Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 182754 June 29, 2015

SPOUSES CRISPIN AQUINO and TERESA V. AQUINO, herein represented by their

Attorney-in-Fact, AMADOR D. LEDESMA, Petitioners,
vs.
SPOUSES EUSEBIO AGUILAR and JOSEFINA V. AGUILAR, Respondents.

DECISION

SERENO, CJ:

In this Petition for Review on Certiorari1 filed under Rule 45 of the Rules of Court,
Petitioner spouses Crispin and Teresa Aquino (petitioners) assail the Court of Appeals
(CA) Decision dated 25 April 20082 in CA-GR SP No. 92778. The CA modified the
Decisions of both the Metropolitan Trial Court (MeTC) and the Regional Trial Court
(RTC). The CA ruled that although respondent spouses Eusebio and Josefina Aguilar
(respondents) cannot be considered builders in good faith, they should still be
reimbursed for the improvements they have introduced on petitioners' property.3

THE FACTS

Teresa Vela Aquino (Teresa) and her husband, Crispin Aquino, are the owners of a
house and lot located at No. 6948, Rosal Street, Guadalupe

Since 1981, this property has been occupied by Teresa's sister, Josefina Vela Aguilar;
Josefina's spouse Eusebio; and their family.5 It appears from the record that
respondents stayed on the property with the consent and approval of petitioners, who
were then residing in the United States.6

While respondents were in possession of the property, the house previously

constructed therein was demolished, and a three-storey building built in its
place.7 Respondents occupied half of the third floor of this new building)for the next 20
years without payment of rental.8

On 22 September 2003, petitioners sent a letter to respondents informing them that an

immediate family member needed to use the premises and demanding the surrender of
the property within 10 days from notice.9 Respondents failed to heed this demand,
prompting petitioners to file a Complaint for ejectment against them before the office of
the barangay captain of Guadalupe Viejo.10 The parties attempted to reach an amicable
settlement in accordance with Section 412 of the Local Government Code, but these
efforts proved unsuccessful.11
On 19 November 2003, petitioner spouses Aquino filed a Complaint12 with the MeTC of
Makati City praying that respondents be ordered to (a) vacate the portion of the
building they were then occupying; and (b) pay petitioner a reasonable amount for the
use and enjoyment of the premises from the time the formal demand to vacate was
made.13

In their Answer with Counterclaim,14 respondents claimed that they had contributed to
the improvement of the property and the construction of the building, both in terms of
money and management/supervision services. Petitioners purportedly agreed to let
them contribute to the costs of construction in exchange for the exclusive use of a
portion of the building. Respondents averred:

2.3 That the construction of the three (3) storey building was also at the
uncompensated supervision of defendant Eusebio Aguilar, of which only r 2
Million was spent by plaintiffs while defendants spent around r 1 Million as
contribution to the construction cost. It was defendants who introduced
improvements on subject lot because at the time plaintiffs bought the property it
was marshy which was filled up by defendants (sic) truck load with builders,
adobe and scumbro that elevated the ground;

2.4 The original agreement was for my client to contribute his share so that they
will have the portion of the subject building for their own exclusive use. It turned
out later that the agreement they had was disowned by plaintiffs when they saw
the totality of the building constructed thereon coupled by the fact, that the value
of the lot has tremendously appreciated due to the commercialization of the
vicinity which will command higher price and windfall profits should plaintiffs
sell the property which they are now contemplating on (sic);

2.5 The portion which plaintiffs want defendants to vacate is a portion which the
latter built with their own money upon your clients agreement and consent
whom they built in good faith knowing and hoping that later on the same will be
theirs exclusively. It was never an act of generosity, liberality and tolerance.
Conversely, it was one of the implied co-ownership or partnership, because aside
from the fact that defendants, who were then peacefully residing in Laguna,
made unquantifiable contributions in terms of money and services arising from
his uncompensated management and supervision over the entire subject
property while plaintiffs are abroad. By legal implications he is an industrial
partner responsible for the development and improvements of the subject
property. His contribution was never without the consent of plaintiffs. Whatever
contribution defendants introduced over the said property was made and built in
good faith;15

Since they were allegedly co-owners of the building and builders in good faith,
respondents claimed that they had the right to be compensated for the current value of
their contribution.16 Accordingly, they prayed for the dismissal of the Complaint and the
award of ₱5 million as compensation for their contributions to the construction of the
building, as well as moral damages, attorney's fees and costs of litigation.17

THE RULING OF THE METC

In a Decision18 dated 12 November 2004, the MeTC ruled in favor of petitioners, stating
that they had the right to enjoy possession of the property as the registered owners
thereof.19 Since the case was merely one for ejectment, the court held that it was no
longer proper to resolve respondents' claim of co-ownership over the building.20

The MeTC also declared that respondents were builders in bad faith who were not
entitled to recover their purported expenses for the construction of the building.21 It
emphasized that their occupation of the property was by mere tolerance of petitioners
and, as such, could be terminated at any time.22 The court further noted that in a letter
dated 15 July 1983, petitioners had already asked respondents to refrain from
constructing improvements on the property because it was intended to be sold.23

The dispositive portion of the MeTC Decision, which ordered respondents to vacate the
property, reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendants

Eusebio & Josefina Aguilar and all persons claiming rights under them to immediately
vacate the subject property, and deliver peaceful possession thereof to the plaintiffs.
Defendants are likewise ordered to pay plaintiffs ₱7,000.00 monthly rental commencing
22 October 2003 until such time that defendant finally vacate the premises, ₱10,000.00
as and by way of attorney's fees, and the cost of suit.24

On 14 September 2005, respondents appealed the MeTC's Decision to the RTC.25

THE RULING OF THE RTC

In their Memorandum on Appeal26 before the R TC, respondents assailed the MeTC's
finding that petitioners, as the registered owners of the land, were also the owners of
the improvement constructed thereon.27 Respondents asserted that they were co-
owners of the building since they built a portion thereof using their own funds, as
evidenced by various receipts they presented before the MeTC.28

Respondents also maintained that they were builders in good faith. They pointed out
that petitioners never objected to the construction of the improvement on their
property.29 According to respondents, petitioners' letter dated 15 July 1983 was written
at a time when an old dilapidated house was still standing on the
property.30 Subsequently however, the house was demolished and the new building was
constructed thereon by respondents, with petitioners' knowledge and consent.31

In a Decision32 dated 3 January 2006, the RTC denied the appeal and affirmed the
MeTC's Decision. According to the court, respondents did not become co-owners of the
property although they may have contributed to the construction of the building
thereon.33 Hence, their stay in the premises remained to be by mere tolerance of the
petitioners.34

The RTC also ruled that respondents cannot be considered builders in good faith.35 The
court found that as early as 1983, petitioners had informed respondents of the intention
to eventually dispose of the property.36 The RTC concluded that petitioners never
consented to the construction of any form of structure on the property.37 Since
respondents participated in the construction of the building even after they had been
notified that their occupation may be terminated anytime, the R TC ruled that they did
not build the structures in good faith.38 The RTC likewise noted that "the improvements
in question as well as other personal belongings of the appellants were removed from
the premises through a writ of demolition, and these properties are now in their
possession."39

THE RULING OF THE CA

Aggrieved by the RTC Decision, respondents elevated the matter to the CA. They
reiterated that they owned one-half of the third floor of the building on the property,
having spent their own funds for the construction thereof. Respondents also asserted
that because they built that portion in good faith, with no objection from petitioners,
they were entitled to reimbursement of all necessary and useful expenses incurred in
the construction.

On 25 April 2008, the CA affirmed the conclusion of the lower courts that respondents
could not be considered co-owners of the property or builders in good faith.40 According
to the appellate court, respondents were aware that their right to possess the property
had a limitation, because they were not the owners thereof. They knew that their
occupation of the building was by mere tolerance or permission of petitioners, who
were the registered owners of the property. The CA likewise noted that respondents
failed to prove the alleged agreement between the parties with respect to the ownership
of one-half of the third floor of the improvement. There being no contract between
them, respondents are necessarily bound to vacate the property upon demand.41 The CA
ruled:

The Supreme Court has consistently held that those who occupy the land of another at
the latter's tolerance or permission, without any contract between them, are necessarily
bound by an implied promise that the occupants will vacate the property upon demand.
Based on the principles enunciated in Calubayan v. Pascual, the status of petitioners is
analogous to that of a lessee or a tenant whose term of lease has expired but whose
occupancy continued by tolerance of the owner. In such a case, the unlawful deprivation
or withholding of possession is to be reckoned from the date of the demand to
vacate.42 (Citations omitted)

Nevertheless, the CA declared that respondents should be reimbursed for the necessary
and useful expenses they had introduced on petitioners' property, pursuant to Articles
1678 and 548 of the Civil Code.43 The dispositive portion of the CA Decision dated 25
April 200844 reads:

WHEREFORE, the assailed Decision is AFFIRMED with the following MODIFICATIONS:

1. The case is REMANDED to the court of origin for further proceedings to

determine the facts essential to the application of Article 1678 and Article 546 of
the Civil Code, specifically on the following matters:

a) To determine the cost of necessary expenses incurred by petitioners

during their period of possession.
 b) To determine the cost of useful improvements introduced by
petitioners in the construction of the building.

2. After said amounts shall have been determined by competent evidence:

a) Respondents Aquino are ordered to pay petitioners the costs of

necessary improvements incurred during the period of their occupation.

b) Petitioners Aguilar are to be reimbursed one half (1/2) of the amount

they expended on the construction of the building should respondents
decided to appropriate the same. Should respondents refuse to reimburse
the costs of the improvements, petitioners may remove the improvements
even though the principal thing may suffer damage thereby.

c) In both instances, petitioners shall have no right of retention over the

subject premises.

d) In any event, petitioners shall pay respondents the amount of

Php7,000.00 as monthly rental commencing 22 October 2003 until such
time that petitioners finally vacate the premises. No pronouncement as to
costs.

SO ORDERED.45

Respondents no longer appealed the Decision of the CA. This time, petitioners elevated
the matter to this Court through the instant Petition for Review46 under Rule 45 of the
Rules of Court.

PROCEEDINGS BEFORE THIS COURT

In their Petition, petitioners allege that the CA seriously erred in remanding the case to
the court of origin for the purpose of ascertaining the right of respondents to be
reimbursed for the improvements introduced on the property.47 They emphasize that
respondents were builders in bad faith, and, as such, are not entitled to reimbursement
under Articles 449, 450 and 451 of the Civil Code.

In their Comment,48 respondents assert that the CA correctly ruled that their status is
akin to that of a lessee or tenant whose term of lease has expired, but whose occupancy
continues by virtue of the tolerance of the owner. They aver that the CA properly upheld
their entitlement to reimbursement pursuant to Articles 167849 and 54650 of the Civil
Code.51

In their Reply,52 petitioners argue against supposed improvements constructed by

respondents from 1999 to 2003 amounting to ₱995,995.94. Petitioners say this claim is
highly ridiculous and unbelievable.53

OUR RULING
Since respondents no longer appealed the Decision of the CA,54 they are considered
bound by its findings and conclusions. These include its affirmation of the earlier
findings of the MeTC and the RTC that respondents cannot be considered builders in
good faith:

Both the MeTC and the RTC have rejected the idea that petitioners are builders in good
faith. We agree. The resolution of the issues at bar calls for the application of the rules
on accession under the Civil Code. The term "builder in good faith" as used in reference
to Article 448 of the Civil Code, refers to one who, not being the owner of the land,
builds on that land believing himself to be its owner and unaware of the land, builds on
that land, believing himself to be its owner and unaware of the defect in h is title or
mode of acquisition. The essence of good faith lies in an honest belief in the validity of
one's right, ignorance of a superior claim, and absence of intention to overreach
another.

In the instant case, the Spouses Aguilar cannot be considered as builders in good faith
on account of their admission that the subject lot belonged to the Spouses Aquino when
they constructed the building. At the onset, petitioners were aware of a flaw in their title
and a limit to their right to possess the property. By law, one is considered in good faith
if he is not aware that there exists in his title or mode of acquisition any flaw which
invalidates it.55

Respondents are deemed to have acquiesced to the foregoing findings when they failed
to appeal the CA Decision. A party who does not appeal from a judgment can no longer
seek the modification or reversal thereof.56 Accordingly, the only issue left for this Court
to determine is that which is now raised by petitioners - whether the CA erred in
remanding this case to the court of origin for the determination of the necessary and
useful expenses to be reimbursed to respondents pursuant to Articles 1678 and 546 of
the Civil Code.

We resolve to PARTLY GRANT the Petition and modify the ruling of the CA.

Article 1678 is not applicable to this case.

In its Decision, the CA found that respondents were occupants of the property by mere
tolerance or generosity of petitioners and were bound by an implied promise to vacate
the premises upon demand.57

Based on this finding, the CA held that "the status of petitioners is analogous to that of a
lessee or a tenant whose term of lease has expired but whose occupancy continued by
tolerance of owner"58 pursuant to this Court's ruling in Calubayan v. Pascual,59 As a
result, the CA concluded that Articles 1678 and 546 of the Civil Code must be applied to
allow respondents to be reimbursed for their necessary and useful expenses.

We disagree. By its express provision, Article 1678 of the Civil Code applies only to
lessees who build useful improvements on the leased property. It does not apply to
those who possess property by mere tolerance of the owners, without a contractual
right.
A careful reading of the statement made by this Court in Calubayan would show that it
did not, as it could not, modify the express provision in Article 1678, but only noted an
"analogous" situation. According to the Court, the analogy between a tenant whose term
of lease has expired and a person who occupies the land of another at the latter's
tolerance lies in their implied obligation to vacate the premises upon demand of the
owner. The Court stated:

To begin with, it would appear that although the defendant is regarded by the plaintiffs
as a "squatter" his occupancy of the questioned premises had been permitted or
tolerated even before the Philippine Realty Corporation sold the lots to the plaintiffs.
Otherwise, the latter would not have found him on the premises. It may be true that
upon their acquisition of the parcels of land in 1957, plaintiffs notified and .requested
defendant to see them, but despite defendant's failure to heed these requests, plaintiffs
did not choose to bring an action in court but suffered the defendant instead to remain
in the premises for almost six years. Only on February 2, 1963, did the plaintiffs for the
first time notify the defendant that "they now need the two parcels of land in question"
and requested him to vacate the same. In allowing several years to pass without
requiring the occupant to vacate the premises nor filing an action to eject him, plaintiffs
have acquiesced to defendant's possession and use of the premises. It has been held that
a person who occupies the land of another at the latter's tolerance or permission,
without any contract between them, is necessarily bound by an implied promise that he
will vacate upon demand, failing which a summary action for ejectment is the proper
remedy against them. The status of defendant is analogous to that of a lessee or tenant
whose term of lease has expired but whose occupancy continued by tolerance of the
owner. In such a case, the unlawful deprivation or withholding of possession is to be
counted from the date of the demand to vacate.60(Emphasis in the original)

It is clear from the above that Calubayan is not sufficient basis to confer the status and
rights of a lessee on those who occupy property by mere tolerance of the owner.

In this case, there is absolutely no evidence of any lease contract between the parties. In
fact, respondents themselves never alleged that they were lessees of the lot or the
building in question. Quite the opposite, they insisted that they were co-owners of the
building and builders in good faith under Article 448 of the Civil Code. For that reason,
respondents argue that it was erroneous for the CA to consider them as lessees and to
determine their rights in accordance with Article 1678.

As builders in bad faith, respondents are

not entitled to reimbursement of useful expenses.

Furthermore, even if we were to subscribe to the CA' s theory that the situation of
respondents is "analogous to that of a lessee or tenant whose term of lease has expired
but whose occupancy continued by tolerance," the absence of good faith on their part
prevents them from invoking the provisions of Article 1678.

As discussed above, the MeTC, the RTC and the CA all rejected the claims of respondents
that they were builders in good faith. This pronouncement is considered conclusive
upon this Court, in view of respondents' failure to appeal from the CA decision. This rule
bars the application of Article 1678 as well as Articles 448 and 576 of the Civil Code and
all other provisions requiring good faith on the part of the builder.

We are aware that in some instances, this Court has allowed the application of Article
448 to a builder who has constructed improvements on the land of another with the
consent of the owner.61 In those cases, the Court found that the owners knew and
approved of the construction of improvements on the property. Hence, we ruled therein
that the structures were built in good faith, even though the builders knew that they
were constructing the improvement on land owned by another.

Although the factual circumstances in the instant case are somewhat similar, there is
one crucial factor that warrants a departure from the above-described rulings: the
presence of evidence that petitioners prohibited respondents from building their own
structure on a portion of the property. Based on the findings of fact of the MeTC and the
RTC, petitioners had already warned respondents not to build a structure on the
property as early as 1983. The MeTC explained: Likewise, in a letter dated 15 July 1983
sent by plaintiffs to the defendants marked as Exhibit "2" of defendants' Position Paper,
Teresa Aquino made known to the defendants not to construct on the premises as she
planned to sell the same when the value of the property shall increase (sic). Defendants
are undoubtedly builders in bad faith for despite the prohibition made upon them, they
continued their construction activities upon respondents' property.62

This ruling was affirmed by the R TC in its Decision dated 3 January 2006, which reads:

An examination of appellants' Exhibit "2" which is a letter dated July 15, 1983, sent to
appellant Josefina Aguilar, the sister of appellee Teresa Aquino, abundantly shows that
their occupancy of the premises in question is by tolerance of the appellees. Thus, the
letter expressly states that the appellants are advised not to put up a shop, as the
appellees had plan (sic) then of disposing the property (the land) in question for a
reasonable profit after a period of three or four years, thereby placing on notice them
(appellants) that their possession of the said property is temporary in nature and by
mere generosity of the appellees, they being sisters.

The letter likewise advised them to apply for a housing project so that by the time the
property in question is sold, they have a place to transfer to. All these undisputed
antecedents which can be considered as judicially admitted by the appellants being
their own evidence marked as Exhibit "2", coupled with the fact that since the time they
occupied the premises in 1983 up to the time when the complaint was filed, they were
not asked to pay any monthly rental for the use, enjoyment and occupancy of the said
property, ineluctably established the fact that their possession of the said property is by
mere tolerance of the appellees.63

xxxx

Their contention that pursuant to Article 453 of the Civil Code, they should be
considered builders in good faith even if they have acted in bad faith, since their act of
introducing improvements to one-half of the third floor of the three storey building was
with knowledge and without opposition on the part of the appellants, cannot be
sustained, principally on the ground that as stated earlier, their Exhibit "2" is very
limpid on the act that they were already forewarned as early as 1983 not to introduce
any improvements thereon as the property is slated to be sold as it was only bought for
investment purposes. The fact that the appellees did not thereafter remind them of this,
is of no moment, as this letter was not likewise withdrawn by a subsequent one or
modified by the appellees.64

We find no reason to depart from the conclusions of the trial courts. Respondents were
evidently prohibited by petitioners from building improvements on the land because
the latter had every intention of selling it. That this sale did not materialize is irrelevant.
What is crucial is that petitioners left respondents clear instructions not to build on the
land.

