G.R. No.
78133 October 18, 1988
MARIANO P. PASCUAL and RENATO P. DRAGON, petitioners,
vs.
THE COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS, respondents.
De la Cuesta, De las Alas and Callanta Law Offices for petitioners.
The Solicitor General for respondents
GANCAYCO, J.:
The distinction between co-ownership and an unregistered partnership or joint venture for income tax purposes
is the issue in this petition.
On June 22, 1965, petitioners bought two (2) parcels of land from Santiago Bernardino, et al. and on May 28,
1966, they bought another three (3) parcels of land from Juan Roque. The first two parcels of land were sold by
petitioners in 1968 toMarenir Development Corporation, while the three parcels of land were sold by petitioners
to Erlinda Reyes and Maria Samson on March 19,1970. Petitioners realized a net profit in the sale made in
1968 in the amount of P165,224.70, while they realized a net profit of P60,000.00 in the sale made in 1970. The
corresponding capital gains taxes were paid by petitioners in 1973 and 1974 by availing of the tax amnesties
granted in the said years.
However, in a letter dated March 31, 1979 of then Acting BIR Commissioner Efren I. Plana, petitioners were
assessed and required to pay a total amount of P107,101.70 as alleged deficiency corporate income taxes for
the years 1968 and 1970.
Petitioners protested the said assessment in a letter of June 26, 1979 asserting that they had availed of tax
amnesties way back in 1974.
In a reply of August 22, 1979, respondent Commissioner informed petitioners that in the years 1968 and 1970,
petitioners as co-owners in the real estate transactions formed an unregistered partnership or joint venture
taxable as a corporation under Section 20(b) and its income was subject to the taxes prescribed under Section
24, both of the National Internal Revenue Code 1 that the unregistered partnership was subject to corporate
income tax as distinguished from profits derived from the partnership by them which is subject to individual
income tax; and that the availment of tax amnesty under P.D. No. 23, as amended, by petitioners relieved
petitioners of their individual income tax liabilities but did not relieve them from the tax liability of the unregistered
partnership. Hence, the petitioners were required to pay the deficiency income tax assessed.
Petitioners filed a petition for review with the respondent Court of Tax Appeals docketed as CTA Case No. 3045.
In due course, the respondent court by a majority decision of March 30, 1987, 2 affirmed the decision and action
taken by respondent commissioner with costs against petitioners.
It ruled that on the basis of the principle enunciated in Evangelista 3 an unregistered partnership was in fact
formed by petitioners which like a corporation was subject to corporate income tax distinct from that imposed
on the partners.
In a separate dissenting opinion, Associate Judge Constante Roaquin stated that considering the circumstances
of this case, although there might in fact be a co-ownership between the petitioners, there was no adequate
basis for the conclusion that they thereby formed an unregistered partnership which made "hem liable for
corporate income tax under the Tax Code.
Hence, this petition wherein petitioners invoke as basis thereof the following alleged errors of the respondent
court:
A. IN HOLDING AS PRESUMPTIVELY CORRECT THE DETERMINATION OF THE
RESPONDENT COMMISSIONER, TO THE EFFECT THAT PETITIONERS FORMED AN
UNREGISTERED PARTNERSHIP SUBJECT TO CORPORATE INCOME TAX, AND THAT
THE BURDEN OF OFFERING EVIDENCE IN OPPOSITION THERETO RESTS UPON THE
PETITIONERS.
B. IN MAKING A FINDING, SOLELY ON THE BASIS OF ISOLATED SALE
TRANSACTIONS, THAT AN UNREGISTERED PARTNERSHIP EXISTED THUS
IGNORING THE REQUIREMENTS LAID DOWN BY LAW THAT WOULD WARRANT THE
PRESUMPTION/CONCLUSION THAT A PARTNERSHIP EXISTS.
C. IN FINDING THAT THE INSTANT CASE IS SIMILAR TO THE EVANGELISTA CASE
AND THEREFORE SHOULD BE DECIDED ALONGSIDE THE EVANGELISTA CASE.
D. IN RULING THAT THE TAX AMNESTY DID NOT RELIEVE THE PETITIONERS FROM
PAYMENT OF OTHER TAXES FOR THE PERIOD COVERED BY SUCH AMNESTY. (pp.
12-13, Rollo.)
The petition is meritorious.
The basis of the subject decision of the respondent court is the ruling of this Court in Evangelista. 4
In the said case, petitioners borrowed a sum of money from their father which together with their own personal
funds they used in buying several real properties. They appointed their brother to manage their properties with
full power to lease, collect, rent, issue receipts, etc. They had the real properties rented or leased to various
tenants for several years and they gained net profits from the rental income. Thus, the Collector of Internal
Revenue demanded the payment of income tax on a corporation, among others, from them.
In resolving the issue, this Court held as follows:
The issue in this case is whether petitioners are subject to the tax on corporations provided
for in section 24 of Commonwealth Act No. 466, otherwise known as the National Internal
Revenue Code, as well as to the residence tax for corporations and the real estate dealers'
fixed tax. With respect to the tax on corporations, the issue hinges on the meaning of the
terms corporation and partnership as used in sections 24 and 84 of said Code, the pertinent
parts of which read:
Sec. 24. Rate of the tax on corporations.There shall be levied, assessed, collected, and
paid annually upon the total net income received in the preceding taxable year from all
sources by every corporation organized in, or existing under the laws of the Philippines, no
matter how created or organized but not including duly registered general co-partnerships
(companies collectives), a tax upon such income equal to the sum of the following: ...
Sec. 84(b). The term "corporation" includes partnerships, no matter how created or
organized, joint-stock companies, joint accounts (cuentas en participation), associations or
insurance companies, but does not include duly registered general co-partnerships
(companies colectivas).
Article 1767 of the Civil Code of the Philippines provides:
By the contract of partnership two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among
themselves.
Pursuant to this article, the essential elements of a partnership are two, namely: (a) an
agreement to contribute money, property or industry to a common fund; and (b) intent to
divide the profits among the contracting parties. The first element is undoubtedly present in
the case at bar, for, admittedly, petitioners have agreed to, and did, contribute money and
property to a common fund. Hence, the issue narrows down to their intent in acting as they
did. Upon consideration of all the facts and circumstances surrounding the case, we are fully
satisfied that their purpose was to engage in real estate transactions for monetary gain and
then divide the same among themselves, because:
1. Said common fund was not something they found already in existence. It was not a
property inherited by them pro indiviso. They created it purposely. What is more they jointly
borrowed a substantial portion thereof in order to establish said common fund.
2. They invested the same, not merely in one transaction, but in a series of transactions. On
February 2, 1943, they bought a lot for P100,000.00. On April 3, 1944, they purchased 21
lots for P18,000.00. This was soon followed, on April 23, 1944, by the acquisition of another
real estate for P108,825.00. Five (5) days later (April 28, 1944), they got a fourth lot for
P237,234.14. The number of lots (24) acquired and transcations undertaken, as well as the
brief interregnum between each, particularly the last three purchases, is strongly indicative
of a pattern or common design that was not limited to the conservation and preservation of
the aforementioned common fund or even of the property acquired by petitioners in
February, 1943. In other words, one cannot but perceive a character of habituality peculiar
to business transactions engaged in for purposes of gain.
3. The aforesaid lots were not devoted to residential purposes or to other personal uses, of
petitioners herein. The properties were leased separately to several persons, who, from
1945 to 1948 inclusive, paid the total sum of P70,068.30 by way of rentals. Seemingly, the
lots are still being so let, for petitioners do not even suggest that there has been any change
in the utilization thereof.
4. Since August, 1945, the properties have been under the management of one person,
namely, Simeon Evangelists, with full power to lease, to collect rents, to issue receipts, to
bring suits, to sign letters and contracts, and to indorse and deposit notes and checks. Thus,
the affairs relative to said properties have been handled as if the same belonged to a
corporation or business enterprise operated for profit.
5. The foregoing conditions have existed for more than ten (10) years, or, to be exact, over
fifteen (15) years, since the first property was acquired, and over twelve (12) years, since
Simeon Evangelists became the manager.
6. Petitioners have not testified or introduced any evidence, either on their purpose in
creating the set up already adverted to, or on the causes for its continued existence. They
did not even try to offer an explanation therefor.
Although, taken singly, they might not suffice to establish the intent necessary to constitute
a partnership, the collective effect of these circumstances is such as to leave no room for
doubt on the existence of said intent in petitioners herein. Only one or two of the
aforementioned circumstances were present in the cases cited by petitioners herein, and,
hence, those cases are not in point. 5
In the present case, there is no evidence that petitioners entered into an agreement to contribute money,
property or industry to a common fund, and that they intended to divide the profits among themselves.
Respondent commissioner and/ or his representative just assumed these conditions to be present on the basis
of the fact that petitioners purchased certain parcels of land and became co-owners thereof.
In Evangelists, there was a series of transactions where petitioners purchased twenty-four (24) lots showing
that the purpose was not limited to the conservation or preservation of the common fund or even the properties
acquired by them. The character of habituality peculiar to business transactions engaged in for the purpose of
gain was present.
In the instant case, petitioners bought two (2) parcels of land in 1965. They did not sell the same nor make any
improvements thereon. In 1966, they bought another three (3) parcels of land from one seller. It was only 1968
when they sold the two (2) parcels of land after which they did not make any additional or new purchase. The
remaining three (3) parcels were sold by them in 1970. The transactions were isolated. The character of
habituality peculiar to business transactions for the purpose of gain was not present.
In Evangelista, the properties were leased out to tenants for several years. The business was under the
management of one of the partners. Such condition existed for over fifteen (15) years. None of the
circumstances are present in the case at bar. The co-ownership started only in 1965 and ended in 1970.
Thus, in the concurring opinion of Mr. Justice Angelo Bautista in Evangelista he said:
I wish however to make the following observation Article 1769 of the new Civil Code lays
down the rule for determining when a transaction should be deemed a partnership or a co-
ownership. Said article paragraphs 2 and 3, provides;
(2) Co-ownership or co-possession does not itself establish a partnership, whether such co-
owners or co-possessors do or do not share any profits made by the use of the property;
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the
persons sharing them have a joint or common right or interest in any property from which
the returns are derived;
From the above it appears that the fact that those who agree to form a co- ownership share
or do not share any profits made by the use of the property held in common does not convert
their venture into a partnership. Or the sharing of the gross returns does not of itself establish
a partnership whether or not the persons sharing therein have a joint or common right or
interest in the property. This only means that, aside from the circumstance of profit, the
presence of other elements constituting partnership is necessary, such as the clear intent to
form a partnership, the existence of a juridical personality different from that of the individual
 partners, and the freedom to transfer or assign any interest in the property by one with the
consent of the others (Padilla, Civil Code of the Philippines Annotated, Vol. I, 1953 ed., pp.
635-636)
It is evident that an isolated transaction whereby two or more persons contribute funds to
buy certain real estate for profit in the absence of other circumstances showing a contrary
intention cannot be considered a partnership.
Persons who contribute property or funds for a common enterprise and agree to share the
gross returns of that enterprise in proportion to their contribution, but who severally retain
the title to their respective contribution, are not thereby rendered partners. They have no
common stock or capital, and no community of interest as principal proprietors in the
business itself which the proceeds derived. (Elements of the Law of Partnership by Flord D.
Mechem 2nd Ed., section 83, p. 74.)
And even assuming for the sake of argument that such unregistered partnership appears to have been formed,
since there is no such existing unregistered partnership with a distinct personality nor with assets that can be
held liable for said deficiency corporate income tax, then petitioners can be held individually liable as partners
for this unpaid obligation of the partnership p. 7 However, as petitioners have availed of the benefits of tax
amnesty as individual taxpayers in these transactions, they are thereby relieved of any further tax liability arising
therefrom.
WHEREFROM, the petition is hereby GRANTED and the decision of the respondent Court of Tax Appeals of
March 30, 1987 is hereby REVERSED and SET ASIDE and another decision is hereby rendered relieving
petitioners of the corporate income tax liability in this case, without pronouncement as to costs.
SO ORDERED.

A joint purchase of land, by two, does not constitute a co-partnership in respect thereto; nor
does an agreement to share the profits and losses on the sale of land create a partnership;
the parties are only tenants in common. (Clark vs. Sideway, 142 U.S. 682,12 Ct. 327, 35 L.
Ed., 1157.)

Where plaintiff, his brother, and another agreed to become owners of a single tract of realty,
holding as tenants in common, and to divide the profits of disposing of it, the brother and the
other not being entitled to share in plaintiffs commission, no partnership existed as between
the three parties, whatever their relation may have been as to third parties. (Magee vs.
Magee 123 N.E. 673, 233 Mass. 341.)

In order to constitute a partnership inter sese there must be: (a) An intent to form the same;
(b) generally participating in both profits and losses; (c) and such a community of interest,
as far as third persons are concerned as enables each party to make contract, manage the
business, and dispose of the whole property.-Municipal Paving Co. vs. Herring 150 P. 1067,
50 III 470.)

The common ownership of property does not itself create a partnership between the owners,
though they may use it for the purpose of making gains; and they may, without becoming
partners, agree among themselves as to the management, and use of such property and
the application of the proceeds therefrom. (Spurlock vs. Wilson, 142 S.W. 363,160 No. App.
14.) 6

The sharing of returns does not in itself establish a partnership whether or not the persons sharing therein have
a joint or common right or interest in the property. There must be a clear intent to form a partnership, the
existence of a juridical personality different from the individual partners, and the freedom of each party to transfer
or assign the whole property.

In the present case, there is clear evidence of co-ownership between the petitioners. There is no adequate
basis to support the proposition that they thereby formed an unregistered partnership. The two isolated
transactions whereby they purchased properties and sold the same a few years thereafter did not thereby make
them partners. They shared in the gross profits as co- owners and paid their capital gains taxes on their net
profits and availed of the tax amnesty thereby. Under the circumstances, they cannot be considered to have
formed an unregistered partnership which is thereby liable for corporate income tax, as the respondent
commissioner proposes.
G.R. No. 120864 October 8, 2003
MANUEL T. DE GUIA, petitioner,
vs.
COURT OF APPEALS (Former Sixth Division) and JOSE B. ABEJO, represented by his Attorney-in-Fact,
Hermenegilda Abejo-Rivera, respondents.
DECISION
CARPIO, J.:
The Case
This is a Petition for Review on Certiorari1 assailing the 22 August 1994 Decision2 as well as the 27 June 1995
Resolution of the Court of Appeals in CA-G.R. CV No. 39875. The Court of Appeals affirmed the Decision 3 of
the Regional Trial Court ("trial court") of Malolos, Bulacan, Branch 16, in Civil Case No. 8796-M. The trial courts
Decision ordered petitioner Manuel T. De Guia ("DE GUIA") to turn over to private respondent Jose B. Abejo
("ABEJO") possession of the one half () undivided portion of a fishpond and to pay actual damages and
attorneys fees.
The Antecedents
On 12 May 1986, ABEJO4 instituted an action for recovery of possession with damages against DE GUIA. In
his complaint, ABEJO alleged that he is the owner of the undivided portion of a property used as a fishpond
("FISHPOND") situated in Meycauayan, Bulacan and covered by TCT No. T-6358 of the Bulacan Register of
Deeds. He alleged ownership over approximately 39,611 square meters out of the FISHPONDs total area of
79,220 square meters. ABEJO further averred that DE GUIA continues to possess and use the FISHPOND
without any contract and without paying rent to ABEJOs damage and prejudice. ABEJO also complained that
DE GUIA refuses to surrender ownership and possession of the FISHPOND despite repeated demands to do
so after DE GUIAs sublease contract over the FISHPOND had expired. ABEJO asked the trial court to order
DE GUIA to vacate an approximate area of 39,611 square meters as well as pay damages.
DE GUIA, a lawyer by profession, appeared on his own behalf. He filed his Answer on 12 January 1990 after
the Court of Appeals resolved several issues concerning the validity of the service of summons on him. In his
Answer, DE GUIA alleged that the complaint does not state a cause of action and has prescribed. He claimed
that the FISHPOND was originally owned by Maxima Termulo who died intestate with Primitiva Lejano as her
only heir. According to him, ABEJO is not the owner of the entire FISHPOND but the heirs of Primitiva Lejano
who authorized him to possess the entire FISHPOND. He assailed ABEJOs ownership of the undivided
portion of the FISHPOND as void and claimed ownership over an undivided half portion of the FISHPOND for
himself. DE GUIA sought payment of damages and reimbursement for the improvements he introduced as a
builder in good faith.
The trial court set the pre-trial and required the parties to file their pre-trial briefs. ABEJO filed his pre-trial
brief5on 05 April 1990. DE GUIA filed his pre-trial brief6 on 31 July 1990. DE GUIAs pre-trial brief raised as the
only issue in the case the amount of damages in the form of rent that DE GUIA should pay ABEJO. DE GUIA
also submitted an Offer to Compromise,7 offering to settle ABEJOs claim for P300,000 and to lease the entire
FISHPOND to any party of ABEJOs choice.
Hearing commenced on 30 July 1990. ABEJO rested his case on 4 December 1990. DE GUIAs last witness
completed her testimony on 22 November 1991. The trial court summarized the evidence presented by ABEJO
and DE GUIA as follows:
Evidence adduced from plaintiff shows that there are two parcels of land covering a fishpond with a total area
of 79,220 sq. m. more or less, situated at Ubihan, Meycauayan, Bulacan and covered by TCT No. 6358 equally
owned by Primitiva Lejano and Lorenza Araniego married to Juan Abejo (Exh. A). The one half undivided portion
owned by Lorenza Araniego corresponding to 39,611 sq. m. was later purchased by plaintiff from his father
Teofilo Abejo (Exh. B), the only heir of the original owner on November 22, 1983. Prior to this sale on July 30,
1974 the whole fishpond (79,220) was the subject of a "Salin ng Pamumusisyong ng Palaisdaan" executed by
the heirs of Primitiva Lejano with the knowledge and consent of Teofilo A. Abejo in favor of one Aniano Victa
and defendant. The contract provided that the period of lease shall be until November 30, 1979. When the
contract expired and defendant failed to surrender the fishpond, written demands the last of which was on
November 27, 1983 were made for defendants to pay back rental and to vacate the premises in question (Exh.
D & E). Defendant refused to deliver possession and also to pay the rentals due. In anticipation, however, that
defendant will vacate the fishpond, plaintiff, on December 21, 1983 entered into a two year "Kasunduan ng
Buwisan ng Palaisdaan" with Ruperto C. Villarico for a consideration of P50,000.00 (Exh. G). This contract,
despite its execution and even already notarized, had to be cancelled and the amount of P50,000.00 returned
by plaintiff to Villarico when the defendant did not heed the demand to vacate the fishpond. For unpaid rental,
actual as well as moral and exemplary damages, plaintiff asks payment of P450,000.00 and P20,000.00
attorneys fees.
On the other hand, defendants evidence tends to show that the entire fishpond with an area of 79,200 sq. m.
was leased to him by the heirs of Primitiva Lejano. Subsequently, defendant became the absolute owner of one
half of the undivided area of the fishpond and he questioned plaintiffs ownership of the other half as void and
fraudulent. As to the area pertaining to plaintiff, defendant claimed that he introduced improvements
worth P500,000 and being in good faith, he asked that he should be reimbursed by plaintiff. In his pre-trial brief,
however, defendant raised the only issue which is the amount of damages plaintiff is entitled to in the form of
rental. Hence, the thrust of the testimonies of defendants witnesses particularly Ben Ruben Camargo and Marta
Fernando Pea was the amount of rental of fishponds in the same locality as the fishpond in question at a given
time. However, the documentary evidence (Exhs. 1 and 2) in support of their testimony were not offered as
evidence.8
The trial court rendered its decision on 8 June 1992, disposing as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the
defendant and hereby orders that:
1. Defendant shall turn over possession to plaintiff one half undivided portion of the 79,200 sq. m.
fishpond who shall enjoy the benefits and fruits in equal share with the defendant effective immediately
until such time that partition of the property is effected;
2. Defendant shall pay to plaintiff the amount of P262,500.00 by way of actual or compensatory
damages;
3 Defendant shall pay plaintiff P20,000.00 as and for attorneys fees; and
4. To pay the costs.
SO ORDERED.9
Aggrieved, DE GUIA went to the Court of Appeals insisting the trial court erred in ordering him to vacate and
surrender possession of the undivided portion of the FISHPOND and to pay actual damages and attorneys
fees. The Court of Appeals found DE GUIAs appeal without merit and affirmed the trial courts decision. Upon
DE GUIAs motion for reconsideration, the appellate court reduced the compensatory damages from P262,500
to P212,500.
Hence, the instant petition.
The undisputed facts as found by the trial court and adopted in toto by the Court of Appeals are restated as
follows:
1. The subject of the dispute are two undivided parcels of land used as a fishpond situated in Barrio
Ubihan, Meycauayan, Bulacan, originally co-owned by Primitiva Lejano and Lorenza Araniego married
to Juan Abejo.
2. The FISHPOND is registered under the names of Primitiva Lejano and Lorenza Araniego under
TCT No. 6358 of the Bulacan Register of Deeds as follows:
PRIMITIVA LEJANO, Filipina, of legal age, single - share; and LORENZA ARANIEGO, Filipina, of
legal age, married to Juan Abejo, share, ---
3. The FISHPOND has a total land area of approximately 79,220 square meters. ABEJO is seeking
to recover possession of the undivided portion of the FISHPOND containing 39,611 square meters.
4. DE GUIA (along with a certain Aniano Victa) acquired possession of the entire FISHPOND by virtue
of a document captioned Salin ng Pamumusisyong ng Palaisdaan ("Lease Contract") executed
between him and the heirs of Primitiva Lejano. The Lease Contract was effective from 30 July 1974
up to 30 November 1979 for a consideration of P100,000.
5. The Lease Contract was executed with the knowledge and consent of Teofilo Abejo, sole heir of
Lorenza Araniego Abejo. Teofilo Abejo acquired Lorenza Araniego Abejos undivided share in the
FISHPOND by intestate succession.
6. Teofilo Abejo (now deceased) sold his undivided share in the FISHPOND to his son, ABEJO, on
22 November 1983.
7. DE GUIA continues to possess the entire FISHPOND and to derive income from the property
despite the expiration of the Lease Contract and several demands to vacate made by Teofilo Abejo
and by his successor-in-interest, ABEJO. The last demand letter was dated 27 November 1983.
8. ABEJO filed his complaint for recovery of possession with damages against DE GUIA on 12 May
1986.
9. DE GUIAs claim of ownership over the other undivided portion of the FISHPOND has not been
finally adjudicated for or against him.
DE GUIA offers the verified Complaint for Annulment of Real Estate Mortgage and Contract of Lease with
Preliminary Injunction signed by the heirs of Primitiva Lejano as proof of his ownership of the other undivided
half portion of the FISHPOND. Records show that DE GUIA filed the complaint for himself and as attorney-in
fact of the heirs of Primitiva Lejano ("Lejano Heirs") 10 against Spouses Teofilo Morte and Angelina Villarico,
Spouses Ruperto and Milagros Villarico, et al. ("Defendants"). The case was raffled to Branch 12 of the Regional
Trial Court of Malolos, Bulacan, and docketed as Civil Case. No. 86-27-M. The complaint alleged that DE GUIA
acquired his undivided share in the FISHPOND from the Lejano Heirs in February 1986. DE GUIA and the
Lejano Heirs sought to annul the Kasulatan ng Sanglaan and Kasulatan ng Pagbubuwis ng
Palaisdaan, executed on 10 November 1979 by Primitiva Lejano in favor of the Defendants. DE GUIA and the
Lejano Heirs claimed that Primitiva Lejano signed these documents under duress and without consideration.
The trial court rendered judgment11 on 28 February 1992 against DE GUIA and the Lejano Heirs as follows:
WHEREFORE, the evidence having shown the plaintiffs, particularly Manuel De Guia, their successor-in-
interest, not entitled upon the facts and the law to the relief prayed for in the amended complaint, the same is
hereby DISMISSED with costs against said plaintiff. Instead, as prayed for by defendants, judgment is hereby
rendered:
1. Declaring the "Kasulatan ng Sanglaan" (Exhs. "A" & "1") dated November 10, 1979, and the
"Kasulatan ng Pagbubuwis ng Palaisdaan" (Exhs. "C" &"3") also dated November 10, 1979, as valid
for all legal intents and purposes;
2. Ordering the Ex-Officio Sheriff, RTC, Bulacan, to proceed with the extrajudicial foreclosure of the
subject real estate mortgage; and
3. Ordering plaintiffs to pay defendants attorneys fees in the amount of P20,000.00.
SO ORDERED.12
The Court of Appeals affirmed the trial court in a Decision dated 30 August 2002 in CA-G.R. CV No. 38031.
The Court of Appeals found the claim of force and intimidation in the execution of the documents as highly
improbable since Primitiva Lejanos son, Renato Davis, witnessed the signing of the documents and found
nothing irregular at the time. The appellate court also held that assuming Defendants threatened DE GUIA and
the Lejano Heirs with immediate foreclosure, Defendants were merely exercising their legitimate right of
foreclosing the mortgaged property for non-payment of the loan. In addition, Primitiva Lejanos lawyer and
notary public, Atty. Mamerto Abao, testified that the parties appeared before him to affirm the contents of the
documents. He also stated that he was present when Defendants paid Primitiva Lejano Davis and her son
Renato. As of this writing, DE GUIA has a pending motion for reconsideration before the Court of Appeals. In
the event the Court of Appeals Decision attains finality, DE GUIA may lose whatever right he claims over the
FISHPOND.
The Trial Courts Ruling
The trial court ruled that ABEJO has the right to demand that DE GUIA vacate and surrender an area equivalent
to ABEJOs undivided share in the FISHPOND. The trial court explained that DE GUIAs sublease contract
expired in 1979 and ABEJO acquired his fathers share in 1983. However, the trial court pointed out that ABEJO
failed to present evidence of the judicial or extra-judicial partition of the FISHPOND. The identification of the
specific area pertaining to ABEJO and his co-owner is vital in an action to recover possession of real property.
Nevertheless, the trial court declared that pending partition, it is only just that DE GUIA pay ABEJO a reasonable
amount as rental for the use of ABEJOs share in the FISHPOND. DE GUIA admitted this obligation when he
raised as sole issue in his pre-trial brief how much rent he should pay ABEJO. DE GUIA even
proposed P300,000 as the reasonable amount but under certain conditions which ABEJO found unacceptable.
In determining the reasonable rent due to ABEJO, the trial court considered the Lease Contract between ABEJO
and a certain Ruperto C. Villarico which provided for a yearly rent of P25,000 for undivided portion of the
FISHPOND. The trial court declared that the total amount of rent due is P212,500, computed from November
1983 when ABEJO became a co-owner of the FISHPOND up to 199113 or a period of eight and one half years.
The trial court further ordered DE GUIA to pay an additional P50,000 which represents the amount ABEJO
returned to Ruperto C. Villarico when they cancelled the Lease Contract between them due to DE GUIAs refusal
to vacate the FISHPOND.
Lastly, the trial court ruled that pending partition, ABEJO as co-owner has the right to possess the FISHPOND
and to receive an equal share in the benefits from the FISHPOND effective immediately. Until there is a partition,
and while there is no contract of lease, the Civil Code provisions on co-ownership shall govern the rights of the
parties.
The Court of Appeals Ruling
The Court of Appeals affirmed the trial courts decision. The Court of Appeals debunked DE GUIAs claim that
partition and not recovery of possession was the proper remedy under the circumstances. The Court of Appeals
pointed out that DE GUIAs failure to respect ABEJOs right over his undivided share in the FISHPOND
justifies the action for recovery of possession. The trial courts decision effectively enforces ABEJOs right over
the property which DE GUIA violated by possession and use without paying compensation. According to the
Court of Appeals, partition would constitute a mechanical aspect of the decision just like accounting when
necessary.
The Court of Appeals likewise rejected DE GUIAs claim that the award of compensatory damages of P242,000,
computed based on the rent stipulated in the Lease Contract between ABEJO and Ruperto C. Villarico, is
grossly exorbitant. The Court of Appeals clarified that the amount the trial court awarded was P262,500 and
not P242,000 as erroneously alleged by DE GUIA. The Court of Appeals pointed out that the notarized Lease
Contract between ABEJO and Ruperto C. Villarico carries more evidentiary weight than the testimonies of DE
GUIAs witnesses, Ben Ruben Camargo and Marta Fernando Pea. The Court of Appeals also upheld the
award of attorneys fees since the parties could have avoided litigation had DE GUIA heeded the justifiable
demands of ABEJO.
On motion for reconsideration, the Court of Appeals reduced the compensatory damages from P262,500
to P212,500. The Court of Appeals explained that the trial court correctly computed the total amount of rent due
at P212,500. The trial court erred, however, in adding the sum of P50,000 representing the rent for 1983 and
1984 which ABEJO returned to Ruperto C. Villarico. The appellate court clarified that the sum of P212,500 was
arrived at by multiplying the rent of P25,000 by 8 years. The 8 year period already included the two months
rent received from and then subsequently reimbursed to Ruperto C. Villarico.
The Issues
DE GUIA raises the following issues in his Memorandum:
I.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS DECISION DENYING
PETITIONERS PLEA FOR DISMISSAL OF THE COMPLAINT FOR FAILURE TO STATE A CAUSE OF
ACTION;
II.
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS ORDER DIRECTING PETITIONER
TO TURN OVER THE ONE-HALF UNDIVIDED PORTION OF THE FISHPOND WHICH IS STILL UNDER A
STATE OF CO-OWNERSHIP;
III.
THE COURT OF APPEALS ERRED IN AFFIRMING, IN PART, THE AWARD OF ACTUAL OR
COMPENSATORY DAMAGES DESPITE LACK OF CREDIBLE EVIDENCE TO SUPPORT THE SAME;
IV.
THE COURT OF APPEALS ERRED IN AFFIRMING THE AWARD OF ATTORNEYS FEES IN PRIVATE
RESPONDENTS FAVOR.14
In essence, this Court is asked to resolve: (1) whether an action for recovery of possession and turn-over of the
undivided portion of a common property is proper before partition; and (2) whether there is sufficient basis
for the award of compensatory damages and attorneys fees.
The Courts Ruling
The petition is partly meritorious.
First and Second Issues: Cause of Action and Turn-Over of Possession
DE GUIA contends that a co-owner cannot claim a definite portion from the property owned in common until
there is a partition. DE GUIA argues that ABEJO should have filed an action for partition instead of recovery of
possession since the court cannot implement any decision in the latter case without first a partition. DE GUIA
contends that an action for recovery of possession cannot prosper when the property subject of the action is
part of an undivided, co-owned property. The procedural mode adopted by ABEJO, which is recovery of
possession, makes enforcement difficult if not impossible since there is still no partition of the subject property.
Under Article 484 of the Civil Code, "there is co-ownership whenever the ownership of an undivided thing or
right belongs to different persons." A co-owner of an undivided parcel of land is an "owner of the whole, and
over the whole he exercises the right of dominion, but he is at the same time the owner of a portion which is
truly abstract."15 On the other hand, there is no co-ownership when the different portions owned by different
people are already concretely determined and separately identifiable, even if not yet technically described. 16
Article 487 of the Civil Code provides, "[a]ny one of the co-owners may bring an action in ejectment." This article
covers all kinds of actions for the recovery of possession. Article 487 includes forcible entry and unlawful
detainer (accion interdictal), recovery of possession (accion publiciana), and recovery of ownership (accion de
reivindicacion). The summary actions of forcible entry and unlawful detainer seek the recovery of physical
possession only. These actions are brought before municipal trial courts within one year from dispossession.
However, accion publiciana, which is a plenary action for recovery of the right to possess, falls under the
jurisdiction of the proper regional trial court when the dispossession has lasted for more than one year. Accion
de reivindicacion, which seeks the recovery of ownership, also falls under the jurisdiction of the proper regional
trial court.171awphi1.nt
Any co-owner may file an action under Article 487 not only against a third person, but also against
another co-owner who takes exclusive possession and asserts exclusive ownership of the property. 18 In
the latter case, however, the only purpose of the action is to obtain recognition of the co-ownership. The plaintiff
cannot seek exclusion of the defendant from the property because as co-owner he has a right of possession.
The plaintiff cannot recover any material or determinate part of the property. 19
In Hermogena G. Engreso with Spouse Jose Engreso v. Nestoria De La Cruz and Herminio De La
Cruz,20we reiterated the rule that a co-owner cannot recover a material or determinate part of a common
property prior to partition as follows:
It is a basic principle in civil law that before a property owned in common is actually partitioned, all that the co-
owner has is an ideal or abstract quota or proportionate share in the entire property. A co-owner has no right to
demand a concrete, specific or determinate part of the thing owned in common because until division is effected
his right over the thing is represented only by an ideal portion.
As such, the only effect of an action brought by a co-owner against a co-owner will be to obtain recognition of
the co-ownership; the defendant cannot be excluded from a specific portion of the property because as a co-
owner he has a right to possess and the plaintiff cannot recover any material or determinate part of the property.
Thus, the courts a quo erred when they ordered the delivery of one-half () of the building in favor of private
respondent.
Indisputably, DE GUIA has been in exclusive possession of the entire FISHPOND since July 1974. Initially, DE
GUIA disputed ABEJOs claim of ownership over the undivided portion of the FISHPOND. Subsequently, he
implicitly recognized ABEJOs undivided share by offering to settle the case for P300,000 and to vacate the
property. During the trial proper, neither DE GUIA nor ABEJO asserted or manifested a claim of absolute and
exclusive ownership over the entire FISHPOND.1a\^/phi1.net Before this Court, DE GUIA limits the issues to
the propriety of bringing an action for recovery of possession and the recovery of compensatory damages.
Following the inherent and peculiar features of co-ownership, while ABEJO and DE GUIA have equal shares in
the FISHPOND quantitatively speaking, they have the same right in a qualitative sense as co-owners. Simply
stated, ABEJO and DE GUIA are owners of the whole and over the whole, they exercise the right of dominion.
However, they are at the same time individual owners of a portion, which is truly abstract because until there
is partition, such portion remains indeterminate or unidentified. 21 As co-owners, ABEJO and DE GUIA may
jointly exercise the right of dominion over the entire FISHPOND until they partition the FISHPOND by identifying
or segregating their respective portions.
Since a co-ownership subsists between ABEJO and DE GUIA, judicial or extra-judicial partition is the proper
recourse. An action to demand partition is imprescriptible and not subject to laches. 22 Each co-owner may
demand at any time the partition of the common property unless a co-owner has repudiated the co-ownership
under certain conditions.23 Neither ABEJO nor DE GUIA has repudiated the co-ownership under the conditions
set by law.
To recapitulate, we rule that a co-owner may file an action for recovery of possession against a co-owner who
takes exclusive possession of the entire co-owned property. However, the only effect of such action is a
recognition of the co-ownership. The courts cannot proceed with the actual partitioning of the co-owned
property. Thus, judicial or extra-judicial partition is necessary to effect physical division of the FISHPOND
between ABEJO and DE GUIA. An action for partition is also the proper forum for accounting the profits received
by DE GUIA from the FISHPOND. However, as a necessary consequence of such recognition, ABEJO shall
exercise an equal right to possess, use and enjoy the entire FISHPOND.
DE GUIA further claims that the trial and appellate courts erred when they ordered the recovery of rent when
the exact identity of the portion in question had not yet been clearly defined and delineated. According to DE
GUIA, an order to pay damages in the form of rent is premature before partition.
We disagree.
The right of enjoyment by each co-owner is limited by a similar right of the other co-owners. A co-owner cannot
devote common property to his exclusive use to the prejudice of the co-ownership.24 Hence, if the subject is a
residential house, all the co-owners may live there with their respective families to the extent possible. However,
if one co-owner alone occupies the entire house without opposition from the other co-owners, and there is no
lease agreement, the other co-owners cannot demand the payment of rent. Conversely, if there is an
agreement to lease the house, the co-owners can demand rent from the co-owner who dwells in the
house.
The co-owners can either exercise an equal right to live in the house, or agree to lease it. If they fail to exercise
any of these options, they must bear the consequences. It would be unjust to require the co-owner to pay rent
after the co-owners by their silence have allowed him to use the property. 25
In case the co-owners agree to lease a building owned in common, a co-owner cannot retain it for his use
without paying the proper rent.26 Moreover, where part of the property is occupied exclusively by some co-
owners for the exploitation of an industry, the other co-owners become co-participants in the accessions of the
property and should share in its net profits.27
The Lejano Heirs and Teofilo Abejo agreed to lease the entire FISHPOND to DE GUIA. After DE GUIAs lease
expired in 1979, he could no longer use the entire FISHPOND without paying rent. To allow DE GUIA to continue
using the entire FISHPOND without paying rent would prejudice ABEJOs right to receive rent, which would
have accrued to his share in the FISHPOND had it been leased to others. 28 Since ABEJO acquired his
undivided share in the FISHPOND on 22 November 1983, DE GUIA should pay ABEJO reasonable rent for his
possession and use of ABEJOs portion beginning from that date. The compensatory damages of P25,000 per
year awarded to ABEJO is the fair rental value or the reasonable compensation for the use and occupation of
the leased property,29 considering the circumstances at that time. DE GUIA shall continue to pay ABEJO a
yearly rent of P25,000 corresponding to ABEJOs undivided share in the FISHPOND. However, ABEJO has
the option either to exercise an equal right to occupy the FISHPOND, or to file a new petition before the trial
court to fix a new rental rate in view of changed circumstances in the last 20 years.1a\^/phi1.net
ABEJO made an extrajudicial demand on DE GUIA by sending the 27 November 1983 demand letter. Thus,
the rent in arrears should earn interest at 6% per annum from 27 November 1983 until finality of this decision
pursuant to Article 220930 of the Civil Code. Thereafter, the interest rate is 12% per annum from finality of this
decision until full payment.31
Third Issue: Lack of Credible Evidence to Support Award of Compensatory Damages
DE GUIA contends the P212,500 in rent awarded to ABEJO is exorbitant. He assails as doubtful and self-
serving evidence the Lease Contract between ABEJO and Ruperto C. Villarico that served as basis for the
yearly rent of P25,000 for ABEJOs share in the FISHPOND.
DE GUIA says the trial and appellate courts should have given credence to the testimonies of his witnesses,
Ben Ruben Camargo ("Camargo") and Marta Fernando Pea ("Pea") that rentals of fishponds in the same
vicinity are for much lesser considerations.
This issue involves calibration of the whole evidence considering mainly the credibility of witnesses. As a rule,
a party may raise only questions of law in an appeal by certiorari under Rule 45 of the Rules of Court. The
Supreme Court is not duty-bound to analyze and weigh again the evidence considered in the proceedings
below.32 More so in the instant case, where the Court of Appeals affirmed the factual findings of the trial court. 33
It is not true that the trial court disregarded the testimonies of Camargo and Pea because DE GUIA failed to 5. After finality of this decision and for as long as Manuel T. de Guia exclusively possesses the entire
present documentary evidence to support their testimonies. Actually, the trial and appellate courts found the FISHPOND, he shall pay Jose B. Abejo a yearly rental of P25,000 for the latters undivided share
testimonies of Camargo and Pea unconvincing. Judges cannot be expected to rely on the testimonies of every in the FISHPOND, unless Jose B. Abejo secures from the proper court an order fixing a different rental
witness. In ascertaining the facts, they determine who are credible and who are not. In doing so, they consider rate in view of possible changed circumstances.
all the evidence before them.34
SO ORDERED.
We find no cogent reason to overturn the trial and appellate courts evaluation of the witnesses testimonies.
We likewise find reasonable the P25,000 yearly compensation for ABEJOs undivided share in the
FISHPOND. Indeed, being a question of fact, it is for the trial and appellate courts to decide and this Court will
not disturb their findings unless clearly baseless or irrational. The exception does not obtain in this case.

Fourth Issue: Attorneys Fees

The trial court did not err in imposing attorneys fees of P20,000. Attorneys fees can be awarded in the cases
enumerated in Article 2208 of the Civil Code specifically:

xxx

(2) Where the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest;

xxx

DE GUIA is a lawyer and he should have known that a co-owner could not take exclusive possession of a
common property. Although DE GUIA offered to settle the case out of court, such offer was made under
conditions not acceptable to ABEJO. Certainly, ABEJO was still put to unnecessary expense and trouble to
protect his interest under paragraph (2), Article 2208 of the Civil Code.

WHEREFORE, the Decision dated 22 August 1994 and Resolution dated 27 June 1995 of the Court of Appeals
in CA-G.R. CV No. 39875 is AFFIRMED with respect to that portion ordering Manuel T. De Guia to pay Jose B.
Abejo compensatory damages of P212,500 and attorneys fees of P20,000, and MODIFIED as follows:

1. The co-ownership between Manuel T. De Guia and Jose B. Abejo over the entire FISHPOND
covered by TCT No. 6358 of the Bulacan Register of Deeds is recognized without prejudice to the
outcome of CAG.R. CV No. 38031 pending before the Court of Appeals and other cases involving
the same property;

2. Manuel T. De Guia and Jose B. Abejo shall equally enjoy possession and use of the entire
FISHPOND prior to partition;

3. The compensatory damages of P25,000 per annum representing rent from 27 November 1983 until
May 1992 shall earn interest at 6% per annum from 27 November 1983 until finality of this decision,
and thereafter at 12% per annum until full payment;

4. Manuel T. de Guia shall pay Jose B. Abejo a yearly rent of P25,000 from June 1992 until finality of
this decision, with interest at 6% per annum during the same period, and thereafter at 12% interest
per annum until full payment;
G.R. No. 157767 September 9, 2004
REYNALDO BALOLOY and ADELINA BALOLOY-HIJE, petitioners,
vs.
ALFREDO HULAR, respondent.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, as amended, of the
Decision1 of the Court of Appeals in CA-G.R. CV No. 51081, which affirmed the Decision2 of the Regional Trial
Court of Sorsogon, Branch 51, in Civil Case No. 93-5871.
The antecedents are as follows:
On May 11, 1993, respondent Alfredo Hular filed a complaint for quieting of title of real property with
damages against the children and heirs of Iluminado Baloloy, namely, Anacorita, Antonio, and
petitioners Reynaldo and Adelina, all surnamed Baloloy. The respondent alleged, inter alia, in his
complaint that his father, Astrologo Hular, was the owner of a parcel of residential land located in Sitio
Page, Biriran, Juban, Sorsogon, with an area of 287 square meters, and that such lot was part of Lot
No. 3347 of the Juban Cadastre. The respondent alleged that Iluminado Baloloy, the petitioners
predecessor-in-interest, was able to secure a Free Patent over the property through fraud on March
1, 1968, on the basis of which the Register of Deeds issued Original Certificate of Title (OCT) No. P-
16540 in his name. The respondent later discovered that in the cadastral survey of lands in Juban,
the property of his father, which actually consisted of 1,405 square meters was made to form part of
Lot No. 3353, the property of Iluminado Baloloy. According to the respondent, even if the residential
land was made to form part of Lot No. 3353 registered under the name of Iluminado Baloloy, he had
acquired ownership of the property by acquisitive prescription, as he and his predecessors had been
in continuous, uninterrupted and open possession of the property in the concept of owners for more
than 60 years.
The respondent prayed for alternative reliefs that, after due hearing, judgment be rendered in his favor,
thus:
a) Declaring the plaintiff as the absolute owner of the land in question;
b) Ordering the defendants to perpetually refrain from disturbing plaintiff in his peaceful
possession in the land in question;
c) Ordering the defendants to remove their houses in the land in question, and to declare
OCT No. P-16540, and whatever paper, form, document or proceeding the defendants may
have, as null and void and without any effect whatsoever as far as the land in question is
concerned as they cast cloud upon the title of the plaintiff;
d) In the alternative, defendants be ordered to reconvey the title in favor of the plaintiff as far
as the land in question is concerned;
e) Ordering the defendants to jointly and severally pay the plaintiff the amount of P50,000.00
as moral damages; P5,000.00 as attorneys fee plus P500.00 for every appearance or
hearing of his lawyer in court; P1,500.00 as consultation fee; P5,000.00 as incidental
litigation expenses; P20,000.00 as exemplary damages; and to pay the costs.
Plaintiff further prays for such other relief [as are] just and equitable in the premises. 3
The Evidence of the Respondent
The respondent adduced evidence that the Spouses Lino and Victoriana Estopin were the original owners of a
parcel of land located in Barangay Biriran, Juban, Sorsogon, designated as Lot No. 3347 of the Juban Cadastre.
A major portion of the property, where a house of strong materials was constructed, was agricultural, while the
rest was residential. The respondent also averred that the Spouses Estopin declared the property in their names
under Tax Declaration No. 4790. On the north of the agricultural portion of the property was the road leading to
Biriran, while north of the residential portion was a creek (canal) and the property of Iluminado.
When Lino Estopin died intestate, his widow, Victoriana Lagata, executed a Deed of Absolute Sale 4 on
November 11, 1961 over the agricultural portion of Lot No. 3347, which had an area of 15,906 square meters,
more or less, in favor of Astrologo Hular, married to Lorenza Hular. Shortly thereafter, on November 25, 1961,
Lagata executed a Deed of Absolute Sale5 over the residential portion of the property with an area of 287 square
meters, including the house constructed thereon, in favor of Hular. Hular and his family, including his son, the
respondent, then resided in the property. In 1961 or thereabouts, Iluminado asked Hulars permission to
construct a house on a portion of Lot No. 3347 near the road, and the latter agreed. In l977, Lorenza Hular, wife
of Astrologo, declared the residential land in the latters name under Tax Declaration No. 6841. 6
Earlier, or on August 14, 1945, Irene Griarte had executed a Deed of Absolute Sale over a coconut land located
in Barangay Biriran, Juban, with an area of 6,666 square meters in favor of Martiniano Balbedina, with the
following boundaries: North, Alejandro Gruta; South, Lino Estopin; East, River Page; West, Pedro Grepal and
Esteban Grepal.7 Subsequently, after a cadastral survey was conducted on lands in Juban, the property of
Balbedina was designated as Lot No. 3353, with the following boundaries: North: Lot No. 3353 (portion),
Alejandro Gruta; South: Lino Estopin; West: Lot No. 3349; East: creek. A trail was then established between
Lot No. 3353 and Lot No. 3347 resulting in the decrease of Lot No. 3353 owned by Balbedina to 4,651 square
meters. He declared the property under his name under Tax Declaration No. 191 with the following boundaries:
North: Lot No. 3353 (portion) Alejandro Gruta; South: trail; East: creek; West: Lot No. 3349. 8
On June 4, 1951, Balbedina executed a Deed of Absolute Sale over Lot No. 3353 with an area of only 4,651
square meters in favor of Iluminado.9 The latter declared the property in his name under Tax Declaration No.
5359.10 Iluminado filed an application with the Bureau of Lands for a free patent over the entirety of Lot No.
3353 on January 5, 1960.11 He indicated in his application that the property was not occupied by any person
and was disposable or alienable public land. In support thereof, he executed an affidavit wherein he declared
that he purchased about one-half portion of the property in 1951 based on a deed of absolute sale attached to
said affidavit; that in 1957, he purchased the other one-half portion, but "for economic reasons," no deed of sale
was executed by the parties. He also alleged that the improvements on the land consisted of coconut
trees.12 The Bureau of Lands processed the application in due course.
In the meantime, Iluminado constructed his house on a portion of Lot No. 3353 near the trail (road) leading to
Biriran. He and his family, including his children, forthwith resided in said house.
On March 1, 1968, the Secretary of Agricultural and Natural Resources approved Iluminados application and
issued Free Patent No. 384019 covering Lot No. 3353 with an area of 9,302 square meters, on the basis of
which OCT No. P-16540 was thereafter issued by the Register of Deeds on March 1, 1968.13
On August 2, 1975, Alejandro Gruta had executed a deed of absolute sale over a portion of Lot No. 3353 with
an area of 4,651 square meters in favor of Estelito Hije, the husband of petitioner Adelina Baloloy, one of
Iluminados children.14
Before he left for employment in Saudi Arabia in 1979, respondent Hular had his house constructed near the
trail (road) on Lot No. 3347, which, however, occupied a big portion of Lot No. 3353. 15
Iluminado died intestate on November 29, 1985. His widow and their children continued residing in the property,
while petitioner Reynaldo Baloloy, one of Iluminados children, later constructed his house near that of his
deceased father. When Astrologo died intestate on December 25, 1989, he was survived by his children, Jose,
Romeo, Anacleto, Elena, Leo, Teresita, and the respondent, among others, 16 who continued to reside in their
house.17
Sometime in l991, the respondents house helper was cleaning the backyard, but was prevented from doing so
by petitioner Adelina Baloloy who claimed that their father Iluminado owned the land where the respondents
house was located. To determine the veracity of the claim, the respondent had Lot No. 3353 surveyed by
Geodetic Engineer Rodolfo Cunanan on February 16, 1993, in the presence of Balbedina, Antonio Baloloy and
petitioner Reynaldo Baloloy. Cunanan prepared a Special Sketch Plan of Lot No. 3353 18 showing that the house
of Iluminado was constructed on Lot No. 335319 near the road behind the houses owned by Astrologo and
Alfredo.20 The engineer discovered that the residential area deeded by Lagata to Hular had an area of 1,405
square meters, instead of 287 square meters only. 21
In their Answer to the complaint, the heirs of Iluminado Baloloy averred that Iluminados house was built in 1962
on a portion of Lot No. 3353, which the latter purchased from Balbedina, and not on a portion of Lot No. 3347
which Hular purchased from Lagata. They alleged that Hular constructed his house on a portion of Lot No. 3353
after securing the permission of their father Iluminado, and that the respondent had no cause of action for the
nullification of Free Patent No. 384019 and OCT No. P-16540 because only the State, through the Office of the
Solicitor General, may file a direct action to annul the said patent and title; and even if the respondent was the
real party in interest to file the action, such actions had long since prescribed. The heirs of Baloloy prayed that
judgment be rendered in their favor, thus:
WHEREFORE, it is most respectfully prayed of the Honorable Court to DISMISS this case pursuant
to paragraph 15, et seq., hereof, and/or DECIDE it in favor of the defendants by UPHOLDING the
sanctity of OCT No. P-16540 and ordering plaintiff to:
1. RESPECT defendants proprietary rights and interests on the property in question covered
by OCT No. P-16540;
2. VACATE it at his sole and exclusive expense, and never to set foot on it ever again;
3. PAY defendants:
a) MORAL DAMAGES at P50,000.00 EACH;
b) ACTUAL DAMAGES and UNREALIZED PROFITS at P1,000.00/MONTH
COMPUTED UP TO THE TIME OF PAYMENT PLUS LEGAL RATE OF
INTEREST;
c) EXEMPLARY DAMAGES of P50,000.00
d) ATTYS FEES and LITIGATION EXPENSES of P100,000.00; and
e) THE COSTS OF THIS SUIT.
DEFENDANTS pray for all other reliefs and remedies consistent with law and equity.22
The Evidence for the Petitioners
Sometime in 1982, Hular asked permission from Iluminado to construct his house on Lot No. 3353 near the
road leading to Biriran. Iluminado agreed, in the presence of his daughter, petitioner Adelina Baloloy. As per
the plan of Lot No. 3353 certified by a Director of the Bureau of Lands on November 6, 1961, Lot No. 3353 had
an area of 9,302 square meters.23
As gleaned from the Sketch Plan of Lot Nos. 3347 and 3353 prepared on February 7, 1991 by Geodetic
Engineer Salvador Balilo, the houses of the Baloloy siblings and those of Astrologo and Alfredo were located in
Lot No. 3353.24 In the said sketch plan, Lot No. 3353 had an area of 9,302 square meters, while Lot No. 3347
had an area of 15,905 square meters. When apprised of Hulars claim over the property, the petitioners and
their co-heirs filed a complaint for unlawful detainer with the Municipal Trial Court of Juban, docketed as Civil
Case No. 331. The case was, however, dismissed for lack of jurisdiction.
On December 4, 1995, the trial court rendered judgment in favor of the respondent. The fallo of the decision
reads:
a/ Declaring plaintiff the absolute owner of the land in question, consisting of 1,405 square
meters, more or less, and entitled to the peaceful possession thereof;
b/ Ordering the defendants to reconvey the title to the plaintiff as far as the land in question
is concerned within fifteen (15) days counted from the finality of the decision, failing in which,
the Clerk of Court is hereby ordered to execute the necessary document of reconveyance
of the title in favor of the plaintiff after an approved survey plan is made;
c/ Ordering defendants to remove their houses from the land in question at their own
expense within fifteen (15) days after the decision has become final;
d/ Ordering the defendants to pay jointly and severally plaintiff the amount of P5,000.00 as
attorneys fees. P5,000.00 as incidental litigation expenses;
e/ To pay the costs.
SO ORDERED.25
The trial court ruled that the property subject of the complaint, with an area of 1,405 square meters, was part of
Lot No. 3347 which the Spouses Estopin owned, and which they later sold to Astrologo Hular. The trial court
also held that Iluminado committed fraud in securing the free patent and the title for the property in question,
and that when Victoriana Lagata executed the deed of absolute sale on the residential portion of Lot No. 3347,
she did not know that it formed part of Lot No. 3353. It further held that the action of the plaintiff to nullify the
title and patent was imprescriptible.
The petitioners filed on December 8, 1995 a motion to reopen the case to admit Tax Declaration Nos. 6957 and
4790 covering Lot No. 3347, under the names of Astrologo Hular and Victoriana Lagata, respectively, in which
it was declared that Lot No. 3347 was coconut land. The trial court ruled that the motion had been mooted by
its decision.
On appeal, the Court of Appeals rendered judgment affirming the decision of the trial court, and thereafter
denied the motion for reconsideration thereof.
The Present Petition
The petitioners, who are still residing on the subject property, filed their petition for review on certiorari for the
reversal of the decision and resolution of the Court of Appeals.
The issues for resolution are:
(1) whether all the indispensable parties had been impleaded by the respondent in the trial court;
(2) whether the said respondent had a cause of action against the petitioners for the nullification of
Free Patent No. 384019 and OCT No. P-16540; for reconveyance and for possession of the subject
property; and for damages; and
(3) whether the respondent had acquired ownership over the property through acquisitive prescription.
The first issue, while not raised by the parties in the trial court and in the Court of Appeals, is so interwoven with
the other issues raised therein and is even decisive of the outcome of this case; hence, such issue must be
delved into and resolved by this Court.26
We note that the action of the respondent in the trial court is for: (a) reinvidicatoria, to declare the respondent
the absolute owner of the subject property and its reconveyance to him as a consequence of the nullification of
Free Patent No. 384019 and OCT No. P-16540; (b) publiciana, to order the petitioners and the other heirs of
Iluminado Baloloy to vacate the property and deliver possession thereof to him; and (c) damages and attorneys
fees.
It is the contention of the respondent that the subject property was sold by Lagata to his father, Astrologo Hular,
in 1961. He adduced evidence that when his parents died intestate, they were survived by their children, the
respondent and his siblings Elena, Jose, Romeo, Anacleto, Leo, and Teresita. Article 1078 of the Civil Code
provides that where there are two or more heirs, the whole estate of the decedent is, before partition, owned in
common by such heirs, subject to the payment of the debts of the deceased. Until a division is made, the
respective share of each cannot be determined and every co-owner exercises, together with his co-participants,
joint ownership over the pro indiviso property, in addition to the use and enjoyment of the same.
Under Article 487 of the New Civil Code, any of the co-owners may bring an action in ejectment. This article
covers all kinds of actions for the recovery of possession, including an accion publiciana and a reinvidicatory
action. A co-owner may bring such an action without the necessity of joining all the other co-owners as co-
plaintiffs because the suit is deemed to be instituted for the benefit of all.27 Any judgment of the court in favor of
the co-owner will benefit the others but if such judgment is adverse, the same cannot prejudice the rights of the
unimpleaded co-owners. If the action is for the benefit of the plaintiff alone who claims to be the sole owner and
entitled to the possession thereof, the action will not prosper unless he impleads the other co-owners who are
indispensable parties.
In this case, the respondent alone filed the complaint, claiming sole ownership over the subject property and
praying that he be declared the sole owner thereof. There is no proof that the other co-owners had waived their
rights over the subject property or conveyed the same to the respondent or such co-owners were aware of the
case in the trial court. The trial court rendered judgment declaring the respondent as the sole owner of the
property and entitled to its possession, to the prejudice of the latters siblings. Patently then, the decision of the
trial court is erroneous.
Under Section 7, Rule 3 of the Rules of Court, the respondent was mandated to implead his siblings, being co-
owners of the property, as parties. The respondent failed to comply with the rule. It must, likewise, be stressed
that the Republic of the Philippines is also an indispensable party as defendant because the respondent sought
the nullification of OCT No. P-16540 which was issued based on Free Patent No. 384019. Unless the State is
impleaded as party-defendant, any decision of the Court would not be binding on it. It has been held that the
absence of an indispensable party in a case renders ineffective all the proceedings subsequent to the filing of
the complaint including the judgment.28 The absence of the respondents siblings, as parties, rendered all
proceedings subsequent to the filing thereof, including the judgment of the court, ineffective for want of authority
to act, not only as to the absent parties but even as to those present. 29
Even if we glossed over the procedural lapses of the respondent, we rule that he failed to prove the material
allegations of his complaint against the petitioners; and that he is not entitled to the reliefs prayed for.
The burden of proof is on the plaintiff to establish his case by the requisite quantum of evidence. If he claims a
right granted as created by law or under a contract of sale, he must prove his claim by competent evidence. He
must rely on the strength of his own evidence and not on the weakness or absence of the evidence of that of
his opponent.30 He who claims a better right to real estate property must prove not only his ownership of the
same but also the identity thereof.31 In Huy v. Huy,32 we held that where a property subject of controversy is
duly registered under the Torrens system, the presumptive conclusiveness of such title should be given weight
and in the absence of strong and compelling evidence to the contrary, the holder thereof should be considered
as the owner of the property until his title is nullified or modified in an appropriate ordinary action. A Torrens
Certificate is evidence of an indefeasible title to property in favor of the person in whose name appears
therein.33 Such holder is entitled to the possession of the property until his title is nullified.
The petitioners aver that Lot No. 3347 owned by the Spouses Estopin was coconut, and not residential, land.
The petitioners contend that, under the deed of absolute sale, Victoriana Lagata executed on November 25,
1961 in favor of Astrologo Hular, she sold the residential portion of Lot No. 3347; however, the latter constructed
his house on a portion of Lot No. 3353 which Iluminado had purchased from Balbedina, now covered by OCT
No. P-16540. The petitioners assert that along with their mother Anacorita and their brother Antonio Baloloy,
they constructed their houses on a part of Lot No. 3353, titled in the name of their father Iluminado; hence, they
could not be dispossessed of the said property. The petitioners posit that, whether the house of Hular was
constructed on a portion of Lot No. 3353 of the property of Balbedina or Gruta is irrelevant because both
properties are now covered by OCT No. P-16540 under the name of Iluminado, their predecessor-in-interest.
The Court of Appeals ruled that Victoriana Lagata owned the subject property, which turned out to be 1,405
square meters, and sold the same to Hular. In contrast, the RTC declared in its decision that while under the
deed of absolute sale executed by Irene Griarte in favor of Balbedina, Lot No. 3353 had an area of 6,666 square
meters, Griarte actually owned only 4,651 square meters; a portion of the lot was actually owned by Lino
Estopin. Hence, Balbedina sold only 4,651 square meters to Iluminado34 because he was aware that he owned
only 4,651 square meters of the land. It also held that, unknown to Lagata, a portion of Lot No. 3347 was
declared as part of Lot No. 3353 when the lands in Juban were surveyed. The trial court concluded that Lagata
erroneously declared, under the deed of absolute sale executed on November 25, 1961 in favor of Hular, that
the property was part of Lot No. 3347.
The trial and appellate courts erred in their decisions.
The evidence on record shows that Irene Griarte owned a parcel of land with an area of 6,666 square meters, Q From whom?
more or less.35 When she sold the property to Martiniano Balbedina on August 14, 1945, it was bounded on the
south by the property of Lino Estopin. There was no trail yet between the property of Griarte on the south and A From Irene Griarte.
of Lino Estopin on the north. In the meantime, however, a road (trail) leading to Biriran was established between
the property of Balbedina on the south and that of Lino Estopin on the north. Thereafter, a cadastral survey of
the lands in Juban was conducted by the Bureau of Lands. The property of Balbedina was designated as a Q Were you present when that sale was consummated?
portion of Lot No. 3353, while that of Estopin was designated as Lot No. 3347. The other portion of Lot No.
3353, with an area of 4,561 square meters, belonged to Alejandro Gruta. Because of the construction of the A I was not there.
road, the property of Balbedina, which was a part of Lot No. 3353, was reduced to 4,651 square meters.
Balbedina declared, under Tax Declaration No. 391, that Lot No. 3353 had an area of 4,651 square meters and
was coconut land36 and that his property was bounded on the south by a trail (road). Lino Estopin declared Lot Q So you do not know how much was it bought by Lino Estopin from Irene Griarte?
No. 3347 under his name for taxation purposes, in which he stated that his property was bounded on the north
by the trail going to Biriran.37Clearly, then, Lot No. 3353 and Lot No. 3347 had a common boundary the trail A No, Sir.
(road) going to Biriran.
Q You do not know whether a document to that effect was actually drafted and executed?
Balbedina sold his property, which was a portion of Lot No. 3353, with an area of 4,651 square meters to
Iluminado Baloloy on June 4, 1951.38 Under the deed of absolute sale, the property was bounded on the south
by the trail (road) owned by Lino Estopin.39 The English translation of the deed of sale attached as page 85 to A There was.
the RTC Records, which both the trial court and the appellate court relied upon, is incorrect.
Q Have you seen the document?
The original deed of absolute sale, which is in Spanish, states that the boundary of the property on the south is
"con camino, Lino Estopin," while the English version of the deed, indicates that the property is bounded "on A I did not see but there was a document.
the south by Lino Estopin." Being an earlier document, the deed in Spanish signed by the parties therefore
should prevail. Conformably to such deed, Iluminado Baloloy declared in Tax Declaration No. 5359 under his
Q You maintain there was a document but you did not see a document, is that it?
name that the property is bounded on the south by a trail, 40 and not by Lot No. 3347 owned by Lino Estopin.

A In my belief there was a document.

The respondent failed to adduce any documentary evidence to prove how the Spouses Estopin acquired the
disputed property. The respondents reliance on the testimonies of Melissa Estopin, the daughter of the Spouses
Estopin, and on Porfirio Guamos as well as the May 8, 1993 Affidavit of Martiniano Balbedina, and the deed of Q In your belief, how did you organize that belief when you did not see a document?
sale executed by Victoriana Lagata on November 27, 1961 in favor of Astrologo Hular to corroborate his claim
over the lot in question, is misplaced. A I insist there was a document.

First. Per the testimony of Porfirio Guamos, the witness of the respondent, Lino Estopin purchased the disputed Q That is why, why are you insisting when you did not see a document?
property in 1941 from Irene Griarte and insisted that there was a deed of sale evidencing the sale:

A Well, during the sale that document was used.

Atty. Dealca:

Q How was it used when you did not see that document?
Q The area of the land in question is 1,405 sq. m., you claim that way back in 1944 the owner of the
land was Lino Estopin; 41 to 44?
A When the deed of sale was executed I did not see the document, but I insist there was a document.
A 1941.
Q Thats why, how were you able to say before the court that there was a document when you contend
that you did not see any?
Q And you said that Lino Estopin was able to acquire the land by purchase?

A There was basis in the sale the sale was based on a document. You cannot sell a property
A That was very long time when Lino Estopin sold the property. without document? (sic)

Q My question is whether you know because you testified earlier that Lino Estopin was able to acquire Q Is that your belief?
the land by purchase; do you confirm that?

A Yes, Sir.
A Yes, Sir.
 Q But you did not see any document?
Atty. Diesta:
Already answered.
Witness:
A I did not see.
Atty. Dealca:
Q You said that that document was used when the property was sold by Lino Estopin to Alfredo Hular.
..
A In 1961. Yes.41
However, the respondent failed to adduce in evidence the said deed or even an authentic copy thereof. The
respondent did not offer any justification for his failure to adduce the same in evidence. As against the
respondents verbal claim that his father acquired the property from Lagata, the Torrens title of Iluminado Baloloy
must prevail.42
Second. The respondent even failed to adduce in evidence any tax declarations over the disputed property
under the name of Irene Griarte and/or Lino Estopin, or realty tax payment receipts in their names from 1941 to
November 1961. The documents are circumstantial evidence to prove that Irene Griarte claimed ownership over
the disputed property and that Lino Estopin acquired the same from her. After all, such tax declarations and tax
receipts can be strong evidence of ownership of land when accompanied by possession for a period sufficient
for acquisitive prescription.43
Third. The respondent even failed to adduce in evidence Tax Declaration No. 4790 covering the two parcels of
land under the name of Lino Estopin to prove his claim that Lot No. 3347 consisted of agricultural and residential
lands. We note that the petitioners appended a certified true copy of Tax Declaration No. 4790 under the name
of Victoriana Lagata over Lot No. 3347 to their Motion to Reopen the Case. In the said declaration, Lot No. 3347
was described as coconut land; this is contrary to the respondents claim that the said lot was then residential,
and that the boundary of the property on the north was the road to Biriran which, in turn, is consistent with the
petitioners claim.44 Unfortunately, the trial court denied the said motion on the ground that it was mooted by its
decision.
Fourth. During the cadastral survey of lands in Juban, the lot of Gruta and that of Balbedina, inclusive of the
subject property, were designated as Lot No. 3353 with a total area of 9,302 square meters under their names,
while that of Lino Estopin was designated as Lot No. 3347 with an area of 15,906 square meters. Iluminado
Baloloy applied for a free patent over Lot No. 3353, including the disputed property, under his name. The
respondent failed to adduce any evidence that the Spouses Estopin and/or Astrologo Hular opposed Balbedina
and/or Iluminados claim of ownership of Lot No. 3353 during the survey and after the filing of the application.
A propos is our ruling in Urquiaga v. Court of Appeals: 45
As succinctly observed by respondent Court of Appeals in assessing the totality of the evidence
We do not agree with defendants that they are also the occupants and possessors of the subject lot
just because it "is adjacent to their titled property." Precisely, the boundaries of defendants titled
property were determined, delineated and surveyed during the cadastral survey of Dipolog and
thereafter indicated in their certificate of title in order that the extent of their property will be known and
fixed. Since the subject lot was already found to be outside their titled property, defendants have no
basis in claiming it or other adjacent lots for that matter. Otherwise, the very purpose of the cadastral
survey as a process of determining the exact boundaries of adjoining properties will be defeated.
Defendants own title, O.C.T. No. 0-357 (in the names of Jose Aguirre and Cristina Gonzales), in fact
belies their claim of occupation and possession over the adjacent subject lot. Examining said title, we
note that: (1) the cadastral survey of Dipolog was conducted from January, 1923 to November 1925;
(2) defendants titled property was one of those lots surveyed and this was designated as Lot No.
2623; (3) during the survey, it was already determined and known that Lot No. 2623 is bounded on
the northeast, southeast, southwest and west by Lot No. 4443 (as we have seen in our narration of
facts, the subject lot is a subdivision lot of Lot No. 6552 which was originally identified as Lot No. 4443-
B-1, Dipolog Cadastre 85 Ext.: hence, the subject lot is a portion of Lot No. 4443); and (4) O.C.T. No.
0-357 was issued on October 11, 1965 on the strength of the judgment rendered on July 31 (sic),
1941 by the then Court of First Instance of Zamboanga del Norte in Cadastral Case No. 6, LRC
Cadastral Record No. 756.
From the foregoing facts, we find that as early as January, 1923 when the cadastral survey was
started, the boundaries of Lot Nos. 2623 and 4443 were already determined and delineated. Since
the subject lot was surveyed to be part of Lot No. 4443, it means that during that time defendants
predecessors-in-interest never claimed ownership or possession over the subject lot. Otherwise, they
would have complained so that the subject lot could be excluded from Lot No. 4443 and included in
Lot No. 2623, they being adjacent lots. It is obvious then that defendants predecessors only claimed
Lot No. 2623 and they pursued their claim in Cadastral Case No. 6, LRC Cadastral Record No. 756
until O.C.T. No. 0-357 was issued to them. The contention of defendants that they and their
predecessors-in-interest occupied and possessed the subject lot since time immemorial therefore is
not true.46
Fifth. Under the deed of absolute sale dated November 25, 1961, Lagata sold to Astrologo Hular Lot No. 3347,
and not Lot No. 3353. In Veterans Federation of the Philippines v. Court of Appeals, 47 we ruled that:
Petitioner VFP maintains that the deed of sale was valid and enforceable and that it was perfected at
the very moment that the parties agreed upon the thing which was the object of the sale and upon the
price. The parties herein had agreed on the parcel of land that petitioner would purchase from
respondent PNR, and the same was described therein; thus, petitioner VFP cannot conveniently set
aside the technical description in this agreement and insist that it is the legal owner of the property
erroneously described in the certificate of title. Petitioner can only claim right of ownership over the
parcel of land that was the object of the deed of sale and nothing else. 48
Sixth. Under the said deed of sale dated November 11, 1961, Victoriana Lagata sold Lot No. 3347 which had
an area of 15,906 square meters and covered by Tax Declaration No. 4790. The deed does not state that what
was sold was only a portion of Lot No. 3347, excluding therefrom the disputed property. This is understandable,
since the subject property is a portion of Lot No. 3353 owned by Alejandro Gruta and Iluminado Baloloy, and
not of Lino Estopin and/or Victoriana Lagata. Lagata could not have sold a portion of Lot No. 3353 which she
does not own. As the Latin adage goes: "NEMO DAT QUOD NON HABET."
Seventh. The Balbedinas Affidavit dated May 8, 1993 offered by the respondent to prove the contents thereof
is inadmissible in evidence against the petitioners. Balbedina did not testify; as such, the petitioners were
deprived of their right to cross-examine him. The said affidavit is thus hearsay and barren of probative weight.
The affidavit varies the contents of the deed of absolute sale which he (Balbedina) executed in favor of Iluminado
more than forty years earlier. In the said affidavit, it was made to appear that Balbedina sold to Iluminado on
June 4, 1951 only a portion of Lot 3353 with an area of 3,333 square meters, when under the said deed of
absolute sale, the property that was sold consisted of 4,651 square meters. The affidavit is proscribed by Section
9, Rule 130 of the Rules of Court, which provides:

Section 9. Evidence of written agreements. - When the terms of an agreement have been reduced to
writing, it is considered as containing all the terms agreed upon and there can be, between the parties
and their successors in interest, no evidence of such terms other than the contents of the written
agreement.

