G.R. No.

L-16513

January 18, 1921

THE UNITED STATES, plaintiff-appellee,

vs.
MANUEL TAMBUNTING, defendant-appellant.
Manuel Garcia Goyena for appellant.
Acting Attorney-General Feria for appellee.
STREET, J.:
This appeal was instituted for the purpose of reversing
a judgment of the Court of First Instance of the city of
Manila, finding the accused, Manuel Tambunting, guilty
of stealing a quantity of gas belonging to the Manila
Gas Corporation, and sentencing him to undergo
imprisonment for two months and one day, of arresto
mayor, with the accessories prescribed by law; to
indemnify the said corporation in the sum of P2, with
subsidiary imprisonment in case of insolvency; and to
pay the costs.
The evidence submitted in behalf of the prosecution
shows that in January of the year 1918, the accused
and his wife became occupants of the upper floor of
the house situated at No. 443, Calle Evangelista, in the
city of Manila. In this house the Manila Gas
Corporation had previously installed apparatus for the
delivery of gas on both the upper and lower floors,
consisting of the necessary piping and a gas meter,
which last mentioned apparatus was installed below.

When the occupants at whose request this installation

had been made vacated the premises, the gas
company disconnected the gas pipe and removed the
meter, thus cutting off the supply of gas from said
premises.
Upon June 2, 1919, one of the inspectors of the gas
company visited the house in question and found that
gas was being used, without the knowledge and
consent of the gas company, for cooking in the
quarters occupied by the defendant and his wife: to
effect which a short piece of iron pipe had been
inserted in the gap where the gas meter had formerly
been placed, and piece of rubber tubing had been
used to connect the gas pipe of rubber tubing had
been used to connect the gas pipe in kitchen with the
gas stove, or plate, used for cooking.
At the time this discovery was made, the accused,
Manuel Tambunting, was not at home, but he presently
arrived and admitted to the agent to the gas company
that he had made the connection with the rubber
tubing between the gas pipe and the stove, though he
denied making the connection below. He also admitted
that he knew he was using gas without the knowledge
of the company and that he had been so using it for
probably two or three months.
The clandestine use of gas by the accused in the
manner stated is thus established in our opinion

beyond a doubt; and inasmuch as the animo

lucrandi is obvious, it only remains to consider, first,
whether gas can be the subject to larceny and,
secondly, whether the quantity of gas appropriated in
the two months, during which the accused admitted
having used the same, has been established with
sufficient certainty to enable the court to fix an
appropriate penalty.
Some legal minds, perhaps more academic than
practical, have entertained doubt upon the question
whether gas can be the subject of larceny; but no
judicial decision has been called to our attention
wherein any respectable court has refused to treat it as
such. In U.S. vs. Genato (15 Phil., 170, 175), this
court, speaking through Mr. Justice Torres, said ". . .
the right of the ownership of electric current is secured
by article 517 and 518 of the Penal Code; the
application of these articles in cases of subtraction of
gas, a fluid used for lighting, and in some respects
resembling electricity, is confirmed by the rule laid
down in the decisions of the supreme court of Spain of
January 20, 1887, and April 1, 1897, construing and
enforcing the provisions of articles 530 and 531 of the
Penal Code of that country, articles identical with
articles 517 and 518 of the code in force in these
Islands." These expressions were used in a case
which involved the subtraction and appropriation of
electrical energy and the court held, in accordance with
the analogy of the case involving the theft of gas, that
electrical energy could also be the subject of theft. The

same conclusion was reached in U.S. vs. Carlos (21

Phil., 553), which was also a case of prosecution for
stealing electricity.
The precise point whether the taking of gas may
constitute larceny has never before, so far as the
present writer is aware, been the subject of
adjudication in this court, but the decisions of Spanish,
English, and American courts all answer the question
in the affirmative. (See U.S. vs. Carlos, 21 Phil., 553,
560.)
In this connection it will suffice to quote the following
from the topic "Larceny," at page 34, Vol. 17, of Ruling
Case Law:
There is nothing in the nature of gas used for
illuminating purposes which renders it incapable of
being feloniously taken and carried away. It is a
valuable article of merchandise, bought and sold like
other personal property, susceptible of being severed
from a mass or larger quantity and of being transported
from place to place. Likewise water which is confined
in pipes and electricity which is conveyed by wires are
subjects of larceny."
As to the amount and value of the gas appropriated by
the accused in the period during which he admits
having used it, the proof is not entirely satisfactory.
Nevertheless we think the trial court was justified in
fixing the value of the gas at P2 per month, which is

the minimum charge for gas made by the gas

company, however small the amount consumed. That
is to say, no person desiring to use gas at all for
domestic purposes can purchase the commodity at a
lower rate per month than P2. There was evidence
before the court showing that the general average of
the monthly bills paid by consumers throughout the city
for the use of gas in a kitchen equipped like that used
by the accused is from P18 to 20, while the average
minimum is about P8 per month. We think that the
facts above stated are competent evidence; and the
conclusion is inevitable that the accused is at least
liable to the extent of the minimum charge of P2 per
month. The market value of the property at the time
and place of the theft is of court the proper value to be
proven (17 R.C.L., p. 66); and when it is found that the
least amount that a consumer can take costs P2 per
months, this affords proof that the amount which the
accused took was certainly worth that much. Absolute
certainty as to the full amount taken is of course
impossible, because no meter wad used; but absolute
certainty upon this point is not necessary, when it is
certain that the minimum that could have been taken
was worth a determinable amount.
It appears that before the present prosecution was
instituted, the accused had been unsuccessfully
prosecuted for an infraction of section 504 of the
Revised Ordinances of the city of Manila, under a
complaint charging that the accused, not being a
registered installer of gas equipment had placed a gas

installation in the house at No. 443, Calle Evangelista.

Upon this it is argued for the accused that, having
been acquitted of that charge, he is not now subject to
prosecution for the offense of theft, having been
acquitted of the former charge. The contention is
evidently not well-founded, since the two offenses are
of totally distinct nature. Furthermore, a prosecution for
violation of a city ordinance is not ordinarily a bar to a
subsequent prosecution for the same offense under
the general law of the land. (U.S. vs. Garcia Gavieres,
10 Phil., 694.)
The conclusion is that the accused is properly subject
to punishment, under No. 5 of article 518 of the Penal
Code, for the gas taken in the course of two months a
the rate of P2 per month. There being no aggravating
or attenuating circumstance to be estimated, it results
that the proper penalty is two months and one day
of arresto mayor, as fixed by the trial court. The
judgment will therefore be affirmed, with costs against
the appellant, it being understood that the amount of
the indemnity which the accused shall pay to the gas
company is P4, instead of P2, with subsidiary
imprisonment for one day in case of insolvency. So
ordered.

(ORIGINAL CASE) G.R. No. 155076

27, 2006

February

LUIS MARCOS P. LAUREL, Petitioner,

vs.
HON. ZEUS C. ABROGAR, Presiding Judge of the
Regional Trial Court, Makati City, Branch 150,
PEOPLE OF THE PHILIPPINES& PHILIPPINE LONG
DISTANCE TELEPHONE COMPANY, Respondents.
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari of the
Decision1 of the Court of Appeals (CA) in CA-G.R. SP
No. 68841 affirming the Order issued by Judge Zeus
C. Abrogar, Regional Trial Court (RTC), Makati City,
Branch 150, which denied the "Motion to Quash (With
Motion to Defer Arraignment)" in Criminal Case No. 992425 for theft.
Philippine Long Distance Telephone Company (PLDT)
is the holder of a legislative franchise to render local
and international telecommunication services under
Republic Act No. 7082.2 Under said law, PLDT is
authorized to establish, operate, manage, lease,
maintain and purchase telecommunication systems,
including transmitting, receiving and switching stations,
for both domestic and international calls. For this
purpose, it has installed an estimated 1.7 million
telephone lines nationwide. PLDT also offers other
services as authorized by Certificates of Public
Convenience and Necessity (CPCN) duly issued by

the National Telecommunications Commission (NTC),

and operates and maintains an International Gateway
Facility (IGF). The PLDT network is thus principally
composed of the Public Switch Telephone Network
(PSTN), telephone handsets and/or
telecommunications equipment used by its
subscribers, the wires and cables linking said
telephone handsets and/or telecommunications
equipment, antenna, the IGF, and other
telecommunications equipment which provide
interconnections.3 1avvphil.net
PLDT alleges that one of the alternative calling
patterns that constitute network fraud and violate its
network integrity is that which is known as International
Simple Resale (ISR). ISR is a method of routing and
completing international long distance calls using
International Private Leased Lines (IPL), cables,
antenna or air wave or frequency, which connect
directly to the local or domestic exchange facilities of
the terminating country (the country where the call is
destined). The IPL is linked to switching equipment
which is connected to a PLDT telephone line/number.
In the process, the calls bypass the IGF found at the
terminating country, or in some instances, even those
from the originating country.4
One such alternative calling service is that offered by
Baynet Co., Ltd. (Baynet) which sells "Bay Super
Orient Card" phone cards to people who call their
friends and relatives in the Philippines. With said card,

one is entitled to a 27-minute call to the Philippines for

about 37.03 per minute. After dialing the ISR access
number indicated in the phone card, the ISR operator
requests the subscriber to give the PIN number also
indicated in the phone card. Once the callers identity
(as purchaser of the phone card) is confirmed, the ISR
operator will then provide a Philippine local line to the
requesting caller via the IPL. According to PLDT, calls
made through the IPL never pass the toll center of IGF
operators in the Philippines. Using the local line, the
Baynet card user is able to place a call to any point in
the Philippines, provided the local line is National
Direct Dial (NDD) capable.5
PLDT asserts that Baynet conducts its ISR activities by
utilizing an IPL to course its incoming international long
distance calls from Japan. The IPL is linked to
switching equipment, which is then connected to PLDT
telephone lines/numbers and equipment, with Baynet
as subscriber. Through the use of the telephone lines
and other auxiliary equipment, Baynet is able to
connect an international long distance call from Japan
to any part of the Philippines, and make it appear as a
call originating from Metro Manila. Consequently, the
operator of an ISR is able to evade payment of access,
termination or bypass charges and accounting rates,
as well as compliance with the regulatory requirements
of the NTC. Thus, the ISR operator offers international
telecommunication services at a lower rate, to the
damage and prejudice of legitimate operators like
PLDT.6

PLDT pointed out that Baynet utilized the following

equipment for its ISR activities: lines, cables, and
antennas or equipment or device capable of
transmitting air waves or frequency, such as an IPL
and telephone lines and equipment; computers or any
equipment or device capable of accepting information
applying the prescribed process of the information and
supplying the result of this process; modems or any
equipment or device that enables a data terminal
equipment such as computers to communicate with
other data terminal equipment via a telephone line;
multiplexers or any equipment or device that enables
two or more signals from different sources to pass
through a common cable or transmission line;
switching equipment, or equipment or device capable
of connecting telephone lines; and software, diskettes,
tapes or equipment or device used for recording and
storing information.7
PLDT also discovered that Baynet subscribed to a total
of 123 PLDT telephone lines/numbers.8 Based on the
Traffic Study conducted on the volume of calls passing
through Baynets ISR network which bypass the IGF
toll center, PLDT incurred an estimated monthly loss of
P10,185,325.96.9 Records at the Securities and
Exchange Commission (SEC) also revealed that
Baynet was not authorized to provide international or
domestic long distance telephone service in the
country. The following are its officers: Yuji Hijioka, a
Japanese national (chairman of the board of directors);
Gina C. Mukaida, a Filipina (board member and

president); Luis Marcos P. Laurel, a Filipino (board

member and corporate secretary); Ricky Chan Pe, a
Filipino (board member and treasurer); and Yasushi
Ueshima, also a Japanese national (board member).
Upon complaint of PLDT against Baynet for network
fraud, and on the strength of two search
warrants10 issued by the RTC of Makati, Branch 147,
National Bureau of Investigation (NBI) agents
searched its office at the 7th Floor, SJG Building,
Kalayaan Avenue, Makati City on November 8, 1999.
Atsushi Matsuura, Nobuyoshi Miyake, Edourd D.
Lacson and Rolando J. Villegas were arrested by NBI
agents while in the act of manning the operations of
Baynet. Seized in the premises during the search were
numerous equipment and devices used in its ISR
activities, such as multiplexers, modems, computer
monitors, CPUs, antenna, assorted computer
peripheral cords and microprocessors, cables/wires,
assorted PLDT statement of accounts, parabolic
antennae and voltage regulators.
State Prosecutor Ofelia L. Calo conducted an inquest
investigation and issued a Resolution11 on January 28,
2000, finding probable cause for theft under Article 308
of the Revised Penal Code and Presidential Decree
No. 40112 against the respondents therein, including
Laurel.
On February 8, 2000, State Prosecutor Calo filed an
Information with the RTC of Makati City charging

Matsuura, Miyake, Lacson and Villegas with theft

under Article 308 of the Revised Penal Code. After
conducting the requisite preliminary investigation, the
State Prosecutor filed an Amended Information
impleading Laurel (a partner in the law firm of Ingles,
Laurel, Salinas, and, until November 19, 1999, a
member of the board of directors and corporate
secretary of Baynet), and the other members of the
board of directors of said corporation, namely, Yuji
Hijioka, Yasushi Ueshima, Mukaida, Lacson and
Villegas, as accused for theft under Article 308 of the
Revised Penal Code. The inculpatory portion of the
Amended Information reads:
On or about September 10-19, 1999, or prior thereto,
in Makati City, and within the jurisdiction of this
Honorable Court, the accused, conspiring and
confederating together and all of them mutually helping
and aiding one another, with intent to gain and without
the knowledge and consent of the Philippine Long
Distance Telephone (PLDT), did then and there
willfully, unlawfully and feloniously take, steal and use
the international long distance calls belonging to PLDT
by conducting International Simple Resale (ISR), which
is a method of routing and completing international
long distance calls using lines, cables, antennae,
and/or air wave frequency which connect directly to the
local or domestic exchange facilities of the country
where the call is destined, effectively stealing this
business from PLDT while using its facilities in the

estimated amount of P20,370,651.92 to the damage

and prejudice of PLDT, in the said amount.

Court of Makati City, docketed as Criminal Case No.

276766.

CONTRARY TO LAW.13

The prosecution, through private complainant PLDT,

opposed the motion,14 contending that the movant
unlawfully took personal property belonging to it, as
follows: 1) intangible telephone services that are being
offered by PLDT and other telecommunication
companies, i.e., the connection and interconnection to
their telephone lines/facilities; 2) the use of those
facilities over a period of time; and 3) the revenues
derived in connection with the rendition of such
services and the use of such facilities.15

Accused Laurel filed a "Motion to Quash (with Motion

to Defer Arraignment)" on the ground that the factual
allegations in the Amended Information do not
constitute the felony of theft under Article 308 of the
Revised Penal Code. He averred that the Revised
Penal Code, or any other special penal law for that
matter, does not prohibit ISR operations. He claimed
that telephone calls with the use of PLDT telephone
lines, whether domestic or international, belong to the
persons making the call, not to PLDT. He argued that
the caller merely uses the facilities of PLDT, and what
the latter owns are the telecommunication
infrastructures or facilities through which the call is
made. He also asserted that PLDT is compensated for
the callers use of its facilities by way of rental; for an
outgoing overseas call, PLDT charges the caller per
minute, based on the duration of the call. Thus, no
personal property was stolen from PLDT. According to
Laurel, the P20,370,651.92 stated in the Information, if
anything, represents the rental for the use of PLDT
facilities, and not the value of anything owned by it.
Finally, he averred that the allegations in the Amended
Information are already subsumed under the
Information for violation of Presidential Decree (P.D.)
No. 401 filed and pending in the Metropolitan Trial

The prosecution asserted that the use of PLDTs

intangible telephone services/facilities allows electronic
voice signals to pass through the same, and ultimately
to the called partys number. It averred that such
service/facility is akin to electricity which, although an
intangible property, may, nevertheless, be appropriated
and be the subject of theft. Such service over a period
of time for a consideration is the business that PLDT
provides to its customers, which enables the latter to
send various messages to installed recipients. The
service rendered by PLDT is akin to merchandise
which has specific value, and therefore, capable of
appropriation by another, as in this case, through the
ISR operations conducted by the movant and his coaccused.

The prosecution further alleged that "international

business calls and revenues constitute personal
property envisaged in Article 308 of the Revised Penal
Code." Moreover, the intangible telephone
services/facilities belong to PLDT and not to the
movant and the other accused, because they have no
telephone services and facilities of their own duly
authorized by the NTC; thus, the taking by the movant
and his co-accused of PLDT services was with intent
to gain and without the latters consent.
The prosecution pointed out that the accused, as well
as the movant, were paid in exchange for their illegal
appropriation and use of PLDTs telephone services
and facilities; on the other hand, the accused did not
pay a single centavo for their illegal ISR operations.
Thus, the acts of the accused were akin to the use of a
"jumper" by a consumer to deflect the current from the
house electric meter, thereby enabling one to steal
electricity. The prosecution emphasized that its position
is fortified by the Resolutions of the Department of
Justice in PLDT v. Tiongson, et al. (I.S. No. 97-0925)
and in PAOCTF-PLDT v. Elton John Tuason, et al. (I.S.
No. 2000-370) which were issued on August 14, 2000
finding probable cause for theft against the
respondents therein.
On September 14, 2001, the RTC issued an
Order16 denying the Motion to Quash the Amended
Information. The court declared that, although there is
no law that expressly prohibits the use of ISR, the facts

alleged in the Amended Information "will show how the

alleged crime was committed by conducting ISR," to
the damage and prejudice of PLDT.
Laurel filed a Motion for Reconsideration17 of the Order,
alleging that international long distance calls are not
personal property, and are not capable of
appropriation. He maintained that business or revenue
is not considered personal property, and that the
prosecution failed to adduce proof of its existence and
the subsequent loss of personal property belonging to
another. Citing the ruling of the Court in United States
v. De Guzman,18Laurel averred that the case is not one
with telephone calls which originate with a particular
caller and terminates with the called party. He insisted
that telephone calls are considered privileged
communications under the Constitution and cannot be
considered as "the property of PLDT." He further
argued that there is no kinship between telephone calls
and electricity or gas, as the latter are forms of energy
which are generated and consumable, and may be
considered as personal property because of such
characteristic. On the other hand, the movant argued,
the telephone business is not a form of energy but is
an activity.
In its Order19 dated December 11, 2001, the RTC
denied the movants Motion for Reconsideration. This
time, it ruled that what was stolen from PLDT was its
"business" because, as alleged in the Amended
Information, the international long distance calls made

through the facilities of PLDT formed part of its

business. The RTC noted that the movant was charged
with stealing the business of PLDT. To support its
ruling, it cited Strochecker v. Ramirez,20 where the
Court ruled that interest in business is personal
property capable of appropriation. It further declared
that, through their ISR operations, the movant and his
co-accused deprived PLDT of fees for international
long distance calls, and that the ISR used by the
movant and his co-accused was no different from the
"jumper" used for stealing electricity.
Laurel then filed a Petition for Certiorari with the CA,
assailing the Order of the RTC. He alleged that the
respondent judge gravely abused his discretion in
denying his Motion to Quash the Amended
Information.21 As gleaned from the material averments
of the amended information, he was charged with
stealing the international long distance calls belonging
to PLDT, not its business. Moreover, the RTC failed to
distinguish between the business of PLDT (providing
services for international long distance calls) and the
revenues derived therefrom. He opined that a
"business" or its revenues cannot be considered as
personal property under Article 308 of the Revised
Penal Code, since a "business" is "(1) a commercial or
mercantile activity customarily engaged in as a means
of livelihood and typically involving some
independence of judgment and power of decision; (2) a
commercial or industrial enterprise; and (3) refers to
transactions, dealings or intercourse of any nature." On

the other hand, the term "revenue" is defined as "the

income that comes back from an investment (as in real
or personal property); the annual or periodical rents,
profits, interests, or issues of any species of real or
personal property."22
Laurel further posited that an electric companys
business is the production and distribution of
electricity; a gas companys business is the production
and/or distribution of gas (as fuel); while a water
companys business is the production and distribution
of potable water. He argued that the "business" in all
these cases is the commercial activity, while the goods
and merchandise are the products of such activity.
Thus, in prosecutions for theft of certain forms of
energy, it is the electricity or gas which is alleged to be
stolen and not the "business" of providing electricity or
gas. However, since a telephone company does not
produce any energy, goods or merchandise and
merely renders a service or, in the words of PLDT, "the
connection and interconnection to their telephone
lines/facilities," such service cannot be the subject of
theft as defined in Article 308 of the Revised Penal
Code.23
He further declared that to categorize "business" as
personal property under Article 308 of the Revised
Penal Code would lead to absurd consequences; in
prosecutions for theft of gas, electricity or water, it
would then be permissible to allege in the Information
that it is the gas business, the electric business or the

water business which has been stolen, and no longer

the merchandise produced by such enterprise. 24
Laurel further cited the Resolution of the Secretary of
Justice in Piltel v. Mendoza,25 where it was ruled that
the Revised Penal Code, legislated as it was before
present technological advances were even conceived,
is not adequate to address the novel means of
"stealing" airwaves or airtime. In said resolution, it was
noted that the inadequacy prompted the filing of
Senate Bill 2379 (sic) entitled "The AntiTelecommunications Fraud of 1997" to deter cloning of
cellular phones and other forms of communications
fraud. The said bill "aims to protect in number (ESN)
(sic) or Capcode, mobile identification number (MIN),
electronic-international mobile equipment identity
(EMEI/IMEI), or subscriber identity module" and "any
attempt to duplicate the data on another cellular phone
without the consent of a public telecommunications
entity would be punishable by law."26 Thus, Laurel
concluded, "there is no crime if there is no law
punishing the crime."
On August 30, 2002, the CA rendered judgment
dismissing the petition.27 The appellate court ruled that
a petition for certiorari under Rule 65 of the Rules of
Court was not the proper remedy of the petitioner. On
the merits of the petition, it held that while business is
generally an activity

which is abstract and intangible in form, it is

nevertheless considered "property" under Article 308 of
the Revised Penal Code. The CA opined that PLDTs
business of providing international calls is personal
property which may be the object of theft, and cited
United States v. Carlos28 to support such conclusion.
The tribunal also cited Strochecker v. Ramirez,29 where
this Court ruled that one-half interest in a days
business is personal property under Section 2 of Act
No. 3952, otherwise known as the Bulk Sales Law. The
appellate court held that the operations of the ISR are
not subsumed in the charge for violation of P.D. No.
401.
Laurel, now the petitioner, assails the decision of the
CA, contending that THE COURT OF APPEALS ERRED IN RULING
THAT THE PERSONAL PROPERTY
ALLEGEDLY STOLEN PER THE INFORMATION
IS NOT THE "INTERNATIONAL LONG
DISTANCE CALLS" BUT THE "BUSINESS OF
PLDT."
THE COURT OF APPEALS ERRED IN RULING
THAT THE TERM "BUSINESS" IS PERSONAL
PROPERTY WITHIN THE MEANING OF ART.
308 OF THE REVISED PENAL CODE.30
Petitioner avers that the petition for a writ of certiorari
may be filed to nullify an interlocutory order of the trial

court which was issued with grave abuse of discretion

amounting to excess or lack of jurisdiction. In support
of his petition before the Court, he reiterates the
arguments in his pleadings filed before the CA. He
further claims that while the right to carry on a
business or an interest or participation in business is
considered property under the New Civil Code, the
term "business," however, is not. He asserts that the
Philippine Legislature, which approved the Revised
Penal Code way back in January 1, 1932, could not
have contemplated to include international long
distance calls and "business" as personal property
under Article 308 thereof.
In its comment on the petition, the Office of the
Solicitor General (OSG) maintains that the amended
information clearly states all the essential elements of
the crime of theft. Petitioners interpretation as to
whether an "international long distance call" is
personal property under the law is inconsequential, as
a reading of the amended information readily reveals
that specific acts and circumstances were alleged
charging Baynet, through its officers, including
petitioner, of feloniously taking, stealing and illegally
using international long distance calls belonging to
respondent PLDT by conducting ISR operations, thus,
"routing and completing international long distance
calls using lines, cables, antenna and/or airwave
frequency which connect directly to the local or
domestic exchange facilities of the country where the
call is destined." The OSG maintains that the

international long distance calls alleged in the

amended information should be construed to mean
"business" of PLDT, which, while abstract and
intangible in form, is personal property susceptible of
appropriation.31 The OSG avers that what was stolen
by petitioner and his co-accused is the business of
PLDT providing international long distance calls which,
though intangible, is personal property of the PLDT.32
For its part, respondent PLDT asserts that personal
property under Article 308 of the Revised Penal Code
comprehends intangible property such as electricity
and gas which are valuable articles for merchandise,
brought and sold like other personal property, and are
capable of appropriation. It insists that the business of
international calls and revenues constitute personal
property because the same are valuable articles of
merchandise. The respondent reiterates that
international calls involve (a) the intangible telephone
services that are being offered by it, that is, the
connection and interconnection to the telephone
network, lines or facilities; (b) the use of its telephone
network, lines or facilities over a period of time; and (c)
the income derived in connection therewith. 33
PLDT further posits that business revenues or the
income derived in connection with the rendition of such
services and the use of its telephone network, lines or
facilities are personal properties under Article 308 of
the Revised Penal Code; so is the use of said
telephone services/telephone network, lines or facilities

which allow electronic voice signals to pass through

the same and ultimately to the called partys number. It
is akin to electricity which, though intangible property,
may nevertheless be appropriated and can be the
object of theft. The use of respondent PLDTs
telephone network, lines, or facilities over a period of
time for consideration is the business that it provides to
its customers, which enables the latter to send various
messages to intended recipients. Such use over a
period of time is akin to merchandise which has value
and, therefore, can be appropriated by another.
According to respondent PLDT, this is what actually
happened when petitioner Laurel and the other
accused below conducted illegal ISR operations. 34
The petition is meritorious.
The issues for resolution are as follows: (a) whether or
not the petition for certiorari is the proper remedy of the
petitioner in the Court of Appeals; (b) whether or not
international telephone calls using Bay Super Orient
Cards through the telecommunication services
provided by PLDT for such calls, or, in short, PLDTs
business of providing said telecommunication services,
are proper subjects of theft under Article 308 of the
Revised Penal Code; and (c) whether or not the trial
court committed grave abuse of discretion amounting
to excess or lack of jurisdiction in denying the motion
of the petitioner to quash the amended information.

On the issue of whether or not the petition for certiorari

instituted by the petitioner in the CA is proper, the
general rule is that a petition for certiorari under Rule
65 of the Rules of Court, as amended, to nullify an
order denying a motion to quash the Information is
inappropriate because the aggrieved party has a
remedy of appeal in the ordinary course of law. Appeal
and certiorari are mutually exclusive of each other. The
remedy of the aggrieved party is to continue with the
case in due course and, when an unfavorable
judgment is rendered, assail the order and the decision
on appeal. However, if the trial court issues the order
denying the motion to quash the Amended Information
with grave abuse of discretion amounting to excess or
lack of jurisdiction, or if such order is patently
erroneous, or null and void for being contrary to the
Constitution, and the remedy of appeal would not
afford adequate and expeditious relief, the accused
may resort to the extraordinary remedy of certiorari. 35 A
special civil action for certiorari is also available where
there are special circumstances clearly demonstrating
the inadequacy of an appeal. As this Court held in
Bristol Myers Squibb (Phils.), Inc. v. Viloria:36
Nonetheless, the settled rule is that a writ of certiorari
may be granted in cases where, despite availability of
appeal after trial, there is at least a prima facie
showing on the face of the petition and its annexes
that: (a) the trial court issued the order with grave
abuse of discretion amounting to lack of or in excess of
jurisdiction; (b) appeal would not prove to be a speedy

and adequate remedy; (c) where the order is a patent

nullity; (d) the decision in the present case will arrest
future litigations; and (e) for certain considerations
such as public welfare and public policy.37
In his petition for certiorari in the CA, petitioner averred
that the trial court committed grave abuse of its
discretion amounting to excess or lack of jurisdiction
when it denied his motion to quash the Amended
Information despite his claim that the material
allegations in the Amended Information do not charge
theft under Article 308 of the Revised Penal Code, or
any offense for that matter. By so doing, the trial court
deprived him of his constitutional right to be informed
of the nature of the charge against him. He further
averred that the order of the trial court is contrary to
the constitution and is, thus, null and void. He insists
that he should not be compelled to undergo the rigors
and tribulations of a protracted trial and incur expenses
to defend himself against a non-existent charge.
Petitioner is correct.
An information or complaint must state explicitly and
directly every act or omission constituting an
offense38 and must allege facts establishing conduct
that a penal statute makes criminal;39 and describes
the property which is the subject of theft to advise the
accused with reasonable certainty of the accusation he
is called upon to meet at the trial and to enable him to
rely on the judgment thereunder of a subsequent

prosecution for the same offense.40 It must show, on its

face, that if the alleged facts are true, an offense has
been committed. The rule is rooted on the
constitutional right of the accused to be informed of the
nature of the crime or cause of the accusation against
him. He cannot be convicted of an offense even if
proven unless it is alleged or necessarily included in
the Information filed against him.
As a general prerequisite, a motion to quash on the
ground that the Information does not constitute the
offense charged, or any offense for that matter, should
be resolved on the basis of said allegations whose
truth and veracity are hypothetically committed; 41 and
on additional facts admitted or not denied by the
prosecution.42 If the facts alleged in the Information do
not constitute an offense, the complaint or information
should be quashed by the court.43
We have reviewed the Amended Information and find
that, as mentioned by the petitioner, it does not contain
material allegations charging the petitioner of theft of
personal property under Article 308 of the Revised
Penal Code. It, thus, behooved the trial court to quash
the Amended Information. The Order of the trial court
denying the motion of the petitioner to quash the
Amended Information is a patent nullity.
On the second issue, we find and so hold that the
international telephone calls placed by Bay Super
Orient Card holders, the telecommunication services

provided by PLDT and its business of providing said

services are not personal properties under Article 308
of the Revised Penal Code. The construction by the
respondents of Article 308 of the said Code to include,
within its coverage, the aforesaid international
telephone calls, telecommunication services and
business is contrary to the letter and intent of the law.

them more comprehensive.47 Words and phrases in a

statute are to be construed according to their common
meaning and accepted usage.

The rule is that, penal laws are to be construed strictly.

Such rule is founded on the tenderness of the law for
the rights of individuals and on the plain principle that
the power of punishment is vested in Congress, not in
the judicial department. It is Congress, not the Court,
which is to define a crime, and ordain its
punishment.44 Due respect for the prerogative of
Congress in defining crimes/felonies constrains the
Court to refrain from a broad interpretation of penal
laws where a "narrow interpretation" is appropriate.
The Court must take heed to language, legislative
history and purpose, in order to strictly determine the
wrath and breath of the conduct the law
forbids.45 However, when the congressional purpose is
unclear, the court must apply the rule of lenity, that is,
ambiguity concerning the ambit of criminal statutes
should be resolved in favor of lenity.46

mischief of a statute is within its provision, so far as to

punish a crime not enumerated in the statute because
it is of equal atrocity, or of kindred character with those
which are enumerated.48 When interpreting a criminal
statute that does not explicitly reach the conduct in
question, the Court should not base an expansive
reading on inferences from subjective and variable
understanding.49

Penal statutes may not be enlarged by implication or

intent beyond the fair meaning of the language used;
and may not be held to include offenses other than
those which are clearly described, notwithstanding that
the Court may think that Congress should have made

As Chief Justice John Marshall declared, "it would be

dangerous, indeed, to carry the principle that a case
which is within the reason or

Article 308 of the Revised Penal Code defines theft as

follows:
Art. 308. Who are liable for theft. Theft is committed
by any person who, with intent to gain but without
violence, against or intimidation of persons nor force
upon things, shall take personal property of another
without the latters consent.
The provision was taken from Article 530 of the
Spanish Penal Code which reads:
1. Los que con nimo de lucrarse, y sin violencia o
intimidacin en las personas ni fuerza en las cosas,

toman las cosas muebles ajenas sin la voluntad de su

dueo.50

material, susceptible de ser aprehendida que tenga un

valor cualquiera."53

For one to be guilty of theft, the accused must have an

intent to steal (animus furandi) personal property,
meaning the intent to deprive another of his
ownership/lawful possession of personal property
which intent is apart from and concurrently with the
general criminal intent which is an essential element of
a felony of dolo (dolus malus).

According to Cuello Callon, in the context of the Penal

Code, only those movable properties which can be
taken and carried from the place they are found are
proper subjects of theft. Intangible properties such as
rights and ideas are not subject of theft because the
same cannot be "taken" from the place it is found and
is occupied or appropriated.

An information or complaint for simple theft must allege

the following elements: (a) the taking of personal
property; (b) the said property belongs to another; (c)
the taking be done with intent to gain; and (d) the
taking be accomplished without the use of violence or
intimidation of person/s or force upon things. 51

Solamente las cosas muebles y corporales pueden ser

objeto de hurto. La sustraccin de cosas inmuebles y
la cosas incorporales (v. gr., los derechos, las ideas)
no puede integrar este delito, pues no es posible
asirlas, tomarlas, para conseguir su apropiacin. El
Codigo emplea la expresin "cosas mueble" en el
sentido de cosa que es susceptible de ser llevada del
lugar donde se encuentra, como dinero, joyas, ropas,
etctera, asi que su concepto no coincide por
completo con el formulado por el Codigo civil (arts. 335
y 336).54

One is apt to conclude that "personal property"

standing alone, covers both tangible and intangible
properties and are subject of theft under the Revised
Penal Code. But the words "Personal property" under
the Revised Penal Code must be considered in
tandem with the word "take" in the law. The statutory
definition of "taking" and movable property indicates
that, clearly, not all personal properties may be the
proper subjects of theft. The general rule is that, only
movable properties which have physical or material
existence and susceptible of occupation by another are
proper objects of theft.52 As explained by Cuelo Callon:
"Cosa juridicamente es toda sustancia corporal,

Thus, movable properties under Article 308 of the

Revised Penal Code should be distinguished from the
rights or interests to which they relate. A naked right
existing merely in contemplation of law, although it may
be very valuable to the person who is entitled to
exercise it, is not the subject of theft or larceny.55 Such
rights or interests are intangible and cannot be "taken"
by another. Thus, right to produce oil, good will or an

interest in business, or the right to engage in business,

credit or franchise are properties. So is the credit line
represented by a credit card. However, they are not
proper subjects of theft or larceny because they are
without form or substance, the mere "breath" of the
Congress. On the other hand, goods, wares and
merchandise of businessmen and credit cards issued
to them are movable properties with physical and
material existence and may be taken by another;
hence, proper subjects of theft.
There is "taking" of personal property, and theft is
consummated when the offender unlawfully acquires
possession of personal property even if for a short
time; or if such property is under the dominion and
control of the thief. The taker, at some particular
amount, must have obtained complete and absolute
possession and control of the property adverse to the
rights of the owner or the lawful possessor thereof. 56 It
is not necessary that the property be actually carried
away out of the physical possession of the lawful
possessor or that he should have made his escape
with it.57 Neither asportation nor actual manual
possession of property is required. Constructive
possession of the thief of the property is enough. 58
The essence of the element is the taking of a thing out
of the possession of the owner without his privity and
consent and without animus revertendi.59

Taking may be by the offenders own hands, by his use

of innocent persons without any felonious intent, as
well as any mechanical device, such as an access
device or card, or any agency, animate or inanimate,
with intent to gain. Intent to gain includes the unlawful
taking of personal property for the purpose of deriving
utility, satisfaction, enjoyment and pleasure.60
We agree with the contention of the respondents that
intangible properties such as electrical energy and gas
are proper subjects of theft. The reason for this is that,
as explained by this Court in United States v.
Carlos61 and United States v. Tambunting,62 based on
decisions of the Supreme Court of Spain and of the
courts in England and the United States of America,
gas or electricity are capable of appropriation by
another other than the owner. Gas and electrical
energy may be taken, carried away and appropriated.
In People v. Menagas,63 the Illinois State Supreme
Court declared that electricity, like gas, may be seen
and felt. Electricity, the same as gas, is a valuable
article of merchandise, bought and sold like other
personal property and is capable of appropriation by
another. It is a valuable article of merchandise, bought
and sold like other personal property, susceptible of
being severed from a mass or larger quantity and of
being transported from place to place. Electrical
energy may, likewise, be taken and carried away. It is a
valuable commodity, bought and sold like other
personal property. It may be transported from place to
place. There is nothing in the nature of gas used for

illuminating purposes which renders it incapable of

being feloniously taken and carried away.
In People ex rel Brush Electric Illuminating Co. v.
Wemple,64 the Court of Appeals of New York held that
electric energy is manufactured and sold in
determinate quantities at a fixed price, precisely as are
coal, kerosene oil, and gas. It may be conveyed to the
premises of the consumer, stored in cells of different
capacity known as an accumulator; or it may be sent
through a wire, just as gas or oil may be transported
either in a close tank or forced through a pipe. Having
reached the premises of the consumer, it may be used
in any way he may desire, being, like illuminating gas,
capable of being transformed either into heat, light, or
power, at the option of the purchaser. In Woods v.
People,65 the Supreme Court of Illinois declared that
there is nothing in the nature of gas used for
illuminating purposes which renders it incapable of
being feloniously taken and carried away. It is a
valuable article of merchandise, bought and sold like
other personal property, susceptible of being severed
from a mass or larger quantity and of being transported
from place to place.
Gas and electrical energy should not be equated with
business or services provided by business
entrepreneurs to the public. Business does not have
an exact definition. Business is referred as that which
occupies the time, attention and labor of men for the
purpose of livelihood or profit. It embraces everything

that which a person can be employed.66 Business may

also mean employment, occupation or profession.
Business is also defined as a commercial activity for
gain benefit or advantage.67 Business, like services in
business, although are properties, are not proper
subjects of theft under the Revised Penal Code
because the same cannot be "taken" or "occupied." If it
were otherwise, as claimed by the respondents, there
would be no juridical difference between the taking of
the business of a person or the services provided by
him for gain, vis--vis, the taking of goods, wares or
merchandise, or equipment comprising his
business.68 If it was its intention to include "business"
as personal property under Article 308 of the Revised
Penal Code, the Philippine Legislature should have
spoken in language that is clear and definite: that
business is personal property under Article 308 of the
Revised Penal Code.69
We agree with the contention of the petitioner that, as
gleaned from the material averments of the Amended
Information, he is charged of "stealing the international
long distance calls belonging to PLDT" and the use
thereof, through the ISR. Contrary to the claims of the
OSG and respondent PLDT, the petitioner is not
charged of stealing P20,370,651.95 from said
respondent. Said amount of P20,370,651.95 alleged in
the Amended Information is the aggregate amount of
access, transmission or termination charges which the
PLDT expected from the international long distance

calls of the callers with the use of Baynet Super Orient

Cards sold by Baynet Co. Ltd.
In defining theft, under Article 308 of the Revised Penal
Code, as the taking of personal property without the
consent of the owner thereof, the Philippine legislature
could not have contemplated the human voice which is
converted into electronic impulses or electrical current
which are transmitted to the party called through the
PSTN of respondent PLDT and the ISR of Baynet Card
Ltd. within its coverage. When the Revised Penal Code
was approved, on December 8, 1930, international
telephone calls and the transmission and routing of
electronic voice signals or impulses emanating from
said calls, through the PSTN, IPL and ISR, were still
non-existent. Case law is that, where a legislative
history fails to evidence congressional awareness of
the scope of the statute claimed by the respondents, a
narrow interpretation of the law is more consistent with
the usual approach to the construction of the statute.
Penal responsibility cannot be extended beyond the
fair scope of the statutory mandate.70
Respondent PLDT does not acquire possession, much
less, ownership of the voices of the telephone callers
or of the electronic voice signals or current emanating
from said calls. The human voice and the electronic
voice signals or current caused thereby are intangible
and not susceptible of possession, occupation or
appropriation by the respondent PLDT or even the
petitioner, for that matter. PLDT merely transmits the

electronic voice signals through its facilities and

equipment. Baynet Card Ltd., through its operator,
merely intercepts, reroutes the calls and passes them
to its toll center. Indeed, the parties called receive the
telephone calls from Japan.
In this modern age of technology, telecommunications
systems have become so tightly merged with computer
systems that it is difficult to know where one starts and
the other finishes. The telephone set is highly
computerized and allows computers to communicate
across long distances.71 The instrumentality at issue in
this case is not merely a telephone but a telephone
inexplicably linked to a computerized communications
system with the use of Baynet Cards sold by the
Baynet Card Ltd. The corporation uses computers,
modems and software, among others, for its ISR. 72
The conduct complained of by respondent PLDT is
reminiscent of "phreaking" (a slang term for the action
of making a telephone system to do something that it
normally should not allow by "making the phone
company bend over and grab its ankles"). A "phreaker"
is one who engages in the act of manipulating phones
and illegally markets telephone services.73 Unless the
phone company replaces all its hardware, phreaking
would be impossible to stop. The phone companies in
North America were impelled to replace all their
hardware and adopted full digital switching system
known as the Common Channel Inter Office Signaling.

Phreaking occurred only during the 1960s and 1970s,

decades after the Revised Penal Code took effect.
The petitioner is not charged, under the Amended
Information, for theft of telecommunication or
telephone services offered by PLDT. Even if he is, the
term "personal property" under Article 308 of the
Revised Penal Code cannot be interpreted beyond its
seams so as to include "telecommunication or
telephone services" or computer services for that
matter. The word "service" has a variety of meanings
dependent upon the context, or the sense in which it is
used; and, in some instances, it may include a sale.
For instance, the sale of food by restaurants is usually
referred to as "service," although an actual sale is
involved.74 It may also mean the duty or labor to be
rendered by one person to another; performance of
labor for the benefit of another.75 In the case of PLDT, it
is to render local and international telecommunications
services and such other services as authorized by the
CPCA issued by the NTC. Even at common law,
neither time nor services may be taken and occupied
or appropriated.76A service is generally not considered
property and a theft of service would not, therefore,
constitute theft since there can be no caption or
asportation.77 Neither is the unauthorized use of the
equipment and facilities of PLDT by the petitioner theft
under the aforequoted provision of the Revised Penal
Code.78

If it was the intent of the Philippine Legislature, in

1930, to include services to be the subject of theft, it
should have incorporated the same in Article 308 of the
Revised Penal Code. The Legislature did not. In fact,
the Revised Penal Code does not even contain a
definition of services.
If taking of telecommunication services or the business
of a person, is to be proscribed, it must be by special
statute79 or an amendment of the Revised Penal Code.
Several states in the United States, such as New York,
New Jersey, California and Virginia, realized that their
criminal statutes did not contain any provisions
penalizing the theft of services and passed laws
defining and penalizing theft of telephone and
computer services. The Pennsylvania Criminal Statute
now penalizes theft of services, thus:
(a) Acquisition of services. -(1) A person is guilty of theft if he intentionally obtains
services for himself or for another which he knows are
available only for compensation, by deception or
threat, by altering or tampering with the public utility
meter or measuring device by which such services are
delivered or by causing or permitting such altering or
tampering, by making or maintaining any unauthorized
connection, whether physically, electrically or
inductively, to a distribution or transmission line, by
attaching or maintaining the attachment of any
unauthorized device to any cable, wire or other

component of an electric, telephone or cable television

system or to a television receiving set connected to a
cable television system, by making or maintaining any
unauthorized modification or alteration to any device
installed by a cable television system, or by false token
or other trick or artifice to avoid payment for the
service.
In the State of Illinois in the United States of America,
theft of labor or services or use of property is
penalized:
(a) A person commits theft when he obtains the
temporary use of property, labor or services of another
which are available only for hire, by means of threat or
deception or knowing that such use is without the
consent of the person providing the property, labor or
services.
In 1980, the drafters of the Model Penal Code in the
United States of America arrived at the conclusion that
labor and services, including professional services,
have not been included within the traditional scope of
the term "property" in ordinary theft statutes. Hence,
they decided to incorporate in the Code Section 223.7,
which defines and penalizes theft of services, thus:
(1) A person is guilty of theft if he purposely obtains
services which he knows are available only for
compensation, by deception or threat, or by false token
or other means to avoid payment for the service.

"Services" include labor, professional service,

transportation, telephone or other public service,
accommodation in hotels, restaurants or elsewhere,
admission to exhibitions, use of vehicles or other
movable property. Where compensation for service is
ordinarily paid immediately upon the rendering of such
service, as in the case of hotels and restaurants,
refusal to pay or absconding without payment or offer
to pay gives rise to a presumption that the service was
obtained by deception as to intention to pay; (2) A
person commits theft if, having control over the
disposition of services of others, to which he is not
entitled, he knowingly diverts such services to his own
benefit or to the benefit of another not entitled thereto.
Interestingly, after the State Supreme Court of Virginia
promulgated its decision in Lund v.
Commonwealth,80declaring that neither time nor
services may be taken and carried away and are not
proper subjects of larceny, the General Assembly of
Virginia enacted Code No. 18-2-98 which reads:
Computer time or services or data processing services
or information or data stored in connection therewith is
hereby defined to be property which may be the
subject of larceny under 18.2-95 or 18.2-96, or
embezzlement under 18.2-111, or false pretenses
under 18.2-178.

In the State of Alabama, Section 13A-8-10(a)(1) of the

Penal Code of Alabama of 1975 penalizes theft of
services:

conspiracy to commit access devices fraud is a crime.

However, the petitioner is not charged of violation of
R.A. 8484.

"A person commits the crime of theft of services if: (a)

He intentionally obtains services known by him to be
available only for compensation by deception, threat,
false token or other means to avoid payment for the
services "

Significantly, a prosecution under the law shall be

without prejudice to any liability for violation of any
provisions of the Revised Penal Code inclusive of theft
under Rule 308 of the Revised Penal Code and estafa
under Article 315 of the Revised Penal Code. Thus, if
an individual steals a credit card and uses the same to
obtain services, he is liable of the following: theft of the
credit card under Article 308 of the Revised Penal
Code; violation of Republic Act No. 8484; and estafa
under Article 315(2)(a) of the Revised Penal Code with
the service provider as the private complainant. The
petitioner is not charged of estafa before the RTC in
the Amended Information.

In the Philippines, Congress has not amended the

Revised Penal Code to include theft of services or theft
of business as felonies. Instead, it approved a law,
Republic Act No. 8484, otherwise known as the Access
Devices Regulation Act of 1998, on February 11, 1998.
Under the law, an access device means any card,
plate, code, account number, electronic serial number,
personal identification number and other
telecommunication services, equipment or
instrumentalities-identifier or other means of account
access that can be used to obtain money, goods,
services or any other thing of value or to initiate a
transfer of funds other than a transfer originated solely
by paper instrument. Among the prohibited acts
enumerated in Section 9 of the law are the acts of
obtaining money or anything of value through the use
of an access device, with intent to defraud or intent to
gain and fleeing thereafter; and of effecting
transactions with one or more access devices issued
to another person or persons to receive payment or
any other thing of value. Under Section 11 of the law,

Section 33 of Republic Act No. 8792, Electronic

Commerce Act of 2000 provides:
Sec. 33. Penalties. The following Acts shall be
penalized by fine and/or imprisonment, as follows:
a) Hacking or cracking which refers to unauthorized
access into or interference in a computer
system/server or information and communication
system; or any access in order to corrupt, alter, steal,
or destroy using a computer or other similar
information and communication devices, without the
knowledge and consent of the owner of the computer

or information and communications system, including

the introduction of computer viruses and the like,
resulting on the corruption, destruction, alteration, theft
or loss of electronic data messages or electronic
documents shall be punished by a minimum fine of
One hundred thousand pesos (P100,000.00) and a
maximum commensurate to the damage incurred and
a mandatory imprisonment of six (6) months to three
(3) years.
IN LIGHT OF ALL THE FOREGOING, the petition is
GRANTED. The assailed Orders of the Regional Trial
Court and the Decision of the Court of Appeals are
REVERSED and SET ASIDE. The Regional Trial Court
is directed to issue an order granting the motion of the
petitioner to quash the Amended Information.

RECONSIDERATION: LAUREL v. ABROGAR (2009)

RESOLUTION
YNARES-SANTIAGO, J.:
On February 27, 2006, this Courts First Division
rendered judgment in this case as follows:
IN
LIGHT
OF
ALL
THE
FOREGOING, the
petition
is GRANTED. The assailed Orders of the

Regional Trial Court and the Decision of

the Court of Appeals are REVERSED and
SET ASIDE. The Regional Trial Court is
directed to issue an order granting the
motion of the petitioner to quash the
Amended Information.
SO ORDERED.[1]
By way of brief background, petitioner is one of
the accused in Criminal Case No. 99-2425, filed with
the Regional Trial Court of Makati City,
Branch
150. The Amended Information charged the accused
with theft under Article 308 of the Revised Penal Code,
committed as follows:
On or about September 10-19,
1999, or prior thereto in Makati City, and
within the jurisdiction of this Honorable
Court, the accused, conspiring and
confederating together and all of them
mutually helping and aiding one another,
with intent to gain and without the
knowledge and consent of the Philippine
Long Distance Telephone (PLDT), did then
and there willfully, unlawfully and
feloniously take, steal and use the
international long distance calls belonging
to PLDT by conducting International Simple
Resale (ISR), which is a method of routing
and completing international long distance
calls using lines, cables, antenae, and/or
air wave frequency which connect directly

to the local or domestic exchange facilities

of the country where the call is destined,
effectively stealing this business from
PLDT while using its facilities in the
estimated amount of P20,370,651.92 to the
damage and prejudice of PLDT, in the said
amount.
CONTRARY TO LAW.[2]
Petitioner filed a Motion to Quash (with Motion
to Defer Arraignment), on the ground that the factual
allegations in the Amended Information do not
constitute the felony of theft. The trial court denied the
Motion to Quash the Amended Information, as well
petitioners subsequent Motion for Reconsideration.
Petitioners special civil action for certiorari was
dismissed by the Court of Appeals. Thus, petitioner
filed the instant petition for review with this Court.
In the above-quoted Decision, this Court held
that the Amended Information does not contain
material allegations charging petitioner with theft of
personal property since international long distance
calls and the business of providing telecommunication
or telephone services are not personal properties
under Article 308 of the Revised Penal Code.
Respondent Philippine Long Distance Telephone
Company (PLDT) filed a Motion for Reconsideration
with Motion to Refer the Case to the Supreme Court
En Banc. It maintains that the Amended Information

charging petitioner with theft is valid and sufficient; that

it states the names of all the accused who were
specifically charged with the crime of theft of PLDTs
international calls and business of providing
telecommunication or telephone service on or about
September 10 to 19, 1999 in Makati City by conducting
ISR or International Simple Resale; that it identifies the
international calls and business of providing
telecommunication or telephone service of PLDT as
the personal properties which were unlawfully taken by
the accused; and that it satisfies the test of sufficiency
as it enabled a person of common understanding to
know the charge against him and the court to render
judgment properly.
PLDT further insists that the Revised Penal Code
should be interpreted in the context of the Civil Codes
definition of real and personal property. The
enumeration of real properties in Article 415 of the Civil
Code is exclusive such that all those not included
therein are personal properties. Since Article 308 of
the Revised Penal Code used the words personal
property without qualification, it follows that all
personal properties as understood in the context of
the Civil Code, may be the subject of theft under Article
308 of the Revised Penal Code. PLDT alleges that the
international calls and business of providing
telecommunication or telephone service are personal
properties capable of appropriation and can be objects
of theft.
PLDT also argues that taking in relation to theft
under the Revised Penal Code does not require

asportation, the sole requisite being that the object

should be capable of appropriation. The element of
taking referred to in Article 308 of the Revised Penal
Code means the act of depriving another of the
possession and dominion of a movable coupled with
the intention, at the time of the taking, of withholding
it with the character of permanency. There must be
intent to appropriate, which means to deprive the
lawful owner of the thing. Thus, the term personal
properties under Article 308 of the Revised Penal
Code is not limited to only personal properties which
are susceptible of being severed from a mass or
larger quantity and of being transported from place to
place.
PLDT likewise alleges that as early as the 1930s,
international telephone calls were in existence; hence,
there is no basis for this Courts finding that the
Legislature could not have contemplated the theft of
international telephone calls and the unlawful
transmission and routing of electronic voice signals or
impulses emanating from such calls by unlawfully
tampering with the telephone device as within the
coverage of the Revised Penal Code.
According to respondent, the international
phone calls which are electric currents or sets of
electric impulses transmitted through a medium, and
carry a pattern representing the human voice to a
receiver, are personal properties which may be
subject of theft. Article 416(3) of the Civil Code deems
forces of nature (which includes electricity) which are

brought under the control by science, are personal

property.
In his Comment to PLDTs motion for
reconsideration, petitioner Laurel claims that a
telephone call is a conversation on the phone or a
communication carried out using the telephone. It is
not
synonymous
to
electric
current
or
impulses. Hence, it may not be considered as
personal
property
susceptible
of
appropriation. Petitioner claims that the analogy
between generated electricity and telephone calls is
misplaced. PLDT does not produce or generate
telephone calls. It only provides the facilities or
services for the transmission and switching of the
calls. He also insists that business is not personal
property. It is not the business that is protected but
the right to carry on a business. This right is what is
considered as property. Since the services of PLDT
cannot be considered as property, the same may not
be subject of theft.
The Office of the Solicitor General (OSG) agrees
with respondent PLDT that international phone calls
and the business or service of providing international
phone calls are subsumed in the enumeration and
definition of personal property under the Civil Code
hence, may be proper subjects of theft. It noted that
the cases of United States v. Genato,[3] United States
v. Carlos[4] and United States v. Tambunting,[5] which
recognized intangible properties like gas and electricity
as personal properties, are deemed incorporated in our
penal laws. Moreover, the theft provision in the

Revised Penal Code was deliberately couched in

broad terms precisely to be all-encompassing and
embracing even such scenario that could not have
been easily anticipated.
According to the OSG, prosecution under
Republic Act (RA) No. 8484 or the Access Device
Regulations Act of 1998 and RA 8792 or the Electronic
Commerce Act of 2000 does not preclude prosecution
under the Revised Penal Code for the crime of
theft. The latter embraces unauthorized appropriation
or use of PLDTs international calls, service and
business, for personal profit or gain, to the prejudice of
PLDT as owner thereof. On the other hand, the
special laws punish the surreptitious and advanced
technical means employed to illegally obtain the
subject service and business. Even assuming that the
correct indictment should have been under RA 8484,
the quashal of the information would still not be
proper. The charge of theft as alleged in the
Information should be taken in relation to RA 8484
because it is the elements, and not the designation of
the crime, that control.
Considering the gravity and complexity of the
novel questions of law involved in this case, the
Special First Division resolved to refer the same to the
Banc.
We resolve to grant the Motion for
Reconsideration but remand the case to the trial court
for proper clarification of the Amended Information.

Article 308 of the Revised Penal Code provides:

Art. 308. Who are liable for theft.
Theft is committed by any person who, with
intent to gain but without violence against,
or intimidation of persons nor force upon
things, shall take personal property of
another without the latters consent.
The elements of theft under Article 308 of the
Revised Penal Code are as follows: (1) that there be
taking of personal property; (2) that said property
belongs to another; (3) that the taking be done with
intent to gain; (4) that the taking be done without the
consent of the owner; and (5) that the taking be
accomplished without the use of violence against or
intimidation of persons or force upon things.
Prior to the passage of the Revised Penal Code
on December 8, 1930, the definition of the term
personal property in the penal code provision on theft
had been established in Philippine jurisprudence. This
Court, in United States v. Genato, United States v.
Carlos, and United States v. Tambunting, consistently
ruled that any personal property, tangible or intangible,
corporeal or incorporeal, capable of appropriation can
be the object of theft.
Moreover, since the passage of the Revised
Penal Code on December 8, 1930, the term personal
property has had a generally accepted definition in
civil law. In Article 335 of the Civil Code of Spain,

personal property is defined as anything susceptible

of appropriation and not included in the foregoing
chapter (not real property). Thus, the term personal
property in the Revised Penal Code should be
interpreted in the context of the Civil Code provisions
in accordance with the rule on statutory construction
that where words have been long used in a technical
sense and have been judicially construed to have a
certain meaning, and have been adopted by the
legislature as having a certain meaning prior to a
particular statute, in which they are used, the words
used in such statute should be construed according to
the sense in which they have been previously used.
[6]
In fact, this Court used the Civil Code definition of
personal property in interpreting the theft provision of
the penal code in United States v. Carlos.
Cognizant of the definition given by
jurisprudence and the Civil Code of Spain to the term
personal property at the time the old Penal Code was
being revised, still the legislature did not limit or qualify
the definition of personal property in the Revised
Penal Code. Neither did it provide a restrictive
definition or an exclusive enumeration of personal
property in the Revised Penal Code, thereby showing
its intent to retain for the term an extensive and
unqualified interpretation. Consequently, any property
which is not included in the enumeration of real
properties under the Civil Code and capable of
appropriation can be the subject of theft under the
Revised Penal Code.

The only requirement for a personal property to

be the object of theft under the penal code is that it be
capable of appropriation. It need not be capable of
asportation, which is defined as carrying
away.[7] Jurisprudence is settled that to take under
the theft provision of the penal code does not require
asportation or carrying away.[8]
To appropriate means to deprive the lawful
owner of the thing.[9] The word take in the Revised
Penal Code includes any act intended to transfer
possession which, as held in the assailed Decision,
may be committed through the use of the offenders
own hands, as well as any mechanical device, such as
an access device or card as in the instant case. This
includes controlling the destination of the property
stolen to deprive the owner of the property, such as the
use of a meter tampering, as held in Natividad v. Court
of Appeals,[10] use of a device to fraudulently obtain
gas, as held in United States v. Tambunting, and the
use of a jumper to divert electricity, as held in the
cases of United States v. Genato, United States v.
Carlos, and United States v. Menagas.[11]
As illustrated in the above cases, appropriation
of forces of nature which are brought under control by
science such as electrical energy can be achieved by
tampering with any apparatus used for generating or
measuring such forces of nature, wrongfully redirecting
such forces of nature from such apparatus, or using
any device to fraudulently obtain such forces of
nature. In the instant case, petitioner was charged

with engaging in International Simple Resale (ISR) or

the unauthorized routing and completing of
international long distance calls using lines, cables,
antennae, and/or air wave frequency and connecting
these calls directly to the local or domestic exchange
facilities of the country where destined.
As early as 1910, the Court declared
in Genato that ownership over electricity (which an
international long distance call consists of), as well
as telephone service, is protected by the provisions on
theft of the Penal Code. The pertinent provision of the
Revised Ordinance of the City of Manila, which was
involved in the said case, reads as follows:
Injury to electric apparatus; Tapping
current; Evidence. No person shall
destroy, mutilate, deface, or otherwise
injure or tamper with any wire, meter, or
other apparatus installed or used for
generating, containing, conducting, or
measuring
electricity,
telegraph
or
telephone service, nor tap or otherwise
wrongfully deflect or take any electric
current from such wire, meter, or other
apparatus.
No person shall, for any purpose
whatsoever, use or enjoy the benefits of
any device by means of which he may
fraudulently obtain any current of electricity
or any telegraph or telephone service; and
the existence in any building premises of

any such device shall, in the absence of

satisfactory explanation, be deemed
sufficient evidence of such use by the
persons benefiting thereby.
It was further ruled that even without the above
ordinance the acts of subtraction punished therein are
covered by the provisions on theft of the Penal Code
then in force, thus:
Even without them (ordinance), the
right of the ownership of electric current is
secured by articles 517 and 518 of the
Penal Code; the application of these
articles in cases of subtraction of gas, a
fluid used for lighting, and in some respects
resembling electricity, is confirmed by the
rule laid down in the decisions of the
supreme court of Spain of January 20,
1887, and April 1, 1897, construing and
enforcing the provisions of articles 530 and
531 of the Penal Code of that country,
articles 517 and 518 of the code in force in
these islands.
The acts of subtraction include: (a) tampering
with any wire, meter, or other apparatus installed or
used for generating, containing, conducting, or
measuring electricity, telegraph or telephone service;
(b) tapping or otherwise wrongfully deflecting or taking
any electric current from such wire, meter, or other
apparatus; and (c) using or enjoying the benefits of any

device by means of which one may fraudulently obtain

any current of electricity or any telegraph or telephone
service.
In the instant case, the act of conducting ISR
operations by illegally connecting various equipment or
apparatus to private respondent PLDTs telephone
system, through which petitioner is able to resell or reroute international long distance calls using respondent
PLDTs facilities constitutes all three acts of subtraction
mentioned above.
The business of providing telecommunication or
telephone service is likewise personal property which
can be the object of theft under Article 308 of the
Revised Penal Code. Business may be appropriated
under Section 2 of Act No. 3952 (Bulk Sales Law),
hence, could be object of theft:
Section
2. Any
sale,
transfer,
mortgage, or assignment of a stock of
goods, wares, merchandise, provisions, or
materials otherwise than in the ordinary
course of trade and the regular prosecution
of the business of the vendor, mortgagor,
transferor, or assignor, or any sale, transfer,
mortgage, or assignment of all, or
substantially all, of the business or trade
theretofore conducted by the vendor,
mortgagor, transferor or assignor, or all, or
substantially all, of the fixtures and
equipment used in and about the business
of the vendor, mortgagor, transferor, or

assignor, shall be deemed to be a sale and

transfer in bulk, in contemplation of the Act.
x x x.
In Strochecker v. Ramirez,[12] this Court stated:
With regard to the nature of the
property thus mortgaged which is one-half
interest in the business above described,
such interest is a personal property
capable of appropriation and not included
in the enumeration of real properties in
article 335 of the Civil Code, and may be
the subject of mortgage.
Interest in business was not specifically
enumerated as personal property in the Civil Code in
force at the time the above decision was
rendered. Yet, interest in business was declared to be
personal property since it is capable of appropriation
and not included in the enumeration of real
properties. Article 414 of the Civil Code provides that
all things which are or may be the object of
appropriation are considered either real property or
personal
property. Business
is
likewise
not
enumerated as personal property under the Civil
Code. Just like interest in business, however, it may
be appropriated. Following the ruling in Strochecker v.
Ramirez, business should also be classified as
personal property. Since it is not included in the

exclusive enumeration of real properties under Article

415, it is therefore personal property.[13]
As can be clearly gleaned from the above
disquisitions, petitioners acts constitute theft of
respondent PLDTs business and service, committed
by means of the unlawful use of the latters
facilities. In this regard, the Amended Information
inaccurately describes the offense by making it appear
that what petitioner took were the international long
distance telephone calls, rather than respondent
PLDTs business.
A perusal of the records of this case readily
reveals that petitioner and respondent PLDT
extensively discussed the issue of ownership of
telephone calls. The prosecution has taken the
position that said telephone calls belong to respondent
PLDT. This is evident from its Comment where it
defined the issue of this case as whether or not the
unauthorized use or appropriation of PLDT
international telephone calls, service and facilities, for
the purpose of generating personal profit or gain that
should have otherwise belonged to PLDT, constitutes
theft.[14]
In discussing the issue of ownership, petitioner
and respondent PLDT gave their respective
explanations on how a telephone call is generated.
[15]
For its part, respondent PLDT explains the process
of generating a telephone call as follows:

38.
The
role
of
telecommunication companies is not
limited to merely providing the medium (i.e.
the electric current) through which the
human voice/voice signal of the caller is
transmitted. Before the human voice/voice
signal can be so transmitted, a
telecommunication company, using its
facilities, must first break down or decode
the human voice/voice signal into electronic
impulses and subject the same to further
augmentation and enhancements. Only
after such process of conversion will the
resulting electronic impulses be transmitted
by a telecommunication company, again,
through the use of its facilities. Upon
reaching the destination of the call, the
telecommunication company will again
break down or decode the electronic
impulses back to human voice/voice signal
before the called party receives the
same. In
other
words,
a
telecommunication
company
both
converts/reconverts the human voice/voice
signal and provides the medium for
transmitting the same.
39.
Moreover, in the case of an
international telephone call, once the
electronic impulses originating from a
foreign
telecommunication
company
country (i.e. Japan) reaches the Philippines
through
a
local
telecommunication

company (i.e. private respondent PLDT), it

is the latter which decodes, augments and
enhances the electronic impulses back to
the human voice/voice signal and provides
the medium (i.e. electric current) to enable
the called party to receive the call. Thus, it
is
not
true
that
the
foreign
telecommunication company provides (1)
the electric current which transmits the
human voice/voice signal of the caller and
(2) the electric current for the called party
to receive said human voice/voice signal.
40.
Thus, contrary to petitioner
Laurels assertion, once the electronic
impulses or electric current originating from
a foreign telecommunication company (i.e.
Japan) reaches private respondent PLDTs
network, it is private respondent PLDT
which decodes, augments and enhances
the electronic impulses back to the human
voice/voice signal and provides the
medium (i.e. electric current) to enable the
called party to receive the call. Without
private respondent PLDTs network, the
human voice/voice signal of the calling
party will never reach the called party.[16]
In the assailed Decision, it was conceded that in
making the international phone calls, the human voice
is converted into electrical impulses or electric current
which are transmitted to the party called. A telephone

call, therefore, is electrical energy. It was also held in

the assailed Decision that intangible property such as
electrical energy is capable of appropriation because it
may be taken and carried away. Electricity is personal
property under Article 416 (3) of the Civil Code, which
enumerates forces of nature which are brought under
control by science.[17]
Indeed, while it may be conceded that
international long distance calls, the matter alleged to
be stolen in the instant case, take the form of electrical
energy, it cannot be said that such international long
distance calls were personal properties belonging to
PLDT since the latter could not have acquired
ownership over such calls. PLDT merely encodes,
augments, enhances, decodes and transmits said calls
using its complex communications infrastructure and
facilities. PLDT not being the owner of said telephone
calls, then it could not validly claim that such telephone
calls were taken without its consent. It is the use of
these communications facilities without the consent of
PLDT that constitutes the crime of theft, which is the
unlawful taking of the telephone services and
business.
Therefore,
the
business
of
providing
telecommunication and the telephone service are
personal property under Article 308 of the Revised
Penal Code, and the act of engaging in ISR is an act of
subtraction penalized under said article. However,
the Amended Information describes the thing taken as,
international long distance calls, and only later
mentions stealing the business from PLDT as the

manner by which the gain was derived by the

accused. In order to correct this inaccuracy of
description, this case must be remanded to the trial
court and the prosecution directed to amend the
Amended Information, to clearly state that the property
subject of the theft are the services and business of
respondent PLDT. Parenthetically, this amendment is
not necessitated by a mistake in charging the proper
offense, which would have called for the dismissal of
the information under Rule 110, Section 14 and Rule
119, Section 19 of the Revised Rules on Criminal
Procedure. To be sure, the crime is properly
designated as one of theft. The purpose of the
amendment is simply to ensure that the accused is
fully and sufficiently apprised of the nature and cause
of the charge against him, and thus guaranteed of his
rights under the Constitution.
ACCORDINGLY, the motion for reconsideration
is GRANTED. The assailed Decision dated February
27, 2006 is RECONSIDERED and SET ASIDE. The
Decision of the Court of Appeals in CA-G.R. SP No.
68841 affirming the Order issued by Judge Zeus C.
Abrogar of the Regional Trial Court of Makati City,
Branch 150, which denied the Motion to Quash (With
Motion to Defer Arraignment) in Criminal Case No. 992425 for theft, is AFFIRMED. The case is remanded
to the trial court and the Public Prosecutor of Makati
City is hereby DIRECTED to amend the Amended
Information to show that the property subject of the
theft were services and business of the private
offended party.

G.R. No. L-41643

July 31, 1935

B.H. BERKENKOTTER, plaintiff-appellant,

vs.
CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND
MARINE INSURANCE COMPANY, MABALACAT
SUGAR COMPANY and THE PROVINCE SHERIFF
OF PAMPANGA, defendants-appellees.
Briones and Martinez for appellant.
Araneta, Zaragoza and Araneta for appellees Cu
Unjieng e Hijos.
No appearance for the other appellees.
VILLA-REAL, J.:
This is an appeal taken by the plaintiff, B.H.
Berkenkotter, from the judgment of the Court of First
Instance of Manila, dismissing said plaintiff's complaint
against Cu Unjiengs e Hijos et al., with costs.
In support of his appeal, the appellant assigns six
alleged errors as committed by the trial court in its
decision in question which will be discussed in the
course of this decision.
The first question to be decided in this appeal, which is
raised in the first assignment of alleged error, is

whether or not the lower court erred in declaring that

the additional machinery and equipment, as
improvement incorporated with the central are subject
to the mortgage deed executed in favor of the
defendants Cu Unjieng e Hijos.
It is admitted by the parties that on April 26, 1926, the
Mabalacat Sugar Co., Inc., owner of the sugar central
situated in Mabalacat, Pampanga, obtained from the
defendants, Cu Unjieng e Hijos, a loan secured by a
first mortgage constituted on two parcels and land
"with all its buildings, improvements, sugar-cane mill,
steel railway, telephone line, apparatus, utensils and
whatever forms part or is necessary complement of
said sugar-cane mill, steel railway, telephone line, now
existing or that may in the future exist is said lots."
On October 5, 1926, shortly after said mortgage had
been constituted, the Mabalacat Sugar Co., Inc.,
decided to increase the capacity of its sugar central by
buying additional machinery and equipment, so that
instead of milling 150 tons daily, it could produce 250.
The estimated cost of said additional machinery and
equipment was approximately P100,000. In order to
carry out this plan, B.A. Green, president of said
corporation, proposed to the plaintiff, B.H.
Berkenkotter, to advance the necessary amount for the
purchase of said machinery and equipment, promising
to reimburse him as soon as he could obtain an
additional loan from the mortgagees, the herein
defendants Cu Unjieng e Hijos. Having agreed to said

proposition made in a letter dated October 5, 1926

(Exhibit E), B.H. Berkenkotter, on October 9th of the
same year, delivered the sum of P1,710 to B.A. Green,
president of the Mabalacat Sugar Co., Inc., the total
amount supplied by him to said B.A. Green having
been P25,750. Furthermore, B.H. Berkenkotter had a
credit of P22,000 against said corporation for unpaid
salary. With the loan of P25,750 and said credit of
P22,000, the Mabalacat Sugar Co., Inc., purchased the
additional machinery and equipment now in litigation.
On June 10, 1927, B.A. Green, president of the
Mabalacat Sugar Co., Inc., applied to Cu Unjieng e
Hijos for an additional loan of P75,000 offering as
security the additional machinery and equipment
acquired by said B.A. Green and installed in the sugar
central after the execution of the original mortgage
deed, on April 27, 1927, together with whatever
additional equipment acquired with said loan. B.A.
Green failed to obtain said loan.
Article 1877 of the Civil Code provides as follows.
ART. 1877. A mortgage includes all natural
accessions, improvements, growing fruits, and
rents not collected when the obligation falls due,
and the amount of any indemnities paid or due
the owner by the insurers of the mortgaged
property or by virtue of the exercise of the power
of eminent domain, with the declarations,
amplifications, and limitations established by law,

whether the estate continues in the possession

of the person who mortgaged it or whether it
passes into the hands of a third person.
In the case of Bischoff vs. Pomar and Compaia
General de Tabacos (12 Phil., 690), cited with approval
in the case of Cea vs. Villanueva (18 Phil., 538), this
court laid shown the following doctrine:
1. REALTY; MORTGAGE OF REAL ESTATE
INCLUDES IMPROVEMENTS AND FIXTURES.
It is a rule, established by the Civil Code and
also by the Mortgage Law, with which the
decisions of the courts of the United States are in
accord, that in a mortgage of real estate, the
improvements on the same are included;
therefore, all objects permanently attached to a
mortgaged building or land, although they may
have been placed there after the mortgage was
constituted, are also included. (Arts. 110 and 111
of the Mortgage Law, and 1877 of the Civil Code;
decision of U.S. Supreme Court in the matter of
Royal Insurance Co. vs. R. Miller, liquidator, and
Amadeo [26 Sup. Ct. Rep., 46; 199 U.S., 353].)
2. ID.; ID.; INCLUSION OR EXCLUSION OF
MACHINERY, ETC. In order that it may be
understood that the machinery and other objects
placed upon and used in connection with a
mortgaged estate are excluded from the
mortgage, when it was stated in the mortgage

that the improvements, buildings, and machinery

that existed thereon were also comprehended, it
is indispensable that the exclusion thereof be
stipulated between the contracting parties.
The appellant contends that the installation of the
machinery and equipment claimed by him in the sugar
central of the Mabalacat Sugar Company, Inc., was not
permanent in character inasmuch as B.A. Green, in
proposing to him to advance the money for the
purchase thereof, made it appear in the letter, Exhibit
E, that in case B.A. Green should fail to obtain an
additional loan from the defendants Cu Unjieng e
Hijos, said machinery and equipment would become
security therefor, said B.A. Green binding himself not
to mortgage nor encumber them to anybody until said
plaintiff be fully reimbursed for the corporation's
indebtedness to him.
Upon acquiring the machinery and equipment in
question with money obtained as loan from the
plaintiff-appellant by B.A. Green, as president of the
Mabalacat Sugar Co., Inc., the latter became owner of
said machinery and equipment, otherwise B.A. Green,
as such president, could not have offered them to the
plaintiff as security for the payment of his credit.
Article 334, paragraph 5, of the Civil Code gives the
character of real property to "machinery, liquid
containers, instruments or implements intended by the
owner of any building or land for use in connection with

any industry or trade being carried on therein and

which are expressly adapted to meet the requirements
of such trade or industry.
If the installation of the machinery and equipment in
question in the central of the Mabalacat Sugar Co.,
Inc., in lieu of the other of less capacity existing
therein, for its sugar industry, converted them into real
property by reason of their purpose, it cannot be said
that their incorporation therewith was not permanent in
character because, as essential and principal elements
of a sugar central, without them the sugar central
would be unable to function or carry on the industrial
purpose for which it was established. Inasmuch as the
central is permanent in character, the necessary
machinery and equipment installed for carrying on the
sugar industry for which it has been established must
necessarily be permanent.
Furthermore, the fact that B.A. Green bound himself to
the plaintiff B.H. Berkenkotter to hold said machinery
and equipment as security for the payment of the
latter's credit and to refrain from mortgaging or
otherwise encumbering them until Berkenkotter has
been fully reimbursed therefor, is not incompatible with
the permanent character of the incorporation of said
machinery and equipment with the sugar central of the
Mabalacat Sugar Co., Inc., as nothing could prevent
B.A. Green from giving them as security at least under
a second mortgage.

As to the alleged sale of said machinery and

equipment to the plaintiff and appellant after they had
been permanently incorporated with sugar central of
the Mabalacat Sugar Co., Inc., and while the mortgage
constituted on said sugar central to Cu Unjieng e Hijos
remained in force, only the right of redemption of the
vendor Mabalacat Sugar Co., Inc., in the sugar central
with which said machinery and equipment had been
incorporated, was transferred thereby, subject to the
right of the defendants Cu Unjieng e Hijos under the
first mortgage.
For the foregoing considerations, we are of the opinion
and so hold: (1) That the installation of a machinery
and equipment in a mortgaged sugar central, in lieu of
another of less capacity, for the purpose of carrying out
the industrial functions of the latter and increasing
production, constitutes a permanent improvement on
said sugar central and subjects said machinery and
equipment to the mortgage constituted thereon (article
1877, Civil Code); (2) that the fact that the purchaser of
the new machinery and equipment has bound himself
to the person supplying him the purchase money to
hold them as security for the payment of the latter's
credit, and to refrain from mortgaging or otherwise
encumbering them does not alter the permanent
character of the incorporation of said machinery and
equipment with the central; and (3) that the sale of the
machinery and equipment in question by the purchaser
who was supplied the purchase money, as a loan, to
the person who supplied the money, after the

incorporation thereof with the mortgaged sugar central,

does not vest the creditor with ownership of said
machinery and equipment but simply with the right of
redemption.
Wherefore, finding no error in the appealed judgment,
it is affirmed in all its parts, with costs to the appellant.
So ordered.

G.R. No. L-41506

March 25, 1935

PHILIPPINE REFINING CO., INC., plaintiff-appellant,

vs.
FRANCISCO JARQUE, JOSE COROMINAS, and
ABOITIZ & CO., defendants.
JOSE COROMINAS, in his capacity as assignee of
the estate of the insolvent Francisco
Jarque, appellee.
Thos. G. Ingalls, Vicente Pelaez and DeWitt, Perkins
and Brady for appellant.
D.G. McVean and Vicente L. Faelnar for appellee.
MALCOLM, J.:
First of all the reason why the case has been decided
by the court in banc needs explanation. A motion was
presented by counsel for the appellant in which it was

asked that the case be heard and determined by the

court sitting in banc because the admiralty jurisdiction
of the court was involved, and this motion was granted
in regular course. On further investigation it appears
that this was error. The mere mortgage of a ship is a
contract entered into by the parties to it without
reference to navigation or perils of the sea, and does
not, therefore, confer admiralty jurisdiction. (Bogart vs.
Steamboat John Jay [1854], 17 How., 399.)
Coming now to the merits, it appears that on varying
dates the Philippine Refining Co., Inc., and Francisco
Jarque executed three mortgages on the motor
vessels Pandan and Zaragoza. These documents
were recorded in the record of transfers and
incumbrances of vessels for the port of Cebu and each
was therein denominated a "chattel mortgage". Neither
of the first two mortgages had appended an affidavit of
good faith. The third mortgage contained such an
affidavit, but this mortgage was not registered in the
customs house until May 17, 1932, or within the period
of thirty days prior to the commencement of insolvency
proceedings against Francisco Jarque; also, while the
last mentioned mortgage was subscribed by Francisco
Jarque and M. N. Brink, there was nothing to disclose
in what capacity the said M. N. Brink signed. A fourth
mortgage was executed by Francisco Jarque and
Ramon Aboitiz on the motorship Zaragoza and was
entered in the chattel mortgage registry of the register
of deeds on May 12, 1932, or again within the thirtyday period before the institution of insolvency

proceedings. These proceedings were begun on June

2, 1932, when a petition was filed with the Court of
First Instance of Cebu in which it was prayed that
Francisco Jarque be declared an insolvent debtor,
which soon thereafter was granted, with the result that
an assignment of all the properties of the insolvent was
executed in favor of Jose Corominas.
On these facts, Judge Jose M. Hontiveros declined to
order the foreclosure of the mortgages, but on the
contrary sustained the special defenses of fatal
defectiveness of the mortgages. In so doing we believe
that the trial judge acted advisedly.
Vessels are considered personal property under the
civil law. (Code of Commerce, article 585.) Similarly
under the common law, vessels are personal property
although occasionally referred to as a peculiar kind of
personal property. (Reynolds vs. Nielson [1903], 96
Am. Rep., 1000; Atlantic Maritime Co vs. City of
Gloucester [1917], 117 N. E., 924.) Since the term
"personal property" includes vessels, they are subject
to mortgage agreeably to the provisions of the Chattel
Mortgage Law. (Act No. 1508, section 2.) Indeed, it has
heretofore been accepted without discussion that a
mortgage on a vessel is in nature a chattel mortgage.
(McMicking vs. Banco Espaol-Filipino [1909], 13 Phil.,
429; Arroyo vs. Yu de Sane [1930], 54 Phil., 511.) The
only difference between a chattel mortgage of a vessel
and a chattel mortgage of other personalty is that it is
not now necessary for a chattel mortgage of a vessel

to be noted n the registry of the register of deeds, but it

is essential that a record of documents affecting the
title to a vessel be entered in the record of the
Collector of Customs at the port of entry. (Rubiso and
Gelito vs. Rivera [1917], 37 Phil., 72; Arroyo vs. Yu de
Sane, supra.) Otherwise a mortgage on a vessel is
generally like other chattel mortgages as to its
requisites and validity. (58 C.J., 92.)
The Chattell Mortgage Law in its section 5, in
describing what shall be deemed sufficient to
constitute a good chattel mortgage, includes the
requirement of an affidavit of good faith appended to
the mortgage and recorded therewith. The absence of
the affidavit vitiates a mortgage as against creditors
and subsequent encumbrancers. (Giberson vs. A. N.
Jureidini Bros. [1922], 44 Phil., 216; Benedicto de
Tarrosa vs. F. M. Yap Tico & Co. and Provincial Sheriff
of Occidental Negros [1923], 46 Phil., 753.) As a
consequence a chattel mortgage of a vessel wherein
the affidavit of good faith required by the Chattel
Mortgage Law is lacking, is unenforceable against third
persons.
In effect appellant asks us to find that the documents
appearing in the record do not constitute chattel
mortgages or at least to gloss over the failure to
include the affidavit of good faith made a requisite for a
good chattel mortgage by the Chattel Mortgage Law.
Counsel would further have us disregard article 585 of
the Code of Commerce, but no reason is shown for

holding this article not in force. Counsel would further

have us revise doctrines heretofore announced in a
series of cases, which it is not desirable to do since
those principles were confirmed after due liberation
and constitute a part of the commercial law of the
Philippines. And finally counsel would have us make
rulings on points entirely foreign to the issues of the
case. As neither the facts nor the law remains in doubt,
the seven assigned errors will be overruled.
Judgment affirmed, the costs of this instance to be
paid by the appellant.

G.R. No. L-17870

September 29, 1962
MINDANAO BUS COMPANY, petitioner,
vs.
THE CITY ASSESSOR & TREASURER and the
BOARD OF TAX APPEALS of Cagayan de Oro
City,respondents.
Binamira, Barria and Irabagon for petitioner.
Vicente E. Sabellina for respondents.
LABRADOR, J.:
This is a petition for the review of the decision of the
Court of Tax Appeals in C.T.A. Case No. 710 holding
that the petitioner Mindanao Bus Company is liable to
the payment of the realty tax on its maintenance and
repair equipment hereunder referred to.

Respondent City Assessor of Cagayan de Oro City

assessed at P4,400 petitioner's above-mentioned
equipment. Petitioner appealed the assessment to the
respondent Board of Tax Appeals on the ground that
the same are not realty. The Board of Tax Appeals of
the City sustained the city assessor, so petitioner
herein filed with the Court of Tax Appeals a petition for
the review of the assessment.
In the Court of Tax Appeals the parties submitted the
following stipulation of facts:
Petitioner and respondents, thru their respective
counsels agreed to the following stipulation of
facts:
1. That petitioner is a public utility solely engaged
in transporting passengers and cargoes by motor
trucks, over its authorized lines in the Island of
Mindanao, collecting rates approved by the
Public Service Commission;
2. That petitioner has its main office and shop at
Cagayan de Oro City. It maintains Branch Offices
and/or stations at Iligan City, Lanao; Pagadian,
Zamboanga del Sur; Davao City and Kibawe,
Bukidnon Province;
3. That the machineries sought to be assessed
by the respondent as real properties are the
following:
(a) Hobart Electric Welder Machine,
appearing in the attached photograph,
marked Annex "A";
(b) Storm Boring Machine, appearing in the
attached photograph, marked Annex "B";

(c) Lathe machine with motor, appearing in

the attached photograph, marked Annex
"C";
(d) Black and Decker Grinder, appearing in
the attached photograph, marked Annex
"D";
(e) PEMCO Hydraulic Press, appearing in
the attached photograph, marked Annex
"E";
(f) Battery charger (Tungar charge
machine) appearing in the attached
photograph, marked Annex "F"; and
(g) D-Engine Waukesha-M-Fuel, appearing
in the attached photograph, marked Annex
"G".
4. That these machineries are sitting on cement
or wooden platforms as may be seen in the
attached photographs which form part of this
agreed stipulation of facts;
5. That petitioner is the owner of the land where
it maintains and operates a garage for its TPU
motor trucks; a repair shop; blacksmith and
carpentry shops, and with these machineries
which are placed therein, its TPU trucks are
made; body constructed; and same are repaired
in a condition to be serviceable in the TPU land
transportation business it operates;
6. That these machineries have never been or
were never used as industrial equipments to
produce finished products for sale, nor to repair
machineries, parts and the like offered to the
general public indiscriminately for business or

commercial purposes for which petitioner has

never engaged in, to date.1awphl.nt
The Court of Tax Appeals having sustained the
respondent city assessor's ruling, and having denied a
motion for reconsideration, petitioner brought the case
to this Court assigning the following errors:
1. The Honorable Court of Tax Appeals erred in
upholding respondents' contention that the
questioned assessments are valid; and that said
tools, equipments or machineries are immovable
taxable real properties.
2. The Tax Court erred in its interpretation of
paragraph 5 of Article 415 of the New Civil Code,
and holding that pursuant thereto the movable
equipments are taxable realties, by reason of
their being intended or destined for use in an
industry.
3. The Court of Tax Appeals erred in denying
petitioner's contention that the respondent City
Assessor's power to assess and levy real estate
taxes on machineries is further restricted by
section 31, paragraph (c) of Republic Act No.
521; and
4. The Tax Court erred in denying petitioner's
motion for reconsideration.
Respondents contend that said equipments, tho
movable, are immobilized by destination, in
accordance with paragraph 5 of Article 415 of the New
Civil Code which provides:
Art. 415. The following are immovable
properties:
xxx
xxx
xxx

(5) Machinery, receptacles, instruments or

implements intended by the owner of the
tenement for an industry or works which may be
carried on in a building or on a piece of land,
and which tend directly to meet the needs of the
said industry or works. (Emphasis ours.)
Note that the stipulation expressly states that the
equipment are placed on wooden or cement platforms.
They can be moved around and about in petitioner's
repair shop. In the case of B. H. Berkenkotter vs. Cu
Unjieng, 61 Phil. 663, the Supreme Court said:
Article 344 (Now Art. 415), paragraph (5) of the
Civil Code, gives the character of real property to
"machinery, liquid containers, instruments or
implements intended by the owner of any
building or land for use in connection with any
industry or trade being carried on therein and
which are expressly adapted to meet the
requirements of such trade or industry."
If the installation of the machinery and equipment
in question in the central of the Mabalacat Sugar
Co., Inc., in lieu of the other of less capacity
existing therein, for its sugar and industry,
converted them into real property by reason of
their purpose, it cannot be said that their
incorporation therewith was not permanent in
character because, as essential and principle
elements of a sugar central, without them the
sugar central would be unable to function or
carry on the industrial purpose for which it was
established. Inasmuch as the central is
permanent in character, the necessary
machinery and equipment installed for carrying

on the sugar industry for which it has been

established must necessarily be permanent.
(Emphasis ours.)
So that movable equipments to be immobilized in
contemplation of the law must first be "essential and
principal elements" of an industry or works without
which such industry or works would be "unable to
function or carry on the industrial purpose for which it
was established." We may here distinguish, therefore,
those movable which become immobilized by
destination because they are essential and principal
elements in the industry for those which may not be so
considered immobilized because they are merely
incidental, not essential and principal. Thus, cash
registers, typewriters, etc., usually found and used in
hotels, restaurants, theaters, etc. are merely
incidentals and are not and should not be considered
immobilized by destination, for these businesses can
continue or carry on their functions without these
equity comments. Airline companies use forklifts, jeepwagons, pressure pumps, IBM machines, etc. which
are incidentals, not essentials, and thus retain their
movable nature. On the other hand, machineries of
breweries used in the manufacture of liquor and soft
drinks, though movable in nature, are immobilized
because they are essential to said industries; but the
delivery trucks and adding machines which they
usually own and use and are found within their
industrial compounds are merely incidental and retain
their movable nature.
Similarly, the tools and equipments in question in this
instant case are, by their nature, not essential and
principle municipal elements of petitioner's business of

transporting passengers and cargoes by motor trucks.

They are merely incidentals acquired as movables
and used only for expediency to facilitate and/or
improve its service. Even without such tools and
equipments, its business may be carried on, as
petitioner has carried on, without such equipments,
before the war. The transportation business could be
carried on without the repair or service shop if its
rolling equipment is repaired or serviced in another
shop belonging to another.
The law that governs the determination of the question
at issue is as follows:
Art. 415. The following are immovable property:
xxx
xxx
xxx
(5) Machinery, receptacles, instruments or
implements intended by the owner of the
tenement for an industry or works which may be
carried on in a building or on a piece of land, and
which tend directly to meet the needs of the said
industry or works; (Civil Code of the Phil.)
Aside from the element of essentiality the abovequoted provision also requires that the industry or
works be carried on in a building or on a piece of land.
Thus in the case of Berkenkotter vs. Cu
Unjieng, supra, the "machinery, liquid containers, and
instruments or implements" are found in a building
constructed on the land. A sawmill would also be
installed in a building on land more or less
permanently, and the sawing is conducted in the land
or building.
But in the case at bar the equipments in question are
destined only to repair or service the transportation
business, which is not carried on in a building or

permanently on a piece of land, as demanded by the

law. Said equipments may not, therefore, be deemed
real property.
Resuming what we have set forth above, we hold that
the equipments in question are not absolutely essential
to the petitioner's transportation business, and
petitioner's business is not carried on in a building,
tenement or on a specified land, so said equipment
may not be considered real estate within the meaning
of Article 415 (c) of the Civil Code.
WHEREFORE, the decision subject of the petition for
review is hereby set aside and the equipment in
question declared not subject to assessment as real
estate for the purposes of the real estate tax. Without
costs.

G.R. No. 137705

August 22, 2000

SERG'S PRODUCTS, INC., and SERGIO T.

GOQUIOLAY, petitioners,
vs.
PCI LEASING AND FINANCE, INC., respondent.
DECISION
PANGANIBAN, J.:
After agreeing to a contract stipulating that a real or
immovable property be considered as personal or
movable, a party is estopped from subsequently

claiming otherwise. Hence, such property is a proper

subject of a writ of replevin obtained by the other
contracting party.
The Case
Before us is a Petition for Review on Certiorari
assailing the January 6, 1999 Decision1 of the Court of
Appeals (CA)2 in CA-GR SP No. 47332 and its
February 26, 1999 Resolution3 denying
reconsideration. The decretal portion of the CA
Decision reads as follows:
"WHEREFORE, premises considered, the assailed
Order dated February 18, 1998 and Resolution dated
March 31, 1998 in Civil Case No. Q-98-33500 are
hereby AFFIRMED. The writ of preliminary injunction
issued on June 15, 1998 is hereby LIFTED."4
In its February 18, 1998 Order,5 the Regional Trial
Court (RTC) of Quezon City (Branch 218)6 issued a
Writ of Seizure.7 The March 18, 1998
Resolution8 denied petitioners Motion for Special
Protective Order, praying that the deputy sheriff be
enjoined "from seizing immobilized or other real
properties in (petitioners) factory in Cainta, Rizal and
to return to their original place whatever immobilized
machineries or equipments he may have removed." 9
The Facts

The undisputed facts are summarized by the Court of

Appeals as follows:10
"On February 13, 1998, respondent PCI Leasing and
Finance, Inc. ("PCI Leasing" for short) filed with the
RTC-QC a complaint for [a] sum of money (Annex E),
with an application for a writ of replevin docketed as
Civil Case No. Q-98-33500.
"On March 6, 1998, upon an ex-parte application of
PCI Leasing, respondent judge issued a writ of
replevin (Annex B) directing its sheriff to seize and
deliver the machineries and equipment to PCI Leasing
after 5 days and upon the payment of the necessary
expenses.
"On March 24, 1998, in implementation of said writ, the
sheriff proceeded to petitioners factory, seized one
machinery with [the] word that he [would] return for the
other machineries.
"On March 25, 1998, petitioners filed a motion for
special protective order (Annex C), invoking the
power of the court to control the conduct of its officers
and amend and control its processes, praying for a
directive for the sheriff to defer enforcement of the writ
of replevin.
"This motion was opposed by PCI Leasing (Annex F),
on the ground that the properties [were] still personal
and therefore still subject to seizure and a writ of
replevin.

"In their Reply, petitioners asserted that the properties

sought to be seized [were] immovable as defined in
Article 415 of the Civil Code, the parties agreement to
the contrary notwithstanding. They argued that to give
effect to the agreement would be prejudicial to
innocent third parties. They further stated that PCI
Leasing [was] estopped from treating these
machineries as personal because the contracts in
which the alleged agreement [were] embodied [were]
totally sham and farcical.
"On April 6, 1998, the sheriff again sought to enforce
the writ of seizure and take possession of the
remaining properties. He was able to take two more,
but was prevented by the workers from taking the rest.
"On April 7, 1998, they went to [the CA] via an original
action for certiorari."
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court
held that the subject machines were personal property,
and that they had only been leased, not owned, by
petitioners. It also ruled that the "words of the contract
are clear and leave no doubt upon the true intention of
the contracting parties." Observing that Petitioner
Goquiolay was an experienced businessman who was
"not unfamiliar with the ways of the trade," it ruled that
he "should have realized the import of the document
he signed." The CA further held:

"Furthermore, to accord merit to this petition would be

to preempt the trial court in ruling upon the case below,
since the merits of the whole matter are laid down
before us via a petition whose sole purpose is to
inquire upon the existence of a grave abuse of
discretion on the part of the [RTC] in issuing the
assailed Order and Resolution. The issues raised
herein are proper subjects of a full-blown trial,
necessitating presentation of evidence by both parties.
The contract is being enforced by one, and [its] validity
is attacked by the other a matter x x x which
respondent court is in the best position to determine."
Hence, this Petition.11
The Issues
In their Memorandum, petitioners submit the following
issues for our consideration:
"A. Whether or not the machineries purchased and
imported by SERGS became real property by virtue of
immobilization.
B. Whether or not the contract between the parties is a
loan or a lease."12
In the main, the Court will resolve whether the said
machines are personal, not immovable, property which
may be a proper subject of a writ of replevin. As a
preliminary matter, the Court will also address briefly
the procedural points raised by respondent.

The Courts Ruling

The Petition is not meritorious.
Preliminary Matter:Procedural Questions
Respondent contends that the Petition failed to
indicate expressly whether it was being filed under
Rule 45 or Rule 65 of the Rules of Court. It further
alleges that the Petition erroneously impleaded Judge
Hilario Laqui as respondent.
There is no question that the present recourse is under
Rule 45. This conclusion finds support in the very title
of the Petition, which is "Petition for Review on
Certiorari."13
While Judge Laqui should not have been impleaded as
a respondent,14 substantial justice requires that such
lapse by itself should not warrant the dismissal of the
present Petition. In this light, the Court deems it proper
to remove, motu proprio, the name of Judge Laqui
from the caption of the present case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines used in
their factory were not proper subjects of the Writ
issued by the RTC, because they were in fact real
property. Serious policy considerations, they argue,
militate against a contrary characterization.

Rule 60 of the Rules of Court provides that writs of

replevin are issued for the recovery of personal
property only.15 Section 3 thereof reads:
"SEC. 3. Order. -- Upon the filing of such affidavit and
approval of the bond, the court shall issue an order
and the corresponding writ of replevin describing the
personal property alleged to be wrongfully detained
and requiring the sheriff forthwith to take such property
into his custody."
On the other hand, Article 415 of the Civil Code
enumerates immovable or real property as follows:
"ART. 415. The following are immovable property:
xxx

xxx

xxx

(5) Machinery, receptacles, instruments or implements

intended by the owner of the tenement for an industry
or works which may be carried on in a building or on a
piece of land, and which tend directly to meet the
needs of the said industry or works;
xxx

xxx

x x x"

In the present case, the machines that were the

subjects of the Writ of Seizure were placed by
petitioners in the factory built on their own land.
Indisputably, they were essential and principal
elements of their chocolate-making industry. Hence,
although each of them was movable or personal

property on its own, all of them have become

"immobilized by destination because they are essential
and principal elements in the industry."16 In that sense,
petitioners are correct in arguing that the said
machines are real, not personal, property pursuant to
Article 415 (5) of the Civil Code.17
Be that as it may, we disagree with the submission of
the petitioners that the said machines are not proper
subjects of the Writ of Seizure.
The Court has held that contracting parties may validly
stipulate that a real property be considered as
personal.18After agreeing to such stipulation, they are
consequently estopped from claiming otherwise. Under
the principle of estoppel, a party to a contract is
ordinarily precluded from denying the truth of any
material fact found therein.
Hence, in Tumalad v. Vicencio,19 the Court upheld the
intention of the parties to treat a house as a personal
property because it had been made the subject of a
chattel mortgage. The Court ruled:
"x x x. Although there is no specific statement referring
to the subject house as personal property, yet by
ceding, selling or transferring a property by way of
chattel mortgage defendants-appellants could only
have meant to convey the house as chattel, or at least,
intended to treat the same as such, so that they should

not now be allowed to make an inconsistent stand by

claiming otherwise."
Applying Tumalad, the Court in Makati Leasing and
Finance Corp. v. Wearever Textile Mills20 also held that
the machinery used in a factory and essential to the
industry, as in the present case, was a proper subject
of a writ of replevin because it was treated as personal
property in a contract. Pertinent portions of the Courts
ruling are reproduced hereunder:
"x x x. If a house of strong materials, like what was
involved in the above Tumalad case, may be
considered as personal property for purposes of
executing a chattel mortgage thereon as long as the
parties to the contract so agree and no innocent third
party will be prejudiced thereby, there is absolutely no
reason why a machinery, which is movable in its nature
and becomes immobilized only by destination or
purpose, may not be likewise treated as such. This is
really because one who has so agreed is estopped
from denying the existence of the chattel mortgage."
In the present case, the Lease Agreement clearly
provides that the machines in question are to be
considered as personal property. Specifically, Section
12.1 of the Agreement reads as follows:21
"12.1 The PROPERTY is, and shall at all times be and
remain, personal property notwithstanding that the
PROPERTY or any part thereof may now be, or

hereafter become, in any manner affixed or attached to

or embedded in, or permanently resting upon, real
property or any building thereon, or attached in any
manner to what is permanent."
Clearly then, petitioners are estopped from denying the
characterization of the subject machines as personal
property. Under the circumstances, they are proper
subjects of the Writ of Seizure.
It should be stressed, however, that our holding -- that
the machines should be deemed personal property
pursuant to the Lease Agreement is good only
insofar as the contracting parties are
concerned.22 Hence, while the parties are bound by the
Agreement, third persons acting in good faith are not
affected by its stipulation characterizing the subject
machinery as personal.23 In any event, there is no
showing that any specific third party would be
adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the
Agreement is a loan and not a lease.24 Submitting
documents supposedly showing that they own the
subject machines, petitioners also argue in their
Petition that the Agreement suffers from "intrinsic
ambiguity which places in serious doubt the intention
of the parties and the validity of the lease agreement

itself."25 In their Reply to respondents Comment, they

further allege that the Agreement is invalid. 26
These arguments are unconvincing. The validity and
the nature of the contract are the lis mota of the civil
action pending before the RTC. A resolution of these
questions, therefore, is effectively a resolution of the
merits of the case. Hence, they should be threshed out
in the trial, not in the proceedings involving the
issuance of the Writ of Seizure.
Indeed, in La Tondea Distillers v. CA,27 the Court
explained that the policy under Rule 60 was that
questions involving title to the subject property
questions which petitioners are now raising -- should
be determined in the trial. In that case, the Court noted
that the remedy of defendants under Rule 60 was
either to post a counter-bond or to question the
sufficiency of the plaintiffs bond. They were not
allowed, however, to invoke the title to the subject
property. The Court ruled:
"In other words, the law does not allow the defendant
to file a motion to dissolve or discharge the writ of
seizure (or delivery) on ground of insufficiency of the
complaint or of the grounds relied upon therefor, as in
proceedings on preliminary attachment or injunction,
and thereby put at issue the matter of the title or right
of possession over the specific chattel being replevied,
the policy apparently being that said matter should be

ventilated and determined only at the trial on the

merits."28
Besides, these questions require a determination of
facts and a presentation of evidence, both of which
have no place in a petition for certiorari in the CA under
Rule 65 or in a petition for review in this Court under
Rule 45.29
Reliance on the Lease Agreement
It should be pointed out that the Court in this case may
rely on the Lease Agreement, for nothing on record
shows that it has been nullified or annulled. In fact,
petitioners assailed it first only in the RTC proceedings,
which had ironically been instituted by respondent.
Accordingly, it must be presumed valid and binding as
the law between the parties.
Makati Leasing and Finance Corporation30 is also
instructive on this point. In that case, the Deed of
Chattel Mortgage, which characterized the subject
machinery as personal property, was also assailed
because respondent had allegedly been required "to
sign a printed form of chattel mortgage which was in a
blank form at the time of signing." The Court rejected
the argument and relied on the Deed, ruling as follows:
"x x x. Moreover, even granting that the charge is true,
such fact alone does not render a contract void ab
initio, but can only be a ground for rendering said
contract voidable, or annullable pursuant to Article

1390 of the new Civil Code, by a proper action in court.

There is nothing on record to show that the mortgage
has been annulled. Neither is it disclosed that steps
were taken to nullify the same. x x x"
Alleged Injustice Committed on the Part of Petitioners
Petitioners contend that "if the Court allows these
machineries to be seized, then its workers would be
out of work and thrown into the streets." 31 They also
allege that the seizure would nullify all efforts to
rehabilitate the corporation.
Petitioners arguments do not preclude the
implementation of the Writ.1wphi1 As earlier
discussed, law and jurisprudence support its propriety.
Verily, the above-mentioned consequences, if they
come true, should not be blamed on this Court, but on
the petitioners for failing to avail themselves of the
remedy under Section 5 of Rule 60, which allows the
filing of a counter-bond. The provision states:
"SEC. 5. Return of property. -- If the adverse party
objects to the sufficiency of the applicants bond, or of
the surety or sureties thereon, he cannot immediately
require the return of the property, but if he does not so
object, he may, at any time before the delivery of the
property to the applicant, require the return thereof, by
filing with the court where the action is pending a bond
executed to the applicant, in double the value of the
property as stated in the applicants affidavit for the

delivery thereof to the applicant, if such delivery be

adjudged, and for the payment of such sum to him as
may be recovered against the adverse party, and by
serving a copy bond on the applicant."
WHEREFORE, the Petition is DENIED and the
assailed Decision of the Court of Appeals AFFIRMED.
Costs against petitioners.

G.R. No. L-40411

August 7, 1935

DAVAO SAW MILL CO., INC., plaintiff-appellant,

vs.
APRONIANO G. CASTILLO and DAVAO LIGHT &
POWER CO., INC., defendants-appellees.
Arsenio Suazo and Jose L. Palma Gil and Pablo
Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.
MALCOLM, J.:
The issue in this case, as announced in the opening
sentence of the decision in the trial court and as set
forth by counsel for the parties on appeal, involves the
determination of the nature of the properties described
in the complaint. The trial judge found that those
properties were personal in nature, and as a

consequence absolved the defendants from the

complaint, with costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber
concession from the Government of the Philippine
Islands. It has operated a sawmill in the sitio of Maa,
barrio of Tigatu, municipality of Davao, Province of
Davao. However, the land upon which the business
was conducted belonged to another person. On the
land the sawmill company erected a building which
housed the machinery used by it. Some of the
implements thus used were clearly personal property,
the conflict concerning machines which were placed
and mounted on foundations of cement. In the contract
of lease between the sawmill company and the owner
of the land there appeared the following provision:
That on the expiration of the period agreed upon,
all the improvements and buildings introduced
and erected by the party of the second part shall
pass to the exclusive ownership of the party of
the first part without any obligation on its part to
pay any amount for said improvements and
buildings; also, in the event the party of the
second part should leave or abandon the land
leased before the time herein stipulated, the
improvements and buildings shall likewise pass
to the ownership of the party of the first part as
though the time agreed upon had expired:
Provided, however, That the machineries and
accessories are not included in the

improvements which will pass to the party of the

first part on the expiration or abandonment of the
land leased.
In another action, wherein the Davao Light & Power
Co., Inc., was the plaintiff and the Davao, Saw, Mill
Co., Inc., was the defendant, a judgment was rendered
in favor of the plaintiff in that action against the
defendant in that action; a writ of execution issued
thereon, and the properties now in question were
levied upon as personalty by the sheriff. No third party
claim was filed for such properties at the time of the
sales thereof as is borne out by the record made by
the plaintiff herein. Indeed the bidder, which was the
plaintiff in that action, and the defendant herein having
consummated the sale, proceeded to take possession
of the machinery and other properties described in the
corresponding certificates of sale executed in its favor
by the sheriff of Davao.
As connecting up with the facts, it should further be
explained that the Davao Saw Mill Co., Inc., has on a
number of occasions treated the machinery as
personal property by executing chattel mortgages in
favor of third persons. One of such persons is the
appellee by assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in
point. According to the Code, real property consists of

1. Land, buildings, roads and constructions of all

kinds adhering to the soil;
xxx

xxx

xxx

5. Machinery, liquid containers, instruments or

implements intended by the owner of any
building or land for use in connection with any
industry or trade being carried on therein and
which are expressly adapted to meet the
requirements of such trade of industry.
Appellant emphasizes the first paragraph, and
appellees the last mentioned paragraph. We entertain
no doubt that the trial judge and appellees are right in
their appreciation of the legal doctrines flowing from
the facts.
In the first place, it must again be pointed out that the
appellant should have registered its protest before or
at the time of the sale of this property. It must further
be pointed out that while not conclusive, the
characterization of the property as chattels by the
appellant is indicative of intention and impresses upon
the property the character determined by the parties. In
this connection the decision of this court in the case of
Standard Oil Co. of New Yorkvs. Jaramillo ( [1923], 44
Phil., 630), whether obiter dicta or not, furnishes the
key to such a situation.
It is, however not necessary to spend overly must time
in the resolution of this appeal on side issues. It is

machinery which is involved; moreover, machinery not

intended by the owner of any building or land for use in
connection therewith, but intended by a lessee for use
in a building erected on the land by the latter to be
returned to the lessee on the expiration or
abandonment of the lease.
A similar question arose in Puerto Rico, and on appeal
being taken to the United States Supreme Court, it was
held that machinery which is movable in its nature only
becomes immobilized when placed in a plant by the
owner of the property or plant, but not when so placed
by a tenant, a usufructuary, or any person having only
a temporary right, unless such person acted as the
agent of the owner. In the opinion written by Chief
Justice White, whose knowledge of the Civil Law is
well known, it was in part said:
To determine this question involves fixing the
nature and character of the property from the
point of view of the rights of Valdes and its nature
and character from the point of view of Nevers &
Callaghan as a judgment creditor of the
Altagracia Company and the rights derived by
them from the execution levied on the machinery
placed by the corporation in the plant. Following
the Code Napoleon, the Porto Rican Code treats
as immovable (real) property, not only land and
buildings, but also attributes immovability in
some cases to property of a movable nature, that
is, personal property, because of the destination

to which it is applied. "Things," says section 334

of the Porto Rican Code, "may be immovable
either by their own nature or by their destination
or the object to which they are applicable."
Numerous illustrations are given in the fifth
subdivision of section 335, which is as follows:
"Machinery, vessels, instruments or implements
intended by the owner of the tenements for the
industrial or works that they may carry on in any
building or upon any land and which tend directly
to meet the needs of the said industry or works."
(See also Code Nap., articles 516, 518 et seq. to
and inclusive of article 534, recapitulating the
things which, though in themselves movable,
may be immobilized.) So far as the subjectmatter with which we are dealing machinery
placed in the plant it is plain, both under the
provisions of the Porto Rican Law and of the
Code Napoleon, that machinery which is
movable in its nature only becomes immobilized
when placed in a plant by the owner of the
property or plant. Such result would not be
accomplished, therefore, by the placing of
machinery in a plant by a tenant or a
usufructuary or any person having only a
temporary right. (Demolombe, Tit. 9, No. 203;
Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent,
Tit. 5, No. 447; and decisions quoted in FuzierHerman ed. Code Napoleon under articles
522 et seq.) The distinction rests, as pointed out
by Demolombe, upon the fact that one only

having a temporary right to the possession or

enjoyment of property is not presumed by the law
to have applied movable property belonging to
him so as to deprive him of it by causing it by an
act of immobilization to become the property of
another. It follows that abstractly speaking the
machinery put by the Altagracia Company in the
plant belonging to Sanchez did not lose its
character of movable property and become
immovable by destination. But in the concrete
immobilization took place because of the express
provisions of the lease under which the
Altagracia held, since the lease in substance
required the putting in of improved machinery,
deprived the tenant of any right to charge against
the lessor the cost such machinery, and it was
expressly stipulated that the machinery so put in
should become a part of the plant belonging to
the owner without compensation to the lessee.
Under such conditions the tenant in putting in the
machinery was acting but as the agent of the
owner in compliance with the obligations resting
upon him, and the immobilization of the
machinery which resulted arose in legal effect
from the act of the owner in giving by contract a
permanent destination to the machinery.
xxx

xxx

xxx

The machinery levied upon by Nevers &

Callaghan, that is, that which was placed in the

plant by the Altagracia Company, being, as

regards Nevers & Callaghan, movable property, it
follows that they had the right to levy on it under
the execution upon the judgment in their favor,
and the exercise of that right did not in a legal
sense conflict with the claim of Valdes, since as
to him the property was a part of the realty which,
as the result of his obligations under the lease,
he could not, for the purpose of collecting his
debt, proceed separately against. (Valdes vs.
Central Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment
appealed from will be affirmed, the costs of this
instance to be paid by the appellant.

