery claim. As such, BPI-FBs computer at the SFDM

This case has its genesis in an ostensible fraud perpetrated on the petitioner BPI Family Bank (BPI-FB) allegedly by respondent Amado Franco (Franco) in conspiracy with other individuals,[3] some of whom opened and maintained separate accounts with BPI-FB, San Francisco del Monte (SFDM) branch, in a series of transactions.

Branch indicated that the current account record was not on file.

With respect to Francos savings account, it appears that Franco agreed to an arrangement, as a favor to Sebastian, wherebyP400,000.00 from his savings account was temporarily transferred to Domingo Quiaoits savings account, subject to its immediate return

On August 15, 1989, Tevesteco Arrastre-Stevedoring Co., Inc. (Tevesteco) opened a savings and current account with BPI-FB. Soon thereafter, or on August 25, 1989, First Metro Investment Corporation (FMIC) also opened a time deposit account with the same branch of BPI-FB with a deposit of P100,000,000.00, to mature one year thence.

upon issuance of a certificate of deposit which Quiaoit needed in connection with his visa application at the Taiwan Embassy. As part of the arrangement, Sebastian retained custody of Quiaoits savings account passbook to ensure that no withdrawal would be effected therefrom, and to preserve Francos deposits.

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1. On May 17, 1990, Franco pre-terminated his time deposit account. BPI-FB deducted the amount of P63,189.00 from the remaining balance of the time deposit account representing advance interest paid to him. 2. P498,973.23 representing the balance on *Francos+ savings account as of May 18, 1990, P76,500.00 representing the legal rate of interest on the amount of P450,000.00 from May 18, 1990 to October 31, 1991;

together with the interest thereon in accordance with the banks guidelines on the payment These transactions spawned a number of cases, some of which we had already resolved. therefor;

FMIC filed a complaint against BPI-FB for the recovery of the amount of P80,000,000.00 debited from its account.[17] The case eventually reached this Court, and in BPI Family Savings Bank, Inc. v. First Metro Investment Corporation,[18] we upheld the finding of the courts below that BPI-FB failed to exercise the degree of diligence required by the nature of its obligation to treat the accounts of its depositors with meticulous care. Thus, BPI-FB was found liable to FMIC for the debited amount in its time deposit. It was ordered to pay P65,332,321.99 plus interest at 17% per annum from August 29, 1989 until fully restored. In turn, the 17% shall itself earn interest at 12% from October 4, 1989 until fully paid.

3.

P30,000.00 by way of attorneys fees; and

4.

P10,000.00 as nominal damages.

The counterclaim of the defendant is DISMISSED for lack of factual and legal anchor.

Costs against [BPI-FB].

SO ORDERED.[28] In a related case, Edgardo Buenaventura, Myrna Lizardo and Yolanda Tica (Buenaventura, et al.),[19] recipients of aP500,000.00 check proceeding from the P80,000,000.00 mistakenly credited to Tevesteco, likewise filed suit. Buenaventura et al., as in the case of Franco, were also prevented from effecting withdrawals[20] from their current account with BPI-FB, Bonifacio Market, Edsa, Caloocan City Branch. Likewise, when the case was elevated to this Court docketed as BPI Family Bank v. Buenaventura,[21] we ruled that BPI-FB had no right to freeze Buenaventura, et al.s accounts and adjudged BPI-FB liable therefor, in addition to damages. WHEREFORE, foregoing considered, the appealed decision is hereby AFFIRMED with modification ordering [BPI-FB] to pay [Franco]P63,189.00 representing the interest deducted Meanwhile, BPI-FB filed separate civil and criminal cases against those believed to be the perpetrators of the multi-million peso scam.[22] In the criminal case, Franco, along with the other accused, except for Manuel Bienvenida who was still at large, were acquitted of the crime of Estafa as defined and penalized under Article 351, par. 2(a) of the Revised Penal Code.[23] However, the civil case[24] remains under litigation and the respective rights and liabilities of the parties have yet to be adjudicated. Cost against [BPI-FB]. from the time deposit of plaintiff-appellant. P200,000.00 as moral damages and P100,000.00 as exemplary damages, deleting the award of nominal damages (in view of the award of moral and exemplary damages) and increasing the award of attorneys fees from P30,000.00 to P75,000.00. Unsatisfied with the decision, both parties filed their respective appeals before the CA. Franco confined his appeal to the Manila RTCs denial of his claim for moral and exemplary damages, and the diminutive award of attorneys fees. In affirming with modification the lower courts decision, the appellate court decreed, to wit:

Consequently, in light of BPI-FBs refusal to heed Francos demands to unfreeze his accounts and release his deposits therein, the latter filed on June 4, 1990 with the Manila RTC the subject suit. In his complaint, Franco prayed for the following reliefs: (1) the interest on the remaining balance[25] of his current account which was eventually released to him on October 31, 1991; (2) the balance[26] on his savings account, plus interest thereon; (3) the advance interest[27] paid to him which had been deducted when he pre-terminated his time deposit account; and (4) the payment of actual, moral and exemplary damages, as well as attorneys fees.