...

It bears stressing that the deed of absolute sale executed by Balbedina in favor of Baloloy was
notarized by the Justice of the Peace who was an Ex-Officio Notary Public; hence, entitled to full
probative weight.

Eighth. The Special Sketch Plan of Lot No. 3353 prepared by Geodetic Engineer Rodolfo P. Cunanan 49 cannot
prevail over OCT No. P-16540. In fact, the plan even buttressed the case for the petitioners because it shows
that the subject property is a portion of Lot No. 3353, and not of Lot No. 3347, covered by OCT No. P-16540
under the name of Iluminado Baloloy, the deceased father of the petitioners.

Ninth. The conclusion of the RTC that Lagata in fact sold a portion of Lot No. 3347 under the deed of absolute
sale dated November 25, 1961, unaware that the property was a part of Lot No. 3353, is based on mere
speculations and surmises.

Iluminado Baloloy included in his application for a free patent the property of Alejandro Gruta, and was able to
secure a free patent over said property in addition to his own. As such, Gruta, not the respondent, is the proper
party to assail such free patent, as well as OCT No. P-16540 which was issued based thereon.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The decisions of the Regional Trial Court and
the Court of Appeals are REVERSED and SET ASIDE. The complaint of the respondent is DISMISSED. No
costs.

SO ORDERED.
G.R. No. 161916 January 20, 2006
ARNELITO ADLAWAN, Petitioner,
vs.
EMETERIO M. ADLAWAN and NARCISA M. ADLAWAN, Respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review is the September 23, 2003 Decision 1 of the Court of Appeals in CA-G.R. SP
No. 74921 which set aside the September 13, 2002 Decision 2 of the Regional Trial Court (RTC) of Cebu City,
Branch 7, in Civil Case No. CEB-27806, and reinstated the February 12, 2002 Judgment3 of the Municipal Trial
Court (MTC) of Minglanilla, Metro Cebu, in Civil Case No. 392, dismissing petitioner Arnelito Adlawans unlawful
detainer suit against respondents Emeterio and Narcisa Adlawan. Likewise questioned is the January 8, 2004
Resolution4of the Court of Appeals which denied petitioners motion for reconsideration.
The instant ejectment suit stemmed from the parties dispute over Lot 7226 and the house built thereon, covered
by Transfer Certificate of Title No. 8842,5 registered in the name of the late Dominador Adlawan and located at
Barrio Lipata, Municipality of Minglanilla, Cebu. In his complaint, petitioner claimed that he is an acknowledged
illegitimate child6 of Dominador who died on May 28, 1987 without any other issue. Claiming to be the sole heir
of Dominador, he executed an affidavit adjudicating to himself Lot 7226 and the house built thereon. 7 Out of
respect and generosity to respondents who are the siblings of his father, he granted their plea to occupy the
subject property provided they would vacate the same should his need for the property arise. Sometime in
January 1999, he verbally requested respondents to vacate the house and lot, but they refused and filed instead
an action for quieting of title8 with the RTC. Finally, upon respondents refusal to heed the last demand letter to
vacate dated August 2, 2000, petitioner filed the instant case on August 9, 2000.9
On the other hand, respondents Narcisa and Emeterio, 70 and 59 years of age, respectively, 10 denied that they
begged petitioner to allow them to stay on the questioned property and stressed that they have been occupying
Lot 7226 and the house standing thereon since birth. They alleged that Lot 7226 was originally registered in the
name of their deceased father, Ramon Adlawan11 and the ancestral house standing thereon was owned by
Ramon and their mother, Oligia Maacap Adlawan. The spouses had nine12 children including the late
Dominador and herein surviving respondents Emeterio and Narcisa. During the lifetime of their parents and
deceased siblings, all of them lived on the said property. Dominador and his wife, Graciana Ramas Adlawan,
who died without issue, also occupied the same. 13 Petitioner, on the other hand, is a stranger who never had
possession of Lot 7226.
Sometime in 1961, spouses Ramon and Oligia needed money to finance the renovation of their house. Since
they were not qualified to obtain a loan, they transferred ownership of Lot 7226 in the name of their son
Dominador who was the only one in the family who had a college education. By virtue of a January 31, 1962
simulated deed of sale,14 a title was issued to Dominador which enabled him to secure a loan with Lot 7226 as
collateral. Notwithstanding the execution of the simulated deed, Dominador, then single, never disputed his
parents ownership of the lot. He and his wife, Graciana, did not disturb respondents possession of the property
until they died on May 28, 1987 and May 6, 1997, respectively.
Respondents also contended that Dominadors signature at the back of petitioners birth certificate was forged,
hence, the latter is not an heir of Dominador and has no right to claim ownership of Lot 7226. 15 They argued
that even if petitioner is indeed Dominadors acknowledged illegitimate son, his right to succeed is doubtful
because Dominador was survived by his wife, Graciana. 16
On February 12, 2002, the MTC dismissed the complaint holding that the establishment of petitioners filiation
and the settlement of the estate of Dominador are conditions precedent to the accrual of petitioners action for
ejectment. It added that since Dominador was survived by his wife, Graciana, who died 10 years thereafter, her
legal heirs are also entitled to their share in Lot 7226. The dispositive portion thereof, reads:
In View of the foregoing, for failure to prove by preponderance of evidence, the plaintiffs cause of action, the
above-entitled case is hereby Ordered DISMISSED.
SO ORDERED.17
On appeal by petitioner, the RTC reversed the decision of the MTC holding that the title of Dominador over Lot
7226 cannot be collaterally attacked. It thus ordered respondents to turn over possession of the controverted
lot to petitioner and to pay compensation for the use and occupation of the premises. The decretal portion
thereof, provides:
Wherefore, the Judgment, dated February 12, 2002, of the Municipal Trial Court of Minglanilla, Cebu, in Civil
Case No. 392, is reversed. Defendants-appellees are directed to restore to plaintiff-appellant possession of Lot
7226 and the house thereon, and to pay plaintiff-appellant, beginning in August 2000, compensation for their
use and occupation of the property in the amount of P500.00 a month.
So ordered.18
Meanwhile, the RTC granted petitioners motion for execution pending appeal 19 which was opposed by the
alleged nephew and nieces of Graciana in their motion for leave to intervene and to file an answer in
intervention.20 They contended that as heirs of Graciana, they have a share in Lot 7226 and that intervention is
necessary to protect their right over the property. In addition, they declared that as co-owners of the property,
they are allowing respondents to stay in Lot 7226 until a formal partition of the property is made.
The RTC denied the motion for leave to intervene. 21 It, however, recalled the order granting the execution
pending appeal having lost jurisdiction over the case in view of the petition filed by respondents with the Court
of Appeals.22
On September 23, 2003, the Court of Appeals set aside the decision of the RTC and reinstated the judgment
of the MTC. It ratiocinated that petitioner and the heirs of Graciana are co-owners of Lot 7226. As such,
petitioner cannot eject respondents from the property via an unlawful detainer suit filed in his own name and as
the sole owner of the property. Thus
WHEEFORE, premises considered, the appealed Decision dated September 13, 2002 of the Regional Trial
Court of Cebu City, Branch 7, in Civil Case No. CEB-27806 is REVERSED and SET ASIDE, and the Judgment
dated February 12, 2002 of the Municipal Trial Court of Minglanilla, Metro Cebu, in Civil Case No. 392 is
REINSTATED. Costs against the respondent.
SO ORDERED.23
Petitioners motion for reconsideration was denied. Hence, the instant petition.
The decisive issue to be resolved is whether or not petitioner can validly maintain the instant case for ejectment.
Petitioner averred that he is an acknowledged illegitimate son and the sole heir of Dominador. He in fact
executed an affidavit adjudicating to himself the controverted property. In ruling for the petitioner, the RTC held
that the questioned January 31, 1962 deed of sale validly transferred title to Dominador and that petitioner is
his acknowledged illegitimate son who inherited ownership of the questioned lot. The Court notes, however,
that the RTC lost sight of the fact that the theory of succession invoked by petitioner would end up proving that
he is not the sole owner of Lot 7226. This is so because Dominador was survived not only by petitioner but also
by his legal wife, Graciana, who died 10 years after the demise of Dominador on May 28, 1987. 24 By intestate
succession, Graciana and petitioner became co-owners of Lot 7226.25 The death of Graciana on May 6, 1997,
did not make petitioner the absolute owner of Lot 7226 because the share of Graciana passed to her relatives
by consanguinity and not to petitioner with whom she had no blood relations. The Court of Appeals thus correctly
held that petitioner has no authority to institute the instant action as the sole owner of Lot 7226.
Petitioner contends that even granting that he has co-owners over Lot 7226, he can on his own file the instant
case pursuant to Article 487 of the Civil Code which provides:
ART. 487. Any one of the co-owners may bring an action in ejectment.
This article covers all kinds of actions for the recovery of possession. Article 487 includes forcible entry and
unlawful detainer (accion interdictal), recovery of possession (accion publiciana), and recovery of ownership
(accion de reivindicacion).26 A co-owner may bring such an action without the necessity of joining all the other
co-owners as co-plaintiffs because the suit is presumed to have been filed to benefit his co-owners. It should
be stressed, however, that where the suit is for the benefit of the plaintiff alone who claims to be the sole owner
and entitled to the possession of the litigated property, the action should be dismissed. 27
The renowned civilist, Professor Arturo M. Tolentino, explained
A co-owner may bring such an action, without the necessity of joining all the other co-owners as co-plaintiffs,
because the suit is deemed to be instituted for the benefit of all. If the action is for the benefit of the plaintiff
alone, such that he claims possession for himself and not for the co-ownership, the action will not
prosper. (Emphasis added)28
In Baloloy v. Hular,29 respondent filed a complaint for quieting of title claiming exclusive ownership of the
property, but the evidence showed that respondent has co-owners over the property. In dismissing the complaint
for want of respondents authority to file the case, the Court held that
Under Article 487 of the New Civil Code, any of the co-owners may bring an action in ejectment. This article
covers all kinds of actions for the recovery of possession, including an accion publiciana and a reinvidicatory
action. A co-owner may bring such an action without the necessity of joining all the other co-owners as co-
plaintiffs because the suit is deemed to be instituted for the benefit of all. Any judgment of the court in favor of
the co-owner will benefit the others but if such judgment is adverse, the same cannot prejudice the rights of the
unimpleaded co-owners. If the action is for the benefit of the plaintiff alone who claims to be the sole owner and
entitled to the possession thereof, the action will not prosper unless he impleads the other co-owners who are
indispensable parties.
In this case, the respondent alone filed the complaint, claiming sole ownership over the subject property and
praying that he be declared the sole owner thereof. There is no proof that the other co-owners had waived their
rights over the subject property or conveyed the same to the respondent or such co-owners were aware of the
case in the trial court. The trial court rendered judgment declaring the respondent as the sole owner of the
property and entitled to its possession, to the prejudice of the latters siblings. Patently then, the decision of the
trial court is erroneous.
Under Section 7, Rule 3 of the Rules of Court, the respondent was mandated to implead his siblings, being co-
owners of the property, as parties. The respondent failed to comply with the rule. It must, likewise, be stressed
that the Republic of the Philippines is also an indispensable party as defendant because the respondent sought
the nullification of OCT No. P-16540 which was issued based on Free Patent No. 384019. Unless the State is
impleaded as party-defendant, any decision of the Court would not be binding on it. It has been held that the
absence of an indispensable party in a case renders ineffective all the proceedings subsequent to the filing of
the complaint including the judgment. The absence of the respondents siblings, as parties, rendered all
proceedings subsequent to the filing thereof, including the judgment of the court, ineffective for want of authority
to act, not only as to the absent parties but even as to those present.30
In the instant case, it is not disputed that petitioner brought the suit for unlawful detainer in his name alone and
for his own benefit to the exclusion of the heirs of Graciana as he even executed an affidavit of self- adjudication
over the disputed property. It is clear therefore that petitioner cannot validly maintain the instant action
considering that he does not recognize the co-ownership that necessarily flows from his theory of succession
to the property of his father, Dominador.
In the same vein, there is no merit in petitioners claim that he has the legal personality to file the present
unlawful detainer suit because the ejectment of respondents would benefit not only him but also his alleged co-
owners. However, petitioner forgets that he filed the instant case to acquire possession of the property and to
recover damages. If granted, he alone will gain possession of the lot and benefit from the proceeds of the award
of damages to the exclusion of the heirs of Graciana. Hence, petitioner cannot successfully capitalize on the
alleged benefit to his co-owners. Incidentally, it should be pointed out that in default of the said heirs of Graciana,
whom petitioner labeled as "fictitious heirs," the State will inherit her share 31 and will thus be petitioners co-
owner entitled to possession and enjoyment of the property.
The present controversy should be differentiated from the cases where the Court upheld the right of a co-owner
to file a suit pursuant to Article 487 of the Civil Code. In Resuena v. Court of Appeals,32 and Sering v.
Plazo,33 the co-owners who filed the ejectment case did not represent themselves as the exclusive owner of the
property. In Celino v. Heirs of Alejo and Teresa Santiago,34 the complaint for quieting of title was brought in
behalf of the co-owners precisely to recover lots owned in common. 35 Similarly in Vencilao v. Camarenta,36 the
amended complaint specified that the plaintiff is one of the heirs who co-owns the controverted properties.
In the foregoing cases, the plaintiff never disputed the existence of a co-ownership nor claimed to be the sole
or exclusive owner of the litigated lot. A favorable decision therein would of course inure to the benefit not only
of the plaintiff but to his co-owners as well. The instant case, however, presents an entirely different backdrop
as petitioner vigorously asserted absolute and sole ownership of the questioned lot. In his complaint, petitioner
made the following allegations, to wit:
3. The plaintiff was the only son (illegitimate) and sole heir of the late DOMINADOR ADLAWAN who died
intestate on 28 May 1987 without any other descendant nor ascendant x x x.
xxxx
5. Being the only child/descendant and, therefore, sole heir of the deceased Dominador Adlawan, the plaintiff
became the absolute owner, and automatically took POSSESSION, of the aforementioned house and lot x x
x. (Emphasis added)37
Clearly, the said cases find no application here because petitioners action operates as a complete repudiation
of the existence of co-ownership and not in representation or recognition thereof. Dismissal of the complaint is
therefore proper. As noted by Former Supreme Court Associate Justice Edgrado L. Paras "[i]t is understood, of
course, that the action [under Article 487 of the Civil Code] is being instituted for all. Hence, if the co-owner
expressly states that he is bringing the case only for himself, the action should not be allowed to prosper." 38

Indeed, respondents not less than four decade actual physical possession of the questioned ancestral house
and lot deserves to be respected especially so that petitioner failed to show that he has the requisite personality
and authority as co-owner to file the instant case. Justice dictates that respondents who are now in the twilight
years of their life be granted possession of their ancestral property where their parents and siblings lived during
their lifetime, and where they, will probably spend the remaining days of their life.

WHEREFORE, the petition is DENIED. The September 23, 2003 Decision of the Court of Appeals in CA-G.R.
SP No. 74921 which reinstated the February 12, 2002 Judgment of the Municipal Trial Court of Minglanilla,
Metro Cebu, dismissing petitioners complaint in Civil Case No. 392, and its January 8, 2004 Resolution,
are AFFIRMED.

SO ORDERED.
G.R. No. L-44546 January 29, 1988
RUSTICO ADILLE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO, TEODORICA ASEJO, DOMINGO ASEJO,
JOSEFA ASEJO and SANTIAGO ASEJO, respondents.
SARMIENTO, J.:
In issue herein are property and property rights, a familiar subject of controversy and a wellspring of enormous
conflict that has led not only to protracted legal entanglements but to even more bitter consequences, like
strained relationships and even the forfeiture of lives. It is a question that likewise reflects a tragic commentary
on prevailing social and cultural values and institutions, where, as one observer notes, wealth and its
accumulation are the basis of self-fulfillment and where property is held as sacred as life itself. "It is in the
defense of his property," says this modern thinker, that one "will mobilize his deepest protective devices, and
anybody that threatens his possessions will arouse his most passionate enmity." 1
The task of this Court, however, is not to judge the wisdom of values; the burden of reconstructing the social
order is shouldered by the political leadership-and the people themselves.
The parties have come to this Court for relief and accordingly, our responsibility is to give them that relief
pursuant to the decree of law.
The antecedent facts are quoted from the decision 2 appealed from:
xxx xxx xxx
... [T]he land in question Lot 14694 of Cadastral Survey of Albay located in Legaspi City with
an area of some 11,325 sq. m. originally belonged to one Felisa Alzul as her own private
property; she married twice in her lifetime; the first, with one Bernabe Adille, with whom she
had as an only child, herein defendant Rustico Adille; in her second marriage with one
Procopio Asejo, her children were herein plaintiffs, now, sometime in 1939, said Felisa
sold the property in pacto de retro to certain 3rd persons, period of repurchase being 3 years,
but she died in 1942 without being able to redeem and after her death, but during the period
of redemption, herein defendant repurchased, by himself alone, and after that, he executed
a deed of extra-judicial partition representing himself to be the only heir and child of his
mother Felisa with the consequence that he was able to secure title in his name alone also,
so that OCT. No. 21137 in the name of his mother was transferred to his name, that was in
1955; that was why after some efforts of compromise had failed, his half-brothers and sisters,
herein plaintiffs, filed present case for partition with accounting on the position that he was
only a trustee on an implied trust when he redeemed,-and this is the evidence, but as it also
turned out that one of plaintiffs, Emeteria Asejo was occupying a portion, defendant
counterclaimed for her to vacate that,
Well then, after hearing the evidence, trial Judge sustained defendant in his position that he
was and became absolute owner, he was not a trustee, and therefore, dismissed case and
also condemned plaintiff occupant, Emeteria to vacate; it is because of this that plaintiffs
have come here and contend that trial court erred in:
I. ... declaring the defendant absolute owner of the property;
II. ... not ordering the partition of the property; and
III. ... ordering one of the plaintiffs who is in possession of the portion of the property to
vacate the land, p. 1 Appellant's brief.
which can be reduced to simple question of whether or not on the basis of evidence and law, judgment appealed
from should be maintained. 3
xxx xxx xxx
The respondent Court of appeals reversed the trial Court, 4 and ruled for the plaintiffs-appellants, the private
respondents herein. The petitioner now appeals, by way of certiorari, from the Court's decision.
We required the private respondents to file a comment and thereafter, having given due course to the petition,
directed the parties to file their briefs. Only the petitioner, however, filed a brief, and the private respondents
having failed to file one, we declared the case submitted for decision.
The petition raises a purely legal issue: May a co-owner acquire exclusive ownership over the property held in
common?
Essentially, it is the petitioner's contention that the property subject of dispute devolved upon him upon the
failure of his co-heirs to join him in its redemption within the period required by law. He relies on the provisions
of Article 1515 of the old Civil Article 1613 of the present Code, giving the vendee a retro the right to demand
redemption of the entire property.
There is no merit in this petition.
The right of repurchase may be exercised by a co-owner with aspect to his share alone. 5 While the records
show that the petitioner redeemed the property in its entirety, shouldering the expenses therefor, that did not
make him the owner of all of it. In other words, it did not put to end the existing state of co-ownership.
Necessary expenses may be incurred by one co-owner, subject to his right to collect reimbursement from the
remaining co-owners. 6 There is no doubt that redemption of property entails a necessary expense. Under the
Civil Code:
ART. 488. Each co-owner shall have a right to compel the other co-owners to contribute to
the expenses of preservation of the thing or right owned in common and to the taxes. Any
one of the latter may exempt himself from this obligation by renouncing so much of his
undivided interest as may be equivalent to his share of the expenses and taxes. No such
waiver shall be made if it is prejudicial to the co-ownership.
The result is that the property remains to be in a condition of co-ownership. While a vendee a retro, under Article
1613 of the Code, "may not be compelled to consent to a partial redemption," the redemption by one co-heir or
co-owner of the property in its totality does not vest in him ownership over it. Failure on the part of all the co-
owners to redeem it entitles the vendee a retro to retain the property and consolidate title thereto in his
name. 7But the provision does not give to the redeeming co-owner the right to the entire property. It does not
provide for a mode of terminating a co-ownership.
Neither does the fact that the petitioner had succeeded in securing title over the parcel in his name terminate
the existing co-ownership. While his half-brothers and sisters are, as we said, liable to him for reimbursement
as and for their shares in redemption expenses, he cannot claim exclusive right to the property owned in
common. Registration of property is not a means of acquiring ownership. It operates as a mere notice of existing
title, that is, if there is one.
The petitioner must then be said to be a trustee of the property on behalf of the private respondents. The Civil
Code states:
ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by
force of law, considered a trustee of an implied trust for the benefit of the person from whom
the property comes.
of registration is equivalent to notice of repudiation, assuming there was one, notwithstanding the long-standing
rule that registration operates as a universal notice of title.
For the same reason, we cannot dismiss the private respondents' claims commenced in 1974 over the estate
registered in 1955. While actions to enforce a constructive trust prescribes in ten years, 12 reckoned from the
date of the registration of the property, 13 we, as we said, are not prepared to count the period from such a date
in this case. We note the petitioner's sub rosa efforts to get hold of the property exclusively for himself beginning
with his fraudulent misrepresentation in his unilateral affidavit of extrajudicial settlement that he is "the only heir
and child of his mother Feliza with the consequence that he was able to secure title in his name
also." 14 Accordingly, we hold that the right of the private respondents commenced from the time they actually
discovered the petitioner's act of defraudation. 15 According to the respondent Court of Appeals, they "came to
know [of it] apparently only during the progress of the litigation." 16 Hence, prescription is not a bar.

Moreover, and as a rule, prescription is an affirmative defense that must be pleaded either in a motion to dismiss
We agree with the respondent Court of Appeals that fraud attended the registration of the property. The
petitioner's pretension that he was the sole heir to the land in the affidavit of extrajudicial settlement he executed or in the answer otherwise it is deemed waived, 17 and here, the petitioner never raised that defense. 18 There
preliminary to the registration thereof betrays a clear effort on his part to defraud his brothers and sisters and to are recognized exceptions to this rule, but the petitioner has not shown why they apply.
exercise sole dominion over the property. The aforequoted provision therefore applies.
WHEREFORE, there being no reversible error committed by the respondent Court of Appeals, the petition is
It is the view of the respondent Court that the petitioner, in taking over the property, did so either on behalf of DENIED. The Decision sought to be reviewed is hereby AFFIRMED in toto. No pronouncement as to costs.
his co-heirs, in which event, he had constituted himself a negotiorum gestor under Article 2144 of the Civil Code,
or for his exclusive benefit, in which case, he is guilty of fraud, and must act as trustee, the private respondents SO ORDERED,
being the beneficiaries, under the Article 1456. The evidence, of course, points to the second alternative the
petitioner having asserted claims of exclusive ownership over the property and having acted in fraud of his co-
heirs. He cannot therefore be said to have assume the mere management of the property abandoned by his
co-heirs, the situation Article 2144 of the Code contemplates. In any case, as the respondent Court itself affirms,
the result would be the same whether it is one or the other. The petitioner would remain liable to the Private
respondents, his co-heirs.

This Court is not unaware of the well-established principle that prescription bars any demand on property
(owned in common) held by another (co-owner) following the required number of years. In that event, the party
in possession acquires title to the property and the state of co-ownership is ended . 8 In the case at bar, the
property was registered in 1955 by the petitioner, solely in his name, while the claim of the private respondents
was presented in 1974. Has prescription then, set in?

We hold in the negative. Prescription, as a mode of terminating a relation of co-ownership, must have been
preceded by repudiation (of the co-ownership). The act of repudiation, in turn is subject to certain conditions:
(1) a co-owner repudiates the co-ownership; (2) such an act of repudiation is clearly made known to the other
co-owners; (3) the evidence thereon is clear and conclusive, and (4) he has been in possession through open,
continuous, exclusive, and notorious possession of the property for the period required by law. 9

The instant case shows that the petitioner had not complied with these requisites. We are not convinced that
he had repudiated the co-ownership; on the contrary, he had deliberately kept the private respondents in the
dark by feigning sole heirship over the estate under dispute. He cannot therefore be said to have "made known"
his efforts to deny the co-ownership. Moreover, one of the private respondents, Emeteria Asejo, is occupying a
portion of the land up to the present, yet, the petitioner has not taken pains to eject her therefrom. As a matter
of fact, he sought to recover possession of that portion Emeteria is occupying only as a counterclaim, and only
after the private respondents had first sought judicial relief.

It is true that registration under the Torrens system is constructive notice of title, 10 but it has likewise been our
holding that the Torrens title does not furnish a shield for fraud. 11 It is therefore no argument to say that the act
G.R. No. L-46935 December 21, 1987
SPOUSES GREGORIO DE GUZMAN, JR. and CORAZON QUINTO petitioners,
vs.
HON. COURT OF APPEALS and RAYMUNDA RINGOR QUIRIMIT, respondents.
FERNAN, J.:
This is a petition for review of the decision * of the Court of Appeals dated March 3, 1977 in CA-G.R. No. 52746-
R entitled "Spouses Gregorio de Guzman, Jr. and Corazon Quinto, Plaintiffs-Appellees, versus Raymunda
Ringor Quirmit, Defendant-Appellant," declaring herein private respondent Raymunda Ringor Quirmit owner of
the land subject of litigation.
Deogracias Queriza was the original owner of a parcel of unregistered residential land containing an area of
745 square meters, more or less, situated at San Fabian, Pangasinan. On July 20, 1957, he executed a Deed
of Pacto de Retro sale over said land in favor of his niece, private respondent Quirmit for the sum of P 500.00,
with the express stipulation that the "vendor a retro may exercise the right of repurchase within 5 years from the
execution of these presents and upon failure to take advantage of the right herein granted him, then this contract
shall acquire the character of absolute, irrevocable and consummated sale. 1 Private respondent did not
register the Deed of Pacto de Retro Sale, but took possession of the land by building her house on a portion
thereof.
It appears that subsequently, Deogracias Queriza mortgaged the same parcel of land to the Manaoag Rural
Bank, from which it was allegedly redeemed on his behalf by his nephew Miguel Queriza on November 4, 1963.
Supposedly for this reason, on April 26, 1967, Deogracias Queriza, without having exercised his right to
repurchase under the Pacto de Retro Sale, executed over said parcel of land and two others, a Deed of
"Rimunitary [sic] Inter-vivos Donation 2 in favor of Miguel Queriza, who thereafter declared the land in his name
for taxation purposes and registered the Deed of Donation on August 8, 1967 in the Register of Deeds of
Pangasinan.
On December 8, 1970, Miguel Queriza sold the land to petitioners spouses Gregorio de Guzman, Jr. and
Corazon Quinto. The Deed of Sale was registered on December 9, 1970 and the tax declaration placed under
their names.
In January, 1971, petitioners sent private respondent written notice to vacate the land in question, and upon
refusal by the latter to do so, instituted on February 7, 1971, Civil Case No. D-2662 for Quieting of Title and
Recovery of Possession before the then Court of First Instance of Pangasinan, Fourth Branch.
After trial, the court rendered judgment on January 19, 1973, declaring petitioners owners of the land in question
and ordering private respondent to vacate the premises, to pay petitioners the total sum of P1,000.00 for
damages and attorney's fees and to pay the cost of suit. It ruled that the Pacto de Retro Sale was only a
mortgage and that the Deed of Donation in favor of Miguel Queriza was valid.
On Appeal by private respondent, the Court of Appeals reversed the decision of the trial court. Applying Article
1544 of the New Civil Code, the appellate court held that private respondent had a preferential right to the land
as against petitioners who were purchasers in bad faith. It also found the transaction between Deogracias
Queriza and private respondent to be what it purported to be a pacto de retro sale and not an equitable
mortgage.
Petitioners moved for a reconsideration of the appellate court's decision and upon denial thereof, took the
present recourse.
Petitioners contend that the appellate court erred in: [a] resolving the case under Article 1544 of the New Civil
Code when such provision was never cited nor invoked by private respondent in the court a quo [b] not holding
that the pacto de retro sale was an equitable mortgage in accordance with Article 1602 of the said Code; [c] not
applying the rule that as between two innocent parties, he who was negligent should bear the loss; and, [d] in
denying their motion for reconsideration.
Petitioners theorize that since the trial court did not cite Article 1544 of the New Civil Code in its decision, the
appellate court is precluded from applying the same, for in so doing it, in effect, entertained an issue not raised
in the lower court and allowed private respondent to change her theory on appeal.
This theory is both right and wrong. Right because the appellate court erred in applying Article 1544 of the New
Civil Code relating to double sales to this case which involves an earlier pacto de retro sale of an unregistered
land and the subsequent donation thereof by the vendor a retro. And wrong because although the appellate
court applied the wrong provision of law, it did not in so doing entertain an issue not raised in the lower court
nor allow private respondent to change her theory on appeal. Precisely, the issue involved in an action for
quieting of title and recovery of possession is who, between the parties, has a better right to the property in
dispute, and this is the very issue resolved by the appellate court in the decision under consideration. Thus, it
is incorrect to say that this issue was never raised in the trial court.
As to the alleged change of theory on appeal by private respondent, an examination of the answer filed by
private respondent in the trial court reveals that she interposed two defenses: [a] the supposed invalidity of the
Deed of Donation in favor of Miguel Queriza by reason of fraud, undue influence or mental incapacity of the
donor at the time of the donation; and, [b] knowledge of petitioners of the pacto de retro sale in her favor prior
to their purchase of the land in question from Miguel Queriza. 3 This being the case, it is equally inaccurate to
say that she shifted her theory from "senility of donor Deogracias Queriza to the bad faith of the vendees
spouses Gregorio de Guzman, Jr. and Corazon Quinto ... to avail of Article 1544 of the New Civil Code. 4
Petitioners further attribute error to the appellate court in not sustaining the lower court's finding that the pacto
de retro sale was an equitable mortgage. After a thorough review of the records, We are as equally convinced
as the appellate court that the transactions between Deogracias Queriza and private respondent was a pacto
de retro sale. The consideration of P500.00 paid by private respondent in 1957 was not unusually inadequate,
considering that the land had an assessed value of only P380.00 at the time of Miguel Queriza's sale thereof to
petitioners in 1971. 5 Also, the finding of the trial court, allegedly on the admission of private respondent herself
that it was the vendor a retro who appropriated the fruits of the land after the sale is contrary to the evidence on
record because in her testimony, private respondent declared that it was she who enjoyed the products of said
land. 6 Moreover, private respondent explained why she did not consolidate her ownership over the land in
question, thus:
RE-DIRECT BY
ATTY. BELEN:
Q Mrs. Quirmit, will you please tell the Court why you did not consolidate
your ownership on the land in question after Deogracias failed to redeem
the property?
A Because Deogracias told me not to worry because he has no child to
question me.
 xxxxxxxxx
Q You testified you did not consolidate your ownership over the land in
question because your uncle told you there is nothing to worry about
because he has no children to challenge, is that correct?
A Yes, sir.
Q What year did he tell you that?
A All the time he told me that.
Q That was after the lapse of 5 years from the date of the execution of
the pacto de retro, is that correct?
A All the time he told me and he said, 'Never mind nobody will trouble
you. "I have no heirs to inherit.
RE-CROSS EXAMINATION
BY ATTY. ANCHETA:
Q He use to say that even after 1965, is that correct?
A Yes, sir.
That is all. 7
Ordinarily, such explanation would sound lame and flimsy. Considering however the close blood relationship
between Deogracias Queriza and private respondent as well as the degree of trust and confidence traditionally
accorded by Filipinos to their relatives, particularly in this case where private respondent had reason to rely on
the words of Deogracias Queriza, the latter being a Notary Public, We find such explanation satisfactory.
Ironically, the rule relied upon by petitioners that as between two innocent parties, he who was negligent should
bear the loss, cannot apply to this case for the simple reason that it is petitioners themselves who cannot be
considered innocent purchasers. As found by the appellate court:
In the instant case, it can hardly be said that plaintiffs-appellees [herein petitioners] were
acting in good faith when they caused their Deed of Sale to be registered with the Registry
of Deeds. In the first place, when the sale was consummated in favor of appellee, appellant
was actually residing in a house standing right on the land in question, and appellees were
living not far from appellant. In the second place, even before appellees bought the land,
appellant had already confronted them and informed them that the land had already been
sold to her. [t.s.n., p. 8, July 7, 1972] Appellees were thus forewarned; the least they could
do was to inquire from their vendor Miguel Queriza and from the other relatives of the original
owner, Deogracias Queriza, by what right or title appellant had her house on the lot she was
occupying. But it seems that appellees did not bother to do this and merely relied upon the
Deed of Donation made in favor of Miguel Queriza. Had appellees exercised due diligence
in inquiring into the right or title of the appellant who was residing in the property they would
doubtless have found out that appellant was occupying it by virtue of the Pacto de Retro
Sale of July 20, 1957, which apparently had become an absolute sale on July 20, 1962 by
express provision thereof and the apparent failure of Deogracias Queriza to redeem the
property.
Although it may be true, as testified by appellee Gregorio de Guzman that he noticed that
there was a house standing on the property, and that when he went there nobody was in the
house, and that he decided to buy the property because of the advice of the Notary Public
that its title was clean, We are of the considered opinion that this was not sufficient to make
appellees purchasers in good faith. If de Guzman went once to the house and found nobody
there, he could have gone back at least once more, and if still there was no one he could
have inquired from the neighbors if any one resided therein. Besides, it is not disputed that
appellees live near the property in question and surely they could not fail to notice whether
the house was tenanted or not. The information of the Notary Public could hardly be relied
upon, considering that the property is unregistered and therefore, there was really no
certificate of title to speak of which the notary is alleged to have attested to the "cleanness"
of.
The failure of appellees to take the ordinary precautions which a prudent man would have
taken under the circumstances, specially in buying a piece of land in the actual visible and
public possession of another person, other than the vendor, constitutes gross negligence
amounting to bad faith.
In this connection, it has been held that where, as in this case, the land
sold is in the possession of a person other than the vendor, the purchaser
is required to go beyond the certificate of title and mae [sic) inquiries
concerning the rights of the actual possessor. Failure to do so would
make him a purchaser in bad faith. [Incala vs. Mendoza, CA-G.R. No.
13677-R, November 9, 1965; De Jesus vs. Revilla, CA-G. R. No. 13562-
R, October 5, 1965; Martelino vs. Manikan CA-G.R. No. 32792-R, June
22, 1956].
xxx xxx xxx
"One who purchases real property which is in the actual possession of
another should, at least make some inquiry concerning the right of those
in possession. The actual possession by other than the vendor should at
least put the purchaser upon inquiry. He can scarely, in the absence of
such inquiry, be regarded as a bona fide purchaser as against such
possessors. [Conspecto vs. Fruto, 31 Phil. 144] "
xxx xxx xxx
Appellant has been and continues to be in actual possession of the property, and her deed
of pacto de retro sale dates back to 1957 while the deed of sale in favor of appellees was
executed in 1970; and there is no showing that appellant's possession and her pacto de
retro sale were done in bad faith. 8
While the appellate court misapplied Article 1544 of the Civil Code in this case, its ultimate conclusion that
private respondent should be declared owner of the land in question is correct. As stated earlier, the transaction
between Deogracias Queriza and private respondent was a true pacto de retro sale. The essence of a pacto
de retro sale is that title and ownership of the property sold are immediately vested in the vendee a retro, subject
to the resolutory condition of repurchase by the vendor a retro within the stipulated period. Failure thus of the
vendor a retro to perform said resolutory condition vests upon the vendee by operation of law absolute title and
ownership over the property sold 9 and failure of the vendee a retro to consolidate his title under Article 1607 of
the Civil Code does not impair such title or ownership for the method prescribed thereunder is merely for the
purpose of registering the consolidated title. 10 In the case at bar, absolute ownership of the land in question
was vested on private respondent in 1962 upon failure of Deogracias Queriza to repurchase said land. Thus, in
1967 when he allegedly donated the same to Miguel Queriza, he was no longer the owner thereof. Settled is
the rule that a donor cannot lawfully convey what is not his property. 11 There being no title to the property
which Deogracias Queriza could convey to Miguel Queriza, it necessarily follows that no title to the property
could be conveyed by the latter to petitioners. The registration of the deeds under which they claimed to have
acquired ownership of the land in dispute was a useless ceremony. Registration does not vest title. It is not a
mode of acquiring ownership but is merely evidence of such title over a particular property. It does not give the
holder any better title than what he actually has. Besides, petitioners' registration of their deed of sale was done
in bad faith. The effect is that it is as if no registration was made at all in so far as private respondent is
concerned. Conversely, actual knowledge of petitioners of the sale to private respondent amounted to
registration thereof. 12

WHEREFORE, the instant petition is hereby DENIED. The decision of the Court of Appeals under review
declaring private respondent Raymunda Ringor Quirmit owner of the land in dispute is affirmed, with costs
against petitioners.

SO ORDERED.
G.R. No. 48049 June 29, 1989
EMILIO TAN, JUANITO TAN, ALBERTO TAN and ARTURO TAN, petitioners,
vs.
THE COURT OF APPEALS and THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, respondents.
O.F. Santos & P.C. Nolasco for petitioners.
Ferry, De la Rosa and Associates for private respondent.
GUTIERREZ, JR., J.:
This is a petition for review on certiorari of the Court of Appeals' decision affirming the decision of the Insurance
Commissioner which dismissed the petitioners' complaint against respondent Philippine American Life
Insurance Company for the recovery of the proceeds from their late father's policy. The facts of the case as
found by the Court of Appeals are:
Petitioners appeal from the Decision of the Insurance Commissioner dismissing herein
petitioners' complaint against respondent Philippine American Life Insurance Company for
the recovery of the proceeds of Policy No. 1082467 in the amount of P 80,000.00.
On September 23,1973, Tan Lee Siong, father of herein petitioners, applied for life insurance
in the amount of P 80,000.00 with respondent company. Said application was approved and
Policy No. 1082467 was issued effective November 6,1973, with petitioners the beneficiaries
thereof (Exhibit A).
On April 26,1975, Tan Lee Siong died of hepatoma (Exhibit B). Petitioners then filed with
respondent company their claim for the proceeds of the life insurance policy. However, in a
letter dated September 11, 1975, respondent company denied petitioners' claim and
rescinded the policy by reason of the alleged misrepresentation and concealment of material
facts made by the deceased Tan Lee Siong in his application for insurance (Exhibit 3). The
premiums paid on the policy were thereupon refunded .
Alleging that respondent company's refusal to pay them the proceeds of the policy was
unjustified and unreasonable, petitioners filed on November 27, 1975, a complaint against
the former with the Office of the Insurance Commissioner, docketed as I.C. Case No. 218.
After hearing the evidence of both parties, the Insurance Commissioner rendered judgment
on August 9, 1977, dismissing petitioners' complaint. (Rollo, pp. 91-92)
The Court of Appeals dismissed ' the petitioners' appeal from the Insurance Commissioner's decision for lack
of merit
Hence, this petition.
The petitioners raise the following issues in their assignment of errors, to wit:
A. The conclusion in law of respondent Court that respondent insurer has the right to rescind
the policy contract when insured is already dead is not in accordance with existing law and
applicable jurisprudence.
B. The conclusion in law of respondent Court that respondent insurer may be allowed to
avoid the policy on grounds of concealment by the deceased assured, is contrary to the
provisions of the policy contract itself, as well as, of applicable legal provisions and
established jurisprudence.
C. The inference of respondent Court that respondent insurer was misled in issuing the
policy are manifestly mistaken and contrary to admitted evidence. (Rollo, p. 7)
The petitioners contend that the respondent company no longer had the right to rescind the contract of insurance
as rescission must allegedly be done during the lifetime of the insured within two years and prior to the
commencement of action.
The contention is without merit.
The pertinent section in the Insurance Code provides:
Section 48. Whenever a right to rescind a contract of insurance is given to the insurer by
any provision of this chapter, such right must be exercised previous to the commencement
of an action on the contract.
After a policy of life insurance made payable on the death of the insured shall have been in
force during the lifetime of the insured for a period of two years from the date of its issue or
of its last reinstatement, the insurer cannot prove that the policy is void ab initio or is
rescindable by reason of the fraudulent concealment or misrepresentation of the insured or
his agent.
According to the petitioners, the Insurance Law was amended and the second paragraph of Section 48 added
to prevent the insurance company from exercising a right to rescind after the death of the insured.
The so-called "incontestability clause" precludes the insurer from raising the defenses of false representations
or concealment of material facts insofar as health and previous diseases are concerned if the insurance has
been in force for at least two years during the insured's lifetime. The phrase "during the lifetime" found in Section
48 simply means that the policy is no longer considered in force after the insured has died. The key phrase in
the second paragraph of Section 48 is "for a period of two years."
As noted by the Court of Appeals, to wit:
The policy was issued on November 6,1973 and the insured died on April 26,1975. The
policy was thus in force for a period of only one year and five months. Considering that the
insured died before the two-year period had lapsed, respondent company is not, therefore,
barred from proving that the policy is void ab initio by reason of the insured's fraudulent
concealment or misrepresentation. Moreover, respondent company rescinded the contract
of insurance and refunded the premiums paid on September 11, 1975, previous to the
commencement of this action on November 27,1975. (Rollo, pp. 99-100)
xxx xxx xxx
The petitioners contend that there could have been no concealment or misrepresentation by their late father
because Tan Lee Siong did not have to buy insurance. He was only pressured by insistent salesmen to do so.
The petitioners state:
Here then is a case of an assured whose application was submitted because of repeated
visits and solicitations by the insurer's agent. Assured did not knock at the door of the insurer
to buy insurance. He was the object of solicitations and visits.
Assured was a man of means. He could have obtained a bigger insurance, not just P
80,000.00. If his purpose were to misrepresent and to conceal his ailments in anticipation of
death during the two-year period, he certainly could have gotten a bigger insurance. He did
not.
Insurer Philamlife could have presented as witness its Medical Examiner Dr. Urbano Guinto.
It was he who accomplished the application, Part II, medical. Philamlife did not.
Philamlife could have put to the witness stand its Agent Bienvenido S. Guinto, a relative to
Dr. Guinto, Again Philamlife did not. (pp. 138139, Rollo)
xxx xxx xxx
This Honorable Supreme Court has had occasion to denounce the pressure and practice
indulged in by agents in selling insurance. At one time or another most of us have been
subjected to that pressure, that practice. This court took judicial cognizance of the whirlwind
pressure of insurance selling-especially of the agent's practice of 'supplying the
information, preparing and answering the application, submitting the application to their
companies, concluding the transactions and otherwise smoothing out all difficulties.
We call attention to what this Honorable Court said in Insular Life v. Feliciano, et al., 73 Phil. 201; at page 205:
It is of common knowledge that the selling of insurance today is subjected to the
whirlwind pressureof modern salesmanship.
Insurance companies send detailed instructions to their agents to solicit and procure
applications.
These agents are to be found all over the length and breadth of the land. They are stimulated
to more active efforts by contests and by the keen competition offered by the other rival
insurance companies.
They supply all the information, prepare and answer the applications, submit the applications
to their companies, conclude the transactions, and otherwise smooth out all difficulties.
The agents in short do what the company set them out to do.
The Insular Life case was decided some forty years ago when the pressure of insurance
salesmanship was not overwhelming as it is now; when the population of this country was
less than one-fourth of what it is now; when the insurance companies competing with one
another could be counted by the fingers. (pp. 140-142, Rollo)
xxx xxx xxx
In the face of all the above, it would be unjust if, having been subjected to the whirlwind
pressure of insurance salesmanship this Court itself has long denounced, the assured who
dies within the two-year period, should stand charged of fraudulent concealment and
misrepresentation." (p. 142, Rollo)
The legislative answer to the arguments posed by the petitioners is the "incontestability clause" added by the
second paragraph of Section 48.
The insurer has two years from the date of issuance of the insurance contract or of its last reinstatement within
which to contest the policy, whether or not, the insured still lives within such period. After two years, the defenses
of concealment or misrepresentation, no matter how patent or well founded, no longer lie. Congress felt this
was a sufficient answer to the various tactics employed by insurance companies to avoid liability. The
petitioners' interpretation would give rise to the incongruous situation where the beneficiaries of an insured who
dies right after taking out and paying for a life insurance policy, would be allowed to collect on the policy even if
the insured fraudulently concealed material facts.
The petitioners argue that no evidence was presented to show that the medical terms were explained in a
layman's language to the insured. They state that the insurer should have presented its two medical field
examiners as witnesses. Moreover, the petitioners allege that the policy intends that the medical examination
must be conducted before its issuance otherwise the insurer "waives whatever imperfection by ratification."
We agree with the Court of Appeals which ruled:
On the other hand, petitioners argue that no evidence was presented by respondent
company to show that the questions appearing in Part II of the application for insurance were
asked, explained to and understood by the deceased so as to prove concealment on his
part. The same is not well taken. The deceased, by affixing his signature on the application
form, affirmed the correctness of all the entries and answers appearing therein. It is but to
be expected that he, a businessman, would not have affixed his signature on the application
form unless he clearly understood its significance. For, the presumption is that a person
intends the ordinary consequence of his voluntary act and takes ordinary care of his
concerns. [Sec. 5(c) and (d), Rule 131, Rules of Court].
The evidence for respondent company shows that on September 19,1972, the deceased
was examined by Dr. Victoriano Lim and was found to be diabetic and hypertensive; that by
January, 1973, the deceased was complaining of progressive weight loss and abdominal
pain and was diagnosed to be suffering from hepatoma, (t.s.n. August 23, 1976, pp. 8-10;
Exhibit 2). Another physician, Dr. Wenceslao Vitug, testified that the deceased came to see
him on December 14, 1973 for consolation and claimed to have been diabetic for five years.
(t.s.n., Aug. 23,1976, p. 5; Exhibit 6) Because of the concealment made by the deceased of
his consultations and treatments for hypertension, diabetes and liver disorders, respondent
company was thus misled into accepting the risk and approving his application as medically
standard (Exhibit 5- C) and dispensing with further medical investigation and examination
(Exhibit 5-A). For as long as no adverse medical history is revealed in the application form,
an applicant for insurance is presumed to be healthy and physically fit and no further medical
investigation or examination is conducted by respondent company. (t.s.n., April 8,1976, pp.
6-8). (Rollo, pp. 96-98)
There is no strong showing that we should apply the "fine print" or "contract of adhesion" rule in this case.
(Sweet Lines, Inc. v. Teves, 83 SCRA 361 [1978]). The petitioners cite:

It is a matter of common knowledge that large amounts of money are collected from ignorant
persons by companies and associations which adopt high sounding titles and print the
amount of benefits they agree to pay in large black-faced type, following such undertakings
by fine print conditions which destroy the substance of the promise. All provisions,
conditions, or exceptions which in any way tend to work a forfeiture of the policy should be
construed most strongly against those for whose benefit they are inserted, and most
favorably toward those against whom they are meant to operate. (Trinidad v. Orient
Protective Assurance Assn., 67 Phil. 184)

There is no showing that the questions in the application form for insurance regarding the insured's medical
history are in smaller print than the rest of the printed form or that they are designed in such a way as to conceal
from the applicant their importance. If a warning in bold red letters or a boxed warning similar to that required
for cigarette advertisements by the Surgeon General of the United States is necessary, that is for Congress or
the Insurance Commission to provide as protection against high pressure insurance salesmanship. We are
limited in this petition to ascertaining whether or not the respondent Court of Appeals committed reversible error.
It is the petitioners' burden to show that the factual findings of the respondent court are not based on substantial
evidence or that its conclusions are contrary to applicable law and jurisprudence. They have failed to discharge
that burden.

WHEREFORE, the petition is hereby DENIED for lack of merit. The questioned decision of the Court of Appeals
is AFFIRMED.

SO ORDERED.
G.R. No. L-10329 December 24, 1915
ARISTON ESTRADA, plaintiff-appellant,
vs.
CIRILA T. REYES, defendant-appellee.
Ariston Estrada in his own behalf.
Gilbert, Haussermann, Cohn and Fisher for appellee.
TORRES, J.:
This case has been brought to this court on bill of exceptions by virtue of an appeal filed by the plaintiff, Ariston
Estrada, from the judgment of the 20th of July, 1914, by which Cirila T. Reyes was absolved from the complaint
and, on a cross-complaint, the said plaintiff was ordered to executed in favor of the said defendant Reyes a
document transferring his share acquired from Luisa del Rosario, for the sum of P166.66. No special finding
was made as to costs.
The plaintiff in his complaint of the 31st of October 1913, prayed that a final judgment be rendered declaring
him to have the right to be subrogated in place of the defendant Reyes in the sale made by Juan N. Aragon and
Agustin del Rosario of their respective shares in the property referred to in his complaint, after payment to the
defendant of the sum of P399.99, and that the said defendant be ordered, after said amount was paid, to execute
the corresponding instrument of transfer to the plaintiff of all interest and share which she had acquired in the
said property from the said Juan N. Aragon and Agustin del Rosario, with the costs of the proceedings. Plaintiff
alleged that he is owner of a sixth part, together with Juan N. Aragon and Agustin del Rosario, Jose Pereyra,
Remedios Pereyra, Ramon Pereyra, and Carmen Pereyra, of certain land owned in common, situated in Calle
Real, interior, in the district of Malate, the extent and boundaries whereof appear in the plan made for the made
for the purpose; that the ownership and dominion of the cotenants are evidenced by the certificate of title No.
2846, appearing at page 343, volume 11, in the property registry of Manila; that on the 29th of October, 1913,
Juan N. Aragon and Agustin del Rosario sold and transferred to the defendant, Cirila T. Reyes, their respective
interests and share in the said property, the first receiving the sum of P266.66 ad the second P133.33, and for
that purpose they executed a deed of transfer before a notary public; that on the 30th of October, 1913, the
plaintiff, as cotenant with the said vendors, Aragon and del Rosario, availing himself of his rights under article
1522 of the Civil Code, offered to redeem or repurchase from the defendant all the interest and share of the
latter which she had acquired in the said real property for the same amount which she had paid to the said two
vendors; this petition the defendant refused without sufficient reasons, inasmuch as the plaintiff has the right to
recover from the defendant the shares referred to and is ready to pay the price paid fro the interest and share
of the vendors in the said property.
Counsel for the defendant in his amended answer made a general and specific denial of each and all the
allegations of those which were admitted, and as a special defense and by way of a cross-complaint alleged:
that on the 6th of March, 1907, Alberto Pereyra, Juan N. Aragon, Longinos M. Javier and Agustin del Rosario
executed and signed a contract in favor of Manuel Calvo y Perez, undertaking to sell to him, after the securing
of a Torres title, the property in question for the sum of P800, and he attached a copy of said contract, Exhibit
A, as an integral part of his cross-complaint; that after the execution of the said contract, Exhibit A, before the
Torrens title was secured, the purchaser, Manuel Calvo, died in this city of Manila; that the defendant was
appointed administratrix of the estate of the deceased; that on the 15th of May, 1911, the register of deeds, by
virtue of a decree of the Court of Land Registration, issued certificate of title No. 2000 in the name of Juan N.
Aragon as co-tenant of one-third part, pro indiviso, of Luisa del Rosario of a sixth part, of Agustin del Rosario of
another sixth part, and of Jose, Remedios, Ramon, Inocencio and Carmen, all surnamed Pereyra, as cotenants
of a third partpro indiviso of the said property; that on the 25th of May, 1911, the defendant, as administratrix,
wrote the letter, a copy of which, Exhibit B, is attached to his cross-complaint as an integral part thereof, to each
and all of the subscribers to the contract of the 6th of March, 1907, which set out the purchase of the land
agreed on with Manuel Calvo, according to the instrument Exhibit A; that in view of the refusal of the parties to
said instrument to effect the sale, the defendant, on the 6th of October, commenced proceedings against the
said parties to secure their compliance with the terms thereof, that is to say, to make the sale of the land in
question to the defendant; that the plaintiff Estrada appeared in behalf of the said Aragon, Rosario, Javier, and
Pereyra; that in the course of the proceedings it was discovered that Longinos Javier was not a co-tenant of the
land, but that his wife, Luisa del Rosario, was, and that she had taken no part in the said contract; that the
defendant Pereyra who signed the contract Exhibit A, owned no share whatever in the land and for this reason
was sentenced to the payment of damages; of which, Exhibit C, is attached as an integral part of his cross-
complaint; that by this judgment Juan N. Aragon and Agustin del Rosario were ordered to make the respective
transfers of their shares in the property to the defendant; that on the 18th of November the plaintiff Estrada, in
representation of the defendants, appealed to this court, and this court in a decision rendered o the 26th of
August, 1913, affirmed the judgment of the lower court in all its parts; that notwithstanding these facts and in
spite of the fact that the plaintiff Estrada was aware of the existence of the said contract and that he knew of
the decision of the Court of First Instance, on the 20th of March, 1912, he acquired from Luisa del Rosario the
sixth part which she owned in the said property in litigation for the sum of P166.66; that on April 13, 1912, the
defendant widow of the deceased Calvo in an order issued in the intestate proceedings was declared to be the
heir of all the property left by the latter at his death; that in accordance with the decision of the court, Juan N.
Aragon and Agustin del Rosario, on October 29, 1913, executed deeds of transfer or sale of their respective
shares of the property in question in favor of the defendant, the latter not being aware of the transfer made to
the plaintiff by one of the cotenants of the property; for this reason, when, on the 30th of October, 1913, she
was advised of said transfer of the sixth part of the property to Estrada, the plaintiff, on the same date the
defendant sought to exercise the right granted her by the said article 1522 of the Civil Code and to that effect
she offered the same amount of P166.66 to the plaintiff Estrada, for the sixth part of the property which he had
acquired; but Estrada refused to accept the money, for which reason she prayed that he be ordered to execute
the deed of transfer in favor of the defendant of all his right, title, interest and share in the sixth part of the
said pro indiviso property, payment of the said amount as the purchase price first being made, and that the
plaintiff be ordered to pay the costs of the suit.
After a hearing of the case and a consideration of the evidence adduced by both parties, the court issued the
order above referred to. The plaintiff appealed therefrom and prayed for a new trial; his motion being overruled,
he excepted and filed a bill of exceptions, which was approved and forwaded to the clerk of this court.
Each of the contending parties claims to exercise the legal right of redemption established by article 1522 of
the Civil Code, subrogating the one for the other and vice versa in the ownership of that part of the land which
each one respectively had bought from its original owners.
In view of these conflicting claims, the question to be decided are: Does either of the two parties have a right to
avail himself of the redemption referred to in the said article of the Code against the other with relation to that
part of the property which he had acquired and vice versa? Which of the two contending parties is cotenant and
which is the third party, and under either of these concepts which of them has the better right to avail himself of
the said right of redemption? The law itself resolves these questions in a decisive manner.
Article 1522 of the Civil Code says:itc-a1f
A coowner of a thing held in common may exercise the redemption in case the shares of all the other
coowners, or of any of them, are sold to a third party.
When two or more coowners wish to exercise the redemption, they shall only do so pro rata with
regard to the share they have in the thing owned in common.
As is seen by the text of the foregoing article the right of redemption lies in all cotenants of the thing held in
common. The law concedes to all the use of the right of redemption in equal degree whenever they exercise it
within the period indicated for the purpose, and on the particular condition that the alienation of the property, or
of a part of it, has been made to a third party who is not a cotenant.

The privilege granted by the said article of the Code to the cotenant of the thing held in common in order to
facilitate and provide a method for terminating the tenancy in common and to establish the dominion in one sole
owner can in no manner be exercised against another cotenant of the same property to whom the law allows
the same privilege; it must be exercise against the third person.

If by reason of Ariston Estrada having bought a one-sixth part of the property from Luisa del Rosario and Cirila
T. Reyes, a one-third part from Juan N. Aragon and another sixth part of said property from Agustin del Rosario
each may be considered as cotenants as between themselves and in relation to the other persons surnamed
Pereyra, then neither Estrada nor Reyes had the right of redemption against the other, because neither of them
is a third party with relation to the other.

The fact that the instrument of purchase made by Estrada on the 20th of March, 1912, was executed a long
time prior to that effected on the 29th of October, 1912, by Cirila T. Reyes, does not give the former a better
right than the latter, when we keep in mind the date of October 11, 1911, on which Juan N. Aragon and Agustin
del Rosario were ordered by the court to execute the deed of sale in favor of said Reyes an order affirmed
by this Court on the 26th of August, 1913, and that on the same date, October 30, 1913, they mutually called
upon each other to have Estrada subrogated in place of Reyes in that portion of the property which the latter
had purchased, and vice versa, a claim which is repeated in these proceedings in the complaint of Estrada and
in Reyes' cross-complaint.

If the right of redemption had been duly exercised by any of the original owners, then both Estrada and Reyes
would perhaps be considered as third parties to the purchases effected, and on the grounds and as such,
neither is entitled to exercise the right of redemption against the other, for the reason that this right lies in the
cotenant of the thing held in common, and in nobody else, to redeem from a third party that part of the property
alienated by another cotenant in favor of such third party.

From all aspects then it is clear that none of the parties in these proceedings is entitled to exercise the right of
redemption with relation to the respective portions of the property which they acquired.1awphil.net

For the foregoing reasons the judgment of the lower court is reversed and the complaint and cross-complaint
filed by both parties are dismissed, without special finding as to the costs in both instances. So ordered.

Arellano, C.J., Johnson and Araullo, JJ., concur.