G.R. No. L-50008 August 31, 1987

PRUDENTIAL BANK, petitioner,
vs.
HONORABLE DOMINGO D. PANIS, Presiding
Judge of Branch III, Court of First Instance of
Zambales and Olongapo City; FERNANDO
MAGCALE & TEODULA BALUYUTMAGCALE, respondents.

PARAS, J.:
This is a petition for review on certiorari of the
November 13, 1978 Decision * of the then Court of
First Instance of Zambales and Olongapo City in Civil
Case No. 2443-0 entitled "Spouses Fernando A.
Magcale and Teodula Baluyut-Magcale vs. Hon.
Ramon Y. Pardo and Prudential Bank" declaring that
the deeds of real estate mortgage executed by
respondent spouses in favor of petitioner bank are null
and void.
The undisputed facts of this case by stipulation of the
parties are as follows:
... on November 19, 1971, plaintiffsspouses Fernando A. Magcale and Teodula
Baluyut Magcale secured a loan in the sum
of P70,000.00 from the defendant
Prudential Bank. To secure payment of this
loan, plaintiffs executed in favor of
defendant on the aforesaid date a deed of
Real Estate Mortgage over the following
described properties:
l. A 2-STOREY, SEMI-CONCRETE,
residential building with warehouse spaces
containing a total floor area of 263 sq.
meters, more or less, generally constructed
of mixed hard wood and concrete

materials, under a roofing of cor. g. i.

sheets; declared and assessed in the
name of FERNANDO MAGCALE under
Tax Declaration No. 21109, issued by the
Assessor of Olongapo City with an
assessed value of P35,290.00. This
building is the only improvement of the lot.
2. THE PROPERTY hereby conveyed by
way of MORTGAGE includes the right of
occupancy on the lot where the above
property is erected, and more particularly
described and bounded, as follows:
A first class residential land
Identffied as Lot No. 720, (Ts308, Olongapo Townsite
Subdivision) Ardoin Street, East
Bajac-Bajac, Olongapo City,
containing an area of 465 sq.
m. more or less, declared and
assessed in the name of
FERNANDO MAGCALE under
Tax Duration No. 19595 issued
by the Assessor of Olongapo
City with an assessed value of
P1,860.00; bounded on the
NORTH:
By No.
6,

Ardoin
Street
SOUTH:
By No.
2,
Ardoin
Street
EAST:
By 37
Canda
Street,
and
WEST:
By
Ardoin
Street.
All corners of the lot
marked by conc.
cylindrical
monuments of the
Bureau of Lands as
visible limits.
( Exhibit "A, " also
Exhibit "1" for
defendant).
Apart from the stipulations in
the printed portion of the

aforestated deed of mortgage,

there appears a rider typed at
the bottom of the reverse side
of the document under the lists
of the properties mortgaged
which reads, as follows:
AND IT IS
FURTHER
AGREED that in the
event the Sales
Patent on the lot
applied for by the
Mortgagors as
herein stated is
released or issued
by the Bureau of
Lands, the
Mortgagors hereby
authorize the
Register of Deeds
to hold the
Registration of
same until this
Mortgage is
cancelled, or to
annotate this
encumbrance on
the Title upon
authority from the
Secretary of

Agriculture and
Natural Resources,
which title with
annotation, shall be
released in favor of
the herein
Mortgage.
From the aforequoted
stipulation, it is obvious that the
mortgagee (defendant
Prudential Bank) was at the
outset aware of the fact that the
mortgagors (plaintiffs) have
already filed a Miscellaneous
Sales Application over the lot,
possessory rights over which,
were mortgaged to it.
Exhibit "A" (Real Estate
Mortgage) was registered
under the Provisions of Act
3344 with the Registry of
Deeds of Zambales on
November 23, 1971.
On May 2, 1973, plaintiffs
secured an additional loan from
defendant Prudential Bank in
the sum of P20,000.00. To
secure payment of this

additional loan, plaintiffs

executed in favor of the said
defendant another deed of Real
Estate Mortgage over the same
properties previously
mortgaged in Exhibit "A."
(Exhibit "B;" also Exhibit "2" for
defendant). This second deed
of Real Estate Mortgage was
likewise registered with the
Registry of Deeds, this time in
Olongapo City, on May 2,1973.
On April 24, 1973, the Secretary of
Agriculture issued Miscellaneous Sales
Patent No. 4776 over the parcel of land,
possessory rights over which were
mortgaged to defendant Prudential Bank,
in favor of plaintiffs. On the basis of the
aforesaid Patent, and upon its transcription
in the Registration Book of the Province of
Zambales, Original Certificate of Title No.
P-2554 was issued in the name of Plaintiff
Fernando Magcale, by the Ex-Oficio
Register of Deeds of Zambales, on May 15,
1972.
For failure of plaintiffs to pay their
obligation to defendant Bank after it
became due, and upon application of said
defendant, the deeds of Real Estate

Mortgage (Exhibits "A" and "B") were

extrajudicially foreclosed. Consequent to
the foreclosure was the sale of the
properties therein mortgaged to defendant
as the highest bidder in a public auction
sale conducted by the defendant City
Sheriff on April 12, 1978 (Exhibit "E"). The
auction sale aforesaid was held despite
written request from plaintiffs through
counsel dated March 29, 1978, for the
defendant City Sheriff to desist from going
with the scheduled public auction sale
(Exhibit "D")." (Decision, Civil Case No.
2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3,
1978 declared the deeds of Real Estate Mortgage as
null and void (Ibid., p. 35).
On December 14, 1978, petitioner filed a Motion for
Reconsideration (Ibid., pp. 41-53), opposed by private
respondents on January 5, 1979 (Ibid., pp. 54-62), and
in an Order dated January 10, 1979 (Ibid., p. 63), the
Motion for Reconsideration was denied for lack of
merit. Hence, the instant petition (Ibid., pp. 5-28).
The first Division of this Court, in a Resolution dated
March 9, 1979, resolved to require the respondents to
comment (Ibid., p. 65), which order was complied with
the Resolution dated May 18,1979, (Ibid., p. 100),

petitioner filed its Reply on June 2,1979 (Ibid., pp. 101112).

Thereafter, in the Resolution dated June 13, 1979, the
petition was given due course and the parties were
required to submit simultaneously their respective
memoranda. (Ibid., p. 114).
On July 18, 1979, petitioner filed its Memorandum
(Ibid., pp. 116-144), while private respondents filed
their Memorandum on August 1, 1979 (Ibid., pp. 146155).
In a Resolution dated August 10, 1979, this case was
considered submitted for decision (Ibid., P. 158).
In its Memorandum, petitioner raised the following
issues:
1. WHETHER OR NOT THE DEEDS OF REAL
ESTATE MORTGAGE ARE VALID; AND
2. WHETHER OR NOT THE SUPERVENING
ISSUANCE IN FAVOR OF PRIVATE RESPONDENTS
OF MISCELLANEOUS SALES PATENT NO. 4776 ON
APRIL 24, 1972 UNDER ACT NO. 730 AND THE
COVERING ORIGINAL CERTIFICATE OF TITLE NO.
P-2554 ON MAY 15,1972 HAVE THE EFFECT OF
INVALIDATING THE DEEDS OF REAL ESTATE
MORTGAGE. (Memorandum for Petitioner, Rollo, p.
122).

This petition is impressed with merit.

The pivotal issue in this case is whether or not a valid
real estate mortgage can be constituted on the building
erected on the land belonging to another.
The answer is in the affirmative.
In the enumeration of properties under Article 415 of
the Civil Code of the Philippines, this Court ruled that,
"it is obvious that the inclusion of "building" separate
and distinct from the land, in said provision of law can
only mean that a building is by itself an immovable
property." (Lopez vs. Orosa, Jr., et al., L-10817-18,
Feb. 28, 1958; Associated Inc. and Surety Co., Inc. vs.
Iya, et al., L-10837-38, May 30,1958).
Thus, while it is true that a mortgage of land
necessarily includes, in the absence of stipulation of
the improvements thereon, buildings, still a building by
itself may be mortgaged apart from the land on which it
has been built. Such a mortgage would be still a real
estate mortgage for the building would still be
considered immovable property even if dealt with
separately and apart from the land (Leung Yee vs.
Strong Machinery Co., 37 Phil. 644). In the same
manner, this Court has also established that
possessory rights over said properties before title is
vested on the grantee, may be validly transferred or
conveyed as in a deed of mortgage (Vda. de Bautista
vs. Marcos, 3 SCRA 438 [1961]).

Coming back to the case at bar, the records show, as

aforestated that the original mortgage deed on the 2storey semi-concrete residential building with
warehouse and on the right of occupancy on the lot
where the building was erected, was executed on
November 19, 1971 and registered under the
provisions of Act 3344 with the Register of Deeds of
Zambales on November 23, 1971. Miscellaneous
Sales Patent No. 4776 on the land was issued on April
24, 1972, on the basis of which OCT No. 2554 was
issued in the name of private respondent Fernando
Magcale on May 15, 1972. It is therefore without
question that the original mortgage was executed
before the issuance of the final patent and before the
government was divested of its title to the land, an
event which takes effect only on the issuance of the
sales patent and its subsequent registration in the
Office of the Register of Deeds (Visayan Realty Inc. vs.
Meer, 96 Phil. 515; Director of Lands vs. De Leon, 110
Phil. 28; Director of Lands vs. Jurado, L-14702, May
23, 1961; Pena "Law on Natural Resources", p. 49).
Under the foregoing considerations, it is evident that
the mortgage executed by private respondent on his
own building which was erected on the land belonging
to the government is to all intents and purposes a valid
mortgage.
As to restrictions expressly mentioned on the face of
respondents' OCT No. P-2554, it will be noted that
Sections 121, 122 and 124 of the Public Land Act,
refer to land already acquired under the Public Land

Act, or any improvement thereon and therefore have

no application to the assailed mortgage in the case at
bar which was executed before such eventuality.
Likewise, Section 2 of Republic Act No. 730, also a
restriction appearing on the face of private
respondent's title has likewise no application in the
instant case, despite its reference to encumbrance or
alienation before the patent is issued because it refers
specifically to encumbrance or alienation on the land
itself and does not mention anything regarding the
improvements existing thereon.
But it is a different matter, as regards the second
mortgage executed over the same properties on May
2, 1973 for an additional loan of P20,000.00 which was
registered with the Registry of Deeds of Olongapo City
on the same date. Relative thereto, it is evident that
such mortgage executed after the issuance of the
sales patent and of the Original Certificate of Title, falls
squarely under the prohibitions stated in Sections 121,
122 and 124 of the Public Land Act and Section 2 of
Republic Act 730, and is therefore null and void.
Petitioner points out that private respondents, after
physically possessing the title for five years, voluntarily
surrendered the same to the bank in 1977 in order that
the mortgaged may be annotated, without requiring the
bank to get the prior approval of the Ministry of Natural
Resources beforehand, thereby implicitly authorizing
Prudential Bank to cause the annotation of said
mortgage on their title.

However, the Court, in recently ruling on violations of

Section 124 which refers to Sections 118, 120, 122
and 123 of Commonwealth Act 141, has held:
... Nonetheless, we apply our earlier rulings
because we believe that as in pari
delicto may not be invoked to defeat the
policy of the State neither may the doctrine
of estoppel give a validating effect to a void
contract. Indeed, it is generally considered
that as between parties to a contract,
validity cannot be given to it by estoppel if it
is prohibited by law or is against public
policy (19 Am. Jur. 802). It is not within the
competence of any citizen to barter away
what public policy by law was to preserve
(Gonzalo Puyat & Sons, Inc. vs. De los
Amas and Alino supra). ... (Arsenal vs. IAC,
143 SCRA 54 [1986]).
This pronouncement covers only the previous
transaction already alluded to and does not pass upon
any new contract between the parties (Ibid), as in the
case at bar. It should not preclude new contracts that
may be entered into between petitioner bank and
private respondents that are in accordance with the
requirements of the law. After all, private respondents
themselves declare that they are not denying the
legitimacy of their debts and appear to be open to new
negotiations under the law (Comment; Rollo, pp. 9596). Any new transaction, however, would be subject to

whatever steps the Government may take for the

reversion of the land in its favor.
PREMISES CONSIDERED, the decision of the Court
of First Instance of Zambales & Olongapo City is
hereby MODIFIED, declaring that the Deed of Real
Estate Mortgage for P70,000.00 is valid but ruling that
the Deed of Real Estate Mortgage for an additional
loan of P20,000.00 is null and void, without prejudice
to any appropriate action the Government may take
against private respondents.

G.R. No. L-50466 May 31, 1982

CALTEX (PHILIPPINES) INC., petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS
and CITY ASSESSOR OF PASAY, respondents.

AQUINO, J.:
This case is about the realty tax on machinery and
equipment installed by Caltex (Philippines) Inc. in its
gas stations located on leased land.

The machines and equipment consists of underground

tanks, elevated tank, elevated water tanks, water
tanks, gasoline pumps, computing pumps, water
pumps, car washer, car hoists, truck hoists, air
compressors and tireflators. The city assessor
described the said equipment and machinery in this
manner:
A gasoline service station is a piece of lot
where a building or shed is erected, a
water tank if there is any is placed in one
corner of the lot, car hoists are placed in an
adjacent shed, an air compressor is
attached in the wall of the shed or at the
concrete wall fence.
The controversial underground tank,
depository of gasoline or crude oil, is dug
deep about six feet more or less, a few
meters away from the shed. This is done to
prevent conflagration because gasoline
and other combustible oil are very
inflammable.
This underground tank is connected with a
steel pipe to the gasoline pump and the
gasoline pump is commonly placed or
constructed under the shed. The footing of
the pump is a cement pad and this cement
pad is imbedded in the pavement under the
shed, and evidence that the gasoline

underground tank is attached and

connected to the shed or building through
the pipe to the pump and the pump is
attached and affixed to the cement pad and
pavement covered by the roof of the
building or shed.
The building or shed, the elevated water
tank, the car hoist under a separate shed,
the air compressor, the underground
gasoline tank, neon lights signboard,
concrete fence and pavement and the lot
where they are all placed or erected, all of
them used in the pursuance of the gasoline
service station business formed the entire
gasoline service-station.
As to whether the subject properties are
attached and affixed to the tenement, it is
clear they are, for the tenement we
consider in this particular case are (is) the
pavement covering the entire lot which was
constructed by the owner of the gasoline
station and the improvement which holds
all the properties under question, they are
attached and affixed to the pavement and
to the improvement.
The pavement covering the entire lot of the
gasoline service station, as well as all the
improvements, machines, equipments and

apparatus are allowed by Caltex

(Philippines) Inc. ...
The underground gasoline tank is attached
to the shed by the steel pipe to the pump,
so with the water tank it is connected also
by a steel pipe to the pavement, then to the
electric motor which electric motor is
placed under the shed. So to say that the
gasoline pumps, water pumps and
underground tanks are outside of the
service station, and to consider only the
building as the service station is grossly
erroneous. (pp. 58-60, Rollo).
The said machines and equipment are loaned by
Caltex to gas station operators under an appropriate
lease agreement or receipt. It is stipulated in the lease
contract that the operators, upon demand, shall return
to Caltex the machines and equipment in good
condition as when received, ordinary wear and tear
excepted.
The lessor of the land, where the gas station is
located, does not become the owner of the machines
and equipment installed therein. Caltex retains the
ownership thereof during the term of the lease.
The city assessor of Pasay City characterized the said
items of gas station equipment and machinery as
taxable realty. The realty tax on said equipment

amounts to P4,541.10 annually (p. 52, Rollo). The city

board of tax appeals ruled that they are personalty.
The assessor appealed to the Central Board of
Assessment Appeals.
The Board, which was composed of Secretary of
Finance Cesar Virata as chairman, Acting Secretary of
Justice Catalino Macaraig, Jr. and Secretary of Local
Government and Community Development Jose Roo,
held in its decision of June 3, 1977 that the said
machines and equipment are real property within the
meaning of sections 3(k) & (m) and 38 of the Real
Property Tax Code, Presidential Decree No. 464,
which took effect on June 1, 1974, and that the
definitions of real property and personal property in
articles 415 and 416 of the Civil Code are not
applicable to this case.

The Solicitor General's contention that the Court of Tax

Appeals has exclusive appellate jurisdiction over this
case is not correct. When Republic act No. 1125
created the Tax Court in 1954, there was as yet no
Central Board of Assessment Appeals. Section 7(3) of
that law in providing that the Tax Court had jurisdiction
to review by appeal decisions of provincial or city
boards of assessment appeals had in mind the local
boards of assessment appeals but not
the Central Board of Assessment Appeals which under
the Real Property Tax Code has appellate jurisdiction
over decisions of the said local boards of assessment
appeals and is, therefore, in the same category as the
Tax Court.

The decision was reiterated by the Board (Minister

Vicente Abad Santos took Macaraig's place) in its
resolution of January 12, 1978, denying Caltex's
motion for reconsideration, a copy of which was
received by its lawyer on April 2, 1979.

Section 36 of the Real Property Tax Code provides that

the decision of the Central Board of Assessment
Appeals shall become final and executory after the
lapse of fifteen days from the receipt of its decision by
the appellant. Within that fifteen-day period, a petition
for reconsideration may be filed. The Code does not
provide for the review of the Board's decision by this
Court.

On May 2, 1979 Caltex filed this certiorari petition

wherein it prayed for the setting aside of the Board's
decision and for a declaration that t he said machines
and equipment are personal property not subject to
realty tax (p. 16, Rollo).

Consequently, the only remedy available for seeking a

review by this Court of the decision of the Central
Board of Assessment Appeals is the special civil action
of certiorari, the recourse resorted to herein by Caltex
(Philippines), Inc.

The issue is whether the pieces of gas station

equipment and machinery already enumerated are
subject to realty tax. This issue has to be resolved
primarily under the provisions of the Assessment Law
and the Real Property Tax Code.
Section 2 of the Assessment Law provides that the
realty tax is due "on real property, including land,
buildings, machinery, and other improvements" not
specifically exempted in section 3 thereof. This
provision is reproduced with some modification in the
Real Property Tax Code which provides:
SEC. 38. Incidence of Real Property Tax.
There shall be levied, assessed and
collected in all provinces, cities and
municipalities an annual ad valorem tax on
real property, such as land, buildings,
machinery and other improvements affixed
or attached to real property not hereinafter
specifically exempted.
The Code contains the following definitions in its
section 3:
k) Improvements is a valuable addition
made to property or an amelioration in its
condition, amounting to more than mere
repairs or replacement of waste, costing
labor or capital and intended to enhance its

value, beauty or utility or to adapt it for new

or further purposes.
m) Machinery shall embrace machines,
mechanical contrivances, instruments,
appliances and apparatus attached to the
real estate. It includes the physical facilities
available for production, as well as the
installations and appurtenant service
facilities, together with all other equipment
designed for or essential to its
manufacturing, industrial or agricultural
purposes (See sec. 3[f], Assessment Law).
We hold that the said equipment and machinery, as
appurtenances to the gas station building or shed
owned by Caltex (as to which it is subject to realty tax)
and which fixtures are necessary to the operation of
the gas station, for without them the gas station would
be useless, and which have been attached or affixed
permanently to the gas station site or embedded
therein, are taxable improvements and machinery
within the meaning of the Assessment Law and the
Real Property Tax Code.
Caltex invokes the rule that machinery which is
movable in its nature only becomes immobilized when
placed in a plant by the owner of the property or plant
but not when so placed by a tenant, a usufructuary, or
any person having only a temporary right, unless such

person acted as the agent of the owner (Davao Saw

Mill Co. vs. Castillo, 61 Phil 709).

property" (Standard Oil Co. of New York vs. Jaramillo,

44 Phil. 630, 633).

That ruling is an interpretation of paragraph 5 of article

415 of the Civil Code regarding machinery that
becomes real property by destination. In the Davao
Saw Mills case the question was whether the
machinery mounted on foundations of cement and
installed by the lessee on leased land should be
regarded as real property forpurposes of execution of
a judgment against the lessee. The sheriff treated the
machinery as personal property. This Court sustained
the sheriff's action. (Compare with Machinery &
Engineering Supplies, Inc. vs. Court of Appeals, 96
Phil. 70, where in a replevin case machinery was
treated as realty).

This case is also easily distinguishable from Board of

Assessment Appeals vs. Manila Electric Co., 119 Phil.
328, where Meralco's steel towers were considered
poles within the meaning of paragraph 9 of its
franchise which exempts its poles from taxation. The
steel towers were considered personalty because they
were attached to square metal frames by means of
bolts and could be moved from place to place when
unscrewed and dismantled.

Here, the question is whether the gas station

equipment and machinery permanently affixed by
Caltex to its gas station and pavement (which are
indubitably taxable realty) should be subject to the
realty tax. This question is different from the issue
raised in the Davao Saw Mill case.
Improvements on land are commonly taxed as realty
even though for some purposes they might be
considered personalty (84 C.J.S. 181-2, Notes 40 and
41). "It is a familiar phenomenon to see things classed
as real property for purposes of taxation which on
general principle might be considered personal

Nor are Caltex's gas station equipment and machinery

the same as tools and equipment in the repair shop of
a bus company which were held to be personal
property not subject to realty tax (Mindanao Bus Co.
vs. City Assessor, 116 Phil. 501).
The Central Board of Assessment Appeals did not
commit a grave abuse of discretion in upholding the
city assessor's is imposition of the realty tax on
Caltex's gas station and equipment.
WHEREFORE, the questioned decision and resolution
of the Central Board of Assessment Appeals are
affirmed. The petition for certiorari is dismissed for lack
of merit. No costs.

G.R. No. 106041 January 29, 1993

BENGUET CORPORATION, petitioner,
vs.
CENTRAL BOARD OF ASSESSMENT APPEALS,
BOARD OF ASSESSMENT APPEALS OF
ZAMBALES, PROVINCIAL ASSESSOR OF
ZAMBALES, PROVINCE OF ZAMBALES, and
MUNICIPALITY OF SAN MARCELINO, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los
Angeles for petitioner.

CRUZ, J.:
The realty tax assessment involved in this case
amounts to P11,319,304.00. It has been imposed on
the petitioner's tailings dam and the land thereunder
over its protest.
The controversy arose in 1985 when the Provincial
Assessor of Zambales assessed the said properties as
taxable improvements. The assessment was appealed
to the Board of Assessment Appeals of the Province of
Zambales. On August 24, 1988, the appeal was
dismissed mainly on the ground of the petitioner's
"failure to pay the realty taxes that fell due during the
pendency of the appeal."

The petitioner seasonably elevated the matter to the

Central Board of Assessment Appeals, 1 one of the
herein respondents. In its decision dated March 22,
1990, the Board reversed the dismissal of the appeal
but, on the merits, agreed that "the tailings dam and
the lands submerged thereunder (were) subject to
realty tax."
For purposes of taxation the dam is
considered as real property as it comes
within the object mentioned in paragraphs
(a) and (b) of Article 415 of the New Civil
Code. It is a construction adhered to the
soil which cannot be separated or detached
without breaking the material or causing
destruction on the land upon which it is
attached. The immovable nature of the
dam as an improvement determines its
character as real property, hence taxable
under Section 38 of the Real Property Tax
Code. (P.D. 464).
Although the dam is partly used as an antipollution device, this Board cannot accede
to the request for tax exemption in the
absence of a law authorizing the same.
xxx xxx xxx
We find the appraisal on the land
submerged as a result of the construction

of the tailings dam, covered by Tax

Declaration Nos.
002-0260 and 002-0266, to be in
accordance with the Schedule of Market
Values for Zambales which was reviewed
and allowed for use by the Ministry
(Department) of Finance in the 1981-1982
general revision. No serious attempt was
made by Petitioner-Appellant Benguet
Corporation to impugn its
reasonableness, i.e., that the P50.00 per
square meter applied by RespondentAppellee Provincial Assessor is indeed
excessive and unconscionable. Hence, we
find no cause to disturb the market value
applied by Respondent Appellee Provincial
Assessor of Zambales on the properties of
Petitioner-Appellant Benguet Corporation
covered by Tax Declaration Nos. 002-0260
and 002-0266.
This petition for certiorari now seeks to reverse the
above ruling.
The principal contention of the petitioner is that the
tailings dam is not subject to realty tax because it is not
an "improvement" upon the land within the meaning of
the Real Property Tax Code. More particularly, it is
claimed

(1) as regards the tailings dam as an

"improvement":
(a) that the tailings dam has no
value separate from and
independent of the mine;
hence, by itself it cannot be
considered an improvement
separately assessable;
(b) that it is an integral part of
the mine;
(c) that at the end of the mining
operation of the petitioner
corporation in the area, the
tailings dam will benefit the
local community by serving as
an irrigation facility;
(d) that the building of the dam
has stripped the property of any
commercial value as the
property is submerged under
water wastes from the mine;
(e) that the tailings dam is an
environmental pollution control
device for which petitioner must
be commended rather than
penalized with a realty tax
assessment;

(f) that the installation and

utilization of the tailings dam as
a pollution control device is a
requirement imposed by law;
(2) as regards the valuation of the tailings
dam and the submerged lands:
(a) that the subject properties
have no market value as they
cannot be sold independently of
the mine;
(b) that the valuation of the
tailings dam should be based
on its incidental use by
petitioner as a water reservoir
and not on the alleged cost of
construction of the dam and the
annual build-up expense;
(c) that the "residual value
formula" used by the Provincial
Assessor and adopted by
respondent CBAA is arbitrary
and erroneous; and
(3) as regards the petitioner's liability for
penalties for
non-declaration of the tailings dam and the
submerged lands for realty tax purposes:

(a) that where a tax is not paid

in an honest belief that it is not
due, no penalty shall be
collected in addition to the
basic tax;
(b) that no other mining
companies in the Philippines
operating a tailings dam have
been made to declare the dam
for realty tax purposes.
The petitioner does not dispute that the tailings dam
may be considered realty within the meaning of Article
415. It insists, however, that the dam cannot be
subjected to realty tax as a separate and independent
property because it does not constitute an "assessable
improvement" on the mine although a considerable
sum may have been spent in constructing and
maintaining it.
To support its theory, the petitioner cites the following
cases:
1. Municipality of Cotabato v. Santos (105 Phil. 963),
where this Court considered the dikes and gates
constructed by the taxpayer in connection with a
fishpond operation as integral parts of the fishpond.
2. Bislig Bay Lumber Co. v. Provincial Government of
Surigao (100 Phil. 303), involving a road constructed
by the timber concessionaire in the area, where this

Court did not impose a realty tax on the road primarily

for two reasons:
In the first place, it cannot be disputed that
the ownership of the road that was
constructed by appellee belongs to the
government by right of accession not only
because it is inherently incorporated or
attached to the timber land . . . but also
because upon the expiration of the
concession said road would ultimately pass
to the national government. . . . In the
second place, while the road was
constructed by appellee primarily for its use
and benefit, the privilege is not exclusive,
for . . . appellee cannot prevent the use of
portions of the concession for
homesteading purposes. It is also duty
bound to allow the free use of forest
products within the concession for the
personal use of individuals residing in or
within the vicinity of the land. . . . In other
words, the government has practically
reserved the rights to use the road to
promote its varied activities. Since, as
above shown, the road in question cannot
be considered as an improvement which
belongs to appellee, although in part is for
its benefit, it is clear that the same cannot
be the subject of assessment within the

meaning of Section 2 of C.A.

No. 470.
Apparently, the realty tax was not imposed not
because the road was an integral part of the lumber
concession but because the government had the right
to use the road to promote its varied activities.
3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific
884), an American case, where it was declared that the
reservoir dam went with and formed part of the
reservoir and that the dam would be "worthless and
useless except in connection with the outlet canal, and
the water rights in the reservoir represent and include
whatever utility or value there is in the dam and
headgates."
4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498),
also from the United States. This case involved drain
tunnels constructed by plaintiff when it expanded its
mining operations downward, resulting in a constantly
increasing flow of water in the said mine. It was held
that:
Whatever value they have is connected
with and in fact is an integral part of the
mine itself. Just as much so as any shaft
which descends into the earth or an
underground incline, tunnel, or drift would
be which was used in connection with the
mine.

On the other hand, the Solicitor General argues that

the dam is an assessable improvement because it
enhances the value and utility of the mine. The primary
function of the dam is to receive, retain and hold the
water coming from the operations of the mine, and it
also enables the petitioner to impound water, which is
then recycled for use in the plant.
There is also ample jurisprudence to support this view,
thus:
. . . The said equipment and machinery, as
appurtenances to the gas station building
or shed owned by Caltex (as to which it is
subject to realty tax) and which fixtures are
necessary to the operation of the gas
station, for without them the gas station
would be useless and which have been
attached or affixed permanently to the gas
station site or embedded therein, are
taxable improvements and machinery
within the meaning of the Assessment Law
and the Real Property Tax Code. (Caltex
[Phil.] Inc. v. CBAA, 114 SCRA 296).
We hold that while the two storage tanks
are not embedded in the land, they may,
nevertheless, be considered as
improvements on the land, enhancing its
utility and rendering it useful to the oil
industry. It is undeniable that the two tanks

have been installed with some degree of

permanence as receptacles for the
considerable quantities of oil needed by
MERALCO for its operations. (Manila
Electric Co. v. CBAA, 114 SCRA 273).
The pipeline system in question is
indubitably a construction adhering to the
soil. It is attached to the land in such a way
that it cannot be separated therefrom
without dismantling the steel pipes which
were welded to form the pipeline.
(MERALCO Securities Industrial Corp. v.
CBAA, 114 SCRA 261).
The tax upon the dam was properly
assessed to the plaintiff as a tax upon real
estate. (Flax-Pond Water Co. v. City of
Lynn, 16 N.E. 742).
The oil tanks are structures within the
statute, that they are designed and used by
the owner as permanent improvement of
the free hold, and that for such reasons
they were properly assessed by the
respondent taxing district as improvements.
(Standard Oil Co. of New Jersey v. Atlantic
City, 15 A 2d. 271)
The Real Property Tax Code does not carry a definition
of "real property" and simply says that the realty tax is

imposed on "real property, such as lands, buildings,

machinery and other improvements affixed or attached
to real property." In the absence of such a definition,
we apply Article 415 of the Civil Code, the pertinent
portions of which state:
Art. 415. The following are immovable
property.
(1) Lands, buildings and constructions of all
kinds adhered to the soil;
xxx xxx xxx
(3) Everything attached to an immovable in
a fixed manner, in such a way that it cannot
be separated therefrom without breaking
the material or deterioration of the object.
Section 2 of C.A. No. 470, otherwise known as the
Assessment Law, provides that the realty tax is due
"on the real property, including land, buildings,
machinery and other improvements" not specifically
exempted in Section 3 thereof. A reading of that
section shows that the tailings dam of the petitioner
does not fall under any of the classes of exempt real
properties therein enumerated.
Is the tailings dam an improvement on the mine?
Section 3(k) of the Real Property Tax Code defines
improvement as follows:

(k) Improvements is a valuable addition

made to property or an amelioration in its
condition, amounting to more than mere
repairs or replacement of waste, costing
labor or capital and intended to enhance its
value, beauty or utility or to adopt it for new
or further purposes.
The term has also been interpreted as "artificial
alterations of the physical condition of the ground that
arereasonably permanent in character." 2
The Court notes that in the Ontario case the plaintiff
admitted that the mine involved therein could not be
operated without the aid of the drain tunnels, which
were indispensable to the successful development and
extraction of the minerals therein. This is not true in the
present case.
Even without the tailings dam, the petitioner's mining
operation can still be carried out because the primary
function of the dam is merely to receive and retain the
wastes and water coming from the mine. There is no
allegation that the water coming from the dam is the
sole source of water for the mining operation so as to
make the dam an integral part of the mine. In fact, as a
result of the construction of the dam, the petitioner can
now impound and recycle water without having to
spend for the building of a water reservoir. And as the
petitioner itself points out, even if the petitioner's mine
is shut down or ceases operation, the dam may still be

used for irrigation of the surrounding areas, again

unlike in the Ontario case.
As correctly observed by the CBAA, the Kendrick case
is also not applicable because it involved water
reservoir dams used for different purposes and for the
benefit of the surrounding areas. By contrast, the
tailings dam in question is being used exclusively for
the benefit of the petitioner.
Curiously, the petitioner, while vigorously arguing that
the tailings dam has no separate existence, just as
vigorously contends that at the end of the mining
operation the tailings dam will serve the local
community as an irrigation facility, thereby implying
that it can exist independently of the mine.
From the definitions and the cases cited above, it
would appear that whether a structure constitutes an
improvement so as to partake of the status of realty
would depend upon the degree of permanence
intended in its construction and use. The expression
"permanent" as applied to an improvement does not
imply that the improvement must be used perpetually
but only until the purpose to which the principal realty
is devoted has been accomplished. It is sufficient that
the improvement is intended to remain as long as the
land to which it is annexed is still used for the said
purpose.

The Court is convinced that the subject dam falls within

the definition of an "improvement" because it is
permanent in character and it enhances both the value
and utility of petitioner's mine. Moreover, the
immovable nature of the dam defines its character as
real property under Article 415 of the Civil Code and
thus makes it taxable under Section 38 of the Real
Property Tax Code.
The Court will also reject the contention that the
appraisal at P50.00 per square meter made by the
Provincial Assessor is excessive and that his use of
the "residual value formula" is arbitrary and erroneous.
Respondent Provincial Assessor explained the use of
the "residual value formula" as follows:
A 50% residual value is applied in the
computation because, while it is true that
when slime fills the dike, it will then be
covered by another dike or stage, the stage
covered is still there and still exists and
since only one face of the dike is filled,
50% or the other face is unutilized.
In sustaining this formula, the CBAA gave the following
justification:
We find the appraisal on the land
submerged as a result of the construction
of the tailings dam, covered by Tax
Declaration Nos.

002-0260 and 002-0266, to be in

accordance with the Schedule of Market
Values for San Marcelino, Zambales, which
is fifty (50.00) pesos per square meter for
third class industrial land (TSN, page 17,
July 5, 1989) and Schedule of Market
Values for Zambales which was reviewed
and allowed for use by the Ministry
(Department) of Finance in the 1981-1982
general revision. No serious attempt was
made by Petitioner-Appellant Benguet
Corporation to impugn its
reasonableness, i.e, that the P50.00 per
square meter applied by RespondentAppellee Provincial Assessor is indeed
excessive and unconscionable. Hence, we
find no cause to disturb the market value
applied by Respondent-Appellee Provincial
Assessor of Zambales on the properties of
Petitioner-Appellant Benguet Corporation
covered by Tax Declaration Nos. 002-0260
and 002-0266.
It has been the long-standing policy of this Court to
respect the conclusions of quasi-judicial agencies like
the CBAA, which, because of the nature of its functions
and its frequent exercise thereof, has developed
expertise in the resolution of assessment problems.
The only exception to this rule is where it is clearly
shown that the administrative body has committed
grave abuse of discretion calling for the intervention of

this Court in the exercise of its own powers of review.

There is no such showing in the case at bar.
We disagree, however, with the ruling of respondent
CBAA that it cannot take cognizance of the issue of the
propriety of the penalties imposed upon it, which was
raised by the petitioner for the first time only on appeal.
The CBAA held that this "is an entirely new matter that
petitioner can take up with the Provincial Assessor
(and) can be the subject of another protest before the
Local Board or a negotiation with the
local sanggunian . . ., and in case of an adverse
decision by either the Local Board or the
local sanggunian, (it can) elevate the same to this
Board for appropriate action."
There is no need for this time-wasting procedure. The
Court may resolve the issue in this petition instead of
referring it back to the local authorities. We have
studied the facts and circumstances of this case as
above discussed and find that the petitioner has acted
in good faith in questioning the assessment on the
tailings dam and the land submerged thereunder. It is
clear that it has not done so for the purpose of evading
or delaying the payment of the questioned tax. Hence,
we hold that the petitioner is not subject to penalty for
its
non-declaration of the tailings dam and the submerged
lands for realty tax purposes.

WHEREFORE, the petition is DISMISSED for failure to

show that the questioned decision of respondent
Central Board of Assessment Appeals is tainted with
grave abuse of discretion except as to the imposition of
penalties upon the petitioner which is hereby SET
ASIDE. Costs against the petitioner. It is so ordered.

G.R. No. L-30173 September 30, 1971

GAVINO A. TUMALAD and GENEROSA R.
TUMALAD, plaintiffs-appellees,
vs.
ALBERTA VICENCIO and EMILIANO
SIMEON, defendants-appellants.
Castillo & Suck for plaintiffs-appellees.
Jose Q. Calingo for defendants-appellants.

REYES, J.B.L., J.:

Case certified to this Court by the Court of Appeals
(CA-G.R. No. 27824-R) for the reason that only
questions of law are involved.
This case was originally commenced by defendantsappellants in the municipal court of Manila in Civil

Case No. 43073, for ejectment. Having lost therein,

defendants-appellants appealed to the court a quo
(Civil Case No. 30993) which also rendered a decision
against them, the dispositive portion of which follows:
WHEREFORE, the court hereby renders
judgment in favor of the plaintiffs and
against the defendants, ordering the latter
to pay jointly and severally the former a
monthly rent of P200.00 on the house,
subject-matter of this action, from March
27, 1956, to January 14, 1967, with interest
at the legal rate from April 18, 1956, the
filing of the complaint, until fully paid, plus
attorney's fees in the sum of P300.00 and
to pay the costs.
It appears on the records that on 1 September 1955
defendants-appellants executed a chattel mortgage in
favor of plaintiffs-appellees over their house of strong
materials located at No. 550 Int. 3, Quezon Boulevard,
Quiapo, Manila, over Lot Nos. 6-B and 7-B, Block No.
2554, which were being rented from Madrigal &
Company, Inc. The mortgage was registered in the
Registry of Deeds of Manila on 2 September 1955.
The herein mortgage was executed to guarantee a
loan of P4,800.00 received from plaintiffs-appellees,
payable within one year at 12% per annum. The mode
of payment was P150.00 monthly, starting September,
1955, up to July 1956, and the lump sum of P3,150
was payable on or before August, 1956. It was also

agreed that default in the payment of any of the

amortizations, would cause the remaining unpaid
balance to becomeimmediately due and Payable and

the Chattel Mortgage will be enforceable in

accordance with the provisions of Special
Act No. 3135, and for this purpose, the
Sheriff of the City of Manila or any of his
deputies is hereby empowered and
authorized to sell all the Mortgagor's
property after the necessary publication in
order to settle the financial debts of
P4,800.00, plus 12% yearly interest, and
attorney's fees... 2
When defendants-appellants defaulted in paying, the
mortgage was extrajudicially foreclosed, and on 27
March 1956, the house was sold at public auction
pursuant to the said contract. As highest bidder,
plaintiffs-appellees were issued the corresponding
certificate of sale. 3 Thereafter, on 18 April 1956,
plaintiffs-appellant commenced Civil Case No. 43073
in the municipal court of Manila, praying, among other
things, that the house be vacated and its possession
surrendered to them, and for defendants-appellants to
pay rent of P200.00 monthly from 27 March 1956 up to
the time the possession is surrendered. 4 On 21
September 1956, the municipal court rendered its
decision

... ordering the defendants to vacate the

premises described in the complaint;
ordering further to pay monthly the amount
of P200.00 from March 27, 1956, until such
(time that) the premises is (sic) completely
vacated; plus attorney's fees of P100.00
and the costs of the suit. 5
Defendants-appellants, in their answers in both the
municipal court and court a quo impugned the legality
of the chattel mortgage, claiming that they are still the
owners of the house; but they waived the right to
introduce evidence, oral or documentary. Instead, they
relied on their memoranda in support of their motion to
dismiss, predicated mainly on the grounds that: (a) the
municipal court did not have jurisdiction to try and
decide the case because (1) the issue involved, is
ownership, and (2) there was no allegation of prior
possession; and (b) failure to prove prior demand
pursuant to Section 2, Rule 72, of the Rules of Court. 6
During the pendency of the appeal to the Court of First
Instance, defendants-appellants failed to deposit the
rent for November, 1956 within the first 10 days of
December, 1956 as ordered in the decision of the
municipal court. As a result, the court granted plaintiffsappellees' motion for execution, and it was actually
issued on 24 January 1957. However, the judgment
regarding the surrender of possession to plaintiffsappellees could not be executed because the subject
house had been already demolished on 14 January

1957 pursuant to the order of the court in a separate

civil case (No. 25816) for ejectment against the
present defendants for non-payment of rentals on the
land on which the house was constructed.
The motion of plaintiffs for dismissal of the appeal,
execution of the supersedeas bond and withdrawal of
deposited rentals was denied for the reason that the
liability therefor was disclaimed and was still being
litigated, and under Section 8, Rule 72, rentals
deposited had to be held until final disposition of the
appeal. 7
On 7 October 1957, the appellate court of First
Instance rendered its decision, the dispositive portion
of which is quoted earlier. The said decision was
appealed by defendants to the Court of Appeals which,
in turn, certified the appeal to this Court. Plaintiffsappellees failed to file a brief and this appeal was
submitted for decision without it.
Defendants-appellants submitted numerous
assignments of error which can be condensed into two
questions, namely: .
(a) Whether the municipal court from which
the case originated had jurisdiction to
adjudicate the same;
(b) Whether the defendants are, under the
law, legally bound to pay rentals to the
plaintiffs during the period of one (1) year

provided by law for the redemption of the

extrajudicially foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the
jurisdiction of the municipal court from which the case
originated, and consequently, the appellate jurisdiction
of the Court of First Instance a quo, on the theory that
the chattel mortgage is void ab initio; whence it would
follow that the extrajudicial foreclosure, and
necessarily the consequent auction sale, are also void.
Thus, the ownership of the house still remained with
defendants-appellants who are entitled to possession
and not plaintiffs-appellees. Therefore, it is argued by
defendants-appellants, the issue of ownership will
have to be adjudicated first in order to determine
possession. lt is contended further that ownership
being in issue, it is the Court of First Instance which
has jurisdiction and not the municipal court.
Defendants-appellants predicate their theory of nullity
of the chattel mortgage on two grounds, which are: (a)
that, their signatures on the chattel mortgage were
obtained through fraud, deceit, or trickery; and (b) that
the subject matter of the mortgage is a house of strong
materials, and, being an immovable, it can only be the
subject of a real estate mortgage and not a chattel
mortgage.

On the charge of fraud, deceit or trickery, the Court of

First Instance found defendants-appellants'
contentions as not supported by evidence and
accordingly dismissed the charge, 8 confirming the
earlier finding of the municipal court that "the defense
of ownership as well as the allegations of fraud and
deceit ... are mere allegations." 9
It has been held in Supia and Batiaco vs. Quintero and
Ayala 10 that "the answer is a mere statement of the
facts which the party filing it expects to prove, but it is
not evidence; 11 and further, that when the question to
be determined is one of title, the Court is given the
authority to proceed with the hearing of the cause until
this fact is clearly established. In the case of Sy vs.
Dalman, 12 wherein the defendant was also a
successful bidder in an auction sale, it was likewise
held by this Court that in detainer cases the aim of
ownership "is a matter of defense and raises an issue
of fact which should be determined from the evidence
at the trial." What determines jurisdiction are the
allegations or averments in the complaint and the relief
asked for. 13
Moreover, even granting that the charge is true, fraud
or deceit does not render a contract void ab initio, and
can only be a ground for rendering the contract
voidable or annullable pursuant to Article 1390 of the
New Civil Code, by a proper action in court. 14 There is
nothing on record to show that the mortgage has been
annulled. Neither is it disclosed that steps were taken

to nullify the same. Hence, defendants-appellants'

claim of ownership on the basis of a voidable contract
which has not been voided fails.
It is claimed in the alternative by defendants-appellants
that even if there was no fraud, deceit or trickery, the
chattel mortgage was still null and void ab
initio because only personal properties can be subject
of a chattel mortgage. The rule about the status of
buildings as immovable property is stated in Lopez vs.
Orosa, Jr. and Plaza Theatre Inc., 15 cited
in Associated Insurance Surety Co., Inc. vs. Iya, et
al. 16 to the effect that
... it is obvious that the inclusion of the
building, separate and distinct from the
land, in the enumeration of what may
constitute real properties (art. 415, New
Civil Code) could only mean one thing
that a building is by itself an immovable
property irrespective of whether or not said
structure and the land on which it is
adhered to belong to the same owner.
Certain deviations, however, have been allowed for
various reasons. In the case of Manarang and
Manarang vs. Ofilada, 17 this Court stated that "it is
undeniable that the parties to a contract may by
agreement treat as personal property that which by
nature would be real property", citing Standard Oil
Company of New York vs. Jaramillo. 18 In the latter

case, the mortgagor conveyed and transferred to the

mortgagee by way of mortgage "the following
described personal property."19 The "personal
property" consisted of leasehold rights and a building.
Again, in the case of Luna vs. Encarnacion, 20 the
subject of the contract designated as Chattel Mortgage
was a house of mixed materials, and this Court hold
therein that it was a valid Chattel mortgage because it
was so expressly designated and specifically that the
property given as security "is a house of mixed
materials, which by its very nature is considered
personal property." In the later case of Navarro vs.
Pineda, 21 this Court stated that
The view that parties to a deed of chattel
mortgage may agree to consider a house
as personal property for the purposes of
said contract, "is good only insofar as the
contracting parties are concerned. It is
based, partly, upon the principle of
estoppel" (Evangelista vs. Alto Surety, No.
L-11139, 23 April 1958). In a case, a
mortgaged house built on a rented
land was held to be a personal property,
not only because the deed of mortgage
considered it as such, but also because it
did not form part of the land (Evangelists
vs. Abad, [CA]; 36 O.G. 2913), for it is now
settled that an object placed on land by
one who had only a temporary right to the
same, such as the lessee or usufructuary,

does not become immobilized by

attachment (Valdez vs. Central Altagracia,
222 U.S. 58, cited in Davao Sawmill Co.,
Inc. vs. Castillo, et al., 61 Phil. 709).
Hence, if a house belonging to a person
stands on a rented land belonging to
another person, it may be mortgaged as a
personal property as so stipulated in the
document of mortgage. (Evangelista vs.
Abad, Supra.) It should be noted, however
that the principle is predicated on
statements by the owner declaring his
house to be a chattel, a conduct that may
conceivably estop him from subsequently
claiming otherwise. (Ladera vs. C.N.
Hodges, [CA] 48 O.G. 5374): 22
In the contract now before Us, the house on rented
land is not only expressly designated as Chattel
Mortgage; it specifically provides that "the mortgagor ...
voluntarily CEDES, SELLS and TRANSFERS by way
of Chattel Mortgage 23 the property together with its
leasehold rights over the lot on which it is constructed
and participation ..." 24Although there is no specific
statement referring to the subject house as personal
property, yet by ceding, selling or transferring a
property by way of chattel mortgage defendantsappellants could only have meant to convey the house
as chattel, or at least, intended to treat the same as
such, so that they should not now be allowed to make
an inconsistent stand by claiming otherwise. Moreover,

the subject house stood on a rented lot to which

defendats-appellants merely had a temporary right as
lessee, and although this can not in itself alone
determine the status of the property, it does so when
combined with other factors to sustain the
interpretation that the parties, particularly the
mortgagors, intended to treat the house as personalty.
Finally unlike in the Iya cases, Lopez vs. Orosa, Jr.
and Plaza Theatre, Inc. 25 and Leung Yee vs. F. L.
Strong Machinery and Williamson, 26 wherein third
persons assailed the validity of the chattel
mortgage, 27 it is the defendants-appellants
themselves, as debtors-mortgagors, who are attacking
the validity of the chattel mortgage in this case. The
doctrine of estoppel therefore applies to the herein
defendants-appellants, having treated the subject
house as personalty.
(b) Turning to the question of possession and rentals of
the premises in question. The Court of First Instance
noted in its decision that nearly a year after the
foreclosure sale the mortgaged house had been
demolished on 14 and 15 January 1957 by virtue of a
decision obtained by the lessor of the land on which
the house stood. For this reason, the said court limited
itself to sentencing the erstwhile mortgagors to pay
plaintiffs a monthly rent of P200.00 from 27 March
1956 (when the chattel mortgage was foreclosed and
the house sold) until 14 January 1957 (when it was
torn down by the Sheriff), plus P300.00 attorney's fees.

Appellants mortgagors question this award, claiming

that they were entitled to remain in possession without
any obligation to pay rent during the one year
redemption period after the foreclosure sale, i.e., until
27 March 1957. On this issue, We must rule for the
appellants.
Chattel mortgages are covered and regulated by the
Chattel Mortgage Law, Act No. 1508. 28 Section 14 of
this Act allows the mortgagee to have the property
mortgaged sold at public auction through a public
officer in almost the same manner as that allowed by
Act No. 3135, as amended by Act No. 4118, provided
that the requirements of the law relative to notice and
registration are complied with. 29 In the instant case,
the parties specifically stipulated that "the chattel
mortgage will be enforceable in accordance with the
provisions of Special Act No. 3135 ... ." 30 (Emphasis
supplied).
Section 6 of the Act referred to 31 provides that the
debtor-mortgagor (defendants-appellants herein) may,
at any time within one year from and after the date of
the auction sale, redeem the property sold at the extra
judicial foreclosure sale. Section 7 of the same
Act 32 allows the purchaser of the property to obtain
from the court the possession during the period of
redemption: but the same provision expressly requires
the filing of a petition with the proper Court of First
Instance and the furnishing of a bond. It is only upon
filing of the proper motion and the approval of the

corresponding bond that the order for a writ of

possession issues as a matter of course. No discretion
is left to the court. 33 In the absence of such a
compliance, as in the instant case, the purchaser can
not claim possession during the period of redemption
as a matter of right. In such a case, the governing
provision is Section 34, Rule 39, of the Revised Rules
of Court 34 which also applies to properties purchased
in extrajudicial foreclosure proceedings. 35 Construing
the said section, this Court stated in the aforestated
case of Reyes vs. Hamada.
In other words, before the expiration of the
1-year period within which the judgmentdebtor or mortgagor may redeem the
property, the purchaser thereof is not
entitled, as a matter of right, to possession
of the same. Thus, while it is true that the
Rules of Court allow the purchaser to
receive the rentals if the purchased
property is occupied by tenants, he is,
nevertheless, accountable to the judgmentdebtor or mortgagor as the case may be,
for the amount so received and the same
will be duly credited against the redemption
price when the said debtor or mortgagor
effects the redemption.Differently stated,
the rentals receivable from tenants,
although they may be collected by the
purchaser during the redemption period, do
not belong to the latter but still pertain to

the debtor of mortgagor. The rationale for

the Rule, it seems, is to secure for the
benefit of the debtor or mortgagor, the
payment of the redemption amount and the
consequent return to him of his properties
sold at public auction. (Emphasis supplied)
The Hamada case reiterates the previous ruling
in Chan vs. Espe. 36
Since the defendants-appellants were occupying the
house at the time of the auction sale, they are entitled
to remain in possession during the period of
redemption or within one year from and after 27 March
1956, the date of the auction sale, and to collect the
rents or profits during the said period.
It will be noted further that in the case at bar the period
of redemption had not yet expired when action was
instituted in the court of origin, and that plaintiffsappellees did not choose to take possession under
Section 7, Act No. 3135, as amended, which is the law
selected by the parties to govern the extrajudicial
foreclosure of the chattel mortgage. Neither was there
an allegation to that effect. Since plaintiffs-appellees'
right to possess was not yet born at the filing of the
complaint, there could be no violation or breach
thereof. Wherefore, the original complaint stated no
cause of action and was prematurely filed. For this
reason, the same should be ordered dismissed, even if
there was no assignment of error to that effect. The

Supreme Court is clothed with ample authority to

review palpable errors not assigned as such if it finds
that their consideration is necessary in arriving at a just
decision of the cases. 37
It follows that the court below erred in requiring the
mortgagors to pay rents for the year following the
foreclosure sale, as well as attorney's fees.
FOR THE FOREGOING REASONS, the decision
appealed from is reversed and another one entered,
dismissing the complaint. With costs against plaintiffsappellees.

G.R. No. L-58469 May 16, 1983

MAKATI LEASING and FINANCE
CORPORATION, petitioner,
vs.
WEAREVER TEXTILE MILLS, INC., and
HONORABLE COURT OF APPEALS, respondents.
Loreto C. Baduan for petitioner.
Ramon D. Bagatsing & Assoc. (collaborating counsel)
for petitioner.
Jose V. Mancella for respondent.

DE CASTRO, J.:
Petition for review on certiorari of the decision of the
Court of Appeals (now Intermediate Appellate Court)
promulgated on August 27, 1981 in CA-G.R. No. SP12731, setting aside certain Orders later specified
herein, of Judge Ricardo J. Francisco, as Presiding
Judge of the Court of First instance of Rizal Branch VI,
issued in Civil Case No. 36040, as wen as the
resolution dated September 22, 1981 of the said
appellate court, denying petitioner's motion for
reconsideration.
It appears that in order to obtain financial
accommodations from herein petitioner Makati Leasing
and Finance Corporation, the private respondent
Wearever Textile Mills, Inc., discounted and assigned
several receivables with the former under a Receivable
Purchase Agreement. To secure the collection of the
receivables assigned, private respondent executed a
Chattel Mortgage over certain raw materials inventory
as well as a machinery described as an Artos Aero
Dryer Stentering Range.
Upon private respondent's default, petitioner filed a
petition for extrajudicial foreclosure of the properties
mortgage to it. However, the Deputy Sheriff assigned
to implement the foreclosure failed to gain entry into
private respondent's premises and was not able to

effect the seizure of the aforedescribed machinery.

Petitioner thereafter filed a complaint for judicial
foreclosure with the Court of First Instance of Rizal,
Branch VI, docketed as Civil Case No. 36040, the case
before the lower court.
Acting on petitioner's application for replevin, the lower
court issued a writ of seizure, the enforcement of which
was however subsequently restrained upon private
respondent's filing of a motion for reconsideration. After
several incidents, the lower court finally issued on
February 11, 1981, an order lifting the restraining order
for the enforcement of the writ of seizure and an order
to break open the premises of private respondent to
enforce said writ. The lower court reaffirmed its stand
upon private respondent's filing of a further motion for
reconsideration.
On July 13, 1981, the sheriff enforcing the seizure
order, repaired to the premises of private respondent
and removed the main drive motor of the subject
machinery.
The Court of Appeals, in certiorari and prohibition
proceedings subsequently filed by herein private
respondent, set aside the Orders of the lower court
and ordered the return of the drive motor seized by the
sheriff pursuant to said Orders, after ruling that the
machinery in suit cannot be the subject of replevin,
much less of a chattel mortgage, because it is a real
property pursuant to Article 415 of the new Civil Code,

the same being attached to the ground by means of

bolts and the only way to remove it from respondent's
plant would be to drill out or destroy the concrete floor,
the reason why all that the sheriff could do to enfore
the writ was to take the main drive motor of said
machinery. The appellate court rejected petitioner's
argument that private respondent is estopped from
claiming that the machine is real property by
constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the
Court of Appeals having been denied, petitioner has
brought the case to this Court for review by writ of
certiorari. It is contended by private respondent,
however, that the instant petition was rendered moot
and academic by petitioner's act of returning the
subject motor drive of respondent's machinery after the
Court of Appeals' decision was promulgated.
The contention of private respondent is without merit.
When petitioner returned the subject motor drive, it
made itself unequivocably clear that said action was
without prejudice to a motion for reconsideration of the
Court of Appeals decision, as shown by the receipt
duly signed by respondent's
representative. 1 Considering that petitioner has
reserved its right to question the propriety of the Court
of Appeals' decision, the contention of private
respondent that this petition has been mooted by such
return may not be sustained.

The next and the more crucial question to be resolved

in this Petition is whether the machinery in suit is real
or personal property from the point of view of the
parties, with petitioner arguing that it is a personality,
while the respondent claiming the contrary, and was
sustained by the appellate court, which accordingly
held that the chattel mortgage constituted thereon is
null and void, as contended by said respondent.
A similar, if not Identical issue was raised in Tumalad v.
Vicencio, 41 SCRA 143 where this Court, speaking
through Justice J.B.L. Reyes, ruled:
Although there is no specific statement
referring to the subject house as personal
property, yet by ceding, selling or
transferring a property by way of chattel
mortgage defendants-appellants could only
have meant to convey the house as
chattel, or at least, intended to treat the
same as such, so that they should not now
be allowed to make an inconsistent stand
by claiming otherwise. Moreover, the
subject house stood on a rented lot to
which defendants-appellants merely had a
temporary right as lessee, and although
this can not in itself alone determine the
status of the property, it does so when
combined with other factors to sustain the
interpretation that the parties, particularly
the mortgagors, intended to treat the house

as personality. Finally, unlike in the Iya

cases, Lopez vs. Orosa, Jr. & Plaza
Theatre, Inc. & Leung Yee vs. F.L. Strong
Machinery & Williamson, wherein third
persons assailed the validity of the chattel
mortgage, it is the defendants-appellants
themselves, as debtors-mortgagors, who
are attacking the validity of the chattel
mortgage in this case. The doctrine of
estoppel therefore applies to the herein
defendants-appellants, having treated the
subject house as personality.
Examining the records of the instant case, We find no
logical justification to exclude the rule out, as the
appellate court did, the present case from the
application of the abovequoted pronouncement. If a
house of strong materials, like what was involved in the
above Tumalad case, may be considered as personal
property for purposes of executing a chattel mortgage
thereon as long as the parties to the contract so agree
and no innocent third party will be prejudiced thereby,
there is absolutely no reason why a machinery, which
is movable in its nature and becomes immobilized only
by destination or purpose, may not be likewise treated
as such. This is really because one who has so agreed
is estopped from denying the existence of the chattel
mortgage.
In rejecting petitioner's assertion on the applicability of
the Tumalad doctrine, the Court of Appeals lays stress

on the fact that the house involved therein was built on

a land that did not belong to the owner of such house.
But the law makes no distinction with respect to the
ownership of the land on which the house is built and
We should not lay down distinctions not contemplated
by law.
It must be pointed out that the characterization of the
subject machinery as chattel by the private respondent
is indicative of intention and impresses upon the
property the character determined by the parties. As
stated inStandard Oil Co. of New York v. Jaramillo, 44
Phil. 630, it is undeniable that the parties to a contract
may by agreement treat as personal property that
which by nature would be real property, as long as no
interest of third parties would be prejudiced thereby.
Private respondent contends that estoppel cannot
apply against it because it had never represented nor
agreed that the machinery in suit be considered as
personal property but was merely required and
dictated on by herein petitioner to sign a printed form
of chattel mortgage which was in a blank form at the
time of signing. This contention lacks persuasiveness.
As aptly pointed out by petitioner and not denied by the
respondent, the status of the subject machinery as
movable or immovable was never placed in issue
before the lower court and the Court of Appeals except
in a supplemental memorandum in support of the
petition filed in the appellate court. Moreover, even
granting that the charge is true, such fact alone does

not render a contract void ab initio, but can only be a

ground for rendering said contract voidable, or
annullable pursuant to Article 1390 of the new Civil
Code, by a proper action in court. There is nothing on
record to show that the mortgage has been annulled.
Neither is it disclosed that steps were taken to nullify
the same. On the other hand, as pointed out by
petitioner and again not refuted by respondent, the
latter has indubitably benefited from said contract.
Equity dictates that one should not benefit at the
expense of another. Private respondent could not now
therefore, be allowed to impugn the efficacy of the
chattel mortgage after it has benefited therefrom,
From what has been said above, the error of the
appellate court in ruling that the questioned machinery
is real, not personal property, becomes very apparent.
Moreover, the case of Machinery and Engineering
Supplies, Inc. v. CA, 96 Phil. 70, heavily relied upon by
said court is not applicable to the case at bar, the
nature of the machinery and equipment involved
therein as real properties never having been disputed
nor in issue, and they were not the subject of a Chattel
Mortgage. Undoubtedly, the Tumalad case bears more
nearly perfect parity with the instant case to be the
more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution
of the Court of Appeals are hereby reversed and set
aside, and the Orders of the lower court are hereby
reinstated, with costs against the private respondent.

G.R. No. L-11139

April 23, 1958

SANTOS EVANGELISTA, petitioner,

vs.
ALTO SURETY & INSURANCE CO.,
INC., respondent.
Gonzalo D. David for petitioner.
Raul A. Aristorenas and Benjamin Relova for
respondent.
CONCEPCION, J.:
This is an appeal by certiorari from a decision of the
Court of Appeals.
Briefly, the facts are: On June 4, 1949, petitioner
herein, Santos Evangelista, instituted Civil Case No.
8235 of the Court of First, Instance of Manila entitled "
Santos Evangelista vs. Ricardo Rivera," for a sum of
money. On the same date, he obtained a writ of
attachment, which levied upon a house, built by Rivera
on a land situated in Manila and leased to him, by filing
copy of said writ and the corresponding notice of
attachment with the Office of the Register of Deeds of
Manila, on June 8, 1949. In due course, judgment was
rendered in favor of Evangelista, who, on October 8,
1951, bought the house at public auction held in

compliance with the writ of execution issued in said

case. The corresponding definite deed of sale was
issued to him on October 22, 1952, upon expiration of
the period of redemption. When Evangelista sought to
take possession of the house, Rivera refused to
surrender it, upon the ground that he had leased the
property from the Alto Surety & Insurance Co., Inc.
respondent herein and that the latter is now the true
owner of said property. It appears that on May 10,
1952, a definite deed of sale of the same house had
been issued to respondent, as the highest bidder at an
auction sale held, on September 29, 1950, in
compliance with a writ of execution issued in Civil
Case No. 6268 of the same court, entitled "Alto Surety
& Insurance Co., Inc. vs. Maximo Quiambao, Rosario
Guevara and Ricardo Rivera," in which judgment, for
the sum of money, had been rendered in favor
respondent herein, as plaintiff therein. Hence, on June
13, 1953, Evangelista instituted the present action
against respondent and Ricardo Rivera, for the
purpose of establishing his (Evangelista) title over said
house, securing possession thereof, apart from
recovering damages.
In its answer, respondent alleged, in substance, that it
has a better right to the house, because the sale
made, and the definite deed of sale executed, in its
favor, on September 29, 1950 and May 10, 1952,
respectively, precede the sale to Evangelista (October
8, 1951) and the definite deed of sale in his favor
(October 22, 1952). It, also, made some special

defenses which are discussed hereafter. Rivera, in

effect, joined forces with respondent. After due trial, the
Court of First Instance of Manila rendered judgment for
Evangelista, sentencing Rivera and respondent to
deliver the house in question to petitioner herein and to
pay him, jointly and severally, forty pesos (P40.00) a
month from October, 1952, until said delivery, plus
costs.

having in his possession or under his control,

such credits or other personal property, or with,
his agent, a copy of the order, and a notice that
the debts owing by him to the defendant, and the
credits and other personal property in his
possession, or under his control, belonging to the
defendant, are attached in pursuance of such
order. (Emphasis ours.)

On appeal taken by respondent, this decision was

reversed by the Court of Appeals, which absolved said
respondent from the complaint, upon the ground that,
although the writ of attachment in favor of Evangelista
had been filed with the Register of Deeds of Manila
prior to the sale in favor of respondent, Evangelista did
not acquire thereby a preferential lien, the attachment
having been levied as if the house in question were
immovable property, although in the opinion of the
Court of Appeals, it is "ostensibly a personal property."
As such, the Court of Appeals held, "the order of
attachment . . . should have been served in the
manner provided in subsection (e) of section 7 of Rule
59," of the Rules of Court, reading:

However, the Court of Appeals seems to have been of

the opinion, also, that the house of Rivera should have
been attached in accordance with subsection (c) of
said section 7, as "personal property capable of
manual delivery, by taking and safely keeping in his
custody", for it declared that "Evangelists could not
have . . . validly purchased Ricardo Rivera's house
from the sheriff as the latter was not in possession
thereof at the time he sold it at a public auction."

The property of the defendant shall be attached

by the officer executing the order in the following
manner:
(e) Debts and credits, and other personal
property not capable of manual delivery, by
leaving with the person owing such debts, or

Evangelista now seeks a review, by certiorari, of this

decision of the Court of Appeals. In this connection, it
is not disputed that although the sale to the respondent
preceded that made to Evangelists, the latter would
have a better right if the writ of attachment, issued in
his favor before the sale to the respondent, had been
properly executed or enforced. This question, in turn,
depends upon whether the house of Ricardo Rivera is
real property or not. In the affirmative case, the
applicable provision would be subsection (a) of section
7, Rule 59 of the Rules of Court, pursuant to which the
attachment should be made "by filing with the registrar

of deeds a copy of the order, together with a

description of the property attached, and a notice that it
is attached, and by leaving a copy of such order,
description, and notice with the occupant of the
property, if any there be."
Respondent maintains, however, and the Court of
Appeals held, that Rivera's house is personal property,
the levy upon which must be made in conformity with
subsections (c) and (e) of said section 7 of Rule 59.
Hence, the main issue before us is whether a house,
constructed the lessee of the land on which it is built,
should be dealt with, for purpose, of attachment, as
immovable property, or as personal property.
It is, our considered opinion that said house is not
personal property, much less a debt, credit or other
personal property not capable of manual delivery, but
immovable property. As explicitly held, in
Laddera vs. Hodges (48 Off. Gaz., 5374), "a true
building (not merely superimposed on the soil) is
immovable or real property, whether it is erected by the
owner of the land or by usufructuary or lessee. This is
the doctrine of our Supreme Court in Leung
Yee vs. Strong Machinery Company, 37 Phil., 644. And
it is amply supported by the rulings of the French
Court. . . ."
It is true that the parties to a deed of chattel mortgage
may agree to consider a house as personal property
for purposes of said contract

(Luna vs. Encarnacion, * 48 Off. Gaz., 2664; Standard

Oil Co. of New York vs.Jaramillo, 44 Phil., 630; De
Jesus vs. Juan Dee Co., Inc., 72 Phil., 464). However,
this view is good only insofar as the contracting
parties are concerned. It is based, partly, upon the
principle of estoppel. Neither this principle, nor said
view, is applicable to strangers to said contract. Much
less is it in point where there has been no
contractwhatsoever, with respect to the status of the
house involved, as in the case at bar. Apart from this,
in Manarang vs. Ofilada (99 Phil., 108; 52 Off. Gaz.,
3954), we held:
The question now before us, however, is: Does
the fact that the parties entering into a contract
regarding a house gave said property the
consideration of personal property in their
contract, bind the sheriff in advertising the
property's sale at public auction as personal
property? It is to be remembered that in the case
at bar the action was to collect a loan secured by
a chattel mortgage on the house. It is also to be
remembered that in practice it is the judgment
creditor who points out to the sheriff the
properties that the sheriff is to levy upon in
execution, and the judgment creditor in the case
at bar is the party in whose favor the owner of
the house had conveyed it by way of chattel
mortgage and, therefore, knew its consideration
as personal property.

These considerations notwithstanding, we hold

that the rules on execution do not allow, and, we
should notinterpret them in such a way as to
allow, the special consideration that parties to a
contract may have desired to impart to real
estate, for example, as personal property, when
they are, not ordinarily so. Sales on execution
affect the public and third persons. The
regulation governing sales on execution are for
public officials to follow. The form of proceedings
prescribed for each kind of property is suited to
its character, not to the character, which the
parties have given to it or desire to give it. When
the rules speak of personal property, property
which is ordinarily so considered is meant; and
when real property is spoken of, it means
property which is generally known as real
property. The regulations were never intended to
suit the consideration that parties may have
privately given to the property levied upon.
Enforcement of regulations would be difficult
were the convenience or agreement of private
parties to determine or govern the nature of the
proceedings. We therefore hold that the mere
fact that a house was the subject of the chattel
mortgage and was considered as personal
property by the parties does not make said
house personal property for purposes of the
notice to be given for its sale of public auction.
This ruling is demanded by the need for a
definite, orderly and well defined regulation for

official and public guidance and would prevent

confusion and misunderstanding.
We, therefore, declare that the house of mixed
materials levied upon on execution, although
subject of a contract of chattel mortgage between
the owner and a third person, is real property
within the purview of Rule 39, section 16, of the
Rules of Court as it has become a permanent
fixture of the land, which, is real property. (42
Am. Jur. 199-200; Leung Yee vs. Strong
Machinery Co., 37 Phil., 644;
Republic vs. Ceniza, et al., 90 Phil., 544;
Ladera,, et al. vs. Hodges, et al., [C.A.] Off. Gaz.
5374.)" (Emphasis ours.)
The foregoing considerations apply, with equal force,
to the conditions for the levy of attachment, for it
similarly affects the public and third persons.
It is argued, however, that, even if the house in
question were immovable property, its attachment by
Evangelista was void or ineffective, because, in the
language of the Court of Appeals, "after presenting a
Copy of the order of attachment in the Office of the
Register of Deeds, the person who might then be in
possession of the house, the sheriff took no pains to
serve Ricardo Rivera, or other copies thereof." This
finding of the Court of Appeals is neither conclusive
upon us, nor accurate.

The Record on Appeal, annexed to the petition for

Certiorari, shows that petitioner alleged, in paragraph 3
of the complaint, that he acquired the house in
question "as a consequence of the levy of an
attachment and execution of the judgment in Civil
Case No. 8235" of the Court of First Instance of
Manila. In his answer (paragraph 2), Ricardo
Rivera admitted said attachment execution of
judgment. He alleged, however, by way a of special
defense, that the title of respondent "is superior to that
of plaintiff because it is based on a public instrument,"
whereas Evangelista relied upon a "promissory note"
which "is only a private instrument"; that said Public
instrument in favor of respondent "is superior also to
the judgment in Civil Case No. 8235"; and that
plaintiff's claim against Rivera amounted only to P866,
"which is much below the real value" of said house, for
which reason it would be "grossly unjust to acquire the
property for such an inadequate consideration."
Thus, Rivera impliedly admitted that his house had
been attached, that the house had been sold to
Evangelista in accordance with the requisite
formalities, and that said attachment was valid,
although allegedly inferior to the rights of respondent,
and the consideration for the sale to Evangelista was
claimed to be inadequate.
Respondent, in turn, denied the allegation in said
paragraph 3 of the complaint, but only " for the
reasons stated in its special defenses" namely: (1) that
by virtue of the sale at public auction, and the final

deed executed by the sheriff in favor of respondent,

the same became the "legitimate owner of the house"
in question; (2) that respondent "is a buyer in good
faith and for value"; (3) that respondent "took
possession and control of said house"; (4) that "there
was no valid attachment by the plaintiff and/or the
Sheriff of Manila of the property in question as neither
took actual or constructive possession or control of the
property at any time"; and (5) "that the alleged
registration of plaintiff's attachment, certificate of sale
and final deed in the Office of Register of Deeds,
Manila, if there was any, is likewise, not valid as there
is no registry of transactions covering houses erected
on land belonging to or leased from another." In this
manner, respondent claimed a better right, merely
under the theory that, in case of double sale of
immovable property, the purchaser who first obtains
possession in good faith, acquires title, if the sale has
not been "recorded . . . in the Registry of Property"
(Art. 1544, Civil Code of the Philippines), and that the
writ of attachment and the notice of attachment in favor
of Evangelista should be considered unregistered, "as
there is no registry of transactions covering houses
erected on land belonging to or leased from another."
In fact, said article 1544 of the Civil Code of the
Philippines, governing double sales, was quoted on
page 15 of the brief for respondent in the Court of
Appeals, in support of its fourth assignment of error
therein, to the effect that it "has preference or priority
over the sale of the same property" to Evangelista.

In other words, there was no issue on whether copy of

the writ and notice of attachment had been served on
Rivera. No evidence whatsoever, to the effect that
Rivera had not been served with copies of said writ
and notice, was introduced in the Court of First
Instance. In its brief in the Court of
Appeals, respondent did not aver, or even, intimate,
that no such copies were served by the sheriff upon
Rivera. Service thereof on Rivera had been impliedly
admitted by the defendants, in their respective
answers, and by their behaviour throughout the
proceedings in the Court of First Instance, and, as
regards respondent, in the Court of Appeals. In fact,
petitioner asserts in his brief herein (p. 26) that copies
of said writ and notice were delivered to Rivera,
simultaneously with copies of the complaint, upon
service of summons, prior to the filing of copies of said
writ and notice with the register deeds, and the truth of
this assertion has not been directly and positively
challenged or denied in the brief filed before us by
respondent herein. The latter did not dare therein to go
beyond making a statement for the first time in the
course of these proceedings, begun almost five (5)
years ago (June 18, 1953) reproducing substantially
the aforementioned finding of the Court of Appeals and
then quoting the same.

that the defendants had impliedly admitted-in said

pleadings and briefs, as well as by their conduct during
the entire proceedings, prior to the rendition of the
decision of the Court of Appeals that Rivera had
received copies of said documents; and that, for this
reason, evidently, no proof was introduced thereon,
we, are of the opinion, and so hold that the finding of
the Court of Appeals to the effect that said copies had
not been served upon Rivera is based upon a
misapprehension of the specific issues involved therein
and goes beyond the range of such issues, apart from
being contrary to the aforementioned admission by the
parties, and that, accordingly, a grave abuse of
discretion was committed in making said finding, which
is, furthermore, inaccurate.

Considering, therefore, that neither the pleadings, nor

the briefs in the Court of Appeals, raised an issue on
whether or not copies of the writ of attachment and
notice of attachment had been served upon Rivera;

RUBY L. TSAI, petitioner,

vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS,
INC. and MAMERTO R VILLALUZ, respondents.

Wherefore, the decision of the Court of Appeals is

hereby reversed, and another one shall be entered
affirming that of the Court of First Instance of Manila,
with the costs of this instance against respondent, the
Alto Surety and Insurance Co., Inc. It is so ordered.

G.R. No. 120098

October 2, 2001

x---------------------------------------------------------x

(REAL AND CHATTEL)

[G.R. No. 120109. October 2, 2001.]

xxx

PHILIPPINE BANK OF
COMMUNICATIONS, petitioner,
vs.
HON. COURT OF APPEALS, EVER TEXTILE MILLS
and MAMERTO R VILLALUZ, respondents.
QUISUMBING, J.:

On November 26, 1975, respondent Ever Textile Mills,

Inc. (EVERTEX) obtained a three million peso
(P3,000,000.00) loan from petitioner Philippine Bank of
Communications (PBCom). As security for the loan,
EVERTEX executed in favor of PBCom, a deed of
Real and Chattel Mortgage over the lot under TCT No.
372097, where its factory stands, and the chattels
located therein as enumerated in a schedule attached
to the mortgage contract. The pertinent portions of the
Real and Chattel Mortgage are quoted below:
MORTGAGE

xxx

The MORTGAGOR(S) hereby transfer(s) and

convey(s), by way of First Mortgage, to the
MORTGAGEE, . . . certain parcel(s) of land,
together with all the buildings and improvements
now existing or which may hereafter exist
thereon, situated in . . .
"Annex A"

These consolidated cases assail the decision of the

Court of Appeals in CA-G.R. CV No. 32986, affirming
the decision2 of the Regional Trial Court of Manila,
Branch 7, in Civil Case No. 89-48265. Also assailed is
respondent court's resolution denying petitioners'
motion for reconsideration.

xxx

(Real and Chattel Mortgage executed by Ever

Textile Mills in favor of PBCommunications
continued)
LIST OF MACHINERIES & EQUIPMENT
A. Forty Eight (48) units of Vayrow Knitting
Machines-Tompkins made in Hongkong:
Serial Numbers Size of Machines
xxx

xxx

xxx

B. Sixteen (16) sets of Vayrow Knitting Machines

made in Taiwan.
xxx

xxx

xxx

C. Two (2) Circular Knitting Machines made in

West Germany.

xxx

xxx

xxx

D. Four (4) Winding Machines.

xxx

xxx

xxx

SCHEDULE "A"
I. TCT # 372097 - RIZAL
xxx

xxx

xxx

II. Any and all buildings and improvements now

existing or hereafter to exist on the abovementioned lot.
III. MACHINERIES & EQUIPMENT situated,
located and/or installed on the above-mentioned
lot located at . . .
(a) Forty eight sets (48) Vayrow Knitting
Machines . . .
(b) Sixteen sets (16) Vayrow Knitting Machines . .
.
(c) Two (2) Circular Knitting Machines . . .
(d) Two (2) Winding Machines . . .
(e) Two (2) Winding Machines . . .

IV. Any and all replacements, substitutions,

additions, increases and accretions to above
properties.
xxx

xxx

xxx3

On April 23, 1979, PBCom granted a second loan of

P3,356,000.00 to EVERTEX. The loan was secured by
a Chattel Mortgage over personal properties
enumerated in a list attached thereto. These listed
properties were similar to those listed in Annex A of the
first mortgage deed.
After April 23, 1979, the date of the execution of the
second mortgage mentioned above, EVERTEX
purchased various machines and equipments.
On November 19, 1982, due to business reverses,
EVERTEX filed insolvency proceedings docketed as
SP Proc. No. LP-3091-P before the defunct Court of
First Instance of Pasay City, Branch XXVIII. The CFI
issued an order on November 24, 1982 declaring the
corporation insolvent. All its assets were taken into the
custody of the Insolvency Court, including the
collateral, real and personal, securing the two
mortgages as abovementioned.
In the meantime, upon EVERTEX's failure to meet its
obligation to PBCom, the latter commenced
extrajudicial foreclosure proceedings against
EVERTEX under Act 3135, otherwise known as "An
Act to Regulate the Sale of Property under Special

Powers Inserted in or Annexed to Real Estate

Mortgages" and Act 1506 or "The Chattel Mortgage
Law". A Notice of Sheriff's Sale was issued on
December 1, 1982.
On December 15, 1982, the first public auction was
held where petitioner PBCom emerged as the highest
bidder and a Certificate of Sale was issued in its favor
on the same date. On December 23, 1982, another
public auction was held and again, PBCom was the
highest bidder. The sheriff issued a Certificate of Sale
on the same day.
On March 7, 1984, PBCom consolidated its ownership
over the lot and all the properties in it. In November
1986, it leased the entire factory premises to petitioner
Ruby L. Tsai for P50,000.00 a month. On May 3, 1988,
PBCom sold the factory, lock, stock and barrel to Tsai
for P9,000,000.00, including the contested
machineries.
On March 16, 1989, EVERTEX filed a complaint for
annulment of sale, reconveyance, and damages with
the Regional Trial Court against PBCom, alleging inter
alia that the extrajudicial foreclosure of subject
mortgage was in violation of the Insolvency Law.
EVERTEX claimed that no rights having been
transmitted to PBCom over the assets of insolvent
EVERTEX, therefore Tsai acquired no rights over such
assets sold to her, and should reconvey the assets.

Further, EVERTEX averred that PBCom, without any

legal or factual basis, appropriated the contested
properties, which were not included in the Real and
Chattel Mortgage of November 26, 1975 nor in the
Chattel Mortgage of April 23, 1979, and neither were
those properties included in the Notice of Sheriff's Sale
dated December 1, 1982 and Certificate of Sale . . .
dated December 15, 1982.
The disputed properties, which were valued at
P4,000,000.00, are: 14 Interlock Circular Knitting
Machines, 1 Jet Drying Equipment, 1 Dryer Equipment,
1 Raisin Equipment and 1 Heatset Equipment.
The RTC found that the lease and sale of said
personal properties were irregular and illegal because
they were not duly foreclosed nor sold at the
December 15, 1982 auction sale since these were not
included in the schedules attached to the mortgage
contracts. The trial court decreed:
WHEREFORE, judgment is hereby rendered in
favor of plaintiff corporation and against the
defendants:
1. Ordering the annulment of the sale executed
by defendant Philippine Bank of Communications
in favor of defendant Ruby L. Tsai on May 3,
1988 insofar as it affects the personal properties
listed in par. 9 of the complaint, and their return
to the plaintiff corporation through its assignee,

plaintiff Mamerto R. Villaluz, for disposition by the

Insolvency Court, to be done within ten (10) days
from finality of this decision;
2. Ordering the defendants to pay jointly and
severally the plaintiff corporation the sum of
P5,200,000.00 as compensation for the use and
possession of the properties in question from
November 1986 to February 1991 and
P100,000.00 every month thereafter, with interest
thereon at the legal rate per annum until full
payment;
3. Ordering the defendants to pay jointly and
severally the plaintiff corporation the sum of
P50,000.00 as and for attorney's fees and
expenses of litigation;
4. Ordering the defendants to pay jointly and
severally the plaintiff corporation the sum of
P200,000.00 by way of exemplary damages;
5. Ordering the dismissal of the counterclaim of
the defendants; and
6. Ordering the defendants to proportionately pay
the costs of suit.
SO ORDERED.4
Dissatisfied, both PBCom and Tsai appealed to the
Court of Appeals, which issued its decision dated

August 31, 1994, the dispositive portion of which

reads:
WHEREFORE, except for the deletion therefrom of the
award; for exemplary damages, and reduction of the
actual damages, from P100,000.00 to P20,000.00 per
month, from November 1986 until subject personal
properties are restored to appellees, the judgment
appealed from is hereby AFFIRMED, in all other
respects. No pronouncement as to costs.5
Motion for reconsideration of the above decision
having been denied in the resolution of April 28, 1995,
PBCom and Tsai filed their separate petitions for
review with this Court.
In G.R No. 120098, petitioner Tsai ascribed the
following errors to the respondent court:
I
THE HONORABLE COURT OF APPEALS
(SECOND DIVISION) ERRED IN EFFECT
MAKING A CONTRACT FOR THE PARTIES BY
TREATING THE 1981 ACQUIRED
MACHINERIES AS CHATTELS INSTEAD OF
REAL PROPERTIES WITHIN THEIR EARLIER
1975 DEED OF REAL AND CHATTEL
MORTGAGE OR 1979 DEED OF CHATTEL
MORTGAGE.
II

THE HONORABLE COURT OF APPEALS

(SECOND DIVISION) ERRED IN HOLDING
THAT THE DISPUTED 1981 MACHINERIES
ARE NOT REAL PROPERTIES DEEMED PART
OF THE MORTGAGE DESPITE THE CLEAR
IMPORT OF THE EVIDENCE AND APPLICABLE
RULINGS OF THE SUPREME COURT.
III
THE HONORABLE COURT OF APPEALS
(SECOND DIVISION) ERRED IN DEEMING
PETITIONER A PURCHASER IN BAD FAITH.
IV
THE HONORABLE COURT OF APPEALS
(SECOND DIVISION) ERRED IN ASSESSING
PETITIONER ACTUAL DAMAGES,
ATTORNEY'S FEES AND EXPENSES OF
LITIGATION FOR WANT OF VALID FACTUAL
AND LEGAL BASIS.
V
THE HONORABLE COURT OF APPEALS
(SECOND DIVISION) ERRED IN HOLDING
AGAINST PETITIONER'S ARGUMENTS ON
PRESCRIPTION AND LACHES.6
In G.R. No. 120098, PBCom raised the following
issues:

I.
DID THE COURT OF APPEALS VALIDLY DECREE
THE MACHINERIES LISTED UNDER PARAGRAPH 9
OF THE COMPLAINT BELOW AS PERSONAL
PROPERTY OUTSIDE OF THE 1975 DEED OF REAL
ESTATE MORTGAGE AND EXCLUDED THEM FROM
THE REAL PROPERTY EXTRAJUDICIALLY
FORECLOSED BY PBCOM DESPITE THE
PROVISION IN THE 1975 DEED THAT ALL AFTERACQUIRED PROPERTIES DURING THE LIFETIME
OF THE MORTGAGE SHALL FORM PART THEREOF,
AND DESPITE THE UNDISPUTED FACT THAT SAID
MACHINERIES ARE BIG AND HEAVY, BOLTED OR
CEMENTED ON THE REAL PROPERTY
MORTGAGED BY EVER TEXTILE MILLS TO
PBCOM, AND WERE ASSESSED FOR REAL
ESTATE TAX PURPOSES?
II
CAN PBCOM, WHO TOOK POSSESSION OF THE
MACHINERIES IN QUESTION IN GOOD FAITH,
EXTENDED CREDIT FACILITIES TO EVER TEXTILE
MILLS WHICH AS OF 1982 TOTALLED
P9,547,095.28, WHO HAD SPENT FOR
MAINTENANCE AND SECURITY ON THE DISPUTED
MACHINERIES AND HAD TO PAY ALL THE BACK
TAXES OF EVER TEXTILE MILLS BE LEGALLY
COMPELLED TO RETURN TO EVER THE SAID
MACHINERIES OR IN LIEU THEREOF BE

ASSESSED DAMAGES. IS THAT SITUATION

TANTAMOUNT TO A CASE OF UNJUST
ENRICHMENT?7

legal basis. Finally, it asserts that the Court of Appeals

erred in assessing damages and attorney's fees
against PBCom.

The principal issue, in our view, is whether or not the

inclusion of the questioned properties in the foreclosed
properties is proper. The secondary issue is whether or
not the sale of these properties to petitioner Ruby Tsai
is valid.

In opposition, private respondents argue that the

controverted units of machinery are not "real
properties" but chattels, and, therefore, they were not
part of the foreclosed real properties, rendering the
lease and the subsequent sale thereof to Tsai a
nullity.12

For her part, Tsai avers that the Court of Appeals in

effect made a contract for the parties by treating the
1981 acquired units of machinery as chattels instead of
real properties within their earlier 1975 deed of Real
and Chattel Mortgage or 1979 deed of Chattel
Mortgage.8 Additionally, Tsai argues that respondent
court erred in holding that the disputed 1981
machineries are not real properties.9 Finally, she
contends that the Court of Appeals erred in holding
against petitioner's arguments on prescription and
laches10 and in assessing petitioner actual damages,
attorney's fees and expenses of litigation, for want of
valid factual and legal basis.11
Essentially, PBCom contends that respondent court
erred in affirming the lower court's judgment decreeing
that the pieces of machinery in dispute were not duly
foreclosed and could not be legally leased nor sold to
Ruby Tsai. It further argued that the Court of Appeals'
pronouncement that the pieces of machinery in
question were personal properties have no factual and

Considering the assigned errors and the arguments of

the parties, we find the petitions devoid of merit and
ought to be denied.
Well settled is the rule that the jurisdiction of the
Supreme Court in a petition for review on certiorari
under Rule 45 of the Revised Rules of Court is limited
to reviewing only errors of law, not of fact, unless the
factual findings complained of are devoid of support by
the evidence on record or the assailed judgment is
based on misapprehension of facts.13 This rule is
applied more stringently when the findings of fact of
the RTC is affirmed by the Court of Appeals.14
The following are the facts as found by the RTC and
affirmed by the Court of Appeals that are decisive of
the issues: (1) the "controverted machineries" are not
covered by, or included in, either of the two mortgages,
the Real Estate and Chattel Mortgage, and the pure
Chattel Mortgage; (2) the said machineries were not

included in the list of properties appended to the Notice

of Sale, and neither were they included in the Sheriff's
Notice of Sale of the foreclosed properties.15
Petitioners contend that the nature of the disputed
machineries, i.e., that they were heavy, bolted or
cemented on the real property mortgaged by
EVERTEX to PBCom, make them ipso
facto immovable under Article 415 (3) and (5) of the
New Civil Code. This assertion, however, does not
settle the issue. Mere nuts and bolts do not foreclose
the controversy. We have to look at the parties' intent.
While it is true that the controverted properties appear
to be immobile, a perusal of the contract of Real and
Chattel Mortgage executed by the parties herein gives
us a contrary indication. In the case at bar, both the
trial and the appellate courts reached the same finding
that the true intention of PBCOM and the owner,
EVERTEX, is to treat machinery and equipment as
chattels. The pertinent portion of respondent appellate
court's ruling is quoted below:
As stressed upon by appellees, appellant bank
treated the machineries as chattels; never as real
properties. Indeed, the 1975 mortgage contract,
which was actually real and chattel mortgage,
militates against appellants' posture. It should be
noted that the printed form used by appellant
bank was mainly for real estate mortgages. But
reflective of the true intention of appellant

PBCOM and appellee EVERTEX was the typing

in capital letters, immediately following the
printed caption of mortgage, of the phrase "real
and chattel." So also, the "machineries and
equipment" in the printed form of the bank had to
be inserted in the blank space of the printed
contract and connected with the word "building"
by typewritten slash marks. Now, then, if the
machineries in question were contemplated to be
included in the real estate mortgage, there would
have been no necessity to ink a chattel mortgage
specifically mentioning as part III of Schedule A a
listing of the machineries covered thereby. It
would have sufficed to list them as immovables
in the Deed of Real Estate Mortgage of the land
and building involved.
As regards the 1979 contract, the intention of the
parties is clear and beyond question. It refers
solely tochattels. The inventory list of the
mortgaged properties is an itemization of sixtythree (63) individually described machineries
while the schedule listed only machines and
2,996,880.50 worth of finished cotton fabrics and
natural cotton fabrics.16
In the absence of any showing that this conclusion is
baseless, erroneous or uncorroborated by the
evidence on record, we find no compelling reason to
depart therefrom.

Too, assuming arguendo that the properties in question

are immovable by nature, nothing detracts the parties
from treating it as chattels to secure an obligation
under the principle of estoppel. As far back as Navarro
v. Pineda, 9 SCRA 631 (1963), an immovable may be
considered a personal property if there is a stipulation
as when it is used as security in the payment of an
obligation where a chattel mortgage is executed over
it, as in the case at bar.
In the instant case, the parties herein: (1) executed a
contract styled as "Real Estate Mortgage and Chattel
Mortgage," instead of just "Real Estate Mortgage" if
indeed their intention is to treat all properties included
therein as immovable, and (2) attached to the said
contract a separate "LIST OF MACHINERIES &
EQUIPMENT". These facts, taken together, evince the
conclusion that the parties' intention is to treat these
units of machinery as chattels. A fortiori, the contested
after-acquired properties, which are of the same
description as the units enumerated under the title
"LIST OF MACHINERIES & EQUIPMENT," must also
be treated as chattels.
Accordingly, we find no reversible error in the
respondent appellate court's ruling that inasmuch as
the subject mortgages were intended by the parties to
involve chattels, insofar as equipment and machinery
were concerned, the Chattel Mortgage Law applies,
which provides in Section 7 thereof that: "a chattel
mortgage shall be deemed to cover only the property

described therein and not like or substituted property

thereafter acquired by the mortgagor and placed in the
same depository as the property originally mortgaged,
anything in the mortgage to the contrary
notwithstanding."
And, since the disputed machineries were acquired in
1981 and could not have been involved in the 1975 or
1979 chattel mortgages, it was consequently an error
on the part of the Sheriff to include subject machineries
with the properties enumerated in said chattel
mortgages.
As the auction sale of the subject properties to PBCom
is void, no valid title passed in its favor. Consequently,
the sale thereof to Tsai is also a nullity under the
elementary principle of nemo dat quod non habet, one
cannot give what one does not have.17
Petitioner Tsai also argued that assuming that
PBCom's title over the contested properties is a nullity,
she is nevertheless a purchaser in good faith and for
value who now has a better right than EVERTEX.
To the contrary, however, are the factual findings and
conclusions of the trial court that she is not a
purchaser in good faith. Well-settled is the rule that the
person who asserts the status of a purchaser in good
faith and for value has the burden of proving such
assertion.18 Petitioner Tsai failed to discharge this
burden persuasively.

Moreover, a purchaser in good faith and for value is

one who buys the property of another without notice
that some other person has a right to or interest in
such property and pays a full and fair price for the
same, at the time of purchase, or before he has notice
of the claims or interest of some other person in the
property.19Records reveal, however, that when Tsai
purchased the controverted properties, she knew of
respondent's claim thereon. As borne out by the
records, she received the letter of respondent's
counsel, apprising her of respondent's claim, dated
February 27, 1987.20 She replied thereto on March 9,
1987.21 Despite her knowledge of respondent's claim,
she proceeded to buy the contested units of machinery
on May 3, 1988. Thus, the RTC did not err in finding
that she was not a purchaser in good faith.
Petitioner Tsai's defense of indefeasibility of Torrens
Title of the lot where the disputed properties are
located is equally unavailing. This defense refers to
sale of lands and not to sale of properties situated
therein. Likewise, the mere fact that the lot where the
factory and the disputed properties stand is in
PBCom's name does not automatically make PBCom
the owner of everything found therein, especially in
view of EVERTEX's letter to Tsai enunciating its claim.
Finally, petitioners' defense of prescription and laches
is less than convincing. We find no cogent reason to
disturb the consistent findings of both courts below that
the case for the reconveyance of the disputed

properties was filed within the reglementary period.

Here, in our view, the doctrine of laches does not
apply. Note that upon petitioners' adamant refusal to
heed EVERTEX's claim, respondent company
immediately filed an action to recover possession and
ownership of the disputed properties. There is no
evidence showing any failure or neglect on its part, for
an unreasonable and unexplained length of time, to do
that which, by exercising due diligence, could or should
have been done earlier. The doctrine of stale demands
would apply only where by reason of the lapse of time,
it would be inequitable to allow a party to enforce his
legal rights. Moreover, except for very strong reasons,
this Court is not disposed to apply the doctrine of
laches to prejudice or defeat the rights of an owner.22
As to the award of damages, the contested damages
are the actual compensation, representing rentals for
the contested units of machinery, the exemplary
damages, and attorney's fees.
As regards said actual compensation, the RTC
awarded P100,000.00 corresponding to the unpaid
rentals of the contested properties based on the
testimony of John Chua, who testified that the
P100,000.00 was based on the accepted practice in
banking and finance, business and investments that
the rental price must take into account the cost of
money used to buy them. The Court of Appeals did not
give full credence to Chua's projection and reduced the
award to P20,000.00.

Basic is the rule that to recover actual damages, the

amount of loss must not only be capable of proof but
must actually be proven with reasonable degree of
certainty, premised upon competent proof or best
evidence obtainable of the actual amount
thereof.23 However, the allegations of respondent
company as to the amount of unrealized rentals due
them as actual damages remain mere assertions
unsupported by documents and other competent
evidence. In determining actual damages, the court
cannot rely on mere assertions, speculations,
conjectures or guesswork but must depend on
competent proof and on the best evidence obtainable
regarding the actual amount of loss.24 However, we are
not prepared to disregard the following dispositions of
the respondent appellate court:
. . . In the award of actual damages under
scrutiny, there is nothing on record warranting
the said award of P5,200,000.00, representing
monthly rental income of P100,000.00 from
November 1986 to February 1991, and the
additional award of P100,000.00 per month
thereafter.
As pointed out by appellants, the testimonial
evidence, consisting of the testimonies of Jonh
(sic) Chua and Mamerto Villaluz, is shy of what is
necessary to substantiate the actual damages
allegedly sustained by appellees, by way of

unrealized rental income of subject machineries

and equipments.
The testimony of John Cua (sic) is nothing but an
opinion or projection based on what is claimed to
be a practice in business and industry. But such
a testimony cannot serve as the sole basis for
assessing the actual damages complained of.
What is more, there is no showing that had
appellant Tsai not taken possession of the
machineries and equipments in question,
somebody was willing and ready to rent the
same for P100,000.00 a month.
xxx

xxx

xxx

Then, too, even assuming arguendo that the said

machineries and equipments could have
generated a rental income of P30,000.00 a
month, as projected by witness Mamerto Villaluz,
the same would have been a gross income.
Therefrom should be deducted or removed,
expenses for maintenance and repairs . . .
Therefore, in the determination of the actual
damages or unrealized rental income sued upon,
there is a good basis to calculate that at least
four months in a year, the machineries in dispute
would have been idle due to absence of a lessee
or while being repaired. In the light of the
foregoing rationalization and computation, We
believe that a net unrealized rental income of

P20,000.00 a month, since November 1986, is

more realistic and fair.25
As to exemplary damages, the RTC awarded
P200,000.00 to EVERTEX which the Court of Appeals
deleted. But according to the CA, there was no clear
showing that petitioners acted malevolently, wantonly
and oppressively. The evidence, however, shows
otherwise.It is a requisite to award exemplary damages
that the wrongful act must be accompanied by bad
faith,26 and the guilty acted in a wanton, fraudulent,
oppressive, reckless or malevolent manner.27 As
previously stressed, petitioner Tsai's act of purchasing
the controverted properties despite her knowledge of
EVERTEX's claim was oppressive and subjected the
already insolvent respondent to gross disadvantage.
Petitioner PBCom also received the same letters of
Atty. Villaluz, responding thereto on March 24,
1987.28 Thus, PBCom's act of taking all the properties
found in the factory of the financially handicapped
respondent, including those properties not covered by
or included in the mortgages, is equally oppressive and
tainted with bad faith. Thus, we are in agreement with
the RTC that an award of exemplary damages is
proper.
The amount of P200,000.00 for exemplary damages is,
however, excessive. Article 2216 of the Civil Code
provides that no proof of pecuniary loss is necessary
for the adjudication of exemplary damages, their
assessment being left to the discretion of the court in

accordance with the circumstances of each

case.29 While the imposition of exemplary damages is
justified in this case, equity calls for its reduction.
In Inhelder Corporation v. Court of Appeals, G.R. No.
L-52358, 122 SCRA 576, 585, (May 30, 1983), we laid
down the rule that judicial discretion granted to the
courts in the assessment of damages must always be
exercised with balanced restraint and measured
objectivity. Thus, here the award of exemplary
damages by way of example for the public good should
be reduced to P100,000.00.
By the same token, attorney's fees and other expenses
of litigation may be recovered when exemplary
damages are awarded.30 In our view, RTC's award of
P50,000.00 as attorney's fees and expenses of
litigation is reasonable, given the circumstances in
these cases.
WHEREFORE, the petitions are DENIED. The
assailed decision and resolution of the Court of
Appeals in CA-G.R. CV No. 32986 are AFFIRMED
WITH MODIFICATIONS. Petitioners Philippine Bank of
Communications and Ruby L. Tsai are hereby ordered
to pay jointly and severally Ever Textile Mills, Inc. the
following: (1) P20,000.00 per month, as compensation
for the use and possession of the properties in
question from November 198631 until subject personal
properties are restored to respondent corporation; (2)
P100,000.00 by way of exemplary damages, and (3)

P50,000.00 as attorney's fees and litigation expenses.

Costs against petitioners.

G.R. No. L-64261 December 26, 1984

JOSE BURGOS, SR., JOSE BURGOS, JR., BAYANI
SORIANO and J. BURGOS MEDIA SERVICES,
INC.,petitioners,
vs.
THE CHIEF OF STAFF, ARMED FORCES OF THE
PHILIPPINES, THE CHIEF, PHILIPPINE
CONSTABULARY, THE CHIEF LEGAL OFFICER,
PRESIDENTIAL SECURITY COMMAND, THE
JUDGE ADVOCATE GENERAL, ET AL., respondents.
Lorenzo M. Taada, Wigberto E. Taada, Martiniano
Vivo, Augusto Sanchez, Joker P. Arroyo, Jejomar
Binay and Rene Saguisag for petitioners.
The Solicitor General for respondents.

ESCOLIN, J.:
Assailed in this petition for certiorari prohibition and
mandamus with preliminary mandatory and prohibitory

injunction is the validity of two [2] search warrants

issued on December 7, 1982 by respondent Judge
Ernani Cruz-Pano, Executive Judge of the then Court
of First Instance of Rizal [Quezon City], under which
the premises known as No. 19, Road 3, Project 6,
Quezon City, and 784 Units C & D, RMS Building,
Quezon Avenue, Quezon City, business addresses of
the "Metropolitan Mail" and "We Forum" newspapers,
respectively, were searched, and office and printing
machines, equipment, paraphernalia, motor vehicles
and other articles used in the printing, publication and
distribution of the said newspapers, as well as
numerous papers, documents, books and other written
literature alleged to be in the possession and control of
petitioner Jose Burgos, Jr. publisher-editor of the "We
Forum" newspaper, were seized.
Petitioners further pray that a writ of preliminary
mandatory and prohibitory injunction be issued for the
return of the seized articles, and that respondents,
"particularly the Chief Legal Officer, Presidential
Security Command, the Judge Advocate General, AFP,
the City Fiscal of Quezon City, their representatives,
assistants, subalterns, subordinates, substitute or
successors" be enjoined from using the articles thus
seized as evidence against petitioner Jose Burgos, Jr.
and the other accused in Criminal Case No. Q- 022782
of the Regional Trial Court of Quezon City,
entitled People v. Jose Burgos, Jr. et al. 1

In our Resolution dated June 21, 1983, respondents

were required to answer the petition. The plea for
preliminary mandatory and prohibitory injunction was
set for hearing on June 28, 1983, later reset to July 7,
1983, on motion of the Solicitor General in behalf of
respondents.
At the hearing on July 7, 1983, the Solicitor General,
while opposing petitioners' prayer for a writ of
preliminary mandatory injunction, manifested that
respondents "will not use the aforementioned articles
as evidence in the aforementioned case until final
resolution of the legality of the seizure of the
aforementioned articles. ..." 2 With this manifestation,
the prayer for preliminary prohibitory injunction was
rendered moot and academic.
Respondents would have this Court dismiss the
petition on the ground that petitioners had come to this
Court without having previously sought the quashal of
the search warrants before respondent judge. Indeed,
petitioners, before impugning the validity of the
warrants before this Court, should have filed a motion
to quash said warrants in the court that issued
them. 3 But this procedural flaw notwithstanding, we
take cognizance of this petition in view of the
seriousness and urgency of the constitutional issues
raised not to mention the public interest generated by
the search of the "We Forum" offices, which was
televised in Channel 7 and widely publicized in all
metropolitan dailies. The existence of this special

circumstance justifies this Court to exercise its inherent

power to suspend its rules. In the words of the revered
Mr. Justice Abad Santos in the case of C. Vda. de
Ordoveza v. Raymundo, 4 "it is always in the power of
the court [Supreme Court] to suspend its rules or to
except a particular case from its operation, whenever
the purposes of justice require it...".
Respondents likewise urge dismissal of the petition on
ground of laches. Considerable stress is laid on the
fact that while said search warrants were issued on
December 7, 1982, the instant petition impugning the
same was filed only on June 16, 1983 or after the
lapse of a period of more than six [6] months.
Laches is failure or negligence 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. 5
Petitioners, in their Consolidated Reply, explained the
reason for the delay in the filing of the petition thus:
Respondents should not find fault, as they
now do [p. 1, Answer, p. 3, Manifestation]
with the fact that the Petition was filed on
June 16, 1983, more than half a year after
the petitioners' premises had been raided.