We also agree with the RTC's ruling that the lack of constant reminders from petitioners
about the "prohibition" expressed in the 1983 letter was immaterial. The prohibition is
considered extant and continuing since there is no evidence that this letter was ever
withdrawn or modified. Moreover, no evidence was presented to show that petitioners
were aware of what was happening: that respondents were constructing a portion of
the building with their own funds and for their exclusive use and ownership. Neither
were respondents able to present evidence that petitioners had agreed to share the
expenses with them, or that the former had given consent to the latter's contribution, if
any.

In view of the foregoing, this Court's previous rulings on Article 448 cannot be applied
to this case. Hence, we hold that petitioners, as the owners of the land, have the right to
appropriate what has been built on the property, without any obligation to pay
indemnity therefor;65 and that respondents have no right to a refund of any
improvement built therein,66 pursuant to Articles 449 and 450 of the Civil Code:

Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is
built, planted or sown without right of indemnity.

Art. 450. The owner of the land on which anything has been built, planted or sown in
bad faith may demand the demolition of the work, or that the planting or sowing be
removed, in order to replace things in their former condition at the expense of the
person who built, planted or sowed; or he may compel the builder or planter to pay the
price of the land, and the sower the proper rent.

Art. 451. In the cases of the two preceding articles, the landowner is entitled to damages
from the builder, planter or sower.

Respondents may recover the

necessary expenses incurred for the
preservation of the property but
without the right of retention.

Pursuant to Article 452 of the Civil Code, a builder in bad faith is entitled to recoup the
necessary expenses incurred for the preservation of the land.67 The CA correctly ruled
that respondents in this case are similarly entitled to this reimbursement. However,
being builders in bad faith, they do not have the right of retention over the premises.68
While the evidence before this Court does not establish the amount of necessary
expenses incurred by respondents during their stay in the property, we note that even
petitioners do not deny that such expenses were incurred. In fact, in a letter dated 15
July 1983, petitioners acknowledged that respondents had spent personal money for
the maintenance of the property. Petitioners even promised to reimburse them for
those expenses.69 In this light, we find it proper to order the remand of this case to the
court a quo for the purpose of determining the amount of necessary expenses to be
reimbursed to respondents.

With respect to the award of actual damages to petitioners, we find no reason to reverse
or modify the ruling of the CA.1âwphi1 This Court has consistently held that those who
occupy the land of another at the latter's tolerance or permission, even without any
contract between them, are necessarily bound by an implied promise that the occupants
would vacate the property upon demand.70 Failure to comply with this demand renders
the possession unlawful and actual damages may be awarded to the owner from the
date of the demand to vacate71 until the actual surrender of the property.

Accordingly, we affirm the CA's award of actual damages to petitioners in the amount of
₱7 ,000 per month from the date of demand (22 October 2003) until the subject
properties are vacated. This amount represents a reasonable compensation for the use
and occupation of respondents' property72 as determined by the RTC and the MeTC.

As to petitioners' prayer for attorney's fees, we find no cogent basis for the award.
WHEREFORE, the Petition is PARTLY GRANTED.

The Court of Appeals Decision dated 25 April 2008 is REVERSED insofar as it ordered:
(a) the reimbursement of the useful expenses incurred by respondents while in
possession of the property; and (b) the determination of the cost of these useful
improvements by the court of origin. The rest of the Decision of the Court of Appeals is
hereby AFFIRMED.

Accordingly, this case is REMANDED to the court of origin for the determination of the
necessary expenses of preservation of the land, if any, incurred by respondent spouses
Eusebio and Josefina Aguilar while they were in possession of the property, which
expenses shall be reimbursed to them by petitioner spouses Crispin and Teresa Aquino.

On the other hand, respondents and all persons claiming rights under them are ordered,
upon finality of this Decision without awaiting the resolution of the matter of necessary
expenses by the trial court, to immediately VACATE the subject property and DELIVER
its peaceful possession to petitioners. Respondents are likewise ordered to PAY
petitioners ₱7 ,000 as monthly rental plus interest thereon at the rate of 6% per annum,
to be computed from 22 October 2003 until the finality of this Decision.

No pronouncement as to costs.

SO ORDERED.

MARIA LOURDES P.A. SERENO

Chief Justice, Chairperson
WE CONCUR:

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

LUCAS P. BERSAMIN JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in
the above Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court's Division.

MARIA LOURDES P.A. SERENO

Chief Justice

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 146259 September 13, 2007

FLORENTINO, TROADIO and PEDRO, all surnamed OCHOA, petitioners,

vs.
MAURO APETA and APOLONIA ALMAZAN, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

Challenged in this Petition for Review on Certiorari under Rule 45 of the 1997 Rules of
Civil Procedure, as amended, are the Decision1 dated September 8, 2000 and
Resolution2 dated November 20, 2000 of the Court of Appeals in CA G.R. CV No. 56109.

The facts are:

Since 1910, the above-named petitioners and their predecessors-in-interest have been
occupying Lot No. 1580 consisting of 886 square meters situated in Malaban, Biñan,
Laguna. The lot is covered by Transfer Certificate of Title (TCT) No. T-40624 of the
Registry of Deeds of that province. They built their houses and apartment building
thereon.
Sometime in May 10, 1982, Mauro Apeta and Apolonia Almazan, respondents, found
that they are the true owners of Lot No. 1580 being occupied by petitioners.

On January 22, 1988, respondents filed with the Regional Trial Court (RTC), Branch 24,
Biñan, Laguna a complaint for recovery of possession and damages against petitioners,
docketed as Civil Case No. B-2777. Respondents alleged in the main that they are the
lawful owners of Lot No. 1580 covered by Certificate of Title No. RT-599 (10731) issued
by the Registry of Deeds of Laguna.

In their answer to the complaint, petitioners specifically denied the allegations in the
complaint, contending that they are the owners of Lot No. 1580 as shown by TCT No. T-
40624 issued by the Registry of Deeds of Laguna.

During the proceedings before the RTC, upon agreement of the parties, the trial judge
commissioned Engr. Romulo Unciano of the Bureau of Lands of Region IV to conduct a
resurvey of the disputed property. The result of the resurvey (approved by the Bureau
of Lands) shows that Lot No. 1580, occupied by petitioners, was registered in the name
of Margarita Almada, respondents’ predecessor-in-interest; and that the lot covered by
TCT No. T-40624 is not Lot No. 1580, but Lot No. 1581 registered in the name of
Servillano Ochoa, petitioners’ predecessor-in-interest. This lot has been occupied by
Isidro Jasmin.

On March 24, 1995, the trial court rendered a Decision in favor of respondents, thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiffs and against the defendants as follows:

1. Declaring plaintiffs as the true and lawful owners of Lot 1580 of the Biñan
Estate Subdivision covered by Transfer Certificate of Title No. RT-599 (10731)
and declaring the defendants without right whatsoever to continue in possession
thereof.

2. Ordering the defendants and all those acting in their behalf to deliver
peacefully the physical possession of Lot 1580 to the plaintiffs and to remove
their houses and apartment building thereon.

3. Ordering the defendants to pay, jointly and severally to plaintiffs the amount
of P30,000 as and for attorney’s fees and litigation expenses.

SO ORDERED.3

On appeal, the Court of Appeals, in its Decision dated September 8, 2000, affirmed the
judgment of the RTC.

Petitioners filed a motion for reconsideration, but it was denied by the appellate court
in its Resolution4 dated November 20, 2000.

Hence, the instant petition.

Petitioners contend that Lot No. 1580 belongs to them and that respondents’ action is
barred by prescription.

Petitioners’ contention lacks merit.

On petitioners’ claim that they are the owners of Lot No. 1580, it is a well-established
principle that in an appeal viaa petition for review on certiorari, only questions of law
may be raised. Here, the issue posed by petitioners requires us to weigh anew the
evidence submitted by the parties already passed upon by the Court of Appeals. It is
basic that this Court is not a trier of facts. Thus, it may not review the findings of the
Court of Appeals except, among others: (a) when its factual findings and those of the
trial court are contradictory; (b) when its inference is manifestly mistaken or absurd;
(c) when its judgment is premised on its misapprehension of the facts; and (d) when it
failed to resolve relevant facts which, if properly considered, would justify a
modification or reversal of the decision of the appellate court.5 The issue raised by
petitioners that they are the actual owners of Lot No. 1580 is factual in nature and
requires a review of the pieces of evidence presented by the parties. Thus, we can no
longer pass upon and evaluate the lower courts’ finding that based on the evidence
presented before them, specifically the result of the resurvey conducted by Engr.
Romulo Unciano, respondents are "the true and lawful owners of Lot 1580."

Anent petitioners’ second contention that respondents’ action has been barred by
prescription, suffice it to state that no title to registered land in derogation to that of the
registered owner shall be acquired by prescription or adverse possession.6 Neither can
prescription be allowed against the hereditary successors of the registered owner,
because they step into the shoes of the decedent and are merely the continuation of the
personality of their predecessor-in-interest.7

Verily, the Court of Appeals did not err when it ruled that respondents are the true and
lawful owners of Lot No. 1580. Hence, they "should now be placed in possession
thereof."

Parenthetically, considering that petitioners and their predecessors-in-interest have

built their houses and apartment building on Lot No. 1580, should respondents be
allowed to take possession of those improvements? In order to settle this matter, we
should determine whether petitioners were builders in good faith.

Good faith is an intangible and abstract quality with no technical meaning or statutory
definition, and it encompasses, among other things, an honest belief, the absence of
malice and the absence of design to defraud or to seek an unconscionable advantage. It
implies honesty of intention, and freedom from knowledge of circumstances which
ought to put the holder upon inquiry.8 The essence of good faith lies in an honest belief
in the validity of one’s right, ignorance of a superior claim and absence of intention to
overreach another.9 Applied to possession, one is considered in good faith if he is not
aware that there exists in his title or mode of acquisition any flaw which invalidates it.10

Using the above parameters, we are convinced that petitioners and their predecessors-
in-interest were in good faith when they built their houses and apartment building on
Lot No. 1580 since they were convinced it was covered by their TCT No. T-40624.
The following provisions of the Civil Code are relevant:

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

Article 546. Necessary expenses shall be refunded to every possessor; but only
the possessor in good faith may retain the thing until he has been reimbursed
therefor.

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

Article 548. Expense for pure luxury or mere pleasure shall not be refunded to
the possessor in good faith; but he may remove the ornaments with which he has
embellished the principal thing if it suffers no injury thereby, and if his
successors in the possession do not prefer to refund the amount expended.

Under the foregoing provisions, the landowner can make a choice - either by
appropriating the building by paying the proper indemnity or obliging the builder to
pay the price of the land. The choice belongs to the owner of the land, a rule that accords
with the principle of accession that the accessory follows the principal and not the other
way around. He must choose only one.

Following the above provisions, respondents, as owners of Lot No. 1580, may choose
between appropriating as their own the houses and apartment building constructed
thereon by petitioners and their predecessors-in-interest by paying the proper
indemnity or value; or obliging petitioners to pay the price of Lot No. 1580 which is not
more than that of the improvements.

WHEREFORE, we DENY the petition. The assailed Decision and Resolution of the Court
of Appeals in CA G.R. CV No. 56109 are AFFIRMED with MODIFICATION in the sense
that respondents have the option to pay for the houses and apartment building
constructed by petitioners and their predecessors-in-interest on Lot No. 1580; or to
oblige petitioners to pay the price of the lot in an amount not more than the value of the
said improvements.

SO ORDERED.

Puno, C.J., Chairperson, Corona, Azcuna, Garcia, JJ., concur.

 THIRD DIVISION

RODOLFO V. ROSALES, G.R. No. 157044

(represented by his heirs, Rodolfo,
Jr., Romeo Allan, Lillian Rhodora, Present:
Roy Victor, Roger Lyle and
Alexander Nicolai, all surnamed PANGANIBAN, J., Chairman,
Rosales) and LILY ROSQUETA- SANDOVAL-GUTIERREZ,
ROSALES, CORONA,
Petitioners, CARPIO MORALES, and
GARCIA, JJ.
- versus -

MIGUEL CASTELLTORT, JUDITH

CASTELLTORT, and LINA LOPEZ-
VILLEGAS, assisted by her
Attorney-in-Fact, Rene Villegas,
Respondents.

Promulgated:

October 5, 2005
xx - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - xx

DECISION

CARPIO MORALES, J.:

The present petition for review on certiorari assails the October 2, 2002
Decision[1] and February 6, 2003 Resolution[2] of the Court of Appeals (CA) in CA G.R. CV
No. 64046 and seeks to reinstate the April 21, 1999 Decision[3] 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. 36856[4] 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
letter[9] 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

Counterclaim[11] that they were builders in good faith.

Lina, represented by her son-attorney-in-fact Villegas, soon filed a Motion for

Intervention[12] before the RTC which was granted by Order[13] 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 Appearance[18] 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 REMANDED to 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 permit pending 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
xx

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 x[20] (Emphasis and underscoring supplied)

Petitioners Motion for Reconsideration[21] 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 CRUZ[22]

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 x[24]

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 Cruz[29] 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-
18550[30]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?
A: Yes.

Q: And you gave your consent?

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

xxx
Q: Was there any remarkable difference between lot 16 and 17 at the time
that this particular lot was sold to Miguel Castelltort and Elizabeth
Cruz?

xxx

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 they were facing the same road. They are practically
the same.
 Q: But at the time or immediately before Mr. Castelltort started the
construction of the house, was there any remarkable distinction
between these two properties?
A: None.[32] (Emphasis and underscoring supplied)

The confusion in the identification of Lot 16 was eventually traced to the error
committed by geodetic engineer 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.

The engineer so testified:

Q: Now, aside from inspecting personally the site, what else did your men
or assistants do?
A: After computing the subdivision lots, they went back to the field to plant
those subdivision corners with concrete monuments.

Q: Which is (sic) also called as mohons?

A: Yes, sir.

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: Maybe after a year, sir.

Q: And you met him again because he had a problem regarding the
property of one Engr. Rosales?
A: Yes, sir.

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

Q: And what did you see there?

A: A house being constructed then I rechecked the location of the house
and it turned out to be in Lot 17.

xxx
Q: Considering that you found out that a mistake was actually made by
your assistants Dennis Orencio, Mario Carpio and Sovejano when you
allowed them to proceed on their own to make this computation, did
you confront these men of yours afterwards?
A: Yes, sir.

Q: In what manner?
A: I actually reprimanded them verbally and also I dismissed Mario Carpio
from my office.

xxx
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: I myself rechecked it and found out that they committed an error.

xxx

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,[44] like 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.

CONCHITA CARPIO MORALES

Associate Justice

THIRD DIVISION

[G.R. No. 108894. February 10, 1997]

TECNOGAS PHILIPPINES MANUFACTURING CORPORATION, petitioner, vs. COURT

OF APPEALS (FORMER SPECIAL SEVENTEENTH DIVISION) and EDUARDO
UY, respondents.

DECISION
PANGANIBAN, J.:

The parties in this case are owners of adjoining lots in Paraaque, Metro Manila. It
was discovered in a survey that a portion of a building of petitioner, which was
presumably constructed by its predecessor-in-interest, encroached on a portion of the
lot owned by private respondent. What are the rights and obligations of the parties? Is
petitioner considered a builder in bad faith because, as held by respondent Court, he is
presumed to know the metes and bounds of his property as described in his certificate
of title? Does petitioner succeed into the good faith or bad faith of his predecessor-in-
interest which presumably constructed the building?
These are the questions raised in the petition for review of the Decision [1] dated
August 28, 1992, in CA-G.R. CV No. 28293 of respondent Court[2] where the disposition
reads:[3]

WHEREFORE, premises considered, the Decision of the Regional Trial Court is hereby
reversed and set aside and another one entered -

1. Dismissing the complaint for lack of cause of action;

2. Ordering Tecnogas to pay the sum of P2,000.00 per month as reasonable rental from
October 4, 1979 until appellee vacates the land;

3. To remove the structures and surrounding walls on the encroached area;

4. Ordering appellee to pay the value of the land occupied by the two-storey building;

5. Ordering appellee to pay the sum of P20,000.00 for and as attorneys fees;

6. Costs against appellee.

Acting on the motions for reconsideration of both petitioner and private

respondent, respondent Court ordered the deletion of paragraph 4 of the dispositive
portion in an Amended Decision dated February 9, 1993, as follows:[4]

WHEREFORE, premises considered, our decision of August 28, 1992 is hereby modified
deleting paragraph 4 of the dispositive portion of our decision which reads:

4. Ordering appellee to pay the value of the land occupied by the two-storey building.

The motion for reconsideration of appellee is hereby DENIED for lack of merit.

The foregoing Amended Decision is also challenged in the instant petition.

The Facts

The facts are not disputed. Respondent Court merely reproduced the factual
findings of the trial court, as follows:[5]

That plaintiff (herein petitioner) which is a corporation duly organized and existing
under and by virtue of Philippine laws is the registered owner of a parcel of land
situated in Barrio San Dionisio, Paraaque, Metro Manila known as Lot 4331-A (should
be 4531-A) of Lot 4531 of the Cadastral Survey of Paraaque, Metro Manila, covered by
Transfer Certificate of Title No. 409316 of the Registry of Deeds of the Province of Rizal;
that said land was purchased by plaintiff from Pariz Industries, Inc. in 1970, together
with all the buildings and improvements including the wall existing thereon; that the
defendant (herein private respondent) is the registered owner of a parcel of land known
as Lot No. 4531-B of Lot 4531 of the Cadastral Survey of Paraaque, LRC (GLRO) Rec. No.
19645 covered by Transfer Certificate of Title No. 279838, of the Registry of Deeds for
the Province of Rizal; that said land which adjoins plaintiffs land was purchased by
defendant from a certain Enrile Antonio also in 1970; that in 1971, defendant purchased
another lot also adjoining plaintiffs land from a certain Miguel Rodriguez and the same
was registered in defendants name under Transfer Certificate of Title No. 31390, of the
Registry of Deeds for the Province of Rizal; that portions of the buildings and wall
bought by plaintiff together with the land from Pariz Industries are occupying a portion
of defendants adjoining land; that upon learning of the encroachment or occupation by
its buildings and wall of a portion of defendants land, plaintiff offered to buy from
defendant that particular portion of defendants land occupied by portions of its
buildings and wall with an area of 770 square meters, more or less, but defendant,
however, refused the offer. In 1973, the parties entered into a private agreement before
a certain Col. Rosales in Malacaang, wherein plaintiff agreed to demolish the wall at the
back portion of its land thus giving to defendant possession of a portion of his land
previously enclosed by plaintiffs wall; that defendant later filed a complaint before the
office of Municipal Engineer of Paraaque, Metro Manila as well as before the Office of the
Provincial Fiscal of Rizal against plaintiff in connection with the encroachment or
occupation by plaintiffs buildings and walls of a portion of its land but said complaint
did not prosper; that defendant dug or caused to be dug a canal along plaintiffs wall, a
portion of which collapsed in June, 1980, and led to the filing by plaintiff of the
supplemental complaint in the above-entitled case and a separate criminal complaint
for malicious mischief against defendant and his wife which ultimately resulted into the
conviction in court of defendants wife for the crime of malicious mischief; that while
trial of the case was in progress, plaintiff filed in Court a formal proposal for settlement
of the case but said proposal, however, was ignored by defendant.

