[G.R. No. 149295.

September 23, 2003]

PHILIPPINE NATIONAL BANK, petitioner, vs. GENEROSO DE JESUS, represented
by his Attorney-in-Fact, CHRISTIAN DE JESUS, respondent.
Petitioner Philippine National Bank disputes the decision handed down by
the Court of Appeals promulgated on 23 March 2001 in CA-G.R. CV No. 56001,
entitled Generoso De Jesus, represented by his Attorney-in-Fact, Christian De
Jesus, versus Philippine National Bank. The assailed decision has affirmed the
judgment rendered by the Regional Trial Court, Branch 44, of Mamburao,
Occidental Mindoro, declaring respondent Generoso de Jesus as being the true
and lawful owner of the 124-square-meter portion of the land covered by
Transfer Certificate of Title (TCT) No. T-17197 and ordering petitioner bank to
vacate the premises, to deliver possession thereof to respondent, and to remove
the improvement thereon.
It would appear that on 10 June 1995, respondent filed a complaint against
petitioner before the Regional Trial Court of Occidental Mindoro for recovery of
ownership and possession, with damages, over the questioned property. In his
complaint, respondent stated that he had acquired a parcel of land situated in
Mamburao, Occidental Mindoro, with an area of 1,144 square meters covered by
TCT No. T-17197, and that on 26 March 1993, he had caused a verification survey
of the property and discovered that the northern portion of the lot was being
encroached upon by a building of petitioner to the extent of 124 square
meters. Despite two letters of demand sent by respondent, petitioner failed and
refused to vacate the area.
Petitioner, in its answer, asserted that when it acquired the lot and the
building sometime in 1981 from then Mayor Bienvenido Ignacio, the
encroachment already was in existence and to remedy the situation, Mayor
Ignacio offered to sell the area in question (which then also belonged to Ignacio)
to petitioner at P100.00 per square meter which offer the latter claimed to have
accepted. The sale, however, did not materialize when, without the knowledge
and consent of petitioner, Mayor Ignacio later mortgaged the lot to the
Development Bank of the Philippines.
The trial court decided the case in favor of respondent declaring him to be
the rightful owner of the disputed 124-square-meter portion of the lot and
ordering petitioner to surrender possession of the property to respondent and to
cause, at its expense, the removal of any improvement thereon.
The Court of Appeals, on appeal, sustained the trial court but it ordered to
be deleted the award to respondent of attorneys fees, as well as moral and
exemplary damages, and litigation expenses.

Petitioner went to this Court, via a petition for review, after the appellate
court had denied the banks motion for reconsideration, here now contending
that 1. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN ADJUDGING PNB A
BUILDER IN BAD FAITH OVER THE ENCROACHED PROPERTY IN QUESTION;
2. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN NOT APPLYING IN FAVOR
OF PNB THE PROVISION OF ARTICLE 448 OF THE CIVIL CODE AND THE RULING IN
TECNOGAS PHILIPPINES MANUFACTURING CORP. VS. COURT OF APPEALS, G.R.
[1]
No. 108894, February 10, 1997, 268 SCRA 7.
The Regional Trial Court and the Court of Appeals have both rejected the
idea that petitioner can be considered a builder in good faith. In the context that
such term is used in particular reference to Article 448, et seq., of the Civil Code,
a builder in good faith is one who, not being the owner of the land, builds on that
land believing himself to be its owner and unaware of any defect in his title or
mode of acquisition.
The various provisions of the Civil Code, pertinent to the subject, read:
Article 448. The owner of the land on which anything has been built, sown, or
planted in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in Articles 546
and 548, or to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent. However, the builder or planter cannot
be obliged to buy the land if its value is considerably more than that of the
building or trees. In such a case, he shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
Article 449. He who builds, plants, or sows in bad faith on the land of another,
loses what is built, planted or sown without right to indemnity.
Article 450. The owner of the land on which anything has been built, planted or
sown in bad faith may demand the demolition of the work, or that the planting or
sowing be removed, in order to replace things in their former condition at the
expense of the person who built, planted or sowed; or he may compel the builder
or planter to pay the price of the land, and the sower the proper rent.

A builder in good faith can, under the foregoing provisions, compel the
landowner to make a choice between appropriating the building by paying the
proper indemnity or obliging the builder to pay the price of the land. The choice
belongs to the owner of the land, a rule that accords with the principle of
accession, i.e., that the accessory follows the principal and not the other way
[2]
around. Even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. He much choose one. He cannot, for instance,
[3]
compel the owner of the building to instead remove it from the land. In order,
however, that the builder can invoke that accruing benefit and enjoy his
corresponding right to demand that a choice be made by the landowner, he
should be able to prove good faith on his part.
Good faith, here understood, is an intangible and abstract quality with no
technical meaning or statutory definition, and it encompasses, among other
things, an honest belief, the absence of malice and the absence of design to
defraud or to seek an unconscionable advantage. An 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
[4]
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
[5]
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
[6]
invalidates it.
Given the findings of both the trial court and the appellate court, it should
be evident enough that petitioner would fall much too short from its claim of
good faith. Evidently, petitioner was quite aware, and indeed advised, prior to its
acquisition of the land and building from Ignacio that a part of the building sold to
it stood on the land not covered by the land conveyed to it.
Equally significant is the fact that the building, constructed on the land by
Ignacio, has in actuality been part of the property transferred to
petitioner. Article 448, of the Civil Code refers to a piece of land whose ownership
is claimed by two or more parties, one of whom has built some works (or sown or
planted something) and not to a case where the owner of the land is the builder,
sower, or planter who then later loses ownership of the land by sale or
otherwise for, elsewise stated, where the true owner himself is the builder of
works on his own land, the issue of good faith or bad faith is entirely
[7]
irrelevant.
In fine, petitioner is not in a valid position to invoke the provisions of Article
448 of the Civil Code. The Court commiserates with petitioner in its present

predicament; upon the other hand, respondent, too, is entitled to his rights under
the law, particularly after having long been deprived of the enjoyment of his
property. Nevertheless, the Court expresses hope that the parties will still be
able to come up with an arrangement that can be mutually suitable and
acceptable to them.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 56001
is AFFIRMED. No costs.
G.R. No. L-33422 May 30, 1983
ROSENDO BALUCANAG vs HON. JUDGE ALBERTO J. FRANCISCO
This petition for review of the decision of the Court of First Instance of Manila in
Civil Case No. 67503 calls for a determination of the respective rights of the lessor
and the lessee over the improvements introduced by the latter in the leased
premises.
Cecilia dela Cruz Charvet was the owner of a 177.50 square meter lot located in
Zamora Street, Pandacan, Manila, covered by Transfer Certificate of Title No.
25664. On August 31, 1952, Mrs. Charvet leased said lot to respondent Richard
Stohner for a period of five [5] years at the monthly rental of 2140.00, payable in
advance within the first ten [10] days of each month. The lease
1
contract provided, among others, that:
IV. The lessee may erect such buildings upon and make such improvements to the
leased land as he shag see fit. All such buildings and improvements shall remain
the property of the lessee and he may remove them at any nine, it being agreed,
however, that should he not remove the said buildings and improvements within
a period of two months after the expiration of this Agreement, the Lessor may
remove the said buildings and improvements or cause them to be removed at the
expense of the Lessee.
During the existence of the lease, Stohner made fillings on the land and
constructed a house thereon, said improvements being allegedly valued at
P35,000.00.
On March 8, 1966, Mrs. Charvet sold the said lot to petitioner Rosendo
2
Balucanag.

For Stohner's failure to pay the rents, Balucanag, thru counsel, wrote Stohner a
3
letter demanding that he vacate the premises. In reply thereto, Stohner, also
thru counsel, claimed that he was a builder in good faith of the residential house
erected in the land. He offered the following proposals for a possible
compromise, to wit:
[a] Mr. Stohner will purchase the said lot from your client with the interest of
12% per annum on the value, or
[b] Your client Mr. Rosendo Balucanag will reimburse our client in the total
amount of P35,000.00 for the improvements and construction he has made on
the lot in question.
As no agreement was reached, Balucanag instituted in the City Court of Manila an
ejectment suit against Stohner and, after due trial, the court rendered a decision,
the decretal portion of which reads as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered,
ordering the defendant to pay the plaintiff the sum of P360.00 as back rentals
from December, 1965 to August 1966 at the rate of P40.00 a month and to vacate
the premises. The defendant is further ordered to pay the sum of P100.00 as
Attomey's fees which is considered reasonable within the premises.
On appeal, the Court of First Instance of Manila, Branch IX, presided by
respondent Judge Alberto J. Francisco, after conducting a trial de novo, rendered
a decision, setting aside the judgment of the city court and dismissing the
petitioner's complaint. Respondent judge held that Stohner was a builder in good
faith because he had constructed the residential house with the consent of the
original lessor, Mrs. Charvet, and also because the latter, after the expiration of
the lease contract on August 31, 1957, had neither sought Stohner's ejectment
from the premises, nor the removal of his house therefrom. Invoking Articles 448
4
and 546 of the Civil Code. respondent judge concluded that Stohner, being a
builder in good faith, cannot be ejected until he is reimbursed of the value of the
improvements.
Frustrated in his effort to have the decision reconsidered, Balucanag filed the
instant petition for review.
We find the petition impressed with merit. Paragraph IV of the lease contract
entered into by Stohner with Mrs. Charvet specifically provides that "... such

buildings and improvements shan remain the property of the lessee and he may
remove them at any time, it being agreed, however, that should he not remove
the said buildings and improvements within a period of two months after the
expiration of this Agreement, the Lessor may remove the said buildings and
improvements or cause them to be removed at the expense of the Lessee."
Respondent Stohner does not assail the validity of this stipulation, Neither has he
advanced any reason why he should not be bound by it.
But even in the absence of said stipulation, respondent Stohner cannot be
considered a builder in good faith. Article 448 of the Civil Code, relied upon by
respondent judge, applies only to a case where one builds on land in the belief
that he is the owner thereof and it does not apply where one's only interest in
the land is that of a lessee under a rental contract. In the case at bar, there is no
dispute that the relation between Balucanag and Stohner is that of lessor and
lessee, the former being the successor in interest of the original owner of the lot.
5
As we ruled inLopez, Inc. vs. Phil. and Eastern Trading Co., Inc., "... the principle
of possessor in good faith refers only to a party who occupies or possess property
in the belief that he is the owner thereof and said good faith ends only when he
discovers a flaw in his title so as to reasonably advise or inform him that after all
he may not be the legal owner of said property. It cannot apply to a lessee
because as such lessee he knows that he is not the owner of he leased premises.
Neither can he deny the ownership or title of his lessor. ... A lessee who
introduces improvements in the leased premises, does so at his own risk in the
sense that he cannot recover their value from the lessor, much less retain the
premises until such reimbursement. ..."
The law applicable to the case at bar is Article 1678 of the Civil Code, which We
quote:
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 the 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. ...
This article gives the lessor the option to appropriate the useful improvements by
6
paying one-half of their value, And the lessee cannot compel the lessor to
appropriate the improvements and make reimbursement, for the lessee's right

under the law is to remove the improvements even if the leased premises may
suffer damage thereby. But he shall not cause any more damage upon the
property than is necessary.
One last point. It appears that while the lease contract entered into by Stohner
and Mrs. Charvet had expired on August 31, 1957, he nevertheless continued in
possession of the premises with the acquiescence of Mrs. Charvet and later, of
Balucanag. An implied new lease or tacita reconduccion was thus created
between the parties, the period of which is established by Article 1687 of the Civil
Code thus:
Art. 1687. If the period for the lease has not been fixed, it is understood to be
from year to year, if the rent agreed upon is annual; from month to month, if it is
monthly: from week to week, if the rent is weekly: and from day to day, if the
rent is to be paid daily. ...
Under the above article, the duration of the new lease must be deemed from
month to month, the agreed rental in the instant case being payable on a
monthly basis. The lessor may thus terminate the lease after each month with
due notice upon the lessee. After such notice, the lessee's right to continue in
possession ceases and his possession becomes one of detainer. Furthermore,
Stohner's failure to pay the stipulated rentals entities petitioner to recover
possession of the premises.
WHEREFORE, the decision in Civil Case No. 67503 is hereby set aside, with costs
against respondent Stohner. The latter is ordered to vacate the premises in
question and to pay Rogelio Balucanag the rentals due from March 1969 up to
the time he surrenders the premises, at the rate of P40.00 a month.
G.R. No. 115814 May 26, 1995
PEDRO P. PECSON vs. COURT OF APPEALS,
1

This petition for review on certiorari seeks to set aside the decision of the Court
2
of Appeals in CA-G.R. SP No. 32679 affirming in part the order of the Regional
Trial Court (RTC) of Quezon City, Branch 101, in Civil Case No. Q-41470.
The factual and procedural antecedents of this case as gathered from the record
are as follows:

Petitioner Pedro P. Pecson was the owner of a commercial lot located in Kamias
Street, Quezon City, on which he built a four-door two-storey apartment building.
For his failure to pay realty taxes amounting to twelve thousand pesos
(P12,000.00), the lot was sold at public auction by the city Treasurer of Quezon
City to Mamerto Nepomuceno who in turn sold it on 12 October 1983 to the
private respondents, the spouses Juan Nuguid and Erlinda Tan-Nuguid, for one
hundred three thousand pesos (P103,000.00).
The petitioner challenged the validity of the auction sale in Civil Case No. Q-41470
before the RTC of Quezon City. In its decision of 8 February 1989, the RTC
dismissed the complaint, but as to the private respondents' claim that the sale
included the apartment building, it held that the issue concerning it was "not a
subject of the . . . litigation." In resolving the private respondents' motion to
reconsider this issue, the trial court held that there was no legal basis for the
3
contention that the apartment building was included in the sale.
Both parties then appealed the decision to the Court of Appeals. The case was
4
docketed as CA-G.R. CV No. 2931. In its decision of 30 April 1992, the Court of
Appeals affirmed in toto the assailed decision. It also agreed with the trial court
that the apartment building was not included in the auction sale of the
commercial lot. Thus:
Indeed, examining the record we are fully convinced that it was only the land
without the apartment building which was sold at the auction sale, for
plaintiff's failure to pay the taxes due thereon. Thus, in the Certificate of Sale of
Delinquent Property To Purchaser (Exh. K, p. 352, Record) the property subject of
the auction sale at which Mamerto Nepomuceno was the purchaser is referred to
as Lot No. 21-A, Block No. K-34, at Kamias, Barangay Piahan, with an area of
256.3 sq. m., with no mention whatsoever, of the building thereon. The same
description of the subject property appears in the Final Notice To Exercise The
Right of Redemption (over subject property) dated September 14, 1981 (Exh. L, p.
353, Record) and in the Final Bill of Sale over the same property dated April 19,
1982 (Exh. P, p. 357, Record). Needless to say, as it was only the land without any
building which Nepomuceno had acquired at the auction sale, it was also only
that land without any building which he could have legally sold to the
Nuguids. Verily, in the Deed of Absolute Sale of Registered Land executed by
Mamerto Nepomuceno in favor of the Nuguids on October 25, 1983 (Exh. U, p.
366, Record) it clearly appears that the property subject of the sale for
P103,000.00 was only the parcel of land, Lot 21-A, Blk. K-34 containing an area of
256.3 sq. meters, without any mention of any improvement, much less any
building thereon. (emphases supplied)

The petition to review the said decision was subsequently denied by this
5
6
Court. Entry of judgment was made on 23 June 1993.

WHEREFORE, finding merit in the Motion, the Court hereby grants the following
prayer that:

On November 1993, the private respondents filed with the trial court a motion
for delivery of possession of the lot and the apartment building, citing article 546
7
of the Civil Code. Acting thereon, the trial court issued on 15 November 1993
8
the challenged order which reads as follows:

1. The movant shall reimburse plaintiff the construction cost of P53,000.00.

Submitted for resolution before this Court is an uncontroverted [sic] for the
Delivery of Possession filed by defendants Erlinda Tan, Juan Nuguid, et al.
considering that despite personal service of the Order for plaintiff to file within
five (5) days his opposition to said motion, he did not file any.
In support of defendant's motion, movant cites the law in point as Article 546 of
the Civil Code . . .
Movant agrees to comply with the provisions of the law considering that plaintiff
is a builder in good faith and he has in fact, opted to pay the cost of the
construction spent by plaintiff. From the complaint itself the plaintiff stated that
the construction cost of the apartment is much more than the lot, which
apartment he constructed at a cost of P53,000.00 in 1965 (par. 8 complaint). This
amount of P53,000.00 is what the movant is supposed to pay under the law
before a writ of possession placing him in possession of both the lot and
apartment would be issued.

2. The payment of P53,000.00 as reimbursement for the construction cost,

movant Juan Nuguid is hereby entitled to immediate issuance of a writ of
possession over the Lot and improvements thereon.
3. The movant having been declared as the uncontested owner of the Lot in
question as per Entry of Judgment of the Supreme Court dated June 23, 1993, the
plaintiff should pay rent to the movant of no less than P21,000.00 per month
from said date as this is the very same amount paid monthly by the tenants
occupying the lot.
4. The amount of P53,000.00 due from the movant is hereby offset against the
amount of rents collected by the plaintiff from June 23, 1993, to September 23,
1993.
The petitioner moved for the reconsideration of the order but it was not acted
upon by the trial court. Instead, on 18 November 1993, it issued a writ of
possession directing the deputy sheriff "to place said movant Juan Nuguid in
possession of subject property located at No. 79 Kamias Road, Quezon City, with
all the improvements thereon and to eject therefrom all occupants therein, their
9
agents, assignees, heirs and representatives."

However, the complaint alleges in paragraph 9 that three doors of the apartment
are being leased. This is further confirmed by the affidavit of the movant
presented in support of the motion that said three doors are being leased at a
rental of P7,000.00 a month each. The movant further alleges in his said affidavit
that the present commercial value of the lot is P10,000.00 per square meter or
P2,500,000.00 and the reasonable rental value of said lot is no less than
P21,000.00 per month.

The petitioner then filed with the Court of Appeals a special civil action
for certiorari and prohibition assailing the order of 15 November 1993, which was
10
docketed as CA-G.R. SP No. 32679. In its decision of 7 June 1994, the Court of
Appeals affirmed in part the order of the trial court citing Article 448 of the Civil
Code. In disposing of the issues, it stated:

The decision having become final as per Entry of Judgment dated June 23, 1993
and from this date on, being the uncontested owner of the property, the rents
should be paid to him instead of the plaintiff collecting them. From June 23, 1993,
the rents collected by plaintiff amounting to more than P53,000.00 from tenants
should be offset from the rents due to the lot which according to movant's
affidavit is more than P21,000.00 a month.

As earlier pointed out, private respondent opted to appropriate the improvement

introduced by petitioner on the subject lot, giving rise to the right of petitioner to
be reimbursed of the cost of constructing said apartment building, in accordance
with Article 546 of the . . . Civil Code, and of the right to retain the improvements
until he is reimbursed of the cost of the improvements, because, basically, the
right to retain the improvement while the corresponding indemnity is not paid
implies the tenancy or possession in fact of the land on which they are built . . . [2
TOLENTINO, CIVIL CODE OF THE PHILIPPINES (1992) p. 112]. With the facts extant

and the settled principle as guides, we agree with petitioner that respondent
judge erred in ordering that "the movant having been declared as the
uncontested owner of the lot in question as per Entry of Judgment of the
Supreme Court dated June 23, 1993, the plaintiff should pay rent to the movant
of no less than P21,000 per month from said date as this is the very same amount
paid monthly by the tenants occupying the lot.
We, however, agree with the finding of respondent judge that the amount of
P53,000.00 earlier admitted as the cost of constructing the apartment building
can be offset from the amount of rents collected by petitioner from June 23, 1993
up to September 23, 1993 which was fixed at P7,000.00 per month for each of
the three doors. Our underlying reason is that during the period of retention,
petitioner as such possessor and receiving the fruits from the property, is obliged
to account for such fruits, so that the amount thereof may be deducted from the
amount of indemnity to be paid to him by the owner of the land, in line with
Mendoza vs. De Guzman, 52 Phil. 164 . . . .
The Court of Appeals then ruled as follows:
WHEREFORE, while it appears that private respondents have not yet indemnified
petitioner with the cost of the improvements, since Annex I shows that the
Deputy Sheriff has enforced the Writ of Possession and the premises have been
turned over to the possession of private respondents, the quest of petitioner that
he be restored in possession of the premises is rendered moot and academic,
although it is but fair and just that private respondents pay petitioner the
construction cost of P53,000.00; and that petitioner be ordered to account for
any and all fruits of the improvements received by him starting on June 23, 1993,
with the amount of P53,000.00 to be offset therefrom.
Aggrieved by the Court of Appeals' decision, the petitioner filed the instant
petition.
The parties agree that the petitioner was a builder in good faith of the apartment
building on the theory that he constructed it at the time when he was still the
owner of the lot, and that the key issue in this case is the application of Articles
448 and 456 of the Civil Code.
The trial court and the Court of Appeals, as well as the parties, concerned
themselves with the application of Articles 448 and 546 of the Civil Code. These
articles read as follows:

Art. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in articles 546
and 548, or to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent. However, the builder or planter cannot
be obliged to buy the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building or trees after proper indemnity.
The parties shall agree upon the terms of the lease and in case of disagreement,
the court shall fix the terms thereof. (361a)
Art. 546. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until he has been reimbursed
therefor.
Useful expenses shall be refunded only to the possessor in good faith with the
same right of retention, the person who has defeated him in the possession
having the option of refunding the amount of the expenses or of paying the
increase in value which the thing may have acquired by reason thereof. (453a)
By its clear language, Article 448 refers to a land whose ownership is claimed by
two or more parties, one of whom has built some works, or sown or planted
something. The building, sowing or planting may have been made in good faith or
in bad faith. The rule on good faith laid down in Article 526 of the Civil Code shall
be applied in determining whether a builder, sower or planter had acted in good
12
faith.
Article 448 does not apply to a case where the owner of the land is the builder,
sower, or planter who then later loses ownership of the land by sale or donation.
13
This Court said so in Coleongco vs. Regalado:
Article 361 of the old Civil Code is not applicable in this case, for Regalado
constructed the house on his own land before he sold said land to Coleongco.
Article 361 applies only in cases where a person constructs a building on the land
of another in good or in bad faith, as the case may be. It does not apply to a case
where a person constructs a building on his own land, for then there can be no
question as to good or bad faith on the part of the builder.
Elsewise stated, where the true owner himself is the builder of works on his own
land, the issue of good faith or bad faith is entirely irrelevant.