The climate of the times has given

petitioners no other choice. If they had
waited this long to bring their case to court,
it was because they tried at first to exhaust
other remedies. The events of the past
eleven fill years had taught them that
everything in this country, from release of
public funds to release of detained persons
from custody, has become a matter of
executive benevolence or largesse
Hence, as soon as they could, petitioners,
upon suggestion of persons close to the
President, like Fiscal Flaminiano, sent a
letter to President Marcos, through counsel
Antonio Coronet asking the return at least
of the printing equipment and vehicles. And
after such a letter had been sent, through
Col. Balbino V. Diego, Chief Intelligence
and Legal Officer of the Presidential
Security Command, they were further
encouraged to hope that the latter would
yield the desired results.
After waiting in vain for five [5] months,
petitioners finally decided to come to Court.
[pp. 123-124, Rollo]
Although the reason given by petitioners may not be
flattering to our judicial system, We find no ground to
punish or chastise them for an error in judgment. On

the contrary, the extrajudicial efforts exerted by

petitioners quite evidently negate the presumption that
they had abandoned their right to the possession of the
seized property, thereby refuting the charge of laches
against them.
Respondents also submit the theory that since
petitioner Jose Burgos, Jr. had used and marked as
evidence some of the seized documents in Criminal
Case No. Q- 022872, he is now estopped from
challenging the validity of the search warrants. We do
not follow the logic of respondents. These documents
lawfully belong to petitioner Jose Burgos, Jr. and he
can do whatever he pleases with them, within legal
bounds. The fact that he has used them as evidence
does not and cannot in any way affect the validity or
invalidity of the search warrants assailed in this
petition.
Several and diverse reasons have been advanced by
petitioners to nullify the search warrants in question.
1. Petitioners fault respondent judge for his alleged
failure to conduct an examination under oath or
affirmation of the applicant and his witnesses, as
mandated by the above-quoted constitutional provision
as wen as Sec. 4, Rule 126 of the Rules of
Court . 6 This objection, however, may properly be
considered moot and academic, as petitioners
themselves conceded during the hearing on August 9,
1983, that an examination had indeed been conducted

by respondent judge of Col. Abadilla and his

witnesses.
2. Search Warrants No. 20-82[a] and No. 20- 82[b]
were used to search two distinct places: No. 19, Road
3, Project 6, Quezon City and 784 Units C & D, RMS
Building, Quezon Avenue, Quezon City, respectively.
Objection is interposed to the execution of Search
Warrant No. 20-82[b] at the latter address on the
ground that the two search warrants pinpointed only
one place where petitioner Jose Burgos, Jr. was
allegedly keeping and concealing the articles listed
therein, i.e., No. 19, Road 3, Project 6, Quezon City.
This assertion is based on that portion of Search
Warrant No. 20- 82[b] which states:
Which have been used, and are being
used as instruments and means of
committing the crime of subversion
penalized under P.D. 885 as amended and
he is keeping and concealing the same at
19 Road 3, Project 6, Quezon City.
The defect pointed out is obviously a typographical
error. Precisely, two search warrants were applied for
and issued because the purpose and intent were to
search two distinct premises. It would be quite absurd
and illogical for respondent judge to have issued two
warrants intended for one and the same place.
Besides, the addresses of the places sought to be
searched were specifically set forth in the application,

and since it was Col. Abadilla himself who headed the

team which executed the search warrants, the
ambiguity that might have arisen by reason of the
typographical error is more apparent than real. The
fact is that the place for which Search Warrant No. 2082[b] was applied for was 728 Units C & D, RMS
Building, Quezon Avenue, Quezon City, which address
appeared in the opening paragraph of the said
warrant. 7 Obviously this is the same place that
respondent judge had in mind when he issued Warrant
No. 20-82 [b].
In the determination of whether a search warrant
describes the premises to be searched with sufficient
particularity, it has been held "that the executing
officer's prior knowledge as to the place intended in the
warrant is relevant. This would seem to be especially
true where the executing officer is the affiant on whose
affidavit the warrant had issued, and when he knows
that the judge who issued the warrant intended the
building described in the affidavit, And it has also been
said that the executing officer may look to the affidavit
in the official court file to resolve an ambiguity in the
warrant as to the place to be searched." 8
3. Another ground relied upon to annul the search
warrants is the fact that although the warrants were
directed against Jose Burgos, Jr. alone, articles b
belonging to his co-petitioners Jose Burgos, Sr.,
Bayani Soriano and the J. Burgos Media Services, Inc.
were seized.

Section 2, Rule 126 of the Rules of Court, enumerates

the personal properties that may be seized under a
search warrant, to wit:
Sec. 2. Personal Property to be seized.
A search warrant may be issued for the
search and seizure of the following
personal property:
[a] Property subject of the
offense;
[b] Property stolen or
embezzled and other proceeds
or fruits of the offense; and
[c] Property used or intended to
be used as the means of
committing an offense.
The above rule does not require that the property to be
seized should be owned by the person against whom
the search warrant is directed. It may or may not be
owned by him. In fact, under subsection [b] of the
above-quoted Section 2, one of the properties that may
be seized is stolen property. Necessarily, stolen
property must be owned by one other than the person
in whose possession it may be at the time of the
search and seizure. Ownership, therefore, is of no
consequence, and it is sufficient that the person
against whom the warrant is directed has control or
possession of the property sought to be seized, as

petitioner Jose Burgos, Jr. was alleged to have in

relation to the articles and property seized under the
warrants.
4. Neither is there merit in petitioners' assertion that
real properties were seized under the disputed
warrants. Under Article 415[5] of the Civil Code of the
Philippines, "machinery, receptables, instruments or
implements intended by the owner of the tenement for
an industry or works which may be carried on in a
building or on a piece of land and which tend directly to
meet the needs of the said industry or works" are
considered immovable property. In Davao Sawmill Co.
v. Castillo 9 where this legal provision was invoked, this
Court ruled that machinery which is movable by nature
becomes immobilized when placed by the owner of the
tenement, property or plant, but not so when placed by
a tenant, usufructuary, or any other person having only
a temporary right, unless such person acted as the
agent of the owner.
In the case at bar, petitioners do not claim to be the
owners of the land and/or building on which the
machineries were placed. This being the case, the
machineries in question, while in fact bolted to the
ground remain movable property susceptible to seizure
under a search warrant.
5. The questioned search warrants were issued by
respondent judge upon application of Col. Rolando N.
Abadilla Intelligence Officer of the P.C.

Metrocom. 10 The application was accompanied by the

Joint Affidavit of Alejandro M. Gutierrez and Pedro U.
Tango, 11 members of the Metrocom Intelligence and
Security Group under Col. Abadilla which conducted a
surveillance of the premises prior to the filing of the
application for the search warrants on December 7,
1982.
It is contended by petitioners, however, that the
abovementioned documents could not have provided
sufficient basis for the finding of a probable cause
upon which a warrant may validly issue in accordance
with Section 3, Article IV of the 1973 Constitution which
provides:
SEC. 3. ... and no search warrant or
warrant of arrest shall issue except upon
probable cause to be determined by the
judge, or such other responsible officer as
may be authorized by law, after
examination under oath or affirmation of
the complainant and the witnesses he may
produce, and particularly describing the
place to be searched and the persons or
things to be seized.
We find petitioners' thesis impressed with merit.
Probable cause for a search is defined as such facts
and circumstances which would lead a reasonably
discreet and prudent man to believe that an offense
has been committed and that the objects sought in

connection with the offense are in the place sought to

be searched. And when the search warrant applied for
is directed against a newspaper publisher or editor in
connection with the publication of subversive materials,
as in the case at bar, the application and/or its
supporting affidavits must contain a specification,
stating with particularity the alleged subversive
material he has published or is intending to publish.
Mere generalization will not suffice. Thus, the broad
statement in Col. Abadilla's application that petitioner
"is in possession or has in his control printing
equipment and other paraphernalia, news publications
and other documents which were used and are all
continuously being used as a means of committing the
offense of subversion punishable under Presidential
Decree 885, as amended ..." 12 is a mere conclusion
of law and does not satisfy the requirements of
probable cause. Bereft of such particulars as would
justify a finding of the existence of probable cause,
said allegation cannot serve as basis for the issuance
of a search warrant and it was a grave error for
respondent judge to have done so.
Equally insufficient as basis for the determination of
probable cause is the statement contained in the joint
affidavit of Alejandro M. Gutierrez and Pedro U. Tango,
"that the evidence gathered and collated by our unit
clearly shows that the premises above- mentioned and
the articles and things above-described were used and
are continuously being used for subversive activities in
conspiracy with, and to promote the objective of, illegal

organizations such as the Light-a-Fire Movement,

Movement for Free Philippines, and April 6
Movement." 13
In mandating that "no warrant shall issue except upon
probable cause to be determined by the judge, ... after
examination under oath or affirmation of the
complainant and the witnesses he may
produce; 14 the Constitution requires no less than
personal knowledge by the complainant or his
witnesses of the facts upon which the issuance of a
search warrant may be justified. In Alvarez v. Court of
First Instance, 15 this Court ruled that "the oath
required must refer to the truth of the facts within the
personal knowledge of the petitioner or his witnesses,
because the purpose thereof is to convince the
committing magistrate, not the individual making the
affidavit and seeking the issuance of the warrant, of
the existence of probable cause." As couched, the
quoted averment in said joint affidavit filed before
respondent judge hardly meets the test of sufficiency
established by this Court in Alvarez case.
Another factor which makes the search warrants under
consideration constitutionally objectionable is that they
are in the nature of general warrants. The search
warrants describe the articles sought to be seized in
this wise:
1] All printing equipment, paraphernalia,
paper, ink, photo (equipment, typewriters,

cabinets, tables, communications/recording

equipment, tape recorders, dictaphone and
the like used and/or connected in the
printing of the "WE FORUM" newspaper
and any and all documents communication,
letters and facsimile of prints related to the
"WE FORUM" newspaper.
2] Subversive documents, pamphlets,
leaflets, books, and other publication to
promote the objectives and piurposes of
the subversive organization known as
Movement for Free Philippines, Light-a-Fire
Movement and April 6 Movement; and,
3] Motor vehicles used in the
distribution/circulation of the "WE FORUM"
and other subversive materials and
propaganda, more particularly,
1] Toyota-Corolla, colored
yellow with Plate No. NKA 892;
2] DATSUN pick-up colored
white with Plate No. NKV 969
3] A delivery truck with Plate
No. NBS 524;
4] TOYOTA-TAMARAW,
colored white with Plate No.
PBP 665; and,

5] TOYOTA Hi-Lux, pick-up

truck with Plate No. NGV 427
with marking "Bagong Silang."
In Stanford v. State of Texas 16 the search warrant
which authorized the search for "books, records,
pamphlets, cards, receipts, lists, memoranda, pictures,
recordings and other written instruments concerning
the Communist Party in Texas," was declared void by
the U.S. Supreme Court for being too general. In like
manner, directions to "seize any evidence in
connectionwith the violation of SDC 13-3703 or
otherwise" have been held too general, and that
portion of a search warrant which authorized the
seizure of any "paraphernalia which could be used to
violate Sec. 54-197 of the Connecticut General
Statutes [the statute dealing with the crime of
conspiracy]" was held to be a general warrant, and
therefore invalid. 17 The description of the articles
sought to be seized under the search warrants in
question cannot be characterized differently.
In the Stanford case, the U.S. Supreme Courts calls to
mind a notable chapter in English history: the era of
disaccord between the Tudor Government and the
English Press, when "Officers of the Crown were given
roving commissions to search where they pleased in
order to suppress and destroy the literature of dissent
both Catholic and Puritan Reference herein to such
historical episode would not be relevant for it is not the
policy of our government to suppress any newspaper

or publication that speaks with "the voice of nonconformity" but poses no clear and imminent danger to
state security.
As heretofore stated, the premises searched were the
business and printing offices of the "Metropolitan Mail"
and the "We Forum newspapers. As a consequence of
the search and seizure, these premises were
padlocked and sealed, with the further result that the
printing and publication of said newspapers were
discontinued.
Such closure is in the nature of previous restraint or
censorship abhorrent to the freedom of the press
guaranteed under the fundamental law, 18 and
constitutes a virtual denial of petitioners' freedom to
express themselves in print. This state of being is
patently anathematic to a democratic framework where
a free, alert and even militant press is essential for the
political enlightenment and growth of the citizenry.
Respondents would justify the continued sealing of the
printing machines on the ground that they have been
sequestered under Section 8 of Presidential Decree
No. 885, as amended, which authorizes "the
sequestration of the property of any person, natural or
artificial, engaged in subversive activities against the
government and its duly constituted authorities ... in
accordance with implementing rules and regulations as
may be issued by the Secretary of National Defense."
It is doubtful however, if sequestration could validly be

effected in view of the absence of any implementing

rules and regulations promulgated by the Minister of
National Defense.
Besides, in the December 10, 1982 issue of the Daily
Express, it was reported that no less than President
Marcos himself denied the request of the military
authorities to sequester the property seized from
petitioners on December 7, 1982. Thus:
The President denied a request flied by
government prosecutors for sequestration
of the WE FORUM newspaper and its
printing presses, according to Information
Minister Gregorio S. Cendana.
On the basis of court orders, government
agents went to the We Forum offices in
Quezon City and took a detailed inventory
of the equipment and all materials in the
premises.
Cendaa said that because of the denial
the newspaper and its equipment remain at
the disposal of the owners, subject to the
discretion of the court. 19
That the property seized on December 7, 1982 had not
been sequestered is further confirmed by the reply of
then Foreign Minister Carlos P. Romulo to the letter
dated February 10, 1983 of U.S. Congressman Tony P.
Hall addressed to President Marcos, expressing alarm

over the "WE FORUM " case. 20 In this reply dated

February 11, 1983, Minister Romulo stated:
2. Contrary to reports, President Marcos
turned down the recommendation of our
authorities to close the paper's printing
facilities and confiscate the equipment and
materials it uses. 21
IN VIEW OF THE FOREGOING, Search Warrants
Nos. 20-82[a] and 20-82[b] issued by respondent judge
on December 7, 1982 are hereby declared null and
void and are accordingly set aside. The prayer for a
writ of mandatory injunction for the return of the seized
articles is hereby granted and all articles seized
thereunder are hereby ordered released to petitioners.
No costs.

G.R. No. L-32917 July 18, 1988

JULIAN S. YAP, petitioner,
vs.
HON. SANTIAGO O. TAADA, etc., and GOULDS
PUMPS INTERNATIONAL (PHIL.), INC., respondents.
Paterno P. Natinga for private respondent.

NARVASA, J.:
The petition for review on certiorari at bar involves two
(2) Orders of respondent Judge Taada 1 in Civil Case
No. 10984. The first, dated September 16, 1970,
denied petitioner Yap's motion to set aside execution
sale and to quash alias writ of execution. The second,
dated November 21, 1970, denied Yap's motion for
reconsideration. The issues concerned the propriety of
execution of a judgment claimed to be "incomplete,
vague and non-final," and the denial of petitioner's
application to prove and recover damages resulting
from alleged irregularities in the process of execution.
The antecedents will take some time in the telling. The
case began in the City Court of Cebu with the filing by
Goulds Pumps International (Phil.), Inc. of a
complaint 2 against Yap and his wife 3 seeking recovery
of P1,459.30 representing the balance of the price and
installation cost of a water pump in the latter's
premises. 4 The case resulted in a judgment by the
City Court on November 25, 1968, reading as follows:
When this case was called for trial today,
Atty. Paterno Natinga appeared for the
plaintiff Goulds and informed the court that
he is ready for trial. However, none of the
defendants appeared despite notices
having been served upon them.

Upon petition Atty. Natinga, the plaintiff is

hereby allowed to present its evidence exparte.
After considering the evidence of the
plaintiff, the court hereby renders judgment
in favor of the plaintiff and against the
defendant (Yap), ordering the latter to pay
to the former the sum of Pl,459.30 with
interest at the rate of 12% per annum until
fully paid, computed from August 12, 1968,
date of the filing of the complaint; to pay
the sum of P364.80 as reasonable
attorney's fees, which is equivalent " to
25% of the unpaid principal obligation; and
to pay the costs, if any.
Yap appealed to the Court of First Instance. The
appeal was assigned to the sala of respondent Judge
Taada. For failure to appear for pre-trial on August 28,
1968, this setting being intransferable since the pretrial had already been once postponed at his
instance, 5 Yap was declared in default by Order of
Judge Taada dated August 28, 1969, 6 reading as
follows:
When this case was called for pre-trial this
morning, the plaintiff and counsel
appeared, but neither the defendants nor
his counsel appeared despite the fact that
they were duly notified of the pre-trial set

this morning. Instead he filed an Ex-Parte

Motion for Postponement which this Court
received only this morning, and on petition
of counsel for the plaintiff that the Ex-Parte
Motion for Postponement was not filed in
accordance with the Rules of Court he
asked that the same be denied and the
defendants be declared in default; ..the
motion for the plaintiff being wellgrounded, the defendants are hereby
declared in default and the Branch Clerk of
Court ..is hereby authorized to receive
evidence for the plaintiff and .. submit his
report within ten (10) days after reception
of evidence.
Goulds presented evidence ex parte and judgment by
default was rendered the following day by Judge
Taada requiring Yap to pay to Goulds (1) Pl,459.30
representing the unpaid balance of the pump
purchased by him; (2) interest of 12% per annum
thereon until fully paid; and (3) a sum equivalent to
25% of the amount due as attorney's fees and costs
and other expenses in prosecuting the action. Notice of
the judgment was served on Yap on September 1,
1969. 7

amicable settlement; that the court should give the

parties time to arrive at an amicable settlement failing
which, he should be allowed to present evidence in
support of his defenses (discrepancy as to the price
and breach of warranty). The motion was not verified
or accompanied by any separate affidavit. Goulds
opposed the motion. Its opposition 9 drew attention to
the eleventh-hour motion for postponement of Yap
which had resulted in the cancellation of the prior
hearing of June 30, 1969 despite Goulds' vehement
objection, and the re-setting thereof on August 28,
1969 with intransferable character; it averred that Yap
had again sought postponement of this last hearing by
another eleventh-hour motion on the plea that an
amicable settlement would be explored, yet he had
never up to that time ever broached the matter, 10 and
that this pattern of seeking to obtain last-minute
postponements was discernible also in the
proceedings before the City Court. In its opposition,
Goulds also adverted to the examination made by it of
the pump, on instructions of the City Court, with a view
to remedying the defects claimed to exist by Yap; but
the examination had disclosed the pump's perfect
condition. Yap's motion for reconsideration was denied
by Order dated October 10, 1969, notice of which was
received by Yap on October 4, 1969. 11

On September 16, 1969 Yap filed a motion for

reconsideration. 8 In it he insisted that his motion for
postponement should have been granted since it
expressed his desire to explore the possibility of an

On October 15, 1969 Judge Taada issued an Order

granting Goulds' Motion for Issuance of Writ of
Execution dated October 14, 1969, declaring the
reasons therein alleged to be meritorious. 12 Yap

forthwith filed an "Urgent Motion for Reconsideration of

Order" dated October 17, 1969, 13 contending that the
judgment had not yet become final, since contrary to
Goulds' view, his motion for reconsideration was
not pro forma for lack of an affidavit of merit, this not
being required under Section 1 (a) of Rule 37 of the
Rules of Court upon which his motion was grounded.
Goulds presented an opposition dated October 22,
1969. 14 It pointed out that in his motion for
reconsideration Yap had claimed to have a valid
defense to the action, i.e., ".. discrepancy as to price
and breach of seller's warranty," in effect, that there
was fraud on Goulds' paint; Yap's motion for
reconsideration should therefore have been supported
by an affidavit of merit respecting said defenses; the
absence thereof rendered the motion for
reconsideration fatally defective with the result that its
filing did not interrupt the running of the period of
appeal. The opposition also drew attention to the
failure of the motion for reconsideration to specify the
findings or conclusions in the judgment claimed to be
contrary to law or not supported by the evidence,
making it a pro forma motion also incapable of
stopping the running of the appeal period. On October
23, 1969, Judge Taada denied Yap's motion for
reconsideration and authorized execution of the
judgment. 15 Yap sought reconsideration of this order,
by another motion dated October 29, 1969. 16 This
motion was denied by Order dated January 26,
1970. 17 Again Yap moved for reconsideration, and
again was rebuffed, by Order dated April 28, 1970. 18

In the meantime the Sheriff levied on the water pump

in question, 19 and by notice dated November 4, 1969,
scheduled the execution sale thereof on November 14,
1969. 20 But in view of the pendency of Yap's motion for
reconsideration of October 29, 1969, suspension of the
sale was directed by Judge Taada in an order dated
November 6, 1969. 21
Counsel for the plaintiff is hereby given 10
days time to answer the Motion, dated
October 29, 1969, from receipt of this
Order and in the meantime, the Order of
October 23, 1969, insofar as it orders the
sheriff to enforce the writ of execution is
hereby suspended.
It appears however that a copy of this Order was not
transmitted to the Sheriff "through oversight,
inadvertence and pressure of work" of the Branch
Clerk of Court. 22 So the Deputy Provincial Sheriff went
ahead with the scheduled auction sale and sold the
property levied on to Goulds as the highest
bidder. 23 He later submitted the requisite report to the
Court dated November 17, 1969, 24 as well as the
"Sheriffs Return of Service" dated February 13,
1970, 25 in both of which it was stated that execution
had been "partially satisfied." It should be observed
that up to this time, February, 1970, Yap had not
bestirred himself to take an appeal from the judgment
of August 29, 1969.

On May 9, 1970 Judge Taada ordered the issuance of

an alias writ of execution on Gould's ex parte motion
therefor. 26 Yap received notice of the Order on June
11. Twelve (1 2) days later, he filed a "Motion to Set
Aside Execution Sale and to Quash Alias Writ of
Execution." 27 As regards the original, partial execution
of the judgment, he argued that
1) "the issuance of the writ of execution on October 16,
1969 was contrary to law, the judgment sought to be
executed not being final and executory;" and
2) "the sale was made without the notice required by
Sec. 18, Rule 39, of the New Rules of Court," i.e.,
notice by publication in case of execution sale of real
property, the pump and its accessories being
immovable because attached to the ground with
character of permanency (Art. 415, Civil Code).
And with respect to the alias writ, he argued that it
should not have issued because
1) "the judgment sought to be executed is null and
void" as "it deprived the defendant of his day in court"
and "of due process;"
2) "said judgment is incomplete and vague" because
there is no starting point for computation of the interest
imposed, or a specification of the "other expenses
incurred in prosecuting this case" which Yap had also
been ordered to pay;

3) "said judgment is defective because it contains no

statement of facts but a mere recital of the evidence;
and
4) "there has been a change in the situation of the
parties which makes execution unjust and inequitable"
because Yap suffered damages by reason of the illegal
execution.
Goulds filed an opposition on July 6, 1970. Yap's
motion was thereafter denied by Order dated
September 16, 1970. Judge Taada pointed out that
the motion had "become moot and academic" since
the decision of August 29, 1969, "received by the
defendant on September 1, 1969 had long become
final when the Order for the Issuance of a Writ of
Execution was promulgated on October 15, 1969." His
Honor also stressed that
The defendant's Motion for
Reconsideration of the Courts decision was
in reality one for new trial. Regarded as
motion for new trial it should allege the
grounds for new trial, provided for in the
Rules of Court, to be supported by affidavit
of merits; and this the defendant failed to
do. If the defendant sincerely desired for an
opportunity to submit to an amicable
settlement, which he failed to do extra
judicially despite the ample time before

him, he should have appeared in the pretrial to achieve the same purpose.
Judge Taada thereafter promulgated another Order
dated September 21, 1970 granting a motion of Goulds
for completion of execution of the judgment of August
29, 1969 to be undertaken by the City Sheriff of Cebu.
Once more, Yap sought reconsideration. He submitted
a "Motion for Reconsideration of Two Orders" dated
October 13, 1970, 28 seeking the setting aside not only
of this Order of September 21, 1970 but also that
dated September 16, 1970, denying his motion to set
aside execution dated June 23, 1970. He contended
that the Order of September 21, 1970 (authorizing
execution by the City Sheriff) was premature, since the
30-day period to appeal from the earlier order of
September 16, 1970 (denying his motion to set aside)
had not yet expired. He also reiterated his view that his
motion for reconsideration dated September 15, 1969
did not require that it be accompanied by an affidavit of
merits. This last motion was also denied for "lack of
merits," by Order dated November 21, 1970. 29
On December 3, 1970, Yap filed a "Notice of Appeal"
manifesting his intention to appeal to the Supreme
Court on certiorari only on questions of law, "from the
Order ... of September 16, 1970 ... and from the
Order ... of November 21, 1970, ... pursuant to
sections 2 and 3 of Republic Act No. 5440." He filed his
petition for review with this Court on January 5, 1971,
after obtaining an extension therefor. 30

The errors of law he attributes to the Court a quo are

the following: 31
1) refusing to invalidate the execution pursuant to its
Order of October 16, 1969 although the judgment had
not then become final and executory and despite its
being incomplete and vague;
2) ignoring the fact that the execution sale was carried
out although it (the Court) had itself ordered
suspension of execution on November 6, 1969;
3) declining to annul the execution sale of the pump
and accessories subject of the action although made
without the requisite notice prescribed for the sale of
immovables; and
4) refusing to allow the petitioner to prove irregularities
in the process of execution which had resulted in
damages to him.
Notice of the Trial Court's judgment was served on Yap
on September 1, 1969. His motion for reconsideration
thereof was filed 15 days thereafter, on September 16,
1969. Notice of the Order denying the motion was
received by him on October 14, 1969. The question is
whether or not the motion for reconsideration which
was not verified, or accompanied by an affidavit of
merits (setting forth facts constituting his meritorious
defenses to the suit) or other sworn statement (stating
facts excusing his failure to appear at the pre-trial
was pro forma and consequently had not interrupted

the running of the period of appeal. It is Yap's

contention that his motion was not pro forma for lack of
an affidavit of merits, such a document not being
required by Section 1 (a) of Rule 37 of the Rules of
Court upon which his motion was based. This is
incorrect.
Section 2, Rule 37 precisely requires that when the
motion for new trial is founded on Section 1 (a), it
should be accompanied by an affidavit of merit.
xxx xxx xxx
When the motion is made for the causes
mentioned in subdivisions (a) and (b) of the
preceding section, it shall be proved in the
manner provided for proof of
motions. Affidavit or affidavits of merits
shall also be attached to a motion for the
cause mentioned in subdivision (a) which
may be rebutted by counter-affidavits.
xxx xxx xxx 32
Since Yap himself asserts that his motion for
reconsideration is grounded on Section 1 (a) of Rule
37, 33 i.e., fraud, accident, mistake or excusable
negligence which ordinary prudence could not have
guarded against and by reason of which ... (the)
aggrieved party has probably been impaired in his
rights" this being in any event clear from a perusal
of the motion which theorizes that he had "been

impaired in his rights" because he was denied the right

to present evidence of his defenses (discrepancy as to
price and breach of warranty) it was a fatal omission
to fail to attach to his motion an affidavit of merits, i.e.,
an affidavit "showing the facts (not conclusions)
constituting the valid x x defense which the movant
may prove in case a new trial is granted." 34 The
requirement of such an affidavit is essential because
obviously "a new trial would be a waste of the court's
time if the complaint turns out to be groundless or the
defense ineffective." 35
In his motion for reconsideration, Yap also contended
that since he had expressed a desire to explore the
possibility of an amicable settlement, the Court should
have given him time to do so, instead of declaring him
in default and thereafter rendering judgment by default
on Gould's ex parte evidence.
The bona fides of this desire to compromise is
however put in doubt by the attendant circumstances.
It was manifested in an eleventh-hour motion for
postponement of the pre-trial which had been
scheduled with intransferable character since it had
already been earlier postponed at Yap's instance; it
had never been mentioned at any prior time since
commencement of the litigation; such a possible
compromise (at least in general or preliminary terms)
was certainly most appropriate for consideration at the
pre-trial; in fact Yap was aware that the matter was
indeed a proper subject of a pre-trial agenda, yet he

sought to avoid appearance at said pre-trial which he

knew to be intransferable in character. These
considerations and the dilatory tactics thus far
attributable to him-seeking postponements of hearings,
or failing to appear therefor despite notice, not only in
the Court of First Instance but also in the City Court
proscribe belief in the sincerity of his avowed desire to
negotiate a compromise. Moreover, the disregard by
Yap of the general requirement that "(n)otice of a
motion shall be served by the applicant to all parties
concerned at least three (3) days before the hearing
thereof, together with a copy of the motion, and of any
affidavits and other papers accompanying it," 36 for
which no justification whatever has been offered, also
militates against the bona fides of Yap's expressed
wish for an amicable settlement. The relevant
circumstances do not therefore justify condemnation,
as a grave abuse of discretion, or a serious mistake, of
the refusal of the Trial Judge to grant postponement
upon this proferred ground.
The motion for reconsideration did not therefore
interrupt the running of the period of appeal. The time
during which it was pending before the court from
September 16, 1969 when it was filed with the
respondent Court until October 14, 1969 when notice
of the order denying the motion was received by the
movant could not be deducted from the 30-day
period of appeal. 37 This is the inescapable conclusion
from a consideration of Section 3 of Rule 41 which in
part declares that, "The "time during which a motion to

set aside the judgment or order or for a new trial has

been pending shall be deducted, unless such motion
fails to satisfy the requirements of Rule 37. 38
Notice of the judgment having been received by Yap
on September 1, 1969, and the period of appeal
therefrom not having been interrupted by his motion for
reconsideration filed on September 16, 1969, the
reglementary period of appeal expired thirty (30) days
after September 1, 1969, or on October 1, 1969,
without an appeal being taken by Yap. The judgment
then became final and executory; Yap could no longer
take an appeal therefrom or from any other
subsequent orders; and execution of judgment
correctly issued on October 15, 1969, "as a matter of
right." 39
The next point discussed by Yap, that the judgment is
incomplete and vague, is not well taken. It is true that
the decision does not fix the starting time of the
computation of interest on the judgment debt, but this
is inconsequential since that time is easily
determinable from the opinion, i.e., from the day the
buyer (Yap) defaulted in the payment of his
obligation, 40 on May 31, 1968. 41 The absence of any
disposition regarding his counterclaim is also
immaterial and does not render the judgment
incomplete. Yap's failure to appear at the pre-trial
without justification and despite notice, which caused
the declaration of his default, was a waiver of his right
to controvert the plaintiff s proofs and of his right to

prove the averments of his answer, inclusive of the

counterclaim therein pleaded. Moreover, the
conclusion in the judgment of the merit of the plaintiff s
cause of action was necessarily and at the same time
a determination of the absence of merit of the
defendant's claim of untenability of the complaint and
of malicious prosecution.

to allow him to prove these acts and recover the

damages rightfully due him. Now, as to the loss of his
water supply, since this arose from acts legitimately
done, the seizure on execution of the water pump in
enforcement of a final and executory judgment, Yap
most certainly is not entitled to claim moral or any
other form of damages therefor.

Yap's next argument that the water pump had become

immovable property by its being installed in his
residence is also untenable. The Civil Code considers
as immovable property, among others, anything
"attached to an immovable in a fixed manner, in such a
way that it cannot be separated therefrom without
breaking the material or deterioration of the
object." 42 The pump does not fit this description. It
could be, and was in fact separated from Yap's
premises without being broken or suffering
deterioration. Obviously the separation or removal of
the pump involved nothing more complicated than the
loosening of bolts or dismantling of other fasteners.

WHEREFORE, the petition is DENIED and the appeal

DISMISSED, and the Orders of September 16, 1970
and November 21, 1970 subject thereof, AFFIRMED in
toto. Costs against petitioner.

Yap's last claim is that in the process of the removal of

the pump from his house, Goulds' men had trampled
on the plants growing there, destroyed the shed over
the pump, plugged the exterior casings with rags and
cut the electrical and conduit pipes; that he had
thereby suffered actual-damages in an amount of not
less than P 2,000.00, as well as moral damages in the
sum of P 10,000.00 resulting from his deprivation of
the use of his water supply; but the Court had refused

G.R. No. L-7057

October 29, 1954

MACHINERY & ENGINEERING SUPPLIES, INC.,

petitioner,
vs.
THE HONORABLE COURT OF APPEALS, HON.
POTENCIANO PECSON, JUDGE OF THE COURT
OF FIRST INSTANCE OF MANILA, IPO LIMESTONE
CO., INC., and ANTONIO VILLARAMA, respondents.
Vicente J. Francisco for petitioner.
Capistrano and Capistrano for respondents.

CONCEPCION, J.:
This is an appeal by certiorari, taken by petitioner
Machinery and Engineering Supplies Inc., from a
decision of the Court of Appeals denying an original
petition for certiorari filed by said petitioner against
Hon. Potenciano Pecson, Ipo Limestone Co., Inc., and
Antonio Villarama, the respondents herein.
The pertinent facts are set forth in the decision of the
Court of Appeals, from which we quote:
On March 13, 1953, the herein petitioner filed a
complaint for replevin in the Court of First
Instance of Manila, Civil Case No. 19067, entitled
"Machinery and Engineering Supplies, Inc.,
Plaintiff, vs. Ipo Limestone Co., Inc., and Dr.
Antonio Villarama, defendants", for the recovery
of the machinery and equipment sold and
delivered to said defendants at their factory in
barrio Bigti, Norzagaray, Bulacan. Upon
application ex-parte of the petitioner company,
and upon approval of petitioner's bond in the
sum of P15,769.00, on March 13,1953,
respondent judge issued an order, commanding
the Provincial Sheriff of Bulacan to seize and
take immediate possession of the properties
specified in the order (Appendix I, Answer). On
March 19, 1953, two deputy sheriffs of Bulacan,
the said Ramon S. Roco, and a crew of technical
men and laborers proceeded to Bigti, for the

purpose of carrying the court's order into effect.

Leonardo Contreras, Manager of the respondent
Company, and Pedro Torres, in charge thereof,
met the deputy sheriffs, and Contreras handed to
them a letter addressed to Atty. Leopoldo C.
Palad, ex-oficio Provincial Sheriff of Bulacan,
signed by Atty. Adolfo Garcia of the defendants
therein, protesting against the seizure of the
properties in question, on the ground that they
are not personal properties. Contending that the
Sheriff's duty is merely ministerial, the deputy
sheriffs, Roco, the latter's crew of technicians
and laborers, Contreras and Torres, went to the
factory. Roco's attention was called to the fact
that the equipment could not possibly be
dismantled without causing damages or injuries
to the wooden frames attached to them. As Roco
insisted in dismantling the equipment on his own
responsibility, alleging that the bond was posted
for such eventuality, the deputy sheriffs directed
that some of the supports thereof be cut
(Appendix 2). On March 20, 1953, the defendant
Company filed an urgent motion, with a counterbond in the amount of P15,769, for the return of
the properties seized by the deputy sheriffs. On
the same day, the trial court issued an order,
directing the Provincial Sheriff of Bulacan to
return the machinery and equipment to the place
where they were installed at the time of the
seizure (Appendix 3). On March 21, 1953, the
deputy sheriffs returned the properties seized, by

depositing them along the road, near the quarry,

of the defendant Company, at Bigti, without the
benefit of inventory and without re-installing hem
in their former position and replacing the
destroyed posts, which rendered their use
impracticable. On March 23, 1953, the
defendants' counsel asked the provincial Sheriff
if the machinery and equipment, dumped on the
road would be re-installed tom their former
position and condition (letter, Appendix 4). On
March 24, 1953, the Provincial Sheriff filed an
urgent motion in court, manifesting that Roco had
been asked to furnish the Sheriff's office with the
expenses, laborers, technical men and
equipment, to carry into effect the court's order,
to return the seized properties in the same way
said Roco found them on the day of seizure, but
said Roco absolutely refused to do so, and
asking the court that the Plaintiff therein be
ordered to provide the required aid or relieve the
said Sheriff of the duty of complying with the said
order dated March 20, 1953 (Appendix 5). On
March 30, 1953, the trial court ordered the
Provincial Sheriff and the Plaintiff to reinstate the
machinery and equipment removed by them in
their original condition in which they were found
before their removal at the expense of the
Plaintiff (Appendix 7). An urgent motion of the
Provincial Sheriff dated April 15, 1953, praying
for an extension of 20 days within which to
comply with the order of the Court (appendix 10)

was denied; and on May 4, 1953, the trial court

ordered the Plaintiff therein to furnish the
Provincial Sheriff within 5 days with the
necessary funds, technical men, laborers,
equipment and materials to effect the repeatedly
mentioned re-installation (Appendix 13).
(Petitioner's brief, Appendix A, pp. I-IV.)
Thereupon petitioner instituted in the Court of Appeals
civil case G.R. No. 11248-R, entitled "Machinery and
Engineering Supplies, Inc. vs. Honorable Potenciano
Pecson, Provincial Sheriff of Bulacan, Ipo Limestone
Co., Inc., and Antonio Villarama." In the petition therein
filed, it was alleged that, in ordering the petitioner to
furnish the provincial sheriff of Bulacan "with necessary
funds, technical men, laborers, equipment and
materials, to effect the installation of the machinery
and equipment" in question, the Court of Firs Instance
of Bulacan had committed a grave abuse if discretion
and acted in excess of its jurisdiction, for which reason
it was prayed that its order to this effect be nullified,
and that, meanwhile, a writ of preliminary injunction be
issued to restrain the enforcement o said order of may
4, 1953. Although the aforementioned writ was issued
by the Court of Appeals, the same subsequently
dismissed by the case for lack of merit, with costs
against the petitioner, upon the following grounds:
While the seizure of the equipment and personal
properties was ordered by the respondent Court,
it is, however, logical to presume that said court

did not authorize the petitioner or its agents to

destroy, as they did, said machinery and
equipment, by dismantling and unbolting the
same from their concrete basements, and cutting
and sawing their wooden supports, thereby
rendering them unserviceable and beyond repair,
unless those parts removed, cut and sawed be
replaced, which the petitioner, not withstanding
the respondent Court's order, adamantly refused
to do. The Provincial Sheriff' s tortious act, in
obedience to the insistent proddings of the
president of the Petitioner, Ramon S. Roco, had
no justification in law, notwithstanding the
Sheriffs' claim that his duty was ministerial. It was
the bounden duty of the respondent Judge to
give redress to the respondent Company, for the
unlawful and wrongful acts committed by the
petitioner and its agents. And as this was the true
object of the order of March 30, 1953, we cannot
hold that same was within its jurisdiction to issue.
The ministerial duty of the Sheriff should have its
limitations. The Sheriff knew or must have known
what is inherently right and inherently wrong,
more so when, as in this particular case, the
deputy sheriffs were shown a letter of respondent
Company's attorney, that the machinery were not
personal properties and, therefore, not subject to
seizure by the terms of the order. While it may be
conceded that this was a question of law too
technical to decide on the spot, it would not have
costs the Sheriff much time and difficulty to bring

the letter to the court's attention and have the

equipment and machinery guarded, so as not to
frustrate the order of seizure issued by the trial
court. But acting upon the directives of the
president of the Petitioner, to seize the properties
at any costs, in issuing the order sought to be
annulled, had not committed abuse of discretion
at all or acted in an arbitrary or despotic manner,
by reason of passion or personal hostility; on the
contrary, it issued said order, guided by the well
known principle that of the property has to be
returned, it should be returned in as good a
condition as when taken (Bachrach Motor Co.,
Inc., vs. Bona, 44 Phil., 378). If any one had
gone beyond the scope of his authority, it is the
respondent Provincial Sheriff. But considering
that fact that he acted under the pressure of
Ramon S. Roco, and that the order impugned
was issued not by him, but by the respondent
Judge, We simply declare that said Sheriff' act
was most unusual and the result of a poor
judgment. Moreover, the Sheriff not being an
officer exercising judicial functions, the writ may
not reach him, forcertiorari lies only to review
judicial actions.
The Petitioner complains that the respondent
Judge had completely disregarded his
manifestation that the machinery and equipment
seized were and still are the Petitioner's property
until fully paid for and such never became

immovable. The question of ownership and the

applicability of Art. 415 of the new Civil Code are
immaterial in the determination of the only issue
involved in this case. It is a matter of evidence
which should be decided in the hearing of the
case on the merits. The question as to whether
the machinery or equipment in litigation are
immovable or not is likewise immaterial, because
the only issue raised before the trial court was
whether the Provincial Sheriff of Bulacan, at the
Petitioner's instance, was justified in destroying
the machinery and in refusing to restore them to
their original form , at the expense of the
Petitioner. Whatever might be the legal character
of the machinery and equipment, would not be in
any way justify their justify their destruction by
the Sheriff's and the said Petitioner's.
(Petitioner's brief, Appendix A, pp. IV-VII.)
A motion for reconsideration of this decision of the
Court of Appeals having been denied , petitioner has
brought the case to Us for review by writ of certiorari.
Upon examination of the record, We are satisfied,
however that the Court of Appeals was justified in
dismissing the case.
The special civil action known as replevin, governed by
Rule 62 of Court, is applicable only to "personal
property".

Ordinarily replevin may be brought to recover

any specific personal property unlawfully taken or
detained from the owner thereof, provided such
property is capable of identification and
delivery; but replevin will not lie for the recovery
of real property or incorporeal personal property.
(77 C. J. S. 17) (Emphasis supplied.)
When the sheriff repaired to the premises of
respondent, Ipo Limestone Co., Inc., machinery and
equipment in question appeared to be attached to the
land, particularly to the concrete foundation of said
premises, in a fixed manner, in such a way that the
former could not be separated from the latter "without
breaking the material or deterioration of the object."
Hence, in order to remove said outfit, it became
necessary, not only to unbolt the same, but , also, to
cut some of its wooden supports. Moreover, said
machinery and equipment were "intended by the owner
of the tenement for an industry" carried on said
immovable and tended." For these reasons, they were
already immovable property pursuant to paragraphs 3
and 5 of Article 415 of Civil Code of the Philippines,
which are substantially identical to paragraphs 3 and 5
of Article 334 of the Civil Code of Spain. As such
immovable property, they were not subject to replevin.
In so far as an article, including a fixture annexed
by a tenant, is regarded as part of the realty, it is
not the subject for personality; . . . .

. . . the action of replevin does not lie for articles

so annexed to the realty as to be part as to be
part thereof, as, for example, a house or a
turbine pump constituting part of a building's
cooling system; . . . (36 C. J. S. 1000 & 1001)
Moreover, as the provincial sheriff hesitated to remove
the property in question, petitioner's agent and
president, Mr. Ramon Roco, insisted "on the
dismantling at his own responsibility," stating that.,
precisely, "that is the reason why plaintiff posted a
bond ." In this manner, petitioner clearly assumed the
corresponding risks.

in substantially the same condition as when taken (54

C.J., 590-600, 640-641). Inasmuch as the machinery
and equipment involved in this case were duly installed
and affixed in the premises of respondent company
when petitioner's representative caused said property
to be dismantled and then removed, it follows that
petitioner must also do everything necessary to the
reinstallation of said property in conformity with its
original condition.
Wherefore, the decision of the Court of Appeals is
hereby affirmed, with costs against the petitioner. So
ordered.

Such assumption of risk becomes more apparent when

we consider that, pursuant to Section 5 of Rule 62 of
the Rules of Court, the defendant in an action for
replevin is entitled to the return of the property in
dispute upon the filing of a counterbond, as provided
therein. In other words, petitioner knew that the
restitution of said property to respondent company
might be ordered under said provision of the Rules of
Court, and that, consequently, it may become
necessary for petitioner to meet the liabilities incident
to such return.

CESAR T. HILARIO, for himself and as Attorney-inFact of IBARRA, NESTOR, LINA and
PRESCILLA,
all
surnamed
HILARIO, petitioners,
vs.
ALLAN
T.
SALVADOR, respondent.

Lastly, although the parties have not cited, and We

have not found, any authority squarely in point
obviously real property are not subject to replevin it
is well settled that, when the restitution of what has
been ordered, the goods in question shall be returned

CALLEJO, SR., J.:

HEIRS OF SALUSTIANO SALVADOR, namely,

REGIDOR M. SALVADOR and VIRGINIA
SALVADOR-LIM, respondents-intervenors.
DECISION

This is a petition for review on certiorari under Rule

45 of the Revised Rules of Court of the Decision [1] of
the Court of Appeals (CA) in CA-G.R. CV No. 63737 as

well as its Resolution[2]denying the motion for the

reconsideration of the said decision.

5. That, to reach a possible amicable settlement,

the plaintiffs brought the matter to the Lupon of
Barangay Sawang, to no avail, evidenced by the
CERTIFICATE TO FILE ACTION hereto
attached as ANNEX B;

The Antecedents
On September 3, 1996, petitioners Cesar, Ibarra,
Nestor, Lina and Prescilla, all surnamed Hilario, filed a
complaint with the Regional Trial Court (RTC) of
Romblon, Romblon, Branch 71, against private
respondent Allan T. Salvador.
They alleged
therein, inter alia, as follows:
2. That, the plaintiffs are co-owners by inheritance
from Concepcion Mazo Salvador of a parcel of
land designated as Cad. Lot No. 3113-part,
located at Sawang, Romblon, Romblon, which
property was [adjudged] as the hereditary share
of their father, Brigido M. Hilario, Jr. when their
father was still single, and which adjudication
was known by the plaintiffs[] fathers co-heirs;
3. That, sometime in 1989, defendant constructed
his dwelling unit of mixed materials on the
property of the plaintiffs father without the
knowledge of the herein plaintiffs or their
predecessors-in-interest;
4. That, demands have been made of the
defendant to vacate the premises but the latter
manifested that he have (sic) asked the prior
consent of their grandmother, Concepcion Mazo
Salvador;

6. That, the unjustified refusal of the defendant to

vacate the property has caused the plaintiffs to
suffer shame, humiliation, wounded feelings,
anxiety and sleepless nights;
7. That, to protect their rights and interest,
plaintiffs were constrained to engage the
services of a lawyer.[3]
The petitioners prayed that, after due proceedings,
judgment be rendered in their favor, thus:
WHEREFORE, it is prayed of this Honorable Court that
after due process (sic), an order be issued for the
defendant to vacate and peacefully turn over to the
plaintiffs the occupied property and that defendant be
made to pay plaintiffs:
a.

actual damages, as follows:

a.1. transportation expenses in connection
with the projected settlement of the case
amounting to P1,500.00 and for the
subsequent attendance to the hearing of
this case at P1,500.00 each schedule;

a.2. attorneys fees in the amount

of P20,000.00 and P500.00 for every
court appearance;
b. moral and exemplary damages in such
amount incumbent upon the Honorable Court
to determine; and
c. such other relief and remedies just and
equitable under the premises.[4]
The private respondent filed a motion to dismiss
the complaint on the ground of lack of jurisdiction over
the nature of the action, citing Section 33 of Batas
Pambansa (B.P.) Blg. 129, as amended by Section
3(3) of Republic Act (R.A.) No. 7691. [5] He averred that

(1)
the complaint failed to state the assessed
value of the land in dispute;
(2)
the complaint does not sufficiently identify
and/or describe the parcel of land referred to as the
subject-matter of this action;
both of which are essential requisites for determining
the jurisdiction of the Court where the case is filed. In
this case, however, the assessed value of the land in
question is totally absent in the allegations of the
complaint and there is nothing in the relief prayed for
which can be picked-up for determining the Courts
jurisdiction as provided by law.

In the face of this predicament, it can nevertheless be

surmised by reading between the lines, that the
assessed value of the land in question cannot
exceed P20,000.00 and, as such, it falls within the
jurisdiction of the Municipal Trial Court of Romblon and
should have been filed before said Court rather than
before the RTC. [6]
The petitioners opposed the motion. [7] They
contended that the RTC had jurisdiction over the action
since the court can take judicial notice of the market
value of the property in question, which was P200.00
per square meter and considering that the property
was 14,797 square meters, more or less, the total
value thereof is P3,500,000.00. Besides, according to
the petitioners, the motion to dismiss was premature
and the proper time to interpose it is when the
[petitioners] introduced evidence that the land is of
such value.
On November 7, 1996, the RTC issued an
Order[8] denying the motion to dismiss, holding that the
action was incapable of pecuniary estimation, and
therefore, cognizable by the RTC as provided in
Section 19(1) of B.P. Blg. 129, as amended.
After the denial of the motion to dismiss, the private
respondent filed his answer with counterclaim.
[9]
Traversing the material allegations of the complaint,
he contended that the petitioners had no cause of
action against him since the property in dispute was

the conjugal property of his grandparents, the spouses

Salustiano Salvador and Concepcion Mazo-Salvador.
On April 8, 1997, Regidor and Virginia Salvador
filed their Answer-in-Intervention [10] making common
cause with the private respondent. On her own
motion, however, Virginia Salvador was dropped as
intervenor.[11]
During trial, the petitioners adduced in evidence
Tax Declaration No. 8590-A showing that in 1991 the
property had an assessed value of P5,950.00.[12]
On June 3, 1999, the trial court rendered judgment
finding in favor of the petitioners. The dispositive
portion of the decision reads:
WHEREFORE, as prayed for, judgment is rendered:
Ordering the defendant to vacate and peacefully turn
over to the plaintiffs the occupied property; and
Dismissing defendants counterclaim.
SO ORDERED.[13]
Aggrieved, the private respondent and respondentintervenor Regidor Salvador appealed the decision to
the CA, which rendered judgment on May 23, 2003
reversing the ruling of the RTC and dismissing the
complaint for want of jurisdiction. The fallo of the
decision is as follows:

IN VIEW OF THE FOREGOING, the appealed

decision is REVERSED, and the case DISMISSED,
without prejudice to its refilling in the proper court.
SO ORDERED.[14]
The CA declared that the action of the petitioners
was one for the recovery of ownership and possession
of real property. Absent any allegation in the complaint
of the assessed value of the property, the Municipal
Trial Court (MTC) had exclusive jurisdiction over the
action, conformably to Section 33[15] of R.A. No. 7691.
The petitioners filed a motion for reconsideration of
the said decision, which the appellate court denied.
[16]
Hence, they filed the instant petition, with the
following assignment of errors:
I
THE HONORABLE COURT OF APPEALS
COMMITTED GRAVE REVERSIBLE ERROR IN
HOLDING THAT THE INSTANT CASE, ACCION
REINVINDICATORIA, FALLS WITHIN THE
EXCLUSIVE ORIGINAL JURISDICTION OF THE
MUNICIPAL TRIAL COURT OF ROMBLON, AND NOT
WITH THE REGIONAL TRIAL COURT OF ROMBLON.
II
THE HONORABLE COURT OF APPEALS
COMMITTED SERIOUS REVERSIBLE ERROR IN

ORDERING THE REFILING OF THE CASE IN THE

[PROPER] COURT, INSTEAD OF DECIDING THE
CASE ON THE MERITS BASED ON THE COMPLETE
RECORDS ELEVATED BEFORE SAID APPELLATE
COURT AND IN NOT AFFIRMING IN TOTO THE
DECISION OF THE TRIAL COURT.[17]
The Ruling of the Court
The lone issue for our resolution is whether the
RTC had jurisdiction over the action of the petitioners,
the plaintiffs in the RTC, against the private
respondent, who was the defendant therein.
The petitioners maintain that the RTC has
jurisdiction
since
their
action
is
an accion
reinvindicatoria, an action incapable of pecuniary
estimation; thus, regardless of the assessed value of
the subject property, exclusive jurisdiction falls within
the said court. Besides, according to the petitioners, in
their opposition to respondents motion to dismiss, they
made mention of the increase in the assessed value of
the land in question in the amount of P3.5 million.
Moreover, the petitioners maintain that their action is
also one for damages exceeding P20,000.00, over
which the RTC has exclusive jurisdiction under R.A.
No. 7691.
The petition has no merit.
It bears stressing that the nature of the action and
which court has original and exclusive jurisdiction over

the same is determined by the material allegations of

the complaint, the type of relief prayed for by the
plaintiff and the law in effect when the action is filed,
irrespective of whether the plaintiffs are entitled to
some or all of the claims asserted therein. [18] The
caption of the complaint is not determinative of the
nature of the action. Nor does the jurisdiction of the
court depend upon the answer of the defendant or
agreement of the parties or to the waiver or
acquiescence of the parties.
We do not agree with the contention of the
petitioners and the ruling of the CA that the action of
the petitioners in the RTC was an accion
reinvindicatoria. We find and so rule that the action of
the petitioners was an accion publiciana, or one for the
recovery of possession of the real property subject
matter thereof. An accion reinvindicatoria is a suit
which has for its object the recovery of possession
over the real property as owner. It involves recovery of
ownership and possession based on the said
ownership. On the other hand, an accion publicianais
one for the recovery of possession of the right to
possess. It is also referred to as an ejectment suit filed
after the expiration of one year after the occurrence of
the cause of action or from the unlawful withholding of
possession of the realty.[19]
The action of the petitioners filed on September 3,
1996 does not involve a claim of ownership over the
property. They allege that they are co-owners thereof,

and as such, entitled to its possession, and that the

private respondent, who was the defendant,
constructed his house thereon in 1989 without their
knowledge and refused to vacate the property despite
demands for him to do so. They prayed that the
private respondent vacate the property and restore
possession thereof to them.
When the petitioners filed their complaint on
September 3, 1996, R.A. No. 7691 was already in
effect. Section 33(3) of the law provides:
Sec. 33. Jurisdiction of Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial
Courts in Civil Cases. Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial
Courts shall exercise:

(3) Exclusive original jurisdiction in all civil actions

which involve title to, or possession of, real property, or
any interest therein where the assessed value of the
property or interest therein does not exceed Twenty
Thousand Pesos (P20,000.00) or, in civil actions in
Metro Manila, where such assessed value does not
exceed Fifty Thousand Pesos (P50,000.00) exclusive
of interest, damages of whatever kind, attorneys fees,
litigation expenses and costs: Provided, That in cases
of land not declared for taxation purposes, the value of
such property shall be determined by the assessed
value of the adjacent lots.
Section 19(2) of the law, likewise, provides that:
Sec. 19. Jurisdiction in civil cases. The Regional
Trial Court shall exercise exclusive original jurisdiction:

(2) In all civil actions, which involve the title to, or

possession of, real property, or any interest therein,
where the assessed value of the property involved
exceeds Twenty Thousand Pesos (P20,000.00) or, for
civil actions in Metro Manila, where such value
exceeds Fifty Thousand Pesos (P50,000.00) except
actions for forcible entry into and unlawful detainer of
lands or buildings, original jurisdiction over which is
conferred upon the Metropolitan Trial Courts, Municipal
Trial Courts, and Municipal Circuit Trial Courts.

The jurisdiction of the court over an action involving

title to or possession of land is now determined by the
assessed value of the said property and not the
market value thereof. The assessed value of real
property is the fair market value of the real property
multiplied by the assessment level. It is synonymous
to taxable value.[20] The fair market value is the price at
which a property may be sold by a seller, who is not
compelled to sell, and bought by a buyer, who is not
compelled to buy.
Even a cursory reading of the complaint will show
that it does not contain an allegation stating the
assessed value of the property subject of the
complaint.[21] The court cannot take judicial notice of
the assessed or market value of lands. [22] Absent any
allegation in the complaint of the assessed value of the
property, it cannot thus be determined whether the
RTC or the MTC had original and exclusive jurisdiction
over the petitioners action.
We note that during the trial, the petitioners
adduced in evidence Tax Declaration No. 8590-A,
showing that the assessed value of the property in
1991 was P5,950.00. The petitioners, however, did not
bother to adduce in evidence the tax declaration
containing the assessed value of the property when
they filed their complaint in 1996. Even assuming that
the assessed value of the property in 1991 was the
same in 1995 or 1996, the MTC, and not the RTC had
jurisdiction over the action of the petitioners since the

case involved title to or possession of real property

with an assessed value of less than P20,000.00.[23]
We quote with approval, in this connection, the
CAs disquisition:
The determining jurisdictional element for the accion
reinvindicatoria is, as RA 7691 discloses, the assessed
value of the property in question. For properties in the
provinces, the RTC has jurisdiction if the assessed
value exceeds P20,000, and the MTC, if the value
is P20,000 or below. An assessed value can have
reference only to the tax rolls in the municipality where
the property is located, and is contained in the tax
declaration. In the case at bench, the most recent tax
declaration secured and presented by the plaintiffsappellees is Exhibit B. The loose remark made by
them that the property was worth 3.5 million pesos, not
to mention that there is absolutely no evidence for this,
is irrelevant in the light of the fact that there is an
assessed value. It is the amount in the tax declaration
that should be consulted and no other kind of value,
and as appearing in Exhibit B, this is P5,950. The
case, therefore, falls within the exclusive original
jurisdiction of the Municipal Trial Court of Romblon
which has jurisdiction over the territory where the
property is located, and not the court a quo.[24]
It is elementary that the tax declaration indicating
the assessed value of the property enjoys the

presumption of regularity as it has been issued by the

proper government agency.[25]
Unavailing also is the petitioners argumentation
that since the complaint, likewise, seeks the recovery
of damages exceeding P20,000.00, then the RTC had
original jurisdiction over their actions. Section 33(3) of
B.P. Blg. 129, as amended, quoted earlier, explicitly
excludes from the determination of the jurisdictional
amount the demand for interest, damages of whatever
kind, attorneys fees, litigation expenses, and costs.
This Court issued Administrative Circular No. 09-94
setting the guidelines in the implementation of R.A. No.
7691, and paragraph 2 thereof states that
2.
The exclusion of the term damages of whatever
kind in determining the jurisdictional amount under
Section 19(8) and Section 33(1) of B.P. Blg. 129, as
amended by R.A. 7691, applies to cases where the
damages are merely incidental to or a consequence of
the main cause of action. However, in cases where
the claim for damages is the main cause of action, or
one of the causes of action, the amount of such claim
shall be considered in determining the jurisdiction of
the court.
Neither may the petitioners find comfort and solace
in Section 19(8) of B.P. Blg. 129, as amended, which
states:

SEC. 19. Jurisdiction in civil cases. Regional Trial

Courts shall exercise exclusive original jurisdiction:

(8) In all other cases in which the demand, exclusive of

interest, damages of whatever kind, attorney's fees,
litigation expenses, and costs or the value of the
property in controversy exceeds One Hundred
Thousand Pesos (P100,000.00) or, in such other cases
in Metro Manila, where the demand, exclusive of the
above-mentioned items exceeds Two Hundred
Thousand Pesos (P200,000.00).
The said provision is applicable only to all other
cases other than an action involving title to, or
possession of real property in which the assessed
value is the controlling factor in determining the courts
jurisdiction. The said damages are merely incidental
to, or a consequence of, the main cause of action for
recovery of possession of real property.[26]
Since the RTC had no jurisdiction over the action of
the petitioners, all the proceedings therein, including
the decision of the RTC, are null and void. The
complaint should perforce be dismissed.[27]
WHEREFORE, the petition is DENIED. The
assailed Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 63737 are AFFIRMED.
Costs against the petitioners.

CESAR
SAMPAYAN, petitioner, vs.
The
HONORABLE
COURT
OF
APPEALS,
CRISPULO VASQUEZ and FLORENCIA
VASQUEZ GILSANO,respondents.
DECISION
GARCIA, J.:
In this verified petition for review on certiorari under
Rule 45 of the Rules of Court, petitioner Cesar
Sampayan seeks the annulment and setting aside of
the following issuances of the Court of Appeals in CAG.R. SP No. 43557, to wit:
1. Decision dated May 16, 2002, denying his petition
for review and affirming an earlier decision of the
Regional Trial Court at Agusan del Sur, Branch VII,
which in turn reversed on appeal a favorable judgment
of the Municipal Circuit Trial Court (MCTC) of Bayugan
and Sibagat, Agusan del Sur in a forcible entry case
thereat commenced against him by herein private
respondents, the brother-and-sister Crispulo Vasquez
and Florencia Vasquez-Gilsano; and
2. Resolution dated November 7, 2002, which denied
his motion for reconsideration.

From the pleadings and memoranda respectively

filed by the parties, the Court gathers the following
factual antecedents:
On July 8, 1992, in the MCTC of Bayugan and
Sibagat, Agusan del Sur, the siblings Crispulo Vasquez
and Florencia Vasquez-Gilsano filed complaint for
forcible entry against Cesar Sampayan for allegedly
having entered and occupied a parcel of land,
identified as Lot No. 1959, PLS-225, and built a house
thereon without their knowledge, consent or authority,
the entry having been supposedly effected through
strategy and stealth.
In their complaint, the plaintiffs (now private
respondents), substantially alleged that their mother
Cristita Quita was the owner and actual possessor of
Lot No. 1959; that after their mothers death on
January 11, 1984, they became co-owners pro-indiviso
and lawful possessors of the same lot; that on June 1,
1992, while they were temporarily absent from the lot
in question, defendant Cesar Sampayan, through
strategy and stealth, entered the lot and built a house
thereon, to their exclusion; and that, despite their
repeated demands for Sampayan to vacate the lot and
surrender the possession thereof to them, the latter
failed and refused to do so.
In his answer, defendant Sampayan denied the
material allegations of the complaint and averred that
neither the plaintiffs nor their mother have ever been in

possession of Lot No. 1959 and that he does not even

know plaintiffs identities or their places of residence.
He claimed that he did not enter the subject lot by
stealth or strategy because he asked and was given
permission therefor by Maria Ybaez, the overseer of
the lots true owners, Mr. and Mrs. Anastacio Terrado
who were then temporarily residing in Cebu City for
business purposes. In the same answer, Sampayan
alleged that the plaintiffs claim has long prescribed for
the reason that the lot in dispute had been possessed
and declared for taxation purposes by the spouses
Felicisimo Oriol and Concordia Balida-Oriol in 1960,
and that in 1978, the Oriol spouses sold one-half (1/2)
of the lot to the spouses Mr. and Mrs. Anastacio
Terrado, while the other half, to the couple Manolito
Occida and Juliana Sambale-Occida in 1979. Both
vendees, so Sampayan averred, have actually
possessed the respective portions purchased by them
up to the present. He thus prayed for the dismissal of
the complaint.
In the ensuing proceedings following the joinder of
issues, the plaintiffs, to prove that they have been in
actual possession of Lot No. 1959 when defendant
Sampayan effected his entry thereto, submitted in
evidence the following documents:
1. Tax Declaration No. 3180 in the name of Cristita
Quita;

2. Certificate of Death showing the date of death of

Cristita Quita on January 11, 1984;
3. Certificate issued by Fermina R. Labonete, Land
Management Officer-III of CENRO X-3-E, DENR-X-39, Bayugan, Agusan del Sur showing that Lot 1959,
PLS-225 is covered by a Miscellaneous Sales
Application of Cristita Quita;
4. Affidavit of one Emiliano G. Gatillo to the effect
that he was the one who gave the lot in question to
Cristita Quita sometime in 1957 and that since then the
latter had been occupying the lot;
Plaintiffs also filed a Supplemental Position Paper
dated July 13, 1994 for the purpose of showing that
Cristita Quita is one of the oppositors in Cadastral
Case No. 149. Together with said position paper, they
submitted a copy of the Answer/Opposition earlier filed
in Cadastral Case No. 149. In said cadastral case,
Cristita Quita was claiming Lot 1959, thus her name
appeared in the list of oppositors therein.
5. The decision in the said Cadastral Case No. 149
showing that the then Court of First Instance of Agusan
del Sur declared Lot No. 1959 as one of the lots
subject of the same cadastral case.
For his part, defendant Sampayan, to prove the
allegations in his answer, offered in evidence the
following:

1. Tax Declaration No. A-11698 in the name of

Felicisimo Oriol, which cancels Tax Declaration 8103;
2. Tax Declaration No. GRB-01-930 in the name of
Felicisimo Oriol which cancels Tax Declaration No. A11698;
3. Deed of Absolute Sale of Portion of Land, dated
April 30, 1979, executed by Jesus Oriol for and in
behalf of the spouses Felicisimo Oriol and Concordia
Balida-Oriol, conveying the one-half (1/2) portion of Lot
No. 1959 to the couple Manolito Occida and Juliana
Sambale-Occida who possessed the one-half (1/2)
portion and introduced improvements thereon, such as
coconut and caimito trees;
4. Deed of Relinquishment of Rights of Portion of
Land, executed by the spouses Oriol in favor of the
same couple Manolito Occida and Juliana SambaleOccida, to further strengthen the transfer of possession
and whatever possessory rights the Oriols had in the
lot in question;
5. Deed of Absolute Sale of Land executed by
Concordia Balida-Oriol with the conformity of Teodosio
Mosquito (another claimant), to prove that the other
half of Lot No. 1959 was sold in 1978 to Mr. and Mrs.
Anastacio Terrado whose overseer allowed Sampayan
to enter and occupy the premises;

6. Protest filed with the CENRO, Agusan del Sur

by the vendee Juliana Sambale-Occida against the
Miscellaneous Sales Application of Cristita Quita;
7. Affidavit of Dionesia Noynay attesting to the fact
that she is residing in Lot No. 1957, a lot adjacent to
the lot in question, since 1960 up to the present. In the
same affidavit, Dionisia claimed that neither Cristita
Quita, much less the plaintiffs, had ever possessed Lot
No. 1959. She claimed that it was the Occida couple
who possessed said lot and introduced improvements
thereon; and
8. Affidavit of Juliana Occida and Maria Ybaez to
show the impossibility of plaintiffs possession of the
same lot.
Meanwhile, on March 21, 1996, while the case was
pending with the MCTC, the presiding judge thereof
personally conducted an ocular inspection of the
contested lot in the presence of the parties and/or their
counsels. Among those found in the area during the
inspection are: the house of defendant Sampayan; the
dilapidated house of a certain Peter Siscon; and a
portion of the house of Macario Noynay, husband of
Dionisia Noynay, one of Sampayans witnesses.
Based on his ocular findings, the judge concluded
that the improvements he saw in the premises could
never have been introduced by the plaintiffs nor by
their mother Cristita Quita but by the vendees of the

same lot. Reproduced by petitioner Jose Sampayan in

the instant petition as well as in the Memorandum he
subsequently filed with this Court, the MCTC judges
findings and observations during the ocular inspection,
about which the herein private respondents took no
exception whatsoever, are hereunder quoted, as
follows:
Noted inside the land are the house of the defendant,
Cesar Sampayan, of Peter Siscon, which appears to
be dilapidated, and part of the house of Macario
Noynay which encroached to the land in question.
Planted on the land are five (5) coconut trees, fruit
bearing, three (3) not fruit bearing coconut trees, and
three (3) star apple or caimito trees. Defendant
Sampayan admitted that he started occupying the land
since 1992. It is admitted by the parties during the
ocular inspection that one-half (1/2) portion of the land
was bought by a certain Occida from certain Mr. and
Mrs. Felicisimo Oriol.
The findings in the ocular inspection have
confirmed the allegation of the defendant that his
predecessors-in-interest have introduced
improvements by planting caimito trees, coconut
trees, and others on the land in question.
Nothing can be seen on the land that plaintiffs had
once upon a time been in possession of the land.
The allegation that Cristita Quita, the predecessorin-interest of the plaintiffs had been in possession

of the said property since 1957, openly,

exclusively, continuously, adversely and in the
concept of an owner is a naked claim, unsupported
by any evidence.
Clearly, from the appearance of the improvements
introduced by the predecessors-in-interest of the
defendant, it is showed that they have been in
possession of the land for more than one (1) year.
Hence, the action of the plaintiffs, if any, is accion
publiciana or plenaria de possession[1] (Emphasis
supplied).
In time, the MCTC rendered judgment dismissing
the compliant for lack of merit.
Therefrom, the plaintiffs appealed to the Regional
Trial Court (RTC) at Agusan del Sur, which appeal was
raffled to Branch VII thereof. In a decision dated
December 5, 1996, said court reversed that of the
MCTC, taking note of the fact that Cristita Quita was
among the oppositors in Cadastral Case No. 149 and
that she filed a Miscellaneous Sales Application over
the lot. On the basis of such finding, the RTC
concluded that it was Cristita Quita, predecessor-ininterest of the herein private respondents, who was in
actual prior physical possession of Lot No. 1959.
Unable to accept the RTC judgment, Sampayan
went to the Court of Appeals on a petition for review,
thereat docketed as CA-G.R. SP No. 43557.

As stated at the threshold hereof, the Court of

Appeals, in the herein assailed Decision dated May
16, 2002,[2] denied Sampayans petition. His motion for
reconsideration having been similarly denied by that
court in its Resolution of November 7, 2002,
[3]
Sampayan is now with us via the present recourse, it
being his submissions I.
THAT THE COURT OF APPEALS ERRED IN RULING
THAT THE MUNICIPAL CIRCUIT TRIAL COURT OF
BAYUGAN, AGUSAN DEL SUR, HAS JURISDICTION
OVER THE CASE, CONSIDERING THAT DURING
THE HEARING THEREOF IT WAS FOUND OUT BY
THE SAID MUNICIPAL COURT THAT ACCION
PUBLICIANA OR PLENARIA DE POSESION, AND
NOT FORCIBLE ENTRY, IS THE PROPER ACTION;
II.
THAT THE CONCLUSION OF THE HONORABLE
COURT OF APPEALS THAT PRIVATE
RESPONDENTS HAVE BEEN IN PRIOR ACTUAL
POSSESSION IS CONTRADICTED BY EVIDENCE
ON RECORD, AND CONSIDERING THAT THE
POSSESSION TO BE LEGALLY SUFFICIENT,
CONSIST (SIC) IN THE EXERCISE OF DOMINIUM
OVER IT, SUCH AS FENCING, CULTIVATING OR
OTHER UNMISTAKABLE ACTS OF EXCLUSIVE
CUSTODY AND CONTROL FACTS WHICH THE

PRIVATE RESPONDENTS HAVE NEVER DONE - IS

CONTRARY TO LAW.[4]
In the main, petitioner maintains that based on the
pieces of evidence on record, he had sufficiently
proven his prior physical possession of the subject lot.
Upon this premise, he argues that private respondents
complaint for forcible entry has no leg to stand on,
adding that the proper remedy available to the latter
is accion publiciana or plenaria de posesion which falls
under the original jurisdiction of Regional Trial Courts
and not of Municipal Circuit Trial Courts.
As we see it, the arguments put forward by the
petitioner crystallize to one pivotal question: will the
complaint for forcible entry in this case prosper? To
resolve this, however, we must first determine as to
who between the herein parties was in prior actual
physical possession of the subject lot at the time the
complaint was filed in the MCTC. For, as we have said
in Gaza vs. Lim[5],
xxx In an action for forcible entry, the plaintiff must
prove that he was in prior possession of the land or
building and that he was deprived thereof by means of
force, intimidation, threat, strategy or stealth. xxx
We emphasize, absence of prior physical
possession by the plaintiff in a forcible entry case
warrants the dismissal of his complaint.

Undoubtedly, the issue of prior physical possession

is one of fact, and settled is the rule that this Court is
not a trier of facts and does not normally embark on a
re-examination of the evidence adduced by the parties
during trial. Of course, the rule admits of exceptions.
So it is that in Insular Life Assurance Company, Ltd.
vs. CA,[6] we wrote:
[i]t is a settled rule that in the exercise of the Supreme
Court's power of review, the Court is not a trier of facts
and does not normally undertake the re-examination of
the evidence presented by the contending parties'
during the trial of the case considering that the findings
of facts of the CA are conclusive and binding on the
Court. However, the Court had recognized several
exceptions to this rule, to wit: (1) when the findings are
grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) when there is
grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the
findings of facts are conflicting; (6) when in making its
findings the Court of Appeals went beyond the issues
of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7)
when the findings are contrary to the trial court; (8)
when the findings are conclusions without citation of
specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by
the respondent; (10) when the findings of fact are

premised on the supposed absence of evidence and

contradicted by the evidence on record; and (11) when
the Court of Appeals manifestly overlooked certain
relevant facts not disputed by the parties, which, if
properly considered, would justify a different
conclusion.
To our mind, exceptions (5) and (11) are present in
this case.
However, before delving into the question of who
as between the petitioner and private respondents had
prior physical possession of the subject lot, we deem it
best to first resolve the issue of whether or not the
MCTC had jurisdiction over the complaint filed in this
case, an issue also raised by the petitioner.
Relying on the conclusion of the MCTC that private
respondents proper remedy is accion publiciana or
plenaria de posesion, and not forcible entry, petitioner
would deny the MCTCs jurisdiction over the case.
Petitioner is in error.
In Sarmiento vs. CA[7], we held:
[t]o give the court jurisdiction to effect the ejectment of
an occupant or deforciant on the land, it is necessary
that the complaint should embody such a statement of
facts as brings the party clearly within the class of
cases for which the statutes provide a remedy, as
these proceedings are summary in nature. The

complaint must show enough on its face to give the

court jurisdiction without resort to parol testimony. The
jurisdictional facts must appear on the face of the
complaint. x x x
Clear it is from the above that for the MCTC to
acquire jurisdiction over a forcible entry case, it is
enough that the complaint avers the jurisdictional
facts, i.e. that the plaintiff had prior physical
possession and that he was deprived thereof by the
defendant through force, intimidation, threats, strategy
and stealth.[8] The complaint in this case makes such
an averment. Hence, the irrelevant circumstance that
the evidence adduced during the hearing rendered
improper an action for forcible entry is of no moment
and cannot deprive the MCTC of its jurisdiction over
the case. The MCTC continues to have that
jurisdiction.
We shall now address the more decisive question
of prior physical possession.
After a careful evaluation of the evidence at hand,
we find for the petitioner.
To begin with, we are at once confronted by the
uncontested findings of the MCTC judge himself during
his ocular inspection of the premises in dispute that
what he saw thereat confirmed the allegations of the
defendant [now petitioner Sampayan] that his
predecessors-in-interest
have
introduced

improvements by planting caimito trees, coconut trees,

and others on the land in question, adding that
[N]othing can be seen on the land that plaintiff had
once upon a time been in possession of the land, and
categorically stating that [T]he allegation that Cristita
Quita, the predecessor-in-interest of the plaintiffs had
been in possession of the said property since 1957,
openly, exclusively, continuously, adversely and in the
concept of an owner is a naked claim, unsupported by
any evidence.
Then, too, there is the sworn affidavit of Dionesia
Noynay to the effect that she had been residing since
1960 onward on Lot No. 1957, the lot adjacent to Lot
No. 1959, and that neither the private respondents nor
their mother had ever possessed Lot No. 1959.
Coming as it does from an immediate neighbor,
Dionesias statement commands great weight and
respect. Incidentally, the MCTC judge himself found
during the ocular inspection that a portion of the house
of Macario Noynay, husband of Dionesia, protruded on
Lot No. 1959.
We note that in the herein assailed decision, the
Court of Appeals attached much significance to the fact
that private respondents mother Cristita Quita was an
oppositor in Cadastral Case No. 149. We rule and so
hold that the mothers being an oppositor in said
cadastral case does not, by itself, establish prior
physical possession because not all oppositors in

cadastral cases are actual possessors of the lots or

lands subject thereof.
WHEREFORE,
GRANTED and
respectively dated
2002, of the Court
ASIDE.

the instant petition is hereby

the Decision and Resolution,
May 16, 2002 and November 7,
of Appeals REVERSED and SET

RUBEN SANTOS, petitioner, vs. SPOUSES TONY

AYON and MERCY AYON, respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
For our resolution is the petition for review
on certiorari assailing the Decision[1] of the Court of
Appeals dated October 5, 1998 in CA-G.R. SP No.
4735 and its Resolution[2] dated December 11, 1998
denying the motion for reconsideration.
The petition alleges that on November 6, 1996,
Ruben Santos, petitioner, filed with the Municipal Trial
Court in Cities (MTCC), Branch 2, Davao City a
complaint for illegal detainer against spouses Tony and
Mercy Ayon, respondents, docketed as Civil Case No.
3506-B-96.

In his complaint, petitioner averred that he is the

registered owner of three lots situated at Lanzona
Subdivision, Matina, Davao City, covered by Transfer
Certificates of Title (TCT) Nos. 108174, 108175, and
108176. Respondent spouses are the registered
owners of an adjacent parcel of land covered by TCT
No. T-247792. The previous occupant of this property
built a building which straddled both the lots of the
herein parties. Respondents have been using the
building as a warehouse.
Petitioner further alleged in his complaint that in
1985, when he bought the three lots, he informed
respondents that the building occupies a portion of his
land. However, he allowed them to continue using the
building. But in 1996, he needed the entire portion of
his lot, hence, he demanded that respondents demolish
and remove the part of the building encroaching his
property and turn over to him their possession. But
they refused. Instead, they continued occupying the
contested portion and even made improvements on the
building.
The dispute was then referred to
the barangay lupon, but the parties failed to reach an
amicable settlement. Accordingly, on March 27, 1996,
a certification to file action was issued.
In their answer, respondents sought a dismissal of
this case on the ground that the court has no
jurisdiction over it since there is no lessor-lessee
relationship between the parties. Respondents denied
they were occupying petitioners property by mere

tolerance, claiming they own the contested portion and

have been occupying the same long before petitioner
acquired his lots in 1985.
On July 31, 1997, the MTCC rendered its Decision
in favor of petitioner, thus:
WHEREFORE, judgment is rendered in favor of the
plaintiff and against the defendants ordering the latter,
their successors-in-interest and other persons acting in
their behalf to vacate the portion of the subject
properties and peacefully surrender possession thereof
to plaintiff as well as dismantle/remove the structures
found thereon.
Defendants are further ordered to pay reasonable value
for the use and occupation of the encroached area in
the amount of One Thousand Pesos (P1,000.00) a
month beginning September 1996 and the subsequent
months thereafter until premises are vacated; to pay
attorneys fees of Ten Thousand Pesos (P10,000.00);
and to pay the costs of suit.
SO ORDERED.[3]
On appeal, the Regional Trial Court (RTC), Branch
11, Davao City, in its Decision dated February 12, 1998
in Civil Case No. 25, 654-97, affirmed in toto the MTCC
judgment.[4] The RTC upheld the finding of the MTCC
that respondents occupation of the contested portion
was by mere tolerance. Hence, when petitioner

needed the same, he has the right to eject them

through court action.
Respondents then elevated the case to the Court of
Appeals through a petition for review. In its Decision
dated October 5, 1988 now being challenged by
petitioner, the Court of Appeals held that petitioners
proper
remedy
should
have
been
an accion publiciana before the RTC, not an action for
unlawful detainer, thus:
In this case, petitioners were already in possession of
the premises in question at the time private respondent
bought three (3) lots at the Lanzona Subdivision in
1985, a portion of which is occupied by a building being
used by the former as a bodega. Apart from private
respondents bare claim, no evidence was alluded to
show that petitioners possession was tolerated by (his)
predecessor-in-interest. The fact that respondent might
have tolerated petitioners possession is not decisive.
What matters for purposes of determining the proper
cause of action is the nature of petitioners possession
from its inception. And in this regard, the Court notes
that the complaint itself merely alleges that defendantspetitioners have been occupying a portion of the above
properties of the plaintiff for the past several years by
virtue of the tolerance of the plaintiff. Nowhere is it
alleged that his predecessor likewise tolerated
petitioners possession of the premises. x x x.

Consequently, x x x, respondent should present his

claim before the Regional Trial Court in an accion
publiciana and not before the Municipal Trial Court in a
summary proceeding of unlawful detainer.

The sole issue here is whether the Court of Appeals

committed a reversible error of law in holding that
petitioners complaint is within the competence of the
RTC, not the MTCC.

WHEREFORE, the decision under review is hereby

REVERSED and SET ASIDE. Accordingly, the
complaint for unlawful detainer is ordered
DISMISSED.[5]

Petitioner contends that it is not necessary that he

has prior physical possession of the questioned
property before he could file an action for unlawful
detainer. He stresses that he tolerated respondents
occupancy of the portion in controversy until he needed
it. After his demand that they vacate, their continued
possession became illegal. Hence, his action for
unlawful detainer before the MTCC is proper.

Petitioner filed a motion for reconsideration, but was

denied by the Appellate Court in its Resolution dated
December 11, 1998.
Hence,
the
instant
petition
for
review
on certiorari ascribing to the Court of Appeals the
following errors:
I
THE HONORABLE COURT OF APPEALS
MISAPPLIED THE LAW IN DISMISSING THE
INSTANT CASE ON THE GROUND THAT
PETITIONER SHOULD PRESENT HIS CLAIM
BEFORE THE REGIONAL TRIAL COURT IN
AN ACCION PUBLICIANA.
II
THE FINDINGS OF THE HONORABLE COURT OF
APPEALS IS NOT IN CONSONANCE WITH EXISTING
LAWS AND JURISPRUDENCE.

Respondents, in their comment, insisted that they

have been in possession of the disputed property even
before petitioner purchased the same on April 10,
1985. Hence, he cannot claim that they were
occupying the property by mere tolerance because they
were ahead in time in physical possession.
We sustain the petition.
It is an elementary rule that the jurisdiction of a
court over the subject matter is determined by the
allegations of the complaint and cannot be made to
depend upon the defenses set up in the answer or
pleadings filed by the defendant.[6] This rule is no
different in an action for forcible entry or unlawful
detainer.[7] All actions for forcible entry or unlawful
detainer shall be filed with the proper Metropolitan Trial

Courts, the Municipal Trial Courts and the Municipal

Circuit Trial Courts, which actions shall include not only
the plea for restoration of possession but also all claims
for damages and costs arising therefrom. [8] The said
courts are not divested of jurisdiction over such cases
even if the defendants therein raises the question of
ownership over the litigated property in his pleadings
and the question of possession cannot be resolved
without deciding the issue of ownership.[9]
Section 1, Rule 70 on forcible entry and unlawful
detainer of the 1997 Rules of Civil Procedure, as
amended, reads:
Section 1. Who may institute proceedings, and
when. Subject to the provisions of the next
succeeding section, a person deprived of the
possession of any land or building by force,
intimidation, threat, strategy, or stealth, or a lessor,
vendor, vendee, or other person against whom the
possession of any land or building is unlawfully withheld
after the expiration or termination of the right to hold
possession, by virtue of any contract, express or
implied, or the legal representatives or assigns of any
such lessor, vendor, vendee or other person may, at
any time within one (1) year after such unlawful
deprivation or withholding of possession, bring an
action in the proper Municipal Trial Court against the
person or persons unlawfully withholding or depriving of
possession, or any person or persons claiming under

them, for the restitution of such possession, together

with damages and costs.
Under the above provision, there are two entirely
distinct and different causes of action, to wit: (1) a case
for forcible entry, which is an action to recover
possession of a property from the defendant whose
occupation thereof is illegal from the beginning as he
acquired possession by force, intimidation, threat,
strategy or stealth; and (2) a case for unlawful detainer,
which is an action for recovery of possession from
defendant whose possession of the property was
inceptively lawful by virtue of a contract (express or
implied) with the plaintiff, but became illegal when he
continued his possession despite the termination of his
right thereunder.[10]
Petitioners complaint for unlawful detainer in Civil
Case No. 3506-B-96 is properly within the competence
of the MTCC. His pertinent allegations in the complaint
read:
4. That defendants (spouses) have constructed an
extension of their residential house as well as other
structures and have been occupying a portion of the
above PROPERTIES of the plaintiff for the past several
years by virtue of the tolerance of the plaintiff since
at the time he has no need of the property;
5.
That plaintiff needed the property in the early
part of 1996 and made demands to the defendants

to vacate and turn over the premises as well as the

removal (of) their structures found inside the
PROPERTIES of plaintiff; that without any
justifiable reasons, defendants refused to vacate
the portion of the PROPERTIES occupied by them
to the damage and prejudice of the plaintiff.
6.
Hence, plaintiff referred the matter to the Office
of the Barangay Captain of Matina Crossing 74-A,
Davao City for a possible settlement sometime in the
latter part of February 1996. The barangay case
reached the Pangkat but no settlement was had.
Thereafter, a Certification To File Action dated March
27, 1996 was issued x x x;
x x x.

[11]

(underscoring ours)

Verily, petitioners allegations in his complaint

clearly make a case for an unlawful detainer. We find
no error in the MTCC assuming jurisdiction over
petitioners complaint. A complaint for unlawful detainer
is sufficient if it alleges that the withholding of the
possession or the refusal to vacate is unlawful without
necessarily employing the terminology of the law.
[12]
Here, there is an allegation in petitioners complaint
that respondents occupancy on the portion of his
property is by virtue of his tolerance. Petitioners
cause of action for unlawful detainer springs from
respondents failure to vacate the questioned premises
upon his demand sometime in 1996. Within one (1)

year therefrom, or on November 6, 1996, petitioner filed

the instant complaint.
It bears stressing that possession by tolerance is
lawful, but such possession becomes unlawful when
the possessor by tolerance refuses to vacate upon
demand made by the owner. Our ruling in Roxas vs.
Court of Appeals[13] is applicable in this case: A person
who occupies the land of another at the latters
tolerance or permission, without any contract between
them, is necessarily bound by an implied promise that
he will vacate upon demand, failing which, a summary
action for ejectment is the proper remedy against him.
WHEREFORE, the petition is GRANTED. The
assailed Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 47435 are hereby
REVERSED and SET ASIDE. The Decision dated
February 12, 1998 of the Regional Trial Court, Branch
11, Davao City in Civil Case No. 25, 654-97, affirming
the Decision dated July 31, 1997 of the Municipal Trial
Court in Cities, Branch 2, Davao City in Civil Case No.
3506-B-96, is hereby REINSTATED.

RENE

GANILA,* EDUARDO DUMADA-OG,

SR.,
RAFAEL
GANILA,
JOSE
PASTRANA,

LOURDES GANILA, FLORENTINO GANILA,

SERAFIN GANILA, LORETO ARELLANO,
CONRADO GANILA, VIVENCIO ALVIOR,
EDUARDO GANTALA, AMPARO VILLANUEVA,
ELEUTERIO SILVA,
ADELINA
GANILA,
FELIZARDO GANILA, SR., ENRIQUE GANILA,
ABRAHAM TANONG, EMILIO ALFARAS, JR.,
BAPTIST
CHRISTIAN
LEARNING
CENTER,petitioners, vs. HON. COURT OF
APPEALS
AND
VIOLETA
C.
HERRERA, respondents.
DECISION
QUISUMBING, J.:
For review on certiorari are the Decision[1] dated
March 30, 2001 of the Court of Appeals in CA-G.R. SP
No. 58191, and its Resolution[2] dated October 18,
2001 denying the motion for reconsideration. The
assailed decision denied the petition to set aside
the Resolution[3] of the Regional Trial Court (RTC) of
San Miguel, Jordan, Guimaras, Branch 65, affirming
the Order of the Municipal Circuit Trial Court (MCTC)
for the 19 petitioners to vacate the contested parcel of
land.
The facts are as follows:
On March 19, 1997, private respondent Violeta
Herrera filed 21 ejectment Complaints[4] before the
16th MCTC,
Jordan-Buenavista-Nueva
Valencia,

Jordan, Guimaras. Private respondent alleged that

she owns Lot 1227 of the Cadastral Survey of Jordan,
Guimaras, with an area of 43,210 square meters; that
she inherited the lot from her parents; and that she
only tolerated petitioners to construct residential
houses or other improvements on certain portions of
the lot without rental. Sometime in September or
October 1996, private respondent demanded that the
petitioners vacate the lot and remove their houses and
other improvements thereon. Petitioners refused,
despite offer of money by way of assistance to them.
After
thebarangay conciliation
failed,
private
respondent filed the complaints.
In
their Answers,[5] eight[6] of
the
petitioners
claimed that Lot 1227 was formerly a shoreline which
they developed when they constructed their respective
houses. Another eight[7]maintained that their houses
stood on Lot 1229 of the Cadastral Survey of Jordan,
Guimaras. The other three[8] asserted that Lot 1227 is a
social forest area.
At the preliminary conference, the parties agreed to
designate two geodetic engineers as commissioners of
the MCTC to conduct a relocation survey of Lot 1227
and to identify who among the petitioners have houses
within the lot.[9]
The commissioners reported that: (1) the house of
Henry Gabasa, defendant in Civil Case No. 288-J, is
almost outside Lot 1227; (2) the house of Ludovico

Amatorio, defendant in Civil Case No. 289-J,

diagonally traversed the boundary; and (3) the houses
of the 19 petitioners are inside Lot 1227. [10]
Eight months after herein petitioners failure to
comment on the manifestation of private respondent to
terminate the preliminary conference, the MCTC
terminated the preliminary conference.[11] Thereafter,
petitioners counsel Atty. Nelia Jesusa L. Gonzales
failed to file her clients position papers and affidavits,
even after they sought a 30-day extension to file the
same.[12]
Consequently, the MCTC decided the cases as
follows:
WHEREFORE, premises considered, judgment is
hereby rendered in favor of the plaintiff whereby each
of the twenty-one (21) defendants are hereby ordered:
1.

To vacate Lot 1227 of the Cadastral

Survey of Jordan, Guimaras;

2.

To pay Two Hundred Pesos (P200.00) per

month from October, 1996 as compensation
for the use of the property until the same is
vacated; and

3.

To pay Two Thousand Pesos (P2,000.00)

as attorneys fees and litigation expenses.

SO ORDERED.[13]

Petitioners appealed to the RTC, Branch 65, at

Jordan, Guimaras, which decided as follows:
WHEREFORE, premises considered, the decision in
Civil Cases Nos. 0270-J, 0272-J, 0273-J, 0274-J,
0275-J, 0276-J, 0277-J, 0278-J, 0279-J, 0280-J, 0281J, 0282-J, 0283-J, 0284-J, 0285-J, 0286-J, 0287-J,
0291-J and 0292-J are hereby affirmed.
The decision of the court below in Civil Cases Nos.
0288-J and 0289-J are set aside. Civil Cases Nos.
0288-J and 0289-J are hereby DISMISSED.
SO ORDERED.[14]
The RTC ruled that the evidence showed the better
right of private respondent to possess Lot 1227.
Private respondents position paper, affidavit and tax
declaration supported her allegations. In addition, the
commissioners report and sketch plan showed that
indeed petitioners occupy Lot 1227. On the other hand,
according to the RTC, the petitioners failed to present
evidence which would show that they are entitled to
possess the lot.
Based on the sketch plan, the RTC dismissed the
cases against Gabasa and Amatorio since their houses
occupy only a small area of Lot 1227. It declared that
Gabasa and Amatorio believed in good faith that the
whole area they occupied was part of the seashore.

The 19 petitioners, who were ordered to vacate the

lot, filed a joint petition for review with the Court of
Appeals. The appellate court denied the petition.
Petitioners moved for reconsideration and filed an
amended petition. The Court of Appeals, however,
affirmed the factual findings and conclusions arrived at
by the trial courts and denied the amended petition for
lack of merit.[15] It also denied the motion for
reconsideration.
Petitioners are now before us, on a petition for
review, alleging that:
The Honorable Court of Appeals, with due respect and
deference, committed a reversible error in the
interpretation/application of the law in the instant case
and in the appreciation of the facts and evidence
presented. The Court of Appeals gravely abused its
discretion when it denied and dismissed the petition
filed by the petitioners.[16]
After considering the parties submissions, we find
three basic issues: (1) Did the MCTC err in taking
jurisdiction over and deciding the cases? (2) Did the
RTC err in sustaining the MCTCs judgment? (3) Did
the CA err in denying the petition for review filed by the
19 petitioners ordered to be ejected?
Petitioners insist that private respondent should
have filed an action to recover possession de jure, not
a mere complaint for ejectment, for two reasons. One,

they possessed Lot 1227 in good faith for more than

30 years in the concept of owners. And two, there was
no withholding of possession since private respondent
was not in prior possession of the lot.
Private respondent states in her Comment before
us that the allegations in her Complaints make out a
clear case of unlawful detainer which is cognizable by
the MCTC. We are in agreement with her stance.
There was no error in the choice of the complainants
remedy, a matter left to her determination as the
suitor. And the complaint itself is defined by the
allegations therein, not the allegations of the
defendants.
At the outset, we note that petitioners question the
MCTCs jurisdiction yet they admit in their preliminary
statement that the Complaints filed are indeed for
unlawful detainer, and that the only issue to be
determined is mere physical possession (possession
de facto) and not juridical possession (possession de
jure), much less ownership.[17]
While petitioners assert that this case involves only
deprivation of possession, they confuse the remedy of
an action for forcible entry with that of unlawful
detainer.
In unlawful detainer, prior physical
possession by the plaintiff is not necessary. It is
enough that plaintiff has a better right of possession.
Actual, prior physical possession of a property by a
party is indispensable only in forcible entry cases. In

unlawful detainer cases, the defendant is necessarily

in prior lawful possession of the property but his
possession eventually becomes unlawful upon
termination or expiration of his right to possess.
[18]
Thus, the fact that petitioners are in possession of
the lot does not automatically entitle them to remain in
possession. And the issue of prior lawful possession
by the defendants does not arise at all in a suit for
unlawful detainer, simply because prior lawful
possession by virtue of contract or other reasons is
given or admitted. Unlike in forcible entry where
defendants, by force, intimidation, threat, strategy or
stealth, deprive the plaintiff or the prior physical
possessor of possession. Here there is no evidence to
show that petitioners entered the lot by any of these
acts.
If only to stress the fundamental principles related
to present controversy, jurisdiction over unlawful
detainer suits is vested in municipal trial courts. [19] And
in ejectment cases, the jurisdiction of the court is
determined by the allegations of the complaint. [20]
In
this
case
for
ejectment,
private
respondents allegations sufficiently present a case of
unlawful detainer. She alleged that (1) she owns Lot
1227; (2) she tolerated petitioners to construct their
houses thereon; (3) she withdrew her tolerance; and
(4) petitioners refused to heed her demand to vacate
the lot. The Complaints were also filed within one
year from the date of her demand. The cause of action

for unlawful detainer between the parties springs from

the failure of petitioners to vacate the lot upon lawful
demand of the private respondent. When they refused
to vacate the lot after her demand, petitioners
continued possession became unlawful. Her complaint
for ejectment against respondent, to put it simply, is not
without sufficient basis.
Petitioners contention that private respondent
should have filed an action to recover possession de
jure with the RTC is not supported by law or
jurisprudence. The distinction between a summary
action of ejectment and a plenary action for recovery of
possession and/or ownership of the land is settled in
our jurisprudence.
What really distinguishes an action for unlawful
detainer from a possessory action (accion publiciana)
and from a reinvindicatory action (accion
reinvindicatoria) is that the first is limited to the
question ofpossession de facto. An unlawful detainer
suit (accion interdictal) together with forcible entry are
the two forms of an ejectment suit that may be filed to
recover possession of real property. Aside from the
summary action of ejectment, accion publiciana or the
plenary action to recover the right of possession
and accion reinvindicatoria or the action to recover
ownership which includes recovery of possession,
make up the three kinds of actions to judicially recover
possession.[21]

It is not up to defendants, now petitioners herein, to

dictate upon plaintiff, now the private respondent, what
her initial recourse should be. Her choice of an action
for ejectment against so-called squatters is well within
her rights.
Petitioners cite the case of Bayubay v. Court of
Appeals,[22] and argue that the MCTCs decision was
without jurisdictional or legal basis because the MCTC
did not issue a preliminary conference order. They
assert that the 10-day period to file position papers and
affidavits only starts after the parties had received a
preliminary conference order. They insist they were
denied due process when the MCTC decided the
cases
based
merely
on
private
respondents Complaints and
affidavit,
without
considering their Answers.
For her part, private respondent maintains that
there was substantial compliance with the rules in the
MCTCs conduct of the preliminary conference, hence
there was no violation of due process nor disregard of
its proper jurisdiction.
Petitioners present contention was first raised only
in their appeal to the RTC. Raising it before the
appellate tribunal is barred by estoppel. [23] They should
have raised it in the proceedings before the MCTC. In
our view, this issue is a mere afterthought, when the
MCTC decided against them. Basic rules of fair play,
justice and due process require that as a rule an issue

cannot be raised by the petitioners for the first time on

appeal.[24]
Besides, petitioners did not question initially the
MCTCs Order dated February 19, 1999, when they
moved for an extension of time to file their position
papers and affidavits. They wanted another 30 days
on top of the 30 days set by the MCTC, which strictly
should have been 10 days only. In this regard,
petitioners could not claim that they were denied
sufficient time to file their position papers and affidavits
before the trial court. Further, they cannot validly
invoke our ruling[25] in Bayubay, for in that case there
was no order at all terminating the preliminary
conference and requiring the parties to submit position
papers and affidavits.
We note with dismay petitioners insistence that we
order the MCTC to conduct the requisite preliminary
conference. The summary character of ejectment
suits will be disregarded if we allow petitioners to
further delay this case by allowing a second
preliminary conference. Ejectment by way of forcible
entry and unlawful detainer cases are summary
proceedings, designed to provide an expeditious
means of protecting actual possession or the right to
possession over the property involved. It is a timely
procedure designed to remedy the delay in the
resolution of such cases.[26]

Lastly, petitioners aver that private respondent

failed to prove her allegation of ownership of Lot 1227
as it is only based on a tax declaration which is not an
evidence of ownership. They also claim that their
possession of the lot was not and could not be by mere
tolerance. However, this is a factual matter best left to
the trial courts.
What we have now is sufficient evidence showing
that private respondent has a better right to possess
Lot 1227. The commissioners report and sketch plan
show that the 19 petitioners occupy the lot, which
corroborate private respondents allegation and
disprove petitioners defense that Lot 1227 is a
shoreline; or that Lot 1227 is a social forest area. While
not a conclusive evidence of ownership, private
respondents tax declaration constitutes proof that she
has a claim of title over the lot. It has been held that:
Although tax declarations or realty tax payment of
property are not conclusive evidence of ownership,
nevertheless, they are good indicia of possession in
the concept of owner for no one in his right mind would
be paying taxes for a property that is not in his actual
or at least constructive possession. They constitute at
least proof that the holder has a claim of title over the
property. The voluntary declaration of a piece of
property for taxation purposes manifests not only ones
sincere and honest desire to obtain title to the property
and announces his adverse claim against the State
and all other interested parties, but also the intention to

contribute needed revenues to the Government. Such

an act strengthens ones bona fide claim of acquisition
of ownership.[27]
The lower courts did not err in adjudicating the
issue of possession. Mere absence of title over the lot
is not a ground for the courts to withhold relief from the
parties in an ejectment case. Plainly stated, the trial
court has validly exercised its jurisdiction over the
ejectment cases below. The policy behind ejectment
suits is to prevent breaches of the peace and criminal
disorder, and to compel the party out of possession to
respect and resort to the law alone to obtain what she
claims is hers. The party deprived of possession must
not take the law into his or her own hands. [28] For their
part, herein petitioners could not be barred from
defending themselves before the court adequately, as
a matter of law and right.
However, petitioners in their defense should show
that they are entitled to possess Lot 1227. If they had
any evidence to prove their defenses, they should
have presented it to the MCTC with their position
papers and affidavits. But they ignored the courts
order and missed the given opportunity to have their
defenses heard, the very essence of due process.
[29]
Their allegations were not only unsubstantiated but
were also disproved by the plaintiffs evidence.
In sum, we find no reversible error much less any
grave abuse of discretion committed by the Court of

Appeals. A person who occupies the land of another at

the latters tolerance or permission, without any
contract between them, is necessarily bound by an
implied promise that he will vacate upon demand,
failing which a summary action for ejectment is the
proper remedy against him.[30] His status is analogous
to that of a lessee or tenant whose term of lease has
expired but whose occupancy continued by tolerance
of the owner. In such a case, the date of unlawful
deprivation or withholding of possession is to be
counted from the date of the demand to vacate. [31]
WHEREFORE, the instant petition is DENIED for
lack of merit. The Decision of the Court of Appeals
dated March 30, 2001 and its Resolution dated
October 18, 2001 are AFFIRMED.
Costs against petitioners.

ROSS RICA SALES CENTER,

INC. and JUANITO KING &
SONS, INC.,
Petitioners,

- versus -

G.R. No. 132197

Present:
PUNO, J.,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and

CHICONAZARIO, JJ.
SPOUSES GERRY ONG and
ELIZABETH ONG,
Respondents.

Promulgated:
August 16,

2005
x-------------------------------------------------------------------x
DECISION
TINGA, J.:
In a Decision[1] dated 6 January 1998, the Former
First Division of the Court of Appeals overturned the
decisions of the Municipal Trial Court (MTC) and the
Regional Trial Court (RTC) of Mandaue City, ruling
instead that the MTC had no jurisdiction over the
subject complaint for unlawful detainer. This petition
for review prays for the reversal of the aforesaid Court
of Appeals Decision.
The case originated from a complaint for
ejectment filed by petitioners against respondents,
docketed as Civil Case No. 2376, before the MTC of
Mandaue City, Branch I. In the complaint, petitioners
alleged the fact of their ownership of three (3) parcels
of land covered by Transfer Certificates of Title (TCT)
Nos. 36466, 36467 and 36468. Petitioners likewise
acknowledged respondent Elizabeth Ongs ownership

of the lots previous to theirs. On 26 January 1995,

Atty. Joseph M. Baduel, representing Mandaue Prime
Estate Realty, wrote respondents informing them of its
intent to use the lots and asking them to vacate within
thirty (30) days from receipt of the letter. But
respondents refused to vacate, thereby unlawfully
withholding possession of said lots, so petitioners
alleged.
Ross Rica Sales Center, Inc. and Juanito King
and Sons, Inc. (petitioners) had acquired the lands
from Mandaue Prime Estate Realty through a sale
made on 23 March 1995. In turn, it appears that
Mandaue Prime Estate Realty had acquired the
properties from the respondents through a Deed of
Absolute Sale dated 14 July 1994. However, this latter
deed of sale and the transfers of title consequential
thereto were subsequently sought to be annulled by
respondents in a complaint filed on 13 February 1995
before the Mandaue RTC against Mandaue Prime
Estate Realty.[2] Per record, this case is still pending
resolution.
Meanwhile, the MYC resolved the ejectment
case on 24 April 1996, with the decision ordering
respondents to vacate the premises in question and to
peacefully turn over possession thereof to petitioners.
On appeal, the RTC rendered on 1 March 1997 a
judgment affirming the MTCs decision in its entirety.
On 8 May 1997, respondents filed a notice of
appeal. However, on the following day, they filed a
motion for reconsideration.
On 23 June 1997, the RTC issued
an Order which concurrently gave due course to

respondents notice of appeal filed on 8 May 1997;

denied their motion for reconsideration dated 9 May
1997,[3] and granted petitioners motion for immediate
execution pending appeal.
In a Petition for Certiorari with Injunction filed
with the Court of Appeals and treated as a Petition for
Review, the appellate court ruled that the MTC had no
jurisdiction over said case as there was no contract
between the parties, express or implied, as would
qualify the same as one for unlawful detainer. Thus,
the assailed Orders of the MTC and RTC were set
aside.
Petitioners then took this recourse via Petition for
Review under Rule 45 of the Rules of Court. The
principal issues raised before this Court are: (i)
whether the RTC decision has already become final
and executory at the time the petition for review was
filed; (ii) whether the allegations in the complaint
constitute a case for unlawful detainer properly
cognizable by the MTC; and, (iii) whether petitioners,
as registered owners, are entitled to the possession of
the subject premises.
We resolve the first argument to be without
merit.
The following sequence of events is undisputed:
(1)
On 1 March 1997,
the RTC rendered the questioned decision
affirming the judgment of the MTC.
(2)
On 28 April 1997,
respondents received a copy of the
aforementioned decision.

(3)

On 8 May 1997,
respondents filed a Notice of Appeal with
the RTC.
(4)
On 9 May 1997,
respondents filed likewise with the RTC
a Motion
for
Reconsideration of
the
aforementioned 1 March 1997 decision.
(5)
On 23 June 1997,
the
RTC
of
Mandaue
issued
an Order denying respondents Motion for
Reconsideration.
(6)
On 9 July 1997,
respondents received a copy of the
aforementioned 23 June 1997 Order.
(7)
On 24 July 1997,
respondents filed with the Court of Appeals
their motion for an additional period of ten
(10) days within which to file their Petition
for Review.
(8)
On 30 July 1997,
respondents filed with the Court of Appeals
their Petition for Review.
Petitioners
assert
that
the Petition
for
Review was filed beyond the fifteen (15)-day period for
appeal. They theorize that the period started running
on 28 April 1995, the date of receipt of the RTC
decision, and ended on 13 May 1997. According to
them, this reglementary period could not have been
interrupted by the filing on 9 May 1997 of the Motion
for Reconsideration because of the filing one day
earlier of the Notice of Appeal. This Notice of
Appeal dated 8 May 1997, albeit the wrong mode of
appeal, expressly manifested their intention to file a

petition for review to either the Court of Appeals or the

Supreme Court.[4]
Petitioners further argue that respondents, after
having filed the Notice of Appeal which was given due
course by the RTC, cannot take an inconsistent stand
such as filing a Motion for Reconsideration. Such
filing, therefore, did not toll the fifteen (15)-day period
which started running from the date of receipt of the
RTC decision on 28 April 1997 and ended on 13 May
1997.
Respondents, in their Comment,[5] submit that the
filing of the Notice of Appeal dated 8 May 1997 was
improper, and as such did not produce any legal
effect. Therefore, the filing of the Motion for
Reconsideration immediately on the following day
cured this defect. The RTC refused to subscribe
respondents position. It justified the denial of
the Motion for Reconsideration on the ground that the
respondents had already filed a Notice of Appeal.
The Order dated 23 June 1997 stated:
On record is a Notice of Appeal by
Certiorari filed by Defendants on May 8,
1997.
Likewise filed by Defendants on May
9, 1997 is a Motion for Reconsideration.
Considering the Notice of Appeal filed
earlier which the court hereby approves, the
Motion for Reconsideration is DENIED.
The Motion for Immediate Execution
Pending Appeal being meritorious, is
GRANTED.[6] (Emphasis in the original.)
Strangely enough, the Court of Appeals passed
no comment on this point when it took cognizance of

respondents position and reversed the RTC. But does

this necessarily mean that the RTC was correct when it
declared that the Motion for Reconsideration was
barred by the filing of theNotice of Appeal, no matter
how erroneous the latter mode was?
Rule 42 governs the mode of appeal applicable
in this case. Sec. 1 provides:
Section 1. How appeal taken; time for
filing. -- A party desiring to appeal from a
decision of the RTC rendered in the
exercise of its appellate jurisdiction may file
a verified petition for review with the Court
of Appeals, paying at the same time to the
clerk of said court the corresponding
docket and other lawful fees, depositing the
amount of P500.00 for costs, and
furnishing the Regional Trial Court and the
adverse party with a copy of the petition.
The petition shall be filed and served within
fifteen (15) days from notice of the decision
sought to be reviewed or of the denial of
petitioners motion for new trial or
reconsideration filed in due time after
judgment. Upon proper motion and the
payment of the full amount of the docket
and other lawful fees and the deposit for
costs before the expiration of the
reglementary period, the Court of Appeals
may grant an additional period of fifteen
(15) days only within which to file the
petition for review. No further extension
shall be granted except for the most

compelling reason and in no case to

exceed fifteen (15) days.
Since the unlawful detainer case was filed with
the MTC and affirmed by the RTC, petitioners should
have filed a Petition for Review with the Court of
Appeals and not a Notice of Appeal with the RTC.
However, we consider this to have been remedied by
the timely filing of the Motion for Reconsideration on
the following day. Section 3, Rule 50 of the Rules of
Court allows the withdrawal of appeal at any time, as a
matter of right, before the filing of the appellees brief.
Applying this rule contextually, the filing of the Motion
for Reconsideration may be deemed as an effective
withdrawal of the defective Notice of Appeal.
Perforce, the period of appeal was tolled by
the Motion for Reconsideration and started to run
again from the receipt of the order denying theMotion
for Reconsideration. A Motion for Additional Time to
File the Petition was likewise filed with the Court of
Appeals. Counting fifteen (15) days from receipt of the
denial of the Motion for Reconsideration and the ten
(10)-day request for additional period, it is clear that
respondents filed their Petition for Review on time.
Petitioners invoke to the ruling in People v. De la
[7]
Cruz that once a notice of appeal is filed, it cannot be
validly withdrawn to give way to a motion for
reconsideration. The factual circumstances in the two
cases are different.
De la Cruz is a criminal case, governed by
criminal procedure. Section 3, Rule 122 of the Rules of
Court provides that the proper mode of appeal from a
decision of the RTC is a notice of appeal and an

appeal is deemed perfected upon filing of the notice of

appeal.
In the case at bar, a petition for review before the
Court of Appeals is the proper mode of appeal from a
decision of the RTC. Since the filing of the notice of
appeal is erroneous, it is considered as if no appeal
was interposed.
Now on the second and more important issue
raised by petitioners: whether the Complaint satisfies
the jurisdictional requirements for a case of unlawful
detainer properly cognizable by the MTC.
The MTC considered itself as having jurisdiction
over the ejectment complaint and disposed of the
same in favor of petitioners. Said ruling was affirmed
by the RTC. The Court of Appeals reversed the lower
courts and found the complaint to be one not for
unlawful detainer based on two (2) grounds, namely:
that the allegations fail to show that petitioners were
deprived of possession by force, intimidation, threat,
strategy or stealth; and that there is no contract,
express or implied, between the parties as would
qualify the case as one of unlawful detainer.
We disagree with the Court of Appeals.
The complaint for unlawful detainer contained the
following material allegations:
....
3.
That plaintiffs are the owners of Lot
No. 2, which is covered by T.C.T. No.
36466 of the Register of Deeds of
Mandaue City, Lot No. 1-A which is
covered by T.C.T. No. 36467 of the
Register of Deeds of Mandaue City and Lot
No. 86-A which is covered by T.C.T. No.