After trial on the merits, the Regional Trial Court[6] of Pasay City, Branch 117, in
Civil Case No. PQ-7631-P, rendered a decision dated December 4, 1989 in favor of
petitioner who was the plaintiff therein. The dispositive portion reads:[7]

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant

and ordering the latter to sell to plaintiff that portion of land owned by him and
occupied by portions of plaintiffs buildings and wall at the price of P2,000.00 per square
meter and to pay the former:

1. The sum of P44,000.00 to compensate for the losses in materials and properties
incurred by plaintiff through thievery as a result of the destruction of its wall;

2. The sum of P7,500.00 as and by way of attorneys fees; and

3. The costs of this suit.

Appeal was duly interposed with respondent Court, which as previously stated,
reversed and set aside the decision of the Regional Trial Court and rendered the
assailed Decision and Amended Decision. Hence, this recourse under Rule 45 of the
Rules of Court.

The Issues

The petition raises the following issues:[8]

(A)

Whether or not the respondent Court of Appeals erred in holding the petitioner a
builder in bad faith because it is presumed to know the metes and bounds of his
property.

(B)

Whether or not the respondent Court of Appeals erred when it used the amicable
settlement between the petitioner and the private respondent, where both parties
agreed to the demolition of the rear portion of the fence, as estoppel amounting to
recognition by petitioner of respondents right over his property including the
 portions of the land where the other structures and the building stand, which were
not included in the settlement.

(C)

Whether or not the respondent Court of Appeals erred in ordering the removal of the
structures and surrounding walls on the encroached area and in withdrawing its earlier
ruling in its August 28, 1992 decision for the petitioner to pay for the value of the land
occupied by the building, only because the private respondent has manifested its choice
to demolish it despite the absence of compulsory sale where the builder fails to pay for
the land, and which choice private respondent deliberately deleted from its September
1, 1980 answer to the supple-mental complaint in the Regional Trial Court.

In its Memorandum, petitioner poses the following issues:

A

The time when to determine the good faith of the builder under Article 448 of the New
Civil Code, is reckoned during the period when it was actually being built; and in a case
where no evidence was presented nor introduced as to the good faith or bad faith of the
builder at that time, as in this case, he must be presumed to be a builder in good faith,
since bad faith cannot be presumed.[9]

B.

In a specific boundary overlap situation which involves a builder in good faith, as in this
case, it is now well settled that the lot owner, who builds on the adjacent lot
is not charged with constructive notice of the technical metes and bounds contained in
their torrens titles to determine the exact and precise extent of his boundary
perimeter.[10]

C.

The respondent courts citation of the twin cases of Tuason & Co. v.
Lumanlan and Tuason & Co. v. Macalindong is not the judicial authority for a boundary
dispute situation between adjacent torrens titled lot owners, as the facts of the present
case do not fall within nor square with the involved principle of a dissimilar case.[11]

D.

Quite contrary to respondent Uys reasoning, petitioner Tecnogas continues to be a

builder in good faith, even if it subsequently built/repaired the walls/other permanent
structures thereon while the case a quowas pending and even while respondent sent the
petitioner many letters/filed cases thereon.[12]

D. (E.)

The amicable settlement between the parties should be interpreted as a contract and
enforced only in accordance with its explicit terms, and not over and beyond that
agreed upon; because the courts do nothave the power to create a contract nor expand
its scope.[13]

E. (F.)

As a general rule, although the landowner has the option to choose between:
(1) buying the building built in good faith, or (2) selling the portion of his land on which
stands the building under Article 448 of the Civil Code; the first option is not absolute,
because an exception thereto, once it would be impractical for the landowner to choose
to exercise the first alternative, i.e. buy that portion of the house standing on his land,
for the whole building might be rendered useless. The workable solution is for him to
select the second alternative, namely, to sell to the builder that part of his land on which
was constructed a portion of the house.[14]

Private respondent, on the other hand, argues that the petition is suffering from the
following flaws:[15]

1. It did not give the exact citations of cases decided by the Honorable Supreme
Court that allegedly contradicts the ruling of the Hon. Court of Appeals based on
the doctrine laid down in Tuason vs. Lumanlan case citing also Tuason vs.
Macalindong case (Supra).

2. Assuming that the doctrine in the alleged Co Tao vs. Chico case is contradictory to
the doctrine in Tuason vs. Lumanlan and Tuason vs. Macalindong, the two cases
being more current, the same should prevail.

Further, private respondent contends that the following unmistakably point to the bad
faith of petitioner: (1) private respondents purchase of the two lots, was ahead of the
purchase by petitioner of the building and lot from Pariz Industries; (2) the declaration
of the General Manager of Tecnogas that the sale between petitioner and Pariz
Industries was not registered because of some problems with China Banking
Corporation; and (3) the Deed of Sale in favor of petitioner was registered in its name
only in the month of May 1973.[16]

The Courts Ruling

The petition should be granted.

Good Faith or Bad Faith

Respondent Court, citing the cases of J. M. Tuason & Co., Inc. vs. Vda. de
Lumanlan[17] and J. M. Tuason & Co., Inc. vs. Macalindong,[18] ruled that petitioner cannot
be considered in good faith because as a land owner, it is presumed to know the metes
and bounds of his own property, specially if the same are reflected in a properly issued
certificate of title. One who erroneously builds on the adjoining lot should be considered
a builder in (b)ad (f)aith, there being presumptive knowledge of the Torrens title, the
area, and the extent of the boundaries.[19]
We disagree with respondent Court. The two cases it relied upon do not support its
main pronouncement that a registered owner of land has presumptive knowledge of the
metes and bounds of its own land, and is therefore in bad faith if he mistakenly builds
on an adjoining land. Aside from the fact that those cases had factual moorings radically
different from those obtaining here, there is nothing in those cases which would
suggest, however remotely, that bad faith is imputable to a registered owner of land
when a part of his building encroaches upon a neighbors land, simply because he is
supposedly presumed to know the boundaries of his land as described in his certificate
of title. No such doctrinal statement could have been made in those cases because such
issue was not before the Supreme Court. Quite the contrary, we have rejected such a
theory in Co Tao vs. Chico,[20] where we held that unless one is versed in the science of
surveying, no one can determine the precise extent or location of his property by merely
examining his paper title.
There is no question that when petitioner purchased the land from Pariz Industries,
the buildings and other structures were already in existence. The record is not clear as
to who actually built those structures, but it may well be assumed that petitioners
predecessor-in-interest, Pariz Industries, did so. Article 527 of the Civil Code presumes
good faith, and since no proof exists to show that the encroachment over a narrow,
needle-shaped portion of private respondents land was done in bad faith by the builder
of the encroaching structures, the latter should be presumed to have built them in good
faith.[21] It is presumed that possession continues to be enjoyed in the same character in
which it was acquired, until the contrary is proved.[22] Good faith consists in the belief of
the builder that the land he is building on is his, and his ignorance of any defect or flaw
in his title.[23] Hence, such good faith, by law, passed on to Parizs successor, petitioner in
this case. Further, (w)here one derives title to property from another, the act,
declaration, or omission of the latter, while holding the title, in relation to the property,
is evidence against the former.[24] And possession acquired in good faith does not lose
this character except in case and from the moment facts exist which show that the
possessor is not unaware that he possesses the thing improperly or wrongfully.[25] The
good faith ceases from the moment defects in the title are made known to the possessor,
by extraneous evidence or by suit for recovery of the property by the true owner.[26]
Recall that the encroachment in the present case was caused by a very slight
deviation of the erected wall (as fence) which was supposed to run in a straight line
from point 9 to point 1 of petitioners lot. It was an error which, in the context of the
attendant facts, was consistent with good faith. Consequently, the builder, if sued by the
aggrieved landowner for recovery of possession, could have invoked the provisions of
Art. 448 of the Civil Code, which reads:

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

The obvious benefit to the builder under this article is that, instead of being outrightly
ejected from the land, he can compel the landowner to make a choice between the two
options: (1) to appropriate the building by paying the indemnity required by law, or (2)
sell the land to the builder. The landowner cannot refuse to exercise either option and
compel instead the owner of the building to remove it from the land.[27]
The question, however, is whether the same benefit can be invoked by petitioner
who, as earlier stated, is not the builder of the offending structures but possesses them
as buyer.
We answer such question in the affirmative.
In the first place, there is no sufficient showing that petitioner was aware of the
encroachment at the time it acquired the property from Pariz Industries. We agree with
the trial court that various factors in evidence adequately show petitioners lack of
awareness thereof. In any case, contrary proof has not overthrown the presumption of
good faith under Article 527 of the Civil Code, as already stated, taken together with the
disputable presumptions of the law on evidence. These presumptions state, under
Section 3 (a) of Rule 131 of the Rules of Court, that the person is innocent of a crime or
wrong; and under Section 3 (ff) of Rule 131, that the law has been obeyed. In fact,
private respondent Eduardo Uy himself was unaware of such intrusion into his property
until after 1971 when he hired a surveyor, following his purchase of another adjoining
lot, to survey all his newly acquired lots. Upon being apprised of the encroachment,
petitioner immediately offered to buy the area occupied by its building -- a species of
conduct consistent with good faith.
In the second place, upon delivery of the property by Pariz Industries, as seller, to
the petitioner, as buyer, the latter acquired ownership of the property. Consequently
and as earlier discussed, petitioner is deemed to have stepped into the shoes of the
seller in regard to all rights of ownership over the immovable sold, including the right to
compel the private respondent to exercise either of the two options provided under
Article 448 of the Civil Code.

Estoppel

Respondent Court ruled that the amicable settlement entered into between
petitioner and private respondent estops the former from questioning the private
respondents right over the disputed property. It held that by undertaking to demolish
the fence under said settlement, petitioner recognized private respondents right over
the property, and cannot later on compel private respondent to sell to it the land since
private respondent is under no obligation to sell.[28]
We do not agree. Petitioner cannot be held in estoppel for entering into the
amicable settlement, the pertinent portions of which read:[29]

That the parties hereto have agreed that the rear portion of the fence that separates the
property of the complainant and respondent shall be demolished up to the back of the
building housing the machineries which demolision (sic) shall be undertaken by the
complainant at anytime.

That the fence which serve(s) as a wall housing the electroplating machineries shall not
be demolished in the mean time which portion shall be subject to negotiation by herein
parties.

From the foregoing, it is clear that petitioner agreed only to the demolition of a
portion of the wall separating the adjoining properties of the parties -- i.e. up to the back
of the building housing the machineries. But that portion of the fence which served as
the wall housing the electroplating machineries was not to be demolished. Rather, it
was to be subject to negotiation by herein parties. The settlement may have recognized
the ownership of private respondent but such admission cannot be equated with bad
faith. Petitioner was only trying to avoid a litigation, one reason for entering into an
amicable settlement.
As was ruled in Osmea vs. Commission on Audit,[30]

A compromise is a bilateral act or transaction that is expressly acknowledged as a

juridical agreement by the Civil Code and is therein dealt with in some detail. `A
compromise, declares Article 2208 of said Code, `is a contract whereby the parties, by
making reciprocal concessions, avoid a litigation or put an end to one already
commenced.

xxx xxx xxx

The Civil Code not only defines and authorizes compromises, it in fact encourages them
in civil actions. Art. 2029 states that `The Court shall endeavor to persuade the litigants
in a civil case to agree upon some fair compromise. x x x.

In the context of the established facts, we hold that petitioner did not lose its rights
under Article 448 of the Civil Code on the basis merely of the fact that some years after
acquiring the property in good faith, it learned about -- and aptly recognized -- the right
of private respondent to a portion of the land occupied by its building. The supervening
awareness of the encroachment by petitioner does not militate against its right to claim
the status of a builder in good faith. In fact, a judicious reading of said Article 448 will
readily show that the landowners exercise of his option can only take place after the
builder shall have come to know of the intrusion -- in short, when both parties shall
have become aware of it. Only then will the occasion for exercising the option arise, for
it is only then that both parties will have been aware that a problem exists in regard to
their property rights.

Options of Private Respondent

What then is the applicable provision in this case which private respondent may
invoke as his remedy: Article 448 or Article 450[31] of the Civil Code?
In view of the good faith of both petitioner and private respondent, their rights and
obligations are to be governed by Art. 448. The essential fairness of this codal provision
has been pointed out by Mme. Justice Ameurfina Melencio-Herrera, citing Manresa and
applicable precedents, in the case of Depra vs. Dumlao,[32] to wit:

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

The private respondents insistence on the removal of the encroaching structures as

the proper remedy, which respondent Court sustained in its assailed Decisions, is thus
legally flawed. This is not one of the remedies bestowed upon him by law. It would be
available only if and when he chooses to compel the petitioner to buy the land at a
reasonable price but the latter fails to pay such price.[33] This has not taken place. Hence,
his options are limited to: (1) appropriating the encroaching portion of petitioners
building after payment of proper indemnity, or (2) obliging the latter to buy the lot
occupied by the structure. He cannot exercise a remedy of his own liking.
Neither is petitioners prayer that private respondent be ordered to sell the
land[34] the proper remedy. While that was dubbed as the more workable solution in
Grana and Torralba vs. The Court of Appeals, et al., [35] it was not the relief granted in
that case as the landowners were directed to exercise within 30 days from this decision
their option to either buy the portion of the petitioners house on their land or sell to
said petitioners the portion of their land on which it stands. [36] Moreover, in Grana and
Torralba, the area involved was only 87 square meters while this case involves 520
square meters[37]. In line with the case of Depra vs. Dumlao,[38] this case will have to be
remanded to the trial court for further proceedings to fully implement the mandate of
Art. 448. It is a rule of procedure for the Supreme Court to strive to settle the entire
controversy in a single proceeding leaving no root or branch to bear the seeds of future
litigation.[39]
Petitioner, however, must also pay the rent for the property occupied by its building
as prescribed by respondent Court from October 4, 1979, but only up to the date private
respondent serves notice of its option upon petitioner and the trial court; that is, if such
option is for private respondent to appropriate the encroaching structure. In such event,
petitioner would have a right of retention which negates the obligation to pay
rent.[40] The rent should however continue if the option chosen is compulsory sale, but
only up to the actual transfer of ownership.
The award of attorneys fees by respondent Court against petitioner is unwarranted
since the action appears to have been filed in good faith. Besides, there should be no
penalty on the right to litigate.[41]
 WHEREFORE, premises considered, the petition is hereby GRANTED and the
assailed Decision and the Amended Decision are REVERSED and SET ASIDE. In
accordance with the case of Depra vs. Dumlao,[42] this case is REMANDED to the
Regional Trial Court of Pasay City, Branch 117, for further proceedings consistent with
Articles 448 and 546 [43] of the Civil Code, as follows:

The trial court shall determine:

a) the present fair price of private respondents 520 square-meter area of land;

b) the increase in value (plus value) which the said area of 520 square meters
may have acquired by reason of the existence of the portion of the
building on the area;

c) the fair market value of the encroaching portion of the building; and

d) whether the value of said area of land is considerably more than the fair
market value of the portion of the building thereon.

2. After said amounts shall have been determined by competent evidence, the regional
trial court shall render judgment as follows:

a) The private respondent shall be granted a period of fifteen (15) days within
which to exercise his option under the law (Article 448, Civil
Code), whether to appropriate the portion of the building as his own by
paying to petitioner its fair market value, or to oblige petitioner to pay the
price of said area. The amounts to be respectively paid by petitioner and
private respondent, in accordance with the option thus exercised by written
notice of the other party and to the court, shall be paid by the obligor within
fifteen (15) days from such notice of the option by tendering the amount to
the trial court in favor of the party entitled to receive it;
b) If private respondent exercises the option to oblige petitioner to pay the
price of the land but the latter rejects such purchase because, as found by the
trial court, the value of the land is considerably more than that of the portion
of the building, petitioner shall give written notice of such rejection to
private respondent and to the trial court within fifteen (15) days from notice
of private respondents option to sell the land. In that event, the parties shall
be given a period of fifteen (15) days from such notice of rejection within
which to agree upon the terms of the lease, and give the trial court formal
written notice of the agreement and its provisos. If no agreement is reached
by the parties, the trial court, within fifteen (15) days from and after the
termination of the said period fixed for negotiation, shall then fix the terms
of the lease provided that the monthly rental to be fixed by the Court shall
not be less than two thousand pesos (P2,000.00) per month, payable within
the first five (5) days of each calendar month. The period for the forced lease
shall not be more than two (2) years, counted from the finality of the
judgment, considering the long period of time since 1970 that petitioner has
occupied the subject area. The rental thus fixed shall be increased by ten
percent (10%) for the second year of the forced lease. Petitioner shall not
 make any further constructions or improvements on the building. Upon
expiration of the two-year period, or upon default by petitioner in the
payment of rentals for two (2) consecutive months, private respondent shall
be entitled to terminate the forced lease, to recover his land, and to have the
portion of the building removed by petitioner or at latters expense. The
rentals herein provided shall be tendered by petitioner to the trial court for
payment to private respondent, and such tender shall constitute evidence of
whether or not compliance was made within the period fixed by the said
court.
c) In any event, petitioner shall pay private respondent an amount computed at
two thousand pesos (P2,000.00) per month as reasonable compensation for
the occupancy of private respondents land for the period counted from
October 4, 1979, up to the date private respondent serves notice of its option
to appropriate the encroaching structures, otherwise up to the actual
transfer of ownership to petitioner or, in case a forced lease has to be
imposed, up to the commencement date of the forced lease referred to in the
preceding paragraph;
d) The periods to be fixed by the trial court in its decision shall be non-
extendible, and upon failure of the party obliged to tender to the trial court
the amount due to the obligee, the party entitled to such payment shall be
entitled to an order of execution for the enforcement of payment of the
amount due and for compliance with such other acts as may be required by
the prestation due the obligee.
No costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

THIRD DIVISION

[G.R. No. 104828. January 16, 1997]

SPOUSES RAFAEL BENITEZ AND AVELINA BENITEZ, petitioners, vs. COURT OF

APPEALS, SPOUSES RENATO MACAPAGAL and ELIZABETH
MACAPAGAL, respondents.