SO ORDERED.[29]

In this recourse, BPI-FB ascribes error to the CA when it ruled that: (1) Franco had a better right to the deposits in the subject accounts which are part of the proceeds of a forged Authority to Debit; (2) Franco is entitled to interest on his current account; (3) Franco can recover the P400,000.00 deposit in Quiaoits savings account; (4) the dishonor of Francos checks was not legally in order; (5) BPI-FB is liable for interest on Francos time deposit, and for moral and exemplary damages; and (6) BPI-FBs counter-claim has no factual and legal anchor.

BPI-FB traversed this complaint, insisting that it was correct in freezing the accounts of Franco and refusing to release his deposits, claiming that it had a better right to the amounts which consisted of part of the money allegedly fraudulently withdrawn from it by Tevesteco and ending up in Francos accounts. BPI-FB asseverated that the claimed consideration of P2,000,000.00 for the introduction facilitated by Franco between George Daantos and Eladio Teves, on the one hand, and Jaime Sebastian, on the other, spoke volumes of Francos participation in the fraudulent transaction. We are in full accord with the common ruling of the lower courts that BPI-FB cannot unilaterally freeze Francos accounts and preclude him from withdrawing his deposits. However, contrary to the appellate courts ruling, we hold that Franco is not entitled to unearned interest on the time deposit as well as to moral and exemplary damages. The petition is partly meritorious.

On August 4, 1993, the Manila RTC rendered judgment, the dispositive portion of which reads as follows:

First. On the issue of who has a better right to the deposits in Francos accounts, BPI-FB urges us that the legal consequence of FMICs forgery claim is that the money transferred by BPI-FB to Tevesteco is its own, and considering that it was able to recover possession of the

WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of [Franco] and against [BPI-FB], ordering the latter to pay to the former the following sums:

same when the money was redeposited by Franco, it had the right to set up its ownership thereon and freeze Francos accounts.

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BPI-FB contends that its position is not unlike that of an owner of personal property who regains possession after it is stolen, and to illustrate this point, BPI-FB gives the following example: where Xs television set is stolen by Y who thereafter sells it to Z, and where Z unwittingly entrusts possession of the TV set to X, the latter would have the right to keep possession of the property and preclude Z from recovering possession thereof. To bolster its position, BPI-FB cites Article 559 of the Civil Code, which provides: More importantly, BPI-FB does not have a unilateral right to freeze the accounts of Franco based on its mere suspicion that the funds therein were proceeds of the multi-million peso scam Franco was allegedly involved in. To grant BPI-FB, or any bank for that matter, the right to take whatever action it pleases on deposits which it supposes are derived from shady transactions, would open the floodgates of public distrust in the banking industry.

Article 559. The possession of movable property acquired in good faith is equivalent to a title. Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may recover it from the person in possession of the same.

Our pronouncement in Simex International (Manila), Inc. v. Court of Appeals[38] continues to resonate, thus:

The banking system is an indispensable institution in the modern world and plays a vital If the possessor of a movable lost or of which the owner has been unlawfully deprived, has acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing the price paid therefor. role in the economic life of every civilized nation. Whether as mere passive entities for the safekeeping and saving of money or as active instruments of business and commerce, banks have become an ubiquitous presence among the people, who have come to regard them with respect and even gratitude and, most of all, confidence. Thus, even the humble wage-earner has not hesitated to entrust his lifes savings to the bank of his choice, knowing that they will BPI-FBs argument is unsound. To begin with, the movable property mentioned in Article 559 of the Civil Code pertains to a specific or determinate thing.[30] A determinate or specific thing is one that is individualized and can be identified or distinguished from others of the same kind.[31] In every case, the depositor expects the bank to treat his account with the utmost In this case, the deposit in Francos accounts consists of money which, albeit characterized as a movable, is generic and fungible.[32] The quality of being fungible depends upon the possibility of the property, because of its nature or the will of the parties, being substituted by others of the same kind, not having a distinct individuality.[33] fidelity, whether such account consists only of a few hundred pesos or of millions. The bank must record every single transaction accurately, down to the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the depositor can dispose of as he sees fit, confident that the bank will deliver it as and to whomever directs. A blunder on the part of the bank, such as the dishonor of the check Significantly, while Article 559 permits an owner who has lost or has been unlawfully deprived of a movable to recover the exact same thing from the current possessor, BPI-FB simply claims ownership of the equivalent amount of money, i.e., the value thereof, which it had mistakenly debited from FMICs account and credited to Tevestecos, and subsequently traced to Francos account. In fact, this is what BPI-FB did in filing the Makati Case against Franco, et al. It staked its claim on the money itself which passed from one account to another, commencing with the forged Authority to Debit. The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. x x x. without good reason, can cause the depositor not a little embarrassment if not also financial loss and perhaps even civil and criminal litigation. be safe in its custody and will even earn some interest for him. The ordinary person, with equal faith, usually maintains a modest checking account for security and convenience in the settling of his monthly bills and the payment of ordinary expenses. x x x.