36468 of the Register of Deeds of

Mandaue City, all situated in the City of
Mandaue.
Copies of said Transfer
Certificate of Titles are hereto attached as
Annexes A, B, and C respectively and
made an integral part hereof;
4.
That defendant Elizabeth Ong is the
previous registered owner of said lots;
5.
That as the previous registered
owner of said lots, defendant Elizabeth
Ong and her husband and co-defendant
Jerry Ong have been living in the house
constructed on said lots;
6.
That on May 6, 1995, plaintiffs,
through the undersigned counsel, wrote
defendants a letter informing them or their
intent to use said lots and demanded of
them to vacate said lots within 30 days
from receipt of said letter. Copy of said
letter is hereto attached as Annex D and
made an integral part thereof;
7.
That despite demand to vacate, the
defendants have refused and still refuse to
vacate
said
lots,
thus,
unlawfully
withholding possession of said lots from
plaintiffs and depriving plaintiffs of the use
of their lots;
8.
That in unlawfully withholding the
possession of said lots from the plaintiffs,
plaintiffs have suffered damages in the
form of unearned rentals in the amount
of P10,000.00 a month
. . . .[8]

Well-settled is the rule that what determines the

nature of an action as well as which court has
jurisdiction over it are the allegations of the complaint
and the character of the relief sought.[9]
Respondents contend that the complaint did not
allege that petitioners possession was originally lawful
but had ceased to be so due to the expiration of the
right to possess by virtue of any express or implied
contract.
The emphasis placed by the Court of Appeals on
the presence of a contract as a requisite to qualify the
case as one of unlawful detainer contradicts the
various jurisprudence dealing on the matter.
In Javelosa v. Court of the Appeals,[10] it was held
that the allegation in the complaint that there was
unlawful withholding of possession is sufficient to make
out a case for unlawful detainer. It is equally settled
that in an action for unlawful detainer, an allegation
that the defendant is unlawfully withholding possession
from the plaintiff is deemed sufficient, without
necessarily employing the terminology of the law.[11]
Hence, the phrase "unlawful withholding" has
been held to imply possession on the part of
defendant, which was legal in the beginning, having no
other source than a contract, express or implied, and
which later expired as a right and is being withheld by
defendant.[12] InRosanna B. Barba v. Court of Appeals,
[13]
we held that a simple allegation that the defendant
is unlawfully withholding possession from plaintiff is
sufficient.
Based on this premise, the allegation in
the Complaint that:

. . . . despite demand to vacate, the

defendants have refused and still refuse to
vacate
said
lots,
thus,
unlawfully
withholding possession of said lots from
plaintiffs and depriving plaintiffs of the use
of their lots;[14]
is already sufficient to constitute an unlawful detainer
case.
In the subject complaint, petitioners alleged that
they are the registered owners of the lots covered by
TCT Nos. 36466, 36467 and 36468. By their implied
tolerance, they have allowed respondents, the former
owners of the properties, to remain therein.
Nonetheless, they eventually sent a letter to
respondents asking that the latter vacate the said lots.
Respondents refused, thereby depriving petitioners of
possession of the lots. Clearly, the complaint
establishes the basic elements of an unlawful detainer
case, certainly sufficient for the purpose of vesting
jurisdiction over it in the MTC.
Respondents would like to capitalize on the
requisites as cited in the case of Raymundo dela Paz
v. Panis.[15] But the citation is a mere reiteration of Sec.
1, Rule 70[16] of the Rules of Court. The case doesid
not provide for rigid standards in the drafting of the
ejectment complaint. The case of Co Tiamco v.
Diaz[17] justifies a more liberal approach, thus:
. . . The principle underlying the brevity and
simplicity of pleadings in forcible entry and
unlawful detainer cases rests upon
considerations of public policy. Cases of
forcible entry and detainer are summary in
nature, for they involve perturbation of

social order which must be restored as

promptly as possible and, accordingly,
technicalities or details of procedure should
be carefully avoided.[18]
Moreover, petitioners fail to mention any of the
incidents of the pending case involving the annulment
of deed of sale and title over said property. Petitioners
know better than to question this in an ejectment
proceeding, which brings us to the nature of the action
in this case.
Respondents insist that the RTC, and not the
MTC, had jurisdiction over the action, it being
an accion reivindicatoria according to them, on the
ground that petitioners were constantly claiming
ownership over the lands in the guise of filing an action
for
ejectment.
In
their Comment,[19]respondents
maintain that they occupy the subject lots as the legal
owners. Petitioners, on the other hand, are seeking
recovery of possession under a claim of ownership
which is tantamount to recovery of possession based
on alleged title to the lands, and therefore is within the
original jurisdiction of the RTC, so respondents
conclude.
This contention is not tenable.
The issue involved in accion reivindicatoria is the
recovery of ownership of real property. This differs
from accion publiciana where the issue is the better
right of possession or possession de jure, and accion
interdictal where the issue is material possession or
possession de facto. In an action for unlawful detainer,
the question of possession is primordial while the issue
of ownership is generally unessential.[20]

Neither the allegation in petitioners complaint for

ejectment nor the defenses thereto raised by
respondents sufficiently convert this case into
an accion reivindicatoria which is beyond the province
of the MTC to decide. Petitioners did not institute the
complaint for ejectment as a means of claiming or
obtaining ownership of the properties. The
acknowledgment in their pleadings of the fact of prior
ownership by respondents does not constitute a
recognition of respondents present ownership. This is
meant only to establish one of the necessary elements
for a case of unlawful detainer, specifically the unlawful
withholding of possession. Petitioners, in all their
pleadings, only sought to recover physical possession
of the subject property. The mere fact that they claim
ownership over the parcels of land as well did not
deprive the MTC of jurisdiction to try the ejectment
case.
Even if respondents claim ownership as a
defense to the complaint for ejectment, the conclusion
would be the same for mere assertion of ownership by
the defendant in an ejectment case will not therefore
oust the municipal court of its summary jurisdiction.[21]
This Court inGanadinv. Ramos[22] stated that if what is
prayed for is ejectment or recovery of possession, it
does not matter if ownership is claimed by either
party. Therefore, the pending actions for declaration
of nullity of deed of sale and Transfer Certificates of
Title and quieting of title in Civil Case No. MAN-2356
will not abate the ejectment case.
In Drilon v. Gaurana,[23] this Court ruled that the
filing of an action for reconveyance of title over the
same property or for annulment of the deed of sale

over the land does not divest the MTC of its jurisdiction
to try the forcible entry or unlawful detainer case before
it, the rationale being that, while there may be identity
of parties and subject matter in the forcible entry case
and the suit for annulment of title and/or reconveyance,
the rights asserted and the relief prayed for are not the
same.[24]
In Oronce v. Court of Appeals,[25] this Court held
that the fact that respondents had previously filed a
separate action for the reformation of a deed of
absolute sale into one of pacto de retro sale or
equitable mortgage in the same Court of First Instance
is not a valid reason to frustrate the summary remedy
of ejectment afforded by law to the plaintiff.
Consequently, an adjudication made in an ejectment
proceeding regarding the issue of ownership should be
regarded as merely provisional and, therefore, would
not bar or prejudice an action between the same
parties involving title to the land. The foregoing
doctrine is a necessary consequence of the nature of
forcible entry and unlawful detainer cases where the
only issue to be settled is the physical or material
possession over the real property, that is,
possession de facto and not possession de jure.
The Court reiterated this in the case of Tecson v.
Gutierrez[26] when it ruled:
We must stress, however, that before
us is only the initial determination of
ownership over the lot in dispute, for the
purpose of settling the issue of possession,
although the issue of ownership is
inseparably linked thereto. As such, the
lower court's adjudication of ownership in

the ejectment case is merely provisional,

and our affirmance of the trial courts'
decisions as well, would not bar or
prejudice an action between the same
parties involving title to the property, if and
when such action is brought seasonably
before the proper forum.
The long settled rule is that the issue of
ownership cannot be subject of a collateral attack.
In Apostol v. Court of Appeals, [27] this Court had
the occasion to clarify this:
. . . Under Section 48 of Presidential
Decree No. 1529, a certificate of title shall
not be subject to collateral attack. It cannot
be altered, modified or cancelled, except in
a direct proceeding for that purpose in
accordance with law. The issue of the
validity of the title of the respondents can
only be assailed in an action expressly
instituted for that purpose. Whether or not
the petitioners have the right to claim
ownership over the property is beyond the
power of the court a quo to determine in an
action for unlawful detainer.[28]
With the conclusion of the second issue in favor
of petitioners, there is no need to discuss the third
assignment of error which is related to the second
issue.
WHEREFORE,
the Petition is
GRANTED.
The Decision of the Court of Appeals dated 6 January

1998 is REVERSED and SET ASIDE

and
the Decision dated 24 April 1996 of the Municipal Trial
Court of Mandaue City REINSTATED and AFFIRMED.
Costs against respondents.

LILIA V. PERALTA-LABRADOR,
165177
Petitioner,

G.R. No.
Present:

Davide, Jr., C.J. (Chairman),

- versus Quisumbing,
YnaresSantiago,
Carpio, and
Azcuna, JJ.
SILVERIO BUGARIN,
substituted
by
Promulgated:
CONSOLACION BUGARIN,[1]
Respondent.
August 25, 2005

his

widow,

YNARES-SANTIAGO, J.:
Challenged in this petition for review on certiorari
is the March 12, 2004 decision[2] of the Court of
Appeals in CA-G.R. SP No. 57475, which affirmed with

modification the January 26, 2000 judgment [3] of the

Regional Trial Court (RTC) of Iba, Zambales, Branch
71, in Civil Case No. RTC-1590-I, which in turn
affirmed the decision[4] dated May 16, 1999 of the
Municipal Trial Court (MTC) of San Felipe, Zambales,
in Civil Case No. 328, and its September 6, 2004
resolution[5] denying reconsideration thereof.
On January 18, 1996, petitioner Lilia V. PeraltaLabrador filed a case for Recovery of Possession and
Ownership, docketed as Civil Case No. 328, with the
MTC of San Felipe, Zambales. She alleged that she is
the owner of Cadastral Lot No. 2650, with an area of
400 sq. m. located at Sitio Caarosipan, Barangay
Manglicmot, San Felipe, Zambales, having purchased
the same in 1976 from spouses Artemio and Angela
Pronto. In 1977, she was issued Tax Declaration No.
10462 and paid the taxes due thereon.[6]
In 1990, the Department of Public Works and
Highways constructed a road which traversed
Cadastral Lot No. 2650 thereby separating 108 sq. m.
from the rest of petitioners lot, for which she was
issued Tax Declaration No. 02-2460R in 1991.[7]
Sometime in 1994, respondent Silverio Bugarin
forcibly took possession of the 108 sq. m. lot and
refused to vacate the same despite the pleas of
petitioner. Hence, on January 18, 1996, she instituted
a complaint for recovery of possession and ownership
against respondent.
In his Answer with Counterclaims,[8] respondent
contended that the area claimed by petitioner is
included in the 4,473 square meter lot, covered by the
Original Certificate of Title (OCT) No. P-13011; and

that he has been in continuous possession and

occupation thereof since 1955. In his Amended
Answer with Counterclaim,[9] however, respondent
failed to allege that the questioned lot is covered by the
OCT No. P-13011, and instead asserted that he
planted fruit bearing trees in the property. Respondent
further pleaded the defenses of lack of cause of action
and prescription.
On May 16, 1999, the court a quo ruled in favor
of respondent declaring him as the owner of the
controverted lot on the basis of the OCT No. P-13011.
The complaint was dismissed for failure of petitioner to
prove prior physical possession and ownership
thereof. The dispositive portion thereof, reads:
WHEREFORE, all the foregoing
premises considered and for failure on the
part of the plaintiff to establish the
preponderance of evidence of prior actual
physical possession and present title over
the lot in her favor, let the instant case be
ordered DISMISSED, and the defendant be
awarded the rightful possession and
ownership of the same and the plaintiff is
hereby
ordered
to
pay
FIFTEEN
THOUSAND (P15,000.00) PESOS as
reasonable Attorneys fee and FIVE
THOUSAND (P5,000.00) PESOS as
appearance fee plus costs.
SO ORDERED.[10]
The RTC affirmed the assailed decision, [11] hence
petitioner filed a petition for review before the Court of
Appeals which was however denied for insufficiency of

evidence to prove ownership or prior actual physical

possession. The appellate court deleted the monetary
awards in favor of respondent as well as the
declaration of the MTC that respondent is the owner of
the questioned lot on the ground that the OCT No. P13011, relied upon by said court was not formally
offered in evidence, hence, cannot be considered by
the court. The decretal portion thereof, states:
WHEREFORE, in view of the
foregoing discussion, the instant petition is
hereby PARTIALLY GRANTED.
The
assailed Decision dated January 26, 2000,
in Civil Case No. RTC 1590 I of the
Regional Trial Court (RTC), Branch 71, Iba,
Zambales, and Decision dated May 16,
1999, in Civil Case No. 328 of the
Municipal Trial Court of San Felipe,
Zambales are MODIFIED by deleting the
declaration of ownership as to the disputed
108 square meters and the monetary
award in favor of respondent Silverio
Bugarin. However, the dismissal of the
complaint is AFFIRMED.
SO ORDERED.[12]
The motion for reconsideration filed by petitioner
was denied. Hence the instant petition.
Pertinent portion of Section 1, Rule 70 of the
Revised Rules of Civil Procedure, provides:
SECTION 1. Who may institute
proceedings, and when. a person
deprived of the possession of any land or

building by force, intimidation, threat,

strategy, or stealth, may at any
time within one (1) year after such
unlawful deprivation or withholding of
possession, bring an action in the proper
Municipal Trial Court against the person or
persons unlawfully withholding or depriving
of possession, or any person or persons
claiming under them, for the restitution of
such possession, together with the
damages and costs. (Emphasis supplied)
In Lopez v. David Jr.,[13] it was held that an action
for forcible entry is a quieting process and the one
year time bar for filing a suit is in pursuance of the
summary nature of the action. Thus, we have nullified
proceedings in the MTCs when it improperly assumed
jurisdiction of a case in which the unlawful deprivation
or withholding of possession had exceeded one year.
After the lapse of the one year period, the suit must be
commenced in the RTC via an accion publiciana, a suit
for recovery of the right to possess. It is an ordinary
civil proceeding to determine the better right of
possession of realty independently of title. It also
refers to an ejectment suit filed after the expiration of
one year from the accrual of the cause of action or
from the unlawful withholding of possession of the
realty independently of title. Likewise, the case may
be instituted before the same court as an accion
reivindicatoria, which is an action to recover ownership
as well as possession.[14]
Corrollarily, jurisdiction of a court is determined
by the allegations of the complaint. Thus, in

ascertaining whether or not the action falls within the

exclusive jurisdiction of the inferior courts, the
averments of the complaint and the character of the
relief sought are to be examined.[15]
In the instant case, petitioners complaint alleges
that:
2.
That plaintiff is the owner of a
parcel of land denominated as Cadastral
lot No. 2650, San Felipe Cadastre, situated
at sitio Caarosipan, Barangay Manglicmot,
San Felipe, Zambales which she bought in
1976 from Spouses Artemio Pronto and
Angela Merano when she was still a widow,
with the following boundaries: North, Alipio
Abad, East, Antonio Cueva, South, Juan
Borja, and West, Old Provincial Road,
containing an area of 108 square meters,
declared under Tax Declaration No. 0021860R and assessed at P1,120.00;
3.
That plaintiff has been in
open,
continuous,
exclusive
and
adverse
as
well
as
notorious
possession of the said lot and in the
concept of an owner since she
[acquired] it in 1976 until the time when
defendant took possession forcibly, two
years ago;
4.
That in or before 1990 the
land was traversed by a new National
Highway and the land was segregated from
a bigger portion of the land, the western
portion is now the land in question and
since the new provincial road which

traversed the whole land of the plaintiff, the

old highway which is west of Lot 2650 shall
belong to the plaintiff in compensation of
the portion of her lot traversed by the new
highway, said old highway is also taken by
defendant unlawfully;[16]
It is clear that petitioners averment make out a
case for forcible entry because she alleged prior
physical possession of the subject lot way back in
1976, and the forcible entry thereon by respondent.
Considering her allegation that the unlawful
possession of respondent occurred two years[17] prior
to the filing of the complaint on January 18, 1996, the
cause of action for forcible entry has prescribed and
the MTC had no jurisdiction to entertain the case.
Petitioners complaint therefore should have been filed
with the proper RTC.
It is settled that jurisdiction over the subject
matter cannot be waived by the parties or cured by
their silence, acquiescence or even express consent.
[18]
Hence, the failure of respondent to insist on the
defenses of lack of cause of action and prescription
stated in his Amended Answer with Counterclaim will
not vest the MTC with jurisdiction over the case.
On this point, the Court held in Bongato v.
Malvar[19] that:
It is wise to be reminded that forcible
entry is a quieting process, and that the
restrictive time bar is prescribed to
complement the summary nature of such
process. Indeed, the one-yearperiod within
which to bring an action for forcible entry is
generally counted from the date of actual

entry to the land. However, when entry is

made through stealth, then the one-year
period is counted from the time the plaintiff
learned about it. After the lapse of the oneyear period, the party dispossessed of a
parcel of land may file either an accion
publiciana, which is a plenary action to
recover the right of possession; or
an accion reivindicatoria, which is an action
to recover ownership as well as
possession.
On the basis of the foregoing facts, it
is clear that the cause of action for forcible
entry filed by respondents had already
prescribed when they filed the Complaint
for ejectment on July 10, 1992. Hence,
even if Severo Malvar may be the owner of
the land, possession thereof cannot be
wrested through a summary action for
ejectment of petitioner, who had been
occupying it for more than one (1) year.
Respondents should have presented their
suit before the RTC in an accion
publiciana or an accion reivindicatoria, not
before the MTCC in summary proceedings
for forcible entry. Their cause of action for
forcible entry had prescribed already, and
the MTCC had no more jurisdiction to hear
and decide it.
...
Further, a courts lack of jurisdiction
over the subject matter cannot be waived
by the parties or cured by their silence,

acquiescence or even express consent. A

party may assail the jurisdiction of the court
over the action at any stage of the
proceedings and even on appeal. That the
MTCC can take cognizance of a motion to
dismiss
on
the
ground
of
lack
of jurisdiction, even if an answer has been
belatedly filed we likewise held in Bayog v.
Natino[.]
Moreover, even if the MTC has jurisdiction over
the subject matter, the complaint should still be
dismissed because petitioner failed to prove that the
controverted 108 sq. m. lot is part of Cadastral Lot No.
2650. Petitioner admitted that she has never seen the
Cadastral Map of San Felipe, Zambales, and relied
only on the Survey Notification Card[20] from the Bureau
of Lands,[21] with a sketch of Cadastral Lot No. 2650.
Said card, however, does not reflect the 108 sq. m. lot
subject of this case. Neither did petitioner cause the
survey of Cadastral Lot No. 2650 after the construction
of a new road to prove that the segregated portion on
the western side is part thereof. Ei incumbit probotio
qui dicit, non qui negat. He who asserts, not he who
denies, must prove.[22] Failing to discharge this burden,
the dismissal of the complaint is proper.
In the same vein, ownership of the lot in question
cannot be awarded to respondent considering that
OCT No. P-13011,[23] and the Survey Plan[24] were not
formally offered in evidence. While the issue of
ownership may be passed upon in ejectment cases for
the sole purpose of determining the nature of
possession,[25] no evidence conclusively show that the

lot in question is covered by said OCT No. P-13011 or

any other title of respondent.
WHEREFORE, the May 16, 1999 decision of the
Municipal Trial Court of San Felipe, Zambales, the
January 26, 2000 decision of the Regional Trial Court,
Branch 71, Iba, Zambales, and the March 12, 2004
decision
of
the
Court
of
Appeals,
are ANNULLED and SET
ASIDE for
lack
of
jurisdiction. The complaint in Civil Case No. 328 is
DISMISSED.

DR. JESUS SERIA and

127382

G.R. No.

ENRIQUETA SERIA
(deceased), represented by
DR. JESUS SERIA, JR.,
ANTONIO SERIA, VIOLETA

Present:

SERIA TAN, REYNALDO

SERIA and EMMANUEL
SERIA,
J., Chairman,

PUNO,

Petitioners,
RIA-MARTINEZ,

AUST
CALLE
JO, SR.,

versus
TINGA, a
nd
CHIC

O-NAZARIO, JJ.
VICTOR CABALLERO,
TEODORO DONELA, OLIVER

Promulgated:

DONELA, COURT OF APPEALS,

and THE HONORABLE REGIONAL
TRIAL COURT, BRANCH 20,
MISAMIS
17, 2004

ORIENTAL,
Respondents.

CALLEJO, SR., J.:

August

Before us is a petition for review on certiorari of

the Decision[1] of the Court of Appeals (CA) dated
August 23, 1996, affirming the dismissal of the
complaint for quieting of title, recovery of possession,
and damages by the Regional Trial Court (RTC) of
Misamis Oriental, Cagayan de Oro City, in Civil Case
No. 8716.
The Antecedents
On August 11, 1982, Dr. Jesus Seria and his
wife, Enriqueta Seria filed a Complaint for quieting of
title, recovery of possession, and damages with a
prayer for a writ of preliminary mandatory injunction
against respondents Victor Caballero and his tenants,
Teodoro Donela and Oliver Donela. When Dr. Seria
died on August 6, 1983, he was substituted by his
children, petitioners Jesus, Jr., Antonio, Violeta,
Reynaldo and Emmanuel.[2]
The petitioners alleged in their complaint that
they are the absolute owners and have been in actual
and constructive possession for thirty-five (35) years of
a parcel of land described as follows:
Lot No. 3533-A, Cad-237, Cagayan
Cadastre
Tax Declaration No. 02161
Location Mantadiao, Opol,
Misamis Oriental
Area - 2.5000 has.
Boundaries:
North - Alejo Seria
South - T. Sabornido
East
- A. Seria & T. Sabornido
West - F. Caballero[3]

The petitioners averred that sometime in March

1982, they discovered that respondent Caballero was
claiming ownership over the said land and offering it
for sale or mortgage to third parties. They also
discovered that the respondents Donelas were
occupying the land as tenants and caretakers of the
land. [4]
The petitioners claimed that their father, Dr.
Seria, bought the land from Lucia Vda. de Marbella
who inherited it from her father, Ramon Neri. [5] They
presented a Deed of Sale[6] dated August 23, 1947
showing that Dr. Seria bought 5 hectares of ricefield,
bounded on the North by Raymundo Seria, on the
East by Teofilo Saburnido, on the South by Obdelio
Caballero, on the West by Obdullo Caballero, from
Lucia Vda. de Marbella. Dr. Seria was issued Tax
Declaration No. 4029 allegedly for the said property. As
indicated in the tax declaration and subsequent tax
declarations issued in the name of Dr. Seria, they
were issued for Cadastral Lot No. 3533 and covered a
2.5-hectare ricefield with the same boundary owners
as those in the complaint.[7] The petitioners also
averred that they regularly paid taxes thereon since
1947 up to the present.[8]
In his answer, respondent Caballero alleged that
he was the lawful owner, and had been in actual
physical possession of the disputed land since time
immemorial. He averred that the disputed land is part
of Cadastral Lot No. 3533, C-7 of the Cagayan
Cadastre and originally owned by his grandfather,
Eustaquio Caballero.[9]
The respondents averred that Eustaquio
Caballero declared the entire parcel of land for tax

purposes even before the war. Tax Declaration No.

2442 was issued in lieu of the records that were
destroyed during the war. This tax declaration
indicated that the 119,490 square-meter parcel of land
was located at Pontacon, Iponan, Cagayan de Oro
City, bounded on North by Rustico Dablio, on the East
by J. Seria and T. Saburnido, on the South by Victor
Obsioma, and on the West by Victorino Caballero.[10]
Emiliana Ibarat, respondent Caballeros sister,
testified that when Eustaquio Caballero died in 1944,
the land was divided among his three children,
Vicenta, Benita and Victorino, the father of respondent
Caballero. Lot A, with an area of 39,625 square
meters, was given to Victorino, which was later
inherited by the respondent. Lot B, with an area of 71,
450 square meters, was given to Benita; and Lot C,
with only 7,938 square meters was given to Vicenta.
Lots B and C were, thereafter, sold to one Gaga Yasay.
Because of the trouble between the petitioners and the
respondents, Yasay agreed to buy only a portion of Lot
A.[11]
The land was surveyed during the trial and it was
determined that it now consisted of only 23,373 square
meters,[12] and not 25,000 square meters as claimed by
the petitioners. Gliceria Legaspi, respondent
Caballeros other sister, also testified that the disputed
land was now bounded on the North by Seria and
Nangcas, on the East by Teofilo Saburnido, on the
South by Gaga Yasay, and on the West by Nangcas. [13]
The RTC rendered judgment[14] on January 21,
1992, dismissing the complaint, and upholding the right
of the respondents over the land. The dispositive
portion reads:

WHEREFORE, judgment is hereby

rendered in favor of the defendant Victor
Caballero and against the plaintiffs herein,
to wit:
1.
Ordering the dismissal
of the complaint with costs.
2.
Ordering the defendant
Victor Caballero as the absolute and lawful
owner and possessor of the land in
question.
3.
Ordering the plaintiffs,
their heirs, lawyers, servants or privies not
to disturb or molest the possession and
ownership of Victor Caballero over the land
in question.
4.
Ordering the plaintiffs to
pay to defendant Victor Caballero, jointly
and severally the sum of FIVE THOUSAND
(P5,000.00) pesos for expenses of
litigation,
and
THREE
THOUSAND
(P3,000.00) pesos for and as attorney's
fees having been compelled to retain the
services of counsel to protect his interest
herein.
SO ORDERED.[15]
The trial court ruled that it was not clearly
shown that the land bought by Dr. Seria from Lucia
Vda. de Marbella was the same land owned by
Victor Caballero, and that the petitioners failed to
show that Lucia Vda. de Marbella bought the land
from Eustaquio Caballero, the original owner and

cadastral claimant of the land. It also noted that the

deed of sale between Lucia Vda. de Marbella and
Dr. Seria showed that the land had an area of 5
hectares, whereas, the petitioners only claimed 2.5
hectares. Furthermore, the boundaries of the land
stated in the complaint did not coincide with what
was stated in the Deed of Sale, or in Tax
Declaration No. 2442 in the name of Eustaquio
Caballero. The trial court ruled that the petitioners
failed to explain these discrepancies, and that there
was
no
showing
that
Tax Declaration No. 2442 was cancelled by Tax
Declaration No. 4029 in the name of Dr. Seria.
The trial court interpreted this to mean that
Eustaquio Caballero's right as owner of the land
remained.
Dissatisfied, the petitioners appealed the case to
the CA, which rendered a Decision [16] affirming in
toto the decision of the RTC. The petitioners filed a
Motion for Reconsideration on September 30, 1996.
[17]
The CA denied the motion.[18]
Hence, the instant petition.
The petitioners assign the following errors:
1.
THAT IT IS ERROR FOR THE
HONORABLE COURT OF APPEALS
TO UPHOLD THE HONORABLE RTC
ON THE ISSUE THAT THE ALLEGED
IDENTITY
OF
THE
LAND
IN
LITIGATION
IS
UNESTABLISHED
BETWEEN THE PARTIES-LITIGANTS.
2. THAT IT IS ERROR FOR THE
HONORABLE COURT OF APPEALS
TO FAIL TO APPRECIATE THE 35-

YEAR ACQUISITIVE PRESCRIPTION

IN FAVOR OF THE PLAINTIFFSAPPELLANTS.[19]
The issues in this petition are, therefore, the
following: (1) whether the petitioners were able to
establish the identity of the land being claimed by
them; and (2) whether acquisitive prescription should
be appreciated in favor of the petitioners.
The Ruling of the Court
The first issue deals clearly with a question of
fact which is beyond the province of this Court in a
petition for review on certiorari. Well-entrenched is the
rule that the Court's jurisdiction in a petition for review
is limited to reviewing or revising errors of law allegedly
committed by the appellate court. Factual findings of
the Court of Appeals are conclusive on the parties and
not reviewable by this Courtand they carry even
more weight when the Court of Appeals affirms the
factual findings of the trial court. [20] The exceptions to
this rule are the following:
(1) when the conclusion is a finding
grounded
entirely
on
speculations,
surmises or conjectures; (2) when the
inference made is manifestly mistaken,
absurd or impossible; (3) when there is
grave abuse of discretion; (4) when the
judgment is based on misapprehension of
facts; (5) when the findings of facts 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 appellant and

appellee; (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, 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 evidence and are
contradicted by the evidence on record.[21]
We find no cogent reason to reverse the findings
of the CA. None of the aforementioned exceptions is
present in this case. The CA was correct in concluding
that the petitioners failed to establish that the parcel of
land in the possession of the respondents is the same
as that subject of their complaint.
The CA noted that the land subject of the
complaint has boundaries different from the land in
possession of the respondents. In fact, the land
described in the complaint appears to be different from
the land described in the Deed of Sale which the
petitioners invoke as the basis of their ownership.
First. The petitioners alleged in their complaint
that the boundaries of their property are as follows:
North - Alejo Seria
South - T. Sabornido
East - A. Seria & T. Sabornido
West - F. Caballero[22]

On the other hand, the Deed of Sale provides

that the property sold to them has the following
boundaries:
North - Raymundo Seria
South - Obdullo Caballero
East - Teofilo Saburnido
West - Obdullo Caballero[23]
Second. The complaint[24] of the petitioners
states that the property they are claiming has an area
of 2.5 hectares. On the other hand, the Deed of
Sale[25] provides that the subject property has an area
of 5 hectares.
Third. The complaint alleged that the property is
located
in
Mantadiao,
Opol,
Misamis
[26]
Oriental, while the Deed of Sale shows that the
property purchased is located in Puntakon, Igpit,
Cagayan Or. Misamis.[27]
We agree with the CA that there was no showing
that Tax Declaration No. 2442 in the name of
Eustaquio Caballero was cancelled. Absent any
specific statement therein to that effect, it cannot be
presumed that Tax Declaration No. 4029 in the name
of Dr. Seria cancelled Tax Declaration No. 2442.
Moreover, the land covered by Tax Declaration
No. 2442 is different from that covered by Tax
Declaration No. 4029 for the following reasons:
The boundary owners of the land as indicated in
Tax Declaration No. 2442 differ from those stated in
Tax Declaration No. 4029. The boundary owners as
indicated in Tax Declaration No. 2442 are as follows:
North - Rustico Dablio
South -Victor Obsioma
East - J. Seria & T. Saburnido

West - Victorino Caballero[28]

Under Tax Declaration No. 4029, on the other
hand, the boundary owners are as follows:
North - Alejo Seria
South - Teofilo Saburnido
East - A. Seria [and] T. Saburnido
West - Eustaquio Caballero[29]
Moreover, Tax Declaration No. 2442 covers an
area of 119,490 square meters[30] while Tax Declaration
No. 4029 covers only 25,000 square meters or 2.5
hectares.[31]
The petitioners argue that the Deed of Sale and
Tax Declaration No. 4029 should not be compared to
Tax Declaration No. 2442 and the Technical
Description of Cadastral Lot No. 3533 because the
former refers only to a portion of the area referred to by
the latter.[32] While the petitioners are correct on this
point, such mistake would still not justify a different
conclusion. The fact remains that the documentary and
testimonial evidence presented by the petitioners did
not prove the identity of the land being claimed. The
petitioners did not present evidence to prove that the
land registered in the name of Eustaquio Caballero
was sold to Lucia Vda. de Marbella or her
predecessor-in-interest from whom they purchased the
land subject of their complaint.
The failure to establish the identity of the land is
obviously fatal to the petitioners case. In Beo vs. Court
of Appeals,[33] a case which also involves an action for
possession and quieting of title, the Court had the
occasion to state:

[B]ecause petitioners failed to

explain the discrepancy or present other
evidence to prove with certainty the
location and area of the land they seek to
recover, respondent court correctly applied
the invariable rule that a person who
claims ownership of real property is
duty-bound to clearly identify the land
being claimed, in accordance with the
title on which he anchors his right of
ownership. When the record does not
show that the land subject matter of the
action for recovery of possession has been
exactly determined, such action cannot
prosper, as in the case of petitioners. In
sum, proof of ownership coupled with
identity of the land is the basic rule.
Corollarily, the rule is likewise wellsettled that in order that an action for
recovery of possession may prosper, it
is indispensable that he who brings the
action fully proves not only his
ownership but also the identity of the
property claimed, by describing the
location,
area
and
boundaries
thereof. As the appellate court succinctly
stated,
he
who
claims to have a better right to the property
must clearly show that the land possessed
by the other party is the very land that
belongs to him.[34]

On the second issue, the CA ruled that inasmuch

as the petitioners failed to establish that the parcel of
land in possession of the respondents is the same as
the subject of their complaint, their claim of acquisitive
prescription is clearly untenable.
The petitioners argue that they would not have
regularly paid taxes on the land since 1947 had they
not believed that they owned the same. [35] The
respondents, for their part, aver that the petitioners
were only able to prove seven (7) years of actual
possession of the land through cultivation by their
tenants. They argue that such seven-year period of
cultivation cannot be considered in the petitioners
favor, since the witness who testified on this fact did
not personally know the boundaries of the land
cultivated, or whether it was the same land bought by
Dr. Seria. The respondents contend that acquisitive
prescription applies only when there is no dispute as to
the identity of the property.[36]
We agree with the respondents. Since the
property has not been clearly identified by the
petitioners, their claim of acquisitive prescriptioncannot
be considered. Insufficient identification of the portion
of land claimed in absolute ownership cannot ripen into
ownership. Possession as a means of acquiring
ownership, while it may be constructive, is not a mere
fiction.[37]
Assuming, however, that the disputed land has
been clearly identified, acquisitive prescription will still
not lie in favor of the petitioners because they were not
able to prove that they have been in possession of the
property for the requisite number of years. Prescription
requires public, peaceful, uninterrupted and adverse

possession of the property in the concept of an owner

for ten years, in case the possession is in good faith
and with just title.[38]
Aside from the testimony of Leonardo Vacalares
that certain tenants of the petitioners cultivated the
land for a total of seven years, the petitioners did not
present any other evidence to show that they have
been in actual possession of the property for at least
ten years.
The petitioners argument that the payment of
taxes on the property since May 31, 1948 constitutes
proof of their possession of the subject land for thirtyfive years is untenable. Tax declarations and receipts
are not conclusive evidence of ownership. At most,
they constitute mere prima facie proof of ownership of
the property for which taxes have been paid. In the
absence of actual, public and adverse possession, the
declaration of the land for tax purposes does not prove
ownership.[39]
IN LIGHT OF ALL THE FOREGOING, the
petition is DENIED. The Decision of the Court of
Appeals is AFFIRMED. No costs.

G.R. No. L-22006 July 28, 1975

BASILIO PEREZ and PETRA
MONTALBO, petitioners,
vs.
NICOLAS MENDOZA, MARGARITA MACALALAD

and the HONORABLE COURT OF

APPEALS, respondents.
Pedro T. Panganiban for petitioners.
Julio D. Enriquez, Sr. for respondents.

MUNOZ PALMA, J.:

Civil Case 689 of the Court of First Instance of
Batangas was an action to quiet title over a piece of
land filed on March 20, 1959, by spouses Basilio Perez
and Petra Montalbo with spouses Nicolas Mendoza
and Margarita Macalalad as defendants. According to
the complaint, the land in controversy is located in
barrio Dagatan, municipality of Taysan, Batangas, with
an area of approximately 4,765 sq. meters, declared
for taxation purposes in the name of the "Heirs of
Estanislao Montalbo", and is "bounded on the north by
a school site, on the east by Calixto Flores, on the
south by a creek, and on the west by a creek and the
land of Gregorio Mendoza." On the basis of evidence
adduced by the parties, the trial court then presided by
Hon. Lorenzo Relova rendered judgment on February
19, 1962, dismissing the complaint and declaring the
spouses Mendoza "to have a better right to the
property in question." 1
Spouses Perez elevated the Relova decision to the
Court of Appeals which, however, affirmed in toto the

findings of the court a quo, and declared that "upon the

evidence it has been shown by a great preponderance
that the land in question belongs to the defendants." 2
The case is now before Us on a petition
for certiorari filed by spouses Perez.
The findings of fact both of the trial court and the Court
of Appeals may be briefly summarized as follows:
The litigated parcel of land was originally part of a
bigger tract owned by Estanislao Montalbo. When
Estanislao died in 1918, his properties passed on to
his children Petra, Felisa, and Pedro all surnamed
Montalbo, and because Pedro died single the two
women remained as the only heirs. By mutual
agreement Petra and Felisa divided between
themselves the lands of their father and the parcel of
which the litigated land was a part was assigned to
Felisa. Sometime in 1922 Felisa exchanged the abovementioned parcel with a land belonging to her aunt.
Andrea Montalbo, a sister of her father. The reason for
the exchange was that Andrea wanted to donate a
piece of land to the municipality for use as a school
site and the land of Felisa was what the municipality
preferred as it was adjacent to other properties of the
municipality. (Exh. 5 for defendants Mendoza) Upon
her acquisition of Felisa's aforementioned land, Andrea
donated to the municipality the northern portion thereof
which constituted almost one-half of the entire parcel,
and since then that portion was declared for taxation

purposes by the municipality together with its adjoining

properties (Exhs. 6, 6-A, 6-B).1wph1.t In 1927 the
remainder of the lot was given by Andrea Montalbo to
her daughter Margarita Macalalad on the occasion of
her marriage to Nicolas Mendoza, and from the time of
their marriage the couple possessed the said property.
That donation was confirmed subsequently in a public
instrument dated August 15, 1951 (Exh. 2 for the
Mendozas). Nicolas Mendoza sought to transfer the
tax declaration of the property to his name and of his
wife and for that purpose he submitted a deed of
exchange of property dated January 14, 1922,
allegedly executed by Felisa Montalbo and Andrea
Montalbo in the presence of the municipal secretary
Rafael Manahan (Exh. 5). When Basilio Perez came to
know about the supposed deed of exchange, he had it
investigated and upon discovering that the signature of
Rafael Manahan appearing on the document was
forged, he filed a criminal complaint before the Fiscal's
office which led to an accusation for falsification of
private document against Andrea Montalbo and
Nicolas Mendoza. Only Nicolas Mendoza was
arraigned and tried and was convicted by the Court of
First Instance of Batangas, but on appeal he was
acquitted by the Court of Appeals for insufficiency of
evidence to show that he participated in affixing the
signature of Rafael Manahan or that he was aware of
the falsity of the document in question when he
presented it to the tax assessor's
office. 3 Notwithstanding the forged signature of Rafael
Manahan on the document Exhibit 5, there is sufficient

evidence to prove that an exchange of property did in

fact occur in 1922 between Andrea and Felisa
Montalbo, and that Felisa's land passed on to Andrea
who in turn gave part of it to the municipality and part
to her daughter, Margarita; hence, the decision in favor
of the spouses Mendoza.
On the other hand, petitioners contend that the
disputed property was inherited by Petra and Felisa
Montalbo from their father Estanislao who died in 1918
and since that date the two sisters were in possession
of said land. In 1934 a deed of partition of the various
properties of Estanislao was executed between Petra
and the heirs of Felisa, and the land in question was
divided equally, between them; among those who
signed as witnesses to that agreement was Andrea
Montalbo(Exh. D for petitioners). In 1952 Felisa's
husband, Jose Ortega, and children sold their one-half
share to spouses Petra Montalbo and Basilio Perez,
now petitioners, but the deed of sale was lost a year
after. Sometime in 1946 petitioners leased the property
to the Mendozas and when the lease expired in 1951
they demanded for the return of the land but the
Mendozas refused and so petitioners had to file an
ejectment suit before the justice of the peace court of
Taysan which was still pending at the time of the trial of
the civil case in 1960. (tsn. witness Basilio Perez,
December 15, 1960, pp. 16-34)

For not giving credit to the foregoing evidence,

petitioners now assail the adverse decision of
respondent court on four assigned errors.
1. Petitioners contend that respondent court erred in
considering the criminal case for falsification res
adjudicataon the matter of ownership of the land in
litigation when the "question of ownership was not
actually and directly in issue in the criminal case and
the latter was not the proper vehicle for the
determination of the ownership of the land." (p. 9,
petitioners brief) Petitioners refer to portions in the
decision of respondent court, viz:
The land in question, together with that
portion that was acquired by the
municipality of Taysan, the identity of which
is admitted by the parties, belonged to
Felisa Montalbo, as held in the decision of
the Court of Appeals, thus "The said
parcel of land previously belonged to Felisa
Montalbo (married to Jose Ortega), who
inherited it from her deceased father, the
aforecited Estanislao Montalbo;", and the
land in question was donated propter
nuptias by Andrea Montalbo to Margarita
Macalalad and Nicolas Mendoza, the
defendants, (Margarita Macalalad is the
daughter of Andrea Montalbo) on the
occasion of their marriage on February 27,
1927, as found and held in the decision of

the Court of Appeals, thus "and this land

was acquired by the donor (Andrea
Montalbo) by means of a barter with her
own parcel of land planted with bamboos
and mango trees"
Upon the basis of the findings of fact and
conclusion arrived at in the decision of the
Court of Appeals, it clearly appears that
although the document of exchange of the
lands was found to be falsified,
nevertheless the Court found upon the
facts as demonstrated by the evidence that
the land in question "previously belonged
to Felisa Montalbo (married to Jose
Ortega), who inherited it from her deceased
father, the aforesaid Estanislao
Montalbo ..."; that said land was
donated propter nuptias by Andrea
Montalbo to the defendants on the
occasion of their marriage on February 27,
1927; and that "this land was acquired by
the donor by means of a barter with her
own parcel of land planted with bamboos
and mango trees". From the context of the
decision the natural and logical inference is
that factually the exchange of the lands
had been consummated.... (pp. 6-7, CA
decision at pp. 20-21, rollo; emphasis
supplied to indicate disputed statements)

Undoubtedly, there is merit to the contention of

petitioners that the pronouncements or findings of fact
made by the Court of Appeals in the criminal case
concerning the possession and ownership of the land
now in litigation in the civil case, do not constitute the
law on the matter and cannot be taken or adopted as a
basis for deciding the question of ownership of said
land in this civil case. Since there is no identity of
parties in the two cases the petitioners here not
being parties in the criminal case and the object or
subject matter in the criminal prosecution is different,
the latter being concerned with the guilt or innocence
of accused Nicolas Mendoza for falsification of private
document, it follows that the judgment in the criminal
action cannot be used as evidence in the civil case
where the issue is ownership of a piece of land. It is
the rule that the plea of res judicata generally cannot
be interposed except where the parties, facts, and
questions are the
same, 4 hence, the judgment in a criminal case cannot
be pleaded as res judicata in a civil action. 5
But whatever error was committed by respondent court
in this regard, the same is not sufficient to nullify the
appealed decision.
Analyzing the decision of respondent court. We see
that the latter made its own appraisal and evaluation of
the evidence existing in the record relative to the
possession and ownership of the land in question.
Thus it said that the conclusions arrived at by the Court

of Appeals in the criminal case to wit(1) that there was

an exchange of lands consummated between Andrea
and Felisa and (2) that the exchanged land was later
donated by Andrea to her daughter Margarita in 1927,
"can hardly be doubted if we take account of the
undisputed fact that the defendants have been in
possession of the land since 1927, and the
plaintiffs (meaning spouses Perez) have not attempted
to disturb defendants' possession of the land until 1952
when said plaintiffs filed an action of unlawful detainer
against the defendants." (p. 7 of appealed decision at
p. 21, SC rollo; emphasis supplied) Continuing,
respondent court expounded:
Contrary to the allegation in the complaint
"That plaintiffs were in possession of the
land prior and up to January, 1946, when
the same was leased to the defendants ...",
and the testimony of Basilio Perez to the
same tenor, the evidence has conclusively
shown that the defendants have been in
continuous possession of the land since
1927 to the present time, and they have
built a house on the land in 1928 where
they have resided and lived to the present,
as testified to by the defendant
Mendoza, ....
The plaintiffs have contended, however,
with the support of the testimony of Basilio
Perez, that the possession of the

defendants since 1946 was that of a mere

lessee of the land. On this matter, the trial
court said, "the records do not show any
documentary evidence to support such
contention. Nor is any document, say
receipts of payment of rentals presented to
bolster their theory. On the contrary their
averment has been strongly denied by the
defendants and the records show that it
was only in 1952 that a civil action was
instituted by the plaintiffs against the
defendants in the Justice of the Peace
Court of Taysan, Batangas, for detainer
and damages", and said allegation of
possession of the defendants as lessees of
the land "is not supported by positive and
convincing evidence". We find no reason to
disagree with the foregoing findings of fact
and conclusion of the trial court because
the same is supported by the
preponderance of evidence, and the
plaintiffs have not pointed to us any fact of
significance or influence which have been
disregarded by the court, other than the
testimony of Basilio Perez who testified
about the supposed contract of lease. (pp.
21-22, 23, ibid.; emphasis supplied)
Digging further into the evidence of herein petitioners,
respondent court found for itself that the agreement of
partition dated May 27, 1934, Exhibit D, is not

incontrovertible proof that in 1934 the litigated property

belonged in common to Petra and the heirs of Felisa
Montalbo both of whom may have been guided by the
fact that the property was still declared for taxation
purposes in the name of Estanislao Montalbo, and that
the document of partition "did not overcome the
evidence on record that Andrea Montalbo became the
owner of the land, and that since 1927 the defendants
have been in continuous possession of the land,
openly, adversely and in the concept of owners thereby
acquiring ownership of the land through acquisitive
prescription." (p. 10 of CA decision at p. 24, SC rollo)
Independently therefore of the pronouncements of the
Court of Appeals in the criminal case, respondent court
examined the evidence in this civil case and made its
own findings of fact on the basis of which it affirmed
the decision of the trial court.
We could have stopped here and resolved this petition
under well-entrenched precepts in Philippine
jurisprudence that findings of fact of the Court of
Appeals are as a rule conclusive and binding upon this
Court; 6 nonetheless, to set our mind at rest that the
conclusions of respondent court were not grounded on
speculation, surmises or conjectures, 7We went over
the evidence before Us.
Certain salient facts strongly support the claim of
respondents Mendoza over the property in dispute:

First, the northern boundary of the land in controversy

is undisputably a school site which originally was part
of a bigger tract belonging to Estanislao Montalbo. This
is admitted by petitioner Basilio Perez who to a
question propounded by his counsel, Atty. Panganiban,
declared:
Mr. Panganiban: (Counsel of
petitioners)
Q. According to these tax
declarations which you said
covers the land in question, the
boundaries on the north, school
site; on the east, land of Calixto
Flores; on the south, estero;
and on the west, estero and
Gregoria Mendoza, why is it
that there is a discrepancy?
A. Because from the whole
parcel of land a portion was
taken for the school site, and
that which remains now is the
land in question, sir. (tsn
December 15, 1960, pp. 22-23)
No explanation however was offered by Perez as to
how that portion became a school site. On the other
hand, there is evidence of respondent Mendoza that
because Andrea Montalbo wanted to donate a piece of

land to be used as a school site and the municipality

preferred the location of the land inherited by Felisa
from her father, the two women exchanged lands after
which Andrea gave one-half of the property to the
municipality while the remaining portion which is the
land now in litigation was donated propter nuptias to
her daughter Margarita way back in 1927. (tsn October
24, 1961, pp. 14-18) This donation of Andrea was not
disproved by any evidence of petitioners. On the part
of respondents Mendoza, their documentary evidence,
Exhibits 6, 6-A and 6-B, show that the municipality of
Taysan declared the donated property in its name as
early as July, 1925, which supports respondents' claim
that the exchange of properties between Andrea and
Felisa Montalbo took place sometime in 1922.
Second, the provincial authorities authorities dealt with
the Mendozas for the widening of the provincial road
which traverses the land in question. Nicolas Mendoza
testified that the land covered by the complaint actually
consists of two lots which he described in his sketch,
Exhibit 1, with letters "A" and "B" respectively,
separated by a provincial road leading to the
municipality of Lobo; that lot "A" which is the bigger
parcel is the one donated to his wife, Margarita, by
Andrea Montalbo on the occasion of their marriage in
1927 (Exh. 2); while lot "B" was bought from Donata
Mendoza in 1951 as shown by the deed of sale,
Exhibit 7; that sometime in 1937-38, the province
widened the provincial road traversing the two lots, and
he and his wife were approached by the provincial

authorities more particularly, Engineer Ramirez, for

them to give without compensation from lot "A" a
stretch of land of one meter in width to widen said
road, and they agreed. At that time Donata Mendoza
still owned lot "B" and she was also asked to give part
of her land for the road but she was paid for the value
of the plants destroyed in the process.(tsn October 24,
1961, pp. 32-34) For his part, petitioner Perez admitted
during the cross-examination conducted by the
opposite counsel, Atty. Julio Enriquez, that the
provincial authorities did not deal with him at all during
the widening of that particular road. (tsn September 25,
1961, p. 34) This is of marked significance, because if
it were true as claimed by petitioners that they were in
possession of the property since the death of
Estanislao Montalbo in 1918 or even after the deed of
partition in 1934, they would have been the persons
approached by the authorities for the widening of the
road. The fact that the Mendozas were the ones who
gave away part of the land for the widening of the Lobo
road shows that they were in possession of the
property and were living there at the time.
Third, respondents Mendoza have been in possession
of the property since 1927 in concept of owners
thereof. We have the testimony of respondent Nicolas
Mendoza that after the land was donated to his wife in
1927 they built a house on it and lived there
continuously, witness referring particularly to what he
described as lot "A" in his sketch Exhibit 1. (tsn
October 24, 1961, pp. 7, .30-31) Respondent's

testimony was found both by the trial and appellate

courts credible because (1) petitioner Basilio Perez
himself admitted during cross-examination that even
before the last world war the Mendozas had
constructed a house on the land in litigation (tsn
September 25, 1971, pp. 37-39; see Exh. E-3) which
admission disproves the allegation in the complaint
and Perez' testimony that it was only in 1946 when the
Mendozas occupied the property as lessees; (2) the
testimony of Nicolas Mendoza was corroborated by
witness Adriano Gonzales, a retired justice of the
peace of Taysan, Batangas, who declared that he
knew the Mendozas since 1937 and he saw them
living on the land in question and they have not
changed residence at all since he had known them (tsn
December 6, 1961, pp. 5-6); and (3) the respondents
Mendoza were the ones who were living on the
property and not the petitioners at the time the
provincial government in 1937 widened the Lobo road
which crosses said land.
The court a quo and the respondent appellate court did
not err when they upheld the claim of ownership of the
Mendozas principally on the ground that the latter were
in actual possession of the property since 1927 and
were sought to be dispossessed by petitioners herein
only in 1952 when an ejectment suit was filed against
them.
Possession is an indicium of ownership of the thing
possessed and to the possessor goes the presumption

that he holds the thing under a claim of

ownership. 8 Article 433 of the Civil Code provides that
"(A)ctual possession under claim of ownership raises a
disputable presumption of ownership. The true owner
must resort to judicial process for the recovery of the
property." In Chan vs. Court of Appeals, et al., L27488, June 30, 1970, 33 SCRA 737, this Court upheld
the finding of the Court of Appeals that the litigated
property belonged to the private respondents therein
based on their possession of the property, not only
because such findings of fact of the appellate court are
conclusive and binding on this Court but because the
conclusion is in accordance with Articles 433 and 531
of the Civil Code. 9
As we have here conflicting claims of possession by
the parties over the land in controversy and because
the fact of possession cannot be recognized at the
same time in two different personalities except in
cases of co-possession, the present possessor is to be
preferred pursuant to Article 538 of the Civil Code
which We quote:
Possession as a fact cannot be recognized
at the same time in two different
personalities except in the cases of copossession. Should a question arise
regarding the fact of possession, the
present possessor shall be preferred; if
there are two possessors, the one longer in
possession; if the dates of the possession

are the same, the one who presents a title;

and if all these conditions are equal, the
thing shall be placed in judicial deposit
pending determination of its possession or
ownership through proper proceedings." 10
The pretension of petitioners that the possession of the
Mendozas is that of a mere lessee was not believed by
the trial judge and the appellate court not only because
of the absence of any written or oral evidence on the
matter other than the bare testimony of petitioner
Basilio Perez, but also due to the circumstances
present in the case which We indicated and
enumerated at pages 7 to 9 of this decision. In fine, it
is a fact that the Mendozas are presently in possession
of the property and the presumption of ownership in
their favor has not been successfully rebutted by
evidence that they are mere lessees of the land in their
possession as claimed by petitioners.
2. In their second assigned error, petitioners contend
that respondent court should not have given weight to
the evidence of respondent Mendoza because the
latter's Exhibit 5 was proven to be a falsified document.
To recall, Exhibit 5 is the alleged deed of exchange or
barter of lands between Andrea and Felisa Montalbo
dated January 14, 1922. On this point, petitioners
overlook the fact that Exhibit 5 was made the basis of
a criminal accusation of falsification of private
document solely on the allegation that the signature of

Rafael Manahan, the person before whom the parties

to the document allegedly appeared, was not his.
There was no finding in that criminal case as per
decision rendered therein that the barter or exchange
of lands between Andrea and Felisa Montalbo did not
in effect take place. On the contrary, what appears in
said decision offered by petitioners as their Exhibit J
are the following findings of the Court of Appeals, viz:
that the land donated by Andrea Montalbo to her
daughter Margarita Macalalad "was acquired by the
donor by means of a barter with her own parcel of land
planted with bamboos and mango trees"; that while it is
true that because of this presentation of the falsified
document appellant (now respondent Nicolas
Mendoza) was able to secure the declaration of the
property donated in his name, no criminal liability
should be imposed upon him in the absence of any
evidence that he presented said exhibit with the
knowledge that it was forged "especially if we take into
consideration the fact that he and his wife were and
are still in possession of the land donated since 1927";
that in fact, the color and appearance of the document
in question show that it is not a new document but an
old one thus confirming Mendoza's theory that it was
executed in or about the year 1922 as appearing in the
document or five years before his marriage. (pp. 1, 5, 6
of Exh. J, folder of exhibits) Thus, if the document
Exhibit 5 was held to be forged, it was simply because
the municipal secretary, Rafael Manahan, did not sign
it and not for any other reason. What is material and
relevant to the civil case is that both the trial court and

respondent appellate court found for a fact that there

was an exchange of lands between Andrea and Felisa
Montalbo on the basis of evidence other than the
disputed Exhibit 5. As to what the evidence is, has
been discussed above.
Petitioners cite Gonzales vs. Mauricio, 53 Phil. 728
where this Court stated inter alia that the introduction
of a forged instrument by a witness renders the
testimony of the latter practically worthless. That
statement however is not applicable to the situation
before Us because in Gonzalez the particular
document or receipt referred to was found to be
entirely false as to its contents, handwriting, and
signature, whereas here all that was found to be false
is the signature of a witnessing official.
3. The last argument of petitioners is the object of the
third assigned error. It is contended that the appellate
court erred in not giving effect to the deed of partition,
Exhibit D, notwithstanding the fact that the name of
Andrea Montalbo appears in the document as one of
the witnesses thereto.
Exhibit D appears to be a document dated May 27,
1934, wherein certain properties allegedly belonging to
Estanislao Montalbo were divided between Petra
Montalbo and Jose Ortega, husband of deceased
Felisa Montalbo. Petitioner Basilio Perez declared that
one of the parcels of land mentioned in the document
is the land now in litigation which is particularly marked

as Exhibit D-1. He also testified that Exhibit D was

signed by him and his wife, Petra Montalbo, by Jose
Ortega, husband of deceased Felisa Montalbo, and
thumbmarked by the latter's children all in his
presence. (tsn December 15,1960, pp. 19-24)
Surprisingly, however, Basilio Perez did not at all
mention during the course of his testimony that the old
woman, Andrea Montalbo, signed the deed of partition
as a witness. We have gone over the transcript of
Basilio Perez' declaration on direct and crossexamination (tsn December 15, 1960, pp. 15-34;
September 25, 1961, pp. 3-40) and at no instance did
he ever state that Andrea Montalbo was present during
the preparation of the document, that she read or knew
the contents thereof which by the way consists of six
handwritten pages, and that she signed her name on
the document. It was incumbent upon petitioners to
identify the signature of Andrea Montalbo on the
document if her signature was truly there. As a matter
of fact, examining the document Exhibit D We entertain
doubts whether the name referred to by petitioners is
"Andrea Montalbo", for, as written, it also can read
"Maria Montalbo". At any rate, whatever is the import of
said deed of partition, the same binds only the parties
thereto but does not affect third persons such as
Andrea Montalbo or the herein Mendozas in the
absence of proof that they participated in one way or
another in the preparation and execution of
thedocument. As it is, Andrea Montalbo was a stranger
to that deed of partition and any recital therein
concerning the property under litigation cannot be used

as evidence to prejudice her and her successors-ininterest or place her in estoppel as to her claims over
the property. Res inter alios acta alteri nocere non
debet. A transaction between two parties ought not to
operate to the prejudice of a third person or stranger. 11
4. In the fourth assignment of error, petitioners claim
that the appellate court should have rendered a
decision in their favor. That both the trial court and
respondent appellate court have correctly evaluated
the evidence, has been clearly demonstrated by Us.
IN VIEW OF ALL THE ABOVE CONSIDERATIONS,
We find no reversible error in the decision under
review and We AFFIRM the same with costs against
petitioners.

G.R. No. 101929 January 6, 1993

BENJAMIN DIZON, ZACARIAS DIZON, AFRICA
DIZON, PERFECTO DIZON, CARMEN DIZON (Heirs
of Paula Galang), JULIA GALANG, CONSOLACION
TABORA, ABELARDO TABORA, CECILIA TABORA,
AVELINA TABORA, TRINIDAD TABORA,
REMEDIOS TABORA, VIRGINIA TABORA, DELFIN
TABORA, PENINA TABORA, FRANCISCO TABORA,
CIPRIANA GALANG, RUFINO DELOS SANTOS,

PEPITO DELOS SANTOS (Heirs of Donata Vergara),

ARNEO VERGARA, BENIGNO VERGARA, JOSE
VERGARA, SCION VERGARA, DEMETRIA
VERGARA (all heirs of Dionisio
Galang), petitioners,
vs.
COURT OF APPEALS, AUREO REYES, AURELIO
SAMIA, ALFONSO SAMIA, POTENCIANO GALANG,
LEONCIA GARCIA, BIENVENIDO TAPNIO, LYDIA
BALINGIT VDA. DE GARCIA, BENEDICTO GARCIA,
ROMULADO GARCIA, AMY GARCIA, ALEXANDER
GARCIA, LUDIVINA GARCIA, MONTANO
GUEVARRA, CORAZON LAMPA, RUDY LAMPA,
EDUARDO LAMPA, ILLUMINADA GUEVARRA,
CARMELITA MASANQUE VDA. DE GARCIA, MA.
CONCEPCION AQUINO VDA. DE GUEVARRA,
HONZAI GUEVARRA, RODA REBECCA
GUEVARRA, RUTH GUEVARRA, minors
represented by their mother Ma. Concepcion Vda.
de Guevarra, PRIMITIVA GUEVARRA, JOSIAS N.
GARCIA, LUCITA M. GARCIA, VICTOR M. GARCIA,
LUTERO M. GARCIA, SAMSON M. GARCIA,
FELIXBERTO M. GARCIA, JR., HERMENIGILDA
GARCIA, CONSTANCIO GARCIA, REYNALDO
GARCIA, AGAPITA GARCIA, ERNESTO GARCIA,
NORICO GARCIA, PACIFICO GARCIA, NORMANDO
GARCIA, ARTURO GARCIA, ESTELLA GARCIA,
DIOSDADO GARCIA (representing LEONCIA
GARCIA), GREGORIA MENDOZA, ELEUTERIA
BAUTISTA, PEDRO ATIENZA, BENITA
SAMANIEGO, NENE SAMANIEGO (representing

FLAVIANA GALANG), LETICIA REYES, MANUEL

REYES (representing MARCIANA GALANG),
CARMEN ROQUE VDA. DE DIMABUYU, PORFIRIO
R. DIMABUYU, CARMEN R. DIMABUYU, CARIDAD
R. DIMABUYU, PEDRO R. DIMABUYU, MARCOS
DIMABUYU (representing GERTRUDES
GALANG), respondents.
Heminio Z. Canlas for petitioners.

Conformably, the Register of Deeds

concerned is hereby ordered to cancel the
said titles; and subject Lots 3548 and 3562
are hereby adjudicated to the heirs of the
deceased co-owners to be partitioned
among them as follows:
a. one-sixth to the Heirs of Marciana
Galang;

Lagunzad, Juan, Rubin & Cabaron Law Office for

respondents.

b. one-sixth to the Heirs of Dionisio Galang;

PADILLA, J.:

d. one-sixth to the Heirs of Gertrudes

Galang;

In this petition for review on certiorari, petitioners seek

to nullify the decision ** of the Court of Appeals, dated
29 April 1991, in CA-G.R. CV. No. 14312, the
dispositive portion of which reads as follows:
WHEREFORE, the appealed judgment is
hereby REVERSED; and the Deed of
Extra-Judicial Settlement of the estate of
the deceased Dionisio Galang (Exh. "D"),
in so far as it relates to Lots 3548 and 3562
the Bacolor Cadastre, and Transfer
Certificates of Title Nos. 182670-R and
182671-R issued by virtue thereof are
hereby declared null and void.

c. one-sixth to the Heirs of Flaviana

Galang;

e. one-sixth to the Heirs of Potenciana

Galang;
f. one-sixth to the Heirs of Leoncia Galang.
Costs against defendants-appellees.
SO ORDERED. 1
It appears that on 21 August 1984, Aureo Reyes, et al.
(hereafter "respondents") filed an amended complaint
before the Regional Trial Court of San Fernando,
Pampanga, docketed as Civil Case No. 6752, for the
annulment of a deed of extra-judicial settlement and

partition of the estate of Dionisio Galang, claiming to

have been deprived thereby of their shares, as coowners, in Lot Nos. 3548 and 3562 Bacolor cadastre,
and that OCT Nos. 9010 and 9102, issued in the name
of Dionisio Galang, covering said lots, are fraudulent
and should therefore be annulled and cancelled.
The facts of the case, as culled from the Court of
Appeals decision, are as follows:
The spouses Hilario Galang and Martina Laxamana
owned two (2) lots located in San Agustin, Potrero,
Municipality of Bacolor, Province of Pampanga. They
had six (6) children, namely, Dionisio, Marciana,
Potenciana, Flaviana, Leonora and Gertrudes.
The spouses (Hilario and Martina) mortgaged the
aforesaid lots to Camilo Angeles. It is alleged by the
respondents that Dionisio Galang redeemed these lots
in his own name, despite the fact that part of the funds
used for the redemption came from his sisters. 2 A
cadastral survey involving the two (2) lots was
conducted, and on 19 May 1919, the Court of First
Instance ordered the issuance in Cadastral Case No.
14, of OCT Nos. 9010 (for lot 3548) and 9102 (for lot
3562) in the name solely of Dionisio Galang ( hereafter
Galang).
Respondents, who are heirs of Galang's sisters, claim
that Galang and his five (5) sisters had partitioned the
subject lots on 27 June 1920, as embodied in an

unnotarized affidavit executed by Galang (Exh. "C"). As

a consequence thereof, Galang's sisters constructed
their houses on Lot 3548. The structures passed on
from generation to generation, with each of Galang's
sisters and their descendants enjoying the benefits
therefrom. No one questioned or disturbed them until
the petitioners (heirs of Galang), informed them that
the lots in question were titled in Galang's name and
had been partitioned, on the basis of a Deed of
Extrajudicial Partition (Exh. "D"), into three (3) equal
parts corresponding to his (Galang's) three (3)
children; that petitioners had succeeded in subdividing
the lots and in obtaining titles thereto in their name
(TCT Nos. 182670-R and 182671-R) despite their
(respondents') earlier demands for an extrajudicial
settlement of their dispute.
Petitioners, on the other hand, contend that the
cadastral case which culminated in the issuance of the
original certificates of title over the subject lots in the
sole name of Galang, was a proceeding in rem, thus
binding on the whole world; that when original
certificates of title (OCT Nos. 9010 and 9102) were
issued on 9 January 1922 to Galang, respondents did
not raise any objection until March 1983 when they
filed the complaint in Civil Case No. 6752, or after a
lapse of sixty-one (61) years.
The trial court 3 upheld Galang's titles over the lots
which, as aforestated, had been issued as early as
1922 in his name. The trial court further held that

respondents' action had long prescribed, having been

filed only on 24 March 1983, or after a lapse of sixtyone (61) long years from the issuance of said titles.
The court also noted respondents' failure to establish
their relationship to Galang's five (5) sisters, premising
their claim solely on an unsubstantiated assertion that
they are descendants of the deceased Galang
sisters. 4 The presence or construction of the houses
on Lot No. 3548 was also not considered as evidence
in respondents' favor, since no proof was submitted
establishing respondents' right to occupy the place.
The documentary evidence (Exh. "C" and "C-1")
allegedly showing co-ownership among Dionisio and
his co-heirs, was likewise ignored by the trial court as
this did not specifically refer to the disputed Lots 3548
and 3562.
On appeal by the respondents, respondent Court of
Appeals reversed the trial court by upholding
respondents' rights. It focused on two (2) issues.
Thus
Are the properties in question owned in
common by the predecessors-in-interest of
appellants and appellees? And has
appellants' present action for partition
prescribed? 5
The appellate court declared that co-ownership existed
between respondents' predecessors-in-interest and
those of petitioners, on the basis of Galang's affidavit

which, although unnotarized, was nonetheless an

ancient document, pursuant to Sec. 22, Rule 132 of
the Rules of Court, since it was executed on 27 June
1920. As such, proof of its due execution and
authentication could be dispensed with, according to
the appellate court.
Hence, this recourse in turn by the petitioners.
We find the petition impressed with merit.
It is a fact that Dionisio Galang's ownership over the
disputed lots (3548 and 3562) had been judicially
confirmed on 19 May 1919 in Cadastral Case No. 14,
G.L.R.O. No. 51, which is a proceeding in rem and
hence binding "on the whole world." OCT No. 1056
(9010) and OCT No. 1057 (9102) were, as a
consequence, issued on 9 January 1922. None of
Galang's co-heirs objected to or protested their
issuance. These titles became indefeasible and
incontrovertible. Then it was only after sixty-one (61)
years or on 24 March 1983 that the descendants of
Galang's co-heirs asserted co-ownership claims over
the subject lots.
It is true that Galang executed an affidavit, unnotarized
at that, on 27 June 1920 which states in part as follows
(per English translation [Exh.
"C-1"]): 6
That on this date, I have received from all
my sisters and nephews who are my co-

heirs, namely Potenciana Galang, Flaviana

Galang, Gertrudes Galang, who are my
sisters, and Silverio Garcia and Hilarion
Samia, in their own names and for their
brothers and sisters who are also co-heirs,
the sum of ONE HUNDRED AND SIX
PESOS (P106.00), Philippine Currency, as
complete payment for the discharge of the
land we co-inherited, which is the one we
partitioned this date also, which was
mortgaged to the Angeles family. 7
However, as can be gleaned from the foregoing, there
is no reference to Lot Nos. 3548 and 3562. Said
affidavit is not therefore a sufficient basis or support for
what is alleged by respondents as a partition among
Dionisio and his now deceased sisters. It does not, as
correctly stated by the trial court, amount to anything
insofar as the two (2) lots involved in this case are
concerned:
Even their presentation of the document
purportedly executed by Dionisio Galang
on June 27, 1910 (Exh. "C" and "C-1")
where the latter acknowledges that he and
his co-heirs named therein as co-owners of
a certain property which they had
mortgaged to a certain family surnamed
Angeles does not amount to anything for
nothing in this document shows that it
pertains to the two lots involved herein. It

merely referred to a certain "land" which

Dionisio Galang and his co-heirs "coinherited" and partitioned without any
indication as to which property is being
referred
to. 8
We likewise agree with the trial court that in the
absence of definite proof establishing respondents'
link/relationship to their alleged predecessors-ininterest, i.e., the Galang sisters, they do not have any
cause of action, and the suit for partition must
necessarily fall. The trial court aptly observed:
. . . the plaintiffs thru their witnesses
Bienvenido Tapnio, Marcos Dimabuyu,
Pedro Atienza, and Carmelita Galang, tried
to prove that all the plaintiffs herein are
heirs and direct descendants, respectively,
of Marciana Galang, Potenciana Galang,
Flaviana Galang, Leoncia Galang and
Gertrudes Galang who, in their lifetime,
together with their late brother Dionisio
Galang, are the co-owners of these two
lots, namely, Lots Nos. 3548 and 3562.
Lamentably, all that was proved in the
process by the plaintiffs thru these
witnesses despite several proddings and
suggestions made by the court toward this
end was that each of these plaintiffs are
just related to one another in varying

degrees of relationship. They failed to

establish their connection or relationship
with any of these five sisters save for their
unfounded averment that they are indeed
descendants and heirs of these deceased
individuals. 9
WHEREFORE, the petition is GRANTED. The
appealed decision of the Court of Appeals is hereby
SET ASIDE and the decision of the trial court dated 3
October 1986 in Civil Case No. 6752 is hereby
REINSTATED. No costs.

G.R. No. 93213 August 9, 1991

LUCIO TAN ALIM, petitioner,
vs.
HON. COURT OF APPEALS and PACIFIC COAST
TIMBER PRODUCTS, INC., respondents.
Celestino R. Calauit for petitioner.
Jose S. Santos, Jr. for private respondent

PARAS, J.:p

This is a petition for review on certiorari of the

February 27, 1990 decision * of the Court of Appeals in
CA-G.R. CV No. 10603 entitled "PACIFIC COAST
TIMBER PRODUCTS, INC. vs. LUCIO TAN ALIM",
affirming the decision ** of the Regional Trial Court of
Quezon City, Branch LXXXIX in Civil Case No. Q24970 which dismissed private respondent's complaint,
but allowed the petitioner to exercise his option to buy
the tractor in question, which decision was later
amended in its Order, dated September 19, 1985,
partially granting petitioner's motion for reconsideration
but denying his plea therein to grant damages for
unrealized income in his logging business due to the
alleged irregular and illegal seizure of the said
equipment leased to him.
The case arose out of a Lease Contract with Option To
Buy, dated January 5, 1977, which was entered into by
and between respondent PACIFIC COAST TIMBER
PRODUCTS, INC., as lessor, and petitioner LUCIO
TAN ALIM, as lessee, for a term of fifteen months over
a unit of tractor at a monthly rental of P10,000.00
subject to the stipulation, among others, that after
payment of five months, the lessee is given an option
to purchase the equipment at the price of P150,000.00,
in which event the rental paid shall be considered as
part payment of the consideration and that the subject
equipment has to remain at the lessee's jobsite at
PARCEL III-R between Dianawan Creek and Bazal,
San Joaquin, Baler (Original Record, p. 7; Exhibit "I"
and Exhibit "A").

However, upon its delivery on January 15, 1977, the

tractor was discovered to be defective. Consequently,
petitioner Alim informed the private respondent's
manager at San Luis, Quezon of such fact in his letter
dated January 25, 1977, relaying likewise the need for
the tractor's reconditioning or replacement with another
unit in good running condition and the immediate repair
thereof as may be arranged by him with the Manila
Office (Ibid., p. 96, Exhibit "2"). The Logging Manager
of the respondent corporation, Luis O. Barredo, issued
a certification on June 11, 1977 that a defective tractor
was delivered to the petitioner (Ibid., p. 98, Exhibit "5").
The amount of P5,000.00 for the repair of the tractor
was then paid by the private respondent to petitioner
Alim on January 29, 1977 (Ibid., p. 97, Exhibit "4").
Petitioner Alim expended the amount of P36,130.60 for
its repair and reconditioning, as specifically contained
in his letter to respondent corporation of June 25, 1977
(Ibid., p. 99, Exhibit "3").
On July 1, 1977, the parties amended the lease
contract with petitioner's obligation to execute a Deed
of Chattel Mortgage for his three motor vehicles in
favor of the respondent to guarantee his undertaking in
the amended lease contract (Ibid., pp. 101-102; Rollo,
pp. 12-13). Respondent corporation's counsel, Lino M.
Patajo, formally informed Alim in a letter dated March
16, 1978 that under the amended contract wherein
payment of rentals commenced in August, 1977, the
latter failed to pay rentals for seven months, from
September, 1977 to February, 1978 in the amount of

P70,000.00, for which reason the contract of lease as

well as the option to buy, are automatically terminated.
The same counsel likewise sent a notice of default in
obligation secured by the Chattel Mortgage (Ibid.,
Exhibit "C"; p. 11, Exhibit "D"; Original Records, p. 12).
However, the petition for extrajudicial foreclosure
thereon was returned by the sheriff unsatisfied (Ibid., p.
12). Thereafter, a complaint for recovery of possession
with replevin of a unit of tractor (Ibid., pp. 13-15-A;
Rollo, pp. 15-18), was filed by private respondent
before the then Court of First Instance of Quezon City
due to petitioner's refusal to pay the arrears and to
deliver the subject equipment.
Upon the filing of a bond by Pacific Coast Timber
Products, Inc., furnished by Pioneer Insurance and
Surety Corporation in the sum of P300,000.00 (Ibid., p.
26), the trial court issued a writ of replevin for the
seizure and delivery of the property in question on April
13, 1978 (Ibid., p. 36; Rollo, p. 20). On April 16, 1978,
Deputy Sheriff Reynaldo P. Lopez of the then Court of
First Instance of Aurora Sub-province at Baler,
Quezon, seized the tractor from the petitioner and
turned it over to the respondent corporation on April
26, 1978 (Ibid p. 45, Sheriff's Return of Service).
In his answer (Ibid., pp. 38-43), the petitioner denied
having defaulted in the payment of rentals and claimed
to have sustained damages for unrealized income in
his logging business as a result of the wrongful seizure
of the tractor (Rollo, p. 21).

Both parties having failed to reach an agreement at the

pretrial, the case was tried on the merits.
In the order of the trial court dated December 17, 1980,
respondent corporation's motion to recall or lift the
Order of Seizure and to cancel the replevin bond the
same having already served their purposes, (Ibid., pp.
142-143), which was opposed by petitioner Alim (Ibid.,
pp. 144-146), was denied for lack of merit since the
case was still pending in court (Ibid., p. 149).
On the scheduled hearing of July 14, 1981, both
parties failed to attend. Hence, the dismissal of the
case (Ibid., p. 158). However, the order of dismissal
was reconsidered upon explanation of the parties
(Ibid., p. 159). The case was finally resolved in favor of
petitioner Alim on July 31, 1985 by the trial court (RTC,
Quezon City), the dispositive portion of which states:
ACCORDINGLY, judgment is hereby
rendered dismissing the plaintiffs
complaint, and allowing the defendant
within fifteen days from and after this
judgment becomes final and executory, to
exercise his option under the Lease
Contract with Option to Buy, as amended,
to buy the tractor, in question, by paying to
the plaintiff the balance of P90,000.00 after
deducting from the purchase price of
P150,000.00, in rentals, already paid by
him, and ordering the plaintiff to pay to the

defendant the amount of P36,130.60 as

reimbursement for the expenses for repairs
made by the defendant on the tractor which
may be offsetted from the remaining
purchase price of P90,000.00 if the
defendant exercises his option to buy, plus
reasonable attorney's fees in the amount of
P5,000.00, with costs against the plaintiff.
SO ORDERED. (Rollo, pp. 32-33)
The said decision was, however, partially modified
upon motion for reconsideration of the petitioner, dated
August 19, 1985 (Original Record, pp. 259-261), in its
Order dated September 19, 1985, in this wise:
ACCORDINGLY, judgment is hereby
rendered dismissing the plaintiff's
complaint, and allowing the defendant,
within fifteen (15) days from and after (sic)
this judgment becomes final and executory,
to exercise his option under the Lease
Contract with Option To Buy, as amended,
to buy the tractor, in question by paying to
the plaintiff the balance of P80,000.00 after
deducting from the purchase price of
P150,000.00, the amount of P70,000.00 in
rentals, already paid by him, and ordering
the plaintiff to pay to the defendant the
amount of P36,130.60 as reimbursement
for the expenses for repairs made by the

defendant on the tractor, which may be offsetted (sic) from the remaining purchase
price of P80,000.00, if the defendant
exercises his option to buy, plus
reasonable attorney's fees in the amount of
P5,000.00, with costs against the plaintiff.
(Rollo, pp. 37-A-38).
Not satisfied with the modified decision, petitioner Alim
appealed, claiming damages because of the wrongful
seizure of the tractor, but the same was affirmed by the
Court of Appeals which denied said petitioner's claim
for compensation and concurred with the following
findings of the trial court:
However, since the fifteen (15) month lease
period provided in the contract had already
expired ... the plaintiff may not be judicially
compelled to deliver the tractor to
defendant since after the expiration of the
lease period, it is legally entitled to its
possession, as the owner thereof. (Rollo, P.
62)
Petitioner's motion for reconsideration was denied by
the Court of Appeals in its resolution dated April 30,
1990 (Rollo, p. 65). Hence, this petition.
The issues raised in this case are: (1) whether or not
the fifteen (15) month lease period had commenced
from August 1977 and expired in October 1978; (2)

whether or not the petitioner is entitled to

collect/recover damages as prayed for in the
complaint; and (3) whether or not petitioner is entitled
to recover the sum of P300,000.00 from the replevin
bond, all of which may be synthesized in one pivotal
issue, the interpretation of the "Amendment to Contract
of Lease" (Exhibit "6", Original Records, p. 9) in
relation to the "Original Lease Contract with Option to
Buy (Exhibit "1". Original Records, p. 7).
Both the trial court and the Court of Appeals are of the
view that there is no amendment as to the duration of
the Contract of Lease; that the contract expired as
originally stipulated on April 5, 1978 and that when the
tractor was seized by virtue of a writ of replevin on
August 16, 1978, the contract of lease had expired and
the lessee Alim was consequently not entitled to
damages.
A careful review of the records shows that in the
original contract, it was expressly stipulated that the
lease shall be for a period of fifteen (15) months
(Exhibit "1". par. 2) and that the lessee is given an
option to purchase the equipment for ONE HUNDRED
FIFTY THOUSAND (P150,000.00) PESOS, after Alim
has completed and religiously paid the 5-month rentals
which shall be considered as part payment of the
consideration (Ibid., par. 4).
On the other hand, there is no provision in the
amended contract as to the period of the lease.

Instead, it provides that "All provisions of the original

lease contract not amended by the foregoing
provisions shall remain in full force and effect." (Exhibit
"6", par. 5). The alteration is evidently focused on the
period for the right to exercise the option to buy.
Originally, the period was five (5) months of regular
payment but under the amended contract, the period
was changed to fifteen (15) months, unquestionably
including the period from the commencement of the
original contract on January 7, 1977, as specifically
provided in paragraph 4 thereof, which states:
4. The monthly rentals of the equipment
which on the date of the execution of this
amendment to the original lease contract
have not been paid shall be considered as
paid obligation of LESSEE to LESSOR, the
payment of which will be the subject of
negotiation between LESSOR and
LESSEE.
The letter of Atty. Lino M. Patajo, counsel of
respondent corporation, on which Alim heavily relied in
his arguments in his favor, unmistakably confirms the
fact of non-extension of the lease agreement when he
spoke of the commencement of the payment of the
rentals, not on the commencement of the new period
of lease (Exhibit "C", Original Records, p. 11).
Inevitably, the courts cannot go beyond what appears
in the documents submitted by the parties.

Nothing is more settled than the rule that the terms of

written contract are binding on the parties thereto. In
the interpretation of the provisions of a written contract,
the courts should follow the literal meaning of the
stipulation. Otherwise, the evident intention of the
parties must prevail (Art. 1370, Civil Code) (Spouses
Roberto E. Fermin and Maylinda Ferraren v. Hon.
Court of Appeals, et al., G.R. 95146, May 6, 1991).
There is therefore no merit in the petitioner's allegation
that the seizure was wrongful for which he must be
compensated. The ownership or right of possession
over the subject equipment belonged to the Pacific
Coast Timber Products, Inc. at the time it was seized.
The seizure of the equipment was ordered by the trial
court for its restoration by means established in the
laws of procedure. Thus, the requisites for the
issuance of the writ of replevin (Sec. 2, Rule 60) have
been satisfied.
The writ is a provisional remedy in replevin suits. It is in
the "nature of a possessory action and the applicant
who seeks the immediate possession of the property
need not be the holder of the legal title to the property."
It is sufficient that at the time he applied for a writ of
replevin he is found to be "entitled to a possession
thereof as stated in Section 2, Rule 60 of the Rules of
Court (Yang v. Valdez, 177 SCRA 141 [1989]).
The Appellate Court correctly observed that the trial
court was right in holding that "the plaintiff may not

anymore be judicially compelled to deliver the tractor to

the defendant since after the expiration of the lease
period, it is legally entitled to its possession, as the
owner thereof (p 5, RTC decision; Rollo, p. 31)". It is
very clear therefore, that Alim is not entitled to any
award of damages based on the foregoing facts and
evidence presented. Neither can he claim moral and
exemplary damages. The records show that the
petitioner was not able to adduce any evidence before
the trial court to prove facts upon which the award for
such damages may be predicated. In fact, even in the
petition and memorandum for the petitioner, there was
no discussion of the evidence upon which Alim relies
for his claim.
Moral damages have to do with injury personal to the
awardee such a physical sufferings and the like, while
exemplary damages are imposed by way of example
or correction for the public good (Makabili v. Court of
Appeals, 157 SCRA 253 [1988]).
Indisputably, moral damages cannot generally be
awarded in the absence of bad faith (De Aparico v.
Paraguya, 150 SCRA 279 [1987]). Otherwise stated,
moral damages can be awarded if they are the
proximate results of a wrongful act or omission
(Filinvest Credit Corporation v. Mendez, 152 SCRA
593 [1987]), while exemplary damages are not
awarded if the defendant had not acted in a wanton,
oppressive or malevolent manner (Zenith Insurance
Corporation v. Court of Appeals, 185 SCRA 398

[1990]), neither can claim for exemplary damages be

granted in the absence of gross or reckless negligence
(De los Santos, et al. v. Court of Appeals, G.R. 51165,
June 21, 1990), which misfeasance is not true in the
case at bar.
A replevin bond is simply intended to indemnify the
defendant against any loss that he may suffer by being
compelled to surrender the possession of the disputed
property pending the trial of the action. He cannot
recover on the bond as for a reconversion when he
has failed to have the judgment entered for the return
of the property. Nor is the surety liable for payment of
the judgment for damages rendered against the
plaintiff on a counterclaim or punitive damages for
fraudulent or wrongful acts committed by the plaintiffs
and unconnected with the defendant's deprivation of
possession by the plaintiff. Even where the judgment
was that the defendant was entitled to the property, but
no order was made requiring the plaintiff to return it or
assessing damages in default of a return, it was
declared that until judgment was entered that the
property should be restored, there could be no liability
on the part of the sureties Sapugay v. Court of
Appeals, 183 SCRA 464 [1990]).
PREMISES CONSIDERED, the instant petition is
DISMISSED and the assailed decision is AFFIRMED.

G.R. No. L-10572 December 21, 1915

FRANCIS A. CHURCHILL and STEWART
TAIT, plaintiffs-appellees,
vs.
JAMES J. RAFFERTY, Collector of Internal
Revenue, defendant-appellant.
Attorney-General Avancea for appellant.
Aitken and DeSelms for appellees.

TRENT, J.:
The judgment appealed from in this case perpetually
restrains and prohibits the defendant and his deputies
from collecting and enforcing against the plaintiffs and
their property the annual tax mentioned and described
in subsection (b) of section 100 of Act No. 2339,
effective July 1, 1914, and from destroying or removing
any sign, signboard, or billboard, the property of the
plaintiffs, for the sole reason that such sign, signboard,
or billboard is, or may be, offensive to the sight; and
decrees the cancellation of the bond given by the
plaintiffs to secure the issuance of the preliminary
injunction granted soon after the commencement of
this action.

This case divides itself into two parts and gives rise to
two main questions; (1) that relating to the power of the
court to restrain by injunction the collection of the tax
complained of, and (2) that relating to the validity of
those provisions of subsection (b) of section 100 of Act
No. 2339, conferring power upon the Collector of
Internal Revenue to remove any sign, signboard, or
billboard upon the ground that the same is offensive to
the sight or is otherwise a nuisance.
The first question is one of the jurisdiction and is of
vital importance to the Government. The sections of
Act No. 2339, which bear directly upon the subject, are
139 and 140. The first expressly forbids the use of an
injunction to stay the collection of any internal revenue
tax; the second provides a remedy for any wrong in
connection with such taxes, and this remedy was
intended to be exclusive, thereby precluding the
remedy by injunction, which remedy is claimed to be
constitutional. The two sections, then, involve the right
of a dissatisfied taxpayers to use an exceptional
remedy to test the validity of any tax or to determine
any other question connected therewith, and the
question whether the remedy by injunction is
exceptional.
Preventive remedies of the courts are extraordinary
and are not the usual remedies. The origin and history
of the writ of injunction show that it has always been
regarded as an extraordinary, preventive remedy, as
distinguished from the common course of the law to

redress evils after they have been consummated. No

injunction issues as of course, but is granted only upon
the oath of a party and when there is no adequate
remedy at law. The Government does, by section 139
and 140, take away the preventive remedy of
injunction, if it ever existed, and leaves the taxpayer, in
a contest with it, the same ordinary remedial actions
which prevail between citizen and citizen. The
Attorney-General, on behalf of the defendant, contends
that there is no provisions of the paramount law which
prohibits such a course. While, on the other hand,
counsel for plaintiffs urge that the two sections are
unconstitutional because (a) they attempt to deprive
aggrieved taxpayers of all substantial remedy for the
protection of their property, thereby, in effect, depriving
them of their property without due process of law, and
(b) they attempt to diminish the jurisdiction of the
courts, as conferred upon them by Acts Nos. 136 and
190, which jurisdiction was ratified and confirmed by
the Act of Congress of July 1, 1902.
In the first place, it has been suggested that section
139 does not apply to the tax in question because the
section, in speaking of a "tax," means only legal taxes;
and that an illegal tax (the one complained of) is not a
tax, and, therefore, does not fall within the inhibition of
the section, and may be restrained by injunction. There
is no force in this suggestion. The inhibition applies to
all internal revenue taxes imposes, or authorized to be
imposed, by Act No. 2339. (Snyder vs. Marks, 109
U.S., 189.) And, furthermore, the mere fact that a tax is

illegal, or that the law, by virtue of which it is imposed,

is unconstitutional, does not authorize a court of equity
to restrain its collection by injunction. There must be a
further showing that there are special circumstances
which bring the case under some well recognized head
of equity jurisprudence, such as that irreparable injury,
multiplicity of suits, or a cloud upon title to real estate
will result, and also that there is, as we have indicated,
no adequate remedy at law. This is the settled law in
the United States, even in the absence of statutory
enactments such as sections 139 and 140.
(Hannewinkle vs. Mayor, etc., of Georgetown, 82 U.S.,
547; Indiana Mfg. Co. vs. Koehne, 188 U.S., 681; Ohio
Tax cases, 232 U. S., 576, 587; Pittsburgh C. C. & St.
L. R. Co. vs. Board of Public Works, 172 U. S., 32;
Shelton vs. Plat, 139 U.S., 591; State Railroad Tax
Cases, 92 U. S., 575.) Therefore, this branch of the
case must be controlled by sections 139 and 140,
unless the same be held unconstitutional, and
consequently, null and void.
The right and power of judicial tribunals to
declare whether enactments of the legislature
exceed the constitutional limitations and are
invalid has always been considered a grave
responsibility, as well as a solemn duty. The
courts invariably give the most careful
consideration to questions involving the
interpretation and application of the Constitution,
and approach constitutional questions with great
deliberation, exercising their power in this

respect with the greatest possible caution and

even reluctance; and they should never declare a
statute void, unless its invalidity is, in their
judgment, beyond reasonable doubt. To justify a
court in pronouncing a legislative act
unconstitutional, or a provision of a state
constitution to be in contravention of the
Constitution of the United States, the case must
be so clear to be free from doubt, and the conflict
of the statute with the constitution must be
irreconcilable, because it is but a decent respect
to the wisdom, the integrity, and the patriotism of
the legislative body by which any law is passed
to presume in favor of its validity until the
contrary is shown beyond reasonable doubt.
Therefore, in no doubtful case will the judiciary
pronounce a legislative act to be contrary to the
constitution. To doubt the constitutionality of a
law is to resolve the doubt in favor of its validity.
(6 Ruling Case Law, secs. 71, 72, and 73, and
cases cited therein.)
It is also the settled law in the United States that "due
process of law" does not always require, in respect to
the Government, the same process that is required
between citizens, though it generally implies and
includes regular allegations, opportunity to answer, and
a trial according to some well settled course of judicial
proceedings. The case with which we are dealing is in
point. A citizen's property, both real and personal, may
be taken, and usually is taken, by the government in

payment of its taxes without any judicial proceedings

whatever. In this country, as well as in the United
States, the officer charged with the collection of taxes
is authorized to seize and sell the property of
delinquent taxpayers without applying to the courts for
assistance, and the constitutionality of the law
authorizing this procedure never has been seriously
questioned. (City of Philadelphia vs. [Diehl] The
Collector, 5 Wall., 720; Nicholl vs. U.S., 7 Wall., 122,
and cases cited.) This must necessarily be the course,
because it is upon taxation that the Government chiefly
relies to obtain the means to carry on its operations,
and it is of the utmost importance that the modes
adopted to enforce the collection of the taxes levied
should be summary and interfered with as little as
possible. No government could exist if every litigious
man were permitted to delay the collection of its taxes.
This principle of public policy must be constantly borne
in mind in determining cases such as the one under
consideration.
With these principles to guide us, we will proceed to
inquire whether there is any merit in the two
propositions insisted upon by counsel for the plaintiffs.
Section 5 of the Philippine Bill provides: "That no law
shall be enacted in said Islands which shall deprive
any person of life, liberty, or property without due
process of law, or deny to any person therein the equal
protection of the law."

The origin and history of these provisions are wellknown. They are found in substance in the Constitution
of the United States and in that of ever state in the
Union.
Section 3224 of the Revised Statutes of the United
States, effective since 1867, provides that: "No suit for
the purpose of restraining the assessment or collection
of any tax shall be maintained in any court."
Section 139, with which we have been dealing, reads:
"No court shall have authority to grant an injunction to
restrain the collection of any internal-revenue tax."
A comparison of these two sections show that they are
essentially the same. Both expressly prohibit the
restraining of taxes by injunction. If the Supreme Court
of the United States has clearly and definitely held that
the provisions of section 3224 do not violate the "due
process of law" and "equal protection of the law"
clauses in the Constitution, we would be going too far
to hold that section 139 violates those same provisions
in the Philippine Bill. That the Supreme Court of the
United States has so held, cannot be doubted.
In Cheatham vs. United States (92 U.S., 85,89) which
involved the validity of an income tax levied by an act
of Congress prior to the one in issue in the case of
Pollock vs. Farmers' Loan & Trust Co. (157 U.S., 429)
the court, through Mr. Justice Miller, said: "If there
existed in the courts, state or National, any general

power of impeding or controlling the collection of taxes,

or relieving the hardship incident to taxation, the very
existence of the government might be placed in the
power of a hostile judiciary. (Dows vs. The City of
Chicago, 11 Wall., 108.) While a free course of
remonstrance and appeal is allowed within the
departments before the money is finally exacted, the
General Government has wisely made the payment of
the tax claimed, whether of customs or of internal
revenue, a condition precedent to a resort to the courts
by the party against whom the tax is assessed. In the
internal revenue branch it has further prescribed that
no such suit shall be brought until the remedy by
appeal has been tried; and, if brought after this, it must
be within six months after the decision on the appeal.
We regard this as a condition on which alone the
government consents to litigate the lawfulness of the
original tax. It is not a hard condition. Few
governments have conceded such a right on any
condition. If the compliance with this condition requires
the party aggrieved to pay the money, he must do it."
Again, in State Railroad Tax Cases (92 U.S., 575,
613), the court said: "That there might be no
misunderstanding of the universality of this principle, it
was expressly enacted, in 1867, that "no suit for the
purpose of restraining the assessment or collection of
any tax shall be maintained in any court." (Rev, Stat.,
sec. 3224.) And though this was intended to apply
alone to taxes levied by the United States, it shows the
sense of Congress of the evils to be feared if courts of

justice could, in any case, interfere with the process of

collecting taxes on which the government depends for
its continued existence. It is a wise policy. It is founded
in the simple philosophy derived from the experience
of ages, that the payment of taxes has to be enforced
by summary and stringent means against a reluctant
and often adverse sentiment; and to do this
successfully, other instrumentalities and other modes
of procedure are necessary, than those which belong
to courts of justice."
And again, in Snyder vs. Marks (109 U.S., 189), the
court said: "The remedy of a suit to recover back the
tax after it is paid is provided by statute, and a suit to
restrain its collection is forbidden. The remedy so given
is exclusive, and no other remedy can be substituted
for it. Such has been the current of decisions in the
Circuit Courts of the United States, and we are
satisfied it is a correct view of the law."itc-a1f
In the consideration of the plaintiffs' second
proposition, we will attempt to show (1) that the
Philippine courts never have had, since the American
occupation, the power to restrain by injunction the
collection of any tax imposed by the Insular
Government for its own purpose and benefit, and (2)
that assuming that our courts had or have such power,
this power has not been diminished or curtailed by
sections 139 and 140.

We will first review briefly the former and present

systems of taxation. Upon the American occupation of
the Philippine, there was found a fairly complete
system of taxation. This system was continued in force
by the military authorities, with but few changes, until
the Civil Government assumed charge of the subject.
The principal sources of revenue under the Spanish
regime were derived from customs receipts, the socalled industrial taxes, the urbana taxes, the stamp tax,
the personal cedula tax, and the sale of the public
domain. The industrial and urbana taxes constituted
practically an income tax of some 5 per cent on the net
income of persons engaged in industrial and
commercial pursuits and on the income of owners of
improved city property. The sale of stamped paper and
adhesive stamp tax. The cedula tax was a graduated
tax, ranging from nothing up to P37.50. The revenue
derived from the sale of the public domain was not
considered a tax. The American authorities at once
abolished the cedula tax, but later restored it in a
modified form, charging for each cedula twenty
centavos, an amount which was supposed to be just
sufficient to cover the cost of issuance. The urbana tax
was abolished by Act No. 223, effective September 6,
1901.
The "Municipal Code" (Act No. 82) and the Provincial
Government Act (No. 83), both enacted in 1901,
authorize municipal councils and provincial boards to
impose an ad valorem tax on real estate. The
Municipal Code did not apply to the city of Manila. This

city was given a special charter (Act No. 183), effective

August 30, 1901; Under this charter the Municipal
Board of Manila is authorized and empowered to
impose taxes upon real estate and, like municipal
councils, to license and regulate certain occupations.
Customs matters were completely reorganized by Act
No. 355, effective at the port of Manila on February 7,
1902, and at other ports in the Philippine Islands the
day after the receipt of a certified copy of the Act. The
Internal Revenue Law of 1904 (Act No. 1189),
repealed all existing laws, ordinances, etc., imposing
taxes upon the persons, objects, or occupations taxed
under that act, and all industrial taxes and stamp taxes
imposed under the Spanish regime were eliminated,
but the industrial tax was continued in force until
January 1, 1905. This Internal Revenue Law did not
take away from municipal councils, provincial boards,
and the Municipal Board of the city of Manila the power
to impose taxes upon real estate. This Act (No. 1189),
with its amendments, was repealed by Act No. 2339,
an act "revising and consolidating the laws relative to
internal revenue."
Section 84 of Act No. 82 provides that "No court shall
entertain any suit assailing the validity of a tax
assessed under this act until the taxpayer shall have
paid, under protest, the taxes assessed against him, . .
. ."
This inhibition was inserted in section 17 of Act No. 83
and applies to taxes imposed by provincial boards. The

inhibition was not inserted in the Manila Charter until

the passage of Act No. 1793, effective October 12,
1907. Act No. 355 expressly makes the payment of the
exactions claimed a condition precedent to a resort to
the courts by dissatisfied importers. Section 52 of Act
No. 1189 provides "That no courts shall have authority
to grant an injunction restraining the collection of any
taxes imposed by virtue of the provisions of this Act,
but the remedy of the taxpayer who claims that he is
unjustly assessed or taxed shall be by payment under
protest of the sum claimed from him by the Collector of
Internal Revenue and by action to recover back the
sum claimed to have been illegally collected."
Sections 139 and 140 of Act No. 2339 contain, as we
have indicated, the same prohibition and remedy. The
result is that the courts have been expressly forbidden,
in every act creating or imposing taxes or imposts
enacted by the legislative body of the Philippines since
the American occupation, to entertain any suit assailing
the validity of any tax or impost thus imposed until the
tax shall have been paid under protest. The only taxes
which have not been brought within the express
inhibition were those included in that part of the old
Spanish system which completely disappeared on or
before January 1, 1905, and possibly the old customs
duties which disappeared in February, 1902.
Section 56 of the Organic Act (No. 136), effective June
16, 1901, provides that "Courts of First Instance shall
have original jurisdiction:

xxx

xxx

xxx

2. In all civil actions which involve the ... legality

of any tax, impost, or assessment, . . . .
xxx

xxx

xxx

7. Said courts and their judges, or any of them,

shall have power to issue writs of
injunction, mandamus,certiorari, prohibition, quo
warranto, and habeas corpus in their respective
provinces and districts, in the manner provided in
the Code of Civil Procedure.
The provisions of the Code of Civil Procedure (Act No.
190), effective October 1, 1901, which deals with the
subject of injunctions, are sections 162 to 172,
inclusive. Injunctions, as here defined, are of two
kinds; preliminary and final. The former may be
granted at any time after the commencement of the
action and before final judgment, and the latter at the
termination of the trial as the relief or part of the relief
prayed for (sec. 162). Any judge of the Supreme Court
may grant a preliminary injunction in any action
pending in that court or in any Court of First Instance. A
preliminary injunction may also be granted by a judge
of the Court of First Instance in actions pending in his
district in which he has original jurisdiction (sec. 163).
But such injunctions may be granted onlywhen the
complaint shows facts entitling the plaintiff to the relief
demanded (sec. 166), and before a final or permanent

injunction can be granted, it must appear upon the trial

of the action that the plaintiff is entitled to have
commission or continuance of the acts complained of
perpetually restrained (sec. 171). These provisions
authorize the institution in Courts of First Instance of
what are known as "injunction suits," the sole object of
which is to obtain the issuance of a final injunction.
They also authorize the granting of injunctions as
aiders in ordinary civil actions. We have defined in
Davesa vs. Arbes (13 Phil. Rep., 273), an injunction to
be "A "special remedy" adopted in that code (Act 190)
from American practice, and originally borrowed from
English legal procedure, which was there issued by the
authority and under the seal of a court of equity, and
limited, as in other cases where equitable relief is
sought, to those cases where there is no "plain,
adequate, and complete remedy at law,"which will not
be granted while the rights between the parties are
undetermined, except in extraordinary cases where
material and irreparable injury will be done,"which
cannot be compensated in damages . . .
By paragraph 2 of section 56 of Act No. 136, supra,
and the provisions of the various subsequent Acts
heretofore mentioned, the Insular Government has
consented to litigate with aggrieved persons the
validity of any original tax or impost imposed by it on
condition that this be done in ordinary civil actions after
the taxes or exactions shall have been paid. But it is
said that paragraph 2 confers original jurisdiction upon
Courts of First Instance to hear and determine "all civil

actions" which involve the validity of any tax, impost or

assessment, and that if the all-inclusive words "all" and
"any" be given their natural and unrestricted meaning,
no action wherein that question is involved can arise
over which such courts do not have jurisdiction.
(Barrameda vs. Moir, 25 Phil. Rep., 44.) This is true.
But the term "civil actions" had its well defined
meaning at the time the paragraph was enacted. The
same legislative body which enacted paragraph 2 on
June 16, 1901, had, just a few months prior to that
time, defined the only kind of action in which the
legality of any tax imposed by it might be assailed.
(Sec. 84, Act 82, enacted January 31, 1901, and sec.
17, Act No. 83, enacted February 6, 1901.) That kind of
action being payment of the tax under protest and an
ordinary suit to recover and no other, there can be no
doubt that Courts of First Instance have jurisdiction
over all such actions. The subsequent legislation on
the same subject shows clearly that the Commission,
in enacting paragraph 2, supra, did not intend to
change or modify in any way section 84 of Act No. 82
and section 17 of Act No. 83, but, on the contrary, it
was intended that "civil actions," mentioned in said
paragraph, should be understood to mean, in so far as
testing the legality of taxes were concerned, only those
of the kind and character provided for in the two
sections above mentioned. It is also urged that the
power to restrain by injunction the collection of taxes or
imposts is conferred upon Courts of First Instance by
paragraph 7 of section 56, supra. This paragraph does
empower those courts to grant injunctions, both

preliminary and final, in any civil action pending in their

districts, provided always, that the complaint shows
facts entitling the plaintiff to the relief demanded.
Injunction suits, such as the one at bar, are "civil
actions," but of a special or extraordinary character. It
cannot be said that the Commission intended to give a
broader or different meaning to the word "action," used
in Chapter 9 of the Code of Civil Procedure in
connection with injunctions, than it gave to the same
word found in paragraph 2 of section 56 of the Organic
Act. The Insular Government, in exercising the power
conferred upon it by the Congress of the United States,
has declared that the citizens and residents of this
country shall pay certain specified taxes and imposts.
The power to tax necessarily carries with it the power
to collect the taxes. This being true, the weight of
authority supports the proposition that the Government
may fix the conditions upon which it will consent to
litigate the validity of its original taxes.
(Tennessee vs. Sneed, 96 U.S., 69.)
We must, therefore, conclude that paragraph 2 and 7
of section 56 of Act No. 136, construed in the light of
the prior and subsequent legislation to which we have
referred, and the legislative and judicial history of the
same subject in the United States with which the
Commission was familiar, do not empower Courts of
firs Instance to interfere by injunction with the
collection of the taxes in question in this
case.1awphil.net

If we are in error as to the scope of paragraph 2 and

7, supra, and the Commission did intend to confer the
power upon the courts to restrain the collection of
taxes, it does not necessarily follow that this power or
jurisdiction has been taken away by section 139 of Act
No. 2339, for the reason that all agree that an
injunction will not issue in any case if there is an
adequate remedy at law. The very nature of the writ
itself prevents its issuance under such circumstances.
Legislation forbidding the issuing of injunctions in such
cases is unnecessary. So the only question to be here
determined is whether the remedy provided for in
section 140 of Act No. 2339 is adequate. If it is, the
writs which form the basis of this appeal should not
have been issued. If this is the correct view, the
authority to issue injunctions will not have been taken
away by section 139, but rendered inoperative only by
reason of an adequate remedy having been made
available.