DECISION
PANGANIBAN, J.:
 May possession of a lot encroached upon by a part of another's house be recovered
in an action for ejectment?
This is the main question raised by the petition for review on certiorari assailing the
Resolution[1] of the Court of Appeals, Sixth Division,[2] dated March 24, 1992, in CA-G.R.
SP No. 26853 denying due course to petitioner's appeal and affirming the decision of the
Regional Trial Court of Pasig in Civil Case No. 61004, which in turn affirmed the decision
of the Metropolitan Trial Court of San Juan, Metro Manila, Branch 58.

The Facts

On January 22, 1986, petitioners Rafael and Avelina Benitez purchased a 303-
square-meter parcel of land with improvement from the Cavite Development Bank,
covered by Transfer Certificate of Title No. 41961 (now, TCT No. 55864).
Subsequently, private respondents Renato and Elizabeth Macapagal bought a 361-
square-meter lot covered by TCT No. 40155. On September 18, 1986, they filed Civil
Case No. 53835 with the Regional Trial Court of Pasig, Branch 157 against petitioners
for the recovery of possession of an encroached portion of the lot they purchased. The
parties were able to reach a compromise in which private respondents sold the
encroached portion to petitioners at the acquisition cost of One Thousand Pesos
(P1,000.00) per square meter.
On July 17, 1989, private respondents purchased still another property, a 285.70
square-meter-lot covered by TCT No. 3249-R, adjacent to that of petitioners. After a
relocation survey was conducted, private respondents discovered that some 46.50
square meters of their property was occupied by petitioners' house. Despite verbal and
written demands, petitioners refused to vacate. A last notice to vacate was sent to
petitioners on October 26, 1989.
On January 18, 1990, private respondents filed with the Metropolitan Trial Court of
San Juan, Branch 58, Civil Case No. 61004 for ejectment against petitioners. The MeTC of
San Juan decided in favor of the former, with the following disposition:[3]

"WHEREFORE, in view of all the foregoing, judgment is hereby rendered for the
plaintiffs and against the defendants ordering them and all persons claiming rights
under them to vacate and surrender possession of the subject premises to the plaintiffs
as well as to pay the following:

1. The amount of P930.00 a month starting July 17, 1989 until they finally vacate the
subject premises;

2. The amount of P5,000.00 for and as attorney's fees; and

3. Cost of suit."

On appeal, the Regional Trial Court of Pasig, Branch 167, affirmed said
decision.[4] The RTC said:[5]
"The controversy in this case is not an encroachment or overlapping of two (2) adjacent
properties owned by the parties. It is a case where a part of the house of the defendants
is constructed on a portion of the property of the plaintiffs. So that as new owner of the
real property, who has a right to the full enjoyment and possession of the entire parcel
covered by Transfer Certificate of Title No. 41961, plaintiffs have the right to demand
that defendants remove the portion of the house standing on plaintiff's realty. . . ."

The dispositive portion thereof reads:[6]

"WHEREFORE, finding no reversible error in the decision appealed from, it being more
consistent with the facts and the law applicable, the same is hereby AFFIRMED in toto.
Costs against the defendant-appellants.

SO ORDERED."

On further appeal, the respondent Court found no merit in petitioners' plea. In a

Resolution dated March 24, 1992, the Sixth Division of said Court found the petition to
be a mere rehash of the issues and arguments presented before the lower courts. It
ruled in part that:[7]

"3) Petitioners were fully aware that part of their house encroached on their neighbor's
property, while respondents became aware of it only after purchasing said property.
Petitioners cannot claim good faith as against the respondents.

"4) Since petitioners are not builders in good faith, they cannot demand that
respondents sell the disputed portion; what the law provides is that the builders in bad
faith can be ordered to dismantle said structure at their own expense. In the interim
period that petitioners' structure remains, they should pay reasonable rent until they
remove the structure."

The dispositive portion thereof reads:[8]

"For reasons indicated, We find the appeal without merit and deny it due course, with
costs against the petitioners.

SO ORDERED."

Hence, this petition.

The Issues

The main issue is whether the possession of the portion of the private respondents'
land encroached by petitioners' house can be recovered through an action of ejectment,
not accionpubliciana. Corollarily, petitioners question (a) the validity of the imposition
of "rental" for the occupancy of the encroached portion, (b) the denial of their claimed
pre-emptive right to purchase the encroached portion of the private respondents' land,
and (c) the propriety of a factual review of the CA's finding of bad faith on the part of
petitioners.
 In a nutshell, petitioners insist that the MeTC had no jurisdiction over the case at
bar because its real nature is accion publiciana or recovery of possession, not unlawful
detainer. It is not forcible entry because private respondents did not have prior
possession of the contested property as petitioners possessed it ahead of private
respondents. It is not unlawful detainer because petitioners were not the private
respondents' tenants nor vendee unlawfully withholding possession thereof. Said court
also has no jurisdiction to impose payment of "rentals" as there is no lessor-lessee
relationship between the parties. They pray for a review of the factual finding of bad
faith, insisting that the facts uphold their position. Due to their alleged good faith, they
claim the pre-emptive right to purchase the litigated portion as a matter of course.
Finally, they insist that the award of attorney's fees is unwarranted as private
respondents allegedly had knowledge of the encroachment prior to their acquisition of
said land.
Private respondents counter that petitioners are estopped from questioning the
jurisdiction of the MeTC after they voluntarily participated in the trial on the merits and
lost; that there is no law giving petitioners the option to buy the encroached property;
and that petitioners acted in bad faith because they waived in their deed of sale the
usual seller's warranty as to the absence of any and all liens and encumbrances on the
property, thereby implying they had knowledge of the encroachment at the time of
purchase .

The Court's Ruling

The petition lacks merit and should be denied.

First Issue: MeTC Has Jurisdiction

The jurisdictional requirements for ejectment, as borne out by the facts, are: after
conducting a relocation survey, private respondents discovered that a portion of their
land was encroached by petitioners' house; notices to vacate were sent to petitioners,
the last one being dated October 26, 1989; and private respondents filed the ejectment
suit against petitioners on January 18, 1990 or within one (1) year from the last
demand.
Private respondents' cause of action springs from Sec. 1, Rule 70 of the Revised
Rules of Court, which provides:

"Section 1. Who may institute proceedings, and when -- Subject to the provisions of the
next succeeding section, a person deprived of the possession of any land or building by
force, intimidation, threat, strategy, or stealth, or a landlord, vendor, vendee, or other
person against whom the possession of any land or building is unlawfully withheld after
the expiration or termination of the right to hold possession, by virtue of any contract,
express or implied, or the legal representatives or assigns of any such landlord, vendor,
vendee, or other person, may, at any time within one (1) year after such unlawful
deprivation or withholding of possession, bring an action in the proper inferior court
against the person or persons unlawfully withholding or depriving of possession, or any
person or persons claiming under them, for the restitution of such possession, together
with damages and costs. . . ."

That petitioners occupied the land prior to private respondents' purchase thereof
does not negate the latter's case for ejectment. Prior possession is not always a
condition sine qua nonin ejectment.[9] This is one of the distinctions between forcible
entry and unlawful detainer. In forcible entry, the plaintiff is deprived of physical
possession of his land or building by means of force, intimidation, threat, strategy or
stealth; thus, he must allege and prove prior possession. But in unlawful detainer, the
defendant unlawfully withholds possession after the expiration or termination of his
right thereto under any contract, express or implied. In such a case,
prior physical possession is not required. [10]
Possession can also be acquired, not only by material occupation, but also by the
fact that a thing is subject to the action of one's will or by the proper acts and legal
formalities established for acquiring such right.[11] Possession of land can be acquired
upon the execution of the deed of sale thereof by its vendor. Actual or physical
occupation is not always necessary.
In the case before us, considering that private respondents are unlawfully deprived
of possession of the encroached land and that the action for the recovery of possession
thereof was made within the one- year reglementary period, ejectment is the proper
remedy.[12] The MeTC of San Juan had jurisdiction.
In addition, after voluntarily submitting themselves to its proceedings, petitioners
are estopped from assailing the jurisdiction of the MeTC.[13] This Court will not allow
petitioners to attack the jurisdiction of the trial court after receiving a decision adverse
to their position.

Second Issue: Compensation For Occupancy

Petitioners erroneously construed the order of the MeTC to pay private

respondents Nine Hundred Thirty Pesos (P930.00) a month starting July 17, 1989 until
they (petitioners) finally vacate the subject premises as "rentals". Technically, such
award is not rental, but damages. Damages are recoverable in ejectment cases under
Section 8, Rule 70 of the Revised Rules of Court.[14] These damages arise from the loss of
the use and occupation of the property, and not the damages which private respondents
may have suffered but which have no direct relation to their loss of material
possession.[15] Damages in the context of Section 8, Rule 70 is limited to "rent" or "fair
rental value" for the use and occupation of the property.[16]
There is no question that petitioners benefited from their occupation of a portion of
private respondents' property. Such benefit justifies the award of the damages of this
kind. Nemo cum alterius, detrimenti locupletari potest. No one shall enrich himself at the
expense of another.

Third Issue: Option To Sell Belongs To Owner

 Article 448 of the Civil Code[17] is unequivocal that the option to sell the land on
which another in good faith builds, plants or sows on, belongs to the landowner.
The option is to sell, not to buy, and it is the landowner's choice. Not even a
declaration of the builder, planter, or sower's bad faith shifts this option to him per
Article 450 of the Civil Code.[18] This advantage in Article 448 is accorded the landowner
because "his right is older, and because, by the principle of accession, he is entitled to
the ownership of the accessory thing."[19] There can be no pre-emptive right to buy even
as a compromise, as this prerogative belongs solely to the landowner. No compulsion
can be legally forced on him, contrary to what petitioners asks from this Court. Such an
order would certainly be invalid and illegal. Thus, the lower courts were correct in
rejecting the petitioners' offer to buy the encroached land.

Fourth Issue: A Review of Factual Findings Is Unwarranted

Petitioners ask this Court to review the alleged error of the respondent Court in
appreciating bad faith on their part. According to them, this is contradictory to the fact
that private respondents acquired their lot and discovered the encroachment after
petitioners bought their house. After careful deliberation on this issue, this Court finds
this petition for review inadequate as it failed to show convincingly a reversible error
on the part of the respondent Court in this regard. Thus, for very good reasons, this
Court has consistently and emphatically declared that review of the factual findings of
the Court of Appeals is not a function that is normally undertaken in petitions for review
under Rule 45 of the Rules of Court. Such findings, as a general rule, are binding and
conclusive.[20] The jurisdiction of this Court is limited to reviewing errors of law unless
there is a showing that the findings complained of are totally devoid of support in the
records or that they are so glaringly erroneous as to constitute reversible error.[21]
Even respondent Court has taken note of the inadequacy of the petition before it, as
it wryly said:[22]

"The Petition for Review is not certainly a manifestation of clarity nor an example of a
well-organized summation of petitioners' cause of action. . . . . .

xxx xxx xxx

A careful scrutiny of the above issues discloses that they are mere repetitions in a
rehashed form of the same issues with the same supporting arguments raised by
petitioners when they appealed from the decision of the (MeTC) to the RTC. x x x."

This petition is no different. We share the foregoing sentiments of the respondent

Court. In essence, respondent Court merely affirmed the decision of the MeTC. The
Court of Appeal's finding of petitioners' bad faith did not alter nor affect the MeTC's
disposition. Petitioners want this Court to declare them in good faith and to determine
their rights under Article 448, Civil Code. However, the mere fact that they bought their
property ahead of the private respondents does not establish this point. Nor does it
prove that petitioners had no knowledge of the encroachment when they purchased
their property. Reliance on the presumption in Article 526 of the Code is misplaced in
view of the declaration of the respondent Court that petitioners are not builders in good
faith.
What petitioners presented are mere allegations and arguments, without sufficient
evidence to support them. As such, we have no ground to depart from the general rule
against factual review.
In sum, the petition has not shown cogent reasons and sufficient grounds to reverse
the unanimous ruling of the three lower courts. The MeTC, RTC and the Court of Appeals
were all in agreement in sustaining private respondents' rights. And we uphold them.
WHEREFORE, the petition is DENIED. The assailed Resolution is hereby AFFIRMED.
SO ORDERED.
Narvasa, C.J., (Chairman), Davide, Jr., Melo, and Francisco, JJ., concur.

SECOND DIVISION

G.R. No. 211170, July 03, 2017

SPOUSES MAXIMO ESPINOZA AND WINIFREDA DE VERA, Petitioners, v. SPOUSES

ANTONIO MAYANDOC AND ERLINDA CAYABYAB MAYANDOC, Respondents.

DECISION

PERALTA,**J.:

Before this Court is the Petition for Review on Certiorari under Rule 45, dated March 21,
2014, of petitioners-spouses Maximo Espinoza and Winifreda De Vera, that seeks to
reverse and set aside the Decision1 dated September 17, 2013 and Resolution dated
January 28, 2014, both of the Court of Appeals (CA) which, in turn, affirmed with
modifications the Decision2 dated February 18, 2011 of the Regional Trial Court (RTC),
Branch 42, Dagupan City, in a complaint for useful expenses under Articles 4483 and
5464 of the New Civil Code of the Philippines.

The facts follow.

A parcel of land located in Dagupan City was originally owned by Eusebio Espinoza.
After the death of Eusebio, the said parcel of land was divided among his heirs, namely:
Pastora Espinoza, Domingo Espinoza and Pablo Espinoza. Petitioner Maximo is the son
of Domingo Espinoza, who died on November 3, 1965, and Agapita Cayabyab, who died
on August 11, 1963.

Thereafter, on May 25, 1972, Pastora Espinoza executed a Deed of Sale conveying her
share of the same property to respondents and Leopoldo Espinoza. However, on that
same date, a fictitious deed of sale was executed by petitioner Maximo's father,
Domingo Espinoza, conveying the three-fourth (3/4) share in the estate in favor of
respondent Erlinda Cayabyab Mayandoc's parents; thus, TCT No. 28397 was issued in
the names of the latter.

On July 9, 1977, a fictitious deed of sale was executed by Nemesio Cayabyab, Candida
Cruz, petitioners-spouses Maximo Espinoza and Winifreda De Vera and Leopoldo
Espinoza over the land in favor of respondents-spouses Antonio and Erlinda Mayandoc;
thus, TCT No. 37403 was issued under the names of the latter.

As a result of the foregoing, petitioners filed an action for annulment of document with
prayer for the nullification of TCT No. 37403 and, on August 16, 1999, the RTC, Branch
40, Dagupan City rendered a Decision in favor of petitioners and ordering respondents
to reconvey the land in dispute and to pay attorney's fees and the cost of the suit.

Respondents appealed, but the CA, in its Decision dated February 6, 2004, affirmed the
RTC with modifications that the award of attorney's fees and litigation expenses be
deleted for lack of factual basis. The said CA Decision became final and executory on
March 8, 2004.

Thus, respondents filed a complaint for reimbursement fox useful expenses, pursuant to
Articles 448 and 546 of the New Civil Code, alleging that the house in question was built
on the disputed land in good faith sometime in 1995 and was finished in 1996.
According to respondents, they then believed themselves to be the owners of the land
with a claim of title thereto and were never prevented by the petitioners in constructing
the house. They added that the new house was built after the old house belonging to
respondent Erlinda Mayandoc's father was torn down due to termite infestation and
would not have reconstructed the said house had they been aware of the defect in their
title. As such, they claimed that they are entitled to reimbursement of the construction
cost of the house in the amount of P800,000.00. They further asserted that at the time
that their house was constructed, they were possessors in good faith, having lived over
the land in question for many years and that petitioners questioned their ownership
and possession only in 1997 when a complaint for nullity of documents was filed by the
latter.

Petitioners, in their Answer, argued that respondents can never be considered as

builders in good faith because the latter were aware that the deeds of sale over the land
in question were fictitious and, therefore, null and void; thus, as builders in bad faith,
they lose whatever has been built over the land without right to indemnity.

Respondents, on January 5, 2011, manifested their option to buy the land where the
house stood, but petitioners expressed that they were not interested to sell the land or
to buy the house in question.

The RTC, on February 18, 2011, rendered its Decision with the following dispositive
portion:

WHEREFORE, judgment is hereby rendered requiring the defendants to sell the land,
where the plaintiffs' house stands, to the latter at a reasonable price based on the zonal
value determined by the Bureau of Internal Revenue (BIR).

SO ORDERED.5
Petitioners appealed to the CA, but the latter, in its Decision dated September 17, 2013,
affirmed the decision of the RTC with modifications. The dispositive portion of the
Decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, the Decision dated February 18, 2011 by the Regional Trial Court, Branch
42 of Dagupan City, in Civil Case No. 2005-0271-D is hereby AFFIRMED with
MODIFICATIONS.

Let the case be REMANDED to the aforementioned trial court for further proceedings
consistent with the proper application of Articles 448, 546 and 548 of the New Civil
Code and to render a complete judgment of the case.

SO ORDERED.6
The motion for reconsideration of petitioners were subsequently denied by the CA in its
Resolution dated January 28, 2014.

Hence, the present petition. Petitioners raise the following

issues:chanRoblesvirtualLawlibrary
I.

WHETHER THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE

PETITIONERS WERE NOT ABLE TO PROVE BAD FAITH ON THE PART OF THE
RESPONDENTS.

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING

THAT RES JUDICATA DOES NOT APPLY IN THE INSTANT CASE.
According to petitioners, whether or not respondents were in bad faith in introducing
improvements on the subject land is already moot, since the judgment rendered by the
RTC of Dagupan City, Branch 40 and affirmed by the CA, that declared the two Deeds of
Definite/Absolute Sale dated May 25, 1972 and July 9, 1977 as null and void, had long
become final and executory on March 8, 2004. They also argue that respondents had not
successfully shown any right to introduce improvements on the said land as their claim
of laches and acquisitive prescription have been rejected by the CA on appeal; thus, it
follows that the respondents were builders in bad faith because knowing that the land
did not belong to them and that they had no right to build thereon, they still caused the
house to be erected. They further insist that respondents are deemed builders in bad
faith because their house has been built and reconstructed into a bigger one after
respondent Erlinda's parents forged a fictitious sale. Finally, they claim that the
principle of res judicata in the mode of "conclusiveness of judgment" applies in this case.

The petition lacks merit.

The findings of facts of the Court of Appeals are conclusive and binding on this
Court7 and they carry even more weight when the said court affirms the factual findings
of the trial court.8 Stated differently, the findings of the Court of Appeals, by itself, which
are supported by substantial evidence, are almost beyond the power of review by this
Court.9 Although this rule is subject to certain exceptions, this Court finds none that is
applicable in this case. Nevertheless, the petition still fails granting that an exception
obtains.