It bears emphasizing that money bears no earmarks of peculiar ownership,[34] and this characteristic is all the more manifest in the instant case which involves money in a banking transaction gone awry. Its primary function is to pass from hand to hand as a medium of exchange, without other evidence of its title.[35] Money, which had passed through various transactions in the general course of banking business, even if of traceable origin, is no exception.

Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound to know the signatures of its customers. Having failed to detect the forgery in the Authority to Debit and in the process inadvertently facilitate the FMIC-Tevesteco transfer, BPI-FB cannot now shift liability thereon to Franco and the other payees of checks issued by Tevesteco, or prevent withdrawals from their respective accounts without the appropriate court writ or a favorable final judgment.

Thus, inasmuch as what is involved is not a specific or determinate personal property, BPI-FBs illustrative example, ostensibly based on Article 559, is inapplicable to the instant case.

Further, it boggles the mind why BPI-FB, even without delving into the authenticity of the signature in the Authority to Debit, effected the transfer of P80,000,000.00 from FMICs to Tevestecos account, when FMICs account was a time deposit and it had already paid advance

There is no doubt that BPI-FB owns the deposited monies in the accounts of Franco, but not as a legal consequence of its unauthorized transfer of FMICs deposits to Tevestecos account. BPI-FB conveniently forgets that the deposit of money in banks is governed by the Civil Code provisions on simple loan or mutuum.[36] As there is a debtor-creditor relationship between a bank and its depositor, BPI-FB ultimately acquired ownership of Francos deposits, but such ownership is coupled with a corresponding obligation to pay him an equal amount on demand.[37] Although BPI-FB owns the deposits in Francos accounts, it cannot prevent him from demanding payment of BPI-FBs obligation by drawing checks against his current account, or asking for the release of the funds in his savings account. Thus, when Franco issued checks drawn against his current account, he had every right as creditor to expect that those checks would be honored by BPI-FB as debtor.

interest to FMIC. Considering that there is as yet no indubitable evidence establishing Francos participation in the forgery, he remains an innocent party. As between him and BPI-FB, the latter, which made possible the present predicament, must bear the resulting loss or inconvenience.

Second. With respect to its liability for interest on Francos current account, BPI-FB argues that its non-compliance with the Makati RTCs Order Lifting the Order of Attachment and the legal consequences thereof, is a matter that ought to be taken up in that court.

The argument is tenuous. We agree with the succinct holding of the appellate court in this respect. The Manila RTCs order to pay interests on Francos current account arose from BPI-

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FBs unjustified refusal to comply with its obligation to pay Franco pursuant to their contract of mutuum. In other words, from the time BPI-FB refused Francos demand for the release of the deposits in his current account, specifically, from May 17, 1990, interest at the rate of 12% began to accrue thereon.[39] The argument is specious. In this argument, we perceive BPI-FBs clever but transparent ploy to circumvent Section 4,[42]Rule 13 of the Rules of Court. It should be noted that the strict requirement on service of court papers upon the parties affected is designed to comply with the elementary requisites of due process. Franco was entitled, as a matter of right, to notice, if the requirements of due process are to be observed. Yet, he received a copy of the Undeniably, the Makati RTC is vested with the authority to determine the legal consequences of BPI-FBs non-compliance with the Order Lifting the Order of Attachment. However, such authority does not preclude the Manila RTC from ruling on BPI-FBs liability to Franco for payment of interest based on its continued and unjustified refusal to perform a contractual obligation upon demand. After all, this was the core issue raised by Franco in his complaint before the Manila RTC. Additionally, it should be remembered that the enforcement of a writ of attachment cannot be made without including in the main suit the owner of the property attached by Third. As to the award to Franco of the deposits in Quiaoits account, we find no reason to depart from the factual findings of both the Manila RTC and the CA. virtue thereof. Section 5, Rule 13 of the Rules of Court specifically provides that no levy or attachment pursuant to the writ issued x x x shall be enforced unless it is preceded, or contemporaneously accompanied, by service of summons, together with a copy of the Noteworthy is the fact that Quiaoit himself testified that the deposits in his account are actually owned by Franco who simply accommodated Jaime Sebastians request to temporarily transfer P400,000.00 from Francos savings account to Quiaoits account.[40] His testimony cannot be characterized as hearsay as the records reveal that he had personal knowledge of the arrangement made between Franco, Sebastian and himself.[41] Franco was impleaded as party-defendant only on May 15, 1990. The Makati RTC had yet to acquire jurisdiction over the person of Franco when BPI-FB garnished his accounts.[43] Effectively, therefore, the Makati RTC had no authority yet to bind the deposits of Franco through the writ of attachment, and consequently, there was no legal basis for BPIBPI-FB makes capital of Francos belated allegation relative to this particular arrangement. It insists that the transaction with Quiaoit was not specifically alleged in Francos complaint before the Manila RTC. However, it appears that BPI-FB had impliedly consented to the trial of this issue given its extensive cross-examination of Quiaoit. Fifth. Anent the CAs finding that BPI-FB was in bad faith and as such liable for the advance interest it deducted from Francos time deposit account, and for moral as well as exemplary damages, we find it proper to reinstate the ruling of the trial court, and allow only Section 5, Rule 10 of the Rules of Court provides: the recovery of nominal damages in the amount of P10,000.00. However, we retain the CAs award of P75,000.00 as attorneys fees. Section 5. Amendment to conform to or authorize presentation of evidence. When In granting Francos prayer for interest on his time deposit account and for moral and exemplary damages, the CA attributed bad faith to BPI-FB because it (1) completely disregarded its obligation to Franco; (2) misleadingly claimed that Francos deposits were under garnishment; (3) misrepresented that Francos current account was not on file; and (4) refused to return the P400,000.00 despite the fact that the ostensible owner, Quiaoit, wanted the amount returned to Franco. FB to dishonor the checks issued by Franco. complaint, the application for attachment, on the defendant within the Philippines. Notice of Garnishment only on September 27, 1989, several days after the two checks he issued were dishonored by BPI-FB on September 20 and 21, 1989. Verily, it was premature for BPI-FB to freeze Francos accounts without even awaiting service of the Makati RTCs Notice of Garnishment on Franco.