G.R. No. 78178 April 15, 1988
DELIA BAILON-CASILAO, LUZ PAULINO-ANG, EMMA PAULINO-YBANEZ, NILDA PAULINO-
TOLENTINO, and SABINA BAILON, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and CELESTINO AFABLE, respondents.
Veronico E. Rubio for petitioners.
Mario G. Fortes for private-respondent.
CORTES, J.:
The fate of petitioners' claim over a parcel of land rests ultimately on a determination of whether or not said
petitioners are chargeable with such laches as may effectively bar their present action.
The petitioners herein filed a case for recovery of property and damages with notice of lis pendens on March
13, 1981 against the defendant and herein private respondent, Celestino Afable. The parcel of land involved in
this case, with an area of 48,849 square meters, is covered by Original Certificate of Title No. 1771 issued on
June 12, 1931, in the names of Rosalia, Gaudencio, Sabina Bernabe, Nenita and Delia, all surnamed Bailon,
as co-owners, each with a 1/6 share. Gaudencio and Nenita are now dead, the latter being represented in this
case by her children. Luz, Emma and Nilda. Bernabe went to China in 1931 and had not been heard from since
then [Decision of the Court of Appeals, Rollo, p. 39].
It appears that on August 23, 1948, Rosalia Bailon and Gaudencio Bailon sold a portion of the said land
consisting of 16,283 square meters to Donato Delgado. On May 13, 1949, Rosalia Bailon alone sold the
remainder of the land consisting of 32,566 square meters to Ponciana V. Aresgado de Lanuza. On the same
date, Lanuza acquired from Delgado the 16,283 square meters of land which the latter had earlier acquired
from Rosalia and Gaudencio. On December 3, 1975, John Lanuza, acting under a special power of attorney
given by his wife, Ponciana V. Aresgado de Lanuza, sold the two parcels of land to Celestino Afable, Sr.
In all these transfers, it was stated in the deeds of sale that the land was not registered under the provisions of
Act No. 496 when the fact is that it is. It appears that said land had been successively declared for taxation first,
in the name of Ciriaca Dellamas, mother of the registered co-owners, then in the name of Rosalia Bailon in
1924, then in that of Donato Delgado in 1936, then in Ponciana de Lanuza's name in 1962 and finally in the
name of Celestino Afable, Sr. in 1983.
In his answer to the complaint filed by the herein petitioners, Afable claimed that he had acquired the land in
question through prescription and contended that the petitioners were guilty of laches.He later filed a third-party
complaint against Rosalia Bailon for damages allegedly suffered as a result of the sale to him of the land.
After trial, the lower court rendered a decision:
1. Finding and declaring Celestino Afable, a co-owner of the land described in paragraph III
of the complaint having validly bought the two-sixth (2/6) respective undivided shares of
Rosalia Bailon and Gaudencio Bailon;
2. Finding and declaring the following as pro-indiviso co-owners, having 1/6 share each, of
the property described in paragraph III of the complaint, to wit:
a. Sabina Bailon
b. Bernabe Bailon
c. Heirs of Nenita Bailon-Paulino
d. Delia Bailon-Casilao;
3. Ordering the segregation of the undivided interests in the property in order to terminate
co-ownership to be conducted by any Geodetic Engineer selected by the parties to delineate
the specific part of each of the co-owners.
4. Ordering the defendant to restore the possession of the plaintiffs respective shares as
well as all attributes of absolute dominion;
5. Ordering the defendant to pay the following:
a. P5,000.00 as damages;
b. P2,000.00 as attorney's fees and;
c. to pay the costs.
[Decision of the Trial Court, Rollo, p. 37-38].
On appeal, the respondent Court of Appeals affirmed the decision of the lower court insofar as it held that
prescription does not he against plaintiffs-appellees because they are co-owners of the original vendors.
However, the appellate court declared that, although registered property cannot be lost by prescription,
nevertheless, an action to recover it may be barred by laches, citing the ruling in Mejia de Lucaz v.
Gamponia[100 Phil. 277 (1956)]. Accordingly, it held the petitioners guilty of laches and dismissed their
complaint. Hence, this petition for review on certiorari of the decision of the Court of Appeals.
The principal issue to be resolved in this case concerns the applicability of the equitable doctrine of laches.
Initially though, a determination of the effect of a sale by one or more co-owners of the entire property held in
common without the consent of all the co-owners and of the appropriate remedy of the aggrieved co-owners is
required.
The rights of a co-owner of a certain property are clearly specified in Article 493 of the Civil Code.Thus:
Art. 493. Each co-owner shall have the full ownership of his part and of the acts and benefits
pertaining thereto, and he may therefore alienate assign or mortgage it and even substitute
another person in its enjoyment, except when personal rights are involved. But the effect of
the alienation or mortgage, with respect to the co-owners, shall be limited to the portion
which may be allotted to him in the division upon the termination of the co-
ownership. [Emphasis supplied.]
As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the sale will affect
only his own share but not those of the other co-owners who did not consent to the sale [Punsalan v. Boon Liat
44 Phil. 320 (1923)]. This is because under the aforementioned codal provision, the sale or other disposition
affects only his undivided share and the transferee gets only what would correspond to his grantor in the partition
of the thing owned in common.[Ramirez v. Bautista, 14 Phil. 528 (1909)]. Consequently, by virtue of the sales
made by Rosalia and Gaudencio Bailon which are valid with respect to their proportionate shares, and the
subsequent transfers which culminated in the sale to private respondent Celestino Afable, the said Afable
thereby became a co-owner of the disputed parcel of land as correctly held by the lower court since the sales
produced the effect of substituting the buyers in the enjoyment thereof [Mainit v. Bandoy, 14 Phil. 730 (1910)].
From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided share, a sale of the
entire property by one co-owner without the consent of the other co-owners is not null and void. However, only
the rights of the co-owner-seller are transferred, thereby making the buyer a co-owner of the property.
The proper action in cases like this is not for the nullification of the sale or for the recovery of possession of the
thing owned in common from the third person who substituted the co-owner or co-owners who alienated their
shares, but the DIVISION of the common property as if it continued to remain in the possession of the co-owners
who possessed and administered it [Mainit v. Bandoy, supra.]
Thus, it is now settled that the appropriate recourse of co-owners in cases where their consent were not secured
in a sale of the entire property as well as in a sale merely of the undivided shares of some of the co-owners is
an action. for PARTITION under Rule 69 of the Revised Rules of Court. Neither recovery of possession nor
restitution can be granted since the defendant buyers are legitimate proprietors and possessors in joint
ownership of the common property claimed [Ramirez v. Bautista, supra].
As to the action for petition, neither prescription nor laches can be invoked.
In the light of the attendant circumstances, defendant-appellee's defense of prescription is a vain proposition.
Pursuant to Article 494 of the Civil Code, '(n)o co-owner shall be obliged to remain in the co-ownership. Such
co-owner may demand at anytime the partition of the thing owned in common, insofar as his share is concerned.'
[Emphasis supplied.] In Budiong v. Bondoc [G.R. No. L-27702, September 9, 1977, 79 SCRA 241, this Court
has interpreted said provision of law to mean that the action for partition is imprescriptible or cannot be barred
by prescription. For Article 494 of the Civil Code explicitly declares: "No prescription shall lie in favor of a co-
owner or co- heir so long as he expressly or impliedly recognizes the co-ownership."
Furthermore, the disputed parcel of land being registered under the Torrens System, the express provision of
Act No. 496 that '(n)o title to registered land in derogation to that of the registered owner shall be acquired by
prescription or adverse possession' is squarely applicable. Consequently, prescription will not lie in favor of
Afable as against the petitioners who remain the registered owners of the disputed parcel of land.
It is argued however, that as to the petitioners Emma, Luz and Nelda who are not the registered co-owners but
merely represented their deceased mother, the late Nenita Bailon, prescription lies.Respondents bolster their
argument by citing a decision of this Court in Pasion v. Pasion [G.R.No. L-15757, May 31, 1961, 2 SCRA 486,
489] holding that "the imprescriptibility of a Torrens title can only be invoked by the person in whose name the
title is registered" and that 'one who is not the registered owner of a parcel of land cannot invoke
imprescriptibility of action to claim the same.'
Reliance on the aforesaid Pasion case is futile. The ruling therein applies only against transferees other than
direct issues or heirs or to complete strangers. The rational is clear:
If prescription is unavailing against the registered owner, it must be equally unavailing
against the latter's hereditary successors, because they merely step into the shoes of the
decedent by operation of law (New Civil Code, Article 777; Old Civil Code, Article 657), the
title or right undergoing no change by its transmission mortis causa [Atus, et al., v. Nunez,
et al., 97 Phil. 762, 764].
The latest pronouncement of this Court in Umbay v. Alecha [G. R. No. 67284, March 18, 1985, 135 SCRA 427,
429], which was promulgated subsequent to the Pasion case reiterated the Atus doctrine. Thus:
Prescription is unavailing not only against the registered owner but also against his
hereditary successors, because they merely step into the shoes of the decedent by operation
of law and are merely the continuation of the personality of their predecessor-in-interest.
[Barcelona v. Barcelona, 100 Phil. 251, 257].
Laches is likewise unavailing as a shield against the action of herein petitioners.
Well-stated in this jurisdiction are the four basic elements of laches, namely: (1) conduct on the part of the
defendant or of one under whom he claims, giving rise to the situation of which complaint is made and for which
the complainant seeks a remedy; (2) delay in asserting the corporations complainant's rights, the complainant
having had knowledge or notice of the defendant's conduct and having been afforded an opportunity to institute
suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on
which he bases his suit; and, (4) injury or prejudice to the defendant in the event relief is accorded to the
complainant, or the suit is not held to be barred [Go China Gun, et al. v. Co Cho et al., 96 Phil. 622 (1955)].
While the first and last elements are present in this case, the second and third elements are missing.
The second element speaks of delay in asserting the complainant's rights. However, the mere fact of delay is
insufficient to constitute, laches. It is required that (1) complainant must have had knowledge of the conduct of
defendant or of one under whom he claims and (2) he must have been afforded an opportunity to institute suit.
This court has pointed out that laches is not concerned with the mere lapse of time. Thus:
Laches has been defined as the failure or neglect, for an unreasonable 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. Tijam, et
al., v. Sibonghanoy, G.R. No. L-21450, April 25, 1968, 23 SCRA 29,35; Tendo v. Zamacoma,
G.R. No. L-63048, August 7, 1985, 138 SCRA 78, 90].
The doctrine of "laches" or of "stale demands" is based upon grounds of public policy which
requires for the peace of society, the discouragement of stale claims and unlike the statute
of limitations, is not a mere question of time but is principally a question of inequity or
unfairness of permitting a right or claim to be enforced or asserted," [Tijam v.
Sibonghanoy, supra, p. 35]. [Emphasis supplied.]
It must be noted that while there was delay in asserting petitioners' rights, such delay was not attended with any
knowledge of the sale nor with any opportunity to bring suit. In the first place, petitioners had no notice of the
sale made by their eldest sister. It is undisputed that the petitioner co-owners had entrusted the care and
management of the parcel of land to Rosalia Bailon who was the oldest among them [TSN, July 27, 1983, p.
14]. In fact, Nicanor Lee, a son of Rosalia, who was presented as a witness by the plaintiffs-petitioners, testified
on cross-examination that his mother was only the administrator of the land as she is the eldest and her brothers
and sisters were away [TSN, October 5, 1983, p. 15]. Indeed, when Delia Bailon-Casilao left Sorsogon in 1942
after she got married, it was only in 1983 that she returned. Sabina on the other hand, is said to be living in
Zamboanga while Bernabe who left for China in 1931 has not been heard from since then. Consequently, when
Rosalia, from whom the private respondent derived his title, made the disputed sales covering the entire
property, the herein petitioners were unaware thereof.
In the second place, they were not afforded an opportunity to bring suit inasmuch as until 1981, they were kept
in the dark about the transactions entered into by their sister. It was only when Delia Bailon-Casilao returned to
Sorsogon in 1981 that she found out about the sales and immediately, she and her co-petitioners filed the
present action for recovery of property. The appellate court thus erred in holding that 'the petitioners did nothing
to show interest in the land." For the administration of the parcel of land was entrusted to the oldest co-owner
who was then in possession thereof precisely because the other co-owners cannot attend to such a task as
they reside outside of Sorsogon where the land is situated. Her co-owners also allowed her to appropriate the
entire produce for herself because it was not even enough for her daily consumption [TSN, October 5, 1983,
pp. 17-18]. And since petitioner was the one receiving the produce, it is but natural that she was the one to take
charge of paying the real estate taxes. Now, if knowledge of the sale by Rosalia was conveyed to the petitioners
only later, they cannot be faulted for the acts of their co-owner who failed to live up to the trust and confidence
expected of her. In view of the lack of knowledge by the petitioners of the conduct of Rosalia in selling the land
without their consent in 1975 and the absence of any opportunity to institute the proper action until 1981, laches
may not be asserted against the petitioners.
The third element of laches is likewise absent. There was no lack of knowledge or notice on the part of the
defendant that the complainants would assert the right on which they base the suit. On the contrary, private
respondent is guilty of bad faith in purchasing the property as he knew that the property was co-owned by six
persons and yet, there were only two signatories to the deeds of sale and no special authorization to self was
granted to the two sellers by the other co-owners.
Even as the land here was misrepresented in the deeds of sale as "unregistered," the truth was that Afable
already had notice that the land was titled in the name of six persons by virtue of the Certificate of Title which
was already in his possession even before the sale. Such fact is apparent from his testimony before the court a
quo:
COURT:
Q: From whom did you get the certificate of Title?
A: When it was mortgaged by Ponciana Aresgado.
Q: It was mortgaged to you before you bought it?
A: Yes, Your Honor. (TSN, March 5, 1984, p. 12) When cross-examined,
he stated:
Q: Mr. Witness, the original Certificate of Title was given to you in the
year 1974, was it not?
A: 1975.
Q: In 1975, you already discovered that the title was in the name of
several persons, is it not?
A: Yes, sir.
Q: When you discovered that it is in the name of several persons, you
filed a case in court for authority to cancel the title to be transferred in
your name, is it not?
A: Yes, sir.
Q: And that was denied by the Court of First Instance of Sorsogon
because there was ordinary one signatory to the deed of sale instead of
six, was it not?
A: Not one but two signatories.
[Decision of the Regional Trial Court of Sorsogon, Rollo, p. 35]
Such actual knowledge of the existence of other co-owners in whose names the lot subject of the sale was
registered should have prompted a searching inquiry by Afable considering the well- known rule in this
jurisdiction that:
... a person dealing with a registered land has a right to rely upon the face of the Torrens
certificate of title and to dispense with the need of inquiring further, except when the party
concerned has actual knowledge of facts and circumstances that would impel a reasonably
cautions man to make such inquiry. [Gonzales v. IAC and Rural Bank of Pavia, Inc., G.R.
No. 69622, January 29, 1988).
Moreover, the undisputed fact is that petitioners are relatives of his wife. As a genuine gesture of good faith, he
should have contacted the petitioners who were still listed as co-owners in the certificate of title which was
already in his possession even before the sale. In failing to exercise even a minimum degree of ordinary
prudence required by the situation, he is deemed to have bought the lot at his own risk. Hence any prejudice or
injury that may be occasioned to him by such sale must be borne by him.
Indeed, aware of the flaws impairing his title, Afable went to the herein petitioner Delia Bailon-Casilao, asking
the latter to sign a document obviously to cure the flaw [TSN, July 27, 1983, p.6]. Later, he even filed a petition
in the Court of First Instance to register the title in his name which was denied as aforesaid.
It may be gleaned from the foregoing examination of the facts that Celestino Afable is not a buyer in good faith.
Laches being an equitable defense, he who invokes it must come to the court with clean hands.
WHEREFORE, the petition for certiorari is hereby GRANTED, the challenged decision of the Court of Appeals
is SET ASIDE, and the decision of the trial court is REINSTATED.
SO ORDERED.
G.R. No. 139540 June 29, 2005
WHEELERS CLUB INTERNATIONAL, INC., petitioner,
vs.
JOVITO BONIFACIO, JR., respondent.
DECISION
CARPIO, J.:
The Case
1 2
This petition for review assails the Decision of the Court of Appeals dated 30 July 1999 in CA-G.R. SP No.
52068. The Court of Appeals dismissed the petition of Wheelers Club International, Inc. ("Wheelers")
questioning the Decision3 dated 11 March 1999 of the Regional Trial Court of Mandaluyong City, Branch 214
("RTC"). The RTC Decision reversed on appeal the Decision4 dated 5 June 1998 of the Metropolitan Trial Court
of Mandaluyong City, Branch 59 ("MTC"), which dismissed the complaint for unlawful detainer of respondent
Jovito Bonifacio, Jr. ("Jovito") against Wheelers.
The Antecedents
Rosario, Romeo, Virgilio, Generoso, Andres, Jovito, Jose (all surnamed Bonifacio), Zenaida B. Lafiguera,
Corazon B. Calub, and Ma. Cristina B. De Guzman are the registered co-owners of a parcel of land with
improvement5 situated at No. 83 EDSA, Mandaluyong City and covered by Transfer Certificate of Title No. 5350
("Property").6
The co-owners comprised the Board of Directors of J & R Bonifacio Development Corporation ("JRBDC"). 7
On 5 May 1994, Bonifacio Development Associates, Inc. ("BDAI"), represented by Jaime C. Bonifacio, Sr.
("Jaime") as President and Chairman of its Board of Directors, entered into a Contract of Lease 8 with Wheelers
for a term of five years from 1 June 1994 to 31 May 1999. Under the Contract of Lease, Wheelers undertook to
pay BDAI a monthly rental of P108,750 for the lease of the Property.
On 31 May 1994, JRBDC, represented by the co-owners as members of the Board of Directors and lessors of
the Property, entered into a Lease Development Agreement 9 with BDAI. Under the Lease Development
Agreement, BDAI was authorized to renovate, manage, develop, and sublease the Property. The term of the
agreement was also for five years from 31 May 1994 to 31 May 1999. The monthly rental was based on the
actual income derived from the lease, management and development of the Property to be shared by the co-
owners and BDAI.10
On the same day, the co-owners executed a General Power of Attorney11 ("power of attorney") in favor of Jaime
granting him the authority to administer the Property, renovate the building, introduce improvements and lease
the Property to any person.
On 16 June 1996, the co-owners demanded that BDAI submit accounting records of all income from the
Property.
BDAI, in turn, demanded that the co-owners furnish it with receipts and records of cash and check advances
made by BDAI to the co-owners.
On 18 August 1996, the co-owners, as directors of JRBDC, approved a Resolution12 terminating the authority
of "Jaime C. Bonifacio" to manage and administer the Property for BDAIs failure to submit an accounting of the
income from the Property.
On 20 August 1996, Rosario Bonifacio ("Rosario"), as President and Chairman of the Board of JRBDC, wrote
Jaime, as President and Chairman of BDAI, a letter terminating the "agreement with JRBDC" for non-payment
of whatever was due to JRBDC under the agreement.
On 26 January 1997, the co-owners as members of the Board of Directors of JRBDC approved a
Resolution13appointing Jovito as the new administrator of the Property.
The following day, Rosario wrote a letter informing Wheelers about the appointment of Jovito as the new
administrator of the Property and the termination of Jaimes authority to manage the Property.
On 11 February 1997, BDAI, through Jaime, wrote a letter14 to Rosario insisting that there was no valid reason
for the termination of BDAI or Jaimes management of the Property. BDAI claimed that Rosarios failure to
furnish receipts hindered its submission of complete accounting records.
On 4 March 1997, Jovito wrote to Wheelers claiming that the co-owners did not authorize the Contract of Lease
between BDAI and Wheelers. Jovito gave Wheelers ten days to vacate the Property.15
Meanwhile, Wheelers continued to pay BDAI the monthly rentals from February to September 1997.
On 9 October 1997, Jovito and the other co-owners, through counsel, sent a letter to Wheelers demanding
payment of rentals in arrears from February to October 1997. The letter also demanded that Wheelers vacate
the Property within five days from receipt of the letter. 16
On 21 October 1997, Jovito, as a co-owner of the Property, filed with the MTC a complaint for unlawful detainer
against Wheelers, docketed as Civil Case No. 15760. 17
Jovito claimed that Wheelers refused to pay him, as the new administrator of the Property, the rentals due from
February to October 1997.
In its Answer dated 19 November 1997,18 Wheelers countered that it paid to BDAI the rentals from February to
September 1997. Wheelers, however, held in abeyance payment of the rental for October 1997 because of
Jovitos demand letter and Wheelers plan to consign the rental in Court.
The MTC ruled that while JRBDC does not own the Property, the co-owners who comprised JRBDCs Board of
Directors signed the Lease Development Agreement signifying the co-owners consent to the act of JRBDC.
The MTC found that since the signing of the Lease Development Agreement, none of the co-owners questioned
the execution of the agreement. The co-owners did not adduce any evidence to show the nullity of the Lease
Development Agreement.
The MTC further ruled that one who is not a party to a contract has no personality to assail the validity of such
contract, following Jovitos claim that he did not consent to the Lease Development Agreement.
In its Joint Decision dated 5 June 1998, the MTC disposed of the cases as follows:
WHEREFORE, these two ejectment cases for forcible entry and unlawful detainer against herein defendants
are hereby dismissed for lack of cause of action.
SO ORDERED.19
Respondent appealed to the RTC which reversed the MTC decision.
The RTC held that upon the termination of Jaimes management of the Property, Wheelers could not simply
rely on its lease contract with BDAI and deny Jovito and the other co-owners their right to collect rentals. The
RTC ruled that Wheelers paid the rentals at its own risk since it knew Jaime no longer had authority to receive
the rentals. Citing Araas v. Tutaan,20 the RTC held that payment to one without authority to receive the
payment is void.
The dispositive portion of the RTC Joint Decision dated 11 March 1999 reads:
FOR ALL THE FOREGOING, judgment is rendered:
xxx
II. The assailed decision of Metropolitan Trial Court of Mandaluyong City, Branch 59 in SCA MC 98-069 is
hereby REVERSED and SET ASIDE, and a new one entered:
a. Ordering defendants-appellees Wheelers Club International, Inc. and all persons claiming rights under them
to:
1. vacate the ground and second floors of the premises located at Bonifacio Sr. Building, No. 83 EDSA,
Mandaluyong City and to surrender possession of the same to plaintiff-appellant;
2. pay plaintiff-appellant the amount of P103,312.50 a month computed from February 1997 up to the
present plus the agreed yearly increment until the premises shall have been finally vacated;
3. pay plaintiff-appellant the amount of P10,000.00 as and by way of attorneys fees;
4. pay the cost of suit;
5. [d]ismissing the counterclaims.
SO ORDERED.21
Wheelers filed a petition for review with the Court of Appeals on 30 March 1999. The Court of Appeals dismissed
the petition, thus:
IN THE LIGHT OF ALL THE FOREGOING, the Petition is DENIED due course and is hereby DISMISSED. With
costs against the Petitioner.
SO ORDERED.22
Meanwhile, Jovito filed a motion for execution23 of the RTC decision, which the RTC granted in its Order dated
23 April 1999.24
Hence, this petition.
The Court of Appeals Ruling
The Court of Appeals found that Wheelers signed the Contract of Lease knowing that BDAI signed such contract
as administrator and developer and not for BDAIs own account. The Court of Appeals stated that Wheelers
knew who the owners of the Property were and BDAI was merely acting as administrator and developer. The
principals under the Contract of Lease were the co-owners of the Property and not BDAI. Therefore, Wheelers
is liable to Jovito and the other co-owners for its obligations under its Contract of Lease with BDAI.
The Court of Appeals also held that "the co-owners had the power to revoke the authority of BDAI to manage
and administer the property."25 The Court of Appeals declared:
x x x Even if the co-owners may have revoked the authority of BDAI in bad faith or in contravention of the "Lease
Development Agreement" or prematurely for that matter, however, the only right of BDAI was to recover
damages from the co-owners and not insist on the authority to continue managing and administering the
property.26
The Court of Appeals found that Wheelers payments were made to BDAI whose authority the co-owners and
JRBDC had already revoked. Hence, Wheelers payments did not bind the co-owners. In effect, Wheelers failed
to pay the rentals from February to October 1997 to Jovito as the rightful representative of the co-owners.
Therefore, Wheelers should be evicted from the Property for non-payment of rentals.
Moreover, Wheelers could no longer stay in the Property because its Contract of Lease with BDAI had already
expired on 31 May 1999 while the Lease Development Agreement between BDAI and JRBDC had expired on
30 May 1999.
The Issue
The core issue in this case is:
WHETHER THE CO-OWNERS HAVE A CAUSE OF ACTION FOR UNLAWFUL DETAINER AGAINST
WHEELERS FOR NON-PAYMENT OF RENTALS AND EXPIRATION OF THE TERM OF THE LEASE
AGREEMENT.
The Courts Ruling
The petition has merit.
In unlawful detainer, the possession of the defendant is inceptively lawful but it becomes illegal because of the
termination of his right to possess the property under his contract with the plaintiff. 27 Hence, by instituting the
unlawful detainer action, Jovito and the other co-owners admit that Wheelers possession of the Property was
lawful at the beginning. In other words, Jovito and the other co-owners recognize the legality of Wheelers
occupation of the Property beginning 1 June 1994 by virtue of the Contract of Lease it had with BDAI. In the
absence of any proof to the contrary, such recognition necessarily debunks Jovitos claim that the co-owners
did not authorize BDAI to lease the Property to Wheelers. This fact likewise negates Jovitos contention that the
Contract of Lease between BDAI and Wheelers is void and inexistent.
The question now is, when did Wheelers possession of the Property become without legal basis to
justify the complaint for unlawful detainer?
In his complaint for unlawful detainer, Jovito claimed that Wheelers disregarded its obligation to pay rentals to
the co-owners from February to October 1997. However, Wheelers obligation to pay the rentals arose from its
Contract of Lease with BDAI. Wheelers did not have a separate lease agreement with Jovito or the other co-
owners. Wheelers continued possession of the Property was by virtue of the Contract of Lease it executed with
BDAI. There is no privity of contract between Wheelers and Jovito or the other co-owners. Since there was
neither a written nor verbal lease agreement between the co-owners and Wheelers, Jovito is mistaken in
claiming that the lease contract between the co-owners and Wheelers is on a month-to-month basis.28
What is clear from the records is that the present case involves a sublease arrangement. In a sublease
arrangement, there are two distinct leases: the principal lease and the sublease. These two juridical
relationships co-exist and are intimately related to each other but nonetheless distinct from one another. The
lessees rights and obligations vis--vis the lessor are not passed on to the sublessee.
A careful review of the Lease Development Agreement between JRBDC and BDAI reveals that the co-owners
are the actual lessors of the Property, not JRBDC. 29 In addition, the co-owners are the registered owners of
Property. BDAI, in turn, subleased the Property to Wheelers. Therefore, the co-owners, except only in the
instances specified in the Civil Code, are strangers to the Contract of Lease between BDAI and Wheelers. 30
Since the co-owners are strangers to the Contract of Lease between BDAI and Wheelers, Wheelers has no
right or authority to pay the sublease rentals to the co-owners as lessors since the rentals are payable to BDAI
as lessee-sublessor. Wheelers was, therefore, under no obligation to pay Jovito or the co-owners the rentals.
Moreover, although Article 1652 of the Civil Code31 permits the lessor to proceed against the sublessee for rent
due from the lessee, this is only on a subsidiary liability basis.32 There must be a judgment cancelling the
lessees principal lease contract or ousting the lessee from the premises before the sub-lessee
becomes subsidiarily liable. As this Court explained in Duellome v. Gotico33:
In the case of Sipin, et al. vs. Court of First Instance of Manila, et al., 74 Phil. 649, We have explained that by
virtue of the above provision, [Article 1652 of the Civil Code], "the sublessee, therefore, can invoke no right
superior to that of his sublessor and the moment the latter is duly ousted from the premises the former has
no leg to stand on. The sublessees right if any, is to demand reparation for damages from his sublessor, should
the latter be at fault." And, in another case, We interpreted the same article to mean that "the sublessees can
only assert such right of possession as could have been granted them by their sublessors, their right of
possession depending entirely upon that of the latter." (Madrigal vs. Ang Sam To, et al., 46 O.G. 2173).
(Emphasis supplied)
The sub-lessee is not liable to the lessor under Article 1652 upon mere demand by the lessor on the sub-lessee.
The sub-lessee is primarily liable to his sub-lessor and only a court order can extinguish or modify this primary
liability if the sub-lessor contests the pre-termination of the principal lease by the lessor. In the present case,
there is no judgment cancelling BDAIs Lease Development Contract or ousting BDAI from the Property.
A sub-lessor is not an agent of the lessor.34 Hence, BDAI is not an agent of the co-owners. Even assuming that
BDAI is an agent of the co-owners, BDAI would have an interest in such agency sufficient to deprive the co-
owners the power to revoke the agency at will. Under the Lease Development Agreement, BDAI had the
authority to construct, and BDAI did construct, improvements on the Property at its expense. The Court of
Appeals found that BDAI "was also the developer of the vacant space of the parcel of land for the construction
of permanent improvements thereon at the cost of BDAI."35
As developer of the permanent improvement on the Property, BDAI has an interest in the Property that is the
subject matter of the agency, assuming such agency exists. An agency coupled with interest is not revocable
at the will of the principal. In Sevilla v. Court of Appeals,36 this Court held:
But unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the
intent of the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency
having been created for the mutual interest of the agent and the principal. It appears that Lina Sevilla is a bona
fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover,
she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment
of rentals. She continued the business, using her own name, after Tourist World had stopped further operations.
Her interest, obviously, is not limited to the commissions she earned as a result of her business transactions,
but one that extends to the very subject matter of the power of management delegated to her. It is an
agency that, as we said, cannot be revoked at the pleasure of the principal. x x x.37 (Emphasis supplied)
Thus, the Court of Appeals erred in holding that the co-owners had the right to revoke at will their Lease
Development Agreement with BDAI.
On the other hand, whether Jaime in his personal capacity was an agent of the co-owners is immaterial because
Wheelers entered into the Contract of Lease with BDAI and not with Jaime. There is no showing that BDAI and
Jaime comprise a single entity. The parties in this case confused Jaime with BDAI and erroneously considered
Jaimes acts as those of BDAIs. Following well-settled principles in Corporation Law,38 Jaime and BDAI are
distinct persons. Since Jaime acted as the President of BDAI when the latter entered into the Contract of Lease
with Wheelers, such contract is binding between BDAI and Wheelers. Consequently, the revocation by the co-
owners of Jaimes authority to administer the Property did not automatically cancel or terminate the Contract of
Lease between BDAI and Wheelers.
The Court rejects Jovitos argument that the Lease Development Agreement between the co-owners and BDAI
is void. Jovito maintains that a lease of the Property involves an act of alteration requiring the unanimous
consent of the co-owners pursuant to Article 491 of the Civil Code, which consent is allegedly absent in this
case.39
A lease over the common property without the consent of all the co-owners is not void. Just as a sale of the
whole common property without the consent of the other co-owners affects only the share or interest of the
selling co-owner,40 a lease of the entire property does not affect the interests of the non-consenting co-owners.
Therefore, a lease over the entire Property is valid insofar as the interests of the consenting co-owners are
concerned.41
However, the Court is not denying the co-owners rentals due from the lease of the Property. As owners of the
Property, they are entitled to the fruits or income of the Property. 42 Considering that BDAI undeniably received
the monthly rentals paid by Wheelers,43 the Court deems it proper and equitable that BDAI should pay the co-
owners the rentals and fees due them. In case BDAI refuses to pay the rentals and other fees due them, the
co-owners remedy is against BDAI and not against Wheelers, in the absence of a judgment cancelling the
Lease Development Agreement or ousting BDAI from the premises.
In sum, the Lease Development Agreement between the co-owners and BDAI, and the Contract of Lease
between BDAI and Wheelers, remain valid, in the absence of any judicial declaration of their nullity. Jovito and
the other co-owners cannot merely assume and allege that these agreements are void.
The Contract of Lease between BDAI and Wheelers had a term running from 1 June 1994 to 31 May 1999. This
term is within the five-year period of BDAIs Lease Development Agreement with the co-owners. Jovito filed the
unlawful detainer case against Wheelers on 21 October 1997. Clearly, the Contract of Lease between BDAI
and Wheelers was still valid and subsisting when Jovito filed the unlawful detainer case. Thus, at the time of
filing of the unlawful detainer complaint, Jovito and the other co-owners did not have a cause of action
to eject Wheelers from the Property.

As things stand, BDAI is the sub-lessor of the Property. BDAIs sub-lease agreement with Wheelers is within
the five-year term of BDAIs principal lease with the co-owners. Until the expiration of the five-year term of
BDAIs principal lease, the sub-lease agreement between BDAI and Wheeler remains valid, unless the sub-
lease agreement is judicially annulled in the proper case,44 or unless there is a judgment cancelling BDAIs
principal lease with the co-owners or ousting BDAI from the Property. 45 Moreover, no lease agreement exists
between the co-owners and Wheelers. Therefore, Jovitos claim that the term of the alleged lease agreement
between the co-owners and Wheelers has expired has no legal basis.

WHEREFORE, we GRANT the instant petition. We REVERSE the Decision of the Court of Appeals dated 30
July 1999 in CA-G.R. SP No. 52068 and REINSTATE the Decision dated 5 June 1998 of the Metropolitan Trial
Court of Mandaluyong City, Branch 59, dismissing the complaint for unlawful detainer of respondent Jovito
Bonifacio, Jr. against petitioner Wheelers Club International, Inc.

SO ORDERED.
G.R. No. 152168 December 10, 2004
HEIRS OF THE LATE SPOUSES AURELIO AND ESPERANZA BALITE; Namely, ANTONIO T. BALITE,
FLOR T. BALITE-ZAMAR, VISITACION T. BALITE-DIFUNTORUM, PEDRO T. BALITE, PABLO T. BALITE,
GASPAR T. BALITE, CRISTETA T. BALITE and AURELIO T. BALITE JR., All Represented by GASPAR T.
BALITE,petitioners,
vs.
RODRIGO N. LIM, respondent.
DECISION
PANGANIBAN, J.:
A deed of sale that allegedly states a price lower than the true consideration is nonetheless binding between
the parties and their successors in interest. Furthermore, a deed of sale in which the parties clearly intended to
transfer ownership of the property cannot be presumed to be an equitable mortgage under Article 1602 of the
Civil Code. Finally, an agreement that purports to sell in metes and bounds a specific portion of an unpartitioned
co-owned property is not void; it shall effectively transfer the sellers ideal share in the co-ownership.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the February 11, 2002
Decision2of the Court of Appeals (CA) in CA-GR CV No. 65395. The decretal portion of the Decision reads as
follows:
"IN THE LIGHT OF ALL THE FOREGOING, the Decision of the Court a quo subject of the appeal is
hereby SET ASIDE AND REVERSED and another Decision is hereby rendered as follows:
1. The "Deed of Absolute Sale" (Exhibit "A") is valid only insofar as the pro indiviso share of
Esperanza Balite over the property covered by Original Certificate of Title No. 10824 is concerned;
2. The Register of Deeds is hereby ordered to cancel Transfer Certificate of Title No. 6683 and to
issue another over the entirety of the property covered by Original Certificate of Title No. 10824, upon
the payment of the capital gains tax due, as provided for by law, (based on the purchase price of the
property in the amount of P1,000,000.00), with the following as co-owners, over the property described
therein:
a) Each of the [petitioners] over an undivided portion of 975 square meters;
b) The [respondent], with an undivided portion of 9,751 square meters.
3. The [respondent] is hereby ordered to pay to the [petitioners] the amount of P120,000.00, within a
period of five (5) months from the finality of the Decision of this Court;
4. In the event that the [respondent] refuses or fails to remit the said amount to the [petitioner] within
the period therefor, the rights and obligations of the parties shall be governed by Republic 6552
(Maceda Law)."3
The Facts
The CA summarized the facts in this manner:
"The spouses Aurelio x x x and Esperanza Balite were the owners of a parcel of land, located [at]
Poblacion (Barangay Molave), Catarman, Northern Samar, with an area of seventeen thousand five
hundred fifty-one (17,551) square meters, [and] covered by Original Certificate of Title [OCT] No.
10824. When Aurelio died intestate [in 1985, his wife], Esperanza Balite, and their children, x x x
[petitioners] Antonio Balite, Flor Balite-Zamar, Visitacion Balite-Difuntorum, Pedro Balite, Pablo Balite,
Gaspar Balite, Cristeta (Tita) Balite and Aurelio Balite, Jr., inherited the [subject] property and became
co-owners thereof, with Esperanza x x x inheriting an undivided [share] of [9,751] square meters.
"In the meantime, Esperanza x x x [became] ill and was in dire need of money for her hospital
expenses x x x. She, through her daughter, Cristeta, offered to sell to Rodrigo Lim, [her] undivided
share x x x for the price of P1,000,000.00. x x x Esperanza x x x and Rodrigo x x x agreed that, under
the "Deed of Absolute Sale", to be executed by Esperanza x x x over the property, it will be made to
appear that the purchase price of the property would be P150,000.00, although the actual price agreed
upon by them for the property was P1,000,000.00.
"On April 16, 1996, Esperanza x x x executed a "Deed of Absolute Sale" in favor of Rodrigo N. Lim
over a portion of the property, covered by [OCT] No. 10824, with an area of 10,000 square meters, for
the price of P150,000.00 x x x.
[They] also executed, on the same day, a "Joint Affidavit" under which they declared that the real price
of the property was P1,000,000.00, payable to Esperanza x x x, by installments, as follows:
1. P30,000.00 upon signing today of the document of sale.
2. P170,000.00 payable upon completion of the actual relocation survey of the land sold
by a Geodetic Engineer.
3. P200,000.00 payable on or before May 15, 1996.
4. P200,000.00 payable on or before July 15, 1996.
5. P200,000.00 payable on or before September 15, 1996.
6. P200,000.00 payable on or before December 15, 1996.
"Only Esperanza and two of her children, namely, Antonio x x x and Cristeta x x x, knew about the
said transaction. x x x Geodetic Engineer Bonifacio G. Tasic conducted a subdivision survey of the
property and prepared a "Sketch Plan" showing a portion of the property, identified as Lot 243 with an
area of 10,000 square meters, under the name Rodrigo N. Lim.
"The "Sketch Plan" was signed by Rodrigo x x x and Esperanza. Thereafter, Rodrigo x x x took actual
possession of the property and introduced improvements thereon. He remitted to Esperanza x x x and
Cristeta x x x sums of money in partial payments of the x x x property for which he signed "Receipts".
"Gaspar, Visitacion, Flor, Pedro and Aurelio, Jr. x x x learned of the sale, and on August 21, 1996,
they wrote a letter to the Register of Deeds [RD] of Northern Samar, [saying] that they [were] not x x
x informed of the sale of a portion of the said property by their mother x x x nor did they give their
consent thereto, and requested the [RD] to:
"x x x hold in abeyance any processal or approval of any application for registration of title
of ownership in the name of the buyer of said lot, which has not yet been partitioned judicially
or extrajudicially, until the issue of the legality/validity of the above sale has been cleared."
"On August 24, 1996, Antonio x x x received from Rodrigo x x x, the amount of P30,000.00 in partial
payment of [the] property and signed a "Receipt" for the said amount, declaring therein that "the
remaining balance of P350,000.00 shall personally and directly be released to my mother, Esperanza
Balite, only." However, Rodrigo x x x drew and issued RCBC Check No. 309171, dated August 26,
1996, [payable] to the order of Antonio Balite in the amount of P30,000.00 in partial payment of the
property.
"On October 1, 1996, Esperanza x x x executed a "Special Power of Attorney" appointing her son,
Antonio, to collect and receive, from Rodrigo, the balance of the purchase price of the x x x property
and to sign the appropriate documents therefor.
"On October 23, 1996, Esperanza signed a letter addressed to Rodrigo informing the latter that her
children did not agree to the sale of the property to him and that she was withdrawing all her
commitments until the validity of the sale is finally resolved:
xxx xxx xxx
"On October 31, 1996, Esperanza died intestate and was survived by her aforenamed children.
"[Meanwhile], Rodrigo caused to be published, in the Samar Reporter, on November 14, 21 and 28,
1996, the aforesaid "Deed of Absolute Sale". Earlier, on November 21, 1996, Antonio received the
amount of P10,000.00 from Rodrigo for the payment of the estate tax due from the estate of
Esperanza.
"Also, the capital gains tax, in the amount of P14,506.25, based on the purchase price of P150,000.00
appearing on the "Deed of Absolute Sale", was paid to the Bureau of Internal Revenue which issued
a "Certification" of said payments, on March 5, 1997, authorizing the registration of the "Deed of
Absolute Sale" x x x. However, the [RD] refused to issue a title over the property to and under the
name of Rodrigo unless and until the owners duplicate of OCT No. 10824 was presented to [it].
Rodrigo filed a "Petition for Mandamus" against the RD with the Regional Trial Court of Northern
Samar (Rodrigo Lim versus Fernando Abella, Special Civil Case No. 48). x x x. On June 13, 1997,
the court issued an Order to the RD to cancel OCT No. 10824 and to issue a certificate of title over
Lot 243 under the name of Rodrigo.
"On June 27, 1997, [petitioners] filed a complaint against Rodrigo with the Regional Trial Court of
Northern Samar, entitled and docketed as "Heirs of the Spouses Aurelio Balite, et al. versus
Rodrigo Lim, Civil Case No. 920, for "Annulment of Sale, Quieting of Title, Injunction and
Damages x x x, [the origin of the instant case.]
xxx xxx xxx
"The [petitioners] had a "Notice of Lis Pendens", dated June 23, 1997, annotated, on June 27, 1997,
at the dorsal portion of OCT No. 10824.
"In the meantime, the RD cancelled, on July 10, 1997, OCT No. 10824 and issued Transfer Certificate
of Title [TCT] No. 6683 to and under the name of Rodrigo over Lot 243. The "Notice of Lis Pendens"
x x x was carried over in TCT No. 6683.
"Subsequently, Rodrigo secured a loan from the Rizal Commercial Banking Corporation in the amount
of P2,000,000.00 and executed a "Real Estate Mortgage" over the [subject] property as security
therefor.
"On motion of the [petitioners], they were granted x x x leave to file an "Amended Complaint"
impleading the bank as [additional] party-defendant. On November 26, 1997, [petitioners] filed their
"Amended Complaint".
The [respondent] opposed the "Amended Complaint" x x x contending that it was improper for
[petitioners] to join, in their complaint, an ordinary civil action for the nullification of the "Real Estate
Mortgage" executed by the respondent in favor of the Bank as the action of the petitioners before the
court was a special civil action.
"On March 30, 1998, the court issued an Order rejecting the "Amended Complaint" of the petitioners
on the grounds that: (a) the Bank cannot be impleaded as party-defendant under Rule 63, Section 1
of the 1997 Rules of Civil Procedure; (b) the "Amended Complaint" constituted a collateral attack on
TCT No. 6683. The [petitioners] did not file any motion for the reconsideration of the order of the
court."4
The trial court dismissed the Complaint and ordered the cancellation of the lis pendens annotated at the back
of TCT No. 6683. It held that, pursuant to Article 493 of the Civil Code, a co-owner has the right to sell his/her
undivided share. The sale made by a co-owner is not invalidated by the absence of the consent of the other co-
owners. Hence, the sale by Esperanza of the 10,000-square-meter portion of the property was valid; the excess
from her undivided share should be taken from the undivided shares of Cristeta and Antonio, who expressly
agreed to and benefited from the sale.
Ruling of the Court of Appeals
The CA held that the sale was valid and binding insofar as Esperanza Balites undivided share of the property
was concerned. It affirmed the trial courts ruling that the lack of consent of the co-owners did not nullify the
sale. The buyer, respondent herein, became a co-owner of the property to the extent of the pro indiviso share
of the vendor, subject to the portion that may be allotted to him upon the termination of the co-ownership. The
appellate court disagreed with the averment of petitioners that the registration of the sale and the issuance of
TCT No. 6683 was ineffective and that they became the owners of the share of Esperanza upon the latters
death.
The CA likewise rejected petitioners claim that the sale was void allegedly because the actual purchase price
of the property was not stated in the Deed of Absolute Sale. It found that the true and correct consideration for
the sale was P1,000,000 as declared by Esperanza and respondent in their Joint Affidavit. Applying Article
13535 of the Civil Code, it held that the falsity of the price or consideration stated in the Deed did not render it
void. The CA pointed out, however, that the State retained the right to recover the capital gains tax based on
the true price of P1,000,000.
The appellate court rejected petitioners contention that, because of the allegedly unconscionably low and
inadequate consideration involved, the transaction covered by the Deed was an equitable mortgage under
Article 1602 of the Civil Code. Observing that the argument had never been raised in the court a quo, it ruled
that petitioners were proscribed from making this claim, for the first time, on appeal.
The CA further held that the remaining liability of respondent was P120,000. It relied on the Receipt dated
August 24, 1996, which stated that his outstanding balance for the consideration was P350,000. It deducted
therefrom the amounts of P30,000 received by Antonio on August 27, 1996; and P200,000, which was the
amount of the check dated September 15, 1996, issued by respondent payable to Esperanza.
Finally, the appellate court noted that the mortgage over the property had been executed after the filing of the
Complaint. What petitioners should have filed was a supplemental complaint instead of an amended complaint.
Contrary to respondents argument, it also held that the bank was not an indispensable party to the case; but
was merely a proper party. Thus, there is no necessity to implead it as party-defendant, although the court a
quo had the option to do so. And even if it were not impleaded, the appellate court ruled that the bank would
still have been bound by the outcome of the case, as the latter was a mortgagee pendente lite over real estate
that was covered by a certificate of title with an annotated lis pendens.
Hence, this Petition.6
Issues
In their Memorandum, petitioners present the following issues:
"A
"Whether or not the [CA] seriously erred in not deciding that the Deed of Absolute Sale dated April 16,
1996 is null and void on the grounds that it is falsified; it has an unlawful cause; and it is contrary to
law and/or public policy.
"B
"Whether or not the [CA] gravely erred in not finding that the amount paid by [respondent] is only three
hundred twenty thousand (P320,000.00) pesos and that respondents claim that he has paid one
million pesos except P44,000.00 as balance, is fraudulent and false.
"C
"Whether or not the [CA] seriously erred in not deciding that at the time the Deed of Sale was
registered x x x on May 30, 1997, said Deed of Sale can no longer bind the property covered by OCT
No. 10824 because said land had already become the property of all the petitioners upon the death
of their mother on October 31, 1996 and therefore such registration is functus of[f]icio involving a null
and void document.
"D
"Whether or not the [CA] seriously erred in not ruling that petitioners amended complaint dated
November 27, 1997 was proper and admissible and deemed admitted to conform to evidence
presented.
"E
"Whether or not the [CA] seriously erred in not declaring that TCT No. T-6683 in the name of
Respondent Rodrigo N. Lim is null and void and all dealings involving the same are likewise null and
void and/or subject to the decision of the case at bar in view of the notice of lis pendens annotated
therein.
"F
"Even assuming but without admitting that the Deed of Sale is enforceable, the respondent court
seriously erred in not deciding that the consideration is unconscionably low and inadequate and
therefore the transaction between the executing parties constitutes an equitable mortgage.
"G
"The [CA] greatly erred in not rendering judgment awarding damages and attorneys fee[s] in favor of
petitioners among others."7
In sum, the issues raised by petitioners center on the following: 1) whether the Deed of Absolute Sale is valid,
and 2) whether there is still any sum for which respondent is liable.
The Courts Ruling
The Petition has no merit.
First Issue:
Validity of the Sale
Petitioners contend that the Deed of Absolute Sale is null and void, because the undervalued consideration
indicated therein was intended for an unlawful purpose -- to avoid the payment of higher capital gains taxes on
the transaction. According to them, the appellate courts reliance on Article 1353 of the Civil Code was
erroneous. They further contend that the Joint Affidavit is not proof of a true and lawful cause, but an integral
part of a scheme to evade paying lawful taxes and registration fees to the government.
We have before us an example of a simulated contract. Article 1345 of the Civil Code provides that the
simulation of a contract may either be absolute or relative. In absolute simulation, there is a colorable contract
but without any substance, because the parties have no intention to be bound by it. An absolutely simulated
contract is void, and the parties may recover from each other what they may have given under the
"contract."8 On the other hand, if the parties state a false cause in the contract to conceal their real agreement,
such a contract is relatively simulated. Here, the parties real agreement binds them. 9
In the present case, the parties intended to be bound by the Contract, even if it did not reflect the actual purchase
price of the property. That the parties intended the agreement to produce legal effect is revealed by the letter of
Esperanza Balite to respondent dated October 23, 199610 and petitioners admission that there was a partial
payment of P320,000 made on the basis of the Deed of Absolute Sale. There was an intention to transfer the
ownership of over 10,000 square meters of the property . Clear from the letter is the fact that the objections of
her children prompted Esperanza to unilaterally withdraw from the transaction.
Since the Deed of Absolute Sale was merely relatively simulated, it remains valid and enforceable. All the
essential requisites prescribed by law for the validity and perfection of contracts are present. However, the
parties shall be bound by their real agreement for a consideration of P1,000,000 as reflected in their Joint
Affidavit.11
The juridical nature of the Contract remained the same. What was concealed was merely the actual price.
Where the essential requisites are present and the simulation refers only to the content or terms of the contract,
the agreement is absolutely binding and enforceable12 between the parties and their successors in interest.
Petitioners cannot be permitted to unmake the Contract voluntarily entered into by their predecessor, even if
the stated consideration was included therein for an unlawful purpose. "The binding force of a contract must be
recognized as far as it is legally possible to do so."13 However, as properly held by the appellate court, the
government has the right to collect the proper taxes based on the correct purchase price.
Being onerous, the Contract had for its cause or consideration the price of P1,000,000. Both this consideration
as well as the subject matter of the contract -- Esperanzas share in the property covered by OCT No. 10824 --
are lawful. The motives of the contracting parties for lowering the price of the sale -- in the present case, the
reduction of capital gains tax liability -- should not be confused with the consideration.14 Although illegal, the
motives neither determine nor take the place of the consideration. 15
Deed of Sale not an
Equitable Mortgage
Petitioner further posits that even assuming that the deed of sale is valid it should only be deemed an equitable
mortgage pursuant to Articles 1602 and 1604 of the Civil Code, because the price was clearly inadequate. They
add that the presence of only one of the circumstances enumerated under Article 1602 would be sufficient to
consider the Contract an equitable mortgage. We disagree.
For Articles 1602 and 1604 to apply, two requisites must concur: one, the parties entered into a contract
denominated as a contract of sale; and, two, their intention was to secure an existing debt by way of mortgage. 16
Indeed, the existence of any of the circumstances enumerated in Article 1602, not a concurrence or an
overwhelming number thereof, suffices to give rise to the presumption that a contract purporting to be an
absolute sale is actually an equitable mortgage. 17 In the present case, however, the Contract does not merely
purport to be an absolute sale. The records and the documentary evidence introduced by the parties indubitably
show that the Contract is, indeed, one of absolute sale. There is no clear and convincing evidence that the
parties agreed upon a mortgage of the subject property.
Furthermore, the voluntary, written and unconditional acceptance of contractual commitments negates the
theory of equitable mortgage. There is nothing doubtful about the terms of, or the circumstances surrounding,
the Deed of Sale that would call for the application of Article 1602. The Joint Affidavit indisputably confirmed
that the transaction between the parties was a sale.
When the words of a contract are clear and readily understandable, there is no room for construction. Contracts
are to be interpreted according to their literal meaning and should not be interpreted beyond their obvious
intendment.18 The contract is the law between the parties.
Notably, petitioners never raised as an issue before the trial court the fact that the document did not express
the true intent and agreement of the contracting parties. They raised mere suppositions on the inadequacy of
the price, in support of their argument that the Contract should be considered as an equitable mortgage.
We find no basis to conclude that the purchase price of the property was grossly inadequate. Petitioners did not
present any witness to testify as to the market values of real estate in the subjects locale. They made their
claim on the basis alone of the P2,000,000 loan that respondent had been able to obtain from the Rizal
Commercial Banking Corporation. This move did not sufficiently show the alleged inadequacy of the purchase
price. A mortgage is a mere security for a loan. There was no showing that the property was the only security
relied upon by the bank; or that the borrowers had no credit worthiness, other than the property offered as
collateral.
Co-Ownership
The appellate court was correct in affirming the validity of the sale of the property insofar as the pro
indiviso share of Esperanza Balite was concerned.
Article 493 of the Civil Code19 gives the owner of an undivided interest in the property the right to freely sell and
dispose of such interest. The co-owner, however, has no right to sell or alienate a specific or determinate part
of the thing owned in common, because such right over the thing is represented by an aliquot or ideal portion
without any physical division. Nonetheless, the mere fact that the deed purports to transfer a concrete portion
does not per se render the sale void.20 The sale is valid, but only with respect to the aliquot share of the selling
co-owner. Furthermore, the sale is subject to the results of the partition upon the termination of the co-
ownership.
Hence, the transaction between Esperanza Balite and respondent could be legally recognized only in respect
to the formers pro indiviso share in the co-ownership. As a matter of fact, the Deed of Absolute Sale executed
between the parties expressly referred to the 10,000-square-meter portion of the land sold to respondent as the
share of Esperanza in the conjugal property. Her clear intention was to sell merely her ideal or undivided share
in it. No valid objection can be made against that intent. Clearly then, the sale can be given effect to the extent
of 9,751 square meters, her ideal share in the property as found by both the trial and the appellate courts.
Transfer of Property
During her lifetime, Esperanza had already sold to respondent her share in the subject parcel; hence her heirs
could no longer inherit it. The property she had transferred or conveyed no longer formed part of her estate to
which her heirs may lay claim at the time of her death. The transfer took effect on April 16, 1996 (the date the
Deed of Absolute Sale was executed), and not on May 30, 1997, when the Deed of Absolute Sale was
registered. Thus, petitioners claim that the property became theirs upon the death of their mother is untenable.
Second Issue:
Respondents Liability
Petitioners insist that the appellate court erred in holding that respondents outstanding liability on the Deed of
Sale was P120,000, when the Receipts on record show payments in the total amount of P320,000 only. They
argue that the August 24, 1996 Receipt, on which the appellate court based its conclusion, was unreliable.

To begin with, this Court is not a trier of facts. 21 It is not its function to examine and determine the weight of the
evidence. Well-entrenched is the doctrine that only errors of law,22 and not of facts, are reviewable by this Court
in a petition for review on certiorari under Rule 45 of the Revised Rules of Court. Philippine Airlines, Inc. v. Court
of Appeals23 has held that factual findings of the Court of Appeals are binding and conclusive upon the Supreme
Court. These findings may be reviewed24 only under exceptional circumstances such as, among others, when
the inference is manifestly mistaken;25 the judgment is based on a misapprehension of facts;26 findings of the
trial court contradict those of the CA; 27 or the CA manifestly overlooked certain relevant and undisputed facts
that, if properly considered, would justify a different conclusion. 28

Although the factual findings of the two lower courts were not identical, we hold that in the present case, the
findings of the CA are in accord with the documents on record. The trial court admitted in evidence the August
24, 1996 Receipt signed by Antonio Balite. Interestingly, he was never presented in the lower court to dispute
the veracity of the contents of that Receipt, particularly the second paragraph that had categorically stated the
outstanding balance of respondent as of August 24, 1996, to be P350,000. Furthermore, the evidence shows
that subsequent payments of P30,000 and P200,000 were made by the latter. Thus, we affirm the CAs Decision
holding that the remaining unpaid balance of the price was P120,000.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against the petitioners.

SO ORDERED.
G.R. No. 141993 March 17, 2006 Tiniman-an:
(Sgd.)
NARCISA AVILA, assisted by her husband Bernardo Avila, Spouses JANUARIO N. ADLAWAN and Narcisa Avila2
NANETTE A. ADLAWAN, NATIVIDAD MACAPAZ, assisted by her husband EMILIO MACAPAZ,
FRANCISCA N. ADLAWAN and LEON NEMEO, Petitioners, Respondents stopped paying rentals to Avila and took possession of the property as owners. They also
vs. assumed the payment of realty taxes on it.
Spouses BENJAMIN BARABAT and JOVITA BARABAT, Respondents.
Sometime in early 1982, respondents were confronted by petitioner Januario Adlawan who informed them that
DECISION they had until March 1982 only to stay in Avilas place because he was buying the property. Respondents replied
that the property had already been sold to them by Avila. They showed Adlawan the July 17, 1979 document
CORONA, J.: executed by Avila.

This petition for review on certiorari under Rule 45 of the Rules of Court assails the July 30, 1999 decision1 and
January 19, 2000 resolution of the Court of Appeals in CA-G.R. CV No. 50899.
The subject of this controversy is a portion of a 433-square meter parcel of land located in Poblacion, Toledo
City, Cebu. The entire property is designated as cadastral lot no. 348 registered in the name of Anunciacion
Bahena vda. de Nemeo. Upon her death, ownership of the lot was transferred by operation of law to her five
children, petitioners Narcisa Avila, Natividad Macapaz, Francisca Adlawan, Leon Nemeo and Jose Bahena.
These heirs built their respective houses on the lot.
In 1964, respondent Benjamin Barabat leased a portion of the house owned by Avila. His co-respondent, Jovita
Barabat, moved in with him in 1969 when they got married.
Avila subsequently relocated to Cagayan de Oro City. She came back to Toledo City in July 1979 to sell her
house and share in the lot to her siblings but no one showed interest in it. She then offered it to respondents
who agreed to buy it. Their agreement was evidenced by a private document dated July 17, 1979 which read:
ALANG SA KASAYURAN SA TANAN:
Nga ako, NARCISA AVILA, nagpuyo sa siyudad sa Cagayan de Oro, 52 aos ang panu-igon, minyo ug may
mga anak magatimaan ning maong kasulatan nga akong guibaligya sa kantidad nga walo ka libo ka pesos
(P8,000.00) ang bahin nga balay ug yuta nga sinunod ko sa akong mga ginikanan ngadto sa magtiayon nga
Benjamin ug Jovita Barabat, mga lumulupyo sa siyudad sa Toledo.
Nga ang maong lote ug balay ana-a mahimutang sa Poblacion, Toledo City kansang mga utlanan mao kining
musunod:
Atubangan ---------- N. Rafols Street
Dapit sa Tuo ---------- yuta ug mga panimalay sa Magsuong Natividad Macapaz, Francisca Adlawan, Jose
Bahena ug Leoning Nemeno
Dapit sa wala ---------- kanal sa tubig
Dapit sa luyo ---------- lote nga kumon sa magsuong Nemeno
On January 6, 1983, respondents received a letter from Atty. Joselito Alo informing them that Avila had sold her
house and share in lot no. 348 to his clients, the spouses Januario and Nanette Adlawan. Considering the sale
to the spouses Adlawan as prejudicial to their title and peaceful possession of the property, they demanded that
Avila execute a public document evidencing the sale of the property to them but Avila refused.
Respondents filed a complaint for quieting of title with the Regional Trial Court (RTC) of Toledo City, Branch
29.3Docketed as Civil Case No. T-53, the complaint was subsequently amended to include annulment of the
deed of sale to the spouses Adlawan, specific performance, partition and damages as additional causes of
action. Respondents anchored their claim over the property to the July 17, 1979 private document which they
presented as Exhibit "A."
Avila denied having offered to sell her property to respondents. She claimed that respondents gave her
an P8,000 loan conditioned on her signing a document constituting her house and share in lot no. 348 as
security for its payment. She alleged that she innocently affixed her signature on Exhibit "A" which was prepared
by respondents and which they now claim as a private deed of sale transferring ownership to them.
The trial court rendered its May 9, 1995 decision in favor of respondents. It declared Exhibit "A" as a valid and
lawful deed of sale. It nullified the subsequent deed of sale between Avila and the spouses Adlawan. Avila was
ordered to execute a formal and notarized deed of sale in favor of respondents. It also held petitioners liable for
moral damages and attorneys fees.
Aggrieved, petitioners filed an appeal with the Court of Appeals. In its July 30, 1999 decision, the appellate court
affirmed the decision of the RTC in toto. Petitioners sought a reconsideration but it was denied. Hence, this
petition.
Petitioners claim that the appellate court erred in ruling that the transaction between respondents and Avila was
an absolute sale, not an equitable mortgage. They assert that the facts of the case fell within the ambit of Article
1602 in relation to Article 1604 of the Civil Code on equitable mortgage because they religiously paid the realty
tax on the property and there was gross inadequacy of consideration. In this connection, Articles 1602 and 1604
provide:
Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
 (3) When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes of the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as rent or
otherwise shall be considered as interest which shall be subject to the usury laws.
xxxxxxxxx
Art. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale.
They also claim that the court erred in denying them the right to redeem the property and in ruling that there
was implied partition by the acts of the parties.
We rule in favor of respondents.
For Articles 1602 and 1604 to apply, two requisites must concur: (1) the parties entered into a contract
denominated as a contract of sale and (2) their intention was to secure an existing debt by way of
mortgage.4Here, both the trial and appellate courts found that Exhibit "A" evidenced a contract of sale. They
also agreed that the circumstances of the case show that Avila intended her agreement with respondents to be
a sale. Both courts were unanimous in finding that the subsequent acts of Avila revealed her intention to
absolutely convey the disputed property. It was only after the perfection of the contract, when her siblings began
protesting the sale, that she wanted to change the agreement.
Furthermore, contrary to petitioners claim, the trial court found that it was respondents who took over the
payment of real property taxes after the execution of Exhibit "A." There is no reason to depart from these factual
findings because, as a rule, factual findings of the trial court, when adopted and confirmed by the Court of
Appeals, are binding and conclusive on the Court and generally will not be reviewed on appeal to us. 5 There is
no reason for us to deviate from this rule.
Petitioners claim of gross inadequacy of selling price has no basis. They failed to introduce evidence of the
correct price at the time the land was sold to respondents in 1979. How can we therefore conclude that the price
was grossly inadequate? In the absence of evidence as to the fair market value of a parcel of land at the time
of its sale, we cannot reasonably conclude that the price at which it was sold was inadequate. 6
Petitioners rely on Article 1623 in relation to Article 1620 of the Civil Code to justify their right of redemption.
This is incorrect.
These provisions state:
Art. 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-
owners or any of them, are sold to a third person. If the price of the alienation is grossly excessive, the
redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to
the share they may respectively have in the thing owned in common.
xxxxxxxxx
Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the
notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be
recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written
notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
Petitioners right to redeem would have existed only had there been co-ownership among petitioners-siblings.
But there was none. For this right to be exercised, co-ownership must exist at the time the conveyance is made
by a co-owner and the redemption is demanded by the other co-owner or co-owner(s).7 However, by their own
admission, petitioners were no longer co-owners when the property was sold to respondents in 1979. The co-
ownership had already been extinguished by partition.
The regime of co-ownership exists when the ownership of an undivided thing or right belongs to different
persons.8 By the nature of co-ownership, a co-owner cannot point to any specific portion of the property owned
in common as his own because his share in it remains intangible and ideal. 9
Every act intended to put an end to indivision among co-heirs is deemed to be a partition.10 Here, the particular
portions pertaining to petitioners had been ascertained and they in fact already took possession of their
respective parts. The following statement of petitioners in their amended answer11 as one of their special and
affirmative defenses was revealing:
F-8. That all defendants [i.e., petitioners] in this case who are co-owners of lot 348 have their own respective
buildings constructed on the said lot in which case it can be safely assumed that that their respective shares
in the lot have been physically segregated although there is no formal partition of the land among
themselves.12(emphasis supplied)
Being an express judicial admission, it was conclusive on petitioners unless it was made through palpable
mistake or that no such admission was in fact made.13 Petitioners proved neither and were therefore bound by
it.
The purpose of partition is to separate, divide and assign a thing held in common among those to whom it
belongs.14 By their own admission, petitioners already segregated and took possession of their respective
shares in the lot. Their respective shares were therefore physically determined, clearly identifiable and no longer
ideal. Thus, the co-ownership had been legally dissolved. With that, petitioners right to redeem any part of the
property from any of their former co-owners was already extinguished. As legal redemption is intended to
minimize co-ownership,15 once a property is subdivided and distributed among the co-owners, the community
ceases to exist and there is no more reason to sustain any right of legal redemption. 16
Under the law, subject to certain conditions, owners of adjoining urban land have the pre-emptive right to a lot
before it is sold to third parties, or the redemptive right if it has already been sold. In particular, Article 1622 of
the Civil Code provides:
Art. 1622. Whenever a piece of urban land is so small and so situated in that a major portion thereof cannot be
used for any practical purpose within a reasonable time, having been bought merely for speculation, is about to
be re-sold, the owner of any adjoining land has a right of pre-emption at a reasonable price.

If the re-sale has been perfected, the owner of the adjoining land shall have a right of redemption, also at a
reasonable price.

When two or more owners of adjoining lands wish to exercise the rights of pre-emption or redemption, the owner
whose intended use of the land in question appears best justified shall be preferred.

However, this provision does not apply here. Aside from the fact that petitioners never raised it as an issue, the
conditions provided for its application were not met. While the property may be considered as urban land, it was
not shown or even alleged that its area and location would render a major portion of no practical use within a
reasonable time. Neither was there any allegation to the effect that the disputed property was bought merely for
speculation.

WHEREFORE, the petition is hereby DENIED. The July 30, 1999 decision and January 19, 2000 resolution of
the Court of Appeals in CA-G.R. CV No. 50899 are AFFIRMED.

Costs against petitioners.

SO ORDERED.
G.R. No. 136803 June 16, 2000
EUSTAQUIO MALLILIN, JR., petitioner,
vs.
MA. ELVIRA CASTILLO, respondent.
MENDOZA, J.:
This is a petition for review of the amended decision1 of the Court of Appeals dated May 7, 1998 in CA G.R. CV
No. 48443 granting respondent's motion for reconsideration of its decision dated November 7, 1996, and of the
resolution dated December 21, 1998 denying petitioner's motion for reconsideration.
The factual and procedural antecedents are as follows:
On February 24, 1993, petitioner Eustaquio Mallilin, Jr. filed a complaint 2 for "Partition and/or Payment of Co-
Ownership Share, Accounting and Damages" against respondent Ma. Elvira Castillo. The complaint, docketed
as Civil Case No. 93-656 at the Regional Trial Court in Makati City, alleged that petitioner and respondent, both
married and with children, but separated from their respective spouses, cohabited after a brief courtship
sometime in 1979 while their respective marriages still subsisted. During their union, they set up the Superfreight
Customs Brokerage Corporation, with petitioner as president and chairman of the board of directors, and
respondent as vice-president and treasurer. The business flourished and petitioner and respondent acquired
real and personal properties which were registered solely in respondent's name. In 1992, due to irreconcilable
differences, the couple separated. Petitioner demanded from respondent his share in the subject properties,
but respondent refused alleging that said properties had been registered solely in her name.
In her Amended Answer,3 respondent admitted that she engaged in the customs brokerage business with
petitioner but alleged that the Superfreight Customs Brokerage Corporation was organized with other individuals
and duly registered with the Securities and Exchange Commission in 1987. She denied that she and petitioner
lived as husband and wife because the fact was that they were still legally married to their respective spouses.
She claimed to be the exclusive owner of all real personal properties involved in petitioner's action for partition
on the ground that they were acquired entirely out of her own money and registered solely in her name.
On November 25, 1994, respondent filed a Motion for Summary Judgment, 4 in accordance with Rule 34 of the
Rules of Court.5 She contended that summary judgment was proper, because the issues raised in the pleadings
were sham and not genuine, to wit:
A.
The main issue is Can plaintiff validly claim the partition and/or payment of co-ownership share,
accounting and damages, considering that plaintiff and defendant are admittedly both married to their
respective spouses under still valid and subsisting marriages, even assuming as claimed by plaintiff,
that they lived together as husband and wife without benefit of marriage? In other words, can the
parties be considered as co-owners of the properties, under the law, considering the present status
of the parties as both married and incapable of marrying each other, even assuming that they lived
together as husband and wife (?)
B.
As a collateral issue, can the plaintiff be considered as an unregistered co-owner of the real properties
under the Transfer Certificates of Title duly registered solely in the name of defendant Ma. Elvira
Castillo? This issue is also true as far as the motor vehicles in question are concerned which are also
registered in the name of defendant.6
On the first point, respondent contended that even if she and petitioner actually cohabited, petitioner could not
validly claim a part of the subject real and personal properties because Art. 144 of the Civil Code, which provides
that the rules on co-ownership shall govern the properties acquired by a man and a woman living together as
husband and wife but not married, or under a marriage which is void ab initio, applies only if the parties are not
in any way incapacitated to contract marriage.7 In the parties' case, their union suffered the legal impediment of
a prior subsisting marriage. Thus, the question of fact being raised by petitioner, i.e., whether they lived together
as husband and wife, was irrelevant as no co-ownership could exist between them.
As to the second issue, respondent maintained that petitioner cannot be considered an unregistered co-owner
of the subject properties on the ground that, since titles to the land are solely in her name, to grant petitioner's
prayer would be to allow a collateral attack on the validity of such titles.
Petitioner opposed respondent's Motion for Summary Judgment. 8 He contended that the case presented
genuine factual issues and that Art. 144 of the Civil Code had been repealed by the Family Code which now
allows, under Art. 148, a limited co-ownership even though a man and a woman living together are not
capacitated to marry each other. Petitioner also asserted that an implied trust was constituted when he and
respondent agreed to register the properties solely in the latter's name although the same were acquired out of
the profits made from their brokerage business. Petitioner invoked the following provisions of the Civil Code:
Art. 1452. If two or more persons agree to purchase property and by common consent the legal title
is taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of
the others in proportion to the interest of each.
Art. 1453. When the property is conveyed to a person in reliance upon his declared intention to hold
it for, or transfer it to another grantor, there is an implied trust in favor of the person whose benefit is
contemplated.
On January 30, 1995, the trial court rendered its decision9 granting respondent's motion for summary judgment.
It ruled that an examination of the pleadings shows that the issues involved were purely legal. The trial court
also sustained respondent's contention that petitioner's action for partition amounted to a collateral attack on
the validity of the certificates of title covering the subject properties. It held that even if the parties really had
cohabited, the action for partition could not be allowed because an action for partition among co-owners ceases
to be so and becomes one for title if the defendant, as in the present case, alleges exclusive ownership of the
properties in question. For these reasons, the trial court dismissed Civil Case No. 93-656.
On appeals, the Court of Appeals on November 7, 1996, ordered the case remanded to the court of origin for
trial on the merits. It cited the decision in Roque v. Intermediate Appellate Court 10 to the effect that an action
for partition is at once an action for declaration of co-ownership and for segregation and conveyance of a
determinate portion of the properties involved. If the defendant asserts exclusive title over the property, the
action for partition should not be dismissed. Rather, the court should resolve the case and if the plaintiff is
unable to sustain his claimed status as a co-owner, the court should dismiss the action, not because the wrong
remedy was availed of, but because no basis exists for requiring the defendant to submit to partition. Resolving
the issue whether petitioner's action for partition was a collateral attack on the validity of the certificates of title,
the Court of Appeals held that since petitioner sought to compel respondent to execute documents necessary
to effect transfer of what he claimed was his share, petitioner was not actually attacking the validity of the titles
but in fact, recognized their validity. Finally, the appellate court upheld petitioner's position that Art. 144 of the
Civil Code had been repealed by Art. 148 of the Family Code.
Respondent moved for reconsideration of the decision of Court of Appeals. On May 7, 1998, nearly two years
after its first decision, the Court of Appeals granted respondent's motion and reconsidered its prior decision. In
its decision now challenged in the present petition, it held
Prefatorily, and to better clarify the controversy on whether this suit is a collateral attack on the titles in issue, it
must be underscored that plaintiff-appellant alleged in his complaint that all the nine (9) titles are registered in
the name of defendant-appellee, Ma. Elvira T. Castillo, except one which appears in the name of Eloisa
Castillo (seepar. 9, Complaint). However, a verification of the annexes of such initiatory pleading shows some
discrepancies, to wit:
1. TCT No. 149046 (Annex A) = Elvira T. Castillo, single
2. TCT No. 168208 (Annex B) = do
3. TCT No. 37046 (Annex C) = do
4. TCT No. 37047 (Annex D) = do
5. TCT No. 37048 (Annex E) = do
6. TCT No. 30368 (Annex F) = Steelhaus Realty & Dev. Corp.
7. TCT No. 30369 (Annex G) = do
8. TCT No. 30371 (Annex F) = do
9. TCT No. (92323) 67881 (Annex I) = Eloisa Castillo
In this action, plaintiff-appellant seeks to be declared as 1/2 co-owner of the real properties covered by the
above listed titles and eventually for their partition [par. (a), Prayer; p. 4 Records]. Notably, in order to achieve
such prayer for a joint co-ownership declaration, it is unavoidable that the individual titles involved be altered,
changed, cancelled or modified to include therein the name of the appellee as a registered 1/2 co-owner. Yet,
no cause of action or even a prayer is contained filed. Manifestly, absent any cause or prayer for the alteration,
cancellation, modification or changing of the titles involved, the desired declaration of co-ownership and
eventual partition will utterly be an indirect or collateral attack on the subject titled in this suit.
It is here that We fell into error, such that, if not rectified will surely lead to a procedural lapse and a possible
injustice. Well settled is the rules that a certificate of title cannot be altered, modified or cancelled except in a
direct proceeding in accordance with law.
In this jurisdiction, the remedy of the landowner whose property has been wrongfully or erroneously registered
in another name is, after one year from the date of the decree, not to set aside the decree, but respecting it as
incontrovertible and no longer open to review, to bring an action for reconveyance or, if the property had passed
into the hands of an innocent purchaser for value, for damages. Verily, plaintiff-appellant should have first
pursued such remedy or any other relief directly attacking the subject titles before instituting the present partition
suit. Apropos, the case at bench appears to have been prematurely filed.
Lastly, to grant the partition prayed for by the appellant will in effect rule and decide against the properties
registered in the names of Steelhouse Realty and Development Corporation and Eloisa Castillo, who are not
parties in the case. To allow this to happen will surely result to injustice and denial of due process of law. . . . 11
Petitioner moved for reconsideration but his motion was denied by the Court of Appeals in its resolution dated
December 21, 1998. Hence this petition.
Petitioner contends that: (1) the Court of Appeals, in its first decision of November 7, 1996, was correct in
applying the Roque ruling and in rejecting respondent's claim that she was the sole owner of the subject
properties and that the partition suit was a collateral attack on the titles; (2) the Court of Appeals correctly rules
in its first decision that Art. 148 of the Family Code governs the co-ownership between the parties, hence, the
complaint for partition is proper; (3) with respect to the properties registered in the name of Steelhouse Realty,
respondent admitted ownership thereof and, at the very least, these properties could simply be excluded and
the partition limited to the remaining real and personal properties; and (4) the Court of Appeals erred in not
holding that under the Civil Code, there is an implied trust in his favor. 12
The issue in this case is really whether summary judgment, in accordance with Rule 35 of the Rules of Court,
is proper. We rule in the negative.
First. Rule 35, 3 of the Rules of Court provides that summary judgment is proper only when, based on the
pleadings, depositions, and admissions on file, and after summary hearing, it is shown that except as to the
amount of damages, there is no veritable issue regarding any material fact in the action and the movant is
entitled to judgment as a matter of law. 1 Conversely, where the pleadings tender a genuine issue, i.e., an issue
of fact the resolution of which calls for the presentation of evidence, as distinguished from an issue which is
sham, fictitious, contrived, set-up in bad faith, or patently unsubstantial, summary judgment is not proper. 14
In the present case, we are convinced that genuine issues exist. Petitioner anchors his claim of co-ownership
on two factual grounds: first, that said properties were acquired by him and respondent during their union from
1979 to 1992 from profits derived from their brokerage business; and second, that said properties were
registered solely in respondent's name only because they agreed to that arrangement, thereby giving rise to an
implied trust in accordance with Art. 1452 and Art. 1453 of the Civil Code. These allegations are denied by
respondent. She denies that she and petitioner lived together as husband and wife. She also claims that the
properties in question were acquired solely by her with her own money and resources. With such conflicting
positions, the only way to ascertain the truth is obviously through the presentation of evidence by the parties.
The trial court ruled that it is immaterial whether the parties actually lived together as husband and wife because
Art. 144 of the Civil Code can not be made to apply to them as they were both incapacitated to marry each
other. Hence, it was impossible for a co-ownership to exist between them.
We disagree.
Art. 144 of the Civil Code provides:
When a man and a woman live together as husband and wife, but they are not married, or their
marriage is void from the beginning, the property acquired by either or both of them through their work
or industry or their wages and salaries shall be governed by the rules on co-ownership.
This provision of the Civil Code, applies only to cases in which a man and a woman live together as husband
and wife without the benefit of marriage provided they are not incapacitated or are without impediment to marry
each other, 15 or in which the marriage is void ab initio, provided it is not bigamous. Art. 144, therefore, does not
cover parties living in an adulterous relationship. However, Art. 148 of the Family Code now provides for a
limited co-ownership in cases where the parties in union are incapacitated to marry each other. It states:
In cases of cohabitation not falling under the preceding article, 16 only the properties acquired by both
of the parties through their actual joint contribution of money, property or industry shall be owned by
them in common in proportion to their respective contributions. In the absence of proof to the contrary,
their contributions and corresponding shares are presumed to be equal. The same rule and
presumption shall apply to joint deposits of money and evidences of credits.
If one of the parties is validly married to another, his or her share in the co-ownership shall accrue to
the absolute community or conjugal partnership existing in such valid marriage. If the party who acted
in bad faith is not validly married to another, his or her share shall be forfeited in the manner provided
in the last paragraph of the preceding article.
The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith.
It was error for the trial court to rule that, because the parties in this case were not capacitated to marry each
other at the time that they were alleged to have been living together, they could not have owned properties in
common. The Family Code, in addition to providing that a co-ownership exists between a man and a woman
who live together as husband and wife without the benefit of marriage, likewise provides that, if the parties are
incapacitated to marry each other, properties acquired by them through their joint contribution of money,
property or industry shall be owned by them in common in proportion to their contributions which, in the absence
of proof to the contrary, is presumed to be equal. There is thus co-ownership eventhough the couple are not
capacitated to marry each other.
In this case, there may be a co-ownership between the parties herein. Consequently, whether petitioner and
respondent cohabited and whether the properties involved in the case are part of the alleged co-ownership are
genuine and material. All but one of the properties involved were alleged to have been acquired after the Family
Code took effect on August 3, 1988. With respect to the property acquired before the Family Code took effect if
it is shown that it was really acquired under the regime of the Civil Code, then it should be excluded.
Petitioner also alleged in paragraph 7 of his complaint that:
Due to the effective management, hardwork and enterprise of plaintiff assisted by defendant, their
customs brokerage business grew and out of the profits therefrom, the parties acquired real and
personal properties which were, upon agreement of the parties, listed and registered in defendant's
name with plaintiff as the unregistered co-owner of all said properties. 17
On the basis of this, he contends that an implied trust existed pursuant to Art. 1452 of the Civil Code which
provides that "(I)f two or more persons agree to purchase property and by common consent the legal title is
taken in the name of one of them for the benefit of all, a trust is created by force of law in favor of the others in
proportion to the interest of each." We do not think this is correct. The legal relation of the parties is already
specifically covered by Art. 148 of the Family Code under which all the properties acquired by the parties out of
their actual joint contributions of money, property or industry shall constitute a co-ownership. Co-ownership is
a form of trust and every co-owner is a trustee for the other. 18 The provisions of Art. 1452 and Art. 1453 of the
Civil Code, then are no longer material since a trust relation already inheres in a co-ownership which is governed
under Title III, Book II of the Civil Code.
Second. The trial court likewise dismissed petitioner's action on the ground that the same amounted to a
collateral attack on the certificates of title involved. As already noted, at first, the Court of Appeals ruled that
petitioner's action does not challenge the validity of respondent's titles. However, on reconsideration, it reversed
itself and affirmed the trial court. It noted that petitioner's complaint failed to include a prayer for the alteration,
cancellation, modification, or changing of the titles involved. Absent such prayer, the appellate court ruled that
a declaration of co-ownership and eventual partition would involve an indirect or collateral attack on the titles.
We disagree.
A torrens title, as a rule, is conclusive and indefeasible. Proceeding from this, P.D. No. 1529, 19 48 provides
that a certificate of title shall not be subject to collateral attack and can not be altered, modified, or canceled
except in a direct proceeding. When is an action an attack on a title? It is when the object of the action or
proceeding is to nullify the title, and thus challenge the judgment pursuant to which the title was decreed. The
attack is direct when the object of an action or proceeding is to annul or set aside such judgment, or enjoin its
enforcement. On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief,
an attack on the judgment is nevertheless made as an incident thereof. 20
In his complaint for partition, consistent with our ruling in Roque regarding the nature of an action for partition,
petitioner seeks first, a declaration that he is a co-owner of the subject properties; and second, the conveyance
of his lawful shares. He does not attack respondent's titles. Petitioner alleges no fraud, mistake, or any other
irregularity that would justify a review of the registration decree in respondent's favor. His theory is that although
the subject properties were registered solely in respondent's name, but since by agreement between them as
well as under the Family Code, he is co-owner of these properties and as such is entitled to the conveyance of
his shares. On the premise that he is a co-owner, he can validly seek the partition of the properties in co-
ownership and the conveyance to him of his share.
Thus, in Guevara v. Guevara, 21 in which a parcel of land bequeathed in a last will and testament was registered
in the name of only one of the heirs, with the understanding that he would deliver to the others their shares after
the debts of the original owner had been paid, this Court ruled that notwithstanding the registration of the land
in the name of only one of the heirs, the other heirs can claim their shares in "such action, judicial or extrajudicial,
as may be necessary to partition the estate of the testator." 22
Third. The Court of Appeals also reversed its first decision on the ground that to order partition will, in effect,
rule and decide against Steelhouse Realty Development Corporation and Eloisa Castillo, both strangers to the
present case, as to the properties registered in their names. This reasoning, however, ignores the fact that the
majority of the properties involved in the present case are registered in respondent's name, over which petitioner
claims rights as a co-owner. Besides, other than the real properties, petitioner also seeks partition of a
substantial amount of personal properties consisting of motor vehicles and several pieces of jewelry. By
dismissing petitioner's complaint for partition on grounds of due process and equity, the appellate court
unwittingly denied petitioner his right to prove ownership over the claimed real and personal properties. The
dismissal of petitioner's complaint is unjustified since both ends may be amply served by simply excluding from
the action for partition the properties registered in the name of Steelhouse Realty and Eloisa Castillo.
WHEREFORE, the amended decision of the Court of Appeals, dated May 7, 1998, is REVERSED and the case
is REMANDED to the Regional Trial Court, Branch 59, Makati City for further proceedings on the merits.
SO ORDERED.
G.R. No. 169356 August 28, 2007
CARMEN FANGONIL - HERRERA, Petitioner,
vs.
TOMAS FANGONIL, PURA FANGONIL TINO, MARINA FANGONIL, MARIANO FANGONIL, MILAGROS
FANGONIL-LAYUG and VICTORIA FANGONIL ESTOQUE,1 Respondents.
DECISION
CHICO-NAZARIO, J.:
In this instant Petition for Review under Rule 45 of the Revised Rules of Court, petitioner assails the (a) Decision
issued by the Court of Appeals dated 30 January 2004 in CA-G.R. CV No. 61990, and (b) the Resolution of the
same Court dated 15 July 2005 denying petitioners Motion for Reconsideration. Petitioner urges this Court to
modify the assailed Decision of the Court of Appeals which affirmed the Decision dated 9 October 1998 of the
Regional Trial Court (RTC) of Agoo, La Union, Branch 31 in Special Proceedings Case No. A-806 for Judicial
Partition. The petition prays that the two parcels of land, one located in Magsaysay, Tubao, La Union, more
particularly described as:
A parcel of rice land which the middle portion (15,364 sq. m) has been included and situated in Barrio Lloren,
Tubao, La Union, declared under Tax Dec. Number 2889. Bounded on the North, by the property of Manuel
Ordoa; on the East, by the property of Severino Padilla, Nicolas Caniero, and Heirs of V. Selga; on the South,
by the properties of Manuel Ordoa and Francisco Padilla; and on the West, by a river; containing an area of
more than two hectares; x x x.2
and the other in San Nicholas East, Agoo, La Union, designated as:
A parcel of unirrigated rice land without permanent improvements, situated in Barrio San Nicolas, Agoo, La
Union with an area of 10,777 sq. m. (1 Ha. 1,777 sq. m.) more or less, visible by signs of pilapiles around its
perimeter, assessed at P400.00, declared for tax purposes in my name under Tax Declaration Number 6373,
and bounded-on the North, by Donato Eslao; on the East, by the Heirs of Flaviano Fangonil, and others; on the
South, by Eulalio Fangonil; and on the West, by the heirs of Remgio Boado; x x x.3
be adjudged solely to petitioner to the exclusion of respondents. In addition, petitioner requests that another
parcel of land located in Poblacion, Tubao, La Union, be divided in accordance with the manner she proposes.
The following are the antecedent facts:
Petitioner and respondents4 are children of the late Fabian Fangonil and Maria Lloren Fangonil 5 of Tubao, La
Union. The Fangonil spouses had 7 children: Tomas, Pura, Marina, Mariano, Milagros, Sinforoso, and Carmen.
Fabian died on 1 June 1953, while Maria Lloren died on February 1976. The spouses died intestate, leaving an
estate consisting of 7 parcels of land herein specified:
Parcel 1 a 1,800 square meter residential land located at Poblacion, Tubao, La Union, which is facing the
Town Plaza;
Parcel 2 a 922 square meter residential lot located at Barangay Sta. Barbara, Agoo, La Union;
Parcel 3 a 54,759 square meter agricultural land located at Francia West, Tubao, La Union;
Parcel 4 an 84,737 square meter agricultural land located at Francia West, Tubao, La Union;
Parcel 5 a 5,821 square meter parcel of agricultural land located at Francia Sur, Tubao, La Union;
Parcel 6 a 17,958 square meter parcel of agricultural land located at Magsaysay, Tubao, La Union;
Parcel 7 9,127 square meter parcel of agricultural land located at San Nicolas East, Agoo, La Union.
The only remaining heirs are the 7 children. Prior to an extrajudicial settlement executed by the heirs in 1983,
there was never any settlement of the estate. The parties do not dispute that the succeeding transactions
involving parcels 6 and 7 took place. Fabian Fangonil, with the consent of Maria Lloren Fangonil, obtained a
loan secured by a mortgage over a 15,364 square meter middle portion of the sixth parcel of land for P1,450.00,
executed under a Deed of Mortgage6 in favor of Francisca Saguitan on 20 April 1949. A portion of the sixth
parcel, with an area of 4,375 square meters, was sold with a right to repurchase to a certain Constantino Oribello
for P1,450.00 on 15 December 1953. The transaction was under an agreement designated as a Deed of Pacto
de Retro Sale7 between Maria Lloren Fangonil, who was a widow by then, and Constantino Oribello. On the
other hand, the seventh parcel of land was sold, with a right to repurchase, by Fabian Fangonil to Quirino
Estacio under an agreement denominated as Deed of Sale with Pacto de Retro 8 on 12 December 1949
for P2,600.00. The total amount received by the Fangonil spouses for the properties was P5,500.00.
The parcels above-mentioned were never repurchased or redeemed by the Fangonil spouses. Prior to
foreclosure, the portion of the sixth parcel covered by a Deed of Mortgage was released from the mortgage on
20 April 1956 upon petitioners payment of P1,950.00 to Francisca Suguitan. The portion of the sixth parcel
covered by the Deed of Pacto de Retro Sale was repurchased on 16 October 1956 upon petitioners payment
of P1,550.00 to Constantino Oribello. On the other hand, the seventh parcel subject of the Deed of Sale with
Pacto de Retro was repurchased by petitioner on 13 November 1959 upon the payment of P2,600.00 to Quirino
Estacio. Petitioner paid the total amount of P6,100.00 for the redemption of parcels 6 and 7.
On 14 November 1983, the parties executed an Extrajudicial Settlement and Partial Partition of the estate of
the Fangonil spouses covering the seven parcels of land. Although petitioner signed the extrajudicial settlement,
she refused to accede to the proposed manner of partition of parcel 1. Thereafter, all the heirs concerned,
except petitioner, executed a joint affidavit dated 19 December 1994, stipulating on the partition of parcel 1. On
2 February 1995 or 11 years after the execution of the extrajudicial settlement, petitioner executed an
affidavit9refuting the portions pertaining to parcels 6 and 7, on the ground that her late brother Sinforoso
Fangonil who was a Regional Trial Court (RTC) Judge then, committed misrepresentation and convinced her
to sign the said settlement.
On 1 March 1995, six of the seven children of the Fangonil spouses, excluding herein petitioner, filed
with the RTC a petition for judicial partition of the seven parcels of land, with prayer for appointment
of Marina Fangonil as administratrix. The case was docketed as Special Proceedings Case No. A-
806. Petitioner intervened before the trial court to oppose the petition. She likewise prayed that she
be appointed administratrix, claiming exclusive ownership over parcels 6 and 7.
The parties agreed to submit the case for decision based on the pleadings, considering there was no
disagreement as to the manner of sharing Parcels 2, 3, 4, and 5 of the estate. In addition, on 16
September 1996, the respondent heirs deposited in court P7,453.0010 as payment to petitioner and
her brother Tomas Fangonil as the only outstanding debtors of the estate as specified in the 14
November 1983 extrajudicial settlement. On 2 September 1998, respondents, through counsel,
submitted a Manifestation/Motion dated 31 August 1998, proposing a manner of computation for
repayment to petitioner, the pertinent portions of which read:
 3. That the currency rate of the Philippine Peso to the U.S. Dollar on November 13, 1959 is P3.90 to Lot 1 (A) Milagros F. Layug
U.S. $1.00;
Lot 2 (B) Tomas Fangonil
4. That the currency rate of the Philippine Peso to the U.S. Dollar as of this date August 31, 1998
is P42.00 to U.S. $1.00; Lot 3 (C) Mariano Fangonil