Thus in strict point of law, Article 448 is not apposite to the case at bar.
Nevertheless, we believe that the provision therein on indemnity may be applied
by analogy considering that the primary intent of Article 448 is to avoid a state of
forced co-ownership and that the parties, including the two courts below, in the
main agree that Articles 448 and 546 of the Civil Code are applicable and
indemnity for the improvements may be paid although they differ as to the basis
of the indemnity.
Article 546 does not specifically state how the value of the useful improvements
should be determined. The respondent court and the private respondents
espouse the belief that the cost of construction of the apartment building in
1965, and not its current market value, is sufficient reimbursement for necessary
and useful improvements made by the petitioner. This position is, however, not
in consonance with previous rulings of this Court in similar cases. In Javier
14
vs. Concepcion, Jr., this Court pegged the value of the useful improvements
consisting of various fruits, bamboos, a house and camarin made of strong
material based on the market value of the said improvements. In Sarmiento
15
vs. Agana, despite the finding that the useful improvement, a residential house,
was built in 1967 at a cost of between eight thousand pesos (P8,000.00) to ten
thousand pesos(P10,000.00), the landowner was ordered to reimburse the
builder in the amount of forty thousand pesos (P40,000.00), the value of the
house at the time of the trial. In the same way, the landowner was required to
pay the "present value" of the house, a useful improvement, in the case of De
16
Guzman vs. De la Fuente, cited by the petitioner.

private respondents have opted to appropriate the apartment building, the

petitioner is thus entitled to the possession and enjoyment of the apartment
building, until he is paid the proper indemnity, as well as of the portion of the lot
where the building has been constructed. This is so because the right to retain
the improvements while the corresponding indemnity is not paid implies the
tenancy or possession in fact of the land on which it is built, planted or
18
sown. The petitioner not having been so paid, he was entitled to retain
ownership of the building and, necessarily, the income therefrom.
It follows, too, that the Court of Appeals erred not only in upholding the trial
court's determination of the indemnity, but also in ordering the petitioner to
account for the rentals of the apartment building from 23 June 1993 to 23
September 1993.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679 and
the Order of 15 November 1993 of the Regional Trial Court, Branch 101, Quezon
City in Civil Case No. Q-41470 are hereby SET ASIDE.
The case is hereby remanded to the trial court for it to determine the current
market value of the apartment building on the lot. For this purpose, the parties
shall be allowed to adduce evidence on the current market value of the
apartment building. The value so determined shall be forthwith paid by the
private respondents to the petitioner otherwise the petitioner shall be restored
to the possession of the apartment building until payment of the required
indemnity.

The objective of Article 546 of the Civil Code is to administer justice between the
parties involved. In this regard, this Court had long ago stated in Rivera vs. Roman
17
Catholic Archbishop of Manila that the said provision was formulated in trying
to adjust the rights of the owner and possessor in good faith of a piece of land, to
administer complete justice to both of them in such a way as neither one nor the
other may enrich himself of that which does not belong to him. Guided by this
precept, it is therefore the current market value of the improvements which
should be made the basis of reimbursement. A contrary ruling would unjustly
enrich the private respondents who would otherwise be allowed to acquire a
highly valued income-yielding four-unit apartment building for a measly amount.
Consequently, the parties should therefore be allowed to adduce evidence on the
present market value of the apartment building upon which the trial court should
base its finding as to the amount of reimbursement to be paid by the landowner.

Balucanag v Francisco Digest

Facts: The petitioner bought a lot owned by Mrs. Charvet which was then
previously leased by the latter to one Richard Stohner. The said lease contract
provided that the lessee may erect structures and improvements which shall
remain as lessee's property and he may remove them at any time. It further
provided that should the lessee fail to remove the same structures or
improvements withing two months after the expiration of the lease, the lessor
may remove them or cause them to be removed at the expense of the lessee.
Stohner made fillings on the land and constructed a house. When he failed to pay
the rent, the petitioner, through counsel, sent Stohner a demand letter ordering
him to vacate the lot. The lessee contended that he is a 'builder in good faith.'
Issue: Is the lessee a builder in good faith?

The trial court also erred in ordering the petitioner to pay monthly rentals equal
to the aggregate rentals paid by the lessees of the apartment building. Since the

Ruling: No, the lessee cannot be considered a builder in good faith. The provision
under Art. 448 of the New Civil Code (Philippine) on a builder of good faith applies

only to the owner of the land who believes he is the rightful owner thereof, but
not to a lessee who's interest in the land is derived only from a rental contract.
Neither can Stohner be considered a 'possessor in good faith'. A possessor in
good faith is a party who possesses property believing that he is its rightful owner
but discovers later on a flaw in his title that could indicate that he might not be its
legal owner. It cannot apply to a lessee because he knows right from the start
that he is merely a lessee and not the owner of the premises.
As a mere lessee, he introduces improvements to the property at his own risk
such that he cannot recover from the owner the reimbursements nor he has any
right to retain the premises until reimbursements. What applies in this case is Art.
1678 (NCC) which provides that, " 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 1/2 of the value of the
improvements at the 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."

G.R. No. L-175 April 30, 1946

IGNACIO VS HILARIO
This is a petition for certiorari arising from a case in the Court of First Instance of
Pangasinan between the herein respondents Elias Hilario and his wife Dionisia
Dres as plaintiffs, and the herein petitioners Damian, Francisco and Luis,
surnamed Ignacio, as defendants, concerning the ownership of a parcel of land,
partly rice-land and partly residential. After the trial of the case, the lower court,
presided over by Hon. Alfonso Felix, rendered judgment holding plaintiffs as the
legal owners of the whole property but conceding to defendants the ownership
of the houses and granaries built by them on the residential portion with the
rights of a possessor in good faith, in accordance with article 361 of the Civil
Code. The dispositive part of the decision, hub of this controversy, follows:

(1) That the plaintiffs are the owners of the whole property described in transfer
certificate of title No. 12872 (Exhibit A) issued in their name, and entitled to the
possession of the same;
(2) That the defendants are entitled to hold the position of the residential lot
until after they are paid the actual market value of their houses and granaries
erected thereon, unless the plaintiffs prefer to sell them said residential lot, in
which case defendants shall pay the plaintiffs the proportionate value of said
residential lot taking as a basis the price paid for the whole land according to
Exhibit B; and chanrobles virtual law library
(3) That upon defendant's failure to purchase the residential lot in question, said
defendants shall remove their houses and granaries after this decision becomes
final and within the period of sixty (60) days from the date that the court is
informed in writing of the attitude of the parties in this
respect.chanroblesvirtualawlibrary chanrobles virtual law library
No pronouncement is made as to damages and costslaw library
Once this decision becomes final, the plaintiffs and defendants may appear again
before this court for the purpose of determining their respective rights under
article 361 of the Civil Code, if they cannot come to an extra-judicial settlement
with regard to said rights.
Subsequently, in a motion filed in the same Court of First Instance but now
presided over by the herein respondent Judge Hon. Felipe Natividad, the plaintiffs
prayed for an order of execution alleging that since they chose neither to pay
defendants for the buildings nor to sell to them the residential lot, said
defendants should be ordered to remove the structure at their own expense and
to restore plaintiffs in the possession of said lot. Defendants objected to this
motion which, after hearing, was granted by Judge Natividad. Hence, this petition
by defendants praying for (a) a restraint and annulment of the order of execution
issued by Judge Natividad; (b) an order to compel plaintiffs to pay them the sum
of P2,000 for the buildings, or sell to them the residential lot for P45; or (c), a
rehearing of the case for a determination of the rights of the parties upon failure
of extra-judicial settlement.chanroblesvirtualawlibrary chanrobles virtual law
library

Wherefore, judgment is hereby rendered declaring:chanrobles virtual law library

The judgment rendered by Judge Felix is founded on articles 361 and 453 of the
Civil Code which are as follows:

ART. 361. The owner of land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the work, sowing or
planting, after the payment of the indemnity stated in articles 453 and 454, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent.chanroblesvirtualawlibrary chanrobles virtual law library
ART. 453. Necessary expenses shall be refunded to every possessor; but only the
possessor in good faith may retain the thing until such expenses are made good
to him.chanroblesvirtualawlibrary chanrobles virtual law library
Useful expenses shall be refunded to the possessor in good faith with the same
right of retention, the person who has defeated him in the possession having the
option of refunding the amount of the expenses or paying the increase in value
which the thing may have acquired in consequence thereof.
The owner of the building erected in good faith on a land owned by another, is
entitled to retain the possession of the land until he is paid the value of his
building, under article 453. The owner of the land, upon the other hand, has the
option, under article 361, either to pay for the building or to sell his land to the
owner of the building. But he cannot, as respondents here did, refuse both to pay
for the building and to sell the land and compel the owner of the building to
remove it from the land where it is erected. He is entitled to such remotion only
when, after having chosen to sell his land, the other party fails to pay for the
same. But this is not the case before us.chanroblesvirtualawlibrary chanrobles
We hold, therefore, that the order of Judge Natividad compelling defendantspetitioners to remove their buildings from the land belonging to plaintiffsrespondents only because the latter chose neither to pay for such buildings not to
sell the land, is null and void, for it amends substantially the judgment sought to
be executed and is, furthermore, offensive to articles 361 and 453 of the Civil
Code.chanroblesvirtualawlibrary chanrobles virtual law library
There is, however, in the decision of Judge Felix a question of procedure which
calls for the clarification, to avoid uncertainty and delay in the disposition of
cases. In that decision, the rights of both parties are well defined under articles
361 and 453 of the Civil Code, but it fails to determine the value of the buildings
and of the lot where they are erected as well as the periods of time within which
the option may be exercised and payment should be made, these particulars
having been left for determination apparently after the judgment has become
final. This procedure is erroneous, for after the judgment has become final, no
additions can be made thereto and nothing can be done therewith except its

execution. And execution cannot be had, the sheriff being ignorant as to how, for
how much, and within what time may the option be exercised, and certainly no
authority is vested in him to settle these matters which involve exercise of judicial
discretion. Thus the judgment rendered by Judge Felix has never become final, it
having left matters to be settled for its completion in a subsequent proceeding,
matters which remained unsettled up to the time the petition is filed in the
instant case.chanroblesvirtualawlibrary chanrobles virtual law library
For all the foregoing, the writ of execution issued by Judge Natividad is hereby set
aside and the lower court ordered to hold a hearing in the principal case wherein
it must determine the prices of the buildings and of the residential lot where they
are erected, as well as the period of time within which the plaintiffs-respondents
may exercise their option either to pay for the buildings or to sell their land, and,
in the last instance, the period of time within which the defendants-petitioners
may pay for the land, all these periods to be counted from the date the judgment
becomes executory or unappealable. After such hearing, the court shall render a
final judgment according to the evidence presented by the
parties.chanroblesvirtualawlibrary chanrobles virtual law library
Ignacio vs Hilario
Sometime during the 1940s in Pangasinan, a civil suit arose between Damian
Ignacio and Elias Hilario. Hilario was the owner of a parcel of land. He later
discovered that Ignacio built some buildings therein (a granary and a house).
After trial, Judge Antonio Felix of the Court of First Instance of Pangasinan ruled
that both were in good faith (Hilario was the owner in good faith while Ignacio
was the builder in good faith).
Judge Felix then spelled out the rights of the parties to wit:
a.) Ignacio can retain possession over the buildings he erected until after he is
paid by Hilario for the value of the buildings he erected;
b.) Hilario can choose to buy the said buildings or he can choose to sell Ignacio his
land since the value of his land was only P45.00 while the value of the buildings
erected was P2,000.00.
However, Hilario refused to avail of his options. Instead, he filed a motion in court
to have Ignacio be ejected and have them destroy the buildings he erected. Judge
Felipe Natividad (he replaced Judge Felix), granted Hilarios motion.
ISSUE: Whether or not Hilario, the owner in good faith, may eject a builder in
good faith without choosing either to appropriate the building for himself after
payment of its value or to sell his land to the builder in good faith.

HELD: No. The owner in good faith has to make a choice. He cannot dispense the
options under the law and then eject the builder in good faith. This is because
both are in good faith.
But when can the owner in good faith compel the builder in good faith to remove
the building he erected?
This is only available if after the owner in good faith chose to sell his land to the
builder in good faith and the latter fails to pay the value of the land within the
agree period. Only then can the owner in good faith compel the builder in good
faith to remove the building he erected.

G.R. No. L-11084

QUEMEL vs OLAES

April 29, 1961

Angel S. Olaes and his wife, Juliana Prudente, defendants-appellees herein, were
plaintiffs in another case (No 5442 of the CFI of Cavite), wherein Alejandro
Quemuel and his wife Ruperta Solis, plaintiffs-appellants herein were defendants.
In that case No. 5442, the Olaes spouses registered owners of lot 1095 of the San
Francisco de Malabon Estate, located in Rosario, Cavite, sought the recover of the
possession of the said lot and rentals therefor, from the Quemuel spouses, who
in their verified answer admitted plaintiffs' ownership, but contended that their
occupation was gratuitous. On March 16, 1954, the trial court ordered Quemuel
and his wife to return the possession of lot 1095 to the Olaes spouses and to pay
the latter P20.00 a month from January, 1954, until they shall have vacated the
premises. Quemuel and his wife did not appeal from said decision which became
final on April 22, 1954. Thereafter, the Olaes spouses sought the execution of the
decision and to forestall ejectment, the Quemuel spouses, filed on July 1, 1954,
the present complaint, docketed as Civil Case No. 5518, CFI of Cavite.
In the present complaint, the Quemuel spouses seek to reduce the monthly
rental of P20.00 fixed in Civil Case No. 5442, and to compel the Olaes spouses to
sell to them (Quemuels) the portion of the lot 1095 where their house is erected.
Respondents, the Olaes spouses, filed a motion to dismiss dated July 9, 1954,
alleging lack of cause of action, res adjudicata; prescription, and the cause of
action, if any, is barred by plaintiffs' failure to set it up as a counter-claim in civil
case No. 5442.
On September 17, 1954, the trial court dismissed the complaint, without
pronouncement as to costs.

An appeal was taken by plaintiffs to the Court of Appeals (Case No. CA-G.R. No.
14837-R) which, by the agreement of the parties certified the case to this Court.
The ex parte petition filed by the plaintiffs-appellants in this Court on August 9,
1956, asking that a writ of prohibition and injunction be issued to the Provincial
Sheriff of Cavite and the defendants-appellees, enjoining them from demolishing
the house of plaintiffs-appellants until there is a final decision in said case No.
14837, by the Supreme Court, was denied on August 14, 1956 by the latter court.
The lone assignment alleges that the trial court erred in dismissing the complaint
without trial on the merits and in not granting the reliefs prayed for by the
plaintiffs-appellants. Appellants stated in their brief that if there will be trial on
the merits, they would be entitled to a decision in their favor, because they will
establish by competent evidence the allegations in their complaint. And on the
claim that they were builders in good faith, they based the right to buy the lot on
which their house is built, upon the decision of Belen Uy Tayao v. Rosario Yuseco,
et al., G.R. No. T,8139, Oct. 24, 1955. It should be recalled at the outstart, that the
trial court ordered the dismissal of the complaint, which must have been granted
in all or any of the grounds therein alleged, to wit:
I. The Complaint states no cause of action.
The first cause of action on the present complaint al alleges that in Civil Case No.
5442, the trial court rendered the decision of March 16, 1954, ordering the latter
to vacate lot No. 1095 belonging to Olaes and his wife and to pay them a monthly
rental of P20.00 from January, 1954 until they shall have vacated the premises;
that plaintiff believe that the portion they are occupying belonged to them; that
they occupy only about one-half of the lot; that considering the purchase price of
the land, its assessed value and the interest the price would have earned, the
rental should not be more than 7-% or P5.60 monthly. Plaintiffs prayed that the
rental be reduced to P5.60 a month.
Assuming the truth of the above allegations, the same do not constitute a cause
of action. A cause of action presupposes a right of the plaintiff and a violation of
such right by the defendant. According to the complaint itself, the rental of
P20.00 monthly and the order to vacate, were provided in a prior judgment (Civil
Case No. 5442), which is final and its validity is not assailed. There being no law
that fixes the rental of the same land at 7 of the allowed market value, the
plaintiffs have no right thereto or aright which could be violated. The defendants
are not compelling the plaintiffs to rent the property but wanted them to vacate
the premises (Civil Case No. 5442). If the rental determined by the trial court
were excessive, the plaintiffs are free to vacate the property. For plaintiffs to

insist on possessing the property and fixing the rentals themselves, would have
no legal sanction at all.
In the second cause of action of the present complaint, the plaintiffs allege: That
they actually occupy about 384 square meters or one-half of lot 1095; of the said
area they thought they own 256 square meters by inheritance from Romualdo
Solis, father of plaintiff, Ruperta Solis, who became the owner thereof pursuant
to a verbal extrajudicial partition made in 1924; Agapita Solis who sold the entire
lot 1095 to defendants, is a sister of Romualdo Solis, and there was an error in
the inclusion of the 256 square meters in the Torrens Title and the sale; they
acquired from Valentin Solis, brother of both Romualdo and Agapita, a part of the
portion occupied by plaintiff's house and warehouse; their house has been there
for almost 34 years and is worth P4,000; the defendants are rich, have a house
and a lot of their own, and will not suffer any material or sentimental damage if
they sell to the plaintiffs one-half of lot No. 1095; plaintiff offered to pay P960 for
the portion they are occupying or P1,920.00 for the whole lot.
On the assumption that the allegations of the second cause of action are true,
what would be the rights of the parties? The plaintiffs claim that their second
cause of action is based on Article 448 in connection with Art. 546, of the new
Civil Code. A cursory reading of these provisions, however, will show that they are
not applicable to plaintiffs' case. Under Article 448, the right to appropriate the
works or improvements or "to oblige the one who built or planted to pay the
price of the land belongs to the owner of the land. The only right given to the
builder in good faith is the right to reimbursement for the improvements; the
builder, cannot compel the owner of the land to sell such land to the former. This
is assuming that the plaintiffs are builders in good faith. But the plaintiffs are not
builders in good faith. From the pleadings and the documentary evidence
submitted, it is indisputable that the land in question originally belonged to the
government as part of the Friar Lands Estate and the title thereto was in the
name of the government, until it was purchased by Agapita Solis who applied,
thru the Bureau of Lands, to purchase the land by installments. The
corresponding Sale Certificate No. 531, effective July 1, 1909 Exhibit 2) was
executed. In defendants' complaint (as plaintiffs in Civil Case No. 5442), they
alleged that they are the owners of lot 109'a and that defendants (plaintiffs
herein), "have been occupying southeastern half portion thereof, without any
right thereto, except the tolerance of plaintiffs" (defendants herein), which were
admitted expressly and under oath, in the answer of plaintiffs herein. It would,
therefore, appear that plaintiffs herein were not Unaware of the flaw in their
title, if any, and that their true relation with the herein defendants was that of

tenant and landlord, and that their rights are governed by Article 1573 in relation
to article 487 of the old Civil Code, which reads as follows:
Art. 1573. A lessee shall have with respect to useful a voluntary
improvements, the same right which are granted the usufructuaries.
Art. 487. The usufructuary may make on the property in usufruct any
improvements, useful or recreative, which may deem proper, provided
he does not change its form or substance, but he shall have no right to
be indemnified thereof. He may, however, remove such improvements,
should it possible to do so without injury to the property.
From the above provisions, it can clearly be inferred that plaintiffs can not
compel the defendants to pay for the improvements the former made on the
property or to sell the latter's land. Plaintiffs' only right, is to remove
improvements, if it is possible to do so, without damage to the land.
It should be noted that article 448 of the new Civil Code, (equivalent to Art. 361
of the old Civil Code), relied upon by plaintiffs, is intended to apply only to a case
where one builds, or sows, or plants on land in which believes himself to have a
claim of title and not to land wherein one's interest is that of tenant, under a
rental co tract, which is the present case (Alburo v. Villanueva, Phil. 277). The
tenant cannot be said to be a builder in good faith as he has no pretension to be
owner (Rivera v. Trinidad, 48 Phil. 396; see also 3 Manresa 4th Ed. pp. 215-216).
The trial court, therefore, did not commit any error in dismissing the two causes
of action.
II. The first cause of action, if any, is barred by prior judgment.
As plaintiffs in Civil Case No. 5442, the defendants al alleged in their complaint
that the reasonable rental value of the premises in question was P20.00 a month
(par. 5). In said case No. 5442, the matter of the rental was in issue and the same
was considered and decided by the trial court, which ordered the defendants
therein "to pay reasonable compensation of P20.00 a month beginning with
January, 1954, until they shall have left the premises". In the instant case, the
parties are the identical parties in Civil Case No. 5442; the same lot 1095 is the
subject matter of both cases; the same issue, namely, the amount of the rental is
involved. Even assuming that appellants have a cause of action, the doctrine
of res judicata already operates against them.