issues not raised by the pleadings are tried with the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is now within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and the ends of substantial justice will be subserved thereby. The court may grant a continuance to enable the amendment to be made. (Emphasis supplied)

In this regard, we are guided by Article 2201 of the Civil Code which provides:

Article 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonable

In all, BPI-FBs argument that this case is not the right forum for Franco to recover the P400,000.00 begs the issue. To reiterate, Quiaoit, testifying during the trial, unequivocally disclaimed ownership of the funds in his account, and pointed to Franco as the actual owner thereof. Clearly, Francos action for the recovery of his deposits appropriately covers the deposits in Quiaoits account.

foreseen at the time the obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation. (Emphasis supplied.)

Fourth. Notwithstanding all the foregoing, BPI-FB continues to insist that the dishonor of Francos checks respectively dated September 11 and 18, 1989 was legally in order in view of the Makati RTCs supplemental writ of attachment issued on September 14, 1989. It posits that as the party that applied for the writ of attachment before the Makati RTC, it need not be served with the Notice of Garnishment before it could place Francos accounts under garnishment. We find, as the trial court did, that BPI-FB acted out of the impetus of self-protection and not out of malevolence or ill will. BPI-FB was not in the corrupt state of mind contemplated in Article 2201 and should not be held liable for all damages now being imputed to it for its breach of obligation. For the same reason, it is not liable for the unearned interest on the time deposit.

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Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it partakes of the nature of fraud.[44] We have held that it is a breach of a known duty through some motive of interest or ill will.[45] In the instant case, we cannot attribute to BPI-FB fraud or even a motive of selfenrichment. As the trial court found, there was no denial whatsoever by BPI-FB of the existence of the accounts. The computer-generated document which indicated that the current account was not on file resulted from the prior debit by BPI-FB of the deposits. The remedy of freezing the account, or the garnishment, or even the outright refusal to honor any transaction thereon was resorted to solely for the purpose of holding on to the funds as a security for its intended court action,[46] and with no other goal but to ensure the integrity of the accounts. SO ORDERED. G.R. No. L-69002 June 30, 1988 REPUBLIC OF THE PHILIPPINES, petitioner, vs. AMANDA LAT VDA. DE CASTILLO, FLORENCIO T. CASTILLO, SOLEDAD LOTA CASTILLO, CARLOS L. CASTILLO, NIEVES KATIGBAK CASTILLO, MARIANO L. CASTILLO, HIPOLITA DYTIAPCO We have had occasion to hold that in the absence of fraud or bad faith,[47] moral damages cannot be awarded; and that the adverse result of an action does not per se make the action wrongful, or the party liable for it. One may err, but error alone is not a ground for granting such damages.[48] CASTILLO, AIDA CASTILLO HERRERA, HERMITO HERRERA, JOSE L. CASTILLO, LILIA MACEDA CASTILLO, TERESITA L. CASTILLO, REGISTER OF DEEDS OF BATANGAS and THE INTERMEDIATE APPELLATE COURT, respondents. Castro, Nardo, Quintanilla, Gonzales & Macatangay Law Office for respondents. No pronouncement as to costs. WHEREFORE, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated November 29, 1995 isAFFIRMED with the MODIFICATION that the award of unearned interest on the time deposit and of moral and exemplary damages is DELETED.