To be deemed a builder in good faith, it is essential that a person asserts title to the land
on which he builds, i.e., that he be a possessor in the concept of owner, and that he be
unaware that there exists in his title or mode of acquisition any flaw which invalidates
it.10 The RTC, as affirmed by the CA, found respondents to be builders in good faith,
thus:chanRoblesvirtualLawlibrary
The plaintiffs are builders in good faith. As asserted by plaintiffs and not rebutted by
defendants, the house of plaintiffs was built on the lot owned by defendants in 1995.
The complaint for nullity of documents and reconveyance was filed in 1997, about two
years after the subject conjugal house was constructed. Defendants-spouses believed
that at the time when they constructed their house on the lot of defendants, they have a
claim of title. Art. 526, New Civil Code, states that a possessor in good faith is one who
has no knowledge of any flaw or defect in his title or mode of acquisition. This
determines whether the builder acted in good faith or not. Surely, plaintiffs would not
have constructed the subject house which plaintiffs claim to have cost them
P800,000.00 to build if they knew that there is a flaw in their claim of title. Nonetheless,
Art. 527, New Civil Code, states clearly that good faith is always presumed, and upon
him who alleges bad faith on the part of the possessor lies the burden of proof. The
records do not show that the burden of proof was successfully discharged by the
defendants.

xxxx

Plaintiffs are in good faith in building their conjugal house in 1995 on the lot they
believed to be their own by purchase. They also have in their favor the legal
presumption of good faith. It is the defendants who had the burden to prove otherwise.
They failed to discharge such burden until the Regional Trial Court, Br. 40, Dagupan
City, promulgated an adverse ruling in Civil Case No. 97-0187-D. Thus, Art. 448 comes in
to protect the plaintiffs-owners of their improvement without causing injustice to the
lot owner. Art. 448 comes in to protect the plaintiff-owners of their improvement
without causing injustice to the lot owner. Art. 448 provided a just resolution of the
resulting "forced-ownership" by giving the defendants lot owners the option to acquire
the conjugal house after payment of the proper indemnity or to oblige the builder
plaintiffs to pay for the lot. It is the defendants-lot owners who are authorized to
exercise the option as their right is older, and under the principle of accession where the
accessory (house) follows the principal. x x x.11
The settled rule is bad faith should be established by clear and convincing evidence
since the law always presumes good faith.12 In this particular case, petitioners were not
able to prove that respondents were in bad faith in constructing the house on the
subject land. Bad faith does not simply connote bad judgment or negligence.13 It imports
a dishonest purpose or some moral obliquity and conscious doing of a wrong.14 It means
breach of a known duty through some motive, interest or ill will that partakes of the
nature of fraud.15 For anyone who claims that someone is in bad faith, the former has
the duty to prove such. Hence, petitioners err in their argument that respondents failed
to prove that they are builders in good faith in spite of the findings of the RTC and the
CA that they are.

As such, Article 44816 of the Civil Code must be applied. It applies when the builder
believes that he is the owner of the land or that by some title he has the right to build
thereon,17 or that, at least, he has a claim of title thereto.18 In Tuatis v. Spouses Escol, et
al.,19 this Court ruled that the seller (the owner of the land) has two options under
Article 448: (1) he may appropriate the improvements for himself after reimbursing the
buyer (the builder in good faith) the necessary and useful expenses under Articles
54620and 54821 of the Civil Code; or (2) he may sell the land to the buyer, unless its
value is considerably more than that of the improvements, in which case, the buyer shall
pay reasonable rent, thus:chanRoblesvirtualLawlibrary
The rule that the choice under Article 448 of the Civil Code belongs to the owner of the
land is in accord 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. The landowner cannot refuse to exercise either
option and compel instead the owner of the building to remove it from the land.

The raison d'etre 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.22
The CA, therefore, did not err in its ruling that instead of requiring the petitioners to sell
the land, the RTC must determine the option which the petitioners would choose. As
aptly ruled by the CA:chanRoblesvirtualLawlibrary
The rule that the right of choice belongs to the owner of the land is in accordance with
the principle of accession. However, even if this right of choice is exclusive to the land
owner, he cannot refuse to exercise either option and demand, instead for the removal
of the building.

Instead of requiring defendants-appellants to sell the land, the court a quo must
determine the option which they would choose. The first option to appropriate the
building upon payment of indemnity or the second option, to sell the land to the
plaintiffs-appellees. Moreover, the court a quo should also ascertain: (a) under the first
option, the amount of indemnification for the building; or (b) under the second option,
the value of the subject property vis-a-vis that of the building, and depending thereon,
the price of, or the reasonable rent for, the subject property.

Hence, following the ruling in the recent case of Briones v. Macabagdal, this case must be
remanded to the court a quo for the conduct of further proceedings to assess the current
fair market of the kind and to determine other matters necessary for the proper
application of Article 448, in relation to Articles 546 and 548 of the New Civil Code.23
Therefore, this Court agrees with the CA that there is a need to remand the case to the
RTC for further proceedings, specifically, in assessing the current fair market value of
the subject land and other matters that are appropriate in the application of Article 448,
in relation to Articles 546 and 548 of the New Civil Code.
As to the issue of res judicata, the CA is correct in its ruling that there is no identity of
subject matter and cause of action between the prior case of annulment of document
and the present case, thus:chanRoblesvirtualLawlibrary
In the instant case, res judicata will not apply since there is no identity of subject matter
and cause of action. The first case is for annulment of document, while the instant case
is for reimbursement of useful expenses as builders in good faith under article 448 in
relation to Articles 546 and 548 of the New Civil Code.

Moreover, We are not changing or reversing any findings of the RTC and by this Court in
Our 6 February 2004 decision. The Court is still bound by this judgment insofar as it
found the Deeds of Absolute Sale null and void, and that defendants-appellants are the
rightful owners of the lot in question.

However, if the court a quo did not take cognizance of the instant case, plaintiffs-
appellees shall lose ownership of the building worth Php316,400.00 without any
compensation. While, the defendant-appellants not only will recover the land but will
also acquire a house without payment of indemnity. The fairness of the rules enunciated
in Article 448 is explained by the Supreme Court in the case of Depra v.
Dumlao, viz.:chanRoblesvirtualLawlibrary
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 ownership, the law has provided a just
solution by giving the owner of the land the option to acquire the improvements after
payment of the proper indemnity, or to oblige the builder or planter to pay for the land
and the sower to pay the proper rent. It is the owner of the land who is authorized to
exercise the option, because his right is older, and because, by the principle of accession,
he is entitled to the ownership of the accessory thing.
Finally, "the decision of the court a quo should, not be viewed as a denigration of the
doctrine of immutability of final judgments, but a recognition of the equally sacrosanct
doctrine that a person should not be allowed to profit or enrich himself inequitably at
another's expense."24
The well-settled rule is that the principle or rule of res judicata is primarily one of public
policy. It is based on the policy against multiplicity of suits,26 whose primary objective is
to avoid unduly burdening the dockets of the courts.27 In this case, however, such
principle is inapplicable.

WHEREFORE, the Petition for Review on Certiorari under Rule 45, dated March 21,
2014, of petitioners-spouses Maximo Espinoza and Winifreda De Vera, is DENIED.
Consequently, the Decision dated September 17, 2013 and Resolution dated January 28,
2014, both of the Court of Appeals are AFFIRMED.

SO ORDERED.

Mendoza, Leonen, and Martires, JJ., on concur.

Carpio, (Chairperson), J., on wellness leave.
 FIRST DIVISION

G.R. No. 211845, August 09, 2017

PEN DEVELOPMENT CORPORATION AND LAS BRISAS RESORT

CORPORATION, Petitioners, v.MARTINEZ LEYBA, INC., Respondent.

DECISION

DEL CASTILLO, J.:

Assailed in this Petition for Review on Certiorari1 are the July 17, 2013 Decision2 of the
Court of Appeals (CA) in CA-G.R CV No. 97478 which affirmed with modification the
January 20, 2009 Decision3 of the Regional Trial Court of Antipolo City, Branch 71 (RTC)
in Civil Case No. 97-4386, and the CA's March 28, 2014 Resolution4 denying herein
petitioners' Motion for Reconsideration.5

Factual Antecedents

As found by the CA, the facts are as follows:

Plaintiff-Appellee Martinez Leyba, Inc. (hereafter Martinez) is a corporation organized

and existing under Philippine laws and the registered owner of three (3) contiguous
parcels of land situated in Antipolo, Rizal, surveyed and identified as Lot Nos. 29, 30 and
31, Block 3, (LRC) Pcs-7305 and registered under Transfer Certificate of Title Nos.
250242, 250244 and 250243, respectively, with the Register of Deeds of Rizal.

Defendants-Appellants Pen Development Corporation and Las Brisas Resorts

Corporation are also domestic corporations duly organized and existing under
Philippine laws. Appellants, thereafter, merged into one corporate entity under the
name Las Brisas Resorts Corporation (hereafter Las Brisas). Las Brisas is the registered
owner of a parcel of land under TCT No. 153101 which is situated adjacent to the lands
owned by Martinez. Las Brisas occupied the said land in 1967 and fenced the same.

In 1968, Martinez noticed that the construction of Las Brisas' fence seemed to encroach
on its land. Upon verification by surveyors, Martinez was infonned that the fence of Las
Brisas overlaps its property. On 11 March 1968, Martinez sent a Letter informing Las
Brisas that the fence it constructed encroaches [sic] on Martinez's land and requested
Las Brisas to refrain from further intruding on the same. Las Brisa did not respond to
Martinez's letter and continued developing its land.

Martinez sent two (2) more Letters dated 31 March 1970 and 3 November 1970 to Las
Brisas informing the latter of the encroachmnent of its structures and improvements
over Martinez's titled land.

On 31 July 1971, Las Brisas, through a certain Paul Naidas, sent a letter to Martinez,
claiming that it 'can not [sic] trace the origin of these titles' (pertaining to Martinez's
land).
Martinez sent two (2) Letters to Las Brisas reiterating its ownership over the land that
Las Brisas' improvements have encroached upon. Despite the notices, Las Brisas
continued developing its property.

Martinez sought the services of a licensed geodetic engineer to survey the boundaries of
its land. The verification survey plan Vs-04,00034, which was approved by the Regional
Technical Director for Lands of the Department of Enviromnent and Natural Resources
(DENR), revealed that the building and improvements constructed by Las Brisas
occupied portions of Martinez's lands: 567 square meters of Lot No. 29, Block 3, (LRC)
Pcs. 7305; a portion of 1,389 square meters of Lot No. 30, Block 3, (LRC) Pes. 7305
covered under TCT Nos. 250242, 250244 and 250243, respectively.

On 24 November 1994, Martinez sent a letter to Las Brisas demanding the latter to
cease and desist from unlawfully holding portions of Martinez's land occupied by Las
Brisas structures and improvements. Despite the said demand, no action was taken by
Las Brisas.

On 24 March 1997, Martinez filed a Complaint for Quieting of Title, Cancellation of Title
and Recovery of Ownership with Damages against Las Brisas before the Regional Trial
Court of Antipolo City, docketed as Civil Case No. 97-4386. The case was raffled to, and
heard by, Branch 71 thereof x x x.

In its Answer, Las Brisas denied that it encroached on Martinez's land and that it
constructed the Las Brisas Resort Complex within the land covered by TCT No. 153101.6

In its Complaint,7 Martinez added that Transfer Certificate of Title (TCT) Nos. 250242,
250244 and 250243 (or the Martinez titles – totaling 9,796 square meters)8 emanated
from Decree No. 1921 issued by the General Land Registration Office pursuant to Land
Registration Case No. 3296, which was transcribed as Original Certificate of Title (OCT)
No. 756 by the Register of Deeds of Rizal on August 14, 1915; that Las Brisas
"constructed a riprapping on the northern portion of Lot No. 29, a building straddling
Lots 30 and 31, and are now constructing a new building on Lot No. 31,"9 which acts
constitute an encroachment on lands covered by the Martinez titles; that Las Brisas's
title, TCT 15310110 (TCT 153101), was originally registered on September 14, 1973,
under OCT 9311 pursuant to Decree No. N-147380, LRC Case No. N-7993, Rec. No. N-
43097; that the encroachment is confirmed per verification survey conducted by a
geodetic engineer and approved by the Regional Technical Director for Lands of the
Department of Environment and Natural Resources (DENR); and that TCT 153101 thus
casts a cloud on the Martinez titles, which must be removed in order to quiet title to the
latter.

Las Brisas countered in its Answer11 that it bought the land covered by TCT 153101
(consisting of 3,606 square meters) on May 18, 1967 from Republic Bank; that it took
possession thereof in good faith that very same year; and that it is actually Martinez that
was encroaching upon its land.

Ruling of the Regional Trial Court

After trial, the RTC issued its Decision dated January 20, 2009, containing the following
pronouncement:

To clarify matters, the plaintiff12 engaged the services of Ricardo S. Cruz, a licensed
Geodetic Engineer, to plot and verify the plans and technical descriptions to determine
the relative geographic positions of the land covered by the titles of plaintiff and
defendant.13This verification survey was approved by the Regional Technical Director of
Lands on May 23, 1996, under plan VS-04-000394. (Exh. T-1, T-2, T-3, T-4, T-5). This
plan revealed that Psu-234002, in relation to T.C.T. No. 153101 of the defendant
overlapped thus:

a. A portion of 567 square meters of Lot No. 29, Block 3, (LRC) Pcs-7305, covered
by plaintiff's T.C.T. No. 250242. This is the portion where the defendant built a
riprapping.

b. A portion of 1,389 square meters of Lot No. 30, Block 3, (LRC) Pcs-7305, covered
by plaintiff's T.C.T. No. 250243. This is the portion where the defendant had
constructed an old building.

c. A portion of 1,498 square meters of Lot No. 31, Block 3, (LRC) Pcs-7305, covered
by plaintiff's T.C.T. No. 250244. This is the portion where the defendant
constructed a new multi-story edifice.

xxxx

The issues sought to be resolved x x x can be read in the respective memorandum [sic]
submitted by the parties.

For the plaintiff, the statement of issues are as follows:

1. Whether x x x the Certificate of Title of the defendant overlapped and thus

created a cloud on plaintiff T.C.T. Nos. 250242, 250243, 250244, covering lots
nos. 29, 30, and 31, block 3 (LRC) PCS-7305, which should be removed under
Article 476 of the Civil Code of the Philippines;

2. Whether x x x defendant's T.C.T. No. 153101 should be cancelled insofar as it

overlapped Lots 29, 30 and 31, Block 3, (LRC) PCS-7305;

3. Whether x x x the defendant is a builder in bad faith and is liable for the
consequence of his acts;

4. Whether x x x the plaintiff is entitled to collect actual or compensatory and moral

damages in the amount of P5,000,000.00, exemplary damage in the amount of
P1,000,000.00, nominal damage in the amount of P1,000,000.00, and attorney's
fees in the amount of P300,000.00, exclusive of appearance fee of P3,000.00 per
hearing or unferome [sic] attended.

For defendants, the issues presented are:

 1. Whether x x x defendant's title over the property is valid and effective;

2. Whether x x x defendant is an innocent purchaser for value;

3. Whether x x x defendant is entitled to reimbursement for expenses in developing

the property.

For its evidence in chief, plaintiff presented Nestor Quesada (direct, June 7, 2001; cross
Ju1y 26, 2001) rested its case on October 4, 2001. Its Formal Offer of Evidence as filed
with the Court on November 15, 2001 wherein Court Order dated January 15, 2002,
Exhibit A to U, inclusive of their submarkings were admitted over the objections of
defendant.

The defendant presented Eufracia Naidas (direct/cross on July 11, 2004), then rested its
case on May 11, 2005, the Formal Offer of Evidence was filed in Court on June 10, 2005
wherein the Court Order dated June 27, 2005, Exhibit 1 to 7 inclusive of submarkings
were all admitted over plaintiff's objections.

xxxx

Considering that the defendant has raised the defense of the validity of T.C.T. No. N-
21871 of the Registry of Deeds, Marikina (Exhibit 1), and subsequently cancelled by
T.C.T. No. 153101 as transferred to the Pen Development Corp. (Exh. 2) and introduced
substantial improvements thereon which from the facts established and evidence
presented during the hearings of the case it cannot be denied that said title over the
property in question is genuine and valid. Moreover, the defendant obtained the
property as innocent purchasers for value, having no knowledge of any irregularity,
defect, or duplication in the title.

Defendant further argued that there is no proof to plaintiff's claim that it had sent
notices and claims to defendant. Assuming that notices were sent to defendant as early
as 1968, it took plaintiff almost thirty (30) years to file the action to quiet its title.
Therefore, by the principle of laches it should suffer the consequence of its failure to do
so within a reasonable period of time. x x x

Defendant, having introduced substantial improvements on the property, if on the

ground or assumption that the case will be decided in favor of the plaintiff, that
defendant should be, by law, entitled to be reimbursed for the expenses incurred in
purchasing and developing the property, the construction cost of the building alone
estimated to be Fifty-Five Million Pesos (P55,000,000.00) x x x.

Defendant also cited Articles 544, 546, 548 of the New Civil Code of the Philippines in
further support of its defense.

It is incumbent upon the plaintiff to adduce evidence in support of his complaint x x x.

Likewise, the trial shall be limited to the issues stated in the pre-trial order.

As earlier stated, the Court shall rule on whether x x x plaintiff has discharged its
obligation to do so in compliance with the Rules of Court. Having closely examined,
evaluated and passed upon the evidence presented by both the plaintiff and defendant
the Court is convinced that the plaintiff has successfully discharged said obligation and
is inclined to grant the reliefs prayed for.

Clearly this is a valid complaint for quieting of title specifically defined under Article
476 of the Civil Code and as cited in the cases of Vda. De Angeles v. CA, G.R. No. 95748,
November 21, 1996; Tan vs. Valdehuesa, 66 SCRA 61 (1975).

As claimed by the plaintiff, defendant's T.C.T. No. 153101 is an instrument, record or

claim which constitutes or casts a cloud upon its T.C.T. Nos. 250242, 250243, and
250244. Sufficient and competent evidence has been introduced by the plaintiff that
upon plotting verification of the technical description of both parcels of land conducted
by Geodetic Engineer Ricardo Cruz, duly approved by the Regional Technical Director of
Lands of the DENR that Psu-234002, covered by defendant's T.C.T. No. 153101
overlapped a portion of 567 square meters of Lot No. 29 x x x, a portion of 1,389 square
meters of Lot No. 30 x x x covered by plaintiffs T.C.T. Nos. 250242, 2502 and 250244,
respectively. Surprisingly, defendant has not disputed nor has it adduced evidence to
disprove these findings.

It was likewise established that plaintiff's T.C.T. No[s]. 250242, 250243 and 250244
emanated from O.C.T. No. 756, which was originally registered on August 14, 1915,
whereas, from defendant's own evidence, its T.C.T. No. 153101 was derived from O.C.T.
No. 9311, which was originally registered on September 14, 1973, pursuant to Decree
No. D-147380, in LRC Case No. N-7993, Rec. No. 43097.