III. The second cause of action, if any, is barred by the statute of limitations.
As shown by the documentary evidence submitted with the defendant's motion
to dismiss, lot No. 1095 was purchased by Agapita Solis from the Government on
July 1, 1909. After full payment of the purchase price, T.C.T. No. 10771 covering
said lot was issued to said Agapita Solis on June 8, 1933,(Exhibits 1 and 2).
Assuming that plaintiffs or their alleged predecessor-in-interest, had a cause of
action for claiming the ownership of potion of said lot, such cause of action
accrued at the latest, on June 8, 1933. The plaintiffs or their predecessors had ten
(10) years from said date, within which to file the corresponding action. They,
however, filed the instant complaint only on July 1, 1954, or more than 21 years,
after the accrual of the cause of action.
IV. The cause of action, if any, is barred by plaintiffs' failure to set it up as a
counterclaim in Civil Case No. 5442.
Whether the cause of action is for recovery of ownership or for an alleged right to
purchase the property, or for reimbursement for some improvements, the herein
plaintiffs as defendants in Civil Case No. 5442, should have set it up as a
counterclaim in said case, because same was necessarily connected with, or arose
out of the transactions involved in said case No. 5442(Sec. 6, Rule 10, Rules of
Court).
It is alleged that plaintiffs-appellants' complaint should not have been dismissed
without trial on the merits, because in the case of De Jesus, et al. v. Belarmino, et
al. G.R. No. L-6665, June 30, 1954; Off. Gaz. July 1954, p. 3064, it was held that
"where the complaint was dismissed not because of any evidence presented by
the parties, or merits, but merely on a motion as a result of a trial on the to
dismiss filed by the defendants, the sufficiency of the motion should be tested on
the strength of the allegation of facts contained in the complaint and no other",
which has been interpreted to apply to cases where the motion to dismiss is
based solely on the ground of lack of cause of action. Considering the fact that (1)
In the case a bar, documentary evidence and the records of the Civil Case No.
5442 were presented and considered by the trial court; and (2) in the De Jesus
case, the only ground for dismissal was the lack of cause of action, while in the
present case, aside from said ground, plaintiffs allegation other grounds, the said
ruling finds no application.
IN VIEW HEREOF, we hereby affirm the order appealed from, with costs against
the plaintiffs-appellants.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Co Concepcion, Reyes, J.B.L.,

Barrera and Dizon, JJ., concur
G.R. No. L-57348 May 16, 1985
FRANCISCO DEPRA vs. AGUSTIN DUMLAO,
This is an appeal from the Order of the former Court of First Instance of Iloilo to
the then Court of Appeals, which the latter certified to this instance as involving
pure questions of law
Plaintiff-appellee, Francisco Depra, is the owner of a parcel of land registered
under Transfer Certificate of Title No. T3087, known as Lot No. 685, situated in
the municipality of Dumangas, Iloilo, with an area of approximately 8,870 square
meters. Agustin Dumlao, defendant-appellant, owns an adjoining lot, designated
as Lot No. 683, with an approximate area of 231 sq. ms.
Sometime in 1972, when DUMLAO constructed his house on his lot, the kitchen
thereof had encroached on an area of thirty four (34) square meters of DEPRA's
property, After the encroachment was discovered in a relocation survey of
DEPRA's lot made on November 2,1972, his mother, Beatriz Depra after writing a
demand letter asking DUMLAO to move back from his encroachment, filed an
action for Unlawful Detainer on February 6,1973 against DUMLAO in the
Municipal Court of of Dumangas, docketed as Civil Case No 1, Said complaint was
later amended to include DEPRA as a party plain. plaintiff.
After trial, the Municipal Court found that DUMLAO was a builder in good faith,
and applying Article 448 of the Civil Code, rendered judgment on September 29,
1973, the dispositive portion of which reads:
Ordering that a forced lease is created between the parties with the plaintiffs, as
lessors, and the defendants as lessees, over the disputed portion with an area of
thirty four (34) square meters, the rent to be paid is five (P5.00) pesos a month,
payable by the lessee to the lessors within the first five (5) days of the month the
rent is due; and the lease shall commence on the day that this decision shall have
become final.
From the foregoing judgment, neither party appeal so that, ff it were a valid
judgment, it would have ordinarily lapsed into finality, but even then, DEPRA did
not accept payment of rentals so that DUMLAO deposited such rentals with the
Municipal Court.

On July 15,1974, DEPRA filed a Complaint for Quieting of Title against DUMLAO
before the then Court of First Instance of Iloilo, Branch IV (Trial Court), involving
the very same 34 square meters, which was the bone of contention in the
Municipal Court. DUMLAO, in his Answer, admitted the encroachment but
alleged, in the main, that the present suit is barred by res judicata by virtue of the
Decision of the Municipal Court, which had become final and executory.
After the case had been set for pre-trial, the parties submitted a Joint Motion for
Judgment based on the Stipulation of Facts attached thereto. Premised thereon,
the Trial Court on October 31, 1974, issued the assailed Order, decreeing:
WHEREFORE, the Court finds and so holds that the thirty four (34) square meters
subject of this litigation is part and parcel of Lot 685 of the Cadastral Survey of
Dumangas of which the plaintiff is owner as evidenced by Transfer Certificate of
Title No. 3087 and such plaintiff is entitled to possess the same.
Rebutting the argument of res judicata relied upon by DUMLAO, DEPRA claims
that the Decision of the Municipal Court was null and void ab initio because its
jurisdiction is limited to the sole issue of possession, whereas decisions affecting
lease, which is an encumbrance on real property, may only be rendered by Courts
of First Instance.
Addressing out selves to the issue of validity of the Decision of the Municipal
Court, we hold the same to be null and void. The judgment in a detainer case is
1
effective in respect of possession only (Sec. 7, Rule 70, Rules of Court). The
Municipal Court over-stepped its bounds when it imposed upon the parties a
situation of "forced lease", which like "forced co-ownership" is not favored in law.
Furthermore, a lease is an interest in real property, jurisdiction over which
belongs to Courts of First Instance (now Regional Trial Courts) (Sec. 44(b),
2
3
Judiciary Act of 1948; Sec. 19 (2) Batas Pambansa Blg. 129). Since the
Municipal Court, acted without jurisdiction, its Decision was null and void and
cannot operate as res judicata to the subject complaint for Queting of Title.
Besides, even if the Decision were valid, the rule on res judicata would not apply
due to difference in cause of action. In the Municipal Court, the cause of action
was the deprivation of possession, while in the action to quiet title, the cause of
action was based on ownership. Furthermore, Sec. 7, Rule 70 of the Rules of
Court explicitly provides that judgment in a detainer case "shall not bar an action
4
between the same parties respecting title to the land. "
Conceded in the Stipulation of Facts between the parties is that DUMLAO was a
builder in good faith. Thus,

8. That the subject matter in the unlawful detainer case, Civil Case No. 1, before
the Municipal Court of Dumangas, Iloilo involves the same subject matter in the
present case, the Thirty-four (34) square meters portion of land and built thereon
in good faith is a portion of defendant's kitchen and has been in the possession of
the defendant since 1952 continuously up to the present; ... (Emphasis ours)
Consistent with the principle that our Court system, like any other, must be a
dispute resolving mechanism, we accord legal effect to the agreement of the
parties, within the context of their mutual concession and stipulation. They have,
thereby, chosen a legal formula to resolve their dispute to appeal ply to DUMLAO
the rights of a "builder in good faith" and to DEPRA those of a "landowner in good
faith" as prescribed in Article 448. Hence, we shall refrain from further examining
whether the factual situations of DUMLAO and DEPRA conform to the juridical
positions respectively defined by law, for a "builder in good faith" under Article
448, a "possessor in good faith" under Article 526 and a "landowner in good faith'
under Article 448.
In regards to builders in good faith, Article 448 of the Civil Code provides:
ART. 448. The owner of the land on which anything has been built sown or
planted in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in articles 546
and 548, or to oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent. However, the builder or planter cannot
be obliged to buy the land if its value is considerably more than that of the
building or trees. In such case, he shall pay reasonable rent, if the owner of the
land does not choose to appropriate the building or trees after proper indemnity.
The parties shall agree upon the terms of the lease and in case of disagreement,
the court shall fix the terms thereof (Paragraphing supplied)
Pursuant to the foregoing provision, DEPRA has the option either to pay for the
encroaching part of DUMLAO's kitchen, or to sell the encroached 34 square
meters of his lot to DUMLAO. He cannot refuse to pay for the encroaching part of
5
the building, and to sell the encroached part of his land, as he had manifested
before the Municipal Court. But that manifestation is not binding because it was
made in a void proceeding.
However, the good faith of DUMLAO is part of the Stipulation of Facts in the
Court of First Instance. It was thus error for the Trial Court to have ruled that
DEPRA is "entitled to possession," without more, of the disputed portion implying
thereby that he is entitled to have the kitchen removed. He is entitled to such

removal only when, after having chosen to sell his encroached land, DUMLAO
6
fails to pay for the same. In this case, DUMLAO had expressed his willingness to
pay for the land, but DEPRA refused to sell.
The owner of the building erected in good faith on a land owned by another, is
entitled to retain the possession of the land until he is paid the value of his
building, under article 453 (now Article 546). The owner of the land, upon the
other hand, has the option, under article 361 (now Article 448), either to pay for
the building or to sell his land to the owner of the building. But he cannot as
respondents here did refuse both to pay for the building and to sell the land and
compel the owner of the building to remove it from the land where it erected. He
is entitled to such remotion only when, after having chosen to sell his land. the
other party fails to pay for the same (italics ours).
We hold, therefore, that the order of Judge Natividad compelling defendantspetitioners to remove their buildings from the land belonging to plaintiffsrespondents only because the latter chose neither to pay for such buildings nor to
sell the land, is null and void, for it amends substantially the judgment sought to
be executed and is. furthermore, offensive to articles 361 (now Article 448) and
453 (now Article 546) of the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605,
608[1946]).

Our own Code Commission must have taken account of the objections to Article
361 of the Spanish Civil Code. Hence, the Commission provided a modification
thereof, and Article 448 of our Code has been made to provide:
ART. 448. The owner of the land on which anything has been
built, sown or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting, after
payment of the indemnity provided for in articles 546 and 548,
or to oblige the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value
is considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land does
not choose to appropriate the building or trees after proper
indemnity. The parties shall agree upon the terms of the lease
and in case of disagreement, the court shall fix the terms
thereof.
Additional benefits were extended to the builder but the landowner retained his
options.
The fairness of the rules in Article 448 has also been explained as follows:

A word anent the philosophy behind Article 448 of the Civil rode.
The original proision was found in Article 361 of the Spanish Civil Code; which
provided:
ART. 361. The owner of land on which anything has been built,
sown or planted in good faith, shall have the right to
appropriate as his own the work, sowing or planting, after the
payment of the indemnity stated in Articles 453 and 454, or to
oblige the one who built or planted to pay the price of the land,
and the one who sowed, the proper rent.
As will be seen, the Article favors the owner of the land, by giving him one of the
two options mentioned in the Article. Some commentators have questioned the
preference in favor of the owner of the land, but Manresa's opinion is that the
Article is just and fair.

Where the builder, planter or sower has acted in good faith, a

conflict of rights arises between the owners, and it becomes
necessary to protect the owner of the improvements without
causing injustice to the owner of the land. In view of the
impracticability of creating a state of forced co-ownership, the
law has provided a just solution by giving the owner of the land
the option to acquire the improvements after payment of the
proper indemnity, or to oblige the builder or planter to pay for
the land and the sower to pay for the proper rent. It is the
owner of the land who is authorized to exercise the option,
because his right is older, and because, by the principle of
accession, he is entitled to the ownership of the accessory
thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382;
Co Tao vs. Chan Chico, G.R. No. 49167, April 30, 1949; Article
applied: see Cabral, et al vs. Ibanez [S.C.] 52 Off. Gaz. 217;
8
Marfori vs. Velasco, [C.A.] 52 Off. Gaz. 2050).

WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is
hereby ordered remanded to the Regional Trial Court of Iloilo for further
proceedings consistent with Articles 448 and 546 of the Civil Code, as follows:
1. The trial Court shall determine
a) the present fair price of DEPRA's 34 square meter area of land;
b) the amount of the expenses spent by DUMLAO for the building of the kitchen;
c) the increase in value ("plus value") which the said area of 34 square meters
may have acquired by reason thereof, and
d) whether the value of said area of land is considerably more than that of the
kitchen built thereon.
2. After said amounts shall have been determined by competent evidence, the
Regional, Trial Court shall render judgment, as follows:
a) The trial Court shall grant DEPRA a period of fifteen (15) days within which to
exercise his option under the law (Article 448, Civil Code), whether to appropriate
the kitchen as his own by paying to DUMLAO either the amount of tile expenses
spent by DUMLAO f or the building of the kitchen, or the increase in value ("plus
value") which the said area of 34 square meters may have acquired by reason
thereof, or to oblige DUMLAO to pay the price of said area. The amounts to be
respectively paid by DUMLAO and DEPRA, in accordance with the option thus
exercised by written notice of the other party and to the Court, shall be paid by
the obligor within fifteen (15) days from such notice of the option by tendering
the amount to the Court in favor of the party entitled to receive it;
b) The trial Court shall further order that if DEPRA exercises the option to oblige
DUMLAO to pay the price of the land but the latter rejects such purchase
because, as found by the trial Court, the value of the land is considerably more
than that of the kitchen, DUMLAO shall give written notice of such rejection to
DEPRA and to the Court within fifteen (15) days from notice of DEPRA's option to
sell the land. In that event, the parties shall be given a period of fifteen (15) days
from such notice of rejection within which to agree upon the terms of the lease,
and give the Court formal written notice of such agreement and its provisos. If no
agreement is reached by the parties, the trial Court, within fifteen (15) days from
and after the termination of the said period fixed for negotiation, shall then fix

the terms of the lease, provided that the monthly rental to be fixed by the Court
shall not be less than Ten Pesos (P10.00) per month, payable within the first five
(5) days of each calendar month. The period for the forced lease shall not be
more than two (2) years, counted from the finality of the judgment, considering
the long period of time since 1952 that DUMLAO has occupied the subject area.
The rental thus fixed shall be increased by ten percent (10%) for the second year
of the forced lease. DUMLAO shall not make any further constructions or
improvements on the kitchen. Upon expiration of the two-year period, or upon
default by DUMLAO in the payment of rentals for two (2) consecutive months,
DEPRA shall be entitled to terminate the forced lease, to recover his land, and to
have the kitchen removed by DUMLAO or at the latter's expense. The rentals
herein provided shall be tendered by DUMLAO to the Court for payment to
DEPRA, and such tender shall constitute evidence of whether or not compliance
was made within the period fixed by the Court.
c) In any event, DUMLAO shall pay DEPRA an amount computed at Ten Pesos
(P10.00) per month as reasonable compensation for the occupancy of DEPRA's
land for the period counted from 1952, the year DUMLAO occupied the subject
area, up to the commencement date of the forced lease referred to in the
preceding paragraph;
d) The periods to be fixed by the trial Court in its Precision shall be inextendible,
and upon failure of the party obliged to tender to the trial Court the amount due
to the obligee, the party entitled to such payment shall be entitled to an order of
execution for the enforcement of payment of the amount due and for compliance
with such other acts as may be required by the prestation due the obligee.

DEPRA V. DUMLAO 136 SCRA 475

FACTS: Francisco Depra, is the owner of a parcel of land registered, situated in
the municipality of Dumangas, Iloilo. Agustin Dumlao, defendant-appellant, owns
an adjoining lot. When DUMLAO constructed his house on his lot, the kitchen
thereof had encroached on an area of thirty four (34) square meters of DEPRAs
property, After the encroachment was discovered in a relocation survey of
DEPRAs lot made on November 2,1972, his mother, Beatriz Depra after writing a
demand letter asking DUMLAO to move back from his encroachment, filed an
action for Unlawful Detainer. Said complaint was later amended to include DEPRA
as a party plaintiff. After trial, the Municipal Court found that DUMLAO was a

builder in good faith, and applying Article 448 of the Civil Code. DEPRA did not
accept payment of rentals so that DUMLAO deposited such rentals with the
Municipal Court. In this case, the Municipal Court, acted without jurisdiction, its

CARLOS versus JOSE REYNANTE: and b) the resolution denying the motion for
reconsideration.
The facts as culled from the records of the case are as follows:

Decision was null and void and cannot operate as res judicata to the subject
complaint for Queting of Title. The court conceded in the MCs decision that
Dumlao is a builder in good faith.
Held: Owner of the land on which improvement was built by another in good

More than 50 years ago, petitioner Jose Reynante was taken as tenant by the late
Don Cosme Carlos, owner and father-in-law of herein private respondents, over a
fishpond located at Barrio Liputan, Meycauayan, Bulacan with an area of 188.711
square meters, more or less and covered by Transfer Certificate of Title No.
25618, Land Registry of Bulacan.

faith is entitled to removal of improvement only after landowner has opted to sell
the land and the builder refused to pay for the same. Res judicata doesnt apply
wherein the first case was for ejectment and the other was for quieting of title.
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

During the tenancy, petitioner Jose Reynante constructed a nipa hut where he
and his family lived and took care of the nipa palms (sasahan) he had planted on
lots 1 and 2 covering an area of 5,096 square meters and 6,011 square meters
respectively. These lots are located between the fishpond covered by TCT No.
25618 and the Liputan (formerly Meycauayan) River. Petitioner harvested and
sold said nipa palms without interference and prohibition from anybody. Neither
did the late Don Cosme Carlos question his right to plant the nipa palms near the
fishpond or to harvest and appropriate them as his own.
After the death of Don Cosme Carlos, his heirs (private respondents'
predecessors-in-interest) entered into a written agreement denominated as
"SINUMPAANG SALAYSAY NG PAGSASAULI NG KARAPATAN" dated November 29,
1984 with petitioner Jose Reynante whereby the latter for and in consideration of
the sum of P200,000.00 turned over the fishpond he was tenanting to the heirs of
Don Cosme Carlos and surrendered all his rights therein as caretaker or "bantaykasama at tagapamahala" (Rollo, p. 77).

of the lease and in case of disagreement, the court shall fix the terms thereof.
G.R. No. 95907 April 8, 1992
REYNANTE VS CA
This is a petition for review on certiorari which seeks the reversal of: a)
1
decision of the Court of Appeals dated February 28, 1990 in CA-G.R. No. 1917
entitled "JOSE REYNANTE versus HON. VALENTIN CRUZ, Judge, RTC of Malolos,
Bulacan, and HEIRS OF LEONCIO AND DOLORES CARLOS, et al.", affirming the
2
decision of the Regional Trial Court
of Malolos, Bulacan, Branch 8, Third Judicial Region which reversed the
3
decision of the Municipal Trial Court of Meycauayan, Bulacan, Branch 1, Third
Judicial Region in Civil Case No. 1526 entitled "HEIRS OF LEONCIO CARLOS &
DOLORES A. CARLOS and HEIRS OF GORGONIO A. CARLOS & CONCEPCION

Pursuant to the said written agreement, petitioner surrendered the fishpond and
the two huts located therein to private respondents. Private respondents
thereafter leased the said fishpond to one Carlos de la Cruz. Petitioner continued
to live in the nipa hut constructed by him on lots 1 and 2 and to take care of the
nipa palms he had planted therein.
On February 17, 1988, private respondents formally demanded that the
petitioner vacate said portion since according to them petitioner had already
been indemnified for the surrender of his rights as a tenant. Despite receipt
thereof, petitioner refused and failed to relinquish possession of lots 1 and 2.

Hence, on April 22, 1988, private respondents filed a complaint for forcible entry
with preliminary mandatory injunction against petitioner alleging that the latter
by means of strategy and stealth, took over the physical, actual and material
possession of lots 1 and 2 by residing in one of the kubos or huts bordering the
Liputan River and cutting off and/or disposing of the sasa or nipa palms adjacent
thereto.
On January 10, 1989, the trial court rendered its decision dismissing the
complaint and finding that petitioner had been in prior possession of lots 1
and 2.
Private respondents appealed to the Regional Trial Court and on August 8, 1989 it
rendered its decision, the dispositive portion of which reads as follows:
WHEREFORE, this Court renders judgment in favor of the plaintiffs and against
defendant and hereby reverses the decision of the Court a quo. Accordingly, the
defendant is ordered to restore possession of that piece of land particularly
described and defined as Lots 1 & 2 of the land survey conducted by Geodetic
Engineer Restituto Buan on March 2, 1983, together with the sasa or nipa palms
planted thereon. No pronouncement as to attorney's fees. Each party shall bear
their respective costs of the suit.
SO ORDERED. (Rollo, p. 55; Decision, p. 4).
From said decision, petitioner filed with the Court of Appeals a petition for review
(Rollo, p. 30; Annex "A"). On February 28, 1990, the Court of Appeals rendered its
decision, the dispositive portion of which reads as follows:
WHEREFORE, the decision of the court a quo, being consistent with law and
jurisprudence, is hereby AFFIRMED in toto. The instant petition seeking to issue a
restraining order is hereby denied.
SO ORDERED. (Rollo, p. 30; Decision, p. 3).
On November 5, 1990, the Court of Appeals denied the motion for
reconsideration filed by petitioner (Rollo, p. 35; Annex "B").
Hence, this petition.