An award of moral damages contemplates the existence of the following requisites: (1) there must be an injury clearly sustained by the claimant, whether physical, mental or psychological; (2) there must be a culpable act or omission factually established; (3) the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) the award for damages is predicated on any of the cases stated in Article 2219 of the Civil Code.[49]

PARAS, J.: This is a petition for review on certiorari of the April 26, 1984 Decision of the then Intermediate Appellate Court *reversing the February 6, 1976 Decision of the then Court of First Instance of Batangas, Branch VI, in Civil Case No. 2044. The antecedental facts of this case, as found by the then Intermediate Appellate Court, are as follows: Sometime in 1951, the late Modesto Castillo applied for the registration of two parcels of land,

Franco could not point to, or identify any particular circumstance in Article 2219 of the Civil Code,[50] upon which to base his claim for moral damages.

Lots 1 and 2, located in Banadero, Tanauan, Batangas, described in Plan Psu-119166, with a total area of 39,755 square meters. In a decision dated August 31, 1951, the said Modesto Castillo, married to Amanda Lat, was declared the true and absolute owner of the land with the

Thus, not having acted in bad faith, BPI-FB cannot be held liable for moral damages under Article 2220 of the Civil Code for breach of contract.[51]

improvements thereon, for which Original Certificate of Title No. 0-665 was, issued to him by the Register of Deeds at Batangas, Batangas, on February 7, 1952. By virtue of an instrument dated March 18, 1960, the said Lots 1 and 2 covered by Original Certificate of Title No. 0-665,

We also deny the claim for exemplary damages. Franco should show that he is entitled to moral, temperate, or compensatory damages before the court may even consider the question of whether exemplary damages should be awarded to him.[52] As there is no basis for the award of moral damages, neither can exemplary damages be granted.

together with Lot No. 12374 covered by Transfer Certificate of Title No. 3254-A and Lot No. 12377 covered by Transfer Certificate of Title No. 3251-A, were consolidated and sub-divided into Lots 1 to 9 under Pcs-1046. After the death of Modesto Castillo, or on August 31, 1960, Amanda Lat Vda. de Castillo, et al., executed a deed of partition and assumption of mortgage in favor of Florencio L. Castillo, et al., as a result of which Original Certificate of Title No. D-665

While it is a sound policy not to set a premium on the right to litigate,[53] we, however, find that Franco is entitled to reasonable attorneys fees for having been compelled to go to court in order to assert his right. Thus, we affirm the CAs grant ofP75,000.00 as attorneys fees.

was cancelled, and in lieu thereof, new transfer cerfificates of title were issued to Florencio Castillo, et al., to wit: Transfer Certificate of Title No. 21703 (Lot 4) (and) Transfer Certificate of Title No. 21704 to Florencio Castillo (Lot 5); Transfer Certificate of Title No. T-21708 to Carlos L. Castillo (Lot 7); Transfer Certificate of Title No. T-21712 to Mariano L. Castillo (Lot 6); Transfer Certificate of Title No. T-21713 to Jose L. Castillo (Lot 9); Transfer Certificate of Title No. T-

Attorneys fees may be awarded when a party is compelled to litigate or incur expenses to protect his interest,[54] or when the court deems it just and equitable.[55] In the case at bench, BPI-FB refused to unfreeze the deposits of Franco despite the Makati RTCs Order Lifting the Order of Attachment and Quiaoits unwavering assertion that the P400,000.00 was part of Francos savings account. This refusal constrained Franco to incur expenses and litigate for almost two (2) decades in order to protect his interests and recover his deposits. Therefore, this Court deems it just and equitable to grant Franco P75,000.00 as attorneys fees. The award is reasonable in view of the complexity of the issues and the time it has taken for this case to be resolved.[56]

21718 to Aida C. Herrera (Lot 2); and Transfer Certificate of Title No. T-21727 to Teresita L. Castillo (Lot 8). The Republic of the Philippines filed Civil Case No. 2044 with the lower court for the annulment of the certificates of title issued to defendants Amanda Lat Vda. de Castillo, et al., as heirs/successors of Modesto Castillo, and for the reversion of the lands covered thereby (Lots 1 and 2, Psu-119166) to the State. It was alleged that said lands had always formed part of the Taal Lake, washed and inundated by the waters thereof, and being of public ownership, it could not be the subject of registration as private property. Appellants herein, defendants below, alleged in their answer that the Government's action was already barred by the decision of the registration court; that the action has prescribed; and that the government was