Plaintiff's mother title was registered 58 years ahead of defendant's mother title. Thus,
while defendant's T.C.T. No. 153101 and its mother title are apparently valid and
effective in the sense that they were issued in consequence of a land registration
proceeding, they are in truth and in fact invalid, ineffective, voidable, and unforceable
[sic] insofar as it overlaps plaintiff's prior and subsisting titles.

xxxx

In the cases of Chan vs. CA, 298 SCRA 713, de Villa vs. Trinidad, 20 SCRA 1167, Gotian
vs. Gaffud, 27 SCRA 706, again the Supreme Court held:

'When two certificates of title are issued to different persons covering the same land, in
whole or in part, the earlier in date must prevail and in cases of successive registrations
where more than one certificate of title is issued over the same land, the person holding a
prior certificate is entitled to the land as against a person who relies on a subsequent
certificate.'

xxxx

Article 526 of the Civil Code defines a possession in good faith as 'one who is not aware
that there exists in his title or mode of acquisition any flaw which invalidates it, and a
possession in bad faith as one who possesses in any case contrary to the foregoing.'
xxxx

In the case of Ortiz vs. Fuentebella, 27 Phil. 537, the Supreme Court held:

'Thus, where defendant received a letter from the daughter of the plaintiff, advising
defendant to desist from planting coconut on a land in possession of defendant, and which
letter the defendant answered by saying she did not intend to plant coconuts on the land
belonging to plaintiff, it was held that the possession [in] bad faith began from the receipt
of such letter.'

A close similarity exists in Fuentebella above cited with the facts obtaining in this case.
The pieces evidence [sic] show that while defendant was in good faith when it bought
the land from the Republic Bank as a foreclosed property, the plaintiff in a letter dated
as early as March 11, 1968 x x x advised the defendant that the land it was trying to
fence is within plaintiff's property and that the defendant should refrain from occupying
and building improvements thereon and from doing any act in derogation of plaintiff's
property rights. Six other letters followed suit x x x. The records show that defendant
received these letters but chose to ignore them and the only communication in writing
from the defendant thru Paul Naidas was a letter dated July 31, 1971, stating that he
(Naidas) was al1 the more confused about plaintiff's claim to the land. The defendant
cannot dispute the letters sent because it sent a response dated July 31, 1970. It is very
clear that while defendant may have been [in] good faith when it purchased the land
from Republic Bank on December 6, 1977, such good faith ceased upon being informed
in writing about plaintiff's title or claim over the same land, and, worse, it acted with
evident bad faith when it proceed [sic] to build the structures on the land despite such
notice.

Consequently, the rule on the matter can be found in Articles 449, 450 of the Civil Code
of the Philippines which provide:

'Article 449. – He who builds, plants, or sows in bad faith on the land of another, loses what
is built, planted or sown without right to indemnity."

Article 450. – The owner of the land on which anything has been built, planted or sown in
bad faith may demand the demolition of the work; or that the planting or sowing be
removed, in order to replace things in their former condition at the expense of the person
who built, planted or sowed, or he may compel the builder or planter to pay the price of
the land, and the sower the proper rent.'

In the case of Tan Queto vs. CA, 122 SCRA 206, the Supreme Court held:

'A builder in bad faith loses the building he builds on another's property without right of
refund,' x x x
xxxx

As to defendant's claim that they had obtained title to the property as innocent
purchasers for value, lack of knowledge of any irregularity, effect or duplication of title,
they could have discovered the overlapping had they only bothered to engage a licensed
geodetic engineer to check the accuracy of their plan Psu-234002. To that extent,
defendant has failed to exercise the diligence to be entitled to the status as an innocent
purchaser for value. It was clearly established that defendant's certificate of title
emanated from a mother title that partially overlapped the plaintiff's prior and
subsisting title. Hence, defendant's certificate of title is void abinittio [sic] insofar as the
overlapped areas are concerned.

Defendant's claim of lack of notice on the claim of the plaintiff on the overlapped
properties is belied by the evidence presented by plaintiff which consisted by [sic] a
letter dated as early as March 11, 1968 (Exh. N, N-1, N-2) advising defendant that the
land it was trying to fence of [sic] is within plaintiff's property, and at the same time
asking the defendant to refrain from occupying and building improvements thereon and
from doing any act in derogation plaintiff's property rights. Five (5) succeeding letters
addressed to defendant followed suit and the evidence clearly show that the same were
received by defendant and no less than Paul Naidas wrote a reply letter to plaintiff's
counsel, Alfonso Roldan on July 31, 1971 which conclusively affirm the fact that
defendant is well aware of plaintiff's claim to the portion of the land encroached. Thus,
the defendant's claim that it is a builder in good faith finds no factual nor legal basis. On
the contrary, the defendant's continued construction and introduction of improvements
on the questioned portion of plaintiff's property clearly negates good faith.

The claim for damages prayed for by plaintiff as a result of defendant's obstinate refusal
to recognize [the] plaintiffs title to the land insofar as the encroachments were made
and to turn over the possession thereof entitles the plaintiff to the award of moral,
exemplary damages and attorney's fees. However, since no sufficient evidence was
presented that the plaintiff suffered actual damages, the Court cannot award any
pursuant to [Article] 2199 of the New Civil Code of the Philippines.

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against 1he
defendant as follows:

1. Quieting its T.C.T. Nos. 250242, 240243 and 250[2]44, and removing the clouds
thereon created by the issuance of T.C.T. No. 153101 insofar as the said titles are
overlapped by the T.C.T. No. 153101;

2. Ordering the cancellation or annulment of portions of T.C.T. No. 153101 insofar

as it overlaps plaintiff's T.C.T. No. 250242, to Lot 29, Block 3, (LRC) Pcs-7305;
plaintiff's T.C.T. No. 250243 to Lot 30, Block 3 (LRC) Pcs-7305; and plaintiff's
[TCT] No. 250244 to Lot 31, Block 3, (LRC) Pcs-7305;

3. Ordering the defendant to vacate and turn over the possession of said portions in
favor of the plaintiff, and to remove the building or structures it has constructed
thereon at its own expense without right to indemnity [therefor]; to allow the
plaintiff to appropriate what the defendant has built or to compel the defendant
to pay for the value of the land encroached upon;

4. Ordering the defendant to pay moral damages to the plaintiff in thy amount of
P1,000,000.00; exemplary damages in the amount of P1,000,000.00 and
attorney's fees in the amount of P100,000.00.

5. Ordering the defendant to pay for the cost of suit.

SO ORDERED.14

Petitioners filed a joint Motion for Reconsideration.15 However, in an August 7, 2009

Order,16 the RTC held its ground

Ruling of the Court of Appeals

Petitioners interposed an appeal before the CA, docketed as CA-G.R. CV No. 97478. They
argued that the trial court erred in, giving probative value to respondent's documentary
evidence despite its hearsay character; that the trial court erred in declaring them
builders in bad faith; that the respondent is guilty of laches; and that the lower court
erred in awarding damages to respondent.

On July 17, 2013, the CA rendered the assailed Decision declaring as follows:

The appeal fails.

Good faith is an intangible and abstract quality with no technical meaning or statutory
definition, and it encompasses, among other things, an honest belief, the absence of
malice and the absence of design to defraud or to seek an unconscionable advantage. An
individual's personal good faith is a concept of his own mind and, therefore, may not
conclusively be determined by his protestations alone. It implies honesty of intention,
and freedom from knowledge of circumstances which ought to put the holder upon
inquiry. The essence of good faith lies in an honest belief in the validity of one's right,
ignorance of a superior claim, and absence of intention to overreach another.

Article 528 of the New Civil Code provides that possession acquired in good faith does
not lose this character, except in a case and from the moment facts exist which show
that the possessor is not unaware that he possesses the thing improperly or wrongfully.
Possession in good faith ceases from the moment defects in the title are made known to
the possessors, by extraneous evidence or by suit for recovery of the property by the
true owner. Whatever may be the cause or the fact from which it can be deduced that
the possessor has knowledge of the defects of his title or mode of acquisition, it must be
considered sufficient to show bad faith.

In the instant case, as early as 1968, Martinez sent several letters to Las Brisas
informing the latter of Martinez's ownership over the land covered by TCT Nos. 250242,
250243 and 250244 and that the buildings and improvements Las Brisas made have
encroached on the said property. In the Letter dated 11 March 1968, Martinez informed
Las Brisas that the latter's fence had overlapped into the former's land and requested
that Las Brisas refrain from entering Martinez's property. However, Las Brisas did not
heed Martinez's demand and continued developing its property. Martinez sent six (6)
more letters to Las Brisas reiterating that the latter's structure and improvements
encroached on Martinez's land. Records show that Las Brisas received these notices and
in fact, made a reply to one of Martinez's letters. Clearly, Las Brisas was informed on
several occasions about Martinez's titles x x x over its land and, despite such notices, Las
Brisas chose to ignore Martinez's demand and continued constructing other buildings
and improvements that intruded into Martinez's property. Hence, Las Brisas cannot
claim that it had no knowledge of the defects of its title and, consequently, cannot be
considered in good faith.

Neither did Las Brisas bother to have its property surveyed in order to discover, for its
own benefit, the actual boundaries of its land (TCT No. 153101). It is doctrinal in land
registration law that possession of titled property adverse to the registered owner is
necessarily tainted with bad faith. Thus, proceeding with the construction works on the
overlapped portions of TCT Nos. 250242, 250243 and 250244 despite knowledge of
Martinez's ownership thereof puts Las Brisas in bad faith.

Las Brisas further argues that Martinez is guilty of laches as it failed to assert its right
over the encroached portions of TCT Nos. 250242, 250243 and 250244 within
reasonable time.

We disagree.

xxxx

Furthermore, Martinez is the registered owner of TCT Nos. 250242, 250243 and
250244 and, as such, its right to demand to recover the portions thereof encroached by
Las Brisas is never barred by laches. In the case of Arroyo vs. Bocago Inland Dev't
Corp., the Supreme Court held:

'As registered owners of the lots in question, the private respondents have a right to
eject any person illegally occupying their property. This right is imprescriptible. Even if
it be supposed that they were aware of the petitioners' occupation of the property, and
regardless of the length of that possession, the lawful owners have a right to demand
the return of their property at any time as long as the possession was unauthorized or
merely tolerated, if at all. This right is never barred by laches.'

Las Brisas argues that the court a quo erred in admitting Martinez's Relocation Survey
of Lot Nos. 28, 29 and 30 and the Verification Plan Vs 04-00394 as they constitute
hearsay evidence and as such are inadmissible.

We are not persuaded.

It bears noting that this issue of hearsay evidence was raised for the first time on appeal.
It is a fundamental rule that no question will be entertained on appeal unless it has been
raised below, Stated differently, issues of fact and arguments not adequately brought to
the attention of the lower courts will not be considered by the reviewing courts as they
cannot be raised for the first time on appeal. An issue, which was neither averred in the
complaint nor raised during the trial in the lower courts, cannot be raised for the first
time on appeal because it would be offensive to the basic rule of fair play and justice,
and would be violative of the constitutional right to due process of the other party. In
fact, the determination of issues at the pre-trial bars consideration of other issues or
questions on appeal,

In this case, Las Brisas failed to raise this argument during pre-trial and in the trial
proper. Las Brisas even failed to [raise] its objection during Martinez's formal offer of
evidence. Clearly, Las Brisas waived its right to object on [sic] the admissibility of
Martinez's evidence. Thus, We cannot bend backwards to examine this issue raised by
Las Brisas at this late stage of the proceedings as it would violate Martinez's right to due
process and should thus be disregarded.

Anent the award of moral damages of Php1,000,000.00 and exemplary damages of

Php1,000,000.00, We find the same without factual or legal basis.

A juridical person is generally not entitled to moral damages because, unlike a natural
person, it not experience physical suffering, or such sentiments as wounded feelings,
serious anxiety, mental anguish or moral shock. While the courts may allow the grant of
moral damages to corporations in exceptional situations, it is not automatically granted
because there must still be proof of the existence of the factual basis of the damage and
its casual relation to the defendant's acts. Moral damages, though incapable of pecuniary
estimation, are in the category of an award designed to compensate the claimant for
actual injury suffered and not to impose a penalty on the wrongdoer. In this case, We
find no evidence that Martinez suffered besmirched reputation on account of the Las
Brisas encroachment on Martinez's land. Hence, the award of moral damages should be
deleted.

Neither is Martinez entitled to exemplary damages. Exemplary damages may only be

awarded if it has been shown that the wrongful act was accompanied by bad faith or
done in a wanton, fraudulent and reckless or malevolent manner. Exemplary damages
are allowed only in addition to moral damages such that no exemplary damage can be
awarded unless the claimant first establishes his clear right to moral damages. As the
moral damages are improper in the instant case, so is the award of exemplary damages.

Nevertheless, an award of nominal damages of Php100,000.00 is warranted since Las

Brisas violated the property rights of Martinez. The New Civil Code provides:

Art. 4221. Nominal damages are adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendan4 may be vindicated or recognized, and
not for the purpose of indemnifying the plaintiff for any loss suffered by him.

Art. 2222. The court may award nominal damages in every obligation arising from any
source enumerated in Article 1157, or in every case where any property right has been
invaded.

The award of damages is also in accordance with Article 451 of the New Civil Code
which states that the landowner is entitled to damages from the builder in bad faith.

WHEREFORE, the Decision dated 20 January 2009 of the Regional Trial Court of
Antipolo City, Branch 71, in Civil Case No. 974386 is AFFIRMED with MODIFICATION, as
follows:

1.) deleting the award of moral damages and exemplary damages to Martinez Leyba,
Inc.; and
2.) ordering Las Brisas Resort Corporation, Leyba, Inc., Php100,000.00, nominal
damages.

SO ORDERED.17 (Citations omitted)

Petitioners sought to reconsider, but were rebuffed. Hence, the present Petition.

Issues

In a June 15, 2015 Resolution,18 this Court resolved to give due course to the Petition,
which contains the following assignment of errors:

1. THE HONORALBE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT

PETITIONER IS A POSSESSOR/BUILDER IN BAD FAITH.

2. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO RULE

THAT THE RESPONDENT INCURRED LACHES IN ENFORCING ITS PUTATIVE
RIGHTS.

3. THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT

THE ISSUE ON HEARSAY CANNOT BE RAISED FOR THE FIRST TIME ON
APPEAL.19

Petitioners' Arguments

In praying that the assailed CA and trial court dispositions be set aside and that Civil
Case No. 97-4386 be dismissed instead, petitioners argue in their Petition and
Reply20 that they are not builders in bad faith; that in constructing the improvements
subject of the instant case, they merely relied on the validity and indefeasibility of their
title, TCT 153101; that until their title is nullified and invalidated, the same subsists;
that as builders in good faith, they are entitled either to a) a refund and reimbursement
of the necessary expenses, and full retention of the land until they are paid by
respondent, or b) removal of the improvements without damage to respondent's
property; that contrary to the CA's pronouncement, respondent may be held
accountable for laches in filing a case only after the lapse of thirty years; and that the
Survey Plan of Lots 29, 30 and 31 and the Verification Survey Plan Vs-04-000394 are
inadmissible in evidence for being hearsay, as they were not authenticated in court.

Respondent's Arguments

Respondent, on the other hand, counters in its Comment21 that the CA is correct in
declaring that petitioners are possessors and builders in bad faith; that while
petitioners may have been innocent purchasers for value, they were not possessors and
builders in good faith because despite having been regularly informed in writing that
they encroached on respondent's land and are building illegal structures thereon, they
continued with their illegal occupation and construction; that under the Civil Code,
petitioners are not entitled to retention or reimbursement for being builders in bad
faith; that the principle of laches does not apply against owners of land registered under
the Torrens system of land registration; and that petitioners cannot be allowed to argue
for the first time on appeal that the pieces of documentary evidence it presented before
the trial court are hearsay.

Our Ruling

The Court denies the Petition.

Under the Manual on Land Survey Procedures of the Philippines, on Verification

Surveys, particularly, it is provided, thus:

Section 146. The Regional Technical Director for Lands may issue order to conduct a
verification survey whenever any approved survey is reported to be erroneous, or when
titled lands are reported to overlap or where occupancy is reported to encroach another
property. x x x

xxxx

Section 149. All survey work undertaken for verification purposes shall be subject of
verification and approval in the DENR-LMS Regional Office concerned and shall be
designated as Verification Surveys Vs). x x x

Pursuant to these provisions, respondent caused its property to be surveyed, and on

May 23, 1996, the Regional Technical Director of Lands approved the verification
survey under Verification Survey Plan Vs-04-000394.22This Verification Survey Plan
revealed that petitioners encroached on respondent's land to the following extent:

a. A Portion of 567 square meters of Lot No. 29, Block 3, (LRC) Pcs-7305, covered
by respondent's TCT 250242. This is the portion where the petitioners built a
riprapping.

b. A portion of 1,389 square meters of Lot No. 30, Block 3, (LRC) Pcs-7305, covered
by respondent's TCT 250243. This is the portion where the petitioners had
constructed an old building.

c. A portion of 1,498 square meters of Lot No. 31, Block 3, (LRC) Pcs-7305, covered
by respondent's TCT 250244. This is the portion where the petitioners
constructed & new multi-story edifice.

On this basis, respondent filed Civil Case No. 97-4386. Respondent's main evidence is
the said Verification Survey Plan Vs-04-000394, which is a public document. As a public
document, it is admissible in evidence even without further proof of its due execution
and genuineness,23 and had in its favor the presumption of regularity, To contradict the
same, there must be evidence that is clear, convincing and more than merely
preponderant, otherwise the document should be upheld.24 The certification and
approval by the Regional Technical Director of Lands signifies the "technical correctness
of the survey plotted in the said plan."25
On the other hand, petitioners' evidence consists mainly of the claim that their TCT
153101 is a valid title and that they purchased the land covered by it in good faith and
for value. TI1ey did not present evidence to contradict respondent's Verification Survey
Plan VS-04-000394; in other words, no evidence was presented to disprove
respondent's claim of overlapping. Their evidence only goes so far as proving that they
acquired the land covered by TCT 153101 in good faith. However, while it may be true
that they acquired TCT 153101 in good faith and for value, this does not prove that they
did not encroach upon respondent's lands.

In effect, respondent's Verification Survey Plan Vs-04-000394 remains unrefuted.

Petitioners' sole objection to this piece of evidence that it was not authenticated during
trial is of no significance considering that the said documentary evidence is a public
document.

Although "[i]n overlapping of titles disputes, it has always been the practice for the
[trial] court to appoint a surveyor from the government land agencies [such as] the
Land Registration Authority or the DENR to act as commissioner,"26 this is not
mandatory procedure; the trial court may rely on the parties' respective evidence to
resolve the case.27 In this case, respondent presented the results of a verification survey
conducted on its lands. On the other hand, petitioners did not present proof like the
results of a survey conducted upon their initiative to contradict respondent's evidence;
nor did they move for the appointment by the trial court of government or private
surveyors to act as commissioners. Their sole defense is that they acquired their land in
good faith and for value; but this does not squarely address respondent's claim of
overlapping.