In its resolution dated May 6, 1991, the Second Division of this court gave due
course to the petition and required both parties to file their respective
memoranda (Rollo, p. 93).
The main issues to be resolved in this case are: a) who between the petitioner
and private respondents has prior physical possession of lots 1 and 2; and b)
whether or not the disputed lots belong to private respondents as a result of
accretion.
An action for forcible entry is merely a quieting process and actual title to the
property is never determined. A party who can prove prior possession can
recover such possession even against the owner himself. Whatever may be the
character of his prior possession, if he has in his favor priority in time, he has the
security that entitles him to remain on the property until he is lawfully ejected by
a person having a better right by accion publiciana oraccion
reivindicatoria (German Management & Services, Inc. v. Court of Appeals, G.R.
No. 76216, September 14, 1989, 177 SCRA 495, 498, 499). On the other hand, if a
plaintiff cannot prove prior physical possession, he has no right of action for
forcible entry and detainer even if he should be the owner of the property (Lizo v.
Carandang, 73 Phil. 469 [1942]).
Hence, the Court of Appeals could not legally restore private respondents'
possession over lots 1 and 2 simply because petitioner has clearly proven that he
had prior possession over lots 1 and 2.
The evidence on record shows that petitioner was in possession of the
questioned lots for more than 50 years. It is undisputed that he was the caretaker
of the fishpond owned by the late Don Cosme Carlos for more than 50 years and
that he constructed a nipa hut adjacent to the fishpond and planted nipa palms
therein. This fact is bolstered by the "SINUMPAANG SALAYSAY" executed by
Epifanio Lucero (Records, p. 66), Apolonio D. Morte (Records, p. 101) and Carling
Dumalay (Records, p. 103), all of whom are disinterested parties with no motive
to falsify that can be attributed to them, except their desire to tell the truth.
Moreover, an ocular inspection was conducted by the trial court dated December
2, 1988 which was attended by the parties and their respective counsels and the
court observed the following:
The Court viewed the location and the distance of the constructed nipa hut and
the subject "sasahan" which appears exists (sic) long ago, planted and stands (sic)
adjacent to the fishpond and the dikes which serves (sic) as passage way of water

river of lot 1 and lot 2. During the course of the hearing, both counsel observed
muniment of title embedded on the ground which is located at the inner side of
the "pilapil" separating the fishpond from the subject "sasa" plant with a height
of 20 to 25 feet from water level and during the ocular inspection it was judicially
observed that the controversial premises is beyond the titled property of the
plaintiffs but situated along the Liputan, Meycauayan River it being a part of the
public domain. (Rollo, p. 51; Decision, p. 12).
On the other hand, private respondents based their claim of possession over lots
1 and 2 simply on the written agreement signed by petitioner whereby the latter
surrendered his rights over the fishpond.
Evidently, the trial court did not err when it ruled that:
An examination of the document signed by the defendant (Exhibit "B"), shows
that what was surrendered to the plaintiffs was the fishpond and not the
"sasahan" or the land on which he constructed his hut where he now lives. That is
a completely different agreement in which a tenant would return a farm or a
fishpond to his landlord in return for the amount that the landlord would pay to
him as a disturbance compensation. There is nothing that indicates that the
tenant was giving other matters not mentioned in a document like Exhibit "B".
Moreover, when the plaintiffs leased the fishpond to Mr. Carlos de La Cruz there
was no mention that the lease included the hut constructed by the defendant
and the nipa palms planted by him (Exhibit "1"), a circumstance that gives the
impression that the nipa hut and the nipa palms were not included in the lease to
Mr. de la Cruz, which may not belong to the plaintiffs. (Rollo, p. 49; Decision, p.
9).
With regard to the second issue, it must be noted that the disputed lots involved
in this case are not included in Transfer Certificate of Title No. 25618 as per
verification made by the Forest Management Bureau, Department of
Environment and Natural Resources. That tract of land situated at Barrio Liputan,
Meycauayan, Bulacan containing an area of 1.1107 hectares as described in the
plan prepared and surveyed by Geodetic Engineer Restituto Buan for Jose
Reynante falls within Alienable and Disposable Land (for fishpond development)
under Project No. 15 per B.F.L.C. Map No. 3122 dated May 8, 1987 (Rollo, p. 31;
Decision, p. 2).
The respondent Court of Appeals ruled that lots 1 and 2 were created by alluvial
formation and hence the property of private respondents pursuant to Article 457
of the New Civil Code, to wit:

Art. 457. To the owners of lands adjoining the banks of rivers belong the
accretion which they gradually receive from the effects of the current of the
waters.
Accretion benefits a riparian owner when the following requisites are present: (1)
that the deposit be gradual and imperceptible; (2) that it resulted from the
effects of the current of the water; and (c) that the land where accretion takes
place is adjacent to the bank of a river (Republic v. Court of Appeals, G.R. No. L61647, October 12, 1984, 132 SCRA 514, cited in Agustin v. Intermediate
Appellate Court, G.R. Nos. 66075-76, July 5, 1990, 187 SCRA 218).
Granting without conceding that lots 1 and 2 were created by alluvial formation
and while it is true that accretions which the banks of rivers may gradually
receive from the effect of the current become the property of the owner of the
banks, such accretion to registered land does not preclude acquisition of the
additional area by another person through prescription.
This Court ruled in the case of Ignacio Grande, et al. v. Hon. Court of Appeals, et
al., G.R. No. L-17652, June 30, 1962, 115 Phil. 521 that:
An accretion does not automatically become registered land just because the lot
which receives such accretion is covered by a Torrens Title. Ownership of a piece
of land is one thing; registration under the Torrens system of that ownership is
another. Ownership over the accretion received by the land adjoining a river is
governed by the Civil Code. Imprescriptibility of registered land is provided in the
registration law. Registration under the Land Registration and Cadastral Act does
not vest or give title to the land, but merely confirms and, thereafter, protects
the title already possessed by the owner, making it imprescriptible by occupation
of third parties. But to obtain this protection, the land must be placed under the
operation of the registration laws, wherein certain judicial procedures have
beenprovided.
Assuming private respondents had acquired the alluvial deposit (the lot in
question), by accretion, still their failure to register said accretion for a period of
fifty (50) years subjected said accretion to acquisition through prescription by
third persons.
It is undisputed that petitioner has been in possession of the subject lots for more
than fifty (50) years and unless private respondents can show a better title over
the subject lots, petitioner's possession over the property must be respected.

PREMISES CONSIDERED, the decision of the respondent Court of Appeals dated

February 28, 1990 is REVERSED and SET ASIDE and the decision of the Municipal
Trial Court of Meycauayan, Bulacan, Branch I, is hereby REINSTATED.

petitioner PVHI was bound to pay the monthly rental on a per square meter basis
at the rate of P20.00 per square meter, which shall be subject to an increase of
20% at the end of every 3-year period. At the time of the renewal of the lease
contract, the monthly rental amounted toP725,780.00.

SO ORDERED.
Beginning January 2001, petitioners defaulted in the payment of their
monthly rental. Respondent repeatedly demanded petitioners to pay the arrears
and vacate the premises. The last demand letter was sent on March 26, 2001.

SULO NG NAYON VS NAYONG PILIPINO

[1]

On appeal are the Court of Appeals (CAs) October 4, 2005 Decision in CA-G.R.
[2]
SP No. 74631 and December 22, 2005 Resolution, reversing the November 29,
[3]
2002 Decision of the Regional Trial Court (RTC) of Pasay City in Civil Case No. 02[4]
0133. The RTC modified the Decision of the Metropolitan Trial Court (MeTC)
of Pasay City which ruled against petitioners and ordered them to vacate the
premises and pay their arrears. The RTC declared petitioners as builders in good
faith and upheld their right to indemnity.
The facts are as follows:
Respondent Nayong Pilipino Foundation, a government-owned and
controlled corporation, is the owner of a parcel of land in Pasay City, known as
the Nayong Pilipino Complex. Petitioner Philippine Village Hotel, Inc. (PVHI),
formerly called Sulo sa Nayon, Inc., is a domestic corporation duly organized and
existing under Philippine laws. Petitioner Jose Marcel E. Panlilio is its Senior
Executive Vice President.
On June 1, 1975, respondent leased a portion of the Nayong Pilipino
Complex, consisting of 36,289 square meters, to petitioner Sulo sa Nayon, Inc. for
the construction and operation of a hotel building, to be known as the Philippine
Village Hotel. The lease was for an initial period of 21 years, or until May 1996. It
is renewable for a period of 25 years under the same terms and conditions upon
due notice in writing to respondent of the intention to renew at least 6 months
before its expiration. Thus, on March 7, 1995, petitioners sent respondent a
letter notifying the latter of their intention to renew the contract for another 25
years. On July 4, 1995, the parties executed a Voluntary Addendum to the Lease
Agreement. The addendum was signed by petitioner Jose Marcel E. Panlilio in his
official capacity as Senior Executive Vice President of the PVHI and by Chairman
Alberto A. Lim of the Nayong Pilipino Foundation. They agreed to the renewal of
the contract for another 25 years, or until 2021. Under the new agreement,

On September 5, 2001, respondent filed a complaint for unlawful

detainer before the MeTC of Pasay City. The complaint was docketed as Civil
Case No. 708-01. Respondent computed the arrears of petitioners in the amount
of twenty-six million one hundred eighty-three thousand two hundred twentyfive pesos and fourteen centavos (P26,183,225.14), as of July 31, 2001.
On February 26, 2002, the MeTC rendered its decision in favor of
respondent. It ruled, thus:
. . . . The court is convinced by the evidence that
indeed, defendants defaulted in the payment of their rentals. It
is basic that the lessee is obliged to pay the price of the lease
according to the terms stipulated (Art. 1657, Civil Code). Upon
the failure of the lessee to pay the stipulated rentals, the lessor
may eject (sic) and treat the lease as rescinded and sue to eject
the lessee (C. Vda[.] De Pamintuan v. Tiglao, 53 Phil. 1). For
non-payment of rentals, the lessor may rescind the lease,
recover the back rentals and recover possession of the leased
premises. . .
xxx
. . . . Improvements made by a lessee such as the defendants herein on
leased premises are not valid reasons for their retention thereof. The
Supreme Court has occasion to address a similar issue in which it ruled
that: The fact that petitioners allegedly made repairs on the premises in
question is not a reason for them to retain the possession of the
premises. There is no provision of law which grants the lessee a right of
retention over the leased premises on that ground. Article 448 of the
Civil Code, in relation to Article 546, which provides for full
reimbursement of useful improvements and retention of the premises

until reimbursement is made, applies only to a possessor in good faith,

i.e., one who builds on a land in the belief that he is the owner
thereof. This right of retention does not apply to a mere lessee, like the
petitioners, otherwise, it would always be in his power to improve his
landlord out of the latters property (Jose L. Chua and Co Sio Eng vs.
Court of Appeals and Ramon Ibarra, G.R. No. 109840, January 21,
1999).

5.

Although the Contract of Lease stipulates that the building and all the
improvements in the leased premises belong to the defendants herein,
such will not defeat the right of the plaintiff to its property as the
defendants failed to pay their rentals in violation of the terms of the
contract. At most, defendants can only invoke [their] right under Article
1678 of the New Civil Code which grants them the right to be
reimbursed one-half of the value of the building upon the termination of
the lease, or, in the alternative, to remove the improvements if the
lessor refuses to make reimbursement.

Petitioners appealed to the RTC which modified the ruling of the MeTC. It held

The dispositive portion of the decision reads as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor
of Nayong Pilipino Foundation, and against the defendant Philippine
Village Hotel, Inc[.], and all persons claiming rights under it, ordering the
latter to:
1. VACATE the subject premises and surrender possession thereof to
plaintiff;
2. PAY plaintiff its rental arrearages in the sum of TWENTY SIX
MILLION ONE HUNDRED EIGHTY THREE THOUSAND TWO HUNDRED
TWENTY FIVE PESOS AND 14/100 (P26,183,225.14) incurred as of July
31, 2001;
3. PAY plaintiff the sum of SEVEN HUNDRED TWENTY FIVE THOUSAND
SEVEN HUNDRED EIGHTY PESOS (P725,780.00) per month starting from
August 2001 and every month thereafter by way of reasonable
compensation for the use and occupation of the premises;
4. PAY plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00) by
way of attorneys fees*; and+

PAY the costs of suit.

The complaint against defendant Jose Marcel E. Panlilio is hereby

dismissed for lack of cause of action. The said defendants counterclaim
however is likewise dismissed as the complaint does not appear to be
frivolous or maliciously instituted.

that:
. . . it is clear and undisputed that appellants-lessees
were expressly required to construct a first-class hotel with
complete facilities. The appellants were also unequivocally
declared in the Lease Agreement as the owner of the
improvements so constructed. They were even explicitly
allowed to use the improvements and building as security or
collateral on loans and credit accommodations that the Lessee
may secure for the purpose of financing the construction of the
building and other improvements (Section 2; pars. A to B,
Lease
Agreement). Moreover,
a
time
frame
was
setforth (sic) with respect to the duration of the lease initially
for 21 years and renewable for another 25 years in order to
enable the appellants-lessees to recoup their huge money
investments relative to the construction and maintenance of
the improvements.
Considering therefore, the elements of permanency of the construction
and substantial value of the improvements as well as the undispute[d]
ownership over the land improvements, these, immensely engender the
application of Art. 448 of the Civil Code. The only remaining and most
crucial issue to be resolved is whether or not the appellants as builders
have acted in good faith in order for Art. 448 in relation to Art. 546 of
the Civil Code may apply with respect to their rights over improvements.
. . . it is undeniable that the improvement of the hotel building of
appellants (sic) PVHI was constructed with the written consent and
knowledge of appellee. In fact, it was precisely the primary purpose for

which they entered into an agreement. Thus, it could not be denied that
appellants were builders in good faith.

pending this appeal from July to November 2002 only at P725,780.00 per
month;

Accordingly, and pursuant to Article 448 in relation to Art. 546 of the

Civil Code, plaintiff-appellee has the sole option or choice, either to
appropriate the building, upon payment of proper indemnity consonant
to Art. 546 or compel the appellants to purchase the land whereon the
building was erected. Until such time that plaintiff-appellee has elected
an option or choice, it has no right of removal or demolition against
appellants unless after having selected a compulsory sale, appellants fail
to pay for the land (Ignacio vs. Hilario; 76 Phil. 605). This, however, is
without prejudice from the parties agreeing to adjust their rights in
some other way as they may mutually deem fit and proper.

5. The fourth and fifth directives in the dispositive portion of the trial
courts decision including that the last paragraph thereof JME Panlilios
complaint is hereby affirmed;

The dispositive portion of the decision of the RTC reads as follows:

WHEREFORE, and in view of the foregoing, judgment is hereby rendered
modifying the decision of [the] MTC, Branch 45 of Pasay City rendered
on February 26, 2002 as follows:
1. Ordering plaintiff-appellee to submit within thirty (30) days from
receipt of a copy of this decision a written manifestation of the option or
choice it selected, i.e., to appropriate the improvements upon payment
of proper indemnity or compulsory sale of the land whereon the hotel
building of PVHI and related improvements or facilities were erected;
2. Directing the plaintiff-appellee to desist and/or refrain from doing
acts in the furtherance or exercise of its rights and demolition against
appellants unless and after having selected the option of compulsory
sale and appellants failed to pay [and] purchase the land within a
reasonable time or at such time as this court will direct;
3. Ordering defendants-appellants to pay plaintiff-appellee [their]
arrears in rent incurred as of July 31, 2001 in the amount of
P26,183,225.14;
4. Ordering defendants-appellants to pay to plaintiff-appellee the
unpaid monthly rentals for the use and occupation of the premises

6. The parties are directed to adjust their respective rights in the

interest of justice as they may deem fit and proper if necessary.
Respondent appealed to the CA which held that the RTC erroneously applied the
rules on accession, as found in Articles 448 and 546 of the Civil Code when it held
that petitioners were builders in good faith and, thus, have the right to
indemnity. The CA held:
By and large, respondents are admittedly mere lessees
of the subject premises and as such, cannot validly claim that
they are builders in good faith in order to solicit the application
of Articles 448 and 546 of the Civil Code in their favor. As it is, it
is glaring error on the part of the RTC to apply the aforesaid
legal provisions on the supposition that the improvements,
which are of substantial value, had been introduced on the
leased premises with the permission of the petitioner. To grant
the respondents the right of retention and reimbursement as
builders in good faith merely because of the valuable and
substantial improvements that they introduced to the leased
premises plainly contravenes the law and settled jurisprudential
doctrines and would, as stated, allow the lessee to easily
improve the lessor out of its property.
. . . . Introduction of valuable improvements on the
leased premises does not strip the petitioner of its right to avail
of recourses under the law and the lease contract itself in case
of breach thereof. Neither does it deprive the petitioner of its
right under Article 1678 to exercise its option to acquire the
improvements or to let the respondents remove the same.
Petitioners Motion for Reconsideration was denied.

[7]

Hence, this appeal.

Petitioners assign the following errors:
I
THE HONORABLE COURT OF APPEALS COMMITTED A
GRAVE REVERSIBLE ERROR IN NOT HOLDING THAT PETITIONERS
WERE BUILDERS IN GOOD FAITH OVER THE SUBSTANTIAL AND
VALUABLE IMPROVEMENTS WHICH THEY HAD INTRODUCED ON
THE SUBJECT PROPERTY, THUS COMPELLING THE APPLICATION
OF ARTICLE 448 OF THE CIVIL CODE IN RELATION TO ARTICLE
546 OF THE SAME CODE, INSTEAD OF ARTICLE 1678 OF THE
CIVIL CODE.
II
THE HONORABLE COURT OF APPEALS COMMITTED A
SERIOUS REVERSIBLE ERROR WHEN IT DISREGARDED THE FACT
THAT THE LEASE CONTRACT GOVERNS THE RELATIONSHIP OF
THE PARTIES AND CONSEQUENTLY THE PARTIES MAY BE
CONSIDERED TO HAVE IMPLIEDLY WAIVED THE APPLICATION
OF ARTICLE 1678 OF THE CIVIL CODE TO THE INSTANT CASE.
III
ASSUMING ARGUENDO THAT THE PETITIONERS ARE
NOT BUILDERS IN GOOD FAITH, THE HONORABLE COURT OF
APPEALS COMMITTED A GRAVE REVERSIBLE ERROR WHEN IT
OVERLOOKED THE FACT THAT RESPONDENT ALSO ACTED IN
BAD FAITH WHEN IT DID NOT HONOR AND INSTEAD BREACHED
THE LEASE CONTRACT BETWEEN THE PARTIES, THUS BOTH
PARTIES ACTED AS IF THEY ARE IN GOOD FAITH.
IV
TO SANCTION THE APPLICATION OF ARTICLE 1678 OF
THE CIVIL CODE INSTEAD OF ARTICLE 448 OF THE CIVIL CODE IN
RELATION TO ARTICLE 546 OF THE SAME CODE WOULD NOT

ONLY WREAK HAVOC AND CAUSE SUBSTANTIAL INJURY TO THE

RIGHTS AND INTERESTS OF PETITIONER PHILIPPINE VILLAGE
HOTEL, INC. WHILE RESPONDENT NAYONG PILIPINO
FOUNDATION, IN COMPARISON THERETO, WOULD SUFFER
ONLY SLIGHT OR INCONSEQUENTIAL INJURY OR LOSS, BUT
ALSO WOULD CONSTITUTE UNJUST ENRICHMENT ON THE PART
OF RESPONDENT AT GREAT EXPENSE AND GRAVE PREJUDICE OF
PETITIONERS.
V
THE HONORABLE COURT OF APPEALS COMMITTED A
GRAVE REVERSIBLE ERROR IN NOT HOLDING THAT THE COURTS
A QUO DID NOT ACQUIRE JURISDICTION OVER THE UNLAWFUL
DETAINER CASE FOR NON-COMPLIANCE WITH JURISDICTIONAL
REQUIREMENTS DUE TO THE ABSENCE OF A NOTICE TO VACATE
[8]
UPON PETITIONERS.

First, we settle the issue of jurisdiction. Petitioners argue that the MeTC
did not acquire jurisdiction to hear and decide the ejectment case because they
never received any demand from respondent to pay rentals and vacate the
premises, since such demand is a jurisdictional requisite. We reiterate the ruling
of the MeTC, RTC and CA. Contrary to the claim of petitioners, documentary
evidence proved that a demand letter dated March 26, 2001 was sent by
respondent through registered mail to petitioners, requesting them to pay the
rental arrears or else it will be constrained to file the appropriate legal action and
possess the leased premises.
Further, petitioners argument that the demand letter is inadequate
because it contained no demand to vacate the leased premises does not
persuade. We have ruled that:
. . . . The word vacate is not a talismanic word that
must be employed in all notices. The alternatives in this case
are clear cut. The tenants must pay rentals which are fixed and
which became payable in the past, failing which they must
move out. There can be no other interpretation of the notice

given to them. Hence, when the petitioners demanded that

either he pays P18,000 in five days or a case of ejectment would
be filed against him, he was placed on notice to move out if he
does not pay. There was, in effect, a notice or demand to
[9]
vacate.
In the case at bar, the language of the demand letter is plain and
simple: respondent demanded payment of the rental arrears amounting
toP26,183,225.14 within ten days from receipt by petitioners, or respondent will
be constrained to file an appropriate legal action against petitioners to recover
the said amount. The demand letter further stated that respondent will possess
the leased premises in case of petitioners failure to pay the rental arrears within
ten days. Thus, it is clear that the demand letter is intended as a notice to
petitioners to pay the rental arrears, and a notice to vacate the premises in case
of failure of petitioners to perform their obligation to pay.

Useful expenses shall be refunded only to the possessor in good faith

with the same right of retention, the person who has defeated him in
the possession having the option of refunding the amount of the
expenses or of paying the increase in value which the thing may have
acquired by reason thereof.

We uphold the ruling of the CA.

The late Senator Arturo M. Tolentino, a leading expert in Civil Law, explains:
This article [Article 448] is manifestly intended to apply
only to a case where one builds, plants, or sows on land in
[10]
which he believes himself to have a claim of title, and not to
lands where the only interest of the builder, planter or sower is
[11]
that of a holder, such as a tenant.

Second, we resolve the main issue of whether the rules on accession, as

found in Articles 448 and 546 of the Civil Code, apply to the instant case.

Article 448 and Article 546 provide:

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

In the case at bar, petitioners have no adverse claim or title to the

land. In fact, as lessees, they recognize that the respondent is the owner of the
land. What petitioners insist is that because of the improvements, which are of
substantial value, that they have introduced on the leased premises with the
permission of respondent, they should be considered builders in good faith who
have the right to retain possession of the property until reimbursement by
respondent.
We affirm the ruling of the CA that introduction of valuable
improvements on the leased premises does not give the petitioners the right of
retention and reimbursement which rightfully belongs to a builder in good
faith. Otherwise, such a situation would allow the lessee to easily improve the
lessor out of its property. We reiterate the doctrine that a lessee is neither a
[12]
builder in good faith nor in bad faith that would call for the application of
Articles 448 and 546 of the Civil Code. His rights are governed by Article 1678 of
the Civil Code, which reads:
Art. 1678. If the lessee makes, in good faith, useful
improvements which are suitable to the use for which the lease
is intended, without altering the form or substance of the
property leased, the lessor upon the termination of the lease
shall pay the lessee one-half of the value of the improvements

at that time. Should the lessor refuse to reimburse said amount,

the lessee may remove the improvements, even though the
principal thing may suffer damage thereby. He shall not,
however, cause any more impairment upon the property leased
than is necessary.
With regard to ornamental expenses, the lessee shall
not be entitled to any reimbursement, but he may remove the
ornamental objects, provided no damage is caused to the
principal thing, and the lessor does not choose to retain them
by paying their value at the time the lease is extinguished.

Under Article 1678, the lessor has the option of paying one-half of the value of
the improvements which the lessee made in good faith, which are suitable for the
use for which the lease is intended, and which have not altered the form and
substance of the land. On the other hand, the lessee may remove the
improvements should the lessor refuse to reimburse.
Petitioners argue that to apply Article 1678 to their case would result to
sheer injustice, as it would amount to giving away the hotel and its other
structures at virtually bargain prices. They allege that the value of the hotel and
its appurtenant facilities amounts to more than two billion pesos, while the
monetary claim of respondent against them only amounts to a little more than
twenty six-million pesos. Thus, they contend that it is the lease contract that
governs the relationship of the parties, and consequently, the parties may be
considered to have impliedly waived the application of Article 1678.
We cannot sustain this line of argument by petitioners. Basic is the
doctrine that laws are deemed incorporated in each and every contract. Existing
laws always form part of any contract. Further, the lease contracts in the case at
bar shows no special kind of agreement between the parties as to how to
proceed in cases of default or breach of the contract. Petitioners maintain that
the lease contract contains a default provision which does not give respondent
the right to appropriate the improvements nor evict petitioners in cases of
cancellation or termination of the contract due to default or breach of its
terms. They cite paragraph 10 of the lease contract, which provides that:
10. DEFAULT. - . . . Default shall automatically take
place upon the failure of the LESSEE to pay or perform its

obligation during the time fixed herein for such obligations

without necessity of demand, or, if no time is fixed, after 90
days from the receipt of notice or demand from the LESSOR. . .
In case of cancellation or termination of this contract
due to the default or breach of its terms, the LESSEE will pay all
reasonable attorneys fees, costs and expenses of litigation that
may be incurred by the LESSOR in enforcing its rights under this
contract or any of its provisions, as well as all unpaid rents, fees,
charges, taxes, assessment and others which the LESSOR may
be entitled to.