Sixth. As for the dismissal of BPI-FBs counter-claim, we uphold the Manila RTCs ruling, as affirmed by the CA, that BPI-FB is not entitled to recover P3,800,000.00 as actual damages. BPIFBs alleged loss of profit as a result of Francos suit is, as already pointed out, of its own making. Accordingly, the denial of its counter-claim is in order.

estopped from questioning the ownership and possession of appellants. After trial, the then Court of First Instance of Batangas, Branch VI, presided over by Honorable Benjamin Relova, in a Decision dated February 6, 1976 (Record on Appeal, pp. 62-69), ruled in favor of herein petitioner Republic of the Philippines. The decretal portion of the said decision, reads:

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WHEREFORE, the Register of Deeds of Batangas is hereby ordered to cancel Original Certificate of Title No. 0-665 in the name of Modesto Castillo and the subsequent Transfer of Certificates of Title issued over the property in the names of the defendants. Lots Nos. 1 and 2 of Plan Psu19166 are hereby declared public lands belonging to the state. Without pronouncement as to costs. The Court of Appeals, on appeal, in a Decision promulgated on April 26,1984, reversed and set aside the appealed decision, and dismissed the complaint (Record, pp. 31-41). Herein petitioner filed a Motion for Reconsideration (Record, pp. 42-51), but the same was denied in a Resolution promulgated on October 12,1984 (Record, p. 52). Hence, the instant petition. The sole issue raised in this case is whether or not the decision of the Land Registration Court involving shore lands constitutes res adjudicata. There is no question that one of the requisites of res judicata is that the court rendering the final judgment must have jurisdiction over the subject matter (Ramos v. Pablo, 146 SCRA 24 [1986]; that shores are properties of the public domain intended for public use (Article 420, Civil Code) and, therefore, not registrable. Thus, it has long been settled that portions of the foreshore or of the territorial waters and beaches cannot be registered. Their inclusion in a certificate of title does not convert the same into properties of private ownership or confer title upon the registrant (Republic v. Ayala y Cia, 14 SCRA, 259 [1965], citing the cases of Dizon, et al. v. Bayona, et al., 98 Phil. 943; and Dizon, et al. v. Rodriguez, et al., 13 SCRA 704). But an important bone of contention is the nature of the lands involved in this case. Petitioner contends "that "Lots 1 and 2, PSU-119166 had always formed part of the Taal Lake, washed and inundated by the waters thereof. Consequently, the same were not subject to registration, being outside the commerce of men; and that since the lots in litigation are of public domain (Art. 502), par. 4 Civil Code) the registration court (of 1951) did not have jurisdiction to adjudicate said lands as private property, hence, res judicata does not apply. (Rollo, pp. 37-38). The Government presented both oral and documentary evidence. As summarized by the Intermediate Appelate Court (now Court of Appeals), the testimonies of the witnesses for the petitioner are as follows: 1. Rosendo Arcenas, a Geodetic Engineer connected with the Bureau of Lands since 1961, testified to the effect that Lots 1 and 2, Psu-119166, which are the lots in question, adjoin the cadastral survey of Tanauan, Batangas (Cad. 168); that the original boundary of the original cadastral survey was foreshore land as indicated on the plan; that the cadastral survey of Tanauan was executed sometime in 1923; that the first survey executed of the land after 1923 was the one executed in 1948 under Plan Psu-119166 that in the relocation survey of the disputed lots in 1962 under SWO-40601, said lots were annotated on the plan as claimed by the Republic of the Philippines in the same manner that it was so annotated in Plan Psu119166; thus showing that the Government was the only claimant of the land during the survey in 1948; that during the relocation survey made in 1962, old points cannot be Identified or located because they were under water by about forty centimeters; that during the ocular inspection of the premises on November 23, 1970, he found that 2 monuments of the lots in question were washed out by the waters of the Baloyboy Creek; that he also found duck pens along the lots in question; that there are houses in the premises as well as some camotes and bananas; and that he found also some shells ('suso') along the banks of the Taal lake (Tsn, Nov. 16, 1970, pp. 13-21; Feb. 16, 1971, pp. 4-36). 2. Braulio Almendral testified to the effect that he is a resident of Tanauan, Batangas, near the Taal lake; that like himself there are other occupants of the land among whom are Atanacio Tironas, Gavino Mendoza, Juliano Tirones, Agapito Llarena, etc.; that it was they who filled up the area to make it habitable; that they filled up the area with shells and sand; that their occupation is duck raising; and that the Castillos never stayed in or occupied the premises (Tsn, Nov. 16, 1970, pp. 32-50). 