The legislative body of the Philippine Islands has

declared from the beginning (Act No. 82) that payment
under protest and suit to recover is an adequate
remedy to test the legality of any tax or impost, and
that this remedy is exclusive. Can we say that the
remedy is not adequate or that it is not exclusive, or
both? The plaintiffs in the case at bar are the first, in so
far as we are aware, to question either the adequacy
or exclusiveness of this remedy. We will refer to a few
cases in the United States where statutes similar to
sections 139 and 140 have been construed and
applied.
In May, 1874, one Bloomstein presented a petition to
the circuit court sitting in Nashville, Tennessee, stating
that his real and personal property had been assessed
for state taxes in the year 1872 to the amount of
$132.60; that he tendered to the collector this amount
in "funds receivable by law for such purposes;" and
that the collector refused to receive the same. He
prayed for an alternative writ of mandamus to compel
the collector to receive the bills in payment for such
taxes, or to show cause to the contrary. To this petition
the collector, in his answer, set up the defense that the
petitioner's suit was expressly prohibited by the Act of
the General Assembly of the State of Tennessee,
passed in 1873. The petition was dismissed and the
relief prayed for refused. An appeal to the supreme
court of the State resulted in the affirmance of the
judgment of the lower court. The case was then carried
to the Supreme Court of the United States

(Tennessee vs. Sneed, 96 U. S., 69), where the

judgment was again affirmed.
The two sections of the Act of [March 21,] 1873, drawn
in question in that cases, read as follows:
1. That in all cases in which an officer, charged
by law with the collection of revenue due the
State, shall institute any proceeding, or take any
steps for the collection of the same, alleged or
claimed to be due by said officer from any
citizen, the party against whom the proceeding or
step is taken shall, if he conceives the same to
be unjust or illegal, or against any statute or
clause of the Constitution of the State, pay the
same under protest; and, upon his making said
payment, the officer or collector shall pay such
revenue into the State Treasury, giving notice at
the time of payment to the Comptroller that the
same was paid under protest; and the party
paying said revenue may, at any time within thirty
days after making said payment, and not longer
thereafter, sue the said officer having collected
said sum, for the recovery thereof. And the same
may be tried in any court having the jurisdiction
of the amount and parties; and, if it be
determined that the same was wrongfully
collected, as not being due from said party to the
State, for any reason going to the merits of the
same, then the court trying the case may certify
of record that the same was wrongfully paid and

ought to be refunded; and thereupon the

Comptroller shall issue his warrant for the same,
which shall be paid in preference to other claims
on the Treasury.
2. That there shall be no other remedy, in any
case of the collection of revenue, or attempt to
collect revenue illegally, or attempt to collect
revenue in funds only receivable by said officer
under the law, the same being other or different
funds than such as the tax payer may tender, or
claim the right to pay, than that above provided;
and no writ for the prevention of the collection of
any revenue claimed, or to hinder or delay the
collection of the same, shall in anywise issue,
either injunction, supersedeas, prohibition, or any
other writ or process whatever; but in all cases in
which, for any reason, any person shall claim
that the tax so collected was wrongfully or
illegally collected, the remedy for said party shall
be as above provided, and in no other manner."
In discussing the adequacy of the remedy provided by
the Tennessee Legislature, as above set forth, the
Supreme Court of the United States, in the case just
cited, said: "This remedy is simple and effective. A suit
at law to recover money unlawfully exacted is as
speedy, as easily tried, and less complicated than a
proceeding bymandamus. ... In revenue cases,
whether arising upon its (United States) Internal
Revenue Laws or those providing for the collection of

duties upon foreign imports, it (United States) adopts

the rule prescribed by the State of Tennessee. It
requires the contestant to pay the amount as fixed by
the Government, and gives him power to sue the
collector, and in such suit to test the legality of the tax.
There is nothing illegal or even harsh in this. It is a
wise and reasonable precaution for the security of the
Government."
Thomas C. Platt commenced an action in the Circuit
Court of the United States for the Eastern District of
Tennessee to restrain the collection of a license tax
from the company which he represented. The defense
was that sections 1 and 2 of the Act of 1873, supra,
prohibited the bringing of that suit. This case also
reached the Supreme Court of the United States.
(Shelton vs. Platt, 139 U. 591.) In speaking of the
inhibitory provisions of sections 1 and 2 of the Act of
1873, the court said: "This Act has been sanctioned
and applied by the Courts of Tennessee.
(Nashville vs. Smith, 86 Tenn., 213; Louisville & N. R.
Co. vs. State, 8 Heisk., 663, 804.) It is, as counsel
observe, similar to the Act of Congress forbidding suit
for the purpose of restraining the assessment or
collection of taxes under the Internal Revenue Laws, in
respect to which this court held that the remedy by suit
to recover back the tax after payment, provided for by
the Statute, was exclusive. (Snyder vs. Marks, of this
character has been called for by the embarrassments
resulting from the improvident employment of the writ
of injunction in arresting the collection of the public

revenue; and, even in its absence, the strong arm of

the court of chancery ought not to be interposed in that
direction except where resort to that court is grounded
upon the settled principles which govern its
jurisdiction."
In Louisville & N.R. Co. vs. State (8 Heisk. [64 Tenn.],
663, 804), cited by the Supreme Court of the United
States in Shelton vs. Platt, supra, the court said: "It
was urged that this statute (sections 1 and 2 of the Act
of 1873,supra) is unconstitutional and void, as it
deprives the citizen of the remedy by certiorari,
guaranteed by the organic law."
By the 10th section of the sixth article of the
Constitution, [Tennessee] it is provided that: "The
judges or justices of inferior courts of law and equity
shall have power in all civil cases to issue writs
of certiorari, to remove any cause, or the transcript of
the record thereof, from any inferior jurisdiction into
such court of law, on sufficient cause, supported by
oath or affirmation."
The court held the act valid as not being in conflict with
these provisions of the State constitution.
In Eddy vs. The Township of Lee (73 Mich., 123), the
complainants sought to enjoin the collection of certain
taxes for the year 1886. The defendants, in support of
their demurrer, insisted that the remedy by injunction
had been taken away by section 107 of the Act of

1885, which section reads as follows: "No injunction

shall issue to stay proceedings for the assessment or
collection of taxes under this Act."
It was claimed by the complainants that the above
quoted provisions of the Act of 1885 were
unconstitutional and void as being in conflict with
article 6, sec. 8, of the Constitution, which provides
that: "The circuit courts shall have original jurisdiction
in all matters, civil and criminal, not excepted in this
Constitution, and not prohibited by law. ... They shall
also have power to issue writs of habeas
corpus, mandamus, injunction, quo warranto, certiorari,
and other writs necessary to carry into effect their
orders, judgments, and decrees."
Mr. Justice Champlin, speaking for the court, said: "I
have no doubt that the Legislature has the
constitutional authority, where it has provided a plain,
adequate, and complete remedy at law to recover back
taxes illegally assessed and collected, to take away
the remedy by injunction to restrain their collection."
Section 9 of the Philippine Bill reads in part as follows:
"That the Supreme Court and the Courts of First
Instance of the Philippine Islands shall possess and
exercise jurisdiction as heretofore provided and such
additional jurisdiction as shall hereafter be prescribed
by the Government of said Islands, subject to the
power of said Government to change the practice and
method of procedure."

It will be seen that this section has not taken away

from the Philippine Government the power to change
the practice and method of procedure. If sections 139
and 140, considered together, and this must always be
done, are nothing more than a mode of procedure,
then it would seem that the Legislature did not exceed
its constitutional authority in enacting them. Conceding
for the moment that the duly authorized procedure for
the determination of the validity of any tax, impost, or
assessment was by injunction suits and that this
method was available to aggrieved taxpayers prior to
the passage of Act No. 2339, may the Legislature
change this method of procedure? That the Legislature
has the power to do this, there can be no doubt,
provided some other adequate remedy is substituted in
lieu thereof. In speaking of the modes of enforcing
rights created by contracts, the Supreme Court of the
United States, in Tennessee vs. Sneed, supra, said:
"The rule seems to be that in modes of proceedings
and of forms to enforce the contract the Legislature
has the control, and may enlarge, limit or alter them,
provided that it does not deny a remedy, or so
embarrass it with conditions and restrictions as
seriously to impair the value of the right."
In that case the petitioner urged that the Acts of 1873
were laws impairing the obligation of the contract
contained in the charter of the Bank of Tennessee,
which contract was entered into with the State in 1838.
It was claimed that this was done by placing such
impediments and obstructions in the way of its

enforcement, thereby so impairing the remedies as

practically to render the obligation of no value. In
disposing of this contention, the court said: "If we
assume that prior to 1873 the relator had authority to
prosecute his claim against the State bymandamus,
and that by the statutes of that year the further use of
that form was prohibited to him, the question remains.
whether an effectual remedy was left to him or
provided for him. We think the regulation of the statute
gave him an abundant means of enforcing such right
as he possessed. It provided that he might pay his
claim to the collector under protest, giving notice
thereof to the Comptroller of the Treasury; that at any
time within thirty days thereafter he might sue the
officer making the collection; that the case should be
tried by any court having jurisdiction and, if found in
favor of the plaintiff on the merits, the court should
certify that the same was wrongfully paid and ought to
be refunded and the Comptroller should thereupon
issue his warrant therefor, which should be paid in
preference to other claim on the Treasury."
But great stress is laid upon the fact that the plaintiffs
in the case under consideration are unable to pay the
taxes assessed against them and that if the law is
enforced, they will be compelled to suspend business.
This point may be best answered by quoting from the
case of Youngblood vs. Sexton (32 Mich., 406),
wherein Judge Cooley, speaking for the court, said:
"But if this consideration is sufficient to justify the
transfer of a controversy from a court of law to a court

of equity, then every controversy where money is

demanded may be made the subject of equitable
cognizance. To enforce against a dealer a promissory
note may in some cases as effectually break up his
business as to collect from him a tax of equal amount.
This is not what is known to the law as irreparable
injury. The courts have never recognized the
consequences of the mere enforcement of a money
demand as falling within that category."
Certain specified sections of Act No. 2339 were
amended by Act No. 2432, enacted December 23,
1914, effective January 1, 1915, by imposing
increased and additional taxes. Act No. 2432 was
amended, were ratified by the Congress of the United
States on March 4, 1915. The opposition manifested
against the taxes imposed by Acts Nos. 2339 and 2432
is a matter of local history. A great many business men
thought the taxes thus imposed were too high. If the
collection of the new taxes on signs, signboards, and
billboards may be restrained, we see no well-founded
reason why injunctions cannot be granted restraining
the collection of all or at least a number of the other
increased taxes. The fact that this may be done, shows
the wisdom of the Legislature in denying the use of the
writ of injunction to restrain the collection of any tax
imposed by the Acts. When this was done, an
equitable remedy was made available to all dissatisfied
taxpayers.

The question now arises whether, the case being one

of which the court below had no jurisdiction, this court,
on appeal, shall proceed to express an opinion upon
the validity of provisions of subsection (b) of section
100 of Act No. 2339, imposing the taxes complained
of. As a general rule, an opinion on the merits of a
controversy ought to be declined when the court is
powerless to give the relief demanded. But it is claimed
that this case is, in many particulars, exceptional. It is
true that it has been argued on the merits, and there is
no reason for any suggestion or suspicion that it is not
a bona fide controversy. The legal points involved in
the merits have been presented with force, clearness,
and great ability by the learned counsel of both sides.
If the law assailed were still in force, we would feel that
an opinion on its validity would be justifiable, but, as
the amendment became effective on January 1, 1915,
we think it advisable to proceed no further with this
branch of the case.
The next question arises in connection with the
supplementary complaint, the object of which is to
enjoin the Collector of Internal Revenue from removing
certain billboards, the property of the plaintiffs located
upon private lands in the Province of Rizal. The
plaintiffs allege that the billboards here in question "in
no sense constitute a nuisance and are not deleterious
to the health, morals, or general welfare of the
community, or of any persons." The defendant denies
these allegations in his answer and claims that after
due investigation made upon the complaints of the

British and German Consuls, he "decided that the

billboard complained of was and still is offensive to the
sight, and is otherwise a nuisance." The plaintiffs
proved by Mr. Churchill that the "billboards were quite
a distance from the road and that they were strongly
built, not dangerous to the safety of the people, and
contained no advertising matter which is filthy,
indecent, or deleterious to the morals of the
community." The defendant presented no testimony
upon this point. In the agreed statement of facts
submitted by the parties, the plaintiffs "admit that the
billboards mentioned were and still are offensive to the
sight."
The pertinent provisions of subsection (b) of section
100 of Act No. 2339 read: "If after due investigation the
Collector of Internal Revenue shall decide that any
sign, signboard, or billboard displayed or exposed to
public view is offensive to the sight or is otherwise a
nuisance, he may by summary order direct the removal
of such sign, signboard, or billboard, and if same is not
removed within ten days after he has issued such
order he my himself cause its removal, and the sign,
signboard, or billboard shall thereupon be forfeited to
the Government, and the owner thereof charged with
the expenses of the removal so effected. When the
sign, signboard, or billboard ordered to be removed as
herein provided shall not comply with the provisions of
the general regulations of the Collector of Internal
Revenue, no rebate or refund shall be allowed for any
portion of a year for which the tax may have been paid.

Otherwise, the Collector of Internal Revenue may in

his discretion make a proportionate refund of the tax
for the portion of the year remaining for which the
taxes were paid. An appeal may be had from the order
of the Collector of Internal Revenue to the Secretary of
Finance and Justice whose decision thereon shall be
final."
The Attorney-General, on behalf of the defendant,
says: "The question which the case presents under this
head for determination, resolves itself into this inquiry:
Is the suppression of advertising signs displayed or
exposed to public view, which are admittedly offensive
to the sight, conducive to the public interest?"
And cunsel for the plaintiffs states the question thus:
"We contend that that portion of section 100 of Act No.
2339, empowering the Collector of Internal Revenue to
remove billboards as nuisances, if objectionable to the
sight, is unconstitutional, as constituting a deprivation
of property without due process of law."
From the position taken by counsel for both sides, it is
clear that our inquiry is limited to the question whether
the enactment assailed by the plaintiffs was a
legitimate exercise of the police power of the
Government; for all property is held subject to that
power.
As a consequence of the foregoing, all discussion and
authorities cited, which go to the power of the state to

authorize administrative officers to find, as a fact, that

legitimate trades, callings, and businesses are, under
certain circumstances, statutory nuisances, and
whether the procedure prescribed for this purpose is
due process of law, are foreign to the issue here
presented.
There can be no doubt that the exercise of the police
power of the Philippine Government belongs to the
Legislature and that this power is limited only by the
Acts of Congress and those fundamentals principles
which lie at the foundation of all republican forms of
government. An Act of the Legislature which is
obviously and undoubtedly foreign to any of the
purposes of the police power and interferes with the
ordinary enjoyment of property would, without doubt,
be held to be invalid. But where the Act is reasonably
within a proper consideration of and care for the public
health, safety, or comfort, it should not be disturbed by
the courts. The courts cannot substitute their own
views for what is proper in the premises for those of
the Legislature. In Munn vs. Illinois (94 U.S., 113), the
United States Supreme Court states the rule thus: "If
no state of circumstances could exist to justify such
statute, then we may declare this one void because in
excess of the legislative power of this state; but if it
could, we must presume it did. Of the propriety of
legislative interference, within the scope of the
legislative power, a legislature is the exclusive judge."

This rule very fully discussed and declared in

Powell vs. Pennsylvania (127 U.S., 678) "oleomargarine" case. (See also Crowley vs. Christensen,
137 U.S., 86, 87; Camfield vs. U.S., 167 U.S., 518.)
While the state may interfere wherever the public
interests demand it, and in this particular a large
discretion is necessarily vested in the legislature to
determine, not only what the interest of the public
require, but what measures are necessary for the
protection of such interests; yet, its determination in
these matters is not final or conclusive, but is subject
to the supervision of the courts. (Lawton vs. Steele,
152 U.S., 133.) Can it be said judicially that signs,
signboards, and billboards, which are admittedly
offensive to the sight, are not with the category of
things which interfere with the public safety, welfare,
and comfort, and therefore beyond the reach of the
police power of the Philippine Government?
The numerous attempts which have been made to limit
by definition the scope of the police power are only
interesting as illustrating its rapid extension within
comparatively recent years to points heretofore
deemed entirely within the field of private liberty and
property rights. Blackstone's definition of the police
power was as follows: "The due regulation and
domestic order of the kingdom, whereby the individuals
of the state, like members of a well governed family,
are bound to conform their general behavior to the
rules of propriety, good neigborhood, and good
manners, to be decent, industrious, and inoffensive in

their respective stations." (Commentaries, vol. 4, p.

162.)
Chanceller Kent considered the police power the
authority of the state "to regulate unwholesome trades,
slaughter houses, operations offensive to the senses."
Chief Justice Shaw of Massachusetts defined it as
follows: "The power vested in the legislature by the
constitution to make, ordain, and establish all manner
of wholesome and reasonable laws, statutes, and
ordinances, either with penalties or without, not
repugnant to the constitution, as they shall judge to be
for the good and welfare of the commonwealth, and of
the subjects of the same." (Com.vs. Alger, 7 Cush.,
53.)
In the case of Butchers' Union Slaughter-house, etc.
Co. vs. Crescent City Live Stock Landing, etc. Co. (111
U.S., 746), it was suggested that the public health and
public morals are matters of legislative concern of
which the legislature cannot divest itself. (See
State vs. Mountain Timber Co. [1913], 75 Wash., 581,
where these definitions are collated.)
In Champer vs. Greencastle (138 Ind., 339), it was
said: "The police power of the State, so far, has not
received a full and complete definition. It may be said,
however, to be the right of the State, or state
functionary, to prescribe regulations for the good order,
peace, health, protection, comfort, convenience and
morals of the community, which do not ... violate any of

the provisions of the organic law." (Quoted with

approval in Hopkins vs. Richmond [Va., 1915], 86 S.E.,
139.)
In Com. vs. Plymouth Coal Co. ([1911] 232 Pa., 141), it
was said: "The police power of the state is difficult of
definition, but it has been held by the courts to be the
right to prescribe regulations for the good order, peace,
health, protection, comfort, convenience and morals of
the community, which does not encroach on a like
power vested in congress or state legislatures by the
federal constitution, or does not violate the provisions
of the organic law; and it has been expressly held that
the fourteenth amendment to the federal constitution
was not designed to interfere with the exercise of that
power by the state."
In People vs. Brazee ([Mich., 1914], 149 N.W., 1053), it
was said: "It [the police power] has for its object the
improvement of social and economic conditioned
affecting the community at large and collectively with a
view to bring about "he greatest good of the greatest
number."Courts have consistently and wisely declined
to set any fixed limitations upon subjects calling for the
exercise of this power. It is elastic and is exercised
from time to time as varying social conditions demand
correction."
In 8 Cyc., 863, it is said: "Police power is the name
given to that inherent sovereignty which it is the right
and duty of the government or its agents to exercise

whenever public policy, in a broad sense, demands, for

the benefit of society at large, regulations to guard its
morals, safety, health, order or to insure in any respect
such economic conditions as an advancing civilization
of a high complex character requires." (As quoted with
approval in Stettlervs. O'Hara [1914], 69 Ore, 519.)
Finally, the Supreme Court of the United States has
said in Noble State Bank vs. Haskell (219 U.S. [1911],
575: "It may be said in a general way that the police
power extends to all the great public needs. It may be
put forth in aid of what is sanctioned by usage, or held
by the prevailing morality or strong and preponderant
opinion to be greatly and immediately necessary to the
public welfare."
This statement, recent as it is, has been quoted with
approval by several courts.
(Cunningham vs. Northwestern Imp. Co. [1911], 44
Mont., 180; State vs. Mountain Timber Co. [1913], 75
Wash., 581; McDavid vs. Bank of Bay Minette [Ala.,
1915], 69 Sou., 452; Hopkins vs. City of Richmond
[Va., 1915], 86 S.E., 139; State vs. Philipps [Miss.
1915], 67 Sou., 651.)
It was said in Com. vs. Alger (7 Cush., 53, 85), per
Shaw, C.J., that: "It is much easier to perceive and
realize the existence and sources of this police power
than to mark its boundaries, or to prescribe limits to its
exercise." In Stone vs. Mississippi (101 U.S., 814), it
was said: "Many attempts have been made in this

court and elsewhere to define the police power, but

never with entire success. It is always easier to
determine whether a particular case comes within the
general scope of the power, than to give an abstract
definition of the power itself, which will be in all
respects accurate."
Other courts have held the same vow of efforts to
evolve a satisfactory definition of the police power.
Manifestly, definitions which fail to anticipate cases
properly within the scope of the police power are
deficient. It is necessary, therefore, to confine our
discussion to the principle involved and determine
whether the cases as they come up are within that
principle. The basic idea of civil polity in the United
States is that government should interfere with
individual effort only to the extent necessary to
preserve a healthy social and economic condition of
the country. State interference with the use of private
property may be exercised in three ways. First, through
the power of taxation, second, through the power of
eminent domain, and third, through the police power.
Buy the first method it is assumed that the individual
receives the equivalent of the tax in the form of
protection and benefit he receives from the
government as such. By the second method he
receives the market value of the property taken from
him. But under the third method the benefits he derived
are only such as may arise from the maintenance of a
healthy economic standard of society and is often
referred to as damnum absque

injuria. (Com. vs. Plymouth Coal Co. 232 Pa., 141;

Bemis vs. Guirl Drainage Co., 182 Ind., 36.) There was
a time when state interference with the use of private
property under the guise of the police power was
practically confined to the suppression of common
nuisances. At the present day, however, industry is
organized along lines which make it possible for large
combinations of capital to profit at the expense of the
socio-economic progress of the nation by controlling
prices and dictating to industrial workers wages and
conditions of labor. Not only this but the universal use
of mechanical contrivances by producers and common
carriers has enormously increased the toll of human
life and limb in the production and distribution of
consumption goods. To the extent that these
businesses affect not only the public health, safety, and
morals, but also the general social and economic life of
the nation, it has been and will continue to be
necessary for the state to interfere by regulation. By so
doing, it is true that the enjoyment of private property is
interfered with in no small degree and in ways that
would have been considered entirely unnecessary in
years gone by. The regulation of rates charged by
common carriers, for instance, or the limitation of hours
of work in industrial establishments have only a very
indirect bearing upon the public health, safety, and
morals, but do bear directly upon social and economic
conditions. To permit each individual unit of society to
feel that his industry will bring a fair return; to see that
his work shall be done under conditions that will not
either immediately or eventually ruin his health; to

prevent the artificial inflation of prices of the things

which are necessary for his physical well being are
matters which the individual is no longer capable of
attending to himself. It is within the province of the
police power to render assistance to the people to the
extent that may be necessary to safeguard these
rights. Hence, laws providing for the regulation of
wages and hours of labor of coal miners (Rail & River
Coal Co. vs. Taylor, 234 U.S., 224); requiring payment
of employees of railroads and other industrial concerns
in legal tender and requiring salaries to be paid
semimonthly (Erie R.R. Co. vs. Williams, 233 U.S.,
685); providing a maximum number of hours of labor
for women (Miller vs. Wilson, U.S. Sup. Ct. [Feb. 23,
1915], Adv. Opns., p. 342); prohibiting child labor
(Sturges & Burn vs. Beauchamp, 231 U.S., 320);
restricting the hours of labor in public laundries (In re
Wong Wing, 167 Cal., 109); limiting hours of labor in
industrial establishment generally (State vs. Bunting,
71 Ore., 259); Sunday Closing Laws (State vs. Nicholls
[Ore., 1915], 151 Pac., 473; People vs. C. Klinck
Packing Co. [N.Y., 1915], 108 N. E., 278;
Hiller vs. State [Md., 1914], 92 Atl., 842;
State vs.Penny, 42 Mont., 118; City of
Springfield vs. Richter, 257 Ill., 578, 580;
State vs. Hondros [S.C., 1915], 84 S.E., 781); have all
been upheld as a valid exercise of the police power.
Again, workmen's compensation laws have been quite
generally upheld. These statutes discard the common
law theory that employers are not liable for industrial
accidents and make them responsible for all accidents

resulting from trade risks, it being considered that such

accidents are a legitimate charge against production
and that the employer by controlling the prices of his
product may shift the burden to the community. Laws
requiring state banks to join in establishing a
depositors' guarantee fund have also been upheld by
the Federal Supreme Court in Noble State
Bank vs. Haskell (219 U. S., 104), and Assaria State
Bank vs. Dolley (219 U.S., 121).
Offensive noises and smells have been for a long time
considered susceptible of suppression in thickly
populated districts. Barring livery stables from such
locations was approved of in Reinman vs. Little Rock
(U.S. Sup. Ct. [Apr. 5, 1915], U.S. Adv. Opns., p. 511).
And a municipal ordinance was recently upheld
(People vs. Ericsson, 263 Ill., 368), which prohibited
the location of garages within two hundred feet of any
hospital, church, or school, or in any block used
exclusively for residential purposes, unless the consent
of the majority of the property owners be obtained.
Such statutes as these are usually upheld on the
theory of safeguarding the public health. But we
apprehend that in point of fact they have little bearing
upon the health of the normal person, but a great deal
to do with his physical comfort and convenience and
not a little to do with his peace of mind. Without
entering into the realm of psychology, we think it quite
demonstrable that sight is as valuable to a human
being as any of his other senses, and that the proper
ministration to this sense conduces as much to his

contentment as the care bestowed upon the senses of

hearing or smell, and probably as much as both
together. Objects may be offensive to the eye as well
as to the nose or ear. Man's esthetic feelings are
constantly being appealed to through his sense of
sight. Large investments have been made in theaters
and other forms of amusement, in paintings and
spectacular displays, the success of which depends in
great part upon the appeal made through the sense of
sight. Moving picture shows could not possible without
the sense of sight. Governments have spent millions
on parks and boulevards and other forms of civic
beauty, the first aim of which is to appeal to the sense
of sight. Why, then, should the Government not
interpose to protect from annoyance this most valuable
of man's senses as readily as to protect him from
offensive noises and smells?
The advertising industry is a legitimate one. It is at the
same time a cause and an effect of the great industrial
age through which the world is now passing. Millions
are spent each year in this manner to guide the
consumer to the articles which he needs. The sense of
sight is the primary essential to advertising success.
Billboard advertising, as it is now conducted, is a
comparatively recent form of advertising. It is
conducted out of doors and along the arteries of travel,
and compels attention by the strategic locations of the
boards, which obstruct the range of vision at points
where travelers are most likely to direct their eyes.
Beautiful landscapes are marred or may not be seen at

all by the traveler because of the gaudy array of

posters announcing a particular kind of breakfast food,
or underwear, the coming of a circus, an incomparable
soap, nostrums or medicines for the curing of all the ills
to which the flesh is heir, etc. It is quite natural for
people to protest against this indiscriminate and
wholesale use of the landscape by advertisers and the
intrusion of tradesmen upon their hours of leisure and
relaxation from work. Outdoor life must lose much of its
charm and pleasure if this form of advertising is
permitted to continue unhampered until it converts the
streets and highways into veritable canyons through
which the world must travel in going to work or in
search of outdoor pleasure.
The success of billboard advertising depends not so
much upon the use of private property as it does upon
the use of the channels of travel used by the general
public. Suppose that the owner of private property, who
so vigorously objects to the restriction of this form of
advertising, should require the advertiser to paste his
posters upon the billboards so that they would face the
interior of the property instead of the exterior. Billboard
advertising would die a natural death if this were done,
and its real dependency not upon the unrestricted use
of private property but upon the unrestricted use of the
public highways is at once apparent. Ostensibly
located on private property, the real and sole value of
the billboard is its proximity to the public thoroughfares.
Hence, we conceive that the regulation of billboards
and their restriction is not so much a regulation of

private property as it is a regulation of the use of the

streets and other public thoroughfares.
We would not be understood as saying that billboard
advertising is not a legitimate business any more than
we would say that a livery stable or an automobile
garage is not. Even a billboard is more sightly than
piles of rubbish or an open sewer. But all these
businesses are offensive to the senses under certain
conditions.
It has been urged against ministering to the sense of
sight that tastes are so diversified that there is no safe
standard of legislation in this direction. We answer in
the language of the Supreme Court in Noble State
Bank vs.Haskell (219 U.S., 104), and which has
already been adopted by several state courts (see
supra), that "the prevailing morality or strong and
preponderating opinion" demands such legislation. The
agitation against the unrestrained development of the
billboard business has produced results in nearly all
the countries of Europe. (Ency. Britannica, vol. 1, pp.
237-240.) Many drastic ordinances and state laws
have been passed in the United States seeking to
make the business amenable to regulation. But their
regulation in the United states is hampered by what we
conceive an unwarranted restriction upon the scope of
the police power by the courts. If the police power may
be exercised to encourage a healthy social and
economic condition in the country, and if the comfort
and convenience of the people are included within

those subjects, everything which encroaches upon

such territory is amenable to the police power. A
source of annoyance and irritation to the public does
not minister to the comfort and convenience of the
public. And we are of the opinion that the prevailing
sentiment is manifestly against the erection of
billboards which are offensive to the sight.
We do not consider that we are in conflict with the
decision in Eubank vs. Richmond (226 U.S., 137),
where a municipal ordinance establishing a building
line to which property owners must conform was held
unconstitutional. As we have pointed out, billboard
advertising is not so much a use of private property as
it is a use of the public thoroughfares. It derives its
value to the power solely because the posters are
exposed to the public gaze. It may well be that the
state may not require private property owners to
conform to a building line, but may prescribe the
conditions under which they shall make use of the
adjoining streets and highways. Nor is the law in
question to be held invalid as denying equal protection
of the laws. In Keokee Coke Co. vs. Taylor (234 U.S.,
224), it was said: "It is more pressed that the act
discriminates unconstitutionally against certain
classes. But while there are differences of opinion as
to the degree and kind of discrimination permitted by
the Fourteenth Amendment, it is established by
repeated decisions that a statute aimed at what is
deemed an evil, and hitting it presumably where
experience shows it to be most felt, is not to be upset

by thinking up and enumerating other instances to

which it might have been applied equally well, so far as
the court can see. That is for the legislature to judge
unless the case is very clear."
But we have not overlooked the fact that we are not in
harmony with the highest courts of a number of the
states in the American Union upon this point. Those
courts being of the opinion that statutes which are
prompted and inspired by esthetic considerations
merely, having for their sole purpose the promotion
and gratification of the esthetic sense, and not the
promotion or protection of the public safety, the public
peace and good order of society, must be held invalid
and contrary to constitutional provisions holding
inviolate the rights of private property. Or, in other
words, the police power cannot interfere with private
property rights for purely esthetic purposes. The
courts, taking this view, rest their decisions upon the
proposition that the esthetic sense is disassociated
entirely from any relation to the public health, morals,
comfort, or general welfare and is, therefore, beyond
the police power of the state. But we are of the opinion,
as above indicated, that unsightly advertisements or
signs, signboards, or billboards which are offensive to
the sight, are not disassociated from the general
welfare of the public. This is not establishing a new
principle, but carrying a well recognized principle to
further application. (Fruend on Police Power, p. 166.)

For the foregoing reasons the judgment appealed from

is hereby reversed and the action dismissed upon the
merits, with costs. So ordered.
Arellano, C.J., Torres, Carson, and Araullo, JJ.,
concur.
DECISION ON THE MOTION FOR A REHEARING,
JANUARY 24, 1916.
TRENT, J.:
Counsel for the plaintiffs call our attention to the case
of Ex parte Young (209 U.S., 123); and say that they
are of the opinion that this case "is the absolutely
determinative of the question of jurisdiction in
injunctions of this kind." We did not refer to this case in
our former opinion because we were satisfied that the
reasoning of the case is not applicable to section 100
(b), 139 and 140 of Act No. 2339. The principles
announced in the Young case are stated as follows: "It
may therefore be said that when the penalties for
disobedience are by fines so enormous and
imprisonment so severe as to intimidate the company
and its officers from resorting to the courts to test the
validity of the legislation, the result is the same as if the
law in terms prohibited the company from seeking
judicial construction of laws which deeply affect its
rights.
It is urged that there is no principle upon which to
base the claim that a person is entitled to

disobey a statute at least once, for the purpose

of testing its validity without subjecting himself to
the penalties for disobedience provided by the
statute in case it is valid. This is not an accurate
statement of the case. Ordinarily a law creating
offenses in the nature of misdemeanors or
felonies relates to a subject over which the
jurisdiction of the legislature is complete in any
event. In these case, however, of the
establishment of certain rates without any
hearing, the validity of such rates necessarily
depends upon whether they are high enough to
permit at least some return upon the investment
(how much it is not now necessary to state), and
an inquiry as to that fact is a proper subject of
judicial investigation. If it turns out that the rates
are too low for that purpose, then they are illegal.
Now, to impose upon a party interested the
burden of obtaining a judicial decision of such a
question (no prior hearing having ever been
given) only upon the condition that, if
unsuccessful, he must suffer imprisonment and
pay fines as provided in these acts, is, in effect,
to close up all approaches to the courts, and thus
prevent any hearing upon the question whether
the rates as provided by the acts are not too low,
and therefore invalid. The distinction is obvious
between a case where the validity of the acts
depends upon the existence of a fact which can
be determined only after investigation of a very
complicated and technical character, and the

ordinary case of a statute upon a subject

requiring no such investigation and over which
the jurisdiction of the legislature is complete in
any event.
An examination of the sections of our Internal Revenue
Law and of the circumstances under which and the
purposes for which they were enacted, will show that,
unlike the statutes under consideration in the above
cited case, their enactment involved no attempt on the
part of the Legislature to prevent dissatisfied taxpayers
"from resorting to the courts to test the validity of the
legislation;" no effort to prevent any inquiry as to their
validity. While section 139 does prevent the testing of
the validity of subsection (b) of section 100 in
injunction suits instituted for the purpose of restraining
the collection of internal revenue taxes, section 140
provides a complete remedy for that purpose. And
furthermore, the validity of subsection (b) does not
depend upon "the existence of a fact which can be
determined only after investigation of a very
complicated and technical character," but the
jurisdiction of the Legislature over the subject with
which the subsection deals "is complete in any event."
The judgment of the court in the Young case rests
upon the proposition that the aggrieved parties had no
adequate remedy at law.
Neither did we overlook the case of General Oil
Co. vs. Crain (209 U.S., 211), decided the same
day and citing Ex parte Young, supra. In that

case the plaintiff was a Tennessee corporation,

with its principal place of business in Memphis,
Tennessee. It was engaged in the manufacture
and sale of coal oil, etc. Its wells and plant were
located in Pennsylvania and Ohio. Memphis was
not only its place of business, at which place it
sold oil to the residents of Tennessee, but also a
distributing point to which oils were shipped from
Pennsylvania and Ohio and unloaded into
various tanks for the purpose of being forwarded
to the Arkansas, Louisiana, and Mississippi
customers. Notwithstanding the fact that the
company separated its oils, which were
designated to meet the requirements of the
orders from those States, from the oils for sale in
Tennessee, the defendant insisted that he had a
right, under the Act of the Tennessee Legislature,
approved April 21, 1899, to inspect all the oils
unlocated in Memphis, whether for sale in that
State or not, and charge and collect for such
inspection a regular fee of twenty-five cents per
barrel. The company, being advised that the
defendant had no such right, instituted this action
in the inferior States court for the purpose of
enjoining the defendant, upon the grounds stated
in the bill, from inspecting or attempting to
inspect its oils. Upon trial, the preliminary
injunction which had been granted at the
commencement of the action, was continued in
force. Upon appeal, the supreme court of the
State of Tennessee decided that the suit was one

against the State and reversed the judgment of

the Chancellor. In the Supreme Court of the
United States, where the case was reviewed
upon a writ of error, the contentions of the parties
were stated by the court as follows: "It is
contended by defendant in error that this court is
without jurisdiction because no matter sought to
be litigated by plaintiff in error was determined by
the Supreme Court of Tennessee. The court
simply held, it is paid, that, under the laws of the
State, it had no jurisdiction to entertain the suit
for any purpose. And it is insisted "hat this
holding involved no Federal question, but only
the powers and jurisdiction of the courts of the
State of Tennessee, in respect to which the
Supreme Court of Tennessee is the final arbiter."
Opposing these contentions, plaintiff in error
urges that whether a suit is one against a State
cannot depend upon the declaration of a statute,
but depends upon the essential nature ofthe suit,
and that the Supreme Court recognized that the
statute "aded nothing to the axiomatic principle
that the State, as a sovereign, is not subject to
suit save by its own consent."And it is hence
insisted that the court by dismissing the bill gave
effect to the law which was attacked. It is further
insisted that the bill undoubtedly present rights
under the Constitution of the United States and
conditions which entitle plaintiff in error to an
injunction for the protection of such rights, and

that a statute of the State which operates to deny

such rights, or such relief, `is itself in conflict with
the Constitution of the United States."
That statute of Tennessee, which the supreme court of
that State construed and held to be prohibitory of the
suit, was an act passed February 28, 1873, which
provides: "That no court in the State of Tennessee has,
nor shall hereafter have, any power, jurisdiction, or
authority to entertain any suit against the State, or any
officer acting by the authority of the State, with a view
to reach the State, its treasury, funds or property; and
all such suits now pending, or hereafter brought, shall
be dismissed as to the State, or such officer, on
motion, plea or demurrer of the law officer of the State,
or counsel employed by the State."
The Supreme Court of the United States, after
reviewing many cases, said: "Necessarily, to give
adequate protection to constitutional rights a distinction
must be made between valid and invalid state laws, as
determining the character of the suit against state
officers. And the suit at bar illustrates the necessity. If a
suit against state officer is precluded in the national
courts by the Eleventh Amendment to the Constitution,
and may be forbidden by a State to its courts, as it is
contended in the case at bar that it may be, without
power of review by this court, it must be evident that an
easy way is open to prevent the enforcement of many
provisions of the Constitution; and the Fourteenth
Amendment, which is directed at state action, could be

nullified as to much of its operation. ... It being then the

right of a party to be protected against a law which
violates a constitutional right, whether by its terms or
the manner of its enforcement, it is manifest that a
decision which denies such protection gives effect to
the law, and the decision is reviewable by this court."
The court then proceeded to consider whether the law
of 1899 would, if administered against the oils in
question, violate any constitutional right of the plaintiff
and after finding and adjudging that the oils were not in
movement through the States, that they had reached
the destination of their first shipment, and were held
there, not in necessary delay at means of
transportation but for the business purposes and profit
of the company, and resting its judgment upon the
taxing power of the State, affirmed the decree of the
supreme court of the State of Tennessee.
From the foregoing it will be seen that the Supreme
Court of Tennessee dismissed the case for want of
jurisdiction because the suit was one against the State,
which was prohibited by the Tennessee Legislature.
The Supreme Court of the United States took
jurisdiction of the controversy for the reasons above
quoted and sustained the Act of 1899 as a revenue
law.
The case of Tennessee vs. Sneed (96 U.S., 69), and
Shelton vs. Platt (139 U.S., 591), relied upon in our
former opinion, were not cited in General Oil

Co. vs. Crain, supra, because the questions presented

and the statutes under consideration were entirely
different. The Act approved March 31, 1873, expressly
prohibits the courts from restraining the collection of
any tax, leaving the dissatisfied taxpayer to his
exclusive remedy payment under protest and suit to
recover while the Act approved February 28, 1873,
prohibits suits against the State.
In upholding the statute which authorizes the removal
of signboards or billboards upon the sole ground that
they are offensive to the sight, we recognized the fact
that we are not in harmony with various state courts in
the American Union. We have just examined the
decision of the Supreme Court of the State of Illinois in
the recent case (October [December], 1914) of
Thomas Cusack Co. vs. City of Chicago (267 Ill., 344),
wherein the court upheld the validity of a municipal
ordinances, which reads as follows: "707. Frontage
consents required. It shall be unlawful for any person,
firm or corporation to erect or construct any bill-board
or sign-board in any block on any public street in which
one-half of the buildings on both sides of the street are
used exclusively for residence purposes, without first
obtaining the consent, in writing, of the owners or duly
authorized agents of said owners owning a majority of
the frontage of the property, on both sides of the street,
in the block in which such bill-board or sign-board is to
be erected, constructed or located. Such written
consent shall be filed with the commissioner of
buildings before a permit shall be issued for the

erection, construction or location of such bill-board or

sign-board."
The evidence which the Illinois court relied upon was
the danger of fires, the fact that billboards promote the
commission of various immoral and filthy acts by
disorderly persons, and the inadequate police
protection furnished to residential districts. The last
objection has no virtue unless one or the other of the
other objections are valid. If the billboard industry
does, in fact, promote such municipal evils to
noticeable extent, it seems a curious inconsistency that
a majority of the property owners on a given block may
legalize the business. However, the decision is
undoubtedly a considerable advance over the views
taken by other high courts in the United States and
distinguishes several Illinois decisions. It is an advance
because it permits the suppression of billboards where
they are undesirable. The ordinance which the court
approved will no doubt cause the virtual suppression of
the business in the residential districts. Hence, it is
recognized that under certain circumstances billboards
may be suppressed as an unlawful use of private
property. Logically, it would seem that the premise of
fact relied upon is not very solid. Objections to the
billboard upon police, sanitary, and moral grounds
have been, as pointed out by counsel for Churchill and
Tait, duly considered by numerous high courts in the
United States, and, with one exception, have been
rejected as without foundation. The exception is the
Supreme Court of Missouri, which advances practically

the same line of reasoning as has the Illinois court in

this recent case. (St. Louis Gunning Advt. Co. vs. City
of St. Louis, 137 S. W., 929.) In fact, the Illinois court,
in Haller Sign Works vs. Physical Culture Training
School (249 Ill., 436), "distinguished" in the recent
case, said: "There is nothing inherently dangerous to
the health or safety of the public in structures that are
properly erected for advertising purposes."
If a billboard is so constructed as to offer no room for
objections on sanitary or moral grounds, it would seem
that the ordinance above quoted would have to be
sustained upon the very grounds which we have
advanced in sustaining our own statute.
It might be well to note that billboard legislation in the
United States is attempting to eradicate a business
which has already been firmly established. This
business was allowed to expand unchecked until its
very extent called attention to its objectionable
features. In the Philippine Islands such legislation has
almost anticipated the business, which is not yet of
such proportions that it can be said to be fairly
established. It may be that the courts in the United
States have committed themselves to a course of
decisions with respect to billboard advertising, the full
consequences of which were not perceived for the
reason that the development of the business has been
so recent that the objectionable features of it did not
present themselves clearly to the courts nor to the
people. We, in this country, have the benefit of the

experience of the people of the United States and may

make our legislation preventive rather than corrective.
There are in this country, moreover, on every hand in
those districts where Spanish civilization has held
sway for so many centuries, examples of architecture
now belonging to a past age, and which are attractive
not only to the residents of the country but to visitors. If
the billboard industry is permitted without constraint or
control to hide these historic sites from the passerby,
the country will be less attractive to the tourist and the
people will suffer a district economic loss.
The motion for a rehearing is therefore denied.

G.R. No. L-59234 September 30, 1982

TAXICAB OPERATORS OF METRO MANILA, INC.,
FELICISIMO CABIGAO and ACE
TRANSPORTATION CORPORATION, petitioners,
vs.
THE BOARD OF TRANSPORTATION and THE
DIRECTOR OF THE BUREAU OF LAND
TRANSPORTATION,respondents.
MELENCIO-HERRERA, J.:
This Petition for "Certiorari, Prohibition and mandamus
with Preliminary Injunction and Temporary Restraining
Order" filed by the Taxicab Operators of Metro Manila,
Inc., Felicisimo Cabigao and Ace Transportation, seeks
to declare the nullity of Memorandum Circular No. 77-

42, dated October 10, 1977, of the Board of

Transportation, and Memorandum Circular No. 52,
dated August 15, 1980, of the Bureau of Land
Transportation.
Petitioner Taxicab Operators of Metro Manila, Inc.
(TOMMI) is a domestic corporation composed of
taxicab operators, who are grantees of Certificates of
Public Convenience to operate taxicabs within the City
of Manila and to any other place in Luzon accessible to
vehicular traffic. Petitioners Ace Transportation
Corporation and Felicisimo Cabigao are two of the
members of TOMMI, each being an operator and
grantee of such certificate of public convenience.
On October 10, 1977, respondent Board of
Transportation (BOT) issued Memorandum Circular
No. 77-42 which reads:
SUBJECT: Phasing out and Replacement of
Old and Dilapidated Taxis
WHEREAS, it is the policy of the
government to insure that only safe and
comfortable units are used as public
conveyances;
WHEREAS, the riding public, particularly in
Metro-Manila, has, time and again,
complained against, and condemned, the
continued operation of old and dilapidated
taxis;
WHEREAS, in order that the commuting
public may be assured of comfort,
convenience, and safety, a program of
phasing out of old and dilapidated taxis
should be adopted;

WHEREAS, after studies and inquiries

made by the Board of Transportation, the
latter believes that in six years of operation,
a taxi operator has not only covered the
cost of his taxis, but has made reasonable
profit for his investments;
NOW, THEREFORE, pursuant to this
policy, the Board hereby declares that no
car beyond six years shall be operated as
taxi, and in implementation of the same
hereby promulgates the following rules and
regulations:
1. As of December 31, 1977, all taxis of
Model 1971 and earlier are ordered
withdrawn from public service and
thereafter may no longer be registered and
operated as taxis. In the registration of
cards for 1978, only taxis of Model 1972
and later shall be accepted for registration
and allowed for operation;
2. As of December 31, 1978, all taxis of
Model 1972 are ordered withdrawn from
public service and thereafter may no longer
be registered and operated as taxis. In the
registration of cars for 1979, only taxis of
Model 1973 and later shall be accepted for
registration and allowed for operation; and
every year thereafter, there shall be a sixyear lifetime of taxi, to wit:
1980 Model 1974
1981 Model 1975, etc.
All taxis of earlier models than those
provided above are hereby ordered

withdrawn from public service as of the last

day of registration of each particular year
and their respective plates shall be
surrendered directly to the Board of
Transportation for subsequent turnover to
the Land Transportation Commission.
For an orderly implementation of this
Memorandum Circular, the rules herein
shall immediately be effective in MetroManila. Its implementation outside MetroManila shall be carried out only after the
project has been implemented in MetroManila and only after the date has been
determined by the Board. 1
Pursuant to the above BOT circular, respondent
Director of the Bureau of Land Transportation (BLT)
issued Implementing Circular No. 52, dated August 15,
1980, instructing the Regional Director, the MV
Registrars and other personnel of BLT, all within the
National Capitol Region, to implement said Circular,
and formulating a schedule of phase-out of vehicles to
be allowed and accepted for registration as public
conveyances. To quote said Circular:
Pursuant to BOT Memo-Circular No. 77-42,
taxi units with year models over six (6)
years old are now banned from operating
as public utilities in Metro Manila. As such
the units involved should be considered as
automatically dropped as public utilities
and, therefore, do not require any further
dropping order from the BOT.
Henceforth, taxi units within the National
Capitol Region having year models over 6

years old shall be refused registration. The

following schedule of phase-out is herewith
prescribed for the guidance of all
concerned:
Year
Model

Automati
c PhaseOut Year
1980

1974

1981

1975

1982

1976

1983

1977
etc.

etc.

Strict compliance here is desired. 2

In accordance therewith, cabs of model 1971 were
phase-out in registration year 1978; those of model
1972, in 1979; those of model 1973, in 1980; and
those of model 1974, in 1981.
On January 27, 1981, petitioners filed a Petition with
the BOT, docketed as Case No. 80-7553, seeking to
nullify MC No. 77-42 or to stop its implementation; to
allow the registration and operation in 1981 and
subsequent years of taxicabs of model 1974, as well
as those of earlier models which were phased-out,
provided that, at the time of registration, they are
roadworthy and fit for operation.
On February 16, 1981, petitioners filed before the BOT
a "Manifestation and Urgent Motion", praying for an

early hearing of their petition. The case was heard on

February 20, 1981. Petitioners presented testimonial
and documentary evidence, offered the same, and
manifested that they would submit additional
documentary proofs. Said proofs were submitted on
March 27, 1981 attached to petitioners' pleading
entitled, "Manifestation, Presentation of Additional
Evidence and Submission of the Case for
Resolution." 3
On November 28, 1981, petitioners filed before the
same Board a "Manifestation and Urgent Motion to
Resolve or Decide Main Petition" praying that the case
be resolved or decided not later than December 10,
1981 to enable them, in case of denial, to avail of
whatever remedy they may have under the law for the
protection of their interests before their 1975 model
cabs are phased-out on January 1, 1982.
Petitioners, through its President, allegedly made
personal follow-ups of the case, but was later informed
that the records of the case could not be located.
On December 29, 1981, the present Petition was
instituted wherein the following queries were posed for
consideration by this Court:
A. Did BOT and BLT promulgate the
questioned memorandum circulars in
accord with the manner required by
Presidential Decree No. 101, thereby
safeguarding the petitioners' constitutional
right to procedural due process?
B. Granting, arguendo, that respondents
did comply with the procedural
requirements imposed by Presidential
Decree No. 101, would the implementation

and enforcement of the assailed

memorandum circulars violate the
petitioners' constitutional rights to.
(1) Equal protection
of the law;
(2) Substantive due
process; and
(3) Protection
against arbitrary
and unreasonable
classification and
standard?
On Procedural and Substantive Due Process:
Presidential Decree No. 101 grants to the Board of
Transportation the power
4. To fix just and reasonable standards,
classification, regulations, practices,
measurements, or service to be furnished,
imposed, observed, and followed by
operators of public utility motor vehicles.
Section 2 of said Decree provides procedural
guidelines for said agency to follow in the exercise of
its powers:
Sec. 2. Exercise of powers. In the
exercise of the powers granted in the
preceding section, the Board shag proceed
promptly along the method of legislative
inquiry.
Apart from its own investigation and
studies, the Board, in its discretion, may
require the cooperation and assistance of
the Bureau of Transportation, the Philippine
Constabulary, particularly the Highway

Patrol Group, the support agencies within

the Department of Public Works,
Transportation and Communications, or
any other government office or agency that
may be able to furnish useful information or
data in the formulation of the Board of any
policy, plan or program in the
implementation of this Decree.
The Board may also can conferences,
require the submission of position papers
or other documents, information, or data by
operators or other persons that may be
affected by the implementation of this
Decree, or employ any other suitable
means of inquiry.
In support of their submission that they were denied
procedural due process, petitioners contend that they
were not caged upon to submit their position papers,
nor were they ever summoned to attend any
conference prior to the issuance of the questioned
BOT Circular.
It is clear from the provision aforequoted, however, that
the leeway accorded the Board gives it a wide range of
choice in gathering necessary information or data in
the formulation of any policy, plan or program. It is not
mandatory that it should first call a conference or
require the submission of position papers or other
documents from operators or persons who may be
affected, this being only one of the options open to the
Board, which is given wide discretionary authority.
Petitioners cannot justifiably claim, therefore, that they
were deprived of procedural due process. Neither can
they state with certainty that public respondents had

not availed of other sources of inquiry prior to issuing

the challenged Circulars. operators of public
conveyances are not the only primary sources of the
data and information that may be desired by the BOT.
Dispensing with a public hearing prior to the issuance
of the Circulars is neither violative of procedural due
process. As held in Central Bank vs. Hon. Cloribel and
Banco Filipino, 44 SCRA 307 (1972):
Pevious notice and hearing as elements of
due process, are constitutionally required
for the protection of life or vested property
rights, as well as of liberty, when its
limitation or loss takes place in
consequence of a judicial or quasi-judicial
proceeding, generally dependent upon a
past act or event which has to be
established or ascertained. It is not
essential to the validity of general rules or
regulations promulgated to govern future
conduct of a class or persons or
enterprises, unless the law provides
otherwise. (Emphasis supplied)
Petitioners further take the position that fixing the
ceiling at six (6) years is arbitrary and oppressive
because the roadworthiness of taxicabs depends upon
their kind of maintenance and the use to which they
are subjected, and, therefore, their actual physical
condition should be taken into consideration at the time
of registration. As public contend, however, it is
impractical to subject every taxicab to constant and
recurring evaluation, not to speak of the fact that it can
open the door to the adoption of multiple standards,
possible collusion, and even graft and corruption. A

reasonable standard must be adopted to apply to an

vehicles affected uniformly, fairly, and justly. The span
of six years supplies that reasonable standard. The
product of experience shows that by that time taxis
have fully depreciated, their cost recovered, and a fair
return on investment obtained. They are also generally
dilapidated and no longer fit for safe and comfortable
service to the public specially considering that they are
in continuous operation practically 24 hours everyday
in three shifts of eight hours per shift. With that
standard of reasonableness and absence of
arbitrariness, the requirement of due process has been
met.
On Equal Protection of the Law:
Petitioners alleged that the Circular in question violates
their right to equal protection of the law because the
same is being enforced in Metro Manila only and is
directed solely towards the taxi industry. At the outset it
should be pointed out that implementation outside
Metro Manila is also envisioned in Memorandum
Circular No. 77-42. To repeat the pertinent portion:
For an orderly implementation of this
Memorandum Circular, the rules herein
shall immediately be effective in Metro
Manila. Its implementation outside Metro
Manila shall be carried out only after the
project has been implemented in Metro
Manila and only after the date has been
determined by the Board. 4
In fact, it is the understanding of the Court that
implementation of the Circulars in Cebu City is already
being effected, with the BOT in the process of

conducting studies regarding the operation of taxicabs

in other cities.
The Board's reason for enforcing the Circular initially in
Metro Manila is that taxicabs in this city, compared to
those of other places, are subjected to heavier traffic
pressure and more constant use. This is of common
knowledge. Considering that traffic conditions are not
the same in every city, a substantial distinction exists
so that infringement of the equal protection clause can
hardly be successfully claimed.
As enunciated in the preambular clauses of the
challenged BOT Circular, the overriding consideration
is the safety and comfort of the riding public from the
dangers posed by old and dilapidated taxis. The State,
in the exercise, of its police power, can prescribe
regulations to promote the health, morals, peace, good
order, safety and general welfare of the people. It can
prohibit all things hurtful to comfort, safety and welfare
of society. 5 It may also regulate property rights. 6 In the
language of Chief Justice Enrique M. Fernando "the
necessities imposed by public welfare may justify the
exercise of governmental authority to regulate even if
thereby certain groups may plausibly assert that their
interests are disregarded". 7
In so far as the non-application of the assailed
Circulars to other transportation services is concerned,
it need only be recalled that the equal protection
clause does not imply that the same treatment be
accorded all and sundry. It applies to things or persons
Identically or similarly situated. It permits of
classification of the object or subject of the law
provided classification is reasonable or based on
substantial distinction, which make for real differences,

and that it must apply equally to each member of the

class. 8 What is required under the equal protection
clause is the uniform operation by legal means so that
all persons under Identical or similar circumstance
would be accorded the same treatment both in
privilege conferred and the liabilities imposed. 9 The
challenged Circulars satisfy the foregoing criteria.
Evident then is the conclusion that the questioned
Circulars do not suffer from any constitutional infirmity.
To declare a law unconstitutional, the infringement of
constitutional right must be clear, categorical and
undeniable.10
WHEREFORE, the Writs prayed for are denied and
this Petition is hereby dismissed. No costs.

G.R. No. L-20620 August 15, 1974

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,
vs.
CARMEN M. VDA. DE CASTELLVI, ET
AL., defendants-appellees.
Office of the Solicitor General for plaintiff-appellant.
C.A. Mendoza & A. V. Raquiza and Alberto Cacnio &
Associates for defendant-appellees.

ZALDIVAR, J.:p
Appeal from the decision of the Court of First Instance
of Pampanga in its Civil Case No. 1623, an
expropriation proceeding.
Plaintiff-appellant, the Republic of the Philippines,
(hereinafter referred to as the Republic) filed, on June
26, 1959, a complaint for eminent domain against
defendant-appellee, Carmen M. Vda. de Castellvi,
judicial administratrix of the estate of the late Alfonso
de Castellvi (hereinafter referred to as Castellvi), over
a parcel of land situated in the barrio of San Jose,
Floridablanca, Pampanga, described as follows:
A parcel of land, Lot No. 199-B Bureau of
Lands Plan Swo 23666. Bounded on the
NE by Maria Nieves Toledo-Gozun; on the
SE by national road; on the SW by AFP
reservation, and on the NW by AFP
reservation. Containing an area of 759,299
square meters, more or less, and
registered in the name of Alfonso Castellvi
under TCT No. 13631 of the Register of
Pampanga ...;
and against defendant-appellee Maria Nieves Toledo
Gozun (hereinafter referred to as Toledo-Gozun over
two parcels of land described as follows:
A parcel of land (Portion Lot Blk-1, Bureau
of Lands Plan Psd, 26254. Bounded on the

NE by Lot 3, on the SE by Lot 3; on the SW

by Lot 1-B, Blk. 2 (equivalent to Lot 199-B
Swo 23666; on the NW by AFP military
reservation. Containing an area of 450,273
square meters, more or less and registered
in the name of Maria Nieves Toledo-Gozun
under TCT No. 8708 of the Register of
Deeds of Pampanga. ..., and
A parcel of land (Portion of lot 3, Blk-1,
Bureau of Lands Plan Psd 26254. Bounded
on the NE by Lot No. 3, on the SE by
school lot and national road, on the SW by
Lot 1-B Blk 2 (equivalent to Lot 199-B Swo
23666), on the NW by Lot 1-B, Blk-1.
Containing an area of 88,772 square
meters, more or less, and registered in the
name of Maria Nieves Toledo Gozun under
TCT No. 8708 of the Register of Deeds of
Pampanga, ....
In its complaint, the Republic alleged, among other
things, that the fair market value of the abovementioned lands, according to the Committee on
Appraisal for the Province of Pampanga, was not more
than P2,000 per hectare, or a total market value of
P259,669.10; and prayed, that the provisional value of
the lands be fixed at P259.669.10, that the court
authorizes plaintiff to take immediate possession of the
lands upon deposit of that amount with the Provincial
Treasurer of Pampanga; that the court appoints three

commissioners to ascertain and report to the court the

just compensation for the property sought to be
expropriated, and that the court issues thereafter a
final order of condemnation.
On June 29, 1959 the trial court issued an order fixing
the provisional value of the lands at P259,669.10.
In her "motion to dismiss" filed on July 14, 1959,
Castellvi alleged, among other things, that the land
under her administration, being a residential land, had
a fair market value of P15.00 per square meter, so it
had a total market value of P11,389,485.00; that the
Republic, through the Armed Forces of the Philippines,
particularly the Philippine Air Force, had been, despite
repeated demands, illegally occupying her property
since July 1, 1956, thereby preventing her from using
and disposing of it, thus causing her damages by way
of unrealized profits. This defendant prayed that the
complaint be dismissed, or that the Republic be
ordered to pay her P15.00 per square meter, or a total
of P11,389,485.00, plus interest thereon at 6% per
annum from July 1, 1956; that the Republic be ordered
to pay her P5,000,000.00 as unrealized profits, and the
costs of the suit.
By order of the trial court, dated August, 1959, Amparo
C. Diaz, Dolores G. viuda de Gil, Paloma Castellvi,
Carmen Castellvi, Rafael Castellvi, Luis Castellvi,
Natividad Castellvi de Raquiza, Jose Castellvi and
Consuelo Castellvi were allowed to intervene as

parties defendants. Subsequently, Joaquin V. Gozun,

Jr., husband of defendant Nieves Toledo Gozun, was
also allowed by the court to intervene as a party
defendant.
After the Republic had deposited with the Provincial
Treasurer of Pampanga the amount of P259,669.10,
the trial court ordered that the Republic be placed in
possession of the lands. The Republic was actually
placed in possession of the lands on August 10,
1959. 1
In her "motion to dismiss", dated October 22, 1959,
Toledo-Gozun alleged, among other things, that her
two parcels of land were residential lands, in fact a
portion with an area of 343,303 square meters had
already been subdivided into different lots for sale to
the general public, and the remaining portion had
already been set aside for expansion sites of the
already completed subdivisions; that the fair market
value of said lands was P15.00 per square meter, so
they had a total market value of P8,085,675.00; and
she prayed that the complaint be dismissed, or that
she be paid the amount of P8,085,675.00, plus interest
thereon at the rate of 6% per annum from October 13,
1959, and attorney's fees in the amount of P50,000.00.
Intervenors Jose Castellvi and Consuelo Castellvi in
their answer, filed on February 11, 1960, and also
intervenor Joaquin Gozun, Jr., husband of defendant
Maria Nieves Toledo-Gozun, in his motion to dismiss,

dated May 27, 1960, all alleged that the value of the
lands sought to be expropriated was at the rate of
P15.00 per square meter.
On November 4, 1959, the trial court authorized the
Provincial Treasurer of Pampanga to pay defendant
Toledo-Gozun the sum of P107,609.00 as provisional
value of her lands. 2 On May 16, 1960 the trial Court
authorized the Provincial Treasurer of Pampanga to
pay defendant Castellvi the amount of P151,859.80 as
provisional value of the land under her administration,
and ordered said defendant to deposit the amount with
the Philippine National Bank under the supervision of
the Deputy Clerk of Court. In another order of May 16,
1960 the trial Court entered an order of
condemnation.3
The trial Court appointed three commissioners: Atty.
Amadeo Yuzon, Clerk of Court, as commissioner for
the court; Atty. Felicisimo G. Pamandanan, counsel of
the Philippine National Bank Branch at Floridablanca,
for the plaintiff; and Atty. Leonardo F. Lansangan,
Filipino legal counsel at Clark Air Base, for the
defendants. The Commissioners, after having qualified
themselves, proceeded to the performance of their
duties.
On March 15,1961 the Commissioners submitted their
report and recommendation, wherein, after having
determined that the lands sought to be expropriated
were residential lands, they recommended

unanimously that the lowest price that should be paid

was P10.00 per square meter, for both the lands of
Castellvi and Toledo-Gozun; that an additional
P5,000.00 be paid to Toledo-Gozun for improvements
found on her land; that legal interest on the
compensation, computed from August 10, 1959, be
paid after deducting the amounts already paid to the
owners, and that no consequential damages be
awarded. 4 The Commissioners' report was objected to
by all the parties in the case by defendants Castellvi
and Toledo-Gozun, who insisted that the fair market
value of their lands should be fixed at P15.00 per
square meter; and by the Republic, which insisted that
the price to be paid for the lands should be fixed at
P0.20 per square meter. 5
After the parties-defendants and intervenors had filed
their respective memoranda, and the Republic, after
several extensions of time, had adopted as its
memorandum its objections to the report of the
Commissioners, the trial court, on May 26, 1961,
rendered its decision 6 the dispositive portion of which
reads as follows:
WHEREFORE, taking into account all the
foregoing circumstances, and that the
lands are titled, ... the rising trend of land
values ..., and the lowered purchasing
power of the Philippine peso, the court
finds that the unanimous recommendation
of the commissioners of ten (P10.00)

pesos per square meter for the three lots of

the defendants subject of this action is fair
and just.
xxx xxx xxx
The plaintiff will pay 6% interest per annum
on the total value of the lands of defendant
Toledo-Gozun since (sic) the amount
deposited as provisional value from August
10, 1959 until full payment is made to said
defendant or deposit therefor is made in
court.
In respect to the defendant Castellvi,
interest at 6% per annum will also be paid
by the plaintiff to defendant Castellvi from
July 1, 1956 when plaintiff commenced its
illegal possession of the Castellvi land
when the instant action had not yet been
commenced to July 10, 1959 when the
provisional value thereof was actually
deposited in court, on the total value of the
said (Castellvi) land as herein adjudged.
The same rate of interest shall be paid from
July 11, 1959 on the total value of the land
herein adjudged minus the amount
deposited as provisional value, or
P151,859.80, such interest to run until full
payment is made to said defendant or
deposit therefor is made in court. All the

intervenors having failed to produce

evidence in support of their respective
interventions, said interventions are
ordered dismissed.
The costs shall be charged to the plaintiff.
On June 21, 1961 the Republic filed a motion for a new
trial and/or reconsideration, upon the grounds of
newly-discovered evidence, that the decision was not
supported by the evidence, and that the decision was
against the law, against which motion defendants
Castellvi and Toledo-Gozun filed their respective
oppositions. On July 8, 1961 when the motion of the
Republic for new trial and/or reconsideration was
called for hearing, the Republic filed a supplemental
motion for new trial upon the ground of additional
newly-discovered evidence. This motion for new trial
and/or reconsideration was denied by the court on July
12, 1961.
On July 17, 1961 the Republic gave notice of its
intention to appeal from the decision of May 26, 1961
and the order of July 12, 1961. Defendant Castellvi
also filed, on July 17, 1961, her notice of appeal from
the decision of the trial court.
The Republic filed various ex-parte motions for
extension of time within which to file its record on
appeal. The Republic's record on appeal was finally
submitted on December 6, 1961.

Defendants Castellvi and Toledo-Gozun filed not only a

joint opposition to the approval of the Republic's record
on appeal, but also a joint memorandum in support of
their opposition. The Republic also filed a
memorandum in support of its prayer for the approval
of its record on appeal. On December 27, 1961 the trial
court issued an order declaring both the record on
appeal filed by the Republic, and the record on appeal
filed by defendant Castellvi as having been filed out of
time, thereby dismissing both appeals.
On January 11, 1962 the Republic filed a "motion to
strike out the order of December 27, 1961 and for
reconsideration", and subsequently an amended
record on appeal, against which motion the defendants
Castellvi and Toledo-Gozun filed their opposition. On
July 26, 1962 the trial court issued an order, stating
that "in the interest of expediency, the questions raised
may be properly and finally determined by the
Supreme Court," and at the same time it ordered the
Solicitor General to submit a record on appeal
containing copies of orders and pleadings specified
therein. In an order dated November 19, 1962, the trial
court approved the Republic's record on appeal as
amended.
Defendant Castellvi did not insist on her appeal.
Defendant Toledo-Gozun did not appeal.

The motion to dismiss the Republic's appeal was

reiterated by appellees Castellvi and Toledo-Gozun
before this Court, but this Court denied the motion.

1. In finding the price of P10 per square

meter of the lands subject of the instant
proceedings as just compensation;

In her motion of August 11, 1964, appellee Castellvi

sought to increase the provisional value of her land.
The Republic, in its comment on Castellvi's motion,
opposed the same. This Court denied Castellvi's
motion in a resolution dated October 2,1964.

2. In holding that the "taking" of the

properties under expropriation commenced
with the filing of this action;

The motion of appellees, Castellvi and Toledo-Gozun,

dated October 6, 1969, praying that they be authorized
to mortgage the lands subject of expropriation, was
denied by this Court or October 14, 1969.
On February 14, 1972, Attys. Alberto Cacnio, and
Associates, counsel for the estate of the late Don
Alfonso de Castellvi in the expropriation proceedings,
filed a notice of attorney's lien, stating that as per
agreement with the administrator of the estate of Don
Alfonso de Castellvi they shall receive by way of
attorney's fees, "the sum equivalent to ten per centum
of whatever the court may finally decide as the
expropriated price of the property subject matter of the
case."
--------Before this Court, the Republic contends that the lower
court erred:

3. In ordering plaintiff-appellant to pay 6%

interest on the adjudged value of the
Castellvi property to start from July of 1956;
4. In denying plaintiff-appellant's motion for
new trial based on newly discovered
evidence.
In its brief, the Republic discusses the second error
assigned as the first issue to be considered. We shall
follow the sequence of the Republic's discussion.
1. In support of the assigned error that the lower court
erred in holding that the "taking" of the properties
under expropriation commenced with the filing of the
complaint in this case, the Republic argues that the
"taking" should be reckoned from the year 1947 when
by virtue of a special lease agreement between the
Republic and appellee Castellvi, the former was
granted the "right and privilege" to buy the property
should the lessor wish to terminate the lease, and that
in the event of such sale, it was stipulated that the fair
market value should be as of the time of occupancy;
and that the permanent improvements amounting to

more that half a million pesos constructed during a

period of twelve years on the land, subject of
expropriation, were indicative of an agreed pattern of
permanency and stability of occupancy by the
Philippine Air Force in the interest of national Security. 7
Appellee Castellvi, on the other hand, maintains that
the "taking" of property under the power of eminent
domain requires two essential elements, to wit: (1)
entrance and occupation by condemn or upon the
private property for more than a momentary or limited
period, and (2) devoting it to a public use in such a way
as to oust the owner and deprive him of all beneficial
enjoyment of the property. This appellee argues that in
the instant case the first element is wanting, for the
contract of lease relied upon provides for a lease from
year to year; that the second element is also wanting,
because the Republic was paying the lessor Castellvi a
monthly rental of P445.58; and that the contract of
lease does not grant the Republic the "right and
privilege" to buy the premises "at the value at the time
of occupancy." 8
Appellee Toledo-Gozun did not comment on the
Republic's argument in support of the second error
assigned, because as far as she was concerned the
Republic had not taken possession of her lands prior to
August 10, 1959. 9
In order to better comprehend the issues raised in the
appeal, in so far as the Castellvi property is concerned,

it should be noted that the Castellvi property had been

occupied by the Philippine Air Force since 1947 under
a contract of lease, typified by the contract marked
Exh. 4-Castellvi, the pertinent portions of which read:
CONTRACT OF LEASE
This AGREEMENT OF LEASE MADE AND
ENTERED into by and between
INTESTATE ESTATE OF ALFONSO DE
CASTELLVI, represented by CARMEN M.
DE CASTELLVI, Judicial Administratrix ...
hereinafter called the LESSOR and THE
REPUBLIC OF THE PHILIPPINES
represented by MAJ. GEN. CALIXTO
DUQUE, Chief of Staff of the ARMED
FORCES OF THE PHILIPPINES,
hereinafter called the LESSEE,
WITNESSETH:
1. For and in consideration of the rentals
hereinafter reserved and the mutual terms,
covenants and conditions of the parties,
the LESSOR has, and by these presents
does, lease and let unto the LESSEE the
following described land together with the
improvements thereon and appurtenances
thereof, viz:
Un Terreno, Lote No. 27 del Plano de
subdivision Psu 34752, parte de la

hacienda de Campauit, situado en el Barrio

de San Jose, Municipio de Floridablanca
Pampanga. ... midiendo una extension
superficial de cuatro milliones once mil
cuatro cientos trienta y cinco (4,001,435)
[sic] metros cuadrados, mas o menos.
Out of the above described property, 75.93
hectares thereof are actually occupied and
covered by this contract. .
Above lot is more particularly described in
TCT No. 1016, province of
Pampanga ...
of which premises, the LESSOR warrants that
he/she/they/is/are the registered owner(s) and with full
authority to execute a contract of this nature.
2. The term of this lease shall be for the
period beginning July 1, 1952 the date the
premises were occupied by the
PHILIPPINE AIR FORCE, AFP until June
30, 1953, subject to renewal for another
year at the option of the LESSEE or unless
sooner terminated by the LESSEE as
hereinafter provided.
3. The LESSOR hereby warrants that the
LESSEE shall have quiet, peaceful and
undisturbed possession of the demised
premises throughout the full term or period

of this lease and the LESSOR undertakes

without cost to the LESSEE to eject all
trespassers, but should the LESSOR fail to
do so, the LESSEE at its option may
proceed to do so at the expense of the
LESSOR. The LESSOR further agrees that
should he/she/they sell or encumber all or
any part of the herein described premises
during the period of this lease, any
conveyance will be conditioned on the right
of the LESSEE hereunder.
4. The LESSEE shall pay to the LESSOR
as monthly rentals under this lease the
sum of FOUR HUNDRED FIFTY-FIVE
PESOS & 58/100 (P455.58) ...
5. The LESSEE may, at any time prior to
the termination of this lease, use the
property for any purpose or purposes and,
at its own costs and expense make
alteration, install facilities and fixtures and
errect additions ... which facilities or fixtures
... so placed in, upon or attached to the
said premises shall be and remain property
of the LESSEE and may be removed
therefrom by the LESSEE prior to the
termination of this lease. The LESSEE
shall surrender possession of the premises
upon the expiration or termination of this
lease and if so required by the LESSOR,

shall return the premises in substantially

the same condition as that existing at the
time same were first occupied by the AFP,
reasonable and ordinary wear and tear and
damages by the elements or by
circumstances over which the LESSEE has
no control excepted: PROVIDED, that if the
LESSOR so requires the return of the
premises in such condition, the LESSOR
shall give written notice thereof to the
LESSEE at least twenty (20) days before
the termination of the lease and provided,
further, that should the LESSOR give
notice within the time specified above, the
LESSEE shall have the right and privilege
to compensate the LESSOR at the fair
value or the equivalent, in lieu of
performance of its obligation, if any, to
restore the premises. Fair value is to be
determined as the value at the time of
occupancy less fair wear and tear and
depreciation during the period of this lease.
6. The LESSEE may terminate this lease at
any time during the term hereof by giving
written notice to the LESSOR at least thirty
(30) days in advance ...
7. The LESSEE should not be responsible,
except under special legislation for any
damages to the premises by reason of

combat operations, acts of GOD, the

elements or other acts and deeds not due
to the negligence on the part of the
LESSEE.
8. This LEASE AGREEMENT supersedes
and voids any and all agreements and
undertakings, oral or written, previously
entered into between the parties covering
the property herein leased, the same
having been merged herein. This
AGREEMENT may not be modified or
altered except by instrument in writing only
duly signed by the parties. 10
It was stipulated by the parties, that "the foregoing
contract of lease (Exh. 4, Castellvi) is 'similar in terms
and conditions, including the date', with the annual
contracts entered into from year to year between
defendant Castellvi and the Republic of the Philippines
(p. 17, t.s.n., Vol. III)". 11 It is undisputed, therefore, that
the Republic occupied Castellvi's land from July 1,
1947, by virtue of the above-mentioned contract, on a
year to year basis (from July 1 of each year to June 30
of the succeeding year) under the terms and conditions
therein stated.
Before the expiration of the contract of lease on June
30, 1956 the Republic sought to renew the same but
Castellvi refused. When the AFP refused to vacate the
leased premises after the termination of the contract,

on July 11, 1956, Castellvi wrote to the Chief of Staff,

AFP, informing the latter that the heirs of the property
had decided not to continue leasing the property in
question because they had decided to subdivide the
land for sale to the general public, demanding that the
property be vacated within 30 days from receipt of the
letter, and that the premises be returned in
substantially the same condition as before occupancy
(Exh. 5 Castellvi). A follow-up letter was sent on
January 12, 1957, demanding the delivery and return
of the property within one month from said date (Exh. 6
Castellvi). On January 30, 1957, Lieutenant General
Alfonso Arellano, Chief of Staff, answered the letter of
Castellvi, saying that it was difficult for the army to
vacate the premises in view of the permanent
installations and other facilities worth almost
P500,000.00 that were erected and already
established on the property, and that, there being no
other recourse, the acquisition of the property by
means of expropriation proceedings would be
recommended to the President (Exhibit "7"
Castellvi).
Defendant Castellvi then brought suit in the Court of
First Instance of Pampanga, in Civil Case No. 1458, to
eject the Philippine Air Force from the land. While this
ejectment case was pending, the Republic instituted
these expropriation proceedings, and, as stated earlier
in this opinion, the Republic was placed in possession
of the lands on August 10, 1959, On November 21,
1959, the Court of First Instance of Pampanga,

dismissed Civil Case No. 1458, upon petition of the

parties, in an order which, in part, reads as follows:
1. Plaintiff has agreed, as a matter of fact
has already signed an agreement with
defendants, whereby she has agreed to
receive the rent of the lands, subject matter
of the instant case from June 30, 1966 up
to 1959 when the Philippine Air Force was
placed in possession by virtue of an order
of the Court upon depositing the
provisional amount as fixed by the
Provincial Appraisal Committee with the
Provincial Treasurer of Pampanga;
2. That because of the above-cited
agreement wherein the administratrix
decided to get the rent corresponding to
the rent from 1956 up to 1959 and
considering that this action is one of illegal
detainer and/or to recover the possession
of said land by virtue of non-payment of
rents, the instant case now has become
moot and academic and/or by virtue of the
agreement signed by plaintiff, she has
waived her cause of action in the aboveentitled case. 12
The Republic urges that the "taking " of Castellvi's
property should be deemed as of the year 1947 by
virtue of afore-quoted lease agreement. In American

Jurisprudence, Vol. 26, 2nd edition, Section 157, on

the subject of "Eminent Domain, we read the definition
of "taking" (in eminent domain) as follows:
Taking' under the power of eminent domain
may be defined generally as entering upon
private property for more than a momentary
period, and, under the warrant or color of
legal authority, devoting it to a public use,
or otherwise informally appropriating or
injuriously affecting it in such a way as
substantially to oust the owner and deprive
him of all beneficial enjoyment thereof. 13
Pursuant to the aforecited authority, a number of
circumstances must be present in the "taking" of
property for purposes of eminent domain.
First, the expropriator must enter a private property.
This circumstance is present in the instant case, when
by virtue of the lease agreement the Republic, through
the AFP, took possession of the property of Castellvi.
Second, the entrance into private property must be for
more than a momentary period. "Momentary" means,
"lasting but a moment; of but a moment's duration"
(The Oxford English Dictionary, Volume VI, page 596);
"lasting a very short time; transitory; having a very brief
life; operative or recurring at every moment" (Webster's
Third International Dictionary, 1963 edition.) The word
"momentary" when applied to possession or

occupancy of (real) property should be construed to

mean "a limited period" not indefinite or permanent.
The aforecited lease contract was for a period of one
year, renewable from year to year. The entry on the
property, under the lease, is temporary, and considered
transitory. The fact that the Republic, through the AFP,
constructed some installations of a permanent nature
does not alter the fact that the entry into the land was
transitory, or intended to last a year, although
renewable from year to year by consent of 'The owner
of the land. By express provision of the lease
agreement the Republic, as lessee, undertook to
return the premises in substantially the same condition
as at the time the property was first occupied by the
AFP. It is claimed that the intention of the lessee was
to occupy the land permanently, as may be inferred
from the construction of permanent improvements. But
this "intention" cannot prevail over the clear and
express terms of the lease contract. Intent is to be
deduced from the language employed by the parties,
and the terms 'of the contract, when unambiguous, as
in the instant case, are conclusive in the absence of
averment and proof of mistake or fraud the question
being not what the intention was, but what is
expressed in the language used. (City of Manila v.
Rizal Park Co., Inc., 53 Phil. 515, 525); Magdalena
Estate, Inc. v. Myrick, 71 Phil. 344, 348). Moreover, in
order to judge the intention of the contracting parties,
their contemporaneous and subsequent acts shall be
principally considered (Art. 1371, Civil Code). If the
intention of the lessee (Republic) in 1947 was really to

occupy permanently Castellvi's property, why was the

contract of lease entered into on year to year basis?
Why was the lease agreement renewed from year to
year? Why did not the Republic expropriate this land of
Castellvi in 1949 when, according to the Republic
itself, it expropriated the other parcels of land that it
occupied at the same time as the Castellvi land, for the
purpose of converting them into a jet air base? 14 It
might really have been the intention of the Republic to
expropriate the lands in question at some future time,
but certainly mere notice - much less an implied notice
of such intention on the part of the Republic to
expropriate the lands in the future did not, and could
not, bind the landowner, nor bind the land itself. The
expropriation must be actually commenced in court
(Republic vs. Baylosis, et al., 96 Phil. 461, 484).
Third, the entry into the property should be under
warrant or color of legal authority. This circumstance in
the "taking" may be considered as present in the
instant case, because the Republic entered the
Castellvi property as lessee.
Fourth, the property must be devoted to a public use or
otherwise informally appropriated or injuriously
affected. It may be conceded that the circumstance of
the property being devoted to public use is present
because the property was used by the air force of the
AFP.

Fifth, the utilization of the property for public use must

be in such a way as to oust the owner and deprive him
of all beneficial enjoyment of the property. In the
instant case, the entry of the Republic into the property
and its utilization of the same for public use did not
oust Castellvi and deprive her of all beneficial
enjoyment of the property. Castellvi remained as
owner, and was continuously recognized as owner by
the Republic, as shown by the renewal of the lease
contract from year to year, and by the provision in the
lease contract whereby the Republic undertook to
return the property to Castellvi when the lease was
terminated. Neither was Castellvi deprived of all the
beneficial enjoyment of the property, because the
Republic was bound to pay, and had been paying,
Castellvi the agreed monthly rentals until the time
when it filed the complaint for eminent domain on June
26, 1959.
It is clear, therefore, that the "taking" of Catellvi's
property for purposes of eminent domain cannot be
considered to have taken place in 1947 when the
Republic commenced to occupy the property as lessee
thereof. We find merit in the contention of Castellvi that
two essential elements in the "taking" of property under
the power of eminent domain, namely: (1) that the
entrance and occupation by the condemnor must be
for a permanent, or indefinite period, and (2) that in
devoting the property to public use the owner was
ousted from the property and deprived of its beneficial

use, were not present when the Republic entered and

occupied the Castellvi property in 1947.
Untenable also is the Republic's contention that
although the contract between the parties was one of
lease on a year to year basis, it was "in reality a more
or less permanent right to occupy the premises under
the guise of lease with the 'right and privilege' to buy
the property should the lessor wish to terminate the
lease," and "the right to buy the property is merged as
an integral part of the lease relationship ... so much so
that the fair market value has been agreed upon, not,
as of the time of purchase, but as of the time of
occupancy" 15 We cannot accept the Republic's
contention that a lease on a year to year basis can
give rise to a permanent right to occupy, since by
express legal provision a lease made for a determinate
time, as was the lease of Castellvi's land in the instant
case, ceases upon the day fixed, without need of a
demand (Article 1669, Civil Code). Neither can it be
said that the right of eminent domain may be exercised
by simply leasing the premises to be expropriated
(Rule 67, Section 1, Rules of Court). Nor can it be
accepted that the Republic would enter into a contract
of lease where its real intention was to buy, or why the
Republic should enter into a simulated contract of
lease ("under the guise of lease", as expressed by
counsel for the Republic) when all the time the
Republic had the right of eminent domain, and could
expropriate Castellvi's land if it wanted to without
resorting to any guise whatsoever. Neither can we see

how a right to buy could be merged in a contract of

lease in the absence of any agreement between the
parties to that effect. To sustain the contention of the
Republic is to sanction a practice whereby in order to
secure a low price for a land which the government
intends to expropriate (or would eventually expropriate)
it would first negotiate with the owner of the land to
lease the land (for say ten or twenty years) then
expropriate the same when the lease is about to
terminate, then claim that the "taking" of the property
for the purposes of the expropriation be reckoned as of
the date when the Government started to occupy the
property under the lease, and then assert that the
value of the property being expropriated be reckoned
as of the start of the lease, in spite of the fact that the
value of the property, for many good reasons, had in
the meantime increased during the period of the lease.
This would be sanctioning what obviously is a
deceptive scheme, which would have the effect of
depriving the owner of the property of its true and fair
market value at the time when the expropriation
proceedings were actually instituted in court. The
Republic's claim that it had the "right and privilege" to
buy the property at the value that it had at the time
when it first occupied the property as lessee nowhere
appears in the lease contract. What was agreed
expressly in paragraph No. 5 of the lease agreement
was that, should the lessor require the lessee to return
the premises in the same condition as at the time the
same was first occupied by the AFP, the lessee would
have the "right and privilege" (or option) of paying the

lessor what it would fairly cost to put the premises in

the same condition as it was at the commencement of
the lease, in lieu of the lessee's performance of the
undertaking to put the land in said condition. The "fair
value" at the time of occupancy, mentioned in the lease
agreement, does not refer to the value of the property
if bought by the lessee, but refers to the cost of
restoring the property in the same condition as of the
time when the lessee took possession of the property.
Such fair value cannot refer to the purchase price, for
purchase was never intended by the parties to the
lease contract. It is a rule in the interpretation of
contracts that "However general the terms of a contract
may be, they shall not be understood to comprehend
things that are distinct and cases that are different from
those upon which the parties intended to agree" (Art.
1372, Civil Code).
We hold, therefore, that the "taking" of the Castellvi
property should not be reckoned as of the year 1947
when the Republic first occupied the same pursuant to
the contract of lease, and that the just compensation to
be paid for the Castellvi property should not be
determined on the basis of the value of the property as
of that year. The lower court did not commit an error
when it held that the "taking" of the property under
expropriation commenced with the filing of the
complaint in this case.
Under Section 4 of Rule 67 of the Rules of Court, 16 the
"just compensation" is to be determined as of the date

of the filing of the complaint. This Court has ruled that

when the taking of the property sought to be
expropriated coincides with the commencement of the
expropriation proceedings, or takes place subsequent
to the filing of the complaint for eminent domain, the
just compensation should be determined as of the date
of the filing of the complaint. (Republic vs. Philippine
National Bank, L-14158, April 12, 1961, 1 SCRA 957,
961-962). In the instant case, it is undisputed that the
Republic was placed in possession of the Castellvi
property, by authority of the court, on August 10, 1959.
The "taking" of the Castellvi property for the purposes
of determining the just compensation to be paid must,
therefore, be reckoned as of June 26, 1959 when the
complaint for eminent domain was filed.
Regarding the two parcels of land of Toledo-Gozun,
also sought to be expropriated, which had never been
under lease to the Republic, the Republic was placed
in possession of said lands, also by authority of the
court, on August 10, 1959, The taking of those lands,
therefore, must also be reckoned as of June 26, 1959,
the date of the filing of the complaint for eminent
domain.
2. Regarding the first assigned error discussed as
the second issue the Republic maintains that, even
assuming that the value of the expropriated lands is to
be determined as of June 26, 1959, the price of P10.00
per square meter fixed by the lower court "is not only
exhorbitant but also unconscionable, and almost

fantastic". On the other hand, both Castellvi and

Toledo-Gozun maintain that their lands are residential
lands with a fair market value of not less than P15.00
per square meter.
The lower court found, and declared, that the lands of
Castellvi and Toledo-Gozun are residential lands. The
finding of the lower court is in consonance with the
unanimous opinion of the three commissioners who, in
their report to the court, declared that the lands are
residential lands.
The Republic assails the finding that the lands are
residential, contending that the plans of the appellees
to convert the lands into subdivision for residential
purposes were only on paper, there being no overt acts
on the part of the appellees which indicated that the
subdivision project had been commenced, so that any
compensation to be awarded on the basis of the plans
would be speculative. The Republic's contention is not
well taken. We find evidence showing that the lands in
question had ceased to be devoted to the production of
agricultural crops, that they had become adaptable for
residential purposes, and that the appellees had
actually taken steps to convert their lands into
residential subdivisions even before the Republic filed
the complaint for eminent domain. In the case of City
of Manila vs. Corrales (32 Phil. 82, 98) this Court laid
down basic guidelines in determining the value of the
property expropriated for public purposes. This Court
said:

In determining the value of land

appropriated for public purposes, the same
consideration are to be regarded as in a
sale of property between private parties.
The inquiry, in such cases, must be what is
the property worth in the market, viewed
not merely with reference to the uses to
which it is at the time applied, but with
reference to the uses to which it is plainly
adapted, that is to say, What is it worth
from its availability for valuable uses?
So many and varied are the circumstances
to be taken into account in determining the
value of property condemned for public
purposes, that it is practically impossible to
formulate a rule to govern its appraisement
in all cases. Exceptional circumstances will
modify the most carefully guarded rule, but,
as a general thing, we should say that the
compensation of the owner is to be
estimated by reference to the use for which
the property is suitable, having regard to
the existing business or wants of the
community, or such as may be reasonably
expected in the immediate future. (Miss.
and Rum River Boom Co. vs. Patterson, 98
U.S., 403).
In expropriation proceedings, therefore, the owner of
the land has the right to its value for the use for which

it would bring the most in the market. 17 The owner

may thus show every advantage that his property
possesses, present and prospective, in order that the
price it could be sold for in the market may be
satisfactorily determined. 18 The owner may also show
that the property is suitable for division into village or
town lots. 19
The trial court, therefore, correctly considered, among
other circumstances, the proposed subdivision plans of
the lands sought to be expropriated in finding that
those lands are residential lots. This finding of the
lower court is supported not only by the unanimous
opinion of the commissioners, as embodied in their
report, but also by the Provincial Appraisal Committee
of the province of Pampanga composed of the
Provincial Treasurer, the Provincial Auditor and the
District Engineer. In the minutes of the meeting of the
Provincial Appraisal Committee, held on May 14, 1959
(Exh. 13-Castellvi) We read in its Resolution No. 10
the following:
3. Since 1957 the land has been classified
as residential in view of its proximity to the
air base and due to the fact that it was not
being devoted to agriculture. In fact, there
is a plan to convert it into a subdivision for
residential purposes. The taxes due on the
property have been paid based on its
classification as residential land;

The evidence shows that Castellvi broached the idea

of subdividing her land into residential lots as early as
July 11, 1956 in her letter to the Chief of Staff of the
Armed Forces of the Philippines. (Exh. 5-Castellvi) As
a matter of fact, the layout of the subdivision plan was
tentatively approved by the National Planning
Commission on September 7, 1956. (Exh. 8-Castellvi).
The land of Castellvi had not been devoted to
agriculture since 1947 when it was leased to the
Philippine Army. In 1957 said land was classified as
residential, and taxes based on its classification as
residential had been paid since then (Exh. 13Castellvi). The location of the Castellvi land justifies its
suitability for a residential subdivision. As found by the
trial court, "It is at the left side of the entrance of the
Basa Air Base and bounded on two sides by roads
(Exh. 13-Castellvi), paragraphs 1 and 2, Exh. 12Castellvi), the poblacion, (of Floridablanca) the
municipal building, and the Pampanga Sugar Mills are
closed by. The barrio schoolhouse and chapel are also
near (T.S.N. November 23,1960, p. 68)." 20
The lands of Toledo-Gozun (Lot 1-B and Lot 3) are
practically of the same condition as the land of
Castellvi. The lands of Toledo-Gozun adjoin the land of
Castellvi. They are also contiguous to the Basa Air
Base, and are along the road. These lands are near
the barrio schoolhouse, the barrio chapel, the
Pampanga Sugar Mills, and the poblacion of
Floridablanca (Exhs. 1, 3 and 4-Toledo-Gozun). As a
matter of fact, regarding lot 1-B it had already been

surveyed and subdivided, and its conversion into a

residential subdivision was tentatively approved by the
National Planning Commission on July 8, 1959 (Exhs.
5 and 6 Toledo-Gozun). As early as June, 1958, no
less than 32 man connected with the Philippine Air
Force among them commissioned officers, noncommission officers, and enlisted men had requested
Mr. and Mrs. Joaquin D. Gozun to open a subdivision
on their lands in question (Exhs. 8, 8-A to 8-ZZ-ToledoGozun). 21
We agree with the findings, and the conclusions, of the
lower court that the lands that are the subject of
expropriation in the present case, as of August 10,
1959 when the same were taken possession of by the
Republic, were residential lands and were adaptable
for use as residential subdivisions. Indeed, the owners
of these lands have the right to their value for the use
for which they would bring the most in the market at
the time the same were taken from them. The most
important issue to be resolved in the present case
relates to the question of what is the just compensation
that should be paid to the appellees.
The Republic asserts that the fair market value of the
lands of the appellees is P.20 per square meter. The
Republic cites the case of Republic vs. Narciso, et al.,
L-6594, which this Court decided on May 18, 1956.
The Narciso case involved lands that belonged to
Castellvi and Toledo-Gozun, and to one Donata
Montemayor, which were expropriated by the Republic

in 1949 and which are now the site of the Basa Air
Base. In the Narciso case this Court fixed the fair
market value at P.20 per square meter. The lands that
are sought to be expropriated in the present case
being contiguous to the lands involved in the Narciso
case, it is the stand of the Republic that the price that
should be fixed for the lands now in question should
also be at P.20 per square meter.
We can not sustain the stand of the Republic. We find
that the price of P.20 per square meter, as fixed by this
Court in the Narciso case, was based on the allegation
of the defendants (owners) in their answer to the
complaint for eminent domain in that case that the
price of their lands was P2,000.00 per hectare and that
was the price that they asked the court to pay them.
This Court said, then, that the owners of the land could
not be given more than what they had asked,
notwithstanding the recommendation of the majority of
the Commission on Appraisal which was adopted by
the trial court that the fair market value of the lands
was P3,000.00 per hectare. We also find that the price
of P.20 per square meter in the Narciso case was
considered the fair market value of the lands as of the
year 1949 when the expropriation proceedings were
instituted, and at that time the lands were classified as
sugar lands, and assessed for taxation purposes at
around P400.00 per hectare, or P.04 per square meter.
22 While the lands involved in the present case, like
the lands involved in the Narciso case, might have a
fair market value of P.20 per square meter in 1949, it

can not be denied that ten years later, in 1959, when

the present proceedings were instituted, the value of
those lands had increased considerably. The evidence
shows that since 1949 those lands were no longer
cultivated as sugar lands, and in 1959 those lands
were already classified, and assessed for taxation
purposes, as residential lands. In 1959 the land of
Castellvi was assessed at P1.00 per square meter. 23
The Republic also points out that the Provincial
Appraisal Committee of Pampanga, in its resolution
No. 5 of February 15, 1957 (Exhibit D), recommended
the sum of P.20 per square meter as the fair valuation
of the Castellvi property. We find that this resolution
was made by the Republic the basis in asking the court
to fix the provisional value of the lands sought to be
expropriated at P259,669.10, which was approved by
the court. 24 It must be considered, however, that the
amount fixed as the provisional value of the lands that
are being expropriated does not necessarily represent
the true and correct value of the land. The value is only
"provisional" or "tentative", to serve as the basis for the
immediate occupancy of the property being
expropriated by the condemnor. The records show that
this resolution No. 5 was repealed by the same
Provincial Committee on Appraisal in its resolution No.
10 of May 14, 1959 (Exhibit 13-Castellvi). In that
resolution No. 10, the appraisal committee stated that
"The Committee has observed that the value of the
land in this locality has increased since 1957 ...", and
recommended the price of P1.50 per square meter. It

follows, therefore, that, contrary to the stand of the

Republic, that resolution No. 5 of the Provincial
Appraisal Committee can not be made the basis for
fixing the fair market value of the lands of Castellvi and
Toledo-Gozun.
The Republic further relied on the certification of the
Acting Assistant Provincial Assessor of Pampanga,
dated February 8, 1961 (Exhibit K), to the effect that in
1950 the lands of Toledo-Gozun were classified partly
as sugar land and partly as urban land, and that the
sugar land was assessed at P.40 per square meter,
while part of the urban land was assessed at P.40 per
square meter and part at P.20 per square meter; and
that in 1956 the Castellvi land was classified as sugar
land and was assessed at P450.00 per hectare, or
P.045 per square meter. We can not also consider this
certification of the Acting Assistant Provincial Assessor
as a basis for fixing the fair market value of the lands
of Castellvi and Toledo-Gozun because, as the
evidence shows, the lands in question, in 1957, were
already classified and assessed for taxation purposes
as residential lands. The certification of the assessor
refers to the year 1950 as far as the lands of ToledoGozun are concerned, and to the year 1956 as far as
the land of Castellvi is concerned. Moreover, this Court
has held that the valuation fixed for the purposes of the
assessment of the land for taxation purposes can not
bind the landowner where the latter did not intervene in
fixing it. 25

On the other hand, the Commissioners, appointed by

the court to appraise the lands that were being
expropriated, recommended to the court that the price
of P10.00 per square meter would be the fair market
value of the lands. The commissioners made their
recommendation on the basis of their observation after
several ocular inspections of the lands, of their own
personal knowledge of land values in the province of
Pampanga, of the testimonies of the owners of the
land, and other witnesses, and of documentary
evidence presented by the appellees. Both Castellvi
and Toledo-Gozun testified that the fair market value of
their respective land was at P15.00 per square meter.
The documentary evidence considered by the
commissioners consisted of deeds of sale of
residential lands in the town of San Fernando and in
Angeles City, in the province of Pampanga, which were
sold at prices ranging from P8.00 to P20.00 per square
meter (Exhibits 15, 16, 17, 18, 19, 20, 21, 22, 23Castellvi). The commissioners also considered the
decision in Civil Case No. 1531 of the Court of First
Instance of Pampanga, entitled Republic vs. Sabina
Tablante, which was expropriation case filed on
January 13, 1959, involving a parcel of land adjacent
to the Clark Air Base in Angeles City, where the court
fixed the price at P18.00 per square meter (Exhibit 14Castellvi). In their report, the commissioners, among
other things, said:
... This expropriation case is specially
pointed out, because the circumstances

and factors involved therein are similar in

many respects to the defendants' lands in
this case. The land in Civil Case No. 1531
of this Court and the lands in the present
case (Civil Case No. 1623) are both near
the air bases, the Clark Air Base and the
Basa Air Base respectively. There is a
national road fronting them and are
situated in a first-class municipality. As
added advantage it may be said that the
Basa Air Base land is very near the sugar
mill at Del Carmen, Floridablanca,
Pampanga, owned by the Pampanga
Sugar Mills. Also just stone's throw away
from the same lands is a beautiful vacation
spot at Palacol, a sitio of the town of
Floridablanca, which counts with a natural
swimming pool for vacationists on
weekends. These advantages are not
found in the case of the Clark Air Base. The
defendants' lands are nearer to the
poblacion of Floridablanca then Clark Air
Base is nearer (sic) to the poblacion of
Angeles, Pampanga.
The deeds of absolute sale, according to
the undersigned commissioners, as well as
the land in Civil Case No. 1531 are
competent evidence, because they were
executed during the year 1959 and before
August 10 of the same year. More

specifically so the land at Clark Air Base

which coincidentally is the subject matter in
the complaint in said Civil Case No. 1531, it
having been filed on January 13, 1959 and
the taking of the land involved therein was
ordered by the Court of First Instance of
Pampanga on January 15, 1959, several
months before the lands in this case were
taken by the plaintiffs ....
From the above and considering further
that the lowest as well as the highest price
per square meter obtainable in the market
of Pampanga relative to subdivision lots
within its jurisdiction in the year 1959 is
very well known by the Commissioners, the
Commission finds that the lowest price that
can be awarded to the lands in question is
P10.00 per square meter. 26
The lower court did not altogether accept the findings
of the Commissioners based on the documentary
evidence, but it considered the documentary evidence
as basis for comparison in determining land values.
The lower court arrived at the conclusion that "the
unanimous recommendation of the commissioners of
ten (P10.00) pesos per square meter for the three lots
of the defendants subject of this action is fair and
just". 27 In arriving at its conclusion, the lower court
took into consideration, among other circumstances,
that the lands are titled, that there is a rising trend of

land values, and the lowered purchasing power of the

Philippine peso.
In the case of Manila Railroad Co. vs. Caligsihan, 40
Phil. 326, 328, this Court said:
A court of first instance or, on appeal, the
Supreme Court, may change or modify the
report of the commissioners by increasing
or reducing the amount of the award if the
facts of the case so justify. While great
weight is attached to the report of the
commissioners, yet a court may substitute
therefor its estimate of the value of the
property as gathered from the record in
certain cases, as, where the
commissioners have applied illegal
principles to the evidence submitted to
them, or where they have disregarded a
clear preponderance of evidence, or where
the amount allowed is either palpably
inadequate or excessive. 28
The report of the commissioners of appraisal in
condemnation proceedings are not binding, but merely
advisory in character, as far as the court is
concerned. 29 In our analysis of the report of the
commissioners, We find points that merit serious
consideration in the determination of the just
compensation that should be paid to Castellvi and
Toledo-Gozun for their lands. It should be noted that

the commissioners had made ocular inspections of the

lands and had considered the nature and similarities of
said lands in relation to the lands in other places in the
province of Pampanga, like San Fernando and
Angeles City. We cannot disregard the observations of
the commissioners regarding the circumstances that
make the lands in question suited for residential
purposes their location near the Basa Air Base, just
like the lands in Angeles City that are near the Clark Air
Base, and the facilities that obtain because of their
nearness to the big sugar central of the Pampanga
Sugar mills, and to the flourishing first class town of
Floridablanca. It is true that the lands in question are
not in the territory of San Fernando and Angeles City,
but, considering the facilities of modern
communications, the town of Floridablanca may be
considered practically adjacent to San Fernando and
Angeles City. It is not out of place, therefore, to
compare the land values in Floridablanca to the land
values in San Fernando and Angeles City, and form an
idea of the value of the lands in Floridablanca with
reference to the land values in those two other
communities.
The important factor in expropriation proceeding is that
the owner is awarded the just compensation for his
property. We have carefully studied the record, and the
evidence, in this case, and after considering the
circumstances attending the lands in question We
have arrived at the conclusion that the price of P10.00
per square meter, as recommended by the

commissioners and adopted by the lower court, is quite

high. It is Our considered view that the price of P5.00
per square meter would be a fair valuation of the lands
in question and would constitute a just compensation
to the owners thereof. In arriving at this conclusion We
have particularly taken into consideration the resolution
of the Provincial Committee on Appraisal of the
province of Pampanga informing, among others, that in
the year 1959 the land of Castellvi could be sold for
from P3.00 to P4.00 per square meter, while the land
of Toledo-Gozun could be sold for from P2.50 to P3.00
per square meter. The Court has weighed all the
circumstances relating to this expropriations
proceedings, and in fixing the price of the lands that
are being expropriated the Court arrived at a happy
medium between the price as recommended by the
commissioners and approved by the court, and the
price advocated by the Republic. This Court has also
taken judicial notice of the fact that the value of the
Philippine peso has considerably gone down since the
year 1959. 30Considering that the lands of Castellvi and
Toledo-Gozun are adjoining each other, and are of the
same nature, the Court has deemed it proper to fix the
same price for all these lands.
3. The third issue raised by the Republic
relates to the payment of interest. The
Republic maintains that the lower court
erred when it ordered the Republic to pay
Castellvi interest at the rate of 6% per
annum on the total amount adjudged as

the value of the land of Castellvi, from July

1, 1956 to July 10, 1959. We find merit in
this assignment of error.
In ordering the Republic to pay 6% interest on the total
value of the land of Castellvi from July 1, 1956 to July
10, 1959, the lower court held that the Republic had
illegally possessed the land of Castellvi from July 1,
1956, after its lease of the land had expired on June
30, 1956, until August 10, 1959 when the Republic was
placed in possession of the land pursuant to the writ of
possession issued by the court. What really happened
was that the Republic continued to occupy the land of
Castellvi after the expiration of its lease on June 30,
1956, so much so that Castellvi filed an ejectment case
against the Republic in the Court of First Instance of
Pampanga. 31 However, while that ejectment case was
pending, the Republic filed the complaint for eminent
domain in the present case and was placed in
possession of the land on August 10, 1959, and
because of the institution of the expropriation
proceedings the ejectment case was later dismissed.
In the order dismissing the ejectment case, the Court
of First Instance of Pampanga said:
Plaintiff has agreed, as a matter of fact has
already signed an agreement with
defendants, whereby she had agreed to
receive the rent of the lands, subject matter
of the instant case from June 30, 1956 up
to 1959 when the Philippine Air Force was

placed in possession by virtue of an order

of the Court upon depositing the
provisional amount as fixed by the
Provincial Appraisal Committee with the
Provincial Treasurer of
Pampanga; ...
If Castellvi had agreed to receive the rentals from June
30, 1956 to August 10, 1959, she should be
considered as having allowed her land to be leased to
the Republic until August 10, 1959, and she could not
at the same time be entitled to the payment of interest
during the same period on the amount awarded her as
the just compensation of her land. The Republic,
therefore, should pay Castellvi interest at the rate of
6% per annum on the value of her land, minus the
provisional value that was deposited, only from July
10, 1959 when it deposited in court the provisional
value of the land.
4. The fourth error assigned by the Republic relates to
the denial by the lower court of its motion for a new
trial based on nearly discovered evidence. We do not
find merit in this assignment of error.
After the lower court had decided this case on May 26,
1961, the Republic filed a motion for a new trial,
supplemented by another motion, both based upon the
ground of newly discovered evidence. The alleged
newly discovered evidence in the motion filed on June
21, 1961 was a deed of absolute sale-executed on

January 25, 1961, showing that a certain Serafin

Francisco had sold to Pablo L. Narciso a parcel of
sugar land having an area of 100,000 square meters
with a sugar quota of 100 piculs, covered by P.A. No.
1701, situated in Barrio Fortuna, Floridablanca, for
P14,000, or P.14 per square meter.
In the supplemental motion, the alleged newly
discovered evidence were: (1) a deed of sale of some
35,000 square meters of land situated at Floridablanca
for P7,500.00 (or about P.21 per square meter)
executed in July, 1959, by the spouses Evelyn D. Laird
and Cornelio G. Laird in favor of spouses Bienvenido
S. Aguas and Josefina Q. Aguas; and (2) a deed of
absolute sale of a parcel of land having an area of
4,120,101 square meters, including the sugar quota
covered by Plantation Audit No. 161 1345, situated at
Floridablanca, Pampanga, for P860.00 per hectare (a
little less than P.09 per square meter) executed on
October 22, 1957 by Jesus Toledo y Mendoza in favor
of the Land Tenure Administration.
We find that the lower court acted correctly when it
denied the motions for a new trial.
To warrant the granting of a new trial based on the
ground of newly discovered evidence, it must appear
that the evidence was discovered after the trial; that
even with the exercise of due diligence, the evidence
could not have been discovered and produced at the
trial; and that the evidence is of such a nature as to

alter the result of the case if admitted. 32 The lower

court correctly ruled that these requisites were not
complied with.
The lower court, in a well-reasoned order, found that
the sales made by Serafin Francisco to Pablo Narciso
and that made by Jesus Toledo to the Land Tenure
Administration were immaterial and irrelevant, because
those sales covered sugarlands with sugar quotas,
while the lands sought to be expropriated in the instant
case are residential lands. The lower court also
concluded that the land sold by the spouses Laird to
the spouses Aguas was a sugar land.
We agree with the trial court. In eminent domain
proceedings, in order that evidence as to the sale price
of other lands may be admitted in evidence to prove
the fair market value of the land sought to be
expropriated, the lands must, among other things, be
shown to be similar.
But even assuming, gratia argumenti, that the lands
mentioned in those deeds of sale were residential, the
evidence would still not warrant the grant of a new trial,
for said evidence could have been discovered and
produced at the trial, and they cannot be considered
newly discovered evidence as contemplated in Section
1(b) of Rule 37 of the Rules of Court. Regarding this
point, the trial court said:

The Court will now show that there was no

reasonable diligence employed.
The land described in the deed of sale
executed by Serafin Francisco, copy of
which is attached to the original motion, is
covered by a Certificate of Title issued by
the Office of the Register of Deeds of
Pampanga. There is no question in the
mind of the court but this document passed
through the Office of the Register of Deeds
for the purpose of transferring the title or
annotating the sale on the certificate of
title. It is true that Fiscal Lagman went to
the Office of the Register of Deeds to
check conveyances which may be
presented in the evidence in this case as it
is now sought to be done by virtue of the
motions at bar, Fiscal Lagman, one of the
lawyers of the plaintiff, did not exercise
reasonable diligence as required by the
rules. The assertion that he only went to
the office of the Register of Deeds 'now
and then' to check the records in that office
only shows the half-hazard [sic] manner by
which the plaintiff looked for evidence to be
presented during the hearing before the
Commissioners, if it is at all true that Fiscal
Lagman did what he is supposed to have
done according to Solicitor Padua. It would
have been the easiest matter for plaintiff to

move for the issuance of a

subpoena duces tecum directing the
Register of Deeds of Pampanga to come to
testify and to bring with him all documents
found in his office pertaining to sales of
land in Floridablanca adjacent to or near
the lands in question executed or recorded
from 1958 to the present. Even this
elementary precaution was not done by
plaintiff's numerous attorneys.
The same can be said of the deeds of sale
attached to the supplementary motion.
They refer to lands covered by certificate of
title issued by the Register of Deeds of
Pampanga. For the same reason they
could have been easily discovered if
reasonable diligence has been exerted by
the numerous lawyers of the plaintiff in this
case. It is noteworthy that all these deeds
of sale could be found in several
government offices, namely, in the Office of
the Register of Deeds of Pampanga, the
Office of the Provincial Assessor of
Pampanga, the Office of the Clerk of Court
as a part of notarial reports of notaries
public that acknowledged these
documents, or in the archives of the
National Library. In respect to Annex 'B' of
the supplementary motion copy of the
document could also be found in the Office

of the Land Tenure Administration, another

government entity. Any lawyer with a
modicum of ability handling this
expropriation case would have right away
though [sic] of digging up documents
diligently showing conveyances of lands
near or around the parcels of land sought
to be expropriated in this case in the offices
that would have naturally come to his mind
such as the offices mentioned above, and
had counsel for the movant really exercised
the reasonable diligence required by the
Rule' undoubtedly they would have been
able to find these documents and/or
caused the issuance of subpoena duces
tecum. ...
It is also recalled that during the hearing
before the Court of the Report and
Recommendation of the Commissioners
and objection thereto, Solicitor Padua
made the observation:
I understand, Your Honor, that there was a
sale that took place in this place of land
recently where the land was sold for P0.20
which is contiguous to this land.
The Court gave him permission to submit
said document subject to the approval of
the Court. ... This was before the decision

was rendered, and later promulgated on

May 26, 1961 or more than one
month after Solicitor Padua made the
above observation. He could have,
therefore, checked up the alleged sale and
moved for a reopening to adduce further
evidence. He did not do so. He forgot to
present the evidence at a more propitious
time. Now, he seeks to introduce said
evidence under the guise of newlydiscovered evidence. Unfortunately the
Court cannot classify it as newlydiscovered evidence, because tinder the
circumstances, the correct qualification that
can be given is 'forgotten evidence'.
Forgotten however, is not newlydiscovered
evidence. 33
The granting or denial of a motion for new trial is, as a
general rule, discretionary with the trial court, whose
judgment should not be disturbed unless there is a
clear showing of abuse of discretion. 34 We do not see
any abuse of discretion on the part of the lower court
when it denied the motions for a new trial.
WHEREFORE, the decision appealed from is modified,
as follows:
(a) the lands of appellees Carmen Vda. de
Castellvi and Maria Nieves Toledo-Gozun,

as described in the complaint, are declared

expropriated for public use;
(b) the fair market value of the lands of the
appellees is fixed at P5.00 per square
meter;

(f) the costs should be paid by appellant

Republic of the Philippines, as provided in
Section 12, Rule 67, and in Section 13,
Rule 141, of the Rules of Court.