Petitioners assert that respondent committed a breach of the lease

contract when it filed the ejectment suit against them. However, we find nothing
in the above quoted provision that prohibits respondent to proceed the way it did
in enforcing its rights as lessor. It can rightfully file for ejectment to evict
petitioners, as it did before the court a quo.
IN VIEW WHEREOF, petitioners appeal is DENIED. The October 4, 2005
Decision of the Court of Appeals in CA-G.R. SP No. 74631 and its December 22,
2005 Resolution are AFFIRMED. Costs against petitioners.

G.R. No. L-25462 February 21, 1980

FLOREZA VS EVANGELISTA
This is a Petition for Review on certiorari of the Decision of the Court of Appeals
(CA-G.R. No. 23516-R) promulgated on November 4, 1965, entitled "Maria de
Evangelista and Sergio Evangelists, (now the respondents) vs. Mariano Floreza
(petitioner herein)," reversing the judgment of the Court of First Instance of Rizal
rendered on July 17, 1957, and instead ordering petitioner to vacate respondents'
residential lot, to remove his house at his own expenses and to pay rental from
May 5, 1956.
Plaintiffs Maria de Evangelista and Sergio Evangelista, who are mother and son,
(the EVANGELISTAS, for short) are the owners of a residential lot located at
Sumilang St., Tanay, Rizal, with an area of 204.08 sq. ms., assessed at P410.00. In
May 1945, the EVANGELISTAS borrowed from FLOREZA the amount of P100.00.

On or about November 1945, with the consent of the EVANGELISTAS, FLOREZA

occupied the above residential lot and built thereon a house of light materials
(barong- barong) without any agreement as to payment for the use of said
residential lot owing to the fact that the EVANGELISTAS has then a standing loan
1
of P100.00 in favor of FLOREZA.

FLOREZA pay them the sum of P10.00 per month as the reasonable value for the
use and occupation of the same from January 2, 1955 (the date the repurchase
price was paid) until FLOREZA removes the house and delivers the lot to them;
and 3) to declare the transaction between them and FLOREZA as one of mortgage
and not of pacto de retro.

On the following dates, the EVANGELISTAS again borrowed the indicated

2
amounts: September 16, 1946 P100.00; August 17, 1947
3
4
5
P200,00; January 30, 1949 P200.00; April 1, 1949 P140.00, or a total of
P740.00 including the first loan. The last three items are evidenced by private
documents stating that the residential lot stands as security therefor and that the
amounts covered thereunder are payable within six years from date, without
mention of interest. The document executed on September 16, 1946 stated
specifically that the loan was without interest "walang anumang patubo."

In his Answer, FLOREZA admitted the repurchase but controverted by stating that
he would execute a deed of repurchase and leave the premises upon payment to
him of the reasonable value of the house worth P7,000.00.

On January 10, 1949, FLOREZA demolished this house of light materials and in its
place constructed one of strong materials assessed in his name at P1,410.00
6
under Tax Declaration No. 4448. FLOREZA paid no rental as before.
On August 1, 1949, the EVANGELISTAS, for and in consideration of P1,000.00
representing the total outstanding loan of P740.00 plus P260.00 in cash, sold
their residential lot to FLOREZA, with a right to repurchase within a period of 6
years from date, or up to August 1, 1955, as evidenced by a notarial document,
7
Exh. B, registered under Act 3344 on December 6, 1949, as Inscription No. 2147.
On January 2, 1955, or seven months before the expiry of the repurchase period,
the EVANGELISTAS paid in full the repurchase price of P1,000.00.
On April 25, 1956, the EVANGELISTAS, through their counsel, wrote FLOREZA a
8
letter asking him to vacate the premises as they wanted to make use of their
residential lot besides the fact that FLOREZA had already been given by them
more than one year within which to move his house to another site. On May 4,
1956, the EVANGELISTAS made a formal written demand to vacate, within five
days from notice, explaining that they had already fully paid the consideration for
9
the repurchase of the lot. FLOREZA refused to vacate unless he was first
reimbursed the value of his house. Hence, the filing of this Complaint on May 18,
1956 by the EVANGELISTAS.
The EVANGELISTAS prayed that: 1) they be declared the owners of the house of
strong materials built by FLOREZA on their residential lot, without payment of
indemnity; or, in the alternative to order FLOREZA to remove said house; 2) that

In a Decision dated July 17, 1957, the Court of First Instance of Rizal opined that
the question of whether the transaction between the parties is one of mortgage
or pacto de retro is no longer material as the indebtedness of P1,000.00 of the
EVANGELISTAS to FLOREZA had already been fully paid. And, applying Article 448
10
of the Civil Code, it rendered a decision dispositively decreeing:
FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment
granting the plaintiffs the right to elect, as owners of the land, to purchase the
house built, on the said lot in question by the defendant for P2,500 or to sell their
said land to e defendant for P1,500. In the event that the plaintiffs shall decide
not to purchase the house in question the defendant should be allowed to
remain in plaintiffs' premises by, paying a monthly rental of P10.00 which is the
reasonable value for the use of the same per month as alleged by plaintiffs in
their complaint. The Court also orders the defendant to pay a monthly rental of
P10.00 for the use of the land in question from May 18, 1956, the date of the
commencement of this action. The counterclaim of the defendant is hereby
ordered dismissed. Without pronouncement as to costs.
SO ORDERED.

11

Both parties appealed to the Court of Appeals.

On November 4, 1965, the Court of Appeals concluded that Article 448 of the Civil
Code, supra, was inapplicable; that FLOREZA was not entitled to reimbursement
for his house but that he could remove the same at his expense; and accordingly
rendered judgment thus:
WHEREFORE, judgment is hereby rendered: (1) adjudging the defendantappellant Mariano Floreza to vacate plaintiffs' residential lot described in the
complaint and to pay rental of P10.00 a month from May 5, 1956, until he

(defendant) shall have vacated the premises; (2) ordering defendant to remove
his house from the land in question within 30 days from the time this decision
becomes final and executory; (3) ordering the Register of Deeds of Rizal to cancel
inscription No. 2147, Page 210, Vol. 36, in the Registration Book under Act 3344
upon payment of his lawful fees; and (4) taxing the costs in both instances against
12
defendant-appellant Mariano Floreza.
Hence, this Petition for Review on certiorari by FLOREZA, seeking a reversal of the
aforestated judgment and ascribing the following errors:
1) That the Court of Appeals erred in holding that petitioner Floreza was a builder
in bad faith without likewise holding that respondents as owners of the land in
dispute, were likewise in bad faith and therefore both parties should in
accordance with Art. 453 of the New Civil Code be considered as having acted in
good faith.
2) That the Court of Appeals erred in completely ignoring the issue raised on
appeal as to whether or not respondents as owners of the questioned lot, were in
bad faith in the sense that they had knowledge of and acquiseced to the
construction of the house of petitioner on their lot.
3) That the Court of Appeals erred in not applying Art. 448 of the New Civil Code
in the adjudication of the rights of petitioner and respondent.
4) That the Court of Appeals erred in declaring that petitioner is not entitled to
reimbursement for the value of his house and that he should instead remove the
same at his expense.
5) That the Court of Appeals erred in adjudging petitioner to vacate respondents'
lot in question and to pay rentals commencing from May 5, 1956, until he shall
have vacated the premises, notwithstanding that petitioner is entitled under Arts.
448 and 546 of the New Civil Code, to retention without payment of rental while
the corresponding indemnity of his house had not been paid.
6) That the Court of Appeals erred in taxing costs against petitioner.
7) That the Court of Appeals erred in not awarding petitioner's counterclaim.

During the pendency of this appeal, petitioner Maria D. de Evangelista died and
was ordered substituted by her son, petitioner Sergio, as her legal representative,
in a Resolution dated May 14, 1976.
On October 20, 1978. the EVANGELISTAS filed a Motion to Dismiss stating that
FLOREZA had since died and that his heirs had voluntarily vacated the residential
lot in question. The date FLOREZA passed away and the date his heirs had
voluntarily vacated the property has not been stated. Required to comment,
"petitioner (represented by his heirs)", through counsel, confirmed his death and
the removal of the house and manifested that thereby the question of
reimbursement had moot and academic. He objected to the dismissal of the case,
however, on the ground that the issue of rentals still pends. On January 21, 1980,
complying with a Resolution of 'his Court, the EVANGELISTAS clarified that the
dismissal they were praying for was not of the entire case but only of this Petition
for Review on Certiorari.
We are not in agreement that the question of reimbursement of the value of the
improvement erected on the subject property has become moot. Petitioner's
right of retention of subject property until he is reimbursed for the value of his
house, as he had demanded, is inextricably linked with the question of rentals.
For if petitioner has the right to indemnity, he has the right of retention and no
rentals need be paid. Conversely, if no right of retention exists, damages in the
form of rentals for the continued use and occupation of the property should be
allowed.
We uphold the Court of Appeals in its conclusion that Article 448 of the Civil Code
is inapplicable to the factual milieu herein. Said codal provision applies only when
the builder, planter, or sower believes he had the right so to build, plant or sow
because he thinks he owns the land or believes himself to have a claim of
13
title. In this case, petitioner makes no pretensions of ownership whatsoever.
Petitioner concedes that he was a builder in bad faith but maintains that' the
EVANGELISTAS should also be held in bad faith, so that both of them being in bad
14
faith, Article 453 of the Civil Code should apply. By the same token, however,
that Article 448 of the same Code is not applicable, neither is Article 453 under
the ambiance of this case.
Would petitioner, as vendee a retro, then be entitled to the rights granted iii
Article 1616 of the Civil Code (Art. 1518 of the old Code)? To quote:

Art. 1616. The vendor cannot avail himself of the right of repurchase without
returning to the vendee the price of the sale, and in addition:
(1) The expenses of the contract, and any other legitimate payments made by
reason of the sale;

hereby ordered substituted for him, shall commence on January 3, 1955 until the
date that the residential lot in question was vacated.

G.R. No. L-35648 February 27, 1987

PERSHING TAN QUETO vs. COURT OF APPEALS

(2) The necessary and useful expenses made on the thing sold.
The question again calls for a negative answer. It should be noted that petitioner
did not construct his house as a vendee a retro. The house had already been
constructed as far back as 1949 (1945 for the house of light materials) even
before the pacto de retro sale in 1949. Petitioner incurred no useful expense,
therefore, after that sale. The house was already there at the tolerance of the
EVANGELISTAS in consideration of the several loans extended to them. Since
petitioner cannot be classified as a builder in good faith within the purview of
Article 448 of the Civil Code, nor as a vendee a retro, who made useful
improvements during the lifetime of the pacto de retro, petitioner has no right to
reimbursement of the value of the house which he had erected on the residential
lot of the EVANGELISTAS, much less to retention of the premises until he is
reimbursed.The rights of petitioner are more akin to those of a usufructuary who,
under Article 579 of the Civil (Art. 487 of the old Code), may make on the
property useful improvements but with no right to be indemnified therefor. He
may, however, remove such improvements should it be possible to do so without
damage to the property: For if the improvements made by the usufructuary were
subject to indemnity, we would have a dangerous and unjust situation in which
the usufructuary could dispose of the owner's funds by compelling him to pay for
15
improvements which perhaps he would not have made.
We come now to the issue of rentals. It is clear that from the date that the
redemption price had been paid by the EVANGELISTAS on January 2, 1955,
petitioner's right to the use of the residential lot without charge had ceased.
Having retained the property although a redemption had been made, he should
be held liable for damages in the form of rentals for the continued use of the
16
subject residential lot at the rate of P10.00 monthly from January 3, 1955, and
not merely from the date of demand on May 4, 1956, as held by the Court of
Appeals, until the house was removed and the property vacated by petitioner or
his heirs.
WHEREFORE, the judgment appealed from is hereby affirmed, with the
modification that payment of rentals by the heir, of Mariano Floreza, who are

This is a Motion for Reconsideration of the decision dated May 16,1983 of this
Court * in the above-entitled case, asking for the reversal of said decision on the
following grounds:
1. Decison erred in disregarding the fact that Lot No. 304-B was registered in the
name of the husband, Juan Pombuena, as per OCT. No. 0-1160 issued pursuant to
the November 22, 1938 Decision (Exhibit 3) of the Cadastral Court in Cadastral
Case No. 12, G.L.R.O. Cad. Rec. No. 1638, and that petitioner had the right
to rely on said OCT;
2. The Decision erred in misinterpreting the admission in the Answer of petitioner
to the complaint in the unlawful detainer Case No. 448 (City Court of Ozamiz City)
as his admission that Lot 304-B is the paraphernal property of the wife, Restituta
Tacalinar;
3. The Decision erred in reforming the Contract of Sale (Exh. B) of Lot 304-B from
Basilides Tacalinar (mother) to the respondent, Restituta Tacalinar Guangco de
Pombuena, from a sale to a conveyance of the share of the wife Restituta
Tacalinar (daughter) in the future hereditary estate of her parents;
4. The Decision erred in over-looking that the barter agreement is an onerous
contract of exchange, whereby private respondents-spouses received valuable
consideration, concessions and other benefits therefor and in concluding that
'the barter agreement has no effect;
5. The Decision erred in disregarding the fact that petitioner constructed his
concrete building on Lot No. 304-B in good faith relying OCT No. 0-1160, after the
dismissal of the ejectment case and onlyafter the execution of said barter
agreement;
6. The Decision erred in confusing the conclusion of law that petitioner is a
builder in bad faith with afinding of fact. The rule is that questions of law are

reviewable on appeal or by certiorari. Moreover, the rule on finding of fact is

subject to well-settled exceptions. (pp. 257-258, Rollo)

(10) that after the barter agreement dated October 10, 1962 between JUAN and
TAN QUETO, the latter constructed (See p. 257, Rollo, Vol. II) on the disputed land
a concrete building, without any objection on the part of RESTITUTA;

It wig be recalled that the undisputed relevant facts indicate:

(1) that Restituta Tacalinar Guanaco de Pombuena (RESTITUTA, for short)
received the questioned lot (no. 304-B), of the Cadastre Survey of the
Municipality of Centro, Mizamis Occidental, either as a purported donation or by
way of purchase on (February 11, 1927) (with P50.00) as the alleged
consideration thereof;

(11) that later, RESTITUTA sued both JUAN and TAN QUETO for reconveyance of
the title over the registered but disputed lot, for annulment of the barter, and for
recovery of the land with damages.
The two principal issues are clearly the following:
(1) Is the questioned lot paraphernal or conjugal?

(2) that the transaction took place during her mother's lifetime, her father having
predeceased the mother;
(3) that the donation or sale was consummated while RESTITUTA was already
married to her husband Juan Pombuena (JUAN, for short);
(4) that on January 22, 1935, JUAN filed for himself and his supposed co-owner
RESTITUTA an application for a Torrens Title over the land;
(5) that under date of November 22, 1938 a decision was promulgated in GLRC
No. 1638 (Cadastral Case No. 12) pronouncing JUAN ('married to RESTITUTA') as
the owner of the land;
(6) that on September 22, 1949 a contract of lease over the lot was entered into
between Pershing Tan Queto (TAN QUETO, for short, the herein petitioner) and
RESTITUTA (with the consent of her husband JUAN) for a period of ten (10) years;

(2) In having constructed the building on the lot, should TAN QUETO be regarded
as a builder in good faith (and hence entitled to reimbursement) or a builder
in bad faith (with no right to reimbursement)?
The finding by both the Court of First Instance and the Court of Appeals that the
disputed lot is paraphernal and that TAN QUETO is a builder in bad faith were
regarded by Us in Our assailed decision as findings of facts and thus ordinarily
conclusive on Us. Assuming they are factual findings, still if they are erroneous
inferences from certain facts, they cannot bind this Court.
A second hard look at the circumstances of the case has constrained Us to rule as
follows:

(8) that as a consequence of the cadastral case, an Original Certificate of Title

(Exh. 10) was issued in JUAN's name ("married to RESTITUTA") on April 22, 1962;

(1) The land is conjugal, not paraphernal. How was ownership transferred, if at
all, from her mother to RESTITUTA? The oral donation of the lot cannot be a valid
donation interviews because it was not executed in a public instrument (Art. 749,
Civil Code), nor as a valid donation mortis causa for the formalities of a will were
not complied with. The allegation that the transfer was a conveyance to
RESTITUTA of her hereditary share in the estate of her mother (or parents)
cannot be sustained for the contractual transmission of future inheritance is
generally prohibited.

(9) that the unlawful detainer case was won by the spouses in the Municipal
Court; but on appeal in the Court of First Instance, the entire case was DISMISSED
because of an understanding (barter) whereby TAN QUETO became the owner of
the disputed lot, and the spouses RESTITUTA and JUAN in turn became the
owners of a parcel of land (with the house constructed thereon) previously
owned (that is, before the barter) by TAN QUETO;

The fact is ownership was acquired by both JUAN and RESTITUTA by tradition
(delivery) as a consequence of the contract of sale (See Art. 712, Civil Code) with
P50.00 (then a considerable amount) as the cause or consideration of the
transaction. The lot is therefore conjugal, having been acquired by the spouses
thru onerous title (the money used being presumably conjugal there being no
proof that RESTITUTA had paraphernal funds of her own). The contention that

(7) that on December 27, 1960 RESTITUTA sued TAN QUETO for unlawful detainer
(the lease contract having expired) before the Municipal Court of Ozamis City;

the sale was fictitious or simulated (and therefore void) is bankrupt. Firstly, there
was a valid consideration therefor. Secondly, assuming that there had indeed
been a simulation, the parties thereto cannot use said simulation to prejudice a
stranger to said stratagem (like petitioner herein).
One nagging question has been posed. But did not TAN QUETO admit in his
Answer that RESTITUTA was the owner of the lot. This is not so. He admitted
RESTITUTA was an owner" (not the owner) of the lot, and this is true, for she was
a co-owner (with JUAN, and therefore "an owner. " Surely, there is no admission
of RESTITUTA's exclusive ownership. And yet this is the basis of the trial court's
conclusion that the lot was indeed paraphernal.
(2) Was Tan Queto a possessor and builder in good faith or in bad faith?

Tan Queto v. CA [G.R. No. L-35648. February 27, 1987.]

Facts: Restituta Tagalinar Guangco de Pombuena received the questioned lot (Lot
304-B of the Cadastre Survey of the Municipality of Centro, Misamis Occidental)
either as a purported donation or by way of purchase on 11 February 1927 for
P50.00 as the alleged consideration thereof. The transaction took place during
her mothers lifetime (her father having predeceased the mother) and
consummated while Restituta was already married to her husband Juan
Pombuena. On 22 January 1935, Juan filed an application of Torrens title over the
land for himself and his supposed co-owner Restituta. On 22 November 1938, a

Even assuming that despite registration of the lot as conjugal, Tan Queto nursed
the belief that the lot was actually RESTITUTA's (making him in bad faith), still
RESTITUTA's failure to prohibit him from building despite her knowledge that
construction was actually being done, makes her also in bad faith. The net
resultant of mutual bad faith would entitle TAN QUETO to the rights of a builder
in good faith (Art. 448, Civil Code), ergo, reimbursement should be given him if
RESTITUTA decides to appropriate the building for herself (Art. 448, Civil Code).

decision was promulgated (GLRC 1638, Cadastral Case 12) pronouncing Juan
(married to Restituto) as the owner of the land. On 22 September 1949 a contract
of lease over the lot was entered into between Pershing Tan Queto and Restituta
(with the consent of her husband) for a period of 10 years.
Meanwhile, On 27 December 1960 Restituta sued Tan Queto for unlawful
detainer (the lease contract having expired) before the Municipal Court of Ozamis

However, as already previously intimated, TAN QUETO having bartered his own
lot and small house with the questioned lot with JUAN (who has been adverted to
by a court decision and by the OCT a conjugal owner) may be said to be the
OWNER-POSSESSOR of the lot. Certainly he is not merely a possessor or builder in
good faith(this phrase presupposes ownership in another); much less is he a
builder in bad faith. He is a builder-possessor jus possidendi because he is the
OWNER himself. Please note that the Chapter on Possession (jus possesionis, not
jus possidendi) in the Civil Code refers to a possessor other than the owner.
Please note further that the difference between a builder (or possessor) in good
faith and one in bad faith is that the former is NOT AWARE of the defect or flaw in
his title or mode of acquisition while the latter is AWARE of such defect or flaw
(Art. 526, Civil Code). But in either case there is a flaw or defect. In the case of
TAN QUETO there is no such flaw or defect because it is he himself (not
somebody else) who is the owner of the property.

City.

WHEREFORE, Our decision promulgated on May 16,1983 is hereby SET ASIDE, and
a new one is hereby rendered declaring the questioned lot together with the
building thereone, as TAN QUETO's exclusive property. No costs..

understanding (barter) entered into by Juan and Tan Queto.

On 22 April 1962, as a consequence of the cadastral case, an OCT was issued in

Juans name. On 10 October 1962, Tan Queto and Juan entered into a barter
agreement whereby Tan Queto became the owner of the disputed lot, and the
spouses in turn became the owners of a parcel of land with the house
constructed thereon previously owned (that is, before the barter) by Tan Queto.
Thereafter, Tan Queto constructed on the disputed land a concrete building,
without any objection on the part of Restituta.
The Municipal court ruled in favor of the spouses in the unlawful detainer case;
but on appeal in the CFI, the entire case was dismissed because of an

Restituta sued both Juan and Tan Queto for reconveyance of the title over the
registered but disputed lot, for annulment of the barter, and for recovery of the

land with damages. The CFI and the Court of Appeals found the disputed lot as

4. Sale not fictitious nor simulated; Allegation of simulation cannot prejudice a

paraphernal and that Tan Queto was a builder in bad faith. These findings were

stranger

regarded by the Supreme Court as findings of facts and thus ordinarily conclusive

The sale cannot be said to be fictitious or simulated (and therefore void) as there

upon the Court. Tan Queto filed for a motion for reconsideration of the Supreme

was a valid consideration therefor. Assuming that there had indeed been a

Court decision dated 16 May 1983.

simulation, the parties thereto cannot use said simulation to prejudice a stranger
to said strategem (like petitioner herein).