3. Arsenio Ibay, a Geodetic Engineer connected with the Bureau of Lands since 1968, also testified to the effect that in accordance with the cadastral plan of Tanauan, the only private claim of Sixto Castillo referred to Lots 1006 to 1008; that the Castillos never asserted any private claim to the lots in question during the cadastral survey;' that in the preparation of plan Psu-119166, Lots 12374 and 12377 were made as reference to conform to previously approved plans; that lot 12374 is a portion of cadastral lot 10107, SWO-86738 while Lot 22377 is a portion of Lot 10108 of the same plan (Tsn, Nov. 25, 1970, pp. 115-137). 4. Jose Isidro, a Land Investigator of the Bureau of Lands, testified to the effect that pursuant to the order of the Director of Lands, he, together with Engineer Rufino Santiago and the barrio captain of Tanauan, Batangas, conducted an investigation of the land in question; that he submitted a report of investigation, dated October 19, 1970 (Exh. H-1); that portions of the lot in question were covered by public land applications filed by the occupants thereof; that Engineer Santiago also submitted a report (Exh. H-8); that he had notified Dr. Mariano Castillo before conducting the investigation (Tsn, Nov. 25,1970, pp. 137-162). 5. Rufino Santiago, another Geodetic Engineer connected with the Bureau of Lands, testified to the effect that on October 19,1970, he submitted a report of investigation regarding the land in question; that he noted on the plan Exhibit H-9 the areas on which the houses of Severo Alcantara and others were built; that he found that the land was planted to coconuts which are about 15 years old; that the land is likewise improved with rice paddies; that the occupants thereof are duck raisers; that the area had been elevated because of the waste matters and duck feeds that have accumulated on the ground through the years (Tsn, Nov. 26,1970, pp. 163-196). 6. Pablo Tapia, Barrio Captain of Tanauan, Batangas, since 1957, testified to the effect that the actual occupants of Lots I and 2 are Atanacio Tirones,tc.; that during the war the water line reached up to a point marked Exhibit A-9 and at present the water has receded to a point up to Exhibit A-12; that the reasons why the waters of Taal lake have receded to the present level is because of the fillings made by the people living in Lots 1 and 2; that there are several duck pens all over the place; that the composition of the soil is a mixture of mud and duck feeds; that improvements consist of bananas, bamboos and palay; that the shoreline is not even in shape because of the Baloyboy Creek; that the people in the area never came to know about the registration case in which the lots in question were registered; that the people living in the area, even without any government aid, helped one another in the construction of irrigated rice paddies; that he helped them file their public land applications for the portions occupied by them; that the Castillos have never been in possession of the premises; that the people depend upon duck raising as their means of their livelihood; that Lots 1 and 2 were yet inexistent during the Japanese occupation; and that the people started improving the area only during liberation and began to build their houses thereon. (Tsn, Nov. 26,1970, pp. 197-234). Among the exhibits formally offered by the Government are: the Original Plan of Tanauan, Batangas, particularly the Banader Estate, the Original Plan of PSU-119166, Relocation Verification Survey Plan, maps, and reports of Geodetic Engineers, all showing the original shoreline of the disputed areas and the fact that the properties in question were under water at the time and are still under water especially during the rainy season (Hearing, March 17,1971, TSN, pp. 46-47). On the other hand, private respondents maintain that Lots 1 and 2 have always been in the possession of the Castillo family for more than 76 years and that their possession was public, peaceful, continuous, and adverse against the whole world and that said lots were not titled during the cadastral survey of Tanauan, because they were still under water as a result of the eruption of Taal Volcano on May 5, 1911 and that the inundation of the land in question by the waters of Taal Lake was merely accidental and does not affect private respondents' ownership and possession thereof pursuant to Article 778 of the Law of Waters. They finally insisted that this issue of facts had been squarely raised at the hearing of the land registration case and, therefore, res judicata (Record on Appeal, pp. 63-64). They submitted oral and documentary evidence in support of their claim. Also summarized by respondent Appellate Court, the testimonies of the witnesses of private respondents are as follows: 1. Silvano Reano, testified to the effect that he was the overseer of the property of the late Modesto Castillo located at Banadero,Tanauan, Batangas since 1944 to 1965; that he also knows Lots 1 and 2, the parcels of land in question, since he was managing said property; that the occupants of said Lots 1 and 2 were engaged in duck raising; that those occupants were