(c) the Republic must pay appellee

Castellvi the sum of P3,796,495.00 as just
compensation for her one parcel of land
that has an area of 759,299 square meters,
minus the sum of P151,859.80 that she
withdrew out of the amount that was
deposited in court as the provisional value
of the land, with interest at the rate of 6%
per annum from July 10, 1959 until the day
full payment is made or deposited in court;
(d) the Republic must pay appellee ToledoGozun the sum of P2,695,225.00 as the
just compensation for her two parcels of
land that have a total area of 539,045
square meters, minus the sum of
P107,809.00 that she withdrew out of the
amount that was deposited in court as the
provisional value of her lands, with interest
at the rate of 6%, per annum from July 10,
1959 until the day full payment is made or
deposited in court; (e) the attorney's lien of
Atty. Alberto Cacnio is enforced; and

G.R. No. L-34915 June 24, 1983

CITY GOVERNMENT OF QUEZON CITY and CITY
COUNCIL OF QUEZON CITY, petitioners,
vs.
HON. JUDGE VICENTE G. ERICTA as Judge of the
Court of First Instance of Rizal, Quezon City,
Branch XVIII; HIMLAYANG PILIPINO,
INC., respondents.
City Fiscal for petitioners.

Manuel Villaruel, Jr. and Feliciano Tumale for

respondents.

GUTIERREZ, JR., J.:

This is a petition for review which seeks the reversal of
the decision of the Court of First Instance of Rizal,
Branch XVIII declaring Section 9 of Ordinance No.
6118, S-64, of the Quezon City Council null and void.
Section 9 of Ordinance No. 6118, S-64, entitled
"ORDINANCE REGULATING THE ESTABLISHMENT,
MAINTENANCE AND OPERATION OF PRIVATE
MEMORIAL TYPE CEMETERY OR BURIAL GROUND
WITHIN THE JURISDICTION OF QUEZON CITY AND
PROVIDING PENALTIES FOR THE VIOLATION
THEREOF" provides:
Sec. 9. At least six (6) percent of the total
area of the memorial park cemetery shall
be set aside for charity burial of deceased
persons who are paupers and have been
residents of Quezon City for at least 5
years prior to their death, to be determined
by competent City Authorities. The area so
designated shall immediately be developed
and should be open for operation not later
than six months from the date of approval
of the application.

For several years, the aforequoted section of the

Ordinance was not enforced by city authorities but
seven years after the enactment of the ordinance, the
Quezon City Council passed the following resolution:
RESOLVED by the council of Quezon
assembled, to request, as it does hereby
request the City Engineer, Quezon City, to
stop any further selling and/or transaction
of memorial park lots in Quezon City where
the owners thereof have failed to donate
the required 6% space intended for
paupers burial.
Pursuant to this petition, the Quezon City Engineer
notified respondent Himlayang Pilipino, Inc. in writing
that Section 9 of Ordinance No. 6118, S-64 would be
enforced
Respondent Himlayang Pilipino reacted by filing with
the Court of First Instance of Rizal Branch XVIII at
Quezon City, a petition for declaratory relief, prohibition
and mandamus with preliminary injunction (Sp. Proc.
No. Q-16002) seeking to annul Section 9 of the
Ordinance in question The respondent alleged that the
same is contrary to the Constitution, the Quezon City
Charter, the Local Autonomy Act, and the Revised
Administrative Code.
There being no issue of fact and the questions raised
being purely legal both petitioners and respondent

agreed to the rendition of a judgment on the pleadings.

The respondent court, therefore, rendered the decision
declaring Section 9 of Ordinance No. 6118, S-64 null
and void.
A motion for reconsideration having been denied, the
City Government and City Council filed the instant
petition.
Petitioners argue that the taking of the respondent's
property is a valid and reasonable exercise of police
power and that the land is taken for a public use as it is
intended for the burial ground of paupers. They further
argue that the Quezon City Council is authorized under
its charter, in the exercise of local police power, " to
make such further ordinances and resolutions not
repugnant to law as may be necessary to carry into
effect and discharge the powers and duties conferred
by this Act and such as it shall deem necessary and
proper to provide for the health and safety, promote the
prosperity, improve the morals, peace, good order,
comfort and convenience of the city and the
inhabitants thereof, and for the protection of property
therein."
On the other hand, respondent Himlayang Pilipino, Inc.
contends that the taking or confiscation of property is
obvious because the questioned ordinance
permanently restricts the use of the property such that
it cannot be used for any reasonable purpose and
deprives the owner of all beneficial use of his property.

The respondent also stresses that the general welfare

clause is not available as a source of power for the
taking of the property in this case because it refers to
"the power of promoting the public welfare by
restraining and regulating the use of liberty and
property." The respondent points out that if an owner is
deprived of his property outright under the State's
police power, the property is generally not taken for
public use but is urgently and summarily destroyed in
order to promote the general welfare. The respondent
cites the case of a nuisance per se or the destruction
of a house to prevent the spread of a conflagration.
We find the stand of the private respondent as well as
the decision of the respondent Judge to be wellfounded. We quote with approval the lower court's
ruling which declared null and void Section 9 of the
questioned city ordinance:
The issue is: Is Section 9 of the ordinance
in question a valid exercise of the police
power?
An examination of the Charter of Quezon
City (Rep. Act No. 537), does not reveal
any provision that would justify the
ordinance in question except the provision
granting police power to the City. Section 9
cannot be justified under the power granted
to Quezon City to tax, fix the license fee,
and regulatesuch other business, trades,

and occupation as may be established or

practised in the City.' (Subsections 'C', Sec.
12, R.A. 537).
The power to regulate does not include the
power to prohibit (People vs. Esguerra, 81
PhiL 33, Vega vs. Municipal Board of Iloilo,
L-6765, May 12, 1954; 39 N.J. Law, 70,
Mich. 396). A fortiori, the power to regulate
does not include the power to confiscate.
The ordinance in question not only
confiscates but also prohibits the operation
of a memorial park cemetery, because
under Section 13 of said ordinance,
'Violation of the provision thereof is
punishable with a fine and/or imprisonment
and that upon conviction thereof the permit
to operate and maintain a private cemetery
shall be revoked or cancelled.' The
confiscatory clause and the penal provision
in effect deter one from operating a
memorial park cemetery. Neither can the
ordinance in question be justified under
sub- section "t", Section 12 of Republic Act
537 which authorizes the City Council to'prohibit the burial of the dead
within the center of population
of the city and provide for their
burial in such proper place and
in such manner as the council

may determine, subject to the

provisions of the general law
regulating burial grounds and
cemeteries and governing
funerals and disposal of the
dead.' (Sub-sec. (t), Sec. 12,
Rep. Act No. 537).
There is nothing in the above provision
which authorizes confiscation or as
euphemistically termed by the
respondents, 'donation'
We now come to the question whether or
not Section 9 of the ordinance in question
is a valid exercise of police power. The
police power of Quezon City is defined in
sub-section 00, Sec. 12, Rep. Act 537
which reads as follows:
(00) To make such further
ordinance and regulations not
repugnant to law as may be
necessary to carry into effect
and discharge the powers and
duties conferred by this act and
such as it shall deem
necessary and proper to
provide for the health and
safety, promote, the prosperity,
improve the morals, peace,

good order, comfort and

convenience of the city and the
inhabitants thereof, and for the
protection of property therein;
and enforce obedience thereto
with such lawful fines or
penalties as the City Council
may prescribe under the
provisions of subsection (jj) of
this section.
We start the discussion with a restatement
of certain basic principles. Occupying the
forefront in the bill of rights is the provision
which states that 'no person shall be
deprived of life, liberty or property without
due process of law' (Art. Ill, Section 1
subparagraph 1, Constitution).
On the other hand, there are three inherent
powers of government by which the state
interferes with the property rights, namely-.
(1) police power, (2) eminent domain, (3)
taxation. These are said to exist
independently of the Constitution as
necessary attributes of sovereignty.
Police power is defined by Freund as 'the
power of promoting the public welfare by
restraining and regulating the use of liberty
and property' (Quoted in Political Law by

Tanada and Carreon, V-11, p. 50). It is

usually exerted in order to merely regulate
the use and enjoyment of property of the
owner. If he is deprived of his property
outright, it is not taken for public use but
rather to destroy in order to promote the
general welfare. In police power, the owner
does not recover from the government for
injury sustained in consequence thereof
(12 C.J. 623). It has been said that police
power is the most essential of government
powers, at times the most insistent, and
always one of the least limitable of the
powers of government (Ruby vs. Provincial
Board, 39 PhiL 660; Ichong vs. Hernandez,
1,7995, May 31, 1957). This power
embraces the whole system of public
regulation (U.S. vs. Linsuya Fan, 10 PhiL
104). The Supreme Court has said that
police power is so far-reaching in scope
that it has almost become impossible to
limit its sweep. As it derives its existence
from the very existence of the state itself, it
does not need to be expressed or defined
in its scope. Being coextensive with selfpreservation and survival itself, it is the
most positive and active of all
governmental processes, the most
essential insistent and illimitable Especially
it is so under the modern democratic
framework where the demands of society

and nations have multiplied to almost

unimaginable proportions. The field and
scope of police power have become almost
boundless, just as the fields of public
interest and public welfare have become
almost all embracing and have
transcended human foresight. Since the
Courts cannot foresee the needs and
demands of public interest and welfare,
they cannot delimit beforehand the extent
or scope of the police power by which and
through which the state seeks to attain or
achieve public interest and welfare. (Ichong
vs. Hernandez, L-7995, May 31, 1957).
The police power being the most active
power of the government and the due
process clause being the broadest station
on governmental power, the conflict
between this power of government and the
due process clause of the Constitution is
oftentimes inevitable.
It will be seen from the foregoing
authorities that police power is usually
exercised in the form of mere regulation or
restriction in the use of liberty or property
for the promotion of the general welfare. It
does not involve the taking or confiscation
of property with the exception of a few
cases where there is a necessity to

confiscate private property in order to

destroy it for the purpose of protecting the
peace and order and of promoting the
general welfare as for instance, the
confiscation of an illegally possessed
article, such as opium and firearms.
It seems to the court that Section 9 of
Ordinance No. 6118, Series of 1964 of
Quezon City is not a mere police regulation
but an outright confiscation. It deprives a
person of his private property without due
process of law, nay, even without
compensation.
In sustaining the decision of the respondent court, we
are not unmindful of the heavy burden shouldered by
whoever challenges the validity of duly enacted
legislation whether national or local As early as 1913,
this Court ruled in Case v. Board of Health (24 PhiL
250) that the courts resolve every presumption in favor
of validity and, more so, where the ma corporation
asserts that the ordinance was enacted to promote the
common good and general welfare.
In the leading case of Ermita-Malate Hotel and Motel
Operators Association Inc. v. City Mayor of Manila (20
SCRA 849) the Court speaking through the then
Associate Justice and now Chief Justice Enrique M.
Fernando stated

Primarily what calls for a reversal of such a

decision is the a of any evidence to offset
the presumption of validity that attaches to
a statute or ordinance. As was expressed
categorically by Justice Malcolm 'The
presumption is all in favor of validity. ... The
action of the elected representatives of the
people cannot be lightly set aside. The
councilors must, in the very nature of
things, be familiar with the necessities of
their particular ... municipality and with all
the facts and lances which surround the
subject and necessitate action. The local
legislative body, by enacting the ordinance,
has in effect given notice that the
regulations are essential to the well-being
of the people. ... The Judiciary should not
lightly set aside legislative action when
there is not a clear invasion of personal or
property rights under the guise of police
regulation. (U.S. v. Salaveria (1918], 39
Phil. 102, at p. 111. There was an
affirmation of the presumption of validity of
municipal ordinance as announced in the
leading Salaveria decision in Ebona v.
Daet, [1950]85 Phil. 369.)
We have likewise considered the principles
earlier stated in Case v. Board of
Health supra :

... Under the provisions of municipal

charters which are known as the general
welfare clauses, a city, by virtue of its
police power, may adopt ordinances to the
peace, safety, health, morals and the best
and highest interests of the municipality. It
is a well-settled principle, growing out of
the nature of well-ordered and society, that
every holder of property, however absolute
and may be his title, holds it under the
implied liability that his use of it shall not be
injurious to the equal enjoyment of others
having an equal right to the enjoyment of
their property, nor injurious to the rights of
the community. An property in the state is
held subject to its general regulations,
which are necessary to the common good
and general welfare. Rights of property, like
all other social and conventional rights, are
subject to such reasonable limitations in
their enjoyment as shall prevent them from
being injurious, and to such reasonable
restraints and regulations, established by
law, as the legislature, under the governing
and controlling power vested in them by the
constitution, may think necessary and
expedient. The state, under the police
power, is possessed with plenary power to
deal with all matters relating to the general
health, morals, and safety of the people, so
long as it does not contravene any positive

inhibition of the organic law and providing

that such power is not exercised in such a
manner as to justify the interference of the
courts to prevent positive wrong and
oppression.
but find them not applicable to the facts of this case.
There is no reasonable relation between the setting
aside of at least six (6) percent of the total area of an
private cemeteries for charity burial grounds of
deceased paupers and the promotion of health,
morals, good order, safety, or the general welfare of
the people. The ordinance is actually a taking without
compensation of a certain area from a private
cemetery to benefit paupers who are charges of the
municipal corporation. Instead of building or
maintaining a public cemetery for this purpose, the city
passes the burden to private cemeteries.
The expropriation without compensation of a portion of
private cemeteries is not covered by Section 12(t) of
Republic Act 537, the Revised Charter of Quezon City
which empowers the city council to prohibit the burial
of the dead within the center of population of the city
and to provide for their burial in a proper place subject
to the provisions of general law regulating burial
grounds and cemeteries. When the Local Government
Code, Batas Pambansa Blg. 337 provides in Section
177 (q) that a Sangguniang panlungsod may "provide
for the burial of the dead in such place and in such

manner as prescribed by law or ordinance" it simply

authorizes the city to provide its own city owned land
or to buy or expropriate private properties to construct
public cemeteries. This has been the law and practise
in the past. It continues to the present. Expropriation,
however, requires payment of just compensation. The
questioned ordinance is different from laws and
regulations requiring owners of subdivisions to set
aside certain areas for streets, parks, playgrounds, and
other public facilities from the land they sell to buyers
of subdivision lots. The necessities of public safety,
health, and convenience are very clear from said
requirements which are intended to insure the
development of communities with salubrious and
wholesome environments. The beneficiaries of the
regulation, in turn, are made to pay by the subdivision
developer when individual lots are sold to homeowners.
As a matter of fact, the petitioners rely solely on the
general welfare clause or on implied powers of the
municipal corporation, not on any express provision of
law as statutory basis of their exercise of power. The
clause has always received broad and liberal
interpretation but we cannot stretch it to cover this
particular taking. Moreover, the questioned ordinance
was passed after Himlayang Pilipino, Inc. had
incorporated. received necessary licenses and permits
and commenced operating. The sequestration of six
percent of the cemetery cannot even be considered as
having been impliedly acknowledged by the private

respondent when it accepted the permits to commence

operations.

defendant on the interconnection of telephone facilities

owned and operated by said parties.

WHEREFORE, the petition for review is hereby

DISMISSED. The decision of the respondent court is
affirmed.

The plaintiff, Republic of the Philippines, is a political

entity exercising governmental powers through its
branches and instrumentalities, one of which is the
Bureau of Telecommunications. That office was
created on 1 July 1947, under Executive Order No. 94,
with the following powers and duties, in addition to
certain powers and duties formerly vested in the
Director of Posts: 1awphil.t

G.R. No. L-18841

January 27, 1969

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,

vs.
PHILIPPINE LONG DISTANCE TELEPHONE
COMPANY, defendant-appellant.
Office of the Solicitor General Arturo A. Alafriz,
Assistant Solicitor General Antonio A. Torres and
Solicitor Camilo D. Quiason for plaintiff-appellant.
Ponce Enrile, Siguion Reyna, Montecillo and Belo for
defendant-appellant.
REYES, J.B.L., J.:
Direct appeals, upon a joint record on appeal, by both
the plaintiff and the defendant from the dismissal, after
hearing, by the Court of First Instance of Manila, in its
Civil Case No. 35805, of their respective complaint and
counterclaims, but making permanent a preliminary
mandatory injunction theretofore issued against the

SEC. 79. The Bureau of Telecommunications shall

exercise the following powers and duties:
(a) To operate and maintain existing wiretelegraph and radio-telegraph offices, stations,
and facilities, and those to be established to
restore the pre-war telecommunication service
under the Bureau of Posts, as well as such
additional offices or stations as may hereafter be
established to provide telecommunication service
in places requiring such service;
(b) To investigate, consolidate, negotiate for,
operate and maintain wire-telephone or radio
telephone communication service throughout the
Philippines by utilizing such existing facilities in
cities, towns, and provinces as may be found
feasible and under such terms and conditions or
arrangements with the present owners or

operators thereof as may be agreed upon to the

satisfaction of all concerned;
(c) To prescribe, subject to approval by the
Department Head, equitable rates of charges for
messages handled by the system and/or for time
calls and other services that may be rendered by
said system;
(d) To establish and maintain coastal stations to
serve ships at sea or aircrafts and, when public
interest so requires, to engage in the
international telecommunication service in
agreement with other countries desiring to
establish such service with the Republic of the
Philippines; and
(e) To abide by all existing rules and regulations
prescribed by the International
Telecommunication Convention relative to the
accounting, disposition and exchange of
messages handled in the international service,
and those that may hereafter be promulgated by
said convention and adhered to by the
Government of the Republic of the Philippines. 1
The defendant, Philippine Long Distance Telephone
Company (PLDT for short), is a public service
corporation holding a legislative franchise, Act 3426, as
amended by Commonwealth Act 407, to install,
operate and maintain a telephone system throughout

the Philippines and to carry on the business of

electrical transmission of messages within the
Philippines and between the Philippines and the
telephone systems of other countries. 2 The RCA
Communications, Inc., (which is not a party to the
present case but has contractual relations with the
parties) is an American corporation authorized to
transact business in the Philippines and is the grantee,
by assignment, of a legislative franchise to operate a
domestic station for the reception and transmission of
long distance wireless messages (Act 2178) and to
operate broadcasting and radio-telephone and radiotelegraphic communications services (Act 3180). 3
Sometime in 1933, the defendant, PLDT, and the
RCA Communications, Inc., entered into an agreement
whereby telephone messages, coming from the United
States and received by RCA's domestic station, could
automatically be transferred to the lines of PLDT; and
vice-versa, for calls collected by the PLDT for
transmission from the Philippines to the United States.
The contracting parties agreed to divide the tolls, as
follows: 25% to PLDT and 75% to RCA. The sharing
was amended in 1941 to 30% for PLDT and 70% for
RCA, and again amended in 1947 to a 50-50 basis.
The arrangement was later extended to radiotelephone messages to and from European and Asiatic
countries. Their contract contained a stipulation that
either party could terminate it on a 24-month notice to
the other. 4 On 2 February 1956, PLDT gave notice to
RCA to terminate their contract on 2 February 1958. 5

Soon after its creation in 1947, the Bureau of

Telecommunications set up its own Government
Telephone System by utilizing its own appropriation
and equipment and by renting trunk lines of the PLDT
to enable government offices to call private parties. 6 Its
application for the use of these trunk lines was in the
usual form of applications for telephone service,
containing a statement, above the signature of the
applicant, that the latter will abide by the rules and
regulations of the PLDT which are on file with the
Public Service Commission. 7 One of the many rules
prohibits the public use of the service furnished the
telephone subscriber for his private use. 8 The Bureau
has extended its services to the general public since
1948, 9 using the same trunk lines owned by, and
rented from, the PLDT, and prescribing its (the
Bureau's) own schedule of rates. 10 Through these
trunk lines, a Government Telephone System (GTS)
subscriber could make a call to a PLDT subscriber in
the same way that the latter could make a call to the
former.
On 5 March 1958, the plaintiff, through the Director of
Telecommunications, entered into an agreement with
RCA Communications, Inc., for a joint overseas
telephone service whereby the Bureau would convey
radio-telephone overseas calls received by RCA's
station to and from local residents. 11 Actually, they
inaugurated this joint operation on 2 February 1958,
under a "provisional" agreement. 12

On 7 April 1958, the defendant Philippine Long

Distance Telephone Company, complained to the
Bureau of Telecommunications that said bureau was
violating the conditions under which their Private
Branch Exchange (PBX) is inter-connected with the
PLDT's facilities, referring to the rented trunk lines, for
the Bureau had used the trunk lines not only for the
use of government offices but even to serve private
persons or the general public, in competition with the
business of the PLDT; and gave notice that if said
violations were not stopped by midnight of 12 April
1958, the PLDT would sever the telephone
connections. 13 When the PLDT received no reply, it
disconnected the trunk lines being rented by the
Bureau at midnight on 12 April 1958. 14 The result was
the isolation of the Philippines, on telephone services,
from the rest of the world, except the United States. 15
At that time, the Bureau was maintaining 5,000
telephones and had 5,000 pending applications for
telephone connection. 16 The PLDT was also
maintaining 60,000 telephones and had also 20,000
pending applications. 17Through the years, neither of
them has been able to fill up the demand for telephone
service.
The Bureau of Telecommunications had proposed to
the PLDT on 8 January 1958 that both enter into an
interconnecting agreement, with the government
paying (on a call basis) for all calls passing through the
interconnecting facilities from the Government

Telephone System to the PLDT. 18 The PLDT replied

that it was willing to enter into an agreement on
overseas telephone service to Europe and Asian
countries provided that the Bureau would submit to the
jurisdiction and regulations of the Public Service
Commission and in consideration of 37 1/2% of the
gross revenues. 19 In its memorandum in lieu of oral
argument in this Court dated 9 February 1964, on page
8, the defendant reduced its offer to 33 1/3 % (1/3) as
its share in the overseas telephone service. The
proposals were not accepted by either party.
On 12 April 1958, plaintiff Republic commenced suit
against the defendant, Philippine Long Distance
Telephone Company, in the Court of First Instance of
Manila (Civil Case No. 35805), praying in its complaint
for judgment commanding the PLDT to execute a
contract with plaintiff, through the Bureau, for the use
of the facilities of defendant's telephone system
throughout the Philippines under such terms and
conditions as the court might consider reasonable, and
for a writ of preliminary injunction against the
defendant company to restrain the severance of the
existing telephone connections and/or restore those
severed.
Acting on the application of the plaintiff, and on the
ground that the severance of telephone connections by
the defendant company would isolate the Philippines
from other countries, the court a quo, on 14 April 1958,
issued an order for the defendant:

(1) to forthwith reconnect and restore the

seventy-eight (78) trunk lines that it has
disconnected between the facilities of the
Government Telephone System, including its
overseas telephone services, and the facilities of
defendant; (2) to refrain from carrying into effect
its threat to sever the existing telephone
communication between the Bureau of
Telecommunications and defendant, and not to
make connection over its telephone system of
telephone calls coming to the Philippines from
foreign countries through the said Bureau's
telephone facilities and the radio facilities of RCA
Communications, Inc.; and (3) to accept and
connect through its telephone system all such
telephone calls coming to the Philippines from
foreign countries until further order of this
Court.
On 28 April 1958, the defendant company filed its
answer, with counterclaims.
It denied any obligation on its part to execute a
contrary of services with the Bureau of
Telecommunications; contested the jurisdiction of the
Court of First Instance to compel it to enter into
interconnecting agreements, and averred that it was
justified to disconnect the trunk lines heretofore leased
to the Bureau of Telecommunications under the
existing agreement because its facilities were being
used in fraud of its rights. PLDT further claimed that

the Bureau was engaging in commercial telephone

operations in excess of authority, in competition with,
and to the prejudice of, the PLDT, using defendants
own telephone poles, without proper accounting of
revenues.
After trial, the lower court rendered judgment that it
could not compel the PLDT to enter into an agreement
with the Bureau because the parties were not in
agreement; that under Executive Order 94,
establishing the Bureau of Telecommunications, said
Bureau was not limited to servicing government offices
alone, nor was there any in the contract of lease of the
trunk lines, since the PLDT knew, or ought to have
known, at the time that their use by the Bureau was to
be public throughout the Islands, hence the Bureau
was neither guilty of fraud, abuse, or misuse of the
poles of the PLDT; and, in view of serious public
prejudice that would result from the disconnection of
the trunk lines, declared the preliminary injunction
permanent, although it dismissed both the complaint
and the counterclaims.
Both parties appealed.

Taking up first the appeal of the Republic, the latter

complains of the action of the trial court in dismissing
the part of its complaint seeking to compel the
defendant to enter into an interconnecting contract with
it, because the parties could not agree on the terms
and conditions of the interconnection, and of its refusal
to fix the terms and conditions therefor.
We agree with the court below that parties can not be
coerced to enter into a contract where no agreement is
had between them as to the principal terms and
conditions of the contract. Freedom to stipulate such
terms and conditions is of the essence of our
contractual system, and by express provision of the
statute, a contract may be annulled if tainted by
violence, intimidation, or undue influence (Articles
1306, 1336, 1337, Civil Code of the Philippines). But
the court a quo has apparently overlooked that while
the Republic may not compel the PLDT to celebrate a
contract with it, the Republic may, in the exercise of the
sovereign power of eminent domain, require the
telephone company to permit interconnection of the
government telephone system and that of the PLDT, as
the needs of the government service may require,
subject to the payment of just compensation to be
determined by the court. Nominally, of course, the
power of eminent domain results in the taking or
appropriation of title to, and possession of, the
expropriated property; but no cogent reason appears
why the said power may not be availed of to impose
only a burden upon the owner of condemned property,

without loss of title and possession. It is

unquestionable that real property may, through
expropriation, be subjected to an easement of right of
way. The use of the PLDT's lines and services to allow
inter-service connection between both telephone
systems is not much different. In either case private
property is subjected to a burden for public use and
benefit. If, under section 6, Article XIII, of the
Constitution, the State may, in the interest of national
welfare, transfer utilities to public ownership upon
payment of just compensation, there is no reason why
the State may not require a public utility to render
services in the general interest, provided just
compensation is paid therefor. Ultimately, the
beneficiary of the interconnecting service would be the
users of both telephone systems, so that the
condemnation would be for public use.
The Bureau of Telecommunications, under section 78
(b) of Executive Order No. 94, may operate and
maintain wire telephone or radio telephone
communications throughout the Philippines by utilizing
existing facilities in cities, towns, and provinces under
such terms and conditions or arrangement with present
owners or operators as may be agreed upon to the
satisfaction of all concerned; but there is nothing in this
section that would exclude resort to condemnation
proceedings where unreasonable or unjust terms and
conditions are exacted, to the extent of crippling or
seriously hampering the operations of said Bureau.

A perusal of the complaint shows that the Republic's

cause of action is predicated upon the radio telephonic
isolation of the Bureau's facilities from the outside
world if the severance of interconnection were to be
carried out by the PLDT, thereby preventing the
Bureau of Telecommunications from properly
discharging its functions, to the prejudice of the
general public. Save for the prayer to compel the PLDT
to enter into a contract (and the prayer is no essential
part of the pleading), the averments make out a case
for compulsory rendering of inter-connecting services
by the telephone company upon such terms and
conditions as the court may determine to be just. And
since the lower court found that both parties "are
practically at one that defendant (PLDT) is entitled to
reasonable compensation from plaintiff for the
reasonable use of the former's telephone facilities"
(Decision, Record on Appeal, page 224), the lower
court should have proceeded to treat the case as one
of condemnation of such services independently of
contract and proceeded to determine the just and
reasonable compensation for the same, instead of
dismissing the petition.
This view we have taken of the true nature of the
Republic's petition necessarily results in overruling the
plea of defendant-appellant PLDT that the court of first
instance had no jurisdiction to entertain the petition
and that the proper forum for the action was the Public
Service Commission. That body, under the law, has no
authority to pass upon actions for the taking of private

property under the sovereign right of eminent domain.

Furthermore, while the defendant telephone company
is a public utility corporation whose franchise,
equipment and other properties are under the
jurisdiction, supervision and control of the Public
Service Commission (Sec. 13, Public Service Act), yet
the plaintiff's telecommunications network is a public
service owned by the Republic and operated by an
instrumentality of the National Government, hence
exempt, under Section 14 of the Public Service Act,
from such jurisdiction, supervision and control. The
Bureau of Telecommunications was created in
pursuance of a state policy reorganizing the
government offices
to meet the exigencies attendant upon the
establishment of the free and independent
Government of the Republic of the Philippines,
and for the purpose of promoting simplicity,
economy and efficiency in its operation (Section
1, Republic Act No. 51)
and the determination of state policy is not vested in
the Commission (Utilities Com. vs. Bartonville Bus
Line, 290 Ill. 574; 124 N.E. 373).
Defendant PLDT, as appellant, contends that the
court below was in error in not holding that the Bureau
of Telecommunications was not empowered to engage
in commercial telephone business, and in ruling that
said defendant was not justified in disconnecting the

telephone trunk lines it had previously leased to the

Bureau. We find that the court a quo ruled correctly in
rejecting both assertions.
Executive Order No. 94, Series of 1947, reorganizing
the Bureau of Telecommunications, expressly
empowered the latter in its Section 79, subsection (b),
to "negotiate for, operate and maintain wire telephone
or radio telephone communication service throughout
the Philippines", and, in subsection (c), "to prescribe,
subject to approval by the Department Head, equitable
rates of charges for messages handled by the system
and/or for time calls and other services that may be
rendered by the system". Nothing in these provisions
limits the Bureau to non-commercial activities or
prevents it from serving the general public. It may be
that in its original prospectuses the Bureau officials
had stated that the service would be limited to
government offices: but such limitations could not
block future expansion of the system, as authorized by
the terms of the Executive Order, nor could the officials
of the Bureau bind the Government not to engage in
services that are authorized by law. It is a well-known
rule that erroneous application and enforcement of the
law by public officers do not block subsequent correct
application of the statute (PLDT vs. Collector of
Internal Revenue, 90 Phil. 676), and that the
Government is never estopped by mistake or error on
the part of its agents (Pineda vs. Court of First
Instance of Tayabas, 52 Phil. 803, 807; Benguet

Consolidated Mining Co. vs. Pineda, 98 Phil. 711,

724).
The theses that the Bureau's commercial services
constituted unfair competition, and that the Bureau was
guilty of fraud and abuse under its contract, are,
likewise, untenable.
First, the competition is merely hypothetical, the
demand for telephone service being very much more
than the supposed competitors can supply. As
previously noted, the PLDT had 20,000 pending
applications at the time, and the Bureau had another
5,000. The telephone company's inability to meet the
demands for service are notorious even now. Second,
the charter of the defendant expressly provides:
SEC. 14. The rights herein granted shall not be
exclusive, and the rights and power to grant to
any corporation, association or person other than
the grantee franchise for the telephone or
electrical transmission of message or signals
shall not be impaired or affected by the granting
of this franchise: (Act 3436)

And third, as the trial court correctly stated, "when the

Bureau of Telecommunications subscribed to the trunk
lines, defendant knew or should have known that their
use by the subscriber was more or less public and all
embracing in nature, that is, throughout the
Philippines, if not abroad" (Decision, Record on
Appeal, page 216).
The acceptance by the defendant of the payment of
rentals, despite its knowledge that the plaintiff had
extended the use of the trunk lines to commercial
purposes, continuously since 1948, implies assent by
the defendant to such extended use. Since this
relationship has been maintained for a long time and
the public has patronized both telephone systems, and
their interconnection is to the public convenience, it is
too late for the defendant to claim misuse of its
facilities, and it is not now at liberty to unilaterally sever
the physical connection of the trunk lines.
..., but there is high authority for the position
that, when such physical connection has been
voluntarily made, under a fair and workable
arrangement and guaranteed by contract and the
continuous line has come to be patronized and
established as a great public convenience, such
connection shall not in breach of the agreement
be severed by one of the parties. In that case,
the public is held to have such an interest in the
arrangement that its rights must receive due
consideration. This position finds approval in

State ex rel. vs. Cadwaller, 172 Ind. 619, 636, 87

N.E. 650, and is stated in the elaborate and
learned opinion of Chief Justice Myers as
follows: "Such physical connection cannot be
required as of right, but if such connection is
voluntarily made by contract, as is here alleged
to be the case, so that the public acquires an
interest in its continuance, the act of the parties
in making such connection is equivalent to a
declaration of a purpose to waive the primary
right of independence, and it imposes upon the
property such a public status that it may not be
disregarded" citing Mahan v. Mich. Tel. Co.,
132 Mich. 242, 93 N.W. 629, and the reasons
upon which it is in part made to rest are referred
to in the same opinion, as follows: "Where
private property is by the consent of the owner
invested with a public interest or privilege for the
benefit of the public, the owner can no longer
deal with it as private property only, but must
hold it subject to the right of the public in the
exercise of that public interest or privilege
conferred for their benefit." Allnut v. Inglis (1810)
12 East, 527. The doctrine of this early case is
the acknowledged law. (Clinton-Dunn Tel. Co. v.
Carolina Tel. & Tel. Co., 74 S.E. 636, 638).
It is clear that the main reason for the objection of the
PLDT lies in the fact that said appellant did not expect
that the Bureau's telephone system would expand with
such rapidity as it has done; but this expansion is no

ground for the discontinuance of the service agreed

upon.
The last issue urged by the PLDT as appellant is its
right to compensation for the use of its poles for
bearing telephone wires of the Bureau of
Telecommunications. Admitting that section 19 of the
PLDT charter reserves to the Government
the privilege without compensation of using the
poles of the grantee to attach one ten-pin crossarm, and to install, maintain and operate wires of
its telegraph system thereon; Provided, however,
That the Bureau of Posts shall have the right to
place additional cross-arms and wires on the
poles of the grantee by paying a compensation,
the rate of which is to be agreed upon by the
Director of Posts and the grantee;
the defendant counterclaimed for P8,772.00 for the
use of its poles by the plaintiff, contending that what
was allowed free use, under the aforequoted provision,
was one ten-pin cross-arm attachment and only for
plaintiff's telegraph system, not for its telephone
system; that said section could not refer to the
plaintiff's telephone system, because it did not have
such telephone system when defendant acquired its
franchise. The implication of the argument is that
plaintiff has to pay for the use of defendant's poles if
such use is for plaintiff's telephone system and has to

pay also if it attaches more than one (1) ten-pin crossarm for telegraphic purposes.

from the future expansion of its services under its nonexclusive franchise.

As there is no proof that the telephone wires strain

the poles of the PLDT more than the telegraph wires,
nor that they cause more damage than the wires of the
telegraph system, or that the Government has
attached to the poles more than one ten-pin cross-arm
as permitted by the PLDT charter, we see no point in
this assignment of error. So long as the burden to be
borne by the PLDT poles is not increased, we see no
reason why the reservation in favor of the telegraph
wires of the government should not be extended to its
telephone lines, any time that the government decided
to engage also in this kind of communication.

WHEREFORE, the decision of the Court of First

Instance, now under appeal, is affirmed, except in so
far as it dismisses the petition of the Republic of the
Philippines to compel the Philippine Long Distance
Telephone Company to continue servicing the
Government telephone system upon such terms, and
for a compensation, that the trial court may determine
to be just, including the period elapsed from the filing
of the original complaint or petition. And for this
purpose, the records are ordered returned to the court
of origin for further hearings and other proceedings not
inconsistent with this opinion. No costs.

In the ultimate analysis, the true objection of the

PLDT to continue the link between its network and that
of the Government is that the latter competes
"parasitically" (sic) with its own telephone services.
Considering, however, that the PLDT franchise is nonexclusive; that it is well-known that defendant PLDT is
unable to adequately cope with the current demands
for telephone service, as shown by the number of
pending applications therefor; and that the PLDT's right
to just compensation for the services rendered to the
Government telephone system and its users is herein
recognized and preserved, the objections of
defendant-appellant are without merit. To uphold the
PLDT's contention is to subordinate the needs of the
general public to the right of the PLDT to derive profit

U.S. v Causby; 328 U.S. 256; May 27,1946

Argued: May 1, 1946.
Decided: May 27, 1946.
Mr. Justice DOUGLAS delivered the opinion of the
Court.
This is a case of first impression. The problem
presented is whether respondents' property was taken
within the meaning of the Fifth Amendment by frequent

and regular flights of army and navy aircraft over

respondents' land at low altitudes. The Court of Claims
held that there was a taking and entered judgment for
respondent, one judge dissenting. 60 F.Supp. 751. The
case is here on a petition for a writ of certiorari which
we granted becuase of the importance of the question
presented.
Respondents own 2.8 acres near an airport outside of
Greensboro, North Carolina. It has on it a dwelling
house, and also various outbuildings which were
mainly used for raising chickens. The end of the
airport's northwest-southeast runway is 2,220 feet from
respondents' barn and 2,275 feet from their house. The
path of glide to this runway passes directly over the
property which is 100 feet wide and 1,200 feet long.
The 30 to 1 safe glide angle 1 approved by the Civil
Aeronautics Authority 2 passes over this property at 83
feet, which is 67 feet above the house, 63 feet above
the barn and 18 feet above the highest tree. 3 The use
by the United States of this airport is pursuant to a
lease executed in May, 1942, for a term commencing
June 1, 1942 and ending June 30, 1942, with a
provision for renewals until June 30, 1967, or six
months after the end of the national emergency,
whichever is the earlier.
Various aircraft of the United States use this airport
bombers, transports and fighters. The direction of the
prevailing wind determines when a particular runway is
used. The north-west-southeast runway in question is

used about four per cent of the time in taking off and
about seven per cent of the time in landing. Since the
United States began operations in May, 1942, its fourmotored heavy bombers, other planes of the heavier
type, and its fighter planes have frequently passed
over respondents' land buildings in considerable
numbers and rather close together. They come close
enough at times to appear barely to miss the tops of
the trees and at times so close to the tops of the trees
as to blow the old leaves off. The noise is startling. And
at night the glare from the planes brightly lights up the
place. As a result of the noise, respondents had to give
up their chicken business. As many as six to ten of
their chickens were killed in one day by flying into the
walls from fright. The total chickens lost in that manner
was about 150. Production also fell off. The result was
the destruction of the use of the property as a
commercial chicken farm. Respondents are frequently
deprived of their sleep and the family has become
nervous and frightened. Although there have been no
airplane accidents on respondents' property, there
have been several accidents near the airport and close
to respondents' place. These are the essential facts
found by the Court of Claims. On the basis of these
facts, it found that respondents' property had
depreciated in value. It held that the United States had
taken an easement over the property on June 1, 1942,
and that the value of the property destroyed and the
easement taken was $2,000.

I. The United States relies on the Air Commerce Act of

1926, 44 Stat. 568, 49 U.S.C. 171 et seq., 49 U.S.C.A.
171 et seq., as amended by the Civil Aeronautics Act
of 1938, 52 Stat. 973, 49 U.S.C. 401 et seq., 49
U.S.C.A. 401 et seq. Under those statutes the United
States has 'complete and exclusive national
sovereignty in the air space' over this country. 49
U.S.C. 176(a), 49 U.S.C.A. 176(a). They grant any
citizen of the United States 'a public right of freedom of
transit in air commerce 4 through the navigable air
space of the United States.' 49 U.S.C.
403, 49 U.S.C.A. 403. And 'navigable air space' is
defined as 'airspace above the minimum safe altitudes
of flight prescribed by the Civil Aeronautics
Authority.' 49 U.S.C. 180, 49 U.S.C.A. 180. And it is
provided that 'such navigable airspace shall be subject
to a public right of freedom of interstate and foreign air
navigation.' Id. It is, therefore, argued that since these
flights were within the minimum safe altitudes of flight
which had been prescribed, they were an exercise of
the declared right of travel through the airspace. The
United States concludes that when flights are made
within the navigable airspace without any physical
invasion of the property of the landowners, there has
been no taking of property. It says that at most there
was merely incidental damage occurring as a
consequence of authorized air navigation. It also
argues that the landowner does not own superadjacent
airspace which he has not subjected to possession by
the erection of structures or other occupancy.
Moreover, it is argued that even if the United States

took airspace owned by respondents, no compensable

damage was shown. Any damages are said to be
merely consequential for which no compensation may
be obtained under the Fifth Amendment.
It is ancient doctrine that at common law ownership of
the land extended to the periphery of the universe
Cujus est solum ejus est usque ad coelum. 5 But that
doctrine has no place in the modern world. The ai is a
public highway, as Congress has declared. Were that
not true, every transcontinental flight would subject the
operator to countless trespass suits. Common sense
revolts at the idea. To recognize such private claims to
the airspace would clog these highways, seriously
interfere with their control and development in the
public interest, and transfer into private ownership that
to which only the public has a just claim.
But that general principle does not control the present
case. For the United States conceded on oral
argument that if the flights over respondents' property
rendered it uninhabitable, there would be a taking
compensable under the Fifth Amendment. It is the
owner's loss, not the taker's gain, which is the measure
of the value of the property taken. United States v.
Miller, 317 U.S. 369, 63 S.Ct. 276, 87 L.Ed. 336,
147 A.L.R. 55. Market value fairly determined is the
normal measure of the recovery. Id. And that value
may reflect the use to which the land could readily be
converted, as well as the existing use. United States v.
Powelson, 319 U.S. 266, 275, 63 S.Ct. 1047, 1053, 87

L.Ed. 1390, and cases cited. If, by reason of the

frequency and altitude of the flights, respondents could
not use this land for any purpose, their loss would be
complete. 6 It would be as complete as if the United
States had entered upon the surface of the land and
taken exclusive possession of it.
We agree that in those circumstances there would be a
taking. Though it would be only an easement of flight
which was taken, that easement, if permanent and not
merely temporary, normally would be the equivalent of
a fee interest. It would be a definite exercise of
complete dominion and control over the surface of the
land. The fact that the planes never touched the
surface would be as irrelevant as the absence in this
day of the feudal livery of seisin on the transfer of real
estate. The owner's right to possess and exploit the
landthat is to say, his beneficial ownership of it
would be destroyed. It would not be a case of
incidental damages arising from a legalized nuisance
such as was involved in Richards v. Washington
Terminal Co., 233 U.S. 546, 34 S.Ct. 654, 58 L.Ed.
1088, L.R.A.1915A, 887. In that case property owners
whose lands adjoined a railroad line were denied
recovery for damages resulting from the noise,
vibrations, smoke and the like, incidental to the
operations of the trains. In the supposed case the line
of flight is over the land. And the land is appropriated
as directly and completely as if it were used for the
runways themselves.

There is no material difference between the supposed

case and the present one, except that here enjoyment
and use of the land are not completely destroyed. But
that does not seem to us to be controlling. The path of
glide for airplanes might reduce a valuable factory site
to grazing land, an orchard to a vegetable patch, a
residential section to a wheat field. Some value would
remain. But the use of the airspace immediately above
the land would limit the utility of the land and cause a
diminution in its value. 7 That was the philosophy of
Portsmouth Harbor Land & Hotel Co. v. United
States, 260 U.S. 327, 43 S.Ct. 135, 67 L.Ed. 287. In
that case the petition alleged that the United States
erected a fort on nearby land, established a battery
and a fire control station there, and fired guns over
petitioner's land. The Court, speaking through Mr.
Justice Holmes, reversed the Court of Claims which
dismissed the petition on a demurrer, olding that 'the
specific facts set forth would warrant a finding that a
servitude has been imposed.' 8 260 U.S. at page 330,
43 S.Ct. at page 137, 67 L.Ed. 287. And see Delta Air
Corp. v. Kersey, 193 Ga. 862, 20 S.E.2d 245, 140
A.L.R. 1352. Cf. United States v. 357.25 Acres of Land,
D.C., 55 F.Supp. 461.
The fact that the path of glide taken by the planes was
that approved by the Civil Aeronautics Authority does
not change the result. The navigable airspace which
Congress has placed in the public domain is 'airspace
above the minimum safe altitudes of flight prescribed
by the Civil Aeronautics Authority.' 49 U.S.C.

180, 49 U.S.C.A. 180. If that agency prescribed 83

feet as the minimum safe altitude, then we would have
presented the question of the validity of the regulation.
But nothing of the sort has been done. The path of
glide governs the method of operatingof landing or
taking off. The altitude required for that operation is not
the minimum safe altitude of flight which is the
downward reach of the navigable airspace. The
minimum prescribed by the authority is 500 feet during
the day and 1000 feet at night for air carriers (Civil Air
Regulations, Pt. 61, 61.7400, 61.7401, Code
Fed.Reg.Cum.Supp., Tit. 14, ch. 1) and from 300 to
1000 feet for other aircraft depending on the type of
plane and the character of the terrain. Id., Pt. 60,
60.350-60.3505, Fed.Reg.Cum.Supp., supra. Hence,
the flights in question were not within the navigable
airspace which Congress placed within the public
domain. If any airspace needed for landing or taking off
were included, flights which were so close to the land
as to render it uninhabitable would be immune. But the
United States concedes, as we have said, that in that
event there would be a taking. Thus, it is apparent that
the path of glide is not the minimum safe altitude of
flight within the meaning of the statute. The Civil
Aeronautics Authority has, of course, the power to
prescribe air traffic rules. But Congress has defined
navigable airspace only in terms of one of themthe
minimum safe altitudes of flight.
We have said that the airspace is a public highway. Yet
it is obvious that if the landowner is to have full

enjoyment of the land, he must have exclusive control

of the immediate reaches of the enveloping
atmosphere. Otherwise buildings could not be erected,
trees could not be planted, and even fences could not
be run. The principle is recognized when the law gives
a remedy in case overhanging structures are erected
on adjoining land. 9 The landowner owns at least as
much of the space above the ground as the can
occupy or use in connection with the land. See Hinman
v. Pacific Air Transport, 9 Cir., 84 F.2d 755. The fact
that he does not occupy it in a physical senseby the
erection of buildings and the likeis not material. As
we have said, the flight of airplanes, which skim the
surface but do not touch it, is as much an appropriation
of the use of the land as a more conventional entry
upon it. We would not doub that if the United States
erected an elevated railway over respondents' land at
the precise altitude where its planes now fly, there
would be a partial taking, even though none of the
supports of the structure rested on the land. 10 The
reason is that there would be an intrusion so
immediate and direct as to subtract from the owner's
full enjoyment of the property and to limit his
exploitation of it. While the owner does not in any
physical manner occupy that stratum of airspace or
make use of it in the conventional sense, he does use
it in somewhat the same sense that space left between
buildings for the purpose of light and air is used. The
superadjacent airspace at this low altitude is so close
to the land that continuous invasions of it affect the use
of the surface of the land itself. We think that the

landowner, as an incident to his ownership, has a claim

to it and that invasions of it are in the same category
as invasions of the surface. 11
In this case, as in Portsmouth Harbor Land & Hotel Co.
v. United States, supra, the damages were not merely
consequential. They were the product of a direct
invasion of respondents' domain. As stated in United
States v. Cress,243 U.S. 316, 328, 37 S.Ct. 380, 385,
61 L.Ed. 746, '* * * it is the character of the invasion,
not the amount of damage resulting from it, so long as
the damage is substantial, that determines the
question whether it is a taking.'
We said in United States v. Powelson, supra, 319 U.S.
at page 279, 63 S.Ct. at page 1054, 87 L.Ed. 1390,
that while the meaning of 'property' as used in the Fifth
Amendment was a federal question, 'it will normally
obtain its content by reference to local law.' If we look
to North Carolina law, we reach the same result.
Sovereignty in the airspace rests in the State 'except
where granted to and assumed by the United States.'
Gen.Stats. 1943, 63-11. The flight of aircraft is lawful
'unless at such a low altitude as to interfere with the
then existing use to which the land or water, or the
space over the land or water, is put by the owner, or
unless so conducted as to be imminently dangerous to
persons or property lawfully on the land or water
beneath.' Id., 63-13. Subject to that right of flight,
'ownership of the space above the lands and waters of
this State is declared to be vested in the several

owners of the surface beneath.' Id. 63-12. Our

holding that there was an invasion of respondents'
property is thus not inconsistent with the local law
governing a landowner's claim to the immediate
reaches of the superadjacent airspace.
The airplane is part of the modern environment of life,
and the inconveniences which it causes are normally
not compensable under the Fifth Amendment. The
airspace, apart from the immediate reaches above the
land, is part of the public domain. We need not
determine at this time what those precise limits are.
Flights over private land are not a taking, unless they
are so low and so frequent as to be a direct and
immediate interference with the enjoyment and use of
the land. We need not speculate on that phase of the
present case. For the findings of the Court of Claims
plainly establish that there was a diminution in value of
the property and that the frequent, low-level flights
were the direct and immediate cause. We agree with
the Court of Claims that a servitude has been imposed
upon the land.
II. By 145(1) of the Judicial Code, 28 U.S.C.
250(1), 28 U.S.C.A. 250(1), the Court of Claims has
jurisdiction to hear and determine 'All claims (except
for pensions) founded upon the Constitution of the
United States or * * * upon any contract, express or
implied, with the Government of the United States.'

We need not decide whether repeated trespasses

might give rise to an implied contract. Cf. Portsmouth
Harbor Land & Hotel Co. v. United States, supra. If
there is a taking, the claim is 'founded upon the
Constitution' and within the jurisdiction of the Court of
Claims to hear and determine. See Hollister v.
Benedict & Burnham Mfg. Co., 113 U.S. 59, 67, 5 S.Ct.
717, 721, 28 L.Ed. 901; Hurley v. Kincaid, 285 U.S. 95,
104, 52 S.Ct. 267, 269, 76 L.Ed. 637; Yearsley v. W. A.
Ross Construction Co., 309 U.S. 18, 21, 60 S.Ct. 413,
415, 84 L.Ed. 554. Thus, the jurisdiction of the Court of
Claims in this case is clear.
III. The Court of Claims held, as we have noted, that
an easement was taken. But the findings of fact
contain no precise description as to its nature. It is not
described in terms of frequency of flight, permissible
altitude, or type of airplane. Nor is there a finding as to
whether the easement taken was temporary or
permanent. Yet an accurate description of the property
taken is essential, since that interest vests in the
United States. United States v. Cress, supra, 243 U.S.
328, 329, 37 S.Ct. 385, 386, 61 L.Ed. 746, and cases
cited. It is true that the Court of Claims stated in its
opinion that the easement taken was permanent. But
the deficiency in findings cannot be rectified by
statements in the opinion. United States v. EsnaultPelterie, 299 U.S. 201, 205, 206, 57 S.Ct. 159, 161,
162, 81 L.Ed. 123; United States v. Seminole
Nation, 299 U.S. 417, 422, 57 S.Ct. 283, 287, 81 L.Ed.
316. Findings of fact on every 'material issue' are a

statutory requirement. 53 Stat. 752, 28 U.S.C.

288, 28 U.S.C.A. 288. The importance of findings of
fact based on evidence is emphasized here by the
Court of Claims' treatment of the nature of the
easement. It stated in its opinion that the easement
was permanent because the United States 'no doubt
intended to make some sort of arrangement whereby it
could use the airport for its military planes whenever it
had occasion to do so.' (60 F.Supp. 758.) That sounds
more like conjecture rather than a conclusion from
evidence; and if so, it would not be a proper foundation
for liability of the United States. We do not stop to
examine the evidence to determine whether it would
support such a finding, if made. For that is not our
function. United States v. Esnault-Pelterie, supra, 299
U.S. at page 206, 57 S.Ct. at page 162, 81 L.Ed. 123.
Since on this record it is not clear whether the
easement taken is a permanent or a temporary one, it
would be premature for us to consider whether the
amount of the award made by the Court of Claims was
proper.
The judgment is reversed and the cause is remanded
to the Court of Claims so that it may make the
necessary findings in conformity with this opin on.
Reversed.

G.R. No. 4223

August 19, 1908

NICOLAS LUNOD, ET AL., plaintiffs-appellees,

vs.
HIGINO MENESES, defendant-appellant.
T. Icasiano, for appellant.
R. Salinas, for appellee.
TORRES, J.:
On the 14th of March, 1904, Nicolas Lunod, Juan de la
Vega, Evaristo Rodriguez, Fernando Marcelo, Esteban
Villena, Benito Litao, Ventura Hernandez, and
Casimiro Pantanilla, residents of the town of Bulacan,
province of the same name, filed a written complaint
against Higino Meneses, alleging that they each
owned and possessed farm lands, situated in the
places known as Maytunas and Balot, near a small
lake named Calalaran; that the defendant is the owner
of a fish-pond and a strip of land situated in Paraanan,
adjoining the said lake on one side, and the River
Taliptip on the other; that from time immemorial, and
consequently for more than twenty years before 1901,
there existed and still exists in favor of the rice fields of
the plaintiffs a statutory easement permitting the flow
of water over the said land in Paraanan, which
easement the said plaintiffs enjoyed until the year 1901
and consisted in that the water collected upon their
lands and in the Calalaran Lake flow through Paraanan
into the Taliptip River. From that year however, the

defendant, without any right or reason, converted the

land in Paraanan into a fishpond and by means of a
dam and a bamboo net, prevented the free passage of
the water through said place into the Taliptip River, that
in consequence the lands of the plaintiff became
flooded and damaged by the stagnant waters, there
being no outlet except through the land in Paraanan;
that their plantation were destroyed, causing the loss
and damages to the extent of about P1,000, which loss
and damage will continue if the obstructions to the flow
of the water are allowed to remain, preventing its
passage through said land and injuring the rice
plantations of the plaintiffs. They therefore asked that
judgment be entered against the defendant, declaring
that the said tract of land in Paraanan is subject to a
statutory easement permitting the flow of water from
the property of the plaintiffs, and that, without prejudice
to the issuing of a preliminary injunction, the defendant
be ordered to remove and destroy the obstructions that
impede the passage of the waters through Paraanan,
and that in future, and forever, he abstain from closing
in any manner the aforesaid tract of land; that, upon
judgment being entered, the said injunction be
declared to be final and that the defendant be
sentenced to pay to the plaintiffs an indemnity of
P1,000, and the costs in the proceedings; that they be
granted any other and further equitable or proper
remedy in accordance with the facts alleged and
proven.

In view of the demurrer interposed by the plaintiffs to

the answer of the defendant, the latter, on the 29th of
August, 1904, filed an amended answer, denying each
and everyone of the allegations of the complaint, and
alleged that no statutory easement existed nor could
exist in favor of the lands described in the complaint,
permitting the waters to flow over the fish pond that he,
together with his brothers, owned in the sitio of
Bambang, the area and boundaries of which were
stated by him, and which he and his brothers had
inherited from their deceased mother.
Apolinara de Leon; that the same had been surveyed
by a land surveyor in September, 1881, he also denied
that he had occupied or converted any land in the
barrio of Bambang into a fishpond; therefore, and to
sentence the plaintiffs to pay the costs and
corresponding damages.
Upon the evidence adduced by both parties to the suit,
the court, on the 13th of March, 1907, entered
judgment declaring that the plaintiffs were entitled to a
decision in their favor, and sentenced the defendant to
remove the dam placed on the east of the Paraanan
passage on the side of the Taliptip River opposite the
old dam in the barrio of Bambang, as well as to
remove and destroy the obstacles to the free passage
of the waters through the strip of land in Paraanan; to
abstain in future, and forever, from obstructing or
closing in any manner the course of the waters through
the said strip of land. The request that the defendant

be sentenced to pay an indemnity was denied, and no

ruling was made as to costs.
The defendant excepted to the above judgment and
furthermore asked for a new trial which was denied
and also excepted to, and, upon approval of the bill of
exceptions, the question was submitted to this court.
Notwithstanding the defendant's denial in his amended
answer, it appears to have been clearly proven in this
case that the lands owned by the plaintiffs in the
aforesaid barrio, as well as the small adjoining lake,
named Calalaran, are located in places relatively
higher than the sitio called Paraanan where the land
and fish pond of the defendant are situated, and which
border on the Taliptip River; that during the rainy
season the rain water which falls on he land of the
plaintiffs, and which flows toward the small Calalaran
Lake at flood time, has no outlet to the Taliptip River
other than through the low land of Paraanan: that the
border line between Calalaran and Paraanan there has
existed from time immemorial a dam, constructed by
the community for the purpose of preventing the salt
waters from the Taliptip River, at high tide, from
flooding the land in Calalaran, passing through the
lowlands of Paraanan; but when rainfall was abundant,
one of the residents was designated in his turn by the
lieutenant or justice of the barrio to open the sluice
gate in order to let out the water that flooded the rice
fields, through the land of Paraanan to the abovementioned river, that since 1901, the defendant

constructed another dam along the boundary of this

fishpond in Paraanan, thereby impeding the outlet of
the waters that flood the fields of Calalaran, to the
serious detriment of the growing crops.
According to article 530 of the Civil Code, an easement
is charge imposed upon one estate for the benefit of
another estate belonging to a different owner, and the
realty in favor of which the easement is established is
called the dominant estate, and the one charged with it
the servient estate.
The lands of Paraanan being the lower are subject to
the easement of receiving and giving passage to the
waters proceeding from the higher lands and the lake
of Calalaran; this easement was not constituted by
agreement between the interested parties; it is of a
statutory nature, and the law had imposed it for the
common public utility in view of the difference in the
altitude of the lands in the barrio Bambang.
Article 552 of the Civil code provides:
Lower estates must receive the waters which
naturally and without the intervention of man
descend from the higher estates, as well as the
stone or earth which they carry with them.
Neither may the owner of the lower estates
construct works preventing this easement, nor
the one of the higher estate works increasing the
burden.

Article 563 of the said code reads also:

The establishment, extent, form, and conditions
of the easements of waters to which this section
refers shall be governed by the special law
relating thereto in everything not provided for in
this code.
The special law cited in the Law of Waters of August 3,
1866, article 111 of which, treating of natural
easements relating to waters, provides:
Lands situated at a lower level are subject to
receive the waters that flow naturally, without the
work of man, from the higher lands together with
the stone or earth which they carry with them.
Hence, the owner of the lower lands can not erect
works that will impede or prevent such an easement or
charge, constituted and imposed by the law upon his
estate for the benefit of the higher lands belonging to
different owners; neither can the latter do anything to
increase or extend the easement.
According to the provisions of law above referred to,
the defendant, Meneses, had no right to construct the
works, nor the dam which blocks the passage, through
his lands and the outlet to the Taliptip River, of the
waters which flood the higher lands of the plaintiffs;
and having done so, to the detriment of the easement
charged on his estate, he has violated the law which
protects and guarantees the respective rights and

regulates the duties of the owners of the fields in

Calalaran and Paraanan.
It is true that article 388 of said code authorizes every
owner to enclose his estate by means of walls, ditches
fences or any other device, but his right is limited by
the easement imposed upon his estate.
The defendant Meneses might have constructed the
works necessary to make and maintain a fish pond
within his own land, but he was always under the strict
and necessary obligation to respect the statutory
easement of waters charged upon his property, and
had no right to close the passage and outlet of the
waters flowing from the lands of the plaintiffs and the
lake of Calalaran into the Taliptip River. He could not
lawfully injure the owners of the dominant estates by
obstructing the outlet to the Taliptip River of the waters
flooding the upper lands belonging to the plaintiffs.
It is perhaps useful and advantageous to the plaintiffs
and other owners of high lands in Calalaran, in addition
to the old dike between the lake of said place and the
low lands in Paraanan, to have another made by the
defendant at the border of Paraanan adjoining the said
river, for the purpose of preventing the salt waters of
the Taliptip River flooding, at high tide, not only the
lowlands in Paraanan but also the higher ones of
Calalaran and its lake, since the plaintiffs can not
prevent the defendant from protecting his lands against
the influx of salt water; but the defendant could never

be permitted to obstruct the flow of the waters through

his lands to the Taliptip River during the heavy rains,
when the high lands in Calalaran and the lake in said
place are flooded, thereby impairing the right of the
owners of the dominant estates.
For the above reasons, and accepting the findings of
the court below in the judgment appealed from in so far
as they agree with the terms of this decision, we must
and do hereby declare that the defendant, Higino
Meneses, as the owner of the servient estate, is
obliged to give passage to and allow the flow of the
waters descending from the Calalaran Lake and from
the land of the plaintiffs through his lands in Paraanan
for their discharge into the Taliptip River; and he is
hereby ordered to remove any obstacle that may
obstruct the free passage of the waters whenever
there may be either a small or large volume of running
water through his lands in the sitio of Paraanan for
their discharge into the Taliptip River; and in future to
abstain from impeding, in any manner, the flow of the
waters coming from the higher lands. The judgment
appealed from is affirmed, in so far as it agrees with
decision, and reversed in other respects, with the costs
of this instance against the appellants. So ordered.

G.R. No. L-2659

October 12, 1950

In the matter of the testate estate of Emil Maurice

Bachrach, deceased. MARY McDONALD
BACHRACH,petitioner-appellee,
vs.
SOPHIE SEIFERT and ELISA ELIANOFF, oppositorsappellants.
Ross, Selph, Carrascoso and Janda for appellants.
Delgado and Flores for appellee.

OZAETA, J.:
Is a stock dividend fruit or income, which belongs to
the usufructuary, or is it capital or part of the corpus of
the estate, which pertains to the remainderman? That
is the question raised in the appeal.
The deceased E. M. Bachrach, who left no forced heir
except his widow Mary McDonald Bachrach, in his last
will and testament made various legacies in cash and
willed the remainder of his estate as follows:
Sixth: It is my will and do herewith bequeath and
devise to my beloved wife Mary McDonald
Bachrach for life all the fruits and usufruct of the
remainder of all my estate after payment of the
legacies, bequests, and gifts provided for above;
and she may enjoy said usufruct and use or
spend such fruits as she may in any manner
wish.

The will further provided that upon the death of Mary

McDonald Bachrach, one-half of the all his estate
"shall be divided share and share alike by and between
my legal heirs, to the exclusion of my brothers."
The estate of E. M. Bachrach, as owner of 108,000
shares of stock of the Atok-Big Wedge Mining Co.,
Inc., received from the latter 54,000 shares
representing 50 per cent stock dividend on the said
108,000 shares. On June 10, 1948, Mary McDonald
Bachrach, as usufructuary or life tenant of the estate,
petitioned the lower court to authorize the Peoples
Bank and Trust Company as administrator of the
estate of E. M. Bachrach, to her the said 54,000 share
of stock dividend by endorsing and delivering to her
the corresponding certificate of stock, claiming that
said dividend, although paid out in the form of stock, is
fruit or income and therefore belonged to her as
usufructuary or life tenant. Sophie Siefert and Elisa
Elianoff, legal heirs of the deceased, opposed said
petition on the ground that the stock dividend in
question was not income but formed part of the capital
and therefore belonged not to the usufructuary but to
the remainderman. And they have appealed from the
order granting the petition and overruling their
objection.
While appellants admits that a cash dividend is an
income, they contend that a stock dividend is not, but
merely represents an addition to the invested capital.
The so-called Massachusetts rule, which prevails in

certain jurisdictions in the United States, supports

appellants' contention . It regards cash dividends,
however large, as income, and stock dividends,
however made, as capital. (Minot vs. Paine, 99 Mass.,
101; 96 Am. Dec., 705.) It holds that a stock dividend is
not in any true sense any true sense any dividend at all
since it involves no division or severance from the
corporate assets of the dividend; that it does not
distribute property but simply dilutes the shares as they
existed before; and that it takes nothing from the
property of the corporation, and nothing to the interests
of the shareholders.
On the other hand, so called Pennsylvania rule, which
prevails in various other jurisdictions in the United
States, supports appellee's contention. This rule
declares that all earnings of the corporation made prior
to the death of the testator stockholder belong to the
corpus of the estate, and that all earnings, when
declared as dividends in whatever form, made during
the lifetime of the usufructuary or life tenant. (Earp's
Appeal, 28 Pa., 368.)
. . . It is clear that testator intent the
remaindermen should have only the corpus of
the estate he left in trust, and that all dividends
should go the life tenants. It is true that profits
realized are not dividends until declared by the
proper officials of the corporation, but distribution
of profits, however made, in dividends, and the
form of the distribution is immaterial. (In

re Thompson's Estate, 262 Pa., 278; 105 Atl.

273, 274.)
In Hite vs. Hite (93 Ky., 257; 20 S. W., 778, 780), the
Court of Appeals of Kentucky, speaking thru its Chief
Justice, said:
. . . Where a dividend, although declared in
stock, is based upon the earnings of the
company, it is in reality, whether called by one
name or another, the income of the capital
invested in it. It is but a mode of distributing the
profit. If it be not income, what is it? If it is, then it
is rightfully and equitably the property of the life
tenant. If it be really profit, then he should have it,
whether paid in stock or money. A stock dividend
proper is the issue of new shares paid for by the
transfer of a sum equal to their par value from
the profits and loss account to that representing
capital stock; and really a corporation has no
right to a dividend, either in cash or stock, except
from its earnings; and a singular state of case
it seems to us, an unreasonable one is
presented if the company, although it rests with it
whether it will declare a dividend, can bind the
courts as to the proper ownership of it, and by
the mode of payment substitute its will for that of
that of the testator, and favor the life tenants or
the remainder-men, as it may desire. It cannot, in
reason, be considered that the testator
contemplated such a result. The law regards

substance, and not form, and such a rule might

result not only in a violation of the testator's
intention, but it would give the power to the
corporation to beggar the life tenants, who, in this
case, are the wife and children of the testator, for
the benefit of the remainder-men, who may
perhaps be unknown to the testator, being
unborn when the will was executed. We are
unwilling to adopt a rule which to us seems so
arbitrary, and devoid of reason and justice. If the
dividend be in fact a profit, although declared in
stock, it should be held to be income. It has been
so held in Pennsylvania and many other states,
and we think it the correct rule. Earp's Appeal, 28
Pa. St. 368; Cook, Stocks & S. sec. 554. . . .
We think the Pennsylvania rule is more in accord with
our statutory laws than the Massachusetts rule. Under
section 16 of our Corporation Law, no corporation may
make or declare any dividend except from the surplus
profits arising from its business. Any dividend,
therefore, whether cash or stock, represents surplus
profits. Article 471 of the Civil Code provides that the
usufructuary shall be entitled to receive all the natural,
industrial, and civil fruits of the property in usufruct.
And articles 474 and 475 provide as follows:
ART. 474. Civil fruits are deemed to accrue day
by day, and belong to the usufructuary in
proportion to the time the usufruct may last.

ART. 475. When a usufruct is created on the right

to receive an income or periodical revenue,
either in money or fruits, or the interest on bonds
or securities payable to bearer, each matured
payment shall be considered as the proceeds or
fruits such right.
When it consists of the enjoyment of the benefits
arising from an interest in an industrial or
commercial enterprise, the profits of which are
not distributed at fixed periods, such profits shall
have the same consideration.lawphil.net
In either case they shall be distributed as civil
fruits, and shall be applied in accordance with the
rules prescribed by the next preceding article.
The 108,000 shares of stock are part of the property in
usufruct. The 54,000 shares of stock dividend are civil
fruits of the original investment. They represent profits,
and the delivery of the certificate of stock covering said
dividend is equivalent to the payment of said profits.
Said shares may be sold independently of the original
shares, just as the offspring of a domestic animal may
be sold independently of its mother.
The order appealed from, being in accordance with the
above-quoted provisions of the Civil Code, his hereby
affirmed, with costs against the appellants.

G.R. No. 35223

September 17, 1931

THE BACHRACH MOTOR CO., INC., plaintiffappellee,

vs.
TALISAY-SILAY MILLING CO., ET AL., defendantsappellees.
THE PHILIPPINE NATIONAL BANK, intervenorappellant.
Roman J. Lacson for intervenor-appellant.
Mariano Ezpeleta for plaintiff-appellee.
Nolan and Hernaez for defendants-appellees TalisaySilay Milling Co. and Cesar Ledesma.
ROMUALDEZ, J.:
This proceeding originated in a complaint filed by the
Bachrach Motor Co., Inc., against the Talisay-Silay
Milling Co., Inc., for the delivery of the amount P13,850
or promissory notes or other instruments or credit for
that sum payable on June 30, 1930, as bonus in favor
of Mariano Lacson Ledesma; the complaint further
prays that the sugar central be ordered to render an
accounting of the amounts it owes Mariano Lacson
Ledesma by way of bonus, dividends, or otherwise,
and to pay the plaintiff a sum sufficient to satisfy the
judgment mentioned in the complaint, and that the sale
made by said Mariano Lacson Ledesma be declared
null and void.

The Philippine National Bank filed a third party claim

alleging a preferential right to receive any amount
which Mariano Lacson Ledesma might be entitled to
from the Talisay-Silay Milling Co. as bonus, because
that would be civil fruits of the land mortgaged to said
bank by said debtor for the benefit of the central
referred to, and by virtue of a deed of assignment, and
praying that said central be ordered to delivered
directly to the intervening bank said sum on account of
the latter's credit against the aforesaid Mariano Lacson
Ledesma.
The corporation Talisay-Silay Milling Co., Inc.,
answered the complaint stating that of Mariano Lacson
Ledesma's credit, P7,500 belonged to Cesar Ledesma
because he had purchased it, and praying that it be
absolved from the complaint and that the proper party
be named so that the remainder might be delivered.
Cesar Ledesma, in turn, claiming to be the owner by
purchase in good faith an for a reconsideration of the
P7,500 which is a part of the credit referred to above,
answered praying that he be absolved from the
complaint.
The plaintiff Bachrach Motor Co., Inc., answered the
third party claim alleging that its credit against Mariano
Lacson Ledesma was prior and preferential to that of
the intervening bank, and praying that the latter's
complaint be dismissed.

At the trial all the parties agreed to recognize and

respect the sale made in favor of Cesar Ledesma of
the P7,500 part of the credit in question, for which
reason the trial court dismissed the complaint and
cross-complaint against Cesar Ledesma authorizing
the defendant central to deliver to him the
aforementioned sum of P7,500. And upon conclusion
of the hearing, the court held that the Bachrach Motor
Co., Inc., had a preferred right to receive the amount of
P11,076.02 which was Mariano Lacson Ledesma's
bonus, and it ordered the defendant central to deliver
said sum to the plaintiff.
The Philippine National Bank appeals, assigning the
following alleged errors as committed by the trial court:
1. In holding that the bonus which the TalisaySilay Milling Co., Inc., bound itself to pay the
planters who had mortgaged their land to the
Philippine National Bank to secure the payment
of the debt of said central to said bank is not civil
fruits of said land.

Mariano Lacson Ledesma to the Philippine

National Bank to be applied to the payment of his
debt to said Philippine National Bank is
fraudulent.
4. In holding that the Bachrach Motor Co. Inc., in
civil case No. 31597 of the Court of First Instance
of Manila levied a valid attachment upon the
bonus in question.
5. In admitting and considering the
supplementary complaint filed by the Bachrach
Motor Co., Inc., alleging as a cause of action the
attachment of the bonus in question which said
Bachrach Motor Co., Inc., in civil case No. 31821
of the Court of First Instance of Manila levied
after the filing of the original complaint in this
case, and after Mariano Lacson Ledesma in this
case had been declared in default.

2. In not holding that said bonus became subject

to the mortgage executed by the defendant
Mariano Lacson Ledesma to the Philippine
National Bank to secure the payment of his
personal debt to said bank when it fell due.

6. In holding that the Bachrach Motor Co., Inc.,

has a preferential right to receive from the
Talisay-Silay Milling Co., Inc., the amount of
P11,076.02 which is in the possession of said
corporation as the bonus to be paid to Mariano
Lacson Ledesma, and in ordering the TalisaySilay Milling Co., Inc., to deliver said amount to
the Bachrach Motor Co., Inc.

3. In holding that the assignment (Exhibit 9,

P.N.B.) of said bonus made on March 7, 1930, by

7. In not holding that the Philippine National Bank

has a preferential right to receive from the

Talisay-Silay Milling Co., Inc., the amount of

P11,076.02 held by said corporation as Mariano
Lacson Ledesma's bonus, and in not ordering
said Talisay-Silay Milling Co., Inc., to deliver said
amount to the Philippine National Bank.
8. In not holding that the amended complaint and
the supplementary complaint of the Bachrach
Motor Co., Inc., do not state facts sufficient to
constitute a cause of action in favor of the
Bachrach Motor Co., Inc., and against the
Talisay-Silay Milling Co., Inc., or against the
Philippine National Bank.
The appellant bank bases its preferential right upon the
contention that the bonus in question is civil fruits of
the lands which the owners had mortgaged for the
benefit of the central giving the bonus, and that, as civil
fruits of said land, said bonus was assigned by
Mariano Lacson Ledesma on March 7, 1930, by virtue
of the document Exhibit 9 of said intervening
institution, which admitted in its brief that "if the bonus
in question is not civil fruits or rent which became
subject to the mortgage in favor of the Philippine
National Bank when Mariano Lacson Ledesma's
personal obligation fell due, the assignment of March
7, 1930 (Exhibit 9, P.N.B.), is null and void, not
because it is fraudulent, for there was no intent of fraud
in executing the deed, but that the cause or
consideration of the assignment was erroneous, for it
was based upon the proposition that the bonus was

civil fruits of the land mortgaged to the Philippine

National Bank." (P. 31.)
The fundamental question, then, submitted to our
consideration is whether or not the bonus in question is
civil fruits.
This is how the bonus came to be granted: On
December 22, 1923, the Talisay-Silay Milling Co., Inc.,
was indebted to the Philippine National Bank. To
secure the payment of its debt, it succeeded in
inducing its planters, among whom was Mariano
Lacson Ledesma, to mortgage their land to the creditor
bank. And in order to compensate those planters for
the risk they were running with their property under the
mortgage, the aforesaid central, by a resolution passed
on that same date, i.e., December 22, 1923, undertook
to credit the owners of the plantation thus mortgaged
every year with a sum equal to two per centum of the
debt secured according to yearly balance, the payment
of the bonus being made at once, or in part from time
to time, as soon as the central became free of its
obligations to the aforesaid bank, and of those
contracted by virtue of the contract of supervision, and
had funds which might be so used, or as soon as it
obtained from said bank authority to make such
payment. (Exhibits 5, 6; P.N.B.)
Article 355 of the Civil Code considers three things as
civil fruits: First, the rents of buildings; second, the
proceeds from leases of lands; and, third, the income

from perpetual or life annuities, or other similar sources

of revenue. It may be noted that according to the
context of the law, the phrase "u otras analogas" refers
only to rent or income, for the
adjectives "otras" and "analogas" agree with the
noun "rentas," as do also the other
adjectives"perpetuas" and "vitalicias." That is why we
say that by "civil fruits" the Civil Code understands one
of three and only three things, to wit: the rent of a
building, the rent of land, and certain kinds of income.
As the bonus in question is not rent of a building or of
land, the only meaning of "civil fruits" left to be
examined is that of "income."
Assuming that in broad juridical sense of the word
"income" it might be said that the bonus in question is
"income" under article 355 of the Civil Code, it is
obvious to inquire whether it is derived from the land
mortgaged by Mariano Lacson Ledesma to the
appellant bank for the benefit of the central; for it is not
obtained from that land but from something else, it is
not civil fruits of that land, and the bank's contention is
untenable.
It is to be noted that the said bonus bears no
immediate, but only a remote accidental relation to the
land mentioned, having been granted as compensation
for the risk of having subjected one's land to a lien in
favor of the bank, for the benefit of the entity granting
said bonus. If this bonus be income or civil fruits of

anything, it is income arising from said risk, or, if one

chooses, from Mariano Lacson Ledesma's generosity
in facing the danger for the protection of the central,
but certainly it is not civil fruits or income from the
mortgaged property, which, as far as this case is
concerned, has nothing to do with it. Hence, the
amount of the bonus, according to the resolution of the
central granting it, is not based upon the value,
importance or any other circumstance of the
mortgaged property, but upon the total value of the
debt thereby secured, according to the annual balance,
which is something quite distinct from and independent
of the property referred to.
Finding no merit in this appeal, the judgment appealed
from is affirmed, without express finding as to costs.
So ordered.

G.R. No. 133879

November 21, 2001
EQUATORIAL REALTY DEVELOPMENT,
INC., petitioner,
vs.
MAYFAIR THEATER, INC., respondent.
PANGANIBAN, J.:
General propositions do not decide specific cases.
Rather, laws are interpreted in the context of the
peculiar factual situation of each proceeding. Each
case has its own flesh and blood and cannot be ruled

upon on the basis of isolated clinical classroom

principles.
While we agree with the general proposition that a
contract of sale is valid until rescinded, it is equally true
that ownership of the thing sold is not acquired by
mere agreement, but by tradition or delivery. The
peculiar facts of the present controversy as found by
this Court in an earlier relevant Decision show that
delivery was not actually effected; in fact, it was
prevented by a legally effective impediment. Not
having been the owner, petitioner cannot be entitled to
the civil fruits of ownership like rentals of the thing sold.
Furthermore, petitioner's bad faith, as again
demonstrated by the specific factual milieu of said
Decision, bars the grant of such benefits. Otherwise,
bad faith would be rewarded instead of punished.
The Case
Filed before this Court is a Petition for Review1 under
Rule 45 of the Rules of Court, challenging the March
11, 1998 Order2 of the Regional Trial Court of Manila
(RTC), Branch 8, in Civil Case No. 97-85141. The
dispositive portion of the assailed Order reads as
follows:
"WHEREFORE, the motion to dismiss filed by
defendant Mayfair is hereby GRANTED, and the
complaint filed by plaintiff Equatorial is hereby
DISMISSED."3
Also questioned is the May 29, 1998 RTC
Order4 denying petitioner's Motion for Reconsideration.
The Facts
The main factual antecedents of the present Petition
are matters of record, because it arose out of an earlier
case decided by this Court on November 21, 1996,

entitled Equatorial Realty Development, Inc. v. Mayfair

Theater, Inc.5 (henceforth referred to as the "mother
case"), docketed as G.R No. 106063.
Carmelo & Bauermann, Inc. ("Camelo" ) used to own a
parcel of land, together with two 2-storey buildings
constructed thereon, located at Claro M. Recto
Avenue, Manila, and covered by TCT No. 18529
issued in its name by the Register of Deeds of Manila.
On June 1, 1967, Carmelo entered into a Contract of
Lease with Mayfair Theater Inc. ("Mayfair") for a period
of 20 years. The lease covered a portion of the second
floor and mezzanine of a two-storey building with about
1,610 square meters of floor area, which respondent
used as a movie house known as Maxim Theater.
Two years later, on March 31, 1969, Mayfair entered
into a second Contract of Lease with Carmelo for the
lease of another portion of the latter's property
namely, a part of the second floor of the two-storey
building, with a floor area of about 1,064 square
meters; and two store spaces on the ground floor and
the mezzanine, with a combined floor area of about
300 square meters. In that space, Mayfair put up
another movie house known as Miramar Theater. The
Contract of Lease was likewise for a period of 20
years.
Both leases contained a provision granting Mayfair a
right of first refusal to purchase the subject properties.
However, on July 30, 1978 within the 20-year-lease
term the subject properties were sold by Carmelo to
Equatorial Realty Development, Inc. ("Equatorial") for
the total sum of P11,300,000, without their first being
offered to Mayfair.

As a result of the sale of the subject properties to

Equatorial, Mayfair filed a Complaint before the
Regional Trial Court of Manila (Branch 7) for (a) the
annulment of the Deed of Absolute Sale between
Carmelo and Equatorial, (b) specific performance, and
(c) damages. After trial on the merits, the lower court
rendered a Decision in favor of Carmelo and
Equatorial. This case, entitled "Mayfair" Theater, Inc. v.
Carmelo and Bauermann, Inc., et al.," was docketed as
Civil Case No. 118019.
On appeal (docketed as CA-GR CV No. 32918), the
Court of Appeals (CA) completely reversed and set
aside the judgment of the lower court.
The controversy reached this Court via G.R No.
106063. In this mother case, it denied the Petition for
Review in this wise:
"WHEREFORE, the petition for review of the
decision of the Court of Appeals, dated June 23,
1992, in CA-G.R. CV No. 32918, is HEREBY
DENIED. The Deed of Absolute Sale between
petitioners Equatorial Realty Development, Inc.
and Carmelo & Bauermann, Inc. is hereby
deemed rescinded; Carmelo & Bauermann is
ordered to return to petitioner Equatorial Realty
Development the purchase price. The latter is
directed to execute the deeds and documents
necessary to return ownership to Carmelo &
Bauermann of the disputed lots. Carmelo &
Bauermann is ordered to allow Mayfair Theater,
Inc. to buy the aforesaid lots for
P11,300,000.00."6
The foregoing Decision of this Court became final and
executory on March 17, 1997. On April 25, 1997,

Mayfair filed a Motion for Execution, which the trial

court granted.
However, Carmelo could no longer be located. Thus,
following the order of execution of the trial court,
Mayfair deposited with the clerk of court a quo its
payment to Carmelo in the sum of P11,300,000 less;
P847,000 as withholding tax. The lower court issued a
Deed of Reconveyance in favor of Carmelo and a
Deed of Sale in favor of Mayfair. On the basis of these
documents, the Registry of Deeds of Manila canceled
Equatorial's titles and issued new Certificates of
Title7 in the name of Mayfair.
Ruling on Equatorial's Petition for Certiorari and
Petition contesting the foregoing manner of execution,
the CA in its Resolution of November 20, 1998,
explained that Mayfair had no right to deduct the
P847,000 as withholding tax. Since Carmelo could no
longer be located, the appellate court ordered Mayfair
to deposit the said sum with the Office of the Clerk of
Court, Manila, to complete the full amount of
P11,300,000 to be turned over to Equatorial.
Equatorial questioned the legality of the above CA
ruling before this Court in G.R No. 136221 entitled
"Equatorial Realty Development, Inc. v. Mayfair
Theater, Inc." In a Decision promulgated on May 12,
2000,8 this Court directed the trial court to follow strictly
the Decision in GR. No. 106063, the mother case. It
explained its ruling in these words:
"We agree that Carmelo and Bauermann is
obliged to return the entire amount of eleven
million three hundred thousand pesos
(P11,300,000.00) to Equatorial. On the other
hand, Mayfair may not deduct from the purchase

price the amount of eight hundred forty-seven

thousand pesos (P847,000.00) as withholding
tax. The duty to withhold taxes due, if any, is
imposed on the seller Carmelo and Bauermann,
Inc."9
Meanwhile, on September 18, 1997 barely five
months after Mayfair had submitted its Motion for
Execution before the RTC of Manila, Branch 7
Equatorial filed with the Regional Trial Court of Manila,
Branch 8, an action for the collection of a sum of
money against Mayfair, claiming payment of rentals or
reasonable compensation for the defendant's use of
the subject premises after its lease contracts had
expired. This action was the progenitor of the present
case.
In its Complaint, Equatorial alleged among other things
that the Lease Contract covering the premises
occupied by Maxim Theater expired on May 31, 1987,
while the Lease Contract covering the premises
occupied by Miramar Theater lapsed on March 31,
1989.10 Representing itself as the owner of the subject
premises by reason of the Contract of Sale on July 30,
1978, it claimed rentals arising from Mayfair's
occupation thereof.
Ruling of the RTC Manila, Branch 8
As earlier stated, the trial court dismissed the
Complaint via the herein assailed Order and denied
the Motion for Reconsideration filed by Equatorial. 11
The lower court debunked the claim of petitioner for
unpaid back rentals, holding that the rescission of the
Deed of Absolute Sale in the mother case did not
confer on Equatorial any vested or residual proprietary
rights, even in expectancy.

In granting the Motion to Dismiss, the court a quo held

that the critical issue was whether Equatorial was the
owner of the subject property and could thus enjoy the
fruits or rentals therefrom. It declared the rescinded
Deed of Absolute Sale as avoid at its inception as
though it did not happen."
The trial court ratiocinated as follows:
"The meaning of rescind in the aforequoted
decision is to set aside. In the case of Ocampo v.
Court of Appeals, G.R. No. 97442, June 30,
1994, the Supreme Court held that, 'to rescind is
to declare a contract void in its inception and to
put an end as though it never were. It is not
merely to terminate it and release parties from
further obligations to each other but to abrogate it
from the beginning and restore parties to relative
positions which they would have occupied had
no contract ever been made.'
"Relative to the foregoing definition, the Deed of
Absolute Sale between Equatorial and Carmelo
dated July 31, 1978 is void at its inception as
though it did not happen.
"The argument of Equatorial that this complaint
for back rentals as 'reasonable compensation for
use of the subject property after expiration of the
lease contracts presumes that the Deed of
Absolute Sale dated July 30, 1978 from whence
the fountain of Equatorial's all rights flows is still
valid and existing.
xxx
xxx
xxx
"The subject Deed of Absolute Sale having been
rescinded by the Supreme Court, Equatorial is
not the owner and does not have any right to

demand backrentals from the subject property. . .

12

The trial court added: "The Supreme Court in the

Equatorial case, G.R No. 106063, has categorically
stated that the Deed of Absolute Sale dated July 31,
1978 has been rescinded subjecting the present
complaint to res judicata."13
Hence, the present recourse.14
Issues
Petitioner submits, for the consideration of this Court,
the following issues:15
"A
The basis of the dismissal of the Complaint by
the Regional Trial Court not only disregards basic
concepts and principles in the law on contracts
and in civil law, especially those on rescission
and its corresponding legal effects, but also
ignores the dispositive portion of the Decision of
the Supreme Court in G.R. No. 106063 entitled
'Equatorial Realty Development, Inc. & Carmelo
& Bauermann, Inc. vs. Mayfair Theater, Inc.'
"B.
The Regional Trial Court erred in holding that the
Deed of Absolute Sale in favor of petitioner by
Carmelo & Bauermann, Inc., dated July 31,
1978, over the premises used and occupied by
respondent, having been 'deemed rescinded' by
the Supreme Court in G.R. No. 106063, is 'void
at its inception as though it did not happen.'
"C.
The Regional Trial Court likewise erred in holding
that the aforesaid Deed of Absolute Sale, dated
July 31, 1978, having been 'deemed rescinded'

by the Supreme Court in G.R. No. 106063,

petitioner 'is not the owner and does not have
any right to demand backrentals from the subject
property,' and that the rescission of the Deed of
Absolute Sale by the Supreme Court does not
confer to petitioner 'any vested right nor any
residual proprietary rights even in expectancy.'
"D.
The issue upon which the Regional Trial Court
dismissed the civil case, as stated in its Order of
March 11, 1998, was not raised by respondent in
its Motion to Dismiss.
"E.
The sole ground upon which the Regional Trial
Court dismissed Civil Case No. 97-85141 is not
one of the grounds of a Motion to Dismiss under
Sec. 1 of Rule 16 of the 1997 Rules of Civil
Procedure."
Basically, the issues can be summarized into two: (1)
the substantive issue of whether Equatorial is entitled
to back rentals; and (2) the procedural issue of
whether the court a quo's dismissal of Civil Case No.
97-85141 was based on one of the grounds raised by
respondent in its Motion to Dismiss and covered by
Rule 16 of the Rules of Court.
This Court's Ruling
The Petition is not meritorious.
First Issue:
Ownership of Subject Properties
We hold that under the peculiar facts and
circumstances of the case at bar, as found by this
Court en banc in its Decision promulgated in 1996 in
the mother case, no right of ownership was transferred

from Carmelo to Equatorial in view of a patent failure to

deliver the property to the buyer.
Rental a Civil
Fruit of Ownership
To better understand the peculiarity of the instant case,
let us begin with some basic parameters. Rent is a civil
fruit16 that belongs to the owner of the property
producing it17 by right of accession.18 Consequently
and ordinarily, the rentals that fell due from the time of
the perfection of the sale to petitioner until its
rescission by final judgment should belong to the
owner of the property during that period.
By a contract of sale, "one of the contracting parties
obligates himself to transfer ownership of and to
deliver a determinate thing and the other to pay
therefor a price certain in money or its equivalent." 19
Ownership of the thing sold is a real right, 20 which the
buyer acquires only upon delivery of the thing to him
"in any of the ways specified in articles 1497 to 1501,
or in any other manner signifying an agreement that
the possession is transferred from the vendor to the
vendee."21 This right is transferred, not merely by
contract, but also by tradition or delivery.22 Non nudis
pactis sed traditione dominia rerum transferantur. And
there is said to be delivery if and when the thing sold
"is placed in the control and possession of the
vendee."23 Thus, it has been held that while the
execution of a public instrument of sale is recognized
by law as equivalent to the delivery of the thing
sold,24 such constructive or symbolic delivery, being
merely presumptive, is deemed negated by the failure
of the vendee to take actual possession of the land
sold.25

Delivery has been described as a composite act, a

thing in which both parties must join and the minds of
both parties concur. It is an act by which one party
parts with the title to and the possession of the
property, and the other acquires the right to and the
possession of the same. In its natural sense, delivery
means something in addition to the delivery of property
or title; it means transfer of possession.26 In the Law on
Sales, delivery may be either actual or constructive,
but both forms of delivery contemplate "the absolute
giving up of the control and custody of the property on
the part of the vendor, and the assumption of the same
by the vendee."27
Possession Never
Acquired by Petitioner
Let us now apply the foregoing discussion to the
present issue. From the peculiar facts of this case, it is
clear that petitioner never took actual
control and possession of the property sold, in view of
respondent's timely objection to the sale and the
continued actual possession of the property. The
objection took the form of a court action impugning the
sale which, as we know, was rescinded by a judgment
rendered by this Court in the mother case. It has been
held that the execution of a contract of sale as a form
of constructive delivery is a legal fiction. It holds true
only when there is no impediment that may prevent the
passing of the property from the hands of the vendor
into those of the vendee.28 When there is such
impediment, "fiction yields to reality the delivery has
not been effected."29
Hence, respondent's opposition to the transfer of the
property by way of sale to Equatorial was a legally

sufficient impediment that effectively prevented the

passing of the property into the latter's hands.
This was the same impediment contemplated in Vda.
de Sarmiento v. Lesaca,30 in which the Court held as
follows:
"The question that now arises is: Is there any
stipulation in the sale in question from which we
can infer that the vendor did not intend to deliver
outright the possession of the lands to the
vendee? We find none. On the contrary, it can be
clearly seen therein that the vendor intended to
place the vendee in actual possession of the
lands immediately as can be inferred from the
stipulation that the vendee 'takes actual
possession thereof . . . with full rights to dispose,
enjoy and make use thereof in such manner and
form as would be most advantageous to herself.'
The possession referred to in the contract
evidently refers to actual possession and not
merely symbolical inferable from the mere
execution of the document.
"Has the vendor complied with this express
commitment? she did not. As provided in Article
1462, the thing sold shall be deemed delivered
when the vendee is placed in
the control and possession thereof, which
situation does not here obtain because from the
execution of the sale up to the present the
vendee was never able to take possession of the
lands due to the insistent refusal of Martin
Deloso to surrender them claiming ownership
thereof. And although it is postulated in the same
article that the execution of a public document is

equivalent to delivery, this legal fiction only holds

true when there is no impediment that may
prevent the passing of the property from the
hands of the vendor into those of the vendee. x x
x."31
The execution of a public instrument gives rise,
therefore, only to a prima facie presumption of delivery.
Such presumption is destroyed when the instrument
itself expresses or implies that delivery was not
intended; or when by other means it is shown that
such delivery was not effected, because a third person
was actually in possession of the thing. In the latter
case, the sale cannot be considered consummated.
However, the point may be raised that under Article
1164 of the Civil Code, Equatorial as buyer acquired a
right to the fruits of the thing sold from the time the
obligation to deliver the property to petitioner
arose.32 That time arose upon the perfection of the
Contract of Sale on July 30, 1978, from which moment
the laws provide that the parties to a sale may
reciprocally demand performance.33 Does this mean
that despite the judgment rescinding the sale, the right
to the fruits34 belonged to, and remained enforceable
by, Equatorial?
Article 1385 of the Civil Code answers this question in
the negative, because "[r]escission creates the
obligation to return the things which were the object of
the contract, together with their fruits, and the price
with its interest; x x x" Not only the land and building
sold, but also the rental payments paid, if any, had to
be returned by the buyer.
Another point. The Decision in the mother case stated
that "Equatorial x x x has received rents" from Mayfair

"during all the years that this controversy has been

litigated." The Separate Opinion of Justice Teodoro
Padilla in the mother case also said that Equatorial
was "deriving rental income" from the disputed
property. Even hereinponente's Separate Concurring
Opinion in the mother case recognized these rentals.
The question now is: Do all these statements concede
actual delivery?
The answer is "No." The fact that Mayfair paid rentals
to Equatorial during the litigation should not be
interpreted to mean either actual delivery or ipso facto
recognition of Equatorial's title.
The CA Records of the mother case 35 show that
Equatorial as alleged buyer of the disputed
properties and as alleged successor-in-interest of
Carmelo's rights as lessor submitted two ejectment
suits against Mayfair. Filed in the Metropolitan Trial
Court of Manila, the first was docketed as Civil Case
No. 121570 on July 9, 1987; and thesecond, as Civil
Case No. 131944 on May 28, 1990. Mayfair eventually
won them both. However, to be able to maintain
physical possession of the premises while awaiting the
outcome of the mother case, it had no choice but to
pay the rentals.
The rental payments made by Mayfair should not be
construed as a recognition of Equatorial as the new
owner. They were made merely to avoid imminent
eviction. It is in this context that one should understand
the aforequoted factual statements in the ponencia in
the mother case, as well as the Separate Opinion of
Mr. Justice Padilla and the Separate Concurring
Opinion of the herein ponente.

At bottom, it may be conceded that, theoretically, a

rescissible contract is valid until rescinded. However,
thisgeneral principle is not decisive to the issue of
whether Equatorial ever acquired the right to collect
rentals. What is decisive is the civil law rule that
ownership is acquired, not by mere agreement, but by
tradition or delivery. Under the factual environment of
this controversy as found by this Court in the mother
case, Equatorial was never put in actual and effective
control or possession of the property because of
Mayfair's timely objection.
As pointed out by Justice Holmes, general propositions
do not decide specific cases. Rather, "laws are
interpreted in the context of the peculiar factual
situation of each case. Each case has its own flesh
and blood and cannot be decided on the basis of
isolated clinical classroom principles."36
In short, the sale to Equatorial may have been valid
from inception, but it was judicially rescinded before it
could be consummated. Petitioner never acquired
ownership, not because the sale was void, as
erroneously claimed by the trial court, but because the
sale was not consummated by a legally
effective delivery of the property sold.
Benefits Precluded by
Petitioner's Bad Faith
Furthermore, assuming for the sake of argument that
there was valid delivery, petitioner is not entitled to any
benefits from the "rescinded" Deed of Absolute Sale
because of its bad faith. This being the law of the
mother case decided in 1996, it may no longer be
changed because it has long become final and

executory. Petitioner's bad faith is set forth in the

following pertinent portions of the mother case:
"First and foremost is that the petitioners acted
in bad faith to render Paragraph 8 'inutile.'
xxx
xxx
xxx
"Since Equatorial is a buyer in bad faith, this
finding renders the sale to it of the property in
question rescissible. We agree with respondent
Appellate Court that the records bear out the fact
that Equatorial was aware of the lease contracts
because its lawyers had, prior to the sale,
studied the said contracts. As such, Equatorial
cannot tenably claim to be a purchaser in good
faith, and, therefore, rescission lies.
xxx
xxx
xxx
"As also earlier emphasized, the contract of sale
between Equatorial and Carmelo is characterized
by bad faith, since it was knowingly entered into
in violation of the rights of and to the prejudice of
Mayfair. In fact, as correctly observed by the
Court of Appeals, Equatorial admitted that its
lawyers had studied the contract of lease prior to
the sale. Equatorial's knowledge of the
stipulations therein should have cautioned it to
look further into the agreement to determine if it
involved stipulations that would prejudice its own
interests.
xxx
xxx
xxx
"On the part of Equatorial, it cannot be a buyer in
good faith because it bought the property with
notice and full knowledge that Mayfair had a right
to or interest in the property superior to its own.

Carmelo and Equatorial took unconscientious

advantage of Mayfair."37 (Italics supplied)
Thus, petitioner was and still is entitled solely to he
return of the purchase price it paid to Carmelo; no
more, no less. This Court has firmly ruled in the mother
case that neither of them is entitled to any
consideration of equity, as both "took unconscientious
advantage of Mayfair."38
In the mother case, this Court categorically denied the
payment of interest, a fruit of ownership. By the same
token, rentals, another fruit of ownership, cannot be
granted without mocking this Court's en banc Decision,
which has long become final.
Petitioner's claim of reasonable compensation for
respondent's use and occupation of the subject
property from the time the lease expired cannot be
countenanced. If it suffered any loss, petitioner must
bear it in silence, since it had wrought that loss upon
itself. Otherwise, bad faith would be rewarded instead
of punished.@lawphil.net
We uphold the trial court's disposition, not for the
reason it gave, but for (a) the patent failure to deliver
the property and (b) petitioner's bad faith, as above
discussed.
Second Issue:itc-alf
Ground in Motion to Dismiss
Procedurally, petitioner claims that the trial court
deviated from the accepted and usual course of judicial
proceedings when it dismissed Civil Case No. 9785141 on a ground not raised in respondent's Motion
to Dismiss. Worse, it allegedly based its dismissal on a
ground not provided for in a motion to dismiss as
enunciated in the Rules of Court.@lawphil.net

We are not convinced A review of respondent's Motion

to Dismiss Civil Case No. 97-85141 shows that there
were two grounds invoked, as follows:
"(A)
Plaintiff is guilty of forum-shopping.itc-alf
"(B)
Plaintiff's cause of action, if any, is barred by
prior judgment."39
The court a quo ruled, inter alia, that the cause of
action of petitioner plaintiff in the case below) had been
barred by a prior judgment of this Court in G.R No.
106063, the mother case.
Although it erred in its interpretation of the said
Decision when it argued that the rescinded Deed of
Absolute Sale was avoid," we hold, nonetheless, that
petitioner's cause of action is indeed barred by a prior
judgment of this Court. As already discussed, our
Decision in G.R No. 106063 shows that petitioner is
not entitled to back rentals, because it never became
the owner of the disputed properties due to a failure of
delivery. And even assuming arguendo that there was
a valid delivery, petitioner's bad faith negates its
entitlement to the civil fruits of ownership, like interest
and rentals.
Under the doctrine of res judicata or bar by prior
judgment, a matter that has been adjudicated by a
court of competent jurisdiction must be deemed to
have been finally and conclusively settled if it arises in
any subsequent litigation between the same parties
and for the same cause.40 Thus, "[a] final judgment on
the merits rendered by a court of competent jurisdiction
is conclusive as to the rights of the parties and their
privies and constitutes an absolute bar to subsequent

actions involving the same claim, demand, or cause of

action."41 Res judicata is based on the ground that the
"party to be affected, or some other with whom he is in
privity, has litigated the same matter in a former action
in a court of competent jurisdiction, and should not be
permitted to litigate it again.42
It frees the parties from undergoing all over again the
rigors of unnecessary suits and repetitive trials. At the
same time, it prevents the clogging of court dockets.
Equally important, it stabilizes rights and promotes the
rule of law.@lawphil.net
We find no need to repeat the foregoing disquisitions
on the first issue to show satisfaction of the elements
of res judicata. Suffice it to say that, clearly, our ruling
in the mother case bars petitioner from claiming back
rentals from respondent. Although the court a
quo erred when it declared "void from inception" the
Deed of Absolute Sale between Carmelo and
petitioner, our foregoing discussion supports the grant
of the Motion to Dismiss on the ground that our prior
judgment in G.R No. 106063 has already resolved the
issue of back rentals.
On the basis of the evidence presented during the
hearing of Mayfair's Motion to Dismiss, the trial court
found that the issue of ownership of the subject
property has been decided by this Court in favor of
Mayfair. We quote the RTC:
"The Supreme Court in the Equatorial case, G.R.
No. 106063 has categorically stated that the
Deed of Absolute Sale dated July 31, 1978 has
been rescinded subjecting the present complaint
to res judicata."43(Emphasis in the original)

Hence, the trial court decided the Motion to Dismiss on

the basis of res judicata, even if it erred in interpreting
the meaning of "rescinded" as equivalent to "void" In
short, it ruled on the ground raised; namely, bar by
prior judgment. By granting the Motion, it disposed
correctly, even if its legal reason for nullifying the sale
was wrong. The correct reasons are given in this
Decision.
WHEREFORE, the Petition is hereby DENIED. Costs
against petitioner.itc-alf

G.R. No. L-44606

November 28, 1938

VICENTE STO. DOMINGO BERNARDO, plaintiffappellant,

vs.
CATALINO BATACLAN, defendant-appellant.
TORIBIO TEODORO, purchaser-appellee.
Pedro de Leon for plaintiff-appellant.
Angel H. Mojica and Francisco Lavides for defendant
appellant.
Jose Y. Garde for appellee.