5. So that the amount of indebtedness of P6,100.00 on November 13, 1959 has now the equivalent Lot 4 (D) Pura F. Tino
of P65,790.00 as of 31 August 1998;

Lot 5 (E) Sinforoso Fangonil

5.1 The equivalent amount of P65,790.00 shall be proportionately paid by all the heirs with each and
every heir having a share in said indebtedness in the amount of P9,398.57;11
Lot 6 (F) Carmen F. Herrera
On 7 October 1998, the RTC issued an Order generally approving the manifestation/motion except for the
computation, modifying the amount to P138,100.00 as the present equivalent of the amount of P6,100.00 Lot 7 (G) Marina Fangonil
previously paid by petitioner to redeem parcels 6 and 7. In its Decision 12 dated 9 October 1998, the RTC ruled
in favor of respondents herein and declared parcels 6 and 7 as part of the estate of the spouses Fangonil to be xxxx
partitioned and ordered the partition of parcel 1 based on the manner proposed by respondents. It ordered the
payment of the estate debt to petitioner and her brother in the amount of P138,100.00, the money equivalent of
the P6,100.00 paid by her at the time of redemption of parcels 6 and 7. The dispositive portion of the decision FOURTH PARCEL
reads:
xxxx
WHEREFORE, upon the foregoing premises, this court hereby adjudicates and partitions the inherited
properties, including the controversial parcels 6 and 7, in accordance with the following: The same thing happened. There was a drawing of lots. The result was the following:

FIRST PARCEL Lot 1 (A) Marina Fangonil

xxxx Lot 2 (B) Carmen F. Herrera

This is divided into two (2) segments, the Eastern Portion and Western Portion. Lot 3 (C) Tomas Fangonil

The Eastern Portion shall belong to three (3) heirs, namely Tomas Fangonil, Sinforoso Fangonil represented Lot 4 (D) Sinforoso Fangonil
by Victoria Estoque and Marina Fangonil. The Western Portion shall belong to two (2) heirs, the Southwestern
part belongs to Pura F. Tino and the Northwestern part belongs to Carmen Fangonil Herrera x x x.
Lot 5 (E) Milagros F. Layug

SECOND PARCEL
Lot 6 (F) Pura F. Tino

xxxx
Lot 7 (G) Mariano Fangonil

This parcel goes to Mariano Fangonil and Milagros Fangonil Layug.

xxxx

THIRD PARCEL
FIFTH PARCEL

xxxx
xxxx

A drawing of lots was conducted on April 25, 1997 with respect to parcel 3. Parcel 3 was divided into seven by
Geodetic Engineer Gerardo Dacayanan. The result was the following (see also, Order dated April 25, 1997, On May 2, 1997, the drawing of lots on Parcel 5 was conducted. The result was as follows:
page 166, Record of the case):
Lot 1 Pura F. Tino
 Lot 2 Marina Fangonil Lot 2 Tomas Fangonil

Lot 3 Milagros F. Layug Lot 3 Milagros F. Layug

Lot 4 Sinforoso Fangonil Lot 4 Marina Fangonil

Lot 5 Carmen F. Herrera Lot 5 Sinforoso Fangonil

Lot 6 Mariano Fangonil Lot 6 Mariano Fangonil

Lot 7 Tomas Fangonil Lot 7 Pura F. Tino

SIXTH PARCEL It should be noted that after the draws on August 27, 1998, Atty. Baltazar, counsel for [respondents], manifested
that he will file a motion as regards the accounting of the produce of the sixth and seventh parcels. However,
xxxx what he filed was the Manifestation/Motion dated August 31, 1998.

On August 27, 1998, the drawing of lots was conducted with respect to the controversial parcels, the sixth parcel
and the seventh parcel. The result on the sixth parcel was as follows:
Lot 1 Pura F. Tino
The six heirs (excluding Carmen F. Herrera) shall reimburse the amount of P138,100.00, each one contributing
the amount of P19,728.57, to Carmen F. Herrera. Since the other six heirs did not insist on the accounting of
the produce with respect to parcels 6 and 7, Carmen F. Herrera does not have to render an accounting. As a
matter of fact, this Court, in its Order dated October 7, 1998, considered the produce of the said two (2) parcels,
which she appropriated from the 50s to the present as interest on her money.13

Lot 2 Sinforoso Fangonil Petitioner appealed the above RTC Decision to the Court of Appeals, alleging the unfair and prejudicial manner
of partition of parcel 1 and claiming exclusive ownership over parcels 6 and 7. The Court of Appeals denied the
Lot 3 Tomas Fangonil appeal in its Decision promulgated 30 January 2004, the dispositive portion of which reads:

Lot 4 Marina Fangonil WHEREFORE, the October 9, 1998 Decision of the Regional Trial Court of Agoo, La Union, Branch 31, in
Special Proceeding Case No. A-806, is AFFIRMED in toto."14
Lot 5 Carmen F. Herrera (boycotted the draw)
Under said decision, the Court of Appeals affirmed in toto the findings of the trial court, pronouncing that
petitioner failed to adduce any evidence that would support her claim that the distribution was not equal and
Lot 6 Mariano Fangonil prejudicial to her interest. It concurred with the trial court in concluding that, at the most, she is only entitled to
the reimbursement of the amount she spent for redemption of the questioned lots in an amount equivalent to
Lot 7 Milagros F. Layug what her money commanded then, stating that petitioner is simply holding the said property in trust for the other
co-heirs. At the same time, it upheld the trial courts finding on the equivalent of the money which petitioner paid
to redeem and repurchase parcels 6 and 7, but the dispositive portion merely indicated the amount
xxxx of P130,100.00.

SEVENTH PARCEL
xxxx
The draw was made on the same day, August 27, 1998. Just like in the drawing of lots for the Sixth Parcel,
Carmen F. Herrera boycotted the draw. Hence, the Court ruled that since there are seven rolled papers for the
seven heirs to draw, the last undrawn rolled-paper containing the lot number shall be for Carmen Herrera. The
result for the draw for the seventh parcel was as follows:
Lot 1 Carmen Herrera
Petitioner filed a Motion for Reconsideration of the 30 January 2004 Decision which the Court of Appeals denied
in a Resolution dated 15 July 2005. Dissatisfied with the final resolution of the Court of Appeals on the matter,
petitioner now comes before this Court via a Petition for Review under Rule 45 of the Revised Rules of Court.
Petitioner insists she is the exclusive owner of parcels 6 and 7 and rejects the partition of parcel 1 as being
unequal and prejudicial, raising the following issues:
I.
THE RESPONDENT COURT GRAVELY ERRED IN SUSTAINING THE MANNER IN WHICH
PARCEL 1 IS TO BE PARTITIONED BASED ON THE PRIVATE RESPONDENTS POSITION
 WHICH IS CLEARLY UNEVEN AND UNFAIR TO THE PETITIONER WHOSE SHARE WILL THEN
BE FOUND AT THE REAR PORTION OF THE SAID LOT.
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT PARCELS
6 AND 7 SHALL BE OWNED SOLELY AND EXCLUSIVELY BY THE PETITIONER BEING THE
ONLY ONE WHO REDEEMED AND REPURCHASED SAID PARCELS IN THE 1950S EVEN WHILE
THE PARENTS OF THE PARTIES WERE STILL ALIVE.
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE
PRIVATE RESPONDENTS RIGHT TO CLAIM A SHARE IN PARCELS 6 AND 7 HAD LONG
PRESCRIBED AS A RESULT OF THEIR INACTION FOR MORE THAN FORTY (40) YEARS WHERE
THEY ALLOWED THE PETITIONER TO EXERCISE FULL OWNERSHIP OVER SAID PARCELS,
EVEN ASSUMING WITHOUT ADMITTING THAT AT FIRST, THEY HAVE THE RIGHT TO REDEEM
THE SAID PARCELS.
IV.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE
PRIVATE RESPONDENTS RIGHT TO CLAIM A SHARE IN PARCELS 6 AND 7 HAD LONG BEEN
BARRED BY LACHES AS A RESULT OF THEIR INACTION FOR MORE THAN FORTY (40) YEARS
WHERE THEY ALLOWED THE PETITIONER [TO] EXERCISE FULL OWNERSHIP OVER SAID
PARCELS, EVEN ASSUMING WITHOUT ADMITTING THAT AT FIRST, THEY HAVE THE RIGHT
TO REDEEM THE SAID PARCELS.
V.
THE TRIAL COURT GRAVELY ERRED IN HOLDING THAT THE MONEY EQUIVALENT OF THE
MONEY OF THE OPPOSITOR-APPELLANT WHICH SHE USED TO REPURCHASE AND REDEEM
PARCELS 6 AND 7 IN THE 1950S WOULD ONLY BE P138,100.00 IN TODAYS MONEY, EVEN
ASSUMING WITHOUT ADMITTING THAT THE SAID PARCELS COULD BE REDEEMED BY THE
ESTATE OF FABIAN AND MARIA LLOREN.15
Petitioners arguments are fallacious.
With respect to procedural matters, respondents argue that the petition is a combination of an appeal via a
petition for review on certiorari under Rule 45 and an independent civil action of certiorari under Rule 65 of the
Revised Rules of Court. This is based on the observation that petitioner impleaded the Court of Appeals as one
of the respondents while at the same time raising issues of fact alone. Respondents posit that these are
indicative of an "intention to categorize the petition to be under both Rules 65 and 45 of the Rules of Court" and
should be dismissed outright. Although petitioner erroneously impleaded the Court of Appeals as one of the
respondents, petitioner clearly and rightly invoked Rule 45 of the Revised Rules of Court as the remedy availed
of. As we held in National Irrigation Administration v. Court of Appeals,16 the appeal from a final disposition of
the Court of Appeals is a petition for review under Rule 45 and not a special civil action under Rule 65 of the
Revised Rules of Court. Under Rule 45 of the Revised Rules of Court, decisions, final orders or resolutions of
the Court of Appeals, regardless of the nature of the action or proceedings involved, may be appealed to us by
filing a petition for review, which would be but a continuation of the appellate process over the original
case.17 The correct procedure is not to implead the Court of Appeals. This Court has ruled in several instances
that where the Court of Appeals is impleaded as respondent in the Petition for Review, and the petition clearly
invokes Rule 45, the Court of Appeals is merely omitted from the title of the case pursuant to Sec. 4(a) of Rule
45 of the Revised Rules of Court.18 The Court of Appeals is herein omitted from the title of the case, as a liberal
interpretation of the rules on technicality, in pursuit of the ends of justice and equity. 19
We now discuss respondents contention that only factual issues have been brought to this Court.
Under Section 1, Rule 45, providing for appeals by certiorari before the Supreme Court, it is clearly enunciated
that only questions of law may be set forth. 20 Questions of fact may not be raised unless the case falls under
any of the following exceptions21 :
(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 fact 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 those of 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 petitioners main and reply briefs are not disputed by the
respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record.
In this particular instance, we are clearly faced with issues of fact. A question of fact is involved when the doubt
or difference arises as to the truth or falsehood of alleged facts or when the query necessarily invites calibration
of the whole evidence, considering mainly the credibility of witnesses, existence and relevance of specific
surrounding circumstances, their relation to each other and to the whole, and the probabilities of the
situation.22We find that the only questions to be resolved are the following: (a) whether or not the respondent
court gravely erred in affirming the partition of parcel 1 in accordance with the findings of the trial court; and (b)
whether or not the respondent court gravely erred in not finding that exclusive ownership of the properties in
question has been vested in petitioner.
In the exercise of the Supreme Courts power of review, this Court is not a trier of facts, and unless there are
excepting circumstances, it does not routinely undertake the re-examination of the evidence presented by the
contending parties during the trial of the case. 23 Factual matters are beyond the jurisdiction of this Court. 24 In
petitions for review on certiorari under Rule 45 of the Revised Rules of Court, this 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 a misapprehension of facts. As held in Philippine Airlines, Inc.
v. Court of Appeals,25 factual findings of the Court of Appeals are conclusive26 on the parties and carry even
more weight when the said court affirms the factual findings of the trial court. 27 Absent any palpable error or
arbitrariness, the findings of fact of the lower court are conclusive. On this ground alone, the appeal warrants a
dismissal.
Setting aside the procedural defects, the appeal must fail based on the merits. Upon perusal of the records of
the case, it is evident to this Court that no cogent reason exists to disturb the decision of the Court of Appeals.
Petitioner contends that the manner of partition of parcel 1 by the RTC, as affirmed by the Court of Appeals, is
unfair and prejudicial to her interest. However, she was not able to adduce substantial evidence aliunde to
support her allegations. Respondents stress that the Fangonil spouses appropriated portions of Parcel 1 to
Carmen, Pura, Tomas, Marina, and Sinforoso, by pointing out specific areas pertaining to each. Carmen,
Tomas, and Marina built their houses on parcel 1. Prior to the order of partition, an ocular inspection of parcel
1 was conducted by the RTC to determine which manner of partition it would approve. During said ocular
inspection, however, the RTC saw existing structures upon which the homes of Carmen, Tomas, Marina, and
a store of Carmen were situated. The arrangement was allegedly based on their oral agreement. This same
arrangement allotting an equal area of 362 square meters to each of the heirs was made the basis of the manner
of partition proposed by respondents and later on approved by both the RTC and Court of Appeals.
Anent the rights of the parties pertaining to parcels 6 and 7, petitioner insists that her act of paying for the
repurchase and release from mortgage of parcels 6 and 7 was on the understanding with her parents that she
would thereafter be the owner thereof. She asserts that her exercise of acts of ownership over parcels 6 and 7,
to the exclusion of her parents and siblings, reveals she is the exclusive owner of these lots. She cites several
circumstances in support of her contention that respondents never considered parcels 6 and 7 part of the estate
of their parents and are not co-owners thereof. First, petitioner presented real estate tax receipts indicating that
she had been the one paying for the realty taxes of the property. Secondly, petitioner asserts she has been the
only one hiring tenants for and benefiting from the produce of parcels 6 and 7. Lastly, the non-attempt of
respondents to partition parcels 6 and 7 within 10 years from the death of the Fangonil spouses, as well as to
reimburse her if indeed such was the agreement, demonstrates that they never considered the said parcels part
of the estate of their parents.
After a thorough examination of the cases cited by petitioner and a painstaking review of the case records, this
Court cannot give credence to petitioners stance. The scales of justice overwhelmingly tilt in favor of
respondents and against petitioners assertion that exclusive ownership of parcels 6 and 7 has vested in her.
The fact that it was petitioners money that was used for the repurchase of the properties does not make her
the owner thereof, in the absence of convincing proof that would indicate such. This is more so if other evidence
was adduced to show such is not the case. Neither will petitioners exercise of acts of ownership over the
properties bring us to that conclusion. It is evident that petitioner was allowed to maintain possession and enjoy
the fruits of the property only by the mere tolerance of the other co-owners.28 Moreover, although we recognize
that real estate tax receipts indicating payment of realty tax and possession of the parcels are indicia of
ownership, such are not conclusive proof of ownership, in the presence of other circumstances and evidence
showing otherwise.29 As a matter of fact, although the receipts indicate that the real estate tax payments for
parcels 6 and 7 for the years following their repurchase and release were made by petitioner, the receipts also
state that the declared owner of the properties is still the decedent Fabian Fangonil.
Petitioner and respondents executed an extrajudicial settlement dated 14 November 1983, wherein it was
stipulated that the Fangonil spouses died intestate, leaving 7 parcels of land in their names. Parcels 6 and 7
were included. It further stipulated that petitioner and her brother Tomas (now deceased) are the only creditors
of the estate, categorically stating petitioner is a creditor of the estate in the amount of P8,700.00. This amount
represents what was paid for by her for the repurchase and release from the mortgage lien of parcels 6 and 7
in the 1950s. Pertinent records of the case reveal that the amount actually advanced for the repurchase
was P6,100.00. The aforementioned extrajudicial settlement, which was later on submitted to the RTC for
consideration in the judicial partition, taken together with petitioners comment30 in the same proceedings, are
clear and categorical evidences that the transaction between petitioner and her parents was a mere loan. Under
this extrajudicial settlement, respondents and petitioner included parcels 6 and 7 as part of the estate of their
deceased parents. It is particularly stated therein that petitioner and her brother Tomas are the only creditors of
the estate. Although petitioners comment allegedly maintained her claims on parcels 6 and 7, she categorically
admitted therein that the amount totaling P8,700.00 referred to in the extrajudicial settlement represents the
personal money she used for the redemption of parcels 6 and 7.
Thus, petitioner is a mere creditor of the estate and not an owner of parcels 6 and 7. An admission, verbal or
written, made by a party in the course of the proceedings in the same case, does not require proof. The
admission may be contradicted only by showing that it was made through palpable mistake, or that no such
admission was made.31 We find that petitioners affidavit retracting her acquiescence to the stipulation on
parcels 6 and 7 in the extrajudicial settlement deserves scant consideration for being self-serving. Absent
positive proof that the earlier statements made by petitioner resulted from palpable mistake, retractions thereof,
especially if unsupported by evidence, lack credence.32
As to the issue of prescription, petitioners possession of parcels 6 and 7 did not ripen into sole and exclusive
ownership thereof. First, prescription applies to adverse, open, continuous, and exclusive possession. In order
that a co-owners possession may be deemed adverse to the other co-owners, the following elements33 must
concur: (1) that he has performed unequivocal acts of repudiation amounting to an ouster of the other co-
owners; (2) that such positive acts of repudiation have been made known to the other co-owners; and (3) that
the evidence thereon must be clear and convincing. Clearly, petitioner cannot claim adverse possession in the
concept of an owner where she voluntarily executed documents stating that she was a mere creditor and/or co-
owner. Mere silent possession by a co-owner; his receipt of rents, fruits or profits from the property; his erection
of buildings and fences and the planting of trees thereon; and the payment of land taxes cannot serve as proofs
of exclusive ownership, if it is not borne out by clear and convincing evidence that he exercised acts of
possession which unequivocably constituted an ouster or deprivation of the rights of the other co-owners.34 In
this case, we find that petitioner effected no clear and evident repudiation of the co-ownership. Petitioners only
act of repudiation of the co-ownership was when she refused to honor the extrajudicial settlement in 1994.
Alternatively, possession by a co-owner is like that of a trustee and shall not be regarded as adverse to the
other co-owners, but in fact as beneficial to all of them. 35 A co-ownership is a form of trust, with each owner
being a trustee for each other.36 Mere actual possession by one will not give rise to the inference that the
possession was adverse because a co-owner is, after all, entitled to possession of the property. 37 Thus, as a
rule, prescription does not run in favor of a co-heir or co-owner as long as he expressly or impliedly recognizes
the co-ownership; and he cannot acquire by prescription the share of the other co-owners, absent a clear
repudiation of the co-ownership.38 An action to demand partition among co-owners is imprescriptible, and each
co-owner may demand at any time the partition of the common property. 39
On the matter of laches, we find no sufficient cause to apply the principle of laches, it being a principle grounded
on equity. Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which,
by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a
right within a reasonable time, warranting the presumption that the party entitled to assert it either has
abandoned or declined to assert it.40 Several circumstances must be present. First, there should exist conduct
on the part of the defendant or one under whom he claims, giving rise to the situation of which complaint is
made and for which the complainant seeks a remedy. Second, there is delay in asserting the complainants
right, the complainant having had knowledge or notice of defendants conduct and having been afforded an
opportunity to institute a suit. Third, defendant had no knowledge or notice that the complainant would assert
the right on which he bases his claim. Fourth, the defendant will suffer injury or prejudice in the event relief is
accorded the complainant, or the suit is not held barred. Petitioner failed to prove the presence of all four
established requisites of laches. Moreover, there is no absolute rule as to what constitutes laches or staleness
of demand; each case is to be determined according to its particular circumstances, with the question of laches
addressed to the sound discretion of the court. 41 Because laches is an equitable doctrine, its application is
controlled by equitable considerations and should not be used to defeat justice or to perpetuate fraud or
injustice.42
Regarding the issue on the computation of the money to be paid to petitioner as reimbursement for the amount
she advanced to repurchase and release parcels 6 and 7 from the mortgage debt, the Court of Appeals adopted
the amount as computed by the RTC based on the present peso money equivalent. 43 There is a discrepancy
between the amount of indebtedness as quoted by the Court of Appeals from the RTC decision and the amount
cited by the Court of Appeals in the latter part of its decision. However, the amount stated in the paragraph
before the dispositive portion was P130,100.00, without any other indication that it intended to modify the
amount determined by the RTC while the body of the Court of Appeals decision quoting the RTC decision
indicated the amount of indebtedness as P138,100.00. There was obviously a typographical error, with the body
of the decision stating that the Court of Appeals was affirming the RTCs manner of computation
totaling P138,100.00. Moreover, in the body and dispositive portion, the Court of Appeals upheld the RTCs
decision in toto. Even then, the amount found by the RTC on the basis of the formula it used in the Order dated
7 October 1998 was erroneous.44
Still applying the present peso-dollar exchange rate, a slight modification in the computation is hereby ordered.
The present peso equivalent of the P6,100.00 indebtedness incurred on 13 November 1959 by the Fangonil
spouses and payable to petitioner should be computed based on the following figures:

The currency exchange rate of the Philippine Peso to the United States Dollar in the 1950s, which
is P2.00:$1.00;

Currency exchange rate of the Philippine Peso to the United States Dollar as of the date of finality of this
judgment.

Therefore, the present peso money equivalent of the P6,100.00 should be derived from the succeeding formula:

[(Current exchange rate of the Philippine Peso to the United States Dollar as of the date of finality of this
judgment divided by the exchange rate in the 1950s)] multiplied by P6,100.001avvphi1

WHEREFORE, premises considered, the instant Petition for Review is DENIED. The (a) Decision issued by the
Court of Appeals dated 30 January 2004 and (b) its Resolution dated 15 July 2005 denying petitioners Motion
for Reconsideration dated 23 February 2004 are hereby affirmed, with MODIFICATION as to the amount to be
reimbursed to petitioner. The present peso equivalent of the P6,100.00 indebtedness is hereby ordered
reimbursed to petitioner which amount shall be computed based on current peso-dollar exchange rates at the
time of finality of judgment, applying the formula below:

[(Current exchange rate of the Philippine Peso to the United States Dollar as of the date of finality of this
judgment divided by the exchange rate in the 1950s)] multiplied by P6,100.00

The equivalent amount shall be proportionately paid by all the heirs with each and every heir having a share in
the said indebtedness. No Costs.

SO ORDERED.
G.R. No. 109910 April 5, 1995
REMEDIOS G. SALVADOR and GRACIA G. SALVADOR, petitioners,
vs.
COURT OF APPEALS, ALBERTO and ELPIA YABO, FRANCISCA YABO, et al., respondents.
DAVIDE, JR., J.:
Assailed in this petition is the legal determination made by the Court of Appeals on the issues of which portion
of Lot No. 6080 and Lot No. 6180 formed part of the conjugal assets of the spouses Pastor Makibalo and Maria
Yabo, and of whether or not the rights of Pastor's co-heirs in the estate of Maria Yabo were extinguished through
prescription or laches.
Alipio Yabo was the owner of Lot No. 6080 and Lot No. 6180 situated in Barrio Bulua, Cagayan de Oro City,
containing an area of 1,267 and 3,816 square meters, respectively. Title thereto devolved upon his nine children,
namely, Victoriano, Procopio, Lope, Jose, Pelagia, Baseliza, Francisca, Maria, and Gaudencia, upon his death
sometime before or during the second world war.
On 28 April 1976, Pastor Makibalo, who is the husband of Maria Yabo, one of Alipio's children, filed with the
then Court of First Instance of Misamis Oriental a complaint, docketed as Civil Case No. 5000, against the
spouses Alberto and Elpia Yabo for "Quieting of Title, Annulment of Documents, and Damages." In the
complaint, he alleged that he owned a total of eight shares of the subject lots, having purchased the shares of
seven of Alipio's children and inherited the share of his wife, Maria, and that except for the portion corresponding
to Gaudencia's share which he did not buy, he occupied, cultivated, and possessed continuously, openly,
peacefully, and exclusively the two parcels of land. He then prayed that he be declared the absolute owner of
8/9 of the lots in question. 1
On 8 October 1976, the grandchildren and great-grandchildren of the late Alipio Yabo 2 lodged with the same
court a complaint for partition and quieting of title with damages, 3 docketed as Civil Case No. 5174, against
Pastor Makibalo, Enecia Cristal, and the spouses Eulogio and Remedies Salvador. They alleged that Lot No.
6080 and Lot No. 6180 are the common property of the heirs of Alipio Yabo, namely, the plaintiffs, defendant
Enecia Cristal, Maria Yabo and Jose Yabo, whose share had been sold to Alberto Yabo; that after Alipio's death,
the spouses Pastor and Maria Makibalo, Enecia Cristal and Jose Yabo became the de facto administrators of
the said properties; and that much to their surprise, they discovered that the Salvador spouses, who were
strangers to the family, have been harvesting coconuts from the lots, which act as a cloud on the plaintiffs' title
over the lots.
The plaintiffs then prayed that (a) they, as well as defendant Pastor Makibalo, in representation of his wife, and
Enecia Cristal, in representation of Gaudencia, be declared as the owners of the lots; (b) the Salvador spouses
be declared as having no rights thereto except as possible assignees of their co-defendants, Pastor Makibalo
and Enecia Cristal; (c) the lots be partitioned according to law among the aforementioned co-owners; and (d)
the defendants be made to pay for the value of the fruits they harvested from the lots and for moral and
exemplary damages, attorney's fees, expenses of the litigation, and costs of the suit.
The two cases were consolidated and jointly heard by Branch 5 of the Court of First Instance of Cagayan de
Oro City.
By evidence, Pastor, Makibalo sought to prove the following allegations:
He was married to Maria Yabo who died on 17 March 1962. 4 In August 1949, Jose and Victoriano, both
surnamed Yabo, sold their respective shares in the disputed lots to one Pedro Ebarat, and in 1952 the latter
sold both shares to Pastor Makibalo. 5 Ebarat formalized this conveyance by executing an Affidavit of Waiver
and Quitclaim dated 30 May 1969 in favor of Pastor. 6
On 16 January 1951, the heirs of the late Lope Yabo sold Lope's shares in the litigated properties to one
Dominador Canomon, 7 who, in turn, sold the same to Pastor. 8 Canomon afterwards executed an Affidavit of
Waiver and Quitclaim in favor of the latter. 9
Pastor Makibalo likewise purchased the shares of Baseliza in the two lots in 1942, of Procopio in 1957, of
Francisca in 1958, and of Pelagia in 1967. The only share he did not buy was that of Gaudencia. After every
purchase, he took possession of the portions bought and harvested the products thereof. 10
In 1966, Pastor sold back to Alberto a portion of Lot No. 6180 which was formerly the share of Alberto's father,
Procopio. 11
In December 1968, Pastor mortgaged the two lots to the spouses Eulogio and Remedios Salvador. 12 On 26
September 1978, he executed a document denominated as a "Confirmation and Quitclaim" whereby he waived
all his rights, interests, and participation in the lots in favor of the Salvador spouses. 13
On the other hand, by their evidence, l4 the spouses Alberto and Elpia Yabo tried to prove that they had
repurchased from Pastor Makibalo the share of Procopio, which was previously sold to Pastor, and had bought
the shares of Jose and Maria. 15
Filoteo Yabo denied having sold the share of his father, Lope Yabo, in the contested lots and disowned his
signature and those of his mother, brothers, and sisters appearing at the back of Exhibit "C". 16
Ignacio Yabo testified that his father, Victoriano Yabo, did not know how to write and sign his name. He further
declared that he had no knowledge that his father affixed his thumbmark in the document marked as Exhibit "A"
purporting to alienate his father's share in the disputed lots. l7
On 15 January 1983, the trial court rendered its decision 18
holding as follows:
Assuming that the thumbmark on the typewritten name "Jose Yabo" in Exh. 3 was that of
Jose Yabo, Alberto Yabo and Elpia R. Yabo purchased the share of Jose Yabo in bad faith
because they knew before and up to the execution of Exh. 3 on October 24, 1972 that Jose
Yabo was no longer the owner of that area because from the documents she borrowed from
Mrs. Salvador they came to know that Jose Yabo had sold his shares to Pedro Ebarat, and
they have seen that Pastor Makibalo has been in possession of those shares together with
the seven others exclusively as owner, he having mortgaged them to Mrs. Salvador.
As Jose Yabo was no longer the owner of the one-ninth (1/9) shares which he sold to Alberto
Yabo and Elpia Yabo under Exh. 3, the sale is null and void, and Alberto and Elpia acquired
nothing because Jose Yabo had no more title, right or interest to dispose of.
...
Pastor Makibalo had been in possession of Jose Yabo's share since 1949 after purchasing
it from Ebarat, and has been in possession thereof up to September 26, 1978 when he sold
it to the spouses Eulogio Salvador and Remedios Salvador, who are now in possession of
the same.
Exh. A, evidencing the sale of Victoriano Yabo's share to Pedro Ebarat was identified by the
latter who testified that he sold it to Pastor Makibalo in 1951. Exh. A is an ancient document
1949 when the document came to existence up to now is more than 30 years, and the
document had been in the possession of Pastor Makibalo, then Remedios Salvador who
had interest in its preservation.
As regards the shares of Lope Yabo, the same had been sold by his surviving spouse Juana
Legaspi, and his children Filoteo, Andresa, Jovita, Bonifacio, and Rundino for P105.00 on
January 16, 1951 to Dominador Conomon (Exh. C and C-1), who in turn sold it to Pastor
Makibalo in 1952, executing a formal Deed of Waiver and Quitclaim on May 30, 1969
(Exh. D).
Exh. C is an ancient document, being more than 30 years old and has been in the possession
of Pastor Makibalo and then the spouses Eulogio and Remedios Salvador who had an
interest in its preservation. The claim of Filoteo Yabo that the signatures appearing in Exh.
C are not his and those of his brothers and sisters are of no avail, for if they were not the
ones who affixed those signatures and so they did not sell the shares of their father Lope
Yabo, why did they not then take possession of said shares they remained silent from
1951 to September 16, 1976 a period of 25 years. They are now [e]stopped by laches.
And as regards the shares of Baseliza, Francisca and Pelagia, there is no evidence
presented to effectively rebut the testimony of Pastor Makibalo that he acquired the shares
of Baseliza Yabo in 1942 by changing it with a buffalo; that he bought the shares of Francisca
Yabo in 1958 and that he bought the shares of Pelagia Yabo in 1967; Pastor Makibalo had
been in possession of these shares from the time he acquired them, continuously, adversely,
openly, and peacefully, as owner up to the time he sold his rights and interest therein to the
spouses Eulogio and Remedies Salvador. The heirs of Baseliza, Francisca and Pelagia
have not taken any step to protect their rights over those shares for over 40 years in the
case of Baseliza's share, for about 20 years in the case of Francisca's share, and for more
than 10 years in the case of Pelagia's share. Laches, likewise has rendered their rights stale.
On March 10, 1966 Pastor Makibalo sold back to Alberto Yabo the share of Procopio Yabo
in Lot 6180 (Exh. 1 and 2), but there is nothing to show that. Pastor Makibalo also sold back
Procopio's share in Lot 6080.
So then, by purchase, Pastor Makibalo and Maria Yabo acquired the shares of Baseliza,
Victoriano, Jose, Lope, Procopio and Francisca, or six (6) shares from Lots 6080 and 6180.
These belonged to the conjugal partnership of Pastor Makibalo and Maria Yabo. Maria Yabo
had also a share from Lots 6080 and 6180, and Pastor Makibalo acquired the shares of
Pelagia Yabo in both Lots 6080 and 6180. All in all; Pastor Makibalo acquired eight shares
in both Lot 6080 and 6180.
While Maria Yabo died on March 17, 1962, and so one-fourth (1/4) of the shares of Baseliza,
Victoriano, Jose, Lope, and Francisca, or one-fourth of five-ninth (5/9) of both lots and one-
fourth (1/4) of Lot 6080 should go to the children of the brothers and sisters of Maria Yabo
by virtue of the provisions of Article 1001 of the New Civil Code, the latter have lost their
rights thereto by laches for their inaction for a very long period and their rights have become
stale. On the other hand, Pastor Makibalo who had been in possession of the whole of the
eight shares in both Lots 6080 and 6180, enjoying the fruits thereof exclusively,
uninterruptedly, publicly, peacefully, and continuously from the death of Maria Yabo up to
the filing of the complaint in Civil Case No. 5174 on October 8, 1976, or a period of 14 years,
had acquired title to the whole of the eight shares in Lot 6080 and seven shares in Lot 6180
(the share of Procopio in Lot 6180 had been sold back to Alberto Yabo).
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered finding Pastor Makibalo,
now Eulogio Salvador and Remedios Salvador the owner of eight (8) shares, equivalent to
eight-ninth (8/9) of Lot No. 6080, and of seven (7) shares, equivalent to seven-ninth (7/9) of
Lot No. 6180, and therefore, ordering the partition of Lot 6080 so that the one-ninth (1/9)
alloted to Gaudencia Yabo will go to her heirs or their assigns, and the remaining eight-ninth
(8/9) will go to the spouses Eulogio Salvador and Remedios Salvador, as successor of
Pastor Makibalo, and the partition of Lot 6180 so that the seven-ninth (7/9) portion which
formerly belonged to Baseliza, Victoriano, Jose, Lope, Maria, Francisca, and Pelagia will go
to the spouses Eulogio and Remedios Salvador, the one-ninth (1/9) which formerly belonged
to Procopio, will go to Alberto Yabo, and the remaining one-ninth (1/9) which formerly
belonged to Gaudencia, will go to Gaudencia's heirs or their assigns.
Doc. No. 720, recorded on page 28 of Notarial Register No. VII, and acknowledged before
Notary Public Isidro S. Baculio (Exh. E) [purportedly executed by Maria Yabo and Pastor
Makibalo] is hereby declared null and void, and so the Office of the City Fiscal is directed to
cause an investigation of this matter to find out the person or persons responsible for the
falsification of the said document, and if the evidence warrants, to file the corresponding
criminal action in court. The Office of the City Assessor of Cagayan de Oro City is, likewise,
directed to cause the cancellation of Tax Declarations Nos. 33553, marked as Exh. H-3,
33557, marked as Exh. H-2, both in the name of Alberto Yabo, for having been issued on
the basis of a falsified document. Let copies of this decision be furnished the Offices of the
City Fiscal and City Assessor, both of Cagayan de Oro City.
No pronouncement as to damages, attorney's fees and costs.
SO ORDERED. 19
The defendants in Civil Case No. 5000 and the plaintiffs in Civil Case No. 5174 appealed from the decision to
the Court of Appeals on 19 August 1983. 20
In its decision of 3 February 1993, 21 the Court of Appeals held that (a) Maria Yabo did not sell her share to
Alberto and Elpia Yabo; (b) prescription and laches have not run against the private respondents with respect
to the 1/9 share of Maria Yabo in the estate of her father and to her conjugal share in the portions acquired from
her brothers and sisters; and (c) Procopio never sold his share in Lot No. 6080 to Pastor Makibalo. More
specifically it stated:
Exh. E is the document found by the lower court to be a falsification. This finding appellants
do not dispute and have not raised an error.
...
While acknowledging. that upon the death of Maria Yabo on March 17, 1962, one-half (1/2)
of the share of Maria Yabo in Lots 6080 and 6180 and one-half (1/2) of Maria Yabo's conjugal
share in the portions bought from Basiliza, Victoriano, Jose, Lope, Pelagia and Francisca
should go to the children of the brothers and sisters of Maria in accordance with Article 1001
of the Civil Code, the lower court rule that said children have lost their rights by laches "for
their inaction for a very long period and their rights have become stale" (Decision, p. 16;
Record, Vol. 2, p. 158).
Appellants in their second assignment of error aver that this is an error.
We agree that the lower court erred.
While between March 17, 1962 when Maria Yabo died and October 8, 1976, when Civil Case
No. 5174 for partition was filed, was a period of more than fourteen (14) years, that alone to
our mind would not suffice to establish laches or prescription. Upon the death of Maria Yabo,
appellee Pastor Makibalo and appellants and the other children of the brothers and sisters
of Maria, by operation of law become co-owners of the one-ninth (1/9) share of Maria as heir
of her father Alipio and the conjugal share of Maria in the portions acquired from Basiliza,
Victoriano, Jose, Lope, Pelagia and Francisca. Time alone is not a decisive factor. Appellee
Pastor Makibalo, it must be remembered, is the husband of Maria and, therefore, an uncle
in-law of appellants. In our culture, a demand by an heir or heirs for partition immediately
upon the death of a relative is more often taken not as a legitimate assertion of a right but of
something else, like greed. It must also be noted that the spouses, the appellee Pastor
Makibalo and his deceased wife Maria, were childless and, therefore, appellants and the
other children of the brothers and sisters of Maria must have felt that at any rate the property
would go to them in the course of time. This probably explains why appellants started
asserting their right over the property only after appellee Pastor Makibalo sold the same to
the spouses Eulogio and Remedios Salvador. Besides, Lots 6080 and 6180 have a
combined area only of 5,083 square meters and before the development of Northern
Mindanao, and even in 1962 when Maria Yabo died, were not that valuable. This is shown
by the fact that each heir sold his other share only for P110.00.
As we have said not time alone. In the early case of Cortes v. Oliva, 33 Phil. 480, it was held
that"(o)rdinarily, possession by one joint owner will not be presumed to be adverse to the
others, but will, as a rule, be held to be for the benefit of all. Much stronger evidence is
required to show an adverse holding by one of several joint owners than by a stranger; and
in such cases, to sustain a plea of prescription, it must always clearly appear that one who
was originally a joint owner has repudiated the claims of his co-owners, and that his co-
owners were apprised or should have been apprised of his claim of adverse and exclusive
ownership before the alleged prescription began to run (at page 484). This ruling on
prescription should apply with equal force to laches.
The third assignment of error challenges the finding of the lower court that "there is nothing
to show that Pastor Makibalo also sold back Procopio's share in Lot 6080" (Decision, p. 16;
Records, Vol. 2,p. 158).
Exhibits 1 and 2 cover only Procopio's share in Lot 6180. In other words, Exhibits 1 and. 2
conveyed back to Alberto Yabo only his father, Procopio's share in Lot 6180.
There is indeed no evidence that Pastor Makibalo also sold back to Alberto, his father
Procopio's share in Lot 6080.
But from the evidence it appears that Procopio Yabo never sold his share in Lot 6080 to
Pastor Makibalo. So there was no need to convey back Procopio's share in Lot 6080.
This fact is evident from the Affidavit of Confirmation of Sale (Exh. M) dated April 22, 1970,
executed by Alberto Yabo, which is the very document relied upon by the lower court
(Decision, p. 11; Record, Vol. 2, p. 153) in finding that "Alberto Yabo admitted that the share
of his father Procopio Yabo was previously bought by Pastor Makibalo." A look at Exh. M,
particularly par. 3 thereof, reveals that AlbertoYabo merely acknowledged or confirmed the
sale of his father's share to Pastor Makibalo in Lot 6180. In effect, it at the same time proves
that Lot 6080 was never sold by Procopio to appellee Pastor Makibalo; otherwise, it would
have been included in the said Affidavit of Confirmation of Sale. The Deed of Absolute Sale
(Exh. 2) subsequently executed by Pastor Makibalo in favor of Alberto Yabo on April 23,
1970, further proves this point, since the latter merely bought back what was previously sold,
his father's share in Lot 6180. 22
The respondent court then concluded and held as follows:
In summary, appellee Pastor Makibalo and his assigns, the spouses Eulogio and Remedios
Salvador, are entitled only to one-half () of the one-ninth (1/9) share of Maria and three-
fourths (3/4) of the six-ninth (6/9) shares acquired from Basiliza, Victoriano, Jose, Lope,
Pelagia and Francisca. Accordingly, the partition should be done as follows:
(1) 1/9 of Lots 6080 end 6180 should be given to the heirs of Gaudencia
Yabo or their successors and assigns;
(2) 1/9 of Lot 6180 should go to Alberto Yabo and his wife Elpia Yabo;
(3) 1/9 of Lot 6080 should be given to the heirs of Procopio Yabo and
their successors end assigns, including Alberto Yabo;
(4) The 1/9 share of Maria Yabo in Lots 6080 and 6180 should be
partitioned: One-half (1/2) for the surviving spouse Pastor Makibalo (now
the spouses Eulogio Salvador and Remedios Salvador) and the other
half for the children of the brothers and sisters of Maria Yabo in equal
shares.
(5) The remaining 6/9, one-half (1/2) of which is conjugal between Maria
Yabo and appellee Pastor Makibalo should be partitioned three-fourths
(3/4) for Pastor Makibalo (now the spouses Eulogio Salvador and
Remedios Salvador) and one-fourth (1/4) for the children of the brothers
and sisters of Maria Yabo in equal shares.
(6) Jose Yabo if he is still alive should participate in the partition as heir
of Maria otherwise he shall be represented by his children.
WHEREFORE, premises considered, subject to the modification in the partition, as indicated
above, the decision appealed from is AFFIRMED, without pronouncement as to costs. The
lower court is directed if necessary to fully effect the partition, to conduct further hearings
and determine whether Jose Yabo is still alive and who are the children of the brothers and
sisters of Maria Yabo. 23
Unable to obtain a reconsideration of the said-decision, Remedios Salvador, together with her daughter, Ma.
Gracia Salvador, as one of the successors-in-interest of Eulogio M. Salvador who died during the pendency of
the appeal, 24 elevated the case to this Court contending that the respondent court erred in ruling that: (1) the
shares of Pelagia Yabo should be included in the partition; (2) prescription and laches have not run against the
private respondents in relation to the 1/9 share of Maria Yabo in the estate of her father and to her conjugal
share in those acquired by purchase; (3) Procopio Yabo never sold to Pastor Makibalo his share in Lot No.
6080; and(4) Jose Yabo should be allowed to participate as heir of Maria even as he had openly rejected this
option by refusing to participate in both civil cases. 25
Article 160 of the Civil Code provides that all property of the marriage is presumed to belong to the conjugal
partnership, unless it be proved that it pertains .exclusively to the husband or to the wife. Since the shares of
Jose, Victoriano, Lope, Baseliza, Procopio, and Francisca in Lot No. 6180 and Lot No. 6080 had been
purchased by Pastor during his marriage with Maria, and there is no proof that these were acquired with his
exclusive money, the same are deemed conjugal properties. Not forming part of the conjugal partnership are:
(1) the 1/9 share inherited by Maria which remained as her exclusive property pursuant to Article 146 (2) of the
Civil Code; (2) the 1/9 share of Gaudencia which was not sold to Pastor; and (3) the 1/9 share of Pelagia which
was acquired by Pastor in 1967 or five years after the death of his wife and which was therefore his exclusive
property.
There is, thus; merit in the petitioners' first assigned error. The Court of .Appeals should have excluded from
the conjugal partnership the share of Pelagia which Pastor had acquired after his wife's death.
Upon Maria's death in 1962, the conjugal partnership of gains was dissolved. 26 Half of the conjugal properties,
together with Maria's l/9 hereditary share in the disputed lots, constituted Maria's estate and should thus go to
her surviving heirs. 27 Under Article 1001 of the Civil Code, her heirs are her spouse, Pastor Makibalo, who shall
be entitled to-one-half (1/2) of her estate, her brother, Jose, and the children of her other brothers and sisters,
who shall inherit the other half. There having been no actual partition of the estate yet, the said heirs became
co-owners thereof by operation of law. 28
We now determine whether prescription and laches can be applied against the co-heirs of Pastor Makibalo.
It has been said that Article 494 of the Civil Code which provides that each co-owner may demand at any time
the partition of the common property implies that an action to demand partition is imprescriptible or cannot be
barred by laches. 29 The imprescriptibility of the action cannot, however, be invoked when one of the co-owners
has possessed the property as exclusive owner and for a period sufficient to acquire it by prescription. 30
What needs to be addressed first is whether or not Pastor Makibalo has acquired by prescription the shares of
his other co-heirs or co-owners. Prescription as a mode of acquiring ownership requires a continuous, open,
peaceful, public, and adverse possession for a period of time fixed by law.
This Court has held that the possession of a co-owner is like that of a trustee and shall not be regarded as
adverse to the other co-owners but in fact as beneficial to all of them. 31 Acts which may be considered adverse
to strangers may not be considered adverse insofar as co-owners are concerned. A mere silent possession by
a co-owner, his receipt of rents, fruits or profits from the property, the erection of buildings and fences and the
planting of trees thereon, and the payment of land taxes, cannot serve as proof of exclusive ownership, if it is
not borne out by clear and convincing evidence that he exercised acts of possession which unequivocably
constituted an ouster or deprivation of the rights of the other co-owners. 32
Thus, in order that a co-owner's possession may be deemed adverse to the cestui que trust or the other co-
owners, the following elements must concur: (1) that he has performed unequivocal acts of repudiation
amounting to an ouster of the cestui que trust or the other co-owners; (2) that such positive acts of repudiation
have been made known to the cestui que trust or the other co-owners; and (3) that the evidence thereon must
be clear and convincing. 33
In Pangan vs. Court of Appeals, 34 this Court had occasion to lay down specific acts which are considered as
acts of repudiation:
Filing by a trustee of an action in court against the trustor to quiet title to property, or for
recovery of ownership thereof, held in possession by the former, may constitute an act of
repudiation of the trust reposed on him by the latter.
The issuance of the certificate of title would constitute an open and clear repudiation of any
trust, and the lapse of more than 20 years, open and adverse possession as owner would
certainly suffice to vest title by prescription.
An action for the reconveyance of land based on implied or constructive trust prescribes
within 10 years. And it is from the date of the issuance of such title that the effective assertion
of adverse title for purposes of the statute of limitation is counted.
The prescriptive period may only be counted from the time petitioners repudiated the trust
relation in 1955 upon the filing of the complaint for recovery of possession against private
respondents so that the counterclaim of the private respondents contained in their amended
answer wherein they asserted absolute ownership of the disputed realty by reason of the
continuous and adverse possession of the same is well within the l0-year prescriptive period.
There is clear repudiation of a trust when one who is an apparent administrator of property
causes the cancellation of the title thereto in the name of the apparent beneficiaries and gets
a new certificate of title in his own name.
It is only when the defendants, alleged co-owners of the property in question, executed a
deed of partition and on the strength thereof obtained the cancellation of the title in the name
of their predecessor and the issuance of a new one wherein they appear as the new owners
of a definite area each, thereby in effect denying or repudiating the ownership of one of the
plaintiffs over his alleged share in the entire lot, that the statute of limitations started to run
for the purposes of the action instituted by the latter seeking a declaration of the existence
of the co-ownership and of their rights thereunder.
The records do not show that Pastor Makibalo adjudicated to himself the whole estate of his wife by means of
an affidavit filed with the Office of the Register of Deeds as allowed under Section 1 Rule 74 of the Rules of
Court, or that he caused the issuance of a certificate of title in his name or the cancellation of the tax declaration
in Alipio's name and the issuance of a new one in his own name. The only act which may be deemed as a
repudiation by Pastor of the co-ownership over the lots is his filing on 28 April 1976 of an action to quiet title
(Civil Case No. 5000). The period of prescription started to run only from this repudiation. However, this was
tolled when his co-heirs, the private respondents herein, instituted on 8 October 1976 an action for partition
(Civil Case No. 5174) of the lots. Hence, the adverse possession by Pastor being for only about six months
would not vest in him exclusive ownership of his wife's estate, and absent acquisitive prescription of ownership,
laches and prescription of the action for partition will not lie in favor of Pastor. 35
The issue presented by the petitioners in their third assigned error involves a question of fact. This Court is not
ordinarily a trier of facts, its jurisdiction being limited to errors of law. Thus; the findings of facts of the Court of
Appeals are as a rule deemed conclusive. However, when the findings of facts of the appellate court vary with
those of the trial court, this Court has to review the evidence in order to arrive at the correct findings. 36
In the instant case, a conflict in the findings of facts of the lower courts exists. The trial court found that Pastor
was the owner of Procopio's share in Lot No. 6080, as there was nothing to show that he sold it back to Alberto
Yabo. The respondent court on the other hand, held that Procopio Yabo never sold his share in Lot No. 6080 Q That is the area you sold to Alberto Yabo, pursuant to his request?
to pastor, thus, there was no need to convey it back to Procopio's son, Alberto.
A Because that was the land they inherited from their father that was
At this juncture, it is worthy to quote pertinent portions of the testimony of Pastor Makibalo: what they requested.

COURT: (To the witness.) Q All right. So that, the area now being occupied by Alberto Yabo?

Q Where is AlbertoYabo living? A Yes. That land in the Centro.

A It is there in their house at Bulua. Q This is now identified as Lot No. 6180?

ATTY. JARAULA: (Continuing.) A Yes, Your Honor.

Q In whose land? ATTY. JARAULA: (Continuing.)

A Alipio Yabo's land. Q Where did you sign a document ceding that portion requested by
Alberto Yabo?
Q What relation has that land to the two (2) parcels of land under
litigation? A We did not make any receipt in favor of AlbertoYabo because they got
only the receipt of that of his father.
A I bought already.
COURT: (To the witness.)
Q So, will you please tell the Honorable Court, why Alberto Yabo is
staying on that land when you said you have bought that land already. Q You mean to say, that the receipt which Procopio signed when he sold
his share for [sic] the document which Alberto got?
A So, I sold back a portion to them because they requested me.
A Yes.
COURT: (To the witness.)
COURT:
Q When was that when you said that Alberto Yabo requested a portion?
All right.
A In 1967.
ATTY. JARAULA (Continuing.)
COURT:
Q Now, for how much did you buy. the shares of each of the brothers
Q Did you give that portion which they requested? and sisters of your wife?

A Their share being inherited from their father Procopio was the portion A One Hundred Ten (P110.00) Pesos.
they requested.
Q When you sold back to Alberto Yabo, the portion corresponding to the
COURT share of his father Procopio in the Poblacion, how much did he pay you?

Q Yes. Did you grant that? A The same.

A Yes. Q By the same, you are referring by the same amount of One Hundred
Ten (P110.00) Pesos?
 37
A Yes, Sir. The same amount.
The petitioners contend that the sales or conveyances made by Alipio's heirs were for their consolidated shares
in the two lots. If this was so, and the receipt which Procopio signed when he sold his consolidated share to
Pastor was turned over to Alberto, the inevitable conclusion is that Alberto redeemed his father's share in both
lots, not only in Lot: No. 6180. This conclusion is further buttressed by the above-quoted testimony of Pastor
that he bought the shares (consolidated) of each of Alipio's heirs for P110.00 and that when he sold back to
Alberto the former share of Procopio, Alberto paid him the same amount of P110.00.
However, since the share of Procopio in the two litigated parcels of land was purchased by Pastor during his
marriage with Maria, the same became conjugal property, and half of it formed part of Maria's estate upon her
death in 1962. Accordingly, Pastor's resale in favor of Alberto could only be valid with respect to Pastor's one-
half (1/2) conjugal share and one-fourth (1/4) hereditary share as heir of Maria. 38 The remaining one-fourth
(1/4) should go to Pastor's co-heirs, the private respondents herein.
Now on the fourth assigned error.
Section 1, Rule 69 of the Rules of Court requires that all persons interested in the land sought to be partitioned
must be joined as defendants in the complaints. All co-owners and persons having an interest in the property
are considered indispensable parties and an action for partition will not lie without the joinder of said
persons. 39 It has been held that the absence of an indispensable party in a case renders ineffective all the
proceedings subsequent to the filing of the complaint including the judgment. 40
It must be recalled that in Civil Case No. 5174 the private respondents sought the partition of the two lots based
on the co-ownership which arose from the right of succession to Alipio's estate. Since Jose Yabo confirmed,
through his thumbmark in the verification of the complaint, that he had already parted with his share in Alipio's
estate, he in effect admitted that he had ceased to be a co-owner of the two lots which comprised his father's
estate. Thus, his non-joinder as a party-plaintiff in the complaint would appear to be proper. He does not, as
well, appear to be an indispensable party in Civil Case No. 5000.
As it turned out, however, the evidence and the issues which cropped up rendered imperative the determination
of the conjugal assets of Pastor Makibalo and Maria Yabo and the partition of the latter's estate among her
heirs. Her estate consists of one-half() of the conjugal properties, which should then be divided pursuant to
Article 1001 of the Civil Code since the marriage produced no child; thus: one-half () to Pastor, and the other
half to her brother Jose, and to her nephews and nieces.
Insofar as the partition of Maria Yabo's estate is concerned, Jose is an indispensable party. Strictly, the rule on
indispensable parties may bar a partition of Maria's estate. Considering, however, that such estate or its partition
are but incidents in Civil Case No. 5000 and Civil Case No. 5174, and the parties have not offered any objection
to the propriety of the determination and partition of her estate, then in the light of Section 11 of Rule 3 41 and
Sections 1 and 5, Rule 10 42 of the Rules of Court, and following the rulings of this Court in the 1910 case
of Alonso vs. Villamor 43 and the 1947 case of Cuyugan vs. Dizon, 44 an amendment of the complaint in Civil
Case No. 5174 to implead Jose Yabo as party plaintiff would be in order.
In Alonso, it was held that under Section 110 of the Code of Civil Procedure whose first paragraph is
substantially the same as the aforesaid Section 1 of Rule 10 and Section 503 thereof, this Court "has full
power, apart from that power and authority which is inherent, to amend the process, pleadings, proceedings,
and decision in this case by substituting, as party plaintiff, the real party in interest." Our ruling
in Cuyugan states:
We, however, do not believe that the case should be dismissed for plaintiff's failure to join
her husband. (Sec. 11, Rule 2, Rules of Court). Nor should the case be remanded to the
court below and a new trial ordered on this account. The complaint may and should be
amended here, to cure the defect of party plaintiffs, after final decision is rendered. Section
11, Rule 2, and Section 2, Rule 17, explicitly authorize such procedure. As this Court had
occasion to say in Quison vs. Salud, (12 Phil., 109, 116), "a second action would be but a
repetition of the first and would involve both parties, plaintiffs and defendant, in much
additional expense and would cause much delay, in that way defeating the purpose of the
section, which is expressly stated to be "that the actual merits of the controversy may
speedily be determined without regard to technicalities and in the most expeditious and
inexpensive manner." (See also Diaz vs. De la Rama, 73 Phil., 104)
To avoid further delay in the disposition of this case, we declare Civil Case No. 5174 as thus duly amended.
Consequently, Jose Yabo may participate in the partition of the estate of Maria Yabo. The fourth assigned error
must then be rejected.
In view of the foregoing disquisitions, the appealed judgment should be modified as follows: (a) the former 1/9
share of Pelagia Yabo in Lots No. 6180 and 6080 which she sold to Pastor should be treated as the latter's
exclusive property which should now pertain to the petitioners, his successors-in-interest; and (b) the former
1/9 share of Procopio Yabo in both lots should be divided as follows: 3/4 (respondent Pastor's 1/2 conjugal
share and 1/4 representing his share therein as Maria's heir) for the spouses Alberto and Elpia Yabo, and 1/4
(representing the share therein of Maria's collateral relatives as Maria's heirs) for the private respondents,
including Alberto and Jose Yabo. The partition of the two lots in controversy should therefore be made in this
wise:
(1) 1/9 share of Gaudencia Yabo should be allotted to her heirs or successors-in-interest;
(2) 1/9 share formerly belonging to Pelagia Yabo to the petitioners as successors-in-
interest of Pastor Makibalo;
(3) 1/9 hereditary share of Maria Yabo to be divided as follows:
(a) 1/2 for the petitioners (as successors-in-interest of Pastor Makibalo),
and
(b) 1/2 for the private respondents, including Jose Yabo or his heirs;
(4) 1/9 share formerly belonging to Procopio Yabo to be divided thus:
(a) 3/4 for Spouses Alberto and Elpia Yabo, and
(b) 1/4 for the other private respondents, including Jose Yabo or his heirs;
(5) 5/9 shares which became the conjugal properties of Pastor Makibalo and Maria Yabo to
be divided thus:
(a) 3/4 for the petitioners (as successors-in-interest of Pastor Makibalo),
and
 (b) for the private respondents, including Jose Yabo or his heirs.

In sum, Lots Nos. 6180 anid 6080 should be partitioned as follows:

1/9 or 4/36 to Guadencia Yabo's heirs or successors-in-interest;

3/4 of 1/9 or 3/36 to the spouses Alberto and Elpina Yabo;

8/36 to the private respondents, including Jose Yabu or his heirs;

21/36 to the petitioners as successors-in-interest of Pastor Makibalo.

WHEREFORE, the challenged decision of the Court of Appeals of 8 February 1993 in CA-G.R. CV No. 12839
is AFFIRMED, subject to the modifications indicated above. Upon the finality of this decision, let this case be
forthwith remanded to the court a quo for further proceedings on the partition of Lots Nos. 6180 and 6080 in
conformity with this decision.

No pronouncement as to costs.