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paying the Castillos certain amount of money because their animals used to get inside the lots in question; that he was present during the survey of the land in 1948; and that aside from the duck pens which are built in the premises, the land is planted to rice (Tsn, April 14, 1971, pp. 62-88). 2. Dr. Mariano Castillo, testified to the effect that the late Modesto Castillo was a government official who held high positions in the Government; and that upon his death the land was subdivided among his legal heirs. (Appellee's Brief, pp. 4-9). As above-stated, the trial court decided the case in favor of the government but the decision was reversed on appeal by the Court of Appeals. A careful study of the merits of their varied contentions readily shows that the evidence for the government has far outweighed the evidence for the private respondents. Otherwise stated, it has been satisfactorily established as found by the trial court, that the properties in question were the shorelands of Taal Lake during the cadastral survey of 1923. Explaining the first survey of 1923, which showed that Lots 1 and 2 are parts of the Taal Lake, Engineer Rosendo Arcenas testified as follows: ATTY. AGCAOILI: Q Now, you mentioned Engineer that a subject matter of that plan which appears to be Lots 1 and 2 are adjoining cadastral lots of the Tanauan Cadastre, now, will you please state to the Court what is the basis of that statement of yours? A The basis of that statement is the plan itself, because there is here an annotation that the boundary on the northeastern side is Tanauan Cadastre 168 which indicates that the boundary of the original cadastral survey of Tanauan Cadastre way back in the year 1923 adjoins a foreshore land which is also indicated in this plan as foreshore lands of Taal lake, sir. xxx xxx xxx Q Now, on this plan Exhibit "A-2", there are two lots indicated namely, Lots 12374 and 12377, what do these lots represent? A This is the cadastral lot executed in favor of a certain Modesto Castillo that corresponds to Lots 12374 and another Lot 12377, sir. Q At the time this survey plan Psu-119166 and marked as Exhibit "A-2" was executed in 1948, were these lots 1 and 2 already in existence as part of the cadastral survey? A No, sir, because there is already a foreshore boundary. Q Do I understand from you Mr. Witness at the time of the survey of this land these two lots form part of this portion? A Yes, sir. Q When again was the cadastral survey of Tanauan, Batangas, executed if you know? A In the year 1923, sir. (Hearing of Nov. 16, 1970, TSN pp. 15-17). Such fact was further verified in the Verification-Relocation Survey of 1948 by Engineer Arcenas who conducted said survey himself and reported the following: That as per original plan Psu-119166, it appears that Lot 1 and Lot 2, Psu-119166 surveyed and approved in the name of Modesto Castillo is a portion of Taal Lake and as such it appears to be under water during the survey of cadastral Lot No. 12374 and Lot No. 12377, which was surveyed and approved in the name of Modesto Castillo under Cad. 168. To support this theory is the annotation appearing and printed along lines 2-3-4-5 of Lot 1, Psu-119166 and along lines 4-5-6 of Lot 2, Psu-119166 which notations clearly indicates that such boundary of property was a former shorelines of Taal Lake, in other words, it was the extent of cultivation being the shorelines and the rest of the area going to the southwestern direction are already covered by water level. Another theory to bolster and support this Idea is the actual location now in the verificationrelocation survey of a known geographic point were Barrio Boundary Monument (BBM N. 22) is under water level quite for sometimes as evidence by earthworks (collection of mud) that amount over its surface by eighty (80) centimeters below the ground, see notation appearing on verification-relocation plan previously submitted. (Re-Verification-Relocation Survey Exhibits, pp. 64-65). Said surveys were further confirmed by the testimonies of witnesses to the effect that from 1950 to 1969, during rainy season, the water of Taal lake even went beyond the questioned lots; and that the water, which was about one (1) foot, stayed up to more or less two (2) to three (3) months (Testimonies of Braulio Almendral and Anastacio Tirones both residents of Banadero, Tanauan, Batangas (Hearing of Nov. 16, 1970, TSN, pp. 41-42 and Hearing of Nov. 23, 1970, TSN, pp. 93, 98-99, respectively). In the Relocation Survey of 1962, there were no definite boundary or area of Lots 1 and 2 because a certain point is existing which was under water by 40 centimeters (Testimony of Engineer Arcena, Hearing of Nov. 16,1970, TSN, p. 20). Lakeshore land or lands adjacent to the lake, like the lands in question must be differentiated from foreshore land or that part of the land adjacent to the sea which is alternately covered and left dry by the ordinary flow of the tides (Castillo, Law on Natural Resources, Fifth Edition, 1954, p. 67). Such distinction draws importance from the fact that accretions on the bank of a lake, like Laguna de Bay, belong to the owners of the estate to which they have been added (Gov't. v. Colegio de San Jose, 53 Phil. 423) while accretion on a sea bank still belongs to the public domain, and is not available for private ownership until formally declared by the government to be no longer needed for public use (Ignacio v. Director of Lands, 108 Phil. 335 [1960]). But said distinction will not help private respondents because there is no accretion shown to exist in the case at bar. On the contrary, it was established that the occupants of the lots who were engaged in duck raising filled up the area with shells and sand to make it habitable. The defense of long possession is likewise not available in this case because, as already ruled by this Court, mere possession of land does not by itself automatically divest the land of its public character (Cuevas v. Pineda, 143 SCRA 674 [1968]). PREMISES CONSIDERED, the April 26,1984 Decision of the then Intermediate Appellate Court is hereby SET ASIDE and REVERSED and the February 6,1976 Decision of the then Court of First Instance of Batangas is hereby AFFIRMED and REINSTATED. SO ORDERED.