For the RTC and CA, respondent's undisputed evidence proved its claim of overlapping.
This Court agr s. As a public document containing the certification and approval by the
Regional Technical Director of Lands, Verification Survey Plan Vs-04-000394 can be
relied upon as proof of the encroachment over respondent's lands. More so when
petitioners could not present contradictory proof.

On the issue of being a builder in bad faith, there is no question that petitioners should
be held liable to respondent for their obstinate refusal to abide by the latter's repeated
demands to cease and desist from continuing their construction upon the encroached
area. Petitioners' sole defense is that they purchased their property in good faith and for
value; but this does not squarely address the issue of encroachment or overlapping. To
repeat, while petitioners may have been innocent purchasers for value with respect to
their land, this does not prove that they are equally innocent of the claim of
encroachment upon respondent's lands. The evidence suggests otherwise: despite being
apprised of the encroachment, petitioners turned a blind eye and deaf ear and
continued to construct on the disputed area. They did not bother to conduct their own
survey to put the issue to rest, and to avoid the possibility of being adjudged as builders
in bad faith upon land that did not long to them.

Under the Civil Code,

Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is
built, planted or sown without right to indemnity.

Art. 450. The owner of the land on which anything has been built, planted or sown in
bad faith may demand the demolition of the work, or that the planting or sowing be
removed, in order to replace things in their former condition at the expense of the
person who built, planted or sowed; or he may compel the builder or planter to pay the
price of the land, and the sower the proper rent.

Art. 451. In the cases of the two preceding articles, the landowner is entitled to damages
from the builder planter or sower.

Moreover, it has been declared that

The right of the owner of the land to recover damages from a builder in bad faith is
clearly provided for in Article 451 of the Civil Code. Although said Article 451 does not
elaborate on the basis for damages, the Court perceives that it should reasonably
correspond with the value of the properties lost or destroyed as a result of the
occupation in bad faith, as well as the fruits (natural, industrial or civil) from those
properties that the owner of the land reasonably expected to obtain. x x x28

For their part, petitioners are not entitled to reimbursement for necessary expenses.
Indeed, under Article 452 of the Civil Code,29 the builder, planter or sower in bad faith is
entitled to reimbursement for the necessary expenses of preservation of the land.
However, in this case, respondent's lands were not preserved: petitioners' construction
and use thereof in fact caused damage, which must be undone or simply endured by
respondent by force of law and circumstance. Respondent did not in any way benefit
from petitioners' occupation of its lands.

Finally, on the question of laches, the CA correctly held that as owners of the subject
property, respondent has the imprescriptible right to recover possession thereof from
any person illegally occupying its lands. Even if petitioners have been occupying these
lands for a significant period of time, respondent as the registered and lawful owner has
the right to demand the return thereof at any time.

Jurisprudence consistently holds that 'prescription and laches cannot apply to

registered land covered by the Torrens system' because 'under the Property
Registration Decree, no title to registered land in derogation to that of the registered
owner shall be acquired by prescription or adverse possession.'30

Under Section 47 of the Property Registration Decree, or Presidential Decree No. 1529,
"(n)o title to registered land in derogation of the title of the registered owner shall be
acquired by prescription or adverse possession."

WHEREFORE, the Petition is DENIED. The July 17, 2013 Decision and March 28, 2014
Resolution of the Court of Appeals in CA-G.R. CV No. 97478 are AFFIRMED in toto.

SO ORDERED.
Sereno, C.J., (Chairperson), and Perlas-Bernabe, JJ., concur.
Leonardo-De Castro, J., join the concurring and dissenting opinion of Justice Caguioa.
Caguioa, J., see dissenting opinion.

FAUSTINO REYES, ESPERIDION G.R. No. 162956

REYES, JULIETA C. RIVERA, and
EUTIQUIO DICO, JR.,
Petitioners,

Present:

PUNO, C.J., Chairperson,

- versus - CARPIO,
CORONA,
*AZCUNA, and
LEONARDO-DE CASTRO, JJ.
PETER B. ENRIQUEZ, for himself
and Attorney-in-Fact of his daughter Promulgated:
DEBORAH ANN C. ENRIQUEZ, and
SPS. DIONISIO FERNANDEZ and
CATALINA FERNANDEZ,
Respondents. April 10, 2008
x------------------------------------------------x

DECISION

PUNO, C.J.:

This case is a Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Court from the decision of the Court of Appeals (CA) dated September 29, 2003
in CA G.R. CV No. 68147, entitled Peter B. Enriquez, et al. v. Faustino Reyes, et al.,
reversing the decision of the Regional Trial Court (RTC) of Cebu City, Branch XI dated
June 29, 2000, which dismissed the complaint filed by the respondents herein.[1]

The subject matter of the present case is a parcel of land known as Lot No. 1851
Flr-133 with an aggregate area of 2,017 square meters located in Talisay, Cebu.[2]

According to petitioners Faustino Reyes, Esperidion Reyes, Julieta C. Rivera, and

Eutiquio Dico, Jr., they are the lawful heirs of Dionisia Reyes who co-owned the subject
parcel of land with Anacleto Cabrera as evidenced by Transfer Certificate of Title (TCT)
No. RT-3551 (T-8070). On April 17, 1996, petitioners executed an Extrajudicial
Settlement with Sale of the Estate of Dionisia Reyes (the Extra Judicial Settlement)
involving a portion of the subject parcel of land. On March 21, 1997, the petitioners and
the known heirs of Anacleto Cabrera executed a Segregation of Real Estate and
Confirmation of Sale (the Segregation and Confirmation) over the same property. By
virtue of the aforestated documents, TCT No. RT-35551 (T-8070) was cancelled and
new TCTs were issued: (1) TCT No. T-98576 in the name of Anacleto Cabrera
covering Lot 1851-A; (2) TCT No. T-98577 covering Lot 1851-B in the name of
petitioner Eutiquio Dico, Jr.; (3) TCT No. T-98578 covering Lot 1851-C in the name of
petitioner Faustino Reyes; (4) TCT No. T-98579 covering Lot 1851-D in the name of
petitioner Esperidion Reyes; (5) TCT No. T-98580 covering Lot 1851-E in the name of
petitioner Julieta G. Rivera; (6) TCT No. T-98581 covering Lot 1851-F in the name of
Felipe Dico; and (7) TCT No. T-98582 covering Lot 1851-G in the name of Archimedes C.
Villaluz.[3]

Respondents Peter B. Enriquez (Peter) for himself and on behalf of his minor
daughter Deborah Ann C. Enriquez (Deborah Ann), also known as Dina Abdullah
Enriquez Alsagoff, on the other hand, alleges that their predecessor-in-interest Anacleto
Cabrera and his wife Patricia Seguera Cabrera (collectively the Spouses Cabrera) owned
pro-indiviso share in the subject parcel of land or 1051 sq. m. They further allege that
Spouses Cabrera were survived by two daughters Graciana, who died single and without
issue, and Etta, the wife of respondent Peter and mother of respondent Deborah Ann
who succeeded their parents rights and took possession of the 1051 sq. m. of the subject
parcel of land. During her lifetime, Graciana sold her share over the land to Etta. Thus,
making the latter the sole owner of the one-half share of the subject parcel of
land. Subsequently, Etta died and the property passed on to petitioners Peter and
Deborah Ann by virtue of an Extra-Judicial Settlement of Estate. On June 19, 1999,
petitioners Peter and Deborah Ann sold 200 sq. m. out of the 1051 sq. m.
for P200,000.00 to Spouses Dionisio and Catalina Fernandez (Spouses Fernandez), also
their co-respondents in the case at bar. After the sale, Spouses Fernandez took
possession of the said area in the subject parcel of land.[4]

When Spouses Fernandez, tried to register their share in the subject land, they
discovered that certain documents prevent them from doing so: (1) Affidavit by
Anacleto Cabrera dated March 16, 1957 stating that his share in Lot No. 1851, the
subject property, is approximately 369 sq. m.; (2) Affidavit by Dionisia Reyes dated July
13, 1929 stating that Anacleto only owned of Lot No. 1851, while 302.55 sq. m. belongs
to Dionisia and the rest of the property is co-owned by Nicolasa Bacalso, Juan Reyes,
Florentino Reyes and Maximiano Dico; (3) Extra-Judicial Settlement with Sale of the
Estate of Dionisia Reyes dated April 17, 1996; (4) certificates of title in the name of the
herein petitioners; and (5) Deed of Segregation of Real Estate and Confirmation of Sale
dated March 21, 1997 executed by the alleged heirs of Dionisia Reyes and Anacleto
Cabrera. Alleging that the foregoing documents are fraudulent and fictitious, the
respondents filed a complaint for annulment or nullification of the aforementioned
documents and for damages. [5]They likewise prayed for the repartition and
resubdivision of the subject property.[6]

The RTC, upon motion of the herein petitioners, dismissed the case on the
ground that the respondents-plaintiffs were actually seeking first and foremost to be
declared heirs of Anacleto Cabrera since they can not demand the partition of the real
property without first being declared as legal heirs and such may not be done in an
ordinary civil action, as in this case, but through a special proceeding specifically
instituted for the purpose.[7]

On appeal, the Court of Appeals (CA) reversed the RTC and directed the trial
court to proceed with the hearing of the case.[8] The Motion for Reconsideration filed by
the herein petitioners was similarly denied.[9]

Hence this petition.

The primary issue in this case is whether or not the respondents have to institute
a special proceeding to determine their status as heirs of Anacleto Cabrera before they
can file an ordinary civil action to nullify the affidavits of Anacleto Cabrera and Dionisia
Reyes, the Extra-Judicial Settlement with the Sale of Estate of Dionisia Reyes, and the
Deed of Segregation of Real Estate and Confirmation of Sale executed by the heirs of
Dionisia Reyes and the heirs of Anacleto Cabrera, as well as to cancel the new transfer
certificates of title issued by virtue of the above-questioned documents.

We answer in the affirmative.

An ordinary civil action is one by which a party sues another for the enforcement
or protection of a right, or the prevention or redress of a wrong.[10] A special proceeding,
on the other hand, is a remedy by which a party seeks to establish a status, a right or a
particular fact.[11]

The Rules of Court provide that only a real party in interest is allowed to
prosecute and defend an action in court.[12] A real party in interest is the one who stands
to be benefited or injured by the judgment in the suit or the one entitled to the avails
thereof.[13] Such interest, to be considered a real interest, must be one which is present
and substantial, as distinguished from a mere expectancy, or a future, contingent,
subordinate or consequential interest.[14] A plaintiff is a real party in interest when he is
the one who has a legal right to enforce or protect, while a defendant is a real party in
interest when he is the one who has a correlative legal obligation to redress a wrong
done to the plaintiff by reason of the defendants act or omission which had violated the
legal right of the former.[15] The purpose of the rule is to protect persons against undue
and unnecessary litigation.[16] It likewise ensures that the court will have the benefit of
having before it the real adverse parties in the consideration of a case. [17] Thus, a
plaintiffs right to institute an ordinary civil action should be based on his own right to
the relief sought.

In cases wherein alleged heirs of a decedent in whose name a property was

registered sue to recover the said property through the institution of an ordinary civil
action, such as a complaint for reconveyance and partition,[18] or nullification of transfer
certificate of titles and other deeds or documents related thereto, [19] this Court has
consistently ruled that a declaration of heirship is improper in an ordinary civil action
since the matter is within the exclusive competence of the court in a special
proceeding. [20] In the recent case of Portugal v. Portugal-Beltran,[21] the Court had the
occasion to clarify its ruling on the issue at hand, to wit:

The common doctrine in Litam, Solivio and Guilas in which the

adverse parties are putative heirs to the estate of a decedent or parties to
the special proceedings for its settlement is that if the special proceedings
are pending, or if there are no special proceedings filed but there is,
under the circumstances of the case, a need to file one, then the
determination of, among other issues, heirship should be raised and
settled in said special proceedings. Where special proceedings had
been instituted but had been finally closed and terminated, however, or if
a putative heir has lost the right to have himself declared in the special
proceedings as co-heir and he can no longer ask for its re-opening, then
an ordinary civil action can be filed for his declaration as heir in order to
bring about the annulment of the partition or distribution or adjudication
of a property or properties belonging to the estate of the deceased.[22]

In the instant case, while the complaint was denominated as an action for the
Declaration of Non-Existency[sic], Nullity of Deeds, and Cancellation of Certificates of
Title, etc., a review of the allegations therein reveals that the right being asserted by the
respondents are their right as heirs of Anacleto Cabrera who they claim co-owned one-
half of the subject property and not merely one-fourth as stated in the documents the
respondents sought to annul. As correctly pointed out by the trial court, the ruling in the
case of Heirs of Guido Yaptinchay v. Hon. Roy del Rosario[23] is applicable in the case
at bar. In the said case, the petitioners therein, claiming to be the legal heirs of the late
Guido and Isabel Yaptinchay filed for annulment of the transfer certificates of title
issued in the name of Golden Bay Realty Corporation on the ground that the subject
properties rightfully belong to the petitioners predecessor and by virtue of succession
have passed on to them. In affirming the trial court therein, this Court ruled:

...(T)he plaintiffs who claimed to be the legal heirs of the said Guido
and Isabel Yaptinchay have not shown any proof or even a semblance of it
except the allegations that they are the legal heirs of the aforementioned
Yaptinchays that they have been declared the legal heirs of the deceased
couple. Now, the determination of who are the legal heirs of the deceased
couple must be made in the proper special proceedings in court, and not
in an ordinary suit for reconveyance of property. This must take
precedence over the action for reconveyance.[24]

In the same manner, the respondents herein, except for their allegations, have
yet to substantiate their claim as the legal heirs of Anacleto Cabrera who are, thus,
entitled to the subject property. Neither is there anything in the records of this case
which would show that a special proceeding to have themselves declared as heirs of
Anacleto Cabrera had been instituted. As such, the trial court correctly dismissed the
case for there is a lack of cause of action when a case is instituted by parties who are not
real parties in interest.While a declaration of heirship was not prayed for in the
complaint, it is clear from the allegations therein that the right the respondents sought
to protect or enforce is that of an heir of one of the registered co-owners of the property
prior to the issuance of the new transfer certificates of title that they seek to
cancel. Thus, there is a need to establish their status as such heirs in the proper forum.

Furthermore, in Portugal,[25] the Court held that it would be superfluous to still

subject the estate to administration proceedings since a determination of the parties'
status as heirs could be achieved in the ordinary civil case filed because it appeared
from the records of the case that the only property left by the decedent was the subject
matter of the case and that the parties have already presented evidence to establish
their right as heirs of the decedent. In the present case, however, nothing in the records
of this case shows that the only property left by the deceased Anacleto Cabrera is the
subject lot, and neither had respondents Peter and Deborah Ann presented any
evidence to establish their rights as heirs, considering especially that it appears that
there are other heirs of Anacleto Cabrera who are not parties in this case that had
signed one of the questioned documents.Hence, under the circumstances in this case,
this Court finds that a determination of the rights of respondents Peter and Deborah
Ann as heirs of Anacleto Cabrera in a special proceeding is necessary.

IN VIEW WHEREOF, the petition is GRANTED. The decision of the Court of

Appeals is hereby REVERSED and the decision of the Regional Trial Court dated June
29, 2000 DISMISSING the complaint is REINSTATED.

No costs.

SO ORDERED.

ISABEL P. PORTUGAL and JOSE DOUGLAS PORTUGAL JR., petitioners, vs. LEONILA
PORTUGAL-BELTRAN, respondent.

DECISION
CARPIO MORALES, J.:

Petitioners Isabel P. Portugal and her son, Jose Douglas Portugal Jr., assail the
September 24, 2002[1] Decision of the Court of Appeals affirming that of the Regional
Trial Court (RTC) of Caloocan City, Branch 124[2] which dismissed, after trial, their
complaint for annulment of title for failure to state a cause of action and lack of
jurisdiction.
From the records of the case are gathered the following material allegations
claims of the parties which they sought to prove by testimonial and documentary
evidence during the trial of the case:
On November 25, 1942, Jose Q. Portugal (Portugal) married Paz Lazo.[3]
 On May 22, 1948, Portugal married petitioner Isabel de la Puerta.[4]
On September 13, 1949, petitioner Isabel gave birth to a boy whom she named Jose
Douglas Portugal Jr., her herein co-petitioner.[5]
On April 11, 1950, Paz gave birth to a girl, Aleli,[6] later baptized as Leonila Perpetua
Aleli Portugal, herein respondent.[7]
On May 16, 1968, Portugal and his four (4) siblings executed a Deed of Extra-
Judicial Partition and Waiver of Rights[8] over the estate of their father, Mariano
Portugal, who died intestate on November 2, 1964.[9] In the deed, Portugals siblings
waived their rights, interests, and participation over a 155 sq. m. parcel of land located
in Caloocan in his favor.[10]
On January 2, 1970, the Registry of Deeds for Caloocan City issued Transfer
Certificate of Title (TCT) No. 34292 covering the Caloocan parcel of land in the name of
Jose Q. Portugal, married to Paz C. Lazo.[11]
On February 18, 1984, Paz died.
On April 21, 1985, Portugal died intestate.
On February 15, 1988, respondent executed an Affidavit of Adjudication by Sole
Heir of Estate of Deceased Person[12] adjudicating to herself the Caloocan parcel of land.
TCT No. 34292/T-172[13] in Portugals name was subsequently cancelled and in its stead
TCT No. 159813[14] was issued by the Registry of Deeds for Caloocan City on March 9,
1988 in the name of respondent, Leonila Portugal-Beltran, married to Merardo M.
Beltran, Jr.
Later getting wind of the death in 1985 of Portugal and still later of the 1988
transfer by respondent of the title to the Caloocan property in her name, petitioners
filed before the RTC of Caloocan City on July 23, 1996 a complaint[15] against respondent
for annulment of the Affidavit of Adjudication executed by her and the transfer
certificate of title issued in her name.
In their complaint, petitioners alleged that respondent is not related whatsoever to
the deceased Portugal, hence, not entitled to inherit the Caloocan parcel of land and that
she perjured herself when she made false representations in her Affidavit of
Adjudication.
Petitioners accordingly prayed that respondents Affidavit of Adjudication and the
TCT in her name be declared void and that the Registry of Deeds for Caloocan be
ordered to cancel the TCT in respondents name and to issue in its stead a new one in
their (petitioners) name, and that actual, moral and exemplary damages and attorneys
fees and litigation expenses be awarded to them.
Following respondents filing of her answer, the trial court issued a Pre-Trial Order
chronicling, among other things, the issues as follows:

a. Which of the two (2) marriages contracted by the deceased Jose Q. Portugal Sr., is
valid?

b. Which of the plaintiff . . . Jose Portugal Jr. and defendant Leonila P. Beltran is the legal
heir of the deceased Jose Q. Portugal Sr.?
c. Whether or not TCT No. 159813 was issued in due course and can still be contested
by plaintiffs.

d. Whether or not plaintiffs are entitled to their claims under the

complaint.[16] (Underscoring supplied)

After trial, the trial court, by Decision of January 18, 2001,[17] after giving an account
of the testimonies of the parties and their witnesses and of their documentary
evidence, without resolving the issues defined during pre-trial, dismissed the case
for lack of cause of action on the ground that petitioners status and right as putative
heirs had not been established before a probate (sic) court, and lack of
jurisdiction over the case, citing Heirs of Guido and Isabel Yaptinchay v. Del Rosario.[18]
In relying on Heirs of Guido and Isabel Yaptinchay, the trial court held:

The Heirs of Yaptinchay case arose from facts not dissimilar to the case at bar.

xxx

In the instant case, plaintiffs presented a Marriage Contract, a Certificate of Live Birth,
pictures (sic) and testimonial evidence to establish their right as heirs of the decedent.
Thus, the preliminary act of having a status and right to the estate of the decedent, was
sought to be determined herein. However, the establishment of a status, a right, or a
particular fact is remedied through a special proceeding (Sec. 3(c), Rule 1, 1997
Rules of Court), not an ordinary civil action whereby a party sues another for the
enforcement or protection of a right, or the protection or redress of a wrong (ibid, a).
The operative term in the former is to establish, while in the latter, it is to enforce, a
right. Their status and right as putative heirs of the decedent not having been
established, as yet, the Complaint failed to state a cause of action.