The Supreme Court set aside its decision promulgated on 16 May 1983, and
rendered a new one declaring the questioned lot together with the building

5. Tan Queto recognized Restituta as an owner, not the owner

thereon, as Tan Quetos exclusive property; without costs.

Tan Queto admitted Restituta was an owner (not the owner) of the lot in his
Answer, and this is true, for she was a co-owner (with Juan, and therefore an

1. Findings of the lower courts ordinary conclusive upon the Court; exception, if

owner.) There is no admission of Restitutas exclusive ownership.

erroneous
The findings of the Court of First Instance and the Court of Appeals were

6. Assuming Tan Queto recognized Restituta as the owner; bad faith of one

regarded by the Supreme Court as findings of facts and thus ordinarily conclusive

neutralizes the bad faith of the other

upon the Court. Assuming they are factual findings, still if they are erroneous

Even assuming that despite registration of the lot as conjugal, Tan Queto nursed

inferences from certain facts, they cannot bind the Court.

the belief that the lot was actually Restitutas (making him in bad faith), still
Restitutas failure to prohibit him from building despite her knowledge that

2. Land not transferred to Restituta by donation, for it to be paraphernal

construction was actually being done, makes her also in bad faith. The net

The oral donation of the lot cannot be a valid donation inter-vivos because it was

resultant of mutual bad faith would entitle Tan Qyeto to the rights of a builder in

not executed in a public instrument (Art. 749, Civil Code), nor as a valid donation

good faith (Art. 448, Civil Code), ergo, reimbursement should be given him if

mortis causa for the formalities of a will were not complied with. The allegation

Restituta decides to appropriate the building for herself (Art. 448, Civil Code).

that the transfer was a conveyance to Restituta of her hereditary share in the
estate of her mother (or parents) cannot be sustained for the contractual

7. Tan Queto an owner-possessor

transmission of future inheritance is generally prohibited.

Tan Queto having bartered his own lot and small house with the questioned lot
with Juan (who has been adverted to by a court decision and by the OCT a

3. Land is conjugal, not paraphernal; Ownership by tradition

conjugal owner) may be said to be the owner-possessor of the lot. Certainly he is

The land is conjugal, not paraphernal. Ownership was acquired by the spouses by

not merely a possessor or builder in good faith (this phrase presupposes

tradition (delivery) as a consequence of the contract of sale (See Art. 712, Civil

ownership in another); much less is he a builder in bad faith. He is a builder-

Code) with P50.00 (then a considerable amount) as the cause or consideration of

possessor (jus possidendi) because he is the owner himself.

the transaction. The lot is therefore conjugal, having been acquired by the
spouses thru onerous title (the money used being presumably conjugal, there

8. Jus possessionis, jus possidendi; good faith and bad faith

being no proof that Restituta had paraphernal funds of her own).

The Chapter on Possession (jus possessionis, not jus possidendi) in the Civil Code
refers to a possessor other than the owner. The difference between a builder (or

possessor) in good faith and one in bad faith is that the former is not aware of the
defect or flaw in his title or mode of acquisition while the latter is aware of such
defect or flaw (Art. 526, Civil Code). But in either case there is a flaw or defect. In
the present case, there is no such flaw or defect because it is Tan Queto himself
(not somebody else) who is the owner of the property.

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

[10]
Quitclaim over Lot No. 356-A in favor of Dr. Rosario. According to the said
Deed, the Torbela siblings for and in consideration of the sum of NINE PESOS
(P9.00) x x x transfer[red] and convey[ed] x x x unto the said Andres T. Rosario,
that undivided portion of THREE HUNDRED SEVENTY-FOUR square meters of that
parcel of land embraced in Original Certificate of Title No. 16676 of the land
[11]
records of Pangasinan x x x.
Four days later, on December 16, 1964, OCT No.
16676 in Valerianos name was partially cancelled as to Lot No. 356-A and TCT
[12]
No. 52751 was issued in Dr. Rosarios name covering the said property.

TORBELA VS SPS ROSARIO AND BANCO FILIPINO

Presently before the Court are two consolidated Petitions for Review
on Certiorari under Rule 45 of the Rules of Court, both assailing the
[1]
[2]
Decision dated June 29, 1999 and Resolution dated October 22, 1999 of the
Court of Appeals in CA-G.R. CV No. 39770.

[3]

The petitioners in G.R. No. 140528 are siblings Maria Torbela, Pedro
[4]
[5]
Torbela, Eufrosina Torbela Rosario, Leonila Torbela Tamin, Fernando
[6]
[7]
Torbela, Dolores Torbela Tablada, Leonora Torbela Agustin, and Severina
Torbela Ildefonso (Torbela siblings).

The petitioner in G.R. No. 140553 is Lena Duque-Rosario (Duque-Rosario),

who was married to, but now legally separated from, Dr. Andres T. Rosario (Dr.
Rosario). Dr. Rosario is the son of Eufrosina Torbela Rosario and the nephew of
the other Torbela siblings.

The controversy began with a parcel of land, with an area of 374 square
meters, located in Urdaneta City, Pangasinan (Lot No. 356-A). It was originally
part of a larger parcel of land, known as Lot No. 356 of the Cadastral Survey of
Urdaneta, measuring 749 square meters, and covered by Original Certificate of
[8]
Title (OCT) No. 16676, in the name of Valeriano Semilla (Valeriano), married to
Potenciana Acosta. Under unexplained circumstances, Valeriano gave Lot No.
356-A to his sister Marta Semilla, married to Eugenio Torbela (spouses
Torbela). Upon the deaths of the spouses Torbela, Lot No. 356-A was adjudicated
in equal shares among their children, the Torbela siblings, by virtue of a Deed of
[9]
Extrajudicial Partition dated December 3, 1962.

[13]

Another Deed of Absolute Quitclaim was subsequently executed on

December 28, 1964, this time by Dr. Rosario, acknowledging that he only
borrowed Lot No. 356-A from the Torbela siblings and was already returning the
same to the latter for P1.00. The Deed stated:

That for and in consideration of the sum of one peso

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

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

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

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

[16]
Adverse Claim, on behalf of the Torbela siblings. Cornelio deposed in said
Affidavit:

3.
That ANDRES T. ROSARIO later quitclaimed his
rights in favor of the former owners by virtue of a Deed of
Absolute Quitclaim which he executed before Notary Public
Banaga, and entered in his Notarial Registry as Dec. No. 43;
Page No. 9; Book No. I; Series of 1964;

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

5.
That pending payment of the obligation with the
DEVELOPMENT BANK OF THE PHILIPPINES or redemption of the
Title from said bank, I, CORNELIO T. TOSINO, in behalf of my
mother MARIA TORBELA-TOSINO, and my Aunts EUFROSINA
TORBELA, LEONILA TORBELA-TAMEN, DOLORES TORBELA,
LEONORA TORBELA-AGUSTIN, SEVERINA TORBELA-ILDEFONSO,
and my Uncles PEDRO TORBELA and FERNANDO, also surnamed
TORBELA, I request the Register of Deeds of Pangasinan to
annotate their adverse claim at the back of Transfer Certificate

of Title No. 52751, based on the annexed document, Deed of

Absolute Quitclaim by ANDRES T. ROSARIO, dated December
28, 1964, marked as Annex A and made a part of this
Affidavit, and it is also requested that the DEVELOPMENT BANK
[17]
OF THE PHILIPPINES be informed accordingly.

The very next day, on May 17, 1967, the Torbela siblings had Cornelios
Affidavit of Adverse Claim dated May 16, 1967 and Dr. Rosarios Deed of Absolute
Quitclaim dated December 28, 1964 annotated on TCT No. 52751 as Entry Nos.
[18]
[19]
274471 and 274472, respectively.

The construction of a four-storey building on Lot No. 356-A was eventually

completed. The building was initially used as a hospital, but was later converted
to a commercial building. Part of the building was leased to PT&T; and the rest to
Mrs. Andrea Rosario-Haduca, Dr. Rosarios sister, who operated the Rose Inn
Hotel and Restaurant.

Dr. Rosario was able to fully pay his loan from DBP. Under Entry No.
[20]
520197 on TCT No. 52751 dated March 6, 1981, the mortgage appearing under
Entry No. 243537 was cancelled per the Cancellation and Discharge of Mortgage
executed by DBP in favor of Dr. Rosario and ratified before a notary public on July
11, 1980.

In the meantime, Dr. Rosario acquired another loan from the Philippine
National Bank (PNB) sometime in 1979-1981. Records do not reveal though the
original amount of the loan from PNB, but the loan agreement was amended
on March 5, 1981 and the loan amount was increased toP450,000.00. The loan
was secured by mortgages constituted on the following properties: (1) Lot No.
356-A, covered by TCT No. 52751 in Dr. Rosarios name; (2) Lot No. 4489, with an
area of 1,862 square meters, located in Dagupan City, Pangasinan, covered by
TCT No. 24832; and (3) Lot No. 5-F-8-C-2-B-2-A, with an area of 1,001 square
meters, located in Nancayasan, Urdaneta, Pangasinan, covered by TCT No.

[21]

104189.
The amended loan agreement and mortgage on Lot No. 356-A was
[22]
annotated on TCT No. 52751 on March 6, 1981 as Entry No. 520099.

loan amount. Thus, the spouses Rosario could only avail of the maximum loan
amount ofP830,064.00 from Banco Filipino.

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

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

Entry No. 520469. Cancellation of Adverse Claim executed

by Andres
Rosario in
favor
of same. The
incumbrance/mortgage appearing under Entry No.274471-72 is
now cancelled as per Cancellation and Discharge of Mortgage
Ratified before Notary Public Mauro G. Meris on March 5, 1981:
Doc. No. 215; Page No. 44; Book No. 1; Series Of 1981.
Lingayen, Pangasinan, 3-11, 19981

[Signed:

Pedro

dela

Cruz]
Deeds

[24]

Register

of

On February 13, 1986, the Torbela siblings filed before the Regional Trial
Court (RTC) of Urdaneta, Pangasinan, a Complaint for recovery of ownership and
possession of Lot No. 356-A, plus damages, against the spouses Rosario, which
was docketed as Civil Case No. U-4359. On the same day, Entry Nos. 593493 and
593494 were made on TCT No. 52751 that read as follows:

Entry No. 593494 Complaint Civil Case No. U-4359 (For:

Recovery of Ownership and Possession and Damages. (Sup.
Paper).
Entry No. 593493 Notice of Lis Pendens The parcel of land
described in this title is subject to Lis Pendens executed by
Liliosa B. Rosario, CLAO, Trial Attorney dated February 13,
1986. Filed to TCT No. 52751
February 13, 1986-1986 February 13 3:30 p.m.

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

PACIFICO

M.

BRAGANZA
Register of Deeds

[27]

The spouses Rosario afterwards failed to pay their loan from Banco
Filipino. As of April 2, 1987, the spouses Rosarios outstanding principal
obligation and penalty charges amounted to P743,296.82 and P151,524.00,
[28]
respectively.

(SGD.)

RUFINO M. MORENO,

SR.
Register of Deeds

Banco Filipino extrajudicially foreclosed the mortgages on Lot No. 356-A,

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

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

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

Entry No. 627059 Lis Pendens Dr. Andres T. Rosario

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

[32]

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

Meanwhile, the Torbela siblings tried to redeem Lot No. 356-A from
Banco Filipino, but their efforts were unsuccessful. Upon the expiration of the
[34]
one-year redemption period in April 1988, the Certificate of Final Sale and
[35]
Affidavit of Consolidation covering all three foreclosed properties were
executed on May 24, 1988 and May 25, 1988, respectively.

On June 7, 1988, new certificates of title were issued in the name of

Banco Filipino, particularly, TCT No. 165812 for Lot No. 5-F-8-C-2-B-2-A and TCT
[36]
No. 165813 for Lot No. 356-A .

The Torbela siblings thereafter filed before the RTC on August 29, 1988 a
[37]
Complaint for annulment of the Certificate of Final Sale dated May 24, 1988,
judicial cancelation of TCT No. 165813, and damages, against Banco Filipino,
the Ex Officio Provincial Sheriff, and the Register of Deeds of Pangasinan, which
was docketed as Civil Case No. U-4733.

On June 19, 1991, Banco Filipino filed before the RTC of Urdaneta City a
Petition for the issuance of a writ of possession. In said Petition, docketed as Pet.
Case No. U-822, Banco Filipino prayed that a writ of possession be issued in its
favor over Lot No. 5-F-8-C-2-B-2-A and Lot No. 356-A, plus the improvements

thereon, and the spouses Rosario and other persons presently in possession of
said properties be directed to abide by said writ.

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

The RTC jointly heard Civil Case Nos. U-4359 and U-4733 and Pet. Case
[38]
No. U-822. The Decision on these three cases was promulgated on January 15,
1992, the dispositive portion of which reads:

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

WHEREFORE, judgment is rendered:

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

2.
Declaring the sheriffs sale dated April 2,
1987 over Lot 356-A covered by TCT 52751 and subsequent
final Deed of Sale dated May 14, 1988 over Lot 356-A covered
by TCT No. 52751 legal and valid;
3.
Declaring Banco Filipino the owner
of Lot 356-A covered by TCT No. 52751 (now TCT 165813);
4.
Banco Filipino is entitled to a Writ of
Possession over Lot 356-A together with the improvements
thereon (Rose Inn Building). The Branch Clerk of Court is
hereby ordered to issue a writ of possession in favor of Banco
Filipino;
5.
[The Torbela siblings] are hereby ordered
to render accounting to Banco Filipino the rental they received
from tenants of Rose Inn Buildingfrom May 14, 1988;

8.
Dr. Rosario and Lena Rosario are hereby
ordered to reimburse [the Torbela siblings] the market value
of Lot 356-A as of December, 1964 minus payments made by
the former;
9.
Dismissing the complaint of [the Torbela
siblings] against Banco Filipino, Pedro Habon and Rufino
Moreno in Civil Case No. U-4733; and against Banco Filipino in
[39]
Civil Case No. U-4359.

The RTC released an Amended Decision

adding the following paragraph to the dispositive:

[40]

dated January 29, 1992,

Banco Filipino is entitled to a Writ of Possession over

Lot-5-F-8-C-2-[B]-2-A of the subdivision plan (LRC) Psd-122471,
covered by Transfer Certificate of Title 104189 of the Registry of
[41]
Deeds of Pangasinan[.]

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

In its Decision

[42]

dated June 29, 1999, the Court of Appeals decreed:

WHEREFORE, foregoing considered, the appealed

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

Costs against [Dr. Rosario].

[43]

DEED OF ABSOLUTE QUITCLAIM EXECUTED BY [DR.

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

Second Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED

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

Third Issue and Assignment of Error:

[44]

The Court of Appeals, in a Resolution dated October 22, 1999, denied

the separate Motions for Reconsideration of the Torbela siblings and Dr. Rosario.

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

First Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN NOT FINDING THAT THE REGISTRATION OF THE

THE HONORABLE COURT OF APPEALS GRAVELY ERRED

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

Fourth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN FINDING THAT RESPONDENT BANCO FILIPINO

SAVINGS AND MORTGAGE BANK IS A MORTGAGEE IN

GOOD FAITH.

Fifth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN NOT FINDING THAT THE FILING OF A CIVIL CASE NO.
U-4359 ON DECEMBER 9, 1987, IMPLEADING
RESPONDENT BANCO FILIPINO AS ADDITIONAL PARTY
DEFENDANT, TOLL OR SUSPEND THE RUNNING OF THE
ONE YEAR PERIOD OF REDEMPTION.

Sixth Issue and Assignment of Error:

THE HONORABLE COURT OF APPEALS GRAVELY ERRED

IN NOT FINDING THAT THE OWNERSHIP OVER THE
SUBJECT
PROPERTY
WAS
PREMATURELY
CONSOLIDATED IN FAVOR OF RESPONDENT BANCO
FILIPINO SAVINGS AND MORTGAGE BANK.

WHEREFORE, in the light of the foregoing

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

The [Torbela siblings] likewise pray for such other

reliefs and further remedies as may be deemed just and
[46]
equitable under the premises.

Duque-Rosario, now legally separated from Dr. Rosario, avers in her

Petition for Review in G.R. No. 140553 that Lot No. 4489 and Lot No. 5-F-8-C-2-B2-A were registered in her name, and she was unlawfully deprived of ownership
of said properties because of the following errors of the Court of Appeals:

Seventh Issue and Assignment of Error:

A
THE HONORABLE COURT OF APPEALS GRAVELY ERRED
IN FINDING THAT THE SUBJECT PROPERTY IS AT LEAST
[45]
WORTHP1,200,000.00.

The Torbela siblings ask of this Court:

THE HON. COURT OF APPEALS PATENTLY ERRED IN

FINDING THAT THE PERIOD TO REDEEM THE PROPERTY
NOT COMMENCED, HENCE, THE CERTIFICATE OF SALE,
CONSOLIDATION OF OWNERSHIP BY [BANCO FILIPINO],
NULL AND VOID.

NOT
HAS
THE
ARE

THE COURT OF APPEALS PATENTLY ERRED IN REFUSING TO

RULE THAT THE FILING OF THE COMPLAINT BEFORE THE COURT
A QUO BY THE [TORBELA SIBLINGS] HAD ALREADY BEEN
[47]
PRESCRIBED.

Duque-Rosario prays that the appealed decision of the Court of Appeals

be reversed and set aside, and that Lot No. 4489 and Lot No. 5-F-8-C-2-B-2-A be
freed from all obligations and encumbrances and returned to her.

The above rule, however, is subject to a number of

exceptions, such as (1) when the inference made is manifestly
mistaken, absurd or impossible; (2) when there is grave abuse of
discretion; (3) when the finding is grounded entirely on speculations,
surmises, or conjectures; (4) when the judgment of the Court of
Appeals is based on misapprehension of facts; (5) when the findings of
fact are conflicting; (6) when the Court of Appeals, in making its
findings, went beyond the issues of the case and the same is contrary
to the admissions of both parties; (7) when the findings of the Court of
Appeals are contrary to those of the trial court; (8) when the findings
of fact are conclusions without citation of specific evidence on which
they are based; (9) when the Court of Appeals manifestly overlooked
certain relevant facts not disputed by the parties and which, if properly
considered, would justify a different conclusion; and (10) when the
findings of fact of the Court of Appeals are premised on the absence of
[49]
evidence and are contradicted by the evidence on record.

Review of findings of fact

by the RTC and the Court of
Appeals warranted.

A disquisition of the issues raised and/or errors assigned in the Petitions

at bar unavoidably requires a re-evaluation of the facts and evidence presented
by the parties in the court a quo.

In Republic v. Heirs of Julia Ramos,

governing the power of review of the Court:

[48]

the Court summed up the rules

Ordinarily, this Court will not review, much less reverse, the
factual findings of the Court of Appeals, especially where such findings
coincide with those of the trial court. The findings of facts of the Court
of Appeals are, as a general rule, conclusive and binding upon this
Court, since this Court is not a trier of facts and does not routinely
undertake the re-examination of the evidence presented by the
contending parties during the trial of the case.

As the succeeding discussion will bear out, the first, fourth, and ninth exceptions
are extant in these case.

Barangay conciliation was

not a pre-requisite to the
institution of Civil Case No.
U-4359.

Dr. Rosario contends that Civil Case No. U-4359, the Complaint of the
Torbela siblings for recovery of ownership and possession of Lot No. 356-A, plus
damages, should have been dismissed by the RTC because of the failure of the
Torbela siblings to comply with the prior requirement of submitting the dispute
to barangay conciliation.

The Torbela siblings instituted Civil Case No. U-4359 on February 13, 1986,
when Presidential Decree No. 1508, Establishing a System of Amicably Settling
[50]
Disputes at the Barangay Level, was still in effect.
Pertinent provisions of said
issuance read:

Section
2. Subject
matters
for
amicable
settlement. The Lupon of each barangay shall have authority to
bring together the parties actually residing in the same city or
municipality for amicable settlement of all disputes except:
1.

Where one party is the government, or any

subdivision or instrumentality thereof;

2.

Where one party is a public officer or employee,

and the dispute relates to the performance of
his official functions;

3.

Offenses
punishable
by
imprisonment
exceeding
30
days,
or
a
fine
exceeding P200.00;

4.

Offenses where there is no private offended

party;

5.

Such other classes of disputes which the Prime

Minister may in the interest of justice
determine upon recommendation of the
Minister of Justice and the Minister of Local
Government.

Section 3. Venue. Disputes between or among persons

actually residing in the same barangay shall be brought for
amicable settlement before the Lupon of said barangay. Those
involving actual residents of different barangays within the
same city or municipality shall be brought in the barangay
where the respondent or any of the respondents actually
resides, at the election of the complainant. However, all
disputes which involved real property or any interest therein
shall be brought in the barangay where the real property or
any part thereof is situated.

The Lupon shall have no authority over disputes:

1.

involving parties who actually reside in

barangays
of
different
cities
or
municipalities, except where such barangays
adjoin each other; and

2.

involving real property located in different

municipalities.

xxxx

Section 6. Conciliation, pre-condition to filing of

complaint. No complaint, petition, action or proceeding
involving any matter within the authority of the Lupon as
provided in Section 2 hereof shall be filed or instituted in court
or any other government office for adjudication unless there
has been a confrontation of the parties before the Lupon
Chairman or the Pangkat and no conciliation or settlement has
been reached as certified by the Lupon Secretary or the Pangkat
Secretary, attested by the Lupon or Pangkat Chairman, or
unless the settlement has been repudiated. x x x. (Emphases
supplied.)

The Court gave the following elucidation on the jurisdiction of the

[51]
Lupong Tagapayapa in Tavora v. Hon. Veloso :

The foregoing provisions are quite clear. Section 2

specifies the conditions under which the Lupon of a barangay
shall have authority to bring together the disputants for
amicable settlement of their dispute: The parties must be
actually residing in the same city or municipality. At the same
time, Section 3 while reiterating that the disputants must be
actually residing in the same barangay or in different
barangays within the same city or municipality

unequivocably declares that the Lupon shall have no

authority over disputes involving parties who actually reside
in barangays of differentcities or municipalities, except where
such barangays adjoin each other.