SO ORDERED.
G.R. No. 152195 January 31, 2005
PEDRO SEPULVEDA, SR., substituted by SOCORRO S. LAWAS, Administratrix of His Estate, petitioner,
vs.
ATTY. PACIFICO S. PELAEZ, respondent.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court, of the Decision1 of the Court
of Appeals (CA) in CA-G.R. CV No. 43758 affirming the decision of the Regional Trial Court (RTC) of Danao
City, Branch 25, in Civil Case No. SF-175.
On December 6, 1972, private respondent Atty. Pacifico Pelaez filed a complaint against his granduncle, Pedro
Sepulveda, Sr., with the then Court of First Instance (CFI) of Cebu, for the recovery of possession and ownership
of his one-half (1/2) undivided share of several parcels of land covered by Tax Declaration (T.D.) Nos. 28199,
18197, 18193 and 28316; his undivided one-third (1/3) share in several other lots covered by T.D. Nos. 28304,
35090, 18228, 28310, 26308, 28714, 28311, 28312 and 28299 (all located in Danao, Cebu); and for the partition
thereof among the co-owners. The case was docketed as Civil Case No. SF-175.
The eleven (11) lots were among the twenty-five (25) parcels of land which the private respondents mother,
Dulce Sepulveda, inherited from her grandmother, Dionisia Sepulveda under the Project of Partition 2 dated April
16, 1937 submitted by Pedro Sepulveda, Sr. as the administrator of the formers estate, duly approved by the
then CFI of Cebu in Special Proceeding No. 778-0. Under the said deed, Pedro Sepulveda, Sr. appeared to be
the owner of an undivided portion of Lot No. 28199, while his brother and Dulces uncle Santiago Sepulveda,
was the undivided owner of one-half (1/2) of the parcels of land covered by T.D. Nos. 18197, 18193 and 28316.
Dulce and her uncles, Pedro and Santiago, were likewise indicated therein as the co-owners of the eleven other
parcels of land, each with an undivided one-third (1/3) share thereof.
In his complaint, the private respondent alleged that his mother Dulce died intestate on March 2, 1944, and
aside from himself, was survived by her husband Rodolfo Pelaez and her mother Carlota Sepulveda. Dulces
grandfather Vicente Sepulveda died intestate on October 25, 1920, 3 and Dulce was then only about four years
old. According to the private respondent, his grandmother Carlota repeatedly demanded the delivery of her
mothers share in the eleven (11) parcels of land, but Pedro Sepulveda, Sr. who by then was the Municipal
Mayor of Tudela, refused to do so. Dulce, likewise, later demanded the delivery of her share in the eleven
parcels of land, but Pedro Sepulveda, Sr. still refused, claiming that he needed to continue to possess the
property to reap the produce therefrom which he used for the payment of the realty taxes on the subject
properties. The private respondent alleged that he himself demanded the delivery of his mothers share in the
subject properties on so many occasions, the last of which was in 1972, to no avail.
The private respondent further narrated that his granduncle executed an affidavit 4 on November 28, 1961,
stating that he was the sole heir of Dionisia when she died intestate on June 5, 1921, when, in fact, the latter
was survived by her three sons, Santiago, Pedro and Vicente. Pedro Sepulveda, Sr. also executed a Deed of
Absolute Sale5 on July 24, 1968 over the property covered by T.D. No. 19804 (T.D. No. 35090) in favor of the
City of Danao for P7,492.00. According to the private respondent, his granduncle received this amount without
his (private respondents) knowledge.
The private respondent prayed that, after due hearing, judgment be rendered in his favor, thus:
ON THE FIRST CAUSE OF ACTION:
1. Declaring the plaintiff the absolute owner of ONE-HALF (1/2) portion of the TWO (2) parcels of land
described in paragraph 2 of the complaint;
2. Declaring the plaintiff the absolute owner of the ONE-THIRD (1/3) portion of the NINE (9) parcels
of land described in paragraph 3 of the complaint;
3. Ordering the defendant to deliver to the plaintiff the latters ONE-THIRD (1/3) share of the SEVEN
THOUSAND FOUR HUNDRED NINETY-TWO PESOS (P7,492.00) representing the purchase price
of the parcel of land described in paragraph 3(a) of the complaint with interest thereon until the amount
is fully paid;
ON THE SECOND CAUSE OF ACTION:
1. Ordering the partition and segregation of the ONE-HALF (1/2) portion belonging to the plaintiff of
the TWO (2) parcels of land described in paragraph 2 of the complaint;
2. Ordering the partition and segregation of the ONE-THIRD (1/3) portion belonging to the plaintiff of
the remaining EIGHT (8) parcels of land described in paragraph 3 of the complaint;
COMMON TO THE FIRST AND SECOND CAUSES OF ACTION:
1. Ordering the defendant to pay the plaintiff the amount of FIFTY THOUSAND PESOS (P50,000.00)
as moral damages;
2. Ordering the defendant to pay the plaintiff exemplary damages the amount of which is left to the
discretion of this Honorable Court;
3. Ordering the defendant to deliver to the plaintiff the latters share of the fruits of the ELEVEN (11)
parcels of land subject-matter of this complaint, the value of which will be proven during the trial;
4. Ordering the defendant to pay the plaintiff actual litigation expenses, the value of which will be
proven during the trial;
5. Ordering the defendant to pay attorneys fee in the amount of TWELVE THOUSAND PESOS
(P12,000.00);
6. Granting to the plaintiff such other reliefs and remedies as he may be entitled to in accordance with
law and equity.6
In his answer to the complaint, Pedro Sepulveda, Sr. admitted having executed a deed of sale over the parcel
of land covered by T.D. No. 19804 in favor of Danao City, but averred that the latter failed to pay the purchase
price thereof; besides, the private respondent had no right to share in the proceeds of the said sale. He likewise
denied having received any demand for the delivery of Dulces share of the subject properties from the latters
mother Carlota, or from the private respondent.
During the trial, Pedro Sepulveda, Sr. died intestate. A petition for the settlement of his estate was filed on May
8, 1975 with the RTC of Cebu, docketed as Special Proceeding No. SF-37. His daughter, petitioner Socorro
Sepulveda Lawas, was appointed administratrix of his estate in July 1976. In compliance with the decision of
this Court in Lawas v. Court of Appeals,7 docketed as G.R. No. L-45809 and promulgated on December 12,
1986, the deceased was substituted by the petitioner.
To prove the delivery of Dulces share under the project of partition, the petitioner presented the Affidavit of
Consolidation she executed in October 1940 covering thirteen (13) of the twenty-five (25) parcels of land which
were deeded to her under the Project of Partition, 8 as well as the Order9 dated March 24, 1962 of the then CFI
in Special Proceeding No. 778-R, denying Carlotas motion for the reconstitution of the records of the said case,
and for the delivery of Dulces share in the eleven parcels of land. The court likewise declared therein that Dulce,
through her grandchildren and her mother, Carlota, had already received her share of the estate from Pedro
Sepulveda, Sr. as early as January 10, 1938.
According to the petitioner, Dulce and Pedro Sepulveda, Sr. had a verbal agreement wherein the eleven parcels
of land covered by the complaint would serve as the latters compensation for his services as administrator of
Dionisias estate. Thus, upon the termination of Special Proceeding No. 778-0, and subsequent to the
distribution of the shares of Dionisias heirs, Pedro Sepulveda, Sr. then became the sole owner of Dulces
shares.
The petitioner likewise adduced evidence that Santiago Sepulveda died intestate and was survived by his wife,
Paz Velez Sepulveda and their then minor children.10 It was pointed out that the private respondent failed to
implead Paz Sepulveda and her minor children as parties-defendants in the complaint.
It was further claimed that Pedro Sepulveda, Sr. declared the property covered by T.D. No. 18199 11 under his
name for taxation purposes since the beginning of 1948.12 It was likewise alleged that the eleven (11) parcels
of land deeded to Dulce under the Project of Partition had been declared for taxation purposes under the name
of Pedro Sepulveda since 1974, and that he and his heirs paid the realty taxes thereon. 13
On June 7, 1993, the trial court rendered judgment14 in favor of the private respondent. The fallo of the decision
reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff and against the defendant
by declaring that the plaintiff is legally and rightfully entitled to the one half (1/2) portion of the two (2) parcels of
land described in paragraph 2 of the Complaint and to the one third (1/3) portion of the nine (9) parcels of land
described in paragraph 3 of the complaint as co-owner thereof, and ordering the partition and segregation of
the said one half (1/2) portion of the said two (2) parcels of land and of the said one third (1/3) portion of the
nine (9) parcels of land, and in the partition thereof, the mechanics of partition outlined in Rule 69 of the Revised
Rules of Court must be followed (Magallon vs. Montejo, 146 SCRA 282); ordering the defendant Socorro Lawas,
as administratrix of the Estate of Pedro Sepulveda, Sr., to deliver to plaintiff the latters one third (1/3) share of
the P7,492.00 representing the purchase price of the parcel of land sold to Danao City with interest of twelve
[per] centum (12%) per annum (Reformina vs. Tomol, 139 SCRA 260) from the date of filing of the Complaint
until the amount due to plaintiff is fully paid, to pay attorneys fees to plaintiffs attorney in the sum of P10,000.00,
and to pay the costs. The counterclaim is hereby dismissed.
SO ORDERED.15
The trial court ruled that the private respondents action for reconveyance based on constructive trust had not
yet prescribed when the complaint was filed; that he was entitled to a share in the proceeds of the sale of the
property to Danao City; and that the partition of the subject property among the adjudicatees thereof was in
order.
The petitioner appealed the decision to the CA, which rendered judgment on January 31, 2002, affirming the
appealed decision with modification.
The petitioner now comes to the Court via a petition for review on certiorari, contending that the appellate court
erred as follows:
1. THE COURT OF APPEALS ERRED IN THE INCORRECT APPLICATION OF ART. 494 OF THE CIVIL
CODE AND IN UPHOLDING THE REGIONAL TRIAL COURTS FINDING THAT A TRUST RELATIONSHIP
WAS CREATED BETWEEN HEREIN RESPONDENT AND PEDRO SEPULVEDA [SR.].
2. THE COURT OF APPEALS ERRED IN NOT APPLYING THE LAWS ON PRESCRIPTION AND LACHES
TO THE FACTS AS PROVEN IN THE CASE AGAINST HEREIN RESPONDENT.
3. THE COURT OF APPEALS ERRED IN UPHOLDING THE FINDING OF THE REGIONAL TRIAL COURT,
BRANCH 25 IN DANAO CITY THAT PAYMENT WAS MADE BY DANAO CITY FOR ONE (1) OF THE ELEVEN
(11) PARCELS INVOLVED IN THE CASE AND OF WHICH HEREIN RESPONDENT SHOULD BE PAID BY
PETITIONER ONE THIRD (1/3) OF THE PURCHASE PRICE.
4. THE COURT OF APPEALS ERRED IN AWARDING MORAL AND EXEMPLARY DAMAGES AND A SHARE
IN THE RENTS AND PROFITS OF THE ELEVEN (11) PARCELS TO HEREIN RESPONDENT.
5. THE COURT OF APPEALS ERRED IN UPHOLDING THE REGIONAL TRIAL COURTS FINDING THAT
ATTORNEYS FEES ARE TO BE AWARDED AND EVEN INCREASING THE AMOUNT THEREOF.16
The petition is granted for the sole reason that the respondent failed to implead as parties, all the indispensable
parties in his complaint.
As gleaned from the material averments of the complaint and the reliefs prayed for therein, the private
respondent, as plaintiff therein, sought the recovery of the ownership and possession of the ten (10) parcels of
land and the partition thereof; and for the payment of his share in the proceeds of the sale of the property which
Pedro Sepulveda, Sr. sold to Danao City amounting to P7,492.00, which Pedro Sepulveda, Sr. claimed was left
unpaid. It appears that when the private respondent filed the complaint, his father, Rodolfo Pelaez, was still
alive. Thus, when his mother Dulce Pelaez died intestate on March 2, 1944, she was survived by her husband
Rodolfo and their son, the private respondent. Under Article 996 of the New Civil Code, 17 Rodolfo Pelaez, as
surviving spouse, is entitled to a portion in usufruct equal to that corresponding by way of legitime to each of
the legitimate children who has not received any betterment. The rights of the usufructuary are provided in
Articles 471 to 490 of the old Civil Code.18 In Gamis v. Court of Appeals,19 we held that:
Under articles 807 and 834 of the old Civil Code the surviving spouse is a forced heir and entitled to a share in
usufruct in the estate of the deceased spouse equal to that which by way of legitime corresponds or belongs to
each of the legitimate children or descendants who have not been bettered or have not received any share in
the one-third share destined for betterment. The right of the surviving spouse to have a share in usufruct in the
estate of the deceased spouse is provided by law of which such spouse cannot be deprived and which cannot
be ignored. Of course, the spouse may waive it but the waiver must be express.
Section 1, Rule 69 of the Rules of Court provides that in an action for partition, all persons interested in the
property shall be joined as defendants.
Section 1. Complaint in action for partition of real estate.- A person having the right to compel the partition of
real estate may do so as in this rule prescribed, setting forth in his complaint the nature and extent of his title
and an adequate description of the real estate of which partition is demanded and joining as defendants all the
other persons interested in the property.
Thus, all the co-heirs and persons having an interest in the property are indispensable parties; as such, an
action for partition will not lie without the joinder of the said parties.20 The mere fact that Pedro Sepulveda, Sr.
has repudiated the co-ownership between him and the respondent does not deprive the trial court of jurisdiction
to take cognizance of the action for partition, for, in a complaint for partition, the plaintiff seeks, first, a declaration
that he is a co-owner of the subject property; and, second, the conveyance of his lawful shares. 21 As the Court
ruled in De Mesa v. Court of Appeals:22
To reiterate, the absence of an indispensable party renders all subsequent actions of the court null and void for
want of authority to act, not only as to the absent parties but even as to those present.26 Hence, the trial court
should have ordered the dismissal of the complaint. 27
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decisions of the Court of Appeals in CA-
G.R. CV No. 43758 and of the Regional Trial Court are SET ASIDE. The Regional Trial Court is ORDERED to
dismiss the complaint without prejudice. No pronouncement as to costs.
SO ORDERED.

The first stage of an action for judicial partition and/or accounting is concerned with the determination of whether
or not a co-ownership in fact exists and a partition is proper, that is, it is not otherwise legally proscribed and
may be made by voluntary agreement of all the parties interested in the property. This phase may end in a
declaration that plaintiff is not entitled to the desired partition either because a co-ownership does not exist or a
partition is legally prohibited. It may also end, on the other hand, with an adjudgment that a co-ownership does
in truth exist, that partition is proper in the premises, and that an accounting of rents and profits received by the
defendant from the real estate in question is in order. In the latter case, "the parties may, if they are able to
agree, make partition among themselves by proper instruments of conveyance, and the court shall confirm the
partition so agreed upon by all the parties." In either case, whether the action is dismissed or partition and/or
accounting is decreed, the order is a final one and may be appealed by any party aggrieved thereby.

The second stage commences when the parties are unable to agree upon the partition ordered by the court. In
that event, partition shall be effected for the parties by the court with the assistance of not more than three (3)
commissioners. This second phase may also deal with the rendition of the accounting itself and its approval by
the Court after the parties have been accorded the opportunity to be heard thereon, and an award for the
recovery by the party or parties thereto entitled of their just shares in the rents and profits of the real estate in
question.23

In the present action, the private respondent, as the plaintiff in the trial court, failed to implead the following
indispensable parties: his father, Rodolfo Pelaez; the heirs of Santiago Sepulveda, namely, Paz Sepulveda and
their children; and the City of Danao which purchased the property covered by T.D. 19804 (T.D. No. 35090)
from Pedro Sepulveda, Sr. and maintained that it had failed to pay for the purchase price of the property.

Rodolfo Pelaez is an indispensable party he being entitled to a share in usufruct, equal to the share of the
respondent in the subject properties. There is no showing that Rodolfo Pelaez had waived his right to usufruct.

Section 7, Rule 3 of the Rules of Court reads:

SEC. 7. Compulsory joinder of indispensable parties. Parties in interest without whom no final determination
can be had of an action shall be joined either as plaintiffs or defendants.

Indeed, the presence of all indispensable parties is a condition sine qua non for the exercise of judicial power.
It is precisely when an indispensable party is not before the court that the action should be dismissed. Thus,
the plaintiff is mandated to implead all the indispensable parties, considering that the absence of one such party
renders all subsequent actions of the court null and void for want of authority to act, not only as to the absent
parties but even as to those present.24 One who is a party to a case is not bound by any decision of the court,
otherwise, he will be deprived of his right to due process. Without the presence of all the other heirs as plaintiffs,
the trial court could not validly render judgment and grant relief in favor of the private respondent. The failure of
the private respondent to implead the other heirs as parties-plaintiffs constituted a legal obstacle to the trial
court and the appellate courts exercise of judicial power over the said case, and rendered any orders or
judgments rendered therein a nullity.25
G.R. No. L-4723 February 8, 1909
THE UNITED STATES, plaintiff-appellee,
vs.
TAN TAYCO AND CO SENCHO, defendants-appellants.
Pastor M. Navarro, for appellants.
Office of the Solicitor-General Harvey, for appellee.
CARSON, J.:
This is an appeal from a judgment convicting the appellants, Tan Tayco and Co Sencho, of a violation of the
provision of section 7 of Act No. 1761 (Opium Law), and sentencing them, and each of them, to a fine of P500,
or in case of insolvency, to the corresponding subsidiary imprisonment prescribed in such cases, and to the
payment of the costs of the trial.
On the night of the 30th day of November, 1907, in the municipality of Ormoc, Province of Leyte, the municipal
treasurer, accompanied by a policeman, found various utensils, used for smoking opium, including a lamp and
a pipe, in a store owned by one of the defendants, Tan Tayco, and his partner, Andres T. Avila. These utensils
were found near or under the Avila's bed in the room occupied by him jointly with the defendant Co Sencho,
who was employed as an assistant in the store. This room connected with the room occupied by the defendant,
Tan Tayco, by a small passageway.
The discovery of these utensils was conclusively established by the testimony of the witnesses for the
prosecution, and was not denied by the defendants, who admitted that they were not authorized under the
provisions of section 7 of the Opium Law is to have such utensils in their possession. But they denied the
allegation of the information, that these utensils were in their possession or control at the time of their discovery,
claiming that they were the property of Andres Avila, one of the co-proprietors of the store. Avila admitted that
he was the owner of the utensils in question, but swore at that time of their discovery he was in Cebu, where
he had gone on business not long before the seizure; that he had left for Cebu prior to the passage of Act No.
1761; that at the time when he left for Cebu he held a license, under the provisions of Act No. 1461, whereby
he was authorized to smoke opium, and to have in his possession, the utensils for smoking opium which were
found in his room; that not anticipating the passage of Act No. 1761, he left the implements in question the tray
in his room; and that his partner, Tan Tayco, and their employee in the store, Co Sencho, had no interest
whatever in the ownership or control of these utensils.
The prosecution introduced three witnesses who testified that the defendant, Tan Tayco, was the real owner of
the pipe and other utensils in question, and that they had seen Tan Tayco smoking opium with the pipe on
various occasions in the months of August, September, and October, 1907.
Defendants introduced evidence which tended to show that these three witnesses were professional gamblers
with no occupation or visible means of support, and wholly unworthy or credit or belief; Tan Tayco and his
partner, Avila, declaring that on various occasions these witnesses had begged them for opium and for
permission to smoke it, and that when their request was denied they became angered, and testified falsely at
the trial in a spirit of revenge.
Section 7 of Act No. 1761 is as follows:
(a) Except upon the prescription of a duly licensed and practicing physician or upon lawful permit of
the Collector of Internal Revenue, it shall be unlawful for any person not a duly licensed and practicing
physician, pharmacist, second class pharmacist, licensed dispensator of opium, or a duly registered
user of opium when using the same in a licensed opium dispensary only and in such quantities as
may be stated in his certificate, to have in his possession opium, or any pipes, hypodermic syringes,
or other apparatus or paraphernalia to be used for smoking, injecting, or using opium in any manner.
(b) Any person violating the provisions of this section shall be punished by a fine not exceeding five
hundred pesos or by imprisonment for a period of not exceeding one year, or by both such fine and
imprisonment, in the discretion of the court: Provided, That all opium, pipes, and other opium
apparatus and paraphernalia found in the possession of any person not authorized to have same shall
be seized and forfeited to the Government.
Defendants on appeal attacked the constitutionality of this section on the ground that its enactment was in
violation of the provisions of section 5 of the Philippine Bill, which provides that no person shall be deprived of
his life, liberty, or property without due process of law. Appellants contend that opium is a beneficial and
wholesome medicine; that to deprive one of such medicine who might have need thereof would inflict serious
injury upon his health; and that the provisions of the Opium Law which forbids the having the utensils for smoking
opium in one's possession in an infringement on the personal liberty of the citizen, which is guaranteed to the
people of these Islands by the terms of the Philippine Bill.
We do not deem it necessary to discuss this question at length in this case, because we are convinced that the
evidence offered by the prosecution is not sufficient to sustain a judgment of conviction. It may not be improper,
however, to indicate that is a fact of general knowledge, not seriously questioned by thinking men, that the
habitual use of opium to excess is a vice degrading and disgusting in its tendencies, and pernicious and
dangerous to a degree in its effect, mental, moral, and physical, upon the individual addicted thereto. We think,
therefore, that there can be no doubt of the power of the legislature to determine for itself whether the
indiscriminate use of this drug is or is not marked by consequences dangerous to the welfare of the general
public, so as to necessitate and justify control of its use as a medicine or otherwise, under such restrictions as
the legislature may deem necessary to prevent its abuse.
But it is urged by the defense that a moderate use of opium, or that the moderate use of an opium
pipe, is not deleterious, and consequently can not be prohibited. We answer that this is a question of
fact, which can only be inquired into by the legislature. Smoking opium is a recognized evil in this
country. It is a matter of general information that it is an insidious and dangerous vice, a loathsome,
disgusting, and degrading habit, that is becoming dangerously common with the youth of the country,
and that its usual concomitants are imbecility, pauperism and crime. It has been regarded as a proper
subject of legislation in every Western State. (Territory of Washington vs. Ah Lim, 9 L.R.A., 395, 397.)
The sale and disposition of such drug may unquestionably be regulated and controlled by law, and
whether its nature and character are such that, for the protection of the public, its possession by
unauthorized persons should be prohibited, is a question of fact and of public policy, which belongs
to the legislative department to determine. The discretion of the legislature in the employment of
means which are reasonably calculated to protect the health, moral, or safety of the public is very
great; and so long as it does not infringe upon the inherent rights of life, liberty, and property, either
directly or through some limitations upon the means of living or some material right essential to the
enjoyment of life, its determination is conclusive upon the courts. (Mon Luck vs. Sears, 32 L.R.A., 738,
739; State vs. Ah Chew, 16 Nev., 50, 40 Am. Rep., 488; In re Yung Jon, 28 Fed. Rep., 308.)
The discovery of the pipe and other utensils at the time and place above indicated tends strongly to support the
contention of the prosecution that they were found in the possession of one or both of these defendants, but it
is not conclusive evidence as to that fact.
Possession has been defined to be the detention or enjoyment of a thing which a man holds or exercise by Q. Now tell the truth, is it true that just a few moments ago you stated this pipe was not
himself or by another who keeps or exercises it in his name. (Bouvier's Law Dictionary, Rawles' revision. Vol. yours because your pipe has a different shaped piece of metal than that which is on this
II.) Clearly it involves a state of mind on the part of the possessor whereby he intends to exercise, and as a pipe?
consequence of which, he does exercise a right of possession, whether that right be legal or otherwise; and
while the intention and the will of possess may be, and usually are inferred from the fact that the thing in question A. I stated before that it was not the same because it is very dirty.
is under the apparent power and control of the alleged possessor, nevertheless, the existence of the animus
possidendi is subject to contradiction, and may be rebutted by evidence which tends to prove that the person
under whose power and control the thing in question appears to be, does not in fact exercise such power of Q. Did you not say that it was not yours because the metal was different?
control and does not intend to required, that there be an occupancy, apprehension, or taking, that the taking be
with an intent to possess (animus possidendi). Hence persons who have no legal wills, as children of insufficient A. But I remember now that it is mine.
understanding and idiots, can not possess or acquire a complete possession (Pothier, Etienne, see 1 Mer., 358;
Abb. Sh., 9); so where stolen property is placed in the house or upon the premises of A, without his knowledge
or consent, A is not properly speaking in possession of such property, so long as he does not assert a right to Q. State whether or not you said the metal on your pipes was different?
its control, and is not moved by the animus possidendi with reference thereto.
A. I said that before.
The statements of the witness Avila, if they can be believed, furnish a full, satisfactory, and sufficient explanation
of the presence of the utensils for smoking opium in his house at the time of their seizure, which is entirely Q. What has caused you to change your mind about the metal?
consistent with the allegations of the defendant that those utensils were not at that time in their possession;
and, therefore, entirely consistent with the innocence of the defendants charged with a violation of the provisions
of the above-cited section of the Opium Act. A. The difference is that the metal is round which caused me to doubt its being mine.

The trial judge was of opinion that the witness Avila was a perjurer and testified falsely, basing his opinion upon Q. Then you have changed your mind and decided that it is yours?
the self-contradictory character of the testimony of this witness, which, in his opinion, left no room for doubt that
this testimony was false and unworthy of belief. We do not think that the evidence of record establishes this A. Yes, sir; because I know it is round.
finding of the trial court beyond a reasonable doubt. The only statement of self-contradictory character which
we find in the testimony of this witness is that pointed out by the trial judge.
Q. What about the metal? Has it changed its appearance since you made the statement?

The first question asked the witness upon direct examination and his answer thereto were as follows:
A. It has not changed since then.

Q. Look at these articles marked Exhibits A, B, C, and D; what are they used for, and
Q. Then you are quite sure that it is your pipe, are you?
who is the owner of them?

A. Yes, sir.
A. All the articles here are used for smoking opium with the exception of this bamboo
(the pipe in question); the rest are mine. I say it is not mine because the metal which gives
it strength is not of the same shape as that on mine. Q. No doubt about it all?

Upon cross-examination by the provincial fiscal, the witness testified as follows: A. No, sir; there is no doubt.

Q. But this pipe, Exhibit A, is not your pipe? FISCAL. It is true that before you answered the question, when you were asked about
recognizing the pipe, you examined the pipe for more than ten seconds before you answered
and said it was not your pipe?
A. It appears like my pipe, but there are so many pipes that look alike.

A. Yes, sir; because I did not recognize it at first glance because it is very dirty.
Q. Answer the question, is this your pipe or not?

Q. Answer the question, is not true that you carefully examined the pipe before you
A. Yes, sir; it is.
stated that it was not yours? This is your direct examination.

Q. Then why did you say before that it was not yours?
A. It is true that I examined it, but I did not recognized it immediately because it is a long
time since I have seen it.
A. Because it is very dirty, and as there are other pipes that look like it, I did not say it
was mine.
We do not think that the fact that the witness, upon due reflection and consideration, and after a careful and
extended examination of the pipe, corrected his first statement in regard thereto, is proof conclusive that his
statement as modified where false and unworthy of credit. It will be observed that he appears to have modified
his testimony under the rigid cross-examination of the prosecution when his attention was especially directed
to the question of ownership of the exhibit which was placed in his hand. If he was indeed a deliberate perjurer
and went upon the stand for the purpose of willfully testifying falsely, it would seem more reasonable that he
should have claimed the ownership of the pipe under the examination of counsel for the defendant, rather than
that fact so essential to the defense should have developed upon cross-examination, at a time when, without
the aid of the prosecution, it could not have been established otherwise. It may well be that at first glance the
witness was mistaken as to the identity of the pipe, which had been out of his possession for many months,
during which the metal finishing might have become tarnished, either in the store where he left it, or in the hands
of the officers of law who held it after its seizure. It appears that Act No. 1761 was not in force when this witness
left Cebu, and at that time he had a license which authorized him to smoke opium and to have in his possession
and under his control the necessary utensils for that purpose. There is nothing incredible in his statements that
he left the pipe in question in his room, expecting to find it there upon his return, and we think that, giving to the
defendants the benefit of the doubt, the testimony of this witness should be accepted as true.

The testimony of the three witnesses for the prosecution, who declared that they had seen the defendants
smoking the pipe in question on various occasions, if it could be believed, would cast grave doubt upon the truth
of the declarations of the witnesses, taken together with the evidence tending to prove that they were actuated
in testifying by a feeling of revenge, because the defendants refused to let them have opium or to smoke in their
store after the passage of the Opium Law, is sufficient to justify us in rejecting their testimony. One of these
witnesses admitted on the stand that he had begged Tan Tayco to let him smoke opium in his store, and that
Tan Tayco had refused to grant his request, and taking into consideration the worthless character of these
witnesses, their suspicious mode of living, the fact that they had no known means a gaining a lawful livelihood,
and the fact that under the law, informers receive a share in the fine inflicted upon violators of the Opium Law,
we feel compelled to hold the statements of these witnesses as unworthy of credit and belief.

The judgment and sentence of the trial court should be and are hereby reversed, and the defendants acquitted
of the offense with which they are charged, with the costs in both instances de oficio.
G.R. No. 156973 June 4, 2004
SPOUSES TOMAS OCCEA and SILVINA OCCEA, petitioners,
vs.
LYDIA MORALES OBSIANA ESPONILLA, ELSA MORALES OBSIANA SALAZAR and DARFROSA
OBSIANA SALAZAR ESPONILLA, respondents.
DECISION
PUNO, J.:
The case at bar involves a portion of the 1,198-square meter residential lot (lot no. 265) situated in Sibalom,
Antique, originally owned by spouses Nicolas and Irene Tordesillas under OCT No. 1130. The Tordesillas
spouses had three (3) children, namely: Harod, Angela and Rosario, the latter having been survived by her two
(2) children, Arnold and Lilia de la Flor.
After the death of the Tordesillas spouses, the lot was inherited by their children Harod and Angela, and
grandchildren Arnold and Lilia. In 1951, the heirs executed a Deed of Pacto de Retro Sale1 in favor of Alberta
Morales covering the southwestern portion of the lot with an area of 748 square meters.
Three (3) years later, in 1954, Arnold and Lilia executed a Deed of Definite Sale of Shares, Rights, Interests
and Participations2 over the same 748 sq. m. lot in favor of Alberta Morales. The notarized deed also
attested that the lot sold by vendors Arnold and Lilia to Alberta were their share in the estate of their deceased
parents.
Alberta possessed the lot as owner, constructed a house on it and appointed a caretaker to oversee her
property. Thereafter, in July 1956, vendor Arnold de la Flor borrowed the OCT from Alberta covering the lot.
He executed an Affidavit3 acknowledging receipt of the OCT in trust and undertook to return said title free from
changes, modifications or cancellations.
In 1966, Arnold and Angela, nephew and daughter respectively of the Tordesillas spouses, without the
knowledge of Alberta, executed a Deed of Extrajudicial Settlement4 declaring the two of them as the only
co-owners of the undivided 1,198 sq. m. lot no. 265, without acknowledging their previous sale of 748
sq. m. thereof to Alberta. A number of times, thereafter, Alberta and her nieces asked Arnold for the OCT of
the land but Arnold just kept on promising to return it.
In 1983, Arnold executed an Affidavit of Settlement of the Estate5 of Angela who died in 1978 without issue,
declaring himself as the sole heir of Angela and thus consolidating the title of the entire lot in his name.
In 1985, vendee Alberta Morales died. Her nieces-heirs, Lydia, Elsa and Dafrosa, succeeded in the
ownership of the lot. Months later, as the heirs were about to leave for the United States, they asked Arnold
to deliver to them the title to the land so they can register it in their name. Arnold repeatedly promised to do so
but failed to deliver the title to them.
On December 4, 1986, after Albertas heirs left for the States, Arnold used the OCT he borrowed from the
deceased vendee Alberta Morales, subdivided the entire lot no. 265 into three sublots, and registered
them all under his name, viz: lot no. 265-A (with TCT No. 16895), lot no. 265-B (with TCT No. 16896) and lot
no. 265-C (with TCT No. 16897). He then paid the real estate taxes on the property.
On August 13, 1990, Arnold sold lot nos. 265-B & C to spouses Tomas and Sylvina Occea, which included the
748 sq. m. portion previously sold to Alberta Morales. A Deed of Absolute Sale 6 over said lots was executed to
the Occea spouses and titles were transferred to their names.
In 1993, after the death of Arnold, the three (3) nieces-heirs of Alberta Morales learned about the second sale
of their lot to the Occea spouses when they were notified by caretaker Abas that they were being ejected from
the land. In 1994, the heirs filed a case7 for annulment of sale and cancellation of titles, with damages, against
the second vendees Occea spouses. In their complaint, they alleged that the Occeas purchased the land in
bad faith as they were aware that the lots sold to them had already been sold to Alberta Morales in 1954. They
averred that before the sale, when Tomas Occea conducted an ocular inspection of the lots, Morito Abas, the
caretaker appointed by Alberta Morales to oversee her property, warned them not to push through with the sale
as the land was no longer owned by vendor Arnold as the latter had previously sold the lot to Alberta Morales
who had a house constructed thereon.
For their part, the Occea spouses claimed that the OCT in the name of the original owners of the lots, the
Tordesillas spouses, was cancelled after it was subdivided between Angela and Arnold in 1969; that new TCTs
had been issued in the latters names; that they were unaware that the subject lots were already previously sold
to Morales as they denied that Tomas had a talk with caretaker Abas on the matter; that as of December 4,
1987, the TCTs covering the lots were in the name of Arnold and his wife, without any adverse claim annotated
thereon; that vendor Arnold represented to them that the occupants they saw on the land were squatters and
that he merely tolerated their presence; that they did not personally investigate the alleged squatters on
the land and merely relied on the representation of vendor Arnold; that sometime in 1966-1967, Arnold
and his co-heir Angela caused the survey of the original lot and subdivided it into 3 lots, without opposition from
Morales or her heirs. Thus, three (3) TCTs were issued in 1969 to Arnold and Angela and, two of the lots were
then sold to the Occea spouses, again without objection from Alberta Morales.
The Occea spouses alleged that they were buyers in good faith as the titles to the subject lots were free from
liens or encumbrances when they purchased them. They claimed that in 1989, Arnold offered to sell the subject
lots to them. On August 13, 1990, after they verified with the Antique Registry of Deeds that Arnolds TCTs were
clean and unencumbered, Arnold signed the instrument of sale over the subject lots in favor of the Occeas
for P100,000.00 and new titles were issued in their names.
The Occeas likewise set up the defenses of laches and prescription. They argue that Alberta and plaintiffs-
heirs were barred from prosecuting their action as they failed to assert their right for forty (40) years. Firstly,
they point out that vendor Arnold and Angela subdivided the entire lot in 1966 and declared themselves as the
only co-owners thereof in the deed of extrajudicial settlement. Alberta Morales failed to oppose the inclusion of
her 748 sq. m. lot in the deed. Thus, the title to the entire lot no. 256 was transferred to the names of Arnold
and Angela. Secondly, preparatory to the division of the lots, vendor Arnold had the land surveyed but Alberta
again failed to oppose the same. Finally, Alberta and her heirs who are claiming adverse rights over the land
based on the 1951 Deed of Pacto de Retro Sale and the 1954 Deed of Definite Sale of Shares failed for 40
years to annotate their adverse claims on the new titles issued to Arnold and Angela, enabling the latter to
possess a clean title and transfer them to the Occea spouses.
After trial, the lower court rendered a decision declaring the Occea spouses as buyers in good faith and ruled
that the action of the heirs was time-barred.
On appeal by Albertas heirs, the Court of Appeals reversed the decision of the trial court. It found that the
Occeas purchased the land in bad faith and that the action filed by Albertas heirs was not barred by
prescription or laches. The dispositive portion reads:
WHEREFORE, the instant appeal is hereby GRANTED. Accordingly, the assailed decision is
hereby REVERSED and SET ASIDE and a new one is rendered declaring the Deed of Absolute Sale
 dated August 13, 1990 executed between Arnold de la Flor in favor of defendants-appellees null and
void and ordering the cancellation of Transfer Certificate of Title Nos. 16896, 16897, T-18241 and T-
18242.
SO ORDERED.8
Hence this appeal where petitioner-spouses Occea raise the following issues:
I of Art. 1544, second paragraph, that the second realty buyer must act in good faith in
WHETHER OR NOT A VERBAL INFORMATION COULD BE MADE TO PREVAIL OVER A CLEAN
CERTIFICATE OF TITLE OF A REGISTERED LAND WHICH IS FREE OF ANY LIEN OR
ENCUMBRANCE ANNOTATED ON ITS CERTIFICATE OF TITLE OR ANY ADVERSE CLAIM
RECORDED WITH THE REGISTER OF DEEDS.
II
WHETHER OR NOT A BUYER OF A REGISTERED LAND IS OBLIGATED TO MAKE INQUIRIES
OF ANY POSSIBLE DEFECT OR ADVERSE CLAIM AFFECTING ITS OWNERSHIP WHICH DOES
NOT APPEAR ON THE CERTIFICATE OF TITLE.
III
WHETHER OR NOT THE PERIOD OF MORE THAN FORTY (40) YEARS WITHOUT POSITIVE
ACTION TAKEN BY RESPONDENTS, AS WELL AS BY ALBERTA MORALES, TO PROTECT
THEIR INTEREST CAN BE CONSIDERED LACHES AND THUS THEIR PRESENT ACTION HAS
PRESCRIBED.
On the first two issues, petitioner-spouses claim that they were purchasers of the land in good faith as the law
does not obligate them to go beyond a clean certificate of title to determine the condition of the property. They
argue that a person dealing with registered land is only charged with notice of the burden on the property
annotated on the title. When there is nothing on the title to indicate any cloud or vice in the ownership of the
property or any encumbrance thereon, the purchaser is not required to explore further than the title in quest of
any hidden defect or inchoate right that may subsequently defeat his right thereto. They claim they had every
right to purchase the land despite the verbal warning made by caretaker Abas as the information was mere
hearsay and cannot prevail over the title of the land which was free from any encumbrance.
Their arguments do not persuade.
The petition at bar presents a case of double sale of an immovable property. Article 1544 of the New Civil Code
provides that in case an immovable property is sold to different vendees, the ownership shall belong: (1) to the
person acquiring it who in good faith first recorded it in the Registry of Property; (2) should there be no
inscription, the ownership shall pertain to the person who in good faith was first in possession; and, (3) in
the absence thereof, to the person who presents the oldest title, provided there is good faith.
In all cases, good faith is essential. It is the basic premise of the preferential rights granted to the one claiming
ownership over an immovable.9 What is material is whether the second buyer first registers the second sale in
good faith, i.e., without knowledge of any defect in the title of the property sold. 10 The defense of indefeasibility
of a Torrens title does not extend to a transferee who takes the certificate of title in bad faith, with notice of a
flaw.11
The governing principle of prius tempore, potior jure (first in time, stronger in right) enunciated under Art. 1544
has been clarified, thus:
x x x Knowledge by the first buyer of the second sale cannot defeat the first buyers rights except when
the second buyer first registers in good faith the second sale (Olivares vs. Gonzales, 159 SCRA
33).Conversely, knowledge gained by the second buyer of the first sale defeats his rights even
if he is first to register, since such knowledge taints his registration with bad faith (see
also Astorga vs. Court of Appeals, G.R. No. 58530, 26 December 1984). In Cruz vs. Cabaa (G.R.
No. 56232, 22 June 1984, 129 SCRA 656), it was held that it is essential, to merit the protection
registering his deed of sale (citing Carbonell vs. Court of Appeals, 69 SCRA 99 and Crisostomo vs.
CA, G.R. No. 95843, 02 September 1992).12
In the case at bar, we find that petitioner-spouses failed to prove good faith in their purchase and registration of
the land. A purchaser in good faith and for value is one who buys property without notice that some other
person has a right to or interest in such property and pays its fair price before he has notice of the adverse
claims and interest of another person in the same property. So it is that the "honesty of intention" which
constitutes good faith implies a freedom from knowledge of circumstances which ought to put a person
on inquiry. At the trial, Tomas Occea admitted that he found houses built on the land during its ocular
inspection prior to his purchase. He relied on the representation of vendor Arnold that these houses were owned
by squatters and that he was merely tolerating their presence on the land. Tomas should have verified from the
occupants of the land the nature and authority of their possession instead of merely relying on the representation
of the vendor that they were squatters, having seen for himself that the land was occupied by persons other
than the vendor who was not in possession of the land at that time. The settled rule is that a buyer of real
property in the possession of persons other than the seller must be wary and should investigate the
rights of those in possession. Without such inquiry, the buyer can hardly be regarded as a buyer in
good faith and cannot have any right over the property.13 A purchaser cannot simply close his eyes to facts
which should put a reasonable man on his guard and then claim that he acted in good faith under the belief that
there was no defect in the title of his vendor. 14 His mere refusal to believe that such defect exists or his willful
closing of his eyes to the possibility of the existence of a defect in his vendors title will not make him an innocent
purchaser for value if it later develops that the title was in fact defective, and it appears that he would have
notice of the defect had he acted with that measure of precaution which may reasonably be required of a prudent
man in a similar situation.
Indeed, the general rule is that one who deals with property registered under the Torrens system need not go
beyond the same, but only has to rely on the title. He is charged with notice only of such burdens and claims as
are annotated on the title. However, this principle does not apply when the party has actual knowledge of facts
and circumstances that would impel a reasonably cautious man to make such inquiry or when the purchaser
has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably prudent
man to inquire into the status of the title of the property in litigation. One who falls within the exception can
neither be denominated an innocent purchaser for value nor a purchaser in good faith.15
The evidence of the private respondents show that when Tomas Occea conducted an ocular inspection of the
land prior to the second sale, Abas, the caretaker of the house which Alberta Morales built on the land,
personally informed Tomas that the lot had been previously sold by the same vendor Arnold to Alberta Morales.
With this information, the Occeas were obliged to look beyond the title of their vendor and make further
inquiries from the occupants of the land as to their authority and right to possess it. However, despite this
information about a prior sale, the Occeas proceeded with the purchase in haste. They did not inquire from
Abas how they could get in touch with the heirs or representatives of Alberta to verify the ownership of the land.
Neither do the records reveal that they exerted effort to examine the documents pertaining to the first sale.
Having discovered that the land they intended to buy was occupied by a person other than the vendor not in
actual possession thereof, it was incumbent upon the petitioners to verify the extent of the occupants
possessory rights.16 The Occeas did nothing and chose to ignore and disbelieve Abas statement.
On the third issue, we hold that the action to annul title filed by respondents-heirs is not barred by laches and
prescription. Firstly, laches is a creation of equity and its application is controlled by equitable considerations.
Laches cannot be used to defeat justice or perpetuate fraud and injustice. Neither should its application be used
to prevent the rightful owners of a property from recovering what has been fraudulently registered in the name
of another.17 Secondly, prescription does not apply when the person seeking annulment of title or
reconveyance is in possession of the lot because the action partakes of a suit to quiet title which is
imprescriptible.18 In this case, Morales had actual possession of the land when she had a house built thereon
and had appointed a caretaker to oversee her property. Her undisturbed possession of the land for a period of
fifty (50) long years gave her and her heirs a continuing right to seek the aid of a court of equity to determine
the nature of the claim of ownership of petitioner-spouses.19 As held by this Court in Faja vs. Court of
Appeals:20

x x x There is settled jurisprudence that one who is in actual possession of a piece of land
claiming to be owner thereof may wait until his possession is disturbed or his title attacked
before taking steps to vindicate his right, the reason for the rule being, that his undisturbed
possession gives him a continuing right to seek the aid of a court of equity to ascertain and
determine the nature of the adverse claim and its effect on his own title, which right can be claimed
only by one who is in possession. x x x The right to quiet title to the property, seek its reconveyance
and annul any certificate of title covering it accrued only from the time the one in possession
was made aware of a claim adverse to his own, and it is only then that the statutory period of
prescription commences to run against such possessor.

In the case at bar, Morales caretaker became aware of the second sale to petitioner-spouses only in 1991
when he received from the latter a notice to vacate the land. Respondents-heirs did not sleep on their rights for
in 1994, they filed their action to annul petitioners title over the land. It likewise bears to stress that when vendor
Arnold reacquired title to the subject property by means of fraud and concealment after he has sold it to Alberta
Morales, a constructive trust was created in favor of Morales and her heirs. As the defrauded parties who were
in actual possession of the property, an action of the respondents-heirs to enforce the trust and recover the
property cannot prescribe. They may vindicate their right over the property regardless of the lapse of
time.21 Hence, the rule that registration of the property has the effect of constructive notice to the whole world
cannot be availed of by petitioners and the defense of prescription cannot be successfully raised against
respondents.

In sum, the general rule is that registration under the Torrens system is the operative act which gives validity to
the transfer of title on the land. However, it does not create or vest title especially where a party has actual
knowledge of the claimants actual, open and notorious possession of the property at the time of his
registration.22 A buyer in bad faith has no right over the land. As petitioner-spouses failed to register the subject
land in good faith, ownership of the land pertains to respondent-heirs who first possessed it in good faith.

IN VIEW WHEREOF, the petition is DISMISSED. No costs.

SO ORDERED.
G.R. No. 157044 October 5, 2005
RODOLFO V. ROSALES, (represented by his heirs, Rodolfo, Jr., Romeo Allan, Lillian Rhodora, Roy
Victor, Roger Lyle and Alexander Nicolai, all surnamed Rosales) and LILY ROSQUETA-
ROSALES, Petitioners
vs.
MIGUEL CASTELLTORT, JUDITH CASTELLTORT, and LINA LOPEZ-VILLEGAS, assisted by her
Attorney-in-Fact, Rene Villegas, Respondents.
DECISION
CARPIO MORALES, J.:
The present petition for review on certiorari assails the October 2, 2002 Decision 1 and February 6, 2003
Resolution2 of the Court of Appeals (CA) in CA G.R. CV No. 64046 and seeks to reinstate the April 21, 1999
Decision3 of the Regional Trial Court (RTC) of Calamba, Laguna, Branch 34 in Civil Case No. 2229-95-C.
Spouses-petitioners Rodolfo V. Rosales and Lily Rosqueta-Rosales (petitioners) are the registered owners of
a parcel of land with an area of approximately 315 square meters, covered by Transfer Certificate of Title (TCT)
No. 368564 and designated as Lot 17, Block 1 of Subdivision Plan LRC Psd-55244 situated in Los Baos,
Laguna.
On August 16, 1995, petitioners discovered that a house was being constructed on their lot, without their
knowledge and consent, by respondent Miguel Castelltort (Castelltort). 5
It turned out that respondents Castelltort and his wife Judith had purchased a lot, Lot 16 of the same Subdivision
Plan, from respondent Lina Lopez-Villegas (Lina) through her son-attorney-in-fact Rene Villegas (Villegas) but
that after a survey thereof by geodetic engineer Augusto Rivera, he pointed to Lot 17 as the Lot 16 the
Castelltorts purchased.
Negotiations for the settlement of the case thus began, with Villegas offering a larger lot near petitioners lot in
the same subdivision as a replacement thereof.6 In the alternative, Villegas proposed to pay the purchase price
of petitioners lot with legal interest.7 Both proposals were, however, rejected by petitioners 8 whose counsel, by
letter9 of August 24, 1995, directed Castelltort to stop the construction of and demolish his house and any other
structure he may have built thereon, and desist from entering the lot.
Petitioners subsequently filed on September 1, 1995 a complaint 10 for recovery of possession and damages
with prayer for the issuance of a restraining order and preliminary injunction against spouses-respondents
Miguel and Judith Castelltort before the RTC of Calamba, Laguna, docketed as Civil Case No. 2229-95-C.
To the complaint, the Castelltorts claimed in their Answer with Counterclaim11 that they were builders in good
faith.
Lina, represented by her son-attorney-in-fact Villegas, soon filed a Motion for Intervention12 before the RTC
which was granted by Order13 of December 19, 1995.
In her Answer to the complaint,14 Lina alleged that the Castelltorts acted in good faith in constructing the house
on petitioners lot as they in fact consulted her before commencing any construction thereon, they having relied
on the technical description of the lot sold to them, Lot 16, which was verified by her officially designated
geodetic engineer.
Nevertheless, Lina proposed to give petitioners a lot containing an area of 536 square meters together with the
house and duplex structure built thereon or, if petitioners choose, to encumber the 536 square meter lot as
collateral "to get immediate cash" through a financing scheme in order to compensate them for the lot in
question.15
Ruling out good faith, the RTC, by Decision of April 21, 1999, found for petitioners in this wise:
In the instant case, there is no well-founded belief of ownership by the defendants of the land upon which they
built their house. The title or mode of acquisition upon which they based their belief of such ownership stemmed
from a Contract to Sell (Exhibit "P") of which they were not even parties, the designated buyer being Elizabeth
Yson Cruz and the sale even subjected to the judicial reconstitution of the title. And by their own actions,
particularly defendant Miguel Castelltort, defendants betrayed this very belief in their ownership when realizing
the inutility of anchoring their ownership on the basis of the Contract of Sale, defendant Miguel Castelltort in his
testimony declared Elizabeth Yson Cruz as his wife (tsn, pp. 7-8, March 24, 1998) despite an admission in their
answer that they are the spouses named as defendants (tsn, p. 8, January 12, 1998) and which declaration is
an utter falsehood as the Contract to Sell itself indicates the civil status of said Elizabeth Yson Cruz to be single.
Even if we are to concede that defendants built their house in good faith on account of the representation of
attorney-in-fact Rene Villegas, their failure to comply with the requirements of the National Building Code,
particularly the procurement of a building permit, stained such good faith and belief.
xxx
From any and all indications, this deliberate breach is an unmitigated manifestation of bad faith. And from the
evidence thus adduced, we hold that defendants and the intervenor were equally guilty of negligence which led
to the construction of the defendants house on plaintiffs property and therefore jointly and severally liable for
all the damages suffered by the plaintiffs.16 (Underscoring supplied)
The dispositive portion of the trial courts Decision reads, quoted verbatim:
ACCORDINGLY, in view of all the foregoing, judgment is hereby rendered in favor of plaintiffs and against the
defendants, ordering the latter to surrender the possession of the property covered by TCT No. 36856 of the
Register of Deeds of Laguna including any and all improvements built thereon to the plaintiffs.
Defendants and intervenors are likewise jointly and severally directed to pay to plaintiffs the following damages:
a) TWO THOUSAND (P2,000.00) PESOS per month from February 1995 by way of reasonable compensation
for the use of plaintiffs property until the surrender of the same;
b) FIFTY THOUSAND (P50,000.00) PESOS by way of moral damages;
c) THIRTY THOUSAND (P30,000.00) PESOS as exemplary damages;
d) TWENTY THOUSAND (P20,000.00) PESOS as attorneys fees and cost of suit.
The counterclaim interposed by the defendants in their responsive pleading is hereby dismissed for lack of
merit.
SO ORDERED.17
Respondents thereupon filed their respective appeals with the CA.
Petitioner Rodolfo Rosales, in the meantime, died on December 7, 2001. His heirs Rodolfo, Jr., Romeo Allan,
Lillian Rhodora, Roy Victor, Roger Lyle and Alexander Nicolai, all surnamed Rosales, filed their
Appearance18 as his substitute.
By Decision of October 2, 2002, the CA granted the appeal and set aside the April 21, 1999 RTC Decision. The
dispositive portion of the Decision reads, quoted verbatim:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED and the assailed decision of the
court a quo REVERSED AND SET ASIDE. In accordance with the cases of Technogas Philippines
Manufacturing Corp. vs. Court of Appeals and Depra vs. Dumlao, applying Article 448 of the Civil Code, this
case is REMANDEDto the Regional Trial Court of Calamba, Laguna, Branch 34, for further proceedings, as
follows:
1. to determine the present fair price of appellees 315 square meter area of land and the amount of the
expenses actually spent by the appellants for building the house as of 21 August 1995, which is the time they
were notified of appellees rightful claim over Lot 17.
2. to order the appellees to exercise their option under the law (Article 448, Civil Code), whether to appropriate
the house as their own by paying to the appellants the amount of the expenses spent for the house as
determined by the court a quo in accordance with the limitations as aforestated or to oblige the appellants to
pay the price of the land.
In case the appellees exercise the option to oblige the appellants to pay the price of the land but the latter reject
such purchase because, as found by the court, the value of the land is considerably more than that of the house,
the court shall order the parties to agree upon the terms of a forced lease, and give the court a quo a formal
written notice of such agreement and its provisos. If no agreement is reached by the parties, the court a quo
shall then fix the terms of the forced lease, provided that the monthly rental to be fixed by the Court shall not be
less that Two Thousand Pesos (P2,000.00) per month, payable within the first five (5) days of each calendar
month and the period thereof shall not be more than two (2) years, counted from the finality of the judgment.
Upon the expiration of the forced lease, or upon default by the appellants in the payment of rentals for two (2)
consecutive months, the appellees shall be entitled to terminate the forced lease, to recover their land, and to
have the improvement removed by the appellants at the latters expense. The rentals herein provided shall be
tendered by the appellants to the court for payment to the appellees, and such tender shall constitute evidence
of whether or not compliance was made within the period fixed by the court.
In any event, the appellants shall pay the appellees the amount of Two Thousand Pesos (P2,000.00) as
reasonable compensation for their occupancy of the encroached property from the time said appellants good
faith cease (sic) to exist until such time the possession of the property is delivered to the appellees subject to
the reimbursement of the aforesaid expenses in favor of the appellants or until such time the payment of the
purchase price of the said lot be made by the appellants in favor of the appellees in case the latter opt for the
compulsory sale of the same.
SO ORDERED.19 (Emphasis in the original)
In reversing the trial court, the CA held:
xxx
x x x A perusal of the records readily reveals that said court instead relied on flimsy, if not immaterial, allegations
of the appellees, which have no direct bearing in the determination of whether the appellants are builders in bad
faith.
For one, the pivotal issue to be resolved in this case, i.e. whether appellant Miguel is a builder in good faith,
was ignored by the court a quo. The instant case does not in any way concern the personal and property
relations of spouses-appellants and Elizabeth Yson Cruz which is an altogether different matter that can be
ventilated by the concerned parties through the institution of a proper action. xxx The court a quo should have
focused on the issue of whether appellant Miguel built, in good faith, the subject house without notice of the
adverse claim of the appellees and under the honest belief that the lot which he used in the construction belongs
to him. xxx
xxx As it is, appellant Miguel relied on the title which the intervenor showed to him which, significantly, has no
annotation that would otherwise show a prior adverse claim. Thus, as far as appellant Miguel is concerned, his
title over the subject lot, as well as the title of the intervenor thereto, is clean and untainted by an adverse claim
or other irregularities.
For another, the appellants failure to secure a building permit from the Municipal Engineers Office on their
construction on Lot 17 does not impinge on the good faith of the appellants. In fact, it can be told that a building
permit was actually filed by appellant Miguel with respect to Lot 16 and it was only due to the confusion and
misapprehension by the intervenor of the exact parameters of the property which caused appellants belief that
Lot 17 [the questioned lot], is his. This fact bolsters appellant Miguels good faith in building his house on
appellees lot under the mistaken belief that the same is his property. Otherwise, he should have secured a
building permit on Lot 17 instead or should not have bothered to take the necessary measures to obtain a
building permit on Lot 16 in the first place.
By and large, the records show that, as testified to by Engr. Rebecca T. Lanuang, appellant Miguel had already
applied for a building permit as early as February 1994 and was in fact issued a temporary building
permitpending the completion of the requirements for said permit. Although the building permit was belatedly
issued in January 1996, this does not in any way detract from appellant Miguels good faith.
xxx
In holding the appellants as builders in bad faith, the court a quo defied law and settled jurisprudence
considering that the factual basis of its findings and the incontrovertible evidence in support thereof prove that
the appellant Miguel, in good faith, built the house on appellees land without knowledge of an adverse claim or
any other irregularities that might cast a doubt as to the veracity of the assurance given to him by the intervenor.
Having been assured by the intervenor that the stone monuments were purposely placed, albeit wrongfully, by
the land surveyor in said land to specifically identify the lot and its inclusive boundaries, the appellants cannot
be faulted for having relied on the expertise of the land surveyor who is more equipped and experienced in the
field of land surveying. Although under the Torrens system of land registration, the appellant is presumed to
have knowledge of the metes and bounds of the property with which he is dealing, appellant however,
considering that he is a layman not versed in the technical description of his property, cannot be faulted in his
reliance on the survey plan that was delivered to him by the intervenor and the stone monuments that were
placed in the encroached property.
xxx
Peremptorily, contrary to the flawed pronouncements made by the court a quo that appellant Miguel is deemed
as a builder in bad faith on the basis of a mere assertion that he built his house without initially satisfying himself
that he owns the said property, this Court finds reason to maintain good faith on the part of the
appellant. Admittedly, the appellants house erroneously encroached on the property of the appellees due to a
mistake in the placement of stone monuments as indicated in the survey plan, which error is directly attributable
to the fault of the geodetic engineer who conducted the same. This fact alone negates bad faith on the part of
appellant Miguel.
xxx
Moreover, it is quite illogical for appellant Miguel to knowingly build his house on a property which he knew
belongs to another person. x x x
xxx
In view of the good faith of both parties in this case, their rights and obligations are to be governed
by Article 448, which has been applied to improvements or portions of improvements built by mistaken
belief on land belonging to the adjoining owner. x x x
x x x20 (Emphasis and underscoring supplied)
Petitioners Motion for Reconsideration21 dated October 22, 2002 having been denied by the CA by Resolution
of March 13, 2002, the present petition was filed raising the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF
DISCRETION IN MAKING A FINDING THAT IS CONTRARY TO THE ADMISSIONS BY THE PARTIES
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF
LAW IN CONCLUDING THAT THE TRIAL COURT, IN DECIDING THE CASE, RELIED ON FLIMSY, IF NOT
IMMATERIAL, ALLEGATIONS OF THE PETITIONERS, WHICH HAVE NO DIRECT BEARING IN THE
DETERMINATION OF WHETHER THE RESPONDENTS ARE BUILDERS IN GOOD FAITH
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF
LAW IN RENDERING A DECISION THAT IS UNENFORCEABLE AGAINST BOTH RESPONDENT JUDITH
CASTELLTORT AND THIRD-PARTY ELIZABETH CRUZ22
Petitioners initially hammer against respondents proving that Castelltort and a certain Elizabeth Cruz are the
builders of the house on the subject property, they faulting them with estoppel for alleging in their Answer before
the trial court that "they (respondents Castelltort and Judith) caused the construction of their house which they
bought from a certain Lina Lopez-Villegas."
Petitioners rely on the following doctrine established in Elayda v. Court of Appeals:23
"an admission made in the pleadings cannot be controverted by the party making such admission and are
conclusive as to him and that all proofs submitted by him contrary thereto or inconsistent therewith, should be
ignored, whether objection is interposed by the party or not x x x"
Petitioners contention is hardly relevant to the case at bar. Whether it was Castelltort and Judith or Castelltort
and Elizabeth Cruz who purchased the property from Lina is not material to the outcome of the instant
controversy. As found by the CA:
The fact remains that appellant [Castelltort] is the builder of the house on Lot 17 xxx The court a quo should
have focused on the issue of whether appellant Miguel built, in good faith, the subject house without notice of
the adverse claim of the appellees and under the honest belief that the lot which he used in the construction
belongs to him. xxx it cannot be gainsaid that appellant Miguel has a title over the land that was purchased from
the intervenor x x x24
At all events, as this Court held in the case of Gardner v. Court of Appeals:25
In its Resolution reversing the original Decision, respondent Court discredited the testimony of Ariosto SANTOS
for being at variance with the allegations in his Answer. The fact, however, that the allegations made by Ariosto
SANTOS in his pleadings and in his declarations in open Court differed will not militate against the findings
herein made nor support the reversal by respondent Court. As a general rule, facts alleged in a partys pleading
are deemed admissions of that party and binding upon it, but this is not an absolute and inflexible rule. An
Answer is a mere statement of fact which the party filing it expects to prove, but it is not evidence. As Ariosto
SANTOS himself, in open Court, had repudiated the defenses he had raised in his Answer and against his own
interest, his testimony is deserving of weight and credence.26 (Underscoring supplied)
The issue determinative of the controversy in the case at bar hinges on whether Castelltort is a builder in good
faith.
A builder in good faith is one who builds with the belief that the land he is building on is his, or that by some title
one has the right to build thereon, and is ignorant of any defect or flaw in his title. 27
Article 527 of the Civil Code provides that good faith is always presumed, and upon him who alleges bad faith
on the part of a possessor rests the burden of proof. 28
In the case at bar, Lot 16 was sold by Lina, through her attorney-in-fact Villegas, to Castelltort and a certain
Elizabeth Cruz29 for a consideration of P500,000.00. While prior to the sale, what Villegas showed Castelltort
as evidence of his mother Linas ownership of the property was only a photocopy of her title TCT No. (T-42171)
T-1855030 he explaining that the owners duplicate of the title was lost and that judicial reconstitution thereof
was ongoing, Castelltort acted in the manner of a prudent man and went to the Registry of Deeds of Laguna to
procure a certified true copy of the TCT.31 The certified true copy bore no annotation indicating any prior adverse
claim on Lot 16.
The records indicate that at the time Castelltort began constructing his house on petitioners lot, he believed
that it was the Lot 16 he bought and delivered to him by Villegas.
In his cross-examination, Villegas testified:
Q: You said the surveyor placed a mujon along boundary of the property?
A: Yes.
Q: When were the mujons placed in the boundary of the property?
A: These mujons were the basis for my locating the property in pointing to Mr. Castelltort.
xxx
Q: Is it not a fact that before Miguel Castelltort started constructing that house he sought your advice or
permission to construct the same over that particular lot?
Q: Now, can you point to this Honorable Court where exactly did your men place these additional mohons and
how many?
A: Later on we discovered that they placed the mohons in the adjoining lot, lot 17.
xxx
Q: x x x when again did you meet Mr. Rene Villegas or after how many months or year?

A: Yes. A: Maybe after a year, sir.

Q: And you gave your consent? Q: And you met him again because he had a problem regarding the property of one Engr. Rosales?

A: Yes, because based on my knowledge also that that was the lot as pointed by Engr. Rivera. A: Yes, sir.

xxx Q: And when he confided to you this matter, did you go to the site of Lot 16 or 17?

Q: Was there any remarkable difference between lot 16 and 17 at the time that this particular lot was sold to A: Yes, sir.
Miguel Castelltort and Elizabeth Cruz?
Q: And what did you see there?
xxx
A: A house being constructed then I rechecked the location of the house and it turned out to be in Lot 17.
A: Both lots 16 and 17 are practically the same. The (sic) have the same frontage. There is only a difference of
4 square meters, one is 311 square meters and the other 315 square meters. Both sides were fenced, as drawn xxx
they were facing the same road. They are practically the same.

Q: Considering that you found out that a mistake was actually made by your assistants Dennis Orencio, Mario
Q: But at the time or immediately before Mr. Castelltort started the construction of the house, was there any Carpio and Sovejano when you allowed them to proceed on their own to make this computation, did you confront
remarkable distinction between these two properties? these men of yours afterwards?

A: None.32 (Emphasis and underscoring supplied) A: Yes, sir.

The confusion in the identification of Lot 16 was eventually traced to the error committed by geodetic engineer Q: In what manner?
Augusto Riveras employees in placing stone monuments on petitioners property, instead of on Lot 16, the lot
sold to Castelltort, based on the survey made by the engineer in 1992.
A: I actually reprimanded them verbally and also I dismissed Mario Carpio from my office.
The engineer so testified:
xxx
Q: Now, aside from inspecting personally the site, what else did your men or assistants do?
Q: And did you investigate how your men committed this mistake of planting these monuments on another lot
when corners 4 & 1 were clearly planted on the ground?
A: After computing the subdivision lots, they went back to the field to plant those subdivision corners with
concrete monuments.
A: I myself rechecked it and found out that they committed an error.
Q: Which is (sic) also called as "mohons"?
xxx
A: Yes, sir.
Q: And now, you are saying that your men committed a mistake by placing thereon monuments by planting
these monuments not on Lot 16 but on Lot 17?
A: When I investigated how did they commit (sic) a mistake it came to be like this. Before when we surveyed
first this in 1992, at that time Dante Villegas contracted my services there was a fence here then when we went
back, the road was already removed so they committed an error that this point is Lot 19, they thought that it
was Lot 19, the back portion.
xxx
Q: In this particular case, did you find out how your men checked the succeeding lots, how they determine (sic)
the exact location of lot 16?
A: They just relied on one side of the subdivision.
Q: By just counting the number of lots?
A: Yes, sir.
Q: Without making any actual measurement?
A: They made an actual measurement but the reference point is not the one, the correct one because they also
checked it with the other corner of the road going back.
xxx
Q: And how did they commit a mistake when you said they checked the lot at the back of Lot 16?
A: Because they were quite confident since we had already relocated the property two years ago so they thought
that they get (sic) the right lot without checking the other side of the subdivision.
xxx
Q: Now, you said that when you went to the place because you heard from Rene Villegas that there was a
mistake you no longer could find the monuments on lines 1 and 4 and according to you the reason is that a
fence was already constructed?
A: Yes, sir.
Q: For clarification, is this line 1 & 4 on Lot 16 a common line 1 &4 on Lot 17?
A: Yes, sir a common line.
Q: In other words, this line 1 &4 devides (sic) Lot 16 & 17?
A: Yes, sir.
Q: So that when these monuments were placed on lines 1 & 4 somebody could mistake it for Lot 17 also
because there were monuments now 1 &4 for lot 16 since these are common lines for
Lot 17 also with Lot 16, it could also be construed that these are monuments for Lot 17?
A: Yes, sir possible.33 (Underscoring supplied)
As correctly found by the CA, both parties having acted in good faith at least until August 21, 1995, the applicable
provision in this case is Article 448 of the Civil Code which reads:
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.
Under the foregoing provision, the landowner can choose between appropriating the building by paying the
proper indemnity or obliging the builder to pay the price of the land, unless its value is considerably more than
that of the structures, in which case the builder in good faith shall pay reasonable rent. 34 If the parties cannot
come to terms over the conditions of the lease, the court must fix the terms thereof.
The choice belongs to the owner of the land, a rule that accords with the principle of accession, i.e., that the
accessory follows the principal and not the other way around. Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive.35 The landowner cannot refuse to exercise either option and compel
instead the owner of the building to remove it from the land.36
The raison detre for this provision has been enunciated thus:
Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and
it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the
land. In view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution
by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity,
or to oblige the builder or planter to pay for the land and the sower the proper rent. He cannot refuse to exercise
either option. It is the owner of the land who is authorized to exercise the option, because his right is older, and
because, by the principle of accession, he is entitled to the ownership of the accessory thing. 37
Possession acquired in good faith does not lose this character except in the case and from the moment facts
exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. 38 The
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 suit for recovery of the property by the true owner. 39
In the case at bar, Castelltorts good faith ceased on August 21, 1995 when petitioners personally apprised him
of their title over the questioned lot. As held by the CA, should petitioners then opt to appropriate the house,
they should only be made to pay for that part of
the improvement built by Castelltort on the questioned property at the time good faith still existed on his part or
until August 21, 1995.
The CA, however, failed to qualify that said part of the improvement should be pegged at its current fair market
value consistent with this Courts pronouncement in Pecson v. Court of Appeals.40
And, as correctly found by the CA, the commencement of Castelltorts payment of reasonable rent should start
on August 21, 1995 as well, to be paid until such time that the possession of the property is delivered to
petitioners, subject to the reimbursement of expenses, that is, if such option is for petitioners to appropriate the
house.

This Court quotes the CAs ratiocination with approval:

x x x Generally, Article 448 of the Civil Code provides that the payment of reasonable rent should be made only
up to the date appellees serve notice of their option as provided by law upon the appellants and the court a quo;
that is, if such option is for appellees to appropriate the encroaching structure. In such event, appellants would
have a right to retain the land on which they have built in good faith until they are reimbursed the expenses
incurred by them. This is so because the right to retain the improvements while the corresponding indemnity is
not paid implies the tenancy or possession in fact of the land on which it is built, planted or sown.

However, considering that appellants had ceased as builders in good faith at the time that appellant Miguel was
notified of appellees lawful title over the disputed property, the payment of reasonable rent should accordingly
commence at that time since he can no longer avail of the rights provided under the law for builders in good
faith.41

If the option chosen by petitioners is compulsory sale, however, the payment of rent should continue up to the
actual transfer of ownership.42

Respecting petitioners argument that the appellate court erred in rendering a decision that is "unenforceable
against Judith who is not the owner of the house and Elizabeth Cruz who was found to be a part owner of the
house built on their lot but is not a party to the case," the same does not lie.

While one who is not a party to a proceeding shall not be affected or bound 43 by a judgment rendered
therein,44like Elizabeth Cruz, this does not detract from the validity and enforceability of the judgment on
petitioners and respondents Castelltorts.

WHEREFORE, the petition is DENIED. The Decision dated October 2, 2002 and Resolution dated February 6,
2003 of the Court of Appeals are AFFIRMED with MODIFICATION such that the trial court shall include for
determination the increase in value ("plus value") which petitioners 315 square meter lot may have acquired by
reason of the existence of that portion of the house built before respondents Miguel and Judith Castelltort were
notified of petitioners rightful claim on said lot, and the current fair market value of said portion.

SO ORDERED.
G.R. No. L-43345 July 29, 1976
JOSEFINA S. DE LAUREANO, petitioner,
vs.
HON. MIDPANTAO L. ADIL, in his capacity as Presiding Judge, Court of First Instance of Iloilo, Branch
II, and ONG CU, respondents.
Celso Ed. T. Unson for petitioner.
Rolando Magbanua Antiquiera for private respondent.
AQUINO, J.:
Josefina S. de Laureano in this special civil action of certiorari assails the interlocutory orders of the Court of
First Instance of Iloilo, denying her motions for execution and for a preliminary mandatory injunction in an
ejectment suit which was decided in her favor by the city court of Iloilo City and which was appealed by the
lessee, Ong Cu (Civil Case No. 10370).
Mrs. Laureano is the registered owner of Lots 996 and 1004-B with a total area of 3,107 square meters located
at the corner of Iznart and Solis Streets, Iloilo City. The lots were leased to Ong Cu for fifteen year period which
allegedly expired on August 31, 1974.
In view of Ong Cu's failure to vacate the lots and remove his improvements thereon. Mrs. Laureano filed against
him an ejectment suit in October, 1974 in the city court of Iloilo City.
After trial, the city court on September 23, 1975 rendered a judgment ordering Ong Cu to vacate the lots, to
restore their possession to Mrs. Laureano, to remove his buildings and other improvements thereon and to pay
P12,428 monthly as compensation for the use and occupation of the lots from September 1, 1974 up to the time
he vacates them, with interest at twelve percent per annum from the date of accrual plus P10,000 as moral and
exemplary damages and attorney's fees.
Ong Cu appealed to the Court of Fist Instance of Iloilo. Instead of filing a supersedeas bond based on the
findings of the city court in its decision, Ong Cu asked the city court ex parte to approve his supersedeas bond
in the sum of P22,000 and to fix the rental value of the two lots at P1,200 a month. The city court granted that ex
partemotion in its order of October 8, 1975. Thereafter, the record was elevated to the Court of First Instance.
The case was assigned to the sala of respondent Judge.
On November 4 Mrs. Laureano received a notice from the clerk of court that Ong Cu's appeal had been
docketed. On November 13 she filed a motion in the lower court praying for a preliminary mandatory injunction
to restore her to the possession of the said lots. Invoking article 1674 of the Civil Code and section 9, Rule 70
of the Rules of Court, she alleged that Ong Cu's appeal was frivolous and dilatory.
She also asked for immediate execution of the city court's judgment on the ground that Ong Cu's supersedeas
bond was inadequate and that he had failed to deposit the sum of P12,428 monthly as reasonable value of the
use and occupation of the lots adjudged by the city court.
Ong Cu opposed the two motions. The lower court in its order of December 9, 1975 upheld the city court's order
fixing the supersedeas bond and the amount to be deposited by Ong Cu.
After the lower court's attention was called to its failure to resolve Mrs. Laureano's other motion for a mandatory
injunction, it ruled in its order of February 12, 1976 that the writ could not be granted because it had already
sanctioned Ong Cu's supersedeas bond, the purpose of which was to stay execution pending appeal. The lower
court reasoned out that it would be absurd to stay execution and at the same time restore possession to the
plaintiff by granting the mandatory injunction. It regarded Ong Cu as a possessor in good faith entitled to
reimbursement of his necessary and useful expenses.
The instant certiorari action was filed on March 25, 1976. The issue is whether the lower court acted. with grave
abuse of discretion in denying Mrs. Laureano's motions for execution and a mandatory injunction.
The motion for execution. Rule 70 of the Rules of Court provides:
SEC. 8. Immediate execution of judgment. Haw to stay same. If judgment is rendered
against the defendant, execution shall issue immediately, unless an appeal has been
perfected and the defendant to stay execution files a sufficient bond, approved by the
municipal or city court and executed to the plaintiff to enter the action in the Court of First
Instance and to pay the rents, damages, and costs accruing down to the time of the judgment
appealed from, and unless, during the pendency of the appeal, he deposits with the appellate
court the amount of rent due from time to time under the contract, if any, as found by the
judgment of the municipal or city court to exist. In the absence of a contract, he shall deposit
with the court the reasonable value of the use and occupation of the premises for the
preceding month or period at the rate determined by the judgment, on or before the tenth
day of each succeeding month or period. The supersedeas bond shall be transmitted by the
municipal or city court, with the other papers, to the clerk of the Court of First Instance to
which the action is appealed.
All moneys so paid to the appellate court shall be deposited in the provincial or city treasury,
and shall be held there until the final disposition of the appeal, unless the court, by
agreement of the interested parties, or in the absence of reasonable grounds of opposition
to a motion to withdraw, or for justifiable reasons, shall decree otherwise. Should the
defendant fail to make the payments above prescribed from time to time during the pendency
of the appeal, the appellate court, upon motion of the plaintiff, of which the defendant shall
have notice, and upon proof of such failure, shall order the execution of the judgment
appealed from with respect to the restoration of possession, but such execution shall not be
a bar to the appeal taking its course until the final disposition thereof on its merits.
xxx xxx xxx
As explicitly provided in section 8, the judgment of tile inferior court in plaintiff's favor in an ejectment case is
immediately executory. Thus, where the city court on the day it rendered the judgment ordered the execution
thereof and the defendant did not perfect his appeal and did not post a supersedeas bond, it was held that
certiorari would not lie to set aside the execution. Section 8 of Rule 70 is an exception to the general rule as to
the execution of the judgment of an inferior court which is found in section 18, Rule 5 of the Rules of Court
(Pascua vs. Nable, 71 Phil. 186).
The inferior court's judgment is immediately executory in order to prevent further damages to the plaintiff should
the defendant continue to deprive him of the possession of the premises in litigation (Yu Tiong Tay vs. Barrios,
79 Phil. '597, 601).
The defendant may stay execution by (a) perfecting an appeal and filing a supersedeas bond and (b) paying
from time to time either to the plaintiff or to the Court of First Instance during the pendency of the appeal the
rentals or the reasonable value Of the use and occupation of the property as fixed by the inferior in its
judgment (Sison vs. Hon. Bayona, 109 Phil. 567, 561; Vda. de Palanca vs. Chua Keng Kian, L-26430, March
11, 1969, 27 SCRA 356).
The reasonable value of the use and occupation of the premises is that fixed by the inferior court in its
judgmentbecause the rental stipulated in the lease contract that had expired might no longer be the reasonable
value for the use and occupation of the premises by the reason of the change or rise in value (Aylon vs. Jugo,
78 Phil. 816).
The purpose of the supersedeas bond is to secure payment of the rents and damages adjudged in the appealed
judgment. Hence, the bond is not n if the defendant deposits in court the amount of back rentals as fixed in the
judgment. In other words, the supersedeas bond answers only for rentals was in the judgment and not for those
that may accrue during the pendency of the appeal which are guaranteed by the periodical deposits to be made
by the defendant. (Sison vs. Hon. Bayona, supra). The appeal bond answers for the costs (Sanchez vs. Zosa,
L-27043, November 28, 1975, 68 SCRA 171, 174; Contreras vs. Dinglasan 79 Phil. 42).
The damages contemplated in section 8 of Rule 70 refer to the reasonable compensation for the use and
occupation of the property which is generally measured by its fair rental value. It cannot refer to other damages
which are foreign to the enjoyment or material possession of the property. Consequently attorney's fees cannot
be considered as damages (Castueras vs. Bayona, 106 Phil. 340).
In the instant case, the city court found that Ong Cu's lease expired on August 31, 1974 and that the reasonable
value of the use and occupation of the two lots is four pesos a square meter or P12,428 monthly. To stay
execution, Ong Cu should have filed, and the city court should have required, a supersedeas bond in the total
amount of the reasonable value of the use and occupation of the two lots for the period from September 1, 1974
to September, 1975, or for thirteen months, at the rate fixed in the city court's judgment which is P12,428.
The supersedeas bond should be in the total sum of P161,564.00. And the amount to be deposited monthly
beginning October, 1975 is that same amount of P12,428. The deposit should be made on or before the tenth
day of the succeeding month.
The city court erred in issuing ex parte an order granting Ong Cu's motion fixing the supersedeas bond at
P22,000 and the monthly deposit at P1,200 which was the rental stipulated in the lease contract that had already
expired. The city court should not have allowed Ong Cu to dictate the amount of the supersedeas bond and the
amount of the monthly payments to be deposited in court.
The reasonable value of the use and occupation of the two lots was already fixed in its judgment. That value is
the value to be deposited in court. Ong Cu's motion that it be fixed at P1,200 was uncalled for and was in
contravention of the mandatory provisions of section 8 of Rule 70.
Also contrary to the peremptory provisions of section 8 was Ong Cu's act of fixing his supersedas bond at
P22,000 instead of at the amount equivalent to the total compensation or rentals Is that had accumulated up to
the rendition of the city court's judgment. That is the amount of the supersedeas bond unalterably fixed in section
8.
The lower court theorized that the city court's order of October 8, 1975 approving Ong Cu's supersedeas bond
in the sum of P22,000 and provisionally fixing the monthly rental deposited at P1,200 was a valid amendment of
the city court's decision of September 23. That theory is untenable. It distorts the meaning of an amendment.
Ong Cu did not move. that the decision be amended. The order according to its letter and tenor can in no sense
be interpreted as amendment of the city court's decision. It makes no reference to the decision.
At the time the order was issued, Ong Cu had already riled his notice of appeal. He did not rile a new notice of
appeal by indicating therein that he was appealing from the city court's ,decision as supposedly amended by its
order of October 8. He could not have done so because the October 8 order in its face does not purport to
amend the decision.
It results that Ong Cu's supersedeas bond was inadequate and that he did not deposit the compensation for the
use and occupation of the two lots which wits fixed in the city court judgment. His supersedeas bond and his
deposits were not sufficient to stay execution.
If this were a case where the defendant did not file any supersedeas bond or did not make any monthly deposit,
then Mrs. Laureano would be entitled as a matter of right to the immediate execution of the city court's judgment
both as to the restoration of possession and the payment of the accrued rentals or compensation for the use
and occupation of the premises (De Pages and Vda. de Rodriguez vs. Hon. Canonoy, 116 Phil. 898, 901;
Paulino, Sr. vs. Hon. Surtida, 109 Phil. 621, 626).
In such a case ' the execution is mandatory. The only exceptions are the existence of fraud, accident, mistake
or execusable negligence which prevented the defendant from posting the supersedeas bond or making the
monthly deposit, or the occurrence of supervening events which brought about a material change in the situation
of the parties and which would make the execution inequitable (Cunanan vs. Rodas, 78 Phil. 800; Laurel vs.
Abalos, L-26098, October 31, 1969, 30 SCRA 281).
This is a case where there was a supersedeas bond and where monthly de sits were made but the bond and
the deposit were inadequate or were not in conformity with the city court's judgment. Ong Cu committed a
mistake because he followed the erroneous order of the city court which fixed the supersedeas bond and the
monthly deposit in contravention of its own decision and, consequently, in violation of section 8 of Rule 70.
Because of that mistake, immediate execution under Rule 70 would not be warranted (See Yu Phil. Khim vs.
Amparo, 86 Phil. 441, 445, Bantug vs. Montinola, 73 Phil. 13, 20; Kraut vs. Encarnacion, 96 Phil. 986; Tagulimot
vs. Makalintal, 85 Phil. 40; De la Cruz vs. Burgos, L-28095, July 30, 1969, 28 SCRA 977). The Court of First
Instance has discretion to order the execution of a new supersedeas bond to replace a defective one (Zamora
vs. Dinglasan and Hilario, 77 Phil. 46, 53).
Ong Cu should be given a thirty-day period from notice within which to file a new supersedeas bond in the sum
of P161,564 and to deposit the value of the use and occupation of the two lots at the rate of P12,428 beginning
October, 1975 less the amounts already deposited by him. Execution should issue if he fails to file a new
supersedeas bond and to make up for the deficiency in his monthly deposits.
Motion for mandatory injunction. The Civil Code provides:
ART. 1674. In ejectment cases where an appeal is taken the remedy granted in article 539,
second paragraph, shall also apply, if the higher court is satisfied that the lessee's appeal is
frivolous or dilatory, or that the lessor's appeal is prima facie meritorious. The period of ten
days referred to in said article shall be counted from the time the appeal is perfected. (n)
Article 1674 is reproduced in section 9 of Rule 70. Article 539 of the Civil Code in its second paragraph grants
to the possessor, who was deprived of the possession of his real property through forcible entry, the right to
secure from an inferior court in the action for forcible entry a writ of preliminary mandatory injunction to restore
him in his possession.
Article 1674 gives to the plaintiff in an unlawful detainer case originating in the inferior court and appealed to
the Court of First Instance the remedy which article 539 gives to the plaintiff in a forcible entry case. It is designed
to eliminate the injustice of the old rule which allowed the lessee to continue in possession during an appeal
even if the owner or plaintiff has an immediate right to the premises in litigation (pp. 98,143, Report of Code
Commission).
Article 1674 is in consonance with the summary character of an ejectment suit which is an expeditious means
for recovering possession of real property (Deveza vs. Montecillo, L-23942, March 28, 1969, 27 SCRA 822;
Mara, Inc. vs. Estrella, L40511, July 25, 1975, 65 SCRA 471) but the effectiveness of which was often frustrated
by defendant's dilatory tactics which were tolerated by inferior courts (Vda. de Palanca vs. Chua Keng Kian L-
26430, March 11, 1969, 27 SCRA 3.56, 365-6).
The decisive issue is whether the pleadings, the city court's decision and Ong Cu's contentions show that his
appeal is manifestly frivolous and dilatory.
There is no question that Mrs. Laureano is the registered owner of the two lots and that they were leased to
Ong Cu for a fifteen year period counted from September 1, 1959 and expiring on August 31, 1974. Ong Cu in
his answer to the ejectment complaint unmistakably admitted that the lease expired on that date. He alleged
that there were negotiations for his purchase of the two lots.
His defenses were that the ejectment action was premature because he was still considering Mrs. Laureano's
proposal to sell the lots; that the removal of his buildings and iniprovements allegedly worth P1,800,000 would
prejudice him and entail considerable expenses; that there is difficulty in looking for another site during the short
period granted to him by Mrs. Laureano; that he is willing to buy the lots at a reasonable price, and that the price
fixed by Mrs. Laureano is excessive.
Those defenses cannot defeat the ejectment suit. The expiration of lease and Mrs. Laureano's refusal to renew
it made Ong Cu a deforciant or an unlawful with holder of the possession of the lots. He has become a possessor
in bad faith. The Civil Code provides:
ART. 1669. If the lease was made for a determinate time, it ceases upon the day fixed,
without the need of a demand. (1565)
ART. 1671. If the lessee continues enjoying the thing after the expiration of the contract over
the lessor's objection, the former shall be subject to the responsibilities of a possessor in
bad faith. (n)
ART. 1673. The lessor may judicially eject the lessee for any of the following causes:
(1) When the period agreed upon, ... has expired.
xxx xxx xxx
(1569a)
The rule is that if after the termination of the lease contract the lessee prolongs his occupation of the premises,
there is unlawful detainer and article 1674 applies. For the purpose of that article, it is enough that the plaintiff
is the owner of the land and that the defendant is in temporary occupation thereof whether under a lease contract
or on mere tolerance or under a temporary permit. (De la Cruz vs. Bocar, 99 Phil. 491).
The lower court assumed that Ong Cu in constructing his building on the leased lots is a possessor in good faith
entitled to reimbursement of the necessary and useful expenses incurred by him and with a right of retention,
as contemplated in articles 546 and 547 of the Civil Code.
That assumption is erroneous. As a lessee, who constructed a building on the leased land, Ong Cu cannot be
characterized as a builder in good faith. Under article 448 of the Civil Code the owner of the land on which
anything has been built in good faith may appropriate the building after payment of the indemnity provided in
articles 546 and 548 of the Civil Code.
Article 448 applies to a case where one builds on land of which he honestly claims to be the owner and not to
lands wherein one's only interest is that of a lessee under a rental contract. A contrary rule would place it within
the power of the lessee "to improve his landlord out of his property" (Alburo vs. Villanueva, 7 Phil. 277, 280;
Cortes vs. Ramos, 46 Phil. 184; Fojas vs. Velasco, 51 Phil. 520; Bantug vs. Montinola, 73 Phil. 13).
In other words, article 448 refers to a possessor who occupied the land in the belief that he was the owner
thereof. It does not apply to the lessee because the lessee knows at the outset that he is not the owner of the
land (Lopez, Inc. vs. Philippine & Eastern Traiding Co., Inc., 98 Phil. 348). The tenant has no pretension to
being the owner of the land (Rivera vs. Trinidad, 48 Phil. 396, 401).
As noted by the city court, Ong Cu's rights with respect to the improvements made by him on the leased land
are governed by the following provisions of the Civil Code:
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. (n)
Under article 1678 it is the lessor who has the option to pay for one-half of the value of the improvements which
the lessee has made in good faith, which are suitable for the use for which the lease is intended and which have
not altered the form and substance of the land (Philippine National Bank vs. Pineda, L-29748, August 29, 1969,
29 SCRA 262; Lapea and Pineda vs. Morfe, 101 Phil. 997; Sto. Domingo vs. Chua Man, 105 Phil. 220; Bacaling
vs. Laguda, 70 O. G. 2694, 54 SCRA 243).
Contrary to the lower courts impression, the lessee has no right of retention because article 546 of the Civil
Code does not apply to the improvements made by him. Only the possessor in good faith has a right of retention
under article 546. As already noted, article 1671 regards an overstaying lessee as a possessor in bad faith.
The lower court discerned an absurdity or incongruency in allowing a defendant in an ejectment case to stay
execution of the inferior court's decision, by filing a supersedeas bond and making monthly deposits, and at the
same time granting a mandatory injunction to restore possession on the theory that the defendant's appeal is
frivolous and mandatory.
The absurdity is more apparent than real. The execution in an ejectment case has two espects: (a) possession
and (b) the rentals or reasonable value of the use of the premises, The mandatory injunction refers to the
possession of the premises in litigation.
On the other hand, the supersedeas bond and the monthly deposits are primarily designed to insure that the
plaintiff would be paid the back rentals or the compensation for the use and occupation of the premises should
the inferior court's decision in his favor be affirmed on appeal. Hence, if no bond was filed or no monthly deposit
was made, the plaintiff is entitled to the possession of the premises. To allow the defendant to continue his
possession without any security for the rentals would be prejudicial to the plaintiff. He might not be able to
recover the back rentals when the judgment in his favor becomes final and executory. In that event, his claim
for rentals would be illusory or ineffectual.
If the mandatory injunction is granted, defendant's possession would cease but the supersedeas bond and the
deposits already made would subsist as security for the accrued pecuniary liability of the defendant to the
plaintiff. The execution as to the rentals or compensation for the use of the premises would be stayed.
It results that the lower court gravely abused its discretion in not granting the writ of mandatory injunction. Its
questioned orders were predicated on erroneous assumptions.
the petition for a special order of demolition. Ong Cu's rights under the law should be respected. Nothing
oppressive or arbitrary should be perpetrated in connection with the removal of his improvements.
WHEREFORE, the lower court's orders of December 9, 1975 and February 12, 1976 are set aside.
(1) The lower court is directed to require Ong Cu (a) to file within thirty (30) days from notice
a new supersedeas bond in the amount of P161,564 representing the reasonable
compensation for the use and occupation of the two lots, at the rate found by the city court,
from September 1, 1974 to September, 1975, when the city court rendered its judgment, and
(b) to deposit in court within the same period the compensation for the use and occupation
of the lots for the period from October 1, 1975 to June, 1976 at the rate of P12,428 a month,
the amount fixed in the inferior court's judgment, less the amounts already deposited by Ong
Cu at the rate of P1,200 a month.
(2) If after June, 1976 he has not restored to Mrs. Laureano the portions of the two lots not
occupied by his buildings, then h should deposit in court on or before the tenth day of each
month, as prescribed in section 8, Rule 70 of the Rules of Court, the same sum of P12,428
until he has complied with the mandatory injunction decreed herein.

Generally, certiorari does not lie to question the propriety of an interlocutory order of the trial court. Interlocutory (3) The lower court is further directed to issue a writ of preliminary mandatory injunction
orders ordinarily should be reviewed when an appeal is taken from the trial court's judgment. Not every requiring Ong Cu to vacate the two lots in question, to deliver the possession thereof to Mrs.
procedural error or erroneous legal or factual conclusion amounts to a grave abuse of discretion. An error of Laureano and to remove his buildings and improvements after the court has passed upon
judgment is not necessarily a jurisdictional error. the corresponding petition for demolition.

But when a grave abuse of discretion was patently committed, such as when the lower court acted capriciously
and whimsically, or petitioner's contention appears to be clearly tenable, or the broader interests of justice or
public policy require the setting aside of the interlocutory order, then it devolves upon this Court in a certiorari
proceeding to exercise its supervisory authority and to correct the error committed which in such a case is
equivalent to lack of jurisdiction (Sanchez vs. Zosa, L-27043, November 28, 1975, 68 SCRA 171, 175; Pacheco
vs. Tumangday and Fernando, 108 Phil. 238; Manila Electric Co. and Sheriff of Quezon City vs. Hon. Enriquez,
etc. and Espinosa, 110 Phil. 499).
(4) After Ong Cu has complied with the mandatory injunction with respect to the portions of
the lots not occupied by his buildings and improvements, he should deposit in court the value
of the use and occupation of the portions of the two lots occupied by his buildings at the rate
of four pesos a square meter. Costs against respondent Ong Cu.
SO ORDERED.

The immediate possession to be granted to Mrs. Laureano under the writ of mandatory injunction would
embrace the portions of the two lots not occupied by Ong Cu's improvements.

As to the portions of the lots occupied by Ong Cu's improvements, their demolition would be necessary in order
to deliver the possession thereof to Mrs. Laureano. In such a case, the provisions of section 14, Rule 39 of the
Rules of Court should be observed. A special order of demolition should be issued only after r notice and hearing
a. c g and after giving Ong Cu a reasonable time effect the removal.

The disposition of the appeal in the lower court should proceed in accordance. with section 45 of the Judiciary
Law as amended. The grant of the mandatory injunction constitutes a prejudgment of the appeal with respect
to the possession of the two lots. The main point to be resolved in the lower court's disposition of the appeal is
the correctness of the city court's finding on the reasonable value of the use and occupation of the two lots after
the lease expired on August 31, 1974.

In filing the ejectment suit Mrs. Laureano opted not to reimburse Ong Cu for his improvements. Consequently,
there is no issue as to the reimbursement to be made under article 1678. What period should be given to Ong
Cu for the removal of his improvements is a matter that should be judiciously resolved by the lower court in the
light of the evidence introduced in the city court and the evidence that will be presented during the hearing on
G.R. No. L-20091 July 30, 1965
PERPETUA ABUAN, ET AL., plaintiffs-appellants,
vs.
EUSTAQUIO S. GARCIA, ET AL., defendants-appellees.
Emilio R. Gombio for plaintiffs-appellants.
Ruperto G. Martin and Associates for defendants-appellees.
BENGZON, C.J.:
This is an action for legal redemption under Section 119 of the Public Land Law 1 which provides that:
Every conveyance of land acquired under the free patient or homestead provisions, when proper, shall
be subject to re-purchase by the applicant, his widow, or legal heirs, for a period of five years from the
date of conveyance.
Acquired by Laureano Abuan the homestead passed after his death to his legal heirs, the plaintiffs herein.
Consequently, the Original Certificate of Title in his name was cancelled, and in lieu thereof, Transfer Certificate
of Title No. T-5486 was issued in their names.
On August 7, 1953, plaintiffs sold the parcel of land to defendants, the sale being evidenced by a public
instrument entitled "Deed of Absolute Sale"; and by virtue thereof, Transfer Certificate of Title No. T-5906 was
issued to defendants.
Later, plaintiffs filed an action to recover the land, alleging that the deed of absolute sale had been executed
through fraud, without consideration. However, the case was subsequently settled amicably, when the parties
entered into an "Agreement" dated February 28, 1955, under the terms of which defendants paid P500.00 on
that day as partial payment of the purchase price of the land, and promised to pay the balance of P1,500.00 on
or before April 30, 1955, with a grace period of thirty days. The parties also stipulated in said Agreement that it
"shall supersede all previous agreements or contracts heretofore entered into and executed by and between
plaintiff and defendants, involving the same parcel of riceland ... .
Claiming that full payment had been effected only sometime in May, 1955, plaintiffs instituted the present action
on March 4, 1960.
Defendants moved to dismiss, on the ground that plaintiffs' right of action was already barred, because the five-
year redemption period had already expired.
Sustaining the motion, the Nueva Vizcaya court dismissed the complaint.
Plaintiffs appealed to the Court of Appeals, which certified the case to this Court because only a legal issue
remains to be determined.
The sole question is: When did the five-year period (within which plaintiffs may exercise their right of repurchase)
begin to run? Should it be August 7, 1953, when the Deed of Absolute Sale was executed, or February 28,
1955, when the compromise "Agreement" was entered into; or should it be in May, 1955, upon full payment of
the purchase price? It is obvious that counted from either of the first two dates more than five years had elapsed
when this action for redemption was brought (March 1960); whereas the action would be well within the period,
if computed from the date of full payment of the purchase price.
The lower court, in dismissing plaintiffs' complaint, fixed the starting date as February 28, 1955, when the
Agreement (Annex "B") was entered into. It is plaintiffs' contention, on the other hand, that the prescriptive
period should be counted from the full payment of the purchase price, that is, from May, 1955, since it was on
this date that the contract was consummated.
Plaintiffs' contention is untenable. The law speaks of "five years from date of conveyance." Conveyance means
transfer of ownership; it means the date when the title to the land is transferred from one person to another. 2 The
five-year period should, therefore, be reckoned with from the date that defendants acquired ownership of the
land. Now, when did defendants legally acquire ownership over the land?
Art. 1477 of the New Civil Code provides that ownership of the thing sold shall be transferred to the vendee
upon the actual or constructive delivery thereof; and Art. 1496 points out that ownership of the thing sold is
acquired by the vendee from the moment it is delivered to him in any of the ways specified in articles 1497 to
1501. Under Art. 1498, When the sale is made through a public instrument as in this case the execution
thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the
contrary does not appear or cannot be clearly inferred. 3 This manner of delivery of the thing through the
execution of a public document is common to personal as well as real property. 4
It is clear, therefore, that defendants acquired ownership to the land in question upon the execution of the deed
of sale. The deed of sale was executed on August 7, 1953, which was "superseded" by the Agreement of
February 28, 1955, as to the terms and conditions of payment of the purchase price. The latter agreement did
not operate to revest the ownership of the land in the plaintiffs. 5
It is apparent that five years had elapsed since the execution of the deed of sale at the time plaintiffs filed this
action for redemption. Our view finds support in a long line of decisions holding, that the five-year period starts
from the date of the execution of the instrument of conveyance. 6
But assuming arguendo that Annex "A" is null and void, as plaintiffs aver, and did not serve to effectuate delivery
of the property, we can consider the date of the Agreement (Annex "B"), at the latest, as the time within which
ownership is vested in the defendants. True, Annex "B" is a private instrument the execution of which could not
be construed as constructive delivery under Art. 1498 of the New Civil Code. But Art. 1496 explicitly provides
that ownership of the thing sold is acquired by the vendee from the moment it is delivered to him "in any other
manner signifying an agreement that the possession is transferred from the vendor to the vendee." The intention
to give possession (and ownership) is manifest in the agreement (Annex "B") entered into by the parties,
specially considering the following circumstances: (1) the payment of part of the purchase price, there being no
stipulation in the agreement that ownership will not vest in the vendees until full payment of the price; and (2)
the fact that the agreement was entered into in consideration of plaintiffs' desistance, as in fact they did desist,
in prosecuting their reivindicatory action, thereby leaving the property in the hands of the then and now
defendants as owners thereof, necessarily. This was delivery brevi manu permissible under Articles 1499
and 1501 of the New Civil Code.
The circumstance that full payment was made only, as plaintiffs allege, in May, 1955, does not alter the fact that
ownership of the land passed to defendants upon the execution of the agreement with the intention of letting
them hold it as owners. In the absence of an express stipulation to the contrary, the payment of the price is not
a condition precedent to the transfer of ownership, which passes by delivery of the thing to the buyer. 7
IN VIEW OF THE FOREGOING, the order of the court a quo dismissing the complaint is hereby affirmed, with
costs against plaintiffs-appellants.
G.R. No. L-29972 January 26, 1976 On January 27, 1955, petitioner and respondent Poncio, in the presence of a witness, made and executed a
document in the Batanes dialect, which, translated into English, reads:
ROSARIO CARBONELL, petitioner,
vs. CONTRACT FOR ONE HALF LOT WHICH I BOUGHT FROM
HONORABLE COURT OF APPEALS, JOSE PONCIO, EMMA INFANTE and RAMON
INFANTE, respondents.
JOSE PONCIO

Beginning today January 27, 1955, Jose Poncio can start living on the lot sold by him to me,
Rosario Carbonell, until after one year during which time he will not pa anything. Then if after
MAKASIAR, J. said one can he could not find an place where to move his house, he could still continue
occupying the site but he should pay a rent that man, be agreed.
Petitioner seeks a review of the resolution of the Court of Appeals (Special Division of Five) dated October 30,
1968, reversing its decision of November 2, 1967 (Fifth Division), and its resolution of December 6, 1968 (
denying petitioner's motion for reconsideration. S
g
The dispositive part of the challenged resolution reads: d
)
J
Wherefore, the motion for reconsideration filed on behalf of appellee Emma Infante, is O
hereby granted and the decision of November 2, 1967, is hereby annulled and set aside. S
Another judgement shall be entered affirming in toto that of the court a quo, dated January E
20, 1965, which dismisses the plaintiff's complaint and defendant's counterclaim. P
O
Without costs. N
C
I
The facts of the case as follows: O

Prior to January 27, 1955, respondent Jose Poncio, a native of the Batanes Islands, was the owner of the parcel (
of land herein involve with improvements situated at 179 V. Agan St., San Juan, Rizal, having an area of some S
one hundred ninety-five (195) square meters, more or less, covered by TCT No. 5040 and subject to mortgage g
in favor of the Republic Savings Bank for the sum of P1,500.00. Petitioner Rosario Carbonell, a cousin and d
adjacent neighbor of respondent Poncio, and also from the Batanes Islands, lived in the adjoining lot at 177 V. .
Agan Street. )
R
O
Both petitioners Rosario Carbonell and respondent Emma Infante offered to buy the said lot from Poncio S
(Poncio's Answer, p. 38, rec. on appeal). A
R
Respondent Poncio, unable to keep up with the installments due on the mortgage, approached petitioner one I
day and offered to sell to the latter the said lot, excluding the house wherein respondent lived. Petitioner O
accepted the offer and proposed the price of P9.50 per square meter. Respondent Poncio, after having secured C
the consent of his wife and parents, accepted the price proposed by petitioner, on the condition that from the A
purchase price would come the money to be paid to the bank. R
B
O
Petitioner and respondent Jose Poncio then went to the Republic Savings Bank and secured the consent of the
N
President thereof for her to pay the arrears on the mortgage and to continue the payment of the installments as
E
they fall due. The amount in arrears reached a total sum of P247.26. But because respondent Poncio had
L
previously told her that the money, needed was only P200.00, only the latter amount was brought by petitioner
L
constraining respondent Jose Poncio to withdraw the sum of P47.00 from his bank deposit with Republic
Savings Bank. But the next day, petitioner refunded to Poncio the sum of P47.00.
(
S
 g assuming the existing mortgage debt in favor of Republic Savings Bank in the amount of P1,177.48. Emma
d Infante lives just behind the houses of Poncio and Rosario Carbonell.
)
C
On February 2, 1955, respondent Jose Poncio executed the formal deed of sale in favor of respondent Mrs.
O Infante in the total sum of P3,554.00 and on the same date, the latter paid Republic Savings Bank the mortgage
N indebtedness of P1,500.00. The mortgage on the lot was eventually discharged.
S
T
A Informed that the sale in favor of respondent Emma Infante had not yet been registered, Atty. Garcia prepared
N an adverse claim for petitioner, who signed and swore to an registered the same on February 8, 1955.
C
I The deed of sale in favor of respondent Mrs. Infante was registered only on February 12, 1955. As a
O consequence thereof, a Transfer Certificate of Title was issued to her but with the annotation of the adverse
M claim of petitioner Rosario Carbonell.
E
O
N Respondent Emma Infante took immediate possession of the lot involved, covered the same with 500 cubic
A meters of garden soil and built therein a wall and gate, spending the sum of P1,500.00. She further contracted
D the services of an architect to build a house; but the construction of the same started only in 1959 years after
A the litigation actually began and during its pendency. Respondent Mrs. Infante spent for the house the total
amount of P11,929.00.
W
i On June 1, 1955, petitioner Rosario Carbonell, thru counsel, filed a second amended complaint against private
t respondents, praying that she be declared the lawful owner of the questioned parcel of land; that the subsequent
n sale to respondents Ramon R. Infante and Emma L. Infante be declared null and void, and that respondent
e Jose Poncio be ordered to execute the corresponding deed of conveyance of said land in her favor and for
s damages and attorney's fees (pp. 1-7, rec. on appeal in the C.A.).
s
Respondents first moved to dismiss the complaint on the ground, among others, that petitioner's claim is
(Pp. 6-7 rec. on appeal). unenforceable under the Statute of Frauds, the alleged sale in her favor not being evidenced by a written
document (pp. 7-13, rec. on appeal in the C.A.); and when said motion was denied without prejudice to passing
Thereafter, petitioner asked Atty. Salvador Reyes, also from the Batanes Islands, to prepare the formal deed of on the question raised therein when the case would be tried on the merits (p. 17, ROA in the C.A.), respondents
sale, which she brought to respondent Poncio together with the amount of some P400.00, the balance she still filed separate answers, reiterating the grounds of their motion to dismiss (pp. 18-23, ROA in the C.A.).
had to pay in addition to her assuming the mortgaged obligation to Republic Savings Bank.
During the trial, when petitioner started presenting evidence of the sale of the land in question to her by
Upon arriving at respondent Jose Poncio's house, however, the latter told petitioner that he could not proceed respondent Poncio, part of which evidence was the agreement written in the Batanes dialect aforementioned,
any more with the sale, because he had already given the lot to respondent Emma Infants; and that he could respondent Infantes objected to the presentation by petitioner of parole evidence to prove the alleged sale
not withdraw from his deal with respondent Mrs. Infante, even if he were to go to jail. Petitioner then sought to between her and respondent Poncio. In its order of April 26, 1966, the trial court sustained the objection and
contact respondent Mrs. Infante but the latter refused to see her. dismissed the complaint on the ground that the memorandum presented by petitioner to prove said sale does
not satisfy the requirements of the law (pp. 31-35, ROA in the C.A.).
On February 5, 1955, petitioner saw Emma Infante erecting a all around the lot with a gate.
From the above order of dismissal, petitioner appealed to the Supreme Court (G.R. No. L-11231) which ruled
in a decision dated May 12, 1958, that the Statute of Frauds, being applicable only to executory contracts, does
Petitioner then consulted Atty. Jose Garcia, who advised her to present an adverse claim over the land in not apply to the alleged sale between petitioner and respondent Poncio, which petitioner claimed to have been
question with the Office of the Register of Deeds of Rizal. Atty. Garcia actually sent a letter of inquiry to the partially performed, so that petitioner is entitled to establish by parole evidence "the truth of this allegation, as
Register of Deeds and demand letters to private respondents Jose Poncio and Emma Infante. well as the contract itself." The order appealed from was thus reversed, and the case remanded to the court a
quo for further proceedings (pp. 26-49, ROA in the C.A.).
In his answer to the complaint Poncio admitted "that on January 30, 1955, Mrs. Infante improved her offer and
he agreed to sell the land and its improvements to her for P3,535.00" (pp. 38-40, ROA). After trial in the court a quo; a decision was, rendered on December 5, 1962, declaring the second sale by
respondent Jose Poncio to his co-respondents Ramon Infante and Emma Infante of the land in question null
In a private memorandum agreement dated January 31, 1955, respondent Poncio indeed bound himself to sell and void and ordering respondent Poncio to execute the proper deed of conveyance of said land in favor of
to his corespondent Emma Infante, the property for the sum of P2,357.52, with respondent Emma Infante still petitioner after compliance by the latter of her covenants under her agreement with respondent Poncio (pp.
5056, ROA in the C.A.).
On January 23, 1963, respondent Infantes, through another counsel, filed a motion for re-trial to adduce
evidence for the proper implementation of the court's decision in case it would be affirmed on appeal (pp. 56-
60, ROA in the C.A.), which motion was opposed by petitioner for being premature (pp. 61-64, ROA in the C.A.).
Before their motion for re-trial could be resolved, respondent Infantes, this time through their former counsel,
filed another motion for new trial, claiming that the decision of the trial court is contrary to the evidence and the
law (pp. 64-78, ROA in the C.A.), which motion was also opposed by petitioner (pp. 78-89, ROA in the C.A.).
The trial court granted a new trial (pp. 89-90, ROA in the C.A.), at which re-hearing only the respondents
introduced additional evidence consisting principally of the cost of improvements they introduced on the land in
question (p. 9, ROA in the C.A.).
After the re-hearing, the trial court rendered a decision, reversing its decision of December 5, 1962 on the
ground that the claim of the respondents was superior to the claim of petitioner, and dismissing the complaint
(pp. 91-95, ROA in the C.A.), From this decision, petitioner Rosario Carbonell appealed to the respondent Court
of Appeals (p. 96, ROA in the C.A.).
On November 2, 1967, the Court of Appeals (Fifth Division composed of Justices Magno Gatmaitan, Salvador
V. Esguerra and Angle H. Mojica, speaking through Justice Magno Gatmaitan), rendered judgment reversing
the decision of the trial court, declaring petitioner therein, to have a superior right to the land in question, and
condemning the defendant Infantes to reconvey to petitioner after her reimbursement to them of the sum of
P3,000.00 plus legal interest, the land in question and all its improvements (Appendix "A" of Petition).
Respondent Infantes sought reconsideration of said decision and acting on the motion for reconsideration, the
Appellate Court, three Justices (Villamor, Esguerra and Nolasco) of Special Division of Five, granted said
motion, annulled and set aside its decision of November 2, 1967, and entered another judgment affirming in
toto the decision of the court a quo, with Justices Gatmaitan and Rodriguez dissenting (Appendix "B" of
Petition).
Petitioner Rosario Carbonell moved to reconsider the Resolution of the Special Division of Five, which motion
was denied by Minute Resolution of December 6, 1968 (but with Justices Rodriguez and Gatmaitan voting for
reconsideration) [Appendix "C" of Petition].
Hence, this appeal by certiorari.
Article 1544, New Civil Code, which is decisive of this case, recites:
If the same thing should have been sold to different vendees, the ownership shall be
transferred to the person who may have first taken possession thereof in good faith, if it
should movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who
in good faith first recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith
was first in the possession; and, in the absence thereof, to the person who presents the
oldest title, provided there is good faith (emphasis supplied).
It is essential that the buyer of realty must act in good faith in registering his deed of sale to merit the protection
of the second paragraph of said Article 1544.
Unlike the first and third paragraphs of said Article 1544, which accord preference to the one who first takes
possession in good faith of personal or real property, the second paragraph directs that ownership of immovable
property should be recognized in favor of one "who in good faith first recorded" his right. Under the first and
third paragraph, good faith must characterize the act of anterior registration (DBP vs. Mangawang, et al., 11
SCRA 405; Soriano, et al. vs. Magale, et al., 8 SCRA 489).
If there is no inscription, what is decisive is prior possession in good faith. If there is inscription, as in the case
at bar, prior registration in good faith is a pre-condition to superior title.
When Carbonell bought the lot from Poncio on January 27, 1955, she was the only buyer thereof and the title
of Poncio was still in his name solely encumbered by bank mortgage duly annotated thereon. Carbonell was
not aware and she could not have been aware of any sale of Infante as there was no such sale to Infante
then. Hence, Carbonell's prior purchase of the land was made in good faith. Her good faith subsisted and
continued to exist when she recorded her adverse claim four (4) days prior to the registration of Infantes's deed
of sale. Carbonell's good faith did not cease after Poncio told her on January 31, 1955 of his second sale of the
same lot to Infante. Because of that information, Carbonell wanted an audience with Infante, which desire
underscores Carbonell's good faith. With an aristocratic disdain unworthy of the good breeding of a good
Christian and good neighbor, Infante snubbed Carbonell like a leper and refused to see her. So Carbonell did
the next best thing to protect her right she registered her adversed claim on February 8, 1955. Under the
circumstances, this recording of her adverse claim should be deemed to have been done in good faith and
should emphasize Infante's bad faith when she registered her deed of sale four (4) days later on February 12,
1955.
Bad faith arising from previous knowledge by Infante of the prior sale to Carbonell is shown by the following
facts, the vital significance and evidenciary effect of which the respondent Court of Appeals either overlooked
of failed to appreciate:
(1) Mrs. Infante refused to see Carbonell, who wanted to see Infante after she was informed by Poncio that he
sold the lot to Infante but several days before Infante registered her deed of sale. This indicates that Infante
knew from Poncio and from the bank of the prior sale of the lot by Poncio to Carbonell. Ordinarily, one will
not refuse to see a neighbor. Infante lives just behind the house of Carbonell. Her refusal to talk to Carbonell
could only mean that she did not want to listen to Carbonell's story that she (Carbonell) had previously bought
the lot from Poncio.
(2) Carbonell was already in possession of the mortgage passbook [not Poncio's saving deposit passbook
Exhibit "1" Infantes] and Poncio's copy of the mortgage contract, when Poncio sold the lot Carbonell who,
after paying the arrearages of Poncio, assumed the balance of his mortgaged indebtedness to the bank, which
in the normal course of business must have necessarily informed Infante about the said assumption by
Carbonell of the mortgage indebtedness of Poncio. Before or upon paying in full the mortgage indebtedness of
Poncio to the Bank. Infante naturally must have demanded from Poncio the delivery to her of his mortgage
passbook as well as Poncio's mortgage contract so that the fact of full payment of his bank mortgage will be
entered therein; and Poncio, as well as the bank, must have inevitably informed her that said mortgage
passbook could not be given to her because it was already delivered to Carbonell.
If Poncio was still in possession of the mortgage passbook and his copy of the mortgage contract at the time
he executed a deed of sale in favor of the Infantes and when the Infantes redeemed his mortgage indebtedness
from the bank, Poncio would have surrendered his mortgage passbook and his copy of the mortgage contract
to the Infantes, who could have presented the same as exhibits during the trial, in much the same way that the
Infantes were able to present as evidence Exhibit "1" Infantes, Poncio's savings deposit passbook, of which
Poncio necessarily remained in possession as the said deposit passbook was never involved in the contract of
sale with assumption of mortgage. Said savings deposit passbook merely proves that Poncio had to withdraw
P47.26, which amount was tided to the sum of P200.00 paid by Carbonell for Poncio's amortization arrearages
in favor of the bank on January 27, 1955; because Carbonell on that day brought with her only P200.00, as
Poncio told her that was the amount of his arrearages to the bank. But the next day Carbonell refunded to
Poncio the sum of P47.26.
(3) The fact that Poncio was no longer in possession of his mortgage passbook and that the said mortgage
passbook was already in possession of Carbonell, should have compelled Infante to inquire from Poncio why
he was no longer in possession of the mortgage passbook and from Carbonell why she was in possession of
the same (Paglago, et. al vs. Jara et al 22 SCRA 1247, 1252-1253). The only plausible and logical reason why
Infante did not bother anymore to make such injury , w because in the ordinary course of business the bank
must have told her that Poncio already sold the lot to Carbonell who thereby assumed the mortgage
indebtedness of Poncio and to whom Poncio delivered his mortgage passbook. Hoping to give a semblance of
truth to her pretended good faith, Infante snubbed Carbonell's request to talk to her about the prior sale to her
b Poncio of the lot. As aforestated, this is not the attitude expected of a good neighbor imbued with Christian
charity and good will as well as a clear conscience.
(4) Carbonell registered on February 8, 1955 her adverse claim, which was accordingly annotated on Poncio's
title, four [4] days before Infante registered on February 12, 1955 her deed of sale executed on February 2,
1955. Here she was again on notice of the prior sale to Carbonell. Such registration of adverse claim is valid
and effective (Jovellanos vs. Dimalanta, L-11736-37, Jan. 30, 1959, 105 Phil. 1250-51).
(5) In his answer to the complaint filed by Poncio, as defendant in the Court of First Instance, he alleged that
both Mrs. Infante and Mrs. Carbonell offered to buy the lot at P15.00 per square meter, which offers he rejected
as he believed that his lot is worth at least P20.00 per square meter. It is therefore logical to presume that
Infante was told by Poncio and consequently knew of the offer of Carbonell which fact likewise should have put
her on her guard and should have compelled her to inquire from Poncio whether or not he had already sold the
property to Carbonell.
As recounted by Chief Justice Roberto Concepcion, then Associate Justice, in the preceding case of Rosario
Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante (1-11231, May 12, 1958), Poncio alleged in his
answer:
... that he had consistently turned down several offers, made by plaintiff, to buy the land in
question, at P15 a square meter, for he believes that it is worth not less than P20 a square
meter; that Mrs. Infante, likewise, tried to buy the land at P15 a square meter; that, on or
about January 27, 1955, Poncio was advised by plaintiff that should she decide to buy the
property at P20 a square meter, she would allow him to remain in the property for one year;
that plaintiff then induced Poncio to sign a document, copy of which if probably the one
appended to the second amended complaint; that Poncio signed it 'relying upon the
statement of the plaintiff that the document was a permit for him to remain in the premises
in the event defendant decided to sell the property to the plaintiff at P20.00 a square meter';
that on January 30, 1955, Mrs. Infante improved her offer and agreed to sell the land and its
improvement to her for P3,535.00; that Poncio has not lost 'his mind,' to sell his property,
worth at least P4,000, for the paltry sum P1,177.48, the amount of his obligation to the
Republic Saving s Bank; and that plaintiff's action is barred by the Statute of Frauds. ... (pp.
38-40, ROA, emphasis supplied).
II
EXISTENCE OF THE PRIOR SALE TO CARBONELL
DULY ESTABLISHED
(1) In his order dated April 26, 1956 dismissing the complaint on the ground that the private document Exhibit
"A" executed by Poncio and Carbonell and witnessed by Constancio Meonada captioned "Contract for One-half
Lot which I Bought from Jose Poncio," was not such a memorandum in writing within the purview of the Statute
of Frauds, the trial judge himself recognized the fact of the prior sale to Carbonell when he stated that "the
memorandum in question merely states that Poncio is allowed to stay in the property which he had sold to the
plaintiff. There is no mention of the reconsideration, a description of the property and such other essential
elements of the contract of sale. There is nothing in the memorandum which would tend to show even in the
slightest manner that it was intended to be an evidence of contract sale. On the contrary, from the terms of the
memorandum, it tends to show that the sale of the property in favor of the plaintiff is already an accomplished
act.By the very contents of the memorandum itself, it cannot therefore, be considered to be the memorandum
which would show that a sale has been made by Poncio in favor of the plaintiff" (p. 33, ROA, emphasis supplied).
As found by the trial court, to repeat the said memorandum states "that Poncio is allowed to stay in the property
which he had sold to the plaintiff ..., it tends to show that the sale of the property in favor of the plaintiff is already
an accomplished act..."
(2) When the said order was appealed to the Supreme Court by Carbonell in the previous case of Rosario
Carbonell vs. Jose Poncio, Ramon Infante and Emma Infante
(L-11231, supra), Chief Justice Roberto Concepcion, then Associate Justice, speaking for a unanimous Court,
reversed the aforesaid order of the trial court dismissing the complaint, holding that because the complaint
alleges and the plaintiff claims that the contract of sale was partly performed, the same is removed from the
application of the Statute of Frauds and Carbonell should be allowed to establish by parol evidence the truth of
her allegation of partial performance of the contract of sale, and further stated:
Apart from the foregoing, there are in the case at bar several circumstances indicating that
plaintiff's claim might not be entirely devoid of factual basis. Thus, for instance, Poncio
admitted in his answer that plaintiff had offered several times to purchase his land.
Again, there is Exhibit A, a document signed by the defendant. It is in the Batanes dialect,
which, according to plaintiff's uncontradicted evidence, is the one spoken by Poncio, he
being a native of said region. Exhibit A states that Poncio would stay in the land sold by him
to plaintiff for one year, from January 27, 1955, free of charge, and that, if he cannot find a
place where to transfer his house thereon, he may remain upon. Incidentally, the allegation
in Poncio's answer to the effect that he signed Exhibit A under the belief that it "was a permit
for him to remain in the premises in the" that "he decided to sell the property" to the plaintiff
at P20 a sq. m." is, on its face, somewhat difficult to believe. Indeed, if he had not decided
as yet to sell the land to plaintiff, who had never increased her offer of P15 a square meter,
there was no reason for Poncio to get said permit from her. Upon the other hand, if plaintiff
intended to mislead Poncio, she would have caused Exhibit A to be drafted, probably, in
English , instead of taking the trouble of seeing to it that it was written precisely in his native
dialect, the Batanes. Moreover, Poncio's signature on Exhibit A suggests that he is neither
illiterate nor so ignorant as to sign document without reading its contents, apart from the fact
that Meonada had read Exhibit A to him and given him a copy thereof, before he signed
thereon, according to Meonada's uncontradicted testimony.
Then, also, defendants say in their brief:
The only allegation in plaintiff's complaint that bears any relation to her
claim that there has been partial performance of the supposed contract
of sale, is the notation of the sum of P247.26 in the bank book of
defendant Jose Poncio. The noting or jotting down of the sum of P247.26
in the bank book of Jose Poncio does not prove the fact that the said
amount was the purchase price of the property in question. For all we
knew, the sum of P247.26 which plaintiff claims to have paid to the
 Republic Savings Bank for the account of the defendant, assuming that
the money paid to the Republic Savings Bank came from the plaintiff,
was the result of some usurious loan or accomodation, rather than
earnest money or part payment of the land. Neither is it competent or
satisfactory evidence to prove the conveyance of the land in question the
fact that the bank book account of Jose Poncio happens to be in the
possession of the plaintiff. (Defendants-Appellees' brief, pp. 25-26).
How shall We know why Poncio's bank deposit book is in plaintiffs possession, or whether
there is any relation between the P247.26 entry therein and the partial payment of P247.26
allegedly made by plaintiff to Poncio on account of the price of his land, if we do not allow
the plaintiff to explain it on the witness stand? Without expressing any opinion on the merits
of plaintiff's claim, it is clear, therefore, that she is entitled , legally as well as from the
viewpoint of equity, to an opportunity to introduce parol evidence in support of the allegations
of her second amended complaint. (pp. 46-49, ROA, emphasis supplied).
(3) In his first decision of December 5, 1962 declaring null and void the sale in favor of the Infantes and ordering
Poncio to execute a deed of conveyance in favor of Carbonell, the trial judge found:
... A careful consideration of the contents of Exh. 'A' show to the satisfaction of the court that
the sale of the parcel of land in question by the defendant Poncio in favor of the plaintiff was
covered therein and that the said Exh. "a' was also executed to allow the defendant to
continue staying in the premises for the stated period. It will be noted that Exh. 'A' refers to
a lot 'sold by him to me' and having been written originally in a dialect well understood by
the defendant Poncio, he signed the said Exh. 'A' with a full knowledge and consciousness
of the terms and consequences thereof. This therefore, corroborates the testimony of the
plaintiff Carbonell that the sale of the land was made by Poncio. It is further pointed out that
there was a partial performance of the verbal sale executed by Poncio in favor of the plaintiff,
when the latter paid P247.26 to the Republic Savings Bank on account of Poncio's mortgage
indebtedness. Finally, the possession by the plaintiff of the defendant Poncio's passbook of
the Republic Savings Bank also adds credibility to her testimony. The defendant contends
on the other hand that the testimony of the plaintiff, as well as her witnesses, regarding the
sale of the land made by Poncio in favor of the plaintiff is inadmissible under the provision
of the Statute of Fraud based on the argument that the note Exh. "A" is not the note or
memorandum referred to in the to in the Statute of Fraud. The defendants argue that Exh.
"A" fails to comply with the requirements of the Statute of Fraud to qualify it as the note or
memorandum referred to therein and open the way for the presentation of parole evidence
to prove the fact contained in the note or memorandum. The defendant argues that there is
even no description of the lot referred to in the note, especially when the note refers to only
one half lot. With respect to the latter argument of the Exhibit 'A', the court has arrived at the
conclusion that there is a sufficient description of the lot referred to in Exh. 'A' as none other
than the parcel of land occupied by the defendant Poncio and where he has his
improvements erected. The Identity of the parcel of land involved herein is sufficiently
established by the contents of the note Exh. "A". For a while, this court had that similar
impression but after a more and thorough consideration of the context in Exh. 'A' and for the
reasons stated above, the Court has arrived at the conclusion stated earlier (pp. 52-54, ROA,
emphasis supplied).
(4) After re-trial on motion of the Infantes, the trial Judge rendered on January 20, 1965 another decision
dismissing the complaint, although he found
1. That on January 27, 1955, the plaintiff purchased from the defendant Poncio a parcel of
land with an area of 195 square meters, more or less, covered by TCT No. 5040 of the
Province of Rizal, located at San Juan del Monte, Rizal, for the price of P6.50 per square
meter;
2. That the purchase made by the plaintiff was not reduced to writing except for a short note
or memorandum Exh. A, which also recited that the defendant Poncio would be allowed to
continue his stay in the premises, among other things, ... (pp. 91-92, ROA, emphasis
supplied).
From such factual findings, the trial Judge confirms the due execution of Exhibit "A", only that his legal
conclusion is that it is not sufficient to transfer ownership (pp. 93-94, ROA).
(5) In the first decision of November 2, 1967 of the Fifth Division of the Court of Appeals composed of Justices
Esguerra (now Associate Justice of the Supreme Court), Gatmaitan and Mojica, penned by Justice Gatmaitan,
the Court of Appeals found that:
... the testimony of Rosario Carbonell not having at all been attempted to be disproved by
defendants, particularly Jose Poncio, and corroborated as it is by the private document in
Batanes dialect, Exhibit A, the testimony being to the effect that between herself and Jose
there had been celebrated a sale of the property excluding the house for the price of P9.50
per square meter, so much so that on faith of that, Rosario had advanced the sum of P247.26
and binding herself to pay unto Jose the balance of the purchase price after deducting the
indebtedness to the Bank and since the wording of Exhibit A, the private document goes so
far as to describe their transaction as one of sale, already consummated between them,
note the part tense used in the phrase, "the lot sold by him to me" and going so far even as
to state that from that day onwards, vendor would continue to live therein, for one year,
'during which time he will not pay anything' this can only mean that between Rosario and
Jose, there had been a true contract of sale, consummated by delivery constitutum
possession, Art. 1500, New Civil Code; vendor's possession having become converted from
then on, as a mere tenant of vendee, with the special privilege of not paying rental for one
year, it is true that the sale by Jose Poncio to Rosario Carbonell corroborated
documentarily only by Exhibit A could not have been registered at all, but it was a valid
contract nonetheless, since under our law, a contract sale is consensual, perfected by mere
consent, Couto v. Cortes, 8 Phil 459, so much so that under the New Civil Code, while a
sale of an immovable is ordered to be reduced to a public document, Art. 1358, that mandate
does not render an oral sale of realty invalid, but merely incapable of proof, where still
executory and action is brought and resisted for its performance, 1403, par. 2, 3; but where
already wholly or partly executed or where even if not yet, it is evidenced by a
memorandum, in any case where evidence to further demonstrate is presented and admitted
as the case was here, then the oral sale becomes perfectly good, and becomes a good
cause of action not only to reduce it to the form of a public document, but even to enforce
the contract in its entirety, Art. 1357; and thus it is that what we now have is a case
wherein on the one hand Rosario Carbonell has proved that she had an anterior sale,
celebrated in her favor on 27 January, 1955, Exhibit A, annotated as an adverse claim on 8
February, 1955, and on other, a sale is due form in favor of Emma L. Infante on 2 February,
1955, Exhibit 3-Infante, and registered in due form with title unto her issued on 12 February,
1955; the vital question must now come on which of these two sales should prevail; ... (pp.
74-76, rec., emphasis supplied).
(6) In the resolution dated October 30, 1968 penned by then Court of Appeals Justice Esguerra (now a member
of this Court), concurred in by Justices Villamor and Nolasco, constituting the majority of a Special Division of
Five, the Court of Appeals, upon motion of the Infantes, while reversing the decision of November 2, 1967 and
affirming the decision of the trial court of January 20, 1965 dismissing plaintiff's complaint, admitted the
existence and genuineness of Exhibit "A", the private memorandum dated January 27, 1955, although it did not
consider the same as satisfying "the essential elements of a contract of sale," because it "neither specifically
describes the property and its boundaries, nor mention its certificate of title number, nor states the price certain
to be paid, or contrary to the express mandate of Articles 1458 and 1475 of the Civil Code.
(7) In his dissent concurred in by Justice Rodriguez, Justice Gatmaitan maintains his decision of November 2,
1967 as well as his findings of facts therein, and reiterated that the private memorandum Exhibit "A", is a
perfected sale, as a sale is consensual and consummated by mere consent, and is binding on and effective
between the parties. This statement of the principle is correct [pp. 89-92, rec.].
III
ADEQUATE CONSIDERATION OR PRICE FOR THE SALE
IN FAVOR OF CARBONELL
It should be emphasized that the mortgage on the lot was about to be foreclosed by the bank for failure on the
part of Poncio to pay the amortizations thereon. To forestall the foreclosure and at the same time to realize
some money from his mortgaged lot, Poncio agreed to sell the same to Carbonell at P9.50 per square meter,
on condition that Carbonell [1] should pay (a) the amount of P400.00 to Poncio and 9b) the arrears in the amount
of P247.26 to the bank; and [2] should assume his mortgage indebtedness. The bank president agreed to the
said sale with assumption of mortgage in favor of Carbonell an Carbonell accordingly paid the arrears of
P247.26. On January 27, 1955, she paid the amount of P200.00 to the bank because that was the amount that
Poncio told her as his arrearages and Poncio advanced the sum of P47.26, which amount was refunded to him
by Carbonell the following day. This conveyance was confirmed that same day, January 27, 1955, by the private
document, Exhibit "A", which was prepared in the Batanes dialect by the witness Constancio Meonada, who is
also from Batanes like Poncio and Carbonell.
The sale did not include Poncio's house on the lot. And Poncio was given the right to continue staying on the
land without paying any rental for one year, after which he should pay rent if he could not still find a place to
transfer his house. All these terms are part of the consideration of the sale to Carbonell.
It is evident therefore that there was ample consideration, and not merely the sum of P200.00, for the sale of
Poncio to Carbonell of the lot in question.
But Poncio, induced by the higher price offered to him by Infante, reneged on his commitment to Carbonell and
told Carbonell, who confronted him about it, that he would not withdraw from his deal with Infante even if he is
sent to jail The victim, therefore, "of injustice and outrage is the widow Carbonell and not the Infantes, who
without moral compunction exploited the greed and treacherous nature of Poncio, who, for love of money and
without remorse of conscience, dishonored his own plighted word to Carbonell, his own cousin.
Inevitably evident therefore from the foregoing discussion, is the bad faith of Emma Infante from the time she
enticed Poncio to dishonor his contract with Carbonell, and instead to sell the lot to her (Infante) by offering
Poncio a much higher price than the price for which he sold the same to Carbonell. Being guilty of bad faith,
both in taking physical possession of the lot and in recording their deed of sale, the Infantes cannot recover the
value of the improvements they introduced in the lot. And after the filing by Carbonell of the complaint in June,
1955, the Infantes had less justification to erect a building thereon since their title to said lot is seriously disputed
by Carbonell on the basis of a prior sale to her.
With respect to the claim of Poncio that he signed the document Exhibit "A" under the belief that it was a permit
for him to remain in the premises in ease he decides to sell the property to Carbonell at P20.00 per square
meter, the observation of the Supreme Court through Mr. Chief Justice Concepcion in G.R. No. L-11231, supra,
bears repeating:
... Incidentally, the allegation in Poncio's answer to the effect that he signed Exhibit A under
the belief that it 'was a permit for him to remain in the premises in the event that 'he decided
to sell the property' to the plaintiff at P20.00 a sq. m is, on its face, somewhat difficult to
believe. Indeed, if he had not decided as yet to sell that land to plaintiff, who had never
increased her offer of P15 a square meter, there as no reason for Poncio to get said permit
from her. Upon the they if plaintiff intended to mislead Poncio, she would have Exhibit A to
be drafted, probably, in English, instead of taking the trouble of seeing to it that it was written
precisely in his native dialect, the Batanes. Moreover, Poncio's signature on Exhibit A
suggests that he is neither illiterate nor so ignorant as to sign a document without reading
its contents, apart from the fact that Meonada had read Exhibit A to him-and given him a
copy thereof, before he signed thereon, according to Meonada's uncontradicted testimony.
(pp. 46-47, ROA).
As stressed by Justice Gatmaitan in his first decision of November 2, 1965, which he reiterated in his dissent
from the resolution of the majority of the Special Division. of Five on October 30, 1968, Exhibit A, the private
document in the Batanes dialect, is a valid contract of sale between the parties, since sale is a consensual
contract and is perfected by mere consent (Couto vs. Cortes, 8 Phil. 459). Even an oral contract of realty is all
between the parties and accords to the vendee the right to compel the vendor to execute the proper public
document As a matter of fact, Exhibit A, while merely a private document, can be fully or partially performed, to
it from the operation of the statute of frauds. Being a all consensual contract, Exhibit A effectively transferred
the possession of the lot to the vendee Carbonell by constitutum possessorium (Article 1500, New Civil Code);
because thereunder the vendor Poncio continued to retain physical possession of the lot as tenant of the vendee
and no longer as knew thereof. More than just the signing of Exhibit A by Poncio and Carbonell with Constancio
Meonada as witness to fact the contract of sale, the transition was further confirmed when Poncio agreed to the
actual payment by at Carbonell of his mortgage arrearages to the bank on January 27, 1955 and by his
consequent delivery of his own mortgage passbook to Carbonell. If he remained owner and mortgagor, Poncio
would not have surrendered his mortgage passbook to' Carbonell.
IV
IDENTIFICATION AND DESCRIPTION OF THE DISPUTED LOT IN THE MEMORANDUM EXHIBIT "A"
The claim that the memorandum Exhibit "A" does not sufficiently describe the disputed lot as the subject matter
of the sale, was correctly disposed of in the first decision of the trial court of December 5, 1962, thus: "The
defendant argues that there is even no description of the lot referred to in the note (or memorandum), especially
when the note refers to only one-half lot. With respect to the latter argument of the defendant, plaintiff points
out that one- half lot was mentioned in Exhibit 'A' because the original description carried in the title states that
it was formerly part of a bigger lot and only segregated later. The explanation is tenable, in (sic) considering the
time value of the contents of Exh. 'A', the court has arrived at the conclusion that there is sufficient description
of the lot referred to in Exh. As none other than the parcel of lot occupied by the defendant Poncio and where
he has his improvements erected. The Identity of the parcel of land involved herein is sufficiently established
by the contents of the note Exh. 'A'. For a while, this court had that similar impression but after a more and
through consideration of the context in Exh. 'A' and for the reasons stated above, the court has arrived to (sic)
the conclusion stated earlier" (pp. 53-54, ROA).
Moreover, it is not shown that Poncio owns another parcel with the same area, adjacent to the lot of his cousin
Carbonell and likewise mortgaged by him to the Republic Savings Bank. The transaction therefore between
Poncio and Carbonell can only refer and does refer to the lot involved herein. If Poncio had another lot to remove
his house, Exhibit A would not have stipulated to allow him to stay in the sold lot without paying any rent for one
year and thereafter to pay rental in case he cannot find another place to transfer his house.
While petitioner Carbonell has the superior title to the lot, she must however refund to respondents Infantes the
amount of P1,500.00, which the Infantes paid to the Republic Savings Bank to redeem the mortgage.
It appearing that the Infantes are possessors in bad faith, their rights to the improvements they introduced op
the disputed lot are governed by Articles 546 and 547 of the New Civil Code. Their expenses consisting of
P1,500.00 for draining the property, filling it with 500 cubic meters of garden soil, building a wall around it and
installing a gate and P11,929.00 for erecting a b ' bungalow thereon, are useful expenditures, for they add to
the value of the property (Aringo vs. Arenas, 14 Phil. 263; Alburo vs. Villanueva, 7 Phil. 277; Valencia vs. Ayala
de Roxas, 13 Phil. 45).
Under the second paragraph of Article 546, the possessor in good faith can retain the useful improvements
unless the person who defeated him in his possession refunds him the amount of such useful expenses or pay
him the increased value the land may have acquired by reason thereof. Under Article 547, the possessor in
good faith has also the right to remove the useful improvements if such removal can be done without damage
to the land, unless the person with the superior right elects to pay for the useful improvements or reimburse the
expenses therefor under paragraph 2 of Article 546. These provisions seem to imply that the possessor in bad
faith has neither the right of retention of useful improvements nor the right to a refund for useful expenses.
But, if the lawful possessor can retain the improvements introduced by the possessor in bad faith for pure luxury
or mere pleasure only by paying the value thereof at the time he enters into possession (Article 549 NCC), as
a matter of equity, the Infantes, although possessors in bad faith, should be allowed to remove the aforesaid
improvements, unless petitioner Carbonell chooses to pay for their value at the time the Infantes introduced
said useful improvements in 1955 and 1959. The Infantes cannot claim reimbursement for the current value of
the said useful improvements; because they have been enjoying such improvements for about two decades
without paying any rent on the land and during which period herein petitioner Carbonell was deprived of its
possession and use.
WHEREFORE, THE DECISION OF THE SPECIAL DIVISION OF FIVE OF THE COURT OF APPEALS OF
OCTOBER 30, 1968 IS HEREBY REVERSED; PETITIONER ROSARIO CARBONELL IS HEREBY
DECLARED TO HAVE THE SUPERIOR RIGHT TO THE LAND IN QUESTION AND IS HEREBY DIRECTED
TO REIMBURSE TO PRIVATE RESPONDENTS INFANTES THE SUM OF ONE THOUSAND FIVE HUNDRED
PESOS (P1,500.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION; AND THE
REGISTER OF DEEDS OF RIZAL IS HEREBY DIRECTED TO CANCEL TRANSFER CERTIFICATE OF TITLE
NO. 37842 ISSUED IN FAVOR OF PRIVATE RESPONDENTS INFANTES COVERING THE DISPUTED LOT,
WHICH CANCELLED TRANSFER CERTIFICATE OF TITLE NO. 5040 IN THE NAME OF JOSE PONCIO,
AND TO ISSUE A NEW TRANSFER CERTIFICATE OF TITLE IN FAVOR OF PETITIONER ROSARIO
CARBONELL UPON PRESENTATION OF PROOF OF PAYMENT BY HER TO THE INFANTES OF THE
AFORESAID AMOUNT OF ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00).
PRIVATE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL
IMPROVEMENTS FROM THE LOT WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION,
UNLESS THE PETITIONER ROSARIO CARBONELL ELECTS TO ACQUIRE THE SAME AND PAYS THE
INFANTES THE AMOUNT OF THIRTEEN THOUSAND FOUR HUNDRED TWENTY-NINE PESOS
(P13,429.00) WITHIN THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION. SHOULD
PETITIONER CARBONELL FAIL TO PAY THE SAID AMOUNT WITHIN THE AFORESTATED PERIOD OF
THREE (3) MONTHS FROM THE FINALITY OF THIS DECISION, THE PERIOD OF THREE (3) MONTHS
WITHIN WHICH THE RESPONDENTS INFANTES MAY REMOVE THEIR AFOREMENTIONED USEFUL
IMPROVEMENTS SHALL COMMENCE FROM THE EXPIRATION OF THE THREE (3) MONTHS GIVEN
PETITIONER CARBONELL TO PAY FOR THE SAID USEFUL IMPROVEMENTS.
WITH COSTS AGAINST PRIVATE RESPONDENTS.
Castro, C.J, Aquino and Martin, JJ., concur.
Separate Opinions
TEEHANKEE, J., concurring:
I concur. My concurrence proceeds from the same premise as the dissenting opinion of Justice Munoz Palma
that both the conflicting buyers of the real property in question, namely, petitioner Rosario Carbonell as the first
buyer may be deemed purchasers in good faith at the respective dates of their purchase.
The answer to the question of who between the two buyers in good faith should prevail is provided in the second
paragraph of Article 1544 of the Civil Code 1 (formerly Article 1473 of the old Civil Code) which ordains that "the
ownership of the immovable property shall belong to the person acquiring it who in good faith first recorded it in
the Registry of Property."
In the case at bar, the seller executed on January 27, 1955 the private memorandum of sale of the property in
favor of the first buyer Carbonell, However, six days later on February 2, 1955, the seller sold the property for
a second time for an improved price, this time executing a formal registrable deed of sale in favor of the second
buyer Infante.
So it was that when the first buyer Carbonell saw the seller a few days afterwards bringing the formal deed of
sale for the seller's signature and the balance of the agreed cash payment, the seller told her that he could not
proceed anymore with formalizing the first sale because he had already formalized the second sale in favor of
the second buyer Infante.
Since Carbonell (the first buyer) did not have a formal registrable deed of sale, she did the next best thing to
protect her legal rights and registered on February 8, 1955 with the Rizal Register of Deeds her adverse claim
as first buyer entitled to the property. The second buyer Infante registered the deed of sale in her favor with the
Rizal Register of Deeds only on February 12, 1955 (notwithstanding its having been executed ten days earlier
on February 2, 1955), and therefore the transfer certificate of title issued in her favor carried the duly annotated
adverse claim of Carbonell as the first buyer.
Both these registrations were in good faith and hence, as provided by the cited code article, the first buyer
Carbonell as also the first registrant is legally entitled to the property.
The fact that Carbonell registered only an adverse claim as she had no registrable deed of sale is of no moment.
The facts of record amply show that she had a written memorandum of sale, which was partially executed with
the advance payment made by her for the seller's mortgage account with the bank, and which was perfected
and binding in law by their accord on the subject matter and price. Carbonell could in law enforce in court her
rights as first buyer under the memorandum agreement and compel the seller to execute in her favor a formal
registrable deed of sale which would relate back to the date of the original memorandum agreement.
And under the cited code provision, Carbonell had to duly register such adverse claim as first buyer, as
otherwise the subsequent registration of the second buyer's deed of sale would have obliterated her legal rights
and enable the seller to achieve his fraudulent act of selling the property a second time for a better price in
derogation of her prior right thereto.
The fact that the seller refused to execute the formal deed of sale in Carbonell's favor and (as was only to be
expected) informed her that he could not proceed anymore with the sale because he had sold it for a second
time for a better price did not convert her prior registration of her adverse claim into one of bad faith.
The fraudulent seller's act of informing the first buyer that he has wrongfully sold his property for a second time
cannot work out to his own advantage and to the detriment of the innocent first buyer (by being considered as
an "automatic registration" of the second sale) and defeat the first buyer's right of priority, in time in right and in
registration.
The governing principle here is prius tempore, portior jure 2 (first in time, stronger in right). Knowledge gained
by the first buyer of the second sale cannot defeat the first buyer's rights except only as provided by the Civil
Code and that is where the second buyer first registers in good faith the second sale ahead of the first. Such
knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register
first her purchase as against the second buyer. But in other so knowledge gained by the second buyer of the
first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior
registration with bad faith.
This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first
buyer: that before the second buyer can obtain priority over the first, he must show that he acted in good faith
throughout (i.e. in ignorance of the first sale and of the first buyer's rights) from the time of acquisition until
the title is transferred to him by registration or failing registration, by delivery of possession. The second buyer
must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens
into full ownership through prior registration as provided by law.
The above principles were aptly restated in a 1948 Court of Appeals decision in the case of Gallardo, vs.
Gallardopenned by Justice J.B.L. Reyes, then a member of the appellate court. 3 The facts of that case and the
case at bar are virtually Identical, except that the earlier case was decided under the old Civil Code (Article
1473 thereof now reproduced as Article 1544 of the present Civil Code), and the ratio decidendi thereof, mutatis
mutandis, is fully applicable, as follows:
Analysis of article 1473 of the Civil Code shows that before a second vendee can
obtain priority over the first, it is indispensable that he should have acted in good faith, (that
is to say, in ignorance of the rights of the first vendee's rights) until the title is transferred to
him by actual or constructive delivery of the thing sold. This is the price exacted by law for
his being able to displace the first vendee; and the mere fact that the second contract of sale
was perfected in good faith is not sufficient if, before the title passes, the second vendee
acquires knowledge of the first transaction. That the second buyer innocently agreed to
purchase the land may protect him against responsibility of conspiring with his vendor to
defraud the established rights of the first purchaser; but to defeat the latter's priority in time
(based on the old principle "prius tempore, potior jure," first in time, better in right) the good
faith or innocence of the posterior vendee must needs continue until his contract ripens into
ownership by tradition or recording (Palanca vs. Director of lands, 43 Phil. 141, 154).
That the formal deed of conveyance to Gabino Gallardo was executed after that of Caoagas
is of no moment, the contract of sale being perfected and binding by mere accord on the
subject matter and the price, even if neither is delivered (Article 1450, Civil Code), the deed
of conveyance will relate back to the date of the original agreement. 4
Finally, in the present case, the first buyer's registration (February 8, 1955) concededly preceded the second
buyer's registration (February 12, 1955) by four days, and therefore, as provided by the Civil Code, the first
buyer thereby duly preserved her right of priority and is entitled to the property.
MUOZ PALMA, J., dissenting:
Strongly convinced as I am that the decision of the Court of Appeals under review should be affirmed, this
dissenting opinion is being written.
We are here confronted with a double sale made by Jose Poncio of his 195-square meter lot located at V. Again
St., San Juan, Rizal, covered by Transfer Certificate of Title No. 5040, the solution to which is found in Art. 1544
of the Civil Code, more particularly the second paragraph thereof which provides that should the thing sold be
immovable property, the ownership shall belong to the person acquiring it who in good with first recorded it in
the Registry of property.
1. The two purchasers, namely, petitioner Rosario Carbonell and respondent Emma Infante, are both
purchasers in good faith.
That Rosario Carbonell is a buyer in good faith cannot be disputed for at the time negotiations for the purchase
of the lot were being made between her and the vendor, Jose Poncio, as of January 27, 1955, there was no
indication at all from the latter that another sale was being contemplated.
That Emma Infante is likewise a buyer in good faith is supported by: (a) an express finding of the trial court in
its decision of January 20, 1965, to the effect that when the vendor and purchaser. Infante consummated the
sale on or about January 29, 1955, an examination of the original of T.C.T. 5040 on file with the Register of
Deeds of Rizal as well as the owner's duplicate revealed no annotation of any encumbrance or lien other than
the mortgage in favor of the Republic Savings Bank (p. 92, Record on Appeal); (b) the findings of fact of the
Court of Appeals given in the decision penned by then Justice Salvador V. Esguerra as well as in the first
decision written by Justice Magno Gatmaitan which subsequently became the basis of the dissenting opinion
to the majority, and from which I quote:
2. CONSIDERING: That as basis for discussion of this issue, it must have to be remembered
that the first vendee, Rosario Carbonell, certainly was an innocent purchaser ... but also
must it be remembered that Emma L. Infante, when she bought the property on 2 February,
1955, under Exhibit 3-Infante, neither had she before then been, preliminary informed of the
first sate to Rosario ...; indeed as Emma has testified on this detail, it is easy to accept her
declaration:
Q. When Mr. Jose Poncio offered you this land in
question, did he tell you that the land was sold or
otherwise promised to Mrs. Carbonell?
A. Of course not, otherwise will never buy.
(tsn. II:27)
in other words, at the respective dates of their purchase, both vendees, Rosario and Emma, were innocent and
had acted in the best of good faith ... (pp. 9-10 of Justice Gatmaitan's decision found on pp. 76-77, rollo; see
also p. 7 of his dissenting opinion found on p. 95, rollo).
Departing from a well-entrenched rule set down in a long array of decisions of this Court that factual findings of
the trial court and of the Court -of Appeals are generally binding and conclusive, 1 and that on appeal by
certiorari, questions of fact are not to be determined nor reviewed by Us 2 the Majority Opinion of my colleagues
however undertakes a fact-finding process of its own, and draws the conclusion that Emma Infante was a buyer
in bad faith because, among other things: (a) Emma allegedly refused to talk to Rosario Carbonell when the
latter went to see her about the sale of the lot, which "is not the attitude expected of a good neighbor imbued
with Christian charity and goodwill as well as a clean conscience" (p. 10, Majority Opinion); (b) "(B)efore or upon
paying in full the mortgage indebtedness of Poncio to the bank. Infante naturally must have demanded from
Poncio the delivery to her of his mortgage passbook as well as Poncio's mortgage contract. . and Poncio as
well as the bank, must have inevitably informed here that said mortgage passbook could not be given to her
because it was already delivered to Carbonell" (p. 9, Ibid); and (c) "... (T)he victim, therefore, 'of injustice and
outrage is the widow Carbonell and not the Infantes, who without moral compunction exploited the greed and
treacherous nature of Poncio, who, for love of money and without remorse of conscience, dishonored his own
plighted word to Carbonell, his own cousin. ... Inevitably evident therefore from the foregoing discussion, is the
bad faith of Emma Infantefrom the time she enticed Poncio to dishonor his contract with Carbonell, and instead
to sell the lot to her (Infante) by offering Poncio a much higher price than the price for which he sold the same
to Carbonell ..." (p. 20, Majority Opinion; all italicized portions supplied) all of which are unsupported by the
evidence and diametrically contrary to the findings of the court a quo and the appellate court sustaining the
good faith of Emma Infante.
2. Inasmuch as the two purchasers are undoubtedly in good faith, the next question to be resolved is who of
the two first registered her purchase or title in good faith.
In applying Art. 1544 of the Civil Code, it is not enough that the buyer bought the property in good faith, but that
the registration of her title must also be accomplished in good faith. This requirement of good faith is not only
applicable to the second or subsequent purchaser but to the first as well. 3
Construing and applying the second paragraph of Art. 1473 of the Spanish Civil Code which has been
adoptedverbatim in Art. 1544 of the Civil Code of the Philippines, this Court in Leung Lee vs. FL Strong
Machinery Co., et al 37 Phil. 644, declared:
It has been suggested that since the provisions of article 1473 of the Civil Code require
"good faith," in express terms, in relation to "possession" and title but contain no express
requirement as to 'good faith' in relation to the "inscription" of the property in the registry, it
must he presumed that good faith is not an essential requisite of registration in order that it
may have the effect contemplated in this article. We cannot agree with this contention. It
could not have been the intention of the legislator to base the preferential right secured under
this article of the code upon an inscription of title in bad faith. Such an interpretation placed
upon the language of this section would open wide the door to fraud and collusion. The
public records cannot be converted into instruments of fraud and oppression by one who
secures an inscription therein in bad faith. The force and effect given by law to an inscription
in a public record presupposes the good faith of him who enters such inscription; and rights
created by statute, which are predicated upon an inscription in a public registry, do not and
cannot accrue under an inscription "in bad faith," to the benefit of the person who thus makes
the inscription. (pp. 648-649, supra)
Good faith means "freedom from knowledge and circumstances which ought to put a person on inquiry"; 3* it
consists of an honest intention to abstain from taking any conscientious advantage of another. 4
On this point it is my view that Rosario Carbonell cannot be held to have a title superior to that of Emma Infante
for even if We were to concede that the notation of her adverse claim on February 8, 1955, was in the nature of
registration of title as required in Art. 1544 of the Civil Code, 5 the same was not accomplished in good faith.
This is obvious from occurrences narrated in the Majority Opinion, thus: that on January 27, 1955, Carbonell
and Jose Poncio made and executed the memorandum of sale, Exhibit A; that thereafter Carbonell asked Atty.
Salvador Reyes to prepare the formal deed of sale which she brought to Poncio together with the amount of
some P400.00, the balance she had to pay in addition to her assuming the mortgage obligation to Republic
Savings Bank; that upon arriving at Poncio's house the latter told Carbonell that he could not proceed anymore
with the sale because he had already given the lot to Emma Infants; that on February 5, 1955, Carbonell saw
Emma Infante erecting a wall around the lot with a gate; that Carbonell consulted Atty. Jose Garcia who advised
her to present an adverse claim with the office of the Register of Deeds, and that being informedthat the sale in
favor of Emma Infante had not yet been registered, Atty. Garcia prepared the notice of adverse claim which was
signed and sworn to by Rosario Carbonell and registered on February 8, 1955. (see pp. 34, Decision)
At the time petitioner herein caused the annotation of her adverse claim she was, therefore, cognizant of facts
which impaired her title to the property in question, and taking advantage of the situation that the second
purchaser had not as yet registered her deed of sale, she went ahead of the second buyer and annotated what
was only in the nature of an adverse claim inasmuch as she had no registrable document of sale at the time.
That annotation of Carbonell's adverse claim did not produce any legal effects as to place her in a preferential
situation to that of Infante, the second purchaser, for the simple reason that a registration made in bad faith is
equivalent to no registration at all. It is a settled rule that the inscription in the registry, to be effective, must be
made in good faith. (Pena, supra, p. 164)
3. One last point to be considered is the theory advanced by the dissenting opinion of Justice Gatmaitan that
while Carbonell's registration of her adverse claim may indeed be considered in bad faith, nonetheless that of
Infante was likewise in bad faith because at the time of the registration of the latter's deed of sale there was
already inscribed on the original of the title on file with the Register of Deeds the adverse claim of Rosario
Carbonell.
With due respect to the foregoing conclusion of highly respected Colleague, I hold the view that the act of the
registration of Infante's deed of sale on February 12, 1955, was but a formality in the sense that it simply
formalized what had already been accomplished earlier, that is, the registration of Infantes purchase as against
Carbonell when the latter inquired knowledge of the second sale on or about January 27, 1955, when she
brought the memorandum of sale, Exh. A, to Jose Poncio and was informed by the latter that he could not go
through with the sale because he had already sold it to Emma Infante, which information was bolstered by the
fact that Carbonell saw Infante erecting a wall around the lot on February 5.
We have long accepted the rule that knowledge is equivalent to registration. What would be the purpose of
registration other than to give notice to interested parties and to the whole world of the existence of rights or
liens against the property under question?
What has been clearly and succinctly postulated in T. de Winkleman and Winkleman vs. Veluz 1922, 43 Phil.
604, 609, is applicable to the case before Us, and We quote therefrom:
. . . The purpose of registering an instrument relating to land, annuities, mortgages, liens or
any other class of real rights is to give notice to persons interested of the existence of these
various liens against the property. If the parties interested have actual notice of the existence
of such liens then the necessity for registration does not exist. Neither can one who
has actual notice of existing liens acquire any rights in such property free from such liens by
the mere fact that such liens have not been proven recorded. (citing Obras Pias vs. Devera
Ignacio, 17 Phil. 45, 47).
We cannot overlook the fact that while it may be true that the vendor Poncio had signed the memorandum, Exh.
A, from which it may be implied that he sold a lot to Carbonell, there were other things to be accomplished for
purposes of binding third parties, the lot in question being registered land, such as the execution of a formal
deed of sale. Such a document of sale was never signed by Poncio for according to petitioner Carbonell, when
she presented to Poncio the corresponding document together with the sum of P400.00 which according to her
was the balance of the purchase price after she had assumed the mortgage with the Republic Bank, she was
informed by the vendor that the property had been sold to another. That sale was confirmed when Carbonell
saw Infante erecting a wall around the lot on February 5, 1955. As of that moment when Carbonell had notice
or actual knowledge of the second sale in favor of Emma Infante a valid registration of the latter's deed of sale
was constituted as against Carbonell. Accordingly, Infante has a preferential right to the property, the
registration of her sale having been effected in the foregoing manner, prior to the annotation of Carbonell's
adverse claim onFebruary 8, 1955.
The circumstances of the present case are strikingly similar to the hypothetical problem posed in Commentator
Edgardo Paras' Book on the Civil Code of the Philippines and I wholeheartedly concur with his solution of the
problem which is based on law. From him I quote: 6
A sold a parcel of land with a torrens title to B on January 5. A week later, A sold the same
land to C. Neither sale was registered. As soon as B learned of the sale in favor of C, he (B)
registered an adverse claim stating that he was making the claim because the second sale
was in fraud of his rights as first buyer. Later, C registered the deed of sale that had been
made in his favor. Who is now the owner B or C?
Ans. C is clearly the owner, although he was the second buyer. This is so, not because of
the registration of the sale itself but because of the AUTOMATIC registration in his favor
caused by Bs knowledge of the first sale (actual knowledge being equivalent to registration).
The purpose of registration is to notify. This notification was done because of Bs knowledge.
It is wrong to assert that B was only trying to protect his right-for there was no more right to
be protected. He should have registered the sale BEFORE knowledge came to him. It is now
too late. It is clear from this that with respect to the principle "actual knowledge is equivalent
to registration of the sale about which knowledge has been obtained' the knowledge may
be that-of either the FIRST or the SECOND buyer. (pp. 142-143, Vol. V, 1972 Ed.)
Aside from the fact that the sale to Infante was considered registered prior to the registration of Carbonell's
notice of adverse claim, Infante also took immediate physical possession of the property by erecting a fence
with a gate around the lot on February 5, at least tree days prior to Carbonell Is registration on February 8,
1955.
On top of all these, equity is on the side of Emma Infante. Under the Majority Opinion, Emma Infante stands to
lose the lot she bought in good faith which was fully paid for plus the building she erected thereon for which she
spent the total sun of a little less than P14,000.00, or equivalent to about P40,000.00 at the time the case was
decided by the Appellate Court, considering that Rosario Carbonell is being given the option either to order the
removal of the house or to acquire it at P13,429.00. On this point I agree with the following statement of Justice
Esguerra who penned the decision of the Appellate Court, thus:
It is indeed inequitable and re revolting to one's sense of justice and fairness that Rosario
Carbonell who paid out of her own money the sum of only P200.00 to the Republic Savings
Bank for the account of Jose Poncio, which was the motivation for the execution of the
private instrument, Exhibit A, should have a superior right to the land involved. The property
has been improved at a great expense and a building of strong materials has been
constructed thereon Emma Infants ho spent for her lot and building the total sum of
P13,429.00 made, up of P11,929.00 for cost of land and improvements and the building and
P1,500.00 to discharge the mortgage in favor of the Republic Savings Bank. with the present
purchasing power of the peso this aft i more than 13 years, would be not equivalent to about
P40,000.00. Courts should not lend a hand to the perpetration of such kind of injustice and
outrage (see page 88, rollo)
I close paraphrasing the Supreme Court of Oklahoma in Phelps vs. Theime, et al., 217 p. 376; 377, that "equity
is a right wiseneth that considerate all of the particular circumstances of the case and is also tempered with the
sweetness of mercy." (quoting from St. Germain) In this case now before Us there is no need to invoke mercy,
for all that is required is a wise consideration of the particular circumstances narrated above which warrant a
judgment in favor of respondents Infants.
With all the foregoing, I vote for the affirmance of the decision under review.
Separate Opinions
TEEHANKEE, J., concurring:
I concur. My concurrence proceeds from the same premise as the dissenting opinion of Justice Munoz Palma
that both the conflicting buyers of the real property in question, namely, petitioner Rosario Carbonell as the first
buyer may be deemed purchasers in good faith at the respective dates of their purchase.
The answer to the question of who between the two buyers in good faith should prevail is provided in the second
paragraph of Article 1544 of the Civil Code 1 (formerly Article 1473 of the old Civil Code) which ordains that "the
ownership of the immovable property shall belong to the person acquiring it who in good faith first recorded it in
the Registry of Property."
In the case at bar, the seller executed on January 27, 1955 the private memorandum of sale of the property in
favor of the first buyer Carbonell, However, six days later on February 2, 1955, the seller sold the property for
a second time for an improved price, this time executing a formal registrable deed of sale in favor of the second
buyer Infante.
So it was that when the first buyer Carbonell saw the seller a few days afterwards bringing the formal deed of
sale for the seller's signature and the balance of the agreed cash payment, the seller told her that he could not
proceed anymore with formalizing the first sale because he had already formalized the second sale in favor of
the second buyer Infante.
Since Carbonell (the first buyer) did not have a formal registrable deed of sale, she did the next best thing to
protect her legal rights and registered on February 8, 1955 with the Rizal Register of Deeds her adverse claim
as first buyer entitled to the property. The second buyer Infante registered the deed of sale in her favor with the
Rizal Register of Deeds only on February 12, 1955 (notwithstanding its having been executed ten days earlier
on February 2, 1955), and therefore the transfer certificate of title issued in her favor carried the duly annotated
adverse claim of Carbonell as the first buyer.
Both these registrations were in good faith and hence, as provided by the cited code article, the first buyer
Carbonell as also the first registrant is legally entitled to the property.
The fact that Carbonell registered only an adverse claim as she had no registrable deed of sale is of no moment.
The facts of record amply show that she had a written memorandum of sale, which was partially executed with
the advance payment made by her for the seller's mortgage account with the bank, and which was perfected
and binding in law by their accord on the subject matter and price. Carbonell could in law enforce in court her
rights as first buyer under the memorandum agreement and compel the seller to execute in her favor a formal
registrable deed of sale which would relate back to the date of the original memorandum agreement.
And under the cited code provision, Carbonell had to duly register such adverse claim as first buyer, as
otherwise the subsequent registration of the second buyer's deed of sale would have obliterated her legal rights
and enable the seller to achieve his fraudulent act of selling the property a second time for a better price in
derogation of her prior right thereto.
The fact that the seller refused to execute the formal deed of sale in Carbonell's favor and (as was only to be
expected) informed her that he could not proceed anymore with the sale because he had sold it for a second
time for a better price did not convert her prior registration of her adverse claim into one of bad faith.
The fraudulent seller's act of informing the first buyer that he has wrongfully sold his property for a second time
cannot work out to his own advantage and to the detriment of the innocent first buyer (by being considered as
an "automatic registration" of the second sale) and defeat the first buyer's right of priority, in time in right and in
registration.
The governing principle here is prius tempore, portior jure 2 (first in time, stronger in right). Knowledge gained
by the first buyer of the second sale cannot defeat the first buyer's rights except only as provided by the Civil
Code and that is where the second buyer first registers in good faith the second sale ahead of the first. Such
knowledge of the first buyer does not bar her from availing of her rights under the law, among them, to register
first her purchase as against the second buyer. But in other so knowledge gained by the second buyer of the
first sale defeats his rights even if he is first to register the second sale, since such knowledge taints his prior
registration with bad faith.
This is the price exacted by Article 1544 of the Civil Code for the second buyer being able to displace the first
buyer: that before the second buyer can obtain priority over the first, he must show that he acted in good faith
throughout (i.e. in ignorance of the first sale and of the first buyer's rights) from the time of acquisition until
the title is transferred to him by registration or failing registration, by delivery of possession. The second buyer
must show continuing good faith and innocence or lack of knowledge of the first sale until his contract ripens
into full ownership through prior registration as provided by law.
The above principles were aptly restated in a 1948 Court of Appeals decision in the case of Gallardo, vs.
Gallardopenned by Justice J.B.L. Reyes, then a member of the appellate court. 3 The facts of that case and the
case at bar are virtually Identical, except that the earlier case was decided under the old Civil Code (Article
1473 thereof now reproduced as Article 1544 of the present Civil Code), and the ratio decidendi thereof, mutatis
mutandis, is fully applicable, as follows:
Analysis of article 1473 of the Civil Code shows that before a second vendee can
obtain priority over the first, it is indispensable that he should have acted in good faith, (that
is to say, in ignorance of the rights of the first vendee's rights) until the title is transferred to
him by actual or constructive delivery of the thing sold. This is the price exacted by law for
his being able to displace the first vendee; and the mere fact that the second contract of sale
was perfected in good faith is not sufficient if, before the title passes, the second vendee
acquires knowledge of the first transaction. That the second buyer innocently agreed to
purchase the land may protect him against responsibility of conspiring with his vendor to
defraud the established rights of the first purchaser; but to defeat the latter's priority in time
(based on the old principle "prius tempore, potior jure," first in time, better in right) the good
faith or innocence of the posterior vendee must needs continue until his contract ripens into
ownership by tradition or recording (Palanca vs. Director of lands, 43 Phil. 141, 154).
That the formal deed of conveyance to Gabino Gallardo was executed after that of Caoagas
is of no moment, the contract of sale being perfected and binding by mere accord on the
subject matter and the price, even if neither is delivered (Article 1450, Civil Code), the deed
of conveyance will relate back to the date of the original agreement. 4
Finally, in the present case, the first buyer's registration (February 8, 1955) concededly preceded the second
buyer's registration (February 12, 1955) by four days, and therefore, as provided by the Civil Code, the first
buyer thereby duly preserved her right of priority and is entitled to the property.
MUOZ PALMA, J., dissenting:
Strongly convinced as I am that the decision of the Court of Appeals under review should be affirmed, this
dissenting opinion is being written.
We are here confronted with a double sale made by Jose Poncio of his 195-square meter lot located at V. Again
St., San Juan, Rizal, covered by Transfer Certificate of Title No. 5040, the solution to which is found in Art. 1544
of the Civil Code, more particularly the second paragraph thereof which provides that should the thing sold be
immovable property, the ownership shall belong to the person acquiring it who in good with first recorded it in
the Registry of property.
1. The two purchasers, namely, petitioner Rosario Carbonell and respondent Emma Infante, are both
purchasers in good faith.
That Rosario Carbonell is a buyer in good faith cannot be disputed for at the time negotiations for the purchase
of the lot were being made between her and the vendor, Jose Poncio, as of January 27, 1955, there was no
indication at all from the latter that another sale was being contemplated.
That Emma Infante is likewise a buyer in good faith is supported by: (a) an express finding of the trial court in
its decision of January 20, 1965, to the effect that when the vendor and purchaser. Infante consummated the
sale on or about January 29, 1955, an examination of the original of T.C.T. 5040 on file with the Register of
Deeds of Rizal as well as the owner's duplicate revealed no annotation of any encumbrance or lien other than
the mortgage in favor of the Republic Savings Bank (p. 92, Record on Appeal); (b) the findings of fact of the
Court of Appeals given in the decision penned by then Justice Salvador V. Esguerra as well as in the first
decision written by Justice Magno Gatmaitan which subsequently became the basis of the dissenting opinion
to the majority, and from which I quote:
2. CONSIDERING: That as basis for discussion of this issue, it must have to be remembered
that the first vendee, Rosario Carbonell, certainly was an innocent purchaser ... but also
must it be remembered that Emma L. Infante, when she bought the property on 2 February,
1955, under Exhibit 3-Infante, neither had she before then been, preliminary informed of the
first sate to Rosario ...; indeed as Emma has testified on this detail, it is easy to accept her
declaration:
Q. When Mr. Jose Poncio offered you this land in
question, did he tell you that the land was sold or
otherwise promised to Mrs. Carbonell?
A. Of course not, otherwise will never buy.
(tsn. II:27)
in other words, at the respective dates of their purchase, both vendees, Rosario and Emma, were innocent and
had acted in the best of good faith ... (pp. 9-10 of Justice Gatmaitan's decision found on pp. 76-77, rollo; see
also p. 7 of his dissenting opinion found on p. 95, rollo).
Departing from a well-entrenched rule set down in a long array of decisions of this Court that factual findings of
the trial court and of the Court of Appeals are generally binding and conclusive, 1 and that on appeal by certiorari,
questions of fact are not to be determined nor reviewed by Us 2 the Majority Opinion of my colleagues however
undertakes a fact-finding process of its own, and draws the conclusion that Emma Infante was a buyer in bad
faith because, among other things: (a) Emma allegedly refused to talk to Rosario Carbonell when the latter went
to see her about the sale of the lot, which "is not the attitude expected of a good neighbor imbued with Christian
charity and goodwill as well as a clean conscience" (p. 10, Majority Opinion); (b) "(B)efore or upon paying in full
the mortgage indebtedness of Poncio to the bank. Infante naturally must have demanded from Poncio the
delivery to her of his mortgage passbook as well as Poncio's mortgage contract. . and Poncio as well as the
bank, must have inevitably informed here that said mortgage passbook could not be given to her because it
was already delivered to Carbonell" (p. 9, Ibid); and (c) "... (T)he victim, therefore, 'of injustice and outrage is
the widow Carbonell and not the Infantes, who without moral compunction exploited the greed and treacherous
nature of Poncio, who, for love of money and without remorse of conscience, dishonored his own plighted word
to Carbonell, his own cousin. ... Inevitably evident therefore from the foregoing discussion, is the bad faith of
Emma Infantefrom the time she enticed Poncio to dishonor his contract with Carbonell, and instead to sell the
lot to her (Infante) by offering Poncio a much higher price than the price for which he sold the same to Carbonell
..." (p. 20, Majority Opinion; all italicized portions supplied) all of which are unsupported by the evidence and
diametrically contrary to the findings of the court a quo and the appellate court sustaining the good faith of
Emma Infante.
2. Inasmuch as the two purchasers are undoubtedly in good faith, the next question to be resolved is who of
the two first registered her purchase or title in good faith.
In applying Art. 1544 of the Civil Code, it is not enough that the buyer bought the property in good faith, but that
the registration of her title must also be accomplished in good faith. This requirement of good faith is not only
applicable to the second or subsequent purchaser but to the first as well. 3
Construing and applying the second paragraph of Art. 1473 of the Spanish Civil Code which has been
adoptedverbatim in Art. 1544 of the Civil Code of the Philippines, this Court in Leung Lee vs. FL Strong
Machinery Co., et al 37 Phil. 644, declared:
It has been suggested that since the provisions of article 1473 of the Civil Code require
"good faith," in express terms, in relation to "possession" and title but contain no express
requirement as to 'good faith' in relation to the "inscription" of the property in the registry, it
must he presumed that good faith is not an essential requisite of registration in order that it
may have the effect contemplated in this article. We cannot agree with this contention. It
could not have been the intention of the legislator to base the preferential right secured under
this article of the code upon an inscription of title in bad faith. Such an interpretation placed
upon the language of this section would open wide the door to fraud and collusion. The
public records cannot be converted into instruments of fraud and oppression by one who
secures an inscription therein in bad faith. The force and effect given by law to an inscription
in a public record presupposes the good faith of him who enters such inscription; and rights
created by statute, which are predicated upon an inscription in a public registry, do not and
cannot accrue under an inscription "in bad faith," to the benefit of the person who thus makes
the inscription. (pp. 648-649, supra)
Good faith means "freedom from knowledge and circumstances which ought to put a person on inquiry"; 3* it
consists of an honest intention to abstain from taking any conscientious advantage of another. 4
On this point it is my view that Rosario Carbonell cannot be held to have a title superior to that of Emma Infante
for even if We were to concede that the notation of her adverse claim on February 8, 1955, was in the nature of
registration of title as required in Art. 1544 of the Civil Code, 5 the same was not accomplished in good faith.
This is obvious from occurrences narrated in the Majority Opinion, thus: that on January 27, 1955, Carbonell
and Jose Poncio made and executed the memorandum of sale, Exhibit A; that thereafter Carbonell asked Atty.
Salvador Reyes to prepare the formal deed of sale which she brought to Poncio together with the amount of
some P400.00, the balance she had to pay in addition to her assuming the mortgage obligation to Republic
Savings Bank; that upon arriving at Poncio's house the latter told Carbonell that he could not proceed anymore
with the sale because he had already given the lot to Emma Infants; that on February 5, 1955, Carbonell saw
Emma Infante erecting a wall around the lot with a gate; that Carbonell consulted Atty. Jose Garcia who advised
her to present an adverse claim with the office of the Register of Deeds, and that being informedthat the sale in
favor of Emma Infante had not yet been registered, Atty. Garcia prepared the notice of adverse claim which was
signed and sworn to by Rosario Carbonell and registered on February 8, 1955. (see pp. 34, Decision)
At the time petitioner herein caused the annotation of her adverse claim she was, therefore, cognizant of facts
which impaired her title to the property in question, and taking advantage of the situation that the second
purchaser had not as yet registered her deed of sale, she went ahead of the second buyer and annotated what
was only in the nature of an adverse claim inasmuch as she had no registrable document of sale at the time.
That annotation of Carbonell's adverse claim did not produce any legal effects as to place her in a preferential
situation to that of Infante, the second purchaser, for the simple reason that a registration made in bad faith is
equivalent to no registration at all. It is a settled rule that the inscription in the registry, to be effective, must be
made in good faith. (Pena, supra, p. 164)
3. One last point to be considered is the theory advanced by the dissenting opinion of Justice Gatmaitan that
while Carbonell's registration of her adverse claim may indeed be considered in bad faith, nonetheless that of
Infante was likewise in bad faith because at the time of the registration of the latter's deed of sale there was
already inscribed on the original of the title on file with the Register of Deeds the adverse claim of Rosario
Carbonell.
With due respect to the foregoing conclusion of highly respected Colleague, I hold the view that the act of the
registration of Infante's deed of sale on February 12, 1955, was but a formality in the sense that it simply
formalized what had already been accomplished earlier, that is, the registration of Infantes purchase as against
Carbonell when the latter inquired knowledge of the second sale on or about January 27, 1955, when she
brought the memorandum of sale, Exh. A, to Jose Poncio and was informed by the latter that he could not go
through with the sale because he had already sold it to Emma Infante, which information was bolstered by the
fact that Carbonell saw Infante erecting a wall around the lot on February 5.
We have long accepted the rule that knowledge is equivalent to registration. What would be the purpose of
registration other than to give notice to interested parties and to the whole world of the existence of rights or
liens against the property under question?
What has been clearly and succinctly postulated in T. de Winkleman and Winkleman vs. Veluz 1922, 43 Phil.
604, 609, is applicable to the case before Us, and We quote therefrom:
... The purpose of registering an instrument relating to land, annuities, mortgages, liens or
any other class of real rights is to give notice to persons interested of the existence of these
various liens against the property. If the parties interested have actual notice of the existence
of such liens then the necessity for registration does not exist. Neither can one who
has actual notice of existing liens acquire any rights in such property free from such liens by
the mere fact that such liens have not been proven recorded. (citing Obras Pias vs. Devera
Ignacio, 17 Phil. 45, 47).
We cannot overlook the fact that while it may be true that the vendor Poncio had signed the memorandum, Exh.
A, from which it may be implied that he sold a lot to Carbonell, there were other things to be accomplished for
purposes of binding third parties, the lot in question being registered land, such as the execution of a formal
deed of sale. Such a document of sale was never signed by Poncio for according to petitioner Carbonell, when
she presented to Poncio the corresponding document together with the sum of P400.00 which according to her
was the balance of the purchase price after she had assumed the mortgage with the Republic Bank, she was
informed by the vendor that the property had been sold to another. That sale was confirmed when Carbonell
saw Infante erecting a wall around the lot on February 5, 1955. As of that moment when Carbonell had notice
or actual knowledge of the second sale in favor of Emma Infante a valid registration of the latter's deed of sale
was constituted as against Carbonell. Accordingly, Infante has a preferential right to the property, the
registration of her sale having been effected in the foregoing manner, prior to the annotation of Carbonell's
adverse claim onFebruary 8, 1955.
The circumstances of the present case are strikingly similar to the hypothetical problem posed in Commentator
Edgardo Paras' Book on the Civil Code of the Philippines and I wholeheartedly concur with his solution of the
problem which is based on law. From him I quote: 6
P1,500.00 to discharge the mortgage in favor of the Republic Savings Bank. with the present
purchasing power of the peso this aft i more than 13 years, would be not equivalent to about
P40,000.00. Courts should not lend a hand to the perpetration of such kind of injustice and
outrage (see page 88, rollo)
I close paraphrasing the Supreme Court of Oklahoma in Phelps vs. Theime, et al., 217 p. 376; 377, that "equity
is a right wiseneth that considerate all of the particular circumstances of the case and is also tempered with the
sweetness of mercy." (quoting from St. Germain) In this case now before Us there is no need to invoke mercy,
for all that is required is a wise consideration of the particular circumstances narrated above which warrant a
judgment in favor of respondents Infants.
With all the foregoing, I vote for the affirmance of the decision under review.

A sold a parcel of land with a torrens title to B on January 5. A week later, A sold the same
land to C. Neither sale was registered. As soon as B learned of the sale in favor of C, he (B)
registered an adverse claim stating that he was making the claim because the second sale
was in fraud of his rights as first buyer. Later, C registered the deed of sale that had been
made in his favor. Who is now the owner B or C?

Ans. C is clearly the owner, although he was the second buyer. This is so, not because of
the registration of the sale itself but because of the AUTOMATIC registration in his favor
caused by Bs knowledge of the first sale (actual knowledge being equivalent to registration).
The purpose of registration is to notify. This notification was done because of Bs knowledge.
It is wrong to assert that B was only trying to protect his right-for there was no more right to
be protected. He should have registered the sale BEFORE knowledge came to him. It is now
too late. It is clear from this that with respect to the principle "actual knowledge is equivalent
to registration of the sale about which knowledge has been obtained' the knowledge may
be that-of either the FIRST or the SECOND buyer. (pp. 142-143, Vol. V, 1972 Ed.)

Aside from the fact that the sale to Infante was considered registered prior to the registration of Carbonell's
notice of adverse claim, Infante also took immediate physical possession of the property by erecting a fence
with a gate around the lot on February 5, at least tree days prior to Carbonell Is registration on February 8,
1955.

On top of all these, equity is on the side of Emma Infante. Under the Majority Opinion, Emma Infante stands to
lose the lot she bought in good faith which was fully paid for plus the building she erected thereon for which she
spent the total sun of a little less than P14,000.00, or equivalent to about P40,000.00 at the time the case was
decided by the Appellate Court, considering that Rosario Carbonell is being given the option either to order the
removal of the house or to acquire it at P13,429.00. On this point I agree with the following statement of Justice
Esguerra who penned the decision of the Appellate Court, thus:

It is indeed inequitable and re revolting to one's sense of justice and fairness that Rosario
Carbonell who paid out of her own money the sum of only P200.00 to the Republic Savings
Bank for the account of Jose Poncio, which was the motivation for the execution of the
private instrument, Exhibit A, should have a superior right to the land involved. The property
has been improved at a great expense and a building of strong materials has been
constructed thereon Emma Infants ho spent for her lot and building the total sum of
P13,429.00 made, up of P11,929.00 for cost of land and improvements and the building and
G.R. No. 124242 January 21, 2005
SAN LORENZO DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, PABLO S. BABASANTA, SPS. MIGUEL LU and PACITA ZAVALLA
LU, respondents.
DECISION
TINGA, J.:
From a coaptation of the records of this case, it appears that respondents Miguel Lu and Pacita Zavalla,
(hereinafter, the Spouses Lu) owned two (2) parcels of land situated in Sta. Rosa, Laguna covered by TCT No.
T-39022 and TCT No. T-39023 both measuring 15,808 square meters or a total of 3.1616 hectares.
On 20 August 1986, the Spouses Lu purportedly sold the two parcels of land to respondent Pablo Babasanta,
(hereinafter, Babasanta) for the price of fifteen pesos (P15.00) per square meter. Babasanta made a
downpayment of fifty thousand pesos (P50,000.00) as evidenced by a memorandum receipt issued by Pacita
Lu of the same date. Several other payments totaling two hundred thousand pesos (P200,000.00) were made
by Babasanta.
Sometime in May 1989, Babasanta wrote a letter to Pacita Lu to demand the execution of a final deed of sale
in his favor so that he could effect full payment of the purchase price. In the same letter, Babasanta notified the
spouses about having received information that the spouses sold the same property to another without his
knowledge and consent. He demanded that the second sale be cancelled and that a final deed of sale be issued
in his favor.
In response, Pacita Lu wrote a letter to Babasanta wherein she acknowledged having agreed to sell the property
to him at fifteen pesos (P15.00) per square meter. She, however, reminded Babasanta that when the balance
of the purchase price became due, he requested for a reduction of the price and when she refused, Babasanta
backed out of the sale. Pacita added that she returned the sum of fifty thousand pesos (P50,000.00) to
Babasanta through Eugenio Oya.
On 2 June 1989, respondent Babasanta, as plaintiff, filed before the Regional Trial Court (RTC), Branch 31, of
San Pedro, Laguna, a Complaint for Specific Performance and Damages 1 against his co-respondents herein,
the Spouses Lu. Babasanta alleged that the lands covered by TCT No. T- 39022 and T-39023 had been sold
to him by the spouses at fifteen pesos (P15.00) per square meter. Despite his repeated demands for the
execution of a final deed of sale in his favor, respondents allegedly refused.
In their Answer,2 the Spouses Lu alleged that Pacita Lu obtained loans from Babasanta and when the total
advances of Pacita reached fifty thousand pesos (P50,000.00), the latter and Babasanta, without the knowledge
and consent of Miguel Lu, had verbally agreed to transform the transaction into a contract to sell the two parcels
of land to Babasanta with the fifty thousand pesos (P50,000.00) to be considered as the downpayment for the
property and the balance to be paid on or before 31 December 1987. Respondents Lu added that as of
November 1987, total payments made by Babasanta amounted to only two hundred thousand pesos
(P200,000.00) and the latter allegedly failed to pay the balance of two hundred sixty thousand pesos
(P260,000.00) despite repeated demands. Babasanta had purportedly asked Pacita for a reduction of the price
from fifteen pesos (P15.00) to twelve pesos (P12.00) per square meter and when the Spouses Lu refused to
grant Babasantas request, the latter rescinded the contract to sell and declared that the original loan transaction
just be carried out in that the spouses would be indebted to him in the amount of two hundred thousand pesos
(P200,000.00). Accordingly, on 6 July 1989, they purchased Interbank Managers Check No. 05020269 in the
amount of two hundred thousand pesos (P200,000.00) in the name of Babasanta to show that she was able
and willing to pay the balance of her loan obligation.
Babasanta later filed an Amended Complaint dated 17 January 19903 wherein he prayed for the issuance of a
writ of preliminary injunction with temporary restraining order and the inclusion of the Register of Deeds of
Calamba, Laguna as party defendant. He contended that the issuance of a preliminary injunction was necessary
to restrain the transfer or conveyance by the Spouses Lu of the subject property to other persons.
The Spouses Lu filed their Opposition4 to the amended complaint contending that it raised new matters which
seriously affect their substantive rights under the original complaint. However, the trial court in its Order dated
17 January 19905 admitted the amended complaint.
On 19 January 1990, herein petitioner San Lorenzo Development Corporation (SLDC) filed a Motion for
Intervention6 before the trial court. SLDC alleged that it had legal interest in the subject matter under litigation
because on 3 May 1989, the two parcels of land involved, namely Lot 1764-A and 1764-B, had been sold to it
in a Deed of Absolute Sale with Mortgage.7 It alleged that it was a buyer in good faith and for value and therefore
it had a better right over the property in litigation.
In his Opposition to SLDCs motion for intervention,8 respondent Babasanta demurred and argued that the latter
had no legal interest in the case because the two parcels of land involved herein had already been conveyed
to him by the Spouses Lu and hence, the vendors were without legal capacity to transfer or dispose of the two
parcels of land to the intervenor.
Meanwhile, the trial court in its Order dated 21 March 1990 allowed SLDC to intervene. SLDC filed its Complaint-
in-Intervention on 19 April 1990.9 Respondent Babasantas motion for the issuance of a preliminary injunction
was likewise granted by the trial court in its Order dated 11 January 199110 conditioned upon his filing of a bond
in the amount of fifty thousand pesos (P50,000.00).
SLDC in its Complaint-in-Intervention alleged that on 11 February 1989, the Spouses Lu executed in its favor
an Option to Buy the lots subject of the complaint. Accordingly, it paid an option money in the amount of three
hundred sixteen thousand one hundred sixty pesos (P316,160.00) out of the total consideration for the purchase
of the two lots of one million two hundred sixty-four thousand six hundred forty pesos (P1,264,640.00). After the
Spouses Lu received a total amount of six hundred thirty-two thousand three hundred twenty pesos
(P632,320.00) they executed on 3 May 1989 a Deed of Absolute Sale with Mortgage in its favor. SLDC added
that the certificates of title over the property were delivered to it by the spouses clean and free from any adverse
claims and/or notice of lis pendens. SLDC further alleged that it only learned of the filing of the complaint
sometime in the early part of January 1990 which prompted it to file the motion to intervene without delay.
Claiming that it was a buyer in good faith, SLDC argued that it had no obligation to look beyond the titles
submitted to it by the Spouses Lu particularly because Babasantas claims were not annotated on the certificates
of title at the time the lands were sold to it.
After a protracted trial, the RTC rendered its Decision on 30 July 1993 upholding the sale of the property to
SLDC. It ordered the Spouses Lu to pay Babasanta the sum of two hundred thousand pesos (P200,000.00)
with legal interest plus the further sum of fifty thousand pesos (P50,000.00) as and for attorneys fees. On the
complaint-in-intervention, the trial court ordered the Register of Deeds of Laguna, Calamba Branch to cancel
the notice of lis pendens annotated on the original of the TCT No. T-39022 (T-7218) and No. T-39023 (T-7219).
Applying Article 1544 of the Civil Code, the trial court ruled that since both Babasanta and SLDC did not register
the respective sales in their favor, ownership of the property should pertain to the buyer who first acquired
possession of the property. The trial court equated the execution of a public instrument in favor of SLDC as
sufficient delivery of the property to the latter. It concluded that symbolic possession could be considered to
have been first transferred to SLDC and consequently ownership of the property pertained to SLDC who
purchased the property in good faith.
Respondent Babasanta appealed the trial courts decision to the Court of Appeals alleging in the main that the
trial court erred in concluding that SLDC is a purchaser in good faith and in upholding the validity of the sale
made by the Spouses Lu in favor of SLDC.
Respondent spouses likewise filed an appeal to the Court of Appeals. They contended that the trial court erred
in failing to consider that the contract to sell between them and Babasanta had been novated when the latter
abandoned the verbal contract of sale and declared that the original loan transaction just be carried out. The
Spouses Lu argued that since the properties involved were conjugal, the trial court should have declared the
verbal contract to sell between Pacita Lu and Pablo Babasanta null and void ab initio for lack of knowledge and
consent of Miguel Lu. They further averred that the trial court erred in not dismissing the complaint filed by
Babasanta; in awarding damages in his favor and in refusing to grant the reliefs prayed for in their answer.
On 4 October 1995, the Court of Appeals rendered its Decision11 which set aside the judgment of the trial court.
It declared that the sale between Babasanta and the Spouses Lu was valid and subsisting and ordered the
spouses to execute the necessary deed of conveyance in favor of Babasanta, and the latter to pay the balance
of the purchase price in the amount of two hundred sixty thousand pesos (P260,000.00). The appellate court
ruled that the Absolute Deed of Sale with Mortgage in favor of SLDC was null and void on the ground that SLDC
was a purchaser in bad faith. The Spouses Lu were further ordered to return all payments made by SLDC with
legal interest and to pay attorneys fees to Babasanta.
SLDC and the Spouses Lu filed separate motions for reconsideration with the appellate court. 12 However, in
a Manifestation dated 20 December 1995,13 the Spouses Lu informed the appellate court that they are no longer
contesting the decision dated 4 October 1995.
In its Resolution dated 11 March 1996,14 the appellate court considered as withdrawn the motion for
reconsideration filed by the Spouses Lu in view of their manifestation of 20 December 1995. The appellate court
denied SLDCs motion for reconsideration on the ground that no new or substantial arguments were raised
therein which would warrant modification or reversal of the courts decision dated 4 October 1995.
Hence, this petition.
SLDC assigns the following errors allegedly committed by the appellate court:
THE COURT OF APPEALS ERRED IN HOLDING THAT SAN LORENZO WAS NOT A BUYER IN GOOD
FAITH BECAUSE WHEN THE SELLER PACITA ZAVALLA LU OBTAINED FROM IT THE CASH ADVANCE
OF P200,000.00, SAN LORENZO WAS PUT ON INQUIRY OF A PRIOR TRANSACTION ON THE
PROPERTY.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE ESTABLISHED FACT THAT THE
ALLEGED FIRST BUYER, RESPONDENT BABASANTA, WAS NOT IN POSSESSION OF THE DISPUTED
PROPERTY WHEN SAN LORENZO BOUGHT AND TOOK POSSESSION OF THE PROPERTY AND NO
ADVERSE CLAIM, LIEN, ENCUMBRANCE OR LIS PENDENS WAS ANNOTATED ON THE TITLES.
THE COURT OF APPEALS ERRED IN FAILING TO APPRECIATE THE FACT THAT RESPONDENT
BABASANTA HAS SUBMITTED NO EVIDENCE SHOWING THAT SAN LORENZO WAS AWARE OF HIS
RIGHTS OR INTERESTS IN THE DISPUTED PROPERTY.
THE COURT OF APPEALS ERRED IN HOLDING THAT NOTWITHSTANDING ITS FULL CONCURRENCE
ON THE FINDINGS OF FACT OF THE TRIAL COURT, IT REVERSED AND SET ASIDE THE DECISION OF
THE TRIAL COURT UPHOLDING THE TITLE OF SAN LORENZO AS A BUYER AND FIRST POSSESSOR
IN GOOD FAITH. 15
SLDC contended that the appellate court erred in concluding that it had prior notice of Babasantas claim over
the property merely on the basis of its having advanced the amount of two hundred thousand pesos
(P200,000.00) to Pacita Lu upon the latters representation that she needed the money to pay her obligation to
Babasanta. It argued that it had no reason to suspect that Pacita was not telling the truth that the money would
be used to pay her indebtedness to Babasanta. At any rate, SLDC averred that the amount of two hundred
thousand pesos (P200,000.00) which it advanced to Pacita Lu would be deducted from the balance of the
purchase price still due from it and should not be construed as notice of the prior sale of the land to Babasanta.
It added that at no instance did Pacita Lu inform it that the lands had been previously sold to Babasanta.
Moreover, SLDC stressed that after the execution of the sale in its favor it immediately took possession of the
property and asserted its rights as new owner as opposed to Babasanta who has never exercised acts of
ownership. Since the titles bore no adverse claim, encumbrance, or lien at the time it was sold to it, SLDC
argued that it had every reason to rely on the correctness of the certificate of title and it was not obliged to go
beyond the certificate to determine the condition of the property. Invoking the presumption of good faith, it added
that the burden rests on Babasanta to prove that it was aware of the prior sale to him but the latter failed to do
so. SLDC pointed out that the notice of lis pendens was annotated only on 2 June 1989 long after the sale of
the property to it was consummated on 3 May 1989.1awphi1.nt
Meanwhile, in an Urgent Ex-Parte Manifestation dated 27 August 1999, the Spouses Lu informed the Court that
due to financial constraints they have no more interest to pursue their rights in the instant case and submit
themselves to the decision of the Court of Appeals. 16
On the other hand, respondent Babasanta argued that SLDC could not have acquired ownership of the property
because it failed to comply with the requirement of registration of the sale in good faith. He emphasized that at
the time SLDC registered the sale in its favor on 30 June 1990, there was already a notice of lis
pendens annotated on the titles of the property made as early as 2 June 1989. Hence, petitioners registration
of the sale did not confer upon it any right. Babasanta further asserted that petitioners bad faith in the acquisition
of the property is evident from the fact that it failed to make necessary inquiry regarding the purpose of the
issuance of the two hundred thousand pesos (P200,000.00) managers check in his favor.
The core issue presented for resolution in the instant petition is who between SLDC and Babasanta has a better
right over the two parcels of land subject of the instant case in view of the successive transactions executed by
the Spouses Lu.
To prove the perfection of the contract of sale in his favor, Babasanta presented a document signed by Pacita
Lu acknowledging receipt of the sum of fifty thousand pesos (P50,000.00) as partial payment for 3.6 hectares
of farm lot situated at Barangay Pulong, Sta. Cruz, Sta. Rosa, Laguna. 17 While the receipt signed by Pacita did
not mention the price for which the property was being sold, this deficiency was supplied by Pacita Lus letter
dated 29 May 198918 wherein she admitted that she agreed to sell the 3.6 hectares of land to Babasanta for
fifteen pesos (P15.00) per square meter.
An analysis of the facts obtaining in this case, as well as the evidence presented by the parties, irresistibly leads
to the conclusion that the agreement between Babasanta and the Spouses Lu is a contract to sell and not a
contract of sale.
Contracts, in general, are perfected by mere consent, 19 which is manifested by the meeting of the offer and the
acceptance upon the thing which are to constitute the contract. The offer must be certain and the acceptance
absolute.20 Moreover, contracts shall be obligatory in whatever form they may have been entered into, provided
all the essential requisites for their validity are present. 21
The receipt signed by Pacita Lu merely states that she accepted the sum of fifty thousand pesos (P50,000.00)
from Babasanta as partial payment of 3.6 hectares of farm lot situated in Sta. Rosa, Laguna. While there is no
stipulation that the seller reserves the ownership of the property until full payment of the price which is a
distinguishing feature of a contract to sell, the subsequent acts of the parties convince us that the Spouses Lu
never intended to transfer ownership to Babasanta except upon full payment of the purchase price.
Babasantas letter dated 22 May 1989 was quite telling. He stated therein that despite his repeated requests for
the execution of the final deed of sale in his favor so that he could effect full payment of the price, Pacita Lu
allegedly refused to do so. In effect, Babasanta himself recognized that ownership of the property would not be
transferred to him until such time as he shall have effected full payment of the price. Moreover, had the sellers
intended to transfer title, they could have easily executed the document of sale in its required form
simultaneously with their acceptance of the partial payment, but they did not. Doubtlessly, the receipt signed by
Pacita Lu should legally be considered as a perfected contract to sell.
The distinction between a contract to sell and a contract of sale is quite germane. In a contract of sale, title
passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, by agreement the
ownership is reserved in the vendor and is not to pass until the full payment of the price. 22 In a contract of sale,
the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded;
whereas in a contract to sell, title is retained by the vendor until the full payment of the price, such payment
being a positive suspensive condition and failure of which is not a breach but an event that prevents the
obligation of the vendor to convey title from becoming effective. 23
The perfected contract to sell imposed upon Babasanta the obligation to pay the balance of the purchase price.
There being an obligation to pay the price, Babasanta should have made the proper tender of payment and
consignation of the price in court as required by law. Mere sending of a letter by the vendee expressing the
intention to pay without the accompanying payment is not considered a valid tender of payment. 24 Consignation
of the amounts due in court is essential in order to extinguish Babasantas obligation to pay the balance of the
purchase price. Glaringly absent from the records is any indication that Babasanta even attempted to make the
proper consignation of the amounts due, thus, the obligation on the part of the sellers to convey title never
acquired obligatory force.
On the assumption that the transaction between the parties is a contract of sale and not a contract to sell,
Babasantas claim of ownership should nevertheless fail.
25
Sale, being a consensual contract, is perfected by mere consent and from that moment, the parties may
reciprocally demand performance.26 The essential elements of a contract of sale, to wit: (1) consent or meeting
of the minds, that is, to transfer ownership in exchange for the price; (2) object certain which is the subject
matter of the contract; (3) cause of the obligation which is established. 27
The perfection of a contract of sale should not, however, be confused with its consummation. In relation to the
acquisition and transfer of ownership, it should be noted that sale is not a mode, but merely a title. A mode is
the legal means by which dominion or ownership is created, transferred or destroyed, but title is only the legal
basis by which to affect dominion or ownership.28 Under Article 712 of the Civil Code, "ownership and other real
rights over property are acquired and transmitted by law, by donation, by testate and intestate succession, and
in consequence of certain contracts, by tradition." Contracts only constitute titles or rights to the transfer or
acquisition of ownership, while delivery or tradition is the mode of accomplishing the same.29 Therefore, sale by
itself does not transfer or affect ownership; the most that sale does is to create the obligation to transfer
ownership. It is tradition or delivery, as a consequence of sale, that actually transfers ownership.
Explicitly, the law provides that the ownership of the thing sold is acquired by the vendee from the moment it is
delivered to him in any of the ways specified in Article 1497 to 1501.30 The word "delivered" should not be taken
restrictively to mean transfer of actual physical possession of the property. The law recognizes two principal
modes of delivery, to wit: (1) actual delivery; and (2) legal or constructive delivery.
Actual delivery consists in placing the thing sold in the control and possession of the vendee. 31 Legal or
constructive delivery, on the other hand, may be had through any of the following ways: the execution of a public
instrument evidencing the sale;32 symbolical tradition such as the delivery of the keys of the place where the
movable sold is being kept;33 traditio longa manu or by mere consent or agreement if the movable sold cannot
yet be transferred to the possession of the buyer at the time of the sale; 34 traditio brevi manu if the buyer already
had possession of the object even before the sale; 35 and traditio constitutum possessorium, where the seller
remains in possession of the property in a different capacity. 36
Following the above disquisition, respondent Babasanta did not acquire ownership by the mere execution of
the receipt by Pacita Lu acknowledging receipt of partial payment for the property. For one, the agreement
between Babasanta and the Spouses Lu, though valid, was not embodied in a public instrument. Hence, no
constructive delivery of the lands could have been effected. For another, Babasanta had not taken possession
of the property at any time after the perfection of the sale in his favor or exercised acts of dominion over it
despite his assertions that he was the rightful owner of the lands. Simply stated, there was no delivery to
Babasanta, whether actual or constructive, which is essential to transfer ownership of the property. Thus, even
on the assumption that the perfected contract between the parties was a sale, ownership could not have passed
to Babasanta in the absence of delivery, since in a contract of sale ownership is transferred to the vendee only
upon the delivery of the thing sold.37
However, it must be stressed that the juridical relationship between the parties in a double sale is primarily
governed by Article 1544 which lays down the rules of preference between the two purchasers of the same
property. It provides:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to
the person who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first
recorded it in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the
possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good
faith.
The principle of primus tempore, potior jure (first in time, stronger in right) gains greater significance in case of
double sale of immovable property. When the thing sold twice is an immovable, the one who acquires it and
first records it in the Registry of Property, both made in good faith, shall be deemed the owner. 38 Verily, the act
of registration must be coupled with good faith that is, the registrant must have no knowledge of the defect or
lack of title of his vendor or must not have been aware of facts which should have put him upon such inquiry
and investigation as might be necessary to acquaint him with the defects in the title of his vendor.39
Admittedly, SLDC registered the sale with the Registry of Deeds after it had acquired knowledge of Babasantas
claim. Babasanta, however, strongly argues that the registration of the sale by SLDC was not sufficient to confer
upon the latter any title to the property since the registration was attended by bad faith. Specifically, he points
out that at the time SLDC registered the sale on 30 June 1990, there was already a notice of lis pendens on the
file with the Register of Deeds, the same having been filed one year before on 2 June 1989.
Did the registration of the sale after the annotation of the notice of lis pendens obliterate the effects of delivery
and possession in good faith which admittedly had occurred prior to SLDCs knowledge of the transaction in
favor of Babasanta?
We do not hold so.
It must be stressed that as early as 11 February 1989, the Spouses Lu executed the Option to Buy in favor of
SLDC upon receiving P316,160.00 as option money from SLDC. After SLDC had paid more than one half of
the agreed purchase price of P1,264,640.00, the Spouses Lu subsequently executed on 3 May 1989 a Deed of
Absolute Sale in favor or SLDC. At the time both deeds were executed, SLDC had no knowledge of the prior
transaction of the Spouses Lu with Babasanta. Simply stated, from the time of execution of the first deed up to
the moment of transfer and delivery of possession of the lands to SLDC, it had acted in good faith and the
subsequent annotation of lis pendens has no effect at all on the consummated sale between SLDC and the
Spouses Lu.
A purchaser in good faith is one who buys 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 such purchase,
or beforehe has notice of the claim or interest of some other person in the property. 40 Following the foregoing
definition, we rule that SLDC qualifies as a buyer in good faith since there is no evidence extant in the records
that it had knowledge of the prior transaction in favor of Babasanta. At the time of the sale of the property to
SLDC, the vendors were still the registered owners of the property and were in fact in possession of the
lands.l^vvphi1.net Time and again, this Court has ruled that a person dealing with the owner of registered land
is not bound to go beyond the certificate of title as he is charged with notice of burdens on the property which
are noted on the face of the register or on the certificate of title. 41 In assailing knowledge of the transaction
between him and the Spouses Lu, Babasanta apparently relies on the principle of constructive notice
incorporated in Section 52 of the Property Registration Decree (P.D. No. 1529) which reads, thus:
Sec. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order,
judgment, instrument or entry affecting registered land shall, if registered, filed, or entered in the office of the
Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all
persons from the time of such registering, filing, or entering.
of Pacita Lu herself on cross-examination.45 However, there is nothing in the said pleading and the testimony
which explicitly relates the amount to the transaction between the Spouses Lu and Babasanta for what they
attest to is that the amount was supposed to pay off the advances made by Babasanta to Pacita Lu. In any
event, the incident took place after the Spouses Lu had already executed the Deed of Absolute Sale with
Mortgage in favor of SLDC and therefore, as previously explained, it has no effect on the legal position of SLDC.
Assuming ex gratia argumenti that SLDCs registration of the sale had been tainted by the prior notice of lis
pendens and assuming further for the same nonce that this is a case of double sale, still Babasantas claim
could not prevail over that of SLDCs. In Abarquez v. Court of Appeals,46 this Court had the occasion to rule that
if a vendee in a double sale registers the sale after he has acquired knowledge of a previous sale, the registration
constitutes a registration in bad faith and does not confer upon him any right. If the registration is done in bad
faith, it is as if there is no registration at all, and the buyer who has taken possession first of the property in good
faith shall be preferred.
In Abarquez, the first sale to the spouses Israel was notarized and registered only after the second vendee,
Abarquez, registered their deed of sale with the Registry of Deeds, but the Israels were first in possession. This
Court awarded the property to the Israels because registration of the property by Abarquez lacked the element
of good faith. While the facts in the instant case substantially differ from that in Abarquez, we would not hesitate
to rule in favor of SLDC on the basis of its prior possession of the property in good faith. Be it noted that delivery
of the property to SLDC was immediately effected after the execution of the deed in its favor, at which time
SLDC had no knowledge at all of the prior transaction by the Spouses Lu in favor of Babasanta.1a\^/phi1.net
The law speaks not only of one criterion. The first criterion is priority of entry in the registry of property; there
being no priority of such entry, the second is priority of possession; and, in the absence of the two priorities, the
third priority is of the date of title, with good faith as the common critical element. Since SLDC acquired
possession of the property in good faith in contrast to Babasanta, who neither registered nor possessed the
property at any time, SLDCs right is definitely superior to that of Babasantas.
At any rate, the above discussion on the rules on double sale would be purely academic for as earlier stated in
this decision, the contract between Babasanta and the Spouses Lu is not a contract of sale but merely a contract
to sell. In Dichoso v. Roxas,47 we had the occasion to rule that Article 1544 does not apply to a case where
there was a sale to one party of the land itself while the other contract was a mere promise to sell the land or at
most an actual assignment of the right to repurchase the same land. Accordingly, there was no double sale of
the same land in that case.

However, the constructive notice operates as suchby the express wording of Section 52from the time of the WHEREFORE, the instant petition is hereby GRANTED. The decision of the Court of Appeals appealed from
is REVERSED and SET ASIDE and the decision of the Regional Trial Court, Branch 31, of San Pedro, Laguna
registration of the notice of lis pendens which in this case was effected only on 2 June 1989, at which time the
sale in favor of SLDC had long been consummated insofar as the obligation of the Spouses Lu to transfer is REINSTATED. No costs.
ownership over the property to SLDC is concerned.
SO ORDERED.
More fundamentally, given the superiority of the right of SLDC to the claim of Babasanta the annotation of the
notice of lis pendens cannot help Babasantas position a bit and it is irrelevant to the good or bad faith
characterization of SLDC as a purchaser. A notice of lis pendens, as the Court held in Natao v.
Esteban,42serves as a warning to a prospective purchaser or incumbrancer that the particular property is in
litigation; and that he should keep his hands off the same, unless he intends to gamble on the results of the
litigation." Precisely, in this case SLDC has intervened in the pending litigation to protect its rights. Obviously,
SLDCs faith in the merit of its cause has been vindicated with the Courts present decision which is the ultimate
denouement on the controversy.

The Court of Appeals has made capital43 of SLDCs averment in its Complaint-in-Intervention44 that at the
instance of Pacita Lu it issued a check for P200,000.00 payable to Babasanta and the confirmatory testimony
G.R. No. 138377 February 28, 2000
CONCEPCION V. AMAGAN, JOSEFINA V. AMAGAN and DINA V. AMAGAN, petitioners,
vs.
TEODORICO T. MARAYAG, respondent.
PANGANIBAN, J.:
As a general rule, an ejectment suit cannot be abated or suspended by the mere filing before the regional trial
court (RTC) of another action raising ownership of the property as an issue. As an exception, however, unlawful
detainer actions may be suspended even on appeal, on considerations of equity, such as when the demolition
of petitioners' house would result from the enforcement of the municipal circuit trial court (MCTC) judgment.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the February 9,
1999 Resolution of the Court of Appeals (CA) in CA-GR SP No. 50472,1 which disposed as follows:
It is plain to see that this Court, under its Decision, merely nullified the Order of the Respondent, dated
November 26, 1996 granting Private Respondent's "Motion for Execution Pending Appeal" and
denying Petitioners "Motion for Reconsideration" [of] its said Order. This Court did not enjoin the
Respondent Court from resolving Petitioners" appeal from the Decision of the Municipal [Circuit] Trial
Court, on its merits.
Petitioners' complaint for "Quieting of Title and Reconveyance in Civil Case No. 1632" filed [at] the
Regional Trial Court does not abate the proceeding in Civil Case No. 1671 (TG) before the
Respondent Court (Asset Privatization Trust v. Court of Appeals, 229 SCRA 627; Felicidad Javier, et
al., versus Hon. Regino T. Veridiano, II, et al., 237 SCRA 565).
In sum, then, the [im]pugned Orders of the Respondent Court are in accord with case law and issued
in the exercise of its sound discretion.
IN THE LIGHT OF ALL THE FOREGOING, the Petition is denied due course and is hereby dismissed.
No cost.
SO ORDERED.2
Also challenged by petitioners is the April 22, 1999 CA Resolution 3 denying their Motion for Reconsideration.
The Facts
The facts as found by the Court of Appeals are as follows:
. . . . On June 3, 1996, the private respondent filed a complaint against the petitioners for "unlawful
detainer" with the Municipal [Circuit] Trial Court in Silang, Cavite. On September 27, 1996, the trial
court promulgated a Decision in favor of the private respondent and against the petitioners, the
decretal portion of which reads as follows:
IN VIEW OF THE FOREGOING, this Court for the plaintiff and against the defendants finds
ordering the latter as follows:
1. To vacate the property of plaintiff located at San Vicente, Silang, Cavite containing an
area of 420 square meters and covered by Tax Declaration No. 13023 and remove their
house constructed thereon;
2. To pay plaintiff, jointly and severally, the amount of P10,000.00 starting from June 1, 1996
until the subject premises are fully vacated, as reasonable compensation for their continued
unlawful use and occupation of the same and another amount of P50,000.00 as and by way
of attorney's fees and other litigation expenses; and
3. To pay the cost of suit.1wphi1.nt
SO ORDERED.
The petitioners appealed to the Regional Trial Court of Cavite from said Decision, which appeal was
docketed as Civil Case No. 1671. On November 26, 1996, the private respondent filed a "Motion for
Execution Pending Appeal" with the Respondent Court which, on November 26, 1996, issued an Order
granting said motion, the decretal portion of which reads as follows:
As prayed for by the plaintiff(s), through (their) counsel, and finding the grounds alleged in
their "Motion for Immediate Exec(u)tion" to be impressed with merit, the same is hereby
GRANTED.
Accordingly, let a writ of execution pending appeal be issued in this case.
"The Petitioners' Motion for Reconsideration" [of] said Order, was denied by the Respondent Court
per its Order dated February 21, 1997.
In the interim, the petitioners filed, on December 10, 19[96], a complaint against private respondent in
the Regional Trial Court for "Quieting of Title, Reconveyance and Damages," entitled "Concepcion v.
Amagan, et al. versus Teodorico Marayag, Civil Case No. 1682 (TG).
The petitioners filed, a "Petition for Certiorari," in the Court of Appeals, under Rule 65 of the Rules of
Court, dated April 28, 1997, against the respondents for the nullification of the aforesaid Orders of the
Respondent Court, dated November 26, 1996 and February 21, 1997, in Civil Case No. 1671, granting
private respondent's "Motion for Reconsideration" respectively, which Petition was entitled
"Concepcion v. Amagan, et al., versus Regional Trial Court, et al., CA-G.R. [SP No. 43611]." This
Court issued a Resolution granting petitioners' plea for a temporary restraining order which expired
on June 25, 1997.
On July 7, 1997, the private respondent filed, with the Respondent Court, in Civil Case No. 1671 (TG),
an "Ex-Parte Omnibus Motion to Direct Sheriff To Make a Report And/Or Implement Writ of Execution
and Declare the Case Submitted for Decision" with the parties submitting to the Respondent Court
their respective "Memorandum on Appeal." The next day, July 18, 1997, this Court promulgated, in
CA-G.R. [SP No. 43611], a Decision in favor of the petitioners and against the respondents therein
the decretal portion of which reads as follows:
 WHEREFORE, the Petition for certiorari is hereby GRANTED. Accordingly, the Order dated The Issue
February 21, 1997, allowing execution pending appeal is REVERSED and SET ASIDE.
In their Memorandum, petitioners submitted for the consideration of the Court the following issues:
On July 11, 1997, the Respondent Court issued an Order granting private respondent's Omnibus
Motion,' supra. The private respondent likewise filed a Petition for Review' with the Supreme Court, I. Whether or not the 8 July 1997 Decision and 23 September 1997 Resolution of the Court of Appeals
from the Decision of this Court in CA-G.R. [SP No. 43611] and its Resolution denying private
in CA-G.R. SP No. 43911 (Annex I), as affirmed in toto by the Supreme Court, called off and restrained
respondent's "Motion for Reconsideration" but the Supreme Court, per its Resolution dated November the proceedings in this case;
12, 1997, issued a Resolution denying private respondents['] "Petition for Review." The Resolution of
the Supreme Court became final and executory.
II. Whether or not the dispositive portion of the Decision in CA-G.R. SP No. 43611 should be referred
to its body and text.
On December 12, 1997, the private respondent filed with the Respondent Court, in Civil Case No. TG-
1671, a "Manifestation and Ex-Parte Motion" praying that the Respondent Court resolve the case and
promulgate its Decision on the merits. However, the petitioners filed an Opposition to private III. Whether or not the Court of Appeals' Decision having been based on Vda. de Legaspi
respondent's motion, contending that the proceedings before the Respondent Court, in Civil Case No. vs. Avendano . . ., is now final and executory as it was upheld by the Supreme Court in toto.
1671 (TG), be suspended pending decision, on the merits, of the Regional Trial Court, in Civil Case
No. 1682 (Quieting of Title, Reconveyance with Damages). On April 3, 1998, the Respondent Court IV. Whether or not Lao vs. Court of Appeals [. . .] is applicable to the present case, and
issued its Order granting private respondent's motion, declaring that the Court, under its Decision, in
CA-G.R. [SP No. 43611], merely nullified its Order granting execution pending appeal but did not
enjoin the Respondent Court from hearing and resolving Civil Case No. 16[7]1 on the merits. The V. Whether or not the Court of Appeals failed to consider and pass judgment on the exceptional nature
petitioners filed a "Motion for Reconsideration" of the aforesaid Order of the Respondent Court but the of the present case.6
latter issued an Order dated December 14, 1998 denying petitioners' Motion for Reconsideration, in
this language. In the main, the issue is whether the peculiar circumstances of this case justify the suspension of the ejectment
proceedings on appeal before the RTC, pending the resolution of the action for quieting of title.
Anent the Motion for Reconsideration, movants anchored their arguments that this Court
should restrain itself from further proceeding with the appealed case because of the decision, The Court's Ruling
resolution of the Court of Appeals, and resolution of the Supreme Court. It is worthy to note
that [what] was brought up with the higher Courts was the Order of the Court allowing the
execution pending appeal, the said Order was reversed and set aside by the Court of The Petition is meritorious.
Appeals[;] however, there was no permanent injunction that has been issued for this Court
to stop from further proceeding with the case. The said motion is, therefore, DENIED for lack Main Issue:
of merit.
Suspension of the Ejectment Suit
The facts of this case may be simply summarized as follows. The MCTC rendered a Decision granting the
ejectment suit filed by respondent against herein petitioners. While an appeal was pending before the RTC,
Unlawful detainer and forcible entry suits under Rule 70 are designed to summarily restore physical possession
respondent filed a Motion for immediate execution of the MCTC judgment, which was granted. However, the
of a piece of land or building to one who has been illegally or forcibly deprived thereof, without prejudice to the
Court of Appeals4 later reversed the RTC Order granting the execution pending appeal, a reversal that was
settlement of the parties' opposing claims of juridical possession in appropriate proceedings. It has been held
subsequently affirmed by the Supreme Court. Meanwhile, petitioners also filed before the RTC a new action for
that these actions "are intended to avoid disruption of public order by those who would take the law in their
quieting of title involving the same property.
hands purportedly to enforce their claimed right of possession." 7 In these cases, the issue is pure physical or de
factopossession, and pronouncements made on questions of ownership are provisional in nature.
Petitioners thence claimed that the proceedings in the ejectment appeal should be suspended pending final
judgment in the quieting of title case. The RTC ruled in the negative.
As a general rule, therefore, a pending civil action involving ownership of the same property does not justify the
suspension of ejectment proceedings. "The underlying reasons for the above ruling were that the actions in the
Ruling of the Court of Appeals Regional Trial Court did not involve physical or de facto possession, and, on not a few occasions, that the case
in the Regional Trial Court was merely a ploy to delay disposition of the ejectment proceeding, or that the issues
In sustaining the RTC, the CA held in two short paragraphs that its earlier Decision in CA-GR SP No. 43611 presented in the former could quite as easily be set up as defenses in the ejectment action and there resolved." 8
enjoined only the execution of the judgment pending appeal. Without discussing petitioners' plea for an
exception, it curtly applied the jurisprudential principle that an action for quieting of title would not abate an Only in rare instances is suspension allowed to await the outcome of the pending civil action. One such
ejectment suit. exception is Vda. de Legaspi v. Avendao, wherein the Court declared:

Hence, this Petition.5 . . . . Where the action, therefore, is one of illegal detainer, as distinguished from one of forcible entry,
and the right of the plaintiff to recover the premises is seriously placed in issue in a proper judicial
 proceeding, it is more equitable and just and less productive of confusion and disturbance of physical
possession, with all its concomitant inconvenience and expenses. For the Court in which the issue of
legal possession, whether involving ownership or not, is brought to restrain, should a petition for
preliminary injunction be filed with it, the effects of any order or decision in the unlawful detainer case
in order to await the final judgment in the more substantive case involving legal possession or
ownership. It is only where there has been forcible entry that as a matter of public policy the right to
physical possession should be immediately set at rest in favor of the prior possession regardless of
the fact that the other party might ultimately be found to have superior claim to the premises involved,
thereby to discourage any attempt to recover possession thru force, strategy or stealth and without
resorting to the courts.9
proceedings. We note that, like Vda. de Legaspi, the respondent's suit is one of unlawful detainer and not of
forcible entry. And most certainly, the ejectment of petitioners would mean a demolition of their house, a matter
that is likely to create the "confusion, disturbance, inconveniences and expenses" mentioned in the said
exceptional case.
Necessarily, the affirmance of the MCTC Decision12 would cause the respondent to go through the whole gamut
of enforcing it by physically removing the petitioners from the premises they claim to have been occupying since
1937. (Respondent is claiming ownership only of the land, not of the house.) Needlessly, the litigants as well as
the courts will be wasting much time and effort by proceeding at a stage wherein the outcome is at best
temporary, but the result of enforcement is permanent, unjust and probably irreparable.1wphi1.nt

From the foregoing, it is clear that the mere existence of a judicial proceeding putting at issue the right of the We should stress that respondent's claim to physical possession is based not on an expired or a violated
plaintiff to recover the premises is not enough reason to justify an exception to the general rule. In Salinas contract of lease, but allegedly on "mere tolerance." Without in any way prejudging the proceedings for the
v. Navarro,10 the Court explained that "the exception to the rule in . . . Vda. de Legaspi is based on strong quieting of title, we deem it judicious under the present exceptional circumstances to suspend the ejectment
reasons of equity not found in the present petition. The right of the petitioners is not so seriously placed in issue case.
in the annulment case as to warrant a deviation, on equitable grounds, from the imperative nature of the rule.
In the Vda. de Legaspi case, execution of the decision in the ejectment case would also have meant demolition
of the premises, a factor not present in this petition." The Suspension of Proceedings
Even During Appeal
After a close reading of the peculiar circumstances of the instant case, however, we hold that equitable
considerations impel an exception to the general rule. In its earlier July 8, 1997 Decision in CA-GR No. 43611- One final point. In Vda. de Legaspi, the Court held that "if circumstances should so require, the proceedings in
SP which has long become final, the Court of Appeals, through Justice Artemio G. Toquero, arrived upon the the ejectment case may be suspended in whatever stage it may be found." This statement is unequivocally
following factual findings which are binding on herein parties: clear; it includes even the appellate stage.

Admittedly, petitioners who appealed the judgment in the ejectment case did not file a supersedeas
bond. Neither have they been depositing the compensation for their use and occupation of the property
in question as determined by the trial court. Ordinarily, these circumstances would justify an execution
pending appeal. However, there are circumstances attendant to this case which would render
immediate execution injudicious and inequitable.
WHEREFORE, the Petition is GRANTED and the appealed Decision REVERSED and SET ASIDE. The
Regional Trial Court of Cavite is DIRECTED to suspend further action in Civil Case No. 1671 until Civil Case
No. 1682 is concluded. No costs.
SO ORDERED.

ONE. Private respondent Teodorico T. Marayag anchors his action for unlawful detainer on the theory
that petitioners' possession of the property in question was by mere tolerance. However, in answer to
his demand letter dated April 13, 1996 (Annex "D"), petitioners categorically denied having any
agreement with him, verbal or written, asserting that they are "owners of the premises we are
occupying at 108 J. P. Rizal Street, San Vicente, Silang, Cavite." In other words, it is not merely
physical possession but ownership as well that is involved in this case.

TWO. In fact, to protect their rights to the premises in question, petitioners filed an action for
reconveyance, quieting of title and damages against private respondents, docketed as Civil Case No.
TG-1682 of the Regional Trial Court, Branch 18, Tagaytay City. The issue of ownership is squarely
raised in this action. Undoubtedly, the resolution of this issue will be determinative of who is entitled
to the possession of the premises in question.

THREE. The immediate execution of the judgment in the unlawful detainer case will include the
removal of the petitioners' house [from] the lot in question.

To the mind of the Court it is injudicious, nay inequitable, to allow demolition of petitioners' house prior
to the determination of the question of ownership [of] the lot on which it stands. 11

Indisputably, the execution of the MCTC Decision would have resulted in the demolition of the house subject of
the ejectment suit; thus, by parity of reasoning, considerations of equity require the suspension of the ejectment
G.R. No. 131726 May 7, 2002
YOLANDA PALATTAO, petitioner,
vs.
THE COURT OF APPEALS, HON. ANTONIO J. FINEZA, as Presiding Judge of the Regional Trial Court of
Caloocan City, Branch 131 and MARCELO CO, respondents.
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking to set aside the August 29, 1997
decision1 and the November 28, 1997 resolution2 of the Court of Appeals3 in CA-G.R. SP No. 40031, affirming
the decision4 of the Regional Trial Court of Caloocan City, Branch 131, in Civil Case No. C-17033 which
reversed the Decision5 of the Metropolitan Trial Court of Caloocan, Branch 53, in an ejectment suit docketed as
Civil Case No. 21755.1wphi1.nt
The antecedent facts are as follows: Petitioner Yolanda Palattao entered into a lease contract whereby she
leased to private respondent a house and a 490-square-meter lot located in 101 Caimito Road, Caloocan City,
covered by Transfer Certificate of Title No. 247536 and registered in the name of petitioner. The duration of the
lease contract was for three years, commencing from January 1, 1991, to December 31, 1993, renewable at
the option of the parties. The agreed monthly rental was P7,500.00 for the first year; P8,000.00 for the second
year; and P8,500.00 for the third year. The contract gave respondent lessee the first option to purchase the
leased property.6
property. Private respondent further prayed for the issuance of a writ of preliminary injunction to prevent
petitioner from filing an ejectment case upon the expiration of the lease contract on December 31, 1993.
During the proceedings in the specific performance case, the parties agreed to maintain the status quo. After
they failed to reach an amicable settlement, petitioner filed the instant ejectment case before the Metropolitan
Trial Court of Caloocan City, Branch 53.14 In his answer,15 private respondent alleged that he refused to vacate
the leased premises because there was a perfected contract of sale of the leased property between him and
petitioner. Private respondent argued that he did not abandon his option to buy the leased property and that his
proposal to renew the lease was but an alternative proposal to the sale. He further contended that the filing of
the ejectment case violated their agreement to maintain the status quo.
On July 28, 1995, the Metropolitan Trial Court rendered a decision in favor of petitioner. The dispositive portion
thereof states:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant,
ordering the defendant and all persons claiming right under him to pay the plaintiff as follows:
1. P12,000.00 per month representing reasonable monthly rental from January 1, 1994 and months
thereafter until defendants shall vacate the subject premises;
2. P10,000.00 representing attorneys fee;

3. To pay the cost of suit.

During the last year of the contract, the parties began negotiations for the sale of the leased premises to private
respondent. In a letter dated April 2, 1993, petitioner offered to sell to private respondent 413.28 square meters
of the leased lot at P7,800.00 per square meter, or for the total amount of P3,223,548.00. 7 Private respondent SO ORDERED.16
replied on April 15, 1993 wherein he informed petitioner that he "shall definitely exercise [his] option [to buy]"
the leased property.8 Private respondent, however, manifested his desire to buy the whole 490-square-meter On appeal, the Regional Trial Court reversed the assailed decision, disposing as follows:
leased premises and inquired from petitioner the reason why only 413.28 square meters of the leased lot were
being offered for sale. In a letter dated November 6, 1993, petitioner made a final offer to sell the lot at P7,500.00
per square meter with a downpayment of 50% upon the signing of the contract of conditional sale, the balance WHEREFORE, in view of all the foregoing, the assailed decision of the Metropolitan Trial Court,
payable in one year with a monthly lease/interest payment of P14,000.00 which must be paid on or before the Branch 53, this City, rendered on July 28, 1995, is hereby REVERSED and SET ASIDE, with costs
fifth day of every month that the balance is still outstanding. 9 On November 7, 1993, private respondent de officio.
accepted petitioners offer and reiterated his request for clarification as to the size of the lot for sale. 10 Petitioner
acknowledged private respondents acceptance of the offer in his letter dated November 10, 1993. SO ORDERED.17

Petitioner gave private respondent on or before November 24, 1993, within which to pay the 50% downpayment Aggrieved, petitioner filed a petition for review with the Court of Appeals, which dismissed the petition. Likewise,
in cash or managers check. Petitioner stressed that failure to pay the downpayment on the stipulated period the motion for reconsideration was denied on August 29, 1997. Hence, the instant petition anchored upon the
will enable petitioner to freely sell her property to others. Petitioner likewise notified private respondent that she following grounds:
is no longer renewing the lease agreement upon its expiration on December 31, 1993. 11
I
Private respondent did not accept the terms proposed by petitioner. Neither was there any documents of sale
nor payment by private respondent of the required downpayment. Private respondent wrote a letter to petitioner
on November 29, 1993 manifesting his intention to exercise his option to renew their lease contract for another THE COURT OF APPEALS AND RTC, CALOOCAN CITY, BRANCH 131, ERRED IN DECLARING
three years, starting January 1, 1994 to December 31, 1996. 12 This was rejected by petitioner, reiterating that THAT PETITIONER IS GUILTY OF ESTOPPEL IN FILING AN EJECTMENT CASE AGAINST
she was no longer renewing the lease. Petitioner demanded that private respondent vacate the premises, but RESPONDENT CO.
the latter refused.
II
Hence, private respondent filed with the Regional Trial Court of Caloocan, Branch 127, a case for specific
performance, docketed as Civil Case No. 16287, 13 seeking to compel petitioner to sell to him the leased
 THE COURT OF APPEALS AND RTC, CALOOCAN CITY, BRANCH 131, ERRED IN FINDING THAT I will not issue any injunction but there will be a status quo and we will concentrate our efforts
AN INJUNCTIVE SUIT WILL BAR THE FILING OF EJECTMENT CASE AGAINST RESPONDENT on letting the parties to (sic) negotiate and enter into an agreement.19
CO.
xxx xxx xxx
III
I will give you the same facts of the case. I want to settle this and not go into trial because
THE RTC, CALOOCAN CITY, BRANCH 131, ERRED IN DECLARING THAT THERE WAS A in due time I will not finish the case, my stay here is only Acting Presiding Judge and there
PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES OVER THE LEASED PROPERTY.18 are other judges nominated for this sala and once the judge will be (sic) appointed then I go,
let us get advantage of settling the matter. I will have your gentlemans agreement that there
will be no adversarial attitude among you will (sic) never arrive at any agreement.
The petition is impressed with merit.

The Court of Appeals ruled that petitioner was estopped from filing the instant ejectment suit against private Atty. Siapan
respondent by the alleged status quo agreement reached in the specific performance case filed by private
respondent against petitioner. A reading, however, of the transcript of stenographic notes taken during the In the meantime, we will move for a resetting of this case your Honor.
January 21, 1994 hearing discloses that the agreement to maintain the status quo pertained only to the duration
of the negotiation for an amicable settlement and was not intended to be operative until the final disposition of Court
the specific performance case. Thus:

Anyway, this is a gentlemans agreement that there will be no new movement but the status
xxx xxx xxx quo will be maintained.

Court
Atty. Siapan, Atty. Mendez & Atty. Uy.

Before we go into the prayer for preliminary injunction and of the merit of the case I want to
Yes, your Honor. (simultaneously (sic) in saying)20
see if I can make the parties settle their differences.

The foregoing agreement to maintain the status quo pending negotiations was noted by the trial court in its
Atty. Siapan January 21, 1994 Order postponing the hearing to enable the parties to arrive at an amicable settlement, to wit:

We will in the meantime maintain the status quo on the matter pending further negotiation.
Court
As a matter of injunction, are you willing to maintain a status quo muna [?]
Upon agreement of the parties herein for postponement of todays schedule as there might be some
possibility of settling the claims herein, let the hearing today be cancelled.
In the meantime this case is set for hearing on February 28, 1994 at 8:30 a.m., should the parties not
arrive at any amicable settlement.21

Atty. Mendez It is beyond cavil therefore that the preservation of the status quo agreed upon by the parties applied only during
the period of negotiations for an amicable settlement and cannot be construed to be effective for the duration
of the pendency of the specific performance case. It is a settled rule that injunction suits and specific
Yes, your Honor.
performance cases, inter alia, will not preclude the filing of, or abate, an ejectment case. Unlawful detainer and
forcible entry suits under Rule 70 are designed to summarily restore physical possession of a piece of land or
Court building to one who has been illegally or forcibly deprived thereof, without prejudice to the settlement of the
parties' opposing claims of juridical possession in appropriate proceedings. It has been held that these actions
How about Atty. Uy are you willing? "are intended to avoid disruption of public order by those who would take the law in their hands purportedly to
enforce their claimed right of possession." In these cases, the issue is pure physical or de facto possession,
and pronouncements made on questions of ownership are provisional in nature. 22
Atty. Uy
In Wilmon Auto Supply Corporation, et al., v. Court of Appeals, et al.,23 the issue of whether or not an ejectment
Yes, your Honor. case based on expiration of lease contract should be abated by an action to enforce the right of preemption or
prior purchase of the leased premises was resolved in the negative. The Court outlined the following precedents:
Court
 1. Injunction suits instituted in the RTC by defendants in ejectment actions in the municipal trial courts
or other courts of the first level (Nacorda v. Yatco, 17 SCRA 920 [1966]) do not abate the latter; and
neither do proceedings on consignation of rentals (Lim Si v. Lim, 98 Phil. 868 [1956], citing Pue, et al.
v. Gonzales, 87 Phil. 81 [1950]).
2. An "accion publiciana" does not suspend an ejectment suit against the plaintiff in the former
(Ramirez v. Bleza, 106 SCRA 187 [1981]).
3. A "writ of possession case" where ownership is concededly the principal issue before the Regional
Trial Court does not preclude nor bar the execution of the judgment in an unlawful detainer suit where
the only issue involved is the material possession or possession de facto of the premises (Heirs of F.
Guballa, Sr. v. C.A., et al.; etc., 168 SCRA 518 [1988]).
4. An action for quieting of title to property is not a bar to an ejectment suit involving the same property
(Quimpo v. de la Victoria, 46 SCRA 139 [1972]).
5. Suits for specific performance with damages do not affect ejectment actions (e.g., to compel
renewal of a lease contract) (Desamito v. Cuyegkeng, 18 SCRA 1184 [1966]; Rosales v. CFI, 154
SCRA 153 [1987]; Commander Realty, Inc. v. C.A., 161 SCRA 264 [1988]).
6. An action for reformation of instrument (e.g., from deed of absolute sale to one of sale with pacto
de retro) does not suspend an ejectment suit between the same parties (Judith v. Abragan, 66 SCRA
600 [1975]).
7. An action for reconveyance of property or "accion reivindicatoria" also has no effect on ejectment
suits regarding the same property (Del Rosario v. Jimenez, 8 SCRA 549 [1963]; Salinas v. Navarro,
126 SCRA 167; De la Cruz v. C.A., 133 SCRA 520 [1984]); Drilon v. Gaurana, 149 SCRA 352 [1987];
Ching v. Malaya, 153 SCRA 412 [1987]; Philippine Feeds Milling Co., Inc. v. C.A., 174 SCRA 108;
Dante v. Sison, 174 SCRA 517 [1989]; Guzman v. C.A. [annulment of sale and reconveyance], 177
SCRA 604 [1989]; Demamay v. C.A., 186 SCRA 608 [1990]; Leopoldo Sy v. C.A., et al., [annulment
of sale and reconveyance], G.R. No. 95818, Aug. 2, 1991).1wphi1.nt
8. Neither do suits for annulment of sale, or title, or document affecting property operate to abate
ejectment actions respecting the same property (Salinas v. Navarro [annulment of deed of sale with
assumption of mortgage and/or to declare the same an equitable mortgage], 126 SCRA 167 [1983];
Ang Ping v. RTC [annulment of sale and title], 154 SCRA 153 [1987]; Caparros v. C.A. [annulment of
title], 170 SCRA 758 [1989]; Dante v. Sison [annulment of sale with damages], 174 SCRA 517;
Galgala v. Benguet Consolidated, Inc. [annulment of document], 177 SCRA 288 [1989]).
The underlying reasons for the above ruling were that the actions in the Regional Trial Court did not
involve physical or de facto possession, and, on not a few occasions, that the case in the Regional
Trial Court was merely a ploy to delay disposition of the ejectment proceeding, or that the issues
presented in the former could quite as easily be set up as defenses in the ejectment action and there
resolved.
Only in rare instances is suspension allowed to await the outcome of the pending civil action. In Wilmon, the
Court recognized that Vda. De Legaspi v. Avendao24 was an exception to the general rule against suspension
of an ejectment proceeding.25 Thus:
x x x [A]s regards the seemingly contrary ruling in Vda. de Legaspi v. Avendano, 89 SCRA 135 (1977),
this Court observed in Salinas v. Navarro, 126 SCRA 167, 172-173 (1983), that the exception to the
rule in this case of Vda. de Legaspi is based on strong reasons of equity not found in the present
petition. The right of the petitioner is not so seriously placed in issue in the annulment case as to
warrant a deviation, on equitable grounds, from the imperative nature of the rule. In the Vda. de
Legaspi case, execution of the decision in the ejectment case would also have meant demolition of
the premises, a factor not present in this petition.
In the case at bar, the continued occupation by private respondent of the leased premises is conditioned upon
his right to acquire ownership over said property. The factual milieu obtaining here, however, hardly falls within
the aforecited exception as the resolution of the ejectment suit will not result in the demolition of the leased
premises, as in the case of Vda. De Legaspi v. Avendao. Verily, private respondent failed to show "strong
reasons of equity" to sustain the suspension or dismissal of the ejectment case. Argumentum a simili valet in
lege. Precedents are helpful in deciding cases when they are on all fours or at least substantially identical with
previous litigations.26 Faced with the same scenario on which the general rule is founded, and finding no reason
to deviate therefrom, the Court adheres to the settled jurisprudence that suits involving ownership may not be
successfully pleaded in abatement of an action for ejectment.
Contracts that are consensual in nature, like a contract of sale, are perfected upon mere meeting of the minds.
Once there is concurrence between the offer and the acceptance upon the subject matter, consideration, and
terms of payment, a contract is produced. The offer must be certain. To convert the offer into a contract, the
acceptance must be absolute and must not qualify the terms of the offer; it must be plain, unequivocal,
unconditional, and without variance of any sort from the proposal. A qualified acceptance, or one that involves
a new proposal, constitutes a counter-offer and is a rejection of the original offer. Consequently, when something
is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to generate
consent because any modification or variation from the terms of the offer annuls the offer. 27
In the case at bar, while it is true that private respondent informed petitioner that he is accepting the latters offer
to sell the leased property, it appears that they did not reach an agreement as to the extent of the lot subject of
the proposed sale. This is evident from the April 15, 1993 reply-letter of private respondent to petitioner, to wit:
I would like to inform you that I shall definitely exercise my option as embodied in Provision "F" (First
Option) of our Contract of Lease dated December 21, 1990. As per agreement, my first option covers
the 490 square meters site which I am currently leasing from you at 101 Caimito Road, Caloocan City.
Specifically, your Transfer Certificate of Title #247536 delineates the property sizes as 492 square
meters.
Your offer, however, states only 413.28 square meters are for sale to me. I trust that this is merely an
oversight on your part. Notwithstanding the rumors to the effect that part of the property have already
been sold to other parties, I would like to believe that you still retain absolute ownership over the entire
property covered by my Contract of Lease. Kindly enlighten me on this matter so that we can proceed
with the negotiations for the sale of your property to me. 28
Likewise, in his November 7, 1993 reply-letter, private respondent stated that:
While it is true that you first offered your property for sale to me last April 14, 1993, it is also equally
true that you only correspond with me on this matter again on October 27, 1993. I answered your April
14 offer with a registered mail on April 15, 1993. In it, I stated that I am definitely exercising my first
option to purchase your property in accordance with Provisions "F" of our Contract of Lease dated
December 21, 1990. Likewise, I requested you to explain the discrepancy between the size of the
property being offered for sale (413.28 square meters) as against the size stated in my option which
is 492 square meters. However, I did not get any reply from you on this matter. Hence the negotiations
 got stalled. If anybody should be blamed for the prolonged negotiation, then surely it is not all mine
alone.29

The foregoing letters reveal that private respondent did not give his consent to buy only 413.28 square meters
of the leased lot, as he desired to purchase the whole 490 square-meter-leased premises which, however, was
not what was exactly proposed in petitioners offer. Clearly, therefore, private respondents acceptance of
petitioners offer was not absolute, and will consequently not generate consent that would perfect a contract.

Even assuming that the parties reached an agreement as to the size of the lot subject of the sale, the records
show that there was subsequently a mutual withdrawal from the contract. 30 This is so because in the November
10, 1993 letter of petitioner, she gave private respondent until November 24, 1993 to pay 50% of the purchase
price, with the caveat that failure to do so would authorize her to sell to others the leased premises. The period
within which to pay the downpayment is a new term or a counter-offer in the contract which needs acceptance
by private respondent. The latter, however, failed to pay said downpayment, or to at least manifest his conformity
to the period given by petitioner. Neither did private respondent ask for an extension nor insist on the sale of
the subject lot. What appears in the record is private respondents November 29, 1993 letter informing petitioner
that he shall exercise or avail of the option to renew their lease contract for another three years, starting January
1, 1994 to December 31, 1996. Evidently, there was a subsequent mutual backing out from the contract of sale.
Hence, private respondent cannot compel petitioner to sell the leased property to him. 1wphi1.nt

Considering that the lease contract was not renewed after its expiration on December 31, 1991, private
respondent has no more right to continue occupying the leased premises. Consequently, his ejectment
therefrom must be sustained.

As to the monthly rental to be paid by private respondent from the expiration of their contract of lease until the
premises is vacated, we find that the P12,000.00 awarded by the Metropolitan Trial Court must be reduced to
P8,500.00, it being the highest amount of monthly rental stated in the lease contract.

WHEREFORE, the petition is GRANTED. The August 29, 1997 decision and the November 28, 1997 resolution
of the Court of Appeals in CA-G.R. SP No. 40031 are SET ASIDE. The Decision of the Metropolitan Trial Court
of Caloocan, Branch 53, in Civil Case No. 21755 is REINSTATED subject to the modification that the monthly
rental to be paid by private respondent from the date of the termination of the lease contract until the leased
premises is vacated is reduced to P8,500.00.

SO ORDERED.
G.R. No. L-32974 July 30, 1979
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.
Salonga, Ordo;ez, Yap, Sicat & Associates and Salvador, Ulgado & Carbon for petitioner.
Jose A. Cusi for private respondents.
ANTONIO, J.:1wph1.t
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 upon petition of private respondents Quirino Comintan and Eleuterio Zamora, respondent Court appointed
The factual background of the case, as found by respondent Court, is as follows:t.hqw diversion road. On August 19, 1969, the Court of Appeals issued a Resolution annulling the Order appointing
... 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-in-law,
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 PLS-45, (Calauag Public Land Subdivision) one-half 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 PLS-45,
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
respondent Vicente Ferro, Clerk of Court, as Receiver to collect tolls on a portion of the property used as a
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 improvements. Any contrary opinion, in his view, would be tantamount to an amendment of a decision which
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
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).
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
or mancomunada, 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.

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
G.R. No. 158687 January 27, 2006
FRISCO F. DOMALSIN, Petitioner,
vs.
SPOUSES JUANITO VALENCIANO and AMALIA VALENCIANO, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review which seeks to set aside the decision1 of the Court of Appeals in CA-G.R. SP
No. 69415 dated 20 August 2002 which reversed and set aside the decision2 of Branch 63 of the Regional Trial
Court (RTC) of La Trinidad, Benguet, in Civil Case No. 01-CV-1582(150) dated 23 January 2002, which affirmed
the decision3 of the Municipal Circuit Trial Court (MCTC) of Tuba-Sablan, Tuba, Benguet, in Civil Case No. 150
dated 20 November 2000, declaring petitioner Frisco F. Domalsin the actual possessor of the lot in dispute and
ordering, inter alia, respondent spouses Juanito and Amalia Valenciano to vacate and deliver the physical
possession thereof to the former, and its Resolution4 dated 20 May 2003 denying petitioners motion for
reconsideration.
The respective allegations of the parties as contained in the complaint and answer are substantially summarized
by the Court of Appeals as follows:
The property subject of this action for forcible entry is a parcel of land located at sitio Riverside, Camp 3, Tuba,
Benguet. Respondent Frisco B. Domalsin claims to be the lawful owner and possessor of said parcel of land
since 1979 up to the present. He declared it for taxation purposes in 1983 as (per) Tax Declaration No. 9540
issued on September 12, 1983 by the Municipal Assessor of Tuba Benguet. He allegedly introduced
improvements consisting of levelling, excavation, riprapping of the earth and a private road to the river,
fruitbearing trees and other agricultural plants of economic value. He was in continuous, adverse possession
and in the concept of an owner for the past nineteen (19) years.
On August 1, 1998, petitioners Spouses Juanito Valenciano and Amalia Valenciano (Sps. Valenciano, for
brevity) allegedly entered the premises to construct a building made of cement and strong materials, without
the authority and consent of respondent, by means of force and strategy, and without a building permit from the
Department of Public Works and Highways (DPWH, for brevity). Respondent protested and demanded that
petitioners Sps. Valenciano halt construction of said building, but the latter refused to do so. Hence, he filed the
instant case.
Petitioners Sps. Valenciano, on the other hand, claimed that the ongoing construction was with the consent and
conformity of the DPWH and in fact the improvements found in the property were introduced by the residents
thereof, including its first residents, William and Gloria Banuca, and not by respondent. The premises on which
petitioners Sps. Valenciano are constructing their house were leveled after the earthquake in 1990 by the
Banuca spouses. Petitioners Sps. Valenciano are just starting the construction because the permission was
only given now by Gloria Banuca.5
On 18 August 1998, petitioner filed before the MCTC of Tuba, Benguet, a complaint for Forcible Entry with
Prayer for Preliminary Mandatory Injunction with Application for Issuance of a Temporary Restraining Order
plus Damages.6 The complaint was amended on 27 August 1998.7 Per Order dated 19 August 1998, a
Temporary Restraining Order (TRO) was issued ordering respondents to desist and cease and refrain from
continuing the construction of a house on the land in question.8
On 27 August 1998, respondent spouses Juanito and Amalia Valenciano filed their Answer with Opposition to
the Prayer for Issuance of Writ of Preliminary Injunction. 9 On 07 September 1998, they filed an Answer to the
Amended Complaint10 to which petitioner filed a Reply.11
On 15 September 1998, the MCTC issued another TRO. 12
The pre-trial order dated 6 November 1998 contained, among other things, petitioners admission that he was
temporarily not operating any business in the area, and respondents admission regarding the issuance of Tax
Declarations on the property in dispute in petitioners name. 13
Trial ensued. Petitioner presented Mariano Suyam and Tonsing Binay-an, two of his former truck drivers from
1981 to 1985 in his business of hauling sand, gravel and other aggregates at Riverside, Camp 3, Tuba, Benguet.
Mariano Suyam testified that sometime in 1981, petitioner caused the construction of a private road leading to
the Bued River from Kennon Road. He added that petitioner constructed two houses, the first was located along
the road-right-of-way of Kennon Road where respondents are now constructing their house, while the second
was located below the private road around 40 to 60 meters down from Kennon Road. He explained that the first
house was used for sleeping quarters and resting center for laborers, while petitioner used the second one as
his quarters. He said William Banuca was hired as foreman in 1983 and that the latter and his family stayed in
the second house.
Tonsing Binay-an corroborated the testimony of Suyam as regards the two houses constructed by petitioner
and added that petitioner was the manager of Salamander Enterprises and had a concession permit from the
Bureau of Mines to haul gravel and sand.
Petitioner testified that he is a lawyer-businessman formerly engaged in trucking business, hauling sand and
gravel, and operated under the name Salamander Enterprises.14 He narrated that while he was passing Kennon
Road, he discovered that a portion of the Bued River, Camp 3, Tuba Benguet, can be a potential source of
supplies for his business. Though the area was steep and deep, he scouted a place where he can construct a
road from Kennon Road to the Bued River. In the course of cleaning the area, his workers noticed that the place
had been tilled. A certain Castillo Binay-an appeared informing him that he was the occupant of the site of the
proposed private road. After agreeing on the consideration, the former executed a Deed of Waiver and
Quitclaim15 over the land in his favor.
Thereafter, the Office of the Highway District Engineer of Baguio, Ministry of Public Highways (now Department
of Public Works and Highways [DPWH]) issued a permit in favor of petitioner to extract construction materials
at Camp 3, Tuba, Benguet,16 which was followed by the issuance on 1 October 1981 of Commercial Permit No.
147 by the Office of the Mines Regional Officer, Mineral Region No. 1, Bureau of Mines and Geo-Sciences
(Bureau of Mines).17 The Commercial Permit, which was renewable every year, was last renewed in 1987. 18
Based on the Deed of Waiver and Quitclaim executed by Castillo Binay-an, petitioner was able to apply for, and
was issued, a tax declaration over the land covering one hectare. Tax Declaration No. 954019 dated 12
September 1983 was issued to petitioner describing the land bounded on the North by Bued River, on the South
by Kennon Road, on the East by Kennon Road, and on the West by a Creek. With the revision of the fair market
value and assessed value of lands, Tax Declaration No. 94-004-00327 dated 12 November 1994 was issued to
him.20 From 1983 up to 1998, petitioner has been regularly paying real property taxes over the land.
Petitioner disclosed that in 1983, William Banuca applied for, and was accepted, as foreman. 21 Due to the nature
of his job, Banuca was permitted to stay in the second house beside the private road. 22 Banuca now lives
permanently in said house after petitioner gave it to him. Petitioner revealed that the houses his former laborers
constructed were awarded to them as a kind gesture to them. As to the land he occupied along the Kennon
Road where the first house was erected, he claims that same still belongs to him. This house, which his laborers
and drivers used as a resting area, was cannibalized and leveled, and the land over which it once stood was
taken possession by respondents who are now building their house thereon.
Gloria Banuca testified for respondents. She disclosed that it was she who invited respondents to come and
reside at Riverside, Camp 3, Tuba, Benguet. She said she knew petitioner to be engaged in the sand and gravel
business in Tuba, Benguet, from 1981 to 1985, and that the latter stopped in 1985 and never returned to haul
sand and gravel at the Bued River. She claimed she never saw petitioner introduce any improvements on the
land he claimed he bought from Castillo Binay-an, and that it was she and the other residents who introduced
the existing improvements.
She narrated that in 1983, she planted fruit-bearing trees in the area where respondents were constructing their
house which is located along the Kennon Roads road-right-of-way, fronting petitioners property. After the
earthquake of 1990, the private road constructed by petitioner became impassable and it was she who hired
the equipment used to clear the same. She even leveled the area where respondents were building their home.
Based on the ocular inspection, she said this area is within the 15-meter radius from the center of the road. This
area, she claims, was sold to her by the Spouses Jularbal. However, the agreement between them shows that
what was sold to her were the improvements near her house which was 40 meters down from Kennon Road
and the improvements along Kennon Road.23
Agustin Domingo next testified for respondents. He testified that in 1986, upon the invitation of Gloria Banuca,
he transferred his residence to sitio Riverside because of its proximity to his place of work. He stayed there for
good and even buried his father near his house. He said that in 1990, the private road constructed by petitioner
was covered by boulders, soil and rocks, and it was Mrs. Banuca who initiated the clearing of the road. Finally,
he declared that since 1986, he never saw petitioner introduce any improvement in the area.
Respondent Juanito Valenciano revealed that he is the cousin of Gloria Banuca. He narrated that in 1984, he
went to Riverside to see the latter whose husband, William Banuca, was working as foreman of petitioner. At
that time, the lot under litigation was still a hill. It was Gloria Banuca who leveled the hill and told him to construct
his house there. Finding the place to be an ideal place to build his house, he paid the Banucas P10,000.00 for
the improvements.
He explained that before he started building his house, he sought the permission of the Benguet District
Engineer, DPWH, which the latter granted. In August 1998, he received a notice 24 to stop and desist from
continuing the construction of a permanent one-storey house made of hollow blocks and cement since the
condition was only to utilize light materials. Thereafter, a letter dated 22 January 1999 was sent to him informing
him that the temporary permit issued to him for the improvement/utilization of a portion of the national road
along Kennon Road had been revoked for non-submission of the waiver as required by the Office of the District
Engineer and his non-compliance with the condition that no permanent structures are to be constructed within
the road-right-of-way. He, however, denied receiving said letter.
Juan de Vera, a retired DPWH foreman, testified last for the respondents. He claimed he witnessed the
execution of the document25 regarding the sale by Adriano Jularbal to Gloria Banuca of improvements found
near the house of the latter in the amount of P1,000.00.
The MCTC found that what is being contested is the possession of a portion of the road-right-of way of Kennon
Road which is located in front of a parcel of land that petitioner bought by way of Deed of Waiver and Quitclaim
from Castillo Binay-an. It held that petitioner had prior material possession over the subject land. It ruled that
the destruction of his house built thereon by the earthquake in 1990, and later cannibalized without being
reconstructed was not tantamount to abandonment of the site by the petitioner because it was destroyed by a
fortuitous event which was beyond his control. It explained that his possession over the land must be recognized
by respondents who came later after the earthquake. It brushed aside respondents allegation that the land in
dispute was abandoned by the latter after he stopped operating his sand and gravel business in 1985 and never
returned anymore, and when the house erected on it was destroyed during the 1990 earthquake, it was no
longer reconstructed and was subsequently leveled or demolished by Gloria Banuca. However, it pronounced
that respondents action to occupy the land was done in good faith considering that their occupation of the land
was with the assurance of the seller (Gloria Banuca) and that they were armed with the permit issued by the
DPWH for him to construct his house thereon.
On 20 November 2000, the MCTC came out with its decision, the decretal portion of which reads:
WHEREFORE PREMISES CONSIDERED, decision is hereby rendered in favor of plaintiff, FRISCO
DOMALSIN, and against defendants, JUANITO VALENCIANO and AMALIA VALENCIANO, with the following:
1. Order to declare the injunction permanent.
2. Order the plaintiff as the actual possessor of the lot in question.
3. Order the defendant(s) to vacate and deliver the physical possession voluntarily of the disputed
land to plaintiff within 60 days from receipt of this decision.
4. Order defendant(s) to remove his structure within from receipt of this decision.
5. Order the defendant(s) to (sic) plaintiff the amount of P10,000.00, as litigation expenses.
6. Order defendant(s) to pay the cost of suit 26
Respondents appealed the decision to the RTC. 27 In affirming the decision in toto the RTC ratiocinated:
It may be well to consider that even after plaintiffs business ceased operation, he religiously paid the taxes due
thereon.
Appellants theory that the plaintiff-appellee abandoned the property does not sit well and finds no support in
the record. Notice that since 1985 up to mid-1990, the Banucas never laid claim over the property taking into
consideration that they were already residents of the place. This only goes to show that they acknowledged and
respected the prior possession of the plaintiff-appellee. Besides, what right has Gloria to cause the leveling of
the property destroying the natural contour thereof, to presume that plaintiff-appellee abandoned it and to invite
and allow other persons to settle thereat? Absolutely none. Knowing fully well that the plaintiff-appellee has
prior possession of the property, Glorias actions are unjustified, to say the least. Her consummated act of
leveling the property without the knowledge of the plaintiff-appellee is viewed as a test to determine whether or
not the latter is still interested in the property. From then on until 1998 (but before the construction), the Banucas
still recognize the plaintiffs possession. But as Gloria claims to have heard no word from the plaintiff, she
unilaterally declared that the place is now abandoned as she "invited and allowed" the defendants to live and
construct their house thereat.
Contrary to the assertion of the appellants, there was no abandonment simply because plaintiff-appellee
continuously paid the corresponding taxes due thereon and that he promptly objected to the construction of the
defendants-appellants house. These are clear manifestations of his intention not to abandon the property. Sad
to say though that here is a former employer. By passing off such property to be hers is so unkind, unfair and
against social order. It is very clear that the Banucas knew of the prior possession of the plaintiff way back then
so that they themselves never personally build construction over the property. If they honestly believe that they
now "own" the land, why will they still have to invite other people who are not their relatives to settle thereat?
Why the preference of strangers over relatives? The Court does not believe that they did not receive any
compensation for having "allowed" strangers, the defendants included, to settle on the land.
From all the foregoing, Gloria is clearly in bad faith. And her being in bad faith must be corrected and if
warranted, must be meted appropriate penalty. If the Banucas are in bad faith, then the appellants cannot have
better rights either. The Banucas transferred nothing to them. Defendants-appellants cannot even be
considered as builders in good faith. It must be noted that they were prohibited by the plaintiff from going further
but they ignored it. They shall lose what was built (Art. 449, Civil Code). Again, if the Banucas believe that they
have an action or a right to deprive the plaintiffs possession, why did they not invoke judicial interference as
required under Art. 536 of the same code? Nonetheless, notwithstanding the fact of leveling without the
knowledge of the plaintiff-appellee, the same did not affect his possession (Art. 537, Civil Code). 28
Via a petition for review, respondents appealed to the Court of Appeals. The Court of Appeals made a sudden
turn-around and reversed the decision under review. Its decision dated 20 August 2002 reads in part:
[T]here is a need to clarify a few things. What is undisputed are the identity and nature of the property subject
of the action for forcible entry. The subject of the action concerns a portion of the road-right-of-way along Kennon
Road just above the private road constructed by respondent. The problem, however, is that petitioners Sps.
Valenciano started constructing a house on the same spot where a house belonging to respondent once stood.
Both parties are now asserting that they are entitled to the possession of said lot. But the decision of the lower
court seems to imply that respondents right to possess the subject property stems from his acquisition of the
one-hectare property below it. That is not the case.
We must emphasize that the subject of the deed of quitclaim and waiver of rights of Castillo Binay-an was not
the road-right-of-way but the sloping terrain below it. This was the property acquired by the respondent to have
access to the sand and gravel on the Bued River. It did not include the road-right-of-way. As regards Gloria
Banucass claims, the evidence show that her agreement with Jularbal involved only the improvements near
her residence down the private road and not the road-right-of-way. Since the subject property is a road-right-of-
way, it forms part of the public dominion. It is not susceptible to private acquisition or ownership. Prolonged
occupation thereof, improvements introduced thereat or payment of the realty taxes thereon will never ripen into
ownership of said parcel of land. Thus, what We have are two parties, neither of which can be owners, only
possessors of the subject property. Beyond these two, only the government has a better right to the subject
property which right it may exercise at any time. This bears emphasizing because if either party has possessory
rights to the subject property, it is not predicated on ownership but only on their actual possession of the subject
property.
xxxx
There is no doubt that respondent had prior physical possession of the subject property. He entered and
acquired possession of the subject property when he built his house thereon. The house was destroyed during
the 1990 earthquake and respondent did not rebuild it. The mound on which it stood was later leveled by Gloria
Banuca and in 1998 petitioners Sps. Valenciano began construction thereat. Petitioners Sps. Valenciano claim
there was abandonment, but the lower court ruled that respondent did not abandon the subject property as he
continued to pay the realty taxes thereon and objected to petitioners Sps. Valencianos construction. We
believe, and so hold, that at this point in time, it is immaterial whether or not there was abandonment by
respondent. The fact remains that Gloria Banuca took possession of the subject property soon after the
earthquake. She leveled the mound and the ruins of respondents house, yet respondent remained silent.
Respondent objected only after petitioners Sps. Valenciano started construction of the house on the subject
property. Respondent cannot now interpose an action for forcible entry against petitioners Sps. Valenciano,
which he should have filed against Gloria Banuca, petitioners Sps. Valencianos predecessor-in-interest. But
more than a year had passed and his right to do so lapsed. Thus, respondents prior possession is material only
as against Gloria Banuca and only within a period of one year from the time she wrested possession of the
property from respondent.
We view with distate Gloria Banucas ingratitude toward her husbands former employer. Her actions smack of
the proverbial hand being offered in aid but the person to whom it is offered would rather have the whole arm
instead. This is an instance where it is the employees who commit injustice against their employer. Nonetheless,
petitioners Sps. Valenciano should not suffer because of Gloria Banucas ingratitude for the former came across
the property in good faith.
But respondent is also reminded that he only has himself to blame. His failure to assert his right for an
unreasonable and unexplained length of time allowed Gloria Banuca to wrest possession from him. Especially
in this case where they do not and cannot own the subject property, actual possession becomes particularly
important.29
The case was disposed as follows:
WHEREFORE, in view of the foregoing, the petition is GRANTED and the decision of the Municipal Circuit Trial
Court of tuba-Sablan dated November 20, 2000 as affirmed by the Regional Trial Court on January 23, 2002 is
hereby REVERSED and SET ASIDE.30
The Motion for Reconsideration filed by petitioner was denied in a resolution 31 dated 20 May 2003.
Petitioner is now before us seeking redress. He assigns the following as the errors committed by the Court of
Appeals:
I.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT PRIVATE RESPONDENT (NOW
PETITIONER) FRISCO DOMALSIN ABANDONED THE PROPERTY SUBJECT OF THE LITIGATION.
II.
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING ASIDE THE DECISION
OF THE REGIONAL TRIAL COURT OF LA TRINIDAD, BENGUET, BRANCH 63 WHICH AFFIRMED THE
DECISION OF THE MUNICIPAL CIRCUIT TRIAL COURT OF TUBA-SABLAN.
At the outset, it must be made clear that the property subject of this case is a portion of the road-right-of way of
Kennon Road which is located in front of a parcel of land that petitioner bought by way of Deed of Waiver and
Quitclaim from Castillo Binay-an.32 The admission33 of petitioner in his Amended Complaint that respondents
started constructing a building within the Kennon Road road-right-of-way belies his claim that the lot in question
is his.
In light of this exposition, it is clear that neither the petitioner nor the respondents can own nor possess the
subject property the same being part of the public dominion. Property of public dominion is defined by Article
420 of the Civil Code as follows:
ART. 420. 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 other 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.
Properties of public dominion are owned by the general public. 34 Public use is "use that is not confined to
privileged individuals, but is open to the indefinite public." 35 As the land in controversy is a portion of Kennon
Road which is for the use of the people, there can be no dispute that same is part of public dominion. This being
the case, the parties cannot appropriate the land for themselves. Thus, they cannot claim any right of possession
over it. This is clear from Article 530 of the Civil Code which provides:
ART. 530. Only things and rights which are susceptible of being appropriated may be the object of possession.
Notwithstanding the foregoing, it is proper to discuss the position of the Court of Appeals for comprehensive
understanding of the facts and the law involved.
Petitioner maintains that the Court of Appeals erred when it ruled that he abandoned the land being disputed
contrary to the rulings of the MCTC and RTC. The MCTC found there was no abandonment of the land because
the house erected thereon was destroyed by a fortuitous event (earthquake), while the RTC ruled there was no
abandonment because petitioner paid taxes due on the land and that he promptly objected to the construction
of respondents house which are clear manifestations of his intention not to abandon the property.
A reading of the decision of the Court of Appeals shows that it did not reverse the two lower courts on the issue
of abandonment. It merely declared that such issue is not material in the resolution of the case at bar. It faulted
petitioner for not asserting his right for a long time allowing Gloria Banuca to wrest the possession of the land
in question from petitioner by leveling the house he built thereon and pronounced that actual possession
becomes important in a case where parties do not and cannot own the land in question.
From the foregoing it appears that the Court of Appeals did not give weight or importance to the fact that
petitioner had prior physical possession over the subject land. It anchored its decision on the fact that the parties
do not and cannot own the land and that respondents now have actual possession over it.
Ejectment proceedings are summary proceedings intended to provide an expeditious means of protecting actual
possession or right to possession of property. Title is not involved. The sole issue to be resolved is the question
as to who is entitled to the physical or material possession of the premises or possession de facto. 36
The Court of Appeals erred when it preferred the present and actual possession of respondents vis--vis the
prior possession of petitioner on the ground that the parties do not and cannot own the lot in question.
Regardless of the actual condition of the title to the property, the party in peaceable, quiet possession shall not
be thrown out by a strong hand, violence or terror. Neither is the unlawful withholding of property allowed. Courts
will always uphold respect for prior possession. Thus, a party who can prove prior possession can recover such
possession even against the owner himself. Whatever may be the character of his possession, if he has in his
favor prior possession in time, he has the security that entitles him to remain on the property until a person with
a better right lawfully ejects him.37
The fact that the parties do not and cannot own the property under litigation does not mean that the issue to be
resolved is no longer priority of possession. The determining factor for one to be entitled to possession will be
prior physical possession and not actual physical possession. Since title is never in issue in a forcible entry
case, the Court of Appeals should have based its decision on who had prior physical possession. The main
thing to be proven in an action for forcible entry is prior possession and that same was lost through force,
intimidation, threat, strategy and stealth, so that it behooves the court to restore possession regardless of title
or ownership.38
Inasmuch as prior physical possession must be respected, the Court of Appeals should have ruled squarely on
the issue of abandonment because it gave precedence to the actual present possession of respondents. If,
indeed, there was abandonment of the land under consideration by petitioner, only then should respondents be
given the possession of the same since abandonment is one way by which a possessor may lose his
possession.39
Abandonment of a thing is the voluntary renunciation of all rights which a person may have in a thing, with the
intent to lose such thing.40 A thing is considered abandoned and possession thereof lost if the spes recuperandi
(the hope of recovery) is gone and the animus revertendi (the intention of returning) is finally given up. 41
In the case before us, we find that petitioner never abandoned the subject land. His opposition to the
construction of respondents house upon learning of the same and the subsequent filing of the instant case are
clear indicia of non-abandonment; otherwise, he could have just allowed the latter to continue with the
construction. Moreover, the fact that the house petitioner built was destroyed by the earthquake in 1990, was
never rebuilt nor repaired and that same was leveled to the ground by Gloria Banuca do not signify
abandonment. Although his house was damaged by the earthquake, Gloria Banuca, the person who supposedly
demolished said house, had no right to do the same. Her act of removing the house and depriving petitioner of
possession of the land was an act of forcible entry. The entry of respondents in 1998 was likewise an act of
forcible entry.
The next question is: Was the action filed the correct one and was it timely filed?
Well-settled is the rule that what determines the nature of the action as well as the court which has jurisdiction
over the case are the allegations in the complaint. 42 In actions for forcible entry, the law tells us that two
allegations are mandatory for the municipal court to acquire jurisdiction: First, the plaintiff must allege prior
physical possession of the property. Second, he must also allege that he was deprived of his possession by
any of the means provided for in Section 1, Rule 70 of the Rules of Court. 43 To effect the ejectment of an
occupant or deforciant on the land, the complaint should embody such a statement of facts as to bring 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
evidence.44
A look at the Amended Complaint filed by petitioner clearly shows a case for forcible entry. Petitioner alleged
therein that he has been in possession of the subject land for the last nineteen years and that respondents, in
the first week of August 1998, without his permission and consent, entered the land by means of force, strategy
and stealth and started the construction of a building thereon; and upon being informed thereof, he requested
them to stop their construction but respondents refused to vacate the land forcing him to file the instant case to
recover possession thereof.
The Court of Appeals pronounced that petitioner cannot interpose an action for forcible entry against
respondents and that the same should have been filed against Gloria Banuca. It added that the right to file
against the latter had already lapsed because more than a year had passed by from the time she wrestled
possession of the property from the petitioner.
We find such pronouncement to be flawed. An action of forcible entry and detainer may be maintained only
against one in possession at the commencement of the action, and not against one who does not in fact hold
the land.45 Under Section 1,46 Rule 70 of the Rules of Court, the action may be filed against persons unlawfully
withholding or depriving possession or any person claiming under them. Considering that respondents are the
ones in present actual possession and are depriving petitioner of the possession of the land in question, it is
proper that they be the ones to be named defendants in the case. The fact that Gloria Banuca was supposedly
the one who first committed forcible entry when she allegedly demolished the house of petitioner does not make
her the proper party to be sued because she is no longer in possession or control of the land in controversy.

As regards the timeliness of the filing of the case for forcible entry, we find that same was filed within the one-
year prescriptive period. We have ruled that where forcible entry was made clandestinely, the one-year
prescriptive period should be counted from the time the person deprived of possession demanded that the
deforciant desist from such dispossession when the former learned thereof. 47 As alleged by petitioner in the
Amended Complaint, he was deprived of his possession over the land by force, strategy and stealth.
Considering that one of the means employed was stealth because the intrusion was done by respondents
without his knowledge and consent, the one-year period should be counted from the time he made the demand
to respondents to vacate the land upon learning of such dispossession. The record shows that upon being
informed that respondents were constructing a building in the subject land sometime in the first week of August
1998, petitioner immediately protested and advised the former to stop; but to no avail. The one-year period
within which to file the forcible entry case had not yet expired when the ejectment suit was filed on 18 August
1998 with the MCTC.

Despite the foregoing findings, this Court finds that the MCTC and the RTC, as well as the Court of Appeals, to
be in error when they respectively declared that petitioner and respondents to be entitled to the possession of
the land in dispute. The parties should not be permitted to take possession of the land, much more, claim
ownership thereof as said lot is part of the public dominion.

WHEREFORE, the foregoing considered, the instant petition is hereby PARTIALLY GRANTED. Nonetheless,
there being a finding that the subject property is a part of the public dominion, of which neither party is entitled
to own nor possess, the decisions of the Court of Appeals dated 20 August 2002, the Regional Trial Court of
La Trinidad, Benguet, dated 23 January 2002, and the Municipal Circuit Trial Court of Tuba-Sablan, Tuba,
Benguet, dated 20 November 2000 are SET ASIDE. Respondents Juanito and Amalia Valenciano are ordered
to remove their structure on the subject land within sixty (60) days from receipt of this decision, and to vacate
and deliver the physical possession thereof to the Office of the District Engineer, Benguet Engineering District,
Department of Public Works and Highways.

SO ORDERED.
G.R. No. L-54598 April 15, 1988
JOSE B. LEDESMA, petitioner,
vs.
HON. COURT OF APPEALS, Spouses PACIFICO DELMO and SANCHA DELMO (as private
respondents),respondents.
The Solicitor General for petitioner.
Luzel D. Demasu-ay for respondent.
GUTIERREZ, JR., J.:
This petition seeks to reverse the decision of the respondent Court of Appeals which afirmed the decision of the
Court of First Instance of Iloilo, adjudging the petitioner, who was then the President of the West Visayas College
liable for damages under Article 27 of the Civil Code of the Philippines for failure to graduate a student with
honors.
The facts are not disputed.
An organization named Student Leadership Club was formed by some students of the West Visayas College.
They elected the late Violets Delmo as the treasurer. In that capacity, Delmo extended loans from the funds of
the club to some of the students of the school. "the petitioner claims that the said act of extending loans was
against school rules and regulations. Thus, the petitioner, as President of the School, sent a letter to Delmo
informing her that she was being dropped from the membership of the club and that she would not be a
candidate for any award or citation from the school.
Delmo asked for a reconsideration of the decision but the petitioner denied it. Delmo, thus, appealed to the
Office of the Director of the Bureau of Public Schools.
The Director after due investigation, rendered a decison on April 13, 1966 which provided:
Records of the preliminary investigation conducted by one of the legal officers of this Office
disclosed the following: That Violeta Delmo was the treasurer of the Student Leadership
Club, an exclusive student organization; that pursuant to Article IX of the of the Constitution
and By-Laws of the club, it passed Resolution No. 2, authorizing the treasurer to disburse
funds of the Club to student for financial aid and other humanitarian purposes; that in
compliance with said resolution and as treasurer of the Club, Violeta Delmo extended loans
to some officers and members of the Club upon proper application duly approved by the
majority of the members of the Executive Board; and that upon receiving the report from Mr.
Jesse Dagoon, adviser of the funds of the Club, that Office conducted an investigation on
the matter and having been convinced of the guilt of Violets Delmo and the other officers
and members of the Club, that Office rendered the order or decision in question. In justifying
that Office's order or decision, it is contended that approval by that Office of the Constitution
and By-Laws of the Club is necessary for its effectivity and validity and since it was never
submitted to that Office, the Club had no valid constitution and By-Laws and that as a
consequence, Resolution No. 2 which was passed based on the Constitution and By-Laws-
is without any force and effect and the treasurer, Violeta Delmo, who extended loans to
some officers and members of the Club pursuant thereto are illegal (sic), hence, she and the
other students involved are deemed guilty of misappropriating the funds of the Club. On the
other hand, Raclito Castaneda, Nestor Golez and Violeta Delmo, President, Secretary and
Treasurer of the Club, respectively, testified that the Club had adopted its Constitution and
By-Laws in a meeting held last October 3, 1965, and that pursuant to Article I of said
Constitution and By-Laws, the majority of the members of the Executive Board passed
Resolution No. 2, which resolution became the basis for the extension on of loans to some
officers and members of the Club, that the Club honestly believed that its Constitution and
By-Laws has been approved by the superintendent because the adviser of the Club, Mr.
Jesse Dagoon, assured the President of the Club that he will cause the approval of the
Constitution and By-Laws by the Superintendent; the officers of the Club have been inducted
to office on October 9,1965 by the Superintendent and that the Club had been likewise
allowed to cosponsor the Education Week Celebration.
After a careful study of the records, this Office sustains the action taken by the
Superintendent in penalizing the adviser of the Club as well as the officers and members
thereof by dropping them from membership therein. However, this Office is convinced that
Violets M. Delmo had acted in good faith, in her capacity as Club Treasurer, in extending
loans to the officers and members of the Student partnership Club. Resolution No. 2
authorizing the Club treasurer to discharge finds to students in need of financial assistance
and other humanitarian purposes had been approved by the Club adviser, Mr. Jesse
Dagoon, with the notation that approval was given in his capacity as adviser of the Club and
extension of the Superintendent's personality. Aside from misleading the officers and
members of the Club, Mr. Dagoon, had unsatisfactorily explained why he failed to give the
Constitution and By-Laws of the Club to the Superintendent for approval despite his
assurance to the Club president that he would do so. With this finding of negligence on the
part of the Club adviser, not to mention laxity in the performance of his duties as such, this
Office considers as too severe and unwarranted that portion of the questioned order stating
that Violeta Delmo "shall not be a candidate for any award or citation from this school or any
organization in this school." Violeta Delmo, it is noted, has been a consistent full scholar of
the school and she alone has maintained her scholarship. The decision in question would,
therefore, set at naught all her sacrifice and frustrate her dreams of graduating with honors
in this year's commencement exercises.
In view of all the foregoing, this Office believes and so holds and hereby directs that appellant
Violeta. M. Delmo, and for that matter all other Club members or officers involved in this
case, be not deprived of any award, citation or honor from the school, if they are otherwise
entitled thereto. (Rollo, pp. 28-30)
On April 27, 1966, the petitioner received by mail the decision of the Director and all the records of the case.
On the same day, petitioner received a telegram stating the following:
"AIRMAIL RECORDS DELMO CASE MISSENT THAT OFFICE"
The Director asked for the return only of the records but the petitioner allegedly mistook the telegram as ordering
him to also send the decision back. On the same day, he returned by mail all the records plus the decision of
the Director to the Bureau of Public Schools.
The next day, the petitioner received another telegram from the Director order him to furnish Delmo with a copy
of the decision. The petitioner, in turn, sent a night letter to the Director informing the latter that he had sent the
decision back and that he had not retained a copy thereof..
On May 3, 1966, the day of the graduation, the petitioner received another telegram from the Director ordering
him not to deprive Delmo of any honors due her. As it was impossible by this time to include Delmo's name in
the program as one of the honor students, the petitioner let her graduate as a plain student instead of being
awarded the Latin honor of Magna Cum Laude.
To delay the matter further, the petitioner on May 5, 1966, wrote the Director for a reconsideration of the latters"
decision because he believed that Delmo should not be allowed to graduate with honors. The Director denied
the petitioner's request.
On July 12, 1966, the petitioner finally instructed the Registrar of the school to enter into the scholastic records
of Delmo the honor, "Magna Cum Laude."
On July 30, 1966, Delmo, then a minor, was joined by her parents in flag action for damages against the
petitioner. During the pendency of the action, however, Delmo passed away, and thus, an Amended and
Supplemental Complaint was filed by her parents as her sole and only heirs.
The trial court after hearing rendered judgment against the petitioner and in favor of the spouses Delmo. The
court said:
Let us go to specific badges of the defendants (now petitioners) bad faith. Per investigation
of Violeta Delmo's appeal to Director Vitaliano Bernardino of the Bureau of Public Schools
(Exhibit L it was the defendant who inducted the officers of the Student Leadership Club on
October 9, 1965. In fact the Club was allowed to cosponsor the Education Week Celebration.
(Exh. "L"). If the defendant he not approve of the constitution and by-laws of the Club, why
did he induct the officers into office and allow the Club to sponsor the Education Week
Celebration"? It was through his own act that the students were misled to do as they did.
Coupled with the defendants tacit recognition of the Club was the assurance of Mr. Jemm
Dagoon, Club Adviser, who made the students believe that he was acting as an extension
of Mr. Ledesma's personality. (Exhibit "L").
Another badge of the defendan'ts want of good faith is the fact that, although, he kaew as
early as April 27,1966 that per on of r Bernardino, Exhibit "L," he was directed to give honors
to Miss Delmo, he kept Id information to . He told the Court that he knew that the letter of
Director Bernardino directed him not to deprive Miss Delmo the honors due her, but she (sic)
says that he has not finished reading the letter-decision, Exhibit "L," of Director Bernardino
0, him to give honors to Miss Delmo. (Tsn, Feb. 5, 1974, testimony of Mr. Ledesma, pp. .33-
35). It could not be true that he has not finished reading the letter-decision, Exh. "L," because
said letter consisted of only three pages, and the portion which directed that Miss Delmo "be
not deprived of any award, citation or honor from the school, if otherwise entitled thereto is
found at the last paragraph of the same. How did he know the last paragraph if he did not
read the letter.
Defendants actuations regarding Miss Delmo's cam had been one of bias and prejudice.
When his action would favor him, he was deliberate and aspect to the utter prejudice and
detriment of Miss Delmo. Thus, although, as early as April 27, 1966, he knew of the
exoneration of Miss Delino by Director Bernardino, he withheld the information from Miss
Delmo. This is eloquently dramatized by Exh. "11" and Exh. "13" On April 29,1966, Director
Bernardino cabled him to furnish Violeta Delmo copy of the Decision, Exh. "L," but instead
of informing Miss Delmo about the decision, since he said he mailed back the decision on
April 28,1966, he sent a night letter on April 29,1966, to Director Bernardino, informing the
latter that he had returned the decision (Exh. "l3"), together with the record. Why a night
letter when the matter was of utmost urgency to the parties in the case, because graduation
day was only four days ahead? An examination of the telegrams sent by the defendant
shows that he had been sending ordinary telegram and not night letters. (Exh. "5", Exhibit
"7"). At least, if the defendant could not furnish a copy of the decision, (Exh. "L"), to Miss
Delmo, he should have told her about it or that Miss Delmo's honors and citation in the
commencement be announced or indicated. But Mr. Ledesma is one who cannot admit a
mistake. Very ungentlemanly this is home out by his own testimony despite his knowledge
that his decision to deprive Miss Delmo of honors due to her was overturned by Director
Bernardino, he on his wrong belief. To quote the defendant,1 believed that she did not
deserve those honors(Tsn Feb. 5, 1974, p. 43,Empasized supplied). Despite the telegram
of Director Bernardino which the defendant received hours before the commencement
executory on May 3-4,1966, he did not obey Director Bernardino because he said in his
testimony that he would be embarrassment . Tan Feb 5,1974, P. 46). Evidently, he knew
only his embarrassment and not that of r Bernardino whose order was being flagrantly and
wantonly disregarded by bim And certainly, not the least of Miss Delmo's embarrassment.
His acts speak eloquently of ho bad faith and unjust of mindwarped by his delicate sensitivity
for having been challenged by Miss Delmo, a mere student.
xxx xxx xxx
Finally the defendant's behaviour relative to Miss s case smacks of contemptuous
arrogance, oppression and abuse of power. Come to think of it. He refused to obey the
directive of Be o and instead, chose to feign ignorance of it." (Reward on Appeal, p. 72-76).
The trial court awarded P20,000.00 to the estate of Violeta Delmo and P10,000.00 to her parents for moral
damages; P5,000.00 for nominal damages to Violeta's estate; exemplary damages of P10,000.00 and
P2,000.00 attorney's fees.
On appeal, the Court of Appeals affirmed the decision. Hence, this petition.
The issues raised in this petition can be reduced to the sole question of whether or not the respondent Court of
Appeals erred in affirming the trial court's finding that petitioner is liable for damages under Article 27 of the
New Civil Code.
We find no reason why the findings of the trial and appellate courts should be reversed. It cannot be disputed
that Violeta Delmo went through a painful ordeal which was brought about by the petitioner's neglect of duty
and callousness. Thus, moral damages are but proper. As we have affirmed in the case of (Prudenciado v.
Alliance Transport System, Inc., 148 SCRA 440, 448):
There is no argument that moral damages include physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation,
and similar injury. Though incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of defendant's wrongly act or omission." (People
v. Baylon, 129 SCRA 62 (1984).
The Solicitor-General tries to cover-up the petitioner's deliberate omission to inform Miss Delmo by stating that
it was not the duty of the petitioner to furnish her a copy of the Director's decision. Granting this to be true, it
was nevertheless the petitioner's duty to enforce the said decision. He could have done so considering that he
received the decision on April 27, 1966 and even though he sent it back with the records of the case, he
undoubtedly read the whole of it which consisted of only three pages. Moreover, the petitioner should have had
the decency to meet with Mr. Delmo, the girl's father, and inform the latter, at the very least of the decision. This,
the petitioner likewise failed to do, and not without the attendant bad faith which the appellate court correctly
pointed out in its decision, to wit:

Third, assuming that defendant could not furnish Miss Delmo of a copy of the decision, he
could have used his discretion and plain common sense by informing her about it or he could
have directed the inclusion of Miss Delmo's honor in the printed commencement program or
announced it during the commencement exercises.

Fourth, defendant despite receipt of the telegram of Director Benardino hours before the
commencement exercises on May 3-4, 1966, disobeyed his superior by refusing to give the
honors due Miss Delmo with a lame excuse that he would be embarrassed if he did so, to
the prejudice of and in complete disregard of Miss Delmo's rights.

Fifth, defendant did not even extend the courtesy of meeting Mr. Pacifico Delmo, father of
Miss Delmo, who tried several times to see defendant in his office thus Mr. Delmo suffered
extreme disappointment and humiliation.

xxx xxx xxx

Defendant, being a public officer should have acted with circumspection and due regard to
the rights of Miss Delmo. Inasmuch as he exceeded the scope of his authority by defiantly
disobeying the lawful directive of his superior, Director Bernardino, defendant is liable for
damages in his personal capacity. . . . (Rollo, pp- 57-58)

Based on the undisputed facts, exemplary damages are also in order. In the same case of Prudenciado v.
Alliance Transport System, Inc., supra., at p. 450, we ruled:

The rationale behind exemplary or corrective damages is, as the name implies, to provide
an example or correction for the public good (Lopez, et al. v. Pan American World Airways,
16 SCRA 431).

However, we do not deem it appropriate to award the spouses Delmo damages in the
amount of P10,000.00 in their individual capacity, separately from and in addition to what
they are already entitled to as sole heirs of the deceased Violeta Delmo. Thus, the decision
is modified insofar as moral damages are awarded to the spouses in their own behalf.

WHEREFORE, the petition is DISMISSED for lack of merit. The decision of the Court of Appeals is AFFIRMED
with the slight modification as stated in the preceding paragraph. This decision is immediately executory.

SO ORDERED.