The court, not being a probate (sic) court, is without jurisdiction to rule on plaintiffs
cause to establish their status and right herein. Plaintiffs do not have the personality to
sue (Secs. 1 and 2, Rule 3, in relation to Secs. 1 and 2, Rule 2, supra).[19] (Italics in the
original; emphasis and underscoring supplied).

Petitioners thereupon appealed to the Court of Appeals, questioning the trial

courts ratio decedendi in dismissing the case as diametrically opposed to this Courts
following ruling in Cario v. Cario,[20] viz:

Under Article 40 of the Family Code, the absolute nullity of a previous marriage may be
invoked for purposes of remarriage on the basis solely of a final judgment declaring
such previous marriage void. Meaning, where the absolute nullity of a previous
marriage is sought to be invoked for purposes of contracting a second marriage, the sole
basis acceptable in law, for said projected marriage to be free from legal infirmity, is a
final judgment declaring the previous void. (Domingo v. Court of Appeals, 226 SCRA
572, 579 [1993]) However, for purposes other than remarriage, no judicial action is
necessary to declare a marriage an absolute nullity. For other purposes, such as but not
limited to the determination of heirship, legitimacy or illegitimacy of a child, settlement
of estate, dissolution of property regime, or a criminal case for that matter, the court
may pass upon the validity of marriage even after the death of the parties thereto, and
even in a suit not directly instituted to question the validity of said marriage, so long as
it is essential to the determination of the case. (Nial, et al. v. Bayadog, GR No. 13378,
March 14, 2000). In such cases, evidence must be adduced, testimonial or documentary,
to prove the existence of grounds rendering such a previous marriage an absolute
nullity. These need not be limited solely to an earlier final judgment of a court declaring
such previous marriage void. (Domingo v. Court of Appeals, supra) (Emphasis and
underscoring supplied).

Conceding that the ruling in Cario was promulgated (in 2001) subsequent to that
of Heirs of Guido and Isabel Yaptinchay (in 1999), the appellate court found Cario to be
inapplicable, however, to the case in this wise:

To be borne in mind is the fact that the main issue in the Cario case was the validity of
the two marriages contracted by the deceased SPO4 Santiago Cario, whose death
benefits was the bone of contention between the two women both named Susan (viz.,
Susan Nicdao Cario and Susan Yee Cario) both of whom he married. It is not disputed in
said case that SPO4 S. Cario contracted two marriages with said two women during his
lifetime, and the only question was: which of these two marriages was validly
celebrated? The award of the death benefits of the deceased Cario was thus, merely
an incident to the question of which of the two marriages was valid. Upon the other
hand, the case at bench is of a different milieu. The main issue here is
the annulment of title to property. The only undisputed fact in this case is that the
deceased Jose Portugal, during his lifetime, owned a parcel of land covered by Transfer
Certificate of Title (TCT) No. T-34292. However, here come two contending parties,
herein plaintiffs-appellants and defendant-appellee, both now insisting to be the legal
heir(s) of the decedent. x x x. The status and rights of the parties herein have not,
therefore, been definitively established, as yet. x x x. Necessarily and naturally, such
questions as to such status or right must be properly ventilated in an appropriate
special proceeding, not in an ordinary civil action, whereunder a party sues another for
the enforcement or protection of a right, or the protection or redress of a wrong. The
institution of an ordinary civil suit for that purpose in the present case is thus
impermissible. For it is axiomatic that what the law prohibits or forbids directly, it
cannot permit or allow indirectly. To permit, or allow, a declaration of heirship, or the
establishment of the legitimacy or illegitimacy of a child to be determined in an ordinary
civil action, not in an appropriate special proceeding brought for that purpose, is thus to
impinge upon this axiom. x x x[21] (Emphasis in the original, underscoring supplied).

The appellate court, by Decision of September 24, 2002,[22] thus affirmed the trial
courts dismissal of the case.
Hence, the present Petition for Review on Certiorari,[23] faulting the appellate court
to have erred when
I.

. . . it affirmed the RTC decision dismissing the initiatory complaint as it failed to state a
cause of action.

II.
. . . (i) it applied the ruling in Heirs of Guido [and Isabel] Yaptingchay despite the
existence of a later and contrary ruling in Cario, and (ii) when the Honorable CA and the
lower court failed to render judgment based on the evidence presented relative to
the issues raised during pre-trial, . . .[24] (Emphasis and underscoring supplied).

Petitioners thus prayed as follows:

WHEREFORE, it is respectfully prayed of this Honorable Supreme Court that the

questioned CA decision be reversed, and a new one entered in accordance with the
prayers set forth in the instant complaint based on the above disquisition and evidence
adduced by petitioners in the court a quo.

IN THE ALTERNATIVE, should the Honorable Supreme Court find that the
pronouncements in Cario apply, a decision be entered remanding to the court a quo the
determination of the issues of which of the two marriages is valid, and the
determination of heirship and legitimacy of Jose Jr. and Leonila preparatory to the
determination of the annulment of title issued in the name of Leonila.

Other relief and remedy just and equitable in the premises are likewise prayed
for.[25] (Underscoring supplied).

Petitioners, in the main, argue that the appellate court misapplied Heirs of Guido
and Isabel Yaptinchay and in effect encouraged multiplicity of suits which is discouraged
by this Court as a reading of Cario shows; that Cario allows courts to pass on the
determination of heirship and the legitimacy or illegitimacy of a child so long as it is
necessary to the determination of the case; and that contrary to the appellate courts
ruling, they had established their status as compulsory heirs.
In the main, the issue in the present petition is whether petitioners have to institute
a special proceeding to determine their status as heirs before they can pursue the case
for annulment of respondents Affidavit of Adjudication and of the TCT issued in her
name.
In the above-cited case of Heirs of Guido and Isabel Yaptinchay,[26] the therein
petitioners executed on March 17, 1994 an extrajudicial settlement of the estate of the
deceased Guido and Isabel Yaptinchay, owners-claimants of the two lots mentioned
therein. They later discovered on August 26, 1994 that a portion, if not all, of the two
lots had been titled in the name of the therein respondent Golden Bay Realty and
Development Corporation which in turn sold portions thereof to the therein individual
respondents. The therein petitioners Heirs thus filed a complaint for annulment of titles.
The therein respondents moved to dismiss the case for failure of the therein petitioners
to, inter alia, state a cause of action and prove their status as heirs. The trial court
granted the motion to dismiss in this wise:

But the plaintiffs who claimed to be the legal heirs of the said Guido and Isabel
Yaptinchay have not shown any proof or even a semblance of itexcept the allegations
that they are the legal heirs of the aforementioned Yaptinchaysthat they have been
declared the legal heirs of the deceased couple. Now, the determination of who are the
legal heirs of the deceased couple must be made in the proper special proceedings in
court, and not in an ordinary suit for reconveyance of property. This must take
precedence over the action for reconveyance . . .[27] (Italics in the original; underscoring
supplied).

On petition for certiorari by the Heirs, this Court, albeit holding that the petition was an
improper recourse, found that the trial court did not commit grave abuse of discretion
in dismissing the case. Citing Litam et al. v. Rivera[28] and Solivio v. Court of
Appeals,[29] this Court held that the declaration of heirship can be made only in a special
proceeding inasmuch as the petitioners here are seeking the establishment of a status
or right.
In the above-cited case of Litam,[30] Gregorio Dy Tam instituted a special
proceeding for issuance of letters of administration before the then Court of First
Instance (CFI) of Rizal, alleging in his petition that he is the son of Rafael Litam who died
in Manila on January 10, 1951 and is survived by him and his therein named seven (7)
siblings who are children of the decedent by his marriage to Sia Khin celebrated in
China in 1911; that the decedent contracted in 1922 in the Philippines another marriage
with Marcosa Rivera; and that the decedent left neither a will nor debt. Dy Tam thus
prayed for the issuance of letters of administration to Marcosa Rivera, the surviving
spouse of the decedent. The CFI granted the petition and issued letters of administration
to, on Marcosas request, her nephew Arminio Rivera.
While the special proceeding was pending, Dy Tam and his purported siblings filed
a civil case before the same court, against the estate of Rafael Litam administrator
Arminio Rivera and Remedios R. Espiritu, duly appointed guardian of Marcosa. In their
complaint, Dy Tam and his purported siblings substantially reproduced the allegations
made in his petition in the special proceeding, with the addition of a list of properties
allegedly acquired during the marriage of the decedent and Marcosa.
Finding the issue raised in the civil case to be identical to some unresolved
incidents in the special proceeding, both were jointly heard by the trial court, following
which it rendered a decision in the civil case dismissing it, declaring, inter alia, that the
plaintiffs Dy Tam et al. are not the children of the decedent whose only surviving heir is
Marcosa.
On appeal to this Court by Dy Tam et al., one of the two issues raised for
determination was whether they are the legitimate children of Rafael Litam.
This Court, holding that the issue hinged on whether Rafael Litam and Sia Khin
were married in 1911, and whether Rafael Litam is the father of appellants Dy Tam et
al., found substantially correct the trial courts findings of fact and its conclusion that,
among other things, the birth certificates of Dy Tam et al. do not establish the identity of
the deceased Rafael Litam and the persons named therein as father [and] it does not
appear in the said certificates of birth that Rafael Litam had in any manner intervened in
the preparation and filing thereof; and that [t]he other documentary evidence presented
by [them] [is] entirely immaterial and highly insufficient to prove the alleged marriage
between the deceased Rafael Litam and Sia Khin and [their] alleged status . . . as children
of said decedent.
This Court went on to opine in Litam, however, that the lower court should not have
declared, in the decision appealed from, that Marcosa is the only heir of the decedent,
for such declaration is improper in the [civil case], it being within the exclusive
competence of the court in [the] [s]pecial [p]roceeding.
 In Solivio,[31] also cited in Heirs of Guido and Isabel Yaptinchay, there was a special
proceeding for the settlement of the estate of the deceased, who was a soltero, filed
before the RTC of Iloilo. In the special proceeding, Branch 23 of said court declared as
sole heir Celedonia Solivio, the decedents maternal aunt-half sister of his mother.
Concordia Javellana-Villanueva, the decedents paternal aunt-sister of his father, moved
to reconsider the courts order declaring Celedonia Solivio as sole heir of the decedent,
she claiming that she too was an heir. The court denied the motion on the ground of
tardiness. Instead of appealing the denial of her motion, Concordia filed a civil
case against Celedonia before the same RTC, for partition, recovery of possession,
ownership and damages. The civil case was raffled to Branch 26 of the RTC, which
rendered judgment in favor of Concordia. On appeal by Celedonia, the appellate court
affirmed the said judgment.
On petition for review filed before this Court by Celedonia who posed, among other
issues, whether Branch 26 of the RTC of Iloilo had jurisdiction to entertain [the civil
action] for partition and recovery of Concordia Villanuevas share of the estate of [the
deceased] while the [estate] proceedings . . . were still pending . . . in Branch 23 of the
same court, this Court held that [i]n the interest of orderly procedure and to avoid
confusing and conflicting dispositions of a decedents estate, a court should not
interfere with [estate] proceedings pending in a co-equal court, citing Guilas v. CFI
Judge of Pampanga.[32]
This Court, however, in Solivio, upon [c]onsidering that the estate proceedings are
still pending, but nonetheless [therein private respondent-Concordia Villanueva]
had lost her right to have herself declared as co-heir in said proceedings, opted to
proceed to discuss the merits of her claim in the interest of justice, and declared her
an heir of the decedent.
In Guilas[33] cited in Solivio, a project of partition between an adopted daughter, the
therein petitioner Juanita Lopez Guilas (Juanita), and her adoptive father was approved
in the proceedings for the settlement of the testate estate of the decedent-adoptive
mother, following which the probate court directed that the records of the case be
archived.
Juanita subsequently filed a civil action against her adoptive father to annul the
project of partition on the ground of lesion, preterition and fraud, and prayed that her
adoptive father immediately deliver to her the two lots allocated to her in the project of
partition. She subsequently filed a motion in the testate estate proceedings for her
adoptive father to deliver to her, among other things, the same two lots allotted to her.
After conducting pre-trial in the civil case, the trial court, noting the parties
agreement to suspend action or resolution on Juanitas motion in the testate estate
proceedings for the delivery to her of the two lots alloted to her until after her
complaint in the civil case had been decided, set said case for trial.
Juanita later filed in the civil case a motion to set aside the order setting it for trial
on the ground that in the amended complaint she, in the meantime, filed, she
acknowledged the partial legality and validity of the project of partition insofar as she
was allotted the two lots, the delivery of which she was seeking. She thus posited in her
motion to set aside the April 27, 1966 order setting the civil case for hearing that there
was no longer a prejudicial question to her motion in the testate estate proceedings for
the delivery to her of the actual possession of the two lots. The trial court, by order of
April 27, 1966, denied the motion.
Juanita thereupon assailed the April 27, 1966 order before this Court.
The probate courts approval of the project of partition and directive that the
records of the case be sent to the archives notwithstanding, this Court held that the
testate estate proceedings had not been legally terminated as Juanitas share under the
project of partition had not been delivered to her. Explained this Court:

As long as the order of the distribution of the estate has not been complied with, the
probate proceedings cannot be deemed closed and terminated (Siguiong vs. Tecson,
supra.); because a judicial partition is not final and conclusive and does not prevent the
heir from bringing an action to obtain his share, provided the prescriptive period
therefor has not elapse (Mari vs. Bonilla, 83 Phil., 137). The better practice, however, for
the heir who has not received his share, is to demand his share through a proper
motion in the same probate or administration proceedings, or for re-opening of
the probate or administrative proceedings if it had already been closed, and not
through an independent action, which would be tried by another court or Judge
which may thus reverse a decision or order of the probate o[r] intestate
court already final and executed and re-shuffle properties long ago distributed and
disposed of (Ramos vs. Ortuzar, 89 Phil. 730, 741-742; Timbol vs. Cano, supra,; Jingco
vs. Daluz, L-5107, April 24, 1953, 92 Phil. 1082; Roman Catholic vs. Agustines, L-14710,
March 29, 1960, 107 Phil., 455, 460-461).[34] (Emphasis and underscoring supplied).

This Court thus set aside the assailed April 27, 1966 order of the trial court setting the
civil case for hearing, but allowed the civil case to continue because it involves no longer
the two lots adjudicated to Juanita.
The common doctrine in Litam, Solivio and Guilas in which the adverse parties are
putative heirs to the estate of a decedent or parties to the special proceedings for its
settlement is that if the special proceedings are pending, or if there are no special
proceedings filed but there is, under the circumstances of the case, a need to file one,
then the determination of, among other issues, heirship should be raised and settled in
said special proceedings. Where special proceedings had been instituted but had been
finally closed and terminated, however, or if a putative heir has lost the right to have
himself declared in the special proceedings as co-heir and he can no longer ask for its
re-opening, then an ordinary civil action can be filed for his declaration as heir in order
to bring about the annulment of the partition or distribution or adjudication of a
property or properties belonging to the estate of the deceased.
In the case at bar, respondent, believing rightly or wrongly that she was the sole
heir to Portugals estate, executed on February 15, 1988[35] the questioned Affidavit of
Adjudication under the second sentence of Rule 74, Section 1 of the Revised Rules of
Court.[36] Said rule is an exception to the general rule that when a person dies leaving a
property, it should be judicially administered and the competent court should appoint a
qualified administrator, in the order established in Sec. 6, Rule 78 in case the deceased
left no will, or in case he did, he failed to name an executor therein.[37]
Petitioners claim, however, to be the exclusive heirs of Portugal. A probate or
intestate court, no doubt, has jurisdiction to declare who are the heirs of a deceased.
 It appearing, however, that in the present case the only property of the intestate
estate of Portugal is the Caloocan parcel of land,[38] to still subject it, under the
circumstances of the case, to a special proceeding which could be long, hence, not
expeditious, just to establish the status of petitioners as heirs is not only impractical; it
is burdensome to the estate with the costs and expenses of an administration
proceeding. And it is superfluous in light of the fact that the parties to the civil case
subject of the present case, could and had already in fact presented evidence before the
trial court which assumed jurisdiction over the case upon the issues it defined during
pre-trial.
In fine, under the circumstances of the present case, there being no compelling
reason to still subject Portugals estate to administration proceedings since a
determination of petitioners status as heirs could be achieved in the civil case filed by
petitioners,[39] the trial court should proceed to evaluate the evidence presented by the
parties during the trial and render a decision thereon upon the issues it defined during
pre-trial, which bear repeating, to wit:

1. Which of the two (2) marriages contracted by the deceased Jose Q. Portugal, is
valid;

2. Which of the plaintiff, Jose Portugal Jr. and defendant Leonila P. Beltran is the
legal heir of the deceased Jose Q. Portugal (Sr.);

3. Whether or not TCT No. 159813 was issued in due course and can still be
contested by plaintiffs;

4. Whether or not plaintiffs are entitled to their claim under the complaint.[40]

WHEREFORE, the petition is hereby GRANTED. The assailed September 24, 2002
Decision of the Court of Appeals is hereby SET ASIDE.
Let the records of the case be REMANDED to the trial court, Branch 124 of the
Regional Trial Court of Caloocan City, for it to evaluate the evidence presented by the
parties and render a decision on the above-enumerated issues defined during the pre-
trial.
No costs.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.