Thus, by express statutory inclusion and exclusion,

the Lupon shall have no jurisdiction over disputes where the
parties are not actual residents of the same city or
municipality, except where the barangays in which they
actually reside adjoin each other.
It is true that immediately after specifying the
barangay whose Lupon shall take cognizance of a given dispute,
Sec. 3 of PD 1508 adds:

"However, all disputes which involve

real property or any interest therein shall be
brought in the barangay where the real
property or any part thereof is situated."

Actually, however, this added sentence is just an

ordinary proviso and should operate as such.

The operation of a proviso, as a rule, should be limited

to its normal function, which is to restrict or vary the operation
of the principal clause, rather than expand its scope, in the
absence of a clear indication to the contrary.

The natural and appropriate office

of a proviso is . . . to except something from
the enacting clause; to limit, restrict, or
qualify the statute in whole or in part; or to
exclude from the scope of the statute that

which otherwise would be within its terms.

(73 Am Jur 2d 467.)

Therefore, the quoted proviso should simply be

deemed to restrict or vary the rule on venue prescribed in the
principal clauses of the first paragraph of Section 3,
thus: Although venue is generally determined by the
residence of the parties, disputes involving real property shall
be brought in the barangay where the real property or any
part thereof is situated, notwithstanding that the parties
reside
elsewhere
within
the
same
[52]
city/municipality. (Emphases supplied.)

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

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

There was an express trust

between
the
Torbela
siblings and Dr. Rosario.

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

Indeed, the Torbela siblings executed a Deed of Absolute Quitclaim

on December 12, 1964 in which they transferred and conveyed Lot No. 356-A to
Dr. Rosario for the consideration of P9.00. However, the Torbela siblings
explained that they only executed the Deed as an accommodation so that Dr.
Rosario could have Lot No. 356-A registered in his name and use said property to
secure a loan from DBP, the proceeds of which would be used for building a
hospital on Lot No. 356-A a claim supported by testimonial and documentary
evidence, and borne out by the sequence of events immediately following the
execution by the Torbela siblings of said Deed. On December 16, 1964, TCT No.
52751, covering Lot No. 356-A, was already issued in Dr. Rosarios
name. On December 28, 1964, Dr. Rosario executed his own Deed of Absolute
Quitclaim, in which he expressly acknowledged that he only borrowed Lot No.
356-A and was transferring and conveying the same back to the Torbela siblings
for the consideration of P1.00. On February 21, 1965, Dr. Rosarios loan in the
amount of P70,200.00, secured by a mortgage on Lot No. 356-A, was approved by
DBP. Soon thereafter, construction of a hospital building started on Lot No. 356A.

Among the notable evidence presented by the Torbela siblings is the

testimony of Atty. Lorenza Alcantara (Atty. Alcantara), who had no apparent
personal interest in the present case. Atty. Alcantara, when she was still a
boarder at the house of Eufrosina Torbela Rosario (Dr. Rosarios mother), was
consulted by the Torbela siblings as regards the extrajudicial partition of Lot No.
356-A. She also witnessed the execution of the two Deeds of Absolute Quitclaim
by the Torbela siblings and Dr. Rosario.

In contrast, Dr. Rosario presented TCT No. 52751, issued in his name, to
prove his purported title to Lot No. 356-A. In Lee Tek Sheng v. Court of
[53]
Appeals, the Court made a clear distinction between title and the certificate of
title:

The certificate referred to is that document issued by the

Register of Deeds known as the Transfer Certificate of Title
(TCT). By title, the law refers to ownership which is represented
by that document. Petitioner apparently confuses certificate
with title. Placing a parcel of land under the mantle of
theTorrens system does not mean that ownership thereof can
no longer be disputed. Ownership is different from a certificate
of title. The TCT is only the best proof of ownership of a piece
of land. Besides, the certificate cannot always be considered as
conclusive evidence of ownership. Mere issuance of the
certificate of title in the name of any person does not
foreclose the possibility that the real property may be under
co-ownership with persons not named in the certificate or
that the registrant may only be a trustee or that other parties
may have acquired interest subsequent to the issuance of the
certificate of title. To repeat, registration is not the equivalent
of title, but is only the best evidence thereof. Title as a concept
of ownership should not be confused with the certificate of
title as evidence of such ownership although both are
[54]
interchangeably used. x x x. (Emphases supplied.)

Registration does not vest title; it is merely the evidence of such title.
Land registration laws do not give the holder any better title than what he
[55]
actually has.
Consequently, Dr. Rosario must still prove herein his acquisition
of title to Lot No. 356-A, apart from his submission of TCT No. 52751 in his name.

Dr. Rosario testified that he obtained Lot No. 356-A after paying the
Torbela siblings P25,000.00, pursuant to a verbal agreement with the latter. The
Court though observes that Dr. Rosarios testimony on the execution and
existence of the verbal agreement with the Torbela siblings lacks significant
details (such as the names of the parties present, dates, places, etc.) and is not
corroborated by independent evidence.

In addition, Dr. Rosario acknowledged the execution of the two Deeds of

Absolute Quitclaim dated December 12, 1964 and December 28, 1964, even

affirming his own signature on the latter Deed. The Parol Evidence Rule provides
that when the terms of the agreement have been reduced into writing, it is
considered as containing all the terms agreed upon and there can be, between
the parties and their successors in interest, no evidence of such terms other than
[56]
the contents of the written agreement.
Dr. Rosario may not modify, explain,
or add to the terms in the two written Deeds of Absolute Quitclaim since he did
not put in issue in his pleadings (1) an intrinsic ambiguity, mistake, or
imperfection in the Deeds; (2) failure of the Deeds to express the true intent and
the agreement of the parties thereto; (3) the validity of the Deeds; or (4) the
existence of other terms agreed to by the Torbela siblings and Dr. Rosario after
[57]
the execution of the Deeds.

Even if the Court considers Dr. Rosarios testimony on his alleged verbal
agreement with the Torbela siblings, the Court finds the same unsatisfactory. Dr.
Rosario averred that the two Deeds were executed only because he was
planning to secure loan from the Development Bank of the Philippines and
[58]
Philippine National Bank and the bank needed absolute quitclaim*.+
While Dr.
Rosarios explanation makes sense for the first Deed of Absolute Quitclaim dated
December 12, 1964 executed by the Torbela siblings (which transferred Lot No.
356-A to Dr. Rosario forP9.00.00), the same could not be said for the second
Deed of Absolute Quitclaim dated December 28, 1964 executed by Dr.
Rosario. In fact, Dr. Rosarios Deed of Absolute Quitclaim (in which he admitted
that he only borrowed Lot No. 356-A and was transferring the same to the
Torbela siblings for P1.00.00) would actually work against the approval of Dr.
Rosarios loan by the banks. Since Dr. Rosarios Deed of Absolute Quitclaim
dated December 28, 1964 is a declaration against his self-interest, it must be
[59]
taken as favoring the truthfulness of the contents of said Deed.

Considering the foregoing, the Court agrees with the RTC and the Court
of Appeals that Dr. Rosario only holds Lot No. 356-A in trust for the Torbela
siblings.

Trust is the right to the beneficial enjoyment of property, the legal title
to which is vested in another. It is a fiduciary relationship that obliges the trustee
to deal with the property for the benefit of the beneficiary. Trust relations
between parties may either be express or implied. An express trust is created by
the intention of the trustor or of the parties, while an implied trust comes into
[61]
being by operation of law.

Express trusts are created by direct and positive acts of the parties, by
some writing or deed, or will, or by words either expressly or impliedly evincing
an intention to create a trust. Under Article 1444 of the Civil Code, *n+o
particular words are required for the creation of an express trust, it being
[62]
sufficient that a trust is clearly intended.
It is possible to create a trust
without using the word trust or trustee. Conversely, the mere fact that these
words are used does not necessarily indicate an intention to create a trust. The
question in each case is whether the trustor manifested an intention to create
the kind of relationship which to lawyers is known as trust. It is immaterial
whether or not he knows that the relationship which he intends to create is
called a trust, and whether or not he knows the precise characteristics of the
[63]
relationship which is called a trust.

[64]

It can also be said that Dr. Rosario is estopped from claiming or asserting
ownership over Lot No. 356-A based on his Deed of Absolute Quitclaim
dated December 28, 1964. Dr. Rosario's admission in the said Deed that he
merely borrowed Lot No. 356-A is deemed conclusive upon him. Under Article
1431 of the Civil Code, *t+hrough estoppel an admission or representation is
rendered conclusive upon the person making it, and cannot be denied or
[60]
disproved as against the person relying thereon.
That admission cannot now
be denied by Dr. Rosario as against the Torbela siblings, the latter having relied
upon his representation.

In Tamayo v. Callejo, the Court recognized that a trust may have a

constructive or implied nature in the beginning, but the registered owners
subsequent express acknowledgement in a public document of a previous sale of
the property to another party, had the effect of imparting to the aforementioned
trust the nature of an express trust. The same situation exists in this case. When
Dr. Rosario was able to register Lot No. 356-A in his name under TCT No. 52751
on December 16, 1964, an implied trust was initially established between him
and the Torbela siblings under Article 1451 of the Civil Code, which provides:

ART. 1451. When land passes by succession to any

person and he causes the legal title to be put in the name of
another, a trust is established by implication of law for the
benefit of the true owner.

Dr. Rosarios execution of the Deed of Absolute Quitclaim on December

28, 1964, containing his express admission that he only borrowed Lot No. 356-A
from the Torbela siblings, eventually transformed the nature of the trust to an
express one. The express trust continued despite Dr. Rosario stating in his Deed
of Absolute Quitclaim that he was already returning Lot No. 356-A to the Torbela
siblings as Lot No. 356-A remained registered in Dr. Rosarios name under TCT No.
52751 and Dr. Rosario kept possession of said property, together with the
improvements thereon.

The right of the Torbela

siblings to recover Lot No.
356-A
has
not
yet
prescribed.

The Court extensively discussed the prescriptive period for express trusts
[65]
in the Heirs of Maximo Labanon v. Heirs of Constancio Labanon, to wit:

On the issue of prescription, we had the opportunity to

rule in Bueno v. Reyes that unrepudiated written express trusts
are imprescriptible:

While there are some decisions

which hold that an action upon a trust is

imprescriptible,
without
distinguishing
between express and implied trusts, the
better rule, as laid down by this Court in other
decisions, is that prescription does supervene
where the trust is merely an implied one. The
reason has been expressed by Justice J.B.L.
Reyes in J.M. Tuason and Co., Inc. vs.
Magdangal, 4 SCRA 84, 88, as follows:

Under Section 40 of
the old Code of Civil
Procedure, all actions for
recovery of real property
prescribed in 10 years,
excepting only actions based
on continuing or subsisting
trusts that were considered
by
section
38
as
imprescriptible. As held in
the case of Diaz v. Gorricho,
L-11229, March 29, 1958,
however, the continuing or
subsisting
trusts
contemplated in section 38
of the Code of Civil
Procedure referred only to
express unrepudiated trusts,
and
did
not
include
constructive trusts (that are
imposed by law) where no
fiduciary relation exists and
the trustee does not
recognize the trust at all.

This principle was amplified in Escay v. Court of

Appeals this way: Express trusts prescribe 10 years from the
repudiation of the trust (Manuel Diaz, et al. vs. Carmen

Gorricho et al., 54 O.G. p. 8429, Sec. 40, Code of Civil

Procedure).

In the more recent case of Secuya v. De Selma, we

again ruled that the prescriptive period for the enforcement of
an express trust of ten (10) years starts upon the repudiation of
[66]
the trust by the trustee.

To apply the 10-year prescriptive period, which would bar a beneficiarys

action to recover in an express trust, the repudiation of the trust must be proven
[67]
by clear and convincing evidence and made known to the beneficiary.
The
express trust disables the trustee from acquiring for his own benefit the property
committed to his management or custody, at least while he does not openly
repudiate the trust, and makes such repudiation known to the beneficiary
or cestui que trust. For this reason, the old Code of Civil Procedure (Act 190)
declared that the rules on adverse possession do not apply to continuing and
subsisting (i.e., unrepudiated) trusts. In an express trust, the delay of the
beneficiary is directly attributable to the trustee who undertakes to hold the
property for the former, or who is linked to the beneficiary by confidential or
fiduciary relations. The trustee's possession is, therefore, not adverse to the
beneficiary, until and unless the latter is made aware that the trust has been
[68]
repudiated.

Dr. Rosario argues that he is deemed to have repudiated the trust on

December 16, 1964, when he registered Lot No. 356-A in his name under TCT No.
52751, so when on February 13, 1986, the Torbela siblings instituted before the
RTC Civil Case No. U-4359, for the recovery of ownership and possession of Lot
No. 356-A from the spouses Rosario, over 21 years had passed. Civil Case No. U4359 was already barred by prescription, as well as laches.

The Court already rejected a similar argument in Ringor v. Ringor

following reasons:

[69]

for the

A trustee who obtains a Torrens title over a property held in

trust for him by another cannot repudiate the trust by relying
on the registration. A Torrens Certificate of Title in Joses name
did not vest ownership of the land upon him.
The Torrens system does not create or vest title. It only
confirms and records title already existing and vested. It does
not protect a usurper from the true owner. The Torrens system
was not intended to foment betrayal in the performance of a
trust. It does not permit one to enrich himself at the expense of
another. Where one does not have a rightful claim to the
property, theTorrens system of registration can confirm or
record nothing. Petitioners cannot rely on the registration of
the lands in Joses name nor in the name of the Heirs of Jose M.
Ringor, Inc., for the wrong result they seek. For Jose could not
repudiate a trust by relying on a Torrens title he held in trust for
his co-heirs. The beneficiaries are entitled to enforce the trust,
notwithstanding the irrevocability of the Torrens title. The
[70]
intended trust must be sustained. (Emphasis supplied.)

In the more recent case of Heirs of Tranquilino Labiste v. Heirs of Jose

[71]
Labiste, the Court refused to apply prescription and laches and reiterated that:

[P]rescription and laches will run only from the time the express
trust is repudiated. The Court has held that for acquisitive
prescription to bar the action of the beneficiary against the
trustee in an express trust for the recovery of the property held
in trust it must be shown that: (a) the trustee has performed
unequivocal acts of repudiation amounting to an ouster of
the cestui que trust; (b) such positive acts of repudiation have
been made known to the cestui que trust, and (c) the evidence
thereon is clear and conclusive. Respondents cannot rely on
the fact that the Torrens title was issued in the name of
Epifanio and the other heirs of Jose. It has been held that a
trustee who obtains a Torrens title over property held in trust
by him for another cannot repudiate the trust by relying on

the registration. The rule requires a clear repudiation of the

trust duly communicated to the beneficiary. The only act that
can be construed as repudiation was when respondents filed
the petition for reconstitution in October 1993. And since
petitioners filed their complaint in January 1995, their cause of
action has not yet prescribed, laches cannot be attributed to
[72]
them.
(Emphasis supplied.)

Thousand Pesos only (P450,000.00) and to secure any and all

negotiations with PNB, whether contracted before, during or
after the date of this instrument, acknowledged before Notary
Public of Pangasinan Alejo M. Dato as Doc. No. 198, Page
No. 41, Book No. 11, Series of 1985.

Date of Instrument March 5, 1981

Date of Inscription March 6, 1981
It is clear that under the foregoing jurisprudence, the registration of Lot
No. 356-A by Dr. Rosario in his name under TCT No. 52751 on December 16, 1964
is not the repudiation that would have caused the 10-year prescriptive period for
the enforcement of an express trust to run.

The Court of Appeals held that Dr. Rosario repudiated the express trust
when he acquired another loan from PNB and constituted a second mortgage on
Lot No. 356-A sometime in 1979, which, unlike the first mortgage to DBP in 1965,
was without the knowledge and/or consent of the Torbela siblings.

The Court only concurs in part with the Court of Appeals on this matter.

For repudiation of an express trust to be effective, the unequivocal act of

repudiation had to be made known to the Torbela siblings as thecestuis que
trust and must be proven by clear and conclusive evidence. A scrutiny of TCT No.
52751 reveals the following inscription:

Entry No. 520099

Amendment of the mortgage in favor of PNB inscribed under

Entry No. 490658 in the sense that the consideration thereof
has been increased to PHILIPPINE PESOS Four Hundred Fifty

[73]

Although according to Entry No. 520099, the original loan and mortgage
agreement of Lot No. 356-A between Dr. Rosario and PNB was previously
inscribed as Entry No. 490658, Entry No. 490658 does not actually appear on TCT
No. 52751 and, thus, it cannot be used as the reckoning date for the start of the
prescriptive period.

The Torbela siblings can only be charged with knowledge of the

mortgage of Lot No. 356-A to PNB on March 6, 1981 when the amended loan and
mortgage agreement was registered on TCT No. 52751 as Entry No.
520099. Entry No. 520099 is constructive notice to the whole
[74]
world that Lot No. 356-A was mortgaged by Dr. Rosario to PNB as security for a
loan, the amount of which was increased to P450,000.00. Hence, Dr. Rosario is
deemed to have effectively repudiated the express trust between him and the
Torbela siblings on March 6, 1981, on which day, the prescriptive period for the
enforcement of the express trust by the Torbela siblings began to run.

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

Civil Case No. U-4359 is likewise not barred by laches. Laches means the
failure or neglect, for an unreasonable and unexplained length of time, to do that
which by exercising due diligence could or should have been done earlier. It is
negligence or omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned it or
declined to assert it. As the Court explained in the preceding paragraphs, the
Torbela siblings instituted Civil Case No. U-4359 five years after Dr. Rosarios
repudiation of the express trust, still within the 10-year prescriptive period for
enforcement of such trusts. This does not constitute an unreasonable delay in
asserting one's right. A delay within the prescriptive period is sanctioned by law
and is not considered to be a delay that would bar relief. Laches apply only in the
[75]
absence of a statutory prescriptive period.

Banco Filipino is not a

mortgagee and buyer in
good faith.

Having determined that the Torbela siblings are the true owners and Dr.
Rosario merely the trustee of Lot No. 356-A, the Court is next faced with the issue
of whether or not the Torbela siblings may still recover Lot No. 356-A considering
that Dr. Rosario had already mortgaged Lot No. 356-A to Banco Filipino, and upon
Dr. Rosarios default on his loan obligations, Banco Filipino foreclosed the
mortgage, acquired Lot No. 356-A as the highest bidder at the foreclosure sale,
and consolidated title in its name under TCT No. 165813. The resolution of this
issue depends on the answer to the question of whether or not Banco Filipino
was a mortgagee in good faith.

Under Article 2085 of the Civil Code, one of the essential requisites of
the contract of mortgage is that the mortgagor should be the absolute owner of
the property to be mortgaged; otherwise, the mortgage is considered null and
void. However, an exception to this rule is the doctrine of mortgagee in good
faith. Under this doctrine, even if the mortgagor is not the owner of the
mortgaged property, the mortgage contract and any foreclosure sale arising
therefrom are given effect by reason of public policy. This principle is based on
the rule that all persons dealing with property covered by a Torrens Certificate of
Title, as buyers or mortgagees, are not required to go beyond what appears on
the face of the title. This is the same rule that underlies the principle of

innocent purchasers for value. The prevailing jurisprudence is that a mortgagee

has a right to rely in good faith on the certificate of title of the mortgagor to the
property given as security and in the absence of any sign that might arouse
suspicion, has no obligation to undertake further investigation. Hence, even if
the mortgagor is not the rightful owner of, or does not have a valid title to, the
mortgaged property, the mortgagee in good faith is, nonetheless, entitled to
[76]
protection.

On one hand, the Torbela siblings aver that Banco Filipino is not a
mortgagee in good faith because as early as May 17, 1967, they had already
annotated Cornelios Adverse Claim dated May 16, 1967 and Dr. Rosarios Deed
of Absolute Quitclaim dated December 28, 1964 on TCT No. 52751 as Entry Nos.
274471-274472, respectively.

On the other hand, Banco Filipino asseverates that it is a mortgagee in

good faith because per Section 70 of Presidential Decree No. 1529, otherwise
known as the Property Registration Decree, the notice of adverse claim,
registered on May 17, 1967 by the Torbela siblings under Entry Nos. 274471274472 on TCT No. 52751, already lapsed after 30 days or on June 16,
1967. Additionally, there was an express cancellation of Entry Nos. 274471274472 by Entry No. 520469 dated March 11, 1981. So when Banco Filipino
approved Dr. Rosarios loan for P1,200,000.00 and constituted a mortgage on Lot
No. 356-A (together with two other properties) on December 8, 1981, the only
other encumbrance on TCT No. 52751 was Entry No. 520099 dated March 6,
1981, i.e., the amended loan and mortgage agreement between Dr. Rosario and
PNB (which was eventually cancelled after it was paid off with part of the
proceeds from Dr. Rosarios loan from Banco Filipino). Hence, Banco Filipino was
not aware that the Torbela siblings adverse claim on Lot No. 356-A still
subsisted.

The Court finds that Banco Filipino is not a mortgagee in good

faith. Entry Nos. 274471-274472 were not validly cancelled, and the improper
cancellation should have been apparent to Banco Filipino and aroused suspicion
in said bank of some defect in Dr. Rosarios title.

The purpose of annotating the adverse claim on the title of the disputed
land is to apprise third persons that there is a controversy over the ownership of
the land and to preserve and protect the right of the adverse claimant during the
pendency of the controversy. It is a notice to third persons that any transaction
[77]
regarding the disputed land is subject to the outcome of the dispute.

Adverse claims were previously governed by Section 110 of Act No. 496,
otherwise known as the Land Registration Act, quoted in full below:

ADVERSE CLAIM

SEC. 110. Whoever claims any part or interest in

registered land adverse to the registered owner, arising
subsequent to the date of the original registration, may, if no
other provision is made in this Act for registering the same,
make a statement in writing setting forth fully his alleged right
or interest, and how or under whom acquired, and a reference
to the volume and page of the certificate of title of the
registered owner, and a description of the land in which the
right or interest is claimed.

The statement shall be signed and sworn to, and shall

state the adverse claimants residence, and designate a place at
which all notices may be served upon him. This statement shall
be entitled to registration as an adverse claim, and the court,
upon a petition of any party in interest, shall grant a speedy
hearing upon the question of the validity of such adverse claim
and shall enter such decree therein as justice and equity may
require. If the claim is adjudged to be invalid, the registration
shall be cancelled. If in any case the court after notice and
hearing shall find that a claim thus registered was frivolous or
vexatious, it may tax the adverse claimant double or treble
costs in its discretion.