LAUREL, J.:

This is an appeal taken by both the plaintiff and the

defendant from the order of September 26, 1935,
hereinabove referred to, of the Court of First Instance
of Cavite in Civil Case No. 2428.
There is no controversy as to the facts. By a contract
of sale executed from Pastor Samonte and others
ownership of a parcel of land of about 90 hectares
situated in sitio Balayunan, Silang, Cavite. To secure
possession of the land from the vendors the said
plaintiff, on July 20, 1929, instituted Civil Case No.
1935 in the Court of First Instance of Cavite. The trial
court found for the plaintiff in a decision which was
affirmed by this Supreme Court on appeal (G.R. No.
33017). 1 When plaintiff entered upon the premises,
however, he found the defendant herein, Catalino
Bataclan, who appears to have been authorized by
former owners, as far back as 1922, to clear the land
and make improvements thereon. As Bataclan was not
a party in Case No. 1935, plaintiff, on June 11, 1931,
instituted against him, in the Court of First Instance of
Cavite, Civil Case No. 2428. In this case, plaintiff was
declared owner but the defendant was held to be a
possessor in good faith, entitled to reimbursement in
the total sum of P1,642, for work done and
improvements made. The dispositive part of the
decision reads:
Por las consideraciones expuestas, se declara al
demandante Vicente Santo Domingo Bernardo
dueo con derecho a la posesion del terreno que

se describe en la demanda, y al demandado

Catalino Bataclan con derecho a que del
demandante le pague la suma de P1,642 por
gastos utiles hechos de buena fe en el terreno, y
por el cerco y ponos de coco y abaca existentes
en el mismo, y con derecho, ademas a retener la
posesion del terreno hasta que se le pague dicha
cantidad. Al demandante puede optar, en el
plazo de treinta dias, a partir de la fecha en que
fuere notificado de la presente, por pagar esa
suma al demandado, haciendo asi suyos el
cerco y todas las plantaciones existentes en el
terreno, u obligar al demandado a pagarle el
precio terreno, a razon de trescientos pesos la
hectarea. En el caso de que el demandante
optara por que el demandado le pagara el precio
del terreno, el demandado efectuara el pago en
el plazo convenientes por las partes o que sera
fijado por el Juzgado. Sin costas.
Both parties appealed to this court (G. R. No.
37319). 2 The decision appealed from was modified by
allowing the defendant to recover compensation
amounting to P2,212 and by reducing the price at
which the plaintiff could require the defendant to
purchase the land in question from P300 to P200 per
hectare. Plaintiff was given by this court 30 days from
the date when the decision became final within which
to exercise his option, either to sell the land to the
defendant or to buy the improvements from him. On
January 9, 1934, the plaintiff manifested to the lower

court his desire "to require the defendant to pay him

the value of the land at the rate of P200 per hectare or
a total price of P18,000 for the whole tract of land." The
defendant informed the lower court that he was unable
to pay the land and, on January 24, 1934, an order
was issued giving the plaintiff 30 days within which to
pay the defendant the sum of P2,212 stating that, in
the event of failure to make such payment, the land
would be ordered sold at public auction "Para hacer
pago al demandante de la suma de P2,212 y el
remanente despues de deducidos los gastos legales
de la venta en publica subasta sera entregado al
demandante." On February 21, 1934, plaintiff moved to
reconsider the foregoing order so that he would have
preference over the defendant in the order of payment.
The motion was denied on March 1, 1934 but on
March 16 following the court below, motu
proprio modified its order of January 24, "en el sentido
de que el demandante tiene derecho preferente al
importe del terreno no se vendiere en publica subasta,
a razon de P200 por hectares y el remanente, si acaso
lo hubiere se entregara al demandado en pago de la
cantidad de P2,212 por la limpieza del terreno y las
mejoras introducidas en el mismo por el citado
demandado." On April 24, 1934, the court below, at the
instance of the plaintiff and without objection on the
part of the defendant, ordered the sale of the land in
question at public auction. The land was sold on April
5, 1935 to Toribio Teodoro, the highest bidder, for
P8,000. In the certificate of sale issued to said
purchaser on the very day of sale, it was stated that

the period of redemption of the land sold was to expire

on April 5, 1936. Upon petition of Toribio Teodoro the
court below ordered the provincial sheriff to issue
another certificate not qualified by any equity of
redemption. This was complied with by the sheriff on
July 30, 1935. On September 18, 1935, Teodoro
moved that he be placed in possession of the land
purchased by him. The motion was granted by order of
September 26, 1935, the dispositive part of which is as
follows:
Por tanto, se ordena al Sheriff Provincial de
Cavite ponga a Toribio Teodoro en posesion del
terreno comprado por el en subasta publica y por
el cual se le expidio certificado de venta
definitiva, reservando al demandado su derecho
de ejercitar una accion ordinaria para reclamar
del demandante la cantidad de P2,212 a que
tiene derecho por la limpieza y mejoras del
terreno y cuya suma, en justicia y equidad, debe
ser descontada y deducida de la suma de
P8,000 que ya ha recibido el demandante.
The Civil Code confirms certain time-honored
principles of the law of property. One of these is the
principle of accession whereby the owner of property
acquires not only that which it produces but that which
is united to it either naturally or artificially. (Art. 353.)
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 (art. 358).

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
coownership" (vol. 3, 4th ed., p. 213), 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 (art. 361). 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 to the ownership of the
accessory thing (3 Manresa, 4th ed., p. 213). In the
case before us, the plaintiff, as owner of the land,
chose to require the defendant, as owner of the
improvements, to pay for the land.
The defendant states that he is a possessor in good
faith and that the amount of P2,212 to which he is
entitled has not yet been paid to him. Therefore, he
says, he has a right to retain the land in accordance
with the provisions of article 453 of the Civil Code. We
do not doubt the validity of the premises stated.
"Considera la ley tan saarada y legitima la deuda, que,
hasta que sea pagada, no consiente que la cosa se
restituya all vencedor." (4 Manresa, 4th ed, p., 304.)
We find, however, that the defendant has lost his right
of retention. In obedience to the decision of this court

in G.R. No. 37319, the plaintiff expressed his desire to

require the defendant to pay for the value of the land.
The said defendant could have become owner of both
land and improvements and continued in possession
thereof. But he said he could not pay and the land was
sold at public auction to Toribio Teodoro. The law, as
we have already said, requires no more than that the
owner of the land should choose between indemnifying
the owner of the improvements or requiring the latter to
pay for the land. When he failed to pay for the land, the
defendant herein lost his right of retention.
The sale at public auction having been asked by the
plaintiff himself (p. 22, bill of exceptions) and the
purchase price of P8,000 received by him from Toribio
Teodoro, we find no reason to justify a rapture of the
situation thus created between them, the defendantappellant not being entitled, after all, to recover from
the plaintiff the sum of P2,212. lawphi1.net
The judgment of the lower court is accordingly
modified by eliminating therefrom the reservation made
in favor of the defendant-appellant to recover from the
plaintiff the sum of P2,212. In all the respects, the
same is affirmed, without pronouncement regarding
costs. So ordered.

G.R. No. L-175

April 30, 1946

DAMIAN IGNACIO, FRANCISCO IGNACIO and LUIS

IGNACIO, petitioners,
vs.
ELIAS HILARIO and his wife DIONISIA DRES, and
FELIPE NATIVIDAD, Judge of First Instance of
Pangasinan, respondents.
Leoncio R. Esliza for petitioners.
Mauricio M. Monta for respondents.
MORAN, C.J.:
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:
Wherefore, judgment is hereby rendered
declaring:
(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
(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.
No pronouncement is made as to damages and
costs.

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.
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.
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.
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.
We hold, therefore, that the order of Judge Natividad
compelling defendants-petitioners 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.
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.
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 plaintiffsrespondents 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.
The costs shall be paid by plaintiffs-respondents.

G.R. No. L-57288 April 30, 1984

LEONILA SARMINETO, petitioner,
vs.
HON. ENRIQUE A. AGANA, District Judge, Court of

First Instance of Rizal, Seventh Judicial District,

Branch XXVIII, Pasay City, and SPOUSES
ERNESTO VALENTINO and REBECCA LORENZOVALENTINO,respondents.
Mercedes M. Respicio for petitioner.
Romulo R. Bobadilla for private respondents.

MELENCIO-HERRERA, J.:+.wph!1
This Petition for certiorari questions a March 29, 1979
Decision rendered by the then Court of First Instance
of Pasay City. The Decision was one made on
memoranda, pursuant to the provisions of RA 6031,
and it modified, on October 17, 1977, a judgment of
the then Municipal Court of Paranaque, Rizal, in an
Ejectment suit instituted by herein petitioner Leonila
SARMIENTO against private respondents, the
spouses ERNESTO Valentino and Rebecca Lorenzo.
For the facts, therefore, we have to look to the
evidence presented by the parties at the original level.
It appears that while ERNESTO was still courting his
wife, the latter's mother had told him the couple could
build a RESIDENTIAL HOUSE on a lot of 145 sq. ms.,
being Lot D of a subdivision in Paranaque (the LAND,
for short). In 1967, ERNESTO did construct a
RESIDENTIAL HOUSE on the LAND at a cost of
P8,000.00 to P10,000.00. It was probably assumed

that the wife's mother was the owner of the LAND and
that, eventually, it would somehow be transferred to
the spouses.
It subsequently turned out that the LAND had been
titled in the name of Mr. & Mrs. Jose C. Santo, Jr. who,
on September 7 , 1974, sold the same to petitioner
SARMIENTO. The following January 6, 1975,
SARMIENTO asked ERNESTO and wife to vacate
and, on April 21, 1975, filed an Ejectment suit against
them. In the evidentiary hearings before the Municipal
Court, SARMIENTO submitted the deed of sale of the
LAND in her favor, which showed the price to be
P15,000.00. On the other hand, ERNESTO testified
that the then cost of the RESIDENTIAL HOUSE would
be from P30,000.00 to P40,000.00. The figures were
not questioned by SARMIENTO.
The Municipal Court found that private respondents
had built the RESIDENTIAL HOUSE in good faith, and,
disregarding the testimony of ERNESTO, that it had a
value of P20,000.00. It then ordered ERNESTO and
wife to vacate the LAND after SARMIENTO has paid
them the mentioned sum of P20,000.00.
The Ejectment suit was elevated to the Court of First
Instance of Pasay where, after the submission of
memoranda, said Court rendered a modifying Decision
under Article 448 of the Civil Code. SARMIENTO was
required, within 60 days, to exercise the option to
reimburse ERNESTO and wife the sum of 40,000.00

as the value of the RESIDENTIAL HOUSE, or the

option to allow them to purchase the LAND for
P25,000.00. SARMIENTO did not exercise any of the
two options within the indicated period, and ERNESTO
was then allowed to deposit the sum of P25,000.00
with the Court as the purchase price for the LAND.
This is the hub of the controversy. SARMIENTO then
instituted the instant certiorari proceedings.
We agree that ERNESTO and wife were builders in
good faith in view of the peculiar circumstances under
which they had constructed the RESIDENTIAL
HOUSE. As far as they knew, the LAND was owned by
ERNESTO's mother-in-law who, having stated they
could build on the property, could reasonably be
expected to later on give them the LAND.
In regards to builders in good faith, Article 448 of the
Code provides:t.hqw
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)
The value of the LAND, purchased for P15,000.00 on
September 7, 1974, could not have been very much
more than that amount during the following January
when ERNESTO and wife were asked to vacate.
However, ERNESTO and wife have not questioned the
P25,000.00 valuation determined by the Court of First
Instance.
In regards to the valuation of the RESIDENTIAL
HOUSE, the only evidence presented was the
testimony of ERNESTO that its worth at the time of the
trial should be from P30,000.00 to P40,000.00. The
Municipal Court chose to assess its value at
P20,000.00, or below the minimum testified by
ERNESTO, while the Court of First Instance chose the
maximum of P40,000.00. In the latter case, it cannot

be said that the Court of First Instance had abused its

discretion.
The challenged decision of respondent Court, based
on valuations of P25,000.00 for the LAND and
P40,000.00 for the RESIDENTIAL HOUSE, cannot be
viewed as not supported by the evidence. The
provision for the exercise by petitioner SARMIENTO of
either the option to indemnify private respondents in
the amount of P40,000.00, or the option to allow
private respondents to purchase the LAND at
P25,000.00, in our opinion, was a correct decision.t.
hqw
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 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. (Emphasis ours)

We hold, therefore, that the order of Judge

Natividad compelling defendantspetitioners to remove their buildings from
the land belonging to plaintiffs-respondents
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]).
WHEREFORE, the Petition for Certiorari is hereby
ordered dismissed, without pronouncement as to
costs.

G.R. No. L-57348 May 16, 1985

FRANCISCO DEPRA, plaintiff-appellee,
vs.
AGUSTIN DUMLAO, defendant-appellant.
Roberto D. Dineros for plaintiff-appellee.
Veil D. Hechanova for defendant-appellant.

MELENCIO-HERRERA, J.:
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.
Without pronouncement as to costs.
SO ORDERED.
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
effective in respect of possession only (Sec. 7, Rule
70, Rules of Court). 1 The Municipal Court over-

stepped its bounds when it imposed upon the parties a

situation of "forced lease", which like "forced coownership" 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), Judiciary Act of 1948; 2 Sec. 19 (2)
Batas Pambansa Blg. 129). 3 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 between the same parties
respecting title to the land. " 4
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 the building, and to
sell the encroached part of his land, 5 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 fails to pay for the
same. 6 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 plaintiffs-respondents
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]).
A word anent the philosophy behind Article 448 of the
Civil rode.
The original provision 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.
. . . es justa la facultad que el codigo da al
dueno del suelo en el articulo 361, en el
caso de edificacion o plantacion? Algunos
comentaristas la conceptuan injusta, y

como un extraordinario privilegio en favor

de la propiedad territorial. Entienden que
impone el Codigo una pena al poseedor de
buena fe y como advierte uno de los
comentaristas aludidos 'no se ve claro el
por que de tal pena . . . al obligar al que
obro de buena fe a quedarse con el edificio
o plantacion, previo el pago del terreno que
ocupa, porque si bien es verdad que
cuando edifico o planto demostro con este
hecho, que queria para si el edificio o
plantio tambien lo es que el que edifico o
planto de buena fe lo hizo en la erronea
inteligencia de creerse dueno del terreno
Posible es que, de saber lo contrario, y de
tener noticia de que habia que comprar y
pagar el terreno, no se hubiera decidido a
plantar ni a edificar. La ley obligandole a
hacerlo fuerza su voluntad, y la fuerza por
un hecho inocente de que no debe ser
responsable'. Asi podra suceder pero la
realidad es que con ese hecho voluntario,
aunque sea inocente, se ha enriquecido
torticeramente con perjuicio de otro a quien
es justo indemnizarle,
En nuestra opinion, el Codigo ha resuelto
el conflicto de la manera mas justa y
equitativa y respetando en lo possible el
principio que para la accesion se establece
en el art. 358. 7

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:

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; Marfori vs. Velasco,
[C.A.] 52 Off. Gaz. 2050). 8
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.

TECNOGAS
PHILIPPINES
MANUFACTURING
CORPORATION, petitioner, vs. COURT OF
APPEALS
(FORMER
SPECIAL
SEVENTEENTH DIVISION) and EDUARDO
UY, respondents.
DECISION
PANGANIBAN, J.:

The parties in this case are owners of adjoining lots

in Paraaque, Metro Manila. It was discovered in a
survey that a portion of a building of petitioner, which
was presumably constructed by its predecessor-ininterest, encroached on a portion of the lot owned by
private respondent. What are the rights and
obligations of the parties? Is petitioner considered a
builder in bad faith because, as held by respondent
Court, he is presumed to know the metes and bounds
of his property as described in his certificate of
title? Does petitioner succeed into the good faith or
bad faith of his predecessor-in-interest which
presumably constructed the building?
These are the questions raised in the petition for
review of the Decision[1] dated August 28, 1992, in CAG.R. CV No. 28293 of respondent Court [2] where the
disposition reads:[3]
WHEREFORE, premises considered, the Decision of
the Regional Trial Court is hereby reversed and set
aside and another one entered 1. Dismissing the complaint for lack of cause of action;
2. Ordering Tecnogas to pay the sum of P2,000.00 per
month as reasonable rental from October 4, 1979 until
appellee vacates the land;
3. To remove the structures and surrounding walls on
the encroached area;

4. Ordering appellee to pay the value of the land

occupied by the two-storey building;
5. Ordering appellee to pay the sum of P20,000.00
for and as attorneys fees;
6. Costs against appellee.
Acting on the motions for reconsideration of both
petitioner and private respondent, respondent Court
ordered the deletion of paragraph 4 of the dispositive
portion in an Amended Decision dated February 9,
1993, as follows:[4]
WHEREFORE, premises considered, our decision of
August 28, 1992 is hereby modified deleting paragraph
4 of the dispositive portion of our decision which reads:
4.
Ordering appellee to pay the value of the land
occupied by the two-storey building.
The motion for reconsideration of appellee is hereby
DENIED for lack of merit.
The foregoing Amended Decision
challenged in the instant petition.

is

also

The Facts
The facts are not disputed. Respondent Court
merely reproduced the factual findings of the trial court,
as follows:[5]

That plaintiff (herein petitioner) which is a corporation

duly organized and existing under and by virtue of
Philippine laws is the registered owner of a parcel of
land situated in Barrio San Dionisio, Paraaque, Metro
Manila known as Lot 4331-A (should be 4531-A) of Lot
4531 of the Cadastral Survey of Paraaque, Metro
Manila, covered by Transfer Certificate of Title No.
409316 of the Registry of Deeds of the Province of
Rizal; that said land was purchased by plaintiff from
Pariz Industries, Inc. in 1970, together with all the
buildings and improvements including the wall existing
thereon; that the defendant (herein private respondent)
is the registered owner of a parcel of land known as
Lot No. 4531-B of Lot 4531 of the Cadastral Survey of
Paraaque, LRC (GLRO) Rec. No. 19645 covered by
Transfer Certificate of Title No. 279838, of the Registry
of Deeds for the Province of Rizal; that said land which
adjoins plaintiffs land was purchased by defendant
from a certain Enrile Antonio also in 1970; that in 1971,
defendant purchased another lot also adjoining
plaintiffs land from a certain Miguel Rodriguez and the
same was registered in defendants name under
Transfer Certificate of Title No. 31390, of the Registry
of Deeds for the Province of Rizal; that portions of the
buildings and wall bought by plaintiff together with the
land from Pariz Industries are occupying a portion of
defendants adjoining land; that upon learning of the
encroachment or occupation by its buildings and wall
of a portion of defendants land, plaintiff offered to buy
from defendant that particular portion of defendants
land occupied by portions of its buildings and wall with

an area of 770 square meters, more or less, but

defendant, however, refused the offer. In 1973, the
parties entered into a private agreement before a
certain Col. Rosales in Malacaang, wherein plaintiff
agreed to demolish the wall at the back portion of its
land thus giving to defendant possession of a portion
of his land previously enclosed by plaintiffs wall; that
defendant later filed a complaint before the office of
Municipal Engineer of Paraaque, Metro Manila as
well as before the Office of the Provincial Fiscal of
Rizal against plaintiff in connection with the
encroachment or occupation by plaintiffs buildings and
walls of a portion of its land but said complaint did not
prosper; that defendant dug or caused to be dug a
canal along plaintiffs wall, a portion of which collapsed
in June, 1980, and led to the filing by plaintiff of the
supplemental complaint in the above-entitled case and
a separate criminal complaint for malicious mischief
against defendant and his wife which ultimately
resulted into the conviction in court of defendants wife
for the crime of malicious mischief; that while trial of
the case was in progress, plaintiff filed in Court a
formal proposal for settlement of the case but said
proposal, however, was ignored by defendant.
After trial on the merits, the Regional Trial Court [6] of
Pasay City, Branch 117, in Civil Case No. PQ-7631-P,
rendered a decision dated December 4, 1989 in favor
of petitioner who was the plaintiff therein. The
dispositive portion reads:[7]

WHEREFORE, judgment is hereby rendered in favor

of plaintiff and against defendant and ordering the
latter to sell to plaintiff that portion of land owned by
him and occupied by portions of plaintiffs buildings
and wall at the price of P2,000.00 per square meter
and to pay the former:

Whether or not the respondent Court of Appeals

erred in holding the petitioner a builder in bad faith
because it is presumed to know the metes and
bounds of his property.

1. The sum of P44,000.00 to compensate for the

losses in materials and properties incurred by plaintiff
through thievery as a result of the destruction of its
wall;

Whether or not the respondent Court of Appeals

erred when it used the amicable settlement
between the petitioner and the private respondent,
where both parties agreed to the demolition of the
rear portion of the fence, as estoppel amounting to
recognition by petitioner of respondents right over
his property including the portions of the land
where the other structures and the building stand,
which were not included in the settlement.

2. The sum of P7,500.00 as and by way of attorneys

fees; and
3. The costs of this suit.
Appeal was duly interposed with respondent Court,
which as previously stated, reversed and set aside the
decision of the Regional Trial Court and rendered the
assailed Decision and Amended Decision. Hence, this
recourse under Rule 45 of the Rules of Court.
The Issues
The petition raises the following issues:[8]
(A)

(B)

(C)
Whether or not the respondent Court of Appeals erred
in ordering the removal of the structures and
surrounding walls on the encroached area and in
withdrawing its earlier ruling in its August 28, 1992
decision for the petitioner to pay for the value of the
land occupied by the building, only because the
private respondent has manifested its choice to
demolish it despite the absence of compulsory sale
where the builder fails to pay for the land, and which
choice private respondent deliberately deleted from its
September 1, 1980 answer to the supple-mental
complaint in the Regional Trial Court.

In its Memorandum, petitioner poses the following

issues:
A
The time when to determine the good faith of the
builder under Article 448 of the New Civil Code, is
reckoned during the period when it was actually being
built; and in a case where no evidence was
presented nor introduced as to the good faith or bad
faith of the builder at that time, as in this case, he must
be presumed to be a builder in good faith, since bad
faith cannot be presumed.[9]
B.
In a specific boundary overlap situation which involves
a builder in good faith, as in this case, it is now well
settled that the lot owner, who builds on the adjacent
lot is not charged with constructive notice of the
technical metes and bounds contained in their torrens
titles to determine the exact and precise extent of his
boundary perimeter.[10]
C.

The respondent courts citation of the twin cases

of Tuason & Co. v. Lumanlan and Tuason & Co. v.
Macalindong is not the judicial authority for a
boundary dispute situation between adjacent torrens
titled lot owners, as the facts of the present case
do not fall within nor square with the involved principle
of a dissimilar case.[11]
D.
Quite contrary to respondent Uys reasoning, petitioner
Tecnogas continues to be a builder in good faith, even
if it subsequently built/repaired the walls/other
permanent structures thereon while the case a quowas
pending and even while respondent sent the petitioner
many letters/filed cases thereon.[12]
D. (E.)
The amicable settlement between the parties should
be interpreted as a contract and enforced only in
accordance with its explicit terms, and not over and
beyond that agreed upon; because the courts
do nothave the power to create a contract nor expand
its scope.[13]
E. (F.)
As a general rule, although the landowner has the
option to choose between: (1) buying the building built
in good faith, or (2) selling the portion of his land on
which stands the building under Article 448 of the Civil

Code; the first option is not absolute, because

an exception thereto, once it would be impractical for
the landowner to choose to exercise the first
alternative, i.e. buy that portion of the house standing
on his land, for the whole building might be rendered
useless. The workable solution is for him to select the
second alternative, namely, to sell to the builder that
part of his land on which was constructed a portion of
the house.[14]
Private respondent, on the other hand, argues that
the petition is suffering from the following flaws: [15]
1. It did not give the exact citations of cases
decided by the Honorable Supreme Court that
allegedly contradicts the ruling of the Hon. Court
of Appeals based on the doctrine laid down in
Tuason vs. Lumanlan case citing also Tuason vs.
Macalindong case (Supra).
2. Assuming that the doctrine in the alleged Co Tao
vs. Chico case is contradictory to the doctrine in
Tuason vs. Lumanlan and Tuason vs.
Macalindong, the two cases being more current,
the same should prevail.
Further, private respondent contends that the following
unmistakably point to the bad faith of petitioner: (1)
private respondents purchase of the two lots, was
ahead of the purchase by petitioner of the building and
lot from Pariz Industries; (2) the declaration of the

General Manager of Tecnogas that the sale between

petitioner and Pariz Industries was not registered
because of some problems with China Banking
Corporation; and (3) the Deed of Sale in favor of
petitioner was registered in its name only in the month
of May 1973.[16]
The Courts Ruling
The petition should be granted.
Good Faith or Bad Faith
Respondent Court, citing the cases of J. M.
Tuason & Co., Inc. vs. Vda. de Lumanlan [17] and J. M.
Tuason & Co., Inc. vs. Macalindong,[18] ruled that
petitioner cannot be considered in good faith because
as a land owner, it is presumed to know the metes
and bounds of his own property, specially if the same
are reflected in a properly issued certificate of
title. One who erroneously builds on the adjoining lot
should be considered a builder in (b)ad (f)aith, there
being presumptive knowledge of the Torrens title, the
area, and the extent of the boundaries. [19]
We disagree with respondent Court. The two
cases it relied upon do not support its main
pronouncement that a registered owner of land has
presumptive knowledge of the metes and bounds of its
own land, and is therefore in bad faith if he mistakenly
builds on an adjoining land. Aside from the fact that
those cases had factual moorings radically different

from those obtaining here, there is nothing in those

cases which would suggest, however remotely, that
bad faith is imputable to a registered owner of land
when a part of his building encroaches upon a
neighbors land, simply because he is supposedly
presumed to know the boundaries of his land as
described in his certificate of title. No such doctrinal
statement could have been made in those cases
because such issue was not before the Supreme
Court. Quite the contrary, we have rejected such a
theory in Co Tao vs. Chico,[20] where we held that
unless one is versed in the science of surveying, no
one can determine the precise extent or location of his
property by merely examining his paper title.

his ignorance of any defect or flaw in his title. [23] Hence,

such good faith, by law, passed on to Parizs
successor, petitioner in this case. Further, (w)here
one derives title to property from another, the act,
declaration, or omission of the latter, while holding the
title, in relation to the property, is evidence against the
former.[24] And possession acquired in good faith does
not lose this character except in case and from the
moment facts exist which show that the possessor is
not unaware that he possesses the thing improperly or
wrongfully.[25] The good faith ceases from the moment
defects in the title are made known to the possessor,
by extraneous evidence or by suit for recovery of the
property by the true owner.[26]

There is no question that when petitioner

purchased the land from Pariz Industries, the buildings
and other structures were already in existence. The
record is not clear as to who actually built those
structures, but it may well be assumed that petitioners
predecessor-in-interest,
Pariz
Industries,
did
so. Article 527 of the Civil Code presumes good faith,
and since no proof exists to show that the
encroachment over a narrow, needle-shaped portion of
private respondents land was done in bad faith by the
builder of the encroaching structures, the latter should
be presumed to have built them in good faith. [21] It is
presumed that possession continues to be enjoyed in
the same character in which it was acquired, until the
contrary is proved.[22] Good faith consists in the belief
of the builder that the land he is building on is his, and

Recall that the encroachment in the present case

was caused by a very slight deviation of the erected
wall (as fence) which was supposed to run in a straight
line from point 9 to point 1 of petitioners lot. It was an
error which, in the context of the attendant facts, was
consistent with good faith. Consequently, the builder, if
sued by the aggrieved landowner for recovery of
possession, could have invoked the provisions of Art.
448 of the Civil Code, which reads:
The owner of the land on which anything has been
built, sown or planted in good faith, shall have the right
to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in
articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who

sowed, the proper rent. However, the builder or

planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In
such case, he shall pay reasonable rent, if the owner
of the land does not choose to appropriate the building
or trees after proper indemnity. The parties shall agree
upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.
The obvious benefit to the builder under this article is
that, instead of being outrightly ejected from the land,
he can compel the landowner to make a choice
between the two options: (1) to appropriate the building
by paying the indemnity required by law, or (2) sell the
land to the builder. The landowner cannot refuse to
exercise either option and compel instead the owner of
the building to remove it from the land.[27]
The question, however, is whether the same benefit
can be invoked by petitioner who, as earlier stated, is
not the builder of the offending structures but
possesses them as buyer.
We answer such question in the affirmative.
In the first place, there is no sufficient showing that
petitioner was aware of the encroachment at the time it
acquired the property from Pariz Industries. We agree
with the trial court that various factors in evidence
adequately show petitioners lack of awareness
thereof. In any case, contrary proof has not

overthrown the presumption of good faith under Article

527 of the Civil Code, as already stated, taken together
with the disputable presumptions of the law on
evidence. These presumptions state, under Section 3
(a) of Rule 131 of the Rules of Court, that the person is
innocent of a crime or wrong; and under Section 3 (ff)
of Rule 131, that the law has been obeyed. In fact,
private respondent Eduardo Uy himself was unaware
of such intrusion into his property until after 1971 when
he hired a surveyor, following his purchase of another
adjoining lot, to survey all his newly acquired
lots. Upon being apprised of the encroachment,
petitioner immediately offered to buy the area occupied
by its building -- a species of conduct consistent with
good faith.
In the second place, upon delivery of the property
by Pariz Industries, as seller, to the petitioner, as
buyer, the latter acquired ownership of the
property. Consequently and as earlier discussed,
petitioner is deemed to have stepped into the shoes of
the seller in regard to all rights of ownership over the
immovable sold, including the right to compel the
private respondent to exercise either of the two options
provided under Article 448 of the Civil Code.
Estoppel
Respondent Court ruled that the amicable
settlement entered into between petitioner and private
respondent estops the former from questioning the

private respondents right over the disputed

property. It held that by undertaking to demolish the
fence under said settlement, petitioner recognized
private respondents right over the property, and
cannot later on compel private respondent to sell to
it the land since private respondent is under no
obligation to sell.[28]

to be subject to negotiation by herein parties. The

settlement may have recognized the ownership of
private respondent but such admission cannot be
equated with bad faith. Petitioner was only trying to
avoid a litigation, one reason for entering into an
amicable settlement.

We do not agree. Petitioner cannot be held in

estoppel for entering into the amicable settlement, the
pertinent portions of which read:[29]

[30]

That the parties hereto have agreed that the rear

portion of the fence that separates the property of the
complainant and respondent shall be demolished up to
the back of the building housing the machineries which
demolision (sic) shall be undertaken by the
complainant at anytime.
That the fence which serve(s) as a wall housing the
electroplating machineries shall not be demolished in
the mean time which portion shall be subject to
negotiation by herein parties.
From the foregoing, it is clear that petitioner agreed
only to the demolition of a portion of the wall
separating the adjoining properties of the parties
-- i.e. up to the back of the building housing the
machineries. But that portion of the fence which
served as the wall housing the electroplating
machineries was not to be demolished. Rather, it was

As was ruled in Osmea vs. Commission on Audit,

A compromise is a bilateral act or transaction that is
expressly acknowledged as a juridical agreement by
the Civil Code and is therein dealt with in some
detail. `A compromise, declares Article 2208 of said
Code, `is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end
to one already commenced.
xxx

xxx

xxx

The Civil Code not only defines and authorizes

compromises, it in fact encourages them in civil
actions. Art. 2029 states that `The Court shall
endeavor to persuade the litigants in a civil case to
agree upon some fair compromise. x x x.
In the context of the established facts, we hold that
petitioner did not lose its rights under Article 448 of the
Civil Code on the basis merely of the fact that some
years after acquiring the property in good faith, it
learned about -- and aptly recognized -- the right of
private respondent to a portion of the land occupied by

its building. The supervening awareness of the

encroachment by petitioner does not militate against its
right to claim the status of a builder in good faith. In
fact, a judicious reading of said Article 448 will readily
show that the landowners exercise of his option can
only take place after the builder shall have come to
know of the intrusion -- in short, when both parties
shall have become aware of it. Only then will the
occasion for exercising the option arise, for it is only
then that both parties will have been aware that a
problem exists in regard to their property rights.
Options of Private Respondent
What then is the applicable provision in this case
which private respondent may invoke as his
remedy: Article 448 or Article 450[31] of the Civil
Code?
In view of the good faith of both petitioner and
private respondent, their rights and obligations are to
be governed by Art. 448. The essential fairness of this
codal provision has been pointed out by Mme. Justice
Ameurfina Melencio-Herrera, citing Manresa and
applicable precedents, in the case of Depra vs.
Dumlao,[32] to wit:
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 impracticality 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 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; Marfori vs. Velasco, [C.A.] 52 Off. Gaz.
2050).
The private respondents insistence on the removal
of the encroaching structures as the proper remedy,
which respondent Court sustained in its assailed
Decisions, is thus legally flawed. This is not one of the
remedies bestowed upon him by law. It would be
available only if and when he chooses to compel the
petitioner to buy the land at a reasonable price but the
latter fails to pay such price. [33] This has not taken
place. Hence, his options are limited to: (1)
appropriating the encroaching portion of petitioners
building after payment of proper indemnity, or (2)
obliging the latter to buy the lot occupied by the
structure. He cannot exercise a remedy of his own
liking.

Neither is petitioners prayer that private

respondent be ordered to sell the land [34] the proper
remedy. While that was dubbed as the more workable
solution in Grana and Torralba vs. The Court of
Appeals, et al.,[35] it was not the relief granted in that
case as the landowners were directed to exercise
within 30 days from this decision their option to either
buy the portion of the petitioners house on their land or
sell to said petitioners the portion of their land on which
it stands.[36] Moreover, in Grana and Torralba, the area
involved was only 87 square meters while this case
involves 520 square meters[37]. In line with the case of
Depra vs. Dumlao,[38] this case will have to be
remanded to the trial court for further proceedings to
fully implement the mandate of Art. 448. It is a rule of
procedure for the Supreme Court to strive to settle the
entire controversy in a single proceeding leaving no
root or branch to bear the seeds of future litigation. [39]
Petitioner, however, must also pay the rent for the
property occupied by its building as prescribed by
respondent Court from October 4, 1979, but only up to
the date private respondent serves notice of its option
upon petitioner and the trial court; that is, if such option
is for private respondent to appropriate the
encroaching structure. In such event, petitioner would
have a right of retention which negates the obligation
to pay rent.[40] The rent should however continue if the
option chosen is compulsory sale, but only up to the
actual transfer of ownership.

The award of attorneys fees by respondent Court

against petitioner is unwarranted since the action
appears to have been filed in good faith. Besides,
there should be no penalty on the right to litigate. [41]
WHEREFORE, premises considered, the petition is
hereby GRANTED and the assailed Decision and the
Amended Decision are REVERSED and SET
ASIDE. In accordance with the case of Depra vs.
Dumlao,[42] this case is REMANDED to the Regional
Trial Court of Pasay City, Branch 117, for further
proceedings consistent with Articles 448 and 546 [43] of
the Civil Code, as follows:
The trial court shall determine:
a)
the present fair price of private respondents
520 square-meter area of land;
b)

the increase in value (plus value) which

the said area of 520 square meters may
have acquired by reason of the existence
of the portion of the building on the area;

c)
the fair market value of the encroaching
portion of the building; and
d)

whether the value of said area of land is

considerably more than the fair market
value of the portion of the building thereon.

2. After said amounts shall have been determined by

competent evidence, the regional trial court shall
render judgment as follows:
a) The private respondent shall be granted a
period of fifteen (15) days within which to
exercise his option under the law (Article 448,
Civil Code), whether to appropriate the
portion of the building as his own by paying to
petitioner its fair market value, or to oblige
petitioner to pay the price of said area. The
amounts to be respectively paid by petitioner
and private respondent, 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 trial court in favor of the party
entitled to receive it;
b) If private respondent exercises the option to
oblige petitioner 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
portion of the building, petitioner shall give
written notice of such rejection to private
respondent and to the trial court within fifteen
(15) days from notice of private respondents
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 trial court formal written notice of
the 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 two
thousand pesos (P2,000.00) 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
1970 that petitioner has occupied the subject
area. The rental thus fixed shall be increased
by ten percent (10%) for the second year of
the forced lease. Petitioner shall not make
any further constructions or improvements on
the building. Upon expiration of the two-year
period, or upon default by petitioner in the
payment of rentals for two (2) consecutive
months, private respondent shall be entitled
to terminate the forced lease, to recover his
land, and to have the portion of the building
removed by petitioner or at latters
expense. The rentals herein provided shall
be tendered by petitioner to the trial court for
payment to private respondent, and such

tender shall constitute evidence of whether or

not compliance was made within the period
fixed by the said court.

G.R. No. L-32974 July 30, 1979

c) In any event, petitioner shall pay private

respondent an amount computed at two
thousand pesos (P2,000.00) per month as
reasonable compensation for the occupancy
of private respondents land for the period
counted from October 4, 1979, up to the date
private respondent serves notice of its option
to appropriate the encroaching structures,
otherwise up to the actual transfer of
ownership to petitioner or, in case a forced
lease has to be imposed, up to the
commencement date of the forced lease
referred to in the preceding paragraph;

BARTOLOME ORTIZ, petitioner,

vs.
HON. UNION C. KAYANAN, in his capacity as
Judge of the Court of First Instance of Quezon,
Branch IV; ELEUTERIO ZAMORA, QUIRINO
COMINTAN, VICENTE FERRO, AND GREGORIO
PAMISARAN, respondents.

d) The periods to be fixed by the trial court in its

decision shall be non-extendible, 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.

ANTONIO, J.:1wph1.t

Salonga, Ordo;ez, Yap, Sicat & Associates and

Salvador, Ulgado & Carbon for petitioner.
Jose A. Cusi for private respondents.

Petition for certiorari and Prohibition with Preliminary

Injunction to nullify the Order of respondent Judge
directing the execution of the final judgment in Civil
Case No. C-90, entitled "Bartolome Ortiz vs. Secretary
of Agriculture and Natural Resources, et al.," and the
Writ of Execution issued to implement said Order,
allegedly for being inconsistent with the judgment
sought to be enforced.
Civil Case No. C-90 was filed by Bartolome Ortiz who
sought the review and/or annulment of the decision of

the Secretary of Agriculture and Natural Resources,

giving preference to the sales applications of private
respondents Quirino Comintan and Eleuterio Zamora
over Lot No. 5785, PLS-45, located at Barrio
Cabuluan, Calauag, Quezon.
I
The factual background of the case, as found by
respondent Court, is as follows:t.hqw
... The lot in controversy was formerly the
subject of Homestead Application No.
122417 of Martin Dolorico II, plaintiff's ward
who died on August 20, 1931; that since
then it was plaintiff who continued the
cultivation and possession of the property,
without however filing any application to
acquire title thereon; that in the Homestead
Application No. 122417, Martin Dolorico II
named his uncle, Martin Dolorico I as his
heir and successor in interest, so that in
1951 Martin Dolorico I executed an affidavit
relinquishing his rights over the property in
favor of defendants Quirino Comintan and
Eleuterio Zamora, his grandson and son-inlaw, respectively, and requested the
Director of Lands to cancel the homestead
application; that on the strength of the
affidavit, Homestead Application No.
122417 was cancelled and thereafter,

defendants Comintan and Zamora filed

their respective sales applications Nos.
8433 and 9258; that plaintiff filed his
protest on November 26, 1951 alleging that
he should be given preference to purchase
the lot inasmuch as he is the actual
occupant and has been in continuous
possession of the same since 1931; and
inspite of plaintiff's opposition, "Portion A"
of the property was sold at public auction
wherein defendant Comintan was the only
bidder; that on June 8, 1957, investigation
was conducted on plaintiff's protest by
Assistant Public Lands Inspector Serapion
Bauzon who submitted his report to the
Regional Land Officer, and who in turn
rendered a decision on April 9, 1958,
dismissing plaintiff's claim and giving due
course to defendants' sales applications on
the ground that the relinquishment of the
homestead rights of Martin Dolorico I in
favor of Comintan and Zamora is proper,
the former having been designated as
successor in interest of the original
homestead applicant and that because
plaintiff failed to participate in the public
auction, he is forever barred to claim the
property; that plaintiff filed a motion for
reconsideration of this decision which was
denied by the Director of Lands in his order
dated June 10, 1959; that, finally, on

appeal to the Secretary of Agriculture and

Natural Resources, the decision rendered
by the Regional Land Officer was
affirmed in toto. 1
On March 22, 1966, respondent Court rendered
judgment in the afore-mentioned civil case, the
dispositive portion of which reads as follows:t.
hqw
IN VIEW OF THE FOREGOING
CONSIDERATIONS, judgment is hereby
rendered awarding Lot No. 5785-A of PLS45, (Calauag Public Land Subdivision) onehalf portion of the property in litigation
located at Bo. Cabuluan, Calauag,
Quezon, in favor of defendant QUIRINO
COMINTAN, being the successful bidder in
the public auction conducted by the bureau
of Lands on April 18, 1955, and hereby
giving due course to the Sales Application
No. 9258 of defendant Eleuterio Zamora
over the other half, Lot No. 5785-B of PLS45, Calauag, without prejudice to the right
of plaintiff BARTOLOME ORTIZ to
participate in the public bidding of the same
to be announced by the Bureau of Lands,
Manila. However, should plaintiff Bartolome
Ortiz be not declared the successful bidder
thereof, defendants Quirino Comintan and
Eleuterio Zamora are ordered to reimburse

jointly said plaintiff the improvements he

has introduced on the whole property in the
amount of THIRTEEN THOUSAND SIX
HUNDRED THIRTY-TWO (P13,632.00)
PESOS, the latter having the right to retain
the property until after he has been fully
paid therefor, without interest since he
enjoys the fruits of the property in
question, with prejudice and with costs
again the plaintiff. 2
Plaintiff appealed the decision to the Court of Appeals.
Two (2) years after the rendition of the judgment by the
court a quo, while the case was pending appeal and
upon petition of private respondents Quirino Comintan
and Eleuterio Zamora, respondent Court appointed
respondent Vicente Ferro, Clerk of Court, as Receiver
to collect tolls on a portion of the property used as a
diversion road. On August 19, 1969, the Court of
Appeals issued a Resolution annulling the Order
appointing the Receiver. Subsequently, on February
19, 1970, the Appellate Court affirmed the decision of
the trial court. A petition for review on certiorari of the
decision of the Court of Appeals was denied by this
Court on April 6, 1970. At this point, private
respondents filed a petition for appointment of a new
receiver with the court a quo. This petition was granted
and the receiver was reappointed. Petitioner sought
the annulment of this Order with the Court of Appeals,
but said Court ruled that its decision had already

become final and that the records of the case were to

be remanded to the trial court.
Not satisfied with such denial, petitioner filed a
petitioner for certiorari, prohibition and mandamus with
preliminary injunction before this Court, 3 praying for
the annulment of the Order reappointing the Receiver.
On July 13, 1970, the petition was dismissed by this
Court on the ground of insufficient showing of grave
abuse of discretion.
II
The judgment having become final and executory
private respondents filed a motion for the execution of
the same, praying as follows:t.hqw
WHEREFORE, it is respectfully prayed of
this Honorable Court to order the issuance
of a writ of execution in accordance with
the judgment of this Honorable Court,
confirmed by the Court of Appeals and the
Supreme Court, commanding any lawful
officer to deliver to defendants Comintan
and Zamora the land subject of the
decision in this case but allowing
defendants to file a bond in such amount
as this Honorable Court may fix, in lieu of
the P13,632.00 required to be paid to
plaintiff, conditioned that after the
accounting of the tools collected by plaintiff,

there is still an amount due and payable to

said plaintiff, then if such amount is not
paid on demand, including the legal
interests, said bond shall be held
answerable.
Ordering further the plaintiff to render an
accounting of the tolls he collected from
March of 1967 to December 31, 1968 and
from September 1969 to March 31, 1970,
and deliver said tolls collected to the
receiver and if judgment is already
executed, then to Quirino Comintan and
Eleuterio Zamora; and,
Finally, to condemn plaintiff to pay moral
damages for withholding the tools which
belong to your movant in an amount this
Court may deem just in the premises. 4
Acting upon the foregoing motion, respondent Judge
issued an Order, dated September 23, 1970, stating,
among others, the following: t.hqw
The records further disclosed that from
March 1967 to December 31, 1968, piaintiff
Bartolome Ortiz collected tolls on a portion
of the propertv in question wherein he has
not introduced anv improvement
particularlv on Lot No. 5785-A; PLS-45
awarded to defendant Quirino Comintan,

thru which vehicular traffic was detoured or

diverted, and again from September 1969
to March 31, 1970, the plaintiff resumed the
collection of tools on the same portion
without rendering any accounting on said
tolls to the Receiver, who, was reappointed
after submitting the required bond and
specifically authorized only to collect tolls
leaving the harvesting of the improvements
to the plaintiff.
xxx xxx xxx
ln virtue of he findings of this Court as
contained in the dispositive portion of its
decision, the defendants are jointly
obligated to pay the plaintiff in the amount
of P13,632.00 as reasonable value of the
improvements he introduced on the whole
property in question, and that he has the
right of retention until fully paid. It can be
gleaned from the motion of the defendants
that if plaintiff submits an accounting of the
tolls he collected during the periods above
alluded to, their damages of about
P25,000.00 can more than offset their
obligation of P13,362.00 in favor of the
plaintiff, thereafter the possession of the
land be delivered to the defendants since
the decision of the Supreme Court has
already become final and executory, but in

the interregnum pending such accounting

and recovery by the Receiver of the tolls
collected by the plaintiff, the defendants
pray that they allowed to put up a bond in
lieu of the said P13,632.00 to answer for
damages of the former, if any.
On the other hand, plaintiff contends in his
opposition, admitting that the decision of
the Supreme Court has become final and
executory; (1) the offer of a bond in lieu of
payment of P13,632.00 does not, and
cannot, satisfy the condition imposed in the
decision of this Court which was affirmed in
toto;(2) the public sale of Portion "B" of the
land has still to take place as ordained
before the decision could be executed;
and, (3) that whatever sums plaintiff may
derive from the property cannot be set off
against what is due him for the
improvements he made, for which he has
to be reimbursed as ordered.
xxx xxx xxx
Let it be known that plaintiff does not
dispute his having collected tolls during the
periods from March 1967 to December 31,
1968 and from September 1969 to March
31, 1970. The Supreme Court affirmed the
decision of this Court its findings that said

tolls belong to the defendant, considering

that the same were collected on a portion
of the land question where the plaintiff
did not introduce any improvement. The
reimbursement to the plaintiff pertains only
to the value of the improvements, like
coconut trees and other plants which he
introduced on the whole property. The tolls
collected by the plaintiff on an unimproved
portion naturally belong to the defendants,
following the doctrine on accretion. Further,
the reappointment of a Receiver by this
Court was upheld by the Supreme Court
when it denied the petition for certiorari
filed by the plaintiff, bolstering the legal
claim of defendants over said tolls. Thus,
the decision of the Supreme Court
rendered the decision of this Court
retroactive from March 22, 1966 although
pending accounting of the tolls collected by
the plaintiff is justified and will not prejudice
anybody, but certainly would substantially
satisfy the conditions imposed in the
decision. However, insofar as the one-half
portion "B" of the property, the decision
may be executed only after public sale by
the Bureau of Lands shall be
accomplished.
WHEREFORE, finding the Motion for
Execution filed by the defendants to be

meritorious, the same is granted; provided,

however, that they put up a bond equal the
adjudicated amount of P13,632.00
accruing in favor of the plaintiff, from a
reputable or recognized bonding or surety
company, conditioned that after an
accounting of the tolls collected by the
plaintiff should there be found out any
balance due and payable to him after
reckoning said obligation of P13,632.00 the
bond shall be held answerable therefor. 5
Accordingly, a Writ of Execution was issued after
private respondent Quirino Comintan had filed the
required bond. The writ directed the Sheriff to enforce
the decision of the Court, and stated, part in, the
following:t.hqw
But should there be found any amount
collectible after accounting and deducting
the amount of P3,632.00, you are hereby
ordered that of the goods and chattels of
Bartolome Ortiz of Bo. Kabuluan, Calauag,
Quezon, be caused to be made any excess
in the above-metioned amount together
with your lawful fees and that you render
same to defendant Quirino Comintan. If
sufficient personal property cannot be
found thereof to satisfy this execution and
lawful fees thereon, then you are
commanded that of the lands and buildings

of the said BARTOLOME ORTIZ you make

the said excess amount in the manner
required by the Rules of Court, and make
return of your proceedings within this Court
within sixty (60) days from date of service.
You are also ordered to cause Bartolome
Ortiz to vacate the property within fifteen
(15) days after service thereof the
defendant Quirino Comintan having filed
the required bond in the amount of
THIRTEEN THOUSAND SIX HUNDRED
THIRTY-TWO (P13,632.00) PESOS. 6
On October 12, 1970, petitioner filed a Motion for
Reconsideration of the aforesaid Order and Writ of
Execution, alleging:t.hqw
(a) That the respondent judge has no
authority to place respondents in
possession of the property;
(b) That the Supreme Court has never
affirmed any decision of the trial court that
tolls collected from the diversionary road on
the property, which is public land, belong to
said respondents;
(c) That to assess petitioner a P25,000.00
liability for damages is purely punitive
imposition without factual or legal
justification.

The foregoing Motion for Reconsideration was denied

by respondent Judge per Order dated November 18,
1970. Saod Order states, in part:t.hqw
It goes without saying that defendant
Comintan is entitled to be placed in
possession of lot No. 5785-A of PLS-45
(Calauag Public Land Subdivision) and
enjoyment of the tolls from March, 1967 to
March, 1968 and from September, 1969 to
March 31, l970 which were received by
plaintiff Bartolome Ortiz, collected from the
property by reason of the diversion road
where vehicular traffic was detoured. To
defendant Comintan belongs the tolls thus
collected from a portion of the land
awarded to him used as a diversionary
road by the doctrine of accretion and his
right over the same is ipso jure, there being
no need of any action to possess said
addition. It is so because as consistently
maintained by the Supreme Court, an
applicant who has complied with all the
terms and conditions which entitle him to a
patent for a particular tract of publlic land,
acquires a vested right therein and is to be
regarded as equitable owner thereof so
that even without a patent, a perfected
homestead or sales application is a
property right in the fullest sense,
unaffectcd by the fact that the paramount

title is still in the Government and no

subsequent law can deprive him of that
vested right The question of the actual
damages suffered by defendant Comintan
by reason of the unaccounted tolls
received by plaintiff had already been fully
discussed in the order of September 23,
1970 and the Court is honestly convinced
and believes it to be proper and regular
under the circumstances.
Incidentally, the Court stands to correct
itself when in the same order, it directed the
execution of he decision with respect to the
one-half portion "B" of the property only
after the public sale by the Bureau of
Lands, the same being an oversight, it
appearing that the Sales Application of
defendant Eleuterio Zamora had already
been recognized and full confirmed by the
Supreme Court.
In view thereof, finding the motion filed by
plaintiff to be without merit, the Court
hereby denies the same and the order of
September 23, 1970 shall remain in full
force subject to the amendment that the
execution of the decision with respect to
the one-half portion "B" shall not be
conditioned to the public sale by the
Bureau of Lands.

SO ORDERED. 7
III
Petitioner thus filed the instant petition, contending that
in having issued the Order and Writ of Execution,
respondent Court "acted without or in excess of
jurisdiction, and/or with grave abuse of discretion,
because the said order and writ in effect vary the terms
of the judgment they purportedly seek to enforce." He
argued that since said judgment declared the petitioner
a possessor in good faith, he is entitled to the payment
of the value of the improvements introduced by him on
the whole property, with right to retain the land until he
has been fully paid such value. He likewise averred
that no payment for improvements has been made
and, instead, a bond therefor had been filed by
defendants (private respondents), which, according to
petitioner, is not the payment envisaged in the decision
which would entitle private respondents to the
possession of the property. Furthermore, with respect
to portion "B", petitioner alleges that, under the
decision, he has the right to retain the same until after
he has participated and lost in the public bidding of the
land to be conducted by the Bureau of Lands. It is
claimed that it is only in the event that he loses in the
bidding that he can be legally dispossessed thereof.
It is the position of petitioner that all the fruits of the
property, including the tolls collected by him from the
passing vehicles, which according to the trial court

amounts to P25,000.00, belongs to petitioner and not

to defendant/private respondent Quirino Comintan, in
accordance with the decision itself, which decreed that
the fruits of the property shall be in lieu of interest on
the amount to be paid to petitioner as reimbursement
for improvements. Any contrary opinion, in his view,
would be tantamount to an amendment of a decision
which has long become final and executory and,
therefore, cannot be lawfully done.
Petitioner, therefore, prayed that: (1) a Writ of
Preliminary Injunction be issued enjoining the
enforcement of the Orders of September 23, 1970 and
November 18, 1970, and the Writ of Execution issued
thereto, or restoring to petitioner the possession of the
property if the private respondents had been placed in
possession thereof; (2) annulling said Orders as well
as the Writ of Execution, dissolving the receivership
established over the property; and (3) ordering private
respondents to account to petitioner all the fruits they
may have gathered or collected from the property in
question from the time of petitioiier's illegal
dispossession thereof.
On January 29, 1971, this Court issued the Writ of
Preliminary Injunction. On January 30, 1971, private
respondents filed a Motion for Reconsideration and/or
Modification of the Order dated January 29, 1971. This
was followed by a Supplemental Motion for
Reconsideration and Manifestation on February 3,
1971. In the latter motion, private respondents

manifested that the amount of P14,040.96,

representing the amount decreed in the judgment as
reimbursement to petitioner for the improvements, plus
interest for six months, has already been deposited by
them in court, "with the understanding that said amount
shall be turned over to the plaintiff after the court a
quo shall have determined the improvement on Lot
5785-A, and subsequently the remaining balance of
the deposit shall be delivered to the petitioner (plaintiff
therein) in the event he loses the bid for Lot 5785-B in
favor of private respondent Eleuterio Zamora." 8 The
deposit is evidenced by a certification made by the
Clerk of the Court a quo. 9 Contending that said deposit
was a faithful compliance with the judgment of the trial
court, private respondent Quirino Comintan prayed for
the dissolution of the Writ of Injunction.
It appears that as a consequence of the deposit made
by private respondents, the Deputy, Sheriff of Calauag,
Quezon ousted petitioner's representative from the
land in question and put private respondents in
possession thereof. 10
On March 10, 1971, petitioner filed a "Comment on
Respondents' 'Motion for Reconsideration' dated
January 29, 1971' and 'Supplemental Motion for
Reconsideration and Manifestation,'" contending that
the tender of deposit mentioned in the Suplemental
Motion was not really and officially made, "inasmuch
as the same is not supported by any official receipt
from the lower court, or from its clerk or cashier, as

required by law;" that said deposit does not constitute

sufficient compliance with the judgment sought to be
enforced, neither was it legally and validly made
because the requisites for consignation had not been
complied with; that the tender of legal interest for six
months cannot substitute petitioner's enjoyment of the
fruits of the property as long as the judgment in Civil
Case No. C-90 has not been implemented in the
manner decreed therein; that contrary to the
allegations of private respondents, the value of the
improvements on the whole property had been
determined by the lower court, and the segregation of
the improvements for each lot should have been raised
by them at the opportune moment by asking for the
modification of the decision before it became final and
executory; and that the tolls on the property constituted
"civil fruits" to which the petitioner is entitled under the
terms of the decision.
IV
The issue decisive of the controvery isafter the
rendition by the trial court of its judgment in Civil Case
No. C-90 on March 22, 1966 confirming the award of
one-half of the property to Quirino Comintanwhether
or not petitioner is still entitled to retain for his own
exclusive benefit all the fruits of the property, such as
the tolls collected by him from March 1967 to
December 1968, and September 1969 to March 31,
1970, amounting to about P25,000.00. In other words,
petitioner contends that so long as the aforesaid

amount of P13,632,00 decreed in the judgment

representing the expenses for clearing the land and
the value of the coconuts and fruit trees planted by him
remains unpaid, he can appropriate for his exclusive
benefit all the fruits which he may derive from the
property, without any obligation to apply any portion
thereof to the payment of the interest and the principal
of the debt.
We find this contention untenable.
There is no question that a possessor in good faith is
entitled to the fruits received before the possession is
legally interrupted. 11 Possession in good faith ceases
or is legally interrupted from the moment defects in the
title are made known to the possessor, by extraneous
evidence or by the filing of an action in court by the
true owner for the recovery of the property. 12 Hence, all
the fruits that the possessor may receive from the time
he is summoned in court, or when he answers the
complaint, must be delivered and paid by him to the
owner or lawful possessor. 13
However, even after his good faith ceases, the
possessor in fact can still retain the property, pursuant
to Article 546 of the New Civil Code, until he has been
fully reimbursed for all the necessary and useful
expenses made by him on the property. This right of
retention has been considered as one of the
conglomerate of measures devised by the law for the
protection of the possessor in good faith. Its object is to

guarantee the reimbursement of the expenses, such

as those for the preservation of the property, 14 or for
the enhancement of its utility or productivity. 15It permits
the actual possessor to remain in possession while he
has not been reimbursed by the person who defeated
him in the possession for those necessary expenses
and useful improvements made by him on the thing
possessed. The principal characteristic of the right of
retention is its accessory character. It is accessory to a
principal obligation. Considering that the right of the
possessor to receive the fruits terminates when his
good faith ceases, it is necessary, in order that this
right to retain may be useful, to concede to the creditor
the right to secure reimbursement from the fruits of the
property by utilizing its proceeds for the payment of the
interest as well as the principal of the debt while he
remains in possession. This right of retention of the
property by the creditor, according to Scaevola, in the
light of the provisions of Article 502 of the Spanish Civil
Code, 16 is considered not a coercive measure to oblige
the debtor to pay, depriving him temporarily of the
enjoyment of the fruits of his property, but as a means
of obtainitig compensation for the debt. The right of
retention in this case is analogous to a contract of
antichresis and it cati be considered as a means of
extinguishing the obligation, inasmuch as the right to
retain the thing lasts only for the period necessary to
enable the creditor to be reimbursed from the fruits for
the necessary and useful expenses. 17

According to Manresa, the right of retention is,

therefore, analogous to that of a pledge, if the property
retained is a movable, and to that of antichresis, if the
property held is immovable. 18 This construction
appears to be in harmony with similar provisions of the
civil law which employs the right of retention as a
means or device by which a creditor is able to obtain
the payment of a debt. Thus, under Article 1731 of the
New Civil Code, any person who has performed work
upon a movable has a right to retain it by way of
pledge until he is paid. Similarly, under Article 1914 of
the same Code, the agent may retain in pledge the
things which are the object of the agency until the
principal effects reimbursement of the funds advanced
by the former for the execution of the agency, or he is
indemnified for all damages which he may have
suffered as a consequence of the execution of the
agency, provided he is free from fault. To the same
effect, the depositary, under Article 1994 of the same
Code, may retain the thing in pledge until the full
payment of what may be due him by reason of the
deposit. The usufructuary, pursuant to Article 612 of
the same Code, may retain the property until he is
reimbursed for the amount paid for taxes levied on the
capital (Article 597) and tor extraordinary repairs
(Article 594).
In all of these cases, the right of retention is used as a
means of extinguishing the obligation. As amply
observed by Manresa: "El derecho de retencion, lo
hemos dicho, es el derecho de prenda o el de

anticresis constituido por la ley con independencia de

las partes." 19 In a pledge, if the thing pledged earns or
produces fruits, income, dividends or interests, the
creditor shall compensate what he receives with those
which are owing him. 20 In the same manner, in a
contract of antichresis, the creditor acquires the right to
receive the fruits of an immovable of his debtor with
the obligation to apply them to payment of the interest,
if owing, and thereafter to the principal of his
credit. 21 The debtor can not reacquire enjoyment of
the immovable until he has actually paid what he owes
the creditor. 22
Applying the afore-cited principles to the case at bar,
petitioner cannot appropriate for his own exclusive
benefit the tolls which he collected from the property
retained by him. It was his duty under the law, after
deducting the necessary expenses for his
administration, to apply such amount collected to the
payment of the interest, and the balance to the
payment of the obligation.
We hold, therefore, that the disputed tolls, after
deducting petitioner's expenses for administration,
belong to Quirino Comintan, owner of the land through
which the toll road passed, further considering that the
same was on portions of the property on which
petitioner had not introduced any improvement. The
trial court itself clarified this matter when it placed the
toll road under receivership. The omission of any
mention of the tolls in the decision itself may be

attributed to the fact that the tolls appear to have been

collected after the rendition of the judgment of the trial
court.
The records further reveal that earnest efforts have
been made by private respondents to have the
judgment executed in the most practicable manner.
They deposited in court the amount of the judgment in
the sum of P13,632.00 in cash, subject only to the
accounting of the tolls collected by the petitioner so
that whatever is due from him may be set off with the
amount of reimbursement. This is just and proper
under the circumstances and, under the law,
compensation or set off may take place, either totally
or partially. Considering that petitioner is the creditor
with respect to the judgment obligation and the debtor
with respect to the tolls collected, Comintan being the
owner thereof, the trial court's order for an accounting
and compensation is in accord with law. 23
With respect to the amount of reimbursement to be
paid by Comintan, it appears that the dispositive
portion of the decision was lacking in specificity, as it
merely provided that Comintan and Zamora are jointly
liable therefor. When two persons are liable under a
contract or under a judgment, and no words appear in
the contract or judgment to make each liable for the
entire obligation, the presumption is that their
obligation is joint ormancomunada, and each debtor is
liable only for a proportionate part of the
obligation. 24 The judgment debt of P13,632.00 should,

therefore, be pro-rated in equal shares to Comintan

and Zamora.
Regarding Lot 5785-B, it appears that no public sale
has yet been conducted by the Bureau of Lands and,
therefore, petitioner is entitled to remain in possession
thereof. This is not disputed by respondent Eleuterio
Zamora. 25 After public sale is had and in the event that
Ortiz is not declared the successful bidder, then he
should be reimbursed by respondent Zamora in the
corresponding amount for the improvements on Lot
5785-B.
WHEREFORE, in view hereof, the Order of respondent
Court of November 18, 1970 is hereby modified to
conform to the foregoing judgment. The Writ of
Preliminary Injunction, dated January 29, 1971, is
hereby dissolved. Without special pronouncement as
to costs.

FEDERICO GEMINIANO, MARIA GEMINIANO,

ERNESTO
GEMINIANO,
ASUNCION
GEMINIANO,
LARRY GEMINIANO,
and

MARLYN GEMINIANO,petitioners, vs. COURT

OF APPEALS, DOMINADOR NICOLAS, and
MARY A. NICOLAS, respondents.
DECISION
DAVIDE, JR., J.:
This petition for review on certiorari has its origins
in Civil Case No. 9214 of Branch 3 of the Municipal
Trial Court in Cities (MTCC) in Dagupan City for
unlawful detainer and damages. The petitioners ask
the Court to set aside the decision of the Court of
Appeals affirming the decision of Branch 40 of the
Regional Trial Court (RTC) of Dagupan City, which, in
turn, reversed the MTCC; ordered the petitioners to
reimburse the private respondents the value of the
house in question and other improvements; and
allowed the latter to retain the premises until
reimbursement was made.
It appears that Lot No. 3765-B-1 containing an area
of 314 square meters was originally owned by the
petitioners' mother, Paulina Amado vda. de
Geminiano. On a 12-square-meter portion of that lot
stood the petitioners' unfinished bungalow, which the
petitioners sold in November 1978 to the private
respondents for the sum of P6,000.00, with an alleged
promise to sell to the latter that portion of the lot
occupied by the house. Subsequently, the petitioners'
mother executed a contract of lease over a 126

square-meter portion of the lot, including that portion

on which the house stood, in favor of the private
respondents for P40.00 per month for a period of
seven years commencing on 15 November 1978.
[1]
The private respondents then introduced additional
improvements and registered the house in their
names. After the expiration of the lease contract in
November 1985, however, the petitioners' mother
refused to accept the monthly rentals.
It turned out that the lot in question was the subject
of a suit, which resulted in its acquisition by one Maria
Lee in 1972. In 1982, Lee sold the lot to Lily Salcedo,
who in turn sold it in 1984 to the spouses Agustin and
Ester Dionisio.
On 14 February 1992, the Dionisio spouses
executed a Deed of Quitclaim over the said property in
favor of the petitioners.[2] As such, the lot was
registered in the latter's names.[3]
On
9
February
1993,
the
petitioners
sent, via registered mail, a letter addressed to private
respondent Mary Nicolas demanding that she vacate
the premises and pay the rentals in arrears within
twenty days from notice.[4]
Upon failure of the private respondents to heed the
demand, the petitioners filed with the MTCC of
Dagupan City a complaint for unlawful detainer and
damages.

During the pre-trial conference, the parties agreed

to confine the issues to: (1) whether there was an
implied renewal of the lease which expired in
November 1985; (2) whether the lessees were builders
in good faith and entitled to reimbursement of the value
of the house and improvements; and (3) the value of
the house.
The parties then submitted their respective position
papers and the case was heard under the Rule on
Summary Procedure.
On the first issue, the court held that since the
petitioners' mother was no longer the owner of the lot
in question at the time the lease contract was executed
in 1978, in view of its acquisition by Maria Lee as early
as 1972, there was no lease to speak of, much less, a
renewal thereof. And even if the lease legally existed,
its implied renewal was not for the period stipulated in
the original contract, but only on a month-to-month
basis pursuant to Article 1687 of the Civil Code. The
refusal of the petitioners' mother to accept the rentals
starting January 1986 was then a clear indication of
her desire to terminate the monthly lease. As regards
the petitioners' alleged failed promise to sell to the
private respondents the lot occupied by the house, the
court held that such should be litigated in a proper
case before the proper forum, not an ejectment case
where the only issue was physical possession of the
property.

The court resolved the second issue in the

negative, holding that Articles 448 and 546 of the Civil
Code, which allow possessors in good faith to recover
the value of improvements and retain the premises
until reimbursed, did not apply to lessees like the
private respondents, because the latter knew that their
occupation of the premises would continue only during
the life of the lease. Besides, the rights of the private
respondents were specifically governed by Article
1678, which allows reimbursement of up to one-half of
the value of the useful improvements, or removal of the
improvements should the lessor refuse to reimburse.
On the third issue, the court deemed as conclusive
the private respondents' allegation that the value of the
house and improvements was P180,000.00, there
being no controverting evidence presented.
The trial court thus ordered the private respondents
to vacate the premises, pay the petitioners P40.00 a
month as reasonable compensation for their stay
thereon from the filing of the complaint on 14 April
1993 until they vacated, and to pay the sum of
P1,000.00 as attorney's fees, plus costs.[5]
On appeal by the private respondents, the RTC of
Dagupan City reversed the trial court's decision and
rendered a new judgment: (1) ordering the petitioners
to reimburse the private respondents for the value of
the house and improvements in the amount of
P180,000.00 and to pay the latter P10,000.00 as

attorney's fees and P2,000.00 as litigation expenses;

and (2) allowing the private respondents to remain in
possession of the premises until they were fully
reimbursed for the value of the house. [6] It ruled that
since the private respondents were assured by the
petitioners that the lot they leased would eventually be
sold to them, they could be considered builders in
good faith, and as such, were entitled to
reimbursement of the value of the house and
improvements with the right of retention until
reimbursement had been made.
On appeal, this time by the petitioners, the Court of
Appeals affirmed the decision of the RTC [7] and
denied[8] the
petitioners'
motion
for
reconsideration. Hence, the present petition.
The Court is confronted with the issue of which
provision of law governs the case at bench: Article
448 or Article 1678 of the Civil Code? The said 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.
xxx xxx

xxx

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.
The crux of the said issue then is whether the
private respondents are builders in good faith or mere
lessees.

The private respondents claim they are builders in

good faith, hence, Article 448 of the Civil Code should
apply. They rely on the lack of title of the petitioners'
mother at the time of the execution of the contract of
lease, as well as the alleged assurance made by the
petitioners that the lot on which the house stood would
be sold to them.
It has been said that while the right to let property is
an incident of title and possession, a person may be a
lessor and occupy the position of a landlord to the
tenant although he is not the owner of the premises let.
[9]
After all, ownership of the property is not being
transferred,[10] only the temporary use and enjoyment
thereof.[11]
In this case, both parties admit that the land in
question was originally owned by the petitioners'
mother. The land was allegedly acquired later by one
Maria Lee by virtue of an extrajudicial foreclosure of
mortgage. Lee, however, never sought a writ of
possession in order that she gain possession of the
property in question.[12] The petitioners' mother
therefore remained in possession of the lot.
It is undisputed that the private respondents came
into possession of a 126 square-meter portion of the
said lot by virtue of a contract of lease executed by the
petitioners' mother in their favor. The juridical relation
between the petitioners' mother as lessor, and the
private respondents as lessees, is therefore well-

established, and carries with it a recognition of the

lessor's title.[13] The private respondents, as lessees
who had undisturbed possession for the entire term
under the lease, are then estopped to deny their
landlord's title, or to assert a better title not only in
themselves, but also in some third person while they
remain in possession of the leased premises and until
they surrender possession to the landlord. [14] This
estoppel applies even though the lessor had no title at
the time the relation of lessor and lessee was created,
[15]
and may be asserted not only by the original lessor,
but also by those who succeed to his title.[16]
Being mere lessees, the private respondents knew
that their occupation of the premises would continue
only for the life of the lease. Plainly, they cannot be
considered as possessors nor builders in good faith. [17]
In a plethora of cases,[18] this Court has held that
Article 448 of the Civil Code, in relation to Article 546 of
the same Code, which allows full reimbursement of
useful improvements and retention of the premises
until reimbursement is made, applies only to a
possessor in good faith, i.e., one who builds on land
with the belief that he is the owner thereof. It does not
apply where one's only interest is that of a lessee
under a rental contract; otherwise, it would always be
in the power of the tenant to "improve" his landlord out
of his property.

Anent the alleged promise of the petitioners to sell

the lot occupied by the private respondents' house, the
same was not substantiated by convincing
evidence. Neither the deed of sale over the house nor
the contract of lease contained an option in favor of the
respondent spouses to purchase the said lot. And
even if the petitioners indeed promised to sell, it would
not make the private respondents possessors or
builders in good faith so as to be covered by the
provisions of Article 448 of the Civil Code. The latter
cannot raise the mere expectancy of ownership of the
aforementioned lot because the alleged promise to sell
was not fulfilled nor its existence even proven. The
first thing that the private respondents should have
done was to reduce the alleged promise into writing,
because under Article 1403 of the Civil Code, an
agreement for the sale of real property or an interest
therein is unenforceable, unless some note or
memorandum thereof be produced. Not having taken
any steps in order that the alleged promise to sell may
be enforced, the private respondents cannot bank on
that promise and profess any claim nor color of title
over the lot in question.
There is no need to apply by analogy the provisions
of Article 448 on indemnity as was done in Pecson vs.
Court of Appeals,[19] because the situation sought to be
avoided and which would justify the application of that
provision, is not present in this case. Suffice it to say,
"a state of forced co-ownership" would not be created
between
the
petitioners
and
the
private

respondents. For, as correctly pointed out by the

petitioners, the rights of the private respondents as
lessees are governed by Article 1678 of the Civil Code
which allows reimbursement to the extent of one-half
of the value of the useful improvements.
It must be stressed, however, that the right to
indemnity under Article 1678 of the Civil Code arises
only if the lessor opts to appropriate the
improvements. Since the petitioners refused to
exercise that option,[20] the private respondents cannot
compel them to reimburse the one-half value of the
house and improvements. Neither can they retain the
premises until reimbursement is made. The private
respondents' sole right then is to remove the
improvements without causing any more impairment
upon the property leased than is necessary.[21]
WHEREFORE, judgment is hereby rendered
GRANTING the instant petition; REVERSING and
SETTING ASIDE the decision of the Court of Appeals
of 27 January 1995 in CA-G.R. SP No. 34337; and
REINSTATING the decision of Branch 3 of the
Municipal Trial Court in Cities of Dagupan City in Civil
Case No. 9214 entitled "Federico Geminiano, et al. vs.
Dominador Nicolas, et al."
Costs against the private respondents.

PLEASANTVILLE
DEVELOPMENT
CORPORATION, petitioner, vs. COURT OF
APPEALS, WILSON KEE, C.T. TORRES
ENTERPRISES,
INC.
and
ELDRED
JARDINICO, respondents.
DECISION
PANGANIBAN, J.:
Is a lot buyer who constructs improvements on the
wrong property erroneously delivered by the owners
agent, a builder in good faith? This is the main issue
resolved in this petition for review on certiorari to
reverse the Decision[1] of the Court of Appeals[2] in CAG.R. SP No. 11040, promulgated on August 20, 1987.
By resolution dated November 13, 1995, the First
Division of this Court resolved to transfer this case
(along with several others) to the Third Division. After
due deliberation and consultation, the Court assigned
the
writing
of
this
Decision
to
the
undersigned ponente.
The Facts
The facts, as found by respondent Court, are as
follows:

Edith Robillo purchased from petitioner a parcel of

land designated as Lot 9, Phase II and located
at Taculing
Road,
Pleasantville
Subdivision, Bacolod City. In 1975, respondent Eldred
Jardinico bought the rights to the lot from Robillo. At
that time, Lot 9 was vacant.
Upon completing all payments, Jardinico secured
from the Register of Deeds of Bacolod City
on December 19, 1978 Transfer Certificate of Title No.
106367 in his name. It was then that he discovered
that improvements had been introduced on Lot 9 by
respondent Wilson Kee, who had taken possession
thereof.

It appears that on March 26, 1974, Kee bought on

installment Lot 8 of the same subdivision from C.T.
Torres Enterprises, Inc. (CTTEI), the exclusive real
estate agent of petitioner. Under the Contract to Sell on
Installment, Kee could possess the lot even before the
completion of all installment payments. On January
20, 1975, Kee paid CTTEI the relocation fee of P50.00
and another P50.00 on January 27, 1975, for the
preparation of the lot plan. These amounts were paid
prior to Kees taking actual possession of Lot 8. After
the preparation of the lot plan and a copy thereof given
to Kee, CTTEI through its employee, Zenaida
Octaviano, accompanied Kees wife, Donabelle Kee, to
inspect Lot 8. Unfortunately, the parcel of land pointed
by Octaviano was Lot 9. Thereafter, Kee proceeded to
construct his residence, a store, an auto repair shop
and other improvements on the lot.
After discovering that Lot 9 was occupied by Kee,
Jardinico confronted him. The parties tried to reach an
amicable settlement, but failed.
On January 30, 1981, Jardinicos lawyer wrote Kee,
demanding that the latter remove all improvements
and vacate Lot 9. When Kee refused to vacate Lot 9,
Jardinico filed with the Municipal Trial Court in Cities,
Branch 3, Bacolod City (MTCC), a complaint for
ejectment with damages against Kee.
Kee, in turn, filed a third-party complaint against
petitioner and CTTEI.

The MTCC held that the erroneous delivery of Lot 9

to Kee was attributable to CTTEI. It further ruled that
petitioner and CTTEI could not successfully invoke as
a defense the failure of Kee to give notice of his
intention to begin construction required under
paragraph 22 of the Contract to Sell on Installment and
his having built a sari-sari store without. the prior
approval of petitioner required under paragraph 26 of
said contract, saying that the purpose of these
requirements was merely to regulate the type of
improvements to be constructed on the lot[3].
However, the MTCC found that petitioner had
already rescinded its contract with Kee over Lot 8 for
the latters failure to pay the installments due, and that
Kee had not contested the rescission. The rescission
was effected in 1979, before the complaint was
instituted. The MTCC concluded that Kee no longer
had any right over the lot subject of the contract
between him and petitioner. Consequently, Kee must
pay reasonable rentals for the use of Lot 9, and,
furthermore, he cannot claim reimbursement for the
improvements he introduced on said lot.
The MTCC thus disposed:
IN VIEW OF ALL THE FOREGOING, judgment is
hereby rendered as follows:
1. Defendant Wilson Kee is ordered to vacate tithe
premises of Lot 9, covered by TCT No. 106367 and to

remove all structures and improvements he introduced

thereon;
2. Defendant Wilson Kee is ordered to pay to the
plaintiff rentals at the rate of P 15.00 a day computed
from the time this suit was filed on March 12, 1981 until
he actually vacates the premises. This amount shall
bear interests (sic) at the rate of 12 per cent (sic) per
annum.
3. Third-Party Defendant CT. Torres Enterprises, Inc.
and Pleasantville Subdivision are ordered to pay the
plaintiff jointly and severally the sum of P3,000.00 as
attorneys fees and P700.00 as cost and litigation
expenses.[4]
On appeal, the Regional Trial Court, Branch 48,
Bacolod City (RTC) ruled that petitioner and CTTEI
were not at fault or were not negligent, there being no
preponderant evidence to show that they directly
participated in the delivery of Lot 9 to Kee.[5] It found
Kee a builder in bad faith. It further ruled that even
assuming arguendo that Kee was acting in good faith,
he was, nonetheless, guilty of unlawfully usurping the
possessory right of Jardinico over Lot 9 from the time
he was served with notice to vacate said lot, and thus
was liable for rental.
The RTC thus disposed:
WHEREFORE, the decision appealed from is affirmed
with respect to the order against the defendant to

vacate the premises of Lot No. 9 covered by Transfer

Certificate of Title No. T-106367 of the land records of
Bacolod City; the removal of all structures and
improvements introduced thereon at his expense and
the payment to plaintiff (sic) the sum of Fifteen (P
15.00) Pesos a day as reasonable rental to be
computed from January 30, 1981, the date of the
demand, and not from the date of the filing of the
complaint, until he had vacated (sic) the premises, with
interest thereon at 12% per annum. This Court further
renders judgment against the defendant to pay the
plaintiff the sum of Three Thousand (P3,000.00) Pesos
as attorneys fees, plus costs of litigation.
The third-party complaint against Third-Party
Defendants Pleasantville Development Corporation
and C.T. Torres Enterprises, Inc. is dismissed. The
order against Third-Party Defendants to pay attorneys
fees to plaintiff and costs of litigation is reversed. [6]
Following the denial of his motion for
reconsideration on October 20, 1986, Kee appealed
directly to the Supreme Court, which referred the
matter to the Court of Appeals.
The appellate court ruled that Kee was a builder in
good faith, as he was unaware of the mix-up when he
began construction of the improvements on Lot 8. It
further ruled that the erroneous delivery was due to the
negligence of CTTEI, and that such wrong delivery
was likewise imputable to its principal, petitioner

herein. The appellate court also ruled that the award

of rentals was without basis.
Thus, the Court of Appeals disposed:
WHEREFORE, the petition is GRANTED, the
appealed decision is REVERSED, and judgment is
rendered as follows:
1. Wilson Kee is declared a builder in good
faith with respect to the improvements he
introduced on Lot 9, and is entitled to the
rights granted him under Articles 448, 546
and 548 of the New Civil Code.
2. Third-party
defendants
C.T.
Torres
Enterprises,
Inc.
and
Pleasantville
Development Corporation are solidarily liable
under the following circumstances:
a.

If Eldred Jardinico decides to appropriate

the improvements and, thereafter, remove
these structures, the third-party defendants
shall answer for all demolition expenses and
the value of the improvements thus
destroyed or rendered useless;

b.

If Jardinico prefers that Kee buy the land,

the third-party defendants shall answer for
the amount representing the value of Lot 9
that Kee should pay to Jardinico.

3. Third-party
defendants
C.T.
Torres
Enterprises,
Inc.
and
Pleasantville
Development Corporation are ordered to
pay in solidum the amount of P3,000.00 to
Jardinico as attorneys fees, as well as
litigation expenses.

2. The Court of Appeals has so far departed from the

accepted course of judicial proceedings, by granting to
private respondent-Kee the rights of a builder in good
faith in excess of what the law provides, thus enriching
private respondent Kee at the expense of the
petitioner;

4. The award of
dispensed with.

3. In the light of the subsequent events or

circumstances which changed the rights of the parties,
it becomes imperative to set aside or at least modify
the judgment of the Court of Appeals to harmonize with
justice and the facts;

rentals

to

Jardinico

is

Furthermore, the case is REMANDED to the court of

origin for the determination of the actual value of the
improvements and the property (Lot 9), as well as for
further proceedings in conformity with Article 448 of the
New Civil Code.[7]
Petitioner then filed the instant petition against Kee,
Jardinico and CTTEI.
The Issues
The petition submitted the following grounds to
justify a review of the respondent Courts Decision, as
follows:
1. The Court of Appeals has decided the case in a
way probably not in accord with law or the the (sic)
applicable decisions of the Supreme Court on thirdparty complaints, by ordering third-party defendants to
pay the demolition expenses and/or price of the land;

4. Private respondent-Kee in accordance with the

findings of facts of the lower court is clearly a builder in
bad faith, having violated several provisions of the
contract to sell on installments;
5. The decision of the Court of Appeals, holding the
principal, Pleasantville Development Corporation
(liable) for the acts made by the agent in excess of its
authority is clearly in violation of the provision of the
law;
6. The award of attorneys fees is clearly without basis
and is equivalent to putting a premium in (sic) court
litigation.
From these grounds, the issues could be re-stated
as follows:
(1) Was Kee a builder in good faith?

(2) What is the liability, if any, of petitioner and its

agent, C.T. Torres Enterprises, Inc.? and
(3) Is the award of attorneys fees proper?
The First Issue: Good Faith
Petitioner contends that the Court of Appeals erred
in reversing the RTCs ruling that Kee was a builder in
bad faith.
Petitioner fails to persuade this Court to abandon
the findings and conclusions of the Court of Appeals
that Kee was a builder in good faith. We agree with
the following observation of the Court of Appeals:
The roots of the controversy can be traced directly to
the errors committed by CTTEI, when it pointed the
wrong property to Wilson Kee and his wife. It is highly
improbable that a purchaser of a lot would knowingly
and willingly build his residence on a lot owned by
another, deliberately exposing himself and his family to
the risk of being ejected from the land and losing all
improvements thereon, not to mention the social
humiliation that would follow.
Under the circumstances, Kee had acted in the
manner of a prudent man in ascertaining the identity of
his property. Lot 8 is covered by Transfer Certificate of
Title No. T-69561, while Lot 9 is identified in Transfer
Certificate of Title No. T-106367. Hence, under
the Torrens system of land registration, Kee is

presumed to have knowledge of the metes and bounds

of the property with which he is dealing. x x x
xxx

xxx
xxx

But as Kee is a layman not versed in the technical

description of his property, he had to find a way to
ascertain that what was described in TCT No. 69561
matched Lot 8. Thus, he went to the subdivision
developers agent and applied and paid for the
relocation of the lot, as well as for the production of a
lot plan by CTTEIs geodetic engineer. Upon Kees
receipt of the map, his wife went to the subdivision site
accompanied by CTTEIs employee, Octaviano, who
authoritatively declared that the land she was pointing
to was indeed Lot 8. Having full faith and confidence
in the reputation of CTTEI, and because of the
companys positive identification of the property, Kee
saw no reason to suspect that there had been a
misdelivery. The steps Kee had taken to protect his
interests were reasonable. There was no need for him
to have acted ex-abundantia cautela, such as being
present during the geodetic engineers relocation
survey or hiring an independent geodetic engineer to
countercheck for errors, for the final delivery of
subdivision lots to their owners is part of the regular
course of everyday business of CTTEI. Because of
CTTEIs blunder, what Kee had hoped to forestall did
in fact transpire. Kees efforts all went to naught. [8]

Good faith consists in the belief of the builder that

the land he is building on is his and his ignorance of
any defect or flaw in his title. [9] And as good faith is
presumed, petitioner has the burden of proving bad
faith on the part of Kee.[10]
At the time he built improvements on Lot 8, Kee
believed that said lot was what he bought from
petitioner. He was not aware that the lot delivered to
him was not Lot 8. Thus, Kees good faith. Petitioner
failed to prove otherwise.
To demonstrate Kees bad faith, petitioner points to
Kees violation of paragraphs 22 and 26 of the
Contract of Sale on Installment.
We disagree. Such violations have no bearing
whatsoever on whether Kee was a builder in good
faith, that is, on his state of mind at the time he built
the improvements on Lot 9. These alleged violations
may give rise to petitioners cause of action against
Kee under the said contract (contractual breach), but
may not be bases to negate the presumption that Kee
was a builder in good faith.
Petitioner also points out that, as found by the trial
court, the Contract of Sale on Installment covering Lot
8 between it and Kee was rescinded long before the
present action was instituted. This has no relevance
on the liability of petitioner, as such fact does not
negate the negligence of its agent in pointing out the

wrong lot to Kee. Such circumstance is relevant only

as it gives Jardinico a cause of action for unlawful
detainer against Kee.
Petitioner next contends that Kee cannot claim
that another lot was erroneously pointed out to him
because the latter agreed to the following provision in
the Contract of Sale on Installment, to wit:
13. The Vendee hereby declares that prior to the
execution of his contract he/she has personally
examined or inspected the property made subjectmatter hereof, as to its location, contours, as well as
the natural condition of the lots and from the date
hereof whatever consequential change therein made
due to erosion, the said Vendee shall bear the
expenses of the necessary fillings, when the same is
so desired by him/her.[11]
The subject matter of this provision of the contract
is the change of the location, contour and condition of
the lot due to erosion. It merely provides that the
vendee, having examined the property prior to the
execution of the contract, agrees to shoulder the
expenses resulting from such change.
We do not agree with the interpretation of petitioner
that Kee contracted away his right to recover damages
resulting from petitioners negligence. Such waiver
would be contrary to public policy and cannot be
allowed. Rights may be waived, unless the waiver is

contrary to law, public order, public policy, morals, or

good customs, or prejudicial to a third person with a
right recognized by law.[12]
The Second Issue: Petitioners Liability
Kee filed a third-party complaint against petitioner
and CTTEI, which was dismissed by the RTC after
ruling that there was no evidence from which fault or
negligence on the part of petitioner and CTTEI can be
inferred. The Court of Appeals disagreed and found
CTTEI negligent for the erroneous delivery of the lot by
Octaviano, its employee.
Petitioner does not dispute the fact that CTTEI was
its agent. But it contends that the erroneous delivery
of Lot 9 to Kee was an act which was clearly outside
the scope of its authority, and consequently, CTTEI
alone should be liable. It asserts that while [CTTEI]
was authorized to sell the lot belonging to the herein
petitioner, it was never authorized to deliver the wrong
lot to Kee.[13]
Petitioners contention is without merit.
The rule is that the principal is responsible for the
acts of the agent, done within the scope of his
authority, and should bear the damage caused to third
persons.[14] On the other hand, the agent who exceeds
his authority is personally liable for the damage. [15]

CTTEI was acting within its authority as the sole

real estate representative of petitioner when it made
the delivery to Kee. In acting within its scope of
authority, it was, however, negligent. It is this
negligence that is the basis of petitioners liability, as
principal of CTTEI, per Articles 1909 and 1910 of the
Civil Code.
Pending resolution of the case before the Court of
Appeals, Jardinico and Kee on July 24, 1987 entered
into a deed of sale, wherein the former sold Lot 9 to
Kee. Jardinico and Kee did not inform the Court of
Appeals of such deal.
The deed of sale contained the following provision:
1. That Civil Case No. 3815 entitled
Jardinico vs. Kee which is now pending appeal with
the Court of Appeals, regardless of the outcome of the
decision shall be mutually disregarded and shall not be
pursued by the parties herein and shall be considered
dismissed and without effect whatsoever;[16]
Kee asserts though that the terms and conditions
in said deed of sale are strictly for the parties thereto
and that (t)here is no waiver made by either of the
parties in said deed of whatever favorable judgment or
award the honorable respondent Court of Appeals may
make in their favor against herein petitioner
Pleasantville Development Corporation and/or private
respondent C.T. Torres Enterprises, Inc.[17]

Obviously, the deed of sale can have no effect on

the liability of petitioner. As we have earlier stated,
petitioners liability is grounded on the negligence of its
agent. On the other hand, what the deed of sale
regulates are the reciprocal rights of Kee and
Jardinico; it stressed that they had reached an
agreement independent of the outcome of the case.
Petitioner further assails the following holding of the
Court of Appeals:
2. Third-party defendants C.T. Torres Enterprises, Inc.
and Pleasantville Development Corporation are
solidarily liable under the following circumstances:
a. If Eldred Jardinico decides to appropriate
the improvements and, thereafter, remove
these structures, the third-party defendants
shall answer for all demolition expenses and
the value of the improvements thus
destroyed or rendered useless;
b. If Jardinico prefers that Kee buy the land,
the third-party defendants shall answer for
the amount representing the value of Lot 9
that Kee should pay to Jardinico.[18]
Petitioner contends that if the above holding would
be carried out, Kee would be unjustly enriched at its
expense. In other words, Kee would be -able to own
the lot, as buyer, without having to pay anything on it,
because the aforequoted portion of respondent Courts

Decision would require petitioner and CTTEI jointly and

solidarily to answer or reimburse Kee there for.
We agree with petitioner.
Petitioners liability lies in the negligence of its
agent CTTEI. For such negligence, the petitioner
should be held liable for damages. Now, the extent
and/or amount of damages to be awarded is a factual
issue which should be determined after evidence is
adduced. However, there is no showing that such
evidence was actually presented in the trial court;
hence no damages could now be awarded.
The rights of Kee and Jardinico vis-a-vis each
other, as builder in good faith and owner in good faith,
respectively, are regulated by law (i.e., Arts. 448, 546
and 548 of the Civil Code). It was error for the Court of
Appeals to make a slight modification in the
application of such law, on the ground of equity. At
any rate, as it stands now, Kee and Jardinico have
amicably settled through their deed of sale their rights
and obligations with regards to Lot 9. Thus, we delete
items 2 (a) and (b) of the dispositive portion of the
Court of Appeals Decision [as reproduced above]
holding petitioner and CTTEI solidarily liable.
The Third Issue: Attorneys Fees
The MTCC awarded Jardinico attorneys fees and
costs in the amount of P3,000.00 and P700.00,
respectively, as prayed for in his complaint. The RTC

deleted the award, consistent with its ruling that

petitioner was without fault or negligence. The Court
of Appeals, however, reinstated the award of attorneys
fees after ruling that petitioner was liable for its agents
negligence.
The award of attorneys fees lies within the
discretion of the court and depends upon the
circumstances of each case.[19] We shall not interfere
with the discretion of the Court of Appeals. Jardinico
was compelled to litigate for the protection of his
interests and for the recovery of damages sustained as
a result of the negligence of petitioners agent. [20]
In sum, we rule that Kee is a builder in good
faith. The disposition of the Court of Appeals that Kee
is entitled to the rights granted him under Articles 448,
546 and 548 of the New Civil Code is deleted, in view
of the deed of sale entered into by Kee and Jardinico,
which deed now governs the rights of Jardinico and
Kee as to each other. There is also no further need, as
ruled by the appellate Court, to remand the case to the
court of origin for determination of the actual value of
the improvements and the property (Lot 9), as well as
for further proceedings in conformity with Article 448 of
the New Civil Code.
WHEREFORE,
the
petition
is
partially
GRANTED. The Decision of the Court of Appeals is
hereby MODIFIED as follows:

(1)

Wilson Kee is declared a builder in good

faith;

(2)

Petitioner
Pleasantville Development
Corporation and respondent C.T. Tones
Enterprises, Inc. are declared solidarily
liable for damages due to negligence;
however, since the amount and/or extent of
such damages was not proven during the
trial, the same cannot now be quantified
and awarded;

(3)

Petitioner
Pleasantville
Develpment
Corporation and respondent C.T. Torres
Enterprises, Inc. are ordered to pay
in solidum the amount of P3,000.00 to
Jardinico as attorneys fees, as well as
litigation expenses; and

(4)
The award of rentals to Jardinico is
dispensed with.

G.R. No. L-11269

February 28, 1958

SILVERIO FELICES, plaintiff-appellee,

vs.
MAMERTO IRIOLA, defendant-appellant.
Ezekiel S. Grageda for appellant.
Reyes & Dy-Liaco for appellee.
REYES, J.B.L., J.:
Originally brought to the Court of Appeals, this appeal
was certified to us by that Court on the ground that it
does not raise any genuine issue of fact.
It appears that plaintiff and appellee Silverio Fences
was the grantee of a homestead of over eight hectares
located in barrio Curry, Municipality of Pili, Province of
Camarines Sur, under Homestead Patent No. V-2117
dated January 26, 1949, and by virtue of which he was
issued Original Certificate of Title No. 104 over said
property. The month following the issuance of his
patent, on February 24, 1949, appellee conveyed in
conditional sale to defendant and appellant Mamerto
Iriola a portion of his homestead of more than four
hectares, for the consideration of P1,700. The
conveyance (Exh. 1) expressly stipulates that the sale
was subject to the provisions of Sec. 119 of Act 141, as
amended, and to the prohibitions spread on the
vendor's patent; and that after the lapse of five years or
as soon as may be allowed by law, the vendor or his
successors would execute in vendee's favor a deed of
absolute sale over the land in question.

Two years after the sale, on April 19, 1951, appellee

tried to recover the land in question from appellant, but
the latter refused to allow it unless he was paid the
amount of P2,000 as the alleged value of
improvements he had introduced on the property. In
view of appellant's persistent refusal, plaintiff deposited
the received price in court and filed this action on
October 4, 1951.
In the court below, appellant, while recognizing
appellee's right to "redeem", insisted that he must first
be reimbursed, the value of his improvements.
Whereupon, the court appointed a commissioner to
ascertain the nature and value of the alleged
improvements, and thereafter found that said
improvements were made by defendant either after
plaintiff had informed him of his intention to recover the
land, or after the complaint had been filed; some of the
improvements were even introduced after a
commissioner had already been appointed to appraise
their value. Wherefore, the lower court held defendant
in bad faith and not entitled to reimbursement for his
improvements. Defendant was, likewise, ordered to
accept the amount of P1,700 deposited by plaintiff in
court, to execute in favor of the latter the
corresponding deed of reconveyance, and to restore
him in possession of the land in question.
At the outset, it must be made clear that as the sale in
question was executed by the parties within the fiveyear prohibitive period under section 118 of the Public

Land Law, the same is absolutely null and void and

ineffective from its inception. Consequently, appellee
never lost his title or ownership over the land in
question, and there was no need either for him to
repurchase the same from appellant, or for the latter to
execute a deed of reconveyance in his favor. The case
is actually for mutual restitution, incident to the
nullity ab initio of the conveyance. .
The question now is: May appellant recover or be
reimbursed the value of his improvements on the land
in question, on the theory that as both he and appellee
knew that their sale was illegal and void, they were
both in bad faith and consequently, Art. 453 of the Civil
Code applies in that "the rights of one and the other
shall be the same as though both had acted in good
faith"?
The rule of Art. 453 of the Civil Code invoked by
appellant1 can not be applied to the instant case for the
reason that the lower court found, and appellant
admits, that the improvements in question were made
on the premises only after appellee had tried to
recover the land in question from appellant, and even
during the pendency of this action in the court below.
After appellant had refused to restore the land to the
appellee, to the extent that the latter even had to resort
to the present action to recover his property, appellee
could no longer be regarded as having impliedly
assented or conformed to the improvements thereafter
made by appellant on the premises. Upon the other

hand, appellant, recognizing as he does appellee's

right to get back his property, continued to act in bad
faith when he made improvements on the land in
question after he had already been asked extrajudicially and judicially, to surrender and return its
possession to appellee; and as a penalty for such bad
faith, he must forfeit his improvements without any
right to reimbursement therefor. "He who builds, plants
or sows in bad faith on the land of another, loses that is
built, planted, or sown without right to indemnity" (Art.
449, New Civil Code).
Wherefore, the judgment appealed from is affirmed,
with the sole modification that appellant need not
execute a deed of reconveyance in appellee's favor,
the original conveyance being hereby declared void ab
initio. Costs against appellant Mamerto Iriola. So
ordered.

G.R. No. 151815

February 23, 2005

SPOUSES JUAN NUGUID AND ERLINDA T.

NUGUID, petitioners,
vs.
HON. COURT OF APPEALS AND PEDRO P.
PECSON, respondents.
DECISION

QUISUMBING, J.:
This is a petition for review on certiorari of the
Decision1 dated May 21, 2001, of the Court of Appeals
in CA-G.R. CV No. 64295, which modified the Order
dated July 31, 1998 of the Regional Trial Court (RTC)
of Quezon City, Branch 101 in Civil Case No. Q-41470.
The trial court ordered the defendants, among them
petitioner herein Juan Nuguid, to pay respondent
herein Pedro P. Pecson, the sum of P1,344,000 as
reimbursement of unrealized income for the period
beginning November 22, 1993 to December 1997. The
appellate court, however, reduced the trial courts
award in favor of Pecson from the said P1,344,000
to P280,000. Equally assailed by the petitioners is the
appellate courts Resolution2 dated January 10, 2002,
denying the motion for reconsideration.
It may be recalled that relatedly in our Decision dated
May 26, 1995, in G.R. No. 115814, entitled Pecson v.
Court of Appeals, we set aside the decision of the
Court of Appeals in CA-G.R. SP No. 32679 and the
Order dated November 15, 1993, of the RTC of
Quezon City, Branch 101 and remanded the case to
the trial court for the determination of the current
market value of the four-door two-storey apartment
building on the 256-square meter commercial lot.
The antecedent facts in this case are as follows:

Pedro P. Pecson owned a commercial lot located at 27

Kamias Road, Quezon City, on which he built a fourdoor two-storey apartment building. For failure to pay
realty taxes, the lot was sold at public auction by the
City Treasurer of Quezon City to Mamerto
Nepomuceno, who in turn sold it for P103,000 to the
spouses Juan and Erlinda Nuguid.
Pecson challenged the validity of the auction sale
before the RTC of Quezon City in Civil Case No. Q41470. In its Decision,3 dated February 8, 1989, the
RTC upheld the spouses title but declared that the
four-door two-storey apartment building was not
included in the auction sale.4 This was affirmed in toto
by the Court of Appeals and thereafter by this Court, in
its Decision5 dated May 25, 1993, in G.R. No. 105360
entitled Pecson v. Court of Appeals.
On June 23, 1993, by virtue of the Entry of Judgment
of the aforesaid decision in G.R. No. 105360, the
Nuguids became the uncontested owners of the 256square meter commercial lot.
As a result, the Nuguid spouses moved for delivery of
possession of the lot and the apartment building.
In its Order6 of November 15, 1993, the trial court,
relying upon Article 5467 of the Civil Code, ruled that
the Spouses Nuguid were to reimburse Pecson for his
construction cost of P53,000, following which, the
spouses Nuguid were entitled to immediate issuance

of a writ of possession over the lot and improvements.

In the same order the RTC also directed Pecson to pay
the same amount of monthly rentals to the Nuguids as
paid by the tenants occupying the apartment units
or P21,000 per month from June 23, 1993, and
allowed the offset of the amount of P53,000 due from
the Nuguids against the amount of rents collected by
Pecson from June 23, 1993 to September 23, 1993
from the tenants of the apartment.8
Pecson duly moved for reconsideration, but on
November 8, 1993, the RTC issued a Writ of
Possession,9directing the deputy sheriff to put the
spouses Nuguid in possession of the subject property
with all the improvements thereon and to eject all the
occupants therein.
Aggrieved, Pecson then filed a special civil action for
certiorari and prohibition docketed as CA-G.R. SP No.
32679 with the Court of Appeals.
In its decision of June 7, 1994, the appellate court,
relying upon Article 44810 of the Civil Code, affirmed
the order of payment of construction costs but
rendered the issue of possession moot on appeal,
thus:
WHEREFORE, while it appears that private
respondents [spouses Nuguid] have not yet
indemnified petitioner [Pecson] 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.
IT IS SO ORDERED.11 [Underscoring supplied.]
Frustrated by this turn of events, Pecson filed a petition
for review docketed as G.R. No. 115814 before this
Court.
On May 26, 1995, the Court handed down the decision
in G.R. No 115814, to wit:
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 [Spouses Juan and Erlinda Nuguid] to the

petitioner [Pedro Pecson] otherwise the petitioner shall

be restored to the possession of the apartment building
until payment of the required indemnity.
No costs.
SO ORDERED.12 [Emphasis supplied.]
In so ruling, this Court pointed out that: (1) Article 448
of the Civil Code is not apposite to the case at bar
where the owner of the land is the builder, sower, or
planter who then later lost ownership of the land by
sale, but may, however, be applied by analogy; (2) the
current market value of the improvements should be
made as the basis of reimbursement; (3) Pecson was
entitled to retain ownership of the building and,
necessarily, the income therefrom; (4) the Court of
Appeals erred not only in upholding the trial courts
determination of the indemnity, but also in ordering
Pecson to account for the rentals of the apartment
building from June 23, 1993 to September 23, 1993.
On the basis of this Courts decision in G.R. No.
115814, Pecson filed a Motion to Restore Possession
and a Motion to Render Accounting, praying
respectively for restoration of his possession over the
subject 256-square meter commercial lot and for the
spouses Nuguid to be directed to render an accounting
under oath, of the income derived from the subject
four-door apartment from November 22, 1993 until
possession of the same was restored to him.

In an Order13 dated January 26, 1996, the RTC denied

the Motion to Restore Possession to the plaintiff
averring that the current market value of the building
should first be determined. Pending the said
determination, the resolution of the Motion for
Accounting was likewise held in abeyance.
With the submission of the parties assessment and the
reports of the subject realty, and the reports of the
Quezon City Assessor, as well as the members of the
duly constituted assessment committee, the trial court
issued the following Order14 dated October 7, 1997, to
wit:
On November 21, 1996, the parties manifested that
they have arrived at a compromise agreement that the
value of the said improvement/building is P400,000.00
The Court notes that the plaintiff has already
receivedP300,000.00. However, when defendant was
ready to pay the balance of P100,000.00, the plaintiff
now insists that there should be a rental to be paid by
defendants. Whether or not this should be paid by
defendants, incident is hereby scheduled for hearing
on November 12, 1997 at 8:30 a.m.
Meantime, defendants are directed to pay plaintiff the
balance of P100,000.00.
SO ORDERED.15
On December 1997, after paying the said P100,000
balance to Pedro Pecson the spouses Nuguid prayed

for the closure and termination of the case, as well as

the cancellation of the notice of lis pendens on the title
of the property on the ground that Pedro Pecsons
claim for rentals was devoid of factual and legal
bases.16
After conducting a hearing, the lower court issued an
Order dated July 31, 1998, directing the spouses to
pay the sum of P1,344,000 as reimbursement of the
unrealized income of Pecson for the period beginning
November 22, 1993 up to December 1997. The sum
was based on the computation of P28,000/month
rentals of the four-door apartment, thus:
The Court finds plaintiffs motion valid and meritorious.
The decision of the Supreme Court in the aforesaid
case [Pecson vs. Court of Appeals, 244 SCRA 407]
which set aside the Order of this Court of November
15, 1993 has in effect upheld plaintiffs right of
possession of the building for as long as he is not fully
paid the value thereof. It follows, as declared by the
Supreme Court in said decision that the plaintiff is
entitled to the income derived therefrom, thus
...
Records show that the plaintiff was dispossessed of
the premises on November 22, 1993 and that he was
fully paid the value of his building in December 1997.
Therefore, he is entitled to the income thereof
beginning on November 22, 1993, the time he was

dispossessed, up to the time of said full payment, in

December 1997, or a total of 48 months.
The only question left is the determination of income of
the four units of apartments per month. But as correctly
pointed out by plaintiff, the defendants have
themselves submitted their affidavits attesting that the
income derived from three of the four units of the
apartment building is P21,000.00 or P7,000.00 each
per month, or P28,000.00 per month for the whole four
units. Hence, at P28,000.00 per month, multiplied by
48 months, plaintiff is entitled to be paid by defendants
the amount of P1,344,000.00.17
The Nuguid spouses filed a motion for reconsideration
but this was denied for lack of merit.18
The Nuguid couple then appealed the trial courts
ruling to the Court of Appeals, their action docketed as
CA-G.R. CV No. 64295.
In the Court of Appeals, the order appealed from in
CA-G.R. CV No. 64295, was modified. The CA
reduced the rentals from P1,344,000 to P280,000 in
favor of the appellee.19 The said amount represents
accrued rentals from the determination of the current
market value on January 31, 199720 until its full
payment on December 12, 1997.
Hence, petitioners state the sole assignment of error
now before us as follows:

THE COURT OF APPEALS ERRED IN HOLDING

PETITIONERS LIABLE TO PAY RENT OVER AND
ABOVE THE CURRENT MARKET VALUE OF THE
IMPROVEMENT WHEN SUCH WAS NOT PROVIDED
FOR IN THE DISPOSITIVE PORTION OF THE
SUPREME COURTS RULING IN G.R. No. 115814.
Petitioners call our attention to the fact that after
reaching an agreed price of P400,000 for the
improvements, they only made a partial payment
of P300,000. Thus, they contend that their failure to
pay the full price for the improvements will, at most,
entitle respondent to be restored to possession, but not
to collect any rentals. Petitioners insist that this is the
proper interpretation of the dispositive portion of the
decision in G.R. No. 115814, which states in part that
"[t]he value so determined shall be forthwith paid by
the private respondents [Spouses Juan and Erlinda
Nuguid] to the petitioner [Pedro Pecson] otherwise the
petitioner shall be restored to the possession of the
apartment building until payment of the required
indemnity."21
Now herein respondent, Pecson, disagrees with herein
petitioners contention. He argues that petitioners are
wrong in claiming that inasmuch as his claim for
rentals was not determined in the dispositive portion of
the decision in G.R. No. 115814, it could not be the
subject of execution. He points out that in moving for
an accounting, all he asked was that the value of the
fruits of the property during the period he was

dispossessed be accounted for, since this Court

explicitly recognized in G.R. No. 115814, he was
entitled to the property. He points out that this Court
ruled that "[t]he petitioner [Pecson] not having been so
paid, he was entitled to retain ownership of the building
and, necessarily, the income therefrom."22 In other
words, says respondent, accounting was necessary.
For accordingly, he was entitled to rental income from
the property. This should be given effect. The Court
could have very well specifically included rent (as fruit
or income of the property), but could not have done so
at the time the Court pronounced judgment because its
value had yet to be determined, according to him.
Additionally, he faults the appellate court for modifying
the order of the RTC, thus defeating his right as a
builder in good faith entitled to rental from the period of
his dispossession to full payment of the price of his
improvements, which spans from November 22, 1993
to December 1997, or a period of more than four
years.
It is not disputed that the construction of the four-door
two-storey apartment, subject of this dispute, was
undertaken at the time when Pecson was still the
owner of the lot. When the Nuguids became the
uncontested owner of the lot on June 23, 1993, by
virtue of entry of judgment of the Courts decision,
dated May 25, 1993, in G.R. No. 105360, the
apartment building was already in existence and
occupied by tenants. In its decision dated May 26,
1995 in G.R. No. 115814, the Court declared the rights

and obligations of the litigants in accordance with

Articles 448 and 546 of the Civil Code. These
provisions of the Code are directly applicable to the
instant case.
Under Article 448, the landowner is given the option,
either to appropriate the improvement as his own upon
payment of the proper amount of indemnity or to sell
the land to the possessor in good faith. Relatedly,
Article 546 provides that a builder in good faith is
entitled to full reimbursement for all the necessary and
useful expenses incurred; it also gives him right of
retention until full reimbursement is made.
While the law aims to concentrate in one person the
ownership of the land and the improvements thereon in
view of the impracticability of creating a state of forced
co-ownership,23 it guards against unjust enrichment
insofar as the good-faith builders improvements are
concerned. The right of retention is considered as one
of the measures devised by the law for the protection
of builders in good faith. Its object is to guarantee full
and prompt reimbursement as it permits the actual
possessor to remain in possession while he has not
been reimbursed (by the person who defeated him in
the case for possession of the property) for those
necessary expenses and useful improvements made
by him on the thing possessed.24 Accordingly, a builder
in good faith cannot be compelled to pay rentals during
the period of retention25 nor be disturbed in his
possession by ordering him to vacate. In addition, as in

this case, the owner of the land is prohibited from

offsetting or compensating the necessary and useful
expenses with the fruits received by the builderpossessor in good faith. Otherwise, the security
provided by law would be impaired. This is so because
the right to the expenses and the right to the fruits both
pertain to the possessor, making compensation
juridically impossible; and one cannot be used to
reduce the other.26
As we earlier held, since petitioners opted to
appropriate the improvement for themselves as early
as June 1993, when they applied for a writ of execution
despite knowledge that the auction sale did not include
the apartment building, they could not benefit from the
lots improvement, until they reimbursed the improver
in full, based on the current market value of the
property.
Despite the Courts recognition of Pecsons right of
ownership over the apartment building, the petitioners
still insisted on dispossessing Pecson by filing for a
Writ of Possession to cover both the lot and the
building. Clearly, this resulted in a violation of
respondents right of retention. Worse, petitioners took
advantage of the situation to benefit from the highly
valued, income-yielding, four-unit apartment building
by collecting rentals thereon, before they paid for the
cost of the apartment building. It was only four years
later that they finally paid its full value to the
respondent.

Petitioners interpretation of our holding in G.R. No.

115814 has neither factual nor legal basis. The
decision of May 26, 1995, should be construed in
connection with the legal principles which form the
basis of the decision, guided by the precept that
judgments are to have a reasonable intendment to do
justice and avoid wrong.27
The text of the decision in G.R. No. 115814 expressly
exempted Pecson from liability to pay rentals, for we
found that the Court of Appeals erred not only in
upholding the trial courts determination of the
indemnity, but also in ordering him to account for the
rentals of the apartment building from June 23, 1993 to
September 23, 1993, the period from entry of judgment
until Pecsons dispossession. As pointed out by
Pecson, the dispositive portion of our decision in G.R.
No. 115814 need not specifically include the income
derived from the improvement in order to entitle him,
as a builder in good faith, to such income. The right of
retention, which entitles the builder in good faith to the
possession as well as the income derived therefrom, is
already provided for under Article 546 of the Civil
Code.
Given the circumstances of the instant case where the
builder in good faith has been clearly denied his right
of retention for almost half a decade, we find that the
increased award of rentals by the RTC was reasonable
and equitable. The petitioners had reaped all the
benefits from the improvement introduced by the

respondent during said period, without paying any

amount to the latter as reimbursement for his
construction costs and expenses. They should account
and pay for such benefits.
We need not belabor now the appellate courts
recognition of herein respondents entitlement to
rentals from the date of the determination of the
current market value until its full payment. Respondent
is clearly entitled to payment by virtue of his right of
retention over the said improvement.
WHEREFORE, the instant petition is DENIED for lack
of merit. The Decision dated May 21, 2001 of the Court
of Appeals in CA-G.R. CV No. 64295 is SET ASIDE
and the Order dated July 31, 1998, of the Regional
Trial Court, Branch 101, Quezon City, in Civil Case No.
Q-41470 ordering the herein petitioners, Spouses Juan
and Erlinda Nuguid, to account for the rental income of
the four-door two-storey apartment building from
November 1993 until December 1997, in the amount
of P1,344,000, computed on the basis of Twenty-eight
Thousand (P28,000.00) pesos monthly, for a period of
48 months, is hereby REINSTATED. Until fully paid,
said amount of rentals should bear the legal rate of
interest set at six percent (6%) per annum computed
from the date of RTC judgment. If any portion thereof
shall thereafter remain unpaid, despite notice of finality
of this Courts judgment, said remaining unpaid
amount shall bear the rate of interest set at twelve

percent (12%) per annum computed from the date of

said notice. Costs against petitioners.

G.R. No. L-61647 October 12, 1984

REPUBLIC OF THE PHILIPPINES (DIRECTOR OF
LANDS), petitioner,
vs.
THE HON. COURT OF APPEALS, BENJAMIN
TANCINCO, AZUCENA TANCINCO REYES, MARINA
TANCINCO IMPERIAL and MARIO C.
TANCINCO, respondents.
The Solicitor General for petitioner.
Martin B. Laurea for respondents.

GUTIERREZ, JR., J.:+.wph!1

This is a petition for certiorari to set aside the decision

of the respondent Court of Appeals (now Intermediate
Appellate Court) affirming the decision of the Court of
First Instance of Bulacan, Fifth Judicial District, Branch
VIII, which found that Lots 1 and 2 of Plan Psu-131892
are accretion to the land covered by Transfer
Certificate of Title No. 89709 and ordered their
registration in the names of the private respondents.
Respondents Benjamin Tancinco, Azucena Tancinco
Reyes, Marina (should be "Maria") Tancinco Imperial
and Mario C. Tancinco are registered owners of a
parcel of land covered by Transfer Certificate of Title
No. T-89709 situated at Barrio Ubihan, Meycauayan,
Bulacan bordering on the Meycauayan and Bocaue
rivers.
On June 24, 1973, the private respondents filed an
application for the registration of three lots adjacent to
their fishpond property and particularly described as
follows: t.hqw
Lot 1-Psu-131892
(Maria C. Tancinco)
A parcel of land (lot 1 as shown on plan
Psu-131892), situated in the Barrio of
Ubihan, Municipality of Meycauayan,
Province of Bulacan. Bounded on the NE.,
along line 1-2, by Lot 3 of plan Psu131892; on the SE., along lines 2-3-4, by

Meycauayan River; on the S.W., along

fines 4-5-6-7-8-9, by Bocaue River; on the
NE., along line 9-10, by property of
Joaquina Santiago; on the E., NE., and
NW., along lines 10-11-12-1, by property of
Mariano Tancinco (Lot 2, Psu-111877). ...
containing an area of THIRTY THREE
THOUSAND NINE HUNDRED THIRTY
SEVEN (33,937) SQUARE METERS. ...
Lot 2-Psu-131892
(Maria C. Tancinco)
A parcel of land (Lot 2 as shown on plan
Psu-131892), situated in the Barrio of
Ubihan, Municipality of Meycauayan,
Province of Bulacan. Bounded on the E.,
along line 1-2, by property of Rafael
Singson; on the S., along line 2-3, by
Meycauayan River; on the SW., along line
3-4, by Lot 3 of plan Psu-131892; and on
the N., along line 4-1, by property of
Mariano Tancinco (Lot 1, Psu-111877). ...
containing an area of FIVE THOUSAND
FOUR HUNDRED FIFTY THREE (5,453)
SQUARE METERS. ...
Lot 3-Psu-131892
(Maria C. Tancinco)

A parcel of land (Lot 3 as shown on plan

Psu-131892), situated in the Barrio of
Ubihan, Municipality of Meycauayan,
Province of Bulacan. Bounded on the NE.,
along line 1-2, by property of Mariano
Tancinco (Lot 1, Psu-111877); and along
line 2-3, by Lot 2 of plan Psu-131892; on
the S., along line 3-4, by Meycauayan
River, on the SW., along line 4-5, by Lot 1
of plan Psu-131892; and along line 5-6 by
property of Mariano Tancinco (Lot 2, Psu111877), and on the NW., along line 6-1, by
property of Joaquina Santiago. ...
containing an area of ONE THOUSAND
NINE HUNDRED EIGHTY FIVE (1,985)
SQUARE METERS. ...
On April 5, 1974, Assistant Provincial Fiscal Amando
C. Vicente, in representation of the Bureau of Lands
filed a written opposition to the application for
registration.
On March 6, 1975, the private respondents filed a
partial withdrawal of the application for registration with
respect to Lot 3 of Plan Psu-131892 in line with the
recommendation of the Commissioner appointed by
the Court.
On March 7, 1975, Lot 3 was ordered withdrawn from
the application and trial proceeded only with respect to
Lots 1 and 2 covered by Plan Psu-131892.

On June 26, 1976, the lower court rendered a decision

granting the application on the finding that the lands in
question are accretions to the private respondents'
fishponds covered by Transfer Certificate of Title No.
89709. The dispositive portion of the decision
reads: t.hqw
WHEREFORE, it appearing that Lots 1 & 2
of plan Psu-131892 (Exh. H) are accretions
to the land covered by Transfer Certificate
of Title No. 89709 of the Register of Deeds
of Bulacan, they belong to the owner of
said property. The Court, therefore, orders
the registration of lots 1 & 2 situated in the
barrio of Ubihan, municipality of
Meycauayan, province of Bulacan, and
more particularly described in plan Psu131892 (Exh. H) and their accompanying
technical descriptions (Exhs. E, E-1) in
favor of Benjamin Tancinco, married to
Alma Fernandez and residing at 3662
Heatherdown, Toledo, Ohio 43614 U.S.A.;
Azucena Tancinco Reyes, married to Alex
Reyes, Jr., residing at 4th St., New Manila,
Quezon City; Marina Tancinco Imperial,
married to Juan Imperial, residing at Pasay
Road, Dasmarias Village, Makati, Rizal;
and Mario C. Tancinco, married to Leticia
Regidor, residing at 1616 Cypress St.,
Dasmarias Village, Makati, Rizal, all of
legal age, all Filipino citizens.

On July 30, 1976, the petitioner Republic appealed to

the respondent Court of Appeals.
On August, 19, 1982, the respondent Court rendered a
decision affirming in toto the decision of the lower
court. The dispositive portion of the decision
reads: t.hqw
DAHIL DITO, ang hatol na iniakyat ay
sinasangayunan at pinagtitibay sa kanyang
kabuuan nang walang bayad.
The rule that the findings of fact of the trial court and
the Court of Appeals are binding upon this Court
admits of certain exceptions. Thus in Carolina
Industries Inc. v. CMS Stock Brokerage, Inc. (97 SCRA
734) we held that this Court retains the power to
review and rectify the findings of fact of said courts
when (1) the conclusion is a finding grounded entirely
on speculations, surmises and conjectures; (2) when
the inference made is manifestly mistaken, absurd,
and impossible; (3) where there is grave abuse of
discretion, (4) when the judgment is based on a
misapprehension of facts; and (5) when the court, in
making its findings, went beyond the issues of the case
and the same are contrary to the admissions of both
appellant and appellee.
There are facts and circumstances in the record which
render untenable the findings of the trial court and the

Court of Appeals that the lands in question are

accretions to the private respondents' fishponds.
The petitioner submits that there is no accretion to
speak of under Article 457 of the New Civil Code
because what actually happened is that the private
respondents simply transferred their dikes further down
the river bed of the Meycauayan River, and thus, if
there is any accretion to speak of, it is man-made and
artificial and not the result of the gradual and
imperceptible sedimentation by the waters of the river.
On the other hand, the private respondents rely on the
testimony of Mrs. Virginia Acua to the effect that: t.
hqw
xxx xxx xxx
... when witness first saw the land, namely,
Lots 1 & 2, they were already dry almost at
the level of the Pilapil of the property of Dr.
Tancinco, and that from the boundaries of
the lots, for about two (2) arms length the
land was still dry up to the edge of the river;
that sometime in 1951, a new Pilapil was
established on the boundaries of Lots 1 & 2
and soil from the old Pilapil was transferred
to the new Pilapil and this was done
sometime in 1951; that the new lots were
then converted into fishpond, and water in
this fishpond was two (2) meters deep on

the side of the Pilapil facing the fishpond ...

.
The private respondents submit that the foregoing
evidence establishes the fact of accretion without
human intervention because the transfer of the dike
occurred after the accretion was complete.
We agree with the petitioner.
Article 457 of the New Civil Code provides: t.
hqw
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.
The above-quoted article requires the concurrence of
three requisites before an accretion covered by this
particular provision is said to have taken place. They
are (1) that the deposit be gradual and imperceptible;
(2) that it be made through the effects of the current of
the water; and (3) that the land where accretion takes
place is adjacent to the banks of rivers.
The requirement that the deposit should be due to the
effect of the current of the river is indispensable. This
excludes from Art. 457 of the New Civil Code all
deposits caused by human intervention. Alluvion must
be the exclusive work of nature. In the instant case,
there is no evidence whatsoever to prove that the

addition to the said property was made gradually

through the effects of the current of the Meycauayan
and Bocaue rivers. We agree with the observation of
the Solicitor General that it is preposterous to believe
that almost four (4) hectares of land came into being
because of the effects of the Meycauayan and Bocaue
rivers. The lone witness of the private respondents
who happens to be their overseer and whose husband
was first cousin of their father noticed the four hectare
accretion to the twelve hectare fishpond only in 1939.
The respondents claim that at this point in time,
accretion had already taken place. If so, their witness
was incompetent to testify to a gradual and
imperceptible increase to their land in the years before
1939. However, the witness testified that in that year,
sheobserved an increase in the area of the original
fishpond which is now the land in question. If she was
telling the truth, the accretion was sudden. However,
there is evidence that the alleged alluvial deposits
were artificial and man-made and not the exclusive
result of the current of the Meycauayan and Bocaue
rivers. The alleged alluvial deposits came into being
not because of the sole effect of the current of the
rivers but as a result of the transfer of the dike towards
the river and encroaching upon it. The land sought to
be registered is not even dry land cast imperceptibly
and gradually by the river's current on the fishpond
adjoining it. It is under two meters of water. The private
respondents' own evidence shows that the water in the
fishpond is two meters deep on the side of the pilapil

facing the fishpond and only one meter deep on the

side of the pilapil facing the river
The reason behind the law giving the riparian owner
the right to any land or alluvion deposited by a river is
to compensate him for the danger of loss that he
suffers because of the location of his land. If estates
bordering on rivers are exposed to floods and other
evils produced by the destructive force of the waters
and if by virtue of lawful provisions, said estates are
subject to incumbrances and various kinds of
easements, it is proper that the risk or danger which
may prejudice the owners thereof should be
compensated by the right of accretion. (Cortes v. City
of Manila, 10 Phil. 567). Hence, the riparian owner
does not acquire the additions to his land caused by
special works expressly intended or designed to bring
about accretion. When the private respondents
transferred their dikes towards the river bed, the dikes
were meant for reclamation purposes and not to
protect their property from the destructive force of the
waters of the river.
We agree with the submission of the Solicitor General
that the testimony of the private respondents' lone
witness to the effect that as early as 1939 there
already existed such alleged alluvial deposits,
deserves no merit. It should be noted that the lots in
question were not included in the survey of their
adjacent property conducted on May 10, 1940 and in
the Cadastral Survey of the entire Municipality of

Meycauayan conducted between the years 1958 to

1960. The alleged accretion was declared for taxation
purposes only in 1972 or 33 years after it had
supposedly permanently formed. The only valid
conclusion therefore is that the said areas could not
have been there in 1939. They existed only after the
private respondents transferred their dikes towards the
bed of the Meycauayan river in 1951. What private
respondents claim as accretion is really an
encroachment of a portion of the Meycauayan river by
reclamation.
The lower court cannot validly order the registration of
Lots 1 & 2 in the names of the private respondents.
These lots were portions of the bed of the Meycauayan
river and are therefore classified as property of the
public domain under Article 420 paragraph 1 and
Article 502, paragraph 1 of the Civil Code of the
Philippines. They are not open to registration under the
Land Registration Act. The adjudication of the lands in
question as private property in the names of the private
respondents is null and void.
WHEREFORE, the instant petition is GRANTED. The
decision appealed from is hereby REVERSED and
SET ASIDE. The private respondents are ordered to
move back the dikes of their fishponds to their original
location and return the disputed property to the river to
which it belongs.

G.R. No. L-17652

June 30, 1962

IGNACIO GRANDE, ET AL., petitioners,

vs.
HON. COURT OF APPEALS, DOMINGO
CALALUNG, and ESTEBAN
CALALUNG, respondents.
Bartolome Guirao and Antonio M. Orara for petitioners.
Gonzales and Fernandez for respondents.
BARRERA, J.:
This is an appeal taken by petitioners Ignacio, Eulogia,
Alfonso, Eulalia, and Sofia Grande, from the decision
of the Court of Appeals (CA-G.R. No. 25169-R)
reversing that of the Court of First Instance of Isabela
(Civil Case No. 1171), and dismissing petitioners'
action against respondents Domingo and Esteban
Calalung, to quiet title to and recover possession of a
parcel of land allegedly occupied by the latter without
petitioners' consent.
The facts of the case, which are undisputed, briefly
are: Petitioners are the owners of a parcel of land, with
an area of 3.5032 hectares, located at barrio Ragan,
municipality of Magsaysay (formerly Tumauini),
province of Isabela, by inheritance from their deceased

mother Patricia Angui (who inherited it from her

parents Isidro Angui and Ana Lopez, in whose name
said land appears registered, as shown by Original
Certificate of Title No. 2982, issued on June 9, 1934).
Said property is identified as Lot No. 1, Plan PSU83342. When it was surveyed for purposes of
registration sometime in 1930, its northeastern
boundary was the Cagayan River (the same boundary
stated in the title). Since then, and for many years
thereafter, a gradual accretion on the northeastern side
took place, by action of the current of the Cagayan
River, so much so, that by 1958, the bank thereof had
receded to a distance of about 105 meters from its
original site, and an alluvial deposit of 19,964 square
meters (1.9964 hectares), more or less, had been
added to the registered area (Exh. C-1).
On January 25, 1958, petitioners instituted the present
action in the Court of First Instance of Isabela against
respondents, to quiet title to said portion (19,964
square meters) formed by accretion, alleging in their
complaint (docketed as Civil Case No. 1171) that they
and their predecessors-in-interest, were formerly in
peaceful and continuous possession thereof, until
September, 1948, when respondents entered upon the
land under claim of ownership. Petitioners also asked
for damages corresponding to the value of the fruits of
the land as well as attorney's fees and costs. In their
answer (dated February 18, 1958), respondents claim
ownership in themselves, asserting that they have
been in continuous, open, and undisturbed possession

of said portion, since prior to the year 1933 to the

present.
After trial, the Court of First Instance of Isabela, on
May 4, 1959, rendered a decision adjudging the
ownership of the portion in question to petitioners, and
ordering respondents to vacate the premises and
deliver possession thereof to petitioners, and to pay to
the latter P250.00 as damages and costs. Said
decision, in part, reads:
It is admitted by the parties that the land involved
in this action was formed by the gradual deposit
of alluvium brought about by the action of the
Cagayan River, a navigable river. We are inclined
to believe that the accretion was formed on the
northeastern side of the land covered by Original
Certificate of Title No. 2982 after the survey of
the registered land in 1931, because the
surveyors found out that the northeastern
boundary of the land surveyed by them was the
Cagayan River, and not the land in question.
Which is indicative of the fact that the accretion
has not yet started or begun in 1931. And, as
declared by Pedro Laman, defendant witness
and the boundary owner on the northwest of the
registered land of the plaintiffs, the accretion was
a little more than one hectare, including the stony
portion, in 1940 or 1941. Therefore, the
declarations of the defendant Domingo Calalung
and his witness, Vicente C. Bacani, to the effect

that the land in question was formed by accretion

since 1933 do not only contradict the testimony
of defendants' witness Pedro Laman, but could
not overthrow the incontestable fact that the
accretion with an area of 4 hectare more or less,
was formed in 1948, reason for which, it was only
declared in that same year for taxation purposes
by the defendants under Tax Dec. No. 257 (Exh.
"2") when they entered upon the land. We could
not give credence to defendants' assertion that
Tax Dec. No. 257 (Exh. "2") cancelled Tax Dee.
No. 28226 (Exh. "1"), because Exh. "2" says that
"tax under this declaration begins with the year
1948. But, the fact that defendants declared the
land for taxation purposes since 1948, does not
mean that they become the owner of the land by
mere occupancy, for it is a new provision of the
New Civil Code that ownership of a piece of land
cannot be acquired by occupation (Art. 714, New
Civil Code). The land in question being an
accretion to the mother or registered land of the
plaintiffs, the accretion belongs to the plaintiffs
(Art. 457, New Civil Code; Art. 366, Old Civil
Code). Assuming arguendo, that the accretion
has been occupied by the defendants since
1948, or earlier, is of no moment, because the
law does not require any act of possession on
the part of the owner of the riparian owner, from
the moment the deposit becomes manifest
(Roxas v. Tuason, 9 Phil. 408; Cortez v. City of
Manila, 10 Phil. 567). Further, no act of

appropriation on the part of the reparian owner is

necessary, in order to acquire ownership of the
alluvial formation, as the law does not require the
same (3 Manresa, C.C., pp. 321-326).
This brings us now to the determination of
whether the defendants, granting that they have
been in possession of the alluvium since 1948,
could have acquired the property by prescription.
Assuming that they occupied the land in
September, 1948, but considering that the action
was commenced on January 25, 1958, they have
not been in possession of the land for ten (10)
years; hence, they could not have acquired the
land by ordinary prescription (Arts. 1134 and
1138, New Civil Code). Moreover, as the alluvium
is, by law, part and parcel of the registered
property, the same may be considered as
registered property, within the meaning of
Section 46 of Act No. 496: and, therefore, it could
not be acquired by prescription or adverse
possession by another person.
Unsatisfied, respondents appealed to the Court of
Appeals, which rendered, on September 14, 1960, the
decision adverted to at the beginning of this opinion,
partly stating:
That the area in controversy has been formed
through a gradual process of alluvium, which
started in the early thirties, is a fact conclusively

established by the evidence for both parties. By

law, therefore, unless some superior title has
supervened, it should properly belong to the
riparian owners, specifically in accordance with
the rule of natural accession in Article 366 of the
old Civil Code (now Article 457), which provides
that "to the owner of lands adjoining the banks of
rivers, belongs the accretion which they gradually
receive from the effects of the current of the
waters." The defendants, however, contend that
they have acquired ownership through
prescription. This contention poses the real issue
in this case. The Courta quo, has resolved it in
favor of the plaintiffs, on two grounds: First, since
by accession, the land in question pertains to the
original estate, and since in this instance the
original estate is registered, the accretion,
consequently, falls within the purview of Section
46 of Act No. 496, which states that "no title to
registered land in derogation to that of the
registered owner shall be acquired by
prescription or adverse possession"; and,
second, the adverse possession of the defendant
began only in the month of September, 1948, or
less than the 10-year period required for
prescription before the present action was
instituted.
As a legal proposition, the first ground relied
upon by the trial court, is not quite correct. An
accretion to registered land, while declared by

specific provision of the Civil Code to belong to

the owner of the land as a natural accession
thereof, does not ipso jure become entitled to the
protection of the rule of imprescriptibility of title
established by the Land Registration Act. Such
protection does not extend beyond the area
given and described in the certificate. To hold
otherwise, would be productive of confusion. It
would virtually deprive the title, and the technical
description of the land given therein, of their
character of conclusiveness as to the identity and
area of the land that is registered. Just as the
Supreme Court, albeit in a negative manner, has
stated that registration does not protect the
riparian owner against the erosion of the area of
his land through gradual changes in the course
of the adjoining stream (Payatas Estate
Development Co. v. Tuason, 53 Phil. 55), so
registration does not entitle him to all the rights
conferred by Land Registration Act, in so far as
the area added by accretion is concerned. What
rights he has, are declared not by said Act, but
by the provisions of the Civil Code on accession:
and these provisions do not preclude acquisition
of the addition area by another person through
prescription. This Court has held as much in the
case of Galindez, et al. v. Baguisa, et al., CAG.R. No. 19249-R, July 17, 1959.
We now proposed to review the second ground
relied upon by the trial court, regarding the length

of time that the defendants have been in

possession. Domingo Calalung testified that he
occupied the land in question for the first time in
1934, not in 1948 as claimed by the plaintiffs.
The area under occupancy gradually increased
as the years went by. In 1946, he declared the
land for purposes of taxation (Exhibit 1). This tax
declaration was superseded in 1948 by another
(Exhibit 2), after the name of the municipality
wherein it is located was changed from Tumauini
to Magsaysay. Calalung's testimony is
corroborated by two witnesses, both owners of
properties nearby. Pedro Laman, 72 years of
age, who was Municipal president of Tumauini
for three terms, said that the land in question
adjoins his own on the south, and that since
1940 or 1951, he has always known it to be in
the peaceful possession of the defendants.
Vicente C. Bacani testified to the same effect,
although, he said that the defendants'
possession started sometime in 1933 or 1934.
The area thereof, he said, was then less than
one hectare.
We find the testimony of the said witnesses
entitled to much greater weight and credence
than that of the plaintiff Pedro Grande and his
lone witness, Laureana Rodriguez. The first
stated that the defendants occupied the land in
question only in 1948; that he called the latter's
attention to the fact that the land was his, but the

defendants, in turn, claimed that they were the

owners, that the plaintiffs did not file an action
until 1958, because it was only then that they
were able to obtain the certificate of title from the
surveyor, Domingo Parlan; and that they never
declared the land in question for taxation
purposes or paid the taxes thereon. Pedro
Grande admitted that the defendants had the
said land surveyed in April, 1958, and that he
tried to stop it, not because he claimed the
accretion for himself and his co-plaintiffs, but
because the survey included a portion of the
property covered by their title. This last fact is
conceded by the defendants who, accordingly,
relinquished their possession to the part thus
included, containing an area of some 458 square
meters.1wph1.t
The oral evidence for the defendants concerning
the period of their possession from 1933 to
1958 is not only preponderant in itself, but is,
moreover, supported by the fact that it is they
and not the plaintiffs who declared the disputed
property for taxation, and by the additional
circumstance that if the plaintiff had really been
in prior possession and were deprived thereof in
1948, they would have immediately taken steps
to recover the same. The excuse they gave for
not doing so, namely, that they did not receive
their copy of the certificate of title to their
property until 1958 for lack of funds to pay the

fees of the surveyor Domingo Parlan, is too

flimsy to merit any serious consideration. The
payment of the surveyor's fees had nothing to do
with their right to obtain a copy of the certificate.
Besides, it was not necessary for them to have it
in their hands, in order to file an action to recover
the land which was legally theirs by accession
and of which, as they allege, they had been
illegally deprived by the defendants. We are
convinced, upon consideration of the evidence,
that the latter, were really in possession since
1934, immediately after the process of alluvion
started, and that the plaintiffs woke up to their
rights only when they received their copy of the
title in 1958. By then, however, prescription had
already supervened in favor of the defendants.
It is this decision of the Court of Appeals which
petitioners seek to be reviewed by us.
The sole issue for resolution in this case is whether
respondents have acquired the alluvial property in
question through prescription.
There can be no dispute that both under Article 457 of
the New Civil Code and Article 366 of the old,
petitioners are the lawful owners of said alluvial
property, as they are the registered owners of the land
which it adjoins. The question is whether the accretion
becomes automatically registered land just because
the lot which receives it is covered by a Torrens title

thereby making the alluvial property imprescriptible.

We agree with the Court of Appeals that it does not,
just as an unregistered land purchased by the
registered owner of the adjoining land does not, by
extension, become ipso facto registered land.
Ownership of a piece of land is one thing, and
registration under the Torrens system of that ownership
is quite 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 Acts 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 been provided. The
fact remain, however, that petitioners never sought
registration of said alluvial property (which was formed
sometime after petitioners' property covered by
Original Certificate of Title No. 2982 was registered on
June 9, 1934) up to the time they instituted the present
action in the Court of First Instance of Isabela in 1958.
The increment, therefore, never became registered
property, and hence is not entitled or subject to the
protection of imprescriptibility enjoyed by registered
property under the Torrens system. Consequently, it
was subject to acquisition through prescription by third
persons.

The next issue is, did respondents acquire said alluvial

property through acquisitive prescription? This is a
question which requires determination of facts:
physical possession and dates or duration of such
possession. The Court of Appeals, after analyzing the
evidence, found that respondents-appellees were in
possession of the alluvial lot since 1933 or 1934,
openly, continuously and adversely, under a claim of
ownership up to the filing of the action in 1958. This
finding of the existence of these facts, arrived at by the
Court of Appeals after an examination of the evidence
presented by the parties, is conclusive as to them and
can not be reviewed by us.

HEIRS
OF
EMILIANO
NAVARRO, petitioner,
vs. INTERMEDIATE APPELLATE COURT AND
HEIRS
OF
SINFOROSO
PASCUAL,
respondents.
DECISION
HERMOSISIMA, JR., J.:
Unique is the legal question visited upon the claim
of an applicant in a Land Registration case by
oppositors thereto, the Government and a Government
lessee, involving as it does ownership of land formed
by alluvium.

The law on prescription applicable to the case is that

provided in Act 190 and not the provisions of the Civil
Code, since the possession started in 1933 or 1934
when the pertinent articles of the old Civil Code were
not in force and before the effectivity of the new Civil
Code in 1950. Hence, the conclusion of the Court of
Appeals that the respondents acquired alluvial lot in
question by acquisitive prescription is in accordance
with law.

The applicant owns the property immediately

adjoining the land sought to be registered. His
registered property is bounded on the east by the
Talisay River, on the west by the Bulacan River, and on
the north by the Manila Bay. The Talisay River and the
Bulacan River flow down towards the Manila Bay and
act as boundaries of the applicant's registered land on
the east and on the west.

The decision of the Court of Appeals under review is

hereby affirmed, with costs against the petitioners. So
ordered.

The land sought to be registered was formed at the

northern tip of the applicant's land. Applicant's
registered property is bounded on the north by the
Manila Bay.
The issue: May the land sought to be registered be
deemed an accretion in the sense that it naturally

accrues in favor of the riparian owner or should the

land be considered as foreshore land?
Before us is a petition for review of: (1) the
decision[1] and (2) two subsequent resolutions[2] of the
Intermediate Appellate Court[3] (now the Court of
Appeals) in Land Registration Case No. N-84, [4] the
application over which was filed by private
respondents'
predecessor-in-interest,
Sinforoso
Pascual, now deceased, before the Court of First
Instance[5] (now the Regional Trial Court) of Balanga,
Bataan.
There is no dispute as to the following facts:
On October 3, 1946, Sinforoso Pascual, now
deceased, filed an application for foreshore lease
covering a tract of foreshore land in Sibocon, Balanga,
Bataan, having an area of approximately seventeen
(17) hectares. This application was denied on January
15, 1953. So was his motion for reconsideration.
Subsequently, petitioners' predecessor-in-interest, also
now deceased, Emiliano Navarro, filed a fishpond
application with the Bureau of Fisheries covering
twenty five (25) hectares of foreshore land also in
Sibocon, Balanga, Bataan. Initially, such application
was denied by the Director of Fisheries on the ground
that the property formed part of the public
domain. Upon motion for reconsideration, the Director
of Fisheries, on May 27, 1988, gave due course to his

application but only to the extent of seven (7) hectares

of the property as may be certified by the Bureau of
Forestry as suitable for fishpond purposes.
The Municipal Council of Balanga, Bataan, had
opposed Emiliano Navarro's application. Aggrieved by
the decision of the Director of Fisheries, it appealed to
the Secretary of Natural Resources who, however,
affirmed the grant. The then Executive Secretary,
acting in behalf of the President of the Philippines,
similarly affirmed the grant.
On the other hand, sometime in the early part of 1960,
Sinforoso Pascual filed an application to register and
confirm his title to a parcel of land, situated in Sibocon,
Balanga, Bataan, described in Plan Psu-175181 and
said to have an area of 146,611 square meters.
Pascual claimed that this land is an accretion to his
property, situated in Barrio Puerto Rivas, Balanga,
Bataan, and covered by Original Certificate of Title No.
6830. It is bounded on the eastern side by the Talisay
River, on the western side by the Bulacan River, and
on the northern side by the Manila Bay. The Talisay
River as well as the Bulacan River flow downstream
and meet at the Manila Bay thereby depositing sand
and silt on Pascual's property resulting in an accretion
thereon. Sinforoso Pascual claimed the accretion as
the riparian owner.
On March 25, 1960, the Director of Lands, represented
by the Assistant Solicitor General, filed an opposition

thereto stating that neither Pascual nor his

predecessors-in-interest possessed sufficient title to
the subject property, the same being a portion of the
public domain and, therefore, it belongs to the
Republic of the Philippines. The Director of Forestry,
through the Provincial Fiscal, similarly opposed
Pascual's application for the same reason as that
advanced by the Director of Lands. Later on, however,
the Director of Lands withdrew his opposition. The
Director of Forestry become the sole oppositor.
On June 2, 1960, the court a quo issued an order of
general default excepting the Director of Lands and the
Director of Forestry.
Upon motion of Emiliano Navarro, however, the order
of general default was lifted and, on February 13,
1961, Navarro thereupon filed an opposition to
Pascual's application. Navarro claimed that the land
sought to be registered has always been part of the
public domain, it being a part of the foreshore of Manila
Bay; that he was a lessee and in possession of a part
of the subject property by virtue of a fishpond permit
issued by the Bureau of Fisheries and confirmed by
the Office of the President; and that he had already
converted the area covered by the lease into a
fishpond.
During the pendency of the land registration case, that
is, on November 6, 1960, Sinforoso Pascual filed a
complaint for ejectment against Emiliano Navarro, one

Marcelo Lopez and their privies, alleged by Pascual to

have unlawfully claimed and possessed, through
stealth, force and strategy, a portion of the subject
property covered by Plan Psu-175181. The
defendants in the case were alleged to have built a
provisional dike thereon: thus they have thereby
deprived Pascual of the premises sought to be
registered. This, notwithstanding repeated demands
for defendants to vacate the property.
The case was decided adversely against
Pascual. Thus, Pascual appealed to the Court of First
Instance (now Regional Trial Court) of Balanga,
Bataan, the appeal having been docketed as Civil
Case No. 2873. Because of the similarity of the parties
and the subject matter, the appealed case for
ejectment was consolidated with the land registration
case and was jointly tried by the court a quo.
During the pendency of the trial of the consolidated
cases, Emiliano Navarro died on November 1, 1961
and was substituted by his heirs, the herein petitioners.
Subsequently, on August 26, 1962, Pascual died and
was substituted by his heirs, the herein private
respondents.
On November 10, 1975, the court a quo rendered
judgment finding the subject property to be foreshore
land and, being a part of the public domain, it cannot
be the subject of land registration proceedings.

The decision's dispositive portion reads:

"WHEREFORE, judgment is rendered:
(1) Dismissing plaintiff [private respondent] Sinforoso
Pascual's complaint for ejectment in Civil Case No.
2873;
(2) Denying the application of Sinforoso Pascual for
land registration over the land in question; and
(3) Directing said Sinforoso Pascual, through his heirs,
as plaintiff in Civil Case No. 2873 and as applicant in
Land Registration Case No. N-84 to pay costs in both
instances."[6]
The heirs of Pascual appealed and, before the
respondent appellate court, assigned the following
errors:
"1. The lower court erred in not finding the land in
question as an accretion by the action of the Talisay
and Bulacan Rivers to the land admittedly owned by
applicants-appellants [private respondents].
2. The lower court erred in holding that the land in
question is foreshore land.
3. The lower court erred in not ordering the registration
of the and is controversy in favor of applicantsappellants [private respondents].

4. The lower court erred in not finding that the

applicants-appellants [private respondents] are entitled
to eject the oppositor-appellee [petitioners]." [7]
On appeal, the respondent court reversed the
findings of the court a quo and granted the petition for
registration of the subject property but excluding
therefrom fifty (50) meters from corner 2 towards
corner 1; and fifty meters (50) meters from corner 5
towards corner 6 of the Psu-175181.
The respondent appellate court explained the
reversal in this wise:
"The paramount issue to be resolved in this appeal as
set forth by the parties in their respective briefs is
whether or not the land sought to be registered is
accretion or foreshore land, or, whether or not said
land was formed by the action of the two rivers of
Talisay and Bulacan or by the action of the Manila
Bay. If formed by the action of the Talisay and Bulacan
rivers, the subject land is accretion but if formed by the
action of the Manila Bay then it is foreshore land.
xxx
It is undisputed that applicants-appellants [private
respondents] owned the land immediately adjoining the
land sought to be registered. Their property which is
covered by OCT No. 6830 is bounded on the east by
the Talisay River, on the west by the Bulacan River,
and on the north by the Manila Bay. The Talisay and

Bulacan rivers come from inland flowing downstream

towards the Manila Bay. In other words, between the
Talisay River and the Bulacan River is the property of
applicants with both rivers acting as the boundary to
said land and the flow of both rivers meeting and
emptying into the Manila Bay. The subject land was
formed at the tip or apex of appellants' [private
respondents'] land adding thereto the land now sought
to be registered.
This makes this case quite unique because while it is
undisputed that the subject land is immediately
attached to appellants' [private respondents'] land and
forms the tip thereof, at the same time, said land
immediately faces the Manila Bay which is part of the
sea. We can understand therefore the confusion this
case might have caused the lower court, faced as it
was with the uneasy problem of deciding whether or
not the subject land was formed by the action of the
two rivers or by the action of the sea. Since the
subject land is found at the shore of the Manila Bay
facing appellants' [private respondents'] land, it would
be quite easy to conclude that it is foreshore and
therefore part of the patrimonial property of the State
as the lower court did in fact rule x x x .
xxx
It is however undisputed that appellants' [private
respondents'] land lies between these two rivers and it
is precisely appellants' [private respondents'] land

which acts as a barricade preventing these two rivers

to meet. Thus, since the flow of the two rivers is
downwards to the Manila Bay the sediments of sand
and silt are deposited at their mouths.
It is, therefore, difficult to see how the Manila Bay
could have been the cause of the deposit thereat for in
the natural course of things, the waves of the sea eat
the land on the shore, as they suge [sic] inland. It
would not therefore add anything to the land but
instead subtract from it due to the action of the waves
and the wind. It is then more logical to believe that the
two rivers flowing towards the bay emptied their cargo
of sand, silt and clay at their mouths, thus causing
appellants' [private respondents'] land to accumulate
therein.
However, our distinguished colleage [sic], Mr. Justice
Serrano, do [sic] not seem to accept this theory and
stated that the subject land arose only when x x x
Pascual planted 'palapat' and 'bakawan' trees thereat
to serve as a boundary or strainer. But we do not see
how this act of planting trees by Pascual would explain
how the land mass came into being. Much less will it
prove that the same came from the sea. Following Mr.
Justice Serrano's argument that it were the few trees
that acted as strainers or blocks, then the land that
grew would have stopped at the place where the said
trees were planted. But this is not so because the land
mass went far beyond the boundary, or where the
trees were planted.

On the other hand, the picture-exhibits of appellants'

[private respondents'] clearly show that the land that
accumulated beyond the so-called boundary, as well
as the entire area being applied for is dry land, above
sea level, and bearing innumerable trees x x x. The
existence of vegetation on the land could only confirm
that the soil thereat came from inland rather than from
the sea, for what could the sea bring to the shore but
sand, pebbles, stones, rocks and corrals? On the other
hand, the two rivers would be bringing soil on their
downward flow which they brought along from the
eroded mountains, the lands along their path, and
dumped them all on the northern portion of appellants'
[private respondents'] land.
In view of the foregoing, we have to deviate from the
lower court's finding. While it is true that the subject
land is found at the shore of the Manila Bay fronting
appellants' [private respondents'] land, said land is not
foreshore but an accretion from the action of the
Talisay and Bulacan rivers. In fact, this is exactly what
the Bureau of Lands found out, as shown in the
following report of the Acting Provincial Officer, Jesus
M. Orozco, to wit:
'Upon ocular inspection of the land subject of this
registration made on June 11, 1960, it was found out
that the said land is x x x sandwitched [sic] by two big
rivers x x x These two rivers bring down considerable
amount of soil and sediments during floods every year
thus raising the soil of the land adjoining the private

property of the applicant [private respondents]. About

four-fifth [sic] of the area applied for is now dry land
whereon are planted palapat trees thickly growing
thereon. It is the natural action of these two rivers that
has caused the formation of said land x x x subject of
this registration case. It has been formed, therefore,
by accretion. And having been formed by accretion,
the said land may be considered the private property of
the riparian owner who is the applicant herein [private
respondents'] x x x .
In view of the above, the opposition hereto filed by the
government should be withdrawn, except for the
portion recommended by the land investigator in his
report dated May 2, 1960, to be excluded and
considered foreshore. x x x'
Because of this report, no less than the Solicitor
General representing the Bureau of Lands withdrew
his opposition dated March 25, 1960, and limited 'the
same to the northern portion of the land applied for,
compromising a strip 50 meters wide along the Manila
Bay, which should be declared public land as part of
the foreshore' x x x.[8]
Pursuant to the aforecited decision, the respondent
appellate court ordered the issuance of the
corresponding decree of registration in the name of
private respondents and the reversion to private
respondents of the possession of the portion of the
subject property included in Navarro's fishpond permit.

On December 20, 1978, petitioners filed a motion

for reconsideration of the aforecited decision. The
Director of Forestry also moved for the reconsideration
of the same decision. Both motions were opposed by
private respondents on January 27, 1979.
On November 21, 1980, respondent appellate court
promulgated a resolution denying the motion for
reconsideration filed by the Director of Forestry. It,
however, modified its decision, to read, viz:
"(3). Ordering private oppositors Heirs of Emiliano
Navarro to vacate that portion included in their
fishpond permit covered by Plan Psu-175181 and hand
over possession of said portion to applicantsappellants, if the said portion is not within the strip of
land fifty (50) meters wide along Manila Bay on the
northern portion of the land subject of the registration
proceedings and which area is more particularly
referred to as fifty (50) meters from corner 2 towards
corner 1; and fifty (50) meters from corner 5 towards
corner 6 of Plan Psu-175181. x x x[9]
On December 15, 1980, we granted the Solicitor
General, acting as counsel for the Director of Forestry,
an extension of time within which to file in this court, a
petition for review of the decision dated November 29,
1978 of the respondent appellate court and of the
aforecited resolution dated November 21, 1980.

Thereafter, the Solicitor General, in behalf of the

Director of Forestry, filed a petition for review entitled,
"The Director of Forestry vs. the Court of
Appeals."[10] We, however, denied the same in a minute
resolution dated July 20, 1981, such petition having
been prematurely filed at a time when the Court of
Appeals was yet to resolve petitioners' pending motion
to set aside the resolution dated November 21, 1980.
On October 9, 1981, respondent appellate court
denied petitioners' motion for reconsideration of the
decision dated November 29, 1978.
On October 17, 1981, respondent appellate court
made an entry of judgment stating that the decision
dated November 29, 1978 had become final and
executory as against herein petitioners as oppositors in
L.R.C. Case No. N-84 and Civil Case No. 2873 of the
Court of First Instance (now the Regional Trial Court)
of Balanga, Bataan.
On October 26, 1981, a second motion for
reconsideration of the decision dated November 29,
1978 was filed by petitioners' new counsel.
On March 26, 1982, respondent appellate court
issued a resolution granting petitioners' request for
leave to file a second motion for reconsideration.
On July 13, 1984, after hearing, respondent
appellate court denied petitioners' second motion for
reconsideration on the ground that the same was filed

out of time, citing Rule 52, Section 1 of the Rules of

Court which provides that a motion for reconsideration
shall be made ex-parte and filed within fifteen (15)
days from the notice of the final order or judgment.
Hence this petition where the respondent appellate
court is imputed to have palpably erred in appreciating
the facts of the case and to have gravely misapplied
statutory and case law relating to accretion,
specifically, Article 457 of the Civil Code.
We find merit in the petition.
The disputed property was brought forth by both
the withdrawal of the waters of Manila Bay and the
accretion formed on the exposed foreshore land by the
action of the sea which brought soil and sand
sediments in turn trapped by the palapat and bakawan
trees planted thereon by petitioner Sulpicio Pascual in
1948.
Anchoring their claim of ownership on Article 457 of
the Civil Code, private respondents vigorously argue
that the disputed 14-hectare land is an accretion
caused by the joint action of the Talisay and Bulacan
Rivers which run their course on the eastern and
western
boundaries,
respectively,
of
private
respondents' own tract of land.
Accretion as a mode of acquiring property under
said Article 457, requires the concurrence of the
following requisites: (1) that the accumulation of soil or

sediment be gradual and imperceptible; (2) that it be

the result of the action of the waters of the river; and
(3) that the land where the accretion takes place is
adjacent to the bank of the river.[11] Accretion is the
process whereby the soil is deposited, while alluvium is
the soil deposited on the estate fronting the river bank;
[12]
the owner of such estate is called the riparian
owner. Riparian owners are, strictly speaking, distinct
from littoral owners, the latter being owners of lands
bordering the shore of the sea or lake or other tidal
waters.[13] The alluvium, by mandate of Article 457 of
the Civil Code, is automatically owned by the riparian
owner from the moment the soil deposit can be
seen[14] but is not automatically registered property,
hence, subject to acquisition through prescription by
third persons.[15]
Private respondents' claim of ownership over the
disputed property under the principle of accretion, is
misplaced.
First, the title of private respondents' own tract of
land reveals its northeastern boundary to be Manila
Bay. Private respondents' land, therefore, used to
adjoin, border or front the Manila Bay and not any of
the two rivers whose torrential action, private
respondents insist, is to account for the accretion on
their land. In fact, one of the private respondents,
Sulpicio Pascual, testified in open court that the waves
of Manila Bay used to hit the disputed land being part
of the bay's foreshore but, after he had planted palapat

and bakawan trees thereon in 1948, the land began to

rise.[16]
Moreover, there is no dispute as to the location of:
(a) the disputed land; (b) private respondents' own
tract of land; (c) the Manila Bay; and, (d) the Talisay
and Bulacan Rivers. Private respondents' own land lies
between the Talisay and Bulacan Rivers; in front of
their land on the northern side lies now the disputed
land where before 1948, there lay the Manila Bay. If
the accretion were to be attributed to the action of
either or both of the Talisay and Bulacan Rivers, the
alluvium should have been deposited on either or both
of the eastern and western boundaries of private
respondents' own tract of land, not on the northern
portion thereof which is adjacent to the Manila
Bay. Clearly lacking, thus, is the third requisite of
accretion, which is, that the alluvium is deposited on
the portion of claimant's land which is adjacent to the
river bank.
Second, there is no dispute as to the fact that
private respondents' own tract of land adjoins the
Manila Bay. Manila Bay is obviously not a river, and
jurisprudence is already settled as to what kind of body
of water the Manila Bay is. It is to be remembered that
we held that:

"Appellant next contends that x x x Manila Bay cannot

be considered as a sea. We find said contention
untenable. A bay is part of the sea, being a mere
indentation of the same:
'Bay. An opening into the land where the water is
shut in on all sides except at the entrance; an inlet of
the sea; an arm of the sea, distinct from a river, a
bending or curbing of the shore of the sea or of a lake.'
7 C.J. 1013-1014."[17]
The disputed land, thus, is an accretion not on a
river bank but on a sea bank, or on what used to be
the foreshore of Manila Bay which adjoined private
respindents' own tract of land on the northern side. As
such, the applicable law is not Article 457 of the Civil
Code but Article 4 of the Spanish Law of Waters of
1866.
The process by which the disputed land was
formed, is not difficult to discern from the facts of the
case. As the trial court correctly observed:
"A perusal of the survey plan x x x of the land subject
matter of these cases shows that on the eastern side,
the property is bounded by Talisay River, on the
western side by Bulacan River, on the southern side by
Lot 1436 and on the northern side by Manila Bay. It is
not correct to state that the Talisay and Bulacan Rivers
meet a certain portion because the two rivers both flow
towards Manila Bay. The Talisay River is straight while

the Bulacan River is a little bit meandering and there is

no portion where the two rivers meet before they end
up at Manila Bay. The land which is adjacent to the
property belonging to Pascual cannot be considered
an accretion [caused by the action of the two rivers].
Applicant Pascual x x x has not presented proofs to
convince the Court that the land he has applied for
registration is the result of the settling down on his
registered land of soil, earth or other deposits so as to
be rightfully be considered as an accretion [caused by
the action of the two rivers]. Said Art. 457 finds no
applicability where the accretion must have been
caused by action of the bay."[18]
The conclusion formed by the trial court on the
basis of the foregoing observation is that the disputed
land is part of the foreshore of Manila Bay and
therefore, part of the public domain. The respondent
appellate court, however, perceived the fact that
petitioners' own land lies between the Talisay and
Bulacan Rivers, to be basis to conclude that the
disputed land must be an accretion formed by the
action of the two rivers because private respondents'
own land acted as a barricade preventing the two
rivers to meet and that the current of the two rivers
carried sediments of sand and silt downwards to the
Manila Bay which accumulated somehow to a 14hectare land. These conclusions, however, are fatally
incongruous in the light of the one undisputed critical
fact: the accretion was deposited, not on either the

eastern or western portion of private respondents' land

where a river each runs, but on the northern portion of
petitioners' land which adjoins the Manila Bay. Worse,
such conclusions are further eroded of their practical
logic and consonance with natural experience in the
light of Sulpicio Pascual's admission as to having
planted palapat and bakawan trees on the northern
boundary of their own land. In amplification of this,
plainly more reasonable and valid are Justice Mariano
Serrano's observations in his dissenting opinion when
he stated that:
"As appellants' (titled) land x x x acts as a barricade
that prevents the two rivers to meet, and considering
the wide expanse of the boundary between said land
and the Manila Bay, measuring some 593.00 meters x
x x it is believed rather farfetched for the land in
question to have been formed through 'sediments of
sand and salt [sic] . . . deposited at their [rivers']
mouths.' Moreover, if 'since the flow of the two rivers is
downwards to the Manila Bay the sediments of sand
and silt are deposited at their mouths,' why then would
the alleged cargo of sand, silt and clay accumulate at
the northern portion of appellants' titled land facing
Manila Bay instead of merely at the mouths and banks
of these two rivers? That being the case, the accretion
formed at said portion of appellants' titled [land] was
not caused by the current of the two rivers but by the
action of the sea (Manila Bay) into which the rivers
empty.

The conclusion x x x is not supported by any reference

to the evidence which, on the contrary, shows that the
disputed land was formed by the action of the
sea. Thus, no less than Sulpicio Pascual, one of the
heirs of the original applicant, testified on crossexamination that the land in dispute was part of the
shore and it was only in 1948 that he noticed that the
land was beginning to get higher after he had planted
trees thereon in 1948. x x x
x x x it is established that before 1948 sea water from
the Manila Bay at high tide could reach as far as the
dike of appellants' fishpond within their titled property,
which dike now separates this titled property from the
land in question. Even in 1948 when appellants had
already planted palapat and bakawan trees in the land
involved, inasmuch as these trees were yet small, the
waves of the sea could still reach the dike. This must
be so because in x x x the survey plan of the titled
property approved in 1918, said titled land was
bounded on the north by Manila Bay. So Manila Bay
was adjacent to it on the north. It was only after the
planting of the aforesaid trees in 1948 that the land in
question began to rise or to get higher in elevation.
The trees planted by appellants in 1948 became a sort
of strainer of the sea water and at the same time a kind
of block to the strained sediments from being carried
back to the sea by the very waves that brought them to
the former shore at the end of the dike, which must
have caused the shoreline to recede and dry up

eventually raising the former shore leading to the

formation of the land in question."[19]
In other words, the combined and interactive effect of
the planting of palapat and bakawan trees, the
withdrawal of the waters of Manila Bay eventually
resulting in the drying up of its former foreshore, and
the regular torrential action of the waters of Manila
Bay, is the formation of the disputed land on the
northern boundary of private respondents' own tract of
land.
The disputed property is an accretion on a sea bank,
Manila Bay being an inlet or an arm of the sea; as
such, the disputed property is, under Article 4 of the
Spanish Law of Waters of 1866, part of the public
domain.
At the outset, there is a need to distinguish
between Manila Bay and Laguna de Bay.
While we held in the case of Ignacio v. Director of
Lands and Valeriano[20] that Manila Bay is considered a
sea for purposes of determining which law on accretion
is to be applied in multifarious situations, we have
ruled differently insofar as accretions on lands
adjoining the Laguna de Bay are concerned.
In the cases of Government of the P.I v. Colegio de
San Jose,[21] Republic v. Court of Appeals,[22] Republic
v. Alagad[23], and Meneses v. Court of Appeals,[24] we
categorically ruled that Laguna de Bay is a lake the

accretion on which, by the mandate of Article 84 of the

Spanish Law of Waters of 1866, belongs to the owner
of the land contiguous thereto.
The instant controversy, however, brings a situation
calling for the application of Article 4 of the Spanish
Law of Waters of 1866, the disputed land being an
accretion on the foreshore of Manila Bay which is, for
all legal purposes, considered a sea.
Article 4 of the Spanish Law of Waters of August 3,
1866 provides as follows:
"Lands added to the shores by accretions and alluvial
deposits caused by the action of the sea, form part of
the public domain. When they are no longer washed by
the waters of the sea and are not necessary for
purposes of public utility, or for the establishment of
special industries, or for the coast-guard service, the
Government shall declare them to be the property of
the owners of the estates adjacent thereto and as
increment thereof."
In the light of the aforecited vintage but still valid
law, unequivocal is the public nature of the disputed
land in this controversy, the same being an accretion
on a sea bank which, for all legal purposes, the
foreshore of Manila Bay is. As part of the public
domain, the herein disputed land is intended for public
uses, and "so long as the land in litigation belongs to
the national domain and is reserved for public uses, it

is not capable of being appropriated by any private

person, except through express authorization granted
in due form by a competent authority." [25]Only the
executive and possibly the legislative departments
have the right and the power to make the declaration
that the lands so gained by action of the sea is no
longer necessary for purposes of public utility or for the
cause of establishment of special industries or for
coast guard services.[26] Petitioners utterly fail to show
that either the executive or legislative department has
already declared the disputed land as qualified, under
Article 4 of the Spanish Law of Waters of 1866, to be
the property of private respondents as owners of the
estates adjacent thereto.
WHEREFORE, the instant Petition for Review is
hereby GRANTED.
The decision of the Intermediate Appellate Court
(now Court of Appeals) in CA G.R. No. 59044-R dated
November 29, 1978 is hereby REVERSED and SET
ASIDE. The resolution dated November 21, 1980 and
March 28, 1982, respectively, promulgated by the
Intermediate Appellate Court are likewise REVERSED
and SET ASIDE.
The decision of the Court of First Instance (now the
Regional Trial Court), Branch 1, Balanga, Bataan, is
hereby ORDERED REINSTATED.
Costs against private respondents.

G.R. No. 108065 July 6, 1993

SPOUSES FELIX BAES AND RAFAELA
BAES, petitioners,
vs.
THE COURT OF APPEALS AND REPUBLIC OF THE
PHILIPPINES, respondents.
Lorenzo F. Miravite for petitioners.
The Solicitor General for respondents.

CRUZ, J.:
This is an appeal by way of certiorari from the decision
of the respondent Court of Appeals which affirmed in
totothe ruling of the trial court in Civil Case No. 0460-P,
the dispositive portion of which read thus:
WHEREFORE, judgment is hereby
rendered declaring null and void TCT Nos.
14405, 29592, 29593, 29594, 29595, and
TCT No. 29593's derivative titles TCT Nos.
124725, 124726, 124727 and 124729, and
ordering the Register of Deeds for Pasay
City to cancel them and issue new ones in

their stead in the name of the plaintiff after

segregating from TCT No. 29593 452 sq.
m., the actual area of Lot 2958-C (covered
by cancelled TCT No. 11043) belonging to
defendant Felix Baes. The counterclaim is
hereby dismissed.
Let a copy of this Decision be furnished the
Register of Deeds for Pasay City.
SO ORDERED.
The controversy began in 1962, when the government
dug a canal on a private parcel of land, identified as
Lot 2958 and covering an area of P33,902 sq.m., to
streamline the Tripa de Gallina creek.
This lot was later acquired by Felix Baes, who
registered it in his name under TCT No. 10990 and
then had it subdivided into three lots, namely: (a) Lot
2958-A, with an area of 28,889 sq.m.; (b) Lot 2958-B,
with an area of 3,588 sq.m.; and (c) Lot 2958-C, with
an area of 452 sq.m., covered by TCT Nos. 11041,
11042 and 11043, respectively.
In exchange for Lot 2958-B, which was totally occupied
by the canal, the government gave Baes a lot with
exactly the same area as Lot 2958-B through a Deed
of Exchange of Real Property dated June 20,
1970. 1 The property, which was near but not
contiguous to Lot 2956-C, was denominated as Lot
3271-A and later registered in the name of Felix Baes

under TCT No. 24300. The soil displaced by the canal

was used to fill up the old bed of the creek.
Meanwhile, Baes had Lot 2958-C and a portion of Lot
2958-A designated as Lot 1, Blk., 4, resurveyed and
subdivided. On January 12, 1968, he submitted a
petition for the approval of his resurvey and subdivision
plans, claiming that after the said lots were plotted by a
competent surveyor, it was found that there were
errors in respect of their bearings and distances.
The resurvey-subdivision plan was approved by the
Court of First Instance of Pasay City in an order dated
January 15, 1968. 2
As a result, the old TCTs covering the said lots were
canceled and new ones were issued, to wit: (a) Lot 1A, Blk. 4, with 672 sq.m., under TCT No.
T-14404; (b) Lot 1-B, with 826 sq.m., representing the
increase in area after the resurvey, under TCT No. T14405; (c) Lot 2958-C-1, with 452 sq.m., under TCT
No. T-14406; and (d) Lot 2958-C-2, with 2,770 sq.m.
representing the increase after resurvey, under TCT
No. T-14407.

Lots 2958-C-1 and 2958-C-2 were later consolidated

and this time further subdivided into four (4) lots,
namely, Lot 1, with an area of 147 sq.m.; Lot 2, with an
area of 950 sq.m.; Lot 3, with an area of 257 sq.m.;
and Lot 4, with an area of 1,868 sq.m., which were
respectively issued TCT Nos. 29592, 29593, 29594,
and 29595.
In 1978, the Republic of the Philippines discovered that
Lot 1-B (with TCT No. 14405 and an area of 826
sq.m.), on which the petitioners had erected an
apartment building, covered Lot 3611 of the Pasay
Cadastre, which is a filled-up portion of the Tripa de
Gallina creek. Moreover, Lot 2958-C (covered by TCT
Nos. 29592 to 29595, with an increased area of 2,770
after resurvey and subdivision) had been unlawfully
enlarged.
On November 17, 1982, it filed a petition for
cancellation of TCT Nos. 14405 and 29592 to 29595. 3
Baes did not object in his answer to the cancellation of
TCT Nos. 29592, 29594 and 29595 and was notable to
prove during the trial that the government utilized a
portion of Lot 2 under, TCT No. 29593. The trial court
therefore decreed (correctly) that the original Lot 2958C (with an area of 452 sq.m.) be reverted to its status
before the resurvey-subdivision of Lot 2958-C.
The only remaining dispute relates to Lot 1-B (TCT No.
14405), which the petitioners, relying on Article 461 of

the Civil Code, are claiming as their own. The

government rejects this claim and avers that the
petitioners had already been fully compensated for it
on June 20, 1970 when they agreed to exchange their
Lot 2958-B with Lot 3271-A belonging to the
government.

This article (461) refers to a natural change

in the course of a stream. If the change of
the course is due to works constructed by
concessioners authorized by the
government, the concession may grant the
abandoned river bed to the concessioners.
If there is no such grant, then, by analogy,
the abandoned river bed will belong to the
owners of the land covered by the waters,
as provided in this article, without prejudice
to a superior right of third persons with
sufficient title. (Citing 3 Manresa 251-252; 2
Navarro Amandi, 100-101; 3 Sanchez
Roman 148)

Article 461 of the Civil Code states:

River beds which are abandoned through
the natural change in the course of the
waters ipso factobelong to the owners
whose lands are occupied by the new
course in proportion to the area lost.
However, the owners of the land adjoining
the old bed shall have the right to acquire
the same by paying the value thereof,
which value shall not exceed the value of
the area occupied by the new bed.
(Emphasis supplied)
A portion of the Tripa de Gallina creek was diverted to
a man-made canal which totally occupied Lot 2958-B
(with an area of 3,588 sq.m.) belonging to Felix Baes.
Thus, the petitioners claim that they became the
owners of the old bed (which was eventually filled up
by soil excavated from Lot 2958-B) by virtue of Article
461.
The petitioners rely heavily on Dr. Arturo M. Tolentino's
interpretation of this Article, to wit:

We agree.
If the riparian owner is entitled to compensation for the
damage to or loss of his property due to natural
causes, there is all the more reason to compensate
him when the change in the course of the river is
effected through artificial means. The loss to the
petitioners of the land covered by the canal was the
result of a deliberate act on the part of the government
when it sought to improve the flow of the Tripa de
Gallina creek. It was therefore obligated to
compensate the Baeses for their loss.
We find, however, that the petitioners have already
been so compensated. Felix Baes was given Lot 3271A in exchange for the affected Lot 2958-B through the

Deed of Exchange of Real Property dated June 20,

1970. This was a fair exchange because the two lots
were of the same area and value and the agreement
was freely entered into by the parties. The petitioners
cannot now claim additional compensation because,
as correctly observed by the Solicitor General,
. . . to allow petitioners to acquire
ownership of the dried-up portion of the
creek would be a clear case of double
compensation and unjust enrichment at the
expense of the state.
The exchange of lots between the petitioners and the
Republic was the result of voluntary negotiations. If
these had failed, the government could still have taken
Lot 2958-B under the power of eminent domain, upon
payment of just compensation, as the land was needed
for a public purpose.
WHEREFORE, the petition is DENIED, with costs
against the petitioners. It is so ordered.

G.R. No. 92161 March 18, 1991

SIMPLICIO BINALAY, PONCIANO GANNABAN,
NICANOR MACUTAY, DOMINGO ROSALES,
GREGORIO ARGONZA, EUSTAQUIO BAUA,
FLORENTINO ROSALES, TEODORO
MABBORANG, PATRICIO MABBORANG and

FULGENCIO MORA, petitioners

vs.
GUILLERMO MANALO and COURT OF
APPEALS, respondents.
Josefin De Alban Law Office for Petitioners.

FELICIANO, J.:p
The late Judge Taccad originally owned a parcel of
land situated in Tumauini, Isabela having an estimated
area of twenty (20) hectares. The western portion of
this land bordering on the Cagayan River has an
elevation lower than that of the eastern portion which
borders on the national road. Through the years, the
western portion would periodically go under the waters
of the Cagayan River as those waters swelled with the
coming of the rains. The submerged portion, however,
would re-appear during the dry season from January to
August. It would remain under water for the rest of the
year, that is, from September to December during the
rainy season.
The ownership of the landholding eventually moved
from one person to another. On 9 May 1959,
respondent Guillermo Manalo acquired 8.65 hectares
thereof from Faustina Taccad, daughter of Judge Juan
Taccad. The land sold was described in the Deed of
Absolute Sale 1 as follows:

. . . a parcel of agricultural land in Balug,

Tumauini, Isabela, containing an area of
8.6500 hectares, more or less; bounded on
the North by Francisco Forto on the East
by National Road; on South by Julian
Tumolva and on the West by Cagayan
River; declared for taxation under Tax
Declaration No. 12681 in the name of
Faustina Taccad, and assessed at P
750.00. . . .
Later in 1964, respondent Manalo purchased another
1.80 hectares from Gregorio Taguba who had earlier
acquired the same from Judge Juan Taccad. The
second purchase brought the total acquisition of
respondent Manalo to 10.45 hectares. The second
piece of property was more particularly described as
follows:
. . . a piece of agricultural land consisting of
tobacco land, and containing an area of
18,000 square meters, more or less,
bounded on the North by Balug Creek; on
the South, by Faustina Taccad (now
Guillermo R. Manalo); on the East, by a
Provincial Road; and on the West, by
Cagayan River assessed at P 440.00, as
tax Declaration No. 3152. . . . 2
During the cadastral survey conducted at Balug,
Tumauini, Isabela on 21 October 1969, the two (2)

parcels of land belonging to respondent Manalo were

surveyed and consolidated into one lot, designated as
Lot No. 307, Pls-964. Lot 307 which contains 4.6489
hectares includes: (a) the whole of the 1.80 hectares
acquired from Gregorio Taguba; and (b) 2.8489
hectares out of the 8.65 hectares purchased from
Faustina Taccad. As the survey was conducted on a
rainy month, a portion of the land bought from Faustina
Taccad then under water was left unsurveyed and was
not included in Lot 307.
The Sketch Plan 3 submitted during the trial of this
case and which was identified by respondent Manalo
shows that the Cagayan River running from south to
north, forks at a certain point to form two (2) branches
the western and the eastern branchesand then
unites at the other end, further north, to form a narrow
strip of land. The eastern branch of the river cuts
through the land of respondent Manalo and is
inundated with water only during the rainy season. The
bed of the eastern branch is the submerged or the
unsurveyed portion of the land belonging to
respondent Manalo. For about eight (8) months of the
year when the level of water at the point where the
Cagayan River forks is at its ordinary depth, river water
does not flow into the eastern branch. While this
condition persists, the eastern bed is dry and is
susceptible to cultivation.
Considering that water flowed through the eastern
branch of the Cagayan River when the cadastral

survey was conducted, the elongated strip of land

formed by the western and the eastern branches of the
Cagayan River looked very much like an island. This
strip of land was surveyed on 12 December 1969. 4 It
was found to have a total area of 22.7209 hectares
and was designated as Lot 821 and Lot 822. The area
of Lot 822 is 10.8122 hectares while Lot 821 has an
area of 11.9087 hectares. Lot 821 is located directly
opposite Lot 307 and is separated from the latter only
by the eastern branch of the Cagayan River during the
rainy season and, during the dry season, by the
exposed, dry river bed, being a portion of the land
bought from Faustina Taccad. Respondent Manalo
claims that Lot 821 also belongs to him by way of
accretion to the submerged portion of the property to
which it is adjacent.

Petitioners who are in possession of Lot 821, upon the

other hand, insist that they own Lot 821. They occupy
the outer edges of Lot 821 along the river banks, i.e.,
the fertile portions on which they plant tobacco and
other agricultural products. They also cultivate the
western strip of the unsurveyed portion during
summer. 5 This situation compelled respondent Manalo
to file a case for forcible entry against petitioners on 20
May 1969. The case was dismissed by the Municipal
Court of Tumauini, Isabela for failure of both parties to
appear. On 15 December 1972, respondent Manalo
again filed a case for forcible entry against petitioners.
The latter case was similarly dismissed for lack of
jurisdiction by the Municipal Court of Tumauini,
Isabela.
On 24 July 1974, respondent Manalo filed a
complaints 6 before the then Court of First Instance of
Isabela, Branch 3 for quieting of title, possession and
damages against petitioners. He alleged ownership of
the two (2) parcels of land he bought separately from
Faustina Taccad and Gregorio Taguba for which
reason he prayed that judgment be entered ordering
petitioners to vacate the western strip of the
unsurveyed portion. Respondent Manalo likewise
prayed that judgment be entered declaring him as
owner of Lot 821 on which he had laid his claim during
the survey.
Petitioners filed their answer denying the material
allegations of the complaint. The case was then set for

trial for failure of the parties to reach an amicable

agreement or to enter into a stipulation of facts. 7 On
10 November 1982, the trial court rendered a decision
with the following dispositive portion:
WHEREFORE, in the light of the foregoing
premises, the Court renders judgment
against the defendants and in favor of the
plaintiff and orders:
1. That plaintiff, Guillermo Manalo, is
declared the lawful owner of the land in
question, Lot No. 821, Pls-964 of Tumauini
Cadastre, and which is more particularly
described in paragraph 2-b of the
Complaint;
2. That the defendants are hereby ordered
to vacate the premises of the land in
question, Lot No. 821, Pls-964 of Tumauini
Cadastre, and which is more particularly
described in paragraph 2-b of the
Complaint;
3. That the defendants are being restrained
from entering the premises of the land in
question, Lot No. 821, Pls-964 of Tumauini
Cadastre, and which is more particularly
described in paragraph 2-b of the
Complaint; and

4. That there is no pronouncement as to

attorney's fees and costs.
SO ORDERED. 8
Petitioners appealed to the Court of Appeals which,
however, affirmed the decision of the trial court. They
filed a motion for reconsideration, without success.
While petitioners insist that Lot 821 is part of an island
surrounded by the two (2) branches of the Cagayan
River, the Court of Appeals found otherwise. The Court
of Appeals concurred with the finding of the trial court
that Lot 821 cannot be considered separate and
distinct from Lot 307 since the eastern branch of the
Cagayan River substantially dries up for the most part
of the year such that when this happens, Lot 821
becomes physically (i.e., by land) connected with the
dried up bed owned by respondent Manalo. Both
courts below in effect rejected the assertion of
petitioners that the depression on the earth's surface
which separates Lot 307 and Lot 821 is, during part of
the year, the bed of the eastern branch of the Cagayan
River.
It is a familiar rule that the findings of facts of the trial
court are entitled to great respect, and that they carry
even more weight when affirmed by the Court of
Appeals. 9 This is in recognition of the peculiar
advantage on the part of the trial court of being able to
observe first-hand the deportment of the witnesses

while testifying. Jurisprudence is likewise settled that

the Court of Appeals is the final arbiter of questions of
fact. 10 But whether a conclusion drawn from such
findings of facts is correct, is a question of law
cognizable by this Court. 11
In the instant case, the conclusion reached by both
courts below apparently collides with their findings that
periodically at the onset of and during the rainy
season, river water flows through the eastern bed of
the Cagayan River. The trial court held:
The Court believes that the land in
controversy is of the nature and character
of alluvion (Accretion), for it appears that
during the dry season, the body of water
separating the same land in controversy
(Lot No. 821, Pls-964) and the two (2)
parcels of land which the plaintiff
purchased from Gregorio Taguba and
Justina Taccad Cayaba becomes a marshy
land and is only six (6) inches deep and
twelve (12) meters in width at its widest in
the northern tip (Exhs. "W", "W-l", "W-2",
"W-3" and "W-4"), It has been held by our
Supreme Court that "the owner of the
riparian land which receives the gradual
deposits of alluvion, does not have to make
an express act of possession. The law
does not require it, and the deposit created
by the current of the water becomes

manifest" (Roxas vs. Tuazon, 6 Phil.

408). 12
The Court of Appeals adhered substantially to the
conclusion reached by the trial court, thus:
As found by the trial court, the disputed
property is not an island in the strict sense
of the word since the eastern portion of the
said property claimed by appellants to be
part of the Cagayan River dries up during
summer. Admittedly, it is the action of the
heavy rains which comes during rainy
season especially from September to
November which increases the water level
of the Cagayan river. As the river becomes
swollen due to heavy rains, the lower
portion of the said strip of land located at
its southernmost point would be inundated
with water. This is where the water of the
Cagayan river gains its entry.
Consequently, if the water level is high the
whole strip of land would be under water.
In Government of the Philippine Islands vs. Colegio de
San Jose, it was held that
According to the foregoing
definition of the words
"ordinary" and "extra-ordinary,"
the highest depth of the waters

of Laguna de Bay during the

dry season is the ordinary one,
and the highest depth they
attain during the extra-ordinary
one (sic); inasmuch as the
former is the one which is
regular, common, natural,
which occurs always or most of
the time during the year, while
the latter is uncommon,
transcends the general rule,
order and measure, and goes
beyond that which is the
ordinary depth. If according to
the definition given by Article 74
of the Law of Waters quoted
above, the natural bed or basin
of the lakes is the ground
covered by their waters when at
their highest ordinary depth, the
natural bed or basin of Laguna
de Bay is the ground covered
by its waters when at their
highest depth during the dry
season, that is up to the
northeastern boundary of the
two parcels of land in question.
We find the foregoing ruling to be
analogous to the case at bar. The highest
ordinary level of the waters of the Cagayan

River is that attained during the dry season

which is confined only on the west side of
Lot [821] and Lot [822]. This is the natural
Cagayan river itself. The small residual of
water between Lot [821] and 307 is part of
the small stream already in existence when
the whole of the late Judge Juan Taccad's
property was still susceptible to cultivation
and uneroded. 13
The Court is unable to agree with the Court of Appeals
that Government of the Philippine Islands vs. Colegio
de San Jose 14 is applicable to the present case. That
case involved Laguna de Bay; since Laguna de Bay is
a lake, the Court applied the legal provisions governing
the ownership and use of lakes and their beds and
shores, in order to determine the character and
ownership of the disputed property. Specifically, the
Court applied the definition of the natural bed or basin
of lakes found in Article 74 of the Law of Waters of 3
August 1866. Upon the other hand, what is involved in
the instant case is the eastern bed of the Cagayan
River.
We believe and so hold that Article 70 of the Law of
Waters of 3 August 1866 is the law applicable to the
case at bar:
Art. 70. The natural bed or channel of a
creek or river is the ground covered by its

waters during the highest floods.

(Emphasis supplied)
We note that Article 70 defines the natural bed or
channel of a creek or river as the ground covered
by its waters during the highest floods. The
highest floods in the eastern branch of the
Cagayan River occur with the annual coming of
the rains as the river waters in their onward
course cover the entire depressed portion.
Though the eastern bed substantially dries up for
the most part of the year (i.e., from January to
August), we cannot ignore the periodical swelling
of the waters ( i.e., from September to
December) causing the eastern bed to be
covered with flowing river waters.
The conclusion of this Court that the depressed portion
is a river bed rests upon evidence of record. Firstly,
respondent Manalo admitted in open court that the
entire area he bought from Gregorio Taguba was
included in Lot 307. 15 If the 1.80 hectares purchased
from Gregorio Taguba was included in Lot 307, then
the Cagayan River referred to as the western boundary
in the Deed of Sale transferring the land from Gregorio
Taguba to respondent Manalo as well as the Deed of
Sale signed by Faustina Taccad, must refer to the
dried up bed (during the dry months) or the eastern
branch of the river (during the rainy months). In the
Sketch Plan attached to the records of the case, Lot
307 is separated from the western branch of the

Cagayan River by a large tract of land which includes

not only Lot 821 but also what this Court characterizes
as the eastern branch of the Cagayan River.
Secondly, the pictures identified by respondent Manalo
during his direct examination depict the depressed
portion as a river bed. The pictures, marked as
Exhibits "W" to "W-4", were taken in July 1973 or at a
time when the eastern bed becomes visible. 16 Thus,
Exhibit "W-2" which according to respondent Manalo
was taken facing the east and Exhibit "W-3" which was
taken facing the west both show that the visible, dried
up portion has a markedly lower elevation than Lot 307
and Lot 821. It has dike-like slopes on both sides
connecting it to Lot 307 and Lot 821 that are vertical
upward and very prominent. This topographic feature
is compatible with the fact that a huge volume of water
passes through the eastern bed regularly during the
rainy season. In addition, petitioner Ponciano
Gannaban testified that one had to go down what he
called a "cliff" from the surveyed portion of the land of
respondent Manalo to the depressed portion. The cliff,
as related by petitioner Gannaban, has a height of
eight (8) meters. 17
The records do not show when the Cagayan River
began to carve its eastern channel on the surface of
the earth. However, Exhibit "E" 18 for the prosecution
which was the Declaration of Real Property standing in
the name of Faustina Taccad indicates that the eastern
bed already existed even before the sale to respondent

Manalo. The words "old bed" enclosed in parentheses

perhaps written to make legitimate the claim of
private ownership over the submerged portionis an
implied admission of the existence of the river bed. In
the Declaration of Real Property made by respondent
Manalo, the depressed portion assumed the name Rio
Muerte de Cagayan. Indeed, the steep dike-like slopes
on either side of the eastern bed could have been
formed only after a prolonged period of time.
Now, then, pursuant to Article 420 of the Civil Code,
respondent Manalo did not acquire private ownership
of the bed of the eastern branch of the river even if it
was included in the deeds of absolute sale executed
by Gregorio Taguba and Faustina Taccad in his favor.
These vendors could not have validly sold land that
constituted property of public dominion. Article 420 of
the Civil Code states:
The following things are property of public
dominion:
(1) Those intended for public use, such as
roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks,
shores, roadsteads, and others of similar
character;
(2) Those which belong to the State,
without being for public use, and are
intended for some public service or for the

development of the national wealth.

(Emphasis supplied)
Although Article 420 speaks only of rivers and banks,
"rivers" is a composite term which includes: (1) the
running waters, (2) the bed, and (3) the
banks. 19 Manresa, in commenting upon Article 339 of
the Spanish Civil Code of 1889 from which Article 420
of the Philippine Civil Code was taken, stressed the
public ownership of river beds:
La naturaleza especial de los rios, en
punto a su disfrute general, hace que sea
necesario considerar en su relacion de
dominio algo mas que sus aguas
corrientes. En efecto en todo rio es preciso
distinguir 1. esta agua corriente; 2. el alveo
o cauce, y 3. las riberas. Ahora bien: son
estas dos ultimas cosas siempre de
dominio publico, como las aguas?
Realmente no puede imaginarse un rio sin
alveo y sin ribera; de suerte que al decir el
Codigo civil que los rios son de dominio
publico, parece que debe ir implicito el
dominio publico de aquellos tres elementos
que integran el rio. Por otra parte, en
cuanto a los alveos o cauces tenemos la
declaracion del art. 407, num 1, donde
dice: son de dominion publico . . . los rios y
sus cauces naturales; declaracion que

concuerda con lo que dispone el art. 34 de

la ley de [Aguas], segun el cual, son de
dominion publico: 1. los alveos o cauces
de los arroyos que no se hallen
comprendidos en el art. 33, y 2. los alveos
o cauces naturales de los rios en la
extension que cubran sus aguas en las
mayores crecidas ordinarias. 20 (Emphasis
supplied)
The claim of ownership of respondent Manalo over the
submerged portion is bereft of basis even if it were
alleged and proved that the Cagayan River first began
to encroach on his property after the purchase from
Gregorio Taguba and Faustina Taccad. Article 462 of
the Civil Code would then apply divesting, by operation
of law, respondent Manalo of private ownership over
the new river bed. The intrusion of the eastern branch
of the Cagayan River into his landholding obviously
prejudiced respondent Manalo but this is a common
occurrence since estates bordering on rivers are
exposed to floods and other evils produced by the
destructive force of the waters. That loss is
compensated by, inter alia, the right of accretion
acknowledged by Article 457 of the Civil Code. 21 It so
happened that instead of increasing the size of Lot
307, the eastern branch of the Cagayan River had
carved a channel on it.
We turn next to the issue of accretion. After examining
the records of the case, the Court considers that there

was no evidence to prove that Lot 821 is an increment

to Lot 307 and the bed of the eastern branch of the
river. Accretion as a mode of acquiring property under
Article 457 of the Civil Code requires the concurrence
of three (3) requisites: (a) that the deposition of soil or
sediment be gradual and imperceptible; (b) that it be
the result of the action of the waters of the river (or
sea); and (c) that the land where accretion takes place
is adjacent to the banks of rivers (or the sea
coast). 22 The Court notes that the parcels of land
bought by respondent Manalo border on the eastern
branch of the Cagayan River. Any accretion formed by
this eastern branch which respondent Manalo may
claim must be deposited on or attached to Lot 307. As
it is, the claimed accretion (Lot 821) lies on the bank of
the river not adjacent to Lot 307 but directly opposite
Lot 307 across the river.
Assuming (arguendo only) that the Cagayan River
referred to in the Deeds of Sale transferring ownership
of the land to respondent Manalo is the western
branch, the decision of the Court of Appeals and of the
trial court are bare of factual findings to the effect that
the land purchased by respondent Manalo received
alluvium from the action of the aver in a slow and
gradual manner. On the contrary, the decision of the
lower court made mention of several floods that
caused the land to reappear making it susceptible to
cultivation. A sudden and forceful action like that of
flooding is hardly the alluvial process contemplated
under Article 457 of the Civil Code. It is the slow and

hardly perceptible accumulation of soil deposits that

the law grants to the riparian owner.
Besides, it is important to note that Lot 821 has an
area of 11.91 hectares. Lot 821 is the northern portion
of the strip of land having a total area of 22.72
hectares. We find it difficult to suppose that such a
sizable area as Lot 821 resulted from slow accretion to
another lot of almost equal size. The total landholding
purchased by respondent Manalo is 10.45 hectares
(8.65 hectares from Faustina Taccad and 1.80
hectares from Gregorio Taguba in 1959 and 1964,
respectively), in fact even smaller than Lot 821 which
he claims by way of accretion. The cadastral survey
showing that Lot 821 has an area of 11.91 hectares
was conducted in 1969. If respondent Manalo's
contention were accepted, it would mean that in a span
of only ten (10) years, he had more than doubled his
landholding by what the Court of Appeals and the trial
court considered as accretion. As already noted, there
are steep vertical dike-like slopes separating the
depressed portion or river bed and Lot 821 and Lot
307. This topography of the land, among other things,
precludes a reasonable conclusion that Lot 821 is an
increment to the depressed portion by reason of the
slow and constant action of the waters of either the
western or the eastern branches of the Cagayan River.
We turn finally to the issue of ownership of Lot 821.
Respondent Manalo's claim over Lot 821 rests on
accretion coupled with alleged prior possession. He

alleged that the parcels of land he bought separately

from Gregorio Taguba and Faustina Taccad were
formerly owned by Judge Juan Taccad who was in
possession thereof through his (Judge Taccad's)
tenants. When ownership was transferred to him,
respondent Manalo took over the cultivation of the
property and had it declared for taxation purposes in
his name. When petitioners forcibly entered into his
property, he twice instituted the appropriate action
before the Municipal Trial Court of Tumauini, Isabela.
Against respondent Manalo's allegation of prior
possession, petitioners presented tax declarations
standing in their respective names. They claimed
lawful, peaceful and adverse possession of Lot 821
since 1955.
If respondent Manalo had proved prior possession, it
was limited physically to Lot 307 and the depressed
portion or the eastern river bed. The testimony of
Dominga Malana who was a tenant for Justina Taccad
did not indicate that she was also cultivating Lot 821.
In fact, the complaints for forcible entry lodged before
the Municipal Trial Court of Tumauini, Isabela
pertained only to Lot 307 and the depressed portion or
river bed and not to Lot 821. In the same manner, the
tax declarations presented by petitioners conflict with
those of respondent Manalo. Under Article 477 of the
Civil Code, the plaintiff in an action for quieting of title
must at least have equitable title to or interest in the
real property which is the subject matter of the action.
The evidence of record on this point is less than

satisfactory and the Court feels compelled to refrain

from determining the ownership and possession of Lot
821, adjudging neither petitioners nor respondent
Manalo as owner(s) thereof.
WHEREFORE, the Decision and Resolution of the
Court of Appeals in CA-GR CV No. 04892 are hereby
SET ASIDE. Respondent Manalo is hereby declared
the owner of Lot 307. The regularly submerged portion
or the eastern bed of the Cagayan River is hereby
DECLARED to be property of public dominion. The
ownership of Lot 821 shall be determined in an
appropriate action that may be instituted by the
interested parties inter se. No pronouncement as to
costs.

G.R. No. L-11005

October 31, 1957

SIARI VALLEY ESTATES, INC., petitioner,

vs.
FILEMON LUCASAN and Hon. W. M. ORTEGA,
Judge of the Court of First Instance of Zamboanga
del Norte, respondents.
Orendain and Sarmiento for petitioner.
Hon. Wenceslao M. Ortega in his own behalf.
Barrios, Barrios and Lucasan for respondents.

BENGZON, J.:
This is an offshoot of our decision in G.R. No. L-7046,
Siari Valley Estate Inc, vs. Filemon Lucasan,1 wherein
we affirmed, on appeal, the judgment of Hon. Patricio
Ceniza, of the Zamboanga court of first instance in its
Civil Case No. 134. The dispositive part of such
affirmed judgment read as follows:
Valley Estate all the cattle that may be found in
the cattle ranch ". . . judgment is hereby
rendered adjudicating to the Siari of Filemon
Lucasan specially the 321 heads that had been
entrusted to his care as receiver or trustee of this
Court and ordering the defendant to deliver to the
plaintiff all said cattle or their value amounting to
P40,000 to pay damages to the Siari Valley
Estate for the 400 heads of cattle that he sold
since 1946 up to the date of the trial at the rate of
P100 per head or P40,000 plus interest at the
rate of 6 per cent from the date of the trial of this
case in January, 1951 and to pay the cost of the
proceeding.In addition, the defendant is hereby
ordered to allow the Siari Valley Estate to round
up all the buffaloes that may be found in his
cattle ranch after the Siari Valley Estate shall
have posted a bond in the amount of P5,000 to
answer for whatever damages the operation may
cause to him.

With regard to the contempt proceedings, Filemon

Lucasan is hereby found guilty of the charges and he
is hereby sentenced to pay a fine of P500 pursuant to
section 6 Rule 64 of the Rules of Court or suffer
subsidiary imprisonment in case of insolvency at the
rate of one day every P2.50 that he falls to pay.
With regard to the three causes of action the counterclaim of the defendant, all of them are hereby
dismissed for lack of merit.
Upon petition by the intervenors, the intervention had
been dismissed in a previous order of this Court,
without prejudice to the filing of an independent action.
(emphasis ours.)
After our decision had become final,
the expediente was returned to the court below for
execution. Thereupon a dispute arose whether we
had affirmed also that part of Judge Ceniza's
judgement underlined in the above quotation
(concerning buffaloes) Lucasan pointed out that, in
quoting the dispositive paragraphs of the appealed
judgment, our decision had omitted the underlined
portion. Therefore, he argued, the affirmance of the
judgment did not include the directive about buffaloes.
As the respondent judge sustained Lucasan's
contention, this petition for mandamus and other
auxiliary remedies was promptly filed.

Knowing the extent and scope of our decision in said

appealed case, we issued a preliminary injunction
designed to protest petitioner's interests. And now,
after the parties have been heard, we turn to the
principal question, which is: did we uphold the right
given to plaintiff by the court below "to round up the
buffaloes"? The answer must be: we did. In the
concluding part of our decision we found the appealed
judgment to be substantially in accordance with the
facts and the law; and then we adjudged: "Therefore it
is hereby affirmed with appellant."
Ordinarily the affirmed judgment is that contained in its
dispositive part; in the said Siari Valley appealed case,
the above-quoted four paragraphs.
It is true that in the opening statements our decision
quoted the dispositive part of the appealed judgment
as follows:
Premises considered, judgment is hereby
rendered, adjudicating to the Siari Valley Estate
all the cattle that may be found in the cattle ranch
of Filemon Lucasan, specially the 321 heads that
had been entrusted to his care as receiver or
trustee of this Court and ordering the defendant
to deliver to the plaintiff all said cattle or their
value amounting to P40,000, to pay damages to
the Siari Valley Estate for the 400 heads of cattle
that he sold since 1946 up to the date of the trial
at the rate of P100 per head or P40,000 plus

interest at the rate of 6 per cent from the date of

the trial of this case in January, 1951 and to pay
the costs of the proceeding.
With regard to the contempt proceedings,
Filemon Lucasan is hereby found guilty of the
charges and he is hereby sentenced to pay a fine
of P500 pursuant to section 6, Rule 64, of the
Rules of Court or suffer subsidiary imprisonment
in case of insolvency at the rate of one day for
every P2.50 that he fails to pay.
thereby omitting the portion regarding buffaloes. But
observe that we used elliptical signs, i. e. several *'s
which indicated the omission of some portion or
portions. This did not evince any intention to "modify"
the judgment by eliminating the omitted portion. 2 The
judgment, we decreed in concluding, "is hereby
affirmed". We did not say, it is hereby modified. Neither
did we say, "the quoted portion of the judgment is
hereby affirmed". For that matter, would respondents
maintain likewise the last two paragraphs of the
dispositive part of the appealed judgment (regarding
the counterclaim and the intervenors) were not equally
affirmed, because they were not quoted?
We explained in Contreras vs. Felix, 78 Phil., 570, 44
Off. Gaz., 4306 that "the final judgment as rendered is
the judgment of the court, irrespective of all seemingly
contrary statements in the decision", and that the
judgement must be distinguished from the opinion. Our

decree was one affirming the appealed judgment. If

any statement in the opinion preceding the decree
seemingly excluded a portion (which we deny), it must
be overlooked, because the judgment or the decree
prevails over the opinion.
In construing confirmatory decisions of appellate courts
the practice is to regard the whole of the appealed
judgment to have been upheld3 even if several points
thereof have not been discussed "or touched upon
such confirmatory decision."4
The truth is, as may be verified from our decision itself,
our statement omitted the portion concerning buffaloes
because it was immaterial for the purpose of the
appeal. It was not a point necessary to understand or
decide the questions then before us.5 Indeed the whole
decision made no reference to the subject of buffaloes,
even as appellant's brief (Lucasan) failed to debate
such aspect of the appealed judgment.
The argument is advanced that inasmuch as the
plaintiff "never claimed the buffaloes in its amended
complaint (and) the (lower) court could not have
granted that which was not prayed", therefore the
Supreme Court most probably had excluded the matter
(of buffaloes) from its confirmatory order. Such
reasoning has no valid foundation because Lucasan
was not in default, there was trial, and under the
circumstances the plaintiff could be granted any relief
that was supported by the evidence "although not

specified in his pleadings."6 The other argument

addressed to the proposition that the Court shouldn't
have, and couldn't have affirmed that phase of the
judgment is too late, if not impertinent. The affirmance
without modification of the judgment is final. And the
parties should realize that the matter of buffaloes was
not such plain error (supposing it was error) as to call
for special consideration by this Court even if
ignored7 by appellant's counsel in his brief.
All the foregoing shows the respondent judge's mistake
in declining to permit Siari Valley Inc. to round up its
buffaloes roaming on Lucasan's ranch. But the latter's
resistance to such rounding-up, founded on a rather
technical plea, despite his knowledge that he had
complained of such buffaloes grazing on his land (R. A.
in L-7046 p. 140), was not a mere mistake but a rather
sharp practice transcending the limits of good faith.
However-overruling petitioner's contention-Lucasan will
not be declared to have committed contempt of court
considering on the one hand that his ground of
objection appeared to be not so flimsy8 as to make his
conduct a "willful disregard or disobedience" 9 or a
"clear and contumacious refusal to obey" 10 and on the
other hand remembering that the power to punish for
contempt should be conservatively exercised.
Wherefore, the petition for mandamus is granted, the
respondent judge, and whoever may be acting in his
place, is hereby ordered to enforce, and the other
respondent Filemon Lucasan is ordered to obey, the

aforementioned judgment in full of Judge Ceniza which

was totally affirmed by this Court on appeal. Costs of
this proceeding shall be paid respondent Lucasan. So
ordered.

G.R. No. L-5416

July 26, 1954
ALFREDO MONTELIBANO, ET AL., plaintiffsappellants,
vs.
THE BACOLOD-MURCIA MILLING CO., defendantsappellants.
San Juan, Africa, Yiquez and Benedicto and Abundio
Z. Arrieta for
plaintiffs-appellants.
Vicente Hilado and Nolan and Manoloto for
defendants-appellants.
LABRADOR, J.:
Parties plaintiffs and defendant appeal from a
judgment of the Court of First Instance of Negros
Occidental dismissing plaintiff's complaint for the
recovery of P4,712,501.89, representing the value of
sugar alleged to belong to them and existing in
defendant's warehouse at the time of the liberation,
and ordering plaintiff Alfredo Montelibano to pay
defendant the sum of P35,163.06, plus legal interest

thereon from April, 1945, until fully paid. Plaintiffs

appeal from the judgment of dismissal, and defendant
from the judgment in so far as it fixes at P35,163.06 as
the amount defendant is entitled to recover from
plaintiff Alfredo Montelibano.
Plaintiffs are sugar planters, members of the Bacolod
Murcia Planters' Association, Inc., or assignees of
sugar planters. The former have contracts with the
defendant corporation, hereinafter known as the
Central, for the delivery of their sugar cane to the
sugar mill of the defendant for milling and processing
into sugar. In accordance with the contracts, which the
planters had signed with the defendant, the sugar
processed from the sugar cane delivered by each
planter was to be divided between the planter and the
Central in the following proportion, namely, 60% for the
planter and 40% for the Central. The Central was to
furnish the planter, from time to time as the milling
progressed, with information as to the share of sugar
that the planter was entitled to receive, furnishing the
planter with quedans or warehouses receipts therefor.
After the milling, and for a period of 90 days, the
Central was to keep the sugar in its warehouse free of
charge; thereafter the planter was to pay five centavos
per picul per month for storage, aside from such
expenses of conservation and repacking as may be
incurred in relation to the sugar upon presentation of
his warehouse receipt (Exhibit KK).
At the time of the occupation of Negros Occidental by
the Japanese forces on May 21, 1942, there were on
deposit at the Central's warehouse 664,091.22 piculs
of sugar, of which 128,452.24 belonged to the
plaintiffs, 284,425.81 to the defendant Central, and the

balance to planters not parties to the action (Exhibit C,

C-1, C-2 and C-3. On February 10, 1943 (18th year of
Showa February 10), the Japanese Military
Administration, Visayan Branch, designated Fidel
Henares, president of the Sugar Planters' Association,
with the following authority:
. . . hereby authorized to sell and dispose of all
sugar to the Mitsui Bussan Kaisha, the
authorized purchaser of the Philippine Military
Administration, and in addition granting the
following powers:
To contract, deliver, to receive payments, to
pay various accounts to the members of
the Planters' Association; and to open
accounts, to contract overdraft accounts
with the Bank of Taiwan, and perform such
other powers as may be necessary in the
premises. (Exhibit RH, Annex A, Annex A-1,
Exhibit 19).
Thereafter the Japanese Military Administration issued
a regulation governing purchases of sugar by the
Military Administration (Exhibit JJ) by virtue of which,
upon purchase of sugar by the Military Administration,
any claim of the Philippine National Bank or of any
other enemy corporation thereto shall be automatically
cancelled, and the sugar thus purchased deposited as
new "Renegesis a/c" in the name of the vendee, the
Bank of Taiwan, Ltd.
Planters or owners of the sugar were authorized , if
they chose, to borrow funds from the Bank of Taiwan,
Ltd. According to regulations issued by the Executive
Commission under the Military Administration, the
checks in payment of the sugar which, however, were

to be deposited with said bank and set-off against the

mortgages on old crop loans of the planters as Farmer
Rehabilitation Funds. New crop loans could be granted
within the limits of the proceeds of their sugar sold
(Exhibit 23).
As early as February 24, 1943, the Mitsui Bussan
Kaisha, Ltd., notified the president of the Planters'
Association that it was buying all the sugar of the
planters, whether they could be located or not (Exhibit
II). Warehouse orders for release of sugar he had sold
were issued at the request of the president of the
Planter's Association on the following dates and for the
following amounts:
February 17,
22,724.09 piculs (Exhibit
1943
62)
March 6, 1943 275,580.35 piculs (Exhibit
22)
March 27,
575.84 piculs (Exhibit
1943
63)
April 20, 1943
4,105.92 piculs (Exhibit
54)
May 17, 1943
22,698.31 piculs (Exhibit
65 C)
May 18, 1943
6,240.92 piculs (Exhibit 6
B)
As for the share of the Central in the sugar, Exhibit E
shows that as early as April 21, 1943, as much as a
total of 272,601 piculs had been sold to the Mitsui
Bussan Kaisha, and by the end of December, 1943, a
full total of 272,801.07 piculs. There was, however, still

a balance of 12,153.05 piculs as of December, 1943

(Exhibit 1, p. 3).
From the time of Mitsui Bussan Kaisha made
purchases it began withdrawing sugar from the Central
in sacks. Withdrawals were made during the years
1943 and 1944 (Exhibit 72, 73, 74), but without
indication as to whose sugar each withdrawal was
being made. As the sugar belonging to the planters
and that of the Central were mixed up, and there being
nothing to show what the vendee was withdrawing, it
could not be determined whose sugar had been
actually sold or withdrawn. It is a fact admitted by both
parties, however, that at the time of the liberation,
notwithstanding the sales and withdrawals, there were
around 150,000 piculs of sugar was impounded by the
U. S. Enemy Property Custodian, but upon
representation of the parties the same was finally
released. And upon resolution of the majority of the
planters, it was agreed that 60 per cent thereof among
them according to the sugar they had on deposit in the
Central prior to the military occupation, irrespective of
whether they had been paid their sugar or not during
the occupation, and the balance of 40 per cent to be
assigned to the Central to be disposed by it, but the
proceed were to be kept by it in trust subject to the
results of this litigation. The share of the defendant in
this distribution was 93,663.60 piculs (Exhibit H) and
that of the plaintiffs 35,405.35 piculs.
After liberation (around March to June, 1945) and
before the proration above set forth, plaintiff Alfredo
Montelibano withdrew from the warehouse some
12,789 piculs. Of these around 5,115.60 piculs were
the share of the defendant Central. Montelibano

received a bill of P45,273.06 for the value of this sugar,

and he proposed to pay the said amount in
installments. A first payment of P10,000 was made.
The amount of the bill was based on a basic price of
P8.85 per picul. The balance of the price has not yet
been paid by plaintiff Alfredo Montelibano.
The present action of plaintiffs is predicated on the
claim that the defendant has already been fully paid for
its share of the sugar in the warehouse, as it had sold
during the period from April, 1943, to March, 1945,
some 284,601 piculs, in excess of around 175.19
piculs of its own share, and had received the total price
of this amount (P2,410,790.03), so that the sugar
remaining at the time of the liberation pertained and
belonged exclusively to plaintiffs and the other
planters. It is contended that of the 129,452.24 piculs
that plaintiffs owned at the time of the military
occupation, only 35,405.35 piculs had actually been
taken advantage of by them (that which they received
by the proration), so that the remaining 94,046.89
piculs should be charged against the balance of the
sugar and which was adjudicated to the Central as its
share in the proration, the value of which was
P4,712,501.89. Moral justification for this claim of the
plaintiffs is sought for in the fact that the defendant
Central had actually sold its share and received in full
the price thereof, which is not the case with the
plaintiffs, who have not been paid for, or credited with,
the value of their own. The defense is that all the sugar
plaintiffs had in the Central's warehouse at the time of
the military occupation was ordered by the Japanese
Military Administration to be sold by the through the
president, which it did itself appoint, in the same

manner that the defendant was obliged to sell its own

sugar to the buyer of the Military Administration, and
that all the sugar that plaintiffs had in the warehouse
had, therefore, been sold and delivered through said
president of the plaintiffs, so that the latter had no
more sugar in the warehouse at the time of the
liberation. The defendant presented a counterclaim
against plaintiff Alfredo Montelibano for the value of the
5,115.60 piculs of the defendant which he appropriated
and which they claim to be valued at P248,337. The
right of the defendant to said sugar is denied, and
instead plaintiff Montelibano demands the return of the
P10,000 which he claims was erroneously paid to
defendant.
The trial court found that the sugar remaining in the
central's warehouse at the time of the liberation was
already purchased by the Military Administration, but it
could not withdraw the same by reason of the advent
of the liberation; that as the sugar of the parties were
all mixed up, none of the owners could claim exclusive
ownership of those remaining in the warehouse, and
their rights thereto should be governed by the provision
of Article 381 of the Spanish Civil Code. This, the court
said, the parties had already accepted and carried out
by the proration. The court also held that the taking of
the sugar belonging to both plaintiffs and defendant
was an act of confiscation by the Japanese Military
Government, which was legal and valid in accordance
with the ruling in the case of Hodges vs. Lacson, 46
Official Gazette (No. 3) 1148, from which no recourse
may be had by the parties against the Japanese
Government or against the defendant. The plaintiffs'

action was, therefore, dismissed and the defendant

absolved therefrom.
As to the counterclaim, the court found the same to be
justified, and it sentenced Montelibano to pay for its
value, which the court, however, fixed at P8.80 per
picul only. It, therefore, rendered judgment against
Montelibano, ordering him to pay defendant the
balance of its value, i.e., P35,163.06.
Plaintiffs have appealed from the judgment dismissing
their action, while defendant has also appealed from
the amount adjudge on its counterclaim, asserting that
the price of the sugar taken by Montelibano should
have been fixed at P256,291.56 at the rate of P50.10
per picul.
Plaintiffs-appellants rely on the following legal
propositions: that the purchase of plaintiffs' sugar
during the Japanese Military Occupation was neither
an act of confiscation nor of requisition, but a voluntary
sale, but as there was no consent of the plaintiffs
thereto or consideration paid for the sugar, none of
plaintiffs' sugar should be considered as sold; that, on
the other hand, defendant's sale of its sugar was
validly made and it had received in full the value
thereof, hence the sugar remaining in the Central's
warehouse at the time of the liberation should belong
to plaintiffs, to the exclusion of the Central.
In our opinion, the determination of the nature or
validity of the act of the Japanese Military
Administration in purchasing plaintiffs' sugar from the
president of the planters, whom it appointed without
the planters or owners consent, is absolutely
immaterial; whether the act of purchase was an act of
confiscation of enemy property by the military

occupant, or one of requisition, or one of voluntary

sale, is beside the fundamental issue, which we find to
be: Who are the legal owners of the sugar existing in
the Central's warehouse at the time of the liberation?
Irrespective of the legality or illegality of the purchase
of plaintiffs' sugar (by the Japanese Military
Administration, for which defendant may not certainly
be made responsible, the fact remains that in
consequence thereof of warehouse orders for the
release of plaintiffs' sugar were issued and sugar
actually taken from the warehouse. Also by the sale of
defendants' sugar, release were authorized to the
purchaser and withdrawals made. But evidently the
delivery of all the sugar sold by both was not
completed, as some 150,000 piculs remained
thereafter. As to this sugar (remaining), we hold that
title thereto remained in the original owners, because
ownership of personal property sold is not transferred
until actual delivery non nudis pactis, sed traditione
dominia rerum transferuntur. (Fidelity and Deposit
Co. vs. Wilson, 8 Phil., 51; Crusado vs. Bustos, 34
Phil., 17.)
It also follows that as the sugar of the plaintiffs and of
the other planters and of the Central were stored
together in one single mass, without separation of
identification, and as it appears that the Mitsui Bussan
Kaisha mad withdrawals of sugar from the Central's
warehouse without express statement as to whose
sugar was being withdrawn, whether the planters' or
the Central's, it is absolutely impossible, physically or
legally, to determine whose sugar it was that remained
after the withdrawals. There is no legal basis for
plaintiffs' proposition that as the taking of their sugar

was without their consent, and that of the defendant's

with its consent, all that remained is theirs. The only
legal solution is, as the mass of sugar in the
warehouse was owned in common, and as it is not
possible to determine whose sugar was withdrawn and
whose was not, the mass remaining must pertain to
the original owners in the proportion of the original
amounts owned by each of them. This is the solution
expressly indicated by the law (article 381, Spanish
Civil Code), and the one most consistent with justice
and equity.
ART. 381. If, by the will of their owners, two
things of identical or dissimilar nature are mixed,
or if the mixture occurs accidentally, and in the
latter case the things can not be separated
without injury each owner shall acquire a right in
the mixture proportionate to the part belonging to
him, according to the value of the things mixed or
commingled. (Spanish Civil Code)
The 778 cavans and 38 kilos of palay belonging
to the plaintiff Urbano Santos, having been mixed
with 1,026 cavans and 9 kilos of palay belonging
to the defendant Pablo Tiongson in Jose C.
Bernabe's warehouse; the sheriff having found
only 924 cavans and 31 1/2 kilos of palay in said
warehouse at the time of the attachment thereof;
and there being no means of separating from
924 cavans and 31 1/2 kilos of palay belonging
to Urbano Santos and those belonging to Pablo
Tiongson, the following rule prescribed in article
381 of the Civil Code for cases of this nature, is
applicable.

ART. 381. If, by the will of their owners, two

things of identical or dissimilar nature are
mixed or if the mixture occurs accidentally,
if in the latter case the things can not be
separated without injury, each owner shall
acquire a right in the mixture proportionate
to the part belonging to him according to
the value of the things mixed or
commingled.
The number of kilos in a cavan not having been
determined, we will take the proportion only of
the 924 cavans of palay which were attached
and sold, thereby giving Urbano Santos, who
deposited 778 cavans, 398.49 thereof, and Pablo
Tiongson, who deposited 1,026 cavans, 525.51
or the value thereof at the rate of P3 per cavan.
(Santos vs. Bernabe, 54 Phil., 19, 22)
Lastly, article 393 of the Civil Code, referring to
common ownership, provides that the share of
the participants in the benefits, as well as in the
charges, shall be proportionate to their
respective interests.
This being the rule, it is obvious that whenever
an undivided property gains an increase in its
area, all the co-owners shall be entitled to
participate in the benefits to be proportionate to
their shares; if it suffers diminution they shall
have to share, too, the charges in accordance
with their interest. (Tarnate vs. Tarnate, 46 Off.
Gaz. (No. 9) 4397,4403-4404)
If goods of the same kind owned by various
persons are so mixed with the mutual consent of
the owners that the portions or shares of the

various owners in the mixture are

indistinguishable, the owners become tenants in
common of the mixture, each having an interest
in common in proportion to his respective shares.
This is the rule of the civil law. The doctrine finds
its most frequent application where several
owners deposit grain in a warehouse although it
of course exists wherever the goods of two or
more parties are indistinguishably mingled by
common consent, as where quantities of oil
belonging to different persons are stored in a
tank. In such cases, in the event of partial loss,
there will be prorated distribution of the loss.
Where such a confusion arises it seldom causes
inconvenience, embarrassment, or dispute, for
the separation of the intermingled goods into the
aliquot shares of the owners is merely a matter of
measuring, weighing, counting, or selecting, and
in all such cases it is certain that he is entitled to
receive back a like quantity. Since they are
tenants in common, however, the co-owners are
subject to stand their pro rata share of any loss
which may accrue to the general property from
diminution, decay, or other causes. (11 Am. Jur.
532-533.)

There can be no doubt that, where the volume of

grain, stored in an elevator, or of oil stored in a
tank, is made up of contributions from different
owners, and becomes "common stock." its partial
destruction by fire, resulting from lightning or
other fortuitous cause must necessitate a pro
rata distribution of the loss. ... (JenningsHeywood Oil Syndicate vs. Houssiere-Latrelle Oil
Co., et al., Ann. Cas. 1913 E. 679, 690.)
With respect to defendant's counterclaim, we agree
with the trial court that the evidence submitted shows
that P8.85 is the fair price of the sugar taken by plaintiff
Alfredo Montelibano. Defendant's own original bill fixed
this as a price for said sugar (Exhibit 49), and sales
made to third persons at the time the sugar was
withdrawn were at prices fluctuating around this sum.
We find no reason, therefore, for disturbing the
judgment in relation thereto.
For the foregoing considerations, the judgment
appealed from is hereby affirmed, both in so far as it
dismisses the complaint and in so far as it awards the
sum of P35,163.06 on defendant's counterclaim
against plaintiff Alfredo Montelibano, with costs against
the plaintiffs-appellants.