Construing the aforequoted provision, the Court stressed in Ty Sin Tei v.

[78]
Lee Dy Piao that *t+he validity or efficaciousness of the *adverse+ claim x x x
may only be determined by the Court upon petition by an interested party, in
which event, the Court shall order the immediate hearing thereof and make the
proper adjudication as justice and equity may warrant. And it is ONLY when such
claim is found unmeritorious that the registration thereof may be cancelled. The
Court likewise pointed out in the same case that while a notice of lis pendens may
be cancelled in a number of ways, the same is not true in a registered adverse
claim, for it may be cancelled only in one instance, i.e., after the claim is adjudged
invalid or unmeritorious by the Court x x x; and if any of the registrations
should be considered unnecessary or superfluous, it would be the notice of lis
pendens and not the annotation of the adverse claim which is more permanent
and cannot be cancelled without adequate hearing and proper disposition of the
claim.

With the enactment of the Property Registration Decree on June 11,

1978, Section 70 thereof now applies to adverse claims:

SEC. 70. Adverse claim. Whoever claims any part or

interest in registered land adverse to the registered owner,
arising subsequent to the date of the original registrations, may,
if no other provision is made in this Decree for registering the
same, make a statement in writing setting forth fully his alleged
right, or interest, and how or under whom acquired, a reference
to the number of the certificate of title of the registered owner,
the name of the registered owner, and a description of the land
in which the right or interest is claimed.

The statement shall be signed and sworn to, and shall

state the adverse claimants residence, and a place at which all
notices may be served upon him. This statement shall be
entitled to registration as an adverse claim on the certificate of
title. The adverse claim shall be effective for a period of thirty
days from the date of registration. After the lapse of said
period, the annotation of adverse claim may be cancelled

upon filing of a verified petition therefor by the party in

interest: Provided, however, that after cancellation, no second
adverse claim based on the same ground shall be registered by
the same claimant.

Before the lapse of thirty days aforesaid, any party in

interest may file a petition in the Court of First Instance where
the land is situated for the cancellation of the adverse claim,
and the court shall grant a speedy hearing upon the question
of the validity of such adverse claim, and shall render
judgment as may be just and equitable. If the adverse claim is
adjudged to be invalid, the registration thereof shall be ordered
cancelled. If, in any case, the court, after notice and hearing,
shall find that the adverse claim thus registered was frivolous, it
may fine the claimant in an amount not less than one thousand
pesos nor more than five thousand pesos, in its
discretion. Before the lapse of thirty days, the claimant may
withdraw his adverse claim by filing with the Register of Deeds
a sworn petition to that effect. (Emphases supplied.)

[79]

In Sajonas v. Court of Appeals, the Court squarely interpreted Section

70 of the Property Registration Decree, particularly, the new 30-day period not
previously found in Section 110 of the Land Registration Act, thus:

In construing the law aforesaid, care should be taken

that every part thereof be given effect and a construction that
could render a provision inoperative should be avoided, and
inconsistent provisions should be reconciled whenever possible
as parts of a harmonious whole. For taken in solitude, a word
or phrase might easily convey a meaning quite different from
the one actually intended and evident when a word or phrase is
considered with those with which it is associated. In
ascertaining the period of effectivity of an inscription of adverse
claim, we must read the law in its entirety. Sentence three,
paragraph two of Section 70 of P.D. 1529 provides:

The adverse claim shall be effective

for a period of thirty days from the date of
registration.

At first blush, the provision in question would seem to

restrict the effectivity of the adverse claim to thirty days. But
the above provision cannot and should not be treated
separately, but should be read in relation to the sentence
following, which reads:

After the lapse of said period, the

annotation of adverse claim may be cancelled
upon filing of a verified petition therefor by
the party in interest.

If the rationale of the law was for the adverse claim

to ipso facto lose force and effect after the lapse of thirty days,
then it would not have been necessary to include the foregoing
caveat to clarify and complete the rule. For then, no adverse
claim need be cancelled. If it has been automatically
terminated by mere lapse of time, the law would not have
required the party in interest to do a useless act.

A statute's clauses and phrases must not be taken

separately, but in its relation to the statute's totality. Each
statute must, in fact, be construed as to harmonize it with the
pre-existing body of laws. Unless clearly repugnant, provisions
of statutes must be reconciled. The printed pages of the
published Act, its history, origin, and its purposes may be
examined by the courts in their construction. x x x.

xxxx

Construing the provision as a whole would reconcile

the apparent inconsistency between the portions of the law
such that the provision on cancellation of adverse claim by
verified petition would serve to qualify the provision on the
effectivity period. The law, taken together, simply means that
the cancellation of the adverse claim is still necessary to
render it ineffective, otherwise, the inscription will remain
annotated and shall continue as a lien upon the property. For
if the adverse claim has already ceased to be effective upon
the lapse of said period, its cancellation is no longer necessary
and the process of cancellation would be a useless ceremony.

It should be noted that the law employs the phrase

"may be cancelled," which obviously indicates, as inherent in its
decision making power, that the court may or may not order
the cancellation of an adverse claim, notwithstanding such
provision limiting the effectivity of an adverse claim for thirty
days from the date of registration. The court cannot be bound
by such period as it would be inconsistent with the very
authority vested in it. A fortiori, the limitation on the period of
effectivity is immaterial in determining the validity or invalidity
of an adverse claim which is the principal issue to be decided in
the court hearing. It will therefore depend upon the evidence at
a proper hearing for the court to determine whether it will
order the cancellation of the adverse claim or not.

To interpret the effectivity period of the adverse claim

as absolute and without qualification limited to thirty days
defeats the very purpose for which the statute provides for the
remedy of an inscription of adverse claim, as the annotation of
an adverse claim is a measure designed to protect the interest
of a person over a piece of real property where the registration
of such interest or right is not otherwise provided for by the
Land Registration Act or Act 496 (now P.D. 1529 or the Property
Registration Decree), and serves as a warning to third parties

dealing with said property that someone is claiming an interest

or the same or a better right than the registered owner thereof.

The reason why the law provides for a hearing where

the validity of the adverse claim is to be threshed out is to
afford the adverse claimant an opportunity to be heard,
providing a venue where the propriety of his claimed interest
can be established or revoked, all for the purpose of
determining at last the existence of any encumbrance on the
title arising from such adverse claim. This is in line with the
provision immediately following:

Provided, however, that after

cancellation, no second adverse claim shall be
registered by the same claimant.

Should the adverse claimant fail to sustain his interest

in the property, the adverse claimant will be precluded from
registering a second adverse claim based on the same ground.

It was held that validity or efficaciousness of the claim

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

Whether under Section 110 of the Land Registration Act or Section 70 of

the Property Registration Decree, notice of adverse claim can only be cancelled

after a party in interest files a petition for cancellation before the RTC wherein
the property is located, and the RTC conducts a hearing and determines the said
claim to be invalid or unmeritorious.

No petition for cancellation has been filed and no hearing has been
conducted herein to determine the validity or merit of the adverse claim of the
Torbela siblings. Entry No. 520469 cancelled the adverse claim of the Torbela
siblings, annotated as Entry Nos. 274471-774472, upon the presentation by Dr.
Rosario of a mere Cancellation and Discharge of Mortgage.

Regardless of whether or not the Register of Deeds should have

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

It is a well-settled rule that a purchaser or mortgagee cannot close his

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

While the defective cancellation of Entry Nos. 274471-274472 by Entry

No. 520469 might not be evident to a private individual, the same should have
been apparent to Banco Filipino. Banco Filipino is not an ordinary mortgagee, but

is a mortgagee-bank, whose business is impressed with public interest. In fact, in

[82]
one case, the Court explicitly declared that the rule that persons dealing with
registered lands can rely solely on the certificate of title does not apply to
[83]
banks. In another case, the Court adjudged that unlike private individuals, a
bank is expected to exercise greater care and prudence in its dealings, including
those involving registered lands. A banking institution is expected to exercise due
diligence before entering into a mortgage contract. The ascertainment of the
status or condition of a property offered to it as security for a loan must be a
standard and indispensable part of its operations.

Banco Filipino cannot be deemed a mortgagee in good faith, much less a

purchaser in good faith at the foreclosure sale of Lot No. 356-A. Hence, the right
of the Torbela siblings over Lot No. 356-A is superior over that of Banco Filipino;
and as the true owners of Lot No. 356-A, the Torbela siblings are entitled to a
reconveyance of said property even from Banco Filipino.

Nonetheless, the failure of Banco Filipino to comply with the due

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

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

The rules on accession shall

govern the improvements
on Lot No. 356-A and the
rents thereof.

It is understood that there is bad faith on the part of

the landowner whenever the act was done with his knowledge
and without opposition on his part. (Emphasis supplied.)
The accessory follows the principal. The right of accession is recognized
under Article 440 of the Civil Code which states that *t+he ownership of property
gives the right by accession to everything which is produced thereby, or which is
incorporated or attached thereto, either naturally or artificially.
When both the landowner and the builder are in good faith, the following
rules govern:
There is no question that Dr. Rosario is the builder of the improvements
on Lot No. 356-A. The Torbela siblings themselves alleged that they allowed Dr.
Rosario to register Lot No. 356-A in his name so he could obtain a loan from DBP,
using said parcel of land as security; and with the proceeds of the loan, Dr.
Rosario had a building constructed on Lot No. 356-A, initially used as a hospital,
and then later for other commercial purposes. Dr. Rosario supervised the
construction of the building, which began in 1965; fully liquidated the loan from
DBP; and maintained and administered the building, as well as collected the
rental income therefrom, until the Torbela siblings instituted Civil Case No. U4359 before the RTC on February 13, 1986.

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

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

ART. 448. The owner of the land on which anything

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

ART. 546. Necessary expenses shall be refunded to

every possessor; but only the possessor in good faith may retain
the thing until he has been reimbursed therefor.

Useful expenses shall be refunded only to the

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

ART. 548. Expenses for pure luxury or mere pleasure

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

Whatever is built, planted, or sown on the land of another, and the

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

The landowner has to make a choice between appropriating the building by

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

This case then must be remanded to the RTC for the determination of
matters necessary for the proper application of Article 448, in relation to Article
546, of the Civil Code. Such matters include the option that the Torbela siblings
will choose; the amount of indemnity that they will pay if they decide to

appropriate the improvements on Lot No. 356-A; the value of Lot No. 356-A if
they prefer to sell it to Dr. Rosario; or the reasonable rent if they opt to sell Lot
No. 356-A to Dr. Rosario but the value of the land is considerably more than the
improvements. The determination made by the Court of Appeals in its Decision
dated June 29, 1999 that the current value of Lot No. 356-A is P1,200,000.00 is
not supported by any evidence on record.

Should the Torbela siblings choose to appropriate the improvements on Lot

[87]
No. 356-A, the following ruling of the Court in Pecson v. Court of Appeals is
relevant in the determination of the amount of indemnity under Article 546 of
the Civil Code:

Article 546 does not specifically state how the value of

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

The objective of Article 546 of the Civil Code is to

administer justice between the parties involved. In this regard,
this Court had long ago stated inRivera vs. Roman Catholic

Archbishop of Manila that the said provision was formulated in

trying to adjust the rights of the owner and possessor in good
faith of a piece of land, to administer complete justice to both
of them in such a way as neither one nor the other may enrich
himself of that which does not belong to him. Guided by this
precept, it is therefore the current market value of the
improvements which should be made the basis of
reimbursement. A contrary ruling would unjustly enrich the
private respondents who would otherwise be allowed to
acquire a highly valued income-yielding four-unit apartment
building for a measly amount. Consequently, the parties should
therefore be allowed to adduce evidence on the present
market value of the apartment building upon which the trial
court should base its finding as to the amount of
[88]
reimbursement to be paid by the landowner. (Emphases
supplied.)
Still following the rules of accession, civil fruits, such as rents, belong to the
[89]
owner of the building.
Thus, Dr. Rosario has a right to the rents of the
improvements on Lot No. 356-A and is under no obligation to render an
accounting of the same to anyone. In fact, it is the Torbela siblings who are
required to account for the rents they had collected from the lessees of the
commercial building and turn over any balance to Dr. Rosario. Dr. Rosarios right
to the rents of the improvements on Lot No. 356-A shall continue until the
Torbela siblings have chosen their option under Article 448 of the Civil Code. And
in case the Torbela siblings decide to appropriate the improvements, Dr. Rosario
shall have the right to retain said improvements, as well as the rents thereof,
[90]
until the indemnity for the same has been paid.
Dr. Rosario is liable for damages to the Torbela siblings.
The Court of Appeals ordered Dr. Rosario to pay the Torbela
siblings P300,000.00 as moral damages; P200,000.00 as exemplary damages;
andP100,000.00 as attorneys fees.
Indeed, Dr. Rosarios deceit and bad faith is evident when, being fully
aware that he only held Lot No. 356-A in trust for the Torbela siblings, he
mortgaged said property to PNB and Banco Filipino absent the consent of the
Torbela siblings, and caused the irregular cancellation of the Torbela siblings
adverse claim on TCT No. 52751. Irrefragably, Dr. Rosarios betrayal had caused
the Torbela siblings (which included Dr. Rosarios own mother, Eufrosina Torbela
Rosario) mental anguish, serious anxiety, and wounded feelings. Resultantly, the

award of moral damages is justified, but the amount thereof is reduced

to P200,000.00.

In addition to the moral damages, exemplary damages may also be imposed

given that Dr. Rosarios wrongful acts were accompanied by bad faith. However,
judicial discretion granted to the courts in the assessment of damages must
always be exercised with balanced restraint and measured objectivity. The
circumstances of the case call for a reduction of the award of exemplary damages
to P100,000.00.
As regards attorney's fees, they may be awarded when the defendant's act or
omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest. Because of Dr. Rosarios acts, the Torbela
siblings were constrained to institute several cases against Dr. Rosario and his
spouse, Duque-Rosario, as well as Banco Filipino, which had lasted for more than
25 years. Consequently, the Torbela siblings are entitled to an award of
attorney's fees and the amount of P100,000.00 may be considered rational, fair,
and reasonable.

Banco Filipino is entitled to

a writ of possession for Lot
No. 5-F-8-C-2-B-2-A.
The Court emphasizes that Pet. Case No. U-822, instituted by Banco Filipino for
the issuance of a writ of possession before the RTC of Urdaneta, included only Lot
No. 5-F-8-C-2-B-2-A and Lot No. 356-A (Lot No. 4489, the third property
mortgaged to secure Dr. Rosarios loan from Banco Filipino, is located in Dagupan
City, Pangasinan, and the petition for issuance of a writ of possession for the
same should be separately filed with the RTC of Dagupan City). Since the Court
has already granted herein the reconveyance of Lot No. 356-A from Banco
Filipino to the Torbela siblings, the writ of possession now pertains only to Lot No.
5-F-8-C-2-B-2-A.
To recall, the Court of Appeals affirmed the issuance by the RTC of a writ
of possession in favor of Banco Filipino. Dr. Rosario no longer appealed from said
judgment of the appellate court. Already legally separated from Dr. Rosario,
Duque-Rosario alone challenges the writ of possession before this Court through
her Petition in G.R. No. 140553.

Duque-Rosario alleges in her Petition that Lot No. 5-F-8-C-2-B-2-A had

been registered in her name under TCT No. 104189. Yet, without a copy of TCT
No. 104189 on record, the Court cannot give much credence to Duque-Rosarios
claim of sole ownership of Lot No. 5-F-8-C-2-B-2-A. Also, the question of whether
Lot No. 5-F-8-C-2-B-2-A was the paraphernal property of Duque-Rosario or the
conjugal property of the spouses Rosario would not alter the outcome of DuqueRosarios Petition.
The following facts are undisputed: Banco Filipino extrajudicially foreclosed
the mortgage constituted on Lot No. 5-F-8-C-2-B-2-A and the two other
properties after Dr. Rosario defaulted on the payment of his loan; Banco Filipino
was the highest bidder for all three properties at the foreclosure sale on April 2,
1987; the Certificate of Sale dated April 2, 1987 was registered in April 1987; and
based on the Certificate of Final Sale dated May 24, 1988 and Affidavit of
Consolidation dated May 25, 1988, the Register of Deeds cancelled TCT No.
104189 and issued TCT No. 165812 in the name of Banco Filipino for Lot No. 5-F8-C-2-B-2-A on June 7, 1988.
The Court has consistently ruled that the one-year redemption period
should be counted not from the date of foreclosure sale, but from the time the
[91]
certificate of sale is registered with the Registry of Deeds.
No copy of TCT No.
104189 can be found in the records of this case, but the fact of annotation of the
Certificate of Sale thereon was admitted by the parties, only differing on the date
it was made: April 14, 1987 according to Banco Filipino and April 15, 1987 as
maintained by Duque-Rosario. Even if the Court concedes that the Certificate of
Sale was annotated on TCT No. 104189 on the later date, April 15, 1987, the one[92]
year redemption period already expired on April 14, 1988.
The Certificate of
Final Sale and Affidavit of Consolidation were executed more than a month
thereafter, on May 24, 1988 and May 25, 1988, respectively, and were clearly not
premature.
It is true that the rule on redemption is liberally construed in favor of the original
owner of the property. The policy of the law is to aid rather than to defeat him in
[93]
the exercise of his right of redemption.
However, the liberal interpretation of
the rule on redemption is inapplicable herein as neither Duque-Rosario nor Dr.
Rosario had made any attempt to redeem Lot No. 5-F-8-C-2-B-2-A. DuqueRosario could only rely on the efforts of the Torbela siblings at redemption, which
were unsuccessful. While the Torbela siblings made several offers to redeem Lot
No. 356-A, as well as the two other properties mortgaged by Dr. Rosario, they did
not make any valid tender of the redemption price to effect a valid

redemption. The general rule in redemption is that it is not sufficient that a

person offering to redeem manifests his desire to do so. The statement of
intention must be accompanied by an actual and simultaneous tender of
payment. The redemption price should either be fully offered in legal tender or
else validly consigned in court. Only by such means can the auction winner be
[94]
assured that the offer to redeem is being made in good faith.
In case of
disagreement over the redemption price, the redemptioner may preserve his
right of redemption through judicial action, which in every case, must be filed
within the one-year period of redemption. The filing of the court action to
enforce redemption, being equivalent to a formal offer to redeem, would have
the effect of preserving his redemptive rights and freezing the expiration of the
[95]
one-year period.
But no such action was instituted by the Torbela siblings or
either of the spouses Rosario.
Duque-Rosario also cannot bar the issuance of the writ of possession
over Lot No. 5-F-8-C-2-B-2-A in favor of Banco Filipino by invoking the pendency
of Civil Case No. U-4359, the Torbela siblings action for recovery of ownership
and possession and damages, which supposedly tolled the period for redemption
of the foreclosed properties. Without belaboring the issue of Civil Case No. U4359 suspending the redemption period, the Court simply points out to DuqueRosario that Civil Case No. U-4359 involved Lot No. 356-A only, and the legal
consequences of the institution, pendency, and resolution of Civil Case No. U4359 apply to Lot No. 356-A alone.
Equally unpersuasive is Duque-Rosarios argument that the writ of
possession over Lot No. 5-F-8-C-2-B-2-A should not be issued given the defects in
the conduct of the foreclosure sale (i.e., lack of personal notice to Duque-Rosario)
and consolidation of title (i.e., failure to provide Duque-Rosario with copies of the
Certificate of Final Sale).
The right of the purchaser to the possession of the foreclosed property
becomes absolute upon the expiration of the redemption period. The basis of
this right to possession is the purchaser's ownership of the property. After the
consolidation of title in the buyer's name for failure of the mortgagor to redeem,
the writ of possession becomes a matter of right and its issuance to a purchaser
[96]
in an extrajudicial foreclosure is merely a ministerial function.
The judge with whom an application for a writ of possession is filed
need not look into the validity of the mortgage or the manner of its
foreclosure. Any question regarding the validity of the mortgage or its
foreclosure cannot be a legal ground for the refusal to issue a writ of
possession. Regardless of whether or not there is a pending suit for the

annulment of the mortgage or the foreclosure itself, the purchaser is entitled to a

writ of possession, without prejudice, of course, to the eventual outcome of the
pending annulment case. The issuance of a writ of possession in favor of the
purchaser in a foreclosure sale is a ministerial act and does not entail the exercise
[97]
of discretion.
WHEREFORE, in view of the foregoing, the Petition of the Torbela siblings in
G.R. No. 140528 is GRANTED, while the Petition of Lena Duque-Rosario in G.R.
No. 140553 is DENIED for lack of merit. The Decision dated June 29, 1999 of the
Court of Appeals in CA-G.R. CV No. 39770, which affirmed with modification the
Amended Decision dated January 29, 1992 of the RTC in Civil Case Nos. U-4359
and U-4733 and Pet. Case No. U-822, is AFFIRMED WITH MODIFICATIONS, to
now read as follows:
(1) Banco Filipino is ORDERED to reconvey Lot No. 356-A to the Torbela
siblings;
(2) The Register of Deeds of Pangasinan is ORDERED to cancel TCT No. 165813
in the name of Banco Filipino and to issue a new certificate of title in the name of
the Torbela siblings for Lot No. 356-A;
(3) The case is REMANDED to the RTC for further proceedings to determine the
facts essential to the proper application of Articles 448 and 546 of the Civil Code,
particularly: (a) the present fair market value of Lot No. 356-A; (b) the present fair
market value of the improvements thereon; (c) the option of the Torbela siblings
to appropriate the improvements on Lot No. 356-A or require Dr. Rosario to
purchase Lot No. 356-A; and (d) in the event that the Torbela siblings choose to
require Dr. Rosario to purchase Lot No. 356-A but the value thereof is
considerably more than the improvements, then the reasonable rent of Lot No.
356-A to be paid by Dr. Rosario to the Torbela siblings;
(4) The Torbela siblings are DIRECTED to submit an accounting of the rents of
the improvements on Lot No. 356-A which they had received and to turn over any
balance thereof to Dr. Rosario;
(5) Dr. Rosario is ORDERED to pay the Torbela siblings P200,000.00 as moral
damages, P100,000.00 as exemplary damages, andP100,000.00 as attorneys
fees; and

(6) Banco Filipino is entitled to a writ of possession over Lot-5-F-8-C-2B-2-A, covered by TCT No. 165812. The RTC Branch Clerk of Court is ORDERED to
issue a writ of possession for the said property in favor of Banco